AstraZeneca 6-K 2010
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For January 2010
Commission File Number: 001-11960
15 Stanhope Gate, London W1K 1LN, England
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F X Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ______
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
If “Yes” is marked, indicate below the file number assigned to the Registrant in connection with Rule 12g3-2(b): 82-_____________
INDEX TO EXHIBITS
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Voting Rights and Capital
The following notification is made in accordance with the UK Financial Services Authority Disclosure and Transparency Rule 5.6.1. On 31 December 2009 the issued share capital of AstraZeneca PLC with voting rights is 1,450,958,562 ordinary shares of US$0.25. No shares are held in Treasury. Therefore, the total number of voting rights in AstraZeneca PLC is 1,450,958,562.
The above figure for the total number of voting rights may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, AstraZeneca PLC under the FSA's Disclosure and Transparency Rules.
A C N Kemp
4 January 2010
ASTRAZENECA REACHES AGREEMENTS WITH TEVA PHARMACEUTICALS REGARDING NEXIUM AND PRILOSEC US PATENT LITIGATIONS
AstraZeneca announced today that it has entered into an agreement with Teva Pharmaceutical Industries Ltd. and affiliates (collectively “Teva”) to settle patent litigation regarding Teva’s proposed generic version of AstraZeneca’s Nexium delayed-release capsules (esomeprazole magnesium).
As part of the Nexium settlement agreement, AstraZeneca has granted Teva a license to enter the US market with its generic esomeprazole on 27 May 2014, subject to regulatory approval, or earlier in certain circumstances. Teva has conceded that all patents-at-issue in Teva’s US Nexium patent litigations are valid and enforceable. Teva has also conceded that six Nexium patents would be infringed by the manufacture or sale of Teva’s US generic esomeprazole. The US District Court for the District of New Jersey will enter a Consent Judgment and corresponding Nexium patent litigations will be dismissed.
In a separate agreement, AstraZeneca and Teva have agreed to settle patent litigation related to Prilosec (omeprazole). Under this agreement, Teva will make a one-time payment to AstraZeneca for past infringing sales. The terms of this agreement are not financially material to AstraZeneca. AstraZeneca and Teva will jointly file a Stipulation of Dismissal with the US District Court for the Southern District of New York.
Merck Sharp & Dohme Corp. (formerly Merck & Co., Inc.) (“Merck”), through KBI Inc. and KBI-E, and under the terms of Merck's restructured partnership with AstraZeneca, announced in 1998, also entered into the settlement agreements.
AstraZeneca is a major international healthcare business engaged in the research, development, manufacturing and marketing of meaningful prescription medicines and supplier for healthcare services. AstraZeneca is one of the world's leading pharmaceutical companies with healthcare sales of US$ 31.6 billion and is a leader in gastrointestinal, cardiovascular, neuroscience, respiratory, oncology and infectious disease medicines. For more information about AstraZeneca, please visit: www.astrazeneca.com
7 January 2010
AstraZeneca Fourth Quarter and Full Year Results 2009
On Thursday, 28 January 2010, AstraZeneca will release fourth quarter and full year results for 2009 at 11:00GMT.
An analyst presentation covering the results will be held at 13:30GMT and can be joined, live, via teleconference on the following numbers:
UK: 0800 077 8491
Sweden: 0200 110 487
US: 1 866 804 8688
International: +44 (0)844 800 0810
Back-up: +44 (0)1296 317 500
Passcode: “AstraZeneca full year results analyst call”
These numbers, and details of the replay facility (available until 17:00GMT Friday, 12 February 2010) are available on the AstraZeneca Investor Relations website www.astrazeneca.com/investors and the AstraZeneca Events website: http://info.astrazenecaevents.com.
A live webcast of the presentation will also be available on these sites, as well as a recorded interview with David Brennan.
Transaction by Persons Discharging Managerial Responsibilities
Disclosure Rule DTR 3.1.4
We hereby inform you that on 26 January 2010, Marcus Wallenberg, a Director of the Company, notified us that the 60,028 shares in the Company owned by him that were pledged as security against personal loans, are no longer pledged.
Accordingly, Marcus Wallenberg continues to have a total interest in 67,264 AstraZeneca PLC Ordinary Shares of USD0.25 each, which represents approximately 0.005% of the issued ordinary capital of the Company.
A C N Kemp
27 January 2010
FOURTH QUARTER AND FULL YEAR RESULTS 2009
London, 28 January 2010
Revenue for the full year increased by 7 percent at constant exchange rates (CER) to $32,804 million.
-Sales of Toprol-XL and Novel Influenza A (H1N1) vaccine in the US accounted for 3 percentage points of the global revenue growth at CER.
-Emerging Markets revenue was up 12 percent at CER, accounting for 13 percent of total Company revenue for the full year.
Core operating profit for the full year increased by 23 percent at CER to $13,621 million on revenue growth and operational efficiencies.
Core EPS for the full year increased by 23 percent at CER to $6.32, in line with guidance.
Reported EPS for the full year increased by 22 percent at CER to $5.19.
Revenue in the fourth quarter increased by 4 percent at CER; Core EPS increased by 7 percent at CER.
Pipeline developments during the year include 4 major regulatory submissions for new products and the addition of 4 significant late stage development assets via in-licensing and acquisitions.
Strong cash flows result in net funds of $535 million at 31 December 2009, compared to net debt of $7,174 million at the end of 2008.
Dividend increased by 12 percent to $2.30 for the full year. Board adopts a progressive dividend policy (See below).
The Board announces that up to $1 billion in share repurchases will be completed in 2010.
Restructuring programmes expanded, including newly announced plan to drive Research and Development productivity (See below).
Company provides mid-term planning assumptions for the 5-year period ending 2014 (See below).
David Brennan, Chief Executive Officer, said>: “In 2009 we delivered a strong financial performance, exceeding the targets we set at the beginning of the year. In addition, good progress was made on the pipeline; we now have five products awaiting regulatory approval, and have added four significant late stage development projects through our externalisation efforts.
Our plans for the next five years confirm our commitment to research-based, innovative biopharmaceuticals. I believe successful execution of this strategy will benefit patients and generate the cash flow necessary to
provide for the investment needs of the business and shareholder returns.”
Business Highlights All narrative in this section refers to growth rates at constant exchange rates (CER) unless otherwise indicated
Revenue in the fourth quarter increased by 4 percent at CER, but was up 9 percent on an actual basis as a result of the positive impact of exchange rate movements. Revenue benefited from strong growth of the Toprol-XL franchise in the US as a result of the market withdrawal by two generic competitors and from revenues from US government orders for vaccine for Novel Influenza A (H1N1); adjusting for these factors, global revenue was unchanged. US revenue was up 4 percent. Excluding Toprol-XL and H1N1 vaccine sales, US revenue was down 5 percent, due to a decline in Synagis revenue, lower levels of inventory stock building compared to last year and a provision for trade inventories of Pulmicort Respules following the launch of the Teva generic under license from the Company. Revenue in the Rest of World was up 4 percent. Revenue in Established Markets was up 2 percent. Emerging Markets revenue growth was 10 percent.
Core operating profit in the fourth quarter was up 6 percent to $3,044 million. The Core operating profit contribution from gross margin improvement was largely offset by increased expenditures in SG&A and lower other income. The stronger than expected revenue performance for the year provided the headroom for increased investment in sales and marketing programmes to support growth in the Emerging Markets, key franchises in the US and launch preparations for the new products awaiting registration. Higher legal expenses also contributed to the increased SG&A expense in the quarter. Adjustments to Core operating profit were $719 million in the quarter, including $211 million of impairment charges, chiefly related to revised estimates of future other income to be derived from intangible assets acquired with MedImmune. Total adjustments were $74 million lower than last year, reflecting significantly lower restructuring costs partially offset by higher intangible impairments and $98 million in legal provisions related primarily to an agreement in principal to settle certain claims related to average wholesale price litigation. Reported operating profit increased by 13 percent, above the rate of Core operating profit growth, as adjusting items were a higher proportion of Core operating profit in the prior year period compared with this year.
Core earnings per share in the fourth quarter were $1.42 compared with $1.25 in the fourth quarter 2008, a 7 percent increase at CER. Reported earnings per share were up 16 percent, reflecting the aforementioned differences in Core adjustments between the periods.
Revenue for the full year increased by 7 percent at CER, but was up 4 percent on an actual basis as a result of the negative impact of exchange rate movements. Global revenue growth was 4 percent excluding US Toprol-XL and H1N1 vaccine sales. Revenue in the US was up 9 percent (2 percent excluding Toprol-XL and H1N1 vaccine sales). Revenue in the Rest of World was up 6 percent. Revenue in Established Markets was up 4 percent. Revenue in Emerging Markets increased by 12 percent.
Core operating profit increased by 23 percent to $13,621 million as a result of revenue growth, operating efficiencies and disposal gains within other income. Adjustments to Core operating profit were $2,078 million, $264 million higher than last year, with lower restructuring costs and intangible impairments more than offset by the legal provisions taken in 2009. Reported operating profit increased by 24 percent, in line with the increase in Core operating profit.
Core earnings per share for the full year were $6.32, an increase of 23 percent, in line with the growth in Core operating profit. Reported earnings per share were up 22 percent to $5.19.
Driving increased productivity from investments in research and development is key to portfolio renewal and value creation. Further to this objective, the Company will undertake additional restructuring within the R&D function. These plans include a reduction in the number of disease area targets within our core therapeutic areas, a continued focus on externalisation, some consolidation of our activities onto a smaller R&D site footprint, and other efficiency measures, subject to consultations with work councils, trades unions and other employee representatives and in accordance with local labour laws.
These initiatives are designed to achieve material efficiency savings in R&D, which will partially mitigate the increase in R&D investment that would be required as projects in the current pipeline progress to the more resource intensive, later phases of development. By 2014, annual savings of $1 billion should be realised, of which one-half is estimated to be cost savings and the other half cost avoidance. Based on preliminary estimates, approximately 3,500 positions may be affected by this programme. After taking account of positions that will be retained whilst being relocated to another site, the investment in new skills and capabilities and further expansion of our Biologics activities, the net reduction may be around 1,800 positions.
The cost of this restructuring is estimated to be $1 billion, of which approximately 60 percent will be cash costs.
Good progress has been made on the implementation of previously announced restructuring programmes. During the period 2007 to 2009, $2.5 billion in restructuring costs have been incurred for these programmes, involving the reduction of 12,600 positions. Annualised benefits of $1.6 billion have been realised by the end of 2009, which will grow to around $2.4 billion by the end of 2010.
The next phase of restructuring, which includes completion of the previous programmes, some additional initiatives in supply chain and in SG&A, and the newly announced R&D programme, will result in the realisation of a further $1.9 billion in estimated annual benefits by the end of 2014; half to be realised by 2011, with most of the remainder realised by the end of 2013. These programmes, when fully implemented, are planned to impact an additional 10,400 positions. Additional restructuring charges of $2.0 billion are anticipated between 2010 and 2013, with approximately 60 percent to be taken in 2010, and most of the remainder by 2011.
AstraZeneca is a focused, integrated, innovation-driven, global biopharmaceutical business:
The Company believes that pursuit of this strategy will continue to build a pipeline of new medicines that will meet the needs of patients and provide attractive returns for shareholders.
The next five years will be challenging for the industry and for the Company, as its revenue base transitions through a period of exclusivity losses and new product launches. The Company believes it would be helpful for investors to understand the Company’s high level planning assumptions for revenue evolution, margins, cash flow and business reinvestment that will guide its management of the business over the next five years.
For the period 2010 to 2014, the Company has made certain assumptions for the industry environment. The Company assumes that the global biopharmaceutical industry can grow at least in line with real GDP over the planning horizon. Downward pressure on revenue from government interventions in the marketplace, including certain proposals associated with efforts to enact US healthcare reform, remain a continuing feature of the challenging market environment; however, for the planning period, the Company assumes no further “step-change” in the evolution of these pressures. The assumptions for revenue, margins and cash flow assume no material mergers, acquisitions or disposals for the Company. In addition, our plans assume no premature loss of exclusivity for key AstraZeneca products. It is also assumed that exchange rates for our principal currencies don’t differ materially from the average rates that prevailed during January 2010.
The Company’s planning assumption is that revenue will be in the range of $28 billion to $34 billion per annum over the next five years. It is expected that a significant portion of current base revenue will be affected by the loss of market exclusivity on a number of products. The Company aims to grow market share for key franchises that retain exclusivity, and plans to sustain double-digit growth rates in its Emerging Markets business, supported by the selective addition of branded generics to the portfolio. Achievement of revenue within the planning range will require a risk-adjusted contribution of around $4 billion to $6 billion from recently launched products, the current pipeline or from further in-licensing by 2014. The Company aspires to achieve revenue performance nearer the top than the bottom of the planning range by 2014, when the Company’s expectation is that it will have returned to a period of more consistent revenue growth.
Based on continued productivity improvements (including successful completion of restructuring initiatives), the planning assumption is that Core operating margin, before investment in research and development (Core Pre-R&D operating margin) will be in the range of 48 to 54 percent of revenue. These levels of revenue and margins would generate strong operating cash flow over the planning period, to support the reinvestment needs of the business, debt service obligations and shareholder distributions. Over the planning period, the Company expects that between 40 and 50 percent of its pre-R&D post tax cash flows will be reinvested in internal and external R&D and capital investments to drive future value and growth.
Revenue in 2010 will be affected by the expected loss of market exclusivity for Arimidex and for Pulmicort Respules in the US. Compared to a 2009 revenue baseline that included unanticipated contributions from US sales of Toprol-XL and H1N1 pandemic influenza vaccine, the Company expects up to a mid single-digit decline in revenue in 2010 on a constant currency basis. Core Pre-R&D operating margin is expected to be lower than 2009 in constant currency terms, but near the top of the mid-term planning range. Based on the January 2010 average exchange rates for our principal currencies, the target for Core earnings per share is in the range of $5.75 to $6.15.
This target takes no account of the likelihood that average exchange rates for the remainder of 2010 may differ materially from the January 2010 average rates upon which our earnings guidance is based. An estimate of the sales and earnings sensitivity to movements of our major currencies versus the US dollar is provided in conjunction with this Full Year 2009 results announcement, and can be found on the AstraZeneca website, www.astrazeneca.com/investors and http://info.astrazenecaevents.com.
Dividends and Share Repurchases
The Board has recommended a 14 percent increase in the second interim dividend to $1.71 (105.4 pence, 12.43 SEK) to be paid on 15 March 2010. This brings the full year dividend to $2.30 (141.4 pence, 16.84 SEK), an increase of 12 percent.
In recognition of the Group’s strong balance sheet, sustainable significant cash flow, and the Board’s confidence in the strategic direction and long-term prospects for the business, the Board has adopted a progressive dividend policy, intending to maintain or grow the dividend each year. The Board recognizes that some earnings fluctuations are to be expected as the Company’s revenue base transitions through this period of exclusivity losses and new product launches. The Board’s view is that the annual dividend will not just reflect the financial performance of a single year taken in isolation, but reflect its view of the earnings prospects for the Group over the entirety of the investment cycle. As a result, dividend cover may vary during the period, but with the target of an average dividend cover of 2 times (ie, a payout ratio of 50 percent), based on reported earnings (before restructuring costs).
In setting the distribution policy and the overall financial strategy, the Board’s aim is to continue to strike a balance between the interests of the business, our financial creditors and our shareholders. After providing for business investment, funding the progressive dividend policy and meeting our debt service obligations, the Board will keep under review the opportunity to return cash in excess of these requirements to shareholders through periodic share repurchases.
In conjunction with today’s financial results announcement, the Board has announced that the Company will repurchase up to $1 billion in shares during 2010.
There were no share repurchases during 2009. In 2009, 3.5 million shares were issued in consideration of share option exercises for a total of $135 million.
The total number of shares in issue at 31 December 2009 was 1,451 million.
Research and Development Update
A comprehensive update of the AstraZeneca R&D pipeline is presented in conjunction with this Full Year 2009 results announcement, and is available on the Company’s website.
The AstraZeneca pipeline now includes 146 projects, including 103 projects in the clinical phase of development. There are 11 NME projects currently in late stage development, either in Phase III or under regulatory review. During 2009, across the portfolio, 53 projects have successfully progressed to their next phase (including 24 molecules entering first human testing); 29 compounds have been added from Discovery research and 20 compounds have been withdrawn.
Five important products are awaiting registration at this time:
The Company was active in supplementing the pipeline with late stage projects through licensing and acquisitions during 2009, including:
Other significant developments since the third quarter update include:
On 4 December 2009, AstraZeneca announced that the US FDA has approved once-daily Seroquel XR
(quetiapine fumarate) Extended Release Tablets as adjunctive (add-on) treatment to antidepressants in adults with MDD. Seroquel XR is the only medication in its class approved by the FDA to treat both major depressive disorder as adjunctive therapy and acute depressive episodes associated with bipolar disorder as monotherapy.
On 15 November 2009, AstraZeneca announced results of a PLATO sub-analysis in the most serious type of Acute Coronary Syndrome (ACS) patients, those with ST Segment Elevation Myocardial Infarction (STEMI). In this setting, ST segment elevation indicates total obstruction of a coronary artery which warrants emergency surgery with angioplasty, a procedure termed primary Percutaneous Coronary Intervention or “PCI,” in order to restore flow, salvage the heart muscle (myocardium) from infarction and reduce mortality.
The sub-analysis showed that, compared to clopidogrel (Plavix®/Iscover®), treatment with ticagrelor (Brilinta) resulted in a reduction of cardiovascular events (composite of CV death, heart attack and stroke) for up to a year (ticagrelor vs. clopidogrel, 9.3% vs. 11.0%, P=0.02), without an increase in major bleeding (9.0% vs. 9.3%, P=0.63). These efficacy findings were driven by a statistically significant reduction in heart attacks (myocardial infarction) (4.7% vs. 6.1%, P=0.01). For these STEMI patients, the benefit observed with ticagrelor increased over time.
Ticagrelor also demonstrated effects across several secondary efficacy endpoints including MI, stent thrombosis, and the composite of MI, stroke and all-cause mortality. There was an 18% relative reduction in all cause mortality at one year from 6.0% to 4.9% (P=0.04) with ticagrelor over clopidogrel.
The pre-specified sub-analysis of the ACS STEMI patients looked at approximately 45% (8,430 patients) of the overall PLATO study population. These data were presented during the late-breaker session at the annual American Heart Association (AHA) Scientific Sessions.
During December 2009, the phase III ZETA and ZEPHYR trials were analysed. The ZETA trial met its primary endpoint of improving progression-free survival in patients with advanced medullary thyroid cancer. The ZEPHYR trial did not meet its primary endpoint of prolonging overall survival in patients with advanced lung cancer who had previously received EGFR inhibitor therapy. Full results of these two trials will be presented at medical congresses during 2010.
On 15 December 2009, the US FDA Endocrinologic and Metabolic Drugs Advisory Committee (EMDAC) met to discuss the supplemental New Drug Application (sNDA) filed by AstraZeneca which seeks to incorporate outcomes data from the JUPITER study into the Crestor prescribing information.
The Committee voted 12 yes, 4 no, and 1 abstention that AstraZeneca has established sufficient benefit to offset the observed risks to support the use of Crestor in individuals meeting the following criteria:
The FDA Advisory Committee also discussed four non-voting items related to a range of other observations in the JUPITER study, including adverse events and whether the JUPITER trial identified an appropriate new target patient population.
The Crestor sNDA remains under regulatory review; a response is anticipated during the first quarter 2010.
All narrative in this section refers to growth rates at constant exchange rates (CER) unless otherwise indicated
Respiratory and Inflammation
Infection and Other
Operating and Financial Review
All narrative in this section refers to growth rates at constant exchange rates (CER) and on a Core basis unless otherwise indicated. These measures, which are presented in addition to our Reported financial information, are non-GAAP measures which management believe useful to enhance understanding of the Group’s underlying financial performance of our ongoing businesses and the key business drivers thereto. The Core financial measure is adjusted to exclude certain significant items, such as charges and provisions related to our global restructuring and synergy programmes, amortisation and impairment of the significant intangibles relating to our acquisition of MedImmune Inc. in 2007 and our current and future exit arrangements with Merck in the US, and other specified items. More detail on the nature of each of these adjustments is given in our Annual Report and Form 20-F Information 2008. During the second quarter, the Group enhanced its methodology for calculating growth rates in constant currency terms. The constant exchange growth rates (CER) disclosed for the second half of 2009 have been calculated using the updated methodology.
All financial figures, except earnings per share, are in $ millions. Weighted average shares in millions.
Revenue grew by 4 percent in the fourth quarter to $8,945 million.
Core gross margin of 81.9 percent in the fourth quarter was 4.9 percentage points higher than last year. Lower payments to Merck (0.5 percentage points), lower intangible asset impairments and provisions (3.1 percentage points) and continued efficiency gains and mix factors (2.0 percentage points) were partially offset by higher royalty payments (0.7 percentage points).
Core R&D expenditure was $1,270 million in the fourth quarter, 1 percent higher than last year, as increased investment in biologics and higher charges relating to intangible asset impairments were partially offset by continued productivity initiatives and lower project costs resulting from several late stage development projects completing their Phase III programmes and progressing to pre-registration.
Core SG&A costs of $3,065 million in the fourth quarter were 16 percent higher than last year. Stronger than expected revenue performance provided the opportunity to drive future growth through increased marketing investment for Emerging Markets and currently marketed brands, and to support launch planning for the new products awaiting registration. SG&A expense growth also included increased legal expenses and impairment of intangible assets related to information systems, which were only partially offset by operational efficiencies.
Core other income of $141 million was $72 million lower than the fourth quarter of 2008, chiefly on expected lower one-time gains and lower HPV royalties.
Core operating profit was $3,044 million, an increase of 6 percent at CER, or 13 percent on an actual basis. In comparison with last year against the dollar, the euro was 12 percent stronger (increasing sales and costs), the Swedish krona was 11 percent stronger (increasing costs) and sterling was 4 percent stronger (increasing costs). Core operating margin increased by 0.5 percentage points to 34.0 percent of revenue as result of leveraging sales growth and lower intangible asset impairments within Cost of Sales.
Core earnings per share in the fourth quarter were $1.42, up 7 percent, as the increase in Core operating profit and a lower effective tax rate were only partially offset by higher net finance expense.
Reported operating profit was up 13 percent to $2,325 million. Reported earnings per share were $1.07 up 16 percent.
All financial figures, except earnings per share, are in $ millions. Weighted average shares in millions.
Revenue grew by 7 percent for the full year to $32,804 million.
Core gross margin of 83.0 percent for the full year was 2.4 percentage points higher than last year. Lower payments to Merck (0.6 percentage points), the impact of the release of a provision with respect to the resolution of an issue related to a third party supply contract in the third quarter (0.5 percentage points), lower intangible asset impairments and provisions (0.8 percentage points) and continued efficiency gains and mix factors (1.4 percentage points) were partially offset by higher royalty payments (0.9 percentage points).
Core R&D expenditure was $4,334 million for the full year, 3 percent lower than last year, as increased investment in biologics was more than offset by the continued productivity initiatives and lower costs associated with late stage development projects that have progressed to pre-registration.
Core SG&A costs of $9,890 million for the full year were 5 percent higher than last year, as increased marketing investment in Emerging Markets and currently marketed brands, and supporting the launch planning for the new products awaiting registration, were partially offset by operational efficiencies across the business.
Core other income of $926 million was $192 million higher than 2008, chiefly as a result of the Abraxaneâ and Nordic OTC disposals in the first half of the year.
Core operating profit was $13,621 million, an increase of 23 percent. Core operating margin increased by 5.1 percentage points to 41.5 percent of revenue, as a result of sales growth, efficiencies across the cost base, lower R&D spend and the disposals within other income.
Core earnings per share for the full year were $6.32, an increase of 23 percent in line with the increase in core operating profit as higher net finance expense was offset by a lower effective tax rate and the benefit of a lower average number of shares outstanding during the previous year.
Reported operating profit was up 24 percent to $11,543 million, including $636 million of legal provisions. Reported earnings per share were $5.19 up 22 percent.
Finance Income and Expense
Net finance expense was $736 million for the year ($161 million for the quarter), versus $463 million in 2008 ($76 million for the quarter). The key drivers were the continued reversal of the fair value gain as described below, reduced interest received due to lower interest rates, a higher net interest expense on pension obligations, partially offset by reduced interest payable on lower debt balances.
Net finance expense included a net fair value loss of $15 million for the quarter ($82 million gain in Q4 2008) and $145 million for the year ($130 million gain in 2008) largely due to credit spreads reducing through 2009. As outlined in the full year 2008 results, the net fair value gain of $130 million recorded mainly related to two long-term bonds. These bonds are swapped to floating interest rates and accounted for using the fair value option under IFRS. Under this accounting treatment both the bonds and the related interest rate swaps are measured at fair value, with changes in fair value reported in the income statement. The fair value of each instrument reflects changes in market interest rates, which broadly offset, but the fair value of these bonds also reflects changes in credit spreads. The 2008 gain has now reversed fully in 2009 and, as credit spreads continued to reduce in Q4, further losses have been recorded.
The Company anticipates that net finance expense for 2010 will be approximately $550 million.
The effective tax rate for the fourth quarter is 27.8 percent (2008 30.7 percent) and 30.2 percent for the year (2008 29.4 percent). Excluding the impact of the legal provisions ($98 million for the fourth quarter and $636 million for the year) the effective tax rate for the fourth quarter would be 28.1 percent and 28.8 percent for the year. The full year tax rate for 2010 is currently anticipated to be around 29 percent. Further details relating to the tax position are set out in Note 4.
Cash generated from operating activities was $11,739 million in the year to 31 December 2009, compared with $8,742 million in 2008. The improvement of $2,997 million is primarily driven by the increase in cash generated from operations of $3,118 million, reflecting the strong underlying performance and improved working capital management, partially offset by an increase in tax payments of $172 million.
Net cash outflows from investing activities were $2,476 million in the year compared with $3,896 million in 2008. The reduction of $1,420 million is due primarily to the payment of $2,630 million to Merck in 2008 as part of the partial retirement, and the proceeds from the disposal of the Abraxane® co-promotion rights of $269 million received in 2009, countered by an increase in the purchase of short-term investments and fixed deposits of
Cash distributions to shareholders were $2,977 million through payment of the second interim dividend from 2008 and the first interim dividend for 2009.
Debt and Capital Structure
As at 31 December 2009, outstanding gross debt (interest bearing loans and borrowings) was $11,063 million (31 December 2008: $11,848 million). The reduction in gross debt of $785 million during the year was principally due to the repayment on maturity of the two–year $650 million Floating Rate Note (issued in September 2007). Of the gross debt outstanding at 31 December 2009, $1,926 million is due within one year (31 December 2008: $993 million) of which $717 million was repaid on the 4 January 2010, relating to the Euro 500 million 18 month bond issued in July 2008. Strong business cash flows have reduced net debt by $7,709 million since 31 December 2008 to net funds of $535 million as at 31 December 2009.
Chief Executive Officer
An interview with David Brennan, Chief Executive Officer is available on www.astrazeneca.com and http://info.astrazenecaevents.com
Condensed Consolidated Statement of Comprehensive Income