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YEAR-END REPORT JANUARY-DECEMBER 1998 * During the period January-December 1998, Astra's sales rose 27 percent, or 15 percent for comparable units, to SEK 57,187 (1997: 44,904) m. Pretax earnings rose 15 percent, or 22 percent for comparable units, to SEK 16,444 (14,305) m. Adjusted for the effect of the agreements with Schering- Plough, pretax earnings rose 13 percent for comparable units. Net earnings rose 16 percent, or 21 percent for comparable units, to SEK 11,803 m. * The Astra Group's sales during the fourth quarter amounted to SEK 18,115 (12,447) m., an increase of 46 percent, or 17 percent for comparable units. Pretax earnings rose 37 percent, or 48 percent for comparable units, to SEK 5,186 (3,797) m. The agreements with Schering-Plough had a positive impact on 1998 fourth quarter earnings, amounting to a non- recurring amount of SEK 1,293 m. Net earnings amounted to SEK 3,736 (2,740) m. * The boards of Astra and Zeneca reached an agreement in December 1998 on a merger of equals. * The Board of Directors proposes, pursuant to the agreement to merge with Zeneca, that the dividend be raised to SEK 1.90 (1.80) per share. * Atacand was launched in Canada, Italy and the U.S.- among other countries- during the fourth quarter. * Two agreements were reached with Schering-Plough. Astra reacquired the rights to Losec in Italy and Spain, while Schering-Plough acquired an extension and widening of its marketing rights in the U.S. with respect to Imdur. Agreement with Merck On July 1, 1998, Astra reached an agreement with Merck & Co., Inc., pertaining to the U.S. market. The agreement gave Astra management control of the operations in the U.S. and made possible, on July 1, 1998, the combination of the operations of the previously half-owned company Astra Merck, Inc., and the wholly owned subsidiary Astra USA, Inc., in a new company, Astra Pharmaceuticals, L.P. Through this arrangement, Astra achieves strategic freedom and the right to buy out Merck's interest at certain points in time. Under the new agreement, all sales of Prilosec (Losec) and Plendil in the U.S. are included in the Astra Group's sales from July 1, 1998, and onwards. Previously, half of sales were included since the half-owned company Astra Merck, Inc., was consolidated according to the proportionate method. Agreement with Schering-Plough In December Astra reached two agreements with Schering-Plough Corporation. As of January 1, 1999, Astra reacquired all rights to market omeprazole under the Losec trademark and felodipine under the Prevex and Perfudal trademarks in Italy and Spain. Astra will be making cash payments to Schering-Plough based on the sales levels attained by Astra. These payments are expected to amount to approximately USD 800 m. (approximately SEK 6.4 bn.), to be paid in installments over at least a five-year period. The agreement enables Astra to maintain and further develop its market-leading position in the gastrointestinal area and resolves a disagreement concerning the interpretation of the previous licensing agreement between Astra and Schering- Plough. Under a separate agreement, Schering-Plough acquired an extension and widening of its marketing rights in the U.S. with respect to Imdur. Pursuant to this agreement, Astra received a payment of USD 200 m. (approximately SEK 1.6 bn.). These agreements impacted Astra's operating result during the fourth quarter by SEK 1,293 m. Proposed Merger with Zeneca The boards of Astra and Zeneca reached an agreement in December 1998 on a merger of equals. Full details of the proposed merger are presented in a separate Merger Document, published in January 1999. Sales Astra's sales during the fourth quarter of 1998 amounted to SEK 18,115 (1997: 12,447) m., an increase of 46 percent compared with the corresponding period a year ago. For comparable units1 the sales increase was 17 percent, or 12 percent when calculated at constant exchange rates.2 Sales during the period January-December 1998 rose 27 percent to SEK 57,187 (44,904) m. For comparable units, sales increased by 15 percent, or 13 percent when calculated at constant exchange rates. Price changes had a positive impact on sales growth during the period of approximately 1 percentage point. The North American market was Astra's fastest-growing market. Combined sales in North America amounted to SEK 24,248 (14,199) m., an increase of 31 percent for comparable units. Astra's sales in Europe in 1998 amounted to SEK 26,170 (23,420) m., an increase of 12 percent. Among the major European markets, Astra's sales in local currency rose 11 percent in Germany, 25 percent in France, and 11 percent in Italy. Astra's sales in the U.K. and Sweden were impacted by parallel import from southern Europe, which caused a 9 percent and 5 percent decline in local sales, respectively. In the Asian countries (including Japan), which accounted for 5 percent of the Group's sales, Astra's sales totaled SEK 2,962 (3,559) m., a decrease of 8 percent when adjusted for the divestment of Astra's generics division in Japan. 1 Starting on July 1, 1998, all sales of Prilosec (Losec) and Plendil in the U.S. are included in the Astra Group's sales. Previously, half of sales were included since the half-owned company Astra Merck, Inc., was consolidated according to the proportionate method. The sales-related compensation payable to Merck is now included in the Group's operating expenses. These changes affect comparability with previous reporting periods. Calculations of changes for comparable units pertain to the situation according to the previous agreement between Astra and Merck. 2 Calculations of trends at constant exchange rates are based on the exchange rates that applied for the corresponding period in the preceding year. SALES BY PRODUCT Oct.-Dec. Percentage Jan.-Dec. Percentage GROUP (SEK m.) 1998 1997 change 1998 1997 change Gastrointestinal 10,964 6,139 +79 (+71) 31,969 21,796 +47 (+43) Cardiovascular 2,776 2,239 +24 (+18) 9,594 8,258 +16 (+16) Respiratory 2,465 2,185 +13 ( + 7) 8,763 7,994 +10 (+ 9) Pain control 1,061 1,041 + 2 ( - 3) 3,829 3,700 + 3 (+ 3) Other products 628 659 - 5 ( - 8) 2,235 2,466 - 9 ( - 9) Astra Tech 222 183 +21 (+15) 796 691 +15 (+14) TOTAL 18,115 12,447 +46 (+39) 57,187 44,904 +27 (+25) Figures in parentheses refer to percentage change at constant exchange rates. Astra's sales of the antipeptic ulcer drug Losec during the period January- December totaled SEK 31,619 (21,526) m., an increase of 47 percent. For comparable units the sales increase was 21 percent. Total sales of Losec in the world market amounted to approximately SEK 40,600 (32,000) m. Losec MUPS (Multiple Unit Pellet System), a new tablet formulation with additional patient benefits, was introduced in Germany, among other countries, during the fourth quarter, and at year-end 1998 the product had been launched in a total of six countries. Sales of the asthma drug Pulmicort rose 11 percent to SEK 5,486 (4,922) m. Sales in the U.S. amounted to SEK 357 (-) m. Prescription volume for Pulmicort Turbuhaler in the U.S. rose steadily during the second half of the year. Market penetration in the U.S. initially developed more slowly than originally anticipated. This was due in part to the restrictive manufacturing specifications that apply for deliveries to the U.S. market. A meeting with the FDA took place in early 1999 to review the manufacturing specifications, and discussions are continuing. Oxis, Astra's new, long-acting bronchodilator, has been launched in a total of some 30 countries as at year-end 1998. The product has been well-received by the market, and sales amounted to SEK 350 (70) m. Sales of the beta-blocker Seloken, Astra's largest product in the cardiovascular area, rose to SEK 3,568 (3,162) m., an increase of 13 percent. An international study was discontinued during the fourth quarter of 1998 after recording positive results for Seloken ZOC in the treatment of congestive heart failure. Regulatory applications for Seloken for treatment of congestive heart failure are expected to be filed in 1999. Sales of the vasodilator Plendil totaled SEK 2,625 (2,241) m., an increase of 10 percent for comparable units. The new antihypertensive agent Atacand was launched during the fourth quarter in Italy, Canada and the U.S., among other countries, and at year-end 1998 had been launched in some 20 countries altogether. The development of prescription volume for Atacand through January 1999 in the U.S. market is promising. Total sales of Atacand amounted to SEK 352 (8) m. Sales of the local anesthetic Naropin amounted to SEK 242 (103) m. The registration process in Japan was initiated at year-end 1998. MUSE, a new local therapy for treatment of impotence (erectile dysfunction), was granted European Union mutual recognition approval during the fourth quarter. Sales of MUSE totaled SEK 86 (-) m. The decline in sales of other products was caused by the divestment of Astra's generics division in Japan. Earnings Astra's pretax earnings for the fourth quarter of 1998 totaled SEK 5,186 (3,797) m. For comparable units i.e., according to the previous agreement with Merck, earnings rose 48 percent. Fourth quarter earnings were favorably affected by the agreements with Schering-Plough (described below). These agreements impacted operating earnings by SEK 1,293 m. Adjusted also for this effect, pretax earnings rose 14 percent. During the period January-December, pretax earnings totaled SEK 16,444 (14,305) m., an increase of 15 percent, or 22 percent for comparable units. Adjusted for the effect of the agreements with Schering-Plough, earnings increased by 13 percent for comparable units. Research and development expenditures rose 21 percent in 1998 to SEK 10,600 (8,746) m. Operating earnings amounted to SEK 15,243 (13,544) m., an increase of 17 percent for comparable units, or 8 percent when adjusted for the agreements with Schering-Plough. Operating earnings included SEK 3,435 (2,721) m. in depreciation. The Group's net financial income for 1998 increased to SEK 1,201 (758) m. Net interest income totaled SEK 886 (818) m. Financial exchange differences totaled SEK 315 (-60) m., and were affected by the weaker Swedish krona. The unease in the financial markets did not affect exchange rate differences. The new agreement with Merck had an initial dilutive effect of 5 percentage points on the Group's net earnings for 1998, in accordance with earlier estimations. The effective tax rate was 28 (29) percent of pretax earnings. Earnings per share amounted to SEK 7.18 (6.21). Capital Expenditures and Financial Position Astra's capital expenditures totaled SEK 5,314 (4,650) m. in 1998, of which SEK 2,401 (2,349) m. were in Sweden. In addition, in connection with the new Merck agreement, Astra acquired assets in the U.S. amounting to a total of SEK 11,354 m., of which SEK 7,170 m. was goodwill. The Group's liquid assets at December 31, 1998, amounted to SEK 22,473 (24,479) m. Other In February 1999 Astra filed a lawsuit in the U.S. against Kremers Urban Development Company (KUDCO) and Schwarz Pharma Inc. The lawsuit is a result of an Abbreviated New Drug Application (ANDA) filed by KUDCO with the FDA concerning its intent to market generic omeprazole products in the U.S. after the expiration of the substance patent, which occurs in April 2001. The basis of Astra's complaint is that both companies' action infringes upon several other patents relating to Prilosec, which provide protection to the year 2014. Employees The number of employees (average) rose by 2,752 persons to 24,958 (22,206). In Sweden the number of employees was 8,060 (7,310). Dividend and Annual Meeting As a result of the differing dividend payment profiles of Astra and Zeneca, Astra's dividend for the 1998 fiscal year will be equalized with Zeneca's second interim dividend for 1998, as set forth in the Merger Document. A dividend of SEK 1.90 (1.80) per share has been proposed for Astra for 1998. The record date for payment of the dividend will be April 9, 1999. If conversion to AstraZeneca shares takes place prior to the record date, Astra stockholders who have accepted the offer will receive a dividend corresponding to 28 pence per AstraZeneca share, and Astra stockholders who have not accepted the offer will receive the proposed dividend of SEK 1.90 per share from Astra. In view of the requirement for a common record date for payment of dividends from Astra and Zeneca, Astra's Annual Meeting will be held on Tuesday, April 6, 1999, at 2:00 p.m. Södertälje, Sweden, February, 16, 1999 Håkan Mogren President and Chief Executive Officer Copies of this year-end report will be dispatched to Astra stockholders. TREND IN FIGURES CONSOLIDATED EARNINGS Oct.-Dec. Percentag Jan.-Dec. Percentag e e STATEMENT 1998 1997 change1 1998 1997 change1 (SEK m.) Sales 18,115 12,447 + 46 57,187 44,904 + 27 (+17) (+15) Operating (14,669 (8,999 + 63 (43,327 (31,392)+ 38 expenses ) ) (+20) ) (+19) Operating exchange 98 (83) - 90 32 - gains/losses Items affecting 1,293 - - 1,293 - - comparability2 Operating 4,837 3,365 + 44 15,243 13,544 + 13 earnings (+51) (+17) Finan 244 297 - 18 1,091 959 + 14 cial income Finan (70) (21) +243 (205) (141) + 45 cial expenses Finan cial exchange gains 175 152 - 315 (60) - / losses Net financial income/ 349 428 - 18 1,201 758 + 59 expenses Minority - interests 0 4 0 3 - in earnings Earnings 5,186 3,797 + 37 16,444 14,305 + 15 before taxes (+48) (+22) Taxes (1,450) (1,057 + 37 (4,641) (4,104) + 13 ) NET EARNINGS 3,736 2,740 + 36 11,803 10,201 + 16 (+51) (+21) Earnings 2.27 1.67 + 36 7.18 6.21 + 16 per share (+51) (+21) (SEK) 1 Figures in parentheses refer to changes for comparable units, i.e. the situation according to the previous agreement between Astra and Merck. 2 Earnings effect of agreements with Schering-Plough Payment received for Imdur 1,608 Other effects of the Schering-Plough agreements (315) Items affecting comparability 1,293 January- Percentage SALES- LARGEST December PHARMACEUTICAL PRODUCTS (SEK m.) 1998 1997 change Losec 31,61 21,526 +47 (+43) 9 Pulmicort 5,486 4,922 +11 (+11) Seloken 3,568 3,162 +13 (+11) Plendil 2,625 2,241 +17 (+19) Xylocaine 1,902 1,915 - 1 (- 1) Rhinocort 1,248 1,267 - 2 (- 2) Bricanyl 1,222 1,275 - 4 (- 3) Imdur 962 913 + 5 (+ 5) Marcaine 636 670 - 5 ( - 4) Ramace 513 488 + 5 (+ 3) Figures in parentheses refer to percentage change at constant exchange rates. CONDENSED CONSOLIDATED BALANCE SHEET (SEK m.) Dec. 31, 1998 Dec. 31, 1997 Intangible noncurrent assets 15,008 6,536 Other noncurrent assets 21,563 18,451 Inventories and current 17,094 12,814 receivables Liquid assets 22,473 24,479 ASSETS 76,138 62,280 Stockholders' equity 54,855 46,015 Provisions 5,313 6,399 Liabilities 15,970 9,866 STOCKHOLDERS' EQUITY AND LIABILITIES1 76,138 62,280 1 of which, interest-bearing provisions and liabilities 3,659 3,500 CONDENSED CONSOLIDATED January-DecemberJanuary-December STATEMENT OF CASH FLOWS 1998 1997 Net cash flows from operating 14,731 10,453 activities Net cash flows from investing (16,390) (4,495) activities Net cash flows from external (348) 358 financing CHANGE IN LIQUID ASSETS (2,007) 6,316 OTHER Dec. 31, 1998 Dec. 31, 1997 Return on capital employed 25 26 (%) Return on stockholders' 26 27 equity (%) Equity ratio (%) 72 74 Number of shares, millions 1,643.2 1,643.2 Reconciliation to U.S. GAAP and U.K. GAAP Astra prepares its consolidated financial statements in accordance with Swedish GAAP, which differ in certain significant respects from U.S. GAAP and U.K. GAAP. Under U.S. GAAP, estimated net earnings for the years ended December 31, 1998 and 1997 were SEK 11,289 m. and SEK 10,195 m., respectively, compared with SEK 11,803 m. and SEK 10,201 m. under Swedish GAAP. Earnings per share under U.S. GAAP for the years ended December 31, 1998 and 1997 were SEK 6.87 and SEK 6.20, respectively, compared with SEK 7.18 and SEK 6.21 under Swedish GAAP. Shareholders' equity at December 31, 1998 and 1997 under U.S. GAAP was SEK 54,567 m. and SEK 46,181 m., respectively, compared with SEK 54,855 m. and SEK 46,015 m. under Swedish GAAP. Under U.K. GAAP, estimated net earnings for the years ended December 31, 1998 and 1997 were SEK 11,313 m. and SEK 10,463 m., respectively, compared with SEK 11,803 m. and SEK 10,201 m. under Swedish GAAP. Earnings per share under U.K. GAAP for the years ended December 31, 1998 and 1997 were SEK 6.88 and SEK 6.37, respectively, compared with SEK 7.18 and SEK 6.21 under Swedish GAAP. Shareholders' equity at December 31, 1998 and 1997 under U.K. GAAP was SEK 54,328 m. and SEK 46,867 m., respectively, compared with SEK 54,855 m. and SEK 46,015 m. under Swedish GAAP. Contact persons: Staffan Ternby, Vice President, PR & Information, Astra AB, +46 8 553 261 07 Mikael Widell, Press Officer, PR & Information, Astra AB, +46 8 553 264 28 Michael Olsson, Manager, Investor Relations, Astra AB, +46 8 553 259 52 Jörgen Winroth, Investor Relations U.S., Astra AB, +1 609 896 4148 ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/02/16/19990216BIT00250/bit0001.doc http://www.bit.se/bitonline/1999/02/16/19990216BIT00250/bit0002.pdf