FIRST QUARTER RESULTS 2012

London, 26 April 2012

First quarter results reflect challenging revenue picture. Pipeline strengthened by Amgen collaboration, the agreement to acquire Ardea Biosciences and positive CHMP opinion for FORXIGATM (dapagliflozin) in Europe.

Revenue for the first quarter was $7,349 million, down 11 percent at constant exchange rates (CER).

-Loss of exclusivity on several key brands accounted for 8 percentage points of the revenue decline, which included the recognition of a $223 million returns reserve against US trade inventories of Seroquel IR following generic launches at the end of March 2012.

-Emerging Markets revenue increased by 1 percent at CER, reflecting the quarterly phasing that the Company anticipated. Company anticipates a rebound in the remaining three quarters, but achieving double-digit growth for the full year may be a challenge.    

Core EPS was $1.81 in the first quarter, a 19 percent decline at CER compared with the first quarter last year, which benefited by $0.46 from two one-off gains. Excluding these gains, Core EPS would have increased by 2 percent compared with last year.

-Core gross margin in the first quarter 2011 included a $131 million benefit ($0.07 per share) from settlement of patent disputes with PDL BioPharma, Inc.

-Core EPS in the first quarter 2011 benefited by $0.39 as a result of agreements reached between the UK and US governments over certain tax matters.  

The third phase of the restructuring programme is being implemented with pace, reflected in the $702 million in restructuring costs taken in the first quarter.

Reported EPS was down 39 percent at CER to $1.28.

-Decline in Reported EPS is significantly larger than the decline in Core EPS, largely the result of restructuring costs that were $0.37 higher than the first quarter 2011.

Net cash distributions to shareholders in the first quarter were $3,417 million, through dividend payments of $2,505 million and net share repurchases of $912 million.

Core EPS target range for the full year lowered to $5.85 to $6.15.    

 
Financial Summary

* Core financial measures are supplemental non-GAAP measures which management believe enhance understanding of the Company’s performance; it is upon these measures that financial guidance for 2012 is based. See page 2 for a definition of Core financial measures and a reconciliation of Core to Reported financial measures.

 
David Brennan, Chief Executive Officer, commenting on the results, said: “The anticipated impact from the loss of exclusivity on several brands, together with challenging market conditions, has made for a difficult start to the year in revenue terms. Delivery on our restructuring plans and continued discipline on operating costs, together with the benefits from a lower tax rate, will only partially mitigate the revenue pressures. As a result we have lowered our Core EPS target for the full year to the range of $5.85 to $6.15.”

“The recently announced collaboration with Amgen on a portfolio of five clinical stage projects in the field of inflammation illustrates our willingness to look beyond our laboratories to invest in innovative science wherever it originates. Our agreement to acquire Ardea Biosciences will add a promising Phase III project for the chronic management of hyperuricaemia in patients with gout. Lastly, we are pleased that the European Union’s CHMP has issued a positive recommendation for regulatory approval for FORXIGA™ (dapagliflozin); together with our partner Bristol-Myers Squibb we look forward to making this new medicine available to patients with diabetes,” Brennan said.

 
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