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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
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Washington,
D.C. 20549
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SCHEDULE
TO
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Tender
Offer Statement under Section 14(d)(1) or 13(e)(1)
of
the
Securities Exchange Act of 1934
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MEDIMMUNE,
INC.
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(Name
of Subject Company)
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ASTRAZENECA
BIOPHARMACEUTICALS INC.
ASTRAZENECA
PLC
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(Names
of Filing Persons – Offeror)
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Common
Stock, Par Value $0.01 Per Share
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(Title
of Class of Securities)
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584699102
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(Cusip
Number of Class of Securities)
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Graeme
Musker
AstraZeneca
PLC
15
Stanhope Gate
London,
England, W1K 1LN
Telephone:
+44 20 7304 5000
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(Name,
Address and Telephone Number of Person Authorized to Receive
Notices
and
Communications on Behalf of Filing Persons)
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Copies
to:
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Paul
R. Kingsley
Davis
Polk & Wardwell
450
Lexington Avenue
New
York, New York 10017
Telephone:
(212) 450-4000
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| x |
Check
the box if the filing relates solely to preliminary communications
made
before the commencement of a tender offer.
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| Check the appropriate boxes below to designate any transactions to which the statement relates: | |
| x | third-party tender offer subject to Rule 14d-1. |
| o | issuer tender offer subject to Rule 13e-4. |
| o | going-private transaction subject to Rule 13e-3. |
| o | |
| Check the following box if the filing is a final amendment reporting the results of the tender offer. o | |
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Operator:
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Please
stand
by, this is Premiere Global Services, we are about to begin. Good
day
ladies and gentlemen and welcome to today’s AstraZeneca Analyst Conference
Call. For your information this conference is being recorded. At
this time
I would like to turn the call over to your host today, Mr Jonathan
Hunt.
Please go ahead sir.
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Jonathan
Hunt:
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Thank
you
operator and welcome ladies and gentlemen. Here with me in New York
is
David Brennan, Chief Executive of AstraZeneca; and Jon Symonds, Chief
Financial Officer. Joining the call today via telephone from Cambridge
is
Dr. John Patterson, Executive Director of Development for AstraZeneca
and
also joining by phone from their headquarters in Maryland is David
Mott,
CEO of MedImmune. Before I hand over to David I would like to read
the
following statement: the companies intend to utilise the Safe Harbour
Provisions of the United States Private Securities Litigation Reform
Act
of 1995. Participants on this call may make forward-looking statements
with respect to the operations and financial performance of AstraZeneca
and MedImmune. By their very nature their forward-looking statements
involve risk and uncertainly and results may differ materially from
those
expressed or implied by these forward-looking statements. The companies
undertake no obligation to update forward-looking statements. I will
now
turn the call over to David Brennan, AstraZeneca’s Chief Executive.
David?
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David
Brennan:
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Thank
you
Jonathan and good morning everyone, we really appreciate you joining
us
for this call this morning. It’s a very important day in the strategic
evolution of AstraZeneca and
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As
you all
know strengthening the pipeline has been our highest priority for
some
time, in addition to increasing our internal R&D budget the numbers of
projects and programmes as you know we’ve also acquired companies and
licensed in products and technologies to complement our disease area
strategies. In May of last year with the acquisition of Cambridge
Antibody
Technologies AstraZeneca took a significant step towards implementing
an
important strategic decision we had made to introduce a biological
strategy alongside our existing strengths and capabilities in
pharmaceutical R&D. It was a significant step and I believe that it
has really positioned us well to move forward with the announcement
that
we made today with the acquisition of MedImmune. We have taken very
decisive action to significantly accelerate delivery of this biologic
strategy. Together MedImmune and AstraZeneca create a leading biologics
business, we will have critical mass in all the necessary functions,
discovery, development, regulatory and manufacturing and we will
have
significant global sales and marketing reach for all of our products.
This
business combination strengthens our pipeline today and it offers
more
potential and new technology and new capabilities to improve our
product
flow over the long term. It diversifies and enhances our R&D
capabilities expanding in scope to cover small molecules, biologics
and
for the first time for AstraZeneca vaccines. It will also allow us
to
expand our licensing and business development activities into areas
where
we previously did not have the technical platforms and expertise
to go and
it enhances our growth prospects.
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The
terms of
the transaction in a snapshot are as follows. It’s a fully recommended all
cash offer at $58 per share and the total enterprise value of the
transaction is $15.2 billion. This transaction has been unanimously
approved by the boards of both AstraZeneca and MedImmune and we expect
that the transaction will close in June of this year.
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Now
about
MedImmune, it’s very familiar obviously to those investors who know the
biotechnology sector but for those of you in the audience that don’t know
it, MedImmune is one of the world’s leading players in biopharmaceuticals,
it’s ranked among the top ten by equity value. Revenues in 2006 were
$1.3
billion generated from three marketed products including the blockbuster
product Synergis which is used to prevent Respiratory
Syncytial Virus in
infants.
MedImmune brings with it a significant pipeline in its own right,
45
projects are in development and just as importantly it aligns very
closely
with our existing disease areas of infection, oncology and respiratory
and
inflammation. Now to discuss MedImmune’s pipeline and more importantly why
we are so excited about how MedImmune strengthens our science and
technology base and makes a step change in our biologic strategy
as I said
before, I would like to hand over to John Patterson so he can take
you
through more details about that.
Jon?
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John
Patterson:
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Thank
you
David, good morning, good afternoon everybody. Just before I describe
what
this deal brings can I just echo what you have just heard from David.
MedImmune really brings all the pieces of the biologicals jigsaw
together
for us overnight with high quality people and a vaccines capability
that
will give us the ability to attack disease targets with small molecules,
large molecules and vaccines, and it really dramatically increases
our
ability to take the latter two through to the marketplace. In addition
MedImmune has a proven track record of identifying new targets and
new
technologies and gaining access to them. The $300 million in house
venture
fund, MedImmune Ventures, is part of their proven ability to find
and
partner in that
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All
companies
that are in or entering the biologics field are scrambling to secure
manufacturing capacity for both the clinical development and commercial
supply. MedImmune have invested heavily in this area in recent years
with
a planned capacity of over 30,000 litres by 2010, with modest additional
investment total capacity could be readily scaled up to over 60,000
litres
securing our requirements for the foreseeable future and avoiding
the need
for major near term green field investment. Within R&D we intend to
find synergies between our approaches to target diseases and look
to apply
the best of the three technologies now available to us to create
the next
generation of medicines. We will also be bale to use these new capacities
and capabilities to continue our strategic and tactical approach
to
external sourcing of medicines but with the added advantage of being
able
to consider late stage biologicals and vaccines through a team who
both
know the fields and have access to the technologies. However this
move
already strengthens our pipeline particularly in cancer, infection,
respiratory and inflammatory disease where there is therapeutic congruence
with MedImmune’s significant paediatric infectious disease expertise as an
addition to our capabilities. The alliance brings a further 12 clinical
phase projects split between MedImmune antibodies and vaccines. The
two
that are most mature are Numax which is a new improved monoclonal
antibody
to respiratory syncytial virus and a reformulated influenza vaccine
FluMist already approved with an anticipated launch in time for
the
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Turning
now to
the pipeline, you will recall this slide that I showed at our annual
results conference in February. It showed 120 total number of projects
in
the AstraZeneca by favour of development at the time. On this next
slide
you can see the dramatic effect of adding in the 45 MedImmune projects
taking the total pipeline to 163. Amongst the Phase I projects clinical
efficacy doubt exists already in one case showing real promise in
the
intended disease area. You will note that we have not at this stage
combined the pre-clinical pipelines as the two companies use different
definitions for early projects so we have simply put them alongside
one
another, but you can see the increase in size is clear. We have previously
stated our ambition to have up to 25% of projects approaching late
phase
development as biologicals by 2010. This slide shows the combined
pipeline
split simply into small molecules and biologicals. The transformation
is
clear. We will have 27% of out total portfolio from biologicals
immediately, a rise from 7% prior to this deal. We are now well on
track
to deliver our promise as well as creating the in-house capability
to take
products all the way through to BLA and into the
marketplace.
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In
summary
there are enormous benefits to our research and development pipeline
and
capabilities resulting from this deal. Numax and FluMist represent
products with near terms sales potential. Our pipeline and biologicals
capabilities are dramatically increased with some very exciting projects
and we can now deliver on the targets we set at the time of the CAT
acquisition. Finally our ability to bring new medicines to patients
and
doctors is significantly enhanced by the combination of the three
technologies as we set out to deliver the medicines that our society
needs. I would now like to hand over to Jon Symonds to take you through
the financials. Jon.
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Jon
Symonds:
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Thank
you John
and good morning everyone. I know this call is predominantly about
the
MedImmune acquisition but I do want to make sure that we have reviewed
the
Q1 results. My primary objective here is to make sure that everyone
has a
good understanding of how the
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So
let’s start
with the headline numbers and at this point I’m referring to the statutory
numbers, that is including TOPROL-XL. Sales in the first quarter
were $7
billion but a 9% increase in constant currency and very much in line
with
our guidance for the full year. With the dollar weaker compared to
Q1
2006, currency had a four percentage point positive effect on sales
so on
a reported basis the sales increase was 13%. Reported earnings per
share
were $1.02 in the quarter and that’s a 14% increase in constant exchange
rates over last year’s $0.90. In the first quarter we have taken the first
restructuring charge related to the $500 million supply chain
rationalisation programme we announced in February. Cash restructuring
costs of $82 million were charged to cost of sales this quarter,
which had
the effect of reducing reported earnings by around $0.04 per share.
For
the full year we expect to expense around $250 million of the total
programme cost.
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If
we now look
at sales and earnings per share excluding the US sales of TOPROL-XL
both
from current and prior periods the shape of the business if broadly
unchanged. Sales are up 10% in constant exchange rates and earnings
per
share are up 14% on this basis from $0.79 per share to $0.89 per
share, so
TOPROL contributed $0.13 of earnings in Q1 and I will come back to
that
number later when we look at the full year guidance.
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So
now let’s
work down the P&L and I’ll try and call out the items that help you
separate underlying performance from one-offs and again I will use
the
reported amounts for this. Gross margin at 78.7% of sales is 1.1
percentage points lower than last year. As well as the $82 million
in
restructuring costs, costs of sales also includes $24 million in
provisions for fixed assets and supplier commitments relating to
the
termination of the AGI-1067 collaboration which we
also
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R&D
expense at $1.17 billion was up 36% on a reported basis or 26% in
constant
exchange rates. R&D activity levels are higher including consolidating
the R&D spend at CAT as well as the incremental spend on the
Bristol-Meyers diabetes programmes but also in the quarter there
are
intangible impairment provisions that total $69 million in conjunction
with the end of the AGI collaboration as well as the close down of
the
Avenir collaboration on reverse cholesterol transport compounds.
Both of
these provisions were anticipated in the $300 million impairment
exposure
I talked about at the beginning of the year.
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SG&A
is
pretty straightforward. Spend is flat in CER terms versus the first
quarter last year. We still anticipate the full year to be in the
low
single digits. Other income of $138 million was up $61 million over
the first quarter of 2006. We did see the expected reduction in royalty
income but in the quarter we also realised some anticipated insurance
recoveries. Back in February you will remember that I guided you
to other
income in the range of one half to two thirds of the levels in 2006.
My
best estimate now is it will be a bit ahead of the two thirds of
last
year. The tax rate in the quarter was 31% and it tends to be a bit
lumpy
quarter to quarter but I’m still expecting a 29% tax rate for the full
year. Strong cash flow continues. We generated 1.9 billion in free
cash
flow in the quarter and cash distributions to shareholders in the
quarter
totalled just over 3 billion, net share repurchases of 1.1 billion
and a
dividend payment of nearly 1.9 billion. We are still aiming for a
net
share buyback for the year of $4 billion. So after unpicking all
of the
moving parts, this represents a good start for the year and we believe
that we are on track to meet our targets and reaffirm our earnings
guidance. You’ll remember our earnings target range of $3.80 to $4.05 was
constructed on an ex TOPROL-XL basis with sales and earnings from
TOPROL-XL excluded from both current and prior year periods. In addition
this range did not include any
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Before
turning
to MedImmune, I just want to make a couple of quick comments on the
key
product highlights. The five key growth brands grew combined sales
by 17%
in the first quarter. Within that group Nexium sales are up 8%, in
line
with our guidance of single digit growth this year. Sales in the
US were
up 9% broadly in line with the trend of dispense tablets. Germany
remains
a drag on the rest of the world performance where sales were up by
5%.
Crestor sales were up by 59% with sales in the US up 56%. Crestor
prescription growth at 46% was well ahead of the 11% growth in the
statin
market. But there’s
no doubt that the strong growth in symbastatin with new generic entries
as
well as the change in plan formularies from the beginning of the
year, it
represents a strong headwind for the branded products in terms of
market
share progress as you’ve seen in recent weeks, but it’s Lipitor that
appears to be taking most of the brunt of this. The METEOR data was
well
received at ACC and the atherosclerosis submissions are well under
review
in the US and in Europe. Seroquel was up 13% in the quarter. US
prescriptions are up 12%. The market share in the US is up to 31%
in
March, that’s half a point higher than it was in December. We
are seeing
a really good uptake for bipolar depression but of course this is
at
somewhat lower doses that you see for schizophrenia. Arimidex was
up 15%,
US prescriptions were up by 11% and its sales growth of 27% includes
some
de-stocking of inventories in the first quarter of last year. Finally
Symbicort had another good quarter with sales up 19% to $354 million
and
we can now confirm that we expect to launch in the US around
the
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So
this brings
me to the MedImmune acquisition. David and John have already explained
why
we are so excited by this acquisition so I’ll stick to the cold facts for
now. At the agreed price of $58 per share the total enterprise value
is
$15.2 billion. We intend to finance the acquisition entirely by cash
from
a $15 billion bridging finance facility supplemented by cash from
our own
resources. It is our intention to refinance this as soon as possible
with
a package of debt that spans various maturities. This will leave
AstraZeneca with permanent debt. We have said for some time that
we expect
to be geared and would achieve it via a transaction that enhances
our long
term prospects rather than through financial engineering and that’s
exactly what we have done today. As I have also said previously the
board
has confirmed its commitment to the 2007 buyback target of $4 billion
in
2007 and additionally there will be no change to our stated dividend
policy.
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So
let’s now
turn to the impact MedImmune will have on our financial position.
To keep
it simple let’s assess what MedImmune brings. First and foremost it’s a
leap from bring an embryonic biologicals business founded on CAT
to a
world class biological business that is fully integrated from discovery
to
the patient. The AstraZeneca biological build would have required
investment in people, investment in capability as well as significant
investment in manufacturing facilities - all of this can now be avoided
bringing substantial financial synergies as well as significantly
reduced
execution risk.
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Secondly
as
David has already mentioned MedImmune is poised for a period of growth
with the launch of Numax and the reformulated FluMist on top of the
Synergis performance and the HPV royalties. Consensus sales growth
through
to 2010 is for a CAGR of a little over 12%, so it fits in perfectly
with
our stated ambition of growing in line with the market over the same
period to the
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So
taking all
of these facts together we believe the acquisition will be accretive
to
cash earnings per share from 2009 through the inherent quality of
the
business and our ability to deliver synergies in sales and marketing
improvements. We believe that the synergy potential across all of
our
related activities could well approach $500 million. When I refer
to
accretion I use the terms cash EPS. Clearly there will be a substantial
amount of intangible assets and consequently a substantial amortisation
charge. Although the accounting exercise will take come time to complete
our working assumption is that amortisation would be in the order
of $750
million per annum or so. Clearly we will give you a much better view
on
this when we have it. Over and above this MedImmune delivers on
AstraZeneca’s ambition to be one of the leading biological companies a
reality now and at substantially reduced risk. This acquisition is
entirely consistent with our strategy of making biologicals a significant
part of our business, improving the breadth and depth of our pipeline
while introducing new skills and technologies, generating strong
financial
returns and utilising our financial resources for the long terms
benefit
of shareholders. I will now hand you back to David to begin the question
and answer session.
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David
Brennan:
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Thanks
Jon.
Just before we do that I wanted to remind everybody that as we approach
this transaction we are clearly mindful that in this industry it’s people
that create value and MedImmune has very talented people in their
organisation and those people are passionate about making a difference
in
the lives of patients. We will be making every effort we can to retain
the
key employees and critical skills that exist there and we expect
to be
able to maintain the culture that has helped create MedImmune’s success.
To that end we will be offering retention grants to employees of
MedImmune
and the people at MedImmune will enhance AstraZeneca’s
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In
closing let
me say to all of you that this is an important day for AstraZeneca.
The
combination of AstraZeneca and MedImmune creates a leading, fully
integrated biologicals business and on an accelerated timeline as
Jon
said. It expands our pipeline now and for the future and by acquiring
this
profitable high quality business with strong growth prospects we
expect it
to be enhancing cash earnings per share in 2009. With that I want
to hand
you back to the conference operator who will give instructions on
how we
are going to handle the Q&A session.
Operator?
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Operator:
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Thank
you. The
question and answer session will be conducted electronically. If
you would
like to ask a question, please do so by pressing the * key followed
by the
digit 1 on your touchtone telephone, Once again, please press *1
on your
touchtone telephone to ask a question. If you find that your question
has
been answered you may remove yourself by pressing *2. We’ll pause for just
a moment to give everybody an opportunity to signal for
questions.
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We
have a
question now from John Murphy from Goldman Sachs. Please go ahead
sir.
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John
Murphy:
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Yes,
good
morning gentlemen, a few questions if I could please. Jon, I know
it’s
early but I wondered if you could give us any comments at all relating
to
finance costs or debt pay down timelines, whether there’s any tax benefits
at all to be gained here and finally you sold the Humira
royalty
stream
when you did the CAT deal, I wondered if we could expect anything
similar
possibly with the HPV royalty stream
here?
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David
Brennan:
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Alright
Jon,
over to you.
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Jon
Symonds:
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Thanks
John,
well, we haven’t put the refinancing plan in place. I think as I said we
will have a mix of maturity, some of which will be out longer and
some
will be shorter. We clearly will want to preserve our financial capacity
to take further opportunities as they come. This is not the end of
our
externalisation ambitions and therefore I think we will see a mix
of
longer term debt as well as rapid pay down of debt at some of the
shorter
terms. Right now we’re planning some tax benefits from this but MedImmune
is predominantly a US located organisation and therefore the marginal
tax
rate of MedImmune is somewhat ahead of ours because it’s pretty well fully
unsheltered US profits. On the royalty streams, well, if we get a
deal
like we did on Humira you bet we’ll look at it, but as of now that’s for
another day.
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John
Murphy:
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Right,
thanks
very much.
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David
Brennan:
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Thank
you
John.
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Operator:
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Thank
you.
We’ve got a question now from Andrew Baem from Morgan Stanley. Please
go
ahead
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Andrew
Baem:
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Morning,
it’s
Andrew Baem. Four questions if I may, firstly on the synergies and
the up
to $500 million. Could you perhaps share with us the split between
cost
reduction and cost avoidance and give us some sense as to where these
cost
savings and/or revenue synergies are coming from, percentage from
MedImmune versus AstraZeneca’s current R&D base? Maybe if I could just
pause there.
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David
Brennan:
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Alright.
Let
me just make a quick comment and then I’ll ask Jon to give a little bit
more colour to it. Clearly we see the opportunity across our business
to
take advantage of where there are overlaps between the companies
and also
as we look now at having three different available ways to drug targets
we
think we can be much more critical with our portfolio looking at
ways we
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Jon
Symonds:
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Thanks
Andrew.
I wish I could tell you that I had a beautifully bottomed out schedule
that said exactly where they were coming for and when. The reality
is that
we’ve been working hard at this for a few weeks but nonetheless the
target
we’ve said of up to $500 million three years out from here seems to
us to
be the right level of ambition. I’d broadly say that there are three
sources and we’re absolutely not ruling out the opportunity to achieve
sale synergies through the integration of our sales and marketing
platform
within the US with the MedImmune sales and marketing capability.
Clearly
given that two of the three areas that MedImmune are in, oncology
particularly we’re in too. We will be looking for synergies there although
the paediatric sales force of MedImmune is one that does not directly
correlate with our own. So that’s one area, the second area is undoubtedly
significant benefits of cost avoidance. As was made clear, the CAT
journey
was at a relatively early stage and we had an investment programme
to
build development capability, to build regulatory, to build process
engineering etc etc which have now largely in the hands of MedImmune
so
some of those investment programmes will not now take place; and
thirdly
the three areas of therapeutic focus of MedImmune in infectious disease,
in oncology, in respiratory and in inflammation are three areas that
we’re
in as well and we will clearly want to look at what is the best portfolio
that we can produce out of all these three components. Somebody said
to me
this morning, well, would you allocate a third, a third, a third
- that’s
not an unreasonable split but I do recognise that as time goes by
we’ll
need to come back to you with a clearer picture. But I think that’s
probably a fair profile for now.
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David
Brennan:
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Andrew,
you
said you had one more question?
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Andrew
Baem:
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Just
a couple
if I may. Firstly on Crestor, given the comments that you said regarding
the manage care environment if I heard correctly, could you give
us some
sense as to the pressure on rebating both within your Medicare and
commercial book of business compared to last year. Is that growing
as you
expect it to continue to grow? Then finally a very quick one, given
MedImmune’s early Phase II products, could you give us a sense of how many
are in-licence and what we can read into that about your ability
to
re-size MedImmune’s in-house discover and research
capabilities?
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David
Brennan:
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I
tell you
what, I’ll comment on the Crestor and ask Jon Symonds to also comment, he
just reviewed the US business as well and then I’ll ask David Mott to
respond to your question about the MedImmune in-licensing. Obviously
you
asked is the pressure increasing in managed care? I think I’ve said yes to
that question each year for the last five years. Clearly the pricing
environment in the US across all aspects of the business continued
to be
pressurised. It seems that it is evolutionary, not revolutionary
and it
really does just put the pressure on us not just from a cost perspective
but to demonstrate why Crestor is truly a valuable addition to a
formulary
and because of its profile and what it has demonstrated in terms
of
clinical efficacy as well as some of the outcomes data that’s now
emerging, we’ve been able to improve the formulary positioning over last
year and that’s not just being driven by bigger rebates on it, it’s being
driven as much by the fact that people want to have an addition to
a
generic, the best patent possible. The ASTEROID and METEOR data as
you
know have been filed, we are looking forward to hopefully getting
additional information from that and so Jon, you’ve reviewed the US
business, do you want to…?
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Jon
Symonds:
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No,
I think
you’ve captured all the points. I think the profile of Crestor in managed
care is very clear and I think people recognise very clearly the
role that
it has as a branded medicine, and so the pressure that it’s in that
segment is less one of price for the branded products but more one
of do
you use a generic or do you use a branded product? It’s clear that
formularies are trying to much more aggressively stamp the position
of
SIMVA in their formularies and
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David
Brennan:
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Good.
David,
might you want to comment on the impact of the licensing activities
at
MedImmune and what you think that means for
us?
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David
Mott:
|
Absolutely,
thanks David. I think if you look at our pipeline of early to mid-stage
programmes you see really a mix across things developed internally
versus
things licensed or developed through collaborations. One of the things
that MedImmune has prided itself on for our entire 19 year history
is
being a very good partner. We find that in the biotech industry almost
everything involves some form of collaboration whether it’s with an
academic lab, another biotech company, a pharmaceutical partner,
we think
that that is a very critical skill set to be successful in building
products in this area. With respect to the balance between discovery
and
applied discovery or development if you will within our pipeline
and what
that might forebode about efficiency and synergy opportunities between
MedImmune and existing AstraZeneca assets, I would just point out
that
really at MedImmune historically we have not done very much what
I would
call green field discovery work at all. We are a very product focused
company and go after applying new technological breakthroughs to
drug
development as fast as we possibly can. One of the things that we
have
been impressed with out at CAT over the years as we have known them
is the
tremendous power of their antibody discovery and early molecule
development technology and frankly I think that is a wonderful fit
with
MedImmune’s biologics drug development capability and I think combining
those organisations has tremendous synergy opportunity for accelerating
drug development, bringing more products into the clinic quickly
than
either company could do on its own. So there are significant synergy
opportunities there.
|
|
David
Brennan:
|
Good,
thank
you David, thank you Andrew. Next
question?
|
|
Operator:
|
Thank
you.
We’ve got a question from Graham Parry from Merrill Lynch. Please go
ahead.
|
|
Graham
Parry:
|
Thanks
for
taking my question. The first one just relates to pipeline products.
If I
look in Phase II, the two projects the anti-[IL9] and the EBV vaccine,
do
you have any sense of what the timelines are for moving those into
Phase
III and seeing any Phase II data and could you give us an update
on what
the lead indication would likely be for the anti-[IL9] going into
Phase
III? Second question is just on the financial aspect, Jon, is it
your
intention to stay at this level of gearing going forward? You referred
to
permanent debt. Are you comfortable with this level of net debt or
would
you prefer to go higher or maybe lower? Then thirdly with the Merck
payments next year, what’s the impact like to be on share buybacks and is
it now inconceivable that they would be at the same levels that you’ve
seen for 2007? Thanks.
|
|
David
Brennan:
|
Why
don’t we
actually start with the financial question to Jon and then I’ll let David
Mott come back on and talk specifically about the pipeline activities
as
well as timing of potential transitions Phase II to Phase III. Jon,
do you
want to start with gearing and then talk a little bit about Merck
and the
cash?
|
|
Jon
Symonds:
|
Graham,
I
don’t have a pre-determined level of debt where I’m happy below it and
unhappy above it. I want to use the balance sheet to drive opportunity
and
that’s clearly what we have been able to do today, we’ve been able to move
extremely quickly and that’s a great position for us to be in. So we have
still got some additional capacity before I think we hit our limits
and
for me the limits are more to do with credit ratings than they are
to do
with absolute amounts and this deal should keep us still within the
AA
rating which would still give us some capacity to move down into
A and
still be a strong credit and still be able to say to the board and
the
shareholders that we have the financial capacity to both build and
defend
if we need to. I think on the question of share buybacks, particularly
as
you say that we do have an obligation to
|
|
David
Brennan:
|
Right,
and
we’ve said all along we would use our cash to try to grow our business
longer term as best we can and this is an example of that. David,
do you
want to comment on potential transition times for those couple of
products
and where we’re at with them?
|
|
David
Mott:
|
Sure.
Let me
actually take it a little more broadly than just those two programmes
and
point out that we have 15 different projects in the clinic right
now at
MedImmune. Of those about 12 are in the Phase II-ish stage of drug
development. You highlighted two in the question but frankly I think
there’s a lot more than that going on that has the potential to move into
Phase III over the relatively near term. Of that 12 programmes, as
we look
at our business going forward we expect that based on standard attrition
rates and where they are in stage of development that somewhere in
the
range of 3-5 of those projects have the potential to be in Phase
III by
the 2009-2010 timeframe, so 3-5 moving out of that basket of 12 into
pivotal trials in the ’09-’10 timeframe. One of the things that I have
just begun to talk about with David Brennan is how when looked at
through
an AstraZeneca prism instead of a MedImmune independent company prism,
we
may be able to select several of these key programmes and accelerate
their
development and broaden it by doing some things in parallel rather
than
sequentially and perhaps there’s a different prioritisation of which
things we go after and at what pace when looked at through the eyes
of
AstraZeneca than the way MedImmune was looking at it independently.
So
there’s a very large portfolio of Phase IIs that should yield multiple
Phase III programmes in the ’09
timeframe.
|
|
Graham
Parry:
|
Would
it be
possible to get a feel for just the timing of any data that we could
see
on that? Are we looking at next year before we see any proof of concept
data on any of these compounds?
|
|
David
Mott:
|
No,
you’ll
actually see a very continual stream of Phase II clinical data being
presented in medical meetings over the course of ’07 and ’08. There are
meetings already scheduled where we’ve submitted abstracts and papers that
in the press right now on many of our Phase II programmes. Just recently
we presented new data on our anti-Hsp90 programme which is moving
very
rapidly in oncology development. There is also going to be a bunch
of data
coming out at some of the rheumatology conferences later this year
on our
anti-inferon alpha programme in lupus patients. We’re just now expanding
that programme also into myositis and cirrhosis and are beginning
enrolment in a large multi-dose Phase II study in lupus patients
with that
as well, so there’s a very active publication and presentation programme
that you’ll be able to monitor the progress of these candidates
with.
|
|
David
Brennan:
|
Good.
Thank
you David, thank you Graham. Next question
please?
|
|
Operator:
|
Thank
you.
We’ve got a question from Matthew Weston from Lehman Brothers. Please
go
ahead.
|
|
Matthew
Weston:
|
Good
morning
gentlemen, a few questions if I could, mainly financial. Firstly
Jon the
cost of the deal and the synergies, you’ve talked about the anticipation
of saving up to $500 million a year. Could you give us some
indication of how much you think that’s going to cost to implement and the
timing of those one-off charges? Secondly can you explain how the
options
programme at MedImmune is going to be dealt with with the merger?
Do all
options get paid out and if so is that going to lead to an exceptional
charge? Again what magnitude is that likely to be and what implications
do
you think that will have for staff retention? Finally just
|
|
David
Brennan:
|
Jon,
go ahead.
Why don’t you start with synergies and the options
programme?
|
|
Jon
Symonds:
|
I
think we’re
still at early stages on the synergy implementation and therefore
I can’t
give you a good feel as to what we think the implementation costs.
Because
a chunk of it is avoidance it pretty well comes at no cost so our
initial
gut feel is that you’re talking about maybe half of the synergy programme
coming out in costs, the majority of which would probably fall in
2008.
The existing option programmes in MedImmune have been paid out as
David
said, retention of MedImmune employees is of paramount importance
as we go
through. We are looking at new incentive schemes and although we
have a
cost number in mind I’m not comfortable at this point in declaring that
until we’ve really explored it properly with the MedImmune leadership and
their employees. David, you might have to help me on the tax rate
as to
why it is in the teens but I think going forward I stand by what
we said
earlier that this is a predominately US income stream. I think we
will
have some opportunities for locating IP or having the international
income
streams come via Europe but I think for now it’s largely a US rate. David,
anything you can add to that?
|
|
David
Brennan:
|
Sure
Jon. I’m
not sure which analyst’s reports you might be looking at but we track all
the analysts that have followed MedImmune and look at the consensus
expectations on every line item in those models and typically they’re
around a 36% long term tax rate going forward for us, so I’m not sure
where you’re finding someone in the teams but that certainly isn’t the
consensus of the analysts that follow MedImmune and that mid-30s,
36%-ish
tax rate is consistent with our internal expectations going forward.
I
also agree completely with Jon that there are some opportunities
as we
begin to build revenues outside the United States to capture
|
|
David
Brennan:
|
As
I in my
closing comments commented about the importance of retention and
the
people, David, would you like to comment about the spirit of the
people at
MedImmune? Clearly you had to make a release 10 days ago or so that
something was going on, but I wonder if you’d comment about how people are
feeling?
|
| David Mott: |
Frankly
soon
after we get off this call I’m going to go down and do an all employee
meeting here this morning with our staff and I expect it to be very,
very
well received. AstraZeneca I think is an excellent fit for MedImmune.
It
gives us greater global resources to continue doing what we love
doing and
already do very, very well. There are tremendous opportunities for
synergy
between us and CAT to really maximise what we’re good at and what they’re
good at by working together and I think that our employees will readily
see that and receive that and certainly my commitment to be a part
of
driving this successful combination of MedImmune and AstraZeneca
and Jim
Young, our Head of R&D’s commitment to do that as well is a strong
signal of how I expect the rest of the employees to
respond.
|
|
David
Brennan:
|
Great,
thank
you David. John Patterson, maybe you just want to comment? You’ve been
leading CAT for the last year. How do you see the fit and the impact
on
the people from your perspective at CAT as
well?
|
|
John
Patterson:
|
Thanks
David.
Well, I’m actually sitting in CAT here this morning as we speak and
obviously the CAT people are interested to see how we can create
this
biologicals machine that they’ve been looking to be part of for some time,
so there’s a real buzz in terms of doing that and as David Mott said
earlier the skills come together brilliantly, the jigsaw fits together
because what MedImmune brings is a skill at search, development and
all
the scale-up required. What CAT brings is a tremendous discovery
platform
and the skills to actually help us find the
targets.
|
|
David
Brennan:
|
That’s
it and
that’s why we see the fit being so strong from our perspective because
of
our position with CAT as well as the alignment from a disease area
and
therapy area strategy. We’ve had our people together for a couple of weeks
and I think it’s all been a good fit, so that had a lot to do with the
decision that we made. We’re down to about our last five minutes, next
question please?
|
|
Operator:
|
Thank
you.
We’ve got a question from Alexandra Hauber from Bear Stearns. Please
go
ahead.
|
|
Alexandra
Hauber:
|
Thank
you for
taking my question, a couple of questions on the transaction. First
a
technical question on the numbers of shares you used to devise the
total
purchase value including the cash of 15.6 billion works out to about
269
million shares and when I look at last MedI’s release they were talking
about 245 million on a fully diluted basis. You mentioned you paid
out the
options, could you shed light whether that accounts for the gap in
the
share numbers? Second point on synergies in Numax, is there a change
in
control clause with Abbott or alternatively is there any chance you
can
take back the European rights for the assets and is there any difference
on how Synergis is treated compared to Numax? Then I have a question
for
clarification on a statement you made in the press release this morning
when you talk about the financial benefits, you talked about potential
milestones and royalties on MedImmune’s other licensed products and 1.5
billion in cash. Can you just be a bit precise what this 1.5 billion
in
cash refers to because that’s obviously…is that what you use to calculate
the net cash of 340 million?
|
|
David
Brennan:
|
Let
me take
the change in control…there are no change in control issues around this.
MedImmune’s had a relationship with Abbott internationally and we have
that now and we will take a look at it. I think we can safely say
we also
have those skills and capabilities so we’ll take a look and see what we
can do to build on that. John, do you want to comment
on…?
|
| Jon Symonds: |
The
total
number of shares, I think the difference would be the shares under
the
convertible debt that clearly are linked to the offer price. If you
still
can’t get it, give us a call and we’ll take you through the calculation.
The 1.5 billion is the gross cash and cash equivalents, the 320 is
the
cash.
|
|
Alexandra
Hauber:
|
Can
I just get
a clarification? What about getting the full economics on synergies
with
Numax that you can take the distribution rights back? Is there any
chance
of that or not?
|
|
David
Brennan:
|
I
don’t think
we’re in a position to comment on it. There’s an agreement in place that
exists and now that we have it we will take a look at it and see
what we
can do on it. I think that’s the answer to the
question.
|
|
Alexandra
Hauber:
|
Ok,
thank
you.
|
|
David
Brennan:
|
Thank
you.
We’ve got time for one more
question.
|
|
Operator:
|
Thank
you.
We’ve got a question from Gbola Amusa from Sandford Bernstein. Please
go
ahead.
|
|
Gbola
Amusa:
|
Thank
you.
Just one last question on the one time retention grant. Would you
comment
a bit on who that’s targeted for, i.e. how deep down into the organisation
it goes and how long it keeps MedImmune employees
there?
|
|
David
Brennan:
|
It’s
a
programme that will be available to all employees at MedImmune. There
will
be some different timescales around it but generally it’ll be one year at
this point and we will then have additionally the AstraZeneca programmes
that we use for all of our employees available as well, so we’ll just
transition to those kinds of
programmes.
|
|
Gbola
Amusa:
|
Was
any
component of that in the purchase
price?
|
|
Jon
Symonds:
|
Not
in the
direct calculation but we are anticipating some of that for
sure.
|
|
David
Brennan:
|
Yes,
we
included it in our calculation but it’s not in the share price equivalent,
no. I think we’re optimistic that it will send the message to David’s
employees about how important we believe they are and how that fits
with
what we’re trying to do which is to significantly increase our capacity in
this area and bring together different parts of a couple different
organisations, CAT, ourselves and MedImmune to create a leading
biologicals business globally. It really does position us very differently
from where we have been in the past and in the mid to long term we
can see
ourselves with different platforms in a very different place, so
we
believe it’s a very good fit, it’s good people. I think the retention
programmes and the other things we’ll put in place will demonstrate that
to everyone there.
|
|
With
that I
think we are out of time so I’d like to thank everybody for your
participation in the call this morning, you know how to get in touch
through our investor relations group. If there are any other questions
please feel free. Again thank you all for joining us this morning
and have
a good day.
|
|
Operator:
|
That
will
conclude today’s conference ladies and gentlemen. Thank you for your
participation and have a good day. You may now
disconnect.
|