Financial Highlights
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H1 2018 |
Q2 2018 |
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$m |
% change |
$m |
% change |
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Actual |
CER |
Actual |
CER |
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|
Total Revenue |
10,333 |
(1) |
(5) |
5,155 |
2 |
(1) |
|
Product Sales |
10,015 |
2 |
(2) |
5,030 |
2 |
(1) |
|
Externalisation Revenue |
318 |
(53) |
(54) |
125 |
14 |
14 |
|
|
|
|
|
|
|
|
|
Reported Operating Profit2 |
1,459 |
(21) |
(20) |
763 |
(17) |
(20) |
|
Core Operating Profit3 |
2,161 |
(33) |
(34) |
1,265 |
(18) |
(22) |
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|
|
|
|
|
|
|
|
Reported Earnings Per Share (EPS) |
$0.54 |
(32) |
(34) |
$0.27 |
(27) |
(38) |
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Core EPS |
$1.17 |
(37) |
(39) |
$0.69 |
(21) |
(26) |
• Product Sales increased by 2% (down by 2% at CER) to $10,015m. New medicines4 generated more than $1bn in additional sales at CER in the half
• The Reported Gross Margin declined by three percentage points to 78.6%, reflecting the favourable impact of manufacturing variances realised in H1 2017 and the agreement on Lynparza with MSD5; the Core Gross Margin fell by three percentage points to 80.0%
• Productivity gains and cost discipline continued with prioritised and targeted investment in new medicines and additional investment in China
o Total Reported Operating Expenses increased by 3% (down by 1% at CER) to $7,814m. Total Core Operating Expenses increased by 6% (2% at CER) to $6,877m.
o Reported R&D costs declined by 6% (9% at CER) to $2,641m; Core R&D costs declined by 2% (5% at CER) to $2,558m, driven by efficiency savings. Reported SG&A costs increased by 8% (3% at CER) to $5,008m; Core SG&A costs increased by 11% (7% at CER) to $4,154m
• Externalisation Revenue declined by 53% (54% at CER) to $318m. Reported Other Operating Income & Expense increased by 29% (28% at CER) to $1,086m; Core Other Operating Income & Expense declined by 27% to $704m, with the difference between the Reported and Core performance reflecting a legal settlement. The Company continues to anticipate a significant level of externalisation activities in H2 2018
• An unchanged first interim dividend of $0.90 per share
• Restructuring costs reduced to $187m (H1 2017: $496m). Capital expenditure reduced to $486m (H1 2017: $549m). The Company continues to anticipate declines in restructuring costs and capital expenditure over the full year
• FY 2018 guidance reiterated and unchanged
Pascal Soriot, Chief Executive Officer, commenting on the results said:
“The performance in the first half demonstrated that we remain firmly on track to return our company to Product Sales growth in 2018. Our new medicines performed strongly and have established themselves as major drivers of Product Sales, including Lynparza, Tagrisso and Imfinzi in Oncology, Brilinta and Farxiga in CVRM and Fasenra in Respiratory. Emerging Markets, led by China, delivered double-digit growth.
The pipeline also continued to deliver: in Oncology, strong results were achieved by Lynparza in first-line ovarian cancer and Imfinzi showed an overall-survival benefit for patients in earlier-stage lung cancer, while a number of approvals were granted, including for Lokelma in hyperkalaemia. AstraZeneca's rich pipeline and sharp commercial focus make us confident that we have in place the right conditions for our return to growth this year.”
Commercial Highlights
New medicines generated more than $1bn in additional sales at CER in the half compared to H1 2017. Product Sales highlights were:
• Oncology: sales growth of 42% in the half (37% at CER) to $2,664m, including:
– Lynparza sales of $269m, growth of 132% (124% at CER), driven by expanded use in the treatment of ovarian cancer and a new approval for the use in the treatment of breast cancer. A very strong start in Japan, following the medicine's launch in Q2 2018
– Tagrisso sales of $760m, growth of 89% (82% at CER) reflecting increased use in the treatment of 2nd-line EGFR6 T790M-mutated7 NSCLC8 and the newly-approved use in the 1st-line EGFR-mutated (EGFRm) setting as a new standard of care (SoC)
– Imfinzi sales of $184m (Q2 2018: $122m), reflecting ongoing launches for the treatment of unresectable, Stage III NSCLC, where the number of new-patient starts continued to grow
• New CVRM9: 12% growth (9% at CER) to $1,874m, including:
– Brilinta sales of $609m, growth of 23% (18% at CER) due to continued market penetration in acute coronary syndrome and high-risk periprocedural myocardial infarction (HR PMI)
– Farxiga sales of $639m, growth of 40% (36% at CER) as the medicine consolidated its blockbuster status
– Bydureon sales of $294m, a decline of 2% (3% at CER). An encouraging BCise device launch was reflected in an increase in Q2 2018 sales of 6% (5% at CER) to $155m
• Respiratory: 6% growth (stable at CER) to $2,407m, including:
– A Symbicort sales decline in the half of 6% (10% at CER) to $1,306m, as competitive class pressures in the US continued. Symbicort, however, delivered a significantly-improved sequential US performance in Q2 2018
– Pulmicort sales growth of 12% in the half (6% at CER) to $633m. Q2 2018 growth of 27% (20% at CER) to $287m, reflecting the normalisation of supply in China
– Fasenra sales of $86m (Q2 2018: $65m) further consolidating its leadership position among novel biologic asthma medicines
• Emerging Markets: the largest region by Product Sales, with growth of 14% (10% at CER) to $3,424m, including:
– A China sales increase of 33% (24% at CER) to $1,893m. Underpinned by the launch of Tagrisso, Oncology sales in China grew by 57% (46% at CER) to $403m
– An ex-China sales decline of 3% to $1,531m. A robust result, impacted by divested Product Sales and adverse performances in the Middle East, Africa and Russia
Pipeline Highlights
The table below highlights significant developments in the late-stage pipeline since the prior results announcement:
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Regulatory Approvals |
– Lynparza – breast cancer (JP) – Tagrisso – lung cancer (1st line) (EU) – Imfinzi – unresectable, Stage III NSCLC (JP) – Lokelma – hyperkalaemia (US) |
|
Regulatory Submissions and/or Acceptances |
– Forxiga – type-1 diabetes (JP) – Forxiga combination with Onglyza and metformin – type-2 diabetes (EU) – Bydureon – type-2 diabetes CVOT10 (US) |
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Major Phase III Data Readouts or Other Major Developments |
– Lynparza – ovarian cancer (1st line): primary PFS11 endpoint met – Imfinzi – unresectable, Stage III NSCLC: primary OS12 endpoint met – selumetinib – thyroid cancer: did not meet primary endpoint – Bydureon BCise – type-2 diabetes; new device: positive CHMP13 opinion – Fasenra – COPD14: did not meet primary endpoints – lanabecestat – Alzheimer's disease: termination of Phase III programme |
Guidance
Guidance for FY 2018 is reiterated and unchanged. All measures in this section are at CER. Company guidance is on Product Sales and Core EPS only:
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Product Sales |
A low single-digit percentage increase |
|
Core EPS |
$3.30 to $3.50 |
Variations in performance between quarters can be expected to continue. The Company is unable to provide guidance and indications on a Reported basis because the Company cannot reliably forecast material elements of the Reported result, including the fair-value adjustments arising on acquisition-related liabilities, intangible-asset impairment charges and legal-settlement provisions. Please refer to the section 'Cautionary Statements Regarding Forward-Looking Statements' at the end of this announcement.
Additional Commentary
Outside of guidance, the Company provides indications for FY 2018 vs. the prior year:
• The sum of Externalisation Revenue and Other Operating Income & Expense is anticipated to decline vs. the prior year. As part of its long-term growth strategy, the Company remains committed to focusing on appropriate cash-generating and value-accretive externalisation activities that reflect the ongoing productivity of the pipeline. It is also committed to the continued management of its portfolio through divestments and to increasing the focus, over time, on its three main therapy areas
• Core R&D costs in FY 2018 are anticipated to be in the range of a low single-digit percentage decline to stable. This expectation includes the favourable impact on development costs from the MSD collaboration
• The Company maintains its focus on reducing operational and infrastructure costs. Total Core SG&A costs are expected to increase by a low to mid single-digit percentage in FY 2018, reflecting targeted support for medicine launches, including Imfinzi in Oncology and Fasenra in Respiratory, as well as additional investment in China. The Company also anticipates declines in restructuring costs and capital expenditure in FY 2018 vs. the prior year
• A Core Tax Rate of 16-20% (FY 2017: 14%)
Currency Impact
Based only on average exchange rates in the six months to 30 June 2018 and the Company's published currency sensitivities, the Company anticipates a favourable low single-digit percentage impact from currency movements on Product Sales and Core EPS in FY 2018. Details on currency sensitivities are contained within the Operating and Financial Review.
Sustainability
AstraZeneca is committed to being a valued and trusted partner to its stakeholders over the long term. There is a distinct connection between maintaining a strong business and making a positive impact to a fairer, safer and healthier world. AstraZeneca is dedicated to pushing the boundaries of science to deliver sustainable health that transforms the lives of patients around the world.
AstraZeneca's sustainability ambition is founded on making science accessible and operating in a way that recognises the interconnection between business growth, the needs of society and the limitations of the planet. The Company's sustainability ambition is reinforced by its purpose and values, which are intrinsic to its business model, and ensures that the delivery of its strategy broadens access to medicines, minimises the environmental footprint of medicines and processes and ensures that all business activities are underpinned by the highest levels of ethics and transparency.