ASTRAZENECA REFINES ITS FINANCIAL REPORTING

AstraZeneca REFINES ITS FINANCIAL REPORTING

in line with evolving business model

 

6 March 2015

 

AstraZeneca today announces an update to the presentation of its Statement of Comprehensive Income, which will see revenue from externalisation becoming more visible to enhance transparency for investors. The change is effective from 1 January 2015 and will be reported as part of the Company's first quarter financial results on 24 April 2015. The impact is presentational and therefore does not impact Reported or Core profit.

 

As previously outlined, AstraZeneca's business model includes an increasing level of externalisation activity to create value from the strong science that exists in the pipeline. This will benefit patients whilst sharpening further the focus on our main therapy areas - Respiratory, Inflammation & Autoimmunity; Cardiovascular & Metabolic Disease and Oncology. The Company's two biotech centres, the Innovative Medicines Unit and MedImmune, continue to increase R&D productivity. Consequently AstraZeneca will consider opportunities to out-licence technologies and potential new medicines to ensure these reach patients as quickly as possible.

 

The updated financial reporting structure reflects the Company's entrepreneurial approach and provides a clear picture of a growing additional revenue stream.

 

Historically, reported revenue reflected only product sales (formerly known as sales revenue), with externalisation revenue forming part of other operating income presented below cost of goods sold (COGS). From 1 January 2015 externalisation revenue, alongside product sales, contribute to total revenue, which is shown above COGS. Externalisation revenue includes development, commercialisation, partnership and out-licence revenue, such as royalties and milestone receipts, together with income from services or repeatable licences.

 

Income will be recorded as externalisation revenue when the Company has an ongoing interest in the product and/or it is repeatable business and there is no derecognition of an intangible asset. Disposals of assets and businesses, where AstraZeneca does not retain an interest, will continue to be recorded in other operating income.

 

The Company has updated its revenue accounting policy with effect from 1 January 2015 and the prior-year financial results will be restated accordingly. An illustration of the change to the presentation of prior-period Core financial performance is shown in the appendix. These numbers are unaudited and are indicative of the impact of the change in policy.

 

2015 Financial Guidance

To reflect the change outlined above, the Company today provides 2015 total revenue guidance. Total revenue is expected to decline by mid single-digit percent at constant exchange rates (CER). This is consistent with previous guidance stating that sales revenue was expected to decline by mid single-digit percent at CER. Core EPS guidance is unchanged and Core EPS is expected to increase by low single-digit percent at CER.

 

The Company also provides the following non-guidance information related to currency sensitivity: Based on current exchange rates¹, total revenue is expected to decline by low double-digit percent. This is consistent with previous expectations stating an anticipated sales revenue decline of low double-digit percent. Core EPS is expected to be broadly in line with 2014. For additional currency sensitivity information, please see below:

 

						Average exchange rates versus USD									Impact of 5% weakening in exchange rate versus USD ($m)2
Currency		Primary relevance			2014			YTD Feb 20151				Change %			Total revenue		Core operating  profit
EUR		Product sales			0.75			0.87				(13)			(194)		(119)
JPY		Product sales			105.87			118.55				(11)			(105)		(75)
CNY		Product sales			6.16			6.23				(1)			(113)		(48)
SEK		Costs			6.86			8.22				(16)			(5)		95
GBP		Costs			0.61			0.66				(7)			(34)		104
Other3															(213)		(123)

¹Based on average daily spot rates YTD to the end of February 2015.

²Based on 2014 actual group currency exposures.

³Other important currencies include AUD, BRL, CAD, KRW and RUB.

 

 ENDS -