Peter Loescher
President, Amersham Health

Amersham Health

Amersham Health is a market-leading, global business specialising in the field of in vivo diagnostic products for the early and accurate detection of disease. Today our products are primarily used to aid in the diagnosis of anatomical and functional abnormalities of soft tissue within the body. Increasingly, however, Amersham is developing products that detect changes in cells at the molecular level. Such changes usually occur well before symptoms or functional changes become apparent.

We focus on the management of heart disease, circulatory disease and stroke; degeneration of the brain such as is seen in Alzheimer’s disease and Parkinson’s disease; lung disease and a range of cancers. In addition, we are a major provider of therapy products to treat prostate and thyroid cancer.

As the cost of healthcare continues to rise and populations age, governments and healthcare providers increasingly recognise the value of investment in early and accurate diagnosis, in order to most effectively manage therapeutic intervention and its associated costs. This, together with increased capability and numbers of scanning machines, greater incidence of disease and improved medical practices (which rely on the identification of the underlying cause of disease), continues to drive growth and demand for our products.

In 2002, turnover increased by eight per cent to £948 million, driven by sales of our portfolio of patented diagnostic products, up 22 per cent to £354 million. In the second half of the year, sales of patented diagnostics surpassed those of our unpatented products for the first time, even though sales of our unpatented diagnostic products also grew by five per cent in 2002.

Trading profit increased 10 per cent to £351 million, driven by growth in higher margin products and manufacturing efficiencies. Our total spend on researching new molecules, developing new products and extending established products into new indications rose 14 per cent to £95 million. After R&D expenses, our operating profit was £256 million, up nine per cent. Excluding profits from the sale of the TARC research facility in 2001, operating profit grew 11 per cent. The operating margin of 26.9 per cent was slightly higher than the 26.1 per cent achieved in 2001.

Excluding Japan, total sales of medical diagnostic products were good in all regions, growing by £60 million to £723 million. In Japan, despite a modest volume increase, sales fell six per cent following a reduction in in-market prices as a result of the Japanese government’s biennial pharmaceutical price review. This affected bulk sales of iohexol (the raw material for Omnipaque™ X-ray diagnostic) into Japan, which were down 13 per cent.

In X-ray diagnostics, sales were £335 million, up eight per cent. Sales in magnetic resonance imaging (MRI) totalled £97 million, up 17 per cent. The radiopharmaceutical diagnostic business grew 14 per cent to £269 million.

Therapy sales were down by £9 million to £62 million in 2002, impacted by continuing price pressure in the US market for brachytherapy seed implants for prostate cancer treatment. However, sales in Europe continued to grow strongly through the opening of new centres using our patented stranded seed product, Rapid Strand™.

Production
We achieved further significant milestones in bringing more of our production in house, which improves process control as well as manufacturing cost efficiency.

In September, we opened the extension to our secondary manufacturing facility in Cork, Ireland and the first shipment of Omnipaque™ and Omniscan™ products into the US started the same month. A major upgrade for the production of our leading radiopharmaceutical, Myoview™, was successfully completed at Gloucester, UK at mid-year and we also received FDA approval to supplement Myoview production at our Oslo, Norway facility in May.

In primary manufacturing, the investment in bulk iohexol capacity completed in 2001 at Lindesnes, Norway showed major volume benefits with record yields achieved by the end of the year. A major £47 million project at Lindesnes to source increased volumes of a significant intermediate for contrast media production in-house was approved in June and will, when completed, help to deliver further unit cost reductions.

In North America, we added five new radiopharmacies to our radiopharmacy distribution network, bringing the number of Amersham owned pharmacies to 30 and the total to 187, giving us excellent customer reach and coverage.

Portfolio development
Our four largest products – Omnipaque™ and Visipaque™ in X-ray, Omniscan™ in MRI and Myoview™ in radiopharmaceutical imaging – are used in a number of disease areas. Life cycle management of these products is key, and we continue to extend their usefulness through new indications and innovative packaging and presentations.

Significant progress was made during the year in refocusing our R&D efforts towards molecular diagnostics, and we now have a higher number of projects for molecular diagnosis of human pathology in development than at any time in the past. We are concentrating on products that can aid the detection and gauge the effectiveness of ongoing treatment in our four areas of focus: cardiology, neurology, oncology and pulmonology.

Cardiology
Cardiovascular disease continues to be one of the most rapidly expanding disease areas globally and a major cause of death in North America and Europe. Amersham offers a broad range of products across the range of modalities to enable physicians to understand the health of a patient’s heart.

Myoview is our leading radiopharmaceutical diagnostic for visualising the supply of blood to the heart, with sales of £133 million in 2002, up 26 per cent. In 2001, this product was approved for use with pharmacological stress agents. In 2002 we completed a phase III trial with Myoview for a new cardiac indication, left ventricular function, and the file has been submitted to the US regulatory authorities.

The safety profile of our third generation X-ray diagnostic, Visipaque, was further strengthened through a landmark study carried out by the Karolinska Institute in Stockholm, Sweden in 2002 and published in the prestigious New England Journal of Medicine in February 2003. The NEPHRIC study showed that Visipaque significantly reduces the relative risk of developing contrast media-induced impairment of renal function, a serious clinical problem in some patient groups. Sales of Visipaque grew 18 per cent to £91 million in 2002. The X-ray diagnostic Omnipaque, which remains the world’s best selling in vivo diagnostic product after 20 years in the market, reached sales of £222 million, up six per cent.

We successfully completed phase II trials to extend the use of our MRI product Omniscan in cardiac perfusion and for monitoring blood flow through the renal arteries. Phase III studies in the US and Europe are being planned and should commence towards the end of 2003.

In the US and Europe, myocardial perfusion has been the primary target market for the development of Sonazoid™, a third generation ultrasound product. The use of ultrasound for this indication has been limited by the slow development of sufficiently robust imaging procedures. Therefore, although Sonazoid has shown excellent safety data, a decision has been taken to suspend work in the US and Europe and to continue to focus on Optison™, our ultrasound product which is marketed for improved visualisation of the surfaces of the heart muscle. In Japan, the development of Sonazoid by our partner, Daiichi Pharmaceutical Co. Ltd., continues. The first use of Sonazoid imaging in Japan will be established in the liver disease market.

In its first full year under Amersham’s ownership, Optison achieved excellent results with sales of £9 million in the new, yet emerging, ultrasound contrast media market. In North America, we have built a specialised sales force for developing this new market through focused education and by working with key opinion leaders. EU marketing authorisation for Optison was granted in June.

Neurology
Omniscan, our leading MRI product, is used in neurology to detect stroke, brain tumours and other brain abnormalities. Omniscan continues to be a market leader in this area and is the number one non-ionic MRI contrast medium sold throughout the world, achieving sales of £96 million in 2002, up 17 per cent.

DaTSCAN™, a molecular diagnostic, is Amersham’s newest entrant to the field of neuro-imaging. It is the only registered product enabling physicians to objectively identify Parkinson’s disease through cellular change in the brain, and to distinguish this from a similar disease, Essential Tremor. DaTSCAN is also being developed for the differentiation of Lewy body from other forms of dementia. Based on supporting proof-of-concept data from external studies, a revised development programme has been initiated to greatly reduce time-to-market and we will proceed directly to phase III studies of DaTSCAN for this new indication.

A technetium-based product, Trodat, also for the diagnosis of Parkinson’s disease, is being developed for the US market and all pre-clinical milestones have been met to date.

Cancer
Myoview, our radiopharmaceutical diagnostic, obtained approval for a new indication in Europe for use in breast tumour imaging in 2002. Breast cancer is one of the most common cancers in women, and while advances have been made in breast cancer treatment, the success of these treatments is highly dependent upon early and accurate diagnosis of the functional status of the disease. Such diagnosis can now be achieved with the use of Myoview.

The new chemical entity NC100692 for the imaging of angiogenesis (blood supply to a tumour) and other potential indications has progressed well in its pre-clinical safety, pharmacology and formulation stages.

Pulmonology
Lung disorders involve a range of problems, from chronic conditions such as asthma to sudden death due to pulmonary embolism. We are beginning to see excellent results from our Thrombus agent, NC100668, which moved into phase II trials in April. This radiopharmaceutical agent has the potential to identify patients with pulmonary embolism earlier than other diagnostic techniques.We also continue to develop the technology relating to Spin Signal™, using Helispin™ to enable early detection of lung disease through high-resolution ventilation imaging of gases using MRI.

Developments in PET imaging
The use of positron-emission tomography (PET) for the early detection of tumours is becoming widely accepted, using fluoro-deoxyglucose (FDG) as the imaging agent. Progress is being made in our collaboration with General Electric Medical Systems on the development of a solid-phase chemistry delivery system for use in an FDG ‘cassette’. Through this collaboration, we will be able to provide hospitals and clinics with PET imaging products such as FDG, with consistently high quality. We are also working to develop new PET diagnostics for neurological indications.

Nihon Medi-Physics (NMP), our joint venture with Sumitomo Chemical in Japan, is planning to invest £68 million in manufacturing facilities to deliver PET diagnostic products to key medical centres in Japan. NMP aims to construct six new manufacturing facilities to supplement its three existing sites. Under current regulations NMP expects to gain a six-year exclusivity period in the Japanese market for its first PET diagnostic product.

We continue to expand our Imanet™ network of imaging research centres, which began in 2001 with the formation of a joint venture with the Medical Research Council in the UK. In 2002 we added a second Imanet centre in conjunction with the University of Uppsala, Sweden. In February 2003, we established a new centre in Finland, TRIS (Turku Research Imaging Solutions Oy), which will work in partnership with Turku PET Centre. Imanet provides diagnostic services, including PET, to assist the pharmaceutical industry in monitoring the effectiveness of new drugs during the development stage. This helps us identify new diagnostic molecules for use in very specific therapeutic applications, and in January 2002 we announced a major research collaboration with Pfizer to achieve this. With contractual work for the majority of the world’s top pharmaceutical companies in addition to the strategic collaboration with Pfizer, Imanet is progressing well financially as well as scientifically. The R&D expenditure in Imanet, which in 2002 included an incremental spend of £3 million, is fully recovered by its revenues.