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AstraZeneca Annual Report

and Form 20-F Information 2009

Contact Information Health in the real world

Registered office and Swedish Central Securities Depository
corporate headquarters Euroclear Sweden AB
AstraZeneca PLC PO Box 7822
15 Stanhope Gate SE-103 97 Stockholm
London W1K 1LN Sweden
UK Tel: +46 (0)8 402 9000
Tel: +44 (0)20 7304 5000
Fax: +44 (0)20 7304 5151 US Depositary
JPMorgan Chase & Co
Investor relations PO Box 64504
E-mail: St Paul MN 55164-0504
UK: as above US
Sweden: Tel (toll free in the US):
AstraZeneca AB 800 990 1135
SE-151 85 Södertälje Tel (outside the US):
Sweden +1 (651) 453 2128
Tel: +46 (0)8 553 260 00 E-mail:
Fax: +46 (0)8 553 290 00
US: Our website
Investor relations This Annual Report is also available
AstraZeneca Pharmaceuticals LP on our website,
1800 Concord Pike annualreport2009
PO Box 15437
DE 19850-5437
Tel: +1 (302) 886 3000
Fax: +1 (302) 886 2972

Equiniti Limited
Aspect House
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Tel (freephone in the UK):

AstraZeneca Annual Report and Form 20-F Information 2009

0800 389 1580
Tel (outside the UK):
+44 (0)121 415 7033
Important information for readers previous year’s exchange rates and adjusting for other
of this Annual Report and Form exchange effects, including hedging). A reconciliation of
Reported results adjusted for the impact of currency
20-F Information movements is provided in the Operating profit (2009
Cautionary statement regarding and 2008) table on page 39.
forward-looking statements
The purpose of this Annual Report and Form 20-F Throughout this Annual Report and Form 20-F
Information is to provide information to the members of Information, growth rates are expressed at CER unless
the Company. The Company and its Directors, otherwise stated.
employees, agents and advisors do not accept or
assume responsibility to any other person to whom this AstraZeneca’s determination of non-GAAP measures
Annual Report and Form 20-F Information is shown or together with our presentation of them within our
into whose hands it may come and any such financial information may differ from similarly titled
responsibility or liability is expressly disclaimed. In order, non-GAAP measures of other companies.
among other things, to utilise the ‘safe harbour’
provisions of the US Private Securities Litigation Reform Statements of competitive position, growth rates
Act 1995 and the UK Companies Act 2006, we are and sales
providing the following cautionary statement: This In this Annual Report and Form 20-F Information,
Annual Report and Form 20-F Information contains except as otherwise stated, market information
certain forward-looking statements with respect to the regarding the position of our business or products
operations, performance and financial condition of the relative to its or their competition is based upon
Group. Forward-looking statements are statements published statistical sales data for the 12 months
relating to the future which are based on information ended 30 September 2009 obtained from IMS Health,
available at the time such statements are made, a leading supplier of statistical data to the
including information relating to risks and uncertainties. pharmaceutical industry. For the US, dispensed new or
Although we believe that the forward-looking total prescription data are taken from the IMS Health
statements in this Annual Report and Form 20-F National Prescription Audit for the 12 months ended
Information are based on reasonable assumptions, the 31 December 2009; such data is not adjusted for
matters discussed in the forward-looking statements Medicaid and similar state rebates. Except as otherwise
may be influenced by factors that could cause actual stated, these market share and industry data from IMS
outcomes and results to be materially different from Health have been derived by comparing our sales
those expressed or implied by these statements. The revenue to competitors’ and total market sales
forward-looking statements reflect knowledge and revenues for that period. Except as otherwise stated,
information available at the date of the preparation of growth rates and sales are given at CER. For the
this Annual Report and Form 20-F Information and the purposes of this Annual Report and Form 20-F
Company undertakes no obligation to update these Information, unless otherwise stated, references to the
forward-looking statements. We identify the forward- world pharmaceutical market or similar phrases are to
looking statements by using the words ‘anticipates’, the 49 countries contained in the IMS Health MIDAS
‘believes’, ‘expects’, ‘intends’ and similar expressions in Quantum database, which amounted to approximately Trade marks
such statements. Important factors that could cause 95% (in value) of the countries audited by IMS Health. Trade marks of the AstraZeneca group of
actual results to differ materially from those contained in companies appear throughout this Annual Report in
forward-looking statements, certain of which are AstraZeneca websites italics. AstraZeneca, the AstraZeneca logotype and
beyond our control, include, among other things, those Information on or accessible through our websites, the AstraZeneca symbol are all trade marks of the
factors identified in the Principal risks and uncertainties including, AstraZeneca group of companies. Trade marks of
section from page 80 of this document. Nothing in this and, does not form part of and is not companies other than AstraZeneca appear with a ™
Annual Report and Form 20-F Information should be incorporated into this document. sign and include: Abraxane™, a trade mark of Abraxis
construed as a profit forecast. BioScience, LLC.; Advair Diskus™, a trade mark of the
External/third party websites GlaxoSmithKline group of companies; Cimzia™, a trade
Inclusion of reported performance, core financial Information on or accessible through any third party mark of UCB Pharma, S.A.; Cubicin™, a trade mark of
measures and constant exchange rate growth rates or external website does not form part of and is not Cubist Pharmaceuticals, Inc.; CytoFab™, a trade mark of
In Our year in brief section on page 2 and throughout the incorporated into this document. Protherics, Inc.; Ethyol™, a trade mark of Scherico Ltd in
Directors’ Report the following measures are referred to: certain countries and AstraZeneca in others; Iscover™,
Definitions a trade mark of Sanofi-Aventis SA; Lipitor™, a trade mark
> Reported performance. Reported performance takes The glossary and the market definitions table from page of Pfizer Ireland Pharmaceuticals; Onglyza™, a trade
into account all the factors (including those which we 206 are intended to provide a useful guide to terms and mark of Bristol-Myers Squibb Company; Plavix™, a trade
cannot influence, principally currency exchange rates) AstraZeneca’s definition of markets, as well as to mark of Sanofi-Aventis SA; Prinivil™, a trade mark of
that have affected the results of our business as acronyms and abbreviations, used in this Annual Report Merck; Spiriva™, a trade mark of Boehringer Ingelheim
reflected in our Group Financial Statements prepared and Form 20-F Information. They are, however, Pharma GmbH & Co. KG; Trilipix™, a trade mark of
in accordance with IFRS as adopted by the EU and provided solely for the convenience of the reader and Fournier Industrie et Santé; and Vioxx™, a trade mark
as issued by the IASB. should therefore not be relied upon as providing a of Merck.
> Core financial measures. These are non-GAAP definitive view of the subject matter to which they relate.
measures because unlike Reported performance they
cannot be derived directly from the information in the Use of terms
Group’s Financial Statements. These measures are In this Annual Report and Form 20-F Information,
adjusted to exclude certain significant items, such as unless the context otherwise requires, ‘AstraZeneca’,
charges and provisions related to our global ‘the Group’, ‘we’, ‘us’ and ‘our’ refer to AstraZeneca
restructuring and synergy programmes, amortisation PLC and its consolidated entities and any reference to
and impairment of the significant intangibles relating ‘this Annual Report’ is a reference to this Annual Report
to the acquisition of MedImmune in 2007, the and Form 20-F Information.
amortisation and impairment of the significant
intangibles relating to our current and future exit Statements of dates
arrangements with Merck in the US, and other Except as otherwise stated, references to days and/or
specified items. See the Reconciliation of Reported months in this Annual Report and Form 20-F Information
results to Core results table on page 40 for a are references to days and/or months in 2009.
reconciliation of Reported to Core performance.
> Constant exchange rate (CER) growth rates. These Figures Designed and produced by Addison,
are also non-GAAP measures. These measures Figures in parentheses in tables and in the Financial
remove the effects of currency movements (by Statements are used to represent negative numbers.
retranslating the current year’s performance at the

AstraZeneca Annual Report and Form 20-F Information 2009

Introduction 01

Welcome to our
Annual Report 2009
Key financial highlights Contents

02 Introduction

02 Our year in brief

04 Chairman’s Statement
05 CEO’s Review
06 AstraZeneca at a glance
Sales up 7% to $32,804 million 08 Path to a new medicine
($31,601 million in 2008)
10 Directors’ Report

12 Business Environment
14 Strategy and Performance
18 Resources, Skills and Capabilities

Core operating profit up 23% to 36 Financial Review
50 Geographical Review
$13,621 million ($10,958 million in 2008)
55 Therapy Area Review
75 Other Businesses
76 Environmental Sustainability

77 In the Global Community

Corporate Governance
79 Risk
87 Business Organisation and Corporate Governance
101 Directors’ Remuneration Report
Strong cash flows reduced net debt
by $7,709 million resulting in net 120 Financial Statements
funds of $535 million
194 Additional Information

196 Development Pipeline

199 Shareholder Information
204 Corporate Information
205 Cross-reference to Form 20-F
206 Glossary
208 Index

AstraZeneca Annual Report and Form 20-F Information 2009

02 Introduction | Our year in brief

Our year in brief

Summary financial
and operational
information for 2009

Financial highlights Sales $m (+7%) Net cash flow from operating activities $m
2009 32,804 2009 11,739
2008 31,601 2008 8,742
2007 29,559 2007 7,510

Core operating profit $m (+23%) Reported operating profit $m (+24%)

2009 13,621 2009 11,543
2008 10,958 2008 9,144
2007 8,094

Core gross margin $m (+10%) Reported gross margin $m (+11%)

2009 27,217 2009 27,029
2008 25,408 2008 25,003
2007 23,140

Core earnings per Reported basic earnings

Sales growth Ordinary Share $ (+23%) per Ordinary Share $ (+22%)

7% 3%
2009 2008

AstraZeneca Annual Report and Form 20-F Information 2009

Introduction | Our year in brief 03

Dividend for 2009
$ Pence SEK Payment date

First interim dividend 0.59 36.0 4.41 14 September 2009

Second interim dividend 1.71 105.4 12.43 15 March 2010
Total 2.30 141.4 16.84 Dividend per Ordinary Share 2009

Operational overview Sales

> Crestor sales were up 29% to
Distributions to shareholders $m $4,502 million; Symbicort up 23% to
2009 2008 2007 $2,294 million; Seroquel up 12% to
Dividends 2,977 2,739 2,641 $4,866 million; and Arimidex up 7% to
Share re-purchases – 610 4,170 $1,921 million. Nexium sales fell by 1%
to $4,959 million and Synagis sales fell
by 12% to $1,082 million

29% 23%
> Sales of Toprol-XL and H1N1 influenza
(swine flu) vaccine in the US accounted
for 3 percentage points of the global
revenue growth
> Emerging Markets growth was 12%,
Crestor up 29% to $4,502 million Symbicort up 23% to $2,294 million accounting for 13% of total revenue
Pipeline developments include

4 4
> Four major regulatory submissions made
> Complete Response Letter submitted
for fifth regulatory submission
> In-licensing/acquisition of four
late-stage projects
Four major regulatory submissions In-licensing/acquisition of four > 89 projects in clinical development
late-stage projects
Restructuring programme delivered
annualised savings of $1.6 billion in 2009

$1.6bn 6%
and expanded to deliver further savings

Positioned in the top 6% in the sector

in the Dow Jones World and STOXX
(European) Indexes
Annualised savings of $1.6 billion Top 6% in the sector in the
from restructuring Dow Jones Indexes Up to $1 billion in Ordinary Shares will be
re-purchased by the Company during 2010

Note: All growth rates are at CER.

AstraZeneca Annual Report and Form 20-F Information 2009

04 Introduction | Chairman’s Statement

We confirmed our commitment to being

an integrated, global and innovation-driven
prescription-based biopharmaceutical
business. While there has already been much
change in the business, the review also
highlighted the need to redouble our efforts
if we are to stay at the forefront of the sector.
Our plans for the business are outlined in more
detail in David’s Review and the Strategy
and Performance section.

In recognition of the Group’s strong balance

sheet, sustainable significant cash flow
and the Board’s confidence in the strategic
direction and long-term prospects for the
business, we have adopted a progressive
dividend policy, intending to maintain or
grow the dividend each year. In order
to ensure that long-term management
incentives and shareholder interests remain
aligned, we are tabling proposals for a new

Chairman’s Statement share-based long-term incentive plan for

shareholder approval. This has been
developed as part of an overall review of
executive remuneration. Further information
Despite the difficult world economic made regulatory submissions based on the about this plan and the review can be found
conditions, 2009 was a successful results of these trials. in the Directors’ Remuneration Report from
year for AstraZeneca. Our strong page 101 and in the Notice of AGM.
performance and considerable Our strategic focus is on innovation-driven
achievement in making a real medicines that are valued by patients and During 2009, Håkan Mogren retired from
difference to patient health around payers alike. We continue to invest in new the Board, having been a Director of the
the world meant that our shareholders medicines and we work to protect our Company since its formation in 1999.
were also able to benefit. investments by rigorously defending our Before then, he had served as Chief
patent rights and thereby optimising our Executive Officer and a Director of Astra AB
Group sales increased by 7% in 2009 to a intellectual property. To this end, AstraZeneca for more than 10 years. He brought a wealth
total of $32,804 million. Reported operating will vigorously defend the challenge to the of experience and sound judgement to the
profit was $11,543 million, up 24%. Reported Crestor US substance patent brought by a work of the Board which we valued highly.
earnings per share for the full year were number of generic drug manufacturers when As announced last year, John Patterson
$5.19 (2008: $4.20). The Board has the case goes to trial in February 2010. also retired in 2009. On behalf of their
recommended a second interim dividend fellow Directors, I would like to reiterate
of $1.71, a 14% increase over the second Worldwide, pharmaceutical industry revenue my thanks to both of them for their service
interim dividend awarded in 2008. This growth, while positive, is slowing. This is due to the Company.
brings the dividend for the full year to to pressure on healthcare costs, exacerbated
$2.30 (141.4 pence, SEK 16.84), an by the current economic downturn, as well Once again, the Board would like to place
increase of 12% from 2008. In 2009, as increased competition from generic on record its appreciation of the leadership
cash distributions to shareholders medicines. We believe pressures on costs shown by David Brennan and his team.
through dividends totalled $2,977 million. are likely to continue, especially in the US. On behalf of the Board I would also like to
thank AstraZeneca employees around the
Meeting patient need lies at the heart of Nevertheless, the demand for healthcare world for their contribution to what has been
what we do. In 2009, immediate need was that will drive the industry’s future growth a very successful year. Their contribution,
met when our people and technology remains strong, especially from economic which has been the foundation of our past
enabled us to develop and be the first to and demographic growth in Emerging success, is also needed more than ever as
market an H1N1 influenza (swine flu) vaccine Markets and the growing number of we address the challenges to come. I am
in the US. Equally, when generic producers patients there who can afford our confident that AstraZeneca has the skills
proved unable to supply the market for medicines. In response to these and capabilities to continue that success
Toprol-XL, we successfully rebuilt our supply developments we have continued to drive by harnessing both its own efforts and the
chain to fill the void. change in the business. We are reshaping efforts of those with whom we work.
our presence in Established Markets to
2009 was also a year in which AstraZeneca ensure we remain competitive and investing
science was at the forefront of the industry, in Emerging Markets around the world so
ensuring that we are able to meet patient that we can benefit from their growth.
need in the longer term. Two of the biggest Louis Schweitzer
landmark clinical trials to report in recent We used our assessment of the future Chairman
years, the Crestor JUPITER and the Brilinta for the pharmaceutical sector as the basis
PLATO trials, engaged academic and clinical for the annual strategy review with
communities across the globe. We have David Brennan and his executive team.

AstraZeneca Annual Report and Form 20-F Information 2009

Introduction | CEO’s Review 05

business processes and support services,

such as HR. To meet evolving customer needs
we are adapting our methods of sales and
marketing and altering our supply chains.

Our drive to improve efficiency and

effectiveness across AstraZeneca has resulted
in further reductions in our workforce. The
executive team and I remain committed to
ensuring that we manage these changes in
the right way. This means that, in meeting the
needs of the business, we deal responsibly
and sympathetically with affected individuals
and the communities in which they live.

We continue to integrate responsible business

considerations into everyday decision-making
across all our activities, reinforcing personal
accountability for compliance with our Code
of Conduct through training and monitoring
of business practices. We were pleased to

CEO’s Review have our efforts recognised externally with

improved scores in the 2009 Dow Jones
Index. Looking ahead, we have identified
areas for improvement and will take action
2009 was a year of considerable we made during the year to withdraw the to strengthen further our governance and
achievement in which I believe we regulatory submissions we had made for management processes, building on our
laid firm foundations for the future our anti-cancer medicine, Zactima, came as progress to date and driving continuous
success of the business. Underpinning a disappointment. improvement throughout the business.
all this is excellent execution of our
plans, improved organisational As projects leave the development pipeline, 2009 also saw some changes to the
flexibility and a committed workforce. we replenish it with new projects that will executive team. Jan Lundberg, Executive
yield regulatory submissions in future years. Vice-President, Discovery Research left
Operational highlights of the year include four We now have 11 projects in Phase III AstraZeneca in November. We thank him for
significant regulatory filings for new medicines development. Twenty-nine projects entered his significant contribution to the business.
and two product launches. We agreed four the pipeline during the year and 53 projects Christer Köhler has taken over the role on
late-stage project collaborations and have were progressed to their next phase of an interim basis. Bruno Angelici, Executive
89 projects in clinical development. In addition, development. We seek to provide each Vice-President, International Sales and
sales of Toprol-XL and H1N1 influenza of these projects with a business case Marketing Organisation, will be leaving
(swine flu) vaccine in the US accounted for underpinned by a clear scientific rationale AstraZeneca later in 2010. He has made an
three percentage points of the global revenue and sound financial case. enormous contribution and we thank him for
growth at CER, while growth in Emerging his sound judgement and strong leadership.
Markets was up 12%, accounting for 13% of In strengthening our pipeline we look beyond
total revenue. 2009 was also the year in which our own laboratories to access the best Finally, the achievements of the year
we reached an agreement in principle with the science and external sources of innovation. would not have been possible without the
US Attorney’s Office to settle claims relating As a result, a significant number of our projects dedication and hard work of all our employees,
to Seroquel sales and marketing practices come from our programme of collaboration. to whom I offer my thanks. For many of our
and to make a payment of $524 million These include two of our regulatory filings: employees 2009 was a year of change. The
(including interest). Certriad was submitted with Abbott and pace of change is not going to let up in 2010.
Vimovo was submitted by our partner Pozen Indeed, it is going to accelerate. I am
If we are to bring benefits to patients and Inc. In addition, Onglyza™ was the first product confident that our staff will respond with the
create value for shareholders, we need of our diabetes collaboration with BMS. commitment they have shown in the past.
a constant flow of new and innovative
medicines. Of the four regulatory filings Other collaborations agreed in 2009 included The Strategy and Performance section
made in 2009, Brilinta is a treatment for the in-licence from Forest of ceftaroline, a ‘next from page 14 outlines our plans and priorities
acute coronary syndromes, Certriad is for the generation’ anti-infective. We enhanced the for 2010 and beyond, which we need to
treatment of lipid abnormalities and Vimovo value of this programme in December with implement to ensure we prosper in the years
is for arthritic pain. The fourth submission an agreement to acquire Novexel, a private ahead. In doing so, we will improve the health
was for a fixed-dose combination of Onglyza™ infection research company. We also agreed of patients around the world and thereby
and metformin for treating diabetes. 2009 in-licensing deals with Nektar and Targacept. create value for our shareholders.
saw Onglyza™ launched in the US and in
the EU for the treatment of Type 2 diabetes. A further focus in 2009 was the continued
Iressa, our anti-cancer medicine, was reshaping of the business to give us the
launched in the EU. Of course, in the process organisational flexibility we need to take
of developing new medicines, we experience advantage of opportunities. Initiatives include David R Brennan
setbacks as well as successes. The decision outsourcing some of our R&D activities, other Chief Executive Officer

AstraZeneca Annual Report and Form 20-F Information 2009

06 Introduction | AstraZeneca at a glance

at a glance

Who we are What we do

AstraZeneca is a global, innovation-driven We are focused on the discovery, development and

biopharmaceutical business commercialisation of prescription medicines for six
important areas of healthcare
Our mission is to make the most meaningful difference
to the health of patients through great medicines We have a broad product range that includes many leaders
in the treatment of the world’s most serious illnesses
We do this with a range of medicines designed to
improve patients’ health and quality of life around We have 10 medicines with sales of more than $1 billion
the world each in 2009
We are committed to developing each activity within We use our scientific and commercial skills to develop a
our business in a responsible way pipeline of innovative new products to meet medical need
Our work is supported by our values and the conduct Healthcare area Key product
of employees in working with each other and Cardiovascular Crestor (for managing cholesterol levels)
our stakeholders Gastrointestinal Nexium (for acid reflux)

We believe that our approach delivers lasting value Infection Synagis (for RSV, a form of respiratory infection
in infants)
for patients, society and our shareholders
Neuroscience Seroquel (for schizophrenia, bipolar disorder
and major depressive disorder)
Oncology Arimidex (for breast cancer)
Respiratory & Inflammation Symbicort (for asthma and chronic obstructive
pulmonary disease)

62,700 employees worldwide
10 medicines with sales of over $1 billion each in 2009

AstraZeneca Annual Report and Form 20-F Information 2009

Introduction | AstraZeneca at a glance 07

How we work Where we work

We are committed to working in a spirit of collaboration We have a global reach but local knowledge, being
to achieve our goal of better health for patients active in over 100 countries, with a growing presence in
emerging markets such as China, Brazil, India and Russia
We recognise the value of collaborative work, and so
continually seek to develop new ways of working with In 2009 we had sales of $15,981 million in North America,
others who complement our existing skills, enhance our $12,471 million in Other Established Markets and
internal innovation or bring extra value to what we do $4,352 million in Emerging Markets
Our products rely not only on teamwork within Combining our disease area expertise with country-
AstraZeneca but on working with doctors, patients specific knowledge helps us to market and sell
and other stakeholders to understand what they need medicines that best meet local needs
and want
Of our 62,700 employees worldwide, 47% are in
We also work with governments and those who pay Europe, 31% in the Americas and 22% in Asia, Africa
for healthcare to ensure our products represent value and Australasia
for money
Around 11,600 people work in our R&D organisation
We work with NGOs and others to improve local and we have 17 principal R&D centres in eight countries,
healthcare in vulnerable communities around the world including Sweden, the US and the UK
We have 9,500 employees at 20 manufacturing sites
in 16 countries

60 major R&D collaborations in the last three years
Active in over 100 countries

AstraZeneca Annual Report and Form 20-F Information 2009

08 Introduction | Path to a new medicine

Path to a new medicine

The discovery, development and commercialisation of a medicine is a complex
process. This is a high level overview of the process for a new small molecule External clinicians
and organisations may be
medicine. It is illustrative only. It is not intended to (and nor does it) represent
involved in the design and
the life-cycle of any particular medicine or of every medicine discovered and/ running of these studies.
or developed by AstraZeneca. These third parties are
typically involved at
AstraZeneca people each study phase
AstraZeneca stakeholders and other third parties
Begin to develop
manufacturing route
Collaborations with to ensure the
academia and external manufacturing process
clinicians to access the is robust and costs
Begin the process 5
best external science and are minimised
of seeking patent
protection for the
medical opinion. These Phase III studies
potential medicine
third parties may be 3 Studies in a larger group
involved throughout the Phase I studies of patients to gather
medicine’s life-cycle
Studies typically in small information about
1 groups of healthy human effectiveness and safety
Find potential medicine volunteers (may include of the medicine and
Having identified the unmet patients in later part of Phase I) evaluate the overall
medical need and the market to understand how the potential benefit/risk profile
opportunity, find a potential medicine is absorbed in the
medicine, through laboratory body, distributed around it and
research, that is potent, excreted. Also to determine
selective and absorbed into a safe dosage and identify
and safe in the body side effects

0 1 2 3 4 5 6 7 8 9
During the discovery phase During the development phase

2 Phase II studies
Safety and initial Studies in small groups
efficacy studies of patients to evaluate
Studies in the lab and effectiveness of
in animals to determine the medicine
if the potential medicine
is safe to introduce
into humans and in
During Phase II studies,
what quantities
design a Phase III programme
to deliver data required for
regulatory approval and
Understand likely pricing and/or reimbursement
efficacy, side throughout the world
To ensure effect profile and Regulatory authorities
patient safety, maximum dose ensure the safety and
regulatory authorities estimate in efficacy of the medicine
approve the testing humans and grant approval for its
External advisory panels marketing. Large numbers
of the medicine
help define the attributes of national, regional and
in humans
to test in studies to local payers grant
demonstrate whether the approval for the pricing
potential new medicine can and/or reimbursement
be differentiated from the of the medicine
existing standard
treatment of care

AstraZeneca Annual Report and Form 20-F Information 2009

Introduction | Path to a new medicine 09

At any stage of the

development process
Regulatory authorities
the medicine may have
approve any
been acquired from a Clinicians begin extensions to the
collaborating company. to prescribe medicine patient populations to
The collaborator may and patients begin whom the medicine
remain involved in the to benefit may be prescribed
future development and
of the medicine
Market and sell Work with external
medicine. Continuously advisory groups
monitor, record and and regulatory authorities to
analyse reported side consider potential additional
Create appropriate effects. Review need to diseases which might be
branding for the new update the side effect treated by the medicine or
medicine in warnings to ensure that better ways
preparation for patients’ safety of administering
its launch is maintained the medicine

7 9
Launch new Life-cycle
medicine management
Raise awareness of Broaden understanding
patient benefit and of the full potential
appropriate use of the medicine

9 10 11 12 13 14 15 16 17 18 20+
Post launch: delivering to patients

Regulatory submission
Seek approval from 8 10
regulatory authorities Post-launch clinical Patent expiry
to market and sell safety studies Typically when patents
the medicine Studies to further protecting the medicine
understand the safety expire, generic versions
profile of the medicine of the medicine may
in larger populations enter the market
Conduct any
required or indicated
Submit package of
post-launch follow-up
clinical data which
clinical trials
demonstrates the
safety and efficacy
of the medicine to Regulatory
the regulatory authorities advise on
authorities any changes required
to the prescribing
information for the
medicine as a result
of greater
understanding of the
safety profile

AstraZeneca Annual Report and Form 20-F Information 2009

10 Directors’ Report

Directors’ Report
Performance Corporate Governance
Business Environment 12 Risk 79
Strategy and Performance 14 >Managing risk 79
> Strategy, objectives and >Principal risks and uncertainties 80
2009 performance 16 Business Organisation and
Resources, Skills and Capabilities 18 Corporate Governance 87
> Our products 18 >Business organisation 87
> Our approach 20 >Board of Directors
>Research and Development 22 at 31 December 88
> Working with others 22 >Senior Executive Team
>Sales and marketing 28 at 31 December 90
>Intellectual property 31 > Reserved matters and
>Supply and manufacturing 32 delegation of authority 92
>People 33 > Principal corporate
governance requirements 96
Directors’ Remuneration Report 101
Financial Review 36
>Measuring performance 37 This Directors’ Report includes information that
>Business background and fulfils the requirements of a business review under
major events affecting 2009 37 the Companies Act 2006.
>Results of operations –
The Development Pipeline, Shareholder Information
summary analysis of year and Corporate Information sections from pages
to 31 December 2009 38 196, 199 and 204, respectively, are incorporated
>Financial position, including into this Directors’ Report.
cash flow and liquidity – 2009 39
Details of the more significant risks to AstraZeneca
>Restructuring and synergy costs 41 are set out in the Principal risks and uncertainties
>Capitalisation and shareholder return 42 section from page 80.
>Future prospects 42
Many of our products are subject to litigation.
>Results of operations – Detailed information about material legal
summary analysis of year to proceedings can be found in Note 25 to the
31 December 2008 42 Financial Statements from page 166.
>Financial position, including
cash flow and liquidity – 2008 43 References to prevalence of disease have been
derived from a variety of sources and are not
>Financial risk management 44 intended to be indicative of the current market
>Critical accounting policies or any potential market for AstraZeneca’s
and estimates 45 pharmaceutical products since, among other
things, there may be no correlation between the
>Other accounting information 49 prevalence of a disease and the number of
Geographical Review 50 individuals who are treated for such a disease.
> North America 50
The glossary and the market definitions table from
> Rest of World 52 page 206 are intended to provide a useful guide to
Therapy Area Review 55 terms and AstraZeneca’s definitions of markets, as
>Cardiovascular 56 well as to acronyms and abbreviations, used in this
Directors’ Report.
>Gastrointestinal 60
>Infection 62 In this Annual Report and Form 20-F Information,
>Neuroscience 65 unless the context otherwise requires, ‘AstraZeneca’,
‘the Group’, ‘we’, ‘us’ and ‘our’ refer to AstraZeneca
>Oncology 68 PLC and its consolidated entities and any reference
>Respiratory & Inflammation 71 to ‘this Annual Report’ is a reference to this Annual
Other Businesses 75 Report and Form 20-F Information.
Environmental Sustainability 76 Except as otherwise stated, references to days
In the Global Community 77 and/or months in this Annual Report are references
to days and/or months in 2009.

Figures in parentheses in tables and in the Financial

Statements are used to represent negative numbers.

Members of the Senior Executive Team address

questions from an audience of employees at a Town
Hall meeting in Westborough, Massachusetts, US.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report 11

AstraZeneca Annual Report and Form 20-F Information 2009

12 Directors’ Report | Business Environment

Business Environment
The challenges
Pricing pressure
The growing demand for healthcare continues
to increase pressure on payer budgets. Whilst
payers may recognise the need to reward
innovation, they have a duty to spend their
limited financial resources wisely. As a result,
cost-containment in healthcare, including
AstraZeneca operates in a rapidly Furthermore, the faster-developing economies, containment of pharmaceutical spending,
changing business environment such as China, India and Brazil, continue to continues to be a focus. This is particularly
that presents both opportunities and offer new opportunities for the industry to the case as the current global economic
challenges. Although industry revenue supply an expanding number of patients who downturn increases cost pressures on
growth is slowing due to continuing can benefit from medicines. As shown by the healthcare payers and those patients who
pressure on healthcare costs figures, Emerging Markets now represent pay directly for all, or a significant proportion,
and pricing, as well as increased approximately 85% of the world population of the cost of their medicines.
competition from generic medicines, and 16% of the total pharmaceutical market.
the demand for healthcare that will Pharmaceutical industry growth in Emerging The research-based pharmaceutical industry’s
drive the industry’s future growth Markets was more than triple the rate of challenge is to manage this downward
remains strong. growth in Established Markets in 2009. pressure on the price of its products,
whilst continuing to invest in the discovery,
Historically, the pharmaceutical industry has Unmet medical need development, manufacture and marketing of
been less exposed than other sectors to In most Established Markets, ageing new medicines. In addition, most of our sales
changes in global economic conditions, but populations and certain lifestyle choices drive are generated in highly regulated markets
continued constraints on payers impacted the an increased incidence of chronic diseases where governments exert various levels of
sector and its prospects in 2009. However, such as cancer, cardiovascular/metabolic and control on price and reimbursement.
the current economic environment also respiratory diseases which require long-term
presents opportunities for the sector, such management. The prevalence of chronic Multiple pricing systems exist across the
as strategic alliances with smaller companies disease is also increasing in middle-income globe, which create a complex matrix that
seeking funding and development expertise. countries, and is now beginning to have must be managed to optimise revenues.
Indeed, partnering activity across the an impact in the least developed countries. This may be further complicated by currency
pharmaceutical sector remained strong Many diseases remain under-diagnosed or fluctuations within regions. The principal
during 2009. sub-optimally treated and, as diagnostic aspects of price regulation in our major
techniques and treatments improve and markets are described further in the
World markets access to medicines widens, the burden of Geographical Review from page 50.
The world pharmaceutical market in 2009 disease is projected to continue increasing
was valued at $709 billion, an increase of over the next 20 years. In addition, the Payers increasingly require that the economic
5% over 2008 at CER (maintaining the rate appearance of new medical challenges such as well as therapeutic value of medicines
of growth for the period 2007 to 2008). as the H1N1 influenza (swine flu) pandemic be demonstrated and that this value be
As shown in the figure opposite the 2009 potentially adds to the burden. supported by evidence of real outcomes.
growth rate in North America recovered Meeting these needs across a diverse range
from its 2008 decline while the 2009 growth Advances in science and technology of national and local reimbursement systems
rate in Other Established Markets fell back Existing medicines will continue to be vital requires significant additional investment
from its 2008 level. On the other hand, in meeting the demand for healthcare, of resources and funds by the industry.
Emerging Markets, in particular Emerging particularly in an increasingly genericised Personalised healthcare (PHC) offers one
Asia Pacific, saw strong double-digit growth. market. In addition, innovation resulting from way of increasing the value of medicines to
advances in both the understanding of the patients, physicians and payers. Under PHC
In 2009 the top five markets in the world key processes involved in the initiation and the optimal treatment for each individual,
remained the US, Japan, France, Germany progression of disease and the application in terms of the choice of medicine and dose,
and Italy, with the US representing 42% of of new technologies will be critical to meeting is determined by analysis of the patient’s
global sales (2008: 42%). Further down current and future unmet medical need. As biochemical or genetic make-up. An example
the rankings, China moved into sixth we noted last year, the use of large molecules, of this approach is the use of a companion
place, displacing the UK to eighth place or biologics, is becoming an increasingly diagnostic test to allow use of Iressa for the
behind Spain. important driver of innovation. It has been treatment of lung cancer, specifically in those
predicted that within the world’s top 100 patients who have an activating mutation
Growth drivers pharmaceutical products, 50% of sales will of the endothelial growth factor receptor.
Expanding patient populations come from biologics based on forecasts for
The world population has doubled in the last 2014. This compares with only 28% in 2008 R&D productivity
50 years from three billion to over six billion and 11% in 2000. With advances in the The research-based pharmaceutical industry
and is expected to reach nine billion by 2050. technologies for the design and testing of continues to drive for increased productivity
In addition, the number of people who can novel compounds, new opportunities also in R&D to ensure a strong pipeline of
access the highest standards of healthcare exist for the use of innovative small molecules commercially viable medicines for launch.
continues to increase, particularly among as new medicines. Companies have addressed this challenge
the elderly, who represent a rising proportion in a variety of ways. Some have sought to
of populations in developed nations. increase output with limited incremental cost

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Business Environment 13


and others have restructured R&D functions molecule medicine. However, biologics are Further information about the specific risk
to promote innovation and entrepreneurship. now becoming subject to competition from of the early loss and expiry of patents is
Others have acquired companies with ‘biosimilars’ and, while the regulatory regimes explained in the Intellectual property section
synergistic development pipelines. for ‘biosimilars’ are less well established than on page 31 and more general information
those for generic small molecule medicines, regarding the principal risks and uncertainties
Regulatory requirements regulatory authorities in Europe and the faced by AstraZeneca can be found in the
The pharmaceutical industry is one of the US are currently reviewing abbreviated Principal risks and uncertainties section from
most regulated of all industries. Whilst approvals processes. page 80.
efforts to harmonise regulations globally are
increasing, the number and impact of these World pharmaceutical markets
regulations continue to grow. Since the World pharmaceutical markets
withdrawal of Vioxx™, regulators have been World pharmaceutical markets
North America Sales $bn
applying a more systematic approach to
North America Sales $bn
safety assessment and the management of 2009 315
North America Sales $bn Growth Market value
known and emerging risks both before and 2009
2008 315
after a medicine is approved. Today, regulators
also require greater amounts of safety data
before approval than in the past. This has led
to a change in the structure of development
programmes and to the need for additional
Other Established Markets Sales $bn
resources to carry them out. For example,
Other Established Markets Sales $bn Growth Market value
companies might initially seek approval for 2009 283

4% 40%
Other Established Markets Sales $bn
a narrower list of medical indications, or 2009
2008 283
request conditional approvals that may later 2009
2007 283
be expanded through additional studies as 2008
2007 273
259 2009 2009
part of a medicine’s life-cycle management. 2007 259

Emerging Markets Sales $bn Growth Market value
Our main competitors are other research-

15% 16%
Emerging Markets Sales $bn
based pharmaceutical companies that sell 2009 111
Emerging Markets Sales $bn
innovative, patent-protected, prescription 2009
2008 111
medicines. Competition also comes 2009
2007 111
84 2009 2009
from collaborations between traditional 2008
2007 97
pharmaceutical companies and smaller 2007based on world market sales using AstraZeneca’s
Data 84 market definitions as set out in the market definitions table
biotechnology and vaccine companies. on page 206. Source: IMS Health.

Generic versions of drugs that are no longer Expanding patient populations

patent protected also compete in the market.
Manufacturers of generic drugs price them
at a significantly lower level than the innovator
equivalents. This is partly because generic
manufacturers do not invest the same
amounts in R&D or market development as
research-based pharmaceutical companies,
and therefore do not need to recoup that
investment. Such competition generally occurs
when patents expire but can also occur
where the validity of patents is being disputed
or has been successfully challenged before
expiry. In addition, competition can occur
when a generic medicine in the same product
class as an innovator product (a product
which does not yet have a generic equivalent)
enters the market and competes to meet the
same medical need.

To date, biologics have sustained longer

life-cycles than traditional pharmaceuticals Established Markets Emerging Markets
and have faced less generic competition. Population: 897 million Population: 5,763 million
GDP growth: 4.8% GDP growth: 9.4%
This is because the manufacturing process GDP per capita: $44,466 GDP per capita: $3,640
for biologics is generally more complex than
it is for small molecule medicines and it is Source: International Monetary Fund, World Economic Outlook Database, October 2009
Population figures are for 2008
significantly harder to produce an identical GDP growth is based on real GDP in US dollars for the years 2003-2008
copy of a biologic compared to a small GDP per capita is nominal GDP per capita for 2008.

AstraZeneca Annual Report and Form 20-F Information 2009

14 Directors’ Report | Strategy and Performance

Strategy and
How we did in 2009
and our plans for
the future

Each year, at the beginning of our potential loss through the ordinary course
business planning cycle, we assess of patent expiries and loss of Regulatory
the challenges and opportunities Exclusivity protecting our products. This loss
presented by the market, stress test of intellectual property is an inherent feature
our short and long-term planning of our industry that occurs naturally as part of
assumptions, and critically assess the cycle of innovation, growth and renewal.
our strengths and weaknesses as It is, however, challenging to be able to
an organisation. We do so to assure synchronise the cycles of patent expiry and
ourselves that, whatever our past portfolio renewal. The goal for our planning
David Brennan successes, the strategic path we are process is to ensure that we can continue
Chief Executive Officer following is the right one for the future. to sustain the cycle of successful innovation
and thus continue to refresh our portfolio
This section summarises our strategic plans of patented products and generate value
“We face near-term challenges for the future as well as our performance for shareholders.
but I am confident that we can against those plans in 2009.
be among the best performers Our strategy
in this sector.” Our challenge The executive team, with the endorsement
In our Business Environment section from of the Board, believes that the most
page 12 we outline the opportunities presented value-creating strategy for AstraZeneca is
by expanding patient populations in Emerging to remain a focused, integrated, innovation-
Markets, unmet medical need and advances in driven, global, prescription-based
science, as well as the pricing pressure and biopharmaceutical business:
other challenges facing the pharmaceutical
sector. Over the last 10 years, our healthcare > focused in that we will continue to be
revenue has grown from $15 billion to almost selective about those areas of the industry
$33 billion and our Emerging Markets business in which we choose to compete, targeting
has grown from 6% of our global revenue those product categories where medical
to 13%. Our challenge as a business is to innovation or brand equity continues to
be nimble in seizing the opportunities and enable us to make acceptable levels of
managing the risks in order to build our returns on our investments
competitive advantage. > integrated in that we believe the best way
to capture value within this industry is to
We estimate that in the next five years, more span the full value chain of discovery,
than half our current revenue is subject to development and commercialisation

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Strategy and Performance 15


>> innovation-driven in that we believe our In terms of the commercialisation of our

technology base will continue to deliver products, we will continue to build on our Measuring our performance
innovative products that patients will leading positions in Established Markets. Each business function is subject to an
want and for which payers will pay Our plans for growth will also build on the annual budget and target-setting process that
>> global in that we believe we have the investments we have already made in includes developing financial and business
ability efficiently and effectively to meet Emerging Markets. In addition to forecasts, conducting sensitivity and risk
healthcare needs in both Established commercialising the current and new product analyses and setting relevant performance
and Emerging Markets. offerings being developed internally, we believe measures. Regular reviews are undertaken in
we can drive further growth by selectively each part of the business in order to monitor
We believe that there are continued supplementing our Emerging Markets and assess progress against business and
opportunities to create value for those who portfolio with branded generic products budget targets, and to assess key risks and
invest in pharmaceutical innovation and that sourced externally and marketed under the mitigating actions. Longer term, 10-year
AstraZeneca has the skills and capabilities to AstraZeneca brand. forecasts are developed as part of our annual
turn these opportunities into long-term value. strategy review.
Business shape
Our priorities to 2014 We will continue to use business improvement Quarterly internal reports provide the Board
The initiatives we are pursuing in the coming programmes, such as Lean Sigma, to drive and SET with shared insight into progress
years are in line with those we reported on efficiencies across the Group. We will also against current year objectives and milestones
last year and we do so again overleaf in this move further towards a more flexible cost for longer-term strategic goals. Performance
Annual Report. These show that we are base which will enable us to respond rapidly is assessed using quantitative, comparative
already on a path of change. Our 2009 review as our requirements change. To do this we will market, operational and financial measures
emphasised the need for the pace of that make greater use of outsourcing and strategic and qualitative analysis.
change to accelerate. collaborations with other organisations.
In relation to our overall goal of creating
Pipeline Culture and behaviour enduring value for shareholders by being
While remaining committed to scientific We define success not only by what we do one of the best-performing pharmaceutical
innovation to deliver a flow of new medicines, but also by how we do it. Acting responsibly companies, we track shareholder value
the need to further improve the productivity ensures we do things in the right way and in using the following financial performance
of R&D is a central part of our plans. Meeting line with the expectations of shareholders, metrics: sales growth (operating profit and
this challenge will require continued investment customers, payers, regulators and other margins); earnings per share growth; net
in new skills and capabilities. It will also require stakeholders. We will continue to embed operating cash flow (before debt repayment
our R&D organisation to undertake more a culture of accountability across the Group, and shareholder distributions); shareholder
transformational change than ever before. nurturing a spirit of innovation in all functions. distributions through dividends and share
Our plans include a reduction in the number re-purchases; and TSR. We report our
of disease area targets within our core Implementation performance against those measures on
Therapy Areas, a continued focus on external Good progress has been made in the pages 2 and 3 of this Annual Report, and
collaboration, some consolidation of our implementation of previously announced with TSR graphs on page 114.
activities onto a smaller R&D site footprint, restructuring programmes. This has involved
and other efficiency measures, subject to a reduction of 12,600 positions. Annualised
consultations with work councils, trades unions benefits of $1.6 billion were realised by the
and other employee representatives and in end of 2009, which are on track to grow
accordance with local employment laws. to around $2.4 billion by the end of 2010.

Our commitment to scientific innovation The next phase of restructuring, which

is coupled with our belief that successful includes completion of the previous
delivery of our plans will require more external programmes, some additional initiatives
collaboration than ever before, including in supply chain and in selling, general &
more extensive collaboration with industry administration, as well as the R&D initiatives,
and academic partners. External project will result in the realisation of a further
opportunities will compete alongside $1.9 billion in estimated annual benefits by
in-house developments for funding from our the end of 2014. These programmes may,
new Portfolio Investment Board which will when fully implemented, involve up to an
replace the R&D Executive Committee. additional 10,400 job reductions.

Business growth Our performance in 2009

Our enhanced programme of external Set out in the next column is more information
collaboration includes working with payers. about how we measure and review our
We are setting out to build an industry-leading performance on an annual basis. For each of
capability in ‘payer partnering’ to ensure our strategic priority areas, the table overleaf
that the needs of our customers are clearly summarises the initiatives we have been
understood throughout R&D and included undertaking in support of them, our 2010
in our decision-making. objectives, our KPIs and our performance
against them in 2009.

AstraZeneca Annual Report and Form 20-F Information 2009

16 Directors’ Report | Strategy and Performance

Strategy, objectives and 2009 performance

Strategic priority Initiatives Objective for three years to end 2010

Strengthen the pipeline

To be one of the fastest and most Accessing the best potential innovative medicines Deliver two new product launches on average per year
productive companies in the industry to meet unmet patient need through from 2010
through continuous improvement in >> small molecule and biologics R&D
our in-house R&D. Seek leading science >> externalisation In order to achieve the above ensure we have 10 or
outside AstraZeneca to broaden our more products in Phase III development or registration
research base and further strengthen
our pipeline of new products Embedding culture of continuous
improvement through
>> leading-edge science
>> collaborations
>> business efficiency

Achieve a median composite eight-year product

development cycle

Grow the business

To maintain our position among the Building on leadership positions in existing markets Deliver sales growth in line with market growth
industry leaders through a continued to provide a return on our investment
focus on driving commercial excellence Expanding presence in important emerging markets

Driving high standards of sales force effectiveness,

marketing excellence and customer support
Profitably launch in-licensed and existing projects
Developing our brands to maximise patient benefit
and commercial potential
Securing new external commercial collaborations

Reshape the business

To create an organisation with the Implementing and expanding restructuring programme Annual benefits of $2.1 billion from restructuring
flexibility and financial strength to
adapt quickly and effectively within Operations’ asset and sourcing strategy Maintain margins
a challenging and rapidly changing
business environment

Delivering continuous improvement across Improve R&D unit costs by 15%

R&D through
>> smarter working
>> business process outsourcing

G&A strategy Achieve planned improvement in selling, general and

Marketing, sales and commercial strategies administrative (SG&A) costs
>> Western Europe and Emerging Markets resource
optimisation plans
>> North America – customer-driven interactions

Procurement strategy Procurement savings

Promote a culture of responsibility and accountability

To create an organisation that is Maintain/improve levels of employee engagement Upper quartile industry ranking for
recognised not only for the skills, employee engagement
experience and quality of its people,
but also for the integrity with which Strengthening leadership development frameworks Achieve step change in leadership and
it conducts its business management capability

Integrating responsible business considerations into Ensure that a culture of responsible business, including
everyday business thinking and decision-making compliance, is embedded across all our activities

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Strategy and Performance 17


Measure 2009 performance summary

Regulatory approvals Onglyza™ approved in 36 countries; Iressa approved in the EU

H1N1 influenza vaccine approved in the US. See Therapy Area Review from page 55

Projects entering development 29 projects entering development. See Strengthening the pipeline section on page 24

Value-creating collaborations and business Major late-stage in-licensing deals signed with Targacept, Forest and Nektar
development activities Agreed to acquire Novexel. See Working with others section from page 22

Major regulatory submissions Submissions made for Brilinta, Certriad, Vimovo and Onglyza™/metformin; Zactima submission withdrawn
H1N1 influenza vaccine approved in the US. See Therapy Area Review from page 55

Development cycle times for small molecule On track to deliver 2010 targets. See Improving productivity section from page 24
and biologics/vaccines

Deliver targeted sales and contribution Global sales +7% at CER. See 2009 Results of operations section from page 38
growth (at CER)

Successful life-cycle projects Additional approvals in the US for Seroquel and Seroquel XR; presented results of Crestor JUPITER trials
and regulatory submissions made in the US and the EU. See Therapy Area Review from page 55

Successful launches Onglyza™ launched in the US and the EU; Iressa launched in the EU
Symbicort approved in Japan and launched in January 2010. See Therapy Area Review from page 55

Commercial collaborations Four major co-promotion collaborations signed (Abbott, Astellas, UCB and Salix). See Working with others section
on page 22

Cost savings Annualised benefits of $1.6 billion in 2009. See Strategy and Performance section from page 14

Gross margin Target exceeded: core gross margin of 83%. See 2009 Results of operations section from page 38

Operating profit margin Core operating profit margin of 41.5%. See 2009 Results of operations section from page 38

Unit cost metrics Progress towards target. See Improving productivity section from page 24

SG&A cost growth rates Core SG&A growth of 5%. See 2009 Results of operations section from page 38

Cost savings Delivered savings of $555 million against a target of $500 million

Levels of employee engagement as measured 86% of our employees completed the FOCUS survey, and employee engagement improved by 2 percentage points
by our global employee survey (FOCUS) from 2008. This is above the industry average. See Engagement and dialogue section on page 34

Improve senior leadership clarity of direction 2009 score improved by 3 percentage points over 2008 to 72% favourable. This follows significant efforts to improve
as measured by our FOCUS survey the quality and effectiveness of senior leaders’ communication to the organisation. See Engagement and dialogue
section on page 34

Number of confirmed breaches of external 24 confirmed breaches of external sales and marketing regulations or codes. See Sales and marketing ethics section
sales and marketing regulations or codes from page 29

Greenhouse gas emissions1 9% reduction in CO2 emissions. See Climate change section on page 76

Waste production 1, 2
8% reduction in total waste production. See Waste management section on page 76

Rate of accidents with serious injury 1

2% reduction in accidents with serious injury. See Safety, health and wellbeing section on page 35

Rate of occupational illness 1

32% increase in cases of occupational illness. See Safety, health and wellbeing section on page 35

Ranking in Dow Jones Sustainability Indexes Positioned in the top 6% in the sector in the Dow Jones World and STOXX (European) Indexes

Data exclude MedImmune.
We have replaced our previous ozone depleting potential (ODP) KPI with waste production, as we believe it is now a more meaningful environmental sustainability
indicator for AstraZeneca. ODP data continue to be published on our website,

AstraZeneca Annual Report and Form 20-F Information 2009

18 Directors’ Report | Resources, Skills and Capabilities

Resources, Skills
and Capabilities
How we deliver
our strategy

70 year track record of
pharmaceutical innovation

We believe that the following brings to our business. In everything we do organic growth of products from our current
resources, skills and capabilities we seek to act as a responsible business portfolio and pipeline but also through
are key to achieving our goals for the and are committed to developing in a selective additions of AstraZeneca branded
longer-term success of our business: sustainable way. generics. For further information about our
branded generics strategy see the Sales
>> a world-class R&D function focused In this section we describe how we are using and marketing section from page 28.
on delivering a range of innovative and our resources, skills and capabilities to
differentiated medicines that meet unmet deliver our goals. A collaborative approach
medical need and for which customers Our medicines are testament to the combined
are prepared to pay Our products skills of AstraZeneca people, our collaborators
>> a sales and marketing activity which We focus on six Therapy Areas: and our commitment to working closely with
is truly global in its approach, listens to Cardiovascular, Gastrointestinal, Infection, physicians, patients and others to understand
customers and focuses on their needs Neuroscience, Oncology and Respiratory & what they need and what they value. Such
>> a cost-effective supply and Inflammation. These represent a significant relationships have helped us develop families
manufacturing operation that ensures proportion of the world’s burden of disease. of medicines, generation by generation, such
our customers receive a reliable supply as our hormone-based cancer treatments,
of medicines when they want them. Our medicines including Arimidex, which have played a part
Our heritage in increasing the five year survival rate for
We also need to have cost-effective and Backed by our 70 year track record of women with breast cancer from under 70%
flexible support services and infrastructure pharmaceutical innovation, we have a broad 50 years ago to around 90% today.
to ensure we meet our customers’ needs as range of marketed medicines that continue
efficiently as possible. to make a positive difference in important Our collaborations are crucial to what we do
areas of healthcare. and how we do it. For example, a programme
To optimise our use of these resources, skills of externalisation and our own internal project
and capabilities, we need to: Our range of medicines includes 10 products work has been at the heart of our work since
each with annual sales of over $1 billion in 2006 in developing a world-class diabetes
>> protect our investment in R&D through 2009. Our business growth in the short to portfolio. From a position where we had no
a rigorous process of patent protection medium term is expected to be driven by clinical projects in diabetes, we now have
that optimises our intellectual property three factors: (1) our key products Crestor, a portfolio with three medicines in Phase I
>> have access to the best external sources Seroquel XR and Symbicort; (2) the successful studies and a further one in Phase IIb studies.
of innovation to complement and build launch of the next wave of products from our Dapagliflozin is undergoing Phase III studies
on our internal skills and capabilities. pipeline, which includes Onglyza™, Brilinta, and is one of the compounds we are
Certriad, Vimovo, Recentin, motavizumab, developing in collaboration with BMS.
Above all, we cannot achieve our goals dapagliflozin, zibotentan, NKTR-118, TC-5214, In 2009, this collaboration resulted in the
without AstraZeneca people and the diverse ceftaroline and CAZ104; and (3) from approval of Onglyza™ in both the US and
skills and capabilities that a global workforce expansion in Emerging Markets, through EU for the treatment of Type 2 diabetes.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Resources, Skills and Capabilities 19


Medicines for more patients Product performance summary $m

Even before a medicine comes to market,
we develop programmes which are designed Nexium (-1%) Seroquel (+12%)
to optimise both the benefit medicines bring
2009 4,959 2009 4,866
to patients’ lives and their commercial potential
2008 5,200 2008 4,452
within the timeframe that patent protection
2007 5,216 2007 4,027
is available to us. We continue to do so
throughout the whole life of a medicine.
In particular, we continue to look for new
Crestor (+29%) Seloken/Toprol-XL (+84%)
disease indications for which a marketed
product might have efficacy. 2009 4,502 2009 1,443
2008 3,597 2008 807
For example, Crestor, our statin for managing 2007 2,796 2007 1,438
cholesterol levels, has been used to treat over
19 million people since its launch in 2003.
Subsequent studies showed that Crestor Symbicort (+23%) Arimidex (+7%)
also slows the progress of atherosclerosis
2009 2,294 2009 1,921
(hardening of the arteries) in patients with
2008 2,004 2008 1,857
elevated cholesterol levels. The JUPITER study
2007 1,575 2007 1,730
in 2008 demonstrated a significant reduction
in major cardiovascular events (44% compared
to placebo) in men (over 50) and women (over
Pulmicort (-10%) Atacand (+5%)
60) with elevated high-sensitivity C-reactive
protein but low/normal cholesterol levels. 2009 1,310 2009 1,436
In 2009 regulatory submissions were made 2008 1,495 2008 1,471
in the US and the EU to reflect the significant 2007 1,454 2007 1,287
reductions in such events.

Similarly, we first introduced Seroquel as Zoladex (0%) Synagis1 (-12%)

a treatment for schizophrenia. Subsequent
2009 1,086 2009 1,082
studies have shown that it is also effective
2008 1,138 2008 1,230
in treating both the manic and depressive
2007 1,104 2007 618
dimensions of bipolar disorder. Seroquel and
Seroquel XR are the only agents approved in 1
Acquired in June 2007.
the EU to treat all phases of bipolar disorder.
In the US, in 2009, Seroquel was approved for
the treatment of schizophrenia in adolescents
and for the acute treatment of manic episodes

94 97
associated with bipolar disorder in children
and adolescents. Seroquel XR was also
approved in the US as an adjunct treatment in
adults with major depressive disorder (MDD).
Our approach to developing generations of
drugs to meet new areas of unmet medical First approved in 1997, Symbicort is approved for
need continues and is illustrated by the Seroquel is now approved use in 97 countries
announcement of a further collaboration in 94 countries
and licence agreement with Targacept for the
global development and commercialisation
of TC-5214, their late-stage investigational
product for MDD.

We also continue to develop better ways

in which our medicines can be used. Our
Symbicort maintenance and reliever therapy
(Symbicort SMART) was the first asthma
treatment regime to combine both regular
maintenance and as-needed reliever therapies.
This allows patients to control daily symptoms
and reduce the severity and number of
asthma attacks using a single inhaler.

AstraZeneca Annual Report and Form 20-F Information 2009

20 Directors’ Report | Resources, Skills and Capabilities

The safety of
Christer Köhler
Interim Executive Vice-President,
Discovery Research

“Having the best science is

patients is a not enough – people with

the capabilities to turn that
knowledge into great medicines

is what brings success.”

Other developments with Symbicort exemplify than 60 years. Our total product supply of the levels of investment we will make in
our approach to optimising the benefit of our approximately 10 million FluMist doses sold different disease areas.
medicines for patient health both in terms of out in 2009. Our technology also enabled
bringing benefits to additional patient groups us to develop, and to be the first to market in Our approach
and working with third parties. In 2009, the US, a vaccine designed to prevent H1N1 Patient safety
Symbicort Turbuhaler was approved in Japan influenza (swine flu). We received approval for The safety of the patients who take our
to treat adult asthma and it was launched in our H1N1 influenza vaccine in September and medicines is a fundamental consideration for
Japan in January 2010. In August, we then contracted with the US Department of us. All drugs have potential side effects and
signed an agreement with Astellas to Health and Human Services for 42 million we aim to minimise the risks and maximise the
co-promote Symbicort Turbuhaler in Japan. doses, which we manufactured and distributed benefits of each of our medicines – starting
Symbicort Turbuhaler is also now approved on time and to schedule. with the discovery of a potential new medicine
in 96 countries for use in treating chronic and continuing throughout its development,
obstructive pulmonary disease, including Further information about all our major launch and marketing.
chronic bronchitis and emphysema. products can be found in the Therapy Area
Review from page 55. Many of our products, After launch, we continually monitor the
In addition to small molecules we also have for example, Seroquel and Crestor, are the use of all our medicines to ensure that
a strong capability in biologics. For example, subject of product liability claims and patent we become aware of any side effects not
Synagis is routinely used by hospitals for the challenges. Information about material legal identified during the development process.
prevention of serious lower respiratory tract proceedings can be found in Note 25 to the This is known as pharmacovigilance and is
disease caused by respiratory syncytial virus Financial Statements from page 166. core to our ongoing responsibility to patients.
(RSV), a respiratory infection in infants, and We have comprehensive and rigorous
has been administered to over one million Investing for the future pharmacovigilance systems in place for
premature babies. Synagis was the first Within each of our Therapy Areas, the detecting and rapidly evaluating such effects,
MAb approved in the US for the prevention individual disease areas in which we work including mechanisms for highlighting those
of an infectious disease. Since its launch in are agreed using a regular review process that require immediate attention. We also work
1998 it has become the standard of care for that enables us to deploy our resources in to ensure that accurate, well-informed and
RSV prevention. the best way to meet our commercial and up-to-date information concerning the safety
scientific objectives. We evaluate market profile of our drugs is provided to regulators,
Our biologics capability is also exemplified opportunities against a set of criteria, doctors, other healthcare professionals and,
by our influenza vaccines, where we have including unmet medical need, competitive where appropriate, patients. Clinical studies,
developed technologies that enable innovative position and our capabilities. Our R&D although extensive, cannot replicate the
ways of reverse-engineering new vaccines. Executive Committee, which will be replaced complete range of patient circumstances.
FluMist, the first nasal spray influenza vaccine in 2010 by the Portfolio Investment Board Rare side effects can often only be identified
to be approved in the US, represented the (further details of which are set out in the after a medicine has been launched and used
first innovation in flu vaccination in more R&D Executive Committee section on in far greater numbers of patients and over
page 92) uses the reviews to determine longer periods of time.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Resources, Skills and Capabilities 21


We have an experienced, in-house team of the Pharmaceutical Security Institute. Further “Our medicines…
around 350 clinical patient safety professionals
working around the world who are dedicated
information on counterfeiting can be found
in the Product counterfeiting section on
bring economic as well
to the task of ensuring that we meet our page 82. as therapeutic benefits.”
commitment to patient safety. This number
of people is lower than in 2008 because Pricing our medicines
data entry of individual case reports is Continued innovation is required to address
now managed by an external provider (as unmet medical need. Our challenge is to

described below). At a global level, every deliver innovations that bring benefits for
medicine in development and on the market patients and society at a level of investment
is allocated a Global Safety Physician and and internal productivity that reflects the
a team of patient safety scientists. In each of downward pressure on pricing.
our markets we also have dedicated safety
managers with responsibility for patient safety Our global pricing policy provides the We developed the first innovation in
at a local level. framework for optimising the profitability of all influenza vaccines in over 60 years
our products in a sustainable way. It balances
Our two Chief Medical Officers (CMOs) many different factors, including ensuring
have overall accountability for the benefit/ appropriate patient access. When setting the
risk profiles of the products we have in price of a medicine, we take into consideration
development and those on the market. One its full value to patients, those who pay for
CMO is responsible for our small molecule healthcare and society in general. Our pricing
products, the other for our biologics. They also takes account of the fact that, as a publicly
provide medical oversight and ensure that owned company, we have a duty to ensure
appropriate risk assessment processes are that we continue to deliver an appropriate
in place to enable informed decisions to be return on investment to our shareholders.
made about safety as quickly as possible.
We continually review our range of medicines
In 2009, we appointed Tata Consultancy (both those on the market and in the pipeline)
Services Sverige AB to manage the data to identify any that may be regarded as
entry process for safety reports relating particularly critical to meeting healthcare
to AstraZeneca products. This is designed needs. This may be either because they treat
to improve efficiency and consistency of diseases that are (or are becoming) prevalent
data entry across AstraZeneca, and allow in developing countries, or because they
our patient safety teams to focus on case are potentially a leading or unique therapy
prioritisation, the medical aspects of patient addressing an unmet need and offering
safety and continuing to improve our significant patient benefit in treating a serious
safety science. or life-threatening condition. In such cases,
we aim to provide patient access to these
Our commitment to patient safety includes medicines through expanded patient access
ensuring the security of our medicines programmes across all markets, including
throughout their manufacture and supply. the US. We also support the concept of
We continuously monitor our business differential pricing in this context, provided
environment to identify any new or emerging that safeguards are in place to ensure that
product security risks and work to ensure that differentially priced products are not diverted
these are managed quickly and effectively. from patients who need them, to be sold and
In addition to our internal processes, we use used in more affluent markets.
a range of measures against counterfeit
medicines and continue to develop our Economic benefit
capabilities in this area. These include Our medicines play an important role in
introducing technologies that make it more treating medical needs and in doing so
difficult for counterfeiters to copy our products; they bring economic as well as therapeutic
conducting market surveillance and benefits. Effective treatments can help to save
monitoring the supply chain to identify potential healthcare costs by reducing the need for
counterfeiting operations; responding rapidly more expensive care, such as hospital stays
to any reports of counterfeit AstraZeneca or surgery. They also contribute to increased
medicines; and working with regulators, productivity by reducing or preventing the
healthcare professionals, distributors, law incidence of diseases that keep people away
enforcement agencies and other organisations from work.
to protect patient interests. We also participate
in a variety of anti-counterfeiting forums and
programmes in the public and private sector,
including WHO/Interpol’s International Medical
Products Anti-Counterfeiting Taskforce and

AstraZeneca Annual Report and Form 20-F Information 2009

22 Directors’ Report | Resources, Skills and Capabilities

Working with others

We recognise that we cannot achieve
our strategic goals on our own. To deliver
successful medicines to market we
need to work with doctors, patients
and other stakeholders to understand
what they need and want. We work
with governments and those who pay
for healthcare to ensure our products
Anders Ekblom represent value for money. We also look
Executive Vice-President, Development to develop new ways of working with
others who complement our existing
skills, enhance our internal innovation or
bring extra value to what we do. In doing
“I am passionate about creating a so, we work to ensure that those we work
world-class R&D organisation that with meet our high ethical standards.
develops medicines which make
a real difference to the health Innovation, value and externalisation
of people around the world.” In a world of rapidly advancing science and
technology, no pharmaceutical company
can rely exclusively on its own resources if it
is to stay at the forefront of pharmaceutical
innovation. Through our strategy of
‘externalisation’, we seek to expand our
product portfolio and geographical presence
through, for example, technology licensing
arrangements and strategic collaborations
Research and Development whether our compounds could become safe and, where appropriate, acquisitions of
Strategy and effective medicines of the future. We are complementary businesses.
Our R&D strategy is centred on delivering also focused on integrating our tools and
sustained business growth through a databases to develop predictive platforms Accessing products through externalisation
continuous flow of new and innovative across R&D. is a key component of our efforts to both
medicines that meet unmet medical need strengthen our pipeline of new products and
at prices payers find acceptable. Our Our capabilities to access opportunities to drive short-term
strategic objective is to deliver a flow of new AstraZeneca has had a long history of growth. Our Strategic Planning and
medicines (two new molecular entities per successful research leading to innovative, Business Development team works closely
year on average). In line with our ongoing effective and valued medicines. We recognise with our R&D, Global Marketing and Finance
externalisation strategy, we continue to look the need to build on this tradition and this is teams to deliver this.
beyond our own laboratories, and actively reflected in our strategy.
seek acquisitions and alliances with third We have completed over 60 major
parties to gain access to the best science As we develop potential medicines through externalisation deals in the last three years as
and/or technology platforms. In 2009, we a structured programme of studies, our well as numerous smaller deals to enhance
completed three Phase III ready in-licence focus is on ensuring that they are developed and strengthen the portfolio. Further details of
deals (2008: three). In addition, we have effectively to meet the needs of patients, the current status of a number of the products
acquired Novexel (completion of the regulators and payers. We do so by applying concerned can be found in the Therapy Area
acquisition is subject to the expiry or the best science to clinical need by designing Review from page 55.
termination of the applicable waiting period appropriate programmes that ultimately
under the US Hart-Scott-Rodino Antitrust deliver successful submissions to regulators. Significant late-stage deals completed in 2009
Improvements Act) thus gaining access to two To this end, our cross-functional project and include the in-licence of ceftaroline, a next
further compounds; one of which is Phase III product teams bring together all the relevant generation anti-infective, from Forest, and the
ready and the other of which is Phase II ready. skills and experience needed to ensure the in-licence of NKTR-118 and NKTR-119 from
rapid development of effective new medicines. Nektar to address opioid-induced constipation.
We are creating a knowledge-driven They also manage the associated risks In December, we also successfully concluded
organisation by investing in information and ensure that quality and safety remain a major in-licence agreement with Targacept
sources and tools to allow our scientists to fundamental considerations at every stage. for TC-5214, a late-stage product for major
integrate and exploit internal and external depressive disorder, and acquired Novexel
knowledge, as well as share this knowledge Our R&D function has access to leading-edge (completion of the acquisition is subject to the
and enable innovative ways of working across technologies and capabilities such as stem expiry or termination of the applicable waiting
the organisation. This information sharing cells and RNA interference technology which period under the US Hart-Scott-Rodino
culture is allowing our pre-clinical and clinical support the development of therapeutic Antitrust Improvements Act) to further build
scientists to work together to select high agents across a range of Therapy Areas. the infection portfolio.
quality targets and compounds and to Our medicines’ pipeline spans all modalities
design clinical studies to establish quickly with the majority of our late-stage pipeline

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Resources, Skills and Capabilities 23


Early-stage deals help build longer-term Training in the new standard was provided
strength in the portfolio and in June we for procurement professionals during 2009.
concluded a ground-breaking deal with For all AstraZeneca employees, our Code of
Merck under which the two companies will Conduct training now includes a responsible
collaborate to research a novel combination procurement awareness module.
anti-cancer regimen composed of two
investigational compounds, MK-2206 from Our Responsible Procurement Process is
Merck and AZD6244 from AstraZeneca based on an escalating set of risk-based due
(in-licensed from Array). Other significant diligence activities, applied in a pragmatic
early-stage deals included a risk-share way. We assess a supplier’s ethical risk areas
collaboration with Jubilant aimed at and identify whether further assessment is
multiple neuroscience targets, and a further needed to assure us that the supplier has
collaboration with the Institute of Cancer appropriate systems and controls in place
Research (UK) and Cancer Research to meet our ethical expectations. The same
Technology Limited. As part of our effort to ensure we have initial assessment process is used for all
cost-effective and flexible support services, suppliers and more detailed, specific
During the year we also signed exclusive we signed a seven-year global outsourcing assessments are then made as required,
worldwide licence agreements with Catalyst contract in December with NorthgateArinso proportionate to the level of risk a supplier
Biosciences, Inc. to develop novel engineered UK Limited (NGA) for some human resource presents. Our process allows us to share
proteases and with Trellis Bioscience Inc. (HR) services. NGA will begin to manage issues with suppliers and encourage them
to develop and commercialise antibodies HR activities, such as payroll and data to improve their standards, rather than
focused on respiratory syncytial virus. management, enabling our internal HR automatically excluding them from our supply
organisation to focus on areas where they can chain. However, we will not use suppliers
Deals that will help drive short-term growth most significantly contribute to the success who are unable or unwilling to embrace, in
include a co-promotion agreement for Abbott’s of the business, for example business a timely way, standards of ethical behaviour
Trilipix™ in the US, a commercialisation partnering and ‘centres of expertise’, such as that are consistent with our own.
agreement with Astellas for Symbicort in talent management. For more information on
Japan, a distribution agreement with UCB our HR services, see the People section from In 2009, we completed responsible
for Cimzia™ in Brazil and a co-promotion page 33. Earlier in 2009, we signed a procurement assessments of over 800 of our
agreement with Salix for Nexium in the US. five-year contract with Genpact International, suppliers (representing over 65% of our total
Inc. to provide global finance and spend on third parties) and implemented
Another component of our externalisation accounting services and will continue to further assessments where required. This
strategy is to maximise value from our explore other areas where outsourcing can ongoing assessment programme will continue
portfolio through disposals and out-licensing bring benefits to the business by improving throughout 2010.
transactions. In 2009, part of our Swedish service and reducing cost.
OTC (over-the-counter) portfolio was Our existing supplier evaluation procedure
divested to GlaxoSmithKline and rights to Responsible procurement requires that comprehensive on-site supplier
ophthalmological indications for a number Our commitment to responsible business audits of all our high-risk manufacturing
of AstraZeneca assets were granted to extends to ensuring that we work only with suppliers are conducted at least once every
Alcon. Other disposals of note included suppliers who embrace standards of ethical four years. Medium-risk suppliers are audited
the out-licence of two pre-clinical oncology behaviour consistent with our own. This is at the start of the business relationship and
assets to Celleron Therapeutics Limited and required by our Code of Conduct and applies additional audits conducted if there are
the divestment of a P38 Inhibitor programme across the full range of our procurement significant changes at a supplier. These
to Flexion Therapeutics AG. activities worldwide. Integrated Supplier Evaluation Protocol (ISEP)
audits cover a range of risk areas, including
Outsourcing and contract manufacturing Implementing our approach across the many product security and waste handling as well
As part of our drive to reshape the business thousands of suppliers we have around the as social elements, such as human rights and
we also outsource certain activities where we world is a significant challenge for a global labour standards. During 2009, we conducted
believe we can take advantage of third party company the size of AstraZeneca. We have ISEP audits at 51 manufacturing sites at
expertise. Using specialist providers helps made some good progress in recent years 45 different suppliers (2008: 34 sites at
us improve efficiency and focus on our core and to further strengthen our effort in this 31 suppliers). The 2008 figures are higher
business. Outsourcing also reduces costs area, in 2009 we published a new Global than reported last year because a post year
and creates a more flexible cost base which Responsible Procurement Standard. end review identified that more audits had
can be changed as our needs change. This standard defines our Responsible been conducted than reported in 2008.
Procurement Process and provides clear
We have already contracted out a significant direction about our risk-based approach
portion of our supply and manufacturing to integrating ethical standards into our
activity and are undertaking a programme procurement activity worldwide. This includes
of outsourcing other services and activities, a requirement to incorporate a responsible
including some R&D processes, information business clause in contracts with suppliers.
services, facilities management and other
internal support functions.

AstraZeneca Annual Report and Form 20-F Information 2009

24 Directors’ Report | Resources, Skills and Capabilities

Development projects – new products and line extensions

43 44 34 11 14

46 34 31 10 23

42 41 20 10 24

49 23 18 5 25

45 17 13 6 25

31 17 13 5 25

Pre-clinical Clinical
Pre-clinical Phase I Phase II Phase III Line Extensions

comprising small molecules. We also have a We use biomarkers to help identify the efficacy taken to deliver key safety studies, without
pipeline of biological approaches to targeting and safety of our compounds. Biomarkers compromising quality. Testing for safety is
disease which includes antibodies, antibody are biological factors or measures that can be also carried out on animals before it is carried
derivatives, therapeutic proteins, peptides, used to quantify the progress of a disease out in man. For further information see the
and various types of live attenuated and and/or the effects of a treatment, although Animal research section from page 26.
sub-unit vaccines. it is not always easy to identify a marker for
each molecule. Strengthening the pipeline
Our R&D activities cover the entire life-cycle In the short term, we have continued to build
of a medicine – from the initial discovery of As responsible participants in the provision on the strong portfolio growth achieved over
a new chemical/molecular entity, through the of valued medicines for patients we believe the last few years. Our portfolio volume in
rigorous phases of pre-clinical and clinical strongly in helping to ensure that the right clinical phases has grown by 5% in 2009 and
studies in man. After a medicine’s launch, our medicines are prescribed to the right patients the distribution of the projects between the
life-cycle management process (including line at the right doses – this is our interpretation various phases of development continues
extensions) is designed to ensure both its of ‘personalised healthcare’. With this in to improve. In the medium term, we will
continued safe use and to explore its potential mind we are investing in finding new ways to continue to drive our pre-clinical and clinical
for treating other diseases or extending its differentiate patients with apparently similar Phase I and II projects towards proof of
use into additional patient populations. diagnoses. A successful example of this concept as rapidly as possible. We have
approach is the recent European regulatory a wide range of compounds across all
Our research process starts with the analysis approval of Iressa for patients with lung cancer modalities in early development and a total of
of many thousands of compounds for their who have an activating mutation of the 44 projects in Phase I, 34 projects in Phase II
potential to become a new medicine. Only a endothelial growth factor receptor. As part and 11 projects in Phase III/Registration
few make it through the various stages and of this approach we signed a collaboration development and are running 14 significant
we work continuously to improve the quality agreement in December with Dako, a world life-cycle management projects.
of our chemical leads and biological targets, leader in cancer diagnostics. We will work
while working to eliminate, at an early stage, together with Dako to develop new medicines Further details are set out in the Development
those compounds that are unlikely to succeed. linked to diagnostic tests to predict which projects chart above and the Pipeline by
We have also invested in a number of key patients are most likely to respond to potential Therapy Area chart opposite and in the
academic collaborations to identify potential oncology treatments. Development Pipeline table from page 196.
new targets, disease mechanisms and
technology platforms. We continue to use Even before clinical studies begin, safety Improving productivity
Lean Sigma-based business improvement assessment is a critical part of our research. The progress we are making in our drive to
programmes. For example, through A process including both in vitro and increase productivity continues to be reflected
improvements in novel compound flow, using computer modelling allows for ‘high in the delivery of projects from the pre-clinical
material handling, and enhancement of many throughput testing’ for safety early in the study phase (Discovery) and the growth of our
key decision-making tests, we have seen stages of selecting the best compounds early clinical study (Development) portfolio
significant reductions in the turnaround time for development. Our Lean Sigma approach where we have embedded a culture of
of data in drug hunting projects. We have also has driven a series of process improvements Lean Sigma. During 2009, 29 projects were
extended this way of working to a key supplier which have reduced the loss of compounds selected for Development (2008: 32).
of compounds from China to improve our in late-stage clinical development on
joint processes. account of safety concerns and cut the time

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Resources, Skills and Capabilities 25


Throughout 2009, we focused on driving Our resources with capital investment supporting increases
continuous improvement activities across At the end of 2009, we had a global R&D to R&D resources in India. Both facilities are
the entire R&D value chain. We maintained organisation with around 11,600 people increasingly involved in Development activities.
and improved the performance gains in cycle (10,500 full time equivalent employees) at
times achieved in 2008 for small molecules. 17 principal centres in eight countries. In 2009, we invested $4.4 billion in R&D (2008:
$5.2 billion; 2007: $5.2 billion), $764 million on
The use of predictive approaches in Our main small molecule facilities are in acquiring product rights (such as in-licensing),
pre-screening of candidate molecules has the UK (Alderley Park, Macclesfield and and additionally approved $329 million of
had notably increased success rates in some Charnwood); Sweden (Lund, MöIndal R&D capital investment to strengthen our
areas in recent years. For example, we have and Södertälje); and the US (Waltham, resources in line with our strategic objectives.
seen failure in early Development due to Massachusetts and Wilmington, Delaware).
genotoxicity fall to zero, and failure due to Other sites which have a focus on research are Several major capital projects were completed
drug metabolism and pharmacokinetics has in Canada (Montreal, Quebec); France (Reims); during 2009, and the facilities handed over to
reduced significantly. Further application of and the UK (KuDOS and Arrow Therapeutics’ the business, including laboratory and office
these predictive approaches to the design and sites). We have a clinical development facility expansions in Boston (US), a new laboratory
simulation of clinical trials using data from in Osaka, Japan. Our principal sites for facility in Macclesfield (UK) and a new
previous studies reduced the duration of the biologics and vaccines are in the US manufacturing facility in Mölndal (Sweden).
clinical trial for one Phase II project by one to (Gaithersburg, Maryland and Mountain View, Of the approved capital investment of
two years, and its full projected development California) and the UK (Cambridge). $329 million, there were no new major small
cost reduced by over $100 million. molecule R&D investments authorised during
As part of our strategic expansion in important 2009. The focus of the $79 million that has
Despite this improvement in productivity, Emerging Markets, we continue to strengthen been authorised is on improving and
we recognise the need to improve our rate our research capabilities in Asia Pacific. enhancing existing facilities. The remaining
of success in progressing projects from Investment continued during 2009 at our $250 million of approved investment was
Phase II to Phase III. This is a focus for our ‘Innovation Centre China’ research facility in associated with our biologics laboratories
future efforts. Shanghai, which opened in 2007. Our research in the US and the UK, and influenza
facility in Bangalore also continues to grow vaccine programmes.

Pipeline by Therapy Area at 28 January 2010

Recentin (NSCLC) ▲
(ARRY-142886) ▲
Olaparib (formerly
AZD2281) (gBRCA
MEDI-534 ▲ breast cancer) ▲
MEDI-560 ▲ Olaparib (formerly
MEDI-550 ▲ AZD2281) (serious
AZD4769 ▲ (formerly MEDI-566) AZD0837 ▲ ovarian cancer) ❖
AZD8931 ▲ MEDI-557 ▲ AZD6370 ▲ AZD1152 ▲
AZD7762 ▲ MEDI-559 ▲ AZD1656 ▲ AZD7295 ▲
azd6482 ▲ AZD8330# AZD9742 ❖ Lesogaberan CytoFab™# ▲ Onglyza™# ♦
azd4017 ▲ (ARRY-424704) ▲ CEF104# * ❖ (AZD3355) ▲ MEDI-3250 ❖ Brilinta/Brilique ◗ Seroquel (bipolar) ♦
AZD6714 ❖ CAT-8015 ▲ AZD5847 ❖ AZD1386 ✚ CAZ104# * ❖ Certriad # ◗ Seroquel XR (MDD) ★
AZD8329 ❖ AZD8055 ▲ CAM-3001# ▲ AZD3480# ▲ AZD1981 ▲ Dapagliflozin# ▲ Seroquel XR (GAD) ▲
AZD7687 ❖ MEDI-573 ❖ AZD8566 ▲ AZD6765 ▲ MEDI-528# ▲ Vimovo# ◗ Crestor Iressa ♦
AZD2066 ▲ MEDI-575 ❖ AZD8075 ▲ AZD2327 ▲ CAT-354 ▲ Zactima+ ● (elevated CRP) ◗ Faslodex (500mg) ◗
AZD2516 ❖ AZD1480 ❖ AZD5985 ▲ AZD2066 ✚ AZD9668▲ Recentin (CRC) ▲ Onglyza™/ Faslodex
AZD3241 ▲ MEDI-547# ❖ AZD2551 ❖ AZD8529 ✚ AZD1236▲ Recentin (recurrent metformin FDC# ◗ (1st line advanced
AZD6280 ▲ AZD2014 ❖ AZD5423 ❖ NKTR-118# ❖ AZD3199 ▲ glioblastoma)+ ▲ Dapagliflozin/ breast cancer) ▲
AZD2516 ▲ AZD6244 AZD5122 ❖ TC-5214# ❖ MEDI-563# ▲ Zibotentan metformin FDC# ▲ FluMist ▲
AZD3043# ❖ (ARRY-142886) AZD8683 ❖ TC-5619# ✚ MEDI-545# ▲ (ZD4054) ▲ Nexium (peptic Motavizumab# ▲
AZD8418 ❖ /MK2206# ❖ AZD5069 ❖ AZD7268 ✚ AZD9164 ❖ Motavizumab# ▲ ulcer bleeding) ♦ MEDI-3414
AZD2423 ❖ AZD4547 ❖ MEDI-546# ❖ AZD1446# ✚ AZD8848 ✚ Ceftaroline# ❖ Axanum ◗ (H1N1 influenza)❖♦

Phase I Phase II Phase III/ Line extensions

Cardiovascular Gastrointestinal Infection ❖ Addition New filing ● Reclassified
Neuroscience Oncology Respiratory & Inflammation No change ★ Approved
Progression ♦ Launched
Partnered product.
* Subject to expiry or termination of the applicable waiting period under the US Hart-Scott-Rodino Antitrust Improvements Act.
Orphan Drug.

AstraZeneca Annual Report and Form 20-F Information 2009

26 Directors’ Report | Resources, Skills and Capabilities

R&D investment $m Externalisation are followed (including managing any special

Core Our externalisation strategy continues to circumstances such as different levels of
focus on enhancing our internal innovation literacy). We also have procedures in place
2009 4,334
through investment, external collaborations to ensure that the privacy of participants’
2008 4,953
and acquisitions that further strengthen our health information is protected.
pipeline of products. Further information on
our activities can be found in the Working We take very seriously our responsibility to
R&D investment $m
with others section from page 22. protect trial participants from any unnecessary
risks and avoid any serious adverse reactions.
2009 4,409 Our New Opportunities group has continued Throughout the research process, we
2008 5,179 to seek additional value from our portfolio continuously review, and make judgements
2007 5,162 by facilitating re-profiling across our Therapy on whether the potential benefits of a new
Areas and by identifying additional disease medicine continue to outweigh the risk of
areas in which our compounds can meet side effects.
unmet medical need. For example, in 2009
we concluded a strategic alliance with Whilst all our AstraZeneca clinical studies are
the ophthalmology company, Alcon, to conceptually designed and finally interpreted
identify innovative eye care products using in-house, some of them are run for us by
AstraZeneca compounds in areas adjacent external contract research organisations
to our Therapy Areas of focus. (CROs). The percentage of studies we place
with CROs varies, depending on the number
R&D ethics of trials we have underway and the amount
We are committed to delivering innovation of internal resources available to do the work.
responsibly by setting and working to In 2009, around 24% of patients in our global
consistently high ethical standards across all studies of our small molecule portfolio and
aspects of our R&D worldwide. Compliance around 89% of patients in our biologics studies
with relevant laws and regulations is a were monitored by CROs on our behalf.
minimum baseline and underpins our own
global principles and standards, as outlined Our clinical data handling is outsourced to
in our global Bioethics Policy. Cognizant Technology Solutions Sweden AB,
a business process solution company and
Further information about our commitment during the year, we announced a strategic
to responsible research is available on our alliance with Quintiles Limited to provide
website, integrated services for the majority of our
clinical pharmacology studies. These sourcing
Clinical trials decisions have helped us to promote
We conduct an increasing number of our consistency, drive resource efficiency and,
clinical trials at multiple sites in several different importantly, helped to speed up our internal
countries. A broad geographic span helps data interpretation and decision-making.
us to ensure that those taking part reflect
the diversity of patients around the world We remain committed to making information
for whom the new medicine is intended. about our clinical trial activities publicly
This approach also helps to identify the types available. We publish information on the
of people for whom the treatment may be registration and results of all new and ongoing
most beneficial. AstraZeneca sponsored clinical trials for all
products in all phases, including marketed
We take a number of factors into account medicines, medicines in development and
when choosing a trial location. These include those whose further development has been
the availability of experienced and independent discontinued. We post results, irrespective of
ethics committees and a robust regulatory whether they are favourable or unfavourable
regime, as well as sufficient numbers of to AstraZeneca on public websites, including
trained healthcare professionals and patients (for small molecule compounds) on our own
willing to participate in a trial. dedicated website, astrazenecaclinicaltrials.
com. By the end of 2009, we had registered
When conducting a trial anywhere in over 1,100 trials and published the results
the world, we operate to the highest of of more than 600 trials.
the standards required by the external
international, regional or local regulations, Animal research
and our own internal standards. Our pre-clinical research includes animal
studies, which continue to play a vital role
Before a trial begins, we work to make sure in the R&D of new medicines. They provide
that those taking part understand the nature essential information, not available through
and purpose of the research and that proper other methods, about the effects of a potential
procedures for gaining informed consent new therapy on disease and the living body.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Resources, Skills and Capabilities 27


Regulatory authorities around the world also MAbs are highly specific to human physiology, may present several such opportunities in
require safety data from pre-clinical testing so primates are, in most cases, the only enhancing the drug discovery process as
in animals before a new medicine can be relevant animal model because of their well as providing therapeutic options.
tested in man. similarity to humans.
Significant scientific progress has been
We are committed to the responsible use of In line with our global Bioethics Policy, made in the development of stem cell-based
animals. All our research using animals is AstraZeneca does not currently conduct or research models for improved prediction of
carefully considered and justified and, backed outsource work using wild caught primates safety, metabolism and efficacy of emerging
by our Bioethics Policy, we continue to drive or great ape species. In the rare case where candidate drugs, with promising results.
the application of the 3Rs (Replacement, there is a substantial medical need and Our interest is in the potential of stem cells to
Reduction and Refinement of animal studies) no credible alternative model is available, differentiate into normal human cells, such as
across our research activity. Wherever exceptions may be considered. However, hepatocytes (liver cells) and cardiac myocytes
possible, we use non-animal methods such this will require rigorous secondary ethical (heart muscle cells) and use those cells in
as cell culture, computer modelling and and scientific review, in addition to our normal biological assays. We believe this could
‘high-throughput screening’ that eliminate the review processes, to challenge the need for represent a significant step forward in
need to use animals early in drug development, the study, followed by appropriate Board increasing the clinical relevance of studies at
or reduce the number needed. As part of level approval. an earlier stage of development of a potential
our drive for continuous improvement, we new medicine and would help us to overcome
continue to use statistical design to optimise The welfare of all the animals we use continues the current limitations that a restricted supply
our studies and reduce the numbers of to be a top priority. Compliance with relevant of human cells presents. However, more work
animals needed. We also work to refine our laws and regulations is a minimum baseline is needed to understand the full potential of
existing animal models to ensure that the and underpins our own global Bioethics Policy this type of research. It is a relatively new
animals we use are exposed to as little pain and standards of animal care and welfare area and we do not have all the necessary
and stress as possible. We continuously which apply worldwide. Qualified veterinary skills and technologies in-house. We are
review all our animal studies to make sure staff are involved in the development and therefore working with external partners who
that they continue to add value to our implementation of our animal welfare have expertise and an ethical commitment
research decision-making processes. programmes and everyone working with consistent with our own, such as Cellartis AB
laboratory animals is trained and competent (Cellartis), a biotech company focused on
The number of animals we use each year in their allocated responsibilities. As well as applications of human embryonic stem cells,
depends on the amount of pre-clinical mandatory inspections by government cell technologies and the UK public-private
research we are doing and the complexity of authorities, we have a formal programme partnership, Stem Cells for Safer Medicines.
the diseases under investigation. We remain of regular audits carried out by our own We also participated in a European
focused on making sure that we minimise qualified staff. Framework Research VI programme working
the use of animals without compromising with stem cells. Further collaborations will
the quality of the research data. In 2009, External contract research organisations that include the use of induced pluripotent
we used approximately 393,000 animals conduct animal studies on AstraZeneca’s stem cells.
in-house (2008: 347,000). In addition, behalf are also required to comply with our
approximately 17,000 animals were used by ethical standards, and we conduct regular Increasingly, we are also exploring the
external contract research organisations on audits to ensure our requirements are potential to treat disease by modulation
our behalf (2008: 29,000). We believe that being met. of stem cells within target organs using
this number would be much greater without either small molecules or biological
our active commitment to the 3Rs. We no In November 2008, the European Commission therapies, an exciting new area often
longer report, as a KPI, the number of published its proposal to revise the 1986 EU referred to as regenerative medicine.
animals we use in our research, although we Directive 86/609 (Directive) on the protection Here, we are embarking on several external
will continue to publish the figures each year. of animals used for scientific purposes. We collaborations, such as the one with Cellartis,
This reflects our commitment to continuous support the need for Europe-wide legislation combining the best ideas and latest innovation
improvement through the application of concerning the use of animals in research and in academic research with our ability to
the 3Rs and good scientific practice, revision of the Directive to reflect advances search for new drugs. We are looking for
which we believe is the true indicator of in science and technology. However, we are the potential of molecules to direct the fate
our performance. More information about contributing to discussions about changes of stem cells towards therapeutic benefit in
our commitment is available on our website, in a number of areas that we believe are diseases such as diabetes and emphysema, necessary to ensure that, alongside the thus identifying potentially new candidate
promotion of high standards of animal welfare, drugs. Further investments will follow in
We only use primates in circumstances where the new legislation supports the ability to this area.
no other species or non-animal methods can conduct, in Europe, R&D that addresses
provide the safety or clinical benefit information patient needs. Our commitment to ensuring high ethical
that we are seeking in a study, and where standards is reflected in our Human
the outcomes of the study are likely to bring Stem cell research Embryonic Stem Cell Research Policy
significant advances for the development of As a company whose success is built on framework, as set out in our Bioethics Policy,
new medicines. Our expanding biologics leading-edge science, we continuously which demands compliance both with
capability means that we will be increasing monitor and assess new research capabilities external legislation, regulations and guidelines,
our primate use over time, particularly in the to identify opportunities that could help and with our own codes of practice.
development of MAbs targeted at important us deliver better medicines for patients
areas such as cancer and respiratory disease. worldwide. We believe that stem cell research

AstraZeneca Annual Report and Form 20-F Information 2009

28 Directors’ Report | Resources, Skills and Capabilities

Medicines that
patients will
want and payers
will pay for

Sales and marketing life-cycle of a medicine to guide our R&D

Customer focus activity and help shape the Therapy Area
Our international sales and marketing and marketing strategies. Early in the
organisation is active in over 100 countries. development of new products, we also
We have an extensive network focused consider how best to demonstrate the
on growing our business and driving levels value of our medicines to payers.
of commercial excellence to maintain our
position among the industry world leaders. Emerging Markets growth
As well as building on our leading positions During the course of 2009, AstraZeneca
Tony Zook in North America and Other Established continued to execute its ambitious
Chief Executive Officer, North America Markets, such as Japan and Western investment strategy across Emerging
Executive Vice-President, Commercial Operations
Europe, we continue to increase our strength Markets in large markets such as China,
through strategic investment in Emerging Mexico, Brazil and Russia, as well as in
“Wherever they are in the world, Markets, where GDP growth and changing medium-sized and smaller markets where
those who pay for our medicines disease demographics present significant there is significant unmet medical need.
and the patients who use them opportunities. See the market definitions
must remain the focus of everything table on page 206 for more information on In China (including Hong Kong), as a result
we do.” AstraZeneca’s market definitions. of its current strategic focus on ‘Big Cities
Big Hospitals’, AstraZeneca is the second
Our Global Marketing function is responsible largest multinational pharmaceutical
for developing and leading our global brand company in the prescription market.
strategy. It ensures a strong customer focus
and commercial direction in the management Our strategy for Emerging Markets is
of our pipeline and marketed products. At an based upon a rapid expansion of the
early stage in the medicine discovery process commercial organisation across areas
we define what we believe the profile of a where we assess there to be significant
medicine needs to be to work most effectively market potential. In this context we provide
in combating a particular disease. These our country leaders with the autonomy
disease target product profiles (TPPs) are to tailor their strategies to local customer
based on the insights we gain through our needs. These local plans are supported
relationships with healthcare professionals, by AstraZeneca’s global capabilities, one
patients and others for whom the medicine of which is a highly disciplined approach
must add value, including regulators and to sales force management.
payers. The attitudes and needs of these
groups are key drivers of the development To maximise these local opportunities,
of the TPPs which are used throughout the AstraZeneca has started to launch a range

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Resources, Skills and Capabilities 29


of branded genericised medicines. These We will continue to explore opportunities
medicines, which are within our key areas to work in collaborations at local or regional
of therapy expertise, will make our products levels as a model to improve success.
available to more patients and at lower This could either be through getting access
price levels than is possible with patent- to commercial capabilities, such as the
protected medicines. Eight new products launched collaboration to sell Symbicort with Astellas
in India in 2009 in Japan, or to strengthen the portfolio,
As an example, to support our new branded such as the collaboration with UCB for
generics business in India, we significantly the commercialisation of UCB’s Cimzia™
increased our level of investment, enabling in Brazil.
the launch of eight new products of which An effective sales force
five were launched in the second half of In the majority of markets, we sell through More information on our collaborations can
2009. This initiative will be rolled out in more wholly-owned local marketing companies. be found in the Working with others section
than 20 Emerging Markets where we assess Elsewhere, we sell through distributors or from page 22.
there to be potential. local representative offices. Our products
are marketed primarily to physicians (both Sales and marketing ethics
Customer choice in North America primary care and specialist) as well as to Driving high ethical standards across all
We continue to develop our sales and other healthcare professionals. Marketing our sales and marketing activity is one of
marketing effort in the US as we strive to efforts are also directed towards explaining our top priorities. It is an important part
best meet our customers’ needs. The focus the economic as well as the therapeutic of our overall commitment to patient
for 2009 was to ensure that our interactions benefits of our products to governments and health and safety, and to delivering
with healthcare professional (HCP) others who pay for healthcare. Face-to-face business success responsibly.
customers match their desire for more contact is still the single most effective
flexible methods to access our products that marketing method but, increasingly, Our business is global and culturally
are not solely dependent on the traditional the efforts of our sales force are being diverse. Societal expectations and legal
sales representative. complemented by our use of the internet. requirements often vary significantly
In the US, where it is an approved and between the different countries in which
As a result, two new customer teams normal practice, we also use direct-to- we operate. We work to manage these
have been created to deliver services and consumer advertising campaigns for differences effectively and deliver
information. One team was charged with some products. consistently high standards worldwide.
delivering all the traditional services, but to
do so remotely and at a time that matched To improve our commercial effectiveness Everyone involved in sales and marketing
the HCP’s schedule. The second team we are benchmarking with leading industries activities is required to adopt the same core
simply focused on delivering samples and in the area of customer insight. This helps standards, regardless of their particular role
patient support materials to the HCP’s develop a better understanding of real needs or location. These standards are outlined
practice. At the same time, we have of customers upon which we can plan and in our Code of Conduct and supporting
expanded our web-based capabilities to act. It allows us to be more focused in our policies, and more detail is given in our
improve the way we deliver service over communications with customers. regional and local marketing codes. Our
the internet. local codes reflect differences in national
Our rapid growth in Emerging Markets legislation and healthcare systems. In cases
The intended result of these changes is to is driving demand for central commercial where our standards differ from local law,
offer customers choices about how we can support, particularly in respect of sales force we adopt whichever standard is higher. Our
best meet their needs and the needs of effectiveness. Core sales and marketing policies are regularly reviewed and updated,
their patients. training programmes have been adapted and targeted training is provided for our staff
for, and deployed in, local environments. on an ongoing basis.
Reshaping in Other Established Markets The main focus of these programmes is
Across Europe, we have significantly reshaped to embed core commercial skills and to Compliance with our Code of Conduct
the organisation in order to stay competitive strengthen sales managers’ coaching and supporting policies is mandatory
in an evolving market place. By focusing on and planning skills. and monitored by line managers locally,
core activities and building capabilities around with support from dedicated compliance
these, we have strengthened focus in the Working in collaboration professionals. We also have a nominated
critical area of market access, whilst also being The preparations and launch of Onglyza™, signatory network that works to ensure that
able to significantly improve productivity in the the first brand in the AstraZeneca/BMS our promotional materials meet all applicable
sales force. diabetes alliance, has brought significant internal and external code requirements.
experience and learning to both
Market access is an increasingly organisations. The joint work between our Information concerning instances where our
important area. In order to develop products companies has improved planning, time to practices may not be up to the standards
that meet the needs of payers we are market and execution of the launch. In June, we require is collected through our various
focusing even more on understanding the we entered into an agreement under which compliance and continuous assurance
priorities and agendas of both payers and AstraZeneca obtained the non-exclusive reporting routes and reviewed by senior
healthcare providers. Building on this right to co-promote Trilipix™, alongside management in local and/or regional
information, we seek to demonstrate how Abbott in the US (excluding Puerto Rico). compliance committees. As appropriate,
our products offer value and support This is the second co-promotion agreement serious breaches are reviewed by the Board
cost-effective healthcare. between AstraZeneca and Abbott, the first and the Audit Committee. More information
being for Crestor.

AstraZeneca Annual Report and Form 20-F Information 2009

30 Directors’ Report | Resources, Skills and Capabilities

Breaches of external sales and marketing

regulations or codes
2009 24
2008 15
2007 32

“Driving high ethical

standards across all
our sales and marketing
activity is one of our
top priorities.”

about our compliance and risk assurance Final settlement is subject to negotiation of a
processes is contained in the Managing risk civil settlement agreement and a corporate
section from page 79. integrity agreement. More information can be
found in Note 25 to the Financial Statements
In 2009, we identified a total of 24 confirmed from page 166.
breaches of external sales and marketing
regulations or codes globally (2008: 15; We will continue to work to strengthen our
2007: 32). The increase over 2008 is, we governance of our sales and marketing
believe, largely due to increased self-reporting activity through 2010, including additional
Jeff Pott
(ie where we have identified that a breach monitoring and audit programmes, and General Counsel
has occurred and voluntarily reported it to the performance measurement. Whilst our
relevant national authorities). This reflects our current KPI has provided a benchmark
continued internal vigilance and determination against which to measure our performance
to identify and follow through on possible in recent years, the variations among the
“Patent protection underpins the
breaches of the high standards we set national external regulatory frameworks
research-based pharmaceutical
ourselves. The number should also be viewed continue to create a challenge for us in
industry – we recognise it brings
in the context of the continuing diligence interpreting the number of cases of confirmed
responsibilities as well as privileges.”
of external code of practice agencies and breaches of external regulations or codes.
regulatory authorities in identifying and In addition, a single confirmed breach by
processing complaints. AstraZeneca can involve more than one
employee failing to meet the standards
We also received a number of approaches required and we are aware that there may
about sales and marketing practices from be failures to meet standards which are not
regulatory authorities and other bodies that ‘confirmed’ and so will not affect the KPI.
did not result in any formal ruling. Although We are therefore currently reviewing more
these incidents are not included in our KPI meaningful ways in which to measure our
number, we did follow-up with appropriate performance and plan to introduce a new
actions to help ensure that all relevant KPI during 2010 which will drive further
learning is taken fully into account in our improvement and support increased
future activities. transparency in this key aspect of our activity.

We take all breaches very seriously and

take appropriate action to prevent repeat
occurrences. This may include retraining
or other corrective action, up to and
including dismissal.

In September 2009, AstraZeneca reached an

agreement in principle with the US Attorney’s
Office to settle claims relating to Seroquel
sales and marketing practices and to make
a payment of $524 million (including interest).

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Resources, Skills and Capabilities 31


Innovative and
Intellectual property The generic industry is increasingly challenging Compulsory licensing
The discovery and development of a innovators’ patents, and almost all leading Compulsory licensing (the overruling of patent
new medicine requires a significant pharmaceutical products in the US have rights to allow patented medicines to be
investment of resources by research- faced or are facing patent challenges from manufactured and sold by other parties)
based pharmaceutical companies over generic manufacturers. The research-based is increasingly being included in the access
a period of 10 or more years. For this to pharmaceutical industry is also experiencing to medicines debate. We recognise the right
be a viable investment, the results – new increased challenges elsewhere in the world, of developing countries to use the flexibilities
medicines – must be safeguarded from for example in Europe, Canada, Asia and in the World Trade Organization’s TRIPS
copying with a reasonable amount of Latin America. Further information about (Trade-Related Aspects of Intellectual Property
certainty for a reasonable period of time. the risk of the early loss and expiry of patents Rights) Agreement (including the Doha
is contained in the Principal risks and amendment) in certain limited circumstances,
The principal safeguard in our industry is a uncertainties section from page 80. such as a public health emergency. We
well-functioning patent system that recognises believe that this should apply only when all
our effort and rewards our innovation with Data exclusivity other ways of meeting the emergency needs
appropriate protection, allowing time to Regulatory Data Protection (RDP or ‘data have been considered and where healthcare
generate the revenue we need to re-invest exclusivity’) is an important intellectual frameworks and safeguards are in place to
in new pharmaceutical innovation. We are property right which arises in respect of ensure that the medicines reach those who
confident of our innovations and therefore certain data generated by our research need them.
commit significant resources to establishing activities, including clinical studies. Data which
effective patent protection for them, and is required to be submitted to regulatory Patent expiries
to defending vigorously our patent and authorities in order to obtain marketing The following table sets out certain patent
related intellectual property rights if they approvals for our medicines may be protected expiry dates for our key marketed products.
are challenged. from use by third parties (such as generic These expiry dates relate to the basic
manufacturers) for a specific number of substance patent relevant to that product
Patent process years. The period of such protection differs unless indicated otherwise. The expiry
We apply for patent protection relatively early significantly between countries. We believe dates shown include any Patent Term
in the R&D process to safeguard our increasing in enforcing our rights to RDP and consider Extension and Paediatric Exclusivity periods.
investment. Further innovation will mean that it an important protection for our innovations, Additional patents relating to the stated
we frequently take out additional patents as particularly as patent rights are being products may have terms extending beyond
we develop a product and its uses. We pursue increasingly challenged. the quoted dates.
these patents through patent offices around
US patent expiry
the world. In some countries, our competitors
Nexium 20151
can challenge our patents in the patent
Crestor 2016
offices, and in all countries competitors can
Toprol-XL Expired
challenge our patents in the courts. We can
Atacand 2012
face challenges early in the patent process
Symbicort 2014 (substance combination)
and throughout the life of the patent. These
Pulmicort Respules 20192 (formulation)
challenges can be to the validity of a patent
Arimidex 2010
and/or to the effective scope of a patent and
Zoladex Expired
are based on ever-evolving legal precedents.
Seroquel/Seroquel XR 2012 (substance)/2017 (XR formulation)
There can be no guarantee of success for
Synagis 2015
either party in patent proceedings. For
information about third party challenges to the 1
Licence agreements with Teva and Ranbaxy allow each to launch a generic version in the US from May 2014,
patents protecting our products, see Note 25 subject to regulatory approval.
A licence agreement with Teva permits their ongoing US sale of a generic version from December 2009.
to the Financial Statements from page 166.

AstraZeneca Annual Report and Form 20-F Information 2009

32 Directors’ Report | Resources, Skills and Capabilities

We hosted inspections from many different

regulatory authorities in 2009. All observations
are reviewed along with the outcomes of our
own internal inspections and improvement
actions are put in place as required to ensure
ongoing compliance with expectations. If
required, we take action to improve quality
and enhance compliance across the
organisation. The knowledge obtained from
David Smith the inspections is shared across the Group.
Executive Vice-President, Operations
We continue to be actively involved in
influencing new product manufacturing
“As we drive for ever-greater regulations, both at national and international
efficiency in producing our levels, through our membership of industry
medicines, we work harder to associations primarily in the EU, the US
ensure we control the quality and Japan.
of our products.”
Our resources
At the end of 2009, we had approximately
Supply and manufacturing During 2009, as part of our commitment to 9,500 people at 20 manufacturing sites
Core to our continued business success strategic sourcing, we sold our Dunkirk in 16 countries working on the supply of
is our ability to provide our customers active pharmaceutical ingredient (API) facility our products.
with a reliable supply of high quality and entered into a contract manufacture
medicines worldwide, when they want agreement with the purchaser for the supply Capital expenditure on supply and
them, and to do so in the most cost- of certain APIs from that site. As part of our manufacturing facilities totalled approximately
effective way. continuous review of our manufacturing $360 million1 in 2009 (2008: $369 million1;
assets to make sure that they are being 2007: $336 million1). As part of our overall risk
Operational excellence used in the most effective way we also management, we carefully consider the timing
We seek to maximise the efficiency of our completed the sale of facilities in Caponago, of investment to ensure that secure supply
supply chain through a culture of continuous Italy and Porriño, Spain. We closed our chains are in place for our products. We have
improvement. We focus on what adds value manufacturing site at Destelbergen, Belgium a programme in place to provide appropriate
for our customers and patients, and eliminates and announced our intention to exit from the supply capabilities for our new products.
waste. Improvements have delivered plant at North Ryde, Australia. We recognise
significant benefits in recent years, including the impact that these changes can have on In addition to our plant at North Ryde,
reduced manufacturing lead times and lower our employees’ morale and productivity and Australia (from which we have announced our
stock levels, which both improve our ability the increased risk of industrial action. We intention to exit), our principal small molecule
to respond to customer needs and reduce manage these risks by consulting fully with manufacturing facilities are in the UK (Avlon
inventory costs. Changes have also been staff representatives and acting in line with and Macclesfield); Sweden (Snäckviken and
achieved without compromising customer local employment laws. Our human resources Gärtuna, Södertälje); the US (Newark,
service and quality. policies and processes are also focused Delaware and Westborough, Massachusetts);
on ensuring that the people affected are France (Reims); Japan (Maihara); China (Wuxi)
We have been applying Lean business treated with respect, sensitivity, fairness and Puerto Rico (Canovanas). Approximately
improvement tools and ways of working to and integrity. This commitment is covered 600 people work in API supply and 8,000
improve the efficiency of our manufacturing in the People section from page 33. in formulation and packaging. We operate
plants for a number of years and have a small number of sites for the manufacture
recently started to apply it to the whole Product quality of active ingredients in the UK and Sweden,
of our supply chain. In 2009, we seconded We are committed to delivering assured complemented by efficient use of sourcing.
two Lean experts from Jaguar Land Rover product quality that underpins both the Our principal tablet and capsule formulation
to apply their knowledge of efficient car safety and efficacy of our medicines. sites are in the UK, Sweden, Puerto Rico and
manufacturing techniques to our the US, and we also have major formulation
pharmaceutical supply chain. Manufacturing processes for medicines can sites for the global supply of parenteral and/
be very complex and must observe rigorous or inhalation products in Sweden, France and
Our customer focus means our supply chains standards of quality. Both manufacturing the UK.
change as the needs of our local markets plants and processes are subject to
evolve. In 2009, we established regional inspections by regulatory authorities to ensure With the addition of a seasonal work force to
offices. This included sourcing centres in compliance with prescribed standards support the production of the H1N1 influenza
Shanghai, China and Bangalore, India, which which can vary between different regulatory vaccine, approximately 870 people are
were created to identify local high quality authorities. Such authorities have the power employed at our four principal biologics
suppliers to support growing market demand. to require changes and improvements, to halt commercial manufacturing facilities in the
We also established a regional packing production and impose conditions that must US (Frederick, Maryland and Philadelphia,
strategy to improve our ability to respond be satisfied before production can resume. Pennsylvania); the UK (Speke); and the
to customer requirements, retain control Regulatory standards, and therefore Netherlands (Nijmegen) with capabilities in
over quality and thereby equip the business manufacturing processes, can also change 1
Figures adjusted to reflect the impact of the
for growth in emerging markets. over time. MedImmune acquisition.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Resources, Skills and Capabilities 33


process development, manufacturing and A strategic approach

distribution of biologics, including worldwide Our business strategy drives our approach
supply of MAbs and influenza vaccines. to managing human resources (HR) issues
Our biologics production capabilities are across AstraZeneca. Identifying and building
scalable, which enables efficient management skills and capability for the long term is critical
of our combined small molecule and if we are to deliver that strategy successfully.
biologics pipeline. To that end we have been developing a
strategic workforce planning (SWP) capability.
Managing sourcing risk
Our global procurement policies and SWP generally takes a longer-term view of Lynn Tetrault
integrated risk management processes are five to seven years and is designed to ensure Executive Vice-President,
Human Resources and Corporate Affairs
aimed at ensuring uninterrupted supply of we have the right capabilities in the right
sufficiently high quality raw materials and other location at the right time. SWP also addresses
key supplies, all of which are purchased from issues such as ensuring a diverse workforce “Our people are the key to our past
a range of suppliers. We focus on a range of and the challenges of attracting and retaining and future success – we need to
risks to global supply, such as disasters that talent globally. nurture our talent and develop the
remove supply capability or the unavailability leaders of tomorrow.”
of key raw materials, and work to ensure Targets and accountabilities
that these risks are effectively mitigated. Clear targets and accountabilities are essential
Contingency plans include the appropriate use for ensuring that people understand what is
of dual or multiple suppliers and maintenance expected of them as we deliver our business Employees by geographical area
of appropriate stock levels. Although the price strategy. The Board and the SET are
of raw materials may fluctuate from time to responsible for setting our high-level strategic
time, our global purchasing policies seek to objectives and managing performance
avoid such fluctuations becoming material to against these (see the Reserved matters
our business. We also take steps to ensure the and delegation of authority section on page F
quality of the raw materials that we receive 92). Managers across AstraZeneca are
from third parties; for more information see accountable for working with their teams B
the Product quality section on page 32. to develop individual and team performance
targets that are aligned to our strategic
We also take into account reputational risk objectives and against which individual D
associated with our use of suppliers and are and team contributions are measured
committed to working only with suppliers and rewarded.
that embrace standards of ethical behaviour
that are consistent with our own. See the Our focus on optimising performance is
Responsible procurement section from reinforced by performance-related bonus and Geographical area %
page 23. incentive plans. AstraZeneca also encourages A UK 14.3
employee share ownership by offering the B Sweden 15.3
People opportunity to participate in various employee C Rest of Europe 17.5
With nearly 63,000 employees worldwide, share plans, some of which are described D North America 25.3
we value the diverse skills and capabilities in the Directors’ Remuneration Report from E Latin America 6.1
that a global workforce brings to our business. page 101 and also in Note 24 to the F Africa, Asia and Australasia 21.5
We work continuously to align these skills and Financial Statements from page 161.
capabilities with strategic and operational The percentage of employees based in the UK
needs, whilst maintaining high levels of Learning and development as reported last year, included employees who
were a cost to AstraZeneca UK Limited although
employee engagement and commitment. We encourage and support all our people they were not based in the UK. Only employees
This means providing employees with effective in achieving their full potential with a range based in the UK have been counted for the purposes
leadership, clear targets, open lines of of high quality learning and development of the above graph.
communication, learning and development (L&D) opportunities around the world.
opportunities and a healthy and safe
workplace. All this needs to take place in We are implementing a new global approach,
a culture in which diversity is valued and backed by the creation of our global
individual success depends solely on personal L&D organisation, which aims to ensure
merit and performance. that standards of best L&D practice are
consistently applied in the most efficient
AstraZeneca is committed to making full use way. During 2009, we have continued to
of the talents and resource of all its workers develop and deploy global on-line and other
within the organisation. We therefore have development resources, as we seek to make
policies in place to ensure that we avoid any L&D tools and programmes available to all
discrimination, including discrimination on the employees, creating a common platform that
grounds of disability. These include recruitment increases access to learning and supports
and selection, performance management, self-development across the organisation.
career development and promotion, transfer
and training (including re-training, if needed,
for employees who have become disabled)
and reward.

AstraZeneca Annual Report and Form 20-F Information 2009

34 Directors’ Report | Resources, Skills and Capabilities

During 2009, we implemented a refreshed direction provided by senior leaders had also activities are consistent with our high-level
on-line L&D portal, with access to all core improved. The survey also identified key areas principles. As we continue to develop our
leadership and management development that continue to require attention, in particular global platform for managing HR we seek
tools. We also launched a number of specific the need for further strengthening leadership to ensure that the strength of our local
business area websites. capability in effective communications and management approaches is not undermined.
change management. In addition, our scores
Our leadership development frameworks are around work-life balance decreased slightly There are particularly well-developed
focused on six core capabilities, which we in some functions. Our leaders take this arrangements for interactions with trades
believe are essential for strong and effective feedback very seriously and targets that unions and employee representative groups
leadership: passion for customers, strategic address employee engagement and across Europe. Before it became a legal
thinking, acting decisively, driving performance, the effectiveness of senior leadership requirement under European law in 1995, both
working collaboratively, and developing people communications in particular are included in our heritage companies, Astra and Zeneca,
and the organisation. These capabilities apply the SET business performance management had European Consultation Committees
to all employees and are used across our HR framework for 2010. (ECCs) in place. Our single AstraZeneca
processes. In 2009, we complemented the ECC comprises trade union representatives
core leadership capabilities with the launch Managing the impact of business change and locally elected employees, and is chaired
of a set of manager accountabilities. These Our continuing strategic drive to improve by a SET member. The committee meets
define what we expect from all managers efficiency and effectiveness through our once a year and a sub-committee meets
across the dimensions of ethical conduct previously announced restructuring quarterly to discuss, among other things,
and compliance, people management and programmes has resulted in the delivery of a business developments and any potential
engagement, as well as fiscal and financial gross reduction of approximately 12,600 impact these may have on the workforce.
awareness. Building line manager capability positions during the period 2007 to 2009.
has been supported by the launch of a To ensure that a consistent approach, based We are always striving to improve consultation
number of global learning programmes, which on our core values, was and continues to be arrangements. For example, in 2009 the Joint
address key elements of people management. adopted throughout the programme, specific Consultation and Information infrastructure in
guidance was provided for the HR teams and the UK was changed and a new arrangement
Talent management line managers throughout the organisation. was agreed and implemented in full
To ensure we maintain a flow of effective Differences in the legal frameworks and the consultation with representatives. The new
leaders, we work to identify individuals with customary practice in the different geographies arrangement enables dialogue, participation
the potential for more senior and complex in which we operate is a challenge. The global and involvement of employees in a process
roles. These talent pools provide succession guidance provided aims to ensure that the that is more responsive and flexible to
candidates for a range of leadership roles same or similar elements are included in local changing needs than the one it replaced.
across AstraZeneca that are critical to our implementation of business change. These
continued business success. We regard include, for example, open communication Human rights
these individuals as key assets to the and consultation with employees, face-to-face AstraZeneca is fully supportive of the principles
organisation and we therefore focus on meetings, re-deployment support and set out in the United Nations Universal
proactively supporting them to reach their appropriate financial arrangements. In line Declaration of Human Rights. Our Code of
potential with, for example, targeted with our core values, we expect the people Conduct and supporting policies outline the
development opportunities. affected to be treated with respect, sensitivity, high standards of employment practice with
fairness and integrity at all times. It was which everyone in AstraZeneca is expected
Engagement and dialogue therefore encouraging that the engagement to comply, both in spirit and letter, worldwide.
We aim to provide an inclusive environment scores in our 2009 FOCUS employee survey
that encourages open discussion and continued to improve despite business change Overall accountability for progressing the
debate at all levels throughout AstraZeneca. that typically involves headcount reduction. human rights agenda within AstraZeneca
As well as line manager briefings and team lies with our Global Human Resources
meetings, we use a wide range of media to Consultation function, supported by our Global Corporate
communicate with our employees around We work to ensure a level of global Responsibility Team who co-ordinate with
the world. consistency in managing employee relations, relevant functions to ensure that human rights
whilst allowing enough flexibility to support the issues continue to be appropriately integrated
To support our goal of promoting high levels local markets in building good relations with into responsible business strategies.
of employee engagement, we also use an their workforces that take account of local
annual global employee survey (FOCUS) laws and circumstances. To that end, relations In January 2010, AstraZeneca signed up to
to track employee opinion across a range with trades unions are nationally determined the United Nations Global Compact (UNGC),
of key topic areas. The results, which are and managed locally in line with the applicable a strategic policy initiative for businesses that
communicated to all employees, provide legal framework and standards of good are committed to aligning their operations
valuable insights that inform strategic planning practice. Managers throughout AstraZeneca and strategies with 10 universally accepted
across the business. are trained in consultation requirements as principles in the areas of human rights,
well as relevant employment law, where employment, environment and anti-corruption.
Eighty six percent of our employees applicable. Training is done at a local level We are now working within the framework of
participated in our 2009 FOCUS survey, and we have a range of HR and line manager the 10 UNGC principles to understand how
reflecting their continued confidence in this networks for sharing experience and good these principles apply to our business, what
feedback mechanism. Results showed that practice, and promoting alignment across the we are doing well and where more work may
employee engagement scores which were organisation. At a global level, we have a Head be needed.
already very strong had improved compared of Employee Relations who supports national
to 2008 and employees felt that the clarity of management in ensuring that their local

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Resources, Skills and Capabilities 35


More information about our commitment in Safety, health and wellbeing AstraZeneca employees: cases of
human rights-related areas is included in this Providing a safe workplace and promoting occupational illness1, 2 per million hours
Annual Report including access to medicines, the health and wellbeing of all our people
2009 1.37
diversity, safety, health and wellbeing, remains a core priority. A safe, healthy
2008 1.04
employee relations, sales and marketing working environment not only benefits
2007 0.99
practice and working with suppliers. employees, it supports our business through
Full details are available on our website, improved employee engagement, retention and productivity. AstraZeneca employees: accidents
with serious injury1, 2 per million hours
Diversity We continue to make significant investment
2009 2.24
With a global workforce comes a rich diversity in providing a wide range of health and
2008 2.28
of skills, capabilities and creativity. We value wellbeing improvement programmes across
2007 2.65
highly the benefits that such diversity can AstraZeneca. These vary according to
bring to our individual employees, to our health risk profile, function and local culture, 1
Data exclude MedImmune.
stakeholders and ultimately to our business. and include general health initiatives aimed at
With and without days lost.
increasing exercise levels, reducing tobacco
We aim to foster a culture of respect and use, improving nutrition and managing stress.
fairness, where differences are recognised, We also have plans in place to deal with the
valued and harnessed, and where individual effect of pandemic flu, including the provision
success depends solely on ability, behaviour, of anti-virals for employees based in areas
work performance and demonstrated where adequate supplies may not be was launched in 2008 across Europe, Latin
potential. Every manager across AstraZeneca available through national treatment regimes. America, the Middle East and Africa. Roll-out
is responsible for ensuring that this happens. was completed during 2009 with the launch
Work-related stress is currently our greatest in Asia Pacific, including Japan.
As we continue to reshape our organisation single cause of occupational illness, with
and our global footprint in line with business continued business change, high workloads During the year, we also commissioned
objectives, our continuing challenge is and interpersonal issues being identified a global assessment of our driver safety
to ensure that diversity is appropriately as significant factors. As part of our ongoing programmes by an external expert in this
supported in our workforce, reflected in our efforts in this area, we are adopting an field, the results of which were presented to
leadership and integrated into business and increasingly proactive, risk-based approach, the SET. Both programmes were reported
people strategies. using wellbeing risk assessment tools to to have a solid foundation on which to build.
identify high-risk areas and target interventions Key findings centred on the need for clear
In 2009, to further strengthen our drive in this more effectively. global and local improvement targets and
area, we appointed a Global Diversity Leader, closer alignment of the two programmes.
a new position, whose role is to develop We regret that during 2009, one of our sales In response, we have developed a set of
a global Diversity & Inclusion strategy, in representatives in Thailand died in a traffic KPIs and global targets, together with a new
partnership with senior leaders who will accident whilst driving on AstraZeneca Global Driver Safety Standard, all of which
be accountable for its implementation in the business. We work hard to identify the root will be introduced across the organisation
business. We are currently working to identify causes of any serious accident and use during 2010.
key areas of strategic focus, considering how a range of investigation procedures to help
best to implement a global strategy with the us avoid repetition. Learning is shared with Our KPI for safety, health and wellbeing
flexibility needed for local interpretation and management and staff, and our conclusions combines the frequency rates for accidents
implementation, and agreeing KPIs. about underlying causes are used to improve resulting in serious injuries and new cases
our management systems. of occupational illness into one KPI, with
As part of this work, during 2009 we an overall target of a 50% reduction in the
identified the need to look more closely at In recent years, our strengthened efforts combined rates by the end of 2010, compared
the advancement of women in AstraZeneca. to promote driver safety worldwide have with a 2001/2002 reference point. The overall
Our data shows that we have 52% of women delivered some improvements and we are serious injury accident rate for AstraZeneca
and 48% of men in our workforce (of the maintaining focus in this important area employees decreased by 2% in 2009, whilst
40,000 people currently in our global HR at all levels of the organisation. the occupational illness rate increased by
database) and 24% of 82 senior managers 32%. This equates to a combined increase
reporting to the SET are women. We are now Our long-standing ‘Road Scholars’ scheme of 9% compared to 2008. The occupational
working with an external expert in this field in the US (the home to our largest sales illness rate increase is due largely to a number
on a global research project designed to help force) continues to be a valuable channel of suspected cases in 2008 being confirmed
us better understand some of the causes for building awareness and improving driver as work-related during 2009 and therefore
underlying the data. The outcomes will inform skills. A driver safety objective is now also included in the 2009 data, rather than in the
the ongoing development of the Diversity & included in the US performance 2008 data. We remain on track to achieve
Inclusion strategy. management framework. Outside the US, the targeted 50% reduction by the end of
our ‘Drive Success’ programme takes into 2010. Data on our performance over the
account the different driving environments last three years is shown above.
in the various countries in which we operate
and provides a high-level framework of We are currently in the process of finalising a
common standards to be adopted by each new safety, health and environment strategy,
country. The ‘Drive Success’ programme including associated safety and health targets.

AstraZeneca Annual Report and Form 20-F Information 2009

36 Directors’ Report | Financial Review

“Revenue growth and operational

efficiencies drove a strong cash
performance, reducing net debt
well ahead of plan.”

Simon Lowth
Chief Financial Officer

Financial Review
Our global financial
performance and position

Contents In 2009, revenue increased by 7% in Since 2007, our restructuring programme has
constant currency terms; 3 percentage delivered $1.6 billion in annual savings by the
37 Measuring performance points of this growth was accounted end of 2009, which will grow to $2.4 billion
37 Business background and for by some unanticipated upsides by the end of 2010. The restructuring costs
major events affecting 2009 from the performance of Toprol-XL to deliver these benefits have totalled
38 Results of operations – and sales of H1N1 influenza (swine flu) $2.5 billion since inception. The next phase
summary analysis of year vaccine in the US. of restructuring is planned to deliver a further
to 31 December 2009 $1.9 billion in annual benefits by the end of
39 Financial position, Our Emerging Markets businesses grew 2014, with a further $2.0 billion in restructuring
including cash flow
and liquidity – 2009 strongly, with revenues up 12% in constant costs anticipated between 2010 and 2013.
41 Restructuring and synergy costs currency terms. Core operating margin
42 Capitalisation and shareholder return increased by 5.1 percentage points in Looking forward, our plans to manage the
42 Future prospects constant currency terms, on increased business, as the revenue base transitions
42 Results of operations – revenue, improved efficiencies throughout through this period of market exclusivity losses
summary analysis of year the organisation, and some disposal gains and new product launches, should generate
to 31 December 2008 within other income. strong cash flow to provide for the needs of
43 Financial position, the business and shareholder returns.
including cash flow Cash generation was strong in 2009;
and liquidity – 2008 cash from operating activities increased Simon Lowth
44 Financial risk management by $3 billion. This enabled us to invest in Chief Financial Officer
45 Critical accounting capital and intangible assets to drive future
policies and estimates growth and productivity and fund a 12%
49 Other accounting information increase in the full year dividend. Net debt
was reduced by $7.7 billion in 2009, well
ahead of plan, and we entered 2010 with
net funds of $0.5 billion.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Financial Review 37


The purpose of this Financial Review is to >> Prescription volumes and trends for key Core financial measures are non-GAAP,
provide a balanced and comprehensive products. These measures can represent adjusted measures. All items for which Core
analysis of the financial performance of the the real business growth and the progress financial measures are adjusted are included
business during 2009, the financial position as of individual products better and more in our Reported financial information because
at the end of the year and the main business immediately than invoiced sales. they represent actual costs of our business
factors and trends which could affect the >> Net Funds/Debt. This represents our in the periods presented. As a result, Core
future financial performance of the business. interest bearing loans and borrowings, financial measures merely allow investors to
less cash and cash equivalents, differentiate among different kinds of costs
All growth rates in this Financial Review are current investments and derivative and they should not be used in isolation.
expressed at CER unless noted otherwise. financial instruments. You should also refer to our Reported financial
information in the Operating profit (2009 and
Measuring performance CER measures allow us to focus on the 2008) table on page 39, our reconciliation of
The following measures are referred to when changes in sales and expenses driven by Core financial measures to Reported financial
reporting on our performance both in absolute volume, prices and cost levels relative to the information in the Reconciliation of Reported
terms but more often in comparison to earlier prior period. Sales and cost growth expressed results to Core results table on page 40,
years in this Financial Review: in CER allows management to understand and to the Results of operations – summary
the true local movement in sales and costs, in analysis of year to 31 December 2008
>> Reported performance. Reported order to compare recent trends and relative section from page 42 for our discussion of
performance takes into account all the return on investment. CER growth rates can comparative Reported growth measures
factors (including those which we cannot be used to analyse sales in a number of ways that reflect all of the factors that affect our
influence, principally currency exchange but, most often, we consider CER growth business. Our determination of non-GAAP
rates) that have affected the results of by products and groups of products, and by measures, together with our presentation
our business as reflected in our Group countries and regions. CER sales growth of them within this financial information,
Financial Statements prepared in can be further analysed into the impact of may differ from similarly titled non-GAAP
accordance with IFRS as adopted by sales volumes and selling price. Similarly, measures of other companies.
the EU and as issued by the IASB. CER cost growth helps us to focus on the
>> Core financial measures. These are real local change in costs so that we can The SET retains strategic management of
non-GAAP measures because unlike manage the cost base effectively. the costs excluded from Reported financial
Reported performance they cannot be information in arriving at Core financial
derived directly from the information in We believe that disclosing Core financial and measures, tracking their impact on Reported
the Group’s Financial Statements. growth measures in addition to our Reported operating profit and EPS, with operational
These measures are adjusted to exclude financial information enhances investors’ management being delegated on a case-by-
certain significant items, such as charges ability to evaluate and analyse the underlying case basis to ensure clear accountability
and provisions related to our global financial performance of our ongoing and consistency for each cost category.
restructuring and synergy programmes, business and the related key business drivers.
amortisation and impairment of the The adjustments made to our Reported Business background and major
significant intangibles relating to the financial information in order to show Core events affecting 2009
acquisition of MedImmune in 2007, financial measures illustrate clearly and on The business background is covered in the
the amortisation and impairment of the a year-on-year or period-by-period basis Business Environment section, Geographical
significant intangibles relating to our the impact upon our performance caused Review and Therapy Area Review and
current and future exit arrangements by factors such as changes in sales and describes in detail the developments in both
with Merck in the US and other specified expenses driven by volume, prices and cost our products and geographical regions.
items. See the Reconciliation of levels relative to such prior years or periods.
Reported results to Core results table Sales of our products are directly influenced
on page 40 for a reconciliation of Further, as shown in the Reconciliation of by medical need and are generally paid for
Reported to Core performance. Reported results to Core results table on page by health insurance schemes or national
>> Constant exchange rate (CER) growth 40, our reconciliation of Reported financial healthcare budgets. Our operating results
rates. These are also non-GAAP measures. information to Core financial measures can be affected by a number of factors other
These measures remove the effects of includes a breakdown of the items for which than the delivery of operating plans and
currency movements (by retranslating the our Reported financial information is adjusted normal competition which are:
current year’s performance at previous and a further breakdown of those items by
year’s exchange rates and adjusting for specific line item as such items are reflected in >> The adverse impact on pharmaceutical
other exchange effects, including hedging). our Reported income statement, to illustrate prices as a result of the regulatory
A reconciliation of the Reported results the significant items that are excluded from environment. For instance, although there
adjusted for the impact of currency Core financial measures and their impact on is no direct governmental control on prices
movements is provided in the Operating our Reported financial information, both as in the US, action from individual state
profit (2009 and 2008) table on page 39. a whole and in respect of specific line items. programmes and health insurance bodies
>> Gross margin and operating profit margin is leading to downward pressures on
percentages. These measures set out Management presents these results realised prices. In other parts of the world,
the progression of key performance externally to meet investors’ requirements there are a variety of price and volume
margins and demonstrate the overall for transparency and clarity. Core financial control mechanisms and retrospective
quality of the business. measures are also used internally in the rebates based on sales levels that are
management of our business performance, imposed by governments.
in our budgeting process and when
determining compensation.

AstraZeneca Annual Report and Form 20-F Information 2009

38 Directors’ Report | Financial Review

>> The risk of generic competition following >> Net funds at 31 December were also included increased legal expenses and
loss of patent protection or patent expiry $535 million, an improvement of impairment of intangible assets related to
or an ‘at risk’ launch by a competitor, $7,709 million on net debt of $7,174 million information systems, which were only partially
with the potential adverse effects on in the previous year. offset by operational efficiencies.
sales volumes and prices, for example, >> Total restructuring and synergy costs
the launch of generic competition to both associated with the global programme Core other income of $926 million was
Ethyol and Pulmicort Respules in 2008. to reshape the cost base of the business, $192 million higher than 2008, chiefly as
>> The timings of new product launches, were $659 million in 2009 (2008: a result of the disposal of the co-promotion
which can be influenced by national $881 million). This brings the total rights of Abraxane™ and Nordic OTC portfolio
regulators and the risk that such new restructuring and synergy costs charged disposals in the first half of the year.
products do not succeed as anticipated, to date to $2,506 million.
together with the rate of sales growth and Impairment charges relating to intangible
costs following new product launches. Results of operations – summary fixed assets totalled $415 million during the
>> Currency fluctuations. Our functional and analysis of year to 31 December 2009 year. Charges totalling $272 million, being
reporting currency is the US dollar but The Sales by Therapy Area (2009 and 2008) the charges arising from impairments in
we have substantial exposures to other table on page 39 shows our sales analysed by respect of assets relating to our HPV cervical
currencies, in particular the euro, Japanese Therapy Area. The Operating profit (2009 and cancer vaccine income stream and other
yen, pound sterling and Swedish krona. 2008) table on page 39 shows operating profit assets capitalised as part of the MedImmune
>> Macro factors such as greater demand for 2009 compared to 2008. The Reconciliation acquisition have been excluded from
from an ageing population and of Reported results to Core results table on Core results.
increasing requirements of servicing page 40 shows a reconciliation of Reported
Emerging Markets. results to Core results for 2009 and 2008. During the year, developments in several
More details on our sales performance by legal matters resulted in provisions totalling
Over the longer term, the success of our Therapy Area are given in the Therapy Area $636 million. Full details of these matters
R&D is crucial, and we devote substantial Review from page 55 in the Performance are included in Note 25 to the Financial
resources to this area. The benefits of this 2009 sections. Statements from page 166.
investment emerge over the long term and
there is considerable inherent uncertainty Sales increased by 4% on a Reported basis Restructuring and synergy costs totalling
as to whether and when it will generate and by 7% on a CER basis. Revenue benefited $659 million, incurred as the Group
future products. from strong growth of the Toprol-XL franchise continues its previously announced
in the US, as a result of the withdrawal from efficiency programmes and amortisation
The most significant features of our financial the market of two other generic metoprolol totalling $511 million relating to assets
results in 2009 are: succinate products and from US government capitalised as part of the MedImmune
orders for the H1N1 influenza (swine flu) acquisition and the Merck partial retirement,
>> Reported sales of $32,804 million, vaccine; adjusting for these factors, global which impacted Reported operating profit,
representing CER sales growth of 7% revenue increased by 4%. AstraZeneca were also excluded from Core performance.
(Reported: 4%). expects this impact to reduce as generic
>> Strong performance in Emerging competitors re-enter the market. Revenue in Core operating profit was $13,621 million,
Markets with CER sales growth of 12% Emerging Markets increased by 12% at CER. an increase of 23% at CER (Reported: 26%).
(Reported: 2%). Core operating margin increased by 5.1% to
>> Excluded from Core results were specific Core gross margin of 83% for the full year 41.5% of revenue, as a result of sales growth,
legal provisions totalling $636 million was 2.4% higher than last year at CER efficiencies across the cost base, lower R&D
(which impacted Reported results in the (Reported: up 3.3%). Lower payments to spend and the disposals within other income.
year). $524 million of this has been made Merck and continued efficiency gains and mix
in respect of the US Attorney’s Office factors were partially offset by higher royalty Net finance expense was $736 million for the
investigation into sales and marketing payments resulting from higher volumes of year, versus $463 million in 2008. The principal
practices involving Seroquel and sales of relevant products. factors contributing to this increase were the
$112 million relates to average wholesale continued reversal of the fair value gain,
price litigation. These charges are Core R&D expenditure was $4,334 million reduced interest received due to lower interest
excluded from Core performance results. for the full year, 3% lower than last year at rates and a higher net interest expense on
>> Operating profit increased by 24% at CER CER (Reported: down 15%), as increased pension obligations, partially offset by
(Reported: 26%). Core operating profit investment in biologics was more than reduced interest payable on lower net
increased by 23% at CER (Reported: 24%). offset by the continued productivity initiatives debt balances.
A reconciliation between these measures and lower costs associated with late-stage
is included in the Reconciliation of Reported development projects that have progressed Net finance expense included a net fair value
results to Core results table on page 40. to pre-registration. loss of $145 million for the year (2008: $130
>> EPS of $5.19 represented an increase million gain) as credit spreads have reduced
of 22% at CER (Reported: 24%). Core Core SG&A costs of $9,890 million for the since the previous year end. The net fair value
EPS of $6.32 represented an increase full year were 5% higher than last year at CER gain of $130 million recorded in the prior year,
of 23% at CER (Reported: 24%). (Reported: up 4%). Stronger than expected mainly related to two long-term bonds. These
>> Net cash inflow from operating activities revenue performance provided the opportunity bonds are swapped to floating interest rates
increased to $11,739 million (2008: to drive future growth through accelerated and accounted for using the fair value option
$8,742 million). marketing investment for Emerging Markets under IFRS. Under this accounting treatment
>> Dividends increased to $2,977 million and currently marketed brands, and to both the bonds and the related interest rate
(2008: $2,739 million). support launch planning for the new products swaps are measured at fair value, with
awaiting registration. SG&A expense growth changes in fair value reported in the income

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Financial Review 39


Sales by Therapy Area (2009 and 2008)

2009 2008 2009 compared to 2008
Growth due
CER to exchange CER Reported
Reported growth effects Reported growth growth
$m $m $m $m % %
Cardiovascular 8,376 1,737 (324) 6,963 25 20
Gastrointestinal 6,011 (157) (176) 6,344 (2) (5)
Infection and other 2,631 257 (77) 2,451 10 7
Neuroscience 6,237 566 (166) 5,837 10 7
Oncology 4,518 (330) (106) 4,954 (7) (9)
Respiratory & Inflammation 4,132 234 (230) 4,128 6 –
Other businesses 899 10 (35) 924 1 (3)
Total 32,804 2,317 (1,114) 31,601 7 4

Operating profit (2009 and 2008)

2009 2008 Percentage of sales 2009 compared to 2008
Growth due
CER to exchange Reported Reported CER Reported
Reported growth effects Reported 2009 2008 growth growth
$m $m $m $m % % % %
Sales 32,804 2,317 (1,114) 31,601 7 4
Cost of sales (5,775) 540 283 (6,598) (17.6) (20.9) (8) (12)
Gross profit 27,029 2,857 (831) 25,003 82.4 79.1 11 8
Distribution costs (298) (37) 30 (291) (0.9) (0.9) 13 3
Research and development (4,409) 298 472 (5,179) (13.5) (16.4) (6) (15)
Selling, general and administrative costs (11,332) (945) 526 (10,913) (34.5) (34.6) 9 4
Other operating income and expense 553 33 (4) 524 1.7 1.7 6 6
Operating profit 11,543 2,206 193 9,144 35.2 28.9 24 26
Net finance expense (736) (463)
Profit before tax 10,807 8,681
Taxation (3,263) (2,551)
Profit for the period 7,544 6,130

Earnings per share ($) 5.19 4.20

Growth rates on line items below operating profit, where meaningful, are given elsewhere in this Annual Report.

statement. The fair value of each instrument Geographical analysis Intangible assets have reduced by $97 million
reflects changes in market interest rates, which We discuss the geographical performances to $12,226 million. Additions totalled $1,003
broadly offset, but the fair value of these bonds in the Geographic Review from page 50. million, amortisation was $729 million and
also reflects changes in credit spreads. The impairments totalled $415 million. Exchange
2008 gain has now reversed fully in 2009 and, Financial position, including cash flow rate impacts increased intangible assets by
as credit spreads continued to reduce in and liquidity – 2009 $178 million.
the final quarter of 2009, further losses have All data in this section is on a Reported basis
been recorded. (unless noted otherwise). Additions in 2009 included $300 million in
respect of milestone payments made under
The effective tax rate for the year is 30.2%. Net assets increased by $4,761 million to our collaboration agreement with BMS,
Excluding the impact of the $636 million $20,821 million. The increase due to Group $200 million in respect of our agreement
legal provisions, the effective tax rate would profit of $7,521 million was offset by dividends with Targacept, and $126 million in respect
be 28.8% (2008: 29.4%). A description of our of $3,026 million. Exchange rate movements of our agreement with Nektar.
tax exposures is set out in Note 25 to the arising on consolidation and actuarial losses
Financial Statements from page 166. also reduced net assets during the year. During 2009, impairments totalled $415 million.
$150 million was impaired as a result of a
Core EPS were $6.32, an increase of 23% Property, plant and equipment reassessment of the licensing income
at CER on 2008, as the increase in Core Property, plant and equipment increased by generated by the HPV cervical cancer vaccine.
operating profit was partially offset by $264 million to $7,307 million primarily due Impairments of other assets acquired with
increased net finance expense. Reported to additions of $967 million and exchange MedImmune totalled $122 million. Impairments
EPS increased 24% to $5.19. rate movements of $391 million offset by related to our acquisition of MedImmune and
depreciation and impairments of $943 million. therefore excluded from our Core results
Total comprehensive income for the year totalled $272 million. In addition, $93 million
increased by $3,266 million from 2008. This Goodwill and intangible assets was written off products in development.
was principally due to an increase in profit Goodwill and intangible assets have increased
for the period of $1,414 million, beneficial by $82 million to $22,115 million. Additions to intangible assets in 2008 included
exchange rate impacts on consolidation of a payment made to Merck under pre-existing
$1,365 million and reduced actuarial losses Goodwill principally arose on the acquisition arrangements under which Merck’s interests
of $663 million compared to 2008. of MedImmune and on the restructuring of in our products in the US will be terminated
our US joint venture with Merck in 1998. (subject to the exercise of options beginning
No goodwill has been capitalised in 2009. in 2010). As a result of the payment,

AstraZeneca Annual Report and Form 20-F Information 2009

40 Directors’ Report | Financial Review

Reconciliation of Reported results to Core results

Restructuring and Merck & MedImmune Intangible
Reported synergy costs amortisation impairments Legal provisions 2009 Core
2009 $m $m $m $m $m $m
Gross margin 27,029 188 – – – 27,217
Distribution costs (298) – – – – (298)
Research and development (4,409) 68 – 7 – (4,334)
Selling, general and administrative costs (11,332) 403 403 – 636 (9,890)
Other operating income and expense 553 – 108 265 – 926
Operating profit 11,543 659 511 272 636 13,621
Net interest (736) – – – – (736)
Profit before tax 10,807 659 511 272 636 12,885
Taxation (3,263) (199) (125) (82) (34) (3,703)
Profit for the period 7,544 460 386 190 602 9,182

Earnings per share ($) 5.19 0.32 0.27 0.13 0.41 6.32

Restructuring and Merck & MedImmune Intangible

Reported synergy costs amortisation impairments Legal provisions 2008 Core
2008 $m $m $m $m $m $m
Gross margin 25,003 405 – – – 25,408
Distribution costs (291) – – – – (291)
Research and development (5,179) 166 – 60 – (4,953)
Selling, general and administrative costs (10,913) 310 406 257 – (9,940)
Other operating income and expense 524 – 120 90 – 734
Operating profit 9,144 881 526 407 – 10,958
Net interest (463) – – – – (463)
Profit before tax 8,681 881 526 407 – 10,495
Taxation (2,551) (259) (125) (121) – (3,056)
Profit for the period 6,130 622 401 286 – 7,439

Earnings per share ($) 4.20 0.43 0.28 0.19 – 5.10

2009 2008 2009 compared to 2008

Growth due
CER to exchange CER Total Core
Core growth effects Core growth growth
2008 to 2009 Core result $m $m $m $m % %
Gross margin 27,217 2,660 (851) 25,408 10 7
Distribution costs (298) (37) 30 (291) 13 3
Research and development (4,334) 150 469 (4,953) (3) (13)
Selling, general and administrative costs (9,890) (452) 502 (9,940) 5 (1)
Other operating income and expense 926 194 (2) 734 26 26
Operating profit 13,621 2,515 148 10,958 23 24
Net interest (736) (463)
Profit before tax 12,885 10,495
Taxation (3,703) (3,056)
Profit for the period 9,182 7,439

Earnings per share ($) 6.32 5.10

AstraZeneca no longer has to pay contingent Receivables, payables and provisions $521 million (2008: $426 million) representing
payments on these products. This payment Trade and other receivables increased by the maximum insurance receivable that
includes $1,656 million in respect of payments $448 million to $7,709 million. Exchange AstraZeneca can recognise under applicable
on account for rights that will crystallise if we rate movements increased receivables accounting principles at this time. This may
exercise future options. If AstraZeneca does by $220 million. The underlying increase increase over time as AstraZeneca believes
not exercise these options certain rights will of $228 million was driven by increased that it is more likely than not that the vast
remain with Merck resulting in a write-off sales in the final quarter and an increase majority of costs incurred to date in excess
for any rights not acquired. Further details in insurance recoverables. of $39 million will ultimately be recovered
of this matter are included in Note 25 to the through this insurance, although there can
Financial Statements from page 166. As of 31 December, legal defence costs of be no assurance of additional coverage
approximately $656 million (2008: $512 million) under the policies, or that the insurance
Inventories have been incurred in connection with receivable which we have recognised, will
Inventories have increased by $114 million Seroquel-related product liability claims. be realisable in full.
to $1,750 million principally due to exchange The first $39 million is not covered by
rate impacts. insurance. At 31 December, AstraZeneca Trade and other payables increased by
has recorded an insurance receivable of $1,604 million primarily due to increases in US

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Financial Review 41


managed market accruals, accruals in respect Net funds/(debt)

of intangibles investments made in the fourth 2009 2008 2007
$m $m $m
quarter and other accruals. Trade and other
payables include $2,618 million in respect of Net (debt)/funds brought forward at 1 January (7,174) (9,112) 6,537

accruals relating to rebates and chargebacks Earnings before interest, tax, depreciation,

amortisation and impairment 13,630 11,764 9,950
in our US market. These are explained and
Movement in working capital and provisions 1,329 (210) (443)
reconciled fully in the Rebates, chargebacks
Tax paid (2,381) (2,209) (2,563)
and returns in the US section from page
Interest paid (639) (690) (335)
45, along with cash discounts and
Other non-cash movements (200) 87 901
customer returns.
Net cash available from operating activities 11,739 8,742 7,510
Purchase of intangibles (net) (355) (2,944) (549)
During the year AstraZeneca made a provision
Other capital expenditure (net) (824) (1,057) (1,076)
of $636 million in respect of various federal
Acquisitions – – (14,891)
and state investigations and civil litigation
Investments (1,179) (4,001) (16,516)
matters relating to drug marketing and pricing
Dividends (2,977) (2,739) (2,641)
practices. $524 million of this provision has
Net share issues/(re-purchases) 135 (451) (3,952)
been made in respect of the US Attorney’s
Distributions (2,842) (3,190) (6,593)
Office investigation into sales and marketing
Other movements (9) 387 (50)
practices involving Seroquel with the
Net funds/(debt) carried forward at 31 December 535 (7,174) (9,112)
remainder relating to average wholesale price
Comprised of:
litigation. Further details on these matters are
Cash & short term investments 11,598 4,674 6,044
included in Note 25 to the Financial Statements
Loans and borrowings (11,063) (11,848) (15,156)
from page 166.

Tax payable and receivable Cash flow Net funds of $535 million have improved by
Net income tax payable has increased by Cash generated from operating activities $7,709 million from net debt of $7,174 million
$885 million to $2,853 million principally was $11,739 million in the year, compared at 31 December 2008.
due to tax audit provisions, cash tax timing with $8,742 million in 2008. The increase of
differences and exchange rate movements. $2,997 million was principally driven by an We continue to believe that, although our
Tax receivable largely comprises tax owing increase in operating profit before depreciation, future operating cash flows are subject to
to AstraZeneca from certain governments amortisation and impairment costs of $1,866 a number of uncertainties, as specified in
expected to be received on settlements of million, offset by a decrease in non-cash items the Business background and major events
transfer pricing audits and disputes (see of $287 million, which includes fair value affecting 2009 section from page 37, our cash
Note 25 to the Financial Statements from adjustments. An improvement in working and funding resources will be sufficient to
page 166). capital flows, including short-term provisions meet our forecast requirements for the
of $1,539 million, which also contributed foreseeable future, including developing and
Retirement benefit obligations significantly to this increase, arose principally launching new products, externalisation, our
Net retirement benefit obligations increased by from an increase in returns and chargebacks ongoing capital programme, our restructuring
$622 million principally as a result of actuarial provisions and the legal provisions made programme, debt servicing and repayment,
losses of $569 million and adverse exchange in the year. options arising under the Merck exit
rate effects of $215 million. Approximately 97% arrangements and shareholder distributions.
of the Group’s obligations are concentrated Net cash outflows from investing activities
in three countries. The following table were $2,476 million in the year compared Restructuring and synergy costs
shows the US dollar effect of a 1% change in with $3,896 million in 2008. The movement of Driving increased productivity from
the discount rate on the retirement benefit $1,420 million is due primarily to the payment investments in R&D is a key to portfolio
obligations in those countries. of $2,630 million to Merck in 2008 as part of renewal and value creation. Further to this
the partial retirement, and the proceeds from objective, AstraZeneca will undertake
-1% +1%
the disposal of the Abraxane™ co-promotion additional restructuring within the R&D
UK ($m) 1,129 (973) rights of $269 million received in 2009, function. These plans include a reduction in
US ($m) 256 (225) countered by an increase in the purchase the number of disease area targets within our
Sweden ($m) 229 (192) of short term investments and fixed deposits core therapeutic areas, some consolidation of
Total ($m) 1,614 (1,390) of $1,372 million. our activities onto a smaller R&D site footprint,
and other efficiency measures, subject to
Commitments and contingencies Cash distributions to shareholders, through consultations with work councils, trades unions
The Group has commitments and dividend payments, were $2,977 million. and other employee representatives and in
contingencies which are accounted for in accordance with local employment laws.
accordance with the accounting policies Gross debt (including loans, short-term
described in the Financial Statements in the borrowings and overdrafts) was $11,063 million The next phase of restructuring which includes
Accounting Policies section from page 128. as at 31 December (2008: $11,848 million). the completion of the previous programmes
The Group also has taxation contingencies. Of this debt, $1,926 million is due within one announced in 2007, will also include some
These are described in the Taxation section year (2008: $993 million), which we currently additional initiatives in supply chain and in
in the Critical accounting policies section anticipate repaying from current cash balances SG&A in addition to the R&D initiatives
from page 48. These matters are explained and short term investments of approximately described above.
fully in Note 25 to the Financial Statements $11.6 billion and business cash flows,
from page 166. without the need to re-finance.

AstraZeneca Annual Report and Form 20-F Information 2009

42 Directors’ Report | Financial Review

Dividend for 2009 It is expected that a significant portion of

$ Pence SEK Payment date current base revenue will be affected by the
First interim dividend 0.59 36.0 4.41 14.09.09 loss of market exclusivity on a number of
Second interim dividend 1.71 105.4 12.43 15.03.10 products. Revenue in 2010, for example, will
Total 2.30 141.4 16.84 be affected by the expected loss of market
exclusivity for Arimidex and for Pulmicort
Summary of shareholder distributions Respules in the US. AstraZeneca aims
Shares Dividend Dividend Shareholder to grow market share for key franchises
re-purchased Cost per share cost distributions that retain exclusivity, and plans to sustain
(million) $m $ $m $m
double-digit growth rates in its Emerging
2000 9.4 352 0.7 1,236 1,588
Markets business, supported by the selective
2001 23.5 1,080 0.7 1,225 2,305
addition of branded generics to the portfolio.
2002 28.3 1,190 0.7 1,206 2,396
2003 27.2 1,154 0.795 1,350 2,504
Results of operations – summary
2004 50.1 2,212 0.94 1,555 3,767
analysis of year to 31 December 2008
2005 67.7 3,001 1.3 2,068 5,069
In 2008 sales increased by 7% on a Reported
2006 72.2 4,147 1.72 2,649 6,796
basis and by 3% on a CER basis compared
2007 79.9 4,170 1.87 2,740 6,910
to 2007. Exchange rate movements benefited
2008 13.6 610 2.05 2,971 3,581
Reported sales by 4%. More details on our
2009 – – 2.30 3,3361 3,336
sales performance by Therapy Area are given
Total 371.9 17,916 13.075 20,336 38,252
in the Therapy Area Review from page 55 in
Total dividend cost estimated based upon number of shares in issue at 31 December 2009. the Performance 2008 sections.

Capitalisation and shareholder return and healthcare systems in both developed Core gross margin of 80.4% in 2008 was
All data in this section is on a Reported basis. and emerging markets is a core capability. 0.8% higher than 2007 at CER (Reported:
79.1%; 0.8% higher). Principal drivers were
Capitalisation AstraZeneca believes that pursuit of this lower payments to Merck (1.0%), continued
The total number of shares in issue at strategy will continue to build a pipeline of new efficiency gains and mix factors (1.2%),
31 December was 1,451 million. 3.5 million medicines that will meet the needs of patients partially offset by higher royalty payments
shares were issued in consideration of share and provide attractive returns for shareholders. (0.6%) and intangible asset impairments
option plans and employee share plans for and other provisions (0.8%).
a total of $135 million. Shareholders’ equity The next five years will be challenging for the
increased by a net $4,748 million to $20,660 industry and for AstraZeneca, as its revenue Core R&D costs of $4,953 million were
million at the year end. Minority interests base transitions through a period of exclusivity down 1% at CER in 2008 compared to 2007
increased to $161 million (2008: $148 million). losses and new product launches. (Reported: 0%). The inclusion of a full year of
AstraZeneca believes it would be helpful MedImmune expense was offset by improved
Dividend and share re-purchases for investors to understand AstraZeneca’s productivity and efficiency, restructuring
In recognition of the Group’s strong balance high-level planning assumptions for revenue benefits, portfolio changes and lower charges
sheet, sustainable significant cash flow evolution, margin structure, cash flow and relating to intangible asset impairments
and the Board’s confidence in the strategic business reinvestment that will guide its charged to Core R&D expense.
direction and long-term prospects for management of the business over the next
the business, the Board has adopted a five years. In 2008, Core SG&A costs of $9,940 million
progressive dividend policy, intending to were up 3% at CER (Reported: 4%) due chiefly
maintain or grow the dividend each year. For the period 2010 to 2014, AstraZeneca has to the inclusion of a full year of MedImmune
made certain assumptions for the industry costs, increased investment in Emerging
In addition the Board has announced a share environment. AstraZeneca assumes that the Markets and some higher legal expenses.
re-purchase programme. global pharmaceutical industry can grow
at least in line with real GDP over the planning Core other income of $734 million was
Future prospects horizon. Downward pressure on revenue from $6 million higher in 2008 compared to 2007
AstraZeneca is a focused, integrated, government interventions in the marketplace, (Reported: decreased $204 million) with
innovation-driven, global biopharmaceutical including certain proposals associated with MedImmune’s licensing and royalty income
business. AstraZeneca will be selective about efforts to enact US healthcare reform, remain streams offset by expected lower one-time
those areas of the industry it chooses to a continuing feature of the challenging market gains and royalty income.
compete in, targeting those product categories environment. However, for the planning
where medical innovation or brand equity period, AstraZeneca assumes no further Impairment charges relating to intangible
continues to command a premium in the ‘step-change’ in the evolution of these fixed assets totalled $631 million in 2008.
marketplace. AstraZeneca believes the best pressures. As for assumptions specific to Charges totalling $407 million, including
way to capture value within this industry is the Group, AstraZeneca assumes that there impairments in respect of Ethyol and HPV
to span the full value chain of discovery, will be no material mergers, acquisitions cervical cancer vaccines, were excluded
development and commercialisation. or disposals. In addition, our plans assume from Core operating profit in 2008. Charges
AstraZeneca believes its technology base no premature loss of exclusivity for key totalling $224 million, including $115 million
will continue to deliver innovative products AstraZeneca products. It is also assumed that in respect of Pulmicort Respules, were
that patients will need and for which payers exchange rates for our principal currencies included in Core operating profit.
will see value. AstraZeneca believes that its will not differ materially from the average
ability to meet the health needs of patients rates that prevailed during January 2010.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Financial Review 43


Sales by Therapy Area (2008 and 2007)

2008 2007 2008 compared to 2007
CER Growth due to CER Reported
Reported growth exchange effects Reported growth growth
$m $m $m $m % %
Cardiovascular 6,963 29 248 6,686 – 4
Gastrointestinal 6,344 (275) 176 6,443 (4) (2)
Infection and other1 2,451 706 31 1,714 41 43
Neuroscience 5,837 346 151 5,340 6 9
Oncology 4,954 (109) 244 4,819 (2) 3
Respiratory & Inflammation 4,128 278 139 3,711 7 11
Other businesses 924 54 24 846 6 9
Total 31,601 1,029 1,013 29,559 3 7

Includes Synagis and FluMist which were acquired in June 2007.

Operating profit (2008 and 2007)

2008 2007 Percentage of sales 2008 compared to 2007
CER Growth due to Reported Reported CER Reported
Reported growth exchange effects Reported 2008 2007 growth growth
$m $m $m $m % % % %
Sales 31,601 1,029 1,013 29,559 3 7
Cost of sales (6,598) 38 (217) (6,419) (20.9) (21.7) (1) 3
Gross profit 25,003 1,067 796 23,140 79.1 78.3 5 8
Distribution costs (291) (39) (4) (248) (0.9) (0.8) 16 17
Research and development (5,179) (88) 71 (5,162) (16.4) (17.5) 2 –
Selling, general and administrative costs (10,913) (433) (116) (10,364) (34.6) (35.1) 4 5
Other operating income and expense 524 (188) (16) 728 1.7 2.5 (26) (28)
Operating profit 9,144 319 731 8,094 28.9 27.4 4 13
Net finance expense (463) (111)
Profit before tax 8,681 7,983
Taxation (2,551) (2,356)
Profit for the period 6,130 5,627

Earnings per share ($) 4.20 3.74

Growth rates on line items below operating profit, where meaningful, are given elsewhere in this Annual Report.

In 2008, Core operating profit was up 9% In 2008, the effective tax rate was 29.4% In March 2008, AstraZeneca paid $2.6 billion
at CER from 2007 (Reported: 13%). CER (2007: 29.5%). to Merck. This payment resulted in
Core operating margin increased by 1.6% AstraZeneca acquiring Merck’s interests
to 34.7% of sales as improvements in gross In 2008, Core EPS were $5.10, an increase in certain AstraZeneca products including
margin were offset by higher SG&A costs. of 8% at CER on 2007, as the increase in Core Pulmicort, Rhinocort, Symbicort and
Reported operating profits, at 28.9%, operating profit and the benefit of a lower Toprol-XL and has been included in intangible
increased by 1.5% compared with 2007 number of shares outstanding was partially assets as explained below.
as a result of improvements in gross margin offset by increased net finance expense.
and R&D efficiencies which more than offset Reported EPS increased by 12% to $4.20. Property, plant and equipment
a modest increase in SG&A costs. In 2008, property, plant and equipment fell
Profit for the period totalled $6,130 million. by $1,255 million to $7,043 million primarily
Net finance expense was $463 million in Adverse exchange rate movements arising due to depreciation and impairments of
2008 compared to $111 million for 2007. on consolidation of $1,336 million and $1,182 million and exchange rate movements
actuarial losses in the year of $1,232 million of $1,131 million offset by additions of
In 2008, the increase in interest expense resulted in a total comprehensive income $1,113 million.
was driven by additional borrowings arising for the year of $4,224 million.
as a result of the acquisition of MedImmune Goodwill and intangible assets
in 2007. Our exposure to interest costs was Financial position, including cash flow In 2008, goodwill and intangible assets
reduced in 2008, from the closing position in and liquidity – 2008 increased by $846 million to $22,197 million.
2007, as we moved debt used to finance the In 2008, total net assets increased by $1,145
purchase of MedImmune from short-term, million to $16,060 million. The increase due The main components within goodwill are
higher interest rate commercial paper, to to Group profit of $6,101 million was offset the amounts capitalised on the acquisition
longer-term debt financing at lower interest by dividends of $2,767 million and net share of MedImmune of $8,757 million and on the
rates. The 2008 net finance expense benefited re-purchases of $451 million. Exchange rate restructuring of our US joint venture with
from a net fair value gain of $130 million movements arising on consolidation and Merck in 1998. No significant amounts were
relating to two long-term bonds due to actuarial losses also reduced net assets capitalised within goodwill in 2008. The total
widening credit spreads. during 2008. goodwill balance reduced by $10 million in
2008 due to exchange rate movements.

AstraZeneca Annual Report and Form 20-F Information 2009

44 Directors’ Report | Financial Review

Intangible assets increased by $856 million In 2008, trade and other payables increased Net debt of $7,174 million decreased in 2008
to $12,323 million in 2008. Additions totalled by $130 million, or $675 million after removing by $1,938 million from 31 December 2007.
$2,941 million, amortisation was $807 million the impacts of exchange rate movements,
and impairments totalled $631 million. primarily due to increases in US managed Investments, divestments
Exchange rate movements in 2008 reduced market accruals. Trade payables include and capital expenditure
intangible assets by $603 million. $2,136 million in respect of accruals relating The major product acquisitions in 2008
to rebates and reductions in our US market. reflected our ongoing commitment to
Additions to intangible assets in 2008 included strengthening the product pipeline.
a payment made to Merck under pre-existing Provisions in 2008 increased by $122 million
arrangements under which Merck’s interests driven mainly by increases in specific In 2007 AstraZeneca acquired MedImmune.
in our products in the US will be terminated insurance and long-term provisions. On the acquisition of MedImmune, the
(subject to the exercise of certain options). purchase price for outstanding shares of
$994 million of this payment relates to certain Tax payable and receivable $13.9 billion was allocated between intangible
AstraZeneca products, including Pulmicort, Net income tax payable in 2008 increased by assets of $8.1 billion (including assets in
Rhinocort, Symbicort and Toprol-XL. As a $667 million to $1,968 million, principally due respect of Synagis and motavizumab RSV
result of the payment AstraZeneca no longer to tax audit provisions and cash tax timing franchise, FluMist, Ethyol and products in
has to pay contingent payments on these differences. Net deferred tax liabilities development), goodwill of $8.8 billion and
products to Merck and has obtained the ability decreased mainly as a result of the impact net liabilities of $3.0 billion. This allocation,
to fully exploit these products and to fully of actuarial losses suffered in the year, the based on strict accounting requirements,
exploit other opportunities in the Respiratory amortisation and impairment of MedImmune does not allow for the separate recognition
Therapy Area that AstraZeneca was previously intangible assets, and exchange rate benefits. of valuable elements such as buyer-specific
prevented from doing by Merck’s interests in synergies, potential additional indications for
these products. The remainder of the payment Retirement benefit obligations identified products or the premium attributable
($1,656 million) represents payments on Net retirement benefit obligations in 2008 to a well-established, highly-regarded
account for the product rights that will increased by $734 million principally as a business in the innovative biologics market.
crystallise if we exercise options in 2010. result of actuarial losses of $1,232 million offset Such elements are instead subsumed within
by exchange rate benefits of $434 million. goodwill, which is not amortised. Further
In March 2008, a $257 million intangible asset During 2008, approximately 95% of the details of this acquisition are included in
impairment charge was taken as a result of the Group’s obligations were concentrated in Note 22 to the Financial Statements from
entry of generic Ethyol, a product capitalised three countries. page 154.
on the acquisition of MedImmune, into the
US market. The settlement of the Pulmicort Cash flow Financial risk management
Respules patent litigation triggered an Cash generated from operating activities Financial risk management policies
impairment of $115 million. The remaining was $8,742 million in 2008 compared with Insurance
impairments for 2008 resulted from the $7,510 million in 2007. The increase of Our risk management processes are
termination of projects in development $1,232 million was principally driven by an described in the Managing risk section
and a charge for $91 million relating to the increase in operating profit before depreciation, from page 79. These processes enable us
reassessment of the licensing income amortisation and impairment costs of $1,814 to identify risks that can be partly or entirely
expected to be generated by the HPV cervical million, a decrease in tax payments of $354 mitigated through the use of insurance.
cancer vaccine. Reported performance for million and lower working capital outflows of We negotiate best available premium rates
2008 included impairments in respect of $233 million, offset by an increase in interest with insurance providers on the basis of
Ethyol, HPV cervical cancer vaccine and other payments of $355 million and a decrease in our extensive risk management procedures.
projects in development (principally the return non-cash items of $814 million, which includes In the current insurance market, the level of
of rights to Infinity Pharmaceuticals) which movements on provisions. cover is decreasing whilst premium rates are
management believed were not part of increasing. Rather than simply paying higher
Core performance for 2008. As a result, Net cash outflows from investing activities premiums for lower cover, we focus our
management adjusted for impairments totalling were $3,896 million in 2008 compared with insurance resources on the most critical
$407 million in presenting Core performance. $14,887 million in 2007. areas, or where there is a legal requirement,
and where we can get best value for money.
Inventories In 2008, cash distributions to shareholders Risks to which we pay particular attention
Inventories decreased in 2008 by were $3,349 million through dividend include business interruption, Directors’
$483 million to $1,636 million due to exchange payments of $2,739 million and share and Officers’ liability and property damage.
rate movements of $298 million along with re-purchases of $610 million. Recently, insurance for product liability has
an underlying reduction in inventory of not been available on commercially acceptable
$185 million. During 2008 we issued a further €500 million, terms and the Group has not held product
5.625% 18-month bond as part of our liability insurance since February 2006.
Receivables, payables and provisions re-financing programme, the proceeds of
Trade and other receivables increased by which were used to re-finance maturing Taxation
$593 million to $7,261 million in 2008. commercial paper. Tax risk management forms an integrated part
Exchange rate movements reduced of the Group risk management processes.
receivables by $429 million. The underlying Gross debt (including loans, short-term Our tax strategy is to manage tax risks and
increase of $1,022 million was driven by borrowings and overdrafts) was $11,848 million tax costs in a manner consistent with
increased sales in Emerging Markets, the at 31 December 2008 (2007: $15,156 million). shareholders’ best long-term interests, taking
extension of major credit terms in the UK Of this debt, $993 million was due within into account both economic and reputational
and increased insurance recoverables. one year. factors. We draw a distinction between tax

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Financial Review 45


planning using artificial structures and >> Revenue recognition >> Contractual, under which entities such as
optimising tax treatment of business >> Research and development third party managed-care organisations,
transactions, and we engage only in the latter. >> Goodwill and intangible assets long-term care facilities and group
>> Litigation purchasing organisations are entitled
Treasury >> Post-retirement benefits to rebates depending on specified
The principal financial risks to which the Group >> Taxation performance provisions, which vary
is exposed are those arising from liquidity, >> Segmental reporting. from contract to contract.
interest rate, foreign currency and credit.
The Group has a centralised treasury function Revenue recognition The effects of these deductions on our US
to manage these risks in accordance with Revenue is recorded at the invoiced amount pharmaceuticals turnover are set out below.
Board-approved policies. Specifically, liquidity (excluding inter-company sales and value
risk is managed through maintaining access added taxes) less movements in estimated Accrual assumptions are built up on a
to a number of sources of funding to meet accruals for rebates and chargebacks given product-by-product and customer-by-
anticipated funding requirements, including to managed-care and other customers and customer basis, taking into account specific
committed bank facilities and cash resources. product returns – a particular feature in the contract provisions coupled with expected
Interest rate risk is managed through US. The impact in the rest of the world is not performance, and are then aggregated into
maintaining a debt portfolio that is weighted significant. It is the Group’s policy to offer a a weighted average rebate accrual rate for
towards fixed rates of interest. Accordingly the credit note for all returns and to destroy all each of our products. Accrual rates are
Group’s net interest charge is not significantly returned stock in all markets. Cash discounts reviewed and adjusted on a monthly basis.
affected by movements in floating rates of for prompt payment are also deducted from There may be further adjustments when actual
interest. We do not currently hedge the impact sales. Revenue is recognised at the point of rebates are invoiced based on utilisation
on earnings and cash flow of changes in delivery, which is usually when title passes information submitted to us (in the case of
exchange rates, with the exception of the to the customer either on shipment or on contractual rebates) and claims/invoices are
currency exposure that arises between the receipt of goods by the customer depending received (in the case of regulatory rebates
booking and settlement dates on non-local on local trading terms. Income from royalties and chargebacks). We believe that we have
currency purchases and sales by subsidiaries and from disposals of intellectual property, been reasonable in our estimates for future
and the external dividend, along with brands and product lines is included in other rebates using a similar methodology to that
certain non-US dollar debt. Credit risk is operating income. of previous years. Inevitably, however, such
managed through setting and monitoring estimates involve judgements on aggregate
credit limits appropriate for the assessed Rebates, chargebacks and returns in the US future sales levels, segment mix and the
risk of the counterparty. At the time of invoicing sales in the US, rebates customer’s contractual performance.
and chargebacks that we expect to pay,
Our capital and risk management objectives in as little time as two weeks or as much as Cash discounts are offered to customers to
and policies are described in further detail eight months, are estimated. These rebates encourage prompt payment. Accruals are
in Note 15 to the Financial Statements from typically arise from sales contracts with third calculated based on historical experience
page 144 and in the Managing risk section party managed-care organisations, hospitals, and are adjusted to reflect actual experience.
from page 79. long-term care facilities, group purchasing
organisations and various federal or Industry practice in the US allows wholesalers
Sensitivity analysis of the Group’s exposure to state programmes (Medicaid ‘best price’ and pharmacies to return unused stocks
exchange rate and interest rate movements is contracts, supplemental rebates etc) and within six months of, and up to 12 months
detailed in Note 16 to the Financial Statements can be classified as follows: after, shelf-life expiry. The customer is credited
from page 146. for the returned product by the issuance of
>> Chargebacks, where we enter into a credit note. Returned product is not
Critical accounting policies arrangements under which certain parties, exchanged for product from inventory and
and estimates typically hospitals, the Department of once a return claim has been determined to
Our Financial Statements are prepared in Veterans Affairs and the Department of be valid and a credit note has been issued
accordance with IFRS as adopted by the EU Defense, are able to buy products from to the customer, the returned goods are
(adopted IFRS) and as issued by the IASB, wholesalers at the lower prices we have destroyed and not resold. At the point of sale
and the accounting policies employed are contracted with them. The chargeback is in the US, we estimate the quantity and value
set out in the Accounting Policies section the difference between the price we invoice of goods which may ultimately be returned.
in the Financial Statements from page 128. to the wholesaler and the contracted price Our returns accruals in the US are based on
In applying these policies, we make estimates charged by the wholesaler. Chargebacks actual experience. Our estimate is based
and assumptions that affect the reported are paid directly to the wholesalers. on the preceding 12 months for established
amounts of assets and liabilities and disclosure >> Regulatory, including Medicaid and other products together with market-related
of contingent assets and liabilities. The actual federal and state programmes, where we information, such as estimated stock levels
outcome could differ from those estimates. pay rebates based on the specific terms at wholesalers and competitor activity, which
Some of these policies require a high level of of agreements in individual states, which we receive via third-party information services.
judgement because the areas are especially include product usage and information For newly launched products, we use rates
subjective or complex. We believe that the on best prices and average market based on our experience with similar products
most critical accounting policies and significant prices benchmarks. or a pre-determined percentage.
areas of judgement and estimation are in:

AstraZeneca Annual Report and Form 20-F Information 2009

46 Directors’ Report | Financial Review

Gross to net sales

 2009 2008 2007 2006
$m $m $m $m
Gross sales 22,641 20,029 18,456 16,577
Chargebacks (1,841) (1,726) (1,130) (975)
Regulatory – US government and state programmes (1,357) (1,005) (732) (532)
Contractual – Managed-care and group purchasing organisation rebates (4,753) (3,658) (3,179) (2,413)
Cash and other discounts (428) (390) (356) (329)
Customer returns (187) (48) (18) (46)
Other (196) (167) (145) (256)
Net sales 13,879 13,035 12,896 12,026

Movement in provisions
Adjustment Carried forward
Brought forward Provision for in respect Returns at 31 December
at 1 January 2009 current year of prior years and payments 2009
$m $m $m $m $m
Chargebacks 359 1,947 (106) (1,804) 396
Regulatory – US government and state programmes 520 1,373 (16) (1,102) 775
Contractual – Managed-care and group purchasing organisation rebates 1,084 4,732 20 (4,389) 1,447
Cash and other discounts 39 428 – (426) 40
Customer returns 77 194 (2) (93) 177
Other 57 198 (2) (194) 59
Total 2,136 8,871 (106) (8,009) 2,895

Adjustment Carried forward

Brought forward Provision for in respect Returns at 31 December
at 1 January 2008 current year of prior years and payments 2008
$m $m $m $m $m
Chargebacks 186 1,745 (19) (1,553) 359
Regulatory – US government and state programmes 428 997 8 (913) 520
Contractual – Managed-care and group purchasing organisation rebates 900 3,622 36 (3,474) 1,084
Cash and other discounts 38 390 – (389) 39
Customer returns 85 48 – (56) 77
Other 53 167 – (163) 57
Total 1,690 6,969 25 (6,548) 2,136

Additions in Adjustment Carried forward

Brought forward respect of Provision for in respect Returns at 31 December
at 1 January 2007 MedImmune current year of prior years and payments 2007
$m $m $m $m $m $m
Chargebacks 92 2 1,115 15 (1,038) 186
Regulatory – US government and state programmes 314 69 769 (37) (687) 428
Contractual – Managed-care and group purchasing organisation rebates 635 5 3,100 79 (2,919) 900
Cash and other discounts 29 1 356 – (348) 38
Customer returns 160 1 19 (1) (94) 85
Other 47 – 153 – (147) 53
Total 1,277 78 5,512 56 (5,233) 1,690

For products facing generic competition revenue is recognised only when the amount fluctuations in the level of inventory they
(such as Ethyol and Toprol-XL in the US) our of the revenue can be measured reliably. hold. We do not offer any incentives to
experience is that we usually lose the ability to Our approach in meeting this condition for encourage wholesaler speculative buying
estimate the levels of returns from wholesalers products facing generic competition will vary and attempt, where possible, to restrict
with the same degree of precision that from product to product depending on the shipments to underlying demand when such
we can for products still subject to patent specific circumstances. speculation occurs.
protection. This is because we have limited or
no insight into a number of areas – the actual The movements on US pharmaceuticals Royalty income
timing of the launch of a generic competitor revenue accruals are set out above. Royalty income is recorded under other
following regulatory approval of the generic operating income in the Financial Statements.
product (for example, a generic manufacturer The adjustments in respect of prior years Royalties tend to be linked to levels of sales
may or may not have produced adequate benefited Reported US pharmaceuticals or production by a third party. At the time of
pre-launch inventory), the pricing and turnover by 0.24% in 2007, and decreased preparing the Financial Statements, we may
marketing strategy of the competitor, the turnover by 1% in 2008. have to estimate the third party’s sales or
take-up of the generic and (in cases where a production when arriving at the royalty income
generic manufacturer has approval to launch We have distribution service agreements with to be included. These estimates, which may
just one dose size in a market of several dose major wholesaler buyers, which serve to differ from actual sales or production, do not
sizes) the likely level of switching from one reduce the speculative purchasing behaviour result in a material impact on Reported other
dose to another. Under our accounting policy, of the wholesalers and reduce short-term operating income.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Financial Review 47


Sales of intangible assets Impairment testing of goodwill Impairment reviews have been carried out
A consequence of charging all internal R&D and intangible assets on all intangible assets that are in development
expenditure to the income statement in the We have significant investments in goodwill (and not being amortised), all major intangible
year in which it is incurred (which is normal and intangible assets as a result of acquisitions assets acquired during the year, all intangible
practice in the pharmaceutical industry) is of businesses and purchases of assets, such assets that have had indications of impairment
that we own valuable intangible assets which as product development and marketing rights. during the year and all intangible assets
are not recorded on the balance sheet. We recognised on the acquisition of MedImmune.
also own acquired intangible assets which For the purpose of impairment testing of Sales forecasts and specific allocated costs
are included on the balance sheet. As a goodwill, the Group is regarded as a single (which have both been subject to appropriate
consequence of regular reviews of product cash-generating unit. senior management sign-off) are discounted
strategy, from time to time we sell such assets using AstraZeneca’s risk-adjusted pre-tax
and generate income. Sales of product lines The recoverable amount is based on value in weighted average cost of capital.
are often accompanied by an agreement use, using discounted risk-adjusted projections
on our part to continue manufacturing the of the Group’s pre-tax cash flows over 10 The majority of our investments in intangible
relevant product for a reasonable period years, a period reflecting the average assets and goodwill arose from the
(often about two years) whilst the purchaser patent-protected lives of our current products. restructuring of the joint venture with Merck in
constructs its own manufacturing facilities. The projections include assumptions about 1998 and 2008, the acquisition of MedImmune
The contracts typically involve the receipt product launches, competition from rival in 2007 and the payment to partially retire
of an upfront payment, which the contract products and pricing policy as well as the Merck’s interests in our products in the US in
attributes to the sale of the intangible assets, possibility of generics entering the market. 2008, and we are satisfied that the carrying
and ongoing receipts, which the contract In setting these assumptions we consider values are fully justified by estimated future
attributes to the sale of the product we our past experience, external sources of cash flows.
manufacture. In cases where the transaction information (including information on expected
has two or more components, we account for increases and ageing of the populations Litigation
the delivered item (for example, the transfer in Established Markets and the expanding In the normal course of business, contingent
of title to the intangible asset) as a separate patient population in newer markets), liabilities may arise from product-specific and
unit of accounting and record revenue on our knowledge of competitor activity and general legal proceedings, from guarantees
delivery of that component provided that our assessment of future changes in the or from environmental liabilities connected
we can make a reasonable estimate of the pharmaceutical industry. The 10-year period with our current or former sites. Where we
fair value of the undelivered component. is covered by internal budgets and forecasts. believe that potential liabilities have a less
Where the fair market value of the undelivered Given that internal budgets and forecasts than 50% probability of crystallising or are
component (for example, a manufacturing are prepared for all projections, no general very difficult to quantify reliably, we treat
agreement) exceeds the contracted price growth rates are used to extrapolate internal them as contingent liabilities. These are not
for that component we defer an appropriate budgets and forecasts for the purposes of provided for but are disclosed in Note 25
element of the upfront consideration and determining value in use. to the Financial Statements from page 166.
amortise this over the performance period.
However, where the fair market value of the In arriving at value in use, we disaggregate In cases that have been settled or adjudicated,
undelivered component is equal to or lower our projected pre-tax cash flows into groups or where quantifiable fines and penalties
than the contracted price for that component reflecting similar risks and tax effects. For each have been assessed and which are not
we treat the whole of the upfront amount as group of cash flows we use an appropriate subject to appeal (or other similar forms of
being attributable to the delivered intangible discount rate reflecting those risks and tax relief), or where a loss is probable and we
assets and recognise that part of the revenue effects. In arriving at the appropriate discount are able to make a reasonable estimate of
upon delivery. No element of the contracted rate for each group of cash flows, we adjust the loss, we indicate the loss absorbed or
revenue related to the undelivered component AstraZeneca’s post-tax weighted average the amount of the provision accrued.
is allocated to the sale of the intangible asset. cost of capital (7.6% for 2009) to reflect the
This is because the contracted revenue impact of risks and tax effects. The weighted AstraZeneca is defending its interests in
relating to the undelivered component is average pre-tax discount rate we used was various federal and state investigations and
contingent on future events (such as sales) approximately 14%. civil litigation matters relating to drug marketing
and so cannot be anticipated. and pricing practices and in respect of which
As a cross-check, we compare our market AstraZeneca has made an aggregate provision
Research and Development capitalisation to the book value of our net of $636 million in the year. $524 million of
Our business is underpinned by our marketed assets and this indicates significant surplus this provision has been made in respect of
products and development portfolio. The R&D at 31 December. the US Attorney’s Office’s investigation into
expenditure on internal activities to generate sales and marketing practices involving
these products is generally charged to the No goodwill impairment was identified. Seroquel, with the remainder relating to
income statement in the year that it is incurred. average wholesale price litigation pending
Purchases of intellectual property and product The Group has also performed sensitivity in the US federal court. The current status
rights to supplement our R&D portfolio analysis calculations on the projections used of these matters is described more fully in
are capitalised as intangible assets. Such and discount rate applied. The Directors have Note 25 to the Financial Statements from
intangible assets are amortised from the concluded that, given the significant headroom page 166. This provision constitutes our best
launch of the underlying products and are that exists, and the results of the sensitivity estimate at this time of the losses expected
tested for impairment both before and after analysis performed, there is no significant risk for these matters.
launch. This policy is in line with practice that reasonable changes in key assumptions
adopted by major pharmaceutical companies. will cause the carrying value of goodwill to
exceed its value in use.

AstraZeneca Annual Report and Form 20-F Information 2009

48 Directors’ Report | Financial Review

Where it is considered that the Group is more Post-retirement benefits to assess whether a provision should be
likely than not to prevail, legal costs involved We offer post-retirement benefit plans which taken against full recognition of the benefit
in defending the claim are charged to profit cover many of our employees around the on the basis of potential settlement through
as they are incurred. Where it is considered world. In keeping with local terms and negotiation and/or litigation. All such provisions
that the Group has a valid contract which conditions, most of these plans are ‘defined are included in creditors due within one year.
provides the right to reimbursement (from contribution’ in nature, where the resulting Any recorded exposure to interest on tax
insurance or otherwise) of legal costs and/or income statement charge is fixed at a set liabilities is provided for in the tax charge.
all or part of any loss incurred or for which a level or is a set percentage of employees’
provision has been established, we consider pay. However, several plans, mainly in the UK AstraZeneca faces a number of transfer
recovery to be virtually certain and the best (which has by far the largest single scheme), pricing audits in jurisdictions around the
estimate of the amount expected to be the US and Sweden, are defined benefit plans world and, in some cases, is in dispute with
received is recognised as an asset. where benefits are based on employees’ the tax authorities. These disputes usually
length of service and final salary (typically result in taxable profits being increased in
At 31 December legal defence costs of averaged over one, three or five years). one territory and correspondingly decreased
approximately $656 million have been incurred The UK and US defined benefit schemes in another. Our balance sheet positions
in connection with Seroquel-related product were closed to new entrants in 2000. All new for these matters reflect appropriate
liability claims. The first $39 million is not employees in these countries are offered corresponding relief in the territories affected.
covered by insurance. At 31 December defined contribution schemes. The total net accrual included in the Financial
AstraZeneca has recorded an insurance Statements to cover the worldwide exposure
receivable of $521 million (2008: $426 million) In applying IAS 19 ‘Employee Benefits’, to transfer pricing audits is $2,327 million,
representing the maximum insurance we recognise all actuarial gains and an increase of $699 million, which is due to
receivable that AstraZeneca can recognise losses immediately through reserves. This a number of new audits, revisions of estimates
under applicable accounting principles at methodology results in a less volatile income relating to existing audits, offset by a number
this time. This amount may increase as statement charge than under the alternative of negotiated settlements and exchange
AstraZeneca believes that it is more likely approach of recognising actuarial gains rate effects.
than not that the vast majority of costs above and losses over time. Investment decisions
the $521 million recorded as an insurance in respect of defined benefit schemes are Included in the total net accrual are
receivable will ultimately be recovered through based on underlying actuarial and economic amounts in respect of the following transfer
this insurance, although there can be no circumstances with the intention of ensuring pricing arrangements:
assurance of additional coverage under the that the schemes have sufficient assets
policies, or that the insurance receivable we to meet liabilities as they fall due, rather >> AstraZeneca and Her Majesty’s Revenue
have recognised will be realisable in full. than meeting accounting requirements. & Customs (HMRC) have made a joint
The trustees follow a strategy of awarding referral to the UK Court in respect of
Assessments as to whether or not to mandates to specialist, active investment transfer pricing between our UK operation
recognise provisions or assets and of the managers, which results in a broad and one of our overseas operations for
amounts concerned usually involve a series diversification of investment styles and the years 1996 to date as there continues
of complex judgements about future events asset classes. The investment approach is to be a material difference between
and can rely heavily on estimates and intended to produce less volatility in the plan the Group’s and HMRC’s positions.
assumptions. AstraZeneca believes that asset returns. An additional referral in respect of
the provisions recorded are adequate based controlled foreign company aspects of
on currently available information and that In assessing the discount rate applied to the same case was made during 2008.
the insurance recoveries recorded will be the obligations, we have used rates on AA Absent a negotiated settlement, litigation
received. However, given the inherent corporate bonds with durations corresponding is set to commence in 2010.
uncertainties involved in assessing the to the maturities of those obligations. >> AstraZeneca has applied for an advance
outcomes of these cases and in estimating pricing agreement in relation to intra-group
the amount of the potential losses and the In all cases, the pension costs recorded in transactions between the UK and the
associated insurance recoveries, we could in the Financial Statements are assessed in US which is being progressed through
future periods incur judgments or insurance accordance with the advice of independent competent authority proceedings under
settlements that could have a material adverse qualified actuaries but require the exercise the relevant double tax treaty.
effect on our results in any particular period. of significant judgement in relation to
assumptions for future salary and pension Management continues to believe that
The position could change over time, and increases, long-term price inflation and AstraZeneca’s positions on all its transfer
there can, therefore, be no assurance that investment returns. pricing audits and disputes are robust and
any losses that result from the outcome of that AstraZeneca is appropriately provided.
any legal proceedings will not exceed the Taxation
amount of the provisions that have been Accruals for tax contingencies require For transfer pricing audits where AstraZeneca
booked in the accounts. management to make judgements and and the tax authorities are in dispute,
estimates in relation to tax audit issues and AstraZeneca estimates the potential for
Although there can be no assurance exposures. Amounts accrued are based reasonably possible additional losses above
regarding the outcome of legal proceedings, on management’s interpretation of country- and beyond the amount provided to be up to
we do not currently expect them to have specific tax law and the likelihood of $575 million. However, management believes
a material adverse effect on our financial settlement. Tax benefits are not recognised that it is unlikely that these additional losses
position, but they could significantly affect unless the tax positions are probable of being will arise. Of the remaining tax exposures,
our Reported financial results in any sustained. Once considered to be probable, AstraZeneca does not expect material
particular period. management reviews each material tax benefit additional losses. It is not possible to estimate

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Financial Review 49


Payments due by period

Less than 1 year 1-3 years 3-5 years Over 5 years Total
$m $m $m $m $m
Bank loans and other borrowings 2,512 2,769 834 12,209 18,324
Operating leases 132 128 80 131 471
Contracted capital expenditure 739 – – – 739
Total 3,383 2,897 914 12,340 19,534

the timing of tax cash flows in relation to In assessing performance, the SET reviews Sarbanes-Oxley Act section 404
each outcome, however, it is anticipated that financial information on an integrated basis As a consequence of our listing on the NYSE,
a number of significant disputes may be for the Group as a whole, substantially in AstraZeneca is required to comply with
resolved over the next one to two years. the form of, and on the same basis as, the those provisions of the Sarbanes-Oxley Act
Included in the provision is an amount of Group’s IFRS Financial Statements. The high applicable to foreign issuers. Section 404 of
interest of $565 million. upfront cost of discovering and developing the Sarbanes-Oxley Act requires companies
new products, coupled with the relatively annually to assess and make public
Segmental reporting insignificant and stable unit cost of production, statements about the quality and effectiveness
During the year AstraZeneca has adopted means that there is not the clear link that of their internal control over financial reporting.
IFRS 8 ‘Operating Segments’. IFRS 8 exists in many manufacturing businesses
requires an entity to report financial and between the revenue generated on an Our approach to the assessment has been to
descriptive information about its reportable individual product sale and the associated select key transaction and financial reporting
segments. Reportable segments are cost (and hence margin) generated on a processes in our largest operating units and a
operating segments or aggregations of product. Consequently, the profitability of number of specialist areas, such as financial
operating segments that meet specified individual drugs or classes of drugs is not consolidation and reporting, treasury
criteria. In addressing these criteria, it was considered a key measure of performance operations and taxation, so that, in aggregate,
determined that AstraZeneca is engaged in for the business and is not monitored by we have covered a significant proportion of
a single business activity of pharmaceuticals the SET. each of the key line items in our Financial
and that the Group does not have multiple Statements. Each of these operating units and
operating segments. Our Resources are allocated on a group-wide specialist areas has ensured that its relevant
biopharmaceuticals business consists of the basis according to need. In particular, capital processes and controls are documented to
discovery and development of new expenditure, in-licensing and R&D resources appropriate standards, taking into account,
products, which are then manufactured, are allocated between activities on merit, in particular, the guidance provided by the
marketed and sold. All of these functional based on overall therapeutic considerations SEC. We have also reviewed the structure
activities take place (and are managed) and strategy under the aegis of the Group’s and operation of our ‘entity level’ control
globally on a highly integrated basis. We do R&D Executive Committee to facilitate a environment. This refers to the overarching
not manage these individual functional group-wide single combined discovery and control environment, including structure
areas separately. development strategy. The Group’s recent of reviews, checks and balances that are
acquisitions in the biologics area, MedImmune essential to the management of a well-
We consider that the SET is AstraZeneca’s and Cambridge Antibody Technology Group controlled business.
chief operating decision-making body plc, have been integrated into the existing
(as defined by IFRS 8). The operation of the management structure of AstraZeneca The Directors have concluded that our internal
SET is principally driven by the management both for allocation of resources and for the control over financial reporting is effective at
of the commercial operations, R&D and purposes of assessment and monitoring of 31 December and the assessment is set out in
manufacturing and supply. The SET also performance. As such, although biologics the Directors’ Responsibilities for, and Report
includes Finance, Human Resources and is a relatively new technological area for the on, Internal Control over Financial Reporting
General Counsel representation. Group, it does not operate as a separate section in the Financial Statements on page
operating segment. 122. KPMG has audited the effectiveness of
All significant operating decisions are taken our internal control over financial reporting
by the SET. While members of the SET have Off-balance sheet transaction and, as noted in the Auditor’s Report on the
responsibility for implementation of decisions and commitments Financial Statements and on Internal Control
in their respective areas, operating decision- We have no off-balance sheet arrangements over Financial Reporting (Sarbanes-Oxley
making is at SET-level as a whole. Where and our derivative activities are non- Act Section 404) on page 123, their report
necessary, decisions are implemented speculative. The table above sets out our is unqualified.
through cross-functional sub-committees minimum contractual obligations at the
that consider the group-wide impact of a year end.
new decision. For example, product launch
decisions would be initially considered by Other accounting information
the SET and, on approval, passed to an New accounting standards
appropriate sub-team for implementation. New IFRS which have been issued (both
The impacts of being able to develop, adopted and not yet adopted) are discussed
produce, deliver and commercialise a wide in the Accounting Policies section in the
range of pharmaceutical products drive Financial Statements from page 128.
the SET’s decision-making process.

AstraZeneca Annual Report and Form 20-F Information 2009

50 Directors’ Report | Geographical Review

Geographical Review
In June, AstraZeneca and Abbott submitted
an NDA for Certriad for the treatment of mixed
dyslipidaemia. AstraZeneca and Abbott have
also entered into an agreement under which
AstraZeneca obtained the non-exclusive
right to co-promote Trilipix™, alongside
Abbott in the US (excluding Puerto Rico),
from June. This is the second co-promotion
2009 in brief North America agreement between AstraZeneca and
US Abbott. In 2008, the companies announced
>>Significant growth continues to be delivered by key Sales in the US increased 9% to $14,778 a non-exclusive agreement for Abbott to
products: Arimidex (7%), Crestor (29%), Seroquel
(12%) and Symbicort (23%). Nexium growth of 9% million, benefiting from the 10% growth of co-promote Crestor alongside AstraZeneca
outside the US. our leading brands. Combined sales of those in the US (excluding Puerto Rico).
brands, namely Arimidex, Crestor, Nexium,
>>Despite a continually challenging environment,
including pressure from generic medicines, Seroquel (all formulations) and Symbicort, Onglyza™ was launched in August, the first
combined sales of Arimidex, Crestor, Nexium, were up 10% to $9,717 million (2008: $8,803 launch in the collaboration with BMS.
Seroquel and Symbicort were up 10% in the US million) and sales of Toprol-XL and its Execution of the Onglyza™ launch strategy
to 66% of our total US sales.
authorised generic increased as a result of remains on-target and the number of
>>In North America, despite several key mergers supply issues facing its generic competitors. physicians prescribing the product is
(Merck/Schering-Plough, Pfizer/Wyeth), AstraZeneca is currently the third largest growing. Brand awareness is increasing and
AstraZeneca maintained its position as the
second largest pharmaceutical company in pharmaceutical company in the US, with is in line with expectations.
Canada. In the US, AstraZeneca is now the third a 6% share of US prescription pharmaceutical
largest pharmaceutical company. In the US, sales. Sales for Aptium Oncology, Inc. fell by Sales for Toprol-XL and the authorised
AstraZeneca grew its audited sales faster than
any other pharmaceutical company in the top 10. 1% to $393 million (2008: $395 million) and generic, which is marketed and distributed by
sales for Astra Tech AB rose by 4% to $83 Par Pharmaceutical Companies, Inc. increased
>>Solid sales performance outside the US, up 6%. million (2008: $80 million). 227% to $964 million (2008: $295 million)
>>Strong brand performance in our Western Europe following the withdrawal from the market
markets but intense competition and governmental Seroquel maintained its strong position as the of two other generic metoprolol succinate
controls over healthcare expenditure. number one prescribed atypical anti-psychotic products in early 2009. AstraZeneca worked
>>Emerging Markets delivered strong sales on the market, with sales up 13% to $3,416 diligently following these withdrawals to
growth, up 12% with Emerging Europe sales up million (2008: $3,015 million). Seroquel ensure an adequate supply of Toprol-XL
7% and Emerging Asia Pacific sales (including (all formulations) posted total prescription and the authorised generic. In September,
China) up 15%.
growth of 2% with an increase of 408,000 Watson Pharmaceuticals Inc. received
>>Live attenuated H1N1 influenza (swine flu) vaccine prescriptions, driven by strong Seroquel XR approval for 25mg and 50mg strengths of
approved. AstraZeneca contracted with the US prescription growth of 195%. At the end of metoprolol succinate. We expect further
Department of Health and Human Services to
supply 42 million doses of live attenuated H1N1 2009, Seroquel XR accounted for 11.1% of generic competition in 2010.
influenza vaccine at $389 million. the Seroquel total prescription volume in the
US, up from 3.4% at the end of 2008. Arimidex continued to perform well with sales
>>For the first time, the seasonal influenza vaccine,
FluMist, sold out of its approximately 10 million up 16% to $878 million (2008: $754 million)
dose supply. Throughout 2009, Nexium continued to lead for the full year. Arimidex continues to be the
the branded proton pump inhibitor (PPI) market market leader in new prescriptions in hormonal
For more information regarding our products for new prescriptions, total prescriptions and treatments for post-menopausal women with
see the Therapy Area Review from page 55. total capsules dispensed. Generic lansoprazole hormone receptor positive breast cancer in
Details of material legal proceedings can be and Prevacid OTC 24 Hour were introduced the US.
found in Note 25 to the Financial Statements in November, leaving Nexium as the only
from page 166 and details of relevant risks are branded product with significant market share Patent protection in the US for the Casodex
set out in the Principal risks and uncertainties in the PPI class. In the face of continuing advanced prostate cancer indication expired
section from page 80. generic, OTC and pricing pressures, Nexium in April 2009. In July, multiple generic
sales were down 9% to $2,835 million in 2009 formulations of Casodex were approved by
See the market definitions table on (2008: $3,101 million). the FDA and entered the market. As a result,
page 206 for information on AstraZeneca’s 2009 sales of Casodex declined 49% to
market definitions. Crestor achieved sales of $2,100 million $148 million (2008: $292 million).
(2008: $1,678 million) and a total prescription
growth of 22.8%. For the second year in a Sales for Pulmicort Respules were down
row Crestor was the only branded statin to 21% to $692 million (2008: $874 million)
grow market share despite pressure from as a result of the ‘at risk’ launch of generic
generic medicines. In fact, in 2009, Crestor’s budesonide inhalation suspension by Teva
total prescription growth of 22.8% significantly in November 2008. On 25 November 2008,
outpaced the market by 17.5% and that of the parties settled the ensuing litigation
total generic statins by 3.3%. We continue to and in accordance with the settlement
see increased interest in the clinical profile of agreement, Teva commenced sales of its
Crestor from physicians following receipt of generic product under an exclusive licence
the atherosclerosis indication. Crestor is the from AstraZeneca on 15 December 2009.
fastest growing branded statin prescribed by
cardiologists and internists.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Geographical Review 51


Our financial performance

2009 2008 2007 2009 compared to 2008 2008 compared to 2007
Growth due Growth due
CER to exchange CER to exchange CER Reported CER Reported
Sales growth effect Sales growth effect Sales growth growth growth growth
$m $m $m $m $m $m $m % % % %
US 14,778 1,268 – 13,510 142 2 13,366 9 9 1 1
Canada 1,203 37 (109) 1,275 95 35 1,145 3 (6) 8 11
North America 15,981 1,305 (109) 14,785 237 37 14,511 9 8 2 2
Western Europe 9,277 257 (723) 9,743 55 573 9,115 3 (5) 1 7
Japan 2,341 142 242 1,957 73 223 1,661 7 20 4 18
Australasia 853 98 (88) 843 107 21 715 12 1 15 18
Other Established Markets 12,471 497 (569) 12,543 235 817 11,491 4 (1) 2 9
Emerging Europe 1,091 87 (211) 1,215 102 85 1,028 7 (10) 10 18
China 811 168 16 627 136 54 437 27 29 31 43
Emerging Asia Pacific 780 52 (74) 802 72 (19) 749 6 (3) 10 7
Other Emerging 1,670 208 (167) 1,629 247 39 1,343 13 3 18 21
Emerging Markets 4,352 515 (436) 4,273 557 159 3,557 12 2 16 20
Total Sales 32,804 2,317 (1,114) 31,601 1,029 1,013 29,559 7 4 3 7

Symbicort pMDI continued to deliver steady AstraZeneca has a number of new drug was the fastest growing branded company
growth in the US with sales up 91% to application submissions under review by the in the top 10. While it is unlikely that there will
$488 million (2008: $255 million). It surpassed regulatory authorities in the US and the EU, be widespread adoption of a broad national
a 15% total prescription share and a 17% including: Crestor (for a new indication, as an price-control scheme in the near future,
new prescription share of the inhaled sNDA based on the results of the JUPITER there will continue to be increased attention
corticosteroid/long-acting beta-agonist study), Vimovo, Certriad, motavizumab and to pharmaceutical prices and their impact on
market. Symbicort pMDI is now prescribed Symbicort pMDI as an sNDA for paediatric healthcare costs for the foreseeable future.
to 26% of all patients who are new to use as well as sNDAs for Seroquel XR for
combination therapy. In February 2009, it was generalised anxiety disorder (acute, In 2010, we anticipate there will be continued
approved for the maintenance treatment of maintenance and use in elderly), and for the focus on health reform that may result in the
airflow obstruction in patients with chronic use of Seroquel XR as monotherapy for the implementation of changes in legislation and
obstructive pulmonary disease, including treatment of patients with major depressive regulation. AstraZeneca believes that every
chronic bronchitis and emphysema. disorder (acute, maintenance and use in American should have affordable health
elderly). Further information about the status insurance and prescription drug coverage.
Synagis is the only FDA-approved MAb to of these submissions and others is contained In reviewing different health reform proposals
help protect high-risk babies against severe in the Therapy Area Review from page 55. that Congress is considering, AstraZeneca
respiratory syncytial virus (RSV). In 2009, will ask whether any particular provision:
sales in the US were $782 million (2008: Currently, there is no direct government
$923 million). Sales in the 2009-2010 RSV control of prices for commercial prescription >> Promotes market competition that leads
season started slower than anticipated due to drug sales in the US. However, some publicly to improved health outcomes
payer pressure as a result of the introduction funded programmes, such as Medicaid and >> Ensures patient safety is maintained
of more restrictive guidelines regarding the TRICARE (Department of Veterans Affairs), or enhanced
use and dosing of Synagis by the American have statutorily mandated rebates and >> Expands coverage for the uninsured
Academy of Pediatrics and the adoption of discounts that have the effect of price controls >> Fosters and rewards innovation
these guidelines. for these programmes. Additionally, pressure >> Provides protection for intellectual property.
on pricing, availability and utilisation of
AstraZeneca’s monovalent H1N1 influenza prescription drugs for both commercial and For further discussion of the proposed US
(swine flu) vaccine, which is made using public payers continues to increase, driven healthcare reforms, see the Competition,
the same technology and process as by, among other things, an increased focus price controls and price reductions section
AstraZeneca’s seasonal influenza vaccine, on generic alternatives. Primary drivers of on page 83.
FluMist, was approved by the FDA in increased generic use are budgetary policies
September for the same patient population within healthcare systems and providers, In its fourth year of operation, the Medicare
as FluMist (patients two to 49 years of age). including the use of ‘generics only’ formularies, Part D prescription drug programme
AstraZeneca began shipping product to the and increases in patient co-insurance or maintained high levels of enrolment and
US Department of Health and Human co-payments. In 2009, 75% of the beneficiary satisfaction. It also achieved
Services (HHS) in September. All sales in prescriptions dispensed in the US were prescription volume growth similar to that of
the US were through the HHS and totalled generic. Despite these price pressures and other mature markets and provided access
$389 million. a challenging economic environment, to our medicines for a large segment of the
AstraZeneca increased net product sales in patient population. Overall access for
2009 by 9% and IMS Health audited sales AstraZeneca’s products in key accounts
for the US market show that AstraZeneca was maintained or improved in 2009.

AstraZeneca Annual Report and Form 20-F Information 2009

52 Directors’ Report | Geographical Review

We continue our long-standing commitment depressive disorder. In addition, new tablet Other Established Markets
to educating Medicare beneficiaries and strengths (32/12.5mg and 32/25mg) were Sales in Other Established Markets increased
supporting healthcare professionals in all approved for Atacand Plus. by 4% (-1% reported). The key products
aspects of Medicare Part D through our driving sales growth in 2009 were Crestor,
partnership with the National Council on Key organisational efficiencies were Symbicort, Nexium and Seroquel.
Aging. This includes a consumer website, obtained through structural changes, as
My Medicare Matters, which was revised well as the move to regional shared service Western Europe
this year to provide detailed, yet easy-to- models and common North American In our Western Europe markets, we saw good
understand information about Medicare technology platforms. growth of 3% (-5% reported). The weakness
services including Part D for people with of the pound sterling in comparison to the
commonly diagnosed diseases among the A recent study, ‘The Rx&D International Report euro resulted in a significant change in the
elderly, starting with diabetes, cancer and on Access to Medicines, 2008-2009’ by pattern of export trade within the EU with
Alzheimer’s disease and related dementias. George Wyatt, highlights that only 55% of strong sales in the UK (up 27%, +6% reported)
Funding from AstraZeneca also supports innovative medicines receive approval from more than offsetting sales declines in Italy, an on-line Canada’s Health Technology Assessment (down 3%, -9% reported), Spain (down 6%,
community for healthcare professionals and appraisal system compared to an international -11% reported), and the Nordics (ie Sweden,
grass roots organisations serving people average of 73%. The Patented Medicine Finland, Denmark and Norway) (down 5%,
with Medicare. Prices Review Board (PMPRB) has the role of -16% reported).
ensuring that prices charged by manufacturers
Additionally, through the AZ&Me Prescription for patented medicines are not excessive. Within our Western Europe markets, Crestor
Savings Programme, AstraZeneca provides Recent PMPRB guideline changes to be has delivered a strong financial performance
prescription access to financially needy introduced in 2010 have secured a competitive and has outperformed the market with strong
Medicare Part D beneficiaries. AstraZeneca pricing environment for the Canadian double-digit growth. Likewise, Seroquel has
has been providing patient assistance pharmaceutical industry. outperformed the market by two times with
to the uninsured for 30 years. Last year, the successful launch of Seroquel XR and
we provided more than $750 million in The provinces have adopted different the bipolar indication driving performance.
savings to approximately 505,000 people approaches to pharmaceutical funding, Symbicort has defended its market position
without drug coverage (approximately from one end of the continuum in Quebec, and Nexium has moved from second to first
3.8 million prescriptions). with more open access, to more restricted place in its class. Arimidex has maintained its
access in British Columbia. Ontario, Alberta position as the leading aromatase inhibitor.
Canada and British Columbia have all undertaken Sales of Casodex continue to decline
Despite the entry of generic forms of reviews of their drug reimbursement system, following patent expiries in 2008.
Seroquel IR in late 2008, total product sales resulting in the introduction of product listing
in Canada increased by 3% to $1,203 million agreements, the reduction of generic prices Sales in our Western Europe markets
(2008: $1,275 million) and we remain the and changes to the role of pharmacists. continued to be impacted by government
second largest brand name pharmaceutical The trend in Canada indicates provinces will initiatives to contain drug expenditures and
company in Canada. Combined sales of continue to introduce policy changes that drive by generic erosion of those of our products
Crestor, Nexium, Symbicort and Atacand were cost savings, while providing reasonable which have lost patent protection and
up 18% to $872 million (2008: $805 million) patient access to innovative medicines. Regulatory Exclusivity.
with Crestor and Nexium among the top 10
prescription products in Canada by sales. Rest of World We have continued with our programme of
Sales of Seroquel were down 68% to $48 Sales in the Rest of World performed strongly resource management in our Western Europe
million (2008: $160 million) as a result of in 2009, up 6% (flat as reported) to $16,823 markets and have reduced our cost base by
generic entry. Crestor maintained its number million (2008: $16,816 million), despite the 5% and headcount by over 600 during 2009.
two ranking in the statin market and was the world economic crisis. Key products (Arimidex,
fastest-growing product in both new and total Crestor, Nexium, Seroquel and Symbicort) Overall our sales in France were up 2%
prescription segments (25.5% and 27.6% delivered a strong performance, up 15% (-4% reported) to $1,849 million (2008: $1,922
growth, respectively). Crestor is also the (+8% reported) with sales of $7,977 million million). The strong performance of Crestor and
second largest pharmaceutical product in (2008: $7,413 million). China, Emerging Nexium, which gained significant market share
Canada by sales. Asia Pacific and Other Emerging markets from competitors, was offset by the continuing
delivered particularly strong sales, up 14% impact of patent expiry for Casodex.
AstraZeneca received a number of important (+7% reported) with sales of $3,261 million
regulatory approvals from Health Canada in (2008: $3,058 million). In Germany, sales were up 3% (-2% reported)
2009, including regulatory approval for to $1,278 million (2008: $1,307 million) with
Onglyza™ for the treatment of Type 2 diabetes, good growth in Atacand, Symbicort and
Symbicort Turbuhaler for the treatment of Seroquel offsetting the continued declines
chronic obstructive pulmonary disease and in Nexium, resulting from government
Seroquel XR for the treatment of major restrictions to access, and Casodex following
patent expiry.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Geographical Review 53


As a result of the weak pound sterling and its In addition, future growth prospects received In many of the larger markets, such as Brazil
impact on export sales through parallel trade, a boost in 2009 with the approval of and Mexico, patients tend to pay directly
in the UK sales were up 27% (+6% reported) Symbicort Turbuhaler for the Japanese for prescription medicines and consequently
to $1,082 million (2008: $1,020 million) driven market. Symbicort Turbuhaler was launched these markets are at less risk of direct
by Crestor (up 62%, +35% reported), Seroquel in January 2010 into an asthma market where government interventions on pricing and
(up 64%, +35% reported), Symbicort (up the proportion of patients treated by inhaled reimbursement. In other markets such as
42%, +18% reported) and Nexium (up 95%, corticosteroids is growing but lags behind South Korea, Taiwan and Turkey where
+59% reported). other major markets by five to 10 years. governments do pay for medicines, we are
Symbicort Turbuhaler is being promoted in seeing measures to reduce the cost of
In Italy, overall sales declined by 3% (-9% Japan by both AstraZeneca and Astellas. prescriptions in line with the systems in
reported) to $1,199 million (2008: $1,323 Europe, Canada and Australia.
million) as a result of reference pricing and In Japan there is formal central government
Casodex patent expiry. However, Crestor control of prices by the Ministry of Health, Emerging Europe
performed well, increasing its sales by 8% (+3% Labour and Welfare (MHLW) and the pricing As part of our ongoing growth strategy,
reported) and Seroquel showed strong growth, and reimbursement system has been stable we have significantly increased our presence
increasing sales by 36% (+28% reported). in recent years. Regular price revisions are in the Russian market and sales have grown
imposed in April every other year that reduce by 23% (-2% reported) to $180 million (2008:
In Spain, sales were down 6% (-11% reported) the reimbursement price of almost all $184 million). The strongest performance has
to $768 million (2008: $863 million) due products. Accordingly, prices were not been seen in the cardiovascular (up 61%,
to Seroquel (down 17%, -21% reported), revised in 2009, but will be in 2010. At the +26% reported) and respiratory (up 33%, +6%
Symbicort (down 3%, -9% reported) same time, it is expected that in April 2010, reported) Therapy Areas.
and Arimidex (down 30%, -33% reported). a new pricing rule will be adopted on a trial
However, Nexium performed well with sales basis to reward the development of innovative In Romania, AstraZeneca has increased
up 15% (+9% reported). new products. Under this rule, new products its market share to 3.3% in a very dynamic
with a below industry-average doctor margin prescription market environment. Sales have
Most governments in Europe intervene directly will be subject to either a zero or a significantly increased by 51% (+29% reported) to $92
to control the price and reimbursement of reduced price revision, as long as the million (2008: $71 million), driven primarily
medicines. The decision-making power of manufacturer has demonstrated appropriate by Crestor (up 54%, +29% reported) and
prescribers in Europe has been eroded in progress in developing unapproved products Nexium (up 59%, +36% reported).
favour of a diverse range of payers. While the and indications requested by the government.
systems to control pharmaceutical spending The long-term objective of the Japanese In late 2009 the government in Turkey imposed
vary, they have all had a noticeable negative government is to raise generic volume share unprecedented levels of price reductions on
impact on the uptake and availability of from 20.9% in 2008 to 30% by 2012; recent the pharmaceutical industry. As a result our
innovative medicines. Several governments reforms have supported this goal by making full-year growth was limited to 6%.
have imposed price reductions and increased the substitution of a generic product for a
the use of generic medicines as part of branded product easier. Ukraine, Kazakhstan, Belarus and Georgia
healthcare expenditure control. Several have been particularly challenged by the
countries are applying strict tests of Australasia financial crisis, most notably in Ukraine,
cost-effectiveness to medicines, which has In Australia and New Zealand, we delivered although the pharmaceutical sector has been
reduced access for European patients to a strong sales performance with sales up less affected than others by the GDP decline.
medicines in areas of high unmet medical 12% (+1% reported) to $853 million (2008:
need. These and other measures all $843 million), driven mainly by sales growth China
contribute to an increasingly difficult for Crestor, Atacand, Nexium, Seroquel and In China, in line with our growth and expansion
environment for branded pharmaceuticals Symbicort. These five brands grew by 26% strategy of the past five years, we have
in Europe. (+14% reported). Crestor’s performance in continued to build our presence and sales
Australia has been particularly strong, gaining (excluding Hong Kong) were up 27% (+29%
Japan over 6% volume market share in the year. reported) to $811 million (2008: $627 million).
In Japan, strong volume gains of 8.3% We are the second largest multinational
increased overall sales by 7% (+20% reported) Emerging Markets pharmaceutical company in the prescription
to $2,341 million (2008: $1,957 million) and In the Emerging Markets, sales increased by market in China (including Hong Kong) with a
allowed us to maintain our twelfth place 12% (+2% reported) to $4,352 million (2008: growth rate for prescription sales of 29%. Our
position in the market. This was achieved $4,273 million), accounting for nearly 49% of investment in China increased with further
despite a decline of 5% (+6% reported) of total sales growth outside the US. Sales in growth in the number of sales representatives,
Casodex, our largest product in Japan, Emerging Europe were up 7% (-10% reported) and continued to support our innovation
following the launch of generic competitors to $1,091 million (2008: $1,215 million). Sales discovery research centre in Shanghai and
in May 2009. The key drivers of growth were in China (excluding Hong Kong) increased by our several external collaborations.
the continued success of Crestor (up 58%, 27% (+29% reported) to $811 million (2008:
+76% reported), the continued growth of $627 million).
Losec (up 8%, +20% reported) and the
increased penetration of Seroquel (up 25%,
+39% reported).

AstraZeneca Annual Report and Form 20-F Information 2009

54 Directors’ Report | Geographical Review

In November, the third edition of China’s Atacand, Crestor, Nexium, Seroquel and
National Reimbursable Drugs List (NRDL) was Symbicort showed strong performance,
published by the Ministry of Human Resources with overall sales up 17% (+5% reported) to
and Social Security (MHRSS), five years after $544 million (2008: $516 million). Nexium is
the publication of the second edition in 2005. our number one prescription product in Latin
131 new ‘western’ medicines were added America, with sales up 4% (-5% reported)
to the list, representing a 13% increase. For to $175 million (2008: $185 million), and is
AstraZeneca Crestor, Nexium i.v., Symbicort ranked fourth in the top 20 products of the
and Seloken XR were included on the list for Latin American prescription market. Crestor
the first time whilst previous restrictions that is our second largest prescription product,
applied to Arimidex, Casodex and Zoladex with overall sales up 27% (+14% reported) to
were removed. Based on the current $146 million (2008: $128 million), and is now
guidelines issued by MHRSS, we expect the number seven in the top 20 Latin American
new list to be operational at the provincial prescription products.
and hospital level in the second half of 2010.
Brazil, Mexico and Venezuela are our three
In August, China’s National Essential Drug largest markets in the region, with sales up
System (NEDL) was officially launched. 18% (+4% reported) to $457 million (2008:
This formulary lists 307 essential drugs (205 $440 million), down 9% (-26% reported) to
chemical and biologics and 102 formulated $261 million (2008: $353 million) and up
traditional Chinese medicines) which should 15% (+15% reported) to $163 million (2008:
be used in all government owned healthcare $142 million), respectively. Mexico in particular
institutions. Seloken and Losec MUPS are has been heavily impacted by the global
listed in the NEDL. The Chinese Government financial crisis as a result of its reliance on
has a target that by the end of 2009, 30% of the US economy.
basic healthcare institutions (ie community
health centres and rural hospitals) will stock Middle East and Africa (MEA)
all drugs listed in the NEDL. During 2009, MEA has achieved strong
growth essentially driven by Maghreb and
Emerging Asia Pacific Egypt. Our largest three markets in the region
In Emerging Asia Pacific, overall sales were are now South Africa, the Gulf States and
up 6% (-3% reported) to $780 million (2008: Saudi Arabia.
$802 million) with double-digit growth in India,
Malaysia and Vietnam and a more subdued Sales force expansion in MEA over the past
performance in Thailand, the Philippines few years has directly contributed to this
and Singapore due to the more pronounced strong performance in the region, with Crestor,
impact of the economic crisis and government Symbicort and Seroquel demonstrating
interventions in these countries. growth. Overall, AstraZeneca’s sales in
MEA are growing twice as fast as the
Other Emerging markets pharmaceutical market in MEA.
Latin America
During 2009, GDP growth in Latin America
slowed significantly to -2.1% from 4.2% in
2008, as a result of the global financial crisis.
The pharmaceutical market in Latin America
grew by 12% compared to 2008 and
AstraZeneca’s sales grew 8% (-4% reported)
to $1,118 million (2008: $1,159 million), mainly
driven by Brazil, Argentina and Venezuela.
As a result, our market share grew to 2.4%
(2008: 2.3%) in the prescription market,
improving our position again from eleventh
last year to tenth this year in the regional
competitor rankings.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Therapy Area Review 55


Sales by Therapy Area $m

Therapy Area Review

Sales by Therapy Area $m

Cardiovascular (+25%) Neurosc

Cardiovascular (+25%) Neurosc
2009 8,376 2009
2009 8,376 2009
2008 6,963 2008
Sales by Therapy Area $m 2008 6,963 2008
Sales by Therapy Area $m 2007 6,686 2007
2007 6,686 2007

Cardiovascular (+25%) Neuroscience (+10%) Gastroin
This section contains
(+25%) further Neuroscience (+10%) Gastrointestinal (-2%)
Oncology (-7%) Infection
information about the Therapy Areas 2009 8,376 Oncology (-7%)
2009 6,237 Infection
2009 8,376 2009 6,237 2009 6,011
in which our efforts are focused: 2008 6,963 2008
2009 4,518
5,837 2008
2008 6,963 2008 5,837 2009
2008 4,518
6,344 2009
Cardiovascular, Gastrointestinal, 2007 6,686 2007
2008 5,340
4,954 2007
2007 6,686 2007 5,340 2008
2007 4,954
6,443 2008
Infection, Neuroscience, Oncology, 2007 4,819 2007
Projects in Phase III 2007 4,819 2007
and Respiratory & Inflammation.
Oncology (-7%) Infection and other1 (+10%) Respirat
Oncology (-7%) Infection and other1 (+10%) Respiratory & Inflammation (+6%)

We describe the business environment, trends
2009 4,518 2009 2,631 2009
and other factors that have influenced our
2009 4,518 2009 2,631 2009 4,132
2008 4,954 2008 2,451 2008
decision to focus on diseases in these six
2008 4,954 2008 2,451 Sales
2008 by Therapy Area $m
Sales by Therapy Area
2007 $m
4,819 2007 1,714 2007
areas, our strategic objectives for each 4,819
2007 and 2007 1,714 2007 3,711
our progress towards achieving these
Cardiovascular (+25%) Neurosc
objectives. We include information about Cardiovascular (+25%) Neuroscience (+10%) Gastroin
Projects in Phase II
our marketed medicines and how they are 2009 8,376 2009
2009 8,376 2009 6,237 2009
designed to make a meaningful difference 2008 6,963 2008
2008 6,963 2008 5,837 2008

for patients, together with an overview of 2007 6,686 2007
Sales by Therapy Area $m 2007 6,686 2007 5,340 2007
performance during the year. We also report
in detail on the potential new products and
product life-cycle(+25%)
developments in our Neuroscience (+10%) Oncology (-7%) (-2%)
Gastrointestinal Infection
Oncology (-7%) Infection and other1 (+10%) Respirat
pipeline that reflect our commitment to
2009 8,376 2009 6,237 2009 6,011
4,518 2009
maintaining a flow of innovation that adds 2009 4,518 2009 2,631 2009
2008 6,963 2008 Projects in Phase I 5,837 2008 4,954
6,344 2008
value for our shareholders and society. 2008 4,954 2008 2,451 2008
2007 6,686 2007 5,340 2007 4,819
6,443 2007
2007 4,819 2007 1,714 2007

For a list of all our potential new products and
product life-cycle developments see the
Oncology (-7%) Infection and other1 (+10%) Respiratory & Inflammation (+6%)
Development Pipeline table from page 196.
2009 4,518 2009 2,631 2009 4,132
Many of our products are subject to litigation.
2008 4,954 2008 2,451 2008 4,128
Detailed information about material legal4,819
2007 2007 1,714 2007 3,711
Projects in pre-clinical
proceedings can be found in Note 25 to the
Financial Statements from page 166. Details 1
Includes Synagis and FluMist which were acquired
of relevant risks are set out in the Principal in June 2007.
risks and uncertainties section from page 80.

AstraZeneca Annual Report and Form 20-F Information 2009

56 Directors’ Report | Therapy Area Review

Cardiovascular Our marketed products Our focus

Our key marketed products
Crestor1 (rosuvastatin calcium) is a statin for the treatment Since its launch in 2003, our statin, Crestor,
of dyslipidaemia and hypercholesterolemia, and to slow
In brief the progression of atherosclerosis. has continued to gain market share, based on
its differentiated profile in managing cholesterol
>>Onglyza™ has been launched in the US, Canada, Atacand2 (candesartan cilexetil) is an angiotensin II
antagonist for the 1st line treatment of hypertension levels and its unique recent label indication
Mexico, Germany, the UK and Denmark and has
been approved in Argentina, Brazil, India and all and symptomatic heart failure. for treating atherosclerosis. Crestor approval
other EU countries. Seloken/Toprol-XL (metoprolol succinate) is a has broadened to every EU country with
beta-blocker once-daily tablet for 24-hour control of launches in Germany and Spain in 2009.
>>Crestor sales up 29% to $4.5 billion. Crestor hypertension and for use in heart failure and angina.
approval has broadened to every EU country
with launches in Germany and Spain in 2009. Tenormin (atenolol) is a cardioselective beta-blocker for Fewer than half of the people thought to
hypertension, angina pectoris and other CV disorders. have high levels of low-density lipoprotein
>>Crestor was approved in the US for the treatment
of paediatric patients from 10 to 17 years of age Zestril 3 (lisinopril dihydrate) is an ACE inhibitor used cholesterol (LDL-C) ‘bad cholesterol’ get
with heterozygous familial hypercholesterolemia for the treatment of a wide range of CV diseases, diagnosed and treated and, of those people,
based on the PLUTO study. This study fulfilled our including hypertension.
only about half reach their physician’s
paediatric exclusivity obligations, which resulted Plendil (felodipine) is a calcium antagonist for the
in Paediatric Exclusivity being granted in July, recommended cholesterol target using
treatment of hypertension and angina.
which will provide an additional six months of existing treatments. Crestor is the most
exclusivity to market Crestor in the US. Onglyza™4 (saxagliptin) is a dipeptidyl peptidase IV effective statin in lowering LDL-C and the
inhibitor for the treatment of Type 2 diabetes.
>>Crestor filings were submitted in the US and the majority of patients reach their LDL-C goals
EU as well as other markets seeking an outcomes
Licensed from Shionogi & Co. Ltd. using the usual 10mg starting dose. Crestor
indication and labelling based on the JUPITER
Licensed from Takeda Chemicals Industries Ltd.
Licensed from Merck & Co., Inc. also produces an increase in high-density
study which demonstrated a significant reduction
in major cardiovascular (CV) events (44% compared
Co-developed and co-commercialised with Bristol- lipoprotein cholesterol (HDL-C) ‘good
to placebo) in men (over 50) and women (over 60) Myers Squibb Company. cholesterol’, across a range of doses. At its
with elevated high-sensitivity C-reactive protein usual 10mg starting dose, Crestor has been
but low/normal cholesterol levels.
shown, versus placebo, to reduce LDL-C by
>>The parties concluded discovery in the Crestor Our strategic objectives up to 52% and raise HDL-C by up to 14%,
consolidated ANDA patent litigations filed in the An estimated 17.5 million people died from with eight out of 10 patients reaching their
US District Court for the District of Delaware.
The actions involve eight generic drug cardiovascular (CV) disease in 2005, 7.6 million lipid goals.
manufacturers challenging the patent covering due to heart attacks, despite improvements in
the active ingredient for Crestor. The Court the quality of diagnosis and treatment. Direct In December, the FDA approved Crestor
decided numerous pre-trial motions, including
a denial of AstraZeneca’s and the licensor’s and indirect costs of treating coronary heart for use as an adjunct to diet for slowing the
(Shionogi) motion for summary judgment in disease were estimated to be €192 billion progression of atherosclerosis in patients
respect of alleged inequitable conduct. The Court in Europe in 20081 and $313 billion in the US with elevated cholesterol. Crestor is the
amended the pre-trial schedule, re-setting the
beginning trial date to 22 February 2010. in 20092. only statin with an atherosclerosis indication
in the US which is not limited by disease
>>In Canada, previously reported Patented Medicines Backed by over 40 years’ experience, severity or restricted to patients with coronary
(Notice of Compliance) Regulations proceedings
in respect of Crestor continued and others were AstraZeneca is a world leader in CV heart disease.
commenced in response to Notices of Allegation medicines. We aim to build on our strong
from further generic manufacturers. position, focusing on the growth areas of Atacand, first launched in 1997, is approved
>>Atacand sales up 5% to $1.4 billion. atherosclerosis (hardening of the arteries), for the treatment of hypertension in over 100
thrombosis (blood clotting), diabetes and countries and for symptomatic heart failure
>>Toprol-XL US sales up 227% for the full year. atrial fibrillation. in 70 countries. Atacand is an angiotensin II
>>MAA filed for Brilinta/Brilique (ticagrelor) in antagonist, and this class of medicine
October and an NDA in November. Hypertension, atherosclerosis is the fastest-growing segment of the
and dyslipidaemia global hypertension market. Atacand Plus
>>In December, AstraZeneca and BMS submitted
an NDA for the once-daily fixed-dose combination High blood pressure (hypertension) and (candesartan cilexetil/hydrochlorothiazide)
of Onglyza™ (saxagliptin) and metformin. abnormal levels of blood cholesterol is a fixed-dose combination of Atacand and
(dyslipidaemia) damage the arterial wall and the diuretic hydrochlorothiazide, indicated
>>US submission for Certriad, a fixed-dose
combination of Crestor (rosuvastatin calcium) thereby lead to atherosclerosis. CV events for the treatment of hypertension in patients
and Abbott’s Trilipix™ (fenofibric acid), for the driven by atherosclerotic disease remain who require more than one hypertensive
treatment of mixed dyslipidaemia. the leading cause of death in the western therapy. Atacand Plus is approved in 88
>>An NDA for Axanum, a single capsule of Nexium world. Lipid-modifying therapy, primarily countries. In 2008, AstraZeneca sought
and aspirin, was filed in April. statins, is a cornerstone for the treatment approval in Europe and other markets for
of atherosclerosis. Within the lipid-modifying two additional dose strengths of Atacand
market, generics are taking a significant Plus. In 2009, the new strengths of Atacand
share of the market and it is anticipated that Plus (32mg/12.5mg and 32mg/25mg) were
generic atorvastatin (Lipitor™) will be available approved in Canada, Australia, Sweden and
late in 2011. nine other markets. Further approvals and
launches are anticipated in 2010.

European cardiovascular disease statistics, 2008


edition, Steven Allender et al, British Foundation

Health Promotion Research Group.
National Heart, Lung, and Blood Institute. Fact Book,

Fiscal Year 2008,


AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Therapy Area Review 57


Our financial performance

2009 2008 2007 2009 compared to 2008 2008 compared to 2007
Growth due Growth due
CER to exchange CER to exchange CER Reported CER Reported
Sales growth effect Sales growth effect Sales growth growth growth growth
$m $m $m $m $m $m $m % % % %
Seloken/Toprol-XL1 1,443 677 (41) 807 (667) 36 1,438 84 79 (46) (44)
Crestor 4,502 1,048 (143) 3,597 714 87 2,796 29 25 26 29
Atacand 1,436 67 (102) 1,471 123 61 1,287 5 (2) 10 14
Plendil 241 (20) (7) 268 (18) 15 271 (7) (10) (7) (1)
Tenormin 296 (15) (2) 313 (17) 22 308 (5) (5) (6) 2
Zestril 184 (40) (12) 236 (72) 13 295 (17) (22) (24) (20)
Onglyza™ 11 11 – – – – – n/m n/m n/m n/m
Other 263 9 (17) 271 (34) 14 291 3 (3) (12) (7)
Total 8,376 1,737 (324) 6,963 29 248 6,686 25 20 – 4

Includes sales of the authorised generic of Toprol-XL to Par Pharmaceutical Companies, Inc.

Therapy area world market Following an sNDA submission in April 2009, The AURORA study, published in April 2009,
(MAT/Q3/09) the FDA has approved Atacand for the evaluated the effects of Crestor 10mg and
treatment of hypertension in children one to placebo on survival and major CV events
17 years of age. This sNDA submission has in patients with end-stage renal disease
also resulted in the granting of an additional on chronic hemodialysis and demonstrated
E six-month period of exclusivity to market that Crestor had no positive impact on such
A Atacand in the US. patients. The findings of the AURORA study
D are consistent with other previously published
Clinical studies of our key results with other statins and suggest that the
marketed products CV disease present in chronic hemodialysis
C GALAXY, our long-term global clinical patients is different from other clinical
research programme for Crestor, which settings and is not positively impacted by
investigates links between optimal lipid statin treatment.
control, atherosclerosis and CV morbidity
Market sectors $bn and mortality, has completed a number of Ongoing studies of Crestor include the
A High blood pressure 51.1 studies involving over 65,000 patients in over SATURN study and the PLANETS I and II
B Abnormal levels of blood cholesterol 35.4 55 countries. Some of the studies undertaken studies. The SATURN study, which is
C Diabetes 28.5 as part of the GALAXY programme are designed to measure the impact of Crestor
D Thrombosis 23.0 referred to below, namely the JUPITER, 40mg and atorvastatin (Lipitor™) 80mg on the
E Other 21.7 PLUTO, AURORA, SATURN and PLANETS I progression of atherosclerosis in high-risk
and II studies. patients, is expected to report in 2011.
CV is the single largest therapy area in the The PLANETS I and II studies, which are
global healthcare market with a worldwide Regulatory submissions for Crestor based on designed to compare the efficacy and safety
market value of $160 billion.
CV disease remains the greatest risk to life for the JUPITER study results, details of which of Crestor 10mg and 40mg to atorvastatin
adults, accounting for 17 million deaths worldwide were included in our 2008 Annual Report and (Lipitor™) 80mg in patients with proteinuric
each year. In the US, 23 million people suffer from Form 20-F Information, are under review in renal disease in diabetics and nondiabetics,
diabetes and two in five people with diabetes still
have poor lipid profiles, one in three have poor the US and the EU as well as in other markets respectively, are expected to report in the
blood pressure control and one in five have poor with approvals in Malaysia and Colombia. first half of 2010.
glucose control. The JUPITER study was the subject of an
FDA Advisory Committee in December In the pipeline
with the Committee voting positively on the We continue the search for the next major

benefit/risk profile demonstrated in the study. therapy to reduce atherosclerotic risk.
A decision by the FDA on the submission is In collaboration with Abbott, we are
expected in the first quarter of 2010. developing an investigational compound,
Certriad, a fixed-dose combination of the
The PLUTO study evaluated the efficacy active ingredients in Crestor (rosuvastatin
CV is the single largest therapy area and safety of Crestor in patients 10 to 17 calcium) and Abbott’s Trilipix™ (fenofibric acid).
in the global healthcare market. years of age with heterozygous familial An NDA submission in respect of Certriad
Worldwide market value of $160 billion hypercholesterolemia. Completion of the for the treatment of mixed dyslipidaemia was
PLUTO study fulfilled our paediatric exclusivity announced jointly by both companies in June.
requirements in the US and resulted in an
additional six-month period of exclusivity to
market Crestor in the US being granted in
July. In October, a successful paediatric
registration for Crestor was achieved.

AstraZeneca Annual Report and Form 20-F Information 2009

58 Directors’ Report | Therapy Area Review

Certriad is a potential new approach to help In the pipeline 18,624 patient outcomes study of ticagrelor
patients with mixed dyslipidaemia achieve In December, AstraZeneca and BMS plus aspirin versus the active comparator,
their treatment goals using a single capsule, submitted an NDA for the once-daily clopidogrel (Plavix™/Iscover™), plus aspirin.
which targets all three major blood lipids: fixed-dose combination of Onglyza™ The PLATO study was designed to establish
LDL-C, HDL-C and triglycerides. Study (saxagliptin) and metformin. whether ticagrelor could achieve meaningful
results presented in 2008 showed that this CV and safety endpoints in ACS patients.
combination provides greater benefit across Dapagliflozin is a potential oral anti-diabetic, The PLATO study included all the major ACS
multiple lipid parameters than the individual which belongs to the novel class of sodium- patient types (unstable angina, ST segment
monotherapies, with significantly improved glucose co-transporter 2 inhibitors. It is elevation myocardial infarction and non-ST
HDL-C and triglycerides compared to Crestor designed to be used both as monotherapy segment elevation myocardial infarction) and
therapy alone, and significantly improved and in combination with other therapies followed patients who underwent invasive
LDL-C compared to Trilipix™ alone. for Type 2 diabetes. Early Phase III data procedures (eg stent placement or surgery) or
demonstrate that, when compared to were managed with prescription medication.
In 2009, AstraZeneca and the University a placebo, 24 weeks’ treatment with
of Virginia entered into a strategic research dapagliflozin improved blood glucose The data from the PLATO study suggests
collaboration to enhance development of parameters, resulted in weight loss and was that ticagrelor has achieved greater efficacy
new treatments primarily for coronary artery well tolerated in patients with Type 2 diabetes. in the primary endpoint, reduction of CV
disease with a secondary focus on peripheral The extensive Phase III programme is ongoing. events (CV death, heart attack, stroke),
vascular disease. The collaborative pre-clinical over clopidogrel without an increase in
research projects will focus on identifying Our activities in the glucokinase activator major bleeding. This efficacy endpoint was
disease mechanisms and biological targets (GKA) area continued during 2009, and driven by a statistically significant reduction
that have the potential to be starting points for Phase II studies for AZD1656 are ongoing. in both CV deaths and heart attacks with
successful and commercially viable treatments The GKA mechanism of action induces no difference in strokes. Ticagrelor is the
for these diseases, both major causes of CV insulin release from the pancreas and reduces first investigational antiplatelet that has
morbidity and mortality worldwide. glucose output from the liver, with marked demonstrated a reduction in CV death
blood glucose reducing effects in situations versus clopidogrel in patients with ACS.
Diabetes of hyperglycaemia. The reduction in the risk of CV events with
The number of people affected by Type 2 ticagrelor occurred early and this benefit
diabetes continues to grow, predominantly During 2009, we also progressed our increased over time compared to clopidogrel.
driven by obesity. Type 2 diabetes is a chronic AZD4017, AZD8329 and AZD7867 projects
progressive disease and patients often into early clinical testing. These potential The PLATO trial design prospectively identified
require multiple medications to control their medicines aim to increase insulin sensitivity 66 subgroups. The findings from 62 of the 66
condition. There are a number of established and thereby induce better glycaemic control subgroups were consistent with the results
oral generic and branded classes, such as with beneficial effects on body weight and of the overall study population. Given the
sulfonylureas and thiazolidinediones; however, blood lipids. large number of subgroups evaluated, the
newer classes such as oral dipeptidyl four inconsistent findings may have been due
peptidase IV inhibitors are entering the In December, AstraZeneca concluded an to chance. One of the four subgroups showed
market successfully by offering effective blood agreement with Biovitrum AB (publ) (Biovitrum) a difference in efficacy results between
sugar control and improved tolerability. Several for the acquisition of all Biovitrum’s rights to its patients in North America and those enrolled
new classes of drugs are in development in leptin modulator programme aimed at treating elsewhere. Alongside explanation by the play
this area. CV safety has been given particular obesity. The leptin modulator programme is of chance, this raised questions of whether
emphasis in recent regulatory reviews and currently in pre-clinical development. geographic differences between populations
guidance documents provided by the FDA. of patients or practice patterns influenced
Additional patient safety requirements for Acute coronary syndromes the effects of the randomised treatments.
new medicines can also be anticipated from Acute coronary syndromes (ACS) is an While no definitive explanation has been
other regulatory authorities. umbrella term for sudden chest pain and found to date, further analyses suggest
other symptoms due to insufficient blood a possible association between aspirin dose
Our focus supply (ischaemia) to the heart muscles. and the primary efficacy results, such that
Our key marketed products ACS is the acute culmination of ischemic reduced efficacy was observed with ticagrelor
The collaboration on a worldwide basis1 heart disease, the leading cause of death and increasing aspirin doses. AstraZeneca
between AstraZeneca and BMS to develop worldwide (WHO 2008). There remains a and the PLATO investigators are continuing
and commercialise two compounds significant need to improve outcomes and to explore these and other hypotheses,
discovered by BMS (Onglyza™ (saxagliptin) reduce the costs of treating ACS. as well as other follow-on analyses of the
and dapagliflozin) for the treatment of Type 2 PLATO trial data set, and plan to publish in
diabetes continues to make good progress. Our focus due course.
In the pipeline
During 2009, Onglyza™ was launched in the Brilinta/Brilique (ticagrelor) is the first reversibly AstraZeneca filed an MAA for ticagrelor in
US, Canada, Mexico, Germany, the UK and binding, oral, adenosine diphosphate October and an NDA in November.
Denmark and was approved in Argentina, receptor antagonist being developed to
Brazil, India and the EU. A large worldwide reduce the risk of blood clots and thrombotic Axanum is a single capsule of aspirin
study assessing CV events will be conducted events in patients diagnosed with ACS. In (acetylsalicylic acid (ASA)) (75-325mg) and
as a US post-marketing requirement. August, AstraZeneca announced results from Nexium. Low-dose ASA (75-325mg) is the
the Phase III study, PLATO, a head-to-head mainstay therapy for patients who are at high

The collaboration for saxagliptin excludes Japan.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Therapy Area Review 59


risk of having a CV event such as a heart Our focus Sales of Seloken/Toprol-XL and its authorised
attack or stroke. Patients report that low-dose In the pipeline generic increased by 84% to $1,443 million
ASA treatment can cause gastrointestinal For the control of heart rhythm in AF, our focus in 2009, as a result of increased sales of
(GI) problems and up to 30% of patients with is on atrial-specific agents as a way to reduce Toprol-XL and its authorised generic in the
upper GI problems (ie complications and the risk of pro-arrhythmic effects. Our first US. Sales in the US increased by 227% to
symptoms) caused by the use of low-dose compound in this area is in pre-clinical $964 million following the withdrawal from
ASA discontinue or take deliberate breaks development. During 2009, the development the market of two other generic metoprolol
from their low-dose ASA treatment due to of AZD1305, a combined ion-channel blocker succinate products in early 2009. However, we
GI problems, which leaves them without which was in Phase II concept testing, was expect further generic competition in 2010.
adequate CV protection and puts them at discontinued due to an emerging unfavourable
greater risk of having a CV event. The risk benefit/risk profile. Sales of Atacand in the US for the full year
of a CV event increases as early as 10 days were unchanged from 2008 at $263 million,
from the discontinuation of the treatment. Our oral, direct thrombin inhibitor (AZD0837) and account for 18% of global Atacand sales.
is ready to be taken into Phase III testing for Atacand sales outside the US were up 5%
An NDA in respect of Axanum was submitted the prevention of strokes and other embolic to $1,173 million, with a 3% increase in Other
to the FDA in April 2009 for risk reduction of events in AF patients, using a once-daily Established Markets and Canada and a
peptic ulcers associated with low-dose ASA extended release formulation that provides a 13% increase in Emerging Markets.
(75-325mg) therapy in patients at risk. The sustained anti-coagulation effect throughout
proposed labelling also includes the approved the dosing interval. AstraZeneca is Alliance revenue from the Onglyza™
low-dose ASA indications. The submission considering the potential for AZD0837 in a collaboration with BMS totalled $11 million
was based on the results of the OBERON and number of indications as well as evaluating in 2009.
ASTERIX studies evaluating the safety and potential collaborations with third parties for
efficacy of Nexium in reducing the risk of its future development. Performance 2008
gastric and/or duodenal ulcers in patients Reported performance
taking low-dose ASA (75-325mg) continuously Litigation CV sales were up 4% as reported to $6,963
during the studies, which is defined as at Detailed information about material legal million (2007: $6,686 million). Strong growth
least five days per week. proceedings relating to our CV products from Crestor, fuelled by the promotion of the
can be found in Note 25 to the Financial atherosclerosis indication, and increased
The data from the recent OBERON study, Statements from page 166. sales of Atacand offset the continuing
a double-blind, randomised, prospective significant declines in Seloken/Toprol-XL.
analysis of 2,426 patients taking low-dose Financial performance 2009/2008
ASA (75-325mg), revealed that each of Performance 2009 Performance – CER growth rates
Nexium 20mg and 40mg reduced the Reported performance CV sales were unchanged from 2007 at CER.
cumulative proportion of patients with peptic CV sales were up 20% as reported to Crestor sales increased by 26% to $3,597
ulcers after 26 weeks of treatment by 80-85% $8,376 million (2008: $6,963 million). million. US sales for Crestor for the full year
compared to placebo. Upper GI symptoms Strong growth from Crestor, driven by the increased by 18% to $1,678 million. Crestor
were assessed showing that the proportion promotion of the atherosclerosis indication, total prescription share in the US statin market
of patients treated with Nexium with upper and substantially increased sales of Toprol-XL increased to 9.9% in December 2008 from
GI symptoms was significantly lower than in and the authorised generic version of the 8.6% in December 2007, and was the only
the placebo arm. drug in the US were the major contributors branded statin to gain market share. Crestor
to growth in CV sales. sales outside the US were up 34% for the full
The ASTERIX study was a randomised, year to $1,919 million, over half of global sales
double-blind, placebo-controlled, study in Performance – CER growth rates for the product. Sales of Crestor were up
991 patients. Patients were randomised to CV sales were up 25% from 2008 at CER. 16% in our Western Europe markets to $836
treatment with either once-daily Nexium 20mg million and 93% in Japan. Sales of Crestor in
or placebo for six months while continuing to Crestor sales increased by 29% to $4,502 Emerging Markets increased by 41%.
take their low-dose ASA therapy. After six million. US sales for Crestor for the full year
months, Nexium was shown to reduce the increased by 25% to $2,100 million. The total Sales of Toprol-XL and authorised generic
risk of developing an ulcer by 70%. prescription share of Crestor in the US statin sales of the drug in the US were down 70%
market increased to 11.3% in December for the full year to $295 million. For the full
Atrial fibrillation 2009 from 9.9% in December 2008, and it year, Seloken sales outside the US were up
Atrial fibrillation (AF) is the most common was the only branded statin to gain market 1% to $512 million.
cardiac arrhythmia. Rhythm-control therapy share. Crestor sales outside the US were up
to control the symptoms of AF is dominated 33% for the full year to $2,402 million, over US sales for Atacand for the full year
by generic amiodarone, which is effective at half of global sales for the product. Sales of increased 1% to $262 million. Atacand sales
maintaining patients in normal heart rhythm Crestor were up 24% in our Western Europe outside the US were up 12% to $1,209 million,
but very poorly tolerated. AF is associated markets to $968 million and 58% in Japan, a 10% increase in Other Established Markets
with an increased risk of cerebral embolism driving sales growth in Other Established and Canada, and an 18% increase in
resulting in stroke and disability. To reduce Markets and Canada up 33% in total. Sales Emerging Markets.
the risk of such AF-related complications, of Crestor in Emerging Markets increased
anti-coagulation with vitamin K antagonists by 32%.
can be used. New anti-coagulation therapies
with improved convenience are emerging.

AstraZeneca Annual Report and Form 20-F Information 2009

60 Directors’ Report | Therapy Area Review

Gastrointestinal Our marketed products Losec/Prilosec was first launched in 1988

and is approved for the treatment of GERD.
Nexium (esomeprazole) is the first proton pump We continue to maintain certain patent
inhibitor (PPI) for the treatment of acid-related
In brief diseases to offer clinical improvements over other PPIs property covering Losec/Prilosec.
and other treatments.
>>Sales of Nexium $5 billion, down 1%. Losec/Prilosec is available both as
Losec/Prilosec (omeprazole) is used for the short-term
>>Nexium oral and intravenous was approved in and long-term treatment of acid-related diseases. a prescription-only medication and, in
the EU and other markets for the short-term Entocort (budesonide) is a locally acting corticosteroid some countries, as an OTC medication
maintenance of haemostasis and prevention for the treatment of inflammatory bowel disease. where it offers consumers a more effective
of re-bleeding in patients following therapeutic
endoscopy for acute bleeding gastric or self-medication option for the treatment of
duodenal ulcers. heartburn compared to antacids and H2
Our strategic objectives receptor antagonists. In 2009, an agreement
>>An sNDA for Nexium was submitted for risk
reduction of peptic ulcers associated with We aim to maintain our strong position in to license rights for Losec for OTC use to
low-dose acetylsalicylic acid therapy in patients gastrointestinal (GI) treatments by continuing Bayer Consumer Care AG was announced.
at risk. to focus on PPIs. New Nexium line extensions This agreement will extend the number of
>>Losec/Prilosec sales $946 million, declining in the include prevention of re-bleeding in patients markets in which Losec is available as an
EU and the US due to continuing generic erosion. with peptic ulcer bleeding and prevention OTC product.
Overall sales down 10%; Japan sales increased of low-dose aspirin associated peptic ulcers.
8%; China sales increased 21%.
Our R&D is focused on finding new, innovative In November, the FDA issued a Public Health
>>A Danish court issued an injunction against sales ways for treating acid-related disease. Advisory to consumers and Information
of generic esomeprazole magnesium by Sandoz for Healthcare Professionals about the
A/S (Sandoz). The injunction prohibits Sandoz
from selling, offering for sale or marketing the Our focus label update to Plavix™ (clopidogrel) about
pharmaceutical products ‘Esomeprazole Sandoz’ Our key marketed products interactions with Prilosec and Prilosec OTC
and other pharmaceutical products containing Nexium is marketed in approximately 100 and potentially with other medicines that
esomeprazole magnesium with an optical purity
of equal or greater to 99.8% enantionmeric countries and is available in oral (tablet/ inhibit the CYP2C19 enzyme, including
excess in Denmark. capsules and oral suspension) and intravenous Nexium. AstraZeneca has full confidence
(i.v.) dosage forms for the treatment of in the overall benefit/risk and safety profile
>>AstraZeneca filed applications in Austria seeking
interlocutory injunctions to restrain Hexal Pharma acid-related diseases. Nexium is an effective of Losec/Prilosec and Nexium. We will
GmbH and 1A Pharma GmbH, both companies short-term and long-term therapy for patients continue to evaluate thoroughly the safety
in the Sandoz group, from marketing products with gastro-oesophageal reflux disease and effectiveness of Losec/Prilosec and
containing generic esomeprazole magnesium
in Austria. (GERD). Nexium is also approved for the Nexium in accordance with AstraZeneca’s
treatment of GERD in children one to 17 years procedures. AstraZeneca is involved in
>>AstraZeneca initiated legal proceedings in Portugal of age. For the treatment of active peptic ulcer ongoing dialogue with the FDA, the EMEA
to suspend approvals for Sandoz’s generic
esomeprazole. In October the court granted disease, seven-day Nexium triple therapy and the CHMP about any pharmacological
AstraZeneca a preliminary injunction against (in combination with two antibiotics for the interaction and its clinical relevance.
Sandoz, suspending the efficacy of the marketing eradication of H.pylori) heals most patients
and price approvals for Sandoz’s generic
esomeprazole. The decision has been appealed without the need for follow-up anti-secretory Entocort is approved for the treatment of
by the Portuguese authorities. therapy. In Europe and other markets, Nexium two types of inflammatory bowel disease.
is approved for the healing and prevention Entocort capsules are approved for use both
>>In January 2010, AstraZeneca settled US Nexium
patent litigation against Teva Pharmaceuticals Ltd of ulcers associated with NSAID therapy, as an acute treatment of and for maintenance
(Teva Pharma) and affiliates. AstraZeneca has including cyclooxygenase 2 selective of remission for mild to moderate Crohn’s
granted Teva Pharma a licence to enter the US inhibitors. In the US, Nexium is approved for disease. Entocort enema is approved in some
market with its generic esomeprazole, subject to
regulatory approval, on 27 May 2014, or earlier in reducing the risk of gastric ulcers associated markets for the treatment of ulcerative colitis.
certain circumstances. Teva Pharma conceded with continuous NSAID therapy in patients at Entocort has better tolerability compared to
validity/enforceability of all patents in Teva risk of developing gastric ulcers. Nexium is other corticosteroids in the treatment of both
Pharma’s US Nexium patent litigations and that
Teva Pharma’s proposed generic esomeprazole also approved in the US, the EU, Canada and conditions. In Crohn’s disease, Entocort
would infringe six US Nexium patents. Australia for the treatment of patients with also has greater efficacy than aminosalicylic
the rare gastric disorder, Zollinger-Ellison acid medicines.
>>Patent litigation continuing in the US against other
generic manufacturers following an ANDA relating syndrome. Following treatment with Nexium i.v.,
to Nexium. oral Nexium is approved in the EU and other Clinical studies of key marketed products
markets for the maintenance of haemostasis Data from the LOTUS study (a multinational,
>>In Canada, Patented Medicines (Notice of
Compliance) Regulations proceedings involving and prevention of re-bleeding of gastric or randomised study of 554 patients) in which
Apotex relating to Nexium continued. A hearing duodenal ulcers. Nexium was compared to surgery for the
is scheduled to commence on 31 May 2010. management of GERD has now reported five
Nexium i.v., which is used when oral years of follow-up. The results show that both
administration is not suitable for the treatment therapies are very effective, with proportions
of GERD and upper GI side effects induced by of patients still in remission above 90% and
NSAIDs, is approved in 86 countries including with both therapies being well tolerated.
the US and all EU countries. Nexium i.v. is also The paediatric GERD programme in the
approved in the EU and other markets for youngest age group of zero to one year of
the short-term maintenance of haemostasis age has been completed and submissions
and prevention of re-bleeding in patients to regulatory authorities have commenced.
following therapeutic endoscopy for acute
bleeding gastric or duodenal ulcers.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Therapy Area Review 61


Our financial performance

2009 2008 2007 2009 compared to 2008 2008 compared to 2007
Growth due Growth due
CER to exchange CER to exchange CER Reported CER Reported
Sales growth effect Sales growth effect Sales growth growth growth growth
$m $m $m $m $m $m $m % % % %
Nexium 4,959 (73) (168) 5,200 (121) 105 5,216 (1) (5) (2) –
Losec/Prilosec 946 (105) (4) 1,055 (156) 68 1,143 (10) (10) (14) (8)
Other 106 21 (4) 89 2 3 84 24 19 2 6
Total 6,011 (157) (176) 6,344 (275) 176 6,443 (2) (5) (4) (2)

Therapy area world market AstraZeneca conducted two studies, For the full year, sales of Losec/Prilosec fell
(MAT/Q3/09) OBERON and ASTERIX, to evaluate the 10% to $946 million. Prilosec sales in the
safety and efficacy of Nexium in the US were down 63% as a result of continued
prevention of gastric and/or duodenal generic erosion. Outside the US, Losec sales
ulcers in patients who take low-dose aspirin were flat, despite increases in China (21%)
(acetylsalicylic acid (ASA)) (75-325mg) and Japan (8%).
continuously during the studies, which is
B defined as at least five days per week. The Performance 2008
results of these studies are described in more Reported performance
detail in the Cardiovascular section from page GI sales for 2008 were down 2% on a reported
56. In April 2009, AstraZeneca submitted an basis to $6,344 million from $6,443 million
sNDA for the low-dose ASA (75-325mg) in 2007.
indication for Nexium and an NDA for the
new product Axanum based upon the Performance – CER growth rates
Market sectors $bn findings in these studies. GI sales fell by 4% at CER. Growth in Canada
A PPI 26.0 (9%), Japan (5%) and Emerging Markets (20%)
B Other 13.0 In the pipeline more than offset the 5% decline in sales in
Our research activities focus on reflux our Western Europe markets.
The GI world market is valued at $39 billion, inhibitors and hypersensitivity therapy. Our
with the PPI market accounting for $26 billion. lead compound, lesogaberan (AZD3355), Nexium sales were down 2%, excluding the
In the West (ie Europe and North America) between
10-20% of adults suffer from GERD. The prevalence is undergoing clinical studies in Phase II. effects of exchange, to $5,200 million from
of GERD in Asia is lower, but increasing. Despite Follow-up compounds are in different stages $5,216 million the previous year. The decline
effective PPI treatments, around 40% of patients up to Phase II testing. was driven by the decrease in the US of 8%
do not achieve full relief from symptoms.
to $3,101 million, however, this was largely
Litigation mitigated by sales outside the US increasing
Detailed information about material legal by 9% to $2,099 million. In the US, dispensed

proceedings relating to our GI products can be retail tablet volumes increased (2%) and
found in Note 25 to the Financial Statements Nexium was the only major PPI brand to do
from page 166. so in 2008.

Financial performance 2009/2008 For the full year, sales of Losec/Prilosec fell
Performance 2009 14% to $1,055 million. Prilosec sales in the
The GI world market is valued at
Reported performance US were down 25% as a result of generic
$39 billion, with the proton pump
GI sales for 2009 were down 5% on a reported competition for the 40mg dosage form in the
inhibitor market accounting for
basis to $6,011 million from $6,344 million second half of the year. Outside the US,
$26 billion
in 2008. Losec sales declined by 11%, despite
increases in China (19%) and Japan (5%).
Performance – CER growth rates
GI sales fell by 2% at CER.

Global Nexium sales were down 1% to $4,959

million from $5,200 million the previous year.
The decline was driven by the decrease in
the US of 9% to $2,835 million, however this
was largely mitigated by sales outside the US
increasing by 9% to $2,124 million. In the US,
dispensed retail tablet volumes decreased
by less than 1% despite increased generic
and OTC competition. In respect of Nexium,
there was growth in Canada (11%), Western
Europe (7%) and Emerging Markets (15%).

AstraZeneca Annual Report and Form 20-F Information 2009

62 Directors’ Report | Therapy Area Review

Infection Our strategic objectives intra-abdominal, urinary tract and hospital

We aim to build a leading franchise in the acquired pneumonia. CEF104 is a combination
In brief treatment of infectious diseases through of NXL-104 and ceftaroline, which is expected
continued commercialisation of brands to move into Phase II development in late 2010
>>Synagis sales of $1.1 billion; in the US $782 million. such as Synagis, Merrem and FluMist, in indications where a mixed Gram-negative
>>Merrem/Meronem sales of $872 million, up 5%. effective use of our structural and genomic- and Gram-positive profile can be of use,
based discovery technologies and antibody such as skin and diabetic foot infections.
>>H1N1 influenza (swine flu) vaccine successfully platforms, and continued research into novel
developed and delivered to the US Department
of Health and Human Services (HHS) (sales approaches in areas of unmet medical need. To meet the high and growing need for new
$389 million). and better therapies for resistant bacterial
Resistant bacterial infections infections we have also built an anti-bacterials
>>FluMist sales of $145 million.
World demand for antibiotics remains discovery capability that places AstraZeneca
>>Filed formal regulatory reply to the motavizumab high due to escalating resistance and the among the industry leaders with the capability
Complete Response Letter. increased risk of serious infections in both to create novel mechanism anti-bacterials.
>>In-licence of ceftaroline from Forest outside the immunosuppressed patients and ageing Out of this work, a candidate anti-bacterial
US, Canada and Japan. populations. Many bacterial infections currently drug, AZD9742, with a novel mechanism of
have few satisfactory treatment options action entered Phase I testing late in 2009.
>>Acquired the infection research company Novexel
(completion of the acquisition is subject to the prompting demand for new and better
expiry or termination of the applicable waiting therapies. The in-licensing from Forest of Respiratory syncytial virus
period under the US Hart-Scott-Rodino Antitrust ceftaroline, ceftazidime/NXL-104 (CAZ104) Approximately half of all infants are infected
Improvements Act).
and ceftaroline/NXL-104 (CEF104) adds to the with respiratory syncytial virus (RSV) during
>>Expanded collaboration with Forest to include strong AstraZeneca portfolio and reinforces the first year of life and nearly all children
two antibiotic development programmes: our commitment to treating resistant in the US have been infected by the time
ceftazidime/NXL-104 (CAZ104) and ceftaroline/
NXL-104 (CEF104). bacterial infections. they reach their second birthday. Unlike
other viral infections, there is no complete
Our focus and durable immunity created by RSV, so
Our key marketed products repeated infection is likely and common.
Our marketed products Merrem/Meronem is the leading carbapenem Premature babies (earlier than 36 weeks
anti-bacterial and has a growing share of gestational age, especially those less than
Synagis (palivizumab) is a humanised MAb used for the the intravenous antibiotic market because 32 weeks) and babies with chronic lung
prevention of serious lower respiratory tract disease
caused by respiratory syncytial virus (RSV) in paediatric of its activity against bacteria resistant to disease or congenital heart disease are at
patients at high risk of acquiring RSV disease. many other agents. Cubicin™ is used for the an even greater risk of contracting severe
Merrem/Meronem 1 (meropenem) is a carbapenem treatment of serious Gram-positive infections RSV disease than full-term babies.
anti-bacterial used for the treatment of serious infections in hospitalised patients and is sold by
in hospitalised patients. AstraZeneca in selected territories in Asia Our focus
FluMist (influenza virus vaccine live, intranasal) is a live, and the Middle East. Our key marketed products
attenuated, trivalent influenza virus vaccine approved Synagis is used for the prevention of serious
for active immunisation of people two to 49 years of
age against influenza disease caused by influenza virus In the pipeline lower respiratory tract disease caused by
subtypes A and B contained in the vaccine. During 2009, we licensed ceftaroline RSV in children at high risk of the disease.
H1N1 influenza (swine flu) vaccine was successfully from Forest and will be responsible for its It was the first MAb approved in the US for
developed and delivered to the HHS and is indicated registration and marketing outside the US, an infectious disease and since its launch in
for the active immunisation of individuals two to 49 Canada and Japan. Four Phase III studies 1998 it has become the standard of care
years of age against influenza caused by pandemic
H1N1 virus. have been completed for ceftaroline, with for RSV prevention. Synagis remains the
NDA filings made in December and MAA only immunoprophylaxis in the marketplace
Cubicin™2 (daptomycin) is a cyclic lipopeptide
anti-bacterial used for the treatment of serious infections filings anticipated in 2010. Ceftaroline has indicated for the prevention of RSV in
in hospitalised patients. demonstrated activity against a number of paediatric patients at high risk of RSV. Synagis
Licensed from Dainippon Sumitomo Pharma Co., Ltd. infections and multi-drug resistant pathogens, is administered by intra-muscular injection.
Licensed from Cubist Pharmaceuticals, Inc. including MRSA.
In the pipeline
In December we acquired Novexel (completion We filed a biological licence application with
of the acquisition is subject to the expiry or the FDA for an improved anti-RSV MAb,
termination of the applicable waiting period motavizumab, and received a Complete
under the US Hart-Scott-Rodino Antitrust Response Letter in 2008. We filed a formal
Improvements Act), a private infection research regulatory reply to the Complete Response
company in France, and we will collaborate Letter in December 2009. We do not believe
with Forest on the future co-development that further clinical studies will be required
and commercialisation of two antibiotic by the FDA for marketing approval.
development programmes, CAZ104 and
CEF104. CAZ104 is a combination of In addition, an intranasal vaccine is being
NXL-104 and ceftazidime, a third generation developed for the prevention of lower
cephalosporin to which resistance has respiratory tract illness caused by RSV and
emerged. It is expected to move into Phase III parainfluenza virus-3 (PIV3) in infants. There
development in late 2010 for serious infections are two RSV vaccine programmes: MEDI-559
requiring intensive care unit stays such as and MEDI-534. We are conducting several

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Directors’ Report | Therapy Area Review 63


Our financial performance

2009 2008 2007 2009 compared to 2008 2008 compared to 2007
Growth due Growth due
CER to exchange CER to exchange CER Reported CER Reported
Sales growth effect Sales growth effect Sales growth growth growth growth
$m $m $m $m $m $m $m % % % %
Merrem 872 44 (69) 897 97 27 773 5 (3) 13 16
Synagis1 1,082 (148) – 1,230 612 – 618 (12) (12) n/m n/m
FluMist1 145 41 – 104 51 – 53 39 39 n/m n/m
H1N1 influenza vaccine 389 389 – – – – – n/m n/m n/m n/m
Other 143 (69) (8) 220 (54) 4 270 (31) (35) (20) (19)
Total 2,631 257 (77) 2,451 706 31 1,714 10 7 41 43

Acquired in June 2007.

Therapy area world market Phase I and Phase I/II studies for these vaccine, which is made using the same
(MAT/Q3/09) vaccines, both alone and in collaboration technology and process as FluMist, was
with the US National Institute of Allergy and approved by the FDA in September for
Infectious Diseases. the same patient population as FluMist.
AstraZeneca began shipping product to
Influenza virus the HHS in September.
Influenza is the most common vaccine-
A preventable disease in the developed world. In the pipeline
According to WHO estimates, seasonal We continually strive to seek ways to improve
influenza results in three to five million cases of our influenza vaccine. Each year we conduct
severe illness and up to half a million deaths clinical studies enabling us to develop and
globally each year, primarily among the release a new vaccine for that year’s influenza
elderly. Rates of infection are highest virus. In addition, we are investigating the
among children, with school-aged children potential of a quadravalent live attenuated
Market sectors $bn significantly contributing to the spread of the influenza vaccine and have two studies for
A Anti-bacterials 35.2 disease. Influenza also has socio-economic this underway.
B Anti-virals 22.1 consequences related to both direct
C Others 20.6 and indirect healthcare costs, including Hepatitis C virus
hospitalisations, work absence and loss of Hepatitis C virus (HCV) infects an estimated
The world infection market is valued at work productivity when either a caregiver or 170 million people worldwide and the current
$78 billion, with anti-bacterials accounting child is sick with influenza. market for HCV therapy exceeds $2 billion
for approximately 45% and anti-virals for 28%.
World demand for antibiotics remains high, due annually. However, therapy for the strains that
to escalating resistance and the increased risk Our focus predominate in the US and Western Europe
of serious infections in both immunosuppressed Our key marketed products requires 12 months’ treatment and produces
patients and ageing populations. Approximately
half of all infants are infected with RSV during the FluMist is the first live, attenuated nasally a durable cure in only 50% of patients. Key
first year of life. Seasonal influenza results in three delivered vaccine approved in the US for the opinion leaders expect the current standard
to five million cases of severe illness and up to prevention of disease caused by influenza of treatment (interferon plus ribavirin) to
a half a million deaths globally each year.
virus subtypes A and B in eligible children and change to a form of combination therapy
adults, two to 49 years of age. Beginning in the involving one or more new mechanism of
2009/2010 season, the Centers for Disease action direct-acting anti-virals and there are

Control and Prevention’s Advisory Committee several small and large pharmaceutical
on Immunization Practices in the US voted to companies with varying HCV pipelines
expand recommendations for routine seasonal focused on such therapies. A future paradigm
influenza vaccination to include all school-age of combinations of anti-virals as standard
children up to 18 years of age. In 2009, FluMist care offers the opportunity for several new
The world infection market is valued was approved for marketing in South Korea, therapies to be widely used.
at $78 billion, with anti-bacterials Hong Kong and Israel. Applications are
accounting for approximately 45% under review in Canada, Mexico and the EU. Our focus
and anti-virals for 28% The total product supply of approximately In the pipeline
10 million seasonal FluMist doses sold out Projects in development include AZD7295,
in 2009. a novel HCV compound, currently in Phase II.

In response to the novel H1N1 influenza Sepsis

(swine flu) pandemic need in 2009, the US Sepsis is a life-threatening condition resulting
Department of Health and Human Services from uncontrolled severe infections, which
(HHS) awarded AstraZeneca a contract to affects an estimated three million people
develop and manufacture 42 million doses of a year worldwide. Few industry pipelines are
influenza A (H1N1) 2009 monovalent vaccine. focused on the development of products
The total contract value is approximately specifically for registration for the treatment
$389 million. The monovalent H1N1 influenza of sepsis or septic shock.

AstraZeneca Annual Report and Form 20-F Information 2009

64 Directors’ Report | Therapy Area Review

Our focus Financial performance 2009/2008

In the pipeline Performance 2009
The development programme for CytoFab™, Reported performance
an anti-TNFα polyclonal antibody, our Total Infection sales increased on a reported
potential treatment for severe sepsis licensed basis by 7% to $2,631 million. H1N1 influenza
from Protherics Inc. (now part of the BTG plc vaccine sales were $389 million.
group), continues in Phase II development.
CytoFab™ has the potential to be one of Performance – CER growth rates
a limited number of medicines specifically Infection sales were up 10% at CER. This was
developed for patients with severe sepsis. driven by sales of $389 million for the H1N1
influenza vaccine to the US government and
Tuberculosis continued growth in Merrem/Meronem (5%)
Tuberculosis (TB) remains a worldwide threat and FluMist (39%), which more than offset
and is newly diagnosed in over eight million the 12% decline in Synagis sales.
people worldwide every year. It is one of the
greatest causes of death from infectious Worldwide sales of Synagis in the fourth
disease in the developing world. quarter were $401 million, a 21% decrease
from the same period in 2008, driven by
Our focus a decrease of 31% of US Synagis sales for
As part of our commitment to make a the fourth quarter. This decline in the US is
contribution to improving health in the a result of the adoption of new guidelines
developing world, we are working to find published by the American Academy of
a new, improved treatment for TB. We have Pediatrics restricting the usage of Synagis
a dedicated research facility in Bangalore, at the start of the 2009/2010 RSV season.
India that is focused on finding a treatment
for TB that will act on drug-resistant strains, FluMist sales were $145 million for the full year.
simplify the treatment regime (current regimes
are complex and lengthy, meaning many Performance 2008
patients give up before the infection is fully Reported performance
treated) and will be compatible with HIV/AIDS Total Infection sales increased on a reported
therapies (TB and HIV/AIDS form a lethal basis by 43% to $2,451 million as a full year
combination, each speeding the other’s of Synagis and FluMist sales were taken
progress). Over 80 scientists in Bangalore are in the Group for the first time, and
working closely with our infection research Merrem/Meronem sales enjoyed another
centre in Boston, US as well as with academic year of good growth.
leaders in the field, and they have full access
to all AstraZeneca’s platform technologies, Performance – CER growth rates
such as ‘high throughput screening’ and Infection sales were up 41% at CER.
compound libraries. It is a complex area of
research but a candidate drug, AZD5847, For the full year, Synagis sales were
entered Phase I studies late in 2009. $1,230 million. Synagis sales in 2007 were
$618 million, but this only reflected sales
Litigation since the acquisition of MedImmune in June
Detailed information about material legal 2007. Worldwide sales of Synagis in the fourth
proceedings relating to our Infection products quarter were $506 million, a 5% increase over
can be found in Note 25 to the Financial the same period in 2007 when the product
Statements from page 166. was included in sales.

FluMist sales were $104 million for the

full year. In contrast to 2008, all of 2007’s
FluMist sales of $53 million were realised in
the fourth quarter as a result of the timing of
regulatory approvals for the new formulation
and expanded label.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Therapy Area Review 65


Neuroscience Our marketed products Our focus

Our key marketed products
Seroquel (quetiapine fumarate) is an atypical anti-psychotic Seroquel is a leading atypical anti-psychotic
drug approved for the treatment of schizophrenia and
In brief bipolar disorder (mania, depression and maintenance). treatment for schizophrenia and bipolar
Seroquel XR (an extended release formulation of quetiapine disorder. Seroquel remains the most commonly
>>Total Seroquel sales up 12% to $4.9 billion. fumarate) is generally approved for the treatment of prescribed atypical anti-psychotic treatment
schizophrenia, bipolar disorder and in some territories
>>Seroquel has been granted Paediatric Exclusivity for MDD and GAD. Approved use for Seroquel and in the US, where it is the only atypical
in the US as a result of studies conducted in Seroquel XR varies based on territory. anti-psychotic approved as monotherapy
children and adolescents, which will provide an treatment for both bipolar depression and
additional six months of exclusivity to market Zomig (zolmitriptan) is used for the treatment of migraines
Seroquel in the US. with or without aura. bipolar mania as well as the leading atypical
Diprivan (propofol) is an intravenous general anaesthetic brand globally by sales value.
>>In December, the FDA approved Seroquel XR used in the induction and maintenance of anaesthesia,
as an adjunctive treatment to anti-depressants light sedation for diagnostic procedures and for intensive
in adults with major depressive disorder (MDD). First launched in 1997, Seroquel is now
care sedation.
AstraZeneca also received a Complete Response approved in 94 countries. Seroquel XR,
Letter for its Seroquel XR submission for MDD as Naropin (ropivacaine) is a long-acting local anaesthetic, an extended release formulation that offers
acute and maintenance monotherapy in adults replacing the previous standard treatment of bupivacaine.
and for acute therapy in the elderly. patients and doctors a once-daily treatment,
Xylocaine (lidocaine) is a widely used short-acting was launched in the US for the treatment of
>>In September, Seroquel XR and Seroquel were local anaesthetic.
schizophrenia in 2007 and is now approved in
approved under the European Mutual Recognition EMLA (lidocaine + prilocaine) is a local anaesthetic for
Procedure for the prevention of recurrence in 63 countries for schizophrenia, 38 countries
topical application.
bipolar disorder. for bipolar mania, 37 countries for bipolar
depression and eight countries, including
>>In December, the FDA approved Seroquel for
the treatment of schizophrenia in adolescents 13 the US, for bipolar maintenance, in three
to 17 years of age as monotherapy, and for the Our strategic objectives markets for major depressive disorder (MDD),
acute treatment of manic episodes associated Disorders of the central nervous system and in one market for generalised anxiety
with bipolar I disorder in children and adolescents
10 to 17 years of age, both as monotherapy and (CNS) represent the number one disease disorder (GAD).
as an adjunct to lithium or divalproex. burden today in high-income countries1.
In many other world regions, including Asia, In January 2009, the FDA granted a six-month
>>The EU submission for Seroquel XR for the
treatment of MDD received a negative opinion in the prevalence of CNS disorders is expected Paediatric Exclusivity to Seroquel for its
May but has been referred to the CHMP and the to grow substantially2 as the standard of licensed indications, based on studies that we
outcome is anticipated in the first quarter of 2010. living increases. We aim to strengthen our conducted in adolescents with schizophrenia,
>>Seroquel XR submissions for generalised anxiety position in neuroscience through further and in children and adolescents with bipolar
disorder (GAD) received a Complete Response growth of Seroquel and Seroquel XR and mania. The six-month Paediatric Exclusivity
Letter from the FDA in February 2009 (adult by the successful introduction of a range of will extend the exclusivity to market Seroquel
population) and in September (elderly population).
new medicines aimed at significant medical in the US to March 2012.
>>Global development and licence agreement with need in psychiatry, analgesia (pain control)
Targacept for Targacept’s late-stage compound and cognition, including Alzheimer’s disease In September, Seroquel and Seroquel XR
and attention deficit hyperactivity disorder. were approved in the EU for the prevention
>>In-licence of NKTR-118 and NKTR-119 from Nektar. of recurrence of bipolar disorder in patients
Psychiatry whose manic, mixed or depressive episode
>>AstraZeneca established several neuroscience
research collaborations in 2009, amongst which Most branded schizophrenia products will face has responded to treatment with Seroquel or
is a collaboration with Jubilant in the areas of generic competition in the period 2012 to 2015, Seroquel XR. Following this new indication,
chemical lead generation and lead optimisation to with major current atypical anti-psychotic Seroquel and Seroquel XR are the only agents
support our efforts in analgesia and neurology.
patents expiring by 2018. Future demand will approved in the EU to treat all phases of
>>The US Court of Appeals affirmed a Summary be for products with significantly improved bipolar disorder, acute depressive episodes,
Judgment Motion granted to AstraZeneca in the efficacy and tolerability. The depression and acute manic episodes and maintenance
patent infringement actions commenced against
two generic drug manufacturers in the US anxiety markets are currently dominated by treatment to prevent recurrence of any mood
following the filing of ANDAs relating to Seroquel. generic selective serotonin re-uptake inhibitors event in bipolar disorder.
and serotonin norepinephrine re-uptake
>>Three consolidated ANDA patent infringement
lawsuits, previously filed in the US against inhibitors. As growth in the US slows, the In 2008, regulatory submissions were made
Handa, Accord and Biovail, proceed in discovery. Japanese and other Asian markets continue for the use of Seroquel XR in MDD and GAD.
The three ANDAs seek approval to market to expand due to increased diagnosis and use In December 2008, the FDA approved
generic copies of Seroquel XR before the expiry
of its patents. of pharmacological treatments in response Seroquel XR as an adjunctive treatment to
to both targeted government programmes anti-depressants in adults with MDD. The FDA
>>Personal injury actions in the US and Canada and wider acceptance of pharmacological also issued Complete Response Letters in
involving Seroquel are being defended vigorously,
with successful results to date in the US. treatments. Generic growth is anticipated over December 2009 for the monotherapy
the next five years as patents expire, which will submissions as acute and maintenance
>>Agreement in principle reached with the US make market entry for new innovative products therapy in adults and acute therapy in the
Attorney’s Office to settle claims relating to
Seroquel sales and marketing practices and to more difficult in the medium and longer term. elderly. The MDD application in the EU was
make a payment of $524 million (including interest). rejected in May and AstraZeneca has now
Final settlement is subject to negotiation of a civil It will be increasingly important to develop new
settlement agreement and a corporate integrity
agreement. Other litigation and government medicines addressing the needs of specific WHO ranking 2008, disease burden measured by

investigations regarding sales and marketing patient segments, and to work closely with the disability adjusted life years.
practices are being defended vigorously. specialists in the medical community and the Brookmeyer R et al, Alzheimer’s & Dementia 2007;

Arthritis Foundation, American Chronic Pain

public health sector to address the growing Foundation, Reforming Chinese Healthcare through
burden of psychiatric disease on society. Public-Private Partnership, Swiss Re May 2007.

AstraZeneca Annual Report and Form 20-F Information 2009

66 Directors’ Report | Therapy Area Review

Our financial performance

2009 2008 2007 2009 compared to 2008 2008 compared to 2007
Growth due Growth due
CER to exchange CER to exchange CER Reported CER Reported
Sales growth effect Sales growth effect Sales growth growth growth growth
$m $m $m $m $m $m $m % % % %
Seroquel 4,866 521 (107) 4,452 346 79 4,027 12 9 9 11
Diprivan 290 18 (6) 278 (3) 18 263 6 4 (1) 6
Zomig 434 2 (16) 448 (3) 17 434 – (3) (1) 3
Local anaesthetics 599 27 (33) 605 13 35 557 4 (1) 2 9
Other 48 (2) (4) 54 (7) 2 59 (4) (11) (12) (8)
Total 6,237 566 (166) 5,837 346 151 5,340 10 7 6 9

Therapy area world market referred the application to the CHMP, with in analgesia and neurology. AstraZeneca
(MAT/Q3/09) the outcome anticipated in early 2010. has also entered into a collaboration with
PsychoGenics, Inc. to support behaviour
Complete Response Letters for the Seroquel profiling of new medicines across several
XR GAD submission were received from the disease areas. Furthermore, AstraZeneca
FDA in February 2009 (adult population) and has entered into a research agreement with
C September (elderly population). The application Duke University to identify novel strategies
was considered unfavourably by an FDA and targets for better treatment of bipolar
Advisory Committee in April 2009; dialogue disorder using optogenetics.
with the FDA remains ongoing.
Analgesia and anaesthesia
In December, the FDA approved Seroquel for (pain control)
the treatment of schizophrenia in adolescents Major unmet need remains for improvements in
13 to 17 years of age as monotherapy, and both efficacy and tolerability in the neuropathic
Market sectors $bn for the acute treatment of manic episodes pain market, including addressing the needs
A Psychiatry 56.7 associated with bipolar disorder in children of specific patient segments such as those
B Neurology 40.1 and adolescents 10 to 17 years of age, both with debilitating conditions, for example
C Analgesia 29.9 as monotherapy and as an adjunct to lithium mechanical hypersensitivity. It is believed
D Anaesthesia 4.9 or divalproex. that advances in the understanding of the
mechanisms which lead to neuropathic pain
The neuroscience world market totals In the pipeline will allow for improved patient segmentation
$132 billion. The medical need in neuroscience AstraZeneca and Targacept have entered and, potentially, this could increase the
is significant.
Depression and anxiety disorders remain into a strategic collaboration and licence success rate of research in this condition.
under-diagnosed and under-treated, with 15% agreement for the global development and
of the population suffering from major depression commercialisation of Targacept’s late-stage The osteoarthritis (OA) market is steadily
at least once in their lives. Schizophrenia affects
around 1% of the adult population, and 17 million compound, TC-5214. TC-5214 is being growing, due to ageing populations and novel
people suffer from bipolar disorder across the major developed as an adjunct to anti-depressant agents entering the market. However, the
markets. Chronic pain is the most common reason therapy in adults with MDD who do not established use of branded generic treatment
for seeking medical care. Alzheimer’s disease
affects approximately 24 million people worldwide respond adequately to 1st line anti-depressant makes market entry more difficult. Biologics
(predicted to reach 40 million by 2020) and current treatment. TC-5214, which recently completed are an emerging treatment option for OA, and
therapy does not significantly change the course a Phase IIb study, is a nicotinic ion channel this is an area in which we have an active
of this progressive neuro-degenerative disorder.
blocker that is thought to treat depression by interest through our biologics activities.
modulating the activity of various neuronal
nicotinic receptor subtypes. AstraZeneca Our focus

and Targacept will jointly design a global Our key marketed products
Phase III clinical programme, anticipated In 2009, Zomig nasal spray was approved
to begin in mid‑2010, with the goal of filing for the acute treatment of migraine attacks
an NDA in 2012. in adolescents (12 to 17 years of age) in 14
member states in the EU.
The neuroscience world market We have progressed AZD8418 into Phase I
totals $132 billion and AZD8529 into Phase II for the treatment of Diprivan is the world’s best-selling intravenous
schizophrenia. AZD7268 entered into Phase II general anaesthetic. A complete changeover
for the treatment of depression and anxiety. to Diprivan EDTA, a microbial-resistant
Development of AZD7325 was discontinued. formulation, will be effective from 2010.

In 2009, AstraZeneca entered into a number EMLA submissions/approvals of patch

of research collaborations, including those presentation have continued, particularly
mentioned below. AstraZeneca has entered in Europe. In Japan, EMLA is out-licensed to
into a research collaboration with Jubilant in Sato Pharmaceuticals Co., Ltd. which expects
the area of new chemical lead generation and to file a Japanese new drug application for
optimisation effectiveness to support our efforts EMLA cream in 2010.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Therapy Area Review 67


In the pipeline of establishing efficacy in clinical studies. has entered a Phase IIa study in CDS.
Vimovo (PN400) is a fixed-dose combination Current treatments, which physicians consider AZD1446 has entered Phase IIa studies in
tablet of enteric-coated naproxen and inadequate, target the symptoms, not the ADHD and AD.
immediate release esomeprazole which uses underlying cause, of the disease. Growth in this
proprietary technology licensed from Pozen area is strong (20% to 40% across the world) Litigation
Inc. through a collaboration established in but all existing marketed treatments will face Detailed information about material legal
August 2006. It is being developed for the relief patent expiry by 2015. Disease modification, proceedings in respect of our Neuroscience
of signs and symptoms of OA, rheumatoid delivered through biologics and/or small products can be found in Note 25 to the
arthritis and ankylosing spondylitis in patients molecule treatments, is clearly the hope for Financial Statements from page 166.
at risk of developing NSAID-associated gastric AD patients. Along with better diagnostics, it
ulcers. Risk factors for the NSAID-associated is expected to allow for earlier intervention and Financial performance 2009/2008
gastric ulcers include age, a documented better clinical outcomes, but the first wave of Performance 2009
history of gastric ulcers, or concomitant use disease modifiers is still several years away. Reported performance
of low-dose aspirin. OA is the most common Neuroscience sales on a reported basis
form of arthritis and the most common cause Attention deficit hyperactivity disorder (ADHD) grew by 7% to $6,237 million in 2009 from
of chronic pain, affecting nearly 151 million affects 22 million children worldwide3 (plus $5,837 million in 2008.
individuals worldwide. The PN400 Phase III another several million adults). While there are
studies demonstrated that patients at risk of a number of treatments available today, which Performance – CER growth rates
developing NSAID-associated gastric ulcers work well for many of these young patients, Neuroscience sales grew by 10% to $6,237
taking PN400 experienced significantly fewer they also carry certain risks because a great million from $5,837 million last year.
endoscopically confirmed gastric ulcers majority of them are psycho-stimulants
compared with patients taking enteric-coated (mostly amphetamines and methylphenidate). US sales for Seroquel (all formulations) for the
naproxen (500mg) alone. An NDA was filed We continue to work on treatment options full year were $3,416 million, 13% ahead of
in June. The FDA has confirmed that the that would offer strong efficacy without the last year. Seroquel (all formulations) remains
proposed trade name for PN400, Vimovo, challenges that current treatments bring. the market leader in the US anti-psychotic
is acceptable and that it will be re-reviewed We also hope to offer new options to adult market, with a total prescription share of 31.3%
90 days prior to the approval of the NDA. ADHD patients, many of whom remain in December 2009.
A regulatory filing in the EU was submitted undiagnosed or untreated today.
in October. For the full year, Seroquel (all formulations)
Our focus sales outside the US increased by 8%
In September, AstraZeneca licensed two In the pipeline to $1,450 million. In the Rest of World
potential products, NKTR-118 and NKTR-119, The current portfolio of potential medicines (ie excluding the US and Canada) value and
from Nektar. NKTR-118, an oral peripherally- in this area includes six development volume growth for Seroquel were well ahead
acting opioid antagonist, is in clinical programmes, of which three are in clinical of the atypical anti-psychotic market.
development for the treatment of opioid evaluation in AD, ADHD and cognitive
induced constipation (OIC), which is the key disorders in schizophrenia (CDS). In addition to Sales of Zomig for the full year were down
gastrointestinal (GI) side effect of opioid developing molecules for cognitive disorders, 3% in the US to $182 million. Sales outside
treatment for pain, for which there are limited we continue to progress one development the US were up 3% to $252 million.
therapeutic treatment options. Data from phase molecule for the treatment of other
a Phase II study demonstrated that oral neurodegenerative diseases. Performance 2008
NKTR-118 improved lower GI dysfunction by Reported performance
increasing the frequency of bowel movements Through our collaboration with the Karolinska Neuroscience sales grew by 9% in 2008, up
in patients with OIC, while simultaneously Institute in Sweden, the Banner Alzheimer’s to $5,837 million from $5,340 million in 2007.
preserving opioid-mediated pain relief. Institute in Phoenix, Arizona and others, All geographic areas experienced growth
NKTR-119 is an earlier-stage programme our R&D capabilities in positron emission and Seroquel (all formulations) grew strongly
that combines NKTR-118 with an opioid, tomography (PET) imaging of the human by 11%.
with the goal of treating pain without the side brain continue to progress. AstraZeneca’s
effect of constipation traditionally associated amyloid PET ligands may enable us to detect Performance – CER growth rates
with opioid therapy. AD early and to assess drug effects in AD. Neuroscience sales grew by 6% to $5,837
We have discovered and taken into patient million from $5,340 million in 2007.
AZD2423 has progressed into Phase I studies studies two C-11 amyloid PET ligands, which
and AZD2066 has entered into Phase II studies are being developed as research biomarkers. US sales for Seroquel (all formulations) for the
for the treatment of neuropathic (caused by Additionally, a collaboration with the Mental full year were $3,015 million. For the full year,
nerve damage) pain. AZD3043, a short-acting Health Research Institute in Australia has been Seroquel (all formulations) sales outside the US
anaesthetic, has entered Phase I studies. initiated to develop new ways of identifying increased by 8% to $1,437 million. In the Rest
Additionally, we have extended our research AD patients at early stages of the disease. of World (ie excluding the US and Canada)
collaboration with the University of Heidelberg value and volume growth for Seroquel were
to further understanding of the pathophysiology Compounds in clinical evaluation include well ahead of the atypical anti-psychotic
of chronic pain conditions. products deriving from our relationship with market in all regions.
Targacept (AZD3480, TC-5619 and AZD1446).
Cognition AZD3480, a neuronal nicotinic receptor agent, Sales of Zomig for the full year were up 6%
Alzheimer’s disease (AD) remains one of the is currently in Phase II clinical testing in ADHD. in the US to $187 million. Sales outside the
largest areas of unmet medical need and also In 2009, Targacept announced top-line results US were down 5% to $261 million.
one of high risk for neuroscience product from a Phase IIa ADHD study in which the
development, due in part to the challenges primary outcome measure was met. TC-5619 3
Decision Resources 2008.

AstraZeneca Annual Report and Form 20-F Information 2009

68 Directors’ Report | Therapy Area Review

Oncology Our strategic objectives In breast cancer, Zoladex is widely approved

We aim to build on our position as a world for use in advanced breast cancer in pre-
In brief leader in cancer treatment through continued menopausal women. In a number of countries,
sales of Arimidex, the launch of a more Zoladex is also approved for the adjuvant
>>Arimidex sales up 7% to $1.9 billion and continues efficacious dose of Faslodex (Faslodex treatment of early stage pre-menopausal
to be the leading branded hormonal therapy for
early breast cancer in the US, Japan, Spain, the 500mg), the growth of Iressa and the breast cancer as an alternative to and/or in
UK and France. successful introduction of novel therapeutic addition to chemotherapy. Zoladex offers
approaches currently in development, proven survival benefits for breast cancer
>>Zoladex sales $1.1 billion, flat from the
previous year. including both small molecule drugs and patients with a favourable tolerability profile.
biologics, targeted at defined patient
>>Casodex sales $0.8 billion, down 34%, following populations with high unmet medical need. Competition in the LHRH agonist market is
expiry of patents in all major territories.
expected to increase in Europe during 2010,
>>Iressa was approved in the EU for the treatment Cancer with the anticipated launches of generic
of adults with locally advanced or metastatic Our focus goserelin. This follows the launch of generic
non-small cell lung cancer (NSCLC) with activating
mutations of the epidermal growth factor receptor- Our key marketed products goserelin (one-month depot) in Germany
tyrosine kinase (EGFR-TK). Arimidex continues to be the leading and the UK in 2009.
branded hormonal therapy for patients with
>>Faslodex 500mg has been shown to be more
efficacious than Faslodex 250mg at treating early breast cancer in the US, Japan, Spain, Iressa is approved in 66 countries and
breast cancer and regulatory submissions to the UK and France, and is also approved in is the leading epidermal growth factor
change the dose have been made in the EU and a number of markets in Europe for a switch receptor-tyrosine kinase (EGFR-TK) inhibitor
the US, together with the first filing in Japan.
indication for patients who have already in Japan and the Asia Pacific region where
>>Withdrawal of the US and the EU regulatory received two to three years of tamoxifen. it is marketed for pre-treated advanced
submissions for Zactima in NSCLC in October but This success is largely based on the non-small cell lung cancer (NSCLC). Based
clinical studies continue in a number of other
types of cancer. extensive long-term efficacy and safety on data from the Phase III INTEREST study,
results of the ATAC study, which showed which compared Iressa with docetaxel in
>>Registration studies ongoing for Recentin in first Arimidex to be significantly superior to pre-treated NSCLC, and the Phase III IPASS
line colorectal cancer and recurrent glioblastoma
multiforme and NSCLC. tamoxifen at preventing breast cancer study, which compared Iressa with doublet
recurrence during and beyond the five-year chemotherapy (carboplatin/paclitaxel) in 1st
>>Registration studies ongoing for zibotentan treatment course. Breast cancer recurrence line NSCLC patients, a marketing authorisation
(ZD4054) in castrate resistant prostate cancer.
is defined as loco-regional recurrence, distant for Iressa for the treatment of EGFR mutation-
>>Olaparib (AZD2281) is in ongoing Phase II studies recurrence or contra-lateral breast cancer. positive advanced NSCLC patients (all lines
for the treatment of certain types of breast and of therapy) was granted by the EMEA in June,
ovarian cancer. Olaparib will progress to Phase III
development in breast cancer with genetic DNA Faslodex 250mg is now approved in 70 followed by the European launch in July.
repair deficits. markets and offers an additional hormonal AstraZeneca is consulting with other
therapy option for patients with hormone- regulatory authorities regarding the data
>>Teva Parenteral Medicines (Teva Par) has
challenged our patents for Faslodex. In January receptor positive advanced breast cancer, from the IPASS study and is progressing
2010, AstraZeneca filed a patent infringement delaying the need for cytotoxic chemotherapy. submissions worldwide.
action against Teva Par in the US District Court It is a once-monthly injection approved for
for the District of Delaware.
the 2nd line treatment of hormone-receptor We have various distribution and marketing
positive advanced breast cancer in arrangements for branded Ethyol. In the US,
post-menopausal women. Ben Venue Laboratories, Inc. is authorised
Our marketed products to distribute Ethyol. Outside the US, our
Casodex is used as a 50mg tablet for the two main distribution partners are Pinnacle
Arimidex (anastrozole) is an aromatase inhibitor for the treatment of advanced prostate cancer, and Biologics, Inc. for our Western Europe
treatment of early breast cancer. as a 150mg tablet for the treatment of locally markets, Turkey and Israel, and Scherico Ltd
Zoladex (goserelin acetate implant), in one- and advanced prostate cancer. for various other countries.
three-month depots, is a luteinising hormone-releasing
hormone agonist for the treatment of prostate cancer,
breast cancer and certain benign gynaecological Zoladex, a luteinising hormone-releasing In the pipeline
disorders. hormone (LHRH) agonist, is approved in 120 Zactima (vandetanib) is a potential new oral
Casodex (bicalutamide) is an anti-androgen therapy for countries. It is approved for the treatment anti-cancer therapy, which has a unique
the treatment of prostate cancer. of prostate cancer, breast cancer and anti-cancer profile through two clinically
Iressa (gefitinib) is an EGFR-TK inhibitor that acts to certain benign gynaecological disorders. proven mechanisms. It blocks the
block signals for cancer cell growth and survival in In non-metastatic prostate cancer, Zoladex development of a tumour’s blood supply
NSCLC. has been shown to improve overall survival, (anti-angiogenesis) and blocks the growth
Faslodex (fulvestrant) is an injectable oestrogen both when used in addition to radical and survival of the tumour itself (anti-EGFR).
receptor antagonist for the treatment of breast cancer. prostatectomy and when used in addition to Vandetanib also inhibits RET (rearranged
Nolvadex (tamoxifen citrate) remains a widely radiotherapy. The 10-year follow-up results during transfection)-kinase activity, an
prescribed breast cancer treatment outside the US. of a study for the European Organisation for important growth driver in certain types of
Research and Treatment of Cancer confirmed thyroid cancer. In June, AstraZeneca made
the long-term survival benefits of Zoladex submissions to the FDA and the EMEA for the
when used as adjuvant to radiotherapy in use of vandetanib 100mg in combination with
patients with locally advanced prostate cancer. chemotherapy in patients with advanced
NSCLC. In October, these submissions were

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Therapy Area Review 69


Our financial performance

2009 2008 2007 2009 compared to 2008 2008 compared to 2007
Growth due Growth due
CER to exchange CER to exchange CER Reported CER Reported
Sales growth effect Sales growth effect Sales growth growth growth growth
$m $m $m $m $m $m $m % % % %
Casodex 844 (424) 10 1,258 (161) 84 1,335 (34) (33) (12) (6)
Arimidex 1,921 129 (65) 1,857 69 58 1,730 7 3 4 7
Zoladex 1,086 – (52) 1,138 (31) 65 1,104 – (5) (3) 3
Iressa 297 20 12 265 8 19 238 8 12 3 11
Faslodex 262 26 (13) 249 25 10 214 10 5 12 16
Nolvadex 88 – 3 85 (5) 7 83 – 4 (6) 2
Abraxane™ – (64) – 64 2 – 62 (100) (100) 3 3
Ethyol 15 (13) – 28 (15) – 43 (46) (46) n/m n/m
Other 5 (4) (1) 10 (1) 1 10 (40) (50) (10) –
Total 4,518 (330) (106) 4,954 (109) 244 4,819 (7) (9) (2) 3

Therapy area world market withdrawn. The decision to withdraw these Patient recruitment for the HORIZON CRC
(MAT/Q3/09) submissions was based on an updated programme completed last year and the
analysis that demonstrated no overall survival Phase III REGAL study in rGBM comparing
advantage when vandetanib was added Recentin monotherapy versus lomustine +/-
to chemotherapy as well as preliminary Recentin finished enrolling patients in
D feedback from regulatory authorities that the third quarter of 2009. Recruitment in the
the submissions based on progression-free BR29 study investigating Recentin at 20mg
survival as the primary endpoint might not plus carboplatin/paclitaxel versus carboplatin/
be sufficient for approval. paclitaxel alone in NSCLC is ongoing. The
initial read-outs for Phase III of the HORIZON
The ZEPHYR study of vandetanib 300mg and REGAL studies are expected in the first
B monotherapy versus placebo in patients who half of 2010.
have previously progressed on EGFR-TK
inhibitor treatment did not meet its primary Encouraging Phase II data for Recentin in
Market sectors $bn endpoint of overall survival. This completes renal cancer, prostate cancer, alveolar soft
A Chemotherapy 18.2 the Phase III development of vandetanib. part sarcoma, NSCLC and rGBM were also
B Monoclonal antibodies 14.4 AstraZeneca has no current plans to make presented in 2009.
C Hormonal therapies 8.8 regulatory submissions in respect of
D Small molecule TKIs 7.2 vandetanib for the treatment of NSCLC. Zibotentan (ZD4054) is an oral once-daily
potent and specific endothelin A-receptor
The world market value for cancer therapies The ZETA study met its primary endpoint, antagonist. Data from Phase II studies
is $49 billion and continues to grow. showing that vandetanib 300mg significantly suggested that in men with metastatic
An increasing number of large research-based
pharmaceutical and biotech companies have a extends progression-free survival in patients castrate resistant prostate cancer (CRPC),
stated ambition to build their business in oncology. with advanced medullary thyroid cancer. zibotentan 10mg demonstrated a promising
For several years there has been a substantial The safety profile of vandetanib in the ZETA survival benefit and a generally well-tolerated
increase in cancer-based clinical study activity.
According to IMS data, value growth in oncology study was manageable, which is similar to the side effect profile. Zibotentan 10mg is now
will continue at double digit compound annual findings of other studies. Medullary thyroid in Phase III development. The Phase III
growth rates and is, therefore, well above the cancer is a rare cancer with no currently ENTHUSE studies are investigating efficacy
growth rates of other therapy areas.
approved treatment. AstraZeneca will be in metastatic CRPC, both as monotherapy
discussing the data from the ZETA study and in combination with docetaxel, and in
with regulatory authorities. non-metastatic CRPC.

The world market value for cancer
therapies is $49 billion and continues
Results from the CONFIRM study demonstrate
that Faslodex 500mg offers a superior
benefit/risk profile to Faslodex 250mg for the
treatment of breast cancer. This data has
formed the basis of regulatory submissions
across the globe.
Olaparib (AZD2281) is an oral poly-ADP-
ribose-polymerase inhibitor, a new class of
drug which potentially offers an innovative
therapeutic approach to treating cancers by
targeting a weakness in DNA repair inherent in
many tumour cells. Olaparib is currently being
to grow evaluated in Phase II studies for the treatment
Recentin (cediranib) is a highly potent of certain types of breast and ovarian cancer.
anti-angiogenic agent that inhibits all three The initial Phase III programme which is
vascular endothelial growth factor receptors planned to start in mid 2010 focuses on breast
and is suitable for once-daily oral dosing. cancer with genetic DNA repair deficits.
It is currently in Phase III development in first
line colorectal cancer (CRC) and recurrent
glioblastoma (rGBM).

AstraZeneca Annual Report and Form 20-F Information 2009

70 Directors’ Report | Therapy Area Review

Our early oncology pipeline includes a range In 2009, three additional oncology antibody Performance 2008
of novel compounds that target signalling programmes entered into Phase I studies Reported performance
pathways believed to be pivotal in cancer targeting a variety of advanced solid Oncology sales increased by 3% on a
cell growth, tumour invasion, DNA repair tumours using different pathways such as reported basis to $4,954 million up from
mechanisms and survival. Phase II data from insulin-like growth factors and specific cell $4,819 million in 2007.
AZD6244, a potent MEK (mitogen-activated surface receptors.
protein kinase 1) inhibitor licensed from Performance – CER growth rates
Array, showed biological activity in lung In 2009, AstraZeneca discontinued its Oncology sales were down 2% at CER.
cancer and melanoma. In June, a deal was development of blinatumomab (MT-103/ Arimidex sales were up 4% to $1,857 million.
signed with Merck relating to a combination MEDI-538) in the US and returned the North In the US, Arimidex sales were up 9% to
of AstraZeneca’s AZD6244 and Merck’s American licence rights for blinatumomab $754 million. Outside the US, Arimidex sales
MK‑2206. AZD6244 has been shown to affect to Micromet, Inc. increased by 1% to $1,103 million.
MEK, an important signal that promotes
cancer cell growth and survival; while In 2009, AstraZeneca entered into a research Casodex sales decreased by 12% to $1,258
Merck’s MK-2206 is a novel AKT kinase collaboration with the Institute of Cancer million, with sales in the US down by 2% and
inhibitor, which acts on a complementary Research (UK) and Cancer Research sales outside the US down by 15%.
signalling pathway in cancer cells. By using Technology Limited to jointly discover inhibitors
a combination of both of these compounds, of targets on a novel pathway which is thought Iressa sales for the year were up 3% as
the aim is to explore the potential effect of to be important in a range of tumour types. growth in Emerging Markets more than
blocking multiple points along a signalling offset the 3% decline in sales in Japan.
pathway thereby preventing tumour growth. Litigation
Detailed information about material legal Faslodex sales were up 12% with a 5%
In December, AstraZeneca entered into proceedings relating to our Oncology increase in the US and an 18% increase
a master collaboration agreement with Dako products can be found in Note 25 to the outside the US.
to develop companion diagnostic tests for Financial Statements from page 166.
selected cancer treatments. This agreement
forms part of AstraZeneca’s personalised Financial performance 2009/2008
healthcare strategy, and will have benefits Performance 2009
for more than 10 of AstraZeneca’s oncology Reported performance
drug projects in early development. Oncology sales decreased by 9% on a
reported basis to $4,518 million down from
AZD8055, AZD8931, AZD1480 and AZD4547 $4,954 million in 2008.
are all undergoing Phase I studies. AZD1152,
an aurora kinase inhibitor, has shown activity Performance – CER growth rates
in acute myelogenous leukaemia and will Oncology sales were down 7% at CER.
complete Phase II studies in mid-2010. Arimidex sales were up 7% to $1,921 million.
We are also developing potential new cancer In the US, Arimidex sales were up 16% to
treatments using biological approaches with $878 million. Outside the US, sales were flat
highly defined molecular targets for patient at $1,043 million.
populations with unmet medical need and
currently have four Phase I studies ongoing Casodex sales decreased by 34% to $844
with biologics. million, with sales in the US down by 49%
and sales outside the US down by 29% due
Our early biologics pipeline consists of to continued erosion from generic competition.
MAbs directed against processes central to
tumour progression. We are also developing Iressa sales for the year were up 8% with
MAbs that enhance the ability of a patient’s growth in China (11%), Western Europe
own immune system to kill cancer cells. (250%) and Japan (10%).

CAT-8015 is a biologic being investigated for Faslodex sales were up 10% with a 5%
the treatment of blood-based malignancies, increase in the US and a 15% increase
including lymphoma and leukaemia. It targets outside the US.
a common protein receptor found on the
majority of ß-cell cancers. In 2009, Phase I
development for CAT-8015 continued to move
forward in ß-cell lymphoma and leukaemia.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Therapy Area Review 71


Respiratory & Our marketed products While there are not many significant new

treatment modalities on the horizon for
Symbicort pMDI (budesonide/formoterol in a asthma and COPD, some pharmaceutical
pressurised metered-dose inhaler) is used for the
maintenance treatment of asthma and COPD in the US. companies have once- and twice-daily ICS/
LABAs in late-stage development and the
Symbicort SMART (our Symbicort Maintenance
In brief and Reliever Therapy) is approved for maintenance first regulatory approvals for a new LABA and
and reliever therapy in persistent asthma. a novel anti-inflammatory mechanism, an oral
>>Total Symbicort sales $2.3 billion, up 23%. phosphodiesterase 4 inhibitor, have been seen
Symbicort Turbuhaler (budesonide/formoterol in
>>Symbicort pMDI licensed for long-term a dry powder inhaler) is a combination of an inhaled this year. Significant new product classes
maintenance treatment of asthma in the US. corticosteroid and a fast onset, long-acting bronchodilator impacting the asthma market are unlikely
The chronic obstructive pulmonary disease used for the treatment of asthma and COPD.
before 2015. However, specifically for the
(COPD) indication was approved by the FDA in Pulmicort (budesonide) is a corticosteroid anti-
February 2009. An additional programme for treatment of COPD, the new product class of
inflammatory inhalation drug that helps prevent
paediatric asthma indication has been submitted symptoms and improves the control of asthma. fixed combination LABA/LAMA is estimated to
to the FDA and a Complete Response Letter was impact the market in early 2013. Longer term,
received in April. AstraZeneca has responded to Pulmicort Respules (budesonide inhalation suspension)
the Complete Response Letter with a proposed is the first nebulised corticosteroid in the US for the novel anti-inflammatory compounds and/or
programme to address the FDA questions. treatment of asthma in children as young as 12 months. anti-proteases, alone or in combinations of
Rhinocort (budesonide) is a nasal steroid treatment LABAs or LAMAs aimed mainly at the
>>Outside the US, Symbicort SMART is now
approved for use in managing asthma in for allergic rhinitis (hay fever), perennial rhinitis and prevention and/or treatment of COPD
96 countries. nasal polyps. exacerbations, are likely to appear on the
Oxis (formoterol) is a fast onset, long-acting beta- market. Generic ICS/LABA combinations may
>>Outside the US, Symbicort Turbuhaler is agonist used for the treatment of asthma and COPD.
now approved for the treatment of COPD in be available from the early part of this decade.
96 countries. Accolate (zafirlukast) is an oral leukotriene receptor
antagonist used for the treatment of asthma. Our focus
>>In October, Symbicort Turbuhaler was approved
in Japan for the treatment of adult asthma and Our key marketed products
it was launched in Japan in January 2010. Symbicort Turbuhaler improves symptoms and
AstraZeneca and Astellas have entered into an Our strategic objectives provides a clinically important improvement in
agreement for the co-promotion of Symbicort
Turbuhaler in Japan. We aim to build on our strong position in the the health of many patients with either asthma
respiratory field through the growth of key or COPD by providing rapid, effective control
>>Total Pulmicort sales of $1,310 million and is now products, particularly Symbicort, with new and effective reduction of exacerbations.
approved in 116 countries.
indications and market launches, including
>>With settlement of AstraZeneca’s Pulmicort chronic obstructive pulmonary disease In October, Symbicort Turbuhaler was
Respules patent infringement litigation against (COPD), as well as through developing a approved in Japan for the treatment of adult
Teva in November 2008, Teva obtained an
exclusive licence to sell generic Pulmicort strong pipeline of novel small molecule and asthma and it was launched in Japan in
Respules in the US from 15 December 2009 biologics approaches to COPD and asthma. January 2010. AstraZeneca and Astellas have
on payment of royalties to AstraZeneca. Teva We aspire to enter the rheumatology market entered into an agreement for the co-
launched its licensed product in December.
AstraZeneca sales of Pulmicort Respules predominantly through our biologics pipeline. promotion of Symbicort Turbuhaler in Japan.
continue despite Teva’s entry.
COPD and asthma Symbicort pMDI (pressurised metered
>>Following FDA approval of Apotex’s generic
version of Pulmicort Respules in March 2009, According to WHO, COPD is currently the dose inhaler) is approved, in the US, for the
AstraZeneca obtained a preliminary injunction fourth leading cause of death worldwide, long-term maintenance treatment of asthma
against Apotex, Inc. and Apotex Corp. (Apotex) with future increases anticipated. Current in patients 12 years of age and older and
preventing an at-risk launch of the product until
further order of the Court. Apotex appealed the treatment has recently demonstrated some was launched in the US in 2007. The COPD
decision. Other patent infringement litigation in survival benefit but the prognosis of the indication was approved and launched in
relation to Pulmicort Respules against Breath COPD patient remains poor. In asthma, the US in early 2009. In December 2008,
Limited continues.
morbidity and mortality remain important the Joint Advisory Committees of the FDA
issues and disease normalisation is not completed a review of the benefits and risks
achieved by any treatment. of asthma medications containing LABAs.
The Advisory Committees concluded that
The typical treatment for both COPD and the benefits of Symbicort pMDI outweigh
asthma is a fixed-dose combination of an the risks in adult and adolescent asthma
inhaled corticosteroid (ICS) with a long-acting patients. However, a final decision has not
beta-agonist (LABA) (for example Symbicort) yet been communicated by the FDA.
or for COPD specifically, an inhaled long-acting
muscarinic antagonist (LAMA). Other major An sNDA for Symbicort pMDI in paediatric
asthma treatments include monotherapy ICSs, asthma was submitted in 2008. AstraZeneca
oral leukotriene receptor antagonists and/ received a Complete Response Letter in
or oral steroids for severe disease and (in April 2009 for this application and has since
combination with antibiotics) for exacerbations. submitted a response outlining an additional
programme to address the FDA’s questions.

AstraZeneca Annual Report and Form 20-F Information 2009

72 Directors’ Report | Therapy Area Review

Our financial performance

2009 2008 2007 2009 compared to 2008 2008 compared to 2007
Growth due Growth due
CER to exchange CER to exchange CER Reported CER Reported
Sales growth effect Sales growth effect Sales growth growth growth growth
$m $m $m $m $m $m $m % % % %
Pulmicort 1,310 (155) (30) 1,495 7 34 1,454 (10) (12) – 3
Symbicort 2,294 456 (166) 2,004 346 83 1,575 23 14 22 27
Rhinocort 264 (47) (11) 322 (41) 9 354 (15) (18) (12) (9)
Oxis 63 – (8) 71 (21) 6 86 – (11) (24) (17)
Accolate 66 (6) (1) 73 (4) 1 76 (8) (10) (5) (4)
Other 135 (14) (14) 163 (9) 6 166 (9) (17) (5) (2)
Total 4,132 234 (230) 4,128 278 139 3,711 6 – 7 11

Therapy area world market Symbicort SMART provides increased asthma Clinical data from the CLIMB study
(MAT/Q3/09) control and simplifies asthma management demonstrated that Symbicort added to
through the use of only one inhaler for both Spiriva™ (tiotropium) provided greater clinical
maintenance and relief of asthma symptoms. improvements than tiotropium alone over
As well as being a cost-effective treatment a 12-week treatment period. Results from
for many healthcare payers, the Symbicort the CLIMB study also showed that the
D A SMART approach can also result in lower occurrence of severe COPD exacerbations
ICS and oral steroid use compared to other was reduced by as much as 62% in patients
treatment options. where Symbicort was added to tiotropium
compared to patients on tiotropium alone.
B Pulmicort remains the world’s leading inhaled Furthermore, the CLIMB study showed that
corticosteroid for the treatment of asthma and patients treated with the Symbicort/tiotropium
is available in several forms. Teva now has inhaled combination experienced benefits.
an exclusive licence to sell generic Pulmicort
Market sectors $bn Respules in the US. In the pipeline
A Asthma 17.1 AZD9668, currently in Phase IIb studies,
B COPD 9.8 Rhinocort combines powerful efficacy with is an oral inhibitor of neutrophil elastase,
C Rhinitis 7.3 rapid onset of action and minimal side effects an enzyme strongly implicated in the
D Other 19.8 and is available as a once-daily treatment for inflammatory process, mucus hypersecretion
allergic rhinitis (hay fever), perennial rhinitis and matrix degradation that drives the signs
The prescription respiratory world market and nasal polyps in the Rhinocort Aqua and symptoms of and disease progression
value is $54 billion. (nasal spray) and the Turbuhaler (dry powder in COPD.
WHO estimates that 300 million people worldwide
suffer from asthma and more than 200 million inhaler) forms.
have COPD, which is currently the fourth leading Alongside this novel approach and building on
cause of death worldwide with further increases Oxis is added to the treatment regimen our capabilities in combinations and device
anticipated in future decades.
for asthma and COPD when corticosteroid development demonstrated through our
treatment alone is not adequate. Oxis is also experience with Symbicort, we are aiming
indicated for symptom relief in COPD. to improve further the mainstay of treatment

for all COPD patients by combining two
Clinical studies of our long-acting bronchodilators, AZD3199 and
key marketed products AZD9164, in one inhaler. The individual
During 2009, the data from the SUN study, compounds are currently in Phase II studies
the second pivotal Symbicort pMDI study, (AZD3199 is in Phase IIb studies). Patients
The prescription respiratory world was published. This study is part of the should benefit from improved symptom
market value is $54 billion COPD NDA submission. The study confirmed control, as well as from the reduction in the
the clinical benefits of Symbicort pMDI in complications arising from multiple dosing or
moderate and severe COPD patients and inhaler devices and the combination supports
showed that Symbicort pMDI 160/4.5 two the recommendations of the international
inhalations twice-daily had a greater guidelines for the treatment of COPD for
improvement in pre-dose forced expiratory maximal bronchodilation as 1st line therapy.
volume I tests averaged over the treatment
period compared with formoterol and AZD1981, a prostanoid receptor CRTh2
placebo. In addition, several other important antagonist currently in Phase IIa studies, is
clinical studies in COPD were published a potential new oral small molecule approach
showing the benefit of early onset effect to treating uncontrolled asthma. AZD1981
relieving morning symptoms as well as is expected to prevent the recruitment and
improved outcomes when added to LAMAs. activation of Th2 cells and eosinophils, which
are both increased in asthma.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Therapy Area Review 73


AZD8848 is a novel small molecule toll-like Our 2007 discovery alliance with Argenta Current treatment of systemic lupus
receptor-7 agonist in Phase II studies for Discovery Limited aimed at identifying erythematosus (SLE) focuses on controlling
the treatment of asthma being developed improved bronchodilators to treat COPD disease flares, preventing renal failure and
in collaboration with Dainippon continues and is now entirely focused on suppressing symptoms to an acceptable level
Sumitomo Pharmaceuticals Co. Ltd the combined anti-muscarinic and beta-2 while minimising toxicity. Despite considerable
(Dainippon Sumitomo). adrenergic agonists. AstraZeneca continues recent development activity, no targeted
to develop the LAMA compounds identified disease-modifying agents have yet been
MEDI-563 is an investigational approach in the collaboration. successfully launched for SLE. Most
that may help treat inadequately controlled emerging biologic agents will likely be used
asthma by targeting the interleukin-5 (IL-5) Our three-year research collaboration initially in combination with corticosteroids or
receptor, blocking the binding of IL-5 to the with Silence Therapeutics A.G. (Silence), immunosuppressants to provide incremental
receptor and depleting the cells expressing established in 2007, is continuing. In 2008, benefit and/or allow reduced doses or
the IL-5 receptor, typically eosinophils, we entered into a new collaboration with numbers of these agents.
which are thought to play a key role in the Silence focused on the development of a
pathology of asthma. In addition, two Phase range of novel approaches for the delivery of Our focus
II studies are ongoing to assess the ability of siRNA molecules, which allows both Silence In the pipeline
MEDI-563 to reduce the asthmatic relapse and AstraZeneca to commercialise the novel In 2009, we invested in several novel
rate following an acute care episode, as well delivery systems which we develop together. multi-functional MAbs in inflammatory and
as its ability to reduce the rate of asthma autoimmune conditions.
exacerbations overall. AstraZeneca announced in July that it had
terminated the licence agreement with MEDI-545 is a MAb which targets interferon-
In 2009, we initiated a Phase IIb study to MAP Pharmaceuticals, Inc. (MAP), regarding alpha, which regulates processes involved in
determine the chronic dosing of MEDI-528 unit dose budesonide (UDB). UDB, an autoimmune diseases. In 2009, we completed
(an anti-IL-9 MAb) on asthma exacerbations investigational treatment for paediatric asthma, enrolment for a Phase IIa study in patients
in moderate to severe asthma. was the subject of an initial Phase III clinical with SLE and a Phase I study in patients with
study conducted by MAP. In February 2009, active dermatomyositis or polymyositis.
CAT-354 targets interleukine-13, one of the key MAP announced that the study failed to
cytokines implicated in asthma pathogenesis. meet its primary endpoints. In light of the CAM-3001 (licensed from CSL Limited) is
In 2009, we initiated a Phase IIa study to clinical study results, AstraZeneca exercised a MAb in Phase I development with potential
investigate the potential of a subcutaneous its right to terminate the licence agreement. to help patients with RA through targeting the
injection form of CAT-354 to treat patients alpha sub-unit of the granulocyte-macrophage
with moderate to severe persistent asthma Rheumatology colony stimulating factor receptor.
who are inadequately controlled despite Rheumatoid arthritis (RA) is currently treated
current standard of care. with generic disease-modifying anti-rheumatic In 2009, we initiated a Phase I study in
agents and, where the relevant criteria are met, scleroderma for a MAb, which targets the
In addition, the early pipeline for respiratory biologic disease-modifiers. There remains anti-interferon alpha receptor. We also filed
biologics was bolstered by the entry of three a need for novel effective treatments since an initial new drug application for a MAb
new development programmes targeting only about a third of patients treated with which targets the CD-19 receptor.
COPD, which will likely progress to human biologics achieve their treatment goals.
studies in late 2010. The RA therapy market will experience AZD9056 and AZD5672, which were in
modest annual growth over the 2008-2018 Phase II development, have been terminated.
The early biologic pipeline has been reshaped forecast period, as sales increase from AstraZeneca continues to explore approaches
to focus more on COPD, looking for novel $8.2 billion to $13.1 billion. In 2008, sales of and mechanisms which have the potential to
strategies to inhibit exacerbations in COPD, the biologic tumour necrosis factor (TNF) alpha improve therapy and to deliver better outcomes
which include regulation of inflammatory cell blockers accounted for 80% of major-market for patients with rheumatological conditions.
migration and activation with MAbs directed RA sales. Launches of additional TNF blockers
to antigens. are ongoing, and use of other biologic Litigation
approaches, currently reserved for TNF failures, Detailed information about material legal
Strategic collaboration activity continues is expected to increase. Targeted novel oral proceedings in respect of our Respiratory &
to be important to our respiratory pipeline. drugs aimed at patients that currently choose Inflammation products can be found in Note
Our collaboration with Dynavax Technologies not to take, are ineligible for or do not respond 25 to the Financial Statements from page 166.
Corporation (Dynavax), which began in 2006, to biologics, are in development to provide
continues to pursue opportunities in the field anti-TNF-like efficacy with safety benefits
of toll-like receptor-9 with immunostimulatory and more convenient dosing. (Source:
DNA sequences. Our collaborations with Decision Resources 2009).
Dainippon Sumitomo (referred to above) and
Dynavax both aim to find treatments for the
normalisation of disease in asthma and the
prevention of exacerbations in COPD.

AstraZeneca Annual Report and Form 20-F Information 2009

74 Directors’ Report | Therapy Area Review

Financial performance 2009/2008 Total Pulmicort sales were flat at $1,495

Performance 2009 million, with US sales up 2% as the generic
Reported performance competition from the Teva product affected
Respiratory & Inflammation (R&I) sales were quarter four sales. US sales for Pulmicort
$4,132 million, almost level with the $4,128 were down 15% to $260 million in the fourth
million in 2008. quarter of 2008 and Pulmicort Respules sales
were down 18% as a result of the ‘at risk’
Performance – CER growth rates launch of generic budesonide inhalation
R&I sales grew by 6% at CER. suspension (BIS) on 18 November 2008.
The patent litigation between Teva and
Total sales of Symbicort grew by 23% to AstraZeneca was subsequently settled on
$2,294 million. In the US, sales of Symbicort 25 November 2008. The agreement allows
pMDI were $488 million, up 91%. This strong Teva to commence sales of BIS under an
growth is lead by physicians’ increasing use exclusive licence from AstraZeneca beginning
of Symbicort pMDI, particularly in those on 15 December 2009. The agreement also
patients newly starting fixed combination provided that any product already shipped by
therapy. For these patients, more than one Teva would remain in the market to be further
in three prescriptions written by specialists distributed and dispensed. As a result, Teva
and more than one in four prescriptions products accounted for nearly 15% of total
written by primary care physicians, is for prescriptions for BIS products dispensed
Symbicort pMDI. Symbicort (Turbuhaler during the fourth quarter of 2008, including
and SMART) sales outside the US in the a 40% share in December 2008. US sales for
year were $1,806 million, up 13%. Pulmicort for the full year were $982 million.
Pulmicort Respules accounted for around
Total sales for Pulmicort were down 10% to 90% of total Pulmicort sales in the US. Total
$1,310 million. Total US sales for Pulmicort for sales of Pulmicort outside the US were
the full year were down 18% to $804 million down 2% for the full year to $513 million.
due to generic competition for Pulmicort
Respules. Pulmicort Respules accounted for
around 86% of total Pulmicort sales in the
US. Total sales of Pulmicort outside the US
were up 4% for the full year to $506 million.

Performance 2008
Reported performance
Sales in R&I increased by 11% to $4,128 million
from $3,711 million in 2007.

Performance – CER growth rates

R&I sales grew by 7% at CER.

Total sales of Symbicort grew by 22% to

$2,004 million. In the US, sales of Symbicort
pMDI were $255 million. Symbicort
(Turbuhaler and SMART) sales outside the
US in the year were $1,749 million, up 9%.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Other Businesses 75


Other Businesses Major investments have been made in new Clinical research is an integral part of care
production equipment for the manufacturing delivery at Aptium Oncology’s cancer centres
of new LoFric catheter products, which will and an area of strategic strength for the
Astra Tech be launched early in 2010. company. Aptium Oncology’s Gastrointestinal
Astra Tech AB (Astra Tech) is engaged in the Cancer Consortium, established in 2008, has
research, development, manufacture and The Astra Tech training and education been successful in bringing together eight
marketing of medical devices and implants programme has been further developed and, leading US academic institutions to speed up
for use in healthcare, primarily in urology, in combination with its state-of-the-art centre the process of finding and testing active new
surgery and odontology. Astra Tech has two for training and education at its headquarters, compounds for patients with gastrointestinal
main business divisions: Astra Tech Dental, advanced international education programmes cancers. In 2010, Aptium Oncology plans
which is responsible for the odontology area and seminars are continuously being offered to create a similar consortium focused on
of the business, and Astra Tech Healthcare, to existing and potential customers. Further multiple myeloma.
which is responsible for the surgery and investments have been made in R&D, clinical
urology areas of the business. Astra Tech research and new production facilities to
has a leading position in several countries strengthen the product portfolio.
in Europe and is expanding its operations
in key markets, particularly in the US, Japan Aptium Oncology
and South East Asia. For more than 25 years, Aptium Oncology, Inc.
(Aptium Oncology) has been developing and
All product lines showed continued good managing hospital-based outpatient cancer
sales growth in 2009. The downturn in the centres in the US. Ownership of Aptium
world economy has had a dramatic impact on Oncology provides AstraZeneca with a
the dental implant market, which is estimated unique window into the provider sector of the
to have declined by 5% during 2009. However, US oncology market and, through Aptium
Astra Tech Dental has performed well in this Oncology’s network of over 175 physicians,
declining market, growing its implant sales access to many opinion leaders in the field of
and increasing its market share in several key oncology who can help to shape early phase
markets. In pursuit of the growth strategy for drug development decisions. It is also involved
Astra Tech Dental, the sales and marketing in clinical study delivery for a number of our
organisation for dental implants was further pipeline products and provides scientific
strengthened and adapted to the prevailing advice and staff training for oncology teams.
market conditions. The downturn in the world
economy has had no significant impact on the In 2009, Aptium Oncology continued
market for Astra Tech Healthcare products. to perform well in its cancer centre
management business with positive profit
Since Astra Tech’s acquisition of Atlantis and cash flow contributions. As anticipated,
Components Inc. (Atlantis) in 2007, Astra Tech in the second half of the year, two of Aptium
has introduced the Atlantis product range Oncology’s long-term management contracts
into most European markets and the market expired. In both cases, Aptium Oncology
response has been very favourable. The successfully established the infrastructure
European manufacturing facility for Atlantis and services to allow the hospitals to
products, which Astra Tech opened in late manage independently their programmes
2008, is now in full operation, meeting an after 15 and 25 years, respectively.
increasing demand from the European market.
The acquisition of Atlantis has given Astra Tech During 2009, Aptium Oncology continued
a strong platform for development within digital to refine its business model to adapt to the
dentistry, offering an important opportunity ever-changing dynamics of the US healthcare
for continued growth for the dental implants industry. Aptium Oncology remains focused
product line. on growth and its consultancy business
continues to lay the groundwork for new
management relationships although, due to
the loss of the long-term management
contracts referred to above, Aptium
Oncology’s growth will be from a lower base.

AstraZeneca Annual Report and Form 20-F Information 2009

76 Directors’ Report | Environmental Sustainability

Environmental suppliers to introduce fleet reporting to track Greenhouse gas emissions1, 2

the CO2 emissions of new and existing fleet
CO2-equivalents million tonnes
vehicles and are introducing CO2 caps on new
car acquisitions in our major markets. We also 2009 1.12
continue to invest in advanced driver training 2008 1.22
In this section, we describe our commitment to improve both safety and fuel efficiency 2007 1.30
in key areas of environmental sustainability associated with driving. Other areas in
– managing our impact on climate change, which we are pursuing further improvement Index tonnes/$m sales
managing our waste and understanding the include the implementation of green
2009 36
potential impact of pharmaceuticals in the technology principles in our process design
2008 40
environment. More information about our and exploration of the potential for further
2007 45
work in these areas and in others, such as investment in low carbon and renewable
resource efficiency, biodiversity and emissions energy options at our sites. Figures are calculated in line with the Greenhouse Gas
to air and water, can be found on our website, (GhG) Protocol guidance ( Our current climate change targets, approved
by the Board in 2005, aim to ensure that our Waste production1, 3
Our current set of five-year targets and absolute emissions in 2010 will be no greater
Total waste thousand tonnes
objectives takes us to the end of 2010. We are than they were at the start of the decade and
in the process of finalising a new environmental 55% less than they were in 1990. This requires 2009 50.0
sustainability strategy, including associated substantial efforts to be made across our 2008 54.1
targets and objectives, which will drive our business to produce, by the end of 2010, an 2007 57.6
continued commitment in this important area. absolute reduction of 12% in global warming
emissions from all sources other than pMDIs, Index tonnes/$m sales
Climate change when compared with 2005. We have made
2009 1.60
We continue to work hard to manage good progress in recent years in reducing
2008 1.79
our impact on climate change without greenhouse gas emissions and, in 2009, our
2007 1.99
compromising our ability to deliver new total emissions from all sources were 9% lower
medicines that make a difference in than in 2008. For data on our performance 1
Data exclude MedImmune.
important areas of healthcare. over the last three years see opposite.
The 2008 and 2007 figures have been revised
due to improved data capture.
We have replaced the ozone depleting potential (ODP)
We believe that our primary responsibility is Across all our activity, we work with our KPI with waste production as we believe this is now a
to reduce our carbon footprint by, amongst partners to share learning and foster best more meaningful KPI. ODP data continue to be published
on our website,
other things, improving our energy efficiency practice. We are also increasingly participating
and pursuing lower-carbon alternatives to in the global debate on what business can
fossil fuels. The use of carbon offset or other do to help mitigate global warming and
third party reduction credits to address adapt to the unavoidable consequences of the environmental burden of new production
residual emissions is something we will not climate change. processes under development, integration of
consider as an alternative to driving our own environmental considerations in purchasing
efforts to reduce emissions. Waste management and internal waste awareness programmes.
The management of waste associated For data on our performance over the last
In common with most businesses, our with our activities is another key element of three years see above.
emissions arise from the energy we use at our environmental sustainability strategy.
our facilities and from the various means of We are working to reduce our total waste Pharmaceuticals in the environment
transport we use. Our carbon footprint is also index to meet our 2010 improvement target We understand, and take seriously, concerns
affected by some of our respiratory therapies, (40% by the end of 2010 from a 2001/2002 about the detection of trace amounts of
specifically our pressurised metered dose reference point). pharmaceutical residues in the environment.
inhaler (pMDI) products which rely on We work continuously to improve our
propellants such as hydrofluoroalkane, which Our waste is categorised as ‘hazardous understanding of the science and how
is a greenhouse gas, to deliver the medicine waste’ or ‘other waste’ according to national pharmaceuticals interact with the environment
to the airways. Patients who are unable to use legislation, which varies in its definitions. and the risks that they may pose.
our Turbuhaler dry powder inhaler, which does The majority of our hazardous waste
not require propellants, need these pMDI consists of solvent and aqueous streams The presence of trace amounts of
products. We believe that the expanded from manufacturing activities. Other waste pharmaceuticals in the environment (PIE)
treatment choice and potential benefits that includes general waste from our facilities resulting from patient excretion is an inevitable
they offer outweigh the potential impact on around the world. result of the way most current medicines work:
the environment. pharmaceuticals need to be stable enough
Our primary objective is waste prevention. to have a useful shelf-life and oral dosage
We continue to drive the management of Where this is not practical, we focus on waste forms must be robust enough, in most cases,
our carbon footprint across key areas of minimisation and appropriate treatment or to pass through the stomach intact.
business activity. For example, recognising disposal to maximise the reuse and recycling
the significant global warming emissions of materials, including energy recovery from We are committed to identifying any potential
from business road travel for sales and the incineration of waste streams. Programmes adverse effects on the environment that
marketing activities, we are maintaining designed to reduce the amount of waste we our medicines might have and responsibly
a strong focus in this area. We are working generate include the continual improvement balancing these against the benefits that
with our fleet management and leasing of existing production processes, minimising these medicines bring to patients’ lives.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | In the Global Community 77


We actively engage and partner with other In the Global Morakot struck Taiwan, AstraZeneca Asia

pharmaceutical companies, NGOs, scientists, Pacific made a $200,000 donation to the
regulators, patients and prescribers to share local Red Cross.
learning and experience and to promote
responsible management of PIE issues, in At a global level, we also made a further
line with current scientific knowledge. Wherever AstraZeneca is located worldwide, contribution of $240,000 to the Red Cross
we aim to make a positive contribution to our Centre in Kuala Lumpur, Malaysia, established
Dedicated research local communities through sponsorships, in 2006 by the Red Cross with $700,000
The levels of pharmaceutical residues detected charitable donations and other initiatives that of funding from AstraZeneca. The Centre
in the environment are generally extremely low help to make a difference. Our activities are continues to play an important role in disaster
and are unlikely to pose a risk to human health. focused on bringing sustainable benefit in relief in the Asia Pacific region. With pre-
For example, the levels detected in drinking ways that are consistent with our business positioned emergency supplies, the Centre
water are so low that, to ingest one single of improving health and quality of life, and was able to respond quickly to the events in
patient dose, someone would have to drink of promoting the value of science among 2009, distributing hygiene kits to thousands
more water than is possible in a lifetime. young people. of people in need in the affected areas.
However, whilst improving all the time, Our 2009 donation, coupled with one of
understanding of the potential for long-term In January 2009, we launched a revised and $200,000 that we made in 2008, has enabled
effects of PIE, for example to aquatic life, strengthened global Community Support the Red Cross to maintain appropriate levels
requires further research. Policy to provide an enhanced platform of emergency relief stock at the Centre.
for capturing, aligning and maximising
This is an ongoing priority for our scientists the benefit of our community support In January 2010, following the earthquake in
at our Environmental Laboratory in Brixham, commitments worldwide. Targeted training Haiti, we donated medicines and contributed
UK, who are at the forefront of this field of for all relevant staff is being provided. As well a total of $500,000 to the British Red Cross
science, working both independently and in as community support, the policy describes Emergency Appeal. We also committed an
collaboration with other companies, leading the requirements regarding product donations additional $500,000 to support a longer-
academics and regulatory bodies to advance and support to patient groups and other term disaster recovery programme that will
PIE-related research. Work at Brixham is healthcare organisations. give the people of Haiti the help they need to
focused on improving our understanding of re-build their lives and their communities.
the processes leading to the breakdown In 2009, we spent a total of $882 million (2008:
and removal of pharmaceutical residues $718 million) on community sponsorships In the developing world
in sewage treatment plants and the wider and charitable donations worldwide, Whilst we remain committed to making
environment, and improving the predictability including our product donation and patient a contribution to improving healthcare in
of the potential adverse environmental assistance programmes which make our the developing world, we believe that real
effects through the development of novel medicines available free of charge or at progress can only be made through the
ecotoxicological test methodologies. reduced prices. Our expanded patient commitment of all the related stakeholders,
assistance programmes in the US contributed including governments, NGOs and the
Product stewardship to a total commitment of $786 million worth international community, as well as the private
We conduct environmental risk assessments of product donations valued at an average sector. Only by working together can
for all our new, and many of our established, wholesale price (2008: $646 million). sustainable improvements be achieved.
products in accordance with applicable The increase is because more people
regulations. Going beyond the regulatory enrolled in our US AZ&Me patient assistance The medicines in our range today are not for
requirements, we have also reviewed the programme and used more medicines in the treatment of tuberculosis (TB), HIV/AIDS
environmental risk assessments for many of 2009 due, we believe, to the economic and malaria, currently the developing world’s
our older established products and, where recession. Our community support spend most significant disease challenges, but
appropriate, have undertaken additional ($96 million) included a contribution during we are applying our skills and resources to
voluntary testing to refine the assessments. the year of $25 million to the AstraZeneca helping in other ways. Our contribution centres
HealthCare Foundation for its cardiovascular on two main areas of activity – dedicated TB
We have also introduced Environmental Risk programme which is focused on improving research and working in partnership to help
Management Plans that will accompany all cardiovascular health in the US. strengthen local health capabilities.
new medicines throughout their life-cycle.
These plans enable all available environmental We also contribute where possible to disaster Dedicated TB research
data to be taken into account at key decision relief efforts. During 2009, when typhoons Our dedicated research facility in Bangalore,
points during drug discovery and development, Ketsana and Parma hit the Philippines, India is focused on finding a new, improved
and to provide early warning of medicines that causing widespread devastation, we donated treatment for TB, which is a major cause of
could pose a potential risk to the environment. medicines to the relief effort and 15 of our illness and death worldwide, especially in Asia
employees did voluntary work with the and Africa. AstraZeneca is the only major
We make environmental risk data for our Philippine army, helping over 1,000 flood pharmaceutical company with a research
existing products publicly available via the victims. We responded similarly with programme in India totally dedicated to TB.
Swedish Doctors Prescribing Guide website donations to the local relief effort when Further information can be found in the
(, using the voluntary disclosure system earthquakes hit Indonesia and, when typhoon Therapy Area Review in the Infection section
introduced by the Swedish Association of the on page 64.
Pharmaceutical Industry. AstraZeneca has a
leading role in developing the guidance for
this activity.

AstraZeneca Annual Report and Form 20-F Information 2009

78 Directors’ Report | In the Global Community

Working in partnership Our partnership with the African Medical Engaging at international level
In some parts of the developing world, and Research Foundation is focused on As part of our focus on TB, we actively
the availability of medicines is not always the developing a model for the integrated engage in international efforts to help in the
main challenge. Access to healthcare also management of TB, HIV/AIDS and malaria fight against this devastating disease.
depends on having a functional healthcare at both national and local levels in Uganda,
system, trained healthcare workers and where there is a high incidence of all three AstraZeneca participates in the Gates Global
effective supply and distribution mechanisms diseases. This integrated management Health CEO Roundtable, the purpose of
in place to ensure that medicines are used approach has not been widely addressed which is to bring together the world’s leading
to their full effect as part of overall health previously and we are one of the few pharmaceutical companies with the Bill &
management. To help meet these challenges, organisations involved in such work. A pilot Melinda Gates Foundation to leverage our
alongside our ongoing TB research, we programme is now underway in the high respective areas of strength and expertise in
partner with NGOs and other organisations incidence areas of the Luwero and Kiboga the pursuit of global health priorities. We will
working with local communities to strengthen districts of central Uganda. Key targets continue to partner with the Bill & Melinda
their frameworks for delivering healthcare in TB include increasing laboratory diagnostic Gates Foundation on TB in a variety of
and other disease areas in a sustainable way. capacity and improving community-based projects spanning early phase drug discovery
healthcare management. Progress to date through to development of suitable regulatory
Key principles for our partnerships are that includes the completion and handover to pathways for new agents.
they lead to positive, measurable outcomes, local district management teams of three
can be scaled up and potentially replicated new laboratories and the establishment of During 2009, we also continued our
to improve outcomes for a greater number, 144 village health teams, with a total of over involvement with the Stop TB Partnership,
and can deliver a sustainable framework 750 people trained in health promotion in which aims to forge a more effective response
that can ultimately be owned and managed their local communities. to TB, and strengthen strategic impact, by
locally, without the need for our support. engaging a broad range of stakeholders,
We also aim to ensure that such partnerships In Ethiopia, our partnership with Axios including the private sector, foundations,
can contribute to our business development, is focused on building local capability in academic and research institutions, the media,
by enabling us to understand better the health managing breast cancer, which is the second NGOs and civil society.
needs of, and to build important relationships most common cancer among young women
in, markets of the future. in that country. The project has focused AstraZeneca is the only major pharmaceutical
on strengthening diagnosis and treatment company involved in the New Medicines for
Our current partnerships are primarily capabilities, including the creation of TB project, begun in 2006. Funded by a grant
focused on helping hard-hit communities previously unavailable treatment protocols from the EU Framework VI programme and
in Asia and Africa to combat TB, which is and standardised reporting guidelines for use consisting of around 15 groups of Europe’s
on the increase in these regions, but we also across the country. Benefits to the patient most prominent scientists and researchers
have some programmes in other disease have included reduced time between in the field, this consortium seeks to combine
areas and in other countries. diagnosis and surgery (from 12-18 months academic and pharmaceutical skills to further
in 2006 to three to six months in 2009). the discovery of new therapies for TB.
Our long-standing partnership with the British
Red Cross and Red Crescent Societies Our support to Voluntary Service Overseas
includes support to community-based (VSO) includes working in partnership to
programmes in Central Asia that are helping help them further develop their strategy and
to combat TB and to improve the quality framework for delivering their health goals.
of life of people living with TB and TB/HIV We also fund VSO volunteers working to
co-infection in the hard-hit areas of build local healthcare capabilities in under-
Turkmenistan, Kyrgyzstan and Kazakhstan. served communities across Africa and Asia.
To date, these programmes have helped over Alongside this, our employees are able to
10,000 people living with TB or TB/HIV to volunteer for placements in appropriate
complete their TB treatment, with treatment countries to support VSO, drawing on the
completion rates reaching 89%, 92% and broad range of skills they can offer in human
73% in Turkmenistan, Kyrgyzstan and resources, finance, information technology
Kazakhstan, respectively. Alongside this, and communications, as well as health
the Red Crescent Society has delivered TB and medicine.
awareness campaigns that have reached over
two million people in the region. The long-term More information about these partnerships and
presence of the Red Crescent Society in our other activities worldwide is available on
Central Asia has enabled the organisation to our website,
build effective and far reaching community
programmes. These activities continue to
contribute to a reduction in TB incidence
and mortality in Central Asia.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Risk 79

Corporate Governance

Risk function are required, prior to the QBRs, to Line and project management are
provide quarterly updates on their key risks accountable for the management of risk
which are then consolidated into the relevant within the context of their functional or cross-
In this section we describe our key risk SET function list of key risks for review at the functional remit or project. Line managers
management and assurance mechanisms, QBRs. The top 10 risks of each SET function have primary responsibility for identifying
and the principal risks and uncertainties are then aggregated into a Group risk register. and managing risk and for putting in place
which we currently consider to be material The purpose of the risk review is threefold: appropriate controls and procedures to
to our business in that they may have a (i) to identify and measure risks; (ii) to define monitor their effectiveness.
significant effect on our financial condition, and review plans to mitigate risks we do not
results of operations and/or reputation. wish to take; and (iii) to define and review plans Oversight and monitoring
Specific risks and uncertainties are also to manage those risks we do wish to take. The Board is responsible for overseeing
discussed at various points in this Directors’ A risk management standard, guidelines and and monitoring the effectiveness of the risk
Report, where relevant. supporting tools are in place to support management processes implemented by
the managers in the effective identification, management. Specialist risk and compliance
Managing risk management, mitigation and reporting of risks. functions (including Group Internal Audit
As a global, innovation-driven (GIA)) support the Board by providing advice
biopharmaceutical company, we face a Our approach to risk management includes and monitoring and testing the adequacy of
diverse range of risks and uncertainties the development of business resilience plans to the processes.
that may adversely affect our business. provide for situations where specific risks have
Our approach to risk management is designed the potential to severely impact our business. Our compliance organisation comprises a
to encourage clear decision-making as Global business resilience plans covering wide range of specialist groups whose work
to which risks we accept and which risks crisis management, business continuity and includes liaising with line management and
we manage to an acceptable level, in each emergency responses are in place, supported the SET to develop systems and processes
case informed by an understanding of the by the training of relevant business managers for managing risk in specific regulated areas
commercial, financial, compliance and and crisis simulation activities. to ensure ongoing legal and regulatory
reputational implications of these risks. compliance. These groups include: Good
One of our strategic priorities, ‘Promote a Laboratory; Clinical and Manufacturing
We work continuously to ensure that we culture of responsibility and accountability’, Compliance; Safety, Health and Environment;
have effective risk management processes involves the continued nurturing of a culture Medical and Regulatory Affairs; Financial
in place to support the delivery of our of responsibility and accountability. Our Control and Compliance; Information
strategic objectives, the material needs Code of Conduct and our Global Policies Security and Data Privacy; Sales and
of our stakeholders and our core values. and Standards set mandatory minimum Marketing Compliance; and Security.
We monitor our business activities and our standards of responsible behaviour for all
external and internal environments for new employees. In addition, all employees We have a dedicated Global CR team who
and emerging risks to ensure that these are receive annual training on the requirements are part of the Group Public Affairs function
proactively managed at the appropriate level of our Code of Conduct, as well as more and whose work includes public policy and
as they arise. specific targeted training on particular policies reputation management. The Global CR team
and standards. Employees are encouraged leads the development of our CR strategy and
The Board believes that the processes to raise questions on the practical application the alignment of tactical delivery. The team
and accountabilities which are in place (and of these standards and to report suspected works closely with senior leaders across
described below in further detail) provide it breaches and incidents of non-compliance AstraZeneca, and with our Global Compliance
with adequate information on the key risks and through the reporting channels described function, to ensure that the CR risks and
uncertainties facing the business. Further in our Code of Conduct. During 2009, opportunities are identified and managed
information about the risks and uncertainties we developed and launched a combined appropriately, in line with business objectives,
facing the business are set out in the Principal Compliance and Corporate Responsibility and to ensure compliance with all relevant
risks and uncertainties section from page 80. (CR) ‘Responsible Business’ scorecard with policies and standards inclusive of the 16
defined objectives and accountabilities, to Principles of our Code of Conduct. Identified
Embedded in business processes track performance consistently across all SET risks are mapped to AstraZeneca’s risk
We strive to ensure sound risk management functions and enable quarterly reporting to ‘taxonomy’, which provides a structured
is embedded within our business and the SET, the Audit Committee and Professor disaggregation of the potential strategic,
performance management processes. Dame Nancy Rothwell (the Non-Executive operational, control/compliance and
Director responsible for overseeing CR within reputational risks facing AstraZeneca.
Annually, the Group develops a long-term the Group), as well as annual reporting to the
business plan to support the delivery of its Board and the SET. Management reporting and assurance
strategy. Each area for which a SET member The Audit Committee is a Committee of the
is responsible (SET function) is required to Key responsibilities Board currently comprising five Non-Executive
provide a comprehensive assessment of its Management of risk Directors and is accountable, amongst other
risks as part of the annual business planning Day-to-day management of risk is delegated things, for assessing the adequacy and
process. The CEO and the CFO undertake from the Board to the CEO and through the effectiveness of the risk management
quarterly business reviews (QBRs) in respect SET to line managers. SET management systems and processes implemented by
of each SET function at which the key risks areas are accountable for establishing an management. In addition to the reports it
relating to the relevant SET function are appropriate line management-led process receives from the GIA function, the Audit
reviewed. Underpinning this review, the and for providing the resources for Committee also regularly receives reports
managers of the key areas within each SET supporting effective risk management. from: (i) the Global Compliance function

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80 Directors’ Report | Risk

(including quarterly reports addressing key the forward-looking statements about Difficulties of obtaining and maintaining
compliance risks, performance against the AstraZeneca in this Annual Report, identified regulatory approvals for new products
‘Responsible Business’ scorecard, by words such as ‘anticipates’, ‘believes’, We are subject to strict controls on the
compliance incidents and updates on key ‘expects’ and ‘intends’, are based on manufacture, labelling, distribution and
compliance initiatives); (ii) the Financial Control reasonable assumptions. However, marketing of our pharmaceutical products.
and Compliance Group; (iii) the external forward-looking statements involve inherent The requirements to obtain regulatory approval
auditor; and (iv) management (including the risks and uncertainties such as those based on a product’s safety, efficacy and
performance management and monitoring summarised below because they relate to quality before it can be marketed for a
processes and a Group-level risk summary events and depend upon circumstances specified therapeutic indication or indications
from the annual business planning process that will occur in the future, and may be in a particular country, and to maintain and
and the QBRs), on a range of financial influenced by factors beyond our control to comply with licences and other regulations
reporting, risk, governance, compliance and/or may have actual outcomes materially relating to its manufacture, are particularly
and business areas. Amongst other things, different from our expectations. important. The submission of an application
the Audit Committee reviews and reports to regulatory authorities (which are different,
to the Board at each Board meeting on Product pipeline risks with different requirements, in each region or
the overall framework of risk management Failure to meet development targets country) may or may not lead to approval to
and internal controls and is responsible for The development of any pharmaceutical market the product. Regulators can refuse to
promptly bringing to the Board’s attention product candidate is a complex, risky and grant approval or may require additional data
any significant concerns about the conduct, time-intensive process involving significant before approval is given, even though the
results or outcome of internal audits. The Audit financial, R&D and other resources, which medicine may already be launched in
Committee also regularly receives reports may fail at any stage of the process due to other parts of the world. The countries that
relating to calls made by employees to the a number of factors, including: constitute key markets for our pharmaceutical
AZethics and MedImmune helplines. For products include the US, the countries of the
further information on the Audit Committee >> Failure to obtain the required regulatory EU and Japan. The approval of a product is
see the Audit Committee section from or marketing approvals for the product required by the relevant regulatory authority
page 94. candidate or the facilities in which it in each country, although a single pan-EU
is manufactured. marketing authorisation approval can be
GIA is an independent assurance and advisory >> Unfavourable data from key studies. obtained through a centralised procedure.
function that reports to and is accountable to >> Adverse reactions to the product
the Audit Committee. GIA’s budget, resources candidate or indications of other In recent years, companies sponsoring new
and programme of audits are approved by safety concerns. drug applications and regulatory authorities
the Audit Committee on an annual basis and >> Failure of R&D to develop new have been under increased public pressure to
the findings from its audit work are reported product candidates. apply more conservative benefit/risk criteria
to and are discussed at each meeting of the >> Failure to demonstrate adequately before a pharmaceutical product is approved.
Audit Committee. A core part of the audit cost-effective benefits to regulators. In addition, third party interpretation of publicly
work carried out by GIA includes assessing >> The emergence of competing products. available data on our marketed products has
the effectiveness of selected aspects of the potential to influence the approval status
AstraZeneca’s risk control framework, A succession of negative drug project results or labelling of a currently approved and
including the effectiveness of other assurance and a failure to reduce development timelines marketed product. Further, predicting when
and compliance functions within the business. effectively could adversely affect the reputation a product will be approved for marketing
During 2009, GIA assessed the effectiveness of our R&D capabilities. Furthermore, the remains challenging. For example, a review
of a number of core compliance and failure of R&D to yield new products that of the FDA performance data indicates that
operational processes operating within the achieve commercial success is likely to have for NDAs approved in 2008, the average
business as well as the effectiveness of risk a material adverse effect on our financial review time (ie the time from submission to
mitigation plans in a number of high risk and/ condition and results of operations. approval) increased from 2007, in part due
or business critical areas. to the FDA failing to meet the review time
Production and release schedules for biologics targets for NDAs specified under the
Principal risks and uncertainties may be more significantly impacted by Prescription Drug User Fee Act IV and the
The pharmaceutical sector is inherently risky regulatory processes than other products due final 2009 data, once available, is expected
and a variety of risks and uncertainties may to more complex and stringent regulation to continue this trend. Delays in regulatory
affect our business. Here we summarise, on biologics development, marketing and reviews could impact the timing of a new
under the headings Product pipeline risks; manufacturing. In addition, various legislative product launch. For example, the approval
Commercialisation and business execution and regulatory authorities are considering of motavizumab and the additional
risks; Supply chain and delivery risks; Legal, whether an abbreviated approval process indications for Symbicort and Seroquel XR
regulatory and compliance risks; and is appropriate for biosimilars or follow-on have been delayed by Complete Response
Economic and financial risks, the principal biologics (similar versions of existing biologics). Letters which requested further information
risks and uncertainties which we currently While it is uncertain when, or if, any such in relation to the biologics licence application
consider to be material to our business in process may be adopted or how it would for motavizumab and the sNDAs for
that they may have a significant effect on our relate to intellectual property rights in Symbicort and Seroquel XR.
financial condition, results of operations and/ connection with pipeline biologics, any
or reputation. These risks are not listed in such process could have a material adverse
any assumed order of priority. Other risks, effect on the future commercial prospects
unknown or not currently considered material, for patented biologics.
could have a similar effect. We believe that

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Corporate Governance

Failure to obtain patent protection Strategic alliances formed as part products, with no assurance that we will
Our policy is to protect our investment in of our externalisation strategy may recoup these payments. If these types of
R&D by applying for appropriate intellectual be unsuccessful transactions are unsuccessful, this may have
property protection in respect of our inventions We seek technology licensing arrangements a material adverse effect on our financial
and innovations; this is a key business priority. and strategic collaborations to expand our condition and results of operations.
Our ability to obtain patents and other product portfolio and geographical presence
proprietary rights in relation to our products is, as part of our business strategy. Examples Furthermore, we experience strong
therefore, an important element of our ability of such recent strategic arrangements and competition from other pharmaceutical
to create long-term value for the business. collaborations include: companies in respect of licensing
arrangements and strategic collaborations,
Many of the countries in which we operate >> In conjunction with our agreement to which means that we may be unsuccessful in
are still developing their patent laws for acquire Novexel (subject to expiry or establishing some of our intended collaborative
pharmaceuticals and there is more uncertainty termination of the applicable waiting period projects. If we are unsuccessful in establishing
regarding the patent protection available now under the US Hart-Scott-Rodino Antitrust such collaborative projects in the future, this
and in the foreseeable future in these countries Improvements Act), an agreement with may have a material adverse effect on our
than in countries with well developed Forest to co-develop and co-commercialise financial condition and results of operations.
intellectual property regimes. In addition, ceftazidime and ceftaroline, next generation
certain countries may seek to limit protection anti-infectives Commercialisation and
for existing patents – see the Patent litigation >> Worldwide licensing agreement with business execution risks
and early loss of intellectual property rights Nektar granting AstraZeneca rights to Challenges to achieving commercial
section on page 82. Limitations on the a late-stage product for the treatment success of new products
availability of patent protection in certain of opioid-induced constipation together The successful launch of a new
countries in which we operate could have a with rights to an early programme to pharmaceutical product involves substantial
material adverse effect on the pricing and sales deliver products for the treatment of pain investment in sales and marketing activities,
of our products and, consequently, could without constipation side effects launch stocks and other items. The commercial
materially adversely affect our revenues from >> Collaboration with Merck to investigate success of our new medicines is of particular
them. More information about protecting a novel combination anti-cancer regimen importance to us in order to replace sales
our intellectual property is contained in the >> Collaboration with Targacept for the global lost as and when patent protection ceases.
Intellectual property section on page 31. development and commercialisation of If a new product does not succeed as
Targacept’s late-stage compound TC-5214 anticipated or its rate of sales growth is slower
Delay to new product launches >> Agreement with Cancer Research than anticipated, there is a risk that the costs
Our continued success depends on the Technology Limited and The Institute of incurred in launching it could have a material
development and successful launch of Cancer Research (UK) to discover and adverse effect on our financial condition and
innovative new drugs. The anticipated launch develop potential new anti-cancer drugs. results of operations. We may ultimately be
dates of major new products have a significant unable to achieve commercial success for
impact on a number of areas of our business, Such licensing arrangements and strategic any number of reasons, including:
including investment in large clinical studies, collaborations are key to enable us to grow
the manufacture of pre-launch stocks of the and strengthen the business. If we fail to >> Inability to manufacture sufficient quantities
products, investment in marketing materials complete these types of collaborative projects of the product candidate for development
ahead of a product launch, sales force training in a timely manner, on a cost-effective basis, or commercialisation activities in a timely
and the timing of anticipated future revenue or at all, we may not realise the expected and cost-efficient manner
streams from commercial sales of new benefits of any such collaborative projects. >> Excessive costs of, or difficulty
products. These launch dates are primarily The success of such current and future in, manufacturing
driven by the development programmes that arrangements is largely dependent on the >> Erosion of patent term and other intellectual
we run and the demands of the regulatory technology and other intellectual property property rights, and infringement of those
authorities in the approvals process, as well as we acquire and the resources, efforts and rights and the intellectual property rights
pricing negotiation in some countries. Delays skills of our partners. There is a risk that these owned by third parties
to anticipated launch dates can result from a collaborative projects may be unsuccessful. >> Failure to show value or a differentiated
number of factors including adverse findings Disputes and difficulties in such relationships profile for our products.
in pre-clinical or clinical studies, regulatory may arise, often due to conflicting priorities
demands, competitor activity and technology or conflicts of interest of the parties, which As a result, we cannot be certain that
transfer. Significant delays to anticipated launch may erode or eliminate the benefits of these compounds currently under development
dates of new products could have a material alliances if, for example, the agreements will achieve success.
adverse effect on our financial condition and are terminated; insufficient financial or other
results of operations. For example, for the resources are made available to the alliances; In addition, the methods of distributing and
launch of products that are seasonal in nature, intellectual property is negatively impacted; marketing biologics could have a material
delays for regulatory approval or manufacturing obligations are not performed as expected; impact on the revenue we are able to generate
difficulties can have the effect of delaying controls and commercial limitations are from the sales of products such as Synagis
launch to the next season which, in turn, may imposed over the marketing and promotion and FluMist. The commercialisation of
significantly reduce the return on costs incurred of the collaboration products; or challenges in biologics is often more complex than for
in preparing for the launch for that season. In achieving commercial success of the product traditional pharmaceutical products. This is
addition, a delay in the launch may give rise are encountered during the development primarily due to differences in the mode of
to increased costs if, for example, marketing process. Also, under many of our strategic administration, the technical aspects of the
and sales efforts need to be rescheduled or alliances, we make milestone payments well product, and the rapidly changing distribution
protracted for longer than expected. in advance of the commercialisation of the and reimbursement environments.

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82 Directors’ Report | Risk

Performance of new products adverse price controls. The failure to exploit In addition to patent challenges by generic
Although we carry out numerous and potential opportunities appropriately in drug manufacturers seeking to market generic
extensive clinical studies on all our products emerging markets may have a material copies of our products, other third parties
before they are launched, for a new product adverse effect on our financial condition and owning patents, including research-based
it can be difficult, for a period following its results of operations. pharmaceutical companies, may assert
launch, to establish from available data a their intellectual property rights against our
complete assessment of its eventual efficacy Expiry of intellectual property rights products or activities or processes related to
and/or safety in broader clinical use on the Pharmaceutical products, diagnostic and our products. Consequently, there are risks
market. Due to the relatively short time that medical devices are normally only protected that we may be found to infringe the patents
a product has been tested and the relatively from competition from copying during the of others, and managing such infringement
small number of patients who have taken the period of protection under patent rights or disputes can be costly. We may be liable
product in clinical studies, the available data related intellectual property rights such as for damages or royalties or, alternatively,
may be immature. Simple extrapolation of Regulatory Data Protection. Following expiry we may need to obtain costly licences or
the data may not be accurate and could of such rights, the product is generally open stop manufacturing, using or selling our
lead to a misleading interpretation of the to competition from generic copies. Products products. These risks may be greater in
likely future commercial performance of a under patent protection or within the period respect of biologics and vaccines where
new product. of Regulatory Data Protection generally intellectual property protection is sometimes
generate significantly higher revenues than not so clear. In the event of such risks arising
Product counterfeiting those not protected by such rights. See the we may be able to mitigate them through,
Counterfeit medicines may contain harmful Intellectual property section on page 31 for for example, acquiring licences or making
substances, the wrong dose of the active a table of certain patent expiry dates for our modifications to cease the infringement and
pharmaceutical ingredient (API) or no API at all. key marketed products. permit commercialisation of our products
Counterfeit medicines are a danger to patients but there is no certainty that any such action
in all parts of the world. The International Patent litigation and early loss will be possible and any such action may
Medical Products Anti-Counterfeiting of intellectual property rights entail significant costs. Details of significant
Taskforce (IMPACT) of WHO estimates Any of the intellectual property rights claims that AstraZeneca is infringing third
that up to 30% of medicines in emerging protecting our products may be subjected to party intellectual property rights can be
economies are counterfeit, a percentage intellectual property litigation by third parties found in Note 25 to the Financial Statements
which is exceeded in parts of Latin America, and/or be affected by validity challenges in from page 166.
Asia and Africa. By contrast, in established patent offices. In either case, however, we
economies with effective regulatory systems, expect that the greater number of challenges In addition to the challenges to our patented
counterfeit medicines represent less than 1% will be directed to our more valuable products. products from manufacturers of generic or
of the market by market value. Public loss of Despite our efforts to establish and defend other patented pharmaceutical products,
confidence in the integrity of pharmaceutical robust patent protection for our products, there is a risk that some countries, particularly
products as a result of counterfeiting could we may not succeed in such challenges some of those in the developing world, may
materially adversely affect our reputation to our patents. If we are not successful in seek to impose limitations on the availability
and financial performance. In addition, maintaining exclusive rights to market one of patent protection for pharmaceutical
undue or misplaced concern about the issue or more of our major products, particularly in products, or on the extent to which such
might induce some patients to stop taking the US where we have our highest revenue protection may be obtained and/or enforced,
their medicines, with consequential risks to and margins, our revenue and margins could within their jurisdictions. As a result, generic
their health. be materially adversely affected. manufacturers in these countries may be
increasingly and more easily able to introduce
Developing our business In particular, generic drug manufacturers competing products to the market earlier
in emerging markets are seeking to market generic versions of than they would have been able to had more
The development of our business in emerging many of our more important products prior robust patent protection been available.
markets may be a critical factor in determining to the expiry of our patents and Regulatory
our future ability to sustain or increase Exclusivity periods. For example, we are Combined with patent protection and
the level of our global product revenues. currently facing challenges from multiple Regulatory Exclusivities, products protected
Challenges that arise in relation to the generic manufacturers to certain of our by a valid trade mark usually generate higher
development of the business in emerging patents for Nexium and Crestor, two of our revenues than those without a trade mark.
markets include more volatile economic best-selling products in the US, our largest We believe that we have robust trade mark
conditions, competition from companies that market. If such challenges succeed and protection for our products but cannot be
are already present in the market, the need generic products are launched, or launched certain that we would be able to defend any
to identify correctly and to leverage ‘at risk’ on the expectation that challenges challenge successfully.
appropriate opportunities for sales and to our intellectual property will be successful,
marketing, poor protection of intellectual this may have a material adverse effect Expiry or earlier loss of patents
property, inadequate protection against on our financial condition and results of covering competing products
crime (including counterfeiting, corruption operations. In 2009, US sales for Nexium and The expiry or earlier loss of patents covering
and fraud), inadvertent breaches of local Crestor were $2,835 million and $2,100 million, others’ innovator products may lead to the
law/regulation, not being able to recruit respectively. The more significant patent availability of generic products in the same
sufficient personnel with appropriate skills litigation relating to our products is described product class as our currently patented
and experience, and interventions by in Note 25 to the Financial Statements from products earlier than anticipated. Such events
national governments or regulators to restrict page 166. could have a material adverse effect on our
access to a market and/or to introduce

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Corporate Governance

financial condition and results of operations. a co-insurance, which is designed, amongst We expect that pressures on pricing will
For example, the loss/expiry of patent rights other reasons, to encourage patients to continue and may increase. Due to these
covering major products in the US, such as use generic medicines. Many of these pressures, there can be no certainty that
Lipitor™ or Advair Diskus™ before 2012 may management tools are also employed by we will be able to charge prices for a product
adversely affect the growth of our still-patented institutional customers in response to the that, in a particular country or in the aggregate,
products in the same product class (ie Crestor current cost-containment environment and enable us to earn an adequate return on our
and Symbicort) in that market. these increasingly restrictive reimbursement investment in that product.
policies could have a material adverse
Competition, price controls effect on our financial condition and results Any expected gains from productivity
and price reductions of operations. initiatives are uncertain
All our products compete directly with other We are implementing various productivity
products marketed either by major research- In the US, new legislation is possible that initiatives and restructuring programmes,
based pharmaceutical companies or by may allow the commercial importation of with the aim of enhancing the long-term
generic pharmaceutical manufacturers. drugs into the US from selected countries. efficiency of the business. However, the
These competitors may invest greater The adoption of such legislation could result anticipated cost savings and other benefits
resources in the marketing of their products in an increase in the volume of cross-border are based on preliminary estimates and
than we do depending on the relative priority product movements which could have the actual savings may vary significantly.
of these competitor products within their a material adverse effect on our financial In particular, these cost reduction measures
company’s portfolio. Generic versions of condition and results of operations. are based on current conditions and do not
products are often sold at lower prices than take into account any future changes to the
branded products because they do not The US House of Representatives and Senate pharmaceutical industry or our operations,
have to recoup the significant cost of R&D have passed their respective healthcare reform including new business developments,
investment. Also, generic pharmaceutical bills. However, Republican Scott Brown’s wage and price increases and other factors.
companies do not generally invest the upset Senate race win, in Massachusetts, If inappropriately managed, the expected
same amounts in education services for has dramatically altered the course of health value of the initiative can be lost through low
healthcare professionals as research-based reform negotiations by ending the Democrats’ employee morale and hence productivity,
pharmaceutical companies, so the sales of filibuster-proof 60 vote majority in the US increased absence levels and industrial
their generic products do not need to cover Senate. Democratic leaders insist they plan action. Our failure to successfully implement
these costs. Industry consolidation has to press ahead with health reform, while these planned cost reduction measures,
resulted in a small number of very large continuing to debate the best way to proceed. either through the successful conclusion
companies, some of which have acquired of employee relations processes (including
generic businesses. This trend, if it continues, Certain aspects of comprehensive health consultation and engagement, talent
could materially adversely affect our reform would cause a significant change in management and recruitment and retention),
competitive position, whilst consolidation the US pharmaceutical market, for example or the possibility that these efforts do not
among our customers may increase price through mandating higher rebates and generate the level of cost savings we
pressures. All our patented products, discounts on branded drugs for certain anticipate, could have a material adverse
including Nexium, Crestor, Seroquel and Medicare and Medicaid patients, increased effect on our results of operations and
Symbicort, are subject to price pressure financial obligations through other federal financial condition. See the People section
from competition from generic products in payer programmes and an industry-wide from page 33 for information about mitigating
the same product class. excise tax. These and other changes, the risk of significant business change.
such as whether further cost-containment
In most of our key markets there is continued measures would need to be incorporated in Acquisitions may be unsuccessful
economic, regulatory and political pressure the final bill to finance the reform of the US The Group seeks to acquire complementary
to limit or reduce the cost of pharmaceutical healthcare system, could have a material businesses as part of its business strategy.
products. A summary of the principal adverse effect on our results of operations The integration of an acquired business
aspects of price regulation and how price and financial condition. could involve incurring significant debt and
pressures are affecting our business in our unknown or contingent liabilities, as well
most important markets is set out in the In the EU, efforts by the European Commission as having a negative effect on our reported
Geographical Review from page 50. to reduce inconsistencies and to improve results of operations from acquisition-related
standards and best practice in the disparate charges, amortisation of expenses related
In the US realised prices are being depressed national regulatory systems have met with to intangibles and charges for impairment of
through the use of a range of cost-control little immediate success. The industry is, long-term assets. These effects, individually
tools, such as restricted lists, or formularies, therefore, exposed to greater application of or in combination, could cause a deterioration
employing generic first strategies, and reference pricing mechanisms and ad hoc in our credit rating and/or increased borrowing
requiring physicians to obtain prior approval national cost-containment measures on prices. costs and interest expense. We could
for the use of a branded medicine. These This can lead to marked price differentials also experience difficulties in integrating
mechanisms put pressure on manufacturers between countries and the consequent geographically separated organisations,
to reduce prices and to limit access to cross-border movement of products. systems and facilities, and personnel with
branded products. Many of these mechanisms The importation of pharmaceutical products different organisational cultures. Integration
shift a greater proportion of the cost of from countries where prices are low due to of an acquired business may also divert
medicines onto the individual via out-of- government price controls or other market management resources that would otherwise
pocket payments at the pharmacy counter. dynamics, to countries where prices for be available for the continuing development
The patient out-of-pocket spend is generally those products are higher, may increase. of our existing business. The integration
in the form of a co-payment or in some cases

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84 Directors’ Report | Risk

process may result in business disruption, Supply chain and delivery risks Legal, regulatory and compliance risks
the loss of key employees, slower execution Manufacturing biologics Adverse outcome of litigation and/or
of various work processes, compliance Manufacturing biologics, especially in large governmental investigations
failures due to a change in applicable quantities, is often complex and may require We may be subject to any number of
regulatory requirements and other issues such the use of innovative technologies to handle legal proceedings and/or governmental
as a failure to integrate information technology living micro-organisms and facilities specifically investigations. Note 25 to the Financial
and other systems. In addition, if liabilities designed and validated for this purpose, Statements includes information about
are uncovered in an acquired business, the with sophisticated quality assurance and material legal proceedings in which we are
Group may suffer losses and may not have control procedures. Slight deviations in any currently involved. Such investigations or legal
remedies against the seller or third parties. part of the manufacturing process may result proceedings, regardless of their outcome,
in lot failure, product recalls or spoilage, for could be costly, divert management attention,
Failure to manage a crisis example due to contamination. or damage our reputation and demand for
We handle chemical and biological materials, our products.
operate research and manufacturing plants Reliance on third parties
and distribute products worldwide. Major for goods and services Litigation, particularly in the US, is inherently
disruption to our business and damage to our Like most, if not all, major research-based unpredictable, and unexpectedly high awards
reputation may be triggered by an operational pharmaceutical companies we increasingly of damages can result if AstraZeneca receives
incident or by actions by our employees or rely on third parties for the timely supply an adverse verdict. In many cases, particularly
third parties. In these circumstances, a plan of goods, such as specified raw materials, in the US, the practice of the plaintiff bar is to
for addressing operational and other issues equipment, formulated drugs and claim damages – compensatory, punitive
should ensure a timely response and the packaging, and services, all of which are and statutory – in extremely high amounts.
ability to resume business as usual. Failure to key to our operations. Accordingly, it is difficult to quantify the
institute proper communication to internal and potential exposure to claims in proceedings
external stakeholders and to mobilise a rapid However, events beyond our control could of the type referred to in Note 25 to the
operational response could have a material result in the failure of supplies of goods Financial Statements. Unfavourable resolution
adverse effect on our financial condition and and services, which could have a material of current and similar future proceedings
results of operations. Further information adverse effect on our financial condition and could have a material adverse effect on our
about our business resilience plans and results of operations. For example, suppliers of financial condition and results of operations,
processes are contained in the Managing some of the key goods and services we rely particularly where such circumstances are
risk section from page 79. upon may cease to trade. The consequence not covered by insurance. We may become
of this may be significant delays and/or subject to fines, penalties and other monetary
Failure of information technology difficulties in obtaining goods and services and/or non-monetary sanctions and/or may
We are dependent on effective IT systems. on commercially acceptable terms, or even be required to make significant provisions in
These systems support key business at all. our accounts related to legal proceedings
functions such as our R&D, manufacturing and/or governmental investigations, which
and sales capabilities, and are an important In addition, we may have limited access to would reduce earnings.
means of internal and external communication. and/or supply of biological materials, such
Any significant disruption of these IT systems as cells, animal products or by-products. Legal proceedings regarding
or failure to integrate new and existing IT Furthermore, government regulations in business practices
systems could have a material adverse multiple jurisdictions could result in restricted The marketing, promotional, clinical
effect on our financial condition and results access to, use or transport of such materials. and pricing practices of pharmaceutical
of operations. Loss of access to sufficient sources of such manufacturers, as well as the manner in
materials, or tighter restrictions on the use which manufacturers interact with purchasers,
Failure of outsourcing of such materials may interrupt or prevent prescribers, and patients, are subject to
We have outsourced a number of business our research activities as planned and/or extensive regulation and litigation. Many
critical operations to third party providers. increase our costs. We seek to mitigate companies, including AstraZeneca, have been
Failure of the outsource provider to deliver these risks as described in the Managing subject to claims related to these practices
services in a timely manner and to the required sourcing risk section on page 33. We actively asserted by federal and state governmental
level of quality could have an adverse impact manage these third party relationships to authorities and private payers and consumers.
on our ability to meet business targets ensure continuity of supplies on time and These have resulted in substantial expense
and maintain a good reputation within the to our required specifications. Recently, we and other significant consequences to
industry and with stakeholders. It may also have established sourcing centres in China AstraZeneca. For example, see Note 25 to
result in non-compliance with applicable and India to identify high quality suppliers in the Financial Statements for a discussion of
laws and regulations. Failure to adequately those regions. Further information is contained litigation and investigations regarding US
manage the risk associated with outsourcing in the Managing sourcing risk section on sales and marketing practices, as well as
could have a material adverse effect on our page 33. pricing litigation. It is possible that additional
financial condition and results of operations. such claims could be made in the future. As
a general matter, these types of claims can
result in criminal liability, fines, penalties, or
other monetary or non-monetary remedies.

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Corporate Governance

Substantial product liability claims approvals, which could result in significant Economic and financial risks
Given the widespread impact that additional costs and/or disruption to these Adverse impact of a sustained
prescription drugs may have on the health processes. Such amendments may be economic downturn
of large patient populations, pharmaceutical, imposed on us as a result of the continuing A variety of significant risks may arise from
biopharmaceutical and medical device inspections to which we are subject or that a sustained global economic downturn,
companies have, historically, been subject may be made at our discretion. It is possible, including those referred to here. Additional
to large product liability damages claims, for example, that regulatory issues concerning pressure from governments and other
settlements and awards for injuries allegedly compliance with current Good Manufacturing healthcare payers on medicine prices and
caused by the use of their products. Adverse Practice (cGMP) regulations for pharmaceutical volumes of sales in response to recessionary
publicity relating to the safety of a product or products could arise and lead to product pressures on budgets may cause a slowdown
of other competing products may increase recalls and seizures, interruption of production or a decline in growth in some markets.
the risk of product liability claims. Substantial leading to product shortages, and delays In addition, the Group’s customers may cease
product liability claims that result in court in the approvals of new products pending to trade, which in turn may result in losses
decisions against us or in the settlement of resolution of the cGMP issues. from writing-off debts. Further, we are
proceedings could have a material adverse highly dependent on being able to access
effect on our financial condition and results Environmental/occupational health a sustainable flow of liquid funds due to
of operations, particularly where such and safety liabilities the high fixed costs of operating a global
circumstances are not covered by insurance. We have environmental and/or occupational research-based pharmaceuticals business
We are currently subject to extensive product health and safety related liabilities at some and the long and uncertain development
liability litigation in relation to Seroquel, and currently or formerly owned, leased and third cycles for our products. In a sustained
further details about this are set out in Note party sites, the most significant of which are and/or severe economic downturn, financial
25 to the Financial Statements. Information detailed in Note 25 to the Financial Statements. institutions that hold our cash and other
about our approach to patient safety is set These liabilities are carefully managed by short-term deposits may cease to trade and
out in the Patient safety section from page 20. designated technical, legal and business there can be no guarantee that we will be
personnel and there is no reason for us to able to access our assets without a protracted,
Failure to adhere to applicable laws, believe that associated current and expected expensive and uncertain process, if at all.
rules and regulations expenditure and/or risks are likely to have Although we have adopted conservative
We operate globally in complex legal and a material adverse effect on our financial cash management and treasury policies
regulatory environments. Any failure to comply condition and results of operations as a to mitigate this risk (further information on
with applicable laws, rules and regulations in general matter, but, to the extent that they which is contained in the Financial risk
these jurisdictions may result in civil and/or exceed applicable provisions, they could management policies section on page 44)
criminal legal proceedings being filed against have a material adverse effect on our we cannot be certain that these will be
us, or in us becoming subject to regulatory financial condition and results of operations completely effective should a number of
sanctions, which could have a material for the relevant period. In addition, a change major financial institutions cease to trade.
adverse effect on the conduct of our in circumstances (including a change in Additionally, if we need access to external
business, our financial condition and results applicable laws or regulations) may result sources of financing to sustain and/or grow
of operations. Regulatory authorities have in such an effect. our business, such as the debt or equity
wide-ranging administrative powers to deal capital financial markets, this may not be
with any failure to comply with continuing A significant non-compliance issue or other available on commercially acceptable terms,
regulatory oversight (and this could affect us, environmental or occupational health or safety if at all, in the event of a severe and/or
whether such failure is our own or that of third incident for which we were responsible could sustained economic downturn. This may
parties with whom we have relationships). result in us being liable to pay compensation, particularly be the case in the event of any
As these laws, rules and regulations change fines or remediation costs. In some default by the Group on its debt obligations,
or as governmental interpretation of those circumstances, such liability could have which may have materially adverse
laws, rules and regulations evolves, prior a material adverse effect on our financial consequences on our ability to secure debt
conduct may no longer be sufficient to ensure condition and results of operations. In addition, funding in the future or generally on our
ongoing compliance. our financial provisions for any obligations financial condition. Further information on
that we may have relating to environmental or debt-funding arrangements is contained in the
For example, once a product has been occupational health and safety liabilities may Financial risk management policies section
approved for marketing by regulatory be insufficient if the assumptions underlying on page 44.
authorities, it is subject to continuing control the provisions, including our assumptions
and regulation, such as the manner of its regarding the portion of waste at a site for
manufacture, distribution, marketing and which we are responsible, prove incorrect,
safety surveillance. In addition, any or if we are held responsible for additional
amendments that are made to the contamination or occupational health and
manufacturing, distribution, marketing safety related claims.
and safety surveillance processes of our
products may require additional regulatory

AstraZeneca Annual Report and Form 20-F Information 2009

86 Directors’ Report | Risk

Impact of fluctuations in exchange rates Limited third party insurance coverage of a tax dispute or a failure by the tax
As a global business, currency fluctuations Recent insurance loss experience in the authorities to agree through competent
can significantly affect our results of pharmaceutical industry, including product authority proceedings. See the Financial risk
operations, which are accounted for in US liability exposures, has increased the cost management policies section on page 44 for
dollars. Approximately 49% of our global of, and narrowed the coverage afforded by, further details of risk mitigation and Note 25
2009 sales were in North America with pharmaceutical companies’ product liability to the Financial Statements for details of
a significant proportion of that figure being insurance. In order to contain insurance current tax disputes.
in respect of US sales, which is expected costs in recent years, we have continued
to remain our largest single market for the to adjust our coverage profile, accepting Pensions
foreseeable future. Sales in other countries a greater degree of uninsured exposure. A particular risk relates to the Group’s pension
are predominantly in currencies other than The Group has not held product liability obligations, the single largest of which is
the US dollar, including the euro, Japanese insurance since February 2006. In addition, the UK Pension Fund. The obligations are
yen, Australian dollar and Canadian dollar. where claims are made under insurance backed by assets invested across the broad
We also have a growing exposure to emerging policies, insurers may reserve the right to investment market. Sustained falls in these
market currencies, although the exchange deny coverage on various grounds. If such assets will put a strain on funding which
rates of some of these currencies are linked denial of coverage is ultimately upheld, this may result in requirements for additional
to the US dollar. Major components of our could result in material additional charges to cash, restricting cash available for strategic
cost base are located in the UK and Sweden, our earnings. An example of a dispute with business growth. Similarly, if the liabilities
where an aggregate of approximately 30% insurers relating to the availability of insurance rise, there will be a strain on funding from the
of our employees are based. Movements in coverage and in relation to which costs business. The likely increase in the IAS19
the exchange rates used to translate foreign incurred by the Group may not ultimately be accounting deficit generated by any of these
currencies into US dollars may, therefore, recovered through such coverage is included may cause the ratings agencies to review
have a material adverse effect on our in Note 25 to the Financial Statements in the our credit rating, with the potential to affect
financial condition and results of operations. Seroquel – product liability section. negatively our ability to raise debt. See
Additionally, some of our subsidiaries import Note 23 to the Financial Statements from
and export goods and services in currencies Taxation page 156 for further details on the Group’s
other than their own functional currency The integrated nature of our worldwide pension obligations.
and so the results of such subsidiaries could operations can produce conflicting claims
be affected by currency fluctuations arising from revenue authorities as to the profits to be
between the transaction dates and the taxed in individual territories. The resolution
settlement dates for these transactions. of these disputes can result in a reallocation
Further information is contained in Note 15 of profits between jurisdictions and an
to the Financial Statements from page 144. increase or decrease in related tax costs,
and has the potential to affect our cash
Credit and return on flows and EPS. Claims, regardless of their
substantial investments merits or their outcome, are costly, divert
As part of its normal operations, the Group will management attention and may adversely
hold significant cash balances. The amount affect our reputation.
of cash held at any point reflects the level of
cash flow generated by the business and the The majority of the jurisdictions in which we
timing of the use of that cash. The majority operate have double tax treaties with other
of excess cash is centralised within the Group foreign jurisdictions, which enable us to
treasury function for investment and as such ensure that our revenues and capital gains do
is subject to counterparty risk on the principal not incur a double tax charge. If any of these
invested. See the Financial risk management double tax treaties should be withdrawn or
policies section on page 44 for details of amended, especially in a territory where a
how the Group seeks to mitigate this risk. member of the Group is involved in a taxation
dispute with a tax authority in relation to
cross-border transactions, such withdrawal or
amendment could have a material adverse
effect on our financial condition and results
of operations, as could a negative outcome

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Business Organisation and Corporate Governance 87

Corporate Governance

Business Board of Directors

Organisation Non-Executive Chairman

and Non-Executive Directors
Board Committees

and Corporate Chief Executive Officer

and other Executive Directors
(Audit Committee, Remuneration Committee,
Nomination and Governance Committee
and Science Committee)
Chief Executive Officer

Business organisation Senior Executive Team

This section briefly describes how the Group
is organised, including the overall structure
and principal roles and responsibilities of the
Board, its committees and the SET.
Balance of Non-Executive Directors Length of tenure of
Board composition, processes and Executive Directors Non-Executive Directors
and responsibilities
The Board comprises two Executive
Directors (the CEO and the CFO) and 10
Non-Executive Directors. The membership D D
of the Board at 31 December 2009 and
information about individual Directors is
contained in the Board of Directors section B
from page 88.
All Directors are collectively responsible for
the success of the Group. In addition,
the Non-Executive Directors are responsible
for exercising independent, objective
judgement in respect of Board decisions and A Independent Non-Executive Directors1 8 A 0-3 years 3
for scrutinising and challenging management. B Executive Directors 2 B 3-6 years 2
The Non-Executive Directors also have C Non-Independent Non-Executive Director1 1 C 6-9 years 4
various responsibilities concerning the D Non-Executive Chairman 1 D 9+ years 1
integrity of financial information, internal 1
As determined by the Board in accordance
controls and risk management. with the Combined Code.

Gender split Geographical mix of

of Directors Non-Executive Directors



A Male 9 A UK 4
B Female 3 B Rest of Europe 4
C US 2

AstraZeneca Annual Report and Form 20-F Information 2009

88 Directors’ Report | Board of Directors

01 02 03

05 06 07

09 10 11

Board of Directors
01 Louis Schweitzer (67) 02 David Brennan (56)
Non-Executive Chairman, Chairman of the Executive Director and Chief Executive Officer
Nomination and Governance Committee Appointed as a Director 14 March 2005 and
and Remuneration Committee Member
at 31 December as CEO 1 January 2006. Chairman of the
Appointed as a Director 11 March 2004 and as
Executive Board of the Pharmaceutical
Chairman 1 January 2005. Non-Executive
Research and Manufacturers of America
Chairman of Renault SA 2005-2009. Chairman
(PhRMA). Vice-President of the International
and Chief Executive Officer of Renault SA
Federation of Pharmaceutical Manufacturers
1992-2005. Non-Executive Director of
and Associations (IFPMA). Board Member of
BNP-Paribas, Veolia Environnement SA
the European Federation of Pharmaceutical
(senior Non-Executive Director) and L’Oréal
Industries and Associations (EFPIA).
SA. Non-Executive Chairman of Volvo AB
Commissioner of the UK Commission for
and Journal Le Monde SA.
Employment and Skills (UKCES). Chairman
of the Board of the Southeastern Pennsylvania
Chapter of the American Heart Association

Other officers of the Company at 31 December included

members of the SET, as set out in the Senior Executive
Team at 31 December section from page 90 and
Adrian Kemp, Company Secretary (appointed on
1 January 2009).

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Board of Directors 89

Corporate Governance

05 Bo Angelin (60) 09 Rudy Markham (63)

Non-Executive Director and Non-Executive Director and
Science Committee Member Audit Committee Member
Appointed as a Director 24 July 2007. Appointed as a Director 12 September 2008.
Professor of Clinical Metabolism at Karolinska Chairman and Non-Executive Director of
Institutet and Head of the Department of Moorfields Eye Hospital Foundation Trust.
Endocrinology, Metabolism and Diabetes Non-Executive Director of United Parcel
at the Karolinska University Hospital in Services Inc., Financial Reporting Council,
Stockholm, Sweden. Member of the Nobel Standard Chartered PLC and Legal & General
Assembly and of the Swedish Royal Academy plc. Non-Executive member of the Board of
of Sciences. Member of the Medical Nobel the UK Foreign and Commonwealth Office.
Institute. Prior appointments include Fellow of the Chartered Institute of
Chairman of the Nobel Committee for Management Accountants and Fellow of
Physiology and Medicine. the Association of Corporate Treasurers.

06 John Buchanan (66) 10 Dame Nancy Rothwell (54)

Non-Executive Director, Chairman of Non-Executive Director, Chairman of the
the Audit Committee and Remuneration Science Committee and Remuneration
Committee Member Committee Member
Appointed as a Director 25 April 2002. Appointed as a Director 27 April 2006. Also
Executive Director and Group Chief Financial has responsibility for overseeing Corporate
Officer of BP p.l.c. 1996-2002. Member of the Responsibility. MRC Research Professor and
UK Accounting Standards Board 1997-2001. Deputy President and Deputy Vice-Chancellor
08 Senior Independent Director of BHP Billiton at the University of Manchester. Vice-President
Plc. Senior Independent Director and Deputy and Council member of the Royal Society;
Chairman of Vodafone Group Plc. Chairman of President of the Society of Biology. Prior
Smith & Nephew plc. Chairman of International appointments include: Trustee of Cancer
Chamber of Commerce (UK). Member of the Research UK and the Campaign for Medical
Advisory Board of Ondra Bank. Progress; Chair of the Research Defence
Society; Chair of the Wellcome Trust Public
07 Jean-Philippe Courtois (49) Engagement Strategy Panel; President of
Non-Executive Director and the British Neuroscience Association; and
Audit Committee Member
Council member of the Medical Research
Appointed as a Director 18 February 2008.
Council and the Biotechnology and
President, Microsoft International and Senior
Biological Sciences Research Council.
Vice-President, Microsoft Corporation.
12 CEO Microsoft EMEA 2003-2005. President
11 John Varley (53)
Microsoft EMEA 2000-2003. Corporate Non-Executive Director, Chairman of the
Vice-President, Microsoft Worldwide Remuneration Committee and Nomination
Customer Marketing 1998-2000. Administrator and Governance Committee Member
for PlaNet Finance and representative at the Appointed as a Director 26 July 2006.
03 Simon Lowth (48) Institut Montaigne. Executive Director of Barclays Bank plc and
Executive Director and Chief Financial Officer Barclays plc since 1998 and Group Chief
Appointed as a Director and as CFO Executive since 2004. Chairman of Business
08 Jane Henney (62)
5 November 2007. Director of Finance and Non-Executive Director, Audit Committee Action on Homelessness and President of the
Strategy, Scottish Power plc (ScottishPower) Member, Nomination and Governance Committee Employers’ Forum on Disability and member
2005-2007 and Executive Director, Corporate Member and Science Committee Member
of the International Advisory Panel of the
Strategy and Development, ScottishPower Appointed as a Director 24 September 2001.
Monetary Authority of Singapore. Honorary
2003-2005. Director – Head of UK Industrial Currently Professor of Medicine, University of
President of the UK Drug Policy Commission.
Practice, McKinsey & Company 2000-2003. Cincinnati. Prior appointments include: Senior
Treasurer and Trustee of St. Dunstan’s and
Effective from 1 May 2010, Non-Executive Vice-President and Provost for Health Affairs,
Trustee of Thornton Smith & Plevins Young
Director of Standard Chartered PLC. University of Cincinnati Academic Health
People’s Trust.
Center; Commissioner of Food and Drugs,
04 Michele Hooper (58) FDA; Vice-President for Health Sciences,
12 Marcus Wallenberg (53)
Senior independent Non-Executive Director, University of New Mexico; Deputy Non-Executive Director
Audit Committee Member and Nomination Commissioner for Operations, FDA;
and Governance Committee Member Appointed as a Director 6 April 1999. Formerly
Vice-Chancellor for Health Programs and a Director of Astra AB (appointed 18 May 1989).
Appointed as a Director 1 July 2003 and as
Policy, University of Kansas; Deputy Director, Chairman of Skandinaviska Enskilda Banken
senior independent Non-Executive Director
US National Cancer Institute. Non-Executive AB, Electrolux AB and Saab AB. Vice-
26 April 2007. President and Chief Executive
Director of AmerisourceBergen Corporation Chairman of Telefonaktiebolaget L M Ericsson
Officer, Directors’ Council. President and Chief
and CIGNA Corporation. Other board (publ). Non-Executive Director of Stora Enso
Executive Officer, Stadtlander Drug Company
appointments include The Commonwealth Oyj and the Knut and Alice Wallenberg
1998-1999. Corporate Vice-President and
Fund and China Medical Board. Foundation. Board member of Temasek
President, International Businesses of
Caremark International Inc. 1992-1998. Holdings (Private) Limited. Honorary Chairman
Non-Executive Director of UnitedHealth Group of International Chamber of Commerce.
Inc., PPG Industries, Inc. and Warner Music
Group, Inc.

AstraZeneca Annual Report and Form 20-F Information 2009

90 Directors’ Report | Senior Executive Team

01 02 03

04 05 06

07 08 09

Senior Executive
01 David Brennan 02 Simon Lowth
Chief Executive Officer Chief Financial Officer
David was appointed Chief Executive Officer Simon joined AstraZeneca as an Executive
Team of AstraZeneca in January 2006. From 2001
until then, David was President and Chief
Director and Chief Financial Officer in
November 2007. He was previously at
at 31 December Executive Officer of the Company’s North ScottishPower where he was Finance
American subsidiary. Director. Simon left ScottishPower following
completion of the sale to Iberdrola.
David began his career in 1975 at Merck,
where he started as a sales representative His move to ScottishPower followed
in the US Division and later worked in sales 15 years’ experience with the global
and marketing management in the US and management consultancy, McKinsey &
International divisions. He joined Astra Merck Company where he advised leading
in 1992 and helped to build the joint venture multinational companies on a wide range of
into a multi-billion dollar business in the US. strategic, financial and operational issues.

He is an alumnus of Gettysburg College Simon has an engineering degree from

where he studied Business Administration. Cambridge University and an MBA from
London Business School.
For further information on David, see the
Board of Directors at 31 December section For further information on Simon, see the
from page 88. Board of Directors at 31 December section
from page 88.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Senior Executive Team 91

Corporate Governance

03 Bruno Angelici1 06 Jeff Pott 09 Tony Zook1

Executive Vice-President, International Sales General Counsel Chief Executive Officer, North America,
and Marketing Organisation (until 31 December) Jeff was appointed General Counsel from President, MedImmune and Executive
From 2001 until 31 December 2009, Bruno was Vice-President, Commercial Operations
1 January 2009 and has overall responsibility
responsible for Europe, Japan, Asia Pacific, Tony has responsibility for our worldwide sales
for all aspects of AstraZeneca’s Legal and
Latin America, Middle East and Africa. Before and marketing activities, including Global
Intellectual Property function.
this he served as President of AstraZeneca Marketing. He took up this newly created post
Japan. Bruno originally joined AstraZeneca in on 1 January 2010 in addition to his continuing
He joined AstraZeneca in 1996 and has worked
1989 as President of ICI Pharma France. He responsibilities as Executive Vice-President,
in various litigation roles, where he has had
began his career in the food industry and then North America and President of MedImmune.
responsibility for intellectual property,
joined Baxter Healthcare where he became He joined Astra USA in 1997 as Vice-President,
anti-trust and product liability litigation. Prior
Managing Director for Baxter in France. Marketing and Sales, having begun his
to joining AstraZeneca, Jeff spent five years
pharmaceutical career at Berlex Laboratories.
at US legal firm Drinker Biddle and Reath,
He holds an MBA from the Kellogg School of where he specialised in pharmaceutical
Management, Chicago, is a member of the Tony earned a bachelor’s degree in
product liability litigation and anti-trust advice
Supervisory Board of Wolters Kluwer and is biology from Frostburg University, and an
and litigation.
President of the Supervisory Board of Reims associate’s degree in chemical engineering
Management School. He was received into from Pennsylvania State University. He is
Jeff received his bachelor’s degree in Political
the Légion d’honneur in December 2009. a member of the board for First State
Science from Wheaton College and his Jurus
Innovation, the Pennsylvania Division of the
Doctor Degree from Villanova University
Bruno will be leaving AstraZeneca in 2010. American Cancer Society and is a member
School of Law.
of the Board of Trustees for the Healthcare
04 Anders Ekblom Leadership Council.
07 David Smith
Executive Vice-President, Development Executive Vice-President, Operations
Before he took over responsibility for Global Changes affecting the positions of Bruno Angelici
David joined AstraZeneca in 2006 as and Tony Zook in 2010 are described in the
Drug Development, Anders was responsible Executive Vice-President, Operations. Reserved matters and delegation of authority
for Global Clinical Development, the largest He leads AstraZeneca’s global manufacturing section on page 92.
single function in R&D, operating across and supply organisation and is also responsible
medicine development and life-cycle for the AstraZeneca Group Safety, Health
management. He joined Astra in 1993 from the and Environment, Regulatory Compliance,
Karolinska Institute and Karolinska Hospital Purchasing and Engineering functions.
in Stockholm, where he was a senior lecturer As of 27 January 2010, David has assumed
and Director for the Perianesthetic Unit. overall responsibility for Corporate
Information Services.
Anders is President of AstraZeneca Sverige
AB, and Director of Albireo Ltd. He is an David spent his early career in pharmaceuticals,
Associate Professor of Physiology at the initially with the Wellcome Foundation in the
Karolinska Institute, a medical doctor qualified UK. He subsequently spent nine years in the
in anaesthesiology and intensive care, and consumer goods sector working for Estée
a doctor of dental surgery. He has long been Lauder in New York and Timberland as Senior
active in both basic and clinical research Vice-President Global Supply Chain. In 2003,
resulting in over 60 original publications in he returned to the pharmaceutical sector and
peer-reviewed journals and book chapters. joined Novartis and was based in Switzerland.

05 Christer Köhler 08 Lynn Tetrault

Interim Executive Vice-President, Executive Vice-President, Human Resources
Discovery Research and Corporate Affairs
Christer was appointed to his current role in Lynn was appointed Executive Vice-President,
November. He joined Astra in 1979 and held Human Resources and Corporate Affairs
a number of R&D positions before joining in 2007 having already been appointed
Hoffmann-La Roche in Basel, Switzerland Vice-President Corporate Affairs. She had
in 1992 as Global Head CNS Discovery. previously been Vice-President of Human
He returned to Astra Arcus and became Resources for Global Drug Development and
Global Vice-President and Head of CNS & was Vice-President of Human Resources for
Pain Research in 1999 and has since been a the US subsidiary of AstraZeneca following
member of the global R&D leadership team. the merger between Astra and Zeneca.

Christer trained at the University of Bergen Lynn started her career in private law practice
Medical School where he also obtained his where she specialised in general corporate
PhD. He conducted postdoctoral studies in and healthcare law. She joined Astra USA in
Lausanne, Switzerland and the Salk Institute, 1993 as Associate General Counsel in the
San Diego US. He became adjunct company’s legal department.
Professor of Neurobiology at the University
of Bergen in 1984. He has published over Lynn received her bachelor’s degree from
150 scientific papers in different areas of Princeton University and her law degree
neuroscience and pharmacology. from the University of Virginia Law School.

AstraZeneca Annual Report and Form 20-F Information 2009

92 Directors’ Report | Business Organisation and Corporate Governance

Reserved matters and Board and Committee meeting attendance in 2009

delegation of authority Number of meetings attended/(number of meetings Director was eligible to attend in 2009)
The Board maintains and regularly reviews Nomination and
Audit Remuneration Governance
a full list of matters and decisions that are Name Board Committee Committee Committee
reserved to, and can only be approved by, Bo Angelin 8 (8) – – –
the Board. These include the appointment, David Brennan 8 (8) – – –
termination and remuneration of any Director; John Buchanan 5 (8) 3 (4) 3 (6) –
the annual budget; any item of fixed capital Jean-Philippe Courtois 7 (8) 4 (4) – –
expenditure or any proposal for the acquisition Jane Henney 7 (8) 3 (4) – 2 (2)
or disposal of an investment or business Michele Hooper 8 (8) 4 (4) – 2 (2)
which exceeds $150 million; raising of capital Simon Lowth 8 (8) – – –
or loans by the Company (subject to certain Rudy Markham 7 (8) 4 (4) – –
exceptions); any guarantee in respect of any Håkan Mogren1 1 (2) – – 0 (1)
borrowing of the Company; and allotting John Patterson2 1 (1) – – –
shares of the Company. The matters that Nancy Rothwell 6 (8) – 6 (6) –
have not been expressly reserved to the Louis Schweitzer 8 (8) – 6 (6) 2 (2)
Board are either delegated by the Board John Varley 8 (8) – 6 (6) 2 (2)
to its committees or to the CEO. Marcus Wallenberg 6 (8) – – –

The CEO is responsible to the Board for the 1

Håkan Mogren retired from the Board on 30 April 2009.
management, development and performance
John Patterson retired from the Board on 31 March 2009.

of the Group’s business in relation to those

matters in respect of which he has been The roles of the Board, the Board’s In 2010, the R&D Executive Committee will be
delegated authority from the Board. committees, the Chairman, the CEO and the replaced by the Portfolio Investment Board,
In exercising his authority, the CEO acts SET are documented, as are the Board’s which will be chaired by the CEO, and will
with the primary aim of enhancing long-term delegated authorities and reserved powers, include the CFO, the Executive Vice-President,
shareholder value and within the framework the means of operation of the business and Development, the Executive Vice-President,
of the Group’s policies and routine reporting the roles of corporate functions. Commercial Operations and other members
requirements. of senior management. The Portfolio
R&D Executive Committee Investment Board will be accountable for all
Although the CEO retains full responsibility The R&D Executive Committee oversees and R&D investments within the Group and will be
for the authority delegated to him by the prioritises the portfolio of both small molecule charged with delivering a pipeline of products
Board, the CEO has established and chairs and biological discovery and development capable of generating attractive returns on
the SET (pictured in the Board of Directors projects across the Group (whether invested capital and driving shareholder value.
at 31 December section from page 88), which originating from our own R&D activities or
is the vehicle through which he exercises from external sources). On an annual basis Operation of the Board
certain of that authority in respect of the it takes a view across all Therapy Areas and The Board is responsible for the Group’s
Group’s business. The SET normally meets makes decisions based on unmet medical corporate governance, sets the Group’s
once a month to consider and decide major need, commercial and scientific opportunity, strategy and policies, has overall responsibility
business issues. Typically, it also reviews, in competitive position and capability mix. It is for the oversight of risk and also monitors
advance of submission to the Board, those also charged with overseeing a portfolio progress towards meeting its objectives
matters that are to be submitted to the Board review process intended to ensure that and annual plans. The Board discharges
for review and decision. internal and external opportunities are these responsibilities through a programme
reviewed using the same criteria and that of meetings that includes a formal, annual
In November, Jan Lundberg, Executive there is a clear externalisation strategy strategy review. The Board also assesses
Vice-President, Discovery Research resigned aligned with the disease area strategies. whether or not and to what extent its
to take up a position at another company. obligations to the Company’s shareholders
He left the Company on 31 December. During 2009 the R&D Executive Committee and others are understood and met.
On 13 November, Christer Köhler was comprised the Interim Executive Vice- This includes regular reviews of the
appointed Interim Executive Vice-President, President, Discovery Research; the Executive Group’s financial performance and critical
Discovery Research. Vice-President, Development; the Executive business issues.
Vice-President, Research and Development,
Bruno Angelici completed his role as MedImmune; the Executive Vice-President, In the view of the Board, at least half of the
Executive Vice-President, International Clinical Research and Chief Medical Officer, Board are, for the purposes of the Combined
Sales and Marketing Organisation on MedImmune; the Chief Executive Officer, Code and the corporate governance listing
31 December and will leave the Company in North America/President, MedImmune/ standards of the NYSE (Listing Standards),
2010 after nine years’ service as a member Executive Vice-President, Commercial independent Non-Executive Directors.
of the SET and 20 years with the Company Operations; the Senior Vice-President,
in total. With effect from 1 January 2010, Strategic Planning and Business Development; Prior to the publication of this Annual Report,
Tony Zook was appointed to the newly- the Vice-President, R&D Finance; and the the Board conducted the annual evaluation
created role of Executive Vice-President, Vice-President, Development Projects. of its own performance and that of its
Commercial Operations. In this role, he will committees. This was carried out internally,
have responsibility for worldwide sales and using a series of web-based questionnaires
marketing activities. that covered a range of topics, including the

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Business Organisation and Corporate Governance 93

Corporate Governance

nature and level of the Board’s interaction with Board Committee membership
Nomination and
the Group’s management; the quality,
Audit Remuneration Governance Science
quantity and scope of information which Name Committee Committee Committee Committee Independent1
flows to the Board from management, and Bo Angelin x x x ✓ ✓
the way in which it flows; the content of and David Brennan x x x x –
presentations to Board meetings; the John Buchanan Chair ✓ x x ✓
composition of the Board; the practical Jean-Philippe Courtois ✓ x x x ✓
arrangements for the work of the Board; Jane Henney ✓ x ✓ ✓ ✓
and the work and operation of the Board’s Michele Hooper2 ✓ x ✓ x ✓
committees. Overall, it was concluded that Simon Lowth x x x x –
the Board and its committees were operating Rudy Markham ✓ x x x ✓
in an effective and constructive manner. Håkan Mogren3 x x ✓ x x
John Patterson4 x x x ✓ –
As part of the assessment process, each Nancy Rothwell x ✓ x Chair ✓
Non-Executive Director received feedback Louis Schweitzer x ✓ Chair x –5
about his or her individual performance. John Varley x Chair ✓ x ✓
The Non-Executive Directors reviewed the Marcus Wallenberg x x x x x
performance of the CEO and CFO in their
As determined by the Board for Combined Code purposes.
absence. In addition, the Board, under the 2
Michele Hooper is the senior independent Non-Executive Director.
chairmanship of the senior independent 3
Håkan Mogren retired from the Board on 30 April 2009.
Non-Executive Director, reviewed the 4
John Patterson retired from the Board on 31 March 2009.
Louis Schweitzer was considered independent by the Board upon his appointment as Chairman; in accordance
performance of the Chairman in his absence.
with the Combined Code, the test of independence is not appropriate to the Chairman after his appointment.
Each Director continues to perform effectively
and demonstrate commitment to the role.
September Board meeting and the strategy In January 2010, on his appointment as
Board matters day, which were held in Södertälje, Sweden, Non-Executive Chairman of Volvo AB,
As part of the business of each meeting all of the meetings were held in London, UK the Chairman consulted the Company and
of the Board, the CEO typically submits or by telephone. The Board is currently considered this new commitment against his
a progress report on each key business scheduled to meet six times and hold a ability to continue to commit sufficient time
area, giving details of progress against the strategy review day in 2010, and will meet at to the Company; it is not anticipated that his
goals the Board has approved and their such other times as may be required to availability for the Company will be reduced.
activities. To ensure that the Board has good conduct business.
visibility of the key operating decisions of Directors
the business, members of the SET routinely On those occasions when a Board or Board In accordance with Article 65 of the Articles,
attend Board meetings on a rotational basis Committee member was unavoidably absent all Directors retire at each AGM and may offer
and the Board regularly meets and consults from a meeting, for example through illness themselves for re-election by shareholders.
other senior employees throughout the year. or where a meeting clashed with his/her Accordingly, all of the Directors will retire at
The Board also receives accounting and existing commitments, he/she still received the AGM in April 2010. The Notice of AGM
other management information about the and reviewed the papers for the meeting and will give details of those Directors presenting
Group’s resources, presentations from provided verbal or written input ahead of the themselves for re-election. The Board reviews
internal and external speakers on legal, meeting, typically through the Chairman annually the status of succession to senior
governance and regulatory developments and of the Board or the Chairman of the Board positions, including those at Board level,
external perspectives. At the end of Board Committee, so that his/her views were made and ensures it has regular contact with, and
meetings, the Non-Executive Directors usually known and considered at the meeting. access to, succession candidates.
meet without the Executive Directors present,
to review and discuss any matters that have In addition, given the nature of the business During 2009:
arisen during the meeting and/or such other to be conducted, some Board meetings
matters as may appear to the Non-Executive were convened at short notice, which made >> John Patterson, Executive Director,
Directors to be relevant in properly discharging it difficult for some Directors to attend due to Development retired from the Board
their duty to act independently. prior commitments. on 31 March 2009.
>> Håkan Mogren, Non-Executive Deputy
The Company Secretary is responsible to As well as their work in relation to formal Chairman, retired from the Board on
the Chairman for ensuring that all Board Board and Board Committee meetings, the 30 April 2009.
and Board Committee meetings are properly Non-Executive Directors also continued to
conducted, that the Directors receive commit time throughout the year to meetings For information relating to the appointment
appropriate information prior to meetings to and telephone calls with various levels of process for new Directors see the Nomination
enable them to make an effective contribution, executive management, visits to AstraZeneca’s and Governance Committee section from
and that governance requirements are sites throughout the world and, for new page 95.
considered and implemented. Non-Executive Directors, induction sessions,
meetings and site visits. In 2009, for example,
The Board held six scheduled and two ad various Non-Executive Directors made
hoc meetings in 2009. It also held a strategy individual visits to AstraZeneca’s sites in
review day, which was attended by all the the UK, Sweden, the US, Canada, China,
SET members. With the exception of the Japan and Vietnam.

AstraZeneca Annual Report and Form 20-F Information 2009

94 Directors’ Report | Business Organisation and Corporate Governance

Newly appointed Directors are provided with 2009, the Company submitted the required the independence of the external auditor is
comprehensive documentation, setting out annual written affirmation to the NYSE not impaired. The policies and procedures
their obligations and duties as Directors. confirming its full compliance with those cover three categories of work – audit
They also typically attend tailored induction standards. For the purposes of the Combined services, audit-related services and tax
programmes that take account of their Code, the Board remains satisfied that at services. The policies define the type of work
individual skills and experience. To develop least one member of the Audit Committee that falls within each of these categories
an understanding of major shareholders’ views has recent and relevant financial experience. and the non-audit services that the external
about the Company, the Non-Executive At its meeting in December 2009, the Board auditor is prohibited from performing under
Directors (together with the rest of the Board) determined that Michele Hooper and Rudy the rules of the SEC and other relevant UK
regularly receive reports and presentations Markham are audit committee financial and US professional and regulatory
from the Company’s brokers and meet experts for the purposes of the Sarbanes- requirements. The pre-approval procedures
with senior managers throughout the year. Oxley Act. The Deputy Company Secretary permit certain audit, audit-related and tax
Moreover, the Directors actively encourage acts as secretary to this committee. services to be performed by the external
shareholders to attend the AGM and ask auditor during the year, subject to fee limits
questions. The core terms of reference of the Audit agreed with the Audit Committee in advance.
Committee continue to include reviewing The CFO (supported by the Senior Vice-
The Company maintained directors’ and and reporting to the Board on: President, Group Finance) monitors the
officers’ liability insurance cover throughout status of all services being provided by the
2009. The Directors are also able to obtain >> Matters relating to the audit plans of external auditor. The procedures also deal
independent legal advice at the expense of the external auditor and GIA as well with placing non-audit work out for tender,
the Company, as necessary, in their capacity as oversight of the work of the Global where appropriate. Authority to approve
as Directors. Compliance function. work in excess of the pre-agreed fee limits
>> The Group’s overall framework for internal is delegated to the Chairman of the Audit
The Company has entered into a deed of control over financial reporting and for Committee in the first instance. A standing
indemnity in favour of each Board member other internal controls and processes. agenda item at Audit Committee meetings
since 2006. These deeds of indemnity are >> The Group’s overall framework for risk covers the operation of the pre-approval
still in force and provide that the Company management, particularly financial risks. procedures and regular reports are provided
shall indemnify the Directors to the fullest >> The accounting policies and practices of to the full Audit Committee.
extent permitted by law and the Articles, the Group.
in respect of all losses arising out of, or in >> The annual and quarterly financial The Audit Committee’s terms of reference
connection with, the execution of their powers, reporting carried out by the Group. are available on our website, astrazeneca.
duties and responsibilities, as Directors of com and on request from the Company
the Company or any of its subsidiaries. The Audit Committee is responsible for Secretary.
This is in line with current market practice notifying the Board of any significant concerns
and helps the Company attract and retain of the external auditor or the Vice-President, The Audit Committee held four scheduled
high-quality, skilled Directors. Group Internal Audit (GIA) arising from their meetings in 2009. The individual attendance
audit work, any matters that may materially record of members of the Audit Committee is
Operation of Board Committees affect or impair the independence of the set out in the Board and Committee meeting
The Board has delegated certain external auditor, any significant deficiencies or attendance in 2009 table on page 92.
responsibilities to the Audit, Remuneration, material weaknesses in the design or operation
Nomination and Governance, and Science of the Group’s internal control over financial Following each Audit Committee meeting,
Committees. The Board provides adequate reporting or other internal controls, and any the Chairman of the Audit Committee (or the
resources to enable each committee to serious issues of non-compliance. senior independent Non-Executive Director
undertake its duties. Further details of the in the absence of the Chairman of the Audit
role, membership and terms of reference for The Audit Committee oversees the Committee) reported to the Board on the
each committee are set out below. In addition establishment, implementation and principal matters covered at the meeting and
to the standing committees of the Board, there maintenance of the Code of Conduct and minutes of the meetings were circulated to
may from time to time be constituted ad hoc other related policies. It has established all Board members.
committees for specific projects or tasks. In procedures for the receipt and handling of
these cases, the scope and responsibilities complaints concerning accounting or audit During 2009, members of the Audit
of the committee is documented. matters. It recommends to the Board the Committee met individual managers or
appointment of the external auditor, subject to groups of managers on a number of
Audit Committee the approval of the Company’s shareholders occasions, which helped the members
The current members of the Audit Committee at a general meeting. Shareholders in a gain a deeper insight into areas relevant to
are John Buchanan (Audit Committee general meeting authorise the Directors to the Audit Committee’s work and provided
Chairman), Jane Henney, Michele Hooper fix the remuneration of the external auditor. an opportunity to discuss specific areas
(senior independent Non-Executive Director), The Audit Committee reviews and approves of interest.
Jean-Philippe Courtois and Rudy Markham. the appointment and any dismissal of the
They are all Non-Executive Directors. Vice-President, GIA. During the year, in line with its normal practice,
The Board considers each member to be the Audit Committee also held a number
independent under the Combined Code The Audit Committee maintains policies and of private meetings, without management
and under the general guidance and specific procedures for the pre-approval of all audit present, with the Vice-President, GIA, the
criteria of the Listing Standards concerning services and permitted non-audit services Global Compliance Officer and the lead
the composition of audit committees undertaken by the external auditor, the partners from the Company’s external audit
applicable to non-US companies. In April principal purpose of which is to ensure that firm. The purpose of these meetings was to

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Business Organisation and Corporate Governance 95

Corporate Governance

facilitate free and open discussions between >> The amount of audit and non-audit fees controls and procedures required by Item
the Audit Committee members and those of the external auditor throughout 2009. 15(a) of Form 20-F at 31 December 2009.
individuals, separately from the main sessions The Audit Committee was satisfied Based on their evaluation, the CEO and
of the Audit Committee, which were attended throughout the year that the objectivity the CFO concluded that, as at that date,
by the CFO and the Senior Vice-President, and independence of the external auditor the Group maintains an effective system of
Group Finance. were not in any way impaired by the disclosure controls and procedures.
nature of the non-audit work undertaken
During 2009 and January 2010, the business by the external auditor during the year, the There was no change in the Group’s
considered and discussed by the Audit level of non-audit fees charged for such internal control over financial reporting
Committee included the matters referred work or any other facts or circumstances. that occurred during the period covered by
to below: Further information about the audit and this Annual Report that has materially
non-audit fees for the year is disclosed in affected, or is reasonably likely to materially
>> The Group’s financial disclosures were Note 27 to the Financial Statements on affect, the Group’s internal control over
reviewed and various accounting page 185. financial reporting.
matters considered. >> A review and assessment of the Audit
>> Reports were received from the external Committee’s performance which The Audit Committee is currently scheduled
auditor concerning its audit of the Financial concluded that such performance to meet four times in 2010 and will meet at
Statements of the Group and from was satisfactory. such other times as may be required.
management, GIA, Global Compliance and
the external auditor on the effectiveness of In line with best practice, the Group will Remuneration Committee
the Group’s system of internal controls periodically consider how the audit The principal role of the Remuneration
and, in particular, its internal control over requirements of the Group are best served Committee continues to be to consider,
financial reporting. This included review and in the context of business need and the on behalf of the Board, the remuneration
discussion of the results of the Group’s prevailing external environment and, against (including pension rights and compensation
‘continuous assurance’ and annual ‘letter the background of this review, will from time payments) of Executive Directors, the
of assurance’ processes (described further to time undertake a formal tendering Chairman and senior executives. More
below in the UK corporate governance programme with audit firms of appropriate information is set out in the Directors’
requirements section from page 96). The size and calibre. Following discussions at Remuneration Report from page 101.
Audit Committee also reviewed quarterly a meeting in January 2010, the Audit
activity reports of audit work carried out Committee unanimously recommended to the Nomination and Governance Committee
by GIA and the status of follow-up actions Board that a resolution for the re-appointment The Nomination and Governance Committee’s
with management as well as reports from of KPMG as the Company’s external auditor core role continues to be (after appropriate
the Global Compliance function. be proposed to shareholders at the AGM in consultation with the Chairman and the
>> The systems and processes that April 2010. Based on its experience of CEO) to recommend to the Board any new
management has developed pertaining working with external auditors, the Audit appointments of Directors. Any decisions
to risk identification, classification Committee believes that the quality of the relating to the appointment of Directors are
and mitigation. interaction with and level of service received made by the entire Board based on the merits
>> Continuing work to comply with the from KPMG were key factors supporting this of the candidates and the relevance of their
applicable provisions of the Sarbanes- recommendation. The Audit Committee background and experience, measured
Oxley Act. In particular, the Audit was also satisfied that, notwithstanding the against objective criteria, with care taken
Committee regularly reviewed the status length of tenure of KPMG, KPMG met the to ensure that appointees have enough time
of compliance with the programme of independence criteria under the relevant to devote to the job. The Nomination and
internal controls over financial reporting statutory, regulatory and ethical standards Governance Committee also advises the
implemented pursuant to section 404 of applicable to auditors. Consistent with Board periodically on significant developments
the Sarbanes-Oxley Act; further information current market practice, KPMG’s services to in corporate governance and the Company’s
about this is set out in the Sarbanes-Oxley the Group are provided pursuant to terms of compliance with the Combined Code.
Act section 404 section on page 49. engagement which are reviewed by the Audit
>> Data about calls made by employees via Committee. These terms of engagement do During 2009, the members of the Nomination
the AZethics telephone lines and other not include any contractual obligations under and Governance Committee were Louis
routes regarding potential breaches of which the Directors would be prevented from Schweitzer (Nomination and Governance
the Code of Conduct together with the appointing a different audit firm were they Committee Chairman), Håkan Mogren (until
results of enquiries into these matters. to consider this to be in the best interests of his retirement from the Board on 30 April
>> The succession of the Vice-President, GIA. the Group. The Audit Committee, through 2009), Jane Henney, Michele Hooper and
>> Accounting issues relevant to litigation management, continues to maintain contact John Varley. They are all Non-Executive
and taxation matters. and dialogue with other major audit firms who Directors. The Board considers all current
>> Reports from the Group Treasury function are familiar with the Group’s business for members of the Nomination and
and, in particular, the Group’s liquidity and succession purposes as required. This is Governance Committee to be independent
cash position and the appropriateness reported to the Audit Committee in order to (Louis Schweitzer was considered by
of its cash management policies in the ensure a smooth transition from the current the Board to be independent upon his
context of the current economic situation. auditor, should this be necessary. appointment as Chairman; in accordance
>> Other reports concerning the GIA, with the Combined Code, the test of
Global Compliance and Finance At the same meeting, the CEO and the CFO independence is not appropriate in relation
functions, including the internal audit plan presented to the Audit Committee their to the Chairman after his appointment).
and progress and plans of the Global conclusions following the evaluation of the The Company Secretary acts as secretary
Compliance Officer. effectiveness of the Group’s disclosure to this committee.

AstraZeneca Annual Report and Form 20-F Information 2009

96 Directors’ Report | Business Organisation and Corporate Governance

The Nomination and Governance Committee Principal corporate Further information on the ways in which we
met twice in 2009. The individual attendance governance requirements manage our business risks is set out in the
record of members of the Nomination and UK corporate governance requirements Managing risk section from page 79 and a
Governance Committee is set out in the The Board has prepared this Annual Report list of the principal risks and uncertainties is
Board and Committee meeting attendance with reference to the Combined Code and set out in the Principal risks and uncertainties
in 2009 table on page 92. During 2009, the related guidance published in June 2008 by section from page 80.
Nomination and Governance Committee the Financial Reporting Council (FRC). It
reviewed the knowledge, experience and describes the way in which the Company is During 2009, the Board considered the
balance of the Board overall and considered applying all the main and supporting principles independence of each Non-Executive
its likely future requirements given the strategic of good governance in the Combined Code Director. With the exception of Marcus
and business objectives of the Group. as described below. The Company has Wallenberg, the Board considers that all of
In addition, the Nomination and Governance complied throughout the accounting period the Non-Executive Directors are independent.
Committee received reports about the various and is also continuing to comply with all Louis Schweitzer was considered by
corporate governance reviews and proposals of the provisions of the Combined Code. the Board to be independent upon his
that were a feature of 2009, and carefully The Combined Code is publically available appointment as Chairman; in accordance
monitored developments and their potential on the FRC website, with the Combined Code, the test of
impact on the Group. independence is not appropriate in relation
The Board has overall responsibility for the to the Chairman after his appointment.
The Nomination and Governance Committee’s Group’s system of internal controls and risk
terms of reference are available on our management policies and is also Marcus Wallenberg was appointed as
website, responsible for reviewing their effectiveness. a Director of Astra in May 1989 and
During 2009, the Directors have continued subsequently became a Director of the
Science Committee to review the effectiveness of the Group’s Company in 1999. Until September 2005,
The Science Committee’s core role system of controls, risk management and he was a member of the board of directors
continues to be to provide assurance to the Group’s high-level internal control and the Chief Executive Officer of Investor AB,
the Board regarding the quality, integrity arrangements. These reviews have included which has a 3.55% interest in the issued share
and competitiveness of the Company’s an assessment of internal controls, and in capital of the Company as at 28 January 2010.
science-based R&D activities. It does not particular, internal, financial, operational and Wallenberg family foundations remain
review individual projects. The Science compliance controls and risk management Investor AB’s largest shareholders in terms of
Committee, together with external experts, and their effectiveness, supported by votes controlled. For these reasons, the Board
where appropriate, does review important management assurance of the maintenance does not believe that Marcus Wallenberg
bioethical issues faced by the Group and of control, reports from GIA, as well as the can be determined independent under the
assists in the formulation of, and agrees on external auditor on matters identified in the Combined Code. However, the Board believes
behalf of the Board, appropriate policies in course of its statutory audit work. The that he has brought, and continues to bring,
relation to such issues. In addition, the system is designed to manage rather than considerable business experience and
Science Committee is responsible for eliminate the risk of failure to achieve makes a valuable contribution to the work
considering general future trends in medical business objectives and can only provide of the Board.
science and technology, and any new areas reasonable (not necessarily absolute)
of science or medicine in which the Group assurance of effective operation and The Board has also considered, in particular,
may be interested. compliance with laws and regulations. the position of Michele Hooper who joined
the board of UnitedHealth Group as a
During 2009, the members of the Science Underpinning these reviews is an annual ‘letter Non-Executive Director in 2007. The Board’s
Committee, all of whom have a knowledge of, of assurance’ process by which responsible approval of this appointment was conditional
or an interest in, life sciences, were Nancy managers confirm the adequacy of their upon Michele Hooper resigning from the
Rothwell (Science Committee Chairman), systems of internal financial and non-financial board of UnitedHealth Group in the event
Jane Henney, Bo Angelin, all Non-Executive controls, their compliance with Group policies of a conflict or non-independence. It is
Directors, and Jan Lundberg (until his and relevant laws and regulations (including the Board’s view that Michele Hooper is
resignation in November), John Patterson the industry’s regulatory requirements), independent and that she discharges her
(until his retirement from the Board on and that they have reported any control duties in a properly independent manner,
31 March 2009), Anders Ekblom and weaknesses through the Group’s ‘continuous constructively and appropriately challenging
Christer Köhler (from his appointment as assurance’ process. the Executive Directors and the Board.
Interim Executive Vice-President, Discovery
Research in November). The Vice-President, The internal control framework has been Jane Henney is a Non-Executive Director
Business Performance and Continuous in operation for the whole of the year under of AmerisourceBergen Corporation and
Improvement, R&D also attends all meetings review and continues to operate up to the CIGNA Corporation, both of which are
and acts as secretary to this committee. date of the approval of this Annual Report. customers of the Group in the US. The Board
The Directors believe that the Group maintains has considered these relationships and
The Science Committee met twice in 2009. an effective, embedded system of internal concluded that they did not compromise
Its remit is available on the Company’s controls and complies with the Turnbull her independence.
website, Report guidance and, in the view of the
Directors, no significant failings have been
identified in the system.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Business Organisation and Corporate Governance 97

Corporate Governance

The position of senior independent Non- internal control. The Company has complied AZethics telephone lines and the new global
Executive Director of the Company was with those provisions of the Sarbanes-Oxley website, Anyone who raises
established in 2002. Michele Hooper (who Act applicable to foreign private issuers. The a possible breach in good faith will be
was appointed as a Non-Executive Director Board continues to believe that the Group supported by management and will not be
in 2003) became the Company’s senior has a sound corporate governance subject to retaliation, which would itself be
independent Non-Executive Director in framework, good processes for the accurate considered a serious violation of the Code of
April 2007. and timely reporting of its financial position Conduct. We review all alleged compliance
and results of operations and an effective breaches and concerns, and we investigate
At the AGM in 2008, a resolution was and robust system of internal controls. The and report on them to the Audit Committee,
passed to amend the Articles to enable the Company has established a Disclosure as appropriate.
Directors to authorise any situation in which Committee, further details of which can be
a Director has an interest that conflicts or found in the Disclosure Policy and Disclosure During 2009, 289 reports of alleged
has the potential to conflict with the Committee section on page 98. compliance breaches or other ethical concerns
Company’s interests and which would were made via the telephone helplines,
otherwise be a breach of the Director’s duty, The Directors’ assessment of the website or Global Compliance
under section 175 of the Companies Act effectiveness of the internal control over e-mail or postal addresses described in the
2006. The Board has a formal system in financial reporting is set out in the Directors’ Code of Conduct. The number of reports
place for Directors to declare such situations Responsibilities for, and Report on, Internal via the equivalent channels in 2008 was 206.
to be considered for authorisation by those Control over Financial Reporting section in We believe that the increase in the number
Directors who have no interest in the matter the Financial Statements on page 122. of reports via these channels is due, in part,
being considered. In deciding whether to to our efforts to enhance these reporting
authorise a situation, the non-conflicted The Company must disclose any significant channels and, in part, to an increased
Directors must act in the way they consider, ways in which its corporate governance awareness of the Code of Conduct and the
in good faith, would be most likely to practices differ from those followed by US accompanying training and communications.
promote the success of the Company, and companies under the Listing Standards. In
they may impose limits or conditions when addition, the Company must comply fully As with the Code of Conduct, our Global
giving the authorisation, or subsequently, if with the provisions of the Listing Standards Policies apply to all members of the Group.
they think this is appropriate. Situations relating to the composition, responsibilities Like the Code of Conduct, the Global
considered by the Board and authorisations and operation of audit committees. These Policies provide clear and comprehensive
given are recorded in the Board minutes and provisions incorporate the rules concerning guidance, in plain language, to all managers
in a register of conflicts maintained by the audit committees implemented by the SEC and employees as to their accountabilities in
Company Secretary and reviewed annually under the Sarbanes-Oxley Act. key ethical, compliance and corporate
by the Board. The Board considers that this responsibility risk areas.
system continues to operate effectively. The Company has reviewed the corporate
governance practices required to be followed A critical element of the effectiveness of
The disclosures that fulfil the requirements of by US companies under the Listing Standards the Code of Conduct and Global Policies
a corporate governance statement under and its corporate governance practices are is to deliver clear training and education to
the Disclosure and Transparency Rules can generally consistent with those standards. employees on an ongoing basis.
be found in this Corporate Governance
section of the Directors’ Report and in other Code of Conduct A Group Finance Code of Conduct
parts of this Annual Report as listed below, The Code of Conduct, which is available on complements the Code of Conduct. It applies
each of which is incorporated into this our website,, applies to to the CEO, the CFO, the Group’s principal
Corporate Governance section by reference: all Directors, officers, full-time, part-time, accounting officers (including key Finance
contractor and temporary staff at all levels in staff in major overseas subsidiaries) and all
>> Significant holders of the Company’s every country where we operate. It has been Finance function employees, and it reinforces
shares (contained in the Shareholder translated into over 40 languages and every the importance of the integrity of the Group’s
Information section from page 199). employee has a copy in his/her local Financial Statements, of the reliability of the
>> Articles (contained in the Corporate language. It is designed to provide clear accounting records on which they are based
Information section on page 204). direction as to how the Company’s and of the robustness of the relevant controls
>> Amendments to the Company’s Articles commitment to honesty and integrity is to be and processes.
(contained in the Corporate Information translated into consistent actions across all
section on page 204). areas of the business. Compliance with the Compliance and Group Internal Audit
Code of Conduct and with the standards The role of the Global Compliance function is
US corporate governance requirements detailed by the Group in support of it is to help embed a culture of ethics and integrity
The Company’s ADSs are traded on the mandatory. The same applies to the laws in the Group. Global Compliance works
NYSE and, accordingly, the Company is and regulations of the countries in which we closely with GIA, with whom it provides joint
subject to the reporting and other work and do business, as well as applicable assurance reporting to the Audit Committee.
requirements of the SEC applicable to national and international codes, and the The key priorities for our Global Compliance
foreign private issuers. Section 404 of the Group seeks to operate to the highest of function for 2009/2010 are closely aligned with
Sarbanes-Oxley Act requires companies to these standards. the Group’s strategic priorities. During 2010,
include in their annual report on Form 20-F the Global Compliance function will continue
filed with the SEC, a report by management The Code of Conduct also includes to focus on ensuring the delivery of an
stating its responsibility for establishing information on how to report possible aligned approach to compliance that
internal control over financial reporting and violations of the Code of Conduct through addresses key risk areas across the business.
to assess annually the effectiveness of such the appropriate channels, including the

AstraZeneca Annual Report and Form 20-F Information 2009

98 Directors’ Report | Business Organisation and Corporate Governance

During 2009, the Global Compliance Disclosure Policy and Branches and countries in which the
Committee met quarterly. The remit of the Disclosure Committee Group conducts business
committee is to oversee and co-ordinate The Group’s Disclosure Policy provides a In accordance with the Companies Act
implementation of an effective global framework for the handling and disclosure of 2006, we disclose below the members
compliance programme and evaluate its inside information and other information of of the Group that have representative or
effectiveness. It does this by assessing interest to shareholders and the investment scientific branches/offices outside the UK:
key compliance risks within and across community. It also defines the role of the
the SET functions; working with GIA to Disclosure Committee. During 2009, the >> AstraZeneca UK Limited: Albania, Algeria,
ensure co-ordination of compliance auditing members of the Disclosure Committee were: Angola, Armenia, Azerbaijan, Bosnia and
and monitoring; reviewing results; and the CFO; the Executive Vice-President, Herzegovina, Bulgaria, Chile, Costa Rica,
addressing significant policy violations and Development; the General Counsel; the Croatia, Cuba, Georgia, Ghana (scientific
identifying trends. Vice-President, Corporate Affairs; the office), Ireland, Jordan, Kazakhstan, Kenya
Vice-President, Investor Relations; and the (scientific office), Macedonia, Romania,
Global Compliance provides direct assurance Senior Vice-President, Group Finance. Russia, Serbia and Montenegro, Slovenia
to the Audit Committee on matters concerning The Deputy Company Secretary acts as and Ukraine.
compliance issues, with a particular focus secretary to this committee. The Disclosure >> AstraZeneca AB: Egypt (scientific office),
on compliance with IFPMA, EFPIA and Committee meets regularly to assist and Latvia, Saudi Arabia (scientific office)
PhRMA codes. Complementing this, GIA inform the decisions of the CEO concerning and Slovakia.
carries out a range of audits that include inside information and its disclosure. >> AstraZeneca Export and Trading AB:
compliance-related audits and reviews of Periodically, it reviews the Group’s disclosure Estonia, Lithuania, Romania and the
the assurance activities of other Company controls and procedures and its own United Arab Emirates.
assurance functions. The results from these operation as part of work carried out to >> AstraZeneca Singapore Pte Limited:
activities are reported to the Audit Committee. enable management and the Board to Cambodia and Vietnam.
assure themselves that appropriate
GIA is an independent appraisal function that processes are operating for the Company’s Distributions to shareholders and
derives its authority from the Board through planned disclosures, such as its quarterly dividends for 2009
the Audit Committee. Its primary role is to results announcements and scheduled The Company’s stated distribution policy
provide reasonable and objective assurance investor relations events. In addition, the comprises both a regular cash dividend and
to the Directors about the adequacy and Disclosure Committee members are a share re-purchase component, further
effectiveness of the Group’s risk members of the steering group that reviews details of which are set out in the Capitalisation
management and control framework and the drafts of, and the process for preparing, and shareholder return section in the Financial
the internal controls over key business risks, this Annual Report. Review on page 42 and Notes 20 and 21
including financial controls and compliance to the Financial Statements from pages 153
with laws, regulations and policies. Disclosure of information to auditors and 154, respectively.
The Directors who held office at the date of
GIA seeks to discharge the responsibilities approval of this Directors’ Report confirm The Company’s dividends for 2009 of $2.30
set down in its charter by reviewing: that, so far as they are each aware, there is (141.4 pence, SEK 16.84) per Ordinary Share
no relevant audit information of which the amount to, in aggregate, a total dividend
>> The processes for ensuring that key Company’s auditors are unaware; and each payment to shareholders of $3,336 million.
business risks are effectively managed. Director has taken all the steps that he/she
>> The financial and operational controls ought to have taken as a Director to make Two of the Group’s employee share trusts,
that help to ensure that the Group’s himself/herself aware of any relevant audit AstraZeneca Share Trust Limited and
assets are properly safeguarded from information and to establish that the AstraZeneca Quest Limited, waive their right
losses, including fraud. Company’s auditors are aware of that to a dividend on the Ordinary Shares that they
>> The controls that help to ensure the information. hold and instead receive a nominal dividend.
reliability and integrity of management
information systems. Other matters A shareholders’ resolution was passed at
>> The processes for ensuring compliance Subsidiaries and principal activities the 2009 AGM authorising the Company to
with policies and procedures, external The Company is the holding company for a purchase its own shares. However, no share
legislation and regulation. group of subsidiaries whose principal activities re-purchases took place in 2009. The
>> On an ad hoc basis, whether value for are described in this Directors’ Report. Company will seek a renewal of its current
money is obtained (in terms of efficient Principal subsidiaries and their locations are permission from shareholders to purchase
use of the Group’s resources). given in the Principal Subsidiaries section in its own shares at the AGM on 29 April 2010.
the Financial Statements on page 186.
GIA acts as a source of constructive advice During the Company’s share re-purchase
and best practice, assisting senior programmes that operated between 1999
management to improve governance, and 2008, a total of 376.3 million Ordinary
control, compliance and risk management. Shares were re-purchased, and subsequently
cancelled, at an average price of 2661 pence
per share for a consideration, including
expenses, of $18,099 million.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Business Organisation and Corporate Governance 99

Corporate Governance

Going concern accounting basis Directors’ shareholdings The Company has frequent discussions
Information on the business environment The Articles require each Director to be the with institutional shareholders on a range
in which the Group operates, including the beneficial owner of Ordinary Shares in the of issues affecting its performance. These
factors underpinning the industry’s future Company with an aggregate nominal value of include individual meetings with some of the
growth prospects, are included in the $125 (which currently represent at least 500 Company’s largest institutional shareholders
Business Environment section from page 12. shares). Such holding must be obtained to seek their views and any concerns can
Details of the product portfolio of the Group, within two months of the date of the Director’s be reported to the Board. In addition, the
our approach to product development and appointment. At 31 December 2009, all of Company responds to individual ad hoc
a summary of our development pipeline are the Directors complied with this requirement requests for discussions from institutional
included in the Research and Development and full details of each Director’s interests in shareholders and analysts. The Group’s
section from page 22. Additional information shares of the Company are set out in the Investor Relations department acts as a main
on our Therapy Areas and a more detailed Directors’ interests in shares section on page point of contact for investors throughout the
table of our development pipeline is included 115. Information about the shareholding year. The senior independent Non-Executive
in the Therapy Area Review from page 55. expectations of the Remuneration Committee Director is also available to shareholders if
(in respect of Executive Directors and SET they have concerns that contact through the
The financial position of the Group, its cash members) and the Board (in respect of normal channels of Chairman, CEO, CFO and/
flows, liquidity position and borrowing facilities Non-Executive Directors) is also set out in the or the Group Investor Relations department
are described in the Financial Review. In Directors’ Remuneration Report on pages has failed to resolve, or in relation to which
addition, Notes 15 and 16 to the Financial 108 and 110, respectively. such contact is inappropriate. All shareholders,
Statements from pages 144 and 146, including private investors, have an opportunity
respectively, include the Group’s objectives, Shareholder communications at the AGM to put questions to members
policies and processes for managing its In its financial and business reporting to of the Board on matters relating to the
capital, its financial risk management shareholders and other interested parties Group’s operation and performance. Formal
objectives, details of its financial instruments by means of quarterly, half-year and full-year notification of the AGM is sent to shareholders
and hedging activities and its exposures to reports, the Board aims to present a balanced at least one month in advance. The Chairmen
credit, market and liquidity risk. Further details and understandable assessment of the of the Board’s committees ordinarily attend
of the Group’s cash balances and borrowings Group’s financial position and prospects. the AGM to answer questions raised by
are included in Notes 13 and 14 to the shareholders. In line with the Combined Code,
Financial Statements from pages 143 The Company makes available to shareholders details of proxy voting by shareholders,
and 144, respectively. information about the Company through including votes withheld, are given at the
a range of media, including a fully integrated AGM and are placed on our website
The Group has considerable financial html corporate website,, following the AGM.
resources available. At 31 December 2009, containing a wide range of information of
the Group had $12.3 billion in financial interest to institutional and private investors. Political donations
resources (cash balances of $9.9 billion and The Company considers its website to be Neither the Company nor its subsidiaries
committed undrawn bank facilities of $4.25 an important means of communication made any EU political donations or incurred
billion, with $1.9 billion of debt due within one with its shareholders. The Company has any EU political expenditure in 2009 and they
year). The Group’s revenues are largely derived been authorised by shareholders to place do not intend to do so in the future in respect
from sales of products which are covered by shareholder communications (such as the of which shareholder authority is required, or
patents and for which, in the short term at Notice of AGM and this Annual Report) on for which disclosure in this Annual Report is
least, demand is relatively unaffected by its corporate website in lieu of sending paper required, under the Companies Act 2006.
changes in the global economy. In addition, copies to shareholders (unless specifically
the Group has a wide diversity of customers requested by shareholders). Whilst recognising However, to enable the Company and its
and suppliers across different geographic and respecting the fact that some of our subsidiaries to continue to support interest
areas. As a consequence, the Directors stakeholders may have different preferences groups or lobbying organisations concerned
believe that the Group is well placed to regarding the manner in which they receive with the review of government policy or law
manage its business risks successfully despite information about the Company, we will reform without inadvertently breaching the
the current uncertain economic outlook. continue to promote the benefits of Companies Act 2006, which defines political
electronic communication given the donations and other political expenditure in
After making enquiries, the Directors have advantages that this has over traditional broad terms, a resolution will be put to
a reasonable expectation that the Group paper-based communications both in terms shareholders at the 2010 AGM, similar to
has adequate resources to continue in of the configurability and accessibility of that passed at the AGM on 30 April 2009, to
operational existence for the foreseeable the information that is provided and the authorise the Company and its subsidiaries
future. Accordingly, they continue to adopt consequent cost savings and reduction to make: (i) donations to political parties; (ii)
the going concern basis in preparing this in environmental impact associated with donations to political organisations other
Annual Report and the Financial Statements. reduced printing and distribution costs. than political parties; and (iii) incur political
expenditure, up to an aggregate limit
Changes in share capital of $250,000.
Changes in the Company’s Ordinary Share
capital during 2009, including details of the
allotment of new shares under the Company’s
share plans, are given in Note 20 to the
Financial Statements from page 153.

AstraZeneca Annual Report and Form 20-F Information 2009

100 Directors’ Report | Business Organisation and Corporate Governance

In 2009, the Group’s US legal entities sheet date was equivalent to 56 days’ average Bureau Veritas
made contributions amounting in aggregate purchases (2008: 46 days). The methodology Bureau Veritas UK Limited (Bureau Veritas)
to $733,687 (2008: $815,838) to state for this calculation has been amended in 2009 has provided external assurance on corporate
political party committees and to campaign whereby rebates and chargeback accruals, responsibility related information within this
committees of various state candidates previously included in this calculation, have Annual Report and of the detailed content of
affiliated with the major parties in accordance been removed. The Company believes that the ‘Responsibility’ section of our website.
with pre-established guidelines. No corporate as these amounts arise typically from our Bureau Veritas has found the information
donations were made at the federal level revenue arrangements, principally in the US, provided within this Annual Report to be
and all contributions were made only where this methodology more accurately reflects accurate and reliable (based on the evidence
allowed by US federal and state law. US time taken on average to repay creditors. provided and subject to the scope,
citizens or individuals holding valid green The comparative calculation for the prior year objectives and limitations defined in the full
cards exercised decision-making over is also presented under the new methodology. assurance statement). The full assurance
the contributions and the funds were not A considerable part of the trade creditors statement which contains detailed
provided or reimbursed by any non-US legal balance relates to the Merck account in the scope, methodology, overall opinion
entity. Such contributions do not constitute US, which has particularly long contractual and recommendations can be found on
political donations or political expenditure for payment terms. By removing this balance AstraZeneca’s website,;
the purposes of the Companies Act 2006 and other items not directly related to trade web page content assured by Bureau Veritas
and were made without any involvement of purchases in the US, a more accurate average is marked at the bottom of each page.
persons or entities outside the US. of 47 days is obtained (2008: 40 days).
Bureau Veritas is an independent professional
Significant agreements The Company has no external trade creditors. services company that specialises in quality,
There are no significant agreements to which health, safety, social and environmental
the Company is a party that take effect, alter Annual General Meeting management with a long history of providing
or terminate on a change of control of the The Company’s AGM will be held on 29 April independent assurance services, and an
Company following a takeover bid. 2010. The meeting place will be in London. annual turnover in 2008 of €2.6 billion.
A Notice of AGM will be sent to all registered
There are no persons, with whom the holders of Ordinary Shares and, where On behalf of the Board
Company has contractual or other requested, to the beneficial holders of shares.
arrangements, who are deemed by the A C N Kemp
Directors to be essential to the business External auditor Company Secretary
of the Company. A resolution will be proposed at the AGM
on 29 April 2010 for the re-appointment of 28 January 2010
Use of financial instruments KPMG as auditor of the Company.
Notes 15 and 16 to the Financial Statements,
from pages 144 and 146 respectively, include The external auditor has undertaken various
further information on the Group’s use of non-audit work for the Company during 2009.
financial instruments. More information about this work and the
audit and non-audit fees paid by the Company
Creditor payment policy are set out in Note 27 to the Financial
It is not Group policy formally to comply with Statements on page 185. The external auditor
the Confederation of British Industry’s code is not engaged by the Company to carry
of practice on the prompt payment of out any non-audit work on which it might,
suppliers. It is, however, Group policy in the future, be required to express an audit
to agree to appropriate payment terms with opinion. As explained more fully in the Audit
all suppliers when agreeing to the terms Committee section from page 94, the Audit
of each transaction, to ensure that those Committee has established pre-approval
suppliers are made aware of the terms of policies and procedures for audit and
payment and, subject to their compliance, non-audit work permitted to be carried out
abide by the terms of payment. The total by the external auditor and has carefully
amount of money owed by the Company’s monitored the objectivity and independence
subsidiaries to trade creditors at the balance of the external auditor throughout 2009.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Directors’ Remuneration Report 101

Corporate Governance

My introduction to the 2009 Directors’ We are therefore proposing to reshape the incentive structures supports the best
Remuneration Report seeks to give context Group’s long-term incentive arrangements, not interests of the business and shareholders
to the pages that follow. to increase the overall value of the package, over the medium and long term.
but to recognise that AstraZeneca operates
As we indicated in last year’s Directors’ in a uniquely long-term industry. We aim to The 2009 Directors’ Remuneration Report
Remuneration Report, the Remuneration strengthen thereby the alignment between which follows describes the key principles that
Committee has undertaken and completed the time horizons over which our business have informed the Remuneration Committee’s
a review of Executive Director and SET investment decisions are taken and those to thinking, and provides a summary of the
member remuneration during the course of which our share incentive programmes relate. proposals themselves. We will seek
the year. As part of this process, we have shareholder approval for the new share plan
consulted a number of institutional investors, You will see that we are proposing the at the AGM on 29 April 2010. Detailed plan
and are grateful for their contribution to the introduction of a new share plan (to operate terms, along with the specific performance
development of our proposals. alongside the existing Performance Share requirements that will apply to the initial
Plan and simultaneous with the cessation awards, will be set out in the circular sent
We have concluded that the fundamental of further grants of options under the Share to shareholders in advance of the AGM.
principles that underpin the Company’s Option Plan) with an eight-year time horizon.
approach to remuneration remain appropriate Shareholders have been receptive to a These proposals will facilitate the delivery of
for the business and our current strategy. At long-term plan of this nature, conditional on AstraZeneca’s business strategy. They explicitly
the same time, we now have the opportunity, sustainable financial performance and delivery reflect the discussions that we have had with
by developing our compensation structures, of shareholder returns. At the same time, our shareholders. On behalf of the Remuneration
to build on the historical financial success discussions with investors have recognised Committee, I commend them to you.
of the Group, to invest for the future, and to that the long-term nature of the plan means
focus on stewardship and shareholder that the Remuneration Committee should John Varley
value-creation over the long term. retain some flexibility as to the operation of Non-Executive Director
the plan to ensure that this combination of Chairman of the Remuneration Committee

Directors’ Remuneration Committee and services that materially assisted the

membership and meetings
Committee. On one occasion in 2009, the
The members of the Remuneration Committee invited Simon Lowth (CFO) to

Committee (Committee) are John Varley attend a meeting to provide background
(Chairman of the Committee), John Buchanan, information about performance measures
Louis Schweitzer and Nancy Rothwell. They that materially assisted the Committee in
are all Non-Executive Directors. The Board connection with its review of long-term
This Directors’ Remuneration Report (Report) considers them all to be independent (Louis incentive (LTI) arrangements for SET members.
has been prepared in accordance with the Schweitzer was considered by the Board This was part of the overall review of the
Large and Medium-sized Companies and to be independent upon his appointment remuneration of SET members, including
Groups (Accounts and Reports) Regulations as Chairman; in accordance with the that of Executive Directors, which began in
2008 (Regulations) and meets the relevant Combined Code, the test of independence 2009 and is referred to in more detail below.
requirements of the Financial Services is not appropriate in relation to the Chairman
Authority’s Listing Rules. As required by after his appointment). The independence of The Committee retains Carol Arrowsmith
the Regulations, a resolution to approve the Non-Executive Directors is discussed in of Deloitte LLP (Deloitte) who provided
this Report will be proposed at the AGM on more detail in the Business Organisation and independent advice on various matters it
29 April 2010. Corporate Governance section from page 87. considered in 2009. During the year, Deloitte
The Company Secretary acts as the secretary also provided taxation advice and other
The following sections of this Report, up to the Committee. non-audit services to the Company.
to and including the Non-Executive Directors
section on page 110, were not subject to The Committee met six times in 2009. Committee terms of reference and
audit by KPMG. The individual attendance record of key activities during the year
members of the Committee is set out Committee terms of reference
in the Board and Committee meeting A copy of the Committee’s terms of reference
attendance in 2009 table on page 92. is available on the Company’s website,, or by request from the
At the invitation of the Committee, except Company Secretary.
where their own remuneration was being
discussed, David Brennan (CEO); Lynn The role of the Committee is to develop and
Tetrault (Executive Vice-President, Human deploy remuneration policies and practices
Resources and Corporate Affairs); Simon for senior management, and for the Group
Appleby (Vice-President, Performance and more broadly, that support the implementation
Reward); and Viv Gill (Vice-President, Global of our business strategy and which thereby
Compensation) attended Committee help the organisation to create value for
meetings in 2009 and provided advice shareholders over time.

AstraZeneca Annual Report and Form 20-F Information 2009

102 Directors’ Report | Directors’ Remuneration Report

The Committee has responsibility for >> A review of the terms of senior executives’ >> Shareholder approval to operate the SOP
determining on behalf of the Board the remuneration packages on appointment, expires during May 2010. This provided
individual compensation paid to Executive promotion and termination. the Company with a natural opportunity
Directors and SET members. It takes >> The assessment of Company and to review the current approach to
responsibility on behalf of the Board for individual performance against remuneration, pay policies and incentive
reviewing the design and operation of total performance targets to determine structures and to consider how these
compensation structures and practices the level of executive bonuses for 2008 may best be developed to support the
across AstraZeneca. In this regard, the and to set executive bonus performance business strategy going forward.
Committee’s approval is required in relation to, targets for 2009. >> The Committee is aware that the subject
amongst other things, decisions regarding: >> The approval of awards made under of executive remuneration is much on the
the Group’s main LTI plans: minds of shareholders and that, since its
>> The eligibility, structure, award/grant levels, the AstraZeneca Performance Share last review, a great deal has changed both
performance metrics and targets, costs Plan (PSP); the AstraZeneca Share in the general market and the corporate
and final vesting levels under LTI plans for Option Plan (SOP); and the AstraZeneca governance landscape and in the shape
Directors, other SET members and the Pharmaceuticals LP Restricted Stock of, and strategic challenges faced by, the
Company Secretary. Unit Award Plan (RSU Plan) to SET global pharmaceutical industry.
>> Annual bonus payments for Executive members and other participants.
Directors, other SET members and senior >> A review of the Company’s governance In conducting this review, the Committee
executives below SET level. arrangements for global compensation has been mindful of shareholder views and
>> The pension entitlements of Executive matters. expectations, and has sought to give major
Directors and other SET members. >> A benchmarking review of the shareholders an opportunity to influence the
>> The Chairman of the Board’s remuneration Committee’s activities and policies direction of the proposals by dialogue during
(which is approved by the other members against institutional investor guidelines. the course of the review.
of the Committee and the senior >> A review of the pension entitlements
independent Non-Executive Director). of Executive Directors and other Key remuneration principles
>> Any single payment or award over SET members. The Committee concluded that the following
$1 million. >> A review of the impact on compensation objectives should continue to define its
>> Shareholding guidelines for Executive policies and practices of the current approach to the formation and execution
Directors and other SET members. economic environment, including of AstraZeneca’s remuneration policy:
>> The contractual terms and conditions ensuring the appropriate degree of risk
of, and any potential or actual payments adjustment to aggregate and individual >> All aspects of executive remuneration
arising on termination to, Executive compensation decisions. should be developed in the context of
Directors, other SET members and >> The preparation, review and approval of shareholder views on ‘best practice’ and
the Company Secretary so as to ensure this Report. be designed to help AstraZeneca create
that they are fair to the individual and the sustainable growth in shareholder value by
Company, that failure is not rewarded Review of SET remuneration the successful implementation of strategy.
and that the duty to mitigate loss is The 2008 Directors’ Remuneration Report >> Reward structures and performance
fully recognised. explained that the Company would undertake measures should support a strong
a review of total remuneration for SET performance culture enabling delivery of
The Committee will again conduct a review members (including Executive Directors) the business strategy, where all employees
of its terms of reference during 2010, taking during 2009. This review is now drawing to have a clear understanding of the Group’s
advice as appropriate from its external adviser. a close and has led to the development of objectives, how their work will impact
the forward-looking remuneration policy those objectives and how they will benefit
Key activities during the year disclosed in this Report. from delivering high levels of performance.
The Committee considered the following >> Base pay and total compensation
principal matters during 2009: There were a number of factors that prompted positioning against the market should
this review: be appropriate to attract and develop
>> The strategic review of the remuneration high-calibre talent and SET remuneration
and incentive framework for Executive >> When the PSP was approved by should continue to be referenced to
Directors and other SET members. shareholders at the AGM in early 2005 competitive levels of remuneration in
This has represented a considerable (following the last full-scale review of the relevant local markets.
proportion of the Committee’s activities executive remuneration), the Committee
and focus during the course of the year. undertook to review its operation within a Additionally, some specific objectives have
As part of its review, the Committee has period of five years, and to take into been established as a consequence of
undertaken a significant consultation with account the views of the Company’s the review. These support the introduction
major shareholders and institutional shareholders and the needs of the of a new incentive structure to allow us to
investor organisations. business at that time. rebalance our LTI framework and include
the following:

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Directors’ Remuneration Report 103

Corporate Governance

>> A clear desire in the business, supported Shareholder approval will be sought at the This free cash flow measure has been
by the Committee, to move towards a AGM in April 2010 for the introduction of chosen because it encompasses a number
longer-term framework which will a new share plan called the AstraZeneca of important elements of operational and
strengthen alignment with the inherently Investment Plan (AZIP) (to operate alongside financial performance and helps to align
long-term nature of pharmaceutical drug the existing PSP) with an eight-year time executives’ rewards with shareholder
development. horizon. Shareholders have been receptive to value-creation. The level of vesting of this
>> Revised LTI structures, designed to a long-term plan of this nature, conditional on element will be based on a sliding scale
provide a clear focus for the business to sustainable shareholder returns and financial against a target that is intended to represent
outperform our industry peers over time, performance. Such a plan will provide annual a significant challenge for the business. It is
to deliver operational efficiency and to awards to Executive Directors and other SET intended that the Committee should have the
engender a strong sense of stewardship members which must be held for a total of discretion to adjust, but on an exceptional
that will deliver long-term sustainable eight years and are subject to a four-year basis only, the free cash flow target during
shareholder value. performance requirement from the date the performance period for material factors
of award. that might otherwise distort the performance
No other element of Executive Director or SET measure in either direction. This is so that
remuneration will change as a consequence The greater weighting within the LTI performance can be assessed against targets
of the review. In particular, there is no intention opportunity will be given to awards under that have been set on a consistent basis.
to increase the overall quantum of short-term the PSP. For 2010, awards under the PSP For example, adjustments may be required
bonus or long-term reward opportunity and will be positioned so that interests under this to reflect exchange rate movements,
the annual incentive structure remains plan can deliver 75% of the overall expected significant acquisitions or divestments and
unchanged. value from long-term remuneration. 25% of major legal and taxation settlements. Any
the overall long-term opportunity for 2010 major adjustments to the calculation will be
The review has also concluded that the will therefore be delivered through the AZIP. disclosed to shareholders. There will be no
shareholding guidelines for Executive The Committee will keep under review the retesting of performance. Further information
Directors and other SET members will be appropriateness of this weighting. about the applicable free cash flow target
increased from current levels and, as such, will be set out in the Notice of AGM and
the shareholding requirement for the CEO is The combination of awards under these two shareholders’ circular.
being increased to 200% of base salary plans will fundamentally improve the alignment
(from 100%) and the requirement for all other between the time horizons over which our Performance requirement for awards
Executive Directors and SET members will be business investment decisions are taken and under the AZIP
increased to 125% of base salary (from 100%). those to which our long-term remuneration The AZIP will be aligned to AstraZeneca’s
vehicles relate. targeted product development cycle, reflecting
Long-term share plans the long term investment horizons that are a
The SOP will expire during 2010 and the Performance conditions for the PSP feature of the industry. The performance
review has concluded that no further grants To date, awards to Executive Directors and requirements attached to awards under the
will be made under the SOP. other SET members under the PSP were AZIP will be a combination of dividend and
subject to a TSR-only performance condition. dividend cover tests, assessed over a period
From 2010 onwards, and subject to of up to four financial years beginning at the
shareholder approval of the new share For awards to be made in 2010 under the start of the first financial year of the Company
plan, it is proposed that the long-term share PSP, it is intended that: in which the award is granted. A subsequent
interests of Executive Directors and other sale restriction will apply over a period that
SET members will be provided through two >> 50% of the award will be based on relative extends to the full eight-year period, during
complementary share plans as detailed below. TSR against a selected peer group of global which time forfeiture provisions will usually
pharmaceutical companies, of which: apply. Accordingly, participants will not
The PSP will continue to operate. However, –– 25% of the maximum award will vest generally be able to realise value until the full
performance conditions will be rebalanced for performance at the median of the eight-year period has elapsed.
so that the current relative TSR performance peer group; and
condition will apply in respect of one half of any –– 75% of the maximum award will vest The Committee’s intention in its choice of
award made under the PSP (as opposed to for upper quartile performance; the proposed performance tests has been to
100%, as under the current terms of the PSP). Committee will retain its existing establish a performance requirement that
The other half of the award will be subject to discretion to determine the amount of motivates financial business performance
a new cash flow performance measure that vesting for performance significantly that will generate returns for shareholders on
will improve the focus on operational above upper quartile, up to 100% of a sustainable basis over an extended time
management of the business that is consistent the maximum award. period. Further details relating to the proposed
with generating value for shareholders. We >> 50% of the award will vest subject to performance requirement and targets for
have chosen a cash flow measure because the achievement of a free cash flow 2010 awards will be provided in the Notice of
it will encompass all elements of operational target, which will operate as a cumulative AGM and shareholders’ circular.
and financial performance, represents a cash flow target over a three-year
strong proxy through time for shareholder performance period.
value-creation and is a key measure for the
Group. In conjunction with this new measure,
the TSR performance condition will continue
to strengthen the focus on outperformance
of competitors.

AstraZeneca Annual Report and Form 20-F Information 2009

104 Directors’ Report | Directors’ Remuneration Report

Components of remuneration

Component of remuneration Role within the remuneration framework Summary of Policy Applies to

Base salary (fixed) Base fixed remuneration. Based on conditions in the relevant All employees
geographic market and recognising
the value of an individual’s sustained
personal performance and contribution to
the business, taking account of the market
rate for an individual’s skills and experience.
Benchmarked against external comparators.

Pension arrangements (fixed) Provision of retirement benefits. Benchmarked against the relevant All employees
local employment market.

Benefits (fixed) Provision of standard non-cash employment Cost-effective and compatible with All employees
benefits, such as healthcare, insurances relevant welfare arrangements and
and, for certain employees, facilitated car local market norms.
purchase arrangements.

Short-term bonus (variable) An annual cash incentive opportunity Differs by market, but the Group All eligible employees
determined by reference to Group, functional performance measures ensure that
and individual performance, measured over all eligible employees receive an element
a single financial year of the Company and of reward based on the Company’s
taking into account external expectations overall financial performance.
of performance. The functional goals are agreed by the
Committee at the start of the year and are
derived from the business scorecard, the key
elements of which are set out in the Strategy,
objectives and 2009 performance table from
page 16, and are monitored as part of the
quarterly business review (QBR) process.
Individual goals are based on
annual objectives, which are linked
to functional goals.

Deferred bonus plan (variable) Aligns SET members’ interests with SET members must defer a proportion of SET members
those of shareholders. their short-term bonus (currently one-third
of pre-tax bonus for Executive Directors
and one-sixth for other SET members)
into Ordinary Shares or ADSs for a
three-year period.

LTI plans (variable) – for more Long-term equity incentive awards to AstraZeneca Performance Share Plan. SET members and
information on these plans provide individual executives and employees other senior executives
see the LTI plans section from with total compensation opportunities that
page 107 are competitive against local market AstraZeneca Investment Plan (from 2010, SET members
practice, for the achievement of operational subject to shareholder approval).
excellence, strong financial performance and
actions that are closely aligned with the
interests of shareholders. Subject to Share Option Plan (final awards made Senior management
shareholder approval, the primary LTI plans in 2009). and SET members
in which SET members participate from
2010 will be the PSP and the AZIP. Global Restricted Share Plan (from 2010, Eligible employees globally
replacing existing restricted stock unit plans).

Other share plans ‘All employee’ share participation Examples include the Share Incentive Plan Eligible employees
arrangements, including some that are and Savings-Related Share Option Plan (UK)1.
tax-approved, for example in the UK.

Shareholding guidelines Aligning SET members’ interests with The current expectation is for SET members SET members
those of shareholders. to hold shares with a value equivalent to their
base salary. From 2010, the CEO will be
expected to hold shares equivalent to 200%
of base salary and the CFO and other SET
members will be expected to hold 125% of
base salary in shares.

Overall approach When assessing the overall value of a SET member’s remuneration the Committee considers, both separately and in aggregate,
each component of the SET member’s total remuneration.

Further information on these plans is provided in Note 24 to the Financial Statements from page 161.

AstraZeneca Annual Report and Form 20-F Information 2009

Directors’ Report | Directors’ Remuneration Report 105

Corporate Governance

2010 proposed components of SET remuneration

Fixed Elements Variable Elements

Basic salary Linked to short-term performance Linked to long-term performance

Pension Bonus AstraZeneca Investment Plan

Benefits (such as healthcare) Deferred Bonus Plan (share-based) Performance Share Plan

2009 components of remuneration creates value for its shareholders. Such Remuneration and terms of
During 2009, the remuneration components measures are designed to stretch and employment for Executive Directors
for all Group employees (including those of challenge the relevant individuals whilst at and other SET members
SET members) comprised fixed and variable the same time giving them an opportunity to Illustration of fixed and variable
performance-related elements. Summaries participate as shareholders in the creation of performance-related remuneration
of these elements are included in the table on long-term economic value. Based on AstraZeneca’s remuneration
page 104. policy, the Components of remuneration –
The Company has continued to take into expected value basis charts below illustrate
The way in which these elements of account the wider business environment and the potential weighting given to fixed and
remuneration are combined and applied varies employment conditions across the Group. variable performance-related elements of the
according to a range of factors, including In particular, no base pay increases were remuneration package at Executive Director
specific business needs and practices in awarded in respect of the 2009 calendar year level. Variable performance-related elements
different markets, although, in general, the to Executive Directors or other SET members of the package are shown on an ‘expected
more senior the role within the business, the whose responsibilities were unchanged. value’ basis, and in the event that performance
greater the proportion of total remuneration In addition, award opportunities under the conditions are not met, such elements would
is made up of variable performance-related Group’s LTI plan framework have been held not deliver any value. The ‘expected value’
elements. The Committee seeks to ensure at a consistent level since the adoption of approach considers the range of possible
that the overall proportion of variable pay the PSP in 2005. outcomes and the probability attached
to which Executive Directors and other SET to each, in order to provide a value that
members may become entitled forms a For 2010, the Company will continue to represents the average that would be delivered
significant part of their overall remuneration benchmark against appropriate comparator if the arrangements were operated over many
opportunity. The Committee’s objective for companies and will assess whether or not and years. The ‘expected value’ for bonus
senior management is to ensure that such to what extent the overall opportunities for payment is taken to be the target payout level.
variable pay is linked to a range of measures remuneration offered by the current structure
designed to promote both individual and team of remuneration remain appropriate in the Fixed remuneration
behaviour and performance in a way that context of changes within the business and Both Executive Directors’ terms and conditions
supports the success of AstraZeneca and the external environment in which it operates. are UK-based and are benchmarked against
external UK comparators, apart from David
Components of remuneration – expected value basis Brennan’s pension and health insurance
arrangements, which are described below.
Chief Executive Officer Chief Financial Officer
Base salary
The base salary for Executive Directors and
D other SET members is determined by the
A Committee. Salary decisions reflect the
experience and performance of the individuals
to whom they apply, taking account of market
C competitiveness and the level of increases
B applicable to employees in the wider Group.
B The Committee has again decided that in
the case of the CEO and those SET members
(other than the CFO) whose responsibilities are
unchanged, there will be no salary increases
for 2010. For Executive Directors and other
Fixed % Variable % Fixed % Variable %
SET members, the policy has been to position
A Base Salary 22 B Bonus 22 A Base Salary 29 B Bonus 26
salaries at the median of the relevant market.
C PSP 42 C PSP 34
In accordance with this policy, and given that
his base salary has remained at the same level
since he was appointed as an Executive
Executive Directors’ base salaries in 2009 and 2010
Annual salary in 2009 Annual salary in 2010 Increase
Director in 2007, Simon Lowth (CFO) has been
Executive Director £ £ % awarded a base salary increase, effective
David Brennan 972,900 972,900 – from 2010, illustrated in the table opposite.
John Patterson1 540,000 n/a n/a
Simon Lowth 550,000 620,000 13 The base salaries of Executive Directors are
set out opposite.
John Patterson retired from the Board on 31 March 2009.

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106 Directors’ Report | Directors’ Remuneration Report

Pension arrangements UK Executive Directors’ Benefits

The table in the Defined benefit arrangements pension arrangements In conjunction with the majority of employers,
section on page 113 gives details of the UK Executive Directors have the option to certain benefits are made available to
changes in the value of the Executive participate in a UK pension plan according to Executive Directors and other SET
Directors’ accrued pensions during 2009. their eligibility, or to take a cash allowance in members via local benefits programmes
lieu of pension. The cash allowance is offered by AstraZeneca. Benefits under
CEO’s pension arrangements consistent with the appropriate value of the these programmes typically include
David Brennan is a member of the alternative gross pension benefit. healthcare, insurances and facilitated car
AstraZeneca US Defined Benefit Pension purchase arrangements.
Plan (US DBP), by virtue of his membership John Patterson (formerly Executive Director,
of pension plans applicable to legacy Astra Development) elected to take the cash Variable performance-
Merck employees. On his appointment to allowance in lieu of pension for the option year related remuneration
the Board, the rules of the US DBP were 1 July 2008 to 30 June 2009 (as detailed Executive Directors and other SET members
amended so as to remove bonus payments in the Defined contribution arrangements are eligible to participate in different elements
from the calculation of his pensionable pay. section on page 113). of variable performance-related pay, which
Benefits for members of the US DBP are are described below. The decision as to
delivered on a tax-qualified basis, with accrued In respect of pension accrued up to his whether or not in any given year they receive
benefits that exceed specific limits under retirement, he remained a member of the any or all of their elements of variable pay is
the plan’s formula and the US Tax Code AstraZeneca main UK defined benefit pension determined by the Committee, which will
being delivered through a supplementary, plan (AstraZeneca Pension Fund). The normal typically have regard to the performance of
non-qualified plan. pension age under this plan is 62. However, the individual and the Group and will consider
a member’s accrued pension is available the elements of variable pay applicable to
The normal pension age under the US DBP from age 60 without any actuarial reduction. senior employees in other comparable
is 65. However, on leaving or retiring from John Patterson retired from the AstraZeneca organisations in making such a determination.
employment, David Brennan is eligible to take Pension Fund on 6 April 2009 aged 61 and
a pension or lump sum equivalent based on was eligible to take a pension based on Short-term bonus
accrued service and final pensionable pay accrued service and final pensionable pay. Performance criteria
(ie without actuarial reduction) due to his He opted to take a commutation lump sum Executive Directors and other SET members
satisfaction of a condition in the pension plan on retirement, in lieu of part of his pension are eligible for a short-term bonus. The basis
relating to the combined age and service entitlement. This lump sum was calculated for the payment of any short-term bonus is
exceeding 85 years, as previously disclosed. and granted in accordance with the rules determined by reference to a range of factors
of the AstraZeneca Pension Fund and linked to the underlying performance of
David Brennan’s participation in the US amounted to £785,000. This reduced his AstraZeneca’s business, the performance of
DBP is subject to a service cap at 35 years’ pension entitlement after commutation to the functional area for which the individual is
service, which will be attained in January £303,000 per annum. responsible and the performance of the
2011, after which no further service accrual individual in his or her role.
can be earned. Pensions in payment are increased annually
in line with inflation, as measured by the UK Structure and assessment of performance
Members and, in the event of death, surviving Retail Prices Index, up to a maximum of 5%. As set out in the 2008 Directors’ Remuneration
spouses/dependants can elect, in relation to Report, following a review by the Committee
those benefits delivered on a tax-qualified Simon Lowth (CFO) is eligible to join the in 2008 of the performance criteria for the
basis under the US DBP, to take pensions in AstraZeneca main UK defined contribution determination of annual bonuses for Executive
lump sum form based on actuarial valuation. pension plan (UK Defined Contribution Plan) Directors and other SET members, the
Members or spouses/dependants may not at a company contribution rate of 24% of performance criteria were adjusted in 2009 to
make such an election in relation to any annual base salary or, alternatively, to take the align more closely with the current objectives
supplementary non-qualified benefits. company contribution as a cash allowance. and measures that are used by the business,
For the option years 1 July 2008 to 30 June and this approach will continue to apply for
In addition, David Brennan (as a US citizen) 2009 and 1 July 2009 to 30 June 2010, he 2010. For 2010, the bonus ranges are the
is a contributing member of the US 401(k) elected to take the cash allowance (as detailed same as for 2009. The bonus deferral
savings plan1. He also contributes to an in the Defined contribution arrangements requirements, described in more detail
associated non-qualified plan, as described section on page 113). below, are also unchanged for 2010.
in the Defined contribution arrangements Executive Directors’ and other SET members’
section on page 113. In the event of a senior employee in the UK bonuses for 2009 were based on performance
Defined Contribution Plan (or where an criteria linked to the following targets:
In the event of a US participant becoming alternative cash allowance has been taken)
incapacitated then permanent health becoming incapacitated, then permanent
insurance cover will provide continuation health insurance cover provides continuation
of a proportion of salary, subject to the of a proportion of salary subject to the
satisfaction of certain medical criteria. In the satisfaction of certain medical criteria. In the
event of the death of a participant prior to event of death prior to retirement, dependants
The 401(k) savings plan is a qualified plan to which
retirement, a life assurance policy will provide are entitled to a pension and/or lump sum eligible employees may make salary-deferral
surviving spouses/dependants with a lump secured from a multiple of 10 times salary. contributions on a post-tax and/or pre-tax basis.
sum equivalent to one times salary (such Employers may also make matching or non-elective
contributions to the plan. There is a supplementary
salary being capped at the maximum non-qualified plan in place for all eligible employees
pensionable salary under the plan). whose earnings exceed specific limits.

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Corporate Governance

>> 60% by reference to EPS, cash flow targets relation to the following categories, which Directors and other SET members. This
and the objectives in each of the strategic the Committee believes are consistent with arrangement is one of the ways in which,
priority areas identified by the Board for delivering shareholder value: over time, Executive Directors and other SET
the business, the key elements of which members will be able to build up a significant
are set out in the Strategy, objectives and >> Strengthen the pipeline shareholding in the Company. The proportion
2009 performance table from page 16 >> Grow the business currently deferred into shares is one-third of
and which are monitored as part of the >> Reshape the business the pre-tax bonus for Executive Directors
QBR against targets set by the >> Promote a culture of responsibility and one-sixth for other SET members.
Committee at the beginning of the year and accountability. On leaving, participants would normally have
and taking into account external to wait for the shares to be released at the
expectations of performance; and When assessing the performance of the end of the three-year period. For Executive
>> 40% by reference to individual measures business in these categories, the Committee Directors and other SET members who cease
and initiatives which link to the business noted that during 2009 there had been three employment for reasons other than that of
objectives relevant to the individual’s significant regulatory approvals across various good leaver (for example, those who are
functional accountability (or, in the case jurisdictions, four regulatory submissions, dismissed), the deferred bonus award
of the CEO, the average of these the agreement of three major late-stage will lapse, unless the Committee decides
individual outcomes). in-licensing deals and the announcement otherwise before the cessation of employment.
of four co-promotion collaborations.
These measures reinforce AstraZeneca’s These achievements were underpinned LTI plans
emphasis on individual and business by a continuing emphasis on reshaping the During 2009, Executive Directors and other
accountability. The key measures referred business and annualising the benefits from SET members were eligible to be granted
to above are clearly set out in the Strategy, restructuring, the strong sales performance share option awards under the SOP and
objectives and 2009 performance table from of the Group despite the ongoing challenging performance share awards under the PSP.
page 16, whereby Group and functional economic environment and a level of The grant of such options and award of such
objectives and measures are managed in a employee engagement which was above shares were determined by the Committee,
robust and consistent way and assessed by the industry average. as were the performance targets that apply
the SET as part of the QBR. The outcome to their vesting and/or exercise. The PSP and
of this process is rigorously scrutinised by Having assessed the Company’s the SOP were intended to align the interests
the Board. performance against all the measures set of Executive Directors and other SET members
out above, the Committee is satisfied that with those of shareholders. For share option
Bonus ranges for 2010 the bonus payments that have been earned awards granted under the SOP, it is the
For 2010, the bonus ranges for each against stretching performance targets are expectation of the Committee that Executive
Executive Director are shown below and are fully justified. Directors and other SET members will retain
the same as for 2009. the net number of shares from the exercise of
The bonus outcomes for the Executive options for a period of not less than six months
Bonus outcomes for 2009 Directors for 2009 are shown in the from the date of exercise. As described above,
In assessing bonuses for 2009, the Committee table below. no further share option awards will be granted
took into account the strong EPS (excluding under the SOP and this plan will expire at
restructuring and synergy costs) and cash Bonus share deferral requirements the end of its 10-year life in May 2010. The
flow performance, which in both cases Consistent with best practice, the Committee Company will not be seeking re-approval of
significantly exceeded budget, together with has put in place a requirement that certain the SOP by shareholders. Those share option
overall business and financial outcomes and proportions of any short-term bonus payment awards granted to date under the SOP will
relevant functional performance against clear (as specified below) be deferred and invested remain exercisable until those options lapse.
measures and initiatives set at the beginning into Ordinary Shares or ADSs. Broadly, these For further information on the SOP, see the
of the bonus year. The key elements of these are acquired on the open market at the AstraZeneca Share Option Plan section on
strategic priorities and business objectives prevailing market price and held for a period page 109.
are set out in the Strategy, objectives and of three years from the date of acquisition
2009 performance table from page 16, in before being delivered to individual Executive

Bonus ranges for 2010

Bonus range for 2010
Executive Director %
David Brennan 0-180
Simon Lowth 0-150

Bonus outcomes for 2009

Short-term bonus (delivered as a combination of cash and shares,
as shown in the Directors’ emoluments in 2009 section from page 111)1
Executive Director £000 % of salary
David Brennan 1,751 180
John Patterson2 187 138
Simon Lowth 825 150
Bonuses for Executive Directors are not pensionable.
John Patterson’s bonus for 2009 was considered by the Committee in January 2010 and his bonus was
based on his eligible earnings for the period in 2009 prior to his retirement on 31 March 2009.

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108 Directors’ Report | Directors’ Remuneration Report

Shareholding guidelines Performance conditions For these awards, AstraZeneca’s TSR

For Executive Directors and other SET Save in exceptional circumstances, which are will be compared with the TSR for the 10
members, the Committee has established prescribed in the PSP rules, the vesting of companies remaining in the peer group in
target shareholding guidelines, under which Share Awards is contingent on the satisfaction respect of the relevant performance period.
it is expected that they build up their own of specified performance targets and
shareholding in the Company. For 2009, the continued employment with the Group. In TSR measures share price growth and
Committee’s expectation was a shareholding addition to the satisfaction of these dividends re-invested in respect of a notional
with a market value approximately equivalent performance targets, Share Awards will number of shares, from the beginning of the
to their base salary. As a result of the review generally not vest until the third anniversary relevant performance period to the end of it,
of the remuneration of SET members carried of the date of grant, although Share Awards and ranks the companies in the selected
out in 2009, the Committee concluded that may vest in part on a time pro-rated basis comparator group by reference to their TSR
the target should be increased from 2010, where a participant ceases to be in relevant achieved over that period. The rank which
such that the CEO will be expected to hold employment under certain circumstances the Company’s TSR achieves over the
shares in the Company with a market value during the vesting period, to the extent that performance period will determine how many
approximately equivalent to 200% of his base the performance targets have been met. Shares will vest under the relevant Share
salary. For other Executive Directors and SET Award. For the purposes of future
members, the guideline is a shareholding Performance period and vesting dates communications to shareholders and PSP
with a market value approximately equivalent In the case of all Share Awards granted to participants, payouts against performance in
to 125% of their base salaries. It is expected date, the performance target relates to the relation to TSR for all existing and future Share
that these shareholding targets will be reached three-year period commencing on 1 January Awards will be expressed as a percentage of
over a period of five years through shares of the year of grant. Therefore, for the Share the maximum Share Award currently payable,
delivered from the various LTI plans as well Awards made in 2009, the performance shown within a range of 0 to 100%. This new
as the deferred part of the short-term bonus period runs from 1 January 2009 to presentation is shown in the table below.
(described above). 31 December 2011. The vesting date is the
third anniversary of the date of grant. TSR ranking Vesting percentage
of the Company (%)
AstraZeneca Performance Share Plan
The PSP was approved by shareholders Performance targets Below median 0

at the AGM in 2005 and provides for the For all Share Awards granted so far to Median 25

grant of performance share awards (Share Executive Directors and other SET members, Upper quartile 75

Awards) over Ordinary Shares or ADSs including Share Awards granted in 2009, Between median and upper quartile Pro rata

(together, Shares). the performance target is the Company’s Significantly above upper quartile Up to 100

TSR over the relevant three-year period

Basis of participation compared with the TSR of a selected peer To alleviate any short-term volatility, the return
The Committee is responsible for setting the group of pharmaceutical companies for index is averaged in the TSR calculations for
policy for the way in which the PSP should the same period. For share awards granted each company over the three months prior
operate, including agreeing performance up to and including 2007 these companies to the start and end of the relevant
targets, identifying which employees should were: Abbott Laboratories, Inc., BMS, performance period.
be invited to participate in the PSP and the Eli Lilly & Company, GlaxoSmithKline plc,
level of Share Awards. Participation is highly Johnson & Johnson, Merck, Novartis AG, In addition to the TSR performance target
selective and tends only to include senior Pfizer Inc., F. Hoffmann-La Roche Ltd, being met for each Share Award as set out
employees on the basis of their performance. Sanofi-Aventis, Schering-Plough Corporation above, the Committee also has to satisfy itself
Share Awards are not pensionable and may and Wyeth Inc. As a result of corporate that achievement of the TSR performance
not generally be assigned or transferred. actions in the pharmaceutical sector during target is a genuine reflection of the Company’s
2009, Schering-Plough Corporation and underlying financial performance and has
Generally, Share Awards can be granted at any Wyeth Inc. have been removed from the the discretion to prevent Share Awards from
time (although in practice they are awarded peer group. As a result of this, the Committee vesting or only to allow them to partially vest
annually), but not during a close or prohibited has decided the following in relation to where this appears to the Committee to
period of the Company. In 2009, the main outstanding unvested awards: be warranted.
grant of Share Awards was made on 27
March, with other Share Awards approved by >> Share Awards in 2007: the TSR At the discretion of the Committee, more than
the Committee in relation to, for example, new performance for Schering-Plough 75% of the maximum Share Award may vest,
appointments, promotions or assignments Corporation and Wyeth Inc. was adjusted up to the limit of the maximum award, if the
being granted on 28 August. The value of from a date a week before the Company’s TSR performance is substantially
Shares subject to a Share Award is determined announcement of the relevant corporate better than that of the upper quartile of the
by reference to the market price of Shares action to the end of the relevant comparator group. For Share Awards to vest
over the three-day period immediately performance period so as to track the at this level, the Company would need to
preceding the date of grant. TSR of the acquiring companies (Merck have sustained a level of performance
in the case of Schering-Plough and Pfizer significantly in excess of upper quartile over
Details of Share Awards granted to Executive Inc. in the case of Wyeth Inc.). a period of years and the Committee would
Directors are shown in the Performance Share >> Share Awards in 2008 and 2009: Schering- need to be satisfied that this was warranted.
Plan table on page 116. Plough Corporation and Wyeth Inc. The number of any additional Shares that
were removed from the peer group thus may vest in this way may not exceed 25% of
reducing the size of the peer group to the total number of Shares made the subject
10 companies (excluding AstraZeneca). of a Share Award on the date of grant.

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Corporate Governance

For those Share Awards to be made in 2010, Basis of participation base figure being the EPS for the financial
as described above, 50% of the Share The Committee was responsible for setting year preceding the date of grant, with no
Awards will continue to be based on relative the policy for the way in which the SOP retesting. In addition, since the review of
TSR against a selected peer group of should operate, including agreeing executive remuneration in 2004, the
pharmaceutical companies. The remaining performance targets and identifying which Committee has included a condition that, if
50% will vest subject to performance employees should be invited to participate an event occurs which causes material
against an adjusted free cash flow target. and the level of Option Awards. Participation reputational damage to the Company, such
In respect of these awards, the relevant peer was highly selective and tended only to that it is not appropriate for the Option
group for the TSR measure will be: Abbott include senior employees on the basis of Awards to vest and become exercisable, the
Laboratories, Inc., BMS, Eli Lilly & Company, their performance (except in the US where for Committee can make a determination to
GlaxoSmithKline plc, Johnson & Johnson, reasons of custom and practice, participation reflect this.
Merck, Novartis AG, Pfizer Inc., F. Hoffmann- in the