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 July 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 30 June 2010 the issued share capital of AstraZeneca PLC with voting rights is 1,439,629,054 ordinary shares of US$0.25. No shares are held in Treasury. Therefore, the total number of voting rights in AstraZeneca PLC is 1,439,629,054.
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 Financial Services Authority's Disclosure and Transparency Rules.
A C N Kemp
1 July 2010
Transaction by Persons Discharging Managerial Responsibilities
Disclosure Rule DTR 3.1.4
We hereby inform you that on 30 June 2010, the interest of Anders Ekblom, a person discharging managerial responsibilities, in AstraZeneca PLC Ordinary Shares of $0.25 each has changed as detailed below.
The change in interest relates to an award made in March 2008 under the AstraZeneca Restricted Share Plan, whereby, in accordance with the terms of the award, 8,306 of the 16,612 shares originally awarded to Mr Ekblom vested on 30 June 2010.
For tax purposes, the fair market value of the shares at vest was £29.47 per share being the closing price of AstraZeneca ordinary shares on the day preceding the vesting day.
A C N Kemp
1 July 2010
Financial Services Authority
ADVISORY COMMITTEE BRIEFING MATERIALS FOR BRILINTA (TICAGRELOR) NDA AVAILABLE ON US FDA WEB SITE
The US Food and Drug Administration (FDA) today posted briefing materials in advance of 28th July 2010 Cardiovascular and Renal Drugs Advisory Committee (CRDAC) to discuss the New Drug Application (NDA) filed by AstraZeneca for its investigational oral antiplatelet ticagrelor. The proposed trade name for ticagrelor in the US is BRILINTA, pending approval from the FDA.
The briefing materials can be found on the FDA web site: http://www.fda.gov/AdvisoryCommittees/CommitteesMeetingMaterials/Drugs/CardiovascularandRenalDrugsAdvisoryCommittee/ucm192863.htm
On 19th November 2009, AstraZeneca announced it had submitted an NDA to the FDA for ticagrelor, for the reduction of major adverse cardiac events in patients with acute coronary syndrome (ACS).
AstraZeneca is a global, innovation-driven biopharmaceutical business with a primary focus on the discovery, development and commercialisation of prescription medicines. As a leader in gastrointestinal, cardiovascular, neuroscience, respiratory and inflammation, oncology and infectious disease medicines, AstraZeneca generated global revenues of US $32.8 billion in 2009. For more information please visit: www.astrazeneca.com
27 July 2010
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AstraZeneca Second Quarter & Half Year Results 2010
Tomorrow, Thursday, 29 July 2010, AstraZeneca will release second quarter and half year results 2010 at 07:00BST.
An analysts presentation of the second quarter and half year results will take place at 12:00BST and will be accessible by a choice of two routes:
UK freephone: 0800 077 8491
USA freephone: 1 866 804 8688
Swedish freephone: 0200 110 487
International: +44 (0)844 335 1192
Emergency back-up number: +44 (0)1296 480 100
Printable pdf versions of slides will be available to download on the AstraZeneca Investor Relations website (http://www.astrazeneca.com/investor/) 15 minutes before the analysts presentation begins.
Details of the teleconference and webcast replay facilities are available on the Investor Relations section of the AstraZeneca website www.astrazeneca.com/investors and the AstraZeneca Events website: http://info.astrazenecaevents.com.
FDA ADVISORY COMMITTEE RECOMMENDS
US FDA APPROVAL OF BRILINTA (TICAGRELOR)
FOR ACUTE CORONARY SYNDROMES
AstraZeneca today announced that the US Food and Drug Administration (FDA) Cardiovascular and Renal Drugs Advisory Committee recommended the FDA approve AstraZeneca’s investigational drug ticagrelor for the reduction of thrombotic events in patients with Acute Coronary Syndromes (ACS).
The Advisory Committee voted as follows:
The review by the Advisory Committee, part of the FDA’s evaluation of the New Drug Application (NDA) submitted for ticagrelor, is based on the results of the large, head-to-head patient outcomes study PLATO (A Study of PLATelet Inhibition and Patient Outcomes). PLATO was designed to establish whether ticagrelor could improve cardiovascular (CV) outcomes in ACS patients, compared to clopidogrel. The study design reflected current clinical practice and included all major ACS patient types (STEMI and UA/NSTEMI), whether they underwent invasive procedures (PCI, coronary artery bypass graft surgery) or were medically managed.
“We are pleased with the Advisory Committee’s recommendation to support the approval of ticagrelor. We look forward to continued discussions with the FDA as it evaluates the panel’s recommendation and completes its review of the NDA,” said Howard Hutchinson, M.D., Chief Medical Officer, AstraZeneca.
AstraZeneca filed the regulatory submission for ticagrelor, in the second half of 2009. The proposed trade name for ticagrelor in the US is BRILINTA, pending approval from the FDA. Ticagrelor is also currently under regulatory review in nine territories around the world, including the European Union (EU), Canada, and Brazil.
The FDA frequently convenes advisory committee meetings to obtain independent expert guidance and recommendations on clinical matters. While the FDA is not required to follow this guidance, the agency takes the advice into consideration when rendering its final decisions on pending applications and other public health matters.
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
29 July 2010
- ENDS -
SECOND QUARTER AND HALF YEAR RESULTS 2010>
London, 29 July 2010
Revenue for the second quarter increased by 1 percent at constant exchange rates (CER) to $8,178 million.>
-Revenue in markets outside the US increased by 5 percent at CER, largely due to the 16 percent increase in Emerging Markets.
-US revenue declined by 4 percent at CER, chiefly as a result of generic competition for Toprol-XL, Pulmicort Respules and Casodex.
-Crestor sales increased in the second quarter by 23 percent at CER.
Core operating profit in the second quarter was $3,650 million, unchanged at CER, as lower other operating income offset increased revenue and lower operating costs.
Core EPS in the second quarter increased by 9 percent at CER to $1.79.>
-Core EPS benefited from lower net finance expense and a lower effective tax rate compared with last year.
Reported EPS in the second quarter increased by 22 percent at CER to $1.46.>
-Higher restructuring costs this quarter were more than offset by legal provisions in the prior period.
Crestor patent upheld by US Court in a ruling announced on 29 June 2010.
The Board has recommended a first interim dividend of $0.70. Target for net share repurchases is increased to $2 billion for 2010. (see page 3).
Core EPS target for the full year increased to the range of $6.35 to $6.65.
David Brennan, Chief Executive Officer, said>: “Our second quarter performance reflects continued strong growth in our Emerging Markets and good performance for key brands Crestor, Seroquel and Symbicort. While revenue and Core EPS comparisons become more challenging in the second half of the year, we have increased our full year financial targets.”
Interim Management Report>
Business Highlights All narrative in this section refers to growth rates at constant exchange rates (CER) unless otherwise indicated
Revenue in the second quarter increased by 1 percent at CER, but was up 3 percent on an actual basis as a result of the positive impact of exchange rate movements. US revenue declined by 4 percent, reflecting the impact of generic competition for Toprol-XL, Pulmicort Respules and Casodex. Group revenue in the Rest of World was up 5 percent, largely the result of a 16 percent increase in Emerging Markets; Emerging Markets accounted for approximately 75 percent of the revenue growth outside the US. Revenue in Western Europe was up 1 percent. Revenue in Established Rest of World was up 4 percent, which was impacted by the biennial price cuts in Japan.
Core operating profit in the second quarter was $3,650 million, unchanged in constant currency terms. The beneficial effect of revenue growth and operating leverage in the quarter was offset by lower other operating income compared with the second quarter last year, which included the proceeds from the Nordic OTC product portfolio disposal. Reported operating profit increased by 5 percent, ahead of the growth in Core operating profit. Adjustments to Core operating profit were $139 million higher in the second quarter last year, as higher restructuring costs in the second quarter this year were more than offset by legal provisions in the prior year.
Core earnings per share in the second quarter were $1.79 compared with $1.64 in the second quarter 2009, a 9 percent increase at CER. Core earnings per share benefited from lower net finance expense and a lower effective tax rate compared with last year. Reported earnings per share in the second quarter were $1.46, up 22 percent compared with the second quarter 2009, reflecting the net impact of restructuring costs and legal provisions that benefited the reported operating profit growth rate.
Revenue in the first half increased by 4 percent at CER, but was up 7 percent on an actual basis as a result of the positive impact of exchange rate movements. Revenue in the US was down 1 percent, reflecting the generic competition that impacted the second quarter performance. Revenue in the Rest of World was up 8 percent. Revenue in Emerging Markets was up 18 percent in the first half, accounting for more than half of the revenue growth outside the US. Revenue in Western Europe increased by 4 percent. Revenue in Established Rest of World markets increased by 8 percent.
Core operating profit for the first half increased by 5 percent to $7,507 million, leveraging higher revenues against lower SG&A and R&D expenditures, which was partially offset by a lower gross margin as a percentage of sales and lower other income compared with last year. Reported operating profit was $6,677 million, an increase of 8 percent. As was cited in the second quarter performance noted above, the step-up compared to Core operating profit growth in the first half is the result of higher adjustments to Core operating profit last year, chiefly the legal provision.
Core earnings per share for the first half were $3.82, an increase of 16 percent, which reflects the benefit from the net adjustments to tax provisions ($0.13) in the first quarter of 2010, in addition to the lower net finance expense and the lower effective tax rate that featured in the second quarter performance. Reported earnings per share were up 23 percent to $3.37.
Good progress continues on the previously announced business reshaping programmes. In the second quarter, $470 million in restructuring costs were charged, with three-quarters of this related to the R&D restructuring activities announced in conjunction with the Full Year 2009 results. These R&D restructuring costs are largely related to the cash costs that will be incurred for the portion of the estimated reduction of positions identified to date. The closure of two major research sites has also been announced.
In aggregate, restructuring costs of $565 million have been incurred in the first half. The 2010 phasing of cost and benefits for the totality of the Company’s restructuring initiatives are broadly in line with that communicated in the Full Year 2009 results announcement.
Dividends and Share Repurchases
In conjunction with the Full Year 2009 results announcement, the Company announced that the Board has adopted a progressive dividend policy, intending to maintain or grow the dividend each year. In making this announcement the Board recognised 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).
The Board has recommended a first interim dividend of $0.70 (44.9 pence, 5.12 SEK). This reflects the Board’s intent to rebalance over time the first and second interim dividends, with the aim of setting the first interim dividend at around a third of the prior year dividend, which last year was $2.30.
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.
To date, the Company has completed net share repurchases of $516 million towards its initial target of $1 billion. The Group has re-purchased 16.1 million shares for a total of $709 million in the first half, whilst 4.8 million shares were issued in consideration of share option exercises for a total of $193 million. The total number of shares in issue at 30 June 2010 was 1,440 million.
The Board has now determined that a total of $2 billion in net share repurchases will be completed in 2010.
Research and Development Update
A comprehensive update of the AstraZeneca R&D pipeline is presented in conjunction with this Half Year 2010 results announcement, and is available on the Company’s website, www.astrazeneca.com, under information for investors.
The AstraZeneca pipeline now includes 146 projects, including 97 projects in the clinical phase of development. There are 10 NME projects currently in late stage development, either in Phase III or under regulatory review. Across the portfolio, since the last update on 29 January, 15 projects have successfully progressed to their next phase (including 6 projects entering first human testing); 16 projects have been added from Discovery research; 18 projects have been withdrawn.
Significant pipeline developments since the first quarter update include:
The FDA held an Advisory Committee meeting to consider Brilinta (ticagrelor) on 28 July 2010. The Company will report on the outcome of the Committee in a separate communication today.
Vimovo, co-developed by POZEN Inc. and AstraZeneca, is a fixed-dose combination of delayed-release enteric-coated naproxen, a pain-relieving non-steroidal anti-inflammatory drug (NSAID), and immediate release esomeprazole, a proton pump inhibitor. On 30 April 2010, the Company announced that the US Food and Drug Administration (FDA) approved Vimovo delayed-release tablets for the relief of the signs and symptoms of osteoarthritis (OA), rheumatoid arthritis (RA) and ankylosing spondylitis (AS), and to decrease the risk of developing gastric ulcers in patients at risk of developing NSAID-associated gastric ulcers. Vimovo is not recommended for initial treatment of acute pain because the absorption of naproxen is delayed compared to the absorption from other naproxen-containing products. Controlled studies do not extend beyond six months.
Since FDA approval, initial commercial efforts have been focused on building brand awareness and on developing formulary access and reimbursement, with detailing scheduled to begin late third quarter or early fourth quarter 2010.
Regulatory review continues for the Marketing Authorisation Application (MAA) filed for Vimovo on 15 October 2009 in the European Union via the decentralised procedure.
On 2 June 2010, MedImmune announced that the US FDA Antiviral Drugs Advisory Committee voted 14 to 3 to recommend that motavizumab should not be licensed for marketing regarding the prevention of serious respiratory syncytial virus (RSV) disease in high-risk infants. The committee’s recommendation will be considered by FDA reviewers in their evaluation of the Biologics License Application (BLA) for motavizumab.
The Company continues to believe motavizumab offers a meaningful clinical benefit to patients at high risk for a very common and serious illness, and will work with the FDA as it completes the review of the BLA, for which a completion date of 27 August 2010 has been set. The Group holds intangible assets of $445 million relating specifically to motavizumab, which may be subject to impairment following the Group’s analysis of the FDA’s decision. This was one of the significant intangible assets recognised on our acquisition of MedImmune in 2007.
On 30 March 2010, AstraZeneca and Abbott announced that the US FDA issued a complete response letter (CRL) for the New Drug Application (NDA) for Certriad (rosuvastatin/fenofibric acid delayed release) Capsules.
AstraZeneca and Abbott have been evaluating the CRL and together will work with the FDA to determine the best path forward.
On 28 May 2010, the Company announced the top-line results of HORIZON II, the Phase III study evaluating Recentin (cediranib) for the first-line treatment of metastatic colorectal cancer (mCRC). Cediranib met the co-primary endpoint of improving progression-free survival, but showed no improvement in overall survival. Based on the results of this trial, taken together with the results of the HORIZON III study announced in March, AstraZeneca announced that it does not intend to file regulatory submissions in first-line mCRC.
The Company has now reviewed topline results from the Phase III REGAL study, evaluating Recentin in recurrent glioblastoma, an aggressive type of malignant brain tumour. These results showed evidence of clinical activity for cediranib, but did not meet the primary endpoint of progression-free survival for either cediranib alone or in combination with lomustine chemotherapy, and there was no benefit in overall survival versus lomustine alone.
Data from the HORIZON and REGAL study programmes will be presented at future medical congresses.
The Company continues to examine whether Recentin may have applications in a number of other tumour types.
On 30 April 2009, the Company submitted an application to the US FDA for Axanum (aspirin/esomeprazole magnesium), seeking approval for the risk reduction of low dose aspirin (ASA) associated gastric and/or duodenal ulcers in patients at risk. At that time the Company also submitted an sNDA for Nexium for the risk reduction of low-dose ASA-associated peptic ulcers.
On 2 June 2010, the Company announced it has received a CRL from the US FDA for both the Axanum NDA and the Nexium sNDA. AstraZeneca is currently evaluating the CRLs, and will continue discussions with the FDA to determine next steps with respect to both applications and will respond to the agency’s request for additional information.
On 4 June 2010, the Company announced that it has submitted an MAA for Axanum in the European Union via the Decentralised Procedure, for the prevention of cardiovascular and cerebrovascular events in patients requiring continuous low-dose ASA treatment who are at risk of developing ASA-associated gastric and/or duodenal ulcers.
On 23 June 2010, AstraZeneca and Targacept, Inc., announced the enrolment of the first patient in the Phase III clinical development program for TC-5214, a nicotinic channel blocker. The Phase III program, referred to as the Renaissance Program, is designed to support the planned second half of 2012 filing of a new drug application with the US FDA for TC-5214 as an adjunct treatment for major depressive disorder (MDD) in patients with an inadequate response to first-line therapy with a selective serotonin reuptake inhibitor (SSRI) or serotonin/norephinephrine reuptake inhibitor (SNRI). A Marketing Authorisation Application in Europe is planned for 2014.
AstraZeneca and Targacept have designed the Renaissance Program to include two fixed dose Phase III studies and two flexible dose Phase III studies to evaluate the efficacy and tolerability of TC-5214 as an adjunct treatment in patients with an inadequate response to SSRI or SNRI therapy. The Renaissance Program also includes a double blind, placebo controlled long-term safety study in which patients would receive TC-5214 or placebo for up to one year. All studies in the Renaissance Program are on track to initiate this year.
In June 2010, new Phase III data were presented for dapagliflozin at the 70th American Diabetes Association Annual Scientific Sessions. Results from a 24-week Phase III clinical study demonstrated that the addition of the investigational drug dapagliflozin achieved reductions in the primary endpoint, glycosylated hemoglobin level (HbA1c), in inadequately controlled type 2 diabetes patients who were treated with insulin (with or without oral anti-diabetes medications (OADs)), compared to placebo plus insulin (with or without OADs). The study also demonstrated that dapagliflozin achieved reductions in the secondary endpoints that evaluated the change in total body weight from baseline, change from baseline in mean daily insulin dose, and change from baseline in fasting plasma glucose (FPG). Generally, adverse events, serious adverse events and study discontinuations were similar across all treatment groups. Signs, symptoms and other reports suggestive of urinary tract and genital infections were more frequently noted in the dapagliflozin treatment arms compared to placebo and rarely led to discontinuation.
In July, results from two Phase II “proof of concept” trials were published in The Lancet. These trials, in previously treated advanced breast and ovarian cancer patients with the BRCA1 and BRCA2 gene mutation, demonstrated that olaparib has single-agent activity in these patients.
A Phase III protocol for a trial of olaparib in breast cancer patients with the BRCA1 and BRCA2 gene mutation is now being discussed with the US FDA. The target for starting this Phase III trial, for which an improved tablet formulation will be required, is now 2011, with the goal of first regulatory submissions in 2014.
The effects on revenue from the generic competition for Toprol-XL, Pulmicort Respules and Casodex are evident in the second quarter results, particularly in the US. Taken together with the expected generic erosion for Arimidex and the absence of a contribution from H1N1 pandemic flu vaccine, as expected, the second half of the year will present a difficult year-on-year comparison for revenue and Core earnings per share.
Nevertheless, the first half performance has been strong and, combined with the outlook for the remainder of the year, this leads to an upward revision in our financial guidance for the full year. The Company now expects a low single-digit decline in revenue in 2010 in constant currency terms. Based on the January 2010 average exchange rates for our principal currencies, the new target for Core EPS is in the range of $6.35 to $6.65.
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 was provided in conjunction with the Full Year 2009 results announcement, and can be found on the AstraZeneca web site.
It is not anticipated that the nature of the principal risks and uncertainties that affect the business, and which are set out on pages 80 to 86 of the Annual Report and Form 20-F Information 2009, will change in respect of the second six months of the financial year.
In summary, the principal risks and uncertainties listed in the Annual Report and 20-F Information 2009 are:
Product pipeline risks>
Failure to meet development targets, difficulties of obtaining and maintaining regulatory approvals for new products, failure to obtain patent protection, delay to new product launches and strategic alliances formed as part of our externalisations strategy may be unsuccessful.
Commercialisation and business execution risks>
Challenges to achieving commercial success of new products, performance of new products, product counterfeiting, developing our business in Emerging Markets, expiry of intellectual property rights, patent litigation and early loss of intellectual property rights, expiry or earlier loss of patents covering competing products, competition, price controls and price reductions, expected gains from productivity initiatives are uncertain, acquisitions may be unsuccessful, failure to manage a crisis, failure of information technology and failure of outsourcing.
Supply chain and delivery risks
Manufacturing biologics and reliance on third parties for goods and services.
Legal, regulatory and compliance risks>
Adverse outcome of litigation and/or governmental investigations, legal proceedings regarding business practices, substantial product liability claims, failure to adhere to applicable laws, rules and regulations and environmental/occupational health and safety liabilities.
Economic and financial risks>
Adverse impact of a sustained economic downturn, impact of fluctuations in exchange rates, credit and return on substantial investments, limited third party insurance coverage, taxation and pensions.
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. Core financial measures are adjusted to exclude certain 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 these measures is given on page 37 of our Annual Report and Form 20-F Information 2009.
All financial figures, except earnings per share, are in $ millions. Weighted average shares in millions.
Revenue grew by 1 percent to $8,178 million.
Core gross margin of 83.0% was 0.8 percentage points higher than last year. Lower Merck payments (0.3 percentage points), favourable mix and operating efficiencies (0.7 percentage points) were partially offset by higher royalty payments (0.2 percentage points).
Core SG&A costs of $2,271 million were 1 percent higher than last year. Investment in Emerging Markets and higher legal costs were largely offset by operational efficiencies across Established Markets.
Core other income of $186 million was $163 million lower than last year chiefly as a result of the 2009 Nordic over-the-counter (OTC) disposal gain only being partially offset by royalties received from sales of Teva’s generic version of Pulmicort Respules.
Core Pre-R&D Operating Margin was 56.4 percent, down 1.5 percentage points, with the higher gross margin more than offset by the impact of the prior year Nordic OTC disposal within other income.
Core R&D expenditure was $966 million, 9 percent lower than last year, due to increased investment in biologics being more than offset by reduced activity across the small molecule portfolio and lower intangible impairments, reflecting the impact of the prior year MAP write off ($44 million).
Core operating profit was $3,650 million, flat at CER or up 1 percent on an actual basis. In comparison with last year against the dollar, the euro was 7 percent weaker (reducing sales and costs), the Swedish krona was 4 percent stronger (increasing costs) and sterling was 4 percent weaker (reducing costs). Core operating margin decreased by 0.3 percentage points to 44.6 percent as a result of lower other income only being partially offset by the higher gross margin and lower R&D expenditure.
Core earnings per share in the second quarter were $1.79, up 9 percent, chiefly driven by lower net finance expense and a lower effective tax rate.
Reported operating profit was up 5 percent to $3,034 million. Reported earnings per share were $1.46 up 22 percent as a result of the factors affecting Core earnings per share and lower legal provisions only being partially offset by higher restructuring costs.
All financial figures in table, except earnings per share, are in $ millions. Weighted average shares in millions.
Revenue grew by 4 percent to $16,754 million.
Core gross margin of 82.0 percent was 0.5 percentage points lower than last year. Higher royalty payments (0.1 percentage points) combined with regional and product mix factors (0.7 percentage points) were only partially offset by lower payments to Merck (0.3 percentage points).
Core SG&A costs of $4,583 million were flat at CER compared with last year. Investment in Emerging Markets and recently launched brands plus higher legal costs were mostly offset by operational efficiencies across the US and Western Europe.
Core other income of $456 million was $186 million lower than last year chiefly as a result of the prior year Nordic OTC and Abraxane® disposal gains only being partially offset by royalties received from sales of Teva’s generic version of Pulmicort Respules.
Core Pre-R&D Operating Margin was 56.4 percent, down 0.9 percentage points, with the lower gross margin and disposals within other income only partially offset by the leverage from revenue growth and efficiencies within SG&A.
Core R&D expenditure was $1,939 million, 7 percent lower than last year, as the increased investment in biologics was more than offset by lower intangible impairments and project costs. The lower project costs reflect several late stage projects completing their trials. Spend is expected to increase in the second half of the year driven by Phase III trials for the recently in-licensed fostamatinib disodium and TC-5214.
Core operating profit was $7,507 million, an increase of 5 percent. Core operating margin increased by 0.5 percentage points to 44.8 percent as a result of lower R&D expenditure and the leverage from revenue growth, partially offset by lower other income.
Core earnings per share in the first half were $3.82, up 16 percent, with the strong operating performance supported by lower net finance expense and a lower effective tax rate largely due to the first quarter net adjustments to tax provisions ($0.13).
Reported operating profit was up 8 percent to $6,677 million. Reported earnings per share were $3.37 up 23% as a result of the factors affecting Core earnings per share and lower legal provisions only being partially offset by higher restructuring costs.
Net finance expense was $241 million for the first half, versus $403 million in 2009 ($117 million for the quarter, versus $243 million for the second quarter of 2009). Fair value gains of $8 million were recorded on the long-term bonds in the first half, versus fair value losses of $100 million in the first half of 2009 ($3 million gain for the quarter versus $79 million loss for quarter two 2009). In addition to this, there is reduced interest payable on lower debt balances, and slightly increased returns from higher cash and cash equivalent balances.
The effective tax rate for the second quarter is 27.5 percent (2009 34.2 percent, 29.3 percent excluding the impact of legal provisions) and 23.9 percent for the first half (2009 31.2 percent, 29.0 percent excluding the impact of legal provisions). As previously disclosed, the effective tax rate has benefited from an adjustment in respect of prior periods following the announcement in February that AstraZeneca had settled a long-running transfer pricing issue and certain other outstanding UK tax matters with the UK Tax Authorities. The effect of this settlement and developments in other transfer pricing matters resulted in a net benefit to earnings of $194 million which was reported in the first quarter. The effective tax rate for the second quarter of 2010 (27.5 percent) was lower than that in the second quarter of 2009 (29.3 percent excluding the impact of legal provisions) largely due to the relative impact of adjustments to prior periods and ongoing effect of the settlement described above. The Company continues to anticipate the tax rate for the full year to be around 27 percent.
The UK government has announced proposed changes to the UK corporation tax system in the June 2010 Budget Statement. Finance (No.2) Act 2010 will reduce the main rate of UK corporation tax from 28 percent to 27 percent effective from 1 April 2011. Proposals to make further reductions to the main rate of corporation tax were also announced and, if enacted, would result in a phased reduction in the UK main rate to 24 percent by 1 April 2014. The initial 1 percent reduction in the main corporation tax rate was still subject to parliamentary approval at the balance sheet date of 30 June 2010 and is not reflected in the half year financial results. The Company is currently assessing the impact of the changes.
Cash generated from operating activities was $4,767 million in the six months to 30 June 2010, compared with $5,334 million in the first half of 2009. The drop of $567 million is primarily driven by strong underlying performance being more than offset by the first instalment payment of $562 million (£350 million) in respect of the UK tax settlement (for which the final instalment of £155 million is due in March 2011) and the payment of $302 million in the US for Seroquel sales and marketing practices (for which an additional $218 million has been segregated to cover the remaining individual state settlements).
Net cash outflows from investing activities were $2,188 million in the six months compared with $162 million in 2009. The increase of $2,026 million is due primarily to the movement in short-term investments and fixed deposits of $707 million and higher payments for intangible assets of $1,032 million (including the Merck First Option payment of $647 million and increased externalisation activity).
Net cash distributions to shareholders increased to $2,883 million (from $2,084 million in 2009) through payment of the second interim dividend from 2009 of $2,367 million and net share repurchases of $516 million.
Debt and Capital Structure>
As at 30 June 2010, outstanding gross debt (including loans, short-term borrowings and overdrafts) was $10,318 million (31 December 2009: $11,063 million). The reduction in gross debt of $745 million during the first half of the year was principally due to the repayment on maturity of the Euro 500 million 18-month bond issued in July 2008. Of the gross debt outstanding at 30 June 2010, $1,275 million is due within one year (31 December 2009: $1,926 million). Net funds of $903 million have increased by $368 million since 31 December 2009 as a result of the net cash inflow during the six months to 30 June 2010 as described above.
There have been no significant related party transactions in the period.
Chief Executive Officer
Condensed Consolidated Statement of Comprehensive Income>