2nd Qtr & Interim Rslts-Pt1

AstraZeneca PLC 1 August 2000 PART 1 AstraZeneca PLC First Half Results 2000 'Profit before tax up 19 per cent; EPS up 18 per cent' Financial Highlights (before Exceptional Items) ------------------------------------------------------------------------------ -- --------------------------------------------- Group 1st Half 1st Half Constant (incl Agrochemicals) 2000 1999* Currency USDm USDm % --------------------------------------------- Sales 9,544 9,043 + 8 Operating Profit 2,389 2,103 +16 Profit before Tax 2,442 2,092 +19 Earnings per Share Group USD0.96 USD0.83 +18 --------------------------------------------- Group (Statutory FRS3) USD0.87 USD0.47 --------------------------------------------- * Excluding Specialties All narrative in this section refers to growth rates at constant exchange rates (CER) - Sales up 8 per cent; Agrochemicals sales up 8 per cent - Operating profit up 16 per cent; Agrochemicals operating profit up 23 per cent - Profit before Tax of USD2,442 million, up 19 per cent - EPS up 18 per cent - Strength of US Dollar versus Euro reduced reported sales and operating profit by 2 per cent ------------------------------------------- Ongoing 1st Half 1st Half Constant (excl Agrochemicals) 2000 1999 Currency USDm USDm % -------------------------------------------- Sales 7,863 7,431 + 8 Operating Profit 2,046 1,820 +15 Earnings per Share USD0.84 USD0.72 +19 --------------------------------------------- All narrative in this section refers to growth rates for ongoing operations at constant exchange rates (CER) - Sales up 8 per cent; US Healthcare sales up 12 per cent - Operating profit up 15 per cent - EPS up 19 per cent - Healthcare operating margin increased to 26.4 per cent - Strength of US Dollar versus Euro reduced reported sales by 2 per cent and operating profit by 3 per cent - Synergy benefits of USD265 million achieved in the half year; exceptional charge of USD179 million related to the ongoing integration and synergy programmes AstraZeneca PLC Second Quarter Results 2000 Financial Highlights (before Exceptional Items) ------------------------------------------------------------------------------ -- --------------------------------------------- Group 2nd Quarter 2nd Quarter Constant (incl Agrochemicals) 2000 1999* Currency USDm USDm % --------------------------------------------- Sales 4,946 4,729 + 7 Operating Profit 1,312 1,155 +16 Profit before Tax 1,324 1,121 +21 Earnings per Share Group USD0.52 USD0.44 +21 -------------------------------------------- Group (Statutory FRS3) USD0.46 USD0.07 -------------------------------------------- * Excluding Specialties All narrative in this section refers to growth rates at constant exchange rates (CER) - Sales up 7 per cent; Agrochemicals sales up 5 per cent - Operating profit up 16 per cent; Agrochemicals operating profit up 20 per cent - Profit before Tax of USD1,324 million, up 21 per cent - EPS up 21 per cent - Strength of US Dollar versus Euro reduced reported sales and operating profit by 2 per cent -------------------------------------------- Ongoing 2nd Quarter 2nd Quarter Constant (excl Agrochemicals) 2000 1999 Currency USDm USDm % -------------------------------------------- Sales 3,971 3,780 + 7 Operating Profit 1,070 943 +15 Earnings per Share USD0.43 USD0.36 +21 All narrative in this section refers to growth rates for ongoing operations at constant exchange rates (CER) - Sales up 7 per cent; Healthcare sales up 8 per cent; US Healthcare sales up 8 per cent - Operating profit up 15 per cent - EPS up 21 per cent - Healthcare operating margin increased to 27.2 per cent - Strength of US Dollar versus Euro reduced reported sales and operating profit by 2 per cent - Synergy benefits of USD145 million achieved in the quarter; exceptional charge of USD96 million related to the ongoing integration and synergy programmes Tom McKillop, Chief Executive Officer, said: 'In the first half of 2000, the business has performed in line with our expectations and we are positioned to deliver the targets of double digit sales growth and good double digit profits growth set for the year. The strength of the US dollar versus the Euro has reduced sales and profits by two per cent and if currencies remain at current levels we expect a similar effect on the full year results. 'Sales for Healthcare grew by eight per cent. Sales from Atacand (for heart disease), Arimidex (for breast cancer), Casodex (for prostate cancer), Seroquel (for schizophrenia) and Zomig (for migraine) - our five current most important drivers of growth - contributed strongly. Future prospects for all these products are excellent as new indications and markets are brought on stream throughout the rest of the year. Further lifecycle plans are in place to realise the potential of these important products. 'Losec/Prilosec grew by seven per cent in the half year. While it is retaining its share of the total anti-secretory market in the USA, it has lost share in the PPI sector as new entrants compete on price ahead of the launch of Nexium. 'Our synergy programme is realising benefits even more quickly than expected and we have increased our target for 2000 by USD100 million, to USD600 million, while maintaining the overall target of USD1.1 billion of annual synergies. USD265 million of benefits were realised in the first half of the year. 'Looking at our development portfolio of new products I am pleased to say that all key projects remain on track, particularly those products we identified at the beginning of the year as being potential 'Megabrands'. Nexium, our next generation Proton Pump Inhibitor (PPI) for the treatment of acid-related disease; ZD4522, our superstatin for lowering cholesterol; H376/95, the first ODTI (Oral Direct Thrombin Inhibitor) for treatment of thrombosis; Iressa for the treatment of a range of solid tumours; and Viozan for the treatment of COPD (Chronic Obstructive Pulmonary Disease). During the second quarter the clinical data on all these compounds presented to medical audiences, and communicated as promised to investors, enhanced our confidence in the opportunities these products offer and underpinned our decision to expand our US primary care field force. 'Agrochemical sales grew by eight per cent, a good performance in the still difficult agrochemical market. Profits grew by 23 per cent benefiting in part from the cost saving initiatives introduced last year. Plans for the spin-off and merger of the business with the agrochemicals and seeds activities of Novartis to form Syngenta, the world's largest dedicated agribusiness, are progressing well. Approval for the planned merger was received from the European Commission on 26 July following the agreement of both AstraZeneca and Novartis to divest or license certain of their crop protection products which in aggregate represent less than five per cent of Syngenta's unaudited proforma 1999 sales. Clearance from the FTC in the USA is still awaited but the plan to launch Syngenta in the final quarter of this year remains on track. 'Earnings per share for the Group (including Agrochemicals) increased by 21 per cent in the quarter and by 18 per cent to USD0.96 for the half year (and by 19 per cent for the ongoing business). In line with our stated dividend policy the Board has declared a first interim dividend of USD0.23 (15.3 pence, SEK 2.10). Our cash position remains strong with USD1.8 billion of net cash funds at the end of June. During the first six months, 9.4 million shares were purchased for cancellation for an aggregate cost of USD353 million. 'The exciting opportunities now available to us provide good prospects of enhanced sales growth and the management team is focused on realising these while balancing the short, medium and long-term financial performance. Our targets for the full year of double digit sales growth and good double digit profit growth, in constant currency, remain unchanged. For the longer-term we shall be driving to realise the increased sales potential while maintaining our previously announced margin target of 27 per cent. The pace of development across our whole portfolio gives us the confidence to plan for ambitious launch programmes in all major markets including our initiative to increase the size of our US field force by 1,300. Supporting this programme will be a sustained strategy of tight financial management and rigorous resource prioritisation, aided by the earlier delivery of synergies.' London, 1 August 2000 Media Enquiries: Steve Brown/Lucy Williams (London) (020) 7304 5033/5034 Staffan Ternby (Sodertalje) (8) 553 26107 Rachel Bloom (Wilmington) (302) 886 7858 Analyst/Investor Enquiries: Elizabeth Sutton/Michael Olsson (London) (020) 7304 5101/5087 Staffan Ternby (Sodertalje) (8) 553 26107 Ed Seage (Wilmington) (302) 886 4065 Jorgen Winroth (Wayne) (609) 896 4148 Healthcare ------------------------------------------------------------------------------ Except where stated, all narrative in this section refers to the second quarter. Growth rates are at constant exchange rates (CER). ---------------------------------------------------- Second Quarter CER % Half Year CER % ---------------------------------------------------- 2000 1999 2000 1999 ---------------------------------------------------- Sales 3,945 3,752 + 8 7,806 7,382 + 8 Sales (ex Losec/Prilosec) 2,566 2,318 +13 4,839 4,534 +10 Operating Profit 1,073 954 +14 2,058 1,834 +14 ROS 27.2% 25.4% 26.4% 24.8% ---------------------------------------------------- Gastrointestinal ---------------------------------------------------- Second Quarter CER % Half Year CER % ---------------------------------------------------- 2000 1999 2000 1999 ---------------------------------------------------- Losec/Prilosec 1,379 1,434 - 1 2,967 2,848 + 7 Total 1,390 1,446 - 2,989 2,872 + 7 ---------------------------------------------------- - Prilosec maintained its prescription market share of the US total anti- secretory market but sales in the quarter were adversely affected by wholesaler destocking following the March price rise - The PPI class has continued to grow in the USA and its market share has expanded to 59.7 per cent (MAT June) - In Europe Losec sales grew by five per cent mainly due to strong growth in France (up 16 per cent) with continued good performance in both GERD and NSAID prophylaxis indications - Monthly sales of Losec in Germany have stabilised following the introduction of generics last year but sales in the UK are being adversely affected by pricing pressure from competitor products - The first launch of Nexium is due to take place to specialists on 14 August in Sweden. Launches in a further five European markets, including the UK and Germany will take place later in the third quarter and in the fourth quarter respectively. Cardiovascular ---------------------------------------------------- Second Quarter CER % Half Year CER % ---------------------------------------------------- 2000 1999 2000 1999 ---------------------------------------------------- Zestril 385 301 +30 661 602 +12 Atacand 68 41 +73 124 73 +78 Seloken/Toprol-XL 155 145 +10 261 257 + 5 Tenormin 134 123 + 8 253 247 + 3 Plendil 118 108 +12 233 216 +11 ---------------------------------------------------- Total 990 855 +18 1,784 1,670 +10 ---------------------------------------------------- - The strong sales growth of Zestril in the quarter has brought the half year trend into line with the underlying growth rate - Atacand sales growth continued to out-pace the class in the USA and a number of European markets with growth in Germany and France stimulated by the launch of Atacand Plus and the 16mg dose. The publication of data showing Atacand to be more effective than a key competitor (losartan) and the US launch of Atacand Plus, scheduled for the fourth quarter, will provide further growth opportunities Respiratory ---------------------------------------------------- Second Quarter CER % Half Year CER % ---------------------------------------------------- 2000 1999 2000 1999 ---------------------------------------------------- Pulmicort 179 180 + 5 353 370 + 1 Accolate 59 46 +28 114 74 +55 Rhinocort 73 56 +32 114 99 +18 Oxis 29 21 +48 56 41 +47 ---------------------------------------------------- Total 384 350 +15 729 686 +11 ---------------------------------------------------- - Sales of Pulmicort grew strongly in the USA with sales in the first half reaching USD59 million as the supply position improves. Sales in Europe, however, continue to be adversely affected by the introduction of new competitive products - The launch of Pulmicort Respules in the USA later this year will boost growth - Accolate sales growth in the USA continued to be influenced by wholesaler buying and stock levels are high - The successful launch of Rhinocort Aqua in the US market has resulted in market share gains. At the end of June the total and new prescription share of the aqueous nasal inhaler market were 5.8 per cent and 7.1 per cent respectively, just five months after launch. Rhinocort is already the third most prescribed nasal steroid in the US market Oncology ---------------------------------------------------- Second Quarter CER % Half Year CER % ---------------------------------------------------- 2000 1999 2000 1999 ---------------------------------------------------- Casodex 105 75 +41 220 166 +35 Arimidex 45 36 +31 82 63 +36 Nolvadex 136 144 - 8 275 287 - 5 Zoladex 197 166 +19 364 331 +11 ---------------------------------------------------- Total 491 426 +15 956 859 +12 ---------------------------------------------------- - Casodex sales continued to grow strongly with market leadership positions maintained across the world. The monotherapy indication has been launched in three markets and is contributing to strong growth with Casodex now the fastest growing hormonal agent for the treatment of prostate cancer. US approval for this indication is expected at the end of the year - Arimidex continued to hold its leadership position across all markets in spite of aggressive marketing pressure from a new competitor. Early launches in the first line treatment of breast cancer in Europe will take place during the second half of the year - Sales of Zoladex in the USA benefited from the implementation of new contracts and from some quarter on quarter phasing - Prescriptions for Nolvadex (tamoxifen) continued to grow but destocking has led to a reduction in reported sales Specialist/Hospital ---------------------------------------------------- Second Quarter CER % Half Year CER % ---------------------------------------------------- 2000 1999 2000 1999 ---------------------------------------------------- Seroquel 122 48 +156 204 95 +116 Zomig 67 47 + 47 132 86 + 58 Merrem 42 39 + 18 78 77 + 9 Diprivan 120 178 - 31 284 327 - 11 Xylocaine 63 67 - 7 117 128 - 11 Marcaine 24 22 + 9 45 42 + 9 Astra Tech 30 28 + 14 58 55 + 12 Salick Health Care 45 58 - 22 90 118 - 24 ---------------------------------------------------- Total 690 675 + 4 1,348 1,295 + 6 ---------------------------------------------------- - An enlarged Seroquel US salesforce has capitalised on the increasing acceptance of the product and market share has continued to grow, achieving 9.2 per cent and 10.5 per cent of total and new prescriptions respectively at the end of June - The launches of Seroquel in Germany (March) and Italy (May) have gone well - Zomig consolidated its position as the lead second generation triptan benefiting from the continued expansion of the triptan market in the USA. In Europe first launches of the Rapimelt formulation have contributed to sales growth by providing excellent product differentiation - Marketing of Merrem resumed in the USA in April following the resolution of manufacturing constraints and this will lead to renewed sales growth - The competitive environment for Diprivan in the USA has stabilised with only one other propofol product on the market and many accounts returning to Diprivan. However, comparison with a strong second quarter in 1999 and the stocking patterns in the first quarter of this year adversely affected the reported result Geographic Sales ---------------------------------------------------- Second Quarter CER % Half Year CER % ---------------------------------------------------- 2000 1999 2000 1999 ---------------------------------------------------- USA 1,989 1,849 + 8 4,010 3,588 + 12 Europe 1,318 1,298 + 10 2,615 2,668 + 7 Japan 218 177 + 7 374 304 + 8 RoW 420 428 + 1 807 822 - 1 ---------------------------------------------------- - In the USA all key growth phase products grew strongly. Sales growth excluding Prilosec was 19 per cent - In Europe sales in France continued to be strong (still growing well ahead of the market) and there were good results from Italy and Spain. Governmental pressure to prescribe generics in Germany continued to adversely impact a number of products with Losec and Zestril particularly affected. In the UK sales performance has been impacted by increased prescribing of generics and parallel trade. - Sales in Japan continue to grow ahead of the overall Japanese market with strong contributions from more recently launched products, most notably Casodex - RoW sales were affected by the introduction of generic omeprazole in Australia Operating Profit - Operating profit grew by 14 per cent, reaching USD1,073 million - The operating margin increased to 27.2 per cent from 25.4 per cent in the second quarter of 1999. The higher margin is mainly a result of the continued realisation of synergy benefits. The full year operating margin target remains at 25.3 per cent for Pharmaceuticals, 25.0 per cent for Healthcare - The stronger US dollar compared to the second quarter in 1999 reduced profits by two per cent - Synergy benefits of USD145 million were realised in the quarter. A majority of the benefits are coming from the selling, general and administrative related areas but research and development related benefits are increasing - Synergy benefits target for 2000 has been increased to USD600 million - Exceptional items of USD96 million were charged in the quarter relating to the ongoing integration and synergy programmes Agrochemicals ------------------------------------------------------------------------------ -- All growth rates in this section are at constant exchange rates. Sales grew eight per cent in the first half, with second quarter growth of five per cent. The increased sales combined with reduced costs produced an improved operating profit at the half year of 23 per cent. Currency effects decreased reported half year sales by four per cent and operating profit by one per cent, principally due to the weaker Euro. Product sales ---------------------------------------------------- Second Quarter CER % Half Year CER % ---------------------------------------------------- 2000 1999 2000 1999 ---------------------------------------------------- Non-Selective Herbicides 275 223 + 24 468 369 + 28 Selective Herbicides 290 297 - 450 490 - 5 Total Herbicides 565 520 + 11 918 859 + 9 Insecticides 161 130 + 26 270 230 + 19 Fungicides 231 272 - 12 457 475 + 2 ---------------------------------------------------- Total 975 949 + 5 1,681 1,612 + 8 ---------------------------------------------------- - Strong growth in non-selective herbicides more than offset a reduction in selective herbicide sales; Touchdown continued to develop successfully with substantial growth in all regions, particularly North America, with Gramoxone also showing good growth in Asia Pacific and Latin America - Insecticide sales recovered to 1998 levels with Karate up 18 per cent on 1999 - After a strong start to the year, fungicide sales were constrained in the second quarter, largely by adverse conditions in the important cereal markets of Western Europe. According to preliminary data, Amistar continued to increase market penetration, with sales increasing by three per cent during the first half Geographic sales ---------------------------------------------------- Second Quarter CER % Half Year CER % ---------------------------------------------------- 2000 1999 2000 1999 ---------------------------------------------------- North America 429 405 + 6 615 576 + 7 Europe 276 322 - 7 600 633 + 4 Latin America 134 102 + 31 209 165 + 27 RoW 136 120 + 11 257 238 + 6 ---------------------------------------------------- Total 975 949 + 5 1,681 1,612 + 8 ---------------------------------------------------- - First quarter growth in North America continued through the second quarter due to significant sales of Touchdown and insecticides - Strong second quarter sales in southern and eastern Europe only partially offset the impact of unfavourable weather in northern Europe; overall first half sales increased in most segments - In Latin America, relatively robust market recovery in Brazil was reflected in strong second quarter sales; Gramoxone, Touchdown and Amistar grew across the Region - Sales in the Rest of World markets increased, due to strong growth in Asia Pacific where non-selective herbicide sales improved significantly; this was partly offset by weak demand in Africa Research and Development Restructuring of R&D facilities announced last year reduced costs overall whilst investment in biotechnology research continued to increase; the development of the phase three compounds mesotrione and picoxystrobin is proceeding to plan. Operating Margin (pre Exceptional Items) The operating margin improved from 17.6 per cent to 20.4 per cent. The increase in sales, combined with benefits from the 1999 restructuring programme underpinned this improvement. Exceptional Items During 1999 Zeneca Agrochemicals undertook a cost restructuring designed to improve profitability. These measures resulted in a charge of USD125 million. At the end of June savings totalling USD25 million have been delivered. Syngenta ------------------------------------------------------------------------------ -- Plans for the spin-off and merger of the Agrochemicals business with the agrochemicals and seeds activities of Novartis to form Syngenta are progressing well. Approval for the planned merger was received from the European Commission on 26 July following the agreement of both AstraZeneca and Novartis to divest or license certain of their crop protection products which in aggregate represent less than five per cent of Syngenta's unaudited proforma 1999 sales. For Zeneca Agrochemicals this means the divestment of the worldwide acetochlor corn herbicide business and the divestment or licensing of other products as announced on 26 July. Clearance from the FTC in the USA is still awaited but the plan to launch Syngenta in the final quarter of this year remains on track. It is planned that an Extraordinary General Meeting will be held on Wednesday, 11 October 2000 to enable AstraZeneca shareholders to vote on the proposed transaction relating to the establishment of Syngenta. The physical separation of the Agrochemicals business from the Healthcare business is well advanced and this will result in an exceptional charge to be taken on final demerger. This charge will cover Information Systems, some tax costs and other costs arising from the restructuring. Taxation ------------------------------------------------------------------------------ -- The effective tax rate for the first half was 31.3 per cent compared to 37.9 per cent. Excluding exceptional items, the effective tax rate for continuing operations is 30.3 per cent (30.0 per cent) and 28.9 per cent (29.1 per cent) in ongoing operations. Cash Flow ------------------------------------------------------------------------------ -- Cash generated from operating activities before exceptional items amounted to USD2.3 billion in the first half year. This was used to settle the 1999 final dividend (USD0.8 billion), and to fund capital expenditure of USD0.6 billion, exceptional item costs of USD0.4 billion and tax payments of USD0.4 billion. The net cash flow was therefore in balance before financing transactions including the share buyback programme. At 30 June 2000 the group had net cash funds of USD1.8 billion. Dividends ------------------------------------------------------------------------------ -- A first interim dividend of USD0.23 (15.3 pence, SEK 2.10) will be paid on 23 October 2000 to all shareholders on the register on 8 September 2000. Share Repurchase Programme ------------------------------------------------------------------------------ -- During the second quarter 4.5 million Ordinary Shares (nominal value USD0.25 each) were purchased for cancellation, bringing the total for 2000 to 9.4 million shares and USD353 million. This represents 0.25 per cent of the total issued share capital of AstraZeneca. The total number of shares re-purchased for cancellation since the start of the programme in December now stands at 13.7 million at an aggregate cost of USD531 million. The total number of shares in issue (as at 30 June 2000) is 1,766 million. Second Half Milestones and Key Dates ------------------------------------------------------------------------------ -- 3 July Nolvadex US approval for Ductal Carcinoma in Situ (DCIS) 11 July Atacand CLAIM study published showing increased benefit over losartan 12 July Nexium European Mutual Recognition approval received August Nexium first European launch in Sweden Symbicort first European approval in Sweden Third Quarter Nexium launches in UK & Denmark Seroquel launch in Spain Seroquel approval in Japan Pulmicort Respules approval in the USA October Atacand Plus launch in the USA Toprol-XL approval for CHF in the USA 11 October EGM on proposed transaction for the establishment of Syngenta 25 October Third Quarter & Nine Months Results 11 November Additional ZD4522 Phase II data published: American Heart Association, New Orleans 11/12 December Analyst/investor visit to Molndal for presentations on Discovery, GI, CV and other novel approaches Fourth Quarter Nexium launch in Germany, Norway & Ireland Nexium approval in the USA Arimidex approval for 1st line treatment of breast cancer in the USA Zomig MAA nasal spray submission Merrem sNDA filed for pneumonia Development Pipeline Update ------------------------------------------------------------------------------ -- A full update of the development portfolio is being published today and is available on AstraZeneca's website (www.astrazeneca.com). Tom McKillop Chief Executive Officer MORE TO FOLLOW

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