3rd Quarter & 9 Months Results - Part 1
ASTRAZENECA PLC
28 October 1999
Part 1
AstraZeneca PLC
Nine Months Results 1999
'Strong momentum maintained'
Nine Months Financial Highlights
----------------------------------------------------------------------------
Continuing Operations before Exceptional Items
----------- ------------------------------------------
Statutory Pro Forma Basis*
Basis
----------- ------------------------------------------
Nine Months Nine Months Nine Months Constant
1999 1999 1998 Currency
USDm USDm USDm % %
Sales:
Group 13,322 13,322 11,599 +15 +15
Healthcare 11,148 11,148 9,276 +20 +21
Operating Profit:
Group 3,052 3,040 2,572 +18 +20
Healthcare 2,792 2,780 2,226 +25 +26
Profit before Tax 3,033 3,000 2,545 +18 +19
Earnings per Share USD1.20 USD1.18 USD1.00 +18 +19
----------- ------------------------------------------
All narrative in this report refers to pro forma growth rates.
Tom McKillop, Chief Executive, said: 'These results are further strong
evidence that the merger is on track and we remain on target to achieve
strong Healthcare double digit sales and profit growth for the year. '
- Healthcare sales up 20 per cent; US Healthcare sales up 29 per cent
- Healthcare operating profit up 25 per cent
- Agrochemicals sales down 7 per cent
- Group operating margin increased to 22.9 per cent
Group Statutory Basis (including Discontinued Operations and Exceptional
Items)
------------------------- --------
Nine Months Nine Months
1999 1998 Reported
USDm USDm %
------------------------- --------
Profit before Tax 2,065 2,752 -25
Earnings per Share (FRS3) USD0.74 USD1.07 -31
------------------------- --------
* Pro forma Basis: see basis of calculation description on page 12.
AstraZeneca PLC
Third Quarter Results 1999
Third Quarter Financial Highlights
----------------------------------------------------------------------------
Continuing Operations before Exceptional Items
----------- ------------------------------------------
Statutory Pro Forma Basis*
Basis
----------- ------------------------------------------
3rd Quarter 3rd Quarter 3rd Quarter Constant
1999 1999 1998 Currency
USDm USDm USDm % %
Sales:
Group 4,279 4,279 3,503 +22 +23
Healthcare 3,766 3,766 2,916 +29 +31
Operating Profit:
Group 949 949 634 +50 +52
Healthcare 958 958 616 +56 +59
Profit before Tax 941 941 611 +54 +56
Earnings per Share USD0.37 USD0.37 USD0.25 +48 +51
----------- ------------------------------------------
All narrative in this report refers to pro forma growth rates.
- Healthcare sales up 29 per cent; US Healthcare sales up 57 per cent
influenced by wholesaler buying patterns of Prilosec
- Healthcare operating profit up 56 per cent
- Agrochemicals sales down 13 per cent
- Group operating margin increased to 22.2 per cent
Group Statutory Basis (including Discontinued Operations and Exceptional
Items)
------------------------- --------
3rd Quarter 3rd Quarter
1999 1998 Reported
USDm USDm %
------------------------- --------
Profit before Tax 723 663 +9
Earnings per Share (FRS3) USD0.27 USD0.26 +4
------------------------- --------
* Pro forma Basis: see basis of calculation description on page 12.
Media Enquiries: Steve Brown/Lucy Williams (London) (0171) 304 5033/5034
Mikael Widell/
Staffan Ternby (Sodertalje) (8) 553 26428/26107
Rachel Bloom (Wilmington) (302) 886 7858
Analyst/Investor
Enquiries: Elizabeth Sutton/
Michael Olsson (London) (0171) 304 5101/5087
Staffan Ternby (Sodertalje) (8) 553 26107
Ed Seage (Wilmington) (302) 886 4065
Jorgen Winroth (Wayne) (609) 896 4148
Chief Executive Officer's Review of Operations
----------------------------------------------------------------------------
All narrative in this report refers to pro forma growth rates for the third
quarter.
The good performance at the half year has continued with attention focused
on the key value drivers and priorities. In Healthcare the excellent growth
in sales and profits benefited from a more even quarterly phasing of
Prilosec sales in the USA compared to 1998. Indeed, Prilosec sales were
even stronger than anticipated at the half year as a result of some
increased stocking in response to a tight supply position during the quarter
This will probably lead to somewhat softer sales in the fourth quarter. The
annualised underlying growth in US prescriptions was 19.6 per cent (as at
the end of August).
Good progress is being made in the defence of Losec/Prilosec patents. An
interlocutory injunction was obtained in Germany removing one generic
product from the market and further actions are underway. The appeal
against an earlier judgement in Australia is due to be heard in late
November and an Israeli court has recently upheld the inventiveness of our
formulation patent. Importantly, the four cases in the USA have been combined
for pre-trial purposes and the judge's timetable now suggests that a
decision is unlikely before 2001.
The integration activities are on track; further detail is provided on page
seven of this report.
The review of R & D projects has been completed and a full presentation of
the portfolio in December will display the progress made with priority
projects and the strength of the overall portfolio. On 21 October the
European regulatory filing was submitted for esomeprazole (H199) which will
be particularly important in sustaining our leading position in
gastroenterology.
There are no signs of a significant improvement in Agrochemicals - Zeneca
Agrochemicals' performance reflects this. Restructuring plans have resulted
in the recent announcement of some 450 planned job losses and the outcome of
the full restructuring programme, including projected savings and their
associated costs, will be announced with the full year results.
Preparations for Year 2000 are nearing completion and the company's systems
are expected to be fully compliant. The focus is now on managing
contingencies. Our aim remains to have as normal a year end as possible
despite some early signs of pressure to build up stocks, particularly in
Cardiovascular medicines.
The expectation remains for strong Healthcare double digit sales and profits
growth for the year, excluding any Year 2000 stocking effects.
Healthcare
----------------------------------------------------------------------------
All narrative in this section refers to pro forma growth rates for the third
quarter at constant currency.
Sales grew by 31 per cent (16 per cent excluding Losec/Prilosec); operating
profits were up 59 per cent.
Gastrointestinal
----------------
-----------------------------------------------------
Third Quarter Nine Months
-----------------------------------------------------
1999 1998 CER% 1999 1998 CER%
-----------------------------------------------------
Losec/Prilosec 1,539 965 +61 4,387 3,433 +29
-----------------------------------------------------
Total 1,551 977 +61 4,423 3,466 +29
-----------------------------------------------------
- As indicated, percentage growth was influenced by the uneven phasing of
Prilosec sales in 1998. Supply difficulties experienced at the beginning
of the quarter this year were resolved but as a result wholesaler and
retail inventories are estimated to be around USD100 to USD125 million
above normal
- US annualised prescription growth to end August for Prilosec remains
strong at 19.6 per cent
- PPI class continues to gain market share of the US anti-secretory market -
around 60 per cent by end August
- Generic competition in Germany for Losec resulted in a 37 per cent decline
in sales in the quarter
Cardiovascular
--------------
-----------------------------------------------------
Third Quarter Nine Months
-----------------------------------------------------
1999 1998 CER% 1999 1998 CER%
-----------------------------------------------------
Zestril 322 268 +21 924 779 +20
Seloken 152 123 +26 409 328 +25
Plendil 112 73 +56 328 268 +22
Atacand 43 12 +258 116 24 +387
-----------------------------------------------------
Total 876 722 +23 2,546 2,145 +19
-----------------------------------------------------
- Zestril growth is slightly overstated due to advanced wholesaler
purchasing ahead of a late August price increase; underlying annualised
prescription growth to end August was 17.8 per cent
- Fourth quarter Zestril sales growth is likely to be weak due to strong
comparative quarter ahead of price increases
- Seloken and Plendil both achieved good prescription growth in the USA
- Atacand US market share over five per cent
- Some evidence of consumer stocking of hypertensives ahead of millennium
following advice to consumers in the US press
Respiratory
-----------
-----------------------------------------------------
Third Quarter Nine Months
-----------------------------------------------------
1999 1998 CER% 1999 1998 CER%
-----------------------------------------------------
Pulmicort 169 156 +12 539 494 +10
Accolate 35 50 -28 109 124 -11
Rhinocort 38 39 - 137 119 +16
Oxis 22 11 +109 63 28 +129
-----------------------------------------------------
Total 306 302 +4 992 918 +9
-----------------------------------------------------
- Demand for Pulmicort in the USA remains strong
- Supply constraints in the USA for Pulmicort remain but are starting to
ease
- Accolate paediatric approval in the USA provides potential for increase
in sales
- Accolate comparable quarter in 1998 influenced by stocking ahead of price
increase
- Rhinocort Aqua approval in the USA provides potential for ongoing growth
- Oxis continued strong growth
Oncology
--------
-----------------------------------------------------
Third Quarter Nine Months
-----------------------------------------------------
1999 1998 CER% 1999 1998 CER%
-----------------------------------------------------
Casodex 79 55 +46 245 171 +44
Arimidex 37 28 +39 100 86 +18
Nolvadex 142 126 +11 429 390 +9
Zoladex 161 157 +1 492 458 +6
-----------------------------------------------------
Total 425 370 +14 1,284 1,117 +14
-----------------------------------------------------
- Continued strong performance of Casodex in all markets
- First line data for Arimidex presented in September should secure future
long-term growth
- Latest market research on Nolvadex indicates around 20 per cent of US
new prescriptions are for 'reduction of risk of breast cancer'
- Zoladex sales growth was muted by a highly competitive environment in the
US market
Specialist/Hospital
-------------------
-----------------------------------------------------
Third Quarter Nine Months
-----------------------------------------------------
1999 1998 CER% 1999 1998 CER%
-----------------------------------------------------
Seroquel 66 25 +168 161 44 +268
Zomig 49 30 +66 135 62 +120
Merrem 37 31 +32 114 96 +28
Diprivan 137 134 +4 464 457 +3
Xylocaine 56 58 -3 184 174 +4
Marcaine 21 19 +11 63 59 +7
-----------------------------------------------------
Total 535 470 +15 1,657 1,405 +19
-----------------------------------------------------
- Continued strong acceptance of Seroquel, particularly in the USA
- Zomig is instrumental in the expansion of the triptan market in the USA
and France
- Diprivan growth in Japan, particularly expansion into ICU, and the Far East
partially offset by nine per cent decline in the USA following the launch
of a generic formulation in April
Others
------
-----------------------------------------------------
Third Quarter Nine Months
-----------------------------------------------------
1999 1998 CER% 1999 1998 CER%
-----------------------------------------------------
Astra Tech 27 24 +13 82 72 +15
Salick Health Care 46 51 -10 164 153 +7
-----------------------------------------------------
Geographic (Pharmaceuticals)
----------
-----------------------------------------------------
Third Quarter Nine Months
-----------------------------------------------------
1999 1998 CER% 1999 1998 CER%
-----------------------------------------------------
USA 1,937 1,213 +60 5,407 4,168 +30
Europe 1,221 1,150 +10 3,889 3,460 +13
Japan 164 126 +7 468 387 +6
RoW 398 376 +13 1,220 1,108 +16
-----------------------------------------------------
- USA comparative sales growth affected by the pattern of Prilosec sales in
1998 (as highlighted above)
- Continued strong growth in France, up 25 per cent
- Japan continuing to outperform market growth
Operating Margin (Pharmaceuticals)
----------------
- Pharmaceuticals operating margin, before exceptional items, for the nine
months increased to 25.5 per cent due to the high volume of Prilosec
sales achieved in the quarter
- Pharmaceuticals margins of around 24 per cent are still anticipated for
the year
Agrochemicals
----------------------------------------------------------------------------
All growth rates in this section are at constant currency and exclude the
effects of acquisitions and disposals.
For the nine months, sales decreased by seven per cent; operating profit
decreased by 19 per cent, and excluding the ISK integration costs charged in
1998, by 27 per cent.
Products
--------
-----------------------------------------------------
Third Quarter Nine Months
-----------------------------------------------------
1999 1998 CER% 1999 1998 CER%
-----------------------------------------------------
Non Selective
Herbicides 164 181 -9 533 550 -3
Selective
Herbicides 100 129 -24 590 735 -20
Total Herbicides 264 310 -16 1,123 1,285 -13
Insecticides 100 120 -16 330 383 -14
Fungicides 115 117 -1 590 522 +13
-----------------------------------------------------
Total 492 565 -13 2,104 2,258 -7
-----------------------------------------------------
- Sales of Herbicides in the third quarter were down due to the enforcement
of tight credit policies following the economic difficulties in Latin
America
- Low insect infestation in the North American market and lower sales in
Latin America resulted in reduced Insecticide sales in the quarter
- Continued strong growth from Amistar in the quarter, up 57 per cent
Geographic
----------
-----------------------------------------------------
Third Quarter Nine Months
-----------------------------------------------------
1999 1998 CER% 1999 1998 CER%
-----------------------------------------------------
North America 151 146 +2 727 825 -12
Europe 122 145 -13 755 745 +1
Latin America 137 187 -25 302 396 -23
RoW 82 87 -13 320 292 +7
-----------------------------------------------------
Total 492 565 -13 2,104 2,258 -7
-----------------------------------------------------
- North American sales up two per cent in the third quarter reflecting
increased Fungicide sales in turf and selected crops
- Sales in Europe were down in the quarter due to lower desiccation sales
and reduced demand in Central and Eastern Europe
- RoW sales down in the quarter ahead of a move to direct distribution in
Japan
Research and Development
------------------------
An agreement was completed with Japan Tobacco, on 1 October 1999, for
biotechnology rice research. On 11 August 1999 the business announced a
gene research collaboration with US-based Maxygen.
Operating Margin
----------------
For the nine months operating margin reduced from 16.1 per cent to 13.2 per
cent mainly due to the overall reduction in sales.
Advanta
-------
Contribution for the nine months from Advanta remains reduced due to depressed
agricultural conditions.
Year 2000 Compliance Project
----------------------------------------------------------------------------
- Almost all projects to confirm compliance of IT and embedded systems have
been completed
- Attention is now focused on finalisation of contingency plans and actions
to reduce risk
- A 'Millennium Communication Centre' is to be set up to co-ordinate
information and ensure appropriate action through the date change period
The estimated final cost of AstraZeneca's Year 2000 programme remains at
USD166 million, of which USD145 million had been spent up to the end of
September, including USD32 million this year. The projected total includes
a contingency allowance which may not be required.
Exceptional Items
----------------------------------------------------------------------------
- Exceptional charges increased by USD214 million in the third quarter to
USD1.036 billion for the nine months
- USD202 million reflects progress in developing the detailed integration
plans arising from the merger, taking the charge to date to USD332 million
- USD12 million relates to the programme initiated in 1998 to rationalise
Astra's US operations following the Astra Merck restructuring
Synergies
----------------------------------------------------------------------------
- Programme on track
- USD100 million of synergy benefits expected to be delivered by the end of
the year and target of USD500 million to be delivered by the end of 2000
- Synergy targets have been fully allocated through the organisation and
implementation plans will be finalised by the end of November
- Approximately 60 per cent of synergy benefits are manpower related with
the balance coming from purchasing, IS, infrastructure rationalisation
and site closures
- The cost synergies represent 11 per cent of the total Pharmaceuticals 1998
cost base which is being used as the baseline for comparison.
Approximately half of the target savings are expected to be realised in
Europe (around 15 per cent of the cost base), around 20 per cent in North
America (around six per cent of the cost base) and the balance in the rest
of the world
- Approximately two thirds of the benefits are expected to be realised
through S,G & A (17 per cent of the 1998 cost base), around 25 per cent
from R & D (10 per cent of 1998 expenditure) and the balance from
production and distribution
- The estimate of the total programme cost is expected to be completed by
the year end and the majority of the restructuring charges to be recorded
by the end of the year
Taxation
----------------------------------------------------------------------------
- An effective tax rate of 30 per cent on continuing operations before
exceptional items
- Only limited tax relief available on exceptional items because of the
nature of these costs and the element of goodwill within them
Cash Flow
----------------------------------------------------------------------------
- USD1.26 billion of net cash generated from operations, before exceptional
items, in the third quarter
- Capital expenditure for the third quarter totalled USD339 million
- Outlays on exceptional items and tax of USD114 million and USD135 million
respectively
- Net cash inflow of almost USD700 million for the third quarter
- At 30 September cash and short term investments exceeded borrowing by USD2.7
billion
Tom McKillop
Chief Executive Officer
MORE TO FOLLOW
QRTAILFAIRLTFAA
Latest directors dealings
- 13 hours ago Savannah Energy
- 14 hours ago Buccaneer Energy PLC
- 14 hours ago Savannah Energy
- 15 hours ago Carclo
- 15 hours ago Schroder Japan Growth Fund