AstraZeneca's revenue in the second quarter was down 2 percent at CER, but was up 3 percent on an actual basis as a result of the positive impact of exchange rate movements. This global revenue performance reflects government price interventions as well as the impact of more than $0.5 billion in revenue lost to generic competition, with the impact from generics in the US and Rest of World broadly similar. US revenue declined by 3 percent, largely on generic competition for Arimidex and Toprol-XL. Group revenue in the Rest of World was down 1 percent, reflecting generic competition for Nexium, chiefly in Western Europe, and for Arimidex. Revenue in Western Europe was down 9 percent. Revenue in Emerging Markets increased 10 percent. Revenue in Established Rest of World was up 4 percent.
Core operating profit in the second quarter was $3,322 million, down 10 percent. Besides lower revenue, the decline is largely the result of a 9 percent increase in Core SG&A expense. Around half of this increase is attributable to two items that are not present in the prior year quarter. The excise tax arising from US healthcare reform amounts to around 2.5 percent of the SG&A increase. Around 2 percent of the increase is due to a one-time payment of a contractually required termination fee associated with the termination of a marketing and distribution contract in the US as a consequence of the launch of an FDA approved generic version of Entocort. The remainder of the increase is the result of investments in Emerging Markets and new product launches partially offset by ongoing sales and marketing efficiencies. SG&A expense growth is anticipated to moderate in the second half of the year. Core R&D expense was up 8 percent, reflecting spending on late stage clinical projects that were initiated in the latter part of 2010 and early 2011. Adjustments to Core operating profit totalled $357 million in the quarter, $259 million lower than last year, chiefly on lower restructuring costs. As a result, the 4 percent decline in reported operating profit, to $2,965 million, was less than the decline on a Core basis.
Core earnings per share in the second quarter were $1.73 compared with $1.79 in the second quarter 2010, a 5 percent decline at CER. Core earnings per share benefited from a lower number of shares outstanding arising from share repurchases. Reported earnings per share in the second quarter were $1.53, up 3 percent compared with the second quarter 2010, reflecting the lower restructuring costs that benefited the reported operating profit growth rate.
Revenue in the first half was down 3 percent at CER, but was unchanged on an actual basis as a result of the positive impact of exchange rate movements. Revenue in the US was down 7 percent. Revenue in the Rest of World was unchanged at CER. Revenue in Emerging Markets was up 11 percent in the first half. Revenue in Western Europe was down 8 percent. Revenue in Established Rest of World markets increased by 4 percent.
Core operating profit for the first half was down 7 percent to $7,000 million, as the increases in R&D and SG&A in the second quarter were partially offset by the $131 million benefit to Core gross margin in the first quarter arising from settlement of patent disputes between MedImmune and PDL Biopharma, Inc. Reported operating profit was $6,366 million, a 5 percent decline, smaller than the decline in Core operating profit largely due to lower restructuring costs compared with the first half of 2010.
Core earnings per share for the first half were $3.96, an increase of 3 percent, which reflects benefits from share repurchases as well as a $0.37 per share benefit to first half 2011 earnings related to net adjustments to tax provisions. These adjustments were a consequence of agreements reached between the UK and the US governments' tax authorities regarding transfer pricing and a related valuation matter arising on integration of the Company’s US businesses following the global AstraZeneca merger in 1999. Core EPS in the first half of 2010 benefited from net adjustments to tax provisions totalling $0.13 in the first quarter of 2010. Reported earnings per share in the first half were up 7 percent to $3.61.
David Brennan, Chief Executive Officer, said: "Despite the anticipated impact of generic competition and government pricing interventions in the quarter, we are able to raise our Core earnings per share guidance and increase our shareholder cash return targets for the full year. The approval of Brilinta in 41 countries around the world, most recently in the US, demonstrates our commitment to deliver our global, innovation-driven biopharmaceuticals strategy."
About AstraZeneca
AstraZeneca is a global, innovation-driven biopharmaceutical business with a primary focus on the discovery, development and commercialisation of prescription medicines for gastrointestinal, cardiovascular, neuroscience, respiratory and inflammation, oncology and infectious disease. AstraZeneca operates in over 100 countries and its innovative medicines are used by millions of patients worldwide.