AstraZeneca goes cold on GM crops 

Roger Cowe 
Guardian, London, Wednesday August 4, 1999 

AstraZeneca yesterday warned that it could sell its agrochemicals business after 
a fundamental review of its prospects this autumn. 

The Anglo-Swedish group, formed in a £22bn merger this year, said its priority 
was to concentrate on the drug business which accounts for four-fifths of its 
sales and includes products such as the ulcer drug Losec. 

Its weedkiller and pesticide division, which is involved in developing genetically 
modified crops, saw profits slump by 19% to £283m in the merged group's first 
half-year results. 

Michael Pragnell, the division's chief executive, said sales had been hit by a 
slump in world commodity prices which has hit farm incomes. "It is unlikely we will 
see a rapid recovery in agriculture, so it is likely that we will carry out a 
restructuring in the second half of the year", he said. 

The division's profits were depressed by heavy spending on new crop developments, 
including a new joint venture with Japan Tobacco to develop a genetically modified 
strain of rice. 

Mr Pragnell said the group was investing £37m in biotech research and the Japanese 
venture completed a network of collaborations covering maize, wheat and rice. 
AstraZeneca's Touchdown weedkiller has won approval in the US for use on genetically 
modified soya. "We remain believers that biotech will offer substantial advantages 
to consumers, food processors and growers," Mr Pragnell said. 

"That will start to be appreciated over the next 10 years. But this is investment 
for the long term. It won't pay off until the middle of the next decade." 

The group's chief executive, Tom McKillip, said that the merger was going according 
to plan and was still expected to cut the two companies' combined costs by about a 
tenth, equivalent to roughly 6,000 jobs. 

But it will cost almost $1bn this year to complete the integration, including a 
$713m payment to the US drug company Merck as part of the cost of breaking its ties 
with Astra. 

Before the cost of the merger, profits rose by 6% to £1,276m, after a 12% increase 
in sales to just over £5.6bn. Drug sales rose by 16% with operating profit 13% ahead 
of last year. 

The group will pay an interim dividend of $0.23 (14p) per share but chief financial 
officer Jon Symonds said it would pay out a falling proportion of net profits 
as dividends. Instead shareholders could benefit from a £1.24bn share buyback 
programme over the next few years. 

AstraZeneca shares fell by nearly 3% yesterday on concerns about drug developments. 
In December, the group will present a detailed breakdown of research prospects.