REG - AstraZeneca PLC - AZN: H1 2016 Results <Origin Href="QuoteRef">AZN.L</Origin> - Part 4
28/07/2016 07:07
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1,247
Non-controlling interests (49) 1
594 1,248
Total comprehensive income attributable to:
Owners of the Parent (636) 1,239
Non-controlling interests (49) 1
(685) 1,240
Basic earnings per $0.25 Ordinary Share $0.51 $0.99
Diluted earnings per $0.25 Ordinary Share $0.51 $0.99
Weighted average number of Ordinary Shares in issue (millions) 1,264 1,263
Diluted weighted average number of Ordinary Shares in issue (millions) 1,265 1,265
1,240
Basic earnings per $0.25 Ordinary Share
$0.51
$0.99
Diluted earnings per $0.25 Ordinary Share
$0.51
$0.99
Weighted average number of Ordinary Shares in issue (millions)
1,264
1,263
Diluted weighted average number of Ordinary Shares in issue (millions)
1,265
1,265
Condensed Consolidated Statement of Comprehensive Income
Product sales 5,469 5,836
Externalisation revenue 134 471
Total revenue 5,603 6,307
Cost of sales (1,062) (1,067)
Gross profit 4,541 5,240
Distribution costs (91) (84)
Research and development expense (1,465) (1,466)
Selling, general and administrative costs (3,052) (2,966)
Other operating income and expense 370 199
Operating profit 303 923
Finance income 17 13
Finance expense (342) (276)
Share of after tax losses in associates and joint ventures (8) (2)
(Loss)/Profit before tax (30) 658
Taxation (1) 38
(Loss)/Profit for the period (31) 696
Other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurement of the defined benefit pension liability (651) 259
Tax on items that will not be reclassified to profit or loss 194 (61)
(457) 198
Items that may be reclassified subsequently to profit or loss
Foreign exchange arising on consolidation (356) 438
Foreign exchange arising on designating borrowings in net investment hedges (274) 191
Cash flow hedge losses (103) -
Cash flow hedge gains transferred to the income statement 60 -
Fair value movements on derivatives designated in net investment hedges (47) (1)
Amortisation of loss on cash flow hedge 1 1
Net available for sale losses taken to equity (7) (48)
Tax on items that may be reclassified subsequently to profit or loss 65 (57)
(661) 524
Other comprehensive income for the period, net of tax (1,118) 722
Total comprehensive income for the period (1,149) 1,418
(Loss)/Profit attributable to:
Owners of the Parent (3) 697
Non-controlling interests (28) (1)
(31) 696
Total comprehensive income attributable to:
Owners of the Parent (1,121) 1,418
Non-controlling interests (28) -
(1,149) 1,418
Basic earnings per $0.25 Ordinary Share $0.00 $0.55
Diluted earnings per $0.25 Ordinary Share $0.00 $0.55
Weighted average number of Ordinary Shares in issue (millions) 1,265 1,264
Diluted weighted average number of Ordinary Shares in issue (millions) 1,265 1,265
1,418
Basic earnings per $0.25 Ordinary Share
$0.00
$0.55
Diluted earnings per $0.25 Ordinary Share
$0.00
$0.55
Weighted average number of Ordinary Shares in issue (millions)
1,265
1,264
Diluted weighted average number of Ordinary Shares in issue (millions)
1,265
1,265
Condensed Consolidated Statement of Financial Position
ASSETS Non-current assets
Property, plant and equipment 6,613 6,413 6,134
Goodwill 11,848 11,868 11,467
Intangible assets 29,438 22,646 20,486
Derivative financial instruments 337 446 471
Investments in associates and joint ventures 105 85 52
Other investments 470 458 448
Other receivables 764 907 957
Deferred tax assets 1,524 1,294 1,342
51,099 44,117 41,357
Current assets
Inventories 2,422 2,143 2,198
Trade and other receivables 5,619 6,622 6,615
Other investments 731 613 531
Derivative financial instruments 5 2 51
Income tax receivable 628 387 450
Cash and cash equivalents 3,915 6,240 3,967
13,320 16,007 13,812
Total assets 64,419 60,124 55,169
LIABILITIES Current liabilities
Interest-bearing loans and borrowings (1,060) (916) (2,705)
Trade and other payables (10,259) (11,663) (10,659)
Derivative financial instruments (57) (9) (6)
Provisions (999) (798) (731)
Income tax payable (1,960) (1,483) (2,049)
(14,335) (14,869) (16,150)
Non-current liabilities
Interest-bearing loans and borrowings (16,519) (14,137) (8,303)
Derivative financial instruments (103) (1) -
Deferred tax liabilities (4,076) (2,733) (1,582)
Retirement benefit obligations (2,628) (1,974) (2,377)
Provisions (426) (444) (479)
Other payables (10,942) (7,457) (7,979)
(34,694) (26,746) (20,720)
Total liabilities (49,029) (41,615) (36,870)
Net assets 15,390 18,509 18,299
EQUITY
Capital and reserves attributable to equity holders of the Company
Share capital 316 316 316
Share premium account 4,326 4,304 4,281
Other reserves 2,030 2,036 2,033
Retained earnings 6,858 11,834 11,649
13,530 18,490 18,279
Non-controlling interests 1,860 19 20
Total equity 15,390 18,509 18,299
Non-controlling interests
1,860
19
20
Total equity
15,390
18,509
18,299
Condensed Consolidated Statement of Cash Flows
Cash flows from operating activities
Profit before tax 693 1,336
Finance income and expense 636 513
Share of after tax losses in associates and joint ventures 12 7
Depreciation, amortisation and impairment 1,156 1,565
Increase in working capital and short-term provisions (183) (767)
Non-cash and other movements (380) (612)
Cash generated from operations 1,934 2,042
Interest paid (298) (252)
Tax paid (262) (782)
Net cash inflow from operating activities 1,374 1,008
Cash flows from investing activities
Movement in short-term investments and fixed deposits (15) 273
Purchase of property, plant and equipment (584) (497)
Disposal of property, plant and equipment 8 16
Purchase of intangible assets (723) (1,222)
Disposal of intangible assets 102 350
Purchase of non-current asset investments (66) (30)
Disposal of non-current asset investments - 56
Payments to joint ventures (15) -
Upfront payments on business acquisitions (2,564) -
Payment of contingent consideration on business acquisitions (141) (239)
Interest received 63 59
Payments made by subsidiaries to non-controlling interests (13) -
Net cash outflow from investing activities (3,948) (1,234)
Net cash outflow before financing activities (2,574) (226)
Cash flows from financing activities
Proceeds from issue of share capital 22 20
New long-term loans 2,483 -
Repayment of loans - (884)
Dividends paid (2,409) (2,357)
Hedge contracts relating to dividend payments 5 (43)
Repayment of obligations under finance leases (8) (34)
Movement in short-term borrowings (99) 910
Net cash outflow from financing activities (6) (2,388)
Net decrease in cash and cash equivalents in the period (2,580) (2,614)
Cash and cash equivalents at the beginning of the period 6,051 6,164
Exchange rate effects 34 (29)
Cash and cash equivalents at the end of the period 3,505 3,521
Cash and cash equivalents consists of:
Cash and cash equivalents 3,915 3,967
Overdrafts (410) (446)
3,505 3,521
(410)
(446)
3,505
3,521
Condensed Consolidated Statement of Changes in Equity
Share Share Other Retained Total Non- Total
capital premium reserves* earnings $m controlling equity
$m account $m $m interests $m
$m $m
At 1 Jan 2015 316 4,261 2,021 13,029 19,627 19 19,646
Profit for the period - - - 1,247 1,247 1 1,248
Other comprehensive income - - - (8) (8) - (8)
Transfer to other reserves - - 12 (12) - - -
Transactions with owners:
Dividends - - - (2,400) (2,400) - (2,400)
Issue of Ordinary Shares - 20 - - 20 - 20
Share-based payments - - - (207) (207) - (207)
Net movement - 20 12 (1,380) (1,348) 1 (1,347)
At 30 Jun 2015 316 4,281 2,033 11,649 18,279 20 18,299
Share Share Other Retained Total Non- Total
capital premium reserves* earnings $m controlling equity
$m account $m $m interests $m
$m $m
At 1 Jan 2016 316 4,304 2,036 11,834 18,490 19 18,509
Profit for the period - - - 643 643 (49) 594
Other comprehensive income - - - (1,279) (1,279) - (1,279)
Transfer to other reserves - - (6) 6 - - -
Transactions with owners:
Dividends - - - (2,402) (2,402) - (2,402)
Dividend paid by subsidiary to non-controlling interest - - - - - (13) (13)
Acerta put option - - - (1,825) (1,825) - (1,825)
Changes in non-controlling interest - - - - - 1,903 1,903
Issue of Ordinary Shares - 22 - - 22 - 22
Share-based payments - - - (119) (119) - (119)
Net movement - 22 (6) (4,976) (4,960) 1,841 (3,119)
At 30 Jun 2016 316 4,326 2,030 6,858 13,530 1,860 15,390
* Other reserves include the capital redemption reserve and the merger reserve.
Responsibility Statement of the Directors in Respect of the Half-Yearly Financial Report
We confirm that to the best of our knowledge:
· the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as
adopted by the European Union and as issued by the International Accounting Standards Board;
· the half-yearly management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the enterprise during that period; and any changes in the related party transactions described in the last annual report that could do so.
The Board
The Board of Directors that served during all or part of the six-month period to 30 June 2016 and their respective
responsibilities can be found on pages 86 and 87 of the AstraZeneca Annual Report and Form 20-F Information 2015.
Approved by the Board and signed on its behalf by
Pascal Soriot
Chief Executive Officer
28 July 2016
Independent Review Report to AstraZeneca PLC
Introduction
We have been engaged by the Company to review the condensed set of Financial Statements in the half-yearly financial report
for the six months ended 30 June 2016 (but not for the quarter ended 30 June 2016 as presented in the Condensed
Consolidated Statement of Comprehensive Income for the quarter ended 30 June 2016) which comprises Condensed Consolidated
Statement of Comprehensive Income, Condensed Consolidated Statement of Financial Position, Condensed Consolidated Statement
of Cash Flows, Condensed Consolidated Statement of Changes in Equity and Notes 1 to 8. We have read the other information
contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting
the requirements of the Disclosure and Transparency Rules (the DTR) of the UK's Financial Conduct Authority (the UK FCA).
Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the Company for our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are
responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in Note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by
the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the
half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for
use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in
scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does
not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an
audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial
statements in the half-yearly financial report for the six months ended 30 June 2016 is not prepared, in all material
respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.
Antony Cates
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London E14 5GL
28 July 2016
Notes to the Interim Financial Statements
1 BASIS OF PREPARATION AND ACCOUNTING POLICIES
These unaudited condensed consolidated interim financial statements (interim financial statements) for the six months ended
30 June 2016 have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union (EU)
and as issued by the International Accounting Standards Board (IASB).
The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the EU and as issued by the IASB. The interim financial statements have been prepared applying the
accounting policies and presentation that were applied in the preparation of the Group's published consolidated financial
statements for the year ended 31 December 2015. There have been no significant new or revised accounting standards applied
in the six months ended 30 June 2016.
Legal proceedings
The information contained in Note 7 updates the disclosures concerning legal proceedings and contingent liabilities in the
Group's Annual Report and Form 20-F Information 2015.
Going concern
The Group has considerable financial resources available. As at 30 June 2016 the Group has $5.8bn in financial resources
(cash balances of $3.9bn and undrawn committed bank facilities of $3bn which are available until April 2021, with only
$1.1bn of debt due within one year). The Group's revenues are largely derived from sales of products which are covered by
patents which provide a relatively high level of resilience and predictability to cash inflows, although our revenue is
expected to continue to be significantly impacted by the expiry of patents over the medium term. In addition, government
price interventions in response to budgetary constraints are expected to continue to adversely affect revenues in many of
our mature markets. However, we anticipate new revenue streams from both recently launched medicines and products in
development, and the Group has a wide diversity of customers and suppliers across different geographic areas. Consequently,
the Directors believe that, overall, the Group is well placed to manage its business risks successfully.
On the basis of the above paragraph and after making enquiries, the Directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly,
the interim financial statements have been prepared on a going concern basis.
Financial information
The comparative figures for the financial year ended 31 December 2015 are not the Company's statutory accounts for that
financial year. Those accounts have been reported on by the Group's auditors and have been delivered to the registrar of
companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under
section 498(2) or (3) of the Companies Act 2006.
2 RESTRUCTURING COSTS
Profit before tax for the quarter ended 30 June 2016 is stated after charging restructuring costs of $463m ($308m for the
second quarter of 2016). These have been charged to profit as follows:
H1 2016 H1 2015 Q2 2016 Q2 2015
$m $m $m $m
Cost of sales 28 101 19 58
Research and development expense 107 124 69 62
Selling, general and administrative costs 328 223 220 115
Total 463 448 308 235
3 NET DEBT
The table below provides an analysis of net debt and a reconciliation of net cash flow to the movement in net debt.
At 1 Jan 2016 $m Cash Flow$m Acquisitions $m Non-cash& Other$m Exchange Movements$m At 30 Jun 2016 $m
Loans due after one year (14,109) (2,483) - (12) 94 (16,510)
Finance leases due after one year (28) - - 19 - (9)
Total long-term debt (14,137) (2,483) - 7 94 (16,519)
Current instalments of finance leases (67) 8 - (31) - (90)
Total current debt (67) 8 - (31) - (90)
Other Investments 613 17 140 15 (37) 748
Net derivative financial instruments 438 10 - (266) - 182
Cash and cash equivalents 6,240 (2,355) - - 30 3,915
Overdrafts (189) (225) - - 4 (410)
Short-term borrowings (660) 99 - 1 - (560)
6,442 (2,454) 140 (250) (3) 3,875
Net debt (7,762) (4,929) 140 (274) 91 (12,734)
Non-cash movements in the period include fair value adjustments under IAS 39.
4 MAJORITY EQUITY INVESTMENT IN ACERTA PHARMA
On 2 February 2016, AstraZeneca completed an agreement to invest in a majority equity stake in Acerta Pharma, a
privately-owned biopharmaceutical company based in the Netherlands and US. The transaction provides AstraZeneca with a
potential best-in-class irreversible oral Bruton's tyrosine kinase (BTK) inhibitor, acalabrutinib (ACP-196), currently in
Phase III development for B-cell blood cancers and in Phase I/II clinical trials in multiple solid tumours.
Under the terms of the agreement, AstraZeneca has acquired 55% of the issued share capital of Acerta for an upfront payment
of $2.5bn. A further payment of $1.5bn will be paid either on receipt of the first regulatory approval for acalabrutinib
for any indication in the US, or the end of 2018, depending on which is first. The agreement also includes options which,
if exercised, provide the opportunity for Acerta shareholders to sell, and AstraZeneca to buy, the remaining 45% of shares
in Acerta. The options can be exercised at various points in time, conditional on the first approval of acalabrutinib in
both the US and Europe and when the extent of the commercial opportunity has been fully established, at a price of
approximately $3bn net of certain costs and payments incurred by AstraZeneca and net of agreed future adjusting items,
using a pre-agreed pricing mechanism. Acerta has approximately 150 employees.
AstraZeneca's 55% holding is a controlling interest and Acerta's combination of intangible product rights with an
established workforce and their operating processes requires that the transaction is accounted for as a business
combination in accordance with IFRS 3.
Goodwill is principally attributable to the value of the specialist knowhow inherent in the acquired workforce and the
accounting for deferred taxes. Goodwill is not expected to be deductible for tax purposes. Acerta Pharma's results have
been consolidated into the Group's results from 2 February 2016. From the period from acquisition to 30 June 2016, Acerta
Pharma had no revenues and its loss after tax was $112 million.
Fair value$m
Intangible assets 7,307
Other assets including cash and cash equivalents 238
Deferred tax liabilities (1,827)
Other liabilities (90)
Total net assets acquired 5,628
Non-controlling interests (1,903)
Goodwill 84
Fair value of total consideration 3,809
Less: fair value of deferred consideration (1,332)
Total upfront consideration 2,477
Less: cash and cash equivalents acquired (94)
Net cash outflow 2,383
5 ACQUISITION OF ZS PHARMA
On 17 December 2015, AstraZeneca completed the acquisition of ZS Pharma, a biopharmaceutical company based in San Mateo,
California. ZS Pharma uses its proprietary ion-trap technology to develop novel treatments for hyperkalaemia, a serious
condition of elevated potassium in the bloodstream, typically associated with CKD and Chronic Heart Failure.
During 2016, we have revised our assessment of the fair values of the assets and liabilities acquired as a result of new
information obtained about facts and circumstances that existed at the date of acquisition that impact the value of
deferred tax. This has resulted in a reduction to both deferred tax liabilities and goodwill of $68m.
Fair value$m
Non-current assets
Intangible assets 3,162
Property, plant and equipment 21
3,183
Current assets 169
Current liabilities (50)
Non-current liabilities
Deferred tax liabilities (977)
Other liabilities (13)
(990)
Total net assets acquired 2,312
Goodwill 388
Total upfront consideration 2,700
Less: cash and cash equivalents acquired (73)
Less: deferred upfront consideration (181)
Net cash outflow 2,446
6 FINANCIAL INSTRUMENTS
As detailed in the Group's most recent annual financial statements, our principal financial instruments consist of
derivative financial instruments, other investments, trade and other receivables, cash and cash equivalents, trade and
other payables, and interest-bearing loans and borrowings. As indicated in Note 1, there have been no changes to the
accounting policies for financial instruments, including fair value measurement, from those disclosed on pages 146 and 147
of the Company's Annual Report and Form 20-F Information 2015. In addition, there have been no changes of significance to
the categorisation or fair value hierarchy of our financial instruments. Financial instruments measured at fair value
include $1,201m of other investments, $1,760m of loans, and $182m of derivatives as at 30 June 2016. The total fair value
of interest-bearing loans and borrowings at 30 June 2016, which have a carrying value of $17,579m in the Condensed
Consolidated Statement of Financial Position, was $19,385m. Contingent consideration liabilities arising on business
combinations have been classified under Level 3 in the fair value hierarchy and movements in fair value are shown below:
DiabetesAlliance2016 Other 2016 Total 2016 Total 2015
$m $m $m $m
At 1 January 5,092 1,319 6,411 6,899
Settlements (141) - (141) (239)
Revaluations 32 128 160 82
Discount unwind 195 53 248 263
At 30 June 5,178 1,500 6,678 7,005
7 LEGAL PROCEEDINGS AND CONTINGENT LIABILITIES
AstraZeneca is involved in various legal proceedings considered typical to its business, including litigation and
investigations relating to product liability, commercial disputes, infringement of intellectual property rights, the
validity of certain patents, anti-trust law and sales and marketing practices. The matters discussed below constitute the
more significant developments since publication of the disclosures concerning legal proceedings in the Company's Annual
Report and Form 20-F Information 2015 (the 2015 Disclosures). Unless noted otherwise below or in the 2015 Disclosures, no
provisions have been established in respect of the claims discussed below.
As discussed in the 2015 Disclosures, for the majority of claims in which AstraZeneca is involved it is not possible to
make a reasonable estimate of the expected financial effect, if any, that will result from ultimate resolution of the
proceedings. In these cases, AstraZeneca discloses information with respect only to the nature and facts of the cases but
no provision is made.
In cases that have been settled or adjudicated, or where quantifiable fines and penalties have been assessed and which are
not subject to appeal, or where a loss is probable and we are able to make a reasonable estimate of the loss, we record the
loss absorbed or make a provision for our best estimate of the expected loss.
The position could change over time and the estimates that we have made and upon which we have relied in calculating these
provisions are inherently imprecise. There can, therefore, be no assurance that any losses that result from the outcome of
any legal proceedings will not exceed the amount of the provisions that have been booked in the accounts. The major factors
causing this uncertainty are described more fully in the 2015 Disclosures and herein.
AstraZeneca has full confidence in, and will vigorously defend and enforce, its intellectual property.
Matters disclosed in respect of the first quarter of 2016 and to 29 April 2016.
Patent litigation
Crestor (rosuvastatin)
US patent proceedings
As previously disclosed, AstraZeneca is defending three patent infringement lawsuits in the US District Court for the
District of South Carolina (the District Court) which, among other things, claim that AstraZeneca's Crestor sales induce
infringement of the plaintiffs' patents. In December 2015, the District Court issued an order dismissing the first of these
cases, filed by Palmetto Pharmaceuticals, LLC (Palmetto), and entered judgment in AstraZeneca's favour, which Palmetto is
appealing. In February 2016, the District Court granted AstraZeneca's motions for summary judgment and dismissed the
remaining two, consolidated cases filed by co-plaintiffs Medical University of South Carolina Foundation for Research
Development and Charleston Medical Therapeutics (together CMT) and entered judgment in AstraZeneca's favour, which CMT has
appealed.
Patent proceedings outside the US
As previously disclosed, in Australia, AstraZeneca was unsuccessful in defending the validity of certain Crestor patents,
at trial and on appeal. This patent litigation concluded in September 2015. A provision has been taken in respect of claims
from generic entities which were prevented by court order from launching their products in Australia before AstraZeneca's
patents were subsequently found invalid. In April 2016, AstraZeneca was notified that the Commonwealth of Australia also
intends to pursue a claim against AstraZeneca in relation to alleged losses it suffered in connection with this patent
litigation. AstraZeneca will respond appropriately in due course.
As previously disclosed, in the Netherlands, in April 2014, AstraZeneca received a writ of summons from Resolution
Chemicals Ltd. (Resolution) alleging partial invalidity and non-infringement of the supplementary protection certificate
(SPC) related to the Crestor substance patent. In July 2015, the District Court of the Hague determined that the SPC does
not extend to zinc salts of rosuvastatin and that Resolution's rosuvastatin zinc product does not infringe the SPC.
AstraZeneca appealed. In February 2016, the Court of Appeal of the Hague overturned the decision and found that
Resolution's product does infringe the SPC. Resolution may seek to appeal.
Faslodex (fulvestrant)
US patent proceedings
As previously disclosed, AstraZeneca has filed patent infringement lawsuits in the US District Court in New Jersey relating
to four patents listed in the FDA Orange Book with reference to Faslodex, after AstraZeneca received seven Paragraph IV
notices relating to six Abbreviated New Drug Applications (ANDAs) seeking FDA approval to market generic versions of
Faslodex prior to the expiration of AstraZeneca's patents. The first trial, against the first three ANDA filers, is
scheduled to commence on 27 June 2016.
Patent proceedings outside the US
As previously disclosed, in September 2015, AstraZeneca filed a request for a provisional injunction against Hexal AG
(Hexal) in the Regional Court of Düsseldorf after Hexal threatened to launch a generic Faslodex product in Germany. The
request was denied in November 2015 and AstraZeneca appealed. In February 2016, the Higher Regional Court of Düsseldorf
ruled in AstraZeneca's favour and ordered the provisional injunction against Hexal.
Movantik/Moventig (naloxegol)
US patent proceedings
As previously disclosed, in 2015, Neptune Generics LLC, filed a petition seeking inter partes review (IPR) with the US
Patent Office challenging the validity of an FDA Orange Book listed patent relating to Movantik (US Patent No. 7,786,133).
In April 2016, the US Patent Trial and Appeal Board denied the petition.
Patent proceedings outside the US
As previously disclosed, in Europe, Generics UK Ltd. (trading as Mylan) filed an opposition to the grant of European Patent
No. 1,694,363 with the European Patent Office (EPO). In February 2016, the Opposition Division of the EPO upheld the patent
as granted and dismissed the opposition.
Onglyza (saxagliptin) and Kombiglyze (saxagliptin and metformin)
US patent proceedings
As previously disclosed, following the denial of Mylan Pharmaceuticals, Inc.'s (Mylan) motion to dismiss for lack of
jurisdiction by the US District Court for the District of Delaware (the District Court), Mylan appealed that decision. In
March 2016, the US Court of Appeals for the Federal Circuit affirmed the District Court's decision (the March Decision). In
April 2016, Mylan filed a petition for rehearing en banc of the March Decision.
Nexium (esomeprazole magnesium)
US patent proceedings
In February 2016, AstraZeneca received a Paragraph IV notice from MacLeods Pharmaceuticals Ltd. (MacLeods) challenging
certain patents listed in the FDA Orange Book with reference to Nexium. MacLeods submitted an ANDA seeking to market
esomeprazole magnesium. In March 2016, in response to MacLeods' notice, AstraZeneca filed a patent infringement lawsuit
against MacLeods in the US District Court for the District of New Jersey. The litigation is at an early stage and no trial
date has been set.
In March 2016, AstraZeneca received a Paragraph IV notice from Hetero USA Inc. (Hetero) challenging certain patents listed
in the FDA Orange Book with reference to Nexium24HR (OTC). Hetero submitted an ANDA seeking to market OTC esomeprazole
magnesium. AstraZeneca is reviewing Hetero's notice.
Patent Proceedings outside the US
As previously disclosed, in Canada, in July 2014, the Federal Court found Canadian Patent No. 2,139,653 invalid and not
infringed by Apotex Inc. In July 2015, AstraZeneca's appeal was dismissed. On 10 March 2016, the Supreme Court of Canada
granted AstraZeneca leave to appeal. A tentative hearing date is set for 8 November 2016.
Product liability litigation
Onglyza (saxagliptin)
As previously disclosed, Amylin Pharmaceuticals, LLC, a wholly owned subsidiary of AstraZeneca, and/or AstraZeneca are
among multiple defendants in various lawsuits filed in state and federal courts in the US involving multiple plaintiffs
claiming physical injury from treatment with Onglyza. The lawsuits allege injuries including pancreatic cancer. AstraZeneca
has been served with lawsuits filed in California state court on behalf of approximately 35 plaintiffs alleging heart
failure, congestive heart failure, cardiac failure and/or death resulting from treatment with Onglyza/Kombiglyze.
Commercial litigation
Nexium/Prilosec trademark litigation
As previously disclosed, AstraZeneca filed separate complaints in the US District Court for the District of Delaware
against Camber Pharmaceuticals, Inc. (Camber) and Dr. Reddy's Laboratories, Inc. (Dr. Reddy's) to enforce certain
AstraZeneca trademark rights related to Nexium and Prilosec. The Delaware District Court issued preliminary injunctions
against Camber's and Dr. Reddy's sales of generic esomeprazole magnesium in purple capsules. The Camber action has been
settled through negotiation and as part of the settlement, the Delaware District Court entered a Consented Judgment of
Permanent Injunction and Other Relief on 31 March 2016 in favour of AstraZeneca. Dr. Reddy's filed its own separate claims
against AstraZeneca in both the Delaware District Court and the US District Court for the District of New Jersey. Dr.
Reddy's also appealed the preliminary injunction decision of the Delaware District Court to the US Court of Appeals for the
Third Circuit and in April 2016, voluntarily withdrew its appeal. All District Court cases involving Dr. Reddy's related to
this matter had been stayed pending the appeal, and have now resumed.
Nexium Consumer litigation
As previously disclosed, in July 2015, the Delaware Superior Court granted AstraZeneca's motion to dismiss and entered
judgment in a putative class action alleging that AstraZeneca's promotion, advertising and pricing of Nexium to physicians,
consumers and third party payers was unfair, unlawful and deceptive. In April 2016, the Delaware Supreme Court affirmed the
dismissal.
Toprol-XL (metoprolol succinate)
As previously disclosed, in March 2015, AstraZeneca was served with a state court complaint filed by the Attorney General
for the State of Louisiana alleging that, in connection with enforcement of its patents for Toprol-XL, it had engaged in
unlawful monopolisation and unfair trade practices, causing the state government to pay increased prices for Toprol-XL. In
February 2016, the Louisiana state court heard oral argument on AstraZeneca's motion to dismiss and ordered the dismissal
of the complaint with prejudice and judgment in AstraZeneca's favour.
Matters disclosed in respect of the second quarter of 2016 and to 28 July 2016.
Patent litigation
Byetta (exenatide)
US patent proceedings
As previously disclosed, AstraZeneca filed a patent infringement lawsuit against Teva Pharmaceuticals USA, Inc. (Teva) in
the US District Court for the District of Delaware (the District Court) relating to patents listed in the FDA Orange Book
with reference to Byetta. In June 2016, AstraZeneca settled the patent litigation against Teva. The District Court entered
a consent judgment which will enjoin Teva from launching its proposed exenatide product until 15 October 2017, subject to
regulatory approval. Patent infringement proceedings against Amneal Pharmaceuticals LLC are ongoing, with trial scheduled
for December 2017.
Crestor (rosuvastatin)
US patent proceedings
As previously disclosed, in February 2016, the US District Court for the District of South Carolina granted AstraZeneca's
motions for summary judgment and dismissed two consolidated patent infringement lawsuits filed by co-plaintiffs Medical
University of South Carolina Foundation for Research Development and Charleston Medical Therapeutics (together, CMT)
relating to the sale of Crestor, which CMT appealed. In July 2016, AstraZeneca and CMT jointly filed a stipulation
requesting the appellate court to dismiss CMT's appeal.
Patent proceedings outside the US
As previously disclosed, in Australia, AstraZeneca was unsuccessful in defending the validity of certain Crestor patents,
at trial and on appeal. The patent litigation concluded in September 2015. A provision was taken in Q4 2015 in respect of
claims from generic entities which were prevented by court order from launching their products in Australia before
AstraZeneca's patents were subsequently found to be invalid. In April 2016, AstraZeneca was notified that the Commonwealth
of Australia also intends to pursue a claim against AstraZeneca in relation to alleged losses it suffered in connection
with the same patent litigation and AstraZeneca has updated its provisions accordingly.
As previously disclosed, in the Netherlands, in April 2014, AstraZeneca received a writ of summons from Resolution
Chemicals Ltd. (Resolution) alleging partial invalidity and non-infringement of the supplementary protection certificate
(SPC) related to the Crestor substance patent. In July 2015, the District Court of the Hague determined that the SPC does
not extend to zinc salts of rosuvastatin and that Resolution's rosuvastatin zinc product does not infringe the SPC. In
February 2016, the Court of Appeal of the Hague overturned the decision and found that Resolution's product does infringe
the SPC. Resolution has appealed. The hearing has been scheduled for 16 December 2016.
In France, in February 2016, Biogaran S.A.S. (Biogaran) obtained a marketing authorisation for its rosuvastatin zinc
product. In April 2016, AstraZeneca and Shionogi Seiyaku Kabushiki Kaisha (Shionogi) sought a preliminary injunction to
prevent Biogaran from launching its product. On 4 July 2016, the Paris Court of First Instance declined to issue a
preliminary injunction. AstraZeneca and Shionogi have appealed.
As previously disclosed, in Japan, in March 2015, an individual filed a patent invalidation request with the Japanese
Patent Office (JPO) in relation to the Crestor substance patent. On 13 July 2016, the JPO dismissed the request.
Faslodex (fulvestrant)
US patent proceedings
As previously disclosed, AstraZeneca has filed patent infringement lawsuits in the US District Court in New Jersey (the
District Court) relating to four patents listed in the FDA Orange Book with reference to Faslodex after AstraZeneca
received seven Paragraph IV notices relating to six ANDAs seeking FDA approval to market generic versions of Faslodex prior
to the expiration of AstraZeneca's patents. In July 2016, AstraZeneca settled one of these, the lawsuit brought against
Sandoz, Inc (Sandoz), and the District Court entered a consent judgment, which includes an injunction preventing Sandoz
from launching a generic fulvestrant product until 25 March 2019, or earlier in some circumstances. Trial against two other
defendants commenced on 11 July 2016 and is scheduled to reconvene on 1 August 2016.
In July 2016, AstraZeneca was served with four petitions for inter parties review by the Patent Trial and Appeal Board
relating to each of the four Orange Book-listed patents.
Onglyza (saxagliptin) and Kombiglyze (saxagliptin and metformin)
US patent proceedings
In May 2016, Apotex Inc. and Apotex Corp. (collectively Apotex) sent a notice that it had submitted an ANDA for saxagliptin
hydrochloride 2.5mg and 5mg tablets containing a Paragraph IV Certification alleging that US Patent No. RE44,186 (the '186
Patent), listed in the FDA Orange Book with reference to Onglyza and Kombiglyze XR, is invalid and/or will not be infringed
by the products as described in its ANDA. In July 2016, AstraZeneca initiated patent infringement proceedings asserting the
'186 Patent in the US District Court for the District of Delaware against Apotex.
In June 2016, Teva Pharmaceuticals USA, Inc., Amneal Pharmaceuticals, LLC, Actavis Laboratories FL, Inc., and Sun Pharma
Global FZE each sent notices that they had submitted ANDAs for saxagliptin hydrochloride and metformin hydrochloride
2.5mg/1000mg, 5mg/1000mg, and 5mg/500mg tablets containing a Paragraph IV Certification alleging that US Patent No.
9,339,472 (the '472 Patent) listed in the FDA Orange Book with reference to Kombiglyze XR, is invalid, unenforceable and/or
will not be infringed by the products as described in their ANDAs.
As previously disclosed, in April 2016, Mylan Pharmaceuticals, Inc. (Mylan) filed a petition for rehearing en banc (the
Petition) of a March 2016 decision by the US Court of Appeals for the Federal Circuit (the Federal Circuit) affirming a
decision by the US District Court for the District of Delaware that denied Mylan's motion to dismiss for lack of
jurisdiction. In June 2016, the Federal Circuit denied the Petition.
As previously disclosed, in January 2016, Mylan filed a Request for Rehearing with the US Patent and Trademark Office
(USPTO) seeking reconsideration of a December 2015 decision by the USPTO denying institution of an inter partes review
challenging the validity of the '186 Patent (the Mylan IPR). In May 2016, the USPTO instituted the Mylan IPR. Following
institution of the Mylan IPR, Wockhardt Bio AG, Amneal Pharmaceuticals LLC, Sun Pharmaceuticals Industries Ltd., Sun Pharma
Global FZE, Teva Pharmaceuticals USA, Inc., and Aurobindo Pharma Ltd. also filed petitions for inter partes review
challenging the validity of the '186 Patent and have sought to join the Mylan IPR.
Seroquel XR (quetiapine fumarate)
Patent proceedings outside the US
In Spain, in May 2016, the Supreme Court affirmed a decision from October 2013 which found the Seroquel XR formulation
patent invalid. The generic challengers were Accord Healthcare S.L.U. and Sandoz Farmaceutica S.A.
In Sweden, in May 2016, following a challenge to the validity of the formulation patent covering Seroquel XR by Sandoz A/S,
the Stockholm District Court found the Seroquel XR formulation patent invalid.
In Denmark, in June 2016, following a challenge to the validity of the formulation patent covering Seroquel XR by Teva
Denmark A/S and Accord Healthcare Ltd., the Danish Maritime and Commercial High Court found the Seroquel XR formulation
patent invalid.
As previously disclosed, in France, in April 2015, Mylan SAS (Mylan) brought a patent invalidation action against
AstraZeneca's French designation of the Seroquel XR formulation patent. In July 2016, the tribunal de grande instance de
Paris found the Seroquel XR formulation patent invalid.
In various countries in Europe generic entities have claimed, or could claim, damages relating to preliminary injunctions
issued in those countries that prevented generic Seroquel XR sales by those entities. A provision has been taken.
Product liability litigation
Byetta/Bydureon (exenatide)
As previously disclosed, Amylin Pharmaceuticals, LLC, a wholly owned subsidiary of AstraZeneca, and/or AstraZeneca are
among multiple defendants in various lawsuits filed in federal and state courts in the US involving claims of physical
injury from treatment with Byetta and/or Bydureon. The lawsuits allege several types of injuries including pancreatitis,
pancreatic cancer, thyroid cancer, and kidney cancer. A multi-district litigation has been established in the US District
Court for the Southern District of California (the District Court) in regard to the alleged pancreatic cancer cases in
federal courts. Further, a co-ordinated proceeding has been established in Los Angeles, California in regard to the various
lawsuits in California state courts.
In November 2015, the District Court granted the defendants' motion for summary judgment and dismissed all claims alleging
pancreatic cancer that accrued prior to 11 September 2015. A similar motion was granted in favour of the defendants in the
California state
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