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Business review
Amersham made impressive gains in 2001, as the breadth of our innovative
technologies and our strong brands enabled us to sustain good growth
across both of our businesses. Turnover, at constant exchange rates,
increased by 13 per cent, driven by our portfolio of leading medical
diagnostic products, our strong separations business and by good
demand for our high throughput drug discovery systems. Together
these product areas grew by 16 per cent and account for two-thirds
of our total business. Our trading profit increased by 11 per cent
to £466 million. After an investment of £174 million in R&D, up
16 per cent over 2000, we had an operating profit, before exceptional
items and goodwill amortisation, of £293 million, up eight per cent
at constant exchange rates.
We rebranded our company in 2001, which increases our recognition
in the marketplace. The new names of our businesses, Amersham Health
and Amersham Biosciences, are a sign that we have successfully completed
the merger process begun in 1997 and are looking towards the future,
united by our common purpose of bringing vision to medical discovery.
Since 1997, we have grown turnover by 47 per cent and increased
our R&D investment by 43 per cent, while the number of staff has
risen by only 11 per cent. As a result, Amersham today is a company
with strong assets, a global franchise and a broad technology base
that is allowing us to make an impact on global health.
The sale of our remaining stake in Nycomed Pharma in 2001 further
added to the strong operating cash flow we generated. This has enabled
us to pay off debt while continuing to invest in the businesses.
We finished the year with net borrowings of £25 million, £298 million
less than at the start of the year. Last year we completed the expansion
of our manufacturing facilities at Amersham Health’s Lindesnes plant
in Norway, enabling us to achieve economies of scale that are a
key part of our industrial success while at the same time improving
environmental performance. Over the past three years we have significantly
increased our investment in life sciences research in order to build
our technology bases in functional genomics and functional proteomics.
The initial R&D investment phase is now complete and we are looking
forward to moving the business into long termprofitability as our
sales volumes grow in discovery systems.
Intellectual property is one of the most important assets for
our innovation-based company, and I am very pleased to report that
our vigorous defence of our rights has borne fruit. In the ultrasound
area, we concluded agreements with Bristol-Myers Squibb Medical
Imaging as well as with Sonus Pharmaceuticals that significantly
strengthen our ultrasound patent portfolio. We also obtained full
commercial rights to Optison™, which is the leading ultrasound
diagnostic in the market. In the drug discovery area, the court
mediated settlement with Applied Biosystems Group, announced in
February 2002, includes a cross-licensing agreement covering all
patents involved in the litigation, and a co-development arrangement
for the joint development, supply and commercialisation of certain
new DNA analysis technologies. The agreement will give us access
to other segments of the sequencing market, allowing us to build
on the strong position we have already established in the very high
throughput segment, and will enable both companies to bring further
innovation more quickly to all of our customers.
Our businesses continue to be driven by our strong brands. Sales
in Amersham Health were up by 13 per cent, largely on the strength
of our top four medical diagnostic products – Myoview™, Visipaque™,
Omniscan™ and Omnipaque™. Our therapy business returned
to growth with sales up by nine per cent, adding new prostate cancer
brachytherapy products to complement our leading OncoSeed™
brand. Amersham Health’s trading profit, at £324 million, and operating
profit before exceptional items and goodwill amortisation, at £241
million, both grew by 10 per cent.
Life cycle management of these brands is key. Last year the FDA
approved the use of Myoview with pharmacological stress agents for
heart patients who are unable to exercise physically, providing
a major new opportunity for the continued growth of this product.
In addition to life cycle projects, Amersham Health is actively
managing and developing its portfolio through partnerships and in-licensing
as well as continued research and development. We are working to
expand our imaging capabilities from the visualisation of tissue
structure and anatomy, to the visualisation of disease-related changes
in the cells and molecules of the human body. Initiatives are also
under way to link the new molecular diagnostic products with targeted
therapies for treating disease. In the future, these activities
will help medical science bring the discoveries being made in the
life sciences, into the clinic.
The breadth of Amersham Biosciences’ product range and geographical
reach helped to underpin continued good growth overall, as the rising
demand for protein technologies offset a slowdown in demand for
gene sequencing products. We are the leader in protein sciences,
a position we have built up over many years, and are well placed
to meet the increase in demand with market-leading brands. Sales
growth was 12 per cent, fuelled by our major brands including ÄKTA™
and Sepharose™ in separations and Ettan™ in proteomics. Trading
profit was up 14 per cent to £158 million. After R&D costs of £86
million, up 22 per cent, the operating profit before exceptional
items and goodwill amortisation was £72 million, a growth of six
per cent. In line with our plans, the rate of R&D spending slowed
in the second half of the year and operating profits began to move
in the right direction.
Significant investment in the business over the last few years
has greatly strengthened the infrastructure and product portfolio
of Amersham Biosciences, through the development and launch of several
major platforms. Now that R&D investments are levelling off, the
focus for the next period of development will be to improve the
profitability of our drug discovery business and reap the benefits
of the technology base, intellectual property assets and service
infrastructure we have created. This is key to our vision of enabling
personalised medicine. As customers move to translate the rapidly
growing body of knowledge about genes and proteins into practical
application for the discovery of new drugs, there will be exciting
opportunities for us to grow our business in areas such as bioassays
and drug screening as well as protein technologies.
During 2001 we made important strides to build the quality and
depth of our senior management, including the appointment of Dr
Lynne Gailey as Director of Corporate Affairs and a member of the
executive management team. As will be seen in the following detailed
review of our businesses, we are strongly positioned and well equipped
for future challenges.
The Chief Executive's review continues
on the next page »
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