On July 27, 2017 AstraZeneca, a global, innovation-driven biopharmaceutical business that focuses on the discovery, development and commercialisation of prescription medicines, primarily for the treatment of diseases in three main therapy areas – respiratory, inflammation, autoimmune disease (RIA), cardiovascular and metabolic disease (CVMD) and oncology – as well as in infection and neuroscience reported financial results for the first half of 2017 ended June 30, 2017 (Press release, AstraZeneca, JUL 27, 2017, View Source [SID1234519936]).

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Financial Summary
H1 2017Q2 2017
$m% change$m% change
Actual1CER2ActualCER
Total Revenue10,456(11)(9)5,051(10)(8)
Product Sales9,783(11)(10)4,940(10)(8)
Externalisation Revenue673(2)(1)111(17)(15)

Reported Operating Profit1,8423722925n/mn/m
Core Operating Profit33,215731,548108

Reported Earnings Per Share (EPS)$0.805841$0.38n/mn/m
Core EPS3$1.8651$0.8756
Financial Highlights
● The residual effects of the Crestor and Seroquel XR loss of exclusivity in the US impacted Product Sales
● Cost discipline continued:
o Reported R&D costs declined by 5% (1% at CER) to $2,802m
o Core R&D costs declined by 7% (4% at CER) to $2,617m
o Reported SG&A costs declined by 17% (15% at CER) to $4,658m
o Core SG&A costs declined by 12% (9% at CER) to $3,728m
● Reported Other Operating Income and Expense increased by 97% (101% at CER) to $839m; Core Other Operating Income and Expense increased by 105% (108% at CER) to $958m
● Reported EPS increased by 58% (41% at CER) to $0.80; Core EPS increased by 5% (1% at CER) to $1.86
● An unchanged first interim dividend of $0.90 per share
● Financial guidance for 2017 reiterated
Commercial Highlights
● The Growth Platforms grew by 2% (3% at CER) and represented 70% of Total Revenue:
● Emerging Markets: 3% growth (6% at CER), underpinned by China sales growth of 3% (8% at CER). Economic conditions in Latin America and Saudi Arabia limited overall Emerging Markets growth
● Respiratory: A decline of 6% (4% at CER), reflecting the competitive environment for Symbicort in the US
● New CVMD4: Growth of 3% (4% at CER). Brilinta growth of 26% (28% at CER) and Farxiga growth 22% (22% at CER), offset by other Diabetes
● Japan: Growth of 7% (6% at CER), with an accelerated performance in Q2 2017 reflecting the strong uptake of Tagrisso
● New Oncology5: Sales of $537m (H1 2016: $251m); particularly encouraging growth of Tagrisso. Lynparza’s US performance reflected the current indication
Achieving Scientific Leadership
The table below highlights the development of the late-stage pipeline since the last results announcement:
Regulatory ApprovalsImfinzi (durvalumab) – bladder cancer (US)
Faslodex – breast cancer (1st line) (EU, JP)
Kyntheum (brodalumab) – psoriasis (EU, received by partner)
Regulatory Submission AcceptancesLynparza – ovarian cancer (2nd line) (EU, JP)
Bevespi – chronic obstructive pulmonary disease (COPD) (EU)
Phase III or Major Data ReadoutsImfinzi – lung cancer (PACIFIC)
Bydureon – type-2 diabetes cardiovascular outcomes trial (met primary safety objective, did not meet primary efficacy objective)
tralokinumab – severe, uncontrolled asthma (did not meet primary endpoint)
Pascal Soriot, Chief Executive Officer, commenting on the results said:
“Our performance in the first half was in line with expectations as we experience the loss of exclusivity of Crestor and Seroquel XR in the US. We continued to deliver transformative science across the pipeline, particularly in Oncology. Imfinzi was launched in bladder cancer while we published practice-changing data in breast cancer for Lynparza, our first-in-class PARP inhibitor. In lung cancer, we strengthened our unique portfolio focused on both the genetic drivers of disease and immunotherapy. In the first half, we shared positive results for Imfinzi in the PACIFIC trial and reported more encouraging data for Tagrisso in patients with central nervous system metastases.
“I’m excited about our pipeline-driven transformation as we continue to deliver for shareholders on our strategy to return to sustainable long-term growth. In a pivotal year for AstraZeneca, we remain focused on realising the potential of our pipeline, growing our new launch medicines and bringing our strong science to patients.”
FY 2017 Guidance: Reiterated
The Company provides guidance on Total Revenue and Core EPS only. All commentary in this section is at CER and is unchanged from the prior results announcement:
Total RevenueA low to mid single-digit percentage decline
Core EPSA low to mid teens percentage decline*
*The Core EPS guidance anticipates a normalised effective Core tax rate in FY 2017 of 16-20% (FY 2016: 11%)
Guidance is subject to base-case assumptions of the progression of the pipeline and the extensive level of news flow listed on the following page. Variations in performance between quarters can be expected, with year-on-year comparisons expected to begin to ease in the second half of the year, given the recent annualisation of the impact of the entry of multiple Crestor generic medicines in the US.
The Company presents Core EPS guidance only at CER. It is unable to provide guidance on a Reported/GAAP basis because the Company cannot reliably forecast material elements of the Reported/GAAP 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.
In addition to the unchanged guidance above, the Company also provides unchanged indications in other areas of the Income Statement. The sum of Externalisation Revenue and Other Operating Income and Expense in
FY 2017 is anticipated to be ahead of that in FY 2016. Sustainable and ongoing income6 is expected to increase further as a proportion of total Externalisation Revenue in FY 2017 (FY 2016: 21%). Core R&D costs are expected to be broadly in line with those in FY 2016 and the Company anticipates a further reduction in Core SG&A costs in FY 2017, reflecting the evolving shape of the business. A full explanation is listed in the Operating & Financial Review.
FY 2017 Currency Impact
Based only on average exchange rates in H1 2017 and the Company’s published currency sensitivities, the Company continues to expect a low single-digit percentage adverse impact from currency movements on Total Revenue and a minimal impact on Core EPS. Further details on currency sensitivities are contained within the Operating and Financial Review.
Notes
1. All growth rates are shown at actual exchange rates, unless stated otherwise.
2. Constant exchange rates. These are non-GAAP measures because they remove the effects of currency movements from Reported results.
3. Core financial measures. These are non-GAAP measures because, unlike Reported performance, they cannot be derived directly from the information in the Group Financial Statements. See the Operating and Financial Review for a definition of Core financial measures and a reconciliation of Core to Reported financial measures.
4. New Cardiovascular and Metabolic Diseases, incorporating Brilinta and Diabetes.
5. New Oncology, comprising Lynparza, Tagrisso, Iressa (US) and Imfinzi.
6. Sustainable and ongoing income is defined as Externalisation Revenue, excluding initial revenue.
7. All commentary in this announcement refers to the performance in H1 2017, unless stated otherwise.
Pipeline: Forthcoming Major News Flow
Innovation is critical to addressing unmet patient needs and is at the heart of the Company’s growth strategy. The focus on research and development is designed to yield strong results from the pipeline.
Mid-2017Imfinzi +/- tremelimumab (treme) – lung cancer (MYSTIC): Data readout
H2 2017Faslodex – breast cancer (1st line): Regulatory decision (US)
Lynparza – ovarian cancer (2nd line): Regulatory decision (US)
Lynparza – breast cancer: Regulatory submission
Tagrisso – lung cancer (1st line): Data readout, regulatory submission
Imfinzi – lung cancer (PACIFIC): Regulatory submission
Imfinzi +/- treme – lung cancer (MYSTIC): Regulatory submission
Imfinzi +/- treme – lung cancer (ARCTIC): Data readout, regulatory submission
acalabrutinib – blood cancer: Regulatory submission (US) (Phase II)*
moxetumomab – leukaemia: Data readout
Bydureon – autoinjector: Regulatory decision (US), regulatory submission (EU)
benralizumab – severe, uncontrolled asthma: Regulatory decision (US)
tralokinumab – severe, uncontrolled asthma: Data readout
H1 2018Lynparza – ovarian cancer (2nd line): Regulatory decision (EU, JP)
Lynparza – ovarian cancer (1st line): Data readout, regulatory submission
Imfinzi +/- treme – head& neck cancer (KESTREL): Data readout
Imfinzi +/- treme – head & neck cancer (EAGLE): Data readout
moxetumomab – leukaemia: Regulatory submission
selumetinib – thyroid cancer: Data readout, regulatory submission
Bevespi – COPD: Regulatory submission (JP)
Duaklir – COPD: Regulatory submission (US)
benralizumab – severe, uncontrolled asthma: Regulatory decision (EU, JP)
tralokinumab – severe, uncontrolled asthma: Regulatory submission
PT010 – COPD: Data readout
H2 2018Imfinzi + treme – lung cancer (NEPTUNE): Data readout, regulatory submission
Imfinzi +/- treme – head& neck cancer (KESTREL): Regulatory submission
Imfinzi +/- treme – head & neck cancer (EAGLE): Regulatory submission
Imfinzi +/- treme – bladder cancer (DANUBE): Data readout, regulatory submission
roxadustat – anaemia: Regulatory submission (US)
Bevespi – COPD: Regulatory decision (EU)
benralizumab – COPD: Data readout, regulatory submission
PT010 – COPD: Regulatory submission (JP)
anifrolumab – lupus: Data readout
The term ‘data readout’ in this section refers to Phase III data readouts, unless stated otherwise.
*Potential fast-to-market opportunity ahead of randomised, controlled trials.