ANNUAL FINANCIAL REPORT
AstraZeneca PLC (the Company) announced today the publication of its Annual
Report and Form 20-F Information 2011 (Annual Report); Notice of Annual General
Meeting 2012 and Shareholders' Circular, together with a covering letter from
the Chairman, and ‘AstraZeneca 2011 In Brief’.
Copies of the documents have been submitted to the National Storage Mechanism
and will shortly be available for inspection at www.Hemscott.com/nsm.do. The
documents will be despatched to shareholders shortly. The documents are also
available on the Company’s website at astrazeneca.com/annualreport2011,
astrazeneca.com/noticeofmeeting2012 and astrazeneca.com/shareholderletter2011.
The meeting place for the Annual General Meeting (AGM) will be the Grange Tower
Bridge Hotel, 45 Prescot Street, London E1 8GP and the AGM will commence at 2.30
pm (BST) on 26 April 2012.
EXPLANATORY NOTE AND WARNING
Solely for the purposes of complying with DTR 6.3.5R and the requirements it
imposes on issuers as to how to make public annual financial reports, we set out
below:
- in Appendix A, a management report;
- in Appendix B, the principal risks and uncertainties facing the Company;
- in Appendix C, the Directors’ responsibility statement made in respect
of the Financial Statements and Directors’ Report contained in the Annual
Report; and
- in Appendix D, a statement regarding related party transactions.
The appendices have been extracted from the Annual Report in unedited full text.
This information should be read in conjunction with the Company’s fourth quarter
and full year results 2011 announcement, issued on 2 February 2012, which
contained a condensed set of financial statements and which can be found at
astrazeneca.com/investors/financial-results. Together, these constitute the
material required by DTR 6.3.5R to be communicated to the media in unedited full
text through a Regulatory Information Service.
Page numbers and section cross-references in the appendices refer to pages and
sections in the Annual Report. Defined terms used in the appendices refer to
terms as defined in the Annual Report.
This material is not a substitute for reading the full Annual Report.
A C N Kemp
Company Secretary
26 March 2012
APPENDIX A
Chairman’s statement
I would like to take this opportunity to review AstraZeneca’s financial
performance in 2011 and the decisions we took to ensure we continue to deliver
sustainable value for you.
Financial performance
Group sales in 2011 were down 2% at CER to $33,591 million (2010: $33,269
million) and reported operating profit was up 10% at $12,795 million (2010:
$11,494 million), which included the gain on the sale of Astra Tech. Performance
for the year reflected strong double digit sales growth for Crestor, Seroquel XR
and Symbicort. It was also impacted by government pricing interventions and
generic competition, which combined to reduce revenue by some $3 billion.
Revenue in the US was down 2%, as was revenue in markets outside the US: revenue
was down 11% in Western Europe, up 4% in Established ROW and up 10% in Emerging
Markets.
Reported earnings per share for the full year were up 29% at $7.33 (2010:
$5.60), which also included the non-taxable gain of $1.08 from the Astra Tech
sale. Our effective tax rate also benefited from an adjustment in respect of
prior periods following the announcement in March 2011 that HM Revenue & Customs
in the UK and the US Internal Revenue Service had agreed the terms of an Advance
Pricing Agreement regarding transfer pricing arrangements for AstraZeneca’s US
business.
A challenging marketplace
The world pharmaceutical market grew by 4.5% in 2011 and the fundamentals of the
industry remain strong. First, the world population continues to increase and
age: it passed the seven billion mark in 2011, while the number of people over
65 in 2030 is estimated to be almost one billion, double the 2005 figure.
Secondly, we are seeing the emergence of expanding numbers of patients in new
markets who can access our medicines for the first time. Thirdly, there remains
considerable unmet medical need. Chronic diseases are on the increase, not only
in wealthy countries but also in middle income and, increasingly, lower income
countries. For example, some 346 million people around the world have diabetes
while 24 million are affected by Alzheimer’s Disease. Finally, advances in
science and technology promise the continued delivery of new medicines that can
make a real difference to patient health.
Yet, while the fundamentals remain strong, the challenges facing the industry
have been unprecedented in recent years. Patents on some of the world’s most
successful innovative medicines are starting to expire and we face increasing
competition from generic alternatives. Additionally, the need to improve R&D
productivity and the number of product launches remains a critical challenge for
the whole sector.
Around the world, rising healthcare costs, coupled with the difficult economic
climate and continued austerity measures being implemented by governments, have
resulted in pressure on prices. This includes pricing interventions in many
countries. The regulatory landscape is changing, becoming more global and more
complex. It is no longer enough for new medicines to be safe and effective.
Health authorities increasingly require additional information regarding a
medicine’s comparative clinical and cost effectiveness.
Our strategic response
It was with these challenges in mind that your Board undertook its strategy
review process in 2011. We are confident that long-term growth in demand for
innovative biopharmaceuticals will remain strong. We believe there continue to
be opportunities to create value for those who invest in pharmaceutical
innovation, and that AstraZeneca has the skills and capabilities to take
advantage of these opportunities and turn them into long-term value through the
research, development and marketing of our medicines. We also recognise that the
industry is going through a period of fundamental change as it seeks to overcome
the serious challenges we face.
For us, that means a continued focus on ensuring we drive:
· world class productivity in R&D
· increased external collaboration
· a global orientation, reflecting the growth in Emerging Markets
· stronger customer orientation, particularly towards payers
· operational efficiency with a flexible cost base.
Our 2011 review highlighted the ongoing need for a substantial improvement in
R&D productivity if we are to sustain acceptable returns to shareholders. We are
therefore planning to accelerate our R&D strategy. We intend to take a new
approach to Neuroscience, closing our existing research centres and creating a
new virtual innovative medicines unit for our R&D in this challenging field. We
also plan to reshape our other R&D global functions to better support a more
focused portfolio and create a simpler organisation with greater flexibility in
all functional areas.
In his Chief Executive Officer’s Review on the following pages, David Brennan
outlines the steps we took in 2011 to secure our future business success. David
also emphasises that how we do business is as important as what we do. We need
to continue to work with integrity and to high ethical standards if we are to
deliver on our promise of bringing benefits to patients, creating sustainable
value for shareholders and contributing to economic and social welfare. In this
regard, the Board has an important role to play in setting high standards and
monitoring performance.
Outlook
We continue to plan on the basis that revenue will be in the range of $28-34
billion a year over the 2010-14 period, as revenue growth from key franchises
that retain exclusivity and continued growth in Emerging Markets are pressured
by the loss of market exclusivity on a number of products. However, based on the
evolution of the base case assumptions since 2010, such as the downward pressure
on revenue from government interventions, revenue for the remainder of the
period is likely to be in the lower half of the range.
Returns to shareholders
In recognition of the Group’s strong balance sheet and sustainable significant
cash flow, and the Board’s confidence in the strategic direction and long-term
prospects for the business, we announced, in conjunction with the full year 2009
results, the adoption of a progressive dividend policy, intending to maintain or
grow the dividend each year. After providing for business investment, funding
the progressive dividend policy and meeting our debt service obligations, the
Board will also keep under review the opportunity to return cash in excess of
these requirements to shareholders through periodic share repurchases.
The Board has recommended a second interim dividend of $1.95, a 5% increase over
the second interim dividend awarded in 2010. This brings the dividend for the
full year to $2.80 (175.5 pence, SEK 18.54), an increase of 10% from 2010. In
2011, cash distributions to shareholders through dividends totalled $3,764
million and net share repurchases totalled $5,606 million.
Appreciation
In the face of intensified pressures we delivered a good performance in 2011 and
took difficult decisions to ensure the future success of AstraZeneca. None of
this would have been possible without the leadership of David Brennan and the
other members of his executive team. My thanks, and those of the whole Board, go
to them and all our employees for their effort in working to deliver on our
promise.
Louis Schweitzer
Chairman
CEO’s review
A trusted partner
We cannot secure our success if we do not have good relationships with those
with whom we do business. Trust is critical to achieving this: we need to
connect with our stakeholders, including patients, physicians, regulators,
governments and payers, if we are to understand their needs and challenges. We
also need to earn and maintain the trust of our customers, partners and other
stakeholders. This requires us to do things in the right way and to behave in
accordance with our core values.
That is why I set such store by our Global External Interactions Policy,
launched in April 2011, which provides a single, common, principle-based
approach to all our interactions worldwide with public officials, healthcare
professionals and community organisations. The introduction of the policy drove
changes in the way we market and sell our products and I believe we now lead the
industry in this area of business.
Our commitment to acting responsibly and the sustainable development of our
Group was further reinforced in 2011 by the publication of our new Responsible
Business Plan, which is closely aligned to our business strategy and its
priorities.
The growing importance of compliance and ethics to our reputation and business
operations was demonstrated during the year by the appointment of Katarina
Ageborg, our new Chief Compliance Officer, to the SET.
World class Research and Development
At the core of our strategy to be a focused, integrated, innovation-driven,
global, prescription-based biopharmaceutical business is the need to have an R&D
function with world class productivity. In his Chairman’s Statement above, Louis
Schweitzer outlined how we are redoubling our efforts to deliver this through
the use of innovative and collaborative ways of working. Our focus is on
ensuring more effective and efficient delivery of our research objectives across
our therapeutic portfolio.
Our results in 2011 were mixed. We were pleased by the FDA’s approval in July of
Brilinta, our treatment for acute coronary syndromes. Brilinta, or Brilique, its
trade name in Europe, is now approved in 64 countries, launched in 37 and under
review in a further 39. Also on a positive note, Caprelsa (vandetanib), for the
treatment of thyroid cancer, has been launched in the US and received a positive
CHMP opinion in the EU. Axanum, for the prevention of cardiovascular events,
Komboglyze™, for diabetes, and Fluenz, our influenza vaccine, were also approved
in the EU. In Japan, both Nexium and Faslodex were launched following approvals
earlier in the year.
During 2011, two of the Phase III trials for TC-5214, our neuroscience
collaboration with Targacept, did not meet their primary endpoint. In December,
we also announced that our investigational compound olaparib (AZD2281) for the
treatment of ovarian cancer will not progress into Phase III. As a result of
these two events we recorded an impairment charge of $435 million.
We were also disappointed during the year by the withdrawal of zibotentan (for
prostate cancer). Axanum was also withdrawn in the US. In January 2012, we
received a Complete Response Letter from the FDA for our submission for
dapagliflozin. We, together with BMS, remain committed to this treatment for
diabetes and will work closely with the FDA to provide additional clinical data.
Increased collaboration
Our focus on developing in-house capabilities is matched by our desire to
develop a more outward-looking organisation committed to accessing the best
science, regardless of its origin. Indeed, six of our nine projects in Phase
III/Registration and 12 out of 24 in Phase II were sourced externally.
During 2011, we completed a number of transactions to strengthen our long-term
development. These included the in-licensing of tremelimumab from Pfizer, and
our groundbreaking collaboration with the UK Medical Research Council providing
academic researchers with access to over 20 AstraZeneca compounds. Our plans for
R&D will see us build further on this collaborative way of working.
Global orientation
Our future success requires us to develop global strategies to commercialise our
products effectively. These need to be tailored to local needs in both mature
and emerging markets.
As part of that drive, we announced our decision to invest $200 million in a
manufacturing facility in China and our agreement to acquire a Chinese company
that will give us access to a portfolio of medicines used to treat infections.
In Russia, we invested $150 million in a manufacturing plant and announced plans
to establish a new predictive science centre.
We are also committed to playing our part in the global challenge of providing
sustainable access to healthcare for all those who need it. Our strategy
recognises the complexities surrounding the issue which range from the
affordability of medicines to the availability of healthcare systems and the
resources to make them effective.
Stronger customer orientation
As the Chairman noted, there is no let up in sight on the downward pressure we
face on the price of medicines. More than ever, we need to demonstrate their
value to those who buy them. Our collaborations with HealthCore and IMS will
help us undertake ‘real world’ studies to understand how to treat disease most
effectively and economically. We also need to undertake more studies such as the
Brilinta PLATO study demonstrating that, even at a higher price, it is a more
cost effective treatment than the generic alternative.
Equally, we need to recognise the changing shape of healthcare systems. Those
who work in them are working more intensively and with less time to research
medicines. We are therefore piloting new ways of working to meet their needs.
These include the use of digital channels which offer information that is
available when it is needed, and without having to leave the office.
Operational efficiency
Our continued drive for operational efficiency is typified by the design and
construction of our new plant in China, which is using ‘Lean’ production
principles from the outset. We are also streamlining processes and moving to a
more flexible cost base in order to remain competitive.
As we reshape our business to meet the needs of our customers efficiently, we
are seeing reductions in the workforce across much of our organisation,
particularly in our mature Established Markets and in our R&D organisation. This
reshaping includes plans for further R&D site consolidation. These are difficult
decisions as they go to the heart of AstraZeneca, our people. Where possible, we
seek to redeploy staff or assist with outplacement and, together with my
colleagues, I remain committed to managing these changes in the right way, in
accordance with local employment laws, our standards and core values.
A confident future
Our industry is undergoing a period of fundamental change. If we are to be one
of the winners in the sector we need to make the necessary changes both to what
we do and how we do it. I am confident that within AstraZeneca we have people
with the skills to do that and pay tribute to their continued efforts in 2011 to
ensure we deliver on our commitments to patients, society and our shareholders.
I look forward to working with them to build on those efforts in 2012.
David R Brennan
Chief Executive Officer
Overview
Financial Review
Core operating profit was down 4%. Core R&D expense included a significant
increase in intangible impairments compared with last year; without these, Core
operating profit would have declined broadly in line with the revenue. Core
earnings per share increased by 7%, benefiting from a lower tax rate and fewer
shares outstanding as a result of share repurchases.
The actions related to the first two phases of our restructuring programmes are
now completed, and are on track to deliver $4.3 billion in annual benefits by
the end of 2014. These programmes have played an integral part in the
significant improvement in our Core operating margin since they were launched in
early 2007.
A new phase was announced in February 2012, and this programme is expected to
deliver a further $1.6 billion in annual benefits by the end of 2014, at a
planned cost of $2.1 billion.
Our cash generation remains strong, enabling us to invest for future growth and
value by funding organic investment in R&D, externalisation and capital
expenditures while also providing $9.4 billion in net cash distributions to
shareholders by way of dividends and net share repurchases.
Simon Lowth
Chief Financial Officer
The purpose of this Financial Review is to provide a balanced and comprehensive
analysis of the financial performance of the business during 2011, the financial
position as at the end of the year and the main business factors and trends
which could affect the future financial performance of the business.
All growth rates in this Financial Review are expressed at CER unless noted
otherwise.
2011 Business background and results overview
The business background is covered in the pharmaceutical industry section from
page 15, the Therapy Area Review from page 56, and the Geographical Review from
page 77 and describes in detail the developments in both our products and
geographical regions.
As described earlier in our Annual Report, sales of our products are directly
influenced by medical need and are generally paid for by health insurance
schemes or national healthcare budgets. Our operating results can be affected by
a number of factors other than the delivery of operating plans and normal
competition, such as:
· The adverse impact on pharmaceutical prices as a result of the macroeconomic
and regulatory environment. For instance, although there is no direct
governmental control on prices in the US, action from federal and individual
state programmes and health insurance bodies is leading to downward pressures on
realised prices. In other parts of the world, there is a variety of price and
volume control mechanisms and retrospective rebates based on sales levels that
are imposed by governments.
· The risk of generic competition following loss of patent protection or
patent expiry or an ‘at risk’ launch by a competitor, with the potential adverse
effects on sales volumes and prices. For example in 2011, our performance was
affected by generic competition in the US for Arimidex and Toprol-XL. Further
details of patent expiries for our key marketed products are included in the
Patent expiries section on page 35.
· The timings of new product launches, which can be influenced by national
regulators, and the risk that such new products do not succeed as anticipated,
together with the rate of sales growth and costs following new product launches.
· Currency fluctuations. Our functional and reporting currency is the US
dollar, but we have substantial exposures to other currencies, in particular the
euro, Japanese yen, pound sterling and Swedish krona.
· Macro factors such as greater demand from an ageing population and
increasing requirements of servicing Emerging Markets.
Over the longer term, the success of our R&D is crucial and we devote
substantial resources to this area. The benefits of this investment emerge over
the long term and there is considerable inherent uncertainty as to whether and
when it will generate future products.
The most significant features of our financial results in 2011 are:
· Revenue was down 2% at $33,591 million (Reported: up 1%).
· Strong double digit sales growth at CER for Crestor, Seroquel XR and
Symbicort.
· Emerging Markets revenue increased by 10% (Reported: 11%).
· Revenue performance reflects the loss of nearly $2 billion of revenue from
generic competition, as well as a further $1 billion lost to the impact of
government price interventions.
· Core operating profit was down 4% (Reported: 3%) to $13,167 million.
· Operating profit up 10% (Reported: 11%) to $12,795 million.
· The sale of Astra Tech, which resulted in a gain of $1,483 million and was
excluded from Core operating profit.
· Core operating margin of 39.2% of revenue was down 1.2 percentage points
(Reported: 1.6 percentage points), as benefits arising from higher gross margin
and lower SG&A spend at CER were more than offset by increased expenditures in
R&D and lower Core other income. Reported operating margin was 38.1%.
· Core EPS increased by 7% (Reported: 9%) to $7.28. Basic EPS was up 29%
(Reported: 31%) to $7.33. Basic and Core EPS benefited from the lower number of
shares outstanding resulting from net share repurchases and a lower effective
tax rate compared with last year.
· Dividends paid increased to $3,764 million (2010: $3,361 million). Net share
repurchases totalled $5,606 million.
· Total restructuring costs associated with the global programme to reshape
the cost base of the business were $1,161 million in 2011. This brings the total
restructuring costs charged to 31 December 2011 to $4,869 million.
Measuring performance
The following measures are referred to when reporting on our performance both in
absolute terms but more often in comparison to earlier years in this Financial
Review:
· Reported performance. Reported performance takes into account all the
factors (including those which we cannot influence, principally currency
exchange rates) that have affected the results of our business as reflected in
our Group Financial Statements prepared in accordance with IFRSs as adopted by
the EU and as issued by the IASB.
· Core financial measures. These are non-GAAP measures because, unlike
Reported performance, they cannot be derived directly from the information in
the Group’s Financial Statements. These measures are adjusted to exclude certain
significant items, such as charges and provisions related to our global
restructuring programmes, amortisation and impairment of the significant
intangibles relating to the acquisition of MedImmune in 2007, the amortisation
and impairment of the significant intangibles relating to our current and future
exit arrangements with Merck in the US and other specified items. See the 2011
Reconciliation of Reported results to Core results table on page 85 for a
reconciliation of Reported to Core performance.
· Constant exchange rate (CER) growth rates. These are also non-GAAP measures.
These measures remove the effects of currency movements (by retranslating the
current year’s performance at previous year’s exchange rates and adjusting for
other exchange effects, including hedging). A reconciliation of the Reported
results adjusted for the impact of currency movements is provided in the 2011
Reported operating profit table on page 85.
· Gross and operating profit margin percentages, and Core pre-R&D operating
margin. These measures set out the progression of key performance margins and
illustrate the overall quality of the business. Core pre-R&D operating margin is
a non-GAAP measure of our Core financial performance. A reconciliation of Core
pre-R&D operating margin to our operating profit is provided on pages 85 and 91.
· Prescription volumes and trends for key products. These measures can
represent the real business growth and the progress of individual products
better and more immediately than invoiced sales.
· Net funds/debt. This represents our cash and cash equivalents, current
investments and derivative financial instruments less interest-bearing loans and
borrowings.
CER measures allow us to focus on the changes in sales and expenses driven by
volume, prices and cost levels relative to the prior period. Sales and cost
growth expressed in CER allows management to understand the true local movement
in sales and costs, in order to compare recent trends and relative return on
investment. CER growth rates can be used to analyse sales in a number of ways
but, most often, we consider CER growth by products and groups of products, and
by countries and regions. CER sales growth can be further analysed into the
impact of sales volumes and selling price. Similarly, CER cost growth helps us
to focus on the real local change in costs so that we can manage the cost base
effectively.
We believe that disclosing Core financial and growth measures in addition to our
Reported financial information enhances investors’ ability to evaluate and
analyse the underlying financial performance of our ongoing business and the
related key business drivers. The adjustments made to our Reported financial
information in order to show Core financial measures illustrate clearly, and on
a year-on-year or period-by-period basis, the impact upon our performance caused
by factors such as changes in sales and expenses driven by volume, prices and
cost levels relative to such prior years or periods.
As shown in the 2011 Reconciliation of Reported results to Core results table on
page 85, our reconciliation of Reported financial information to Core financial
measures includes a breakdown of the items for which our Reported financial
information is adjusted and a further breakdown of those items by specific line
item as such items are reflected in our Reported income statement. This
illustrates the significant items that are excluded from Core financial measures
and their impact on our Reported financial information, both as a whole and in
respect of specific line items.
Core pre-R&D operating margin is our Core operating margin before research and
development costs recorded in the year. This measure reflects Core operating
performance before reinvestment in internal research and development.
Management presents these results externally to meet investors’ requirements for
transparency and clarity. Core financial measures are also used internally in
the management of our business performance, in our budgeting process and when
determining compensation.
Core financial measures are non-GAAP adjusted measures. All items for which Core
financial measures are adjusted are included in our Reported financial
information as they represent actual costs of our business in the periods
presented. As a result, Core financial measures merely allow investors to
differentiate between different kinds of costs and they should not be used in
isolation. You should also refer to our Reported financial information in the
2011 Reported operating profit table on page 85, our reconciliation of Core
financial measures to Reported financial information in the Reconciliation of
Reported results to Core results table on page 85, and to the Results of
operations – summary analysis of year to 31 December 2010 section from page 91
for our discussion of comparative Reported growth measures that reflect all
factors that affect our business. Our determination of non-GAAP measures, and
our presentation of them within this financial information, may differ from
similarly titled non-GAAP measures of other companies.
The SET retains strategic management of the costs excluded from Reported
financial information in arriving at Core financial measures, tracking their
impact on Reported operating profit and EPS, with operational management being
delegated on a case-by-case basis to ensure clear accountability and consistency
for each cost category.
Results of operations – summary analysis of year to 31 December 2011
2011 Reported operating profit
2011 2010 Percentage
2011 compared
of sales
with 2010
Reported$m CERgrowth$m Growthdue Reported$m
Reported2011% Reported2010% CERgrowth% Reportedgrowth%
toexchangeeffects$m
Revenue 33,591 (601) 923 33,269
(2) 1
Cost of sales (6,026) 625 (262) (6,389)
(17.9) (19.2) (10) (6)
Gross margin 27,565 24 661 26,880
82.1 80.8 – 3
Distribution (346) 3 (14) (335)
(1.0) (1.0) (1) 3
costs
Research and (5,523) (15) (190) (5,318)
(16.5) (16.0) – 4
development
Selling, (11,161) (409) (307) (10,445)
(33.2) (31.4) 4 7
general and
administrative
costs
Profit on 1,483 1,483 – –
4.4 – n/a n/a
disposal
of Astra Tech
Other 777 59 6 712
2.3 2.1 8 9
operating
income and
expense
Operating 12,795 1,145 156 11,494
38.1 34.5 10 11
profit
Net finance (428) (517)
expense
Profit before 12,367 10,977
tax
Taxation (2,351) (2,896)
Profit for the 10,016 8,081
period
Basic earnings 7.33 5.60
per
share ($)
2011 Core operating results
2011 2010 2011
compared
with
2010
Core$m CERgrowth$m Growthdue Core$m
CERgrowth% TotalCoregrowth%
toexchangeeffects$m
Gross margin 27,619 (63) 658 27,024 –
2
Gross margin % 82.2% 81.2%
Distribution (346) 3 (14) (335) (1)
3
costs
Research and (5,033) (639) (175) (4,219) 15
19
development
Selling, (9,918) 160 (301) (9,777) (2)
1
general and
administrative
costs
Other 845 (71) 6 910 (8)
(7)
operating
income and
expense
Operating 13,167 (610) 174 13,603 (4)
(3)
profit
Operating 39.2% 40.8%
margin %
Net finance (428) (517)
expense
Profit before 12,739 13,086
tax
Taxation (2,797) (3,416)
Profit for the 9,942 9,670
period
Basic earnings 7.28 6.71
per
share ($)
2011 Reconciliation of Reported results to Core results
2011Reported$m Restructuringcosts$m Merck &
Profit
MedImmune
onsale
ofAstra
Tech$m
Amortisation$m Intangibleimpairments$m Legalsettlements$m 2011Core$m
Gross margin 27,565 54 – –
– – 27,619
Distribution (346) – – –
– – (346)
costs
Research and (5,523) 468 – 22
– – (5,033)
development
Selling, (11,161) 639 469 –
135 – (9,918)
general and
administrative
costs
Profit on 1,483 – – –
– (1,483) –
disposal
of Astra Tech
Other 777 – 68 –
– – 845
operating
income and
expense
Operating 12,795 1,161 537 22
135 (1,483) 13,167
profit
Add back: 5,523 (468) – (22)
– – 5,033
Research
and
development
Pre-R&D 18,318 693 537 –
135 (1,483) 18,200
operating
margin
Pre-R&D 54.5%
54.2%
operating
margin %
Net finance (428) – – –
– – (428)
expense
Profit before 12,367 1,161 537 22
135 (1,483) 12,739
tax
Taxation (2,351) (306) (98) (6)
(36) – (2,797)
Profit for the 10,016 855 439 16
99 (1,483) 9,942
period
Basic earnings 7.33 0.63 0.32 0.01
0.07 (1.08) 7.28
per
share ($)
Results of operations – summary analysis of year to 31 December 2011 continued
Revenue increased by 1% on a Reported basis but decreased by 2% on a CER basis.
As in 2010, revenue benefited from strong growth of Crestor, Symbicort and
Seroquel but was offset by lower revenues for Nexium, Arimidex and
Seloken/Toprol-XL. Emerging Markets sales growth of 10% (Reported: 11%) and
Established ROW 4% (Reported: 14%) was offset by a decline in US sales of 2%
(Reported: 2%) and Western Europe of 11% (Reported: 7%). Further details of our
sales performance are contained in the Performance 2011 sections of the Therapy
Area Review from page 56 and the Geographical Review from page 77.
Core gross margin of 82.2% increased 1.3 percentage points (Reported: 1.0
percentage points). The year-on-year improvement in the margin was largely due
to the impact of the intangible impairment related to lesogaberan on 2010 gross
margin and a $131 million benefit from the settlement of patent disputes with
PDL Biopharma Inc. in 2011.
Core R&D expenditure was $5,033 million, 15% higher than last year (Reported:
19%), driven by higher intangible impairments charged to R&D expenditure in
2011, including $285 million for olaparib and $150 million for TC-5214, and late
stage project spend.
Core SG&A costs of $9,918 million were 2% lower than in 2010 (Reported: 1%
higher). Investment in Emerging Markets and recently launched brands, as well as
the impact of the US healthcare reform excise tax were more than offset by
operational efficiencies across Established Markets.
Core other income of $845 million was $65 million less than the previous year
principally as a result of a higher level of disposal gains in 2010.
Core pre-R&D operating margin was 54.2%, up 1.0 percentage points (Reported: 0.7
percentage points), as the higher gross margin was only slightly offset by lower
Core other income and higher SG&A costs as a percentage of revenue.
Core operating profit was $13,167 million, a decrease of 4% (Reported: 3%). Core
operating margin declined by 1.2 percentage points (Reported: 1.6 percentage
points) to 39.2% as a result of the higher R&D spend and lower Core other
operating income.
Core EPS were $7.28, up 7% (Reported: 9%), with the lower operating profit
offset by a lower effective tax rate, lower net interest as well as the benefit
of a lower average number of shares outstanding.
Within Core adjustments, restructuring costs and amortisation were broadly in
line with last year’s level. Non-core intangible impairments and legal
provisions were significantly reduced from 2010. In 2011, Core adjustments also
included the profit on the sale of our dental and healthcare subsidiary Astra
Tech. Excluded from Core results were:
· Impairment charges of $22 million (2010: $568 million), arising from
impairments of assets capitalised as part of the MedImmune acquisition.
· $135 million (2010: $612 million) of legal provision charges in respect of
the ongoing Seroquel product liability litigation, Average Wholesale Price
litigation in the US and the Toprol-XL antitrust litigation. In line with prior
years these have been excluded from our Core performance and full details of
these matters are included in Note 25 to the Financial Statements from page 184.
· Restructuring costs totalling $1,161 million (2010: $1,202 million),
incurred as the Group continues its previously announced efficiency programmes.
· Amortisation totalling $537 million (2010: $518 million) relating to assets
capitalised as part of the MedImmune acquisition and the Merck exit
arrangements.
· Profit on sale of our subsidiary Astra Tech of $1,483 million. On 31 August,
we completed the sale of Astra Tech to DENTSPLY International Inc. for a net
cash consideration of $1,772 million. Further details of this disposal are
included in Note 22 to the Financial Statements on page 170.
Reported operating profit was up 10% at CER (Reported: 11%) at $12,795 million,
largely as a result of the impact of the profit on the disposal of Astra Tech.
Reported EPS were $7.33, up 29% (Reported: 31%), as a result of the same factors
affecting Core EPS along with the profit recognised on the disposal of Astra
Tech.
Net finance expense was $428 million, against $517 million in 2010, due to
reduced interest payable on lower debt balances ($46 million) and a lower net
pension interest expense of $55 million principally due to increased pension
assets held by our defined benefit schemes.
The 2011 taxation charge of $2,351 million (2010: $2,896 million) consists of a
current tax charge of $2,578 million (2010: $3,435 million) and a credit arising
from movements on deferred tax of $227 million (2010: $539 million).
The current year tax charge includes a prior period current tax credit of $102
million (2010: charge of $370 million). The reported effective tax rate for the
year was 19.0% (2010: 26.4%). The reported effective tax rate has benefited from
the non-taxable gain on the disposal of Astra Tech and an adjustment in respect
of prior periods following the announcement in March 2011 that HM Revenue &
Customs in the UK and the US Internal Revenue Service (IRS) agreed the terms of
an Advance Pricing Agreement regarding transfer pricing arrangements for
AstraZeneca’s US business for the period from 2002 to the end of 2014 and a
related valuation matter as detailed more fully in Note 4 to the Financial
Statements from page 152. Excluding these benefits, the effective tax rate for
the year was 26.4% on a reported basis. This 26.4% tax rate is applied to the
taxable Core adjustments to operating profit, resulting in a Core effective tax
rate for the year of 22.0% including the benefit of the Advanced Pricing
Agreement and related valuation matter settlement. A description of our tax
exposures is set out in Note 25 to the Financial Statements on page 189.
Total comprehensive income for the year increased by $1,364 million from 2010 to
$9,470 million. This was driven by the increase in profit for the year of $1,935
million, offset by a decrease of $571 million in other comprehensive income,
principally due to $741 million of actuarial losses on our defined benefit
schemes arising from lower discount rates being applied to our long-term pension
obligations reflecting external market conditions.
Cash flow and liquidity – 2011
All data in this section is on a Reported basis.
Cash generated from operating activities was $7,821 million in the year to 31
December 2011, compared with $10,680 million in 2010. The decrease of $2,859
million is primarily driven by higher tax payments made this year, including a
net amount of $1.1 billion in relation to the Advance Pricing Agreement between
the UK and US governments’ tax authorities and the settlement of a related
valuation matter, an increase in trade and other receivables and higher
contributions made to our UK defined benefit pension fund.
Investment cash inflows of $577 million include the sale of Astra Tech ($1,772
million). Cash outflows on the purchase of tangible fixed assets amounted to
$839 million in the year, in line with 2010. Further details of the Astra Tech
disposal are included in Note 22 to the Financial Statements from page 170.
Net cash distributions to shareholders increased from $5,471 million in 2010 to
$9,370 million in 2011 through dividend payments of $3,764 million and net share
repurchases of $5,606 million, a significant increase on 2010 repurchases of
$2,110 million. This reflects the Board’s 2010 stated objective of $4 billion
share repurchases in 2011, with the target increased in 2011 following the
Board’s decision to use the net proceeds from the Astra Tech sale to increase
share repurchases.
Summary cash flows
2011$m 2010$m 2009$m
Net funds/(debt) brought forward at 1 3,653 535 (7,174)
January
Earnings before interest, tax, 15,345 14,235 13,630
depreciation, amortisation and
impairment (EBITDA)
Profit on disposal of Astra Tech (1,483) – –
EBITDA before profit on disposal of 13,862 14,235 13,630
Astra Tech
Movement in working capital and (897) 82 1,329
provisions
Tax paid (3,999) (2,533) (2,381)
Interest paid (548) (641) (639)
Other non-cash movements (597) (463) (200)
Net cash available from operating 7,821 10,680 11,739
activities
Purchase of intangibles (net) (458) (1,180) (355)
Other capital expenditure (net) (737) (708) (824)
Acquisitions – (348) –
Net cash received on disposal of Astra 1,772 – –
Tech
Investments 577 (2,236) (1,179)
Dividends (3,764) (3,361) (2,977)
Net share (repurchases)/issues (5,606) (2,110) 135
Distributions (9,370) (5,471) (2,842)
Other movements 168 145 (9)
Net funds carried forward at 31 December 2,849 3,653 535
Net funds
2011$m 2010$m 2009$m
Cash and cash equivalents 7,571 11,068 9,918
Short-term investments 4,248 1,482 1,484
Net derivative financial instruments 358 325 196
Cash, short-term investments and derivatives 12,177 12,875 11,598
Overdraft and short-term borrowings (221) (125) (136)
Current instalments of loan (1,769) – (1,790)
Loans due after one year (7,338) (9,097) (9,137)
Loans and borrowings (9,328) (9,222) (11,063)
Net funds 2,849 3,653 535
At 31 December 2011, outstanding gross debt (interest-bearing loans and
borrowings) was $9,328 million (2010: $9,222 million). Of this gross debt,
$1,990 million is due within one year (2010: $125 million).
Closing net funds include $3,765 million of US Treasury Bills with a maturity
date greater than 90 days. These are included in short-term investments. Net
funds of $2,849 million have decreased by $804 million during the year as a
result of the net cash outflow described above.
Off-balance sheet transactions and commitments
We have no off-balance sheet arrangements and our derivative activities are
non-speculative. The table below sets out our minimum contractual obligations at
the year end.
Payments due by period
Less 1-3 3-5 Over5 2011Total$m 2010Total$m
than1 years$m years$m years$m
year$m
Bank loans and 2,493 1,574 1,684 9,764 15,515 15,964
other
borrowings
Operating 92 116 62 122 392 506
leases
Contracted 190 – – – 190 259
capital
expenditure
Total 2,775 1,690 1,746 9,886 16,097 16,729
Financial position – 2011
All data in this section is on a Reported basis.
Summary statement of financial position
2011$m Movement$m 2010$m Movement$m 2009$m
Property, plant 6,425 (532) 6,957 (350) 7,307
and equipment
Goodwill and 20,842 (1,187) 22,029 (86) 22,115
intangible
assets
Inventories 1,852 170 1,682 (68) 1,750
Trade and other 8,754 907 7,847 138 7,709
receivables
Trade and other (9,360) (326) (9,034) (103) (8,931)
payables
Provisions (1,862) 76 (1,938) (252) (1,686)
Net income tax (2,334) 1,521 (3,855) (1,002) (2,853)
payable
Net deferred (1,221) 449 (1,670) 285 (1,955)
tax liabilities
Retirement (2,674) (202) (2,472) 882 (3,354)
benefit
obligations
Non-current 201 (10) 211 27 184
other
investments
Net funds 2,849 (804) 3,653 3,118 535
Net assets 23,472 62 23,410 2,589 20,821
In 2011, net assets increased by $62 million to $23,472 million. The increase in
net assets as a result of the Group profit of $10,016 million was offset by
dividends of $3,752 million and share repurchases of $6,015 million.
Property, plant and equipment
Property, plant and equipment decreased by $532 million to $6,425 million.
Additions of $807 million (2010: $808 million) were offset by depreciation of
$1,086 million (2010: $1,076 million) and disposals of $233 million (2010: $73
million), including $151 million of assets on the sale of Astra Tech.
Goodwill and intangible assets
Our goodwill of $9,862 million (2010: $9,871 million) principally arose on the
acquisition of MedImmune and the restructuring of our US joint venture with
Merck in 1998. No goodwill has been capitalised in 2011.
Intangible assets amounted to $10,980 million at 31 December 2011 (2010: $12,158
million). Intangible asset additions were $442 million in 2011 (2010: $1,791
million), amortisation was $911 million (2010: $810 million) and impairments
totalled $553 million (2010: $833 million). $113 million of assets were disposed
of on the sale of Astra Tech.
Intangible asset impairment charges recorded in 2011 include $285 million
following the termination of development of olaparib for the maintenance
treatment of serous ovarian cancer and an impairment of $150 million reflecting
a lower probability of success assessment for TC-5214, based on the results of
the first two of four Phase III efficacy and tolerability studies. See pages 72
and 68 respectively of the Therapy Area Review for more information.
Included within our intangible assets are rights we have acquired as a result of
our Merck termination arrangements. Further details of these arrangements are
included in Note 25 to the Financial Statements from page 181. 2012 is the first
year that AstraZeneca may exercise the second (and final) option in relation to
these termination arrangements. If the option is exercised in 2012, this will
effectively end AstraZeneca’s relationships with, and obligations to, Merck
(other than some residual manufacturing arrangements).
Receivables, payables and provisions
Trade receivables increased by $383 million to $6,630 million driven,
principally, by higher gross sales in the US in December 2011 and the way
calendar working days fell at the 2011 year end. Other receivables increased by
$566 million to $1,237 million driven by an increase in our Seroquel related
settlement funds.
Included within trade receivables is approximately $650 million of net
receivables, representing 10% of our trade receivables, due from customers in
eurozone countries that have a sovereign credit rating of A or lower (Spain $300
million, Italy $270 million, Portugal $50 million and Greece $30 million).
Within this balance is approximately $230 million of overdue government debt. In
light of current market conditions, debts within these euro countries have been
subject to enhanced monitoring and scrutiny by the Group. Our bad debt
provisioning against these debts reflects our current estimate of the
recoverability of these balances based on consideration of a number of factors
such as the status of current negotiations, past payment history and individual
countries’ budget constraints. In 2011, our revenue from these four countries
was $1,113 million (Italy), $709 million (Spain), $305 million (Greece) and $223
million (Portugal).
Trade and other payables increased by $326 million in 2011, driven by increases
in accruals of $177 million and rebates and chargebacks of $446 million, offset
by a decrease in other payables of $215 million. The increase in rebates and
chargebacks arose principally from increased managed-care and group purchasing
organisation rebates. Further details of the movements on rebates and
chargebacks are included on page 94.
The movement in provisions of $76 million in 2011 includes $716 million of
additional charges recorded in the year, offset by $657 million of cash
payments. Included within the $716 million of charges for the year is $135
million in respect of legal charges and $450 million for our global
restructuring initiative. Cash payments of $657 million include $377 million
against our ongoing global restructuring initiatives and $153 million related to
legal matters. Further details of the charges made against our provisions are
contained in Notes 17 and 25 to the Financial Statements.
Tax payable and receivable
Net income tax payable has decreased by $1,521 million to $2,334 million,
principally due to the payment of a net amount of $1.1 billion in relation to
the Advance Pricing Agreement between the UK and US governments’ tax authorities
and the settlement of a related valuation matter. Our tax receivable balance of
$1,056 million largely comprises tax owing to AstraZeneca from certain
governments expected to be received on settlements of transfer pricing audits
and disputes (see Note 25 to the Financial Statements on page 189). Net deferred
tax liabilities reduced by $449 million in the year.
Retirement benefit obligations
Net retirement benefit obligations increased by $202 million, due to an increase
in post-retirement scheme obligations of $954 million driven by a reduction in
the discount rate applied to long-term scheme obligations, reflecting present
market conditions for corporate bonds, offset by pension fund employer
contributions made in the year of $733 million (2010: $469 million) as detailed
in Note 18 to the Financial Statements from page 165.
In recent years the Group has undertaken several initiatives to reduce its net
pension obligation exposure. For the UK defined benefit pension scheme, which
represents AstraZeneca’s largest defined benefit scheme, these initiatives have
included agreeing funding principles for cash contributions to be paid to the UK
pension scheme to target a level of assets in excess of the current expected
cost of providing benefits, and, in 2010, amendments to the scheme to freeze
pensionable pay at 30 June 2010 levels (reducing the pension fund obligation by
$693 million). In addition to the cash contributions to be paid into the UK
pension scheme, AstraZeneca makes contributions to an escrow account which is
held outside the pension scheme. The escrow account assets are payable to the
fund in agreed circumstances, for example, in the event of AstraZeneca and the
pension fund trustee agreeing on a change to the current long-term investment
strategy.
AstraZeneca has agreed to fund the UK defined benefit scheme shortfall by making
lump sum payments totalling £715 million ($1,103 million) before 30 June 2013.
The first of these lump sum payments of £180 million ($278 million) was paid
into the pension scheme from the escrow account in December 2011. A further £300
million ($463 million) was paid into the pension scheme during January 2012 with
the balance payable by 30 June 2013. In 2011, £132 million ($213 million) was
paid into the escrow account and a further £230 million ($355 million) was paid
in during January 2012. At 31 December 2011, $296 million escrow fund assets are
included within other investments (as detailed in Note 10 to the Financial
Statements on page 160).
In 2011, approximately 96.7% (2010: 96.5%) of the Group’s obligations were
concentrated in the UK, the US, Sweden and Germany. Further details of the
Group’s pension schemes are included in Note 18 to the Financial Statements from
page 165.
Commitments and contingencies
The Group has commitments and contingencies which are accounted for in
accordance with the accounting policies described in the Financial Statements in
the Group Accounting Policies section from page 146. The Group also has taxation
contingencies. These are described in the Taxation section in the Critical
accounting policies and estimates section on page 97 and in Note 25 to the
Financial Statements from page 189.
Research and development collaboration payments
Details of future potential research and development collaboration payments are
also included in Note 25 to the Financial Statements from page 181. As detailed
in Note 25, payments to our collaboration partners may not become payable due to
the inherent uncertainty in achieving the development and revenue milestones
linked to the future payments. As part of our overall externalisation strategy,
we may enter into further collaboration projects in the future that may include
milestone payments and, therefore, as certain milestone payments fail to
crystallise due to, for example, development not proceeding, they may be
replaced by potential payments under new collaborations.
Investments, divestments and capital expenditure
As detailed earlier in the Research and Development section from page 30,
AstraZeneca views collaborations, including externalisation arrangements in the
field of research and development, as a crucial element of the development of
our business.
The Group has completed over 90 major externalisation transactions over the past
three years, one of which was a business acquisition and all others were
strategic alliances and collaborations. Details of our business acquisitions and
disposals in the past three years are contained in Note 22 to the Financial
Statements from page 170. Details of our significant externalisation
transactions are given below:
· In January 2007, AstraZeneca signed an exclusive co-development and
co-promotion agreement with BMS for the development and commercialisation of
saxagliptin, a dipeptidyl peptidase IV inhibitor (DPP-IV) and dapagliflozin, a
selective sodium-glucose co-transporter 2 (SGLT2) inhibitor, both for the
treatment of Type 2 diabetes. The agreement is global with the exception of
Japan for saxagliptin. Under each agreement the two companies jointly develop
the clinical and marketing strategy and share development and commercialisation
expenses on a global basis. To date, AstraZeneca has made upfront and milestone
payments totalling $300 million for saxagliptin and $170 million for
dapagliflozin and may make future milestone payments of $230 million on
dapagliflozin contingent on achievement of regulatory milestones and launch in
key markets. Following launch, profits and losses globally are shared equally
and an additional $300 million of sales-related payments for each product may be
triggered based on worldwide sales success. The Group made milestone payments to
BMS of $120 million in 2011, $50 million in 2010 and $150 million in 2009.
· In December 2009, AstraZeneca and Targacept entered into an in-licence
agreement for AstraZeneca to obtain exclusive global development and
commercialisation rights to Targacept’s investigational product for major
depressive disorder (MDD), TC-5214. Under the deal, AstraZeneca made an upfront
payment of $200 million and may make milestone payments to a maximum of $540
million up to launch. In addition, Targacept will be entitled to receive
royalties on worldwide product sales and further milestone payments linked to
worldwide product sales. As detailed in Note 9 to the Financial Statements from
page 158, the carrying value of the intangible asset in relation to TC-5214, was
impaired by $150 million in 2011 based on the results of the first two of four
Phase III efficacy and tolerability studies of the compound.
The Group determines the above externalisation transactions to be significant
using a range of factors. We look at the specific circumstances of the
individual externalisation arrangement and apply several quantitative and
qualitative criteria. Because we consider our externalisation strategy to be an
extension of our R&D strategy, the expected total value of development payments
under the transaction and its proportion of our annual R&D spend, both of which
are proxies for overall research and development effort and cost, are important
elements of the significance determination. Other quantitative criteria we apply
include, without limitation, expected levels of future sales, the possible value
of milestone payments and the resources used for commercialisation activities
(for example, the number of staff). Qualitative factors we consider include,
without limitation, new market developments, new territories, new areas of
research and strategic implications.
In aggregate, milestones capitalised under the Group’s other externalisation
arrangements totalled $123 million in 2011, $337 million in 2010 and $306
million in 2009, and the Group recognised other income in respect of other
externalisation arrangements totalling $18 million in 2011, $82 million in 2010
and $440 million in 2009.
Capitalisation and shareholder return
Dividend for 2011
$ Pence SEK Payment date
First interim dividend 0.85 51.9 5.33 12 September 2011
Second interim dividend 1.95 123.6 13.21 19 March 2012
Total 2.80 175.5 18.54
Summary of shareholder distributions
Sharesrepurchased(million) Cost$m Dividend Dividendcost$m
Shareholderdistributions$m
pershare$
2000 9.4 352 0.70 1,236 1,588
2001 23.5 1,080 0.70 1,225 2,305
2002 28.3 1,190 0.70 1,206 2,396
2003 27.2 1,154 0.795 1,350 2,504
2004 50.1 2,212 0.94 1,555 3,767
2005 67.7 3,001 1.30 2,068 5,069
2006 72.2 4,147 1.72 2,649 6,796
2007 79.9 4,170 1.87 2,740 6,910
2008 13.6 610 2.05 2,971 3,581
2009 – – 2.30 3,339 3,339
2010 53.7 2,604 2.55 3,604 6,208
2011 127.4 6,015 2.80 3,6781 9,693
Total 553.0 26,535 18.425 27,621 54,156
1Total dividend cost estimated based upon number of shares in issue at 31
December 2011.
Capitalisation
The total number of shares in issue at 31 December 2011 was 1,292 million. 10.7
million shares were issued in consideration of share option exercises for a
total of $409 million. Share repurchases amounted to 127.4 million Ordinary
Shares at a cost of $6,015 million. Shareholders’ equity increased by a net $33
million to $23,246 million at the year end. Non-controlling interests increased
to $226 million (2010: $197 million).
Dividend and share repurchases
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, the Board has adopted a progressive dividend policy,
intending to maintain or grow the dividend each year.
The Board has recommended a 5% increase in the second interim dividend to $1.95
(123.6 pence, 13.21 SEK) to be paid on 19 March 2012. This brings the full year
dividend to $2.80 (175.5 pence per share, 18.54 SEK), an increase of 10%.
In 2010, the Group recommenced its share repurchase programme. The Group
completed net share repurchases of $5,606 million in 2011 (2010: $2,110
million). The Board has announced that the Group intends to complete net share
repurchases in the amount of $4.5 billion during 2012, subject to market
conditions and business needs.
In setting the distribution policy and the overall financial strategy, the
Board’s aim is to continue to strike a balance between the interests of the
business, our financial creditors and our shareholders. After providing for
business investment, funding the progressive dividend policy and meeting our
debt service obligations, the Board will keep under review the opportunity to
return cash in excess of these requirements to shareholders through periodic
share repurchases.
Future prospects
As described earlier in our Annual Report, the coming years will be challenging
for the industry and for AstraZeneca as its revenue base transitions through a
period of exclusivity losses and new product launches. AstraZeneca makes
high-level planning assumptions for revenue evolution, margins, cash flow and
business reinvestment to help guide the management of the business.
AstraZeneca assumes that the global biopharmaceutical industry can grow at least
in line with real GDP over the planning horizon. While downward pressures on
revenue from government interventions in the marketplace have intensified,
AstraZeneca’s assessment remains that, as yet, these do not yet constitute a
sustained ‘step-change’ in trend. The assumptions going forward for revenue,
margins and cash flow assume no material mergers, acquisitions or disposals. In
addition, our plans assume no premature loss of exclusivity for key AstraZeneca
products.
It is expected that revenue in 2012 will continue to be affected by government
interventions on pricing, and ongoing generic competition, including the
anticipated loss of market exclusivity for Seroquel IR and Atacand in global
markets, as well as for Crestor in Canada.
Over the last several years, the Group has undertaken significant restructuring
initiatives aimed at reshaping the cost base to improve long-term
competitiveness. The second phase of restructuring, which was announced in
January 2010, comprised a significant change programme in R&D as well as
additional productivity improvement initiatives in the supply chain and SG&A.
The first two phases of the restructuring programme are now largely complete at
a cumulative cost of $4.6 billion. This programme will deliver annual benefits
to the Group by 2014. In February 2012, the Group announced the next phase of
restructuring. Further details are set out in the Our strategic priorities to
2014 section from page 21.
A planning assumption remains that continued productivity improvements
(including successful completion of restructuring initiatives), will aid the
achievement of levels of revenue and margins to generate the requisite operating
cash flow over the planning period to support the reinvestment needs of the
business, debt service obligations and shareholder distributions.
APPENDIX B
Principal risks and uncertainties
The pharmaceutical sector is inherently risky and a variety of risks and
uncertainties may affect our business. Below we describe the principal risks and
uncertainties which we consider to be material to our business in that they may
have a significant effect on our financial condition, results of operations
and/or reputation.
These risks are not listed in any particular order of priority. Other risks,
unknown or not currently considered material, could have a similar effect. We
believe that the forward-looking statements about AstraZeneca in our Annual
Report and as extracted here, identified by words such as ‘anticipates’,
‘believes’, ‘expects’ and ‘intends’, are based on reasonable assumptions.
However, forward-looking statements involve inherent risks and uncertainties
such as those summarised below. They relate to events that may occur in the
future, that may be influenced by factors beyond our control and that may have
actual outcomes materially different from our expectations.
Product pipeline risks
+---------------------+--------------------------------------------------------+
|Failure to meet |Impact |
|development targets | |
+---------------------+--------------------------------------------------------+
|The development of |A succession of negative drug project results and a |
|any pharmaceutical |failure to reduce development timelines effectively or |
|product candidate is |produce new products that achieve commercial success |
|a complex, risky and |could adversely affect the reputation of our R&D |
|lengthy process |capabilities and is likely to materially adversely |
|involving significant|affect our financial condition and results of |
|financial, R&D and |operations. |
|other resources, | |
|which may fail at any| |
|stage of the process | |
|due to a number of | |
|factors. These | |
|include: failure to | |
|obtain the required | |
|regulatory or | |
|marketing approvals | |
|for the product | |
|candidate or its | |
|manufacturing | |
|facilities; | |
|unfavourable clinical| |
|efficacy data; safety| |
|concerns; failure of | |
|R&D to develop new | |
|product candidates; | |
|and failure to | |
|demonstrate adequate | |
|cost effective | |
|benefits to | |
|regulators and the | |
|emergence of | |
|competing | |
|products.Production | |
|and release schedules| |
|for biologics may be | |
|more significantly | |
|impacted by | |
|regulatory processes | |
|than other products. | |
|This is due to more | |
|complex and stringent| |
|regulation on the | |
|manufacturing of | |
|biologics and their | |
|supply chain. | |
+---------------------+--------------------------------------------------------+
|Difficulties of |Impact |
|obtaining and | |
|maintaining | |
|regulatory approvals | |
|for new products | |
+---------------------+--------------------------------------------------------+
|We are subject to |The predictability of the outcome and timing of review |
|strict controls on |processes remains challenging, particularly in the US, |
|the commercialisation|due to competing regulatory priorities and a continuing |
|processes for our |sentiment of risk aversion on the part of regulatory |
|pharmaceutical |reviewers and management.Delays in regulatory reviews |
|products, including |and approvals could impact the timing of a new product |
|in their development,|launch. In addition, the drive for public transparency |
|manufacture, |of the review processes through the more extensive use |
|distribution and |of public advisory committees increases the |
|marketing. The |unpredictability of the process. For example, in the US,|
|requirements to |the approval date for Brilinta was delayed in December |
|obtain regulatory |2010 by the issuance of a Complete Response Letter by |
|approval based on a |the FDA requesting further data and analysis, which led |
|product’s safety, |to the product ultimately receiving US approval in the |
|efficacy and quality |third quarter of 2011. |
|before it can be | |
|marketed for an | |
|indication in a | |
|particular country, | |
|as well as to | |
|maintain and comply | |
|with licences and | |
|other regulations | |
|relating to its | |
|manufacture and | |
|marketing, are | |
|particularly | |
|important. The | |
|submission of an | |
|application to | |
|regulatory | |
|authorities (which | |
|vary, with different | |
|requirements, in each| |
|region or country) | |
|may or may not lead | |
|to the grant of | |
|marketing approval. | |
|Regulators can refuse| |
|to grant approval or | |
|may require | |
|additional data | |
|before approval is | |
|given, even though | |
|the medicine may | |
|already be launched | |
|in other countries. | |
|The approval of a | |
|product is required | |
|by the relevant | |
|regulatory authority | |
|in each country, | |
|although a single pan| |
|-EU MAA can be | |
|obtained through a | |
|centralised | |
|procedure.In recent | |
|years, companies | |
|sponsoring new drug | |
|applications and | |
|regulatory | |
|authorities have been| |
|under increased | |
|public pressure to | |
|apply more | |
|conservative | |
|benefit/risk | |
|criteria. In some | |
|instances, regulatory| |
|authorities require a| |
|company to develop | |
|plans to ensure safe | |
|use of a marketed | |
|product before a | |
|pharmaceutical | |
|product is approved, | |
|or after approval, if| |
|a new and significant| |
|safety issue is | |
|established. In | |
|addition, third party| |
|interpretation of | |
|publicly available | |
|data on our marketed | |
|products has the | |
|potential to | |
|influence the | |
|approval status or | |
|labelling of a | |
|currently approved | |
|and marketed product.| |
+---------------------+--------------------------------------------------------+
|Failure to obtain and|Impact |
|enforce effective IP | |
|protection | |
+---------------------+--------------------------------------------------------+
|Our ability to obtain|Limitations on the availability of patent protection or |
|and enforce patents |the use of compulsory licensing in certain countries in |
|and other IP rights |which we operate could have a material adverse effect on|
|in relation to our |the pricing and sales of our products and, consequently,|
|products is an |could materially adversely affect our revenues from |
|important element of |those products. More information about protecting our IP|
|our ability to |is contained in the Intellectual Property section from |
|protect our |page 34. Information about the risk of patent litigation|
|investment in R&D and|and the early loss of IP rights is contained in the |
|create long-term |Expiry or loss of, or limitations on, IP rights section |
|value for the |on page 132. |
|business. A number of| |
|the countries in | |
|which we operate are | |
|still developing | |
|their IP laws or may | |
|even be limiting the | |
|applicability of | |
|these laws to | |
|pharmaceutical | |
|inventions. Adverse | |
|political | |
|perspectives on the | |
|desirability of | |
|strong IP protection | |
|for pharmaceuticals | |
|in certain emerging | |
|and even developed | |
|markets may limit the| |
|scope for us to | |
|obtain effective IP | |
|protection for our | |
|products. As a | |
|result, certain | |
|countries may seek to| |
|limit or deny | |
|effective IP | |
|protection for | |
|pharmaceuticals. | |
+---------------------+--------------------------------------------------------+
|Delay to new product |Impact |
|launches | |
+---------------------+--------------------------------------------------------+
|Our continued success|Significant delays to anticipated launch dates of new |
|depends on the |products could have a material adverse effect on our |
|development and |financial condition and results of operations. For |
|successful launch of |example, for the launch of products that are seasonal in|
|innovative new drugs.|nature, delays in regulatory approvals or manufacturing |
|The anticipated |difficulties may delay launch to the next season which, |
|launch dates of major|in turn, may significantly reduce the return on costs |
|new products have a |incurred in preparing for the launch for that season. In|
|significant impact on|addition, a delay in the launch may lead to increased |
|a number of areas of |costs if, for example, marketing and sales efforts need |
|our business, |to be rescheduled or protracted for longer than |
|including investment |expected. |
|in large clinical | |
|studies, the | |
|manufacture of pre | |
|-launch product | |
|stocks, investment in| |
|marketing materials | |
|pre-launch, sales | |
|force training and | |
|the timing of | |
|anticipated future | |
|revenue streams from | |
|new product sales. | |
|These launch dates | |
|are primarily driven | |
|by the development | |
|programmes that we | |
|run and the demands | |
|of the regulatory | |
|authorities in the | |
|approvals process, as| |
|well as pricing | |
|negotiations. Delays | |
|to anticipated launch| |
|dates can result from| |
|a number of factors | |
|including adverse | |
|findings in | |
|preclinical or | |
|clinical studies, | |
|regulatory demands, | |
|competitor activity | |
|and technology | |
|transfer. | |
+---------------------+--------------------------------------------------------+
|Strategic alliances |Impact |
|and acquisitions may | |
|be unsuccessful | |
+---------------------+--------------------------------------------------------+
|We seek technology |If we fail to complete these types of collaborative |
|licensing |projects in a timely manner, on a cost effective basis, |
|arrangements and |or at all, this may limit our ability to access a |
|strategic |greater portfolio of products, IP, technology and shared|
|collaborations to |expertise.Additionally, disputes or difficulties in our |
|expand our product |relationship with our collaborators or partners may |
|portfolio and |arise, often due to conflicting priorities or conflicts |
|geographical presence|of interest between parties, which may erode or |
|as part of our |eliminate the benefits of these alliances.The incurrence|
|business |of significant debt or liabilities as a result of |
|strategy.Such |integration of an acquired business could cause |
|licensing |deterioration in our credit rating and result in |
|arrangements and |increased borrowing costs and interest expense.Further, |
|strategic |if, following an acquisition, liabilities are uncovered |
|collaborations are |in the acquired business, the Group may suffer losses |
|key, enabling us to |and may not have remedies against the seller or third |
|grow and strengthen |parties. The integration process may also result in |
|the business. The |business disruption, diversion of management resources, |
|success of such |the loss of key employees, and other issues such as a |
|arrangements is |failure to integrate IT and other systems. |
|largely dependent on | |
|the technology and | |
|other IP we acquire | |
|and the resources, | |
|efforts and skills of| |
|our partners. Also, | |
|under many of our | |
|strategic alliances, | |
|we make milestone | |
|payments well in | |
|advance of the | |
|commercialisation of | |
|the products, with no| |
|assurance that we | |
|will recoup these | |
|payments.Furthermore,| |
|we experience strong | |
|competition from | |
|other pharmaceutical | |
|companies in respect | |
|of licensing | |
|arrangements and | |
|strategic | |
|collaborations, and | |
|therefore may be | |
|unsuccessful in | |
|establishing some of | |
|our intended | |
|projects.We may also | |
|seek to acquire | |
|complementary | |
|businesses as part of| |
|our business | |
|strategy. The | |
|integration of an | |
|acquired business | |
|could involve | |
|incurring significant| |
|debt and unknown or | |
|contingent | |
|liabilities, as well | |
|as having a negative | |
|effect on our | |
|reported results of | |
|operations from | |
|acquisition related | |
|charges, amortisation| |
|of expenses related | |
|to intangibles and | |
|charges for the | |
|implementation of | |
|long-term assets. We | |
|may also experience | |
|difficulties in | |
|integrating | |
|geographically | |
|separated | |
|organisations, | |
|systems and | |
|facilities, and | |
|personnel with | |
|different | |
|organisational | |
|cultures. | |
+---------------------+--------------------------------------------------------+
Commercialisation and business execution risks
+-------------------------------+----------------------------------------------+
|Challenges to achieving |Impact |
|commercial success of new | |
|products | |
+-------------------------------+----------------------------------------------+
|The successful launch of a new |If a new product does not succeed as |
|pharmaceutical product involves|anticipated or its rate of sales growth is |
|substantial investment in sales|slower than anticipated, there is a risk that |
|and marketing activities, |we are unable to fully recoup the costs |
|launch stocks and other items. |incurred in launching it, which could |
|The commercial success of our |materially adversely affect our financial |
|new medicines is of particular |condition and results of operations.Due to the|
|importance to us in order to |complexity of the commercialisation process |
|replace lost sales following |for biologics, the methods of distributing and|
|patent expiry. We may |marketing biologics could materially adversely|
|ultimately be unable to achieve|impact our revenues from the sales of products|
|commercial success for any |such as Synagis and FluMist/Fluenz. |
|number of reasons. These | |
|include difficulties in | |
|manufacturing sufficient | |
|quantities of the product | |
|candidate for development or | |
|commercialisation in a timely | |
|manner, erosion of IP rights | |
|including infringement by third| |
|parties and failure to show a | |
|differentiated product | |
|profile.As a result, we cannot | |
|be certain that compounds | |
|currently under development | |
|will achieve success, and our | |
|ability to accurately assess, | |
|prior to launch, the eventual | |
|efficacy or safety of a new | |
|product once in broader | |
|clinical use can only be based | |
|on data available at that time,| |
|which is inherently limited due| |
|to relatively short periods of | |
|product testing and small | |
|clinical study patient | |
|samples.Additionally, the | |
|commercialisation of biologics | |
|is often more complex than for | |
|traditional pharmaceutical | |
|products, primarily due to | |
|differences in the mode of | |
|administration, technical | |
|aspects of the product and | |
|rapidly changing distribution | |
|and reimbursement environments.| |
+-------------------------------+----------------------------------------------+
|Illegal trade in our products |Impact |
+-------------------------------+----------------------------------------------+
|Illegal trade covers the theft,|Public loss of confidence in the integrity of |
|illegal diversion and |pharmaceutical products as a result of |
|counterfeiting of our products.|counterfeiting could materially adversely |
|Illegal trade in pharmaceutical|affect our reputation and financial |
|products is estimated to exceed|performance. In addition, undue or misplaced |
|$75 billion per year and is |concern about the issue may induce some |
|generally considered by the |patients to stop taking their medicines, with |
|industry, NGOs and governmental|consequential risks to their health. There is |
|authorities to be increasing. |also a direct financial loss where counterfeit|
|We suffer a commensurate |medicines replace sales of genuine products |
|financial exposure to illegal |and where genuine products are recalled |
|trade, but in many cases, due |following discovery of counterfeit, stolen |
|to the nature of our portfolio,|and/or illegally traded products in an effort |
|this exposure has a greater |to regain control of the integrity of the |
|impact on public health. |supply chain. In many countries, particularly |
|Regulators and the public |developing markets, a robust programme to |
|expect us to secure the |tackle illegal trade is seen as part of the |
|integrity of our supply chain |licence to operate. |
|and to actively cooperate in | |
|the reduction of illegal trade | |
|in genuine AstraZeneca | |
|products, whether illegally | |
|diverted or stolen, and in | |
|counterfeited products. | |
+-------------------------------+----------------------------------------------+
|Developing our business in |Impact |
|Emerging Markets | |
+-------------------------------+----------------------------------------------+
|The development of our business|The failure to exploit potential opportunities|
|in Emerging Markets is a |appropriately in Emerging Markets may |
|critical factor in determining |materially adversely affect our reputation, |
|our future ability to sustain |financial condition and results of operations.|
|or increase our global product | |
|revenues. This poses various | |
|challenges including: more | |
|volatile economic conditions; | |
|competition from companies with| |
|existing market presence; the | |
|need to identify correctly and | |
|to leverage appropriate | |
|opportunities for sales and | |
|marketing; poor IP protection; | |
|inadequate protection against | |
|crime (including | |
|counterfeiting, corruption and | |
|fraud); the need to impose | |
|developed market compliance | |
|standards; inadvertent breaches| |
|of local and international law;| |
|not being able to recruit | |
|appropriately skilled and | |
|experienced personnel; | |
|identification of the most | |
|effective sales channels and | |
|route to market; and | |
|interventions by national | |
|governments or regulators | |
|restricting access to market | |
|and/or introducing adverse | |
|price controls. | |
+-------------------------------+----------------------------------------------+
|Expiry or loss of, or |Impact |
|limitations on, IP rights | |
+-------------------------------+----------------------------------------------+
|Pharmaceutical products are |Products under patent protection or within the|
|only protected from being |period of Regulatory Data Protection typically|
|copied during the limited |generate significantly higher revenues than |
|period of protection under |those not protected by such rights. Our |
|patent rights and/or related IP|revenues, financial condition and results of |
|rights such as Regulatory Data |operations may be materially adversely |
|Protection or Orphan Drug |affected upon expiry or early loss of our IP |
|status. Expiry or loss of these|rights, due to generic entrants into the |
|rights typically leads to the |market for the applicable product. |
|immediate launch of generic |Additionally, the loss of patent rights |
|copies of the product in the |covering major products of other |
|country where the rights have |pharmaceutical companies, such as Lipitor™ (in|
|expired or been lost. See the |November), may adversely affect the growth of |
|Intellectual Property section |our still-patented products in the same |
|from page 34 which contains a |product class (ie Crestor) in that market. |
|table of certain patent expiry | |
|dates for our key | |
|marketed products.Additionally,| |
|the expiry or loss of patents | |
|covering other innovator | |
|companies’ products may also | |
|lead to increased competition | |
|for our own, still-patented, | |
|products in the same product | |
|class due to the availability | |
|of generic products in that | |
|product class. | |
+-------------------------------+----------------------------------------------+
|Pressures resulting from |Impact |
|generic competition | |
+-------------------------------+----------------------------------------------+
|Our products compete not only |If challenges to our patents by generic drug |
|with other products approved |manufacturers succeed and generic products are|
|for the same condition, |launched, or generic products are launched ‘at|
|marketed by research-based |risk’ on the expectation that challenges to |
|pharmaceutical companies but |our IP will be successful, this may materially|
|also with generic drugs |adversely affect our financial condition and |
|marketed by generic |results of operations. In 2011, US sales for |
|pharmaceutical manufacturers. |Seroquel XR, Nexium and Crestor were $779 |
|These competitors may invest |million, $2,397 million, and $3,074 million |
|more of their resources into |respectively. Furthermore, if limitations on |
|the marketing of their products|the availability, scope or enforceability of |
|than we do depending on the |patent protection are implemented in |
|relative priority of these |jurisdictions in which we operate, generic |
|competitor products within |manufacturers in these countries may be |
|their company’s portfolio. |increasingly able to introduce competing |
|Generic versions of products |products to the market earlier than they would|
|are often sold at lower prices |have been able to, had more robust patent or |
|than branded products as the |Regulatory Data Protection been available. |
|manufacturer does not have to | |
|recoup the significant cost of | |
|R&D investment and market | |
|development. All our patented | |
|products, including Nexium, | |
|Crestor and Seroquel are | |
|subject to price pressures as a| |
|result of competition from | |
|generic copies of these | |
|products and from generic forms| |
|of other drugs in the same | |
|product class.As well as facing| |
|generic competition upon expiry| |
|or loss of IP rights, we also | |
|face the risk that generic drug| |
|manufacturers seek to market | |
|generic versions of our | |
|products prior to expiries of | |
|our patents and/or the | |
|Regulatory Exclusivity periods.| |
|For example, we are currently | |
|facing challenges in the US | |
|from numerous generic drug | |
|manufacturers regarding our | |
|patents for Seroquel XR, Nexium| |
|and Crestor, three of our best | |
|selling products. Generic | |
|manufacturers may also take | |
|advantage of the failure of | |
|certain countries to properly | |
|enforce Regulatory Data | |
|Protection and may launch | |
|generics during this protected | |
|period. This is a particular | |
|risk in some Emerging Markets | |
|where appropriate patent | |
|protection may be difficult to | |
|obtain or enforce. | |
+-------------------------------+----------------------------------------------+
|Effects of patent litigation in|Impact |
|respect of IP rights | |
+-------------------------------+----------------------------------------------+
|Any of the IP rights protecting|If we are not successful in maintaining |
|our products may be asserted or|exclusive rights to market one or more of our |
|challenged in IP litigation |major products, particularly in the US where |
|initiated against or by alleged|we achieve our highest revenue, our revenue |
|infringers. Such IP rights may |and margins could be materially adversely |
|be affected by validity |affected.Managing or litigating infringement |
|challenges in patent offices. |disputes over so-called ‘freedom to operate’ |
|Regardless, we expect our most |can be costly. We may be subject to |
|valuable products to receive |injunctions against our products or processes |
|the greater number of |and be liable for damages or royalties. We may|
|challenges. Despite our efforts|need to obtain costly licences. These risks |
|to establish and defend robust |may be greater in respect of biologics and |
|patent protection for our |vaccines, where patent infringement claims may|
|products, we may not succeed in|relate to research tools, methods and |
|protecting our patents from |biological materials. While we seek to manage |
|such litigation or other |such risks by, for example, acquiring |
|challenges.We also bear the |licences, foregoing certain activities or |
|risk that we may be found to |uses, or modifying processes to avoid |
|infringe patents owned or |infringement claims and permit |
|licensed exclusively by third |commercialisation of our products, such steps |
|parties, including research |entail significant cost and there is no |
|-based and generic |guarantee that they will be successful. |
|pharmaceutical companies and | |
|individuals. Infringement | |
|accusations may implicate, for | |
|example, our manufacturing | |
|processes, product | |
|intermediates or use of | |
|research tools. Details of | |
|significant infringement claims| |
|against us by third parties | |
|enforcing IP rights can be | |
|found in Note 25 to the | |
|Financial Statements from page | |
|181. | |
+-------------------------------+----------------------------------------------+
|Price controls and reductions |Impact |
+-------------------------------+----------------------------------------------+
|Most of our key markets have |Due to these pressures on the pricing of our |
|experienced the implementation |products, there can be no certainty that we |
|of various cost control or |will be able to charge prices for a product |
|reimbursement mechanisms in |that, in a particular country or in the |
|respect of pharmaceutical |aggregate, enable us to earn an adequate |
|products. For example, in the |return on our product investment. These |
|US, realised prices are being |pressures, including the increasingly |
|depressed through cost-control |restrictive reimbursement policies to which we|
|tools such as restricted lists |are subject and the potential adoption of new |
|and formularies, which employ |legislation expanding the scope of permitted |
|‘generic first’ strategies and |commercial importation of medicines into the |
|require physicians to obtain |US, could materially adversely affect our |
|prior approval for the use of a|financial condition and results of |
|branded medicine where a |operations.We expect that these pressures on |
|generic version exists. These |pricing will continue, and there can be no |
|mechanisms put pressure on |assurance that they will not increase. |
|manufacturers to reduce prices | |
|and to limit access to branded | |
|products. Many of these | |
|mechanisms shift a greater | |
|proportion of the cost of | |
|medicines to the individual via| |
|out-of-pocket payments at the | |
|pharmacy counter. The patient | |
|out-of-pocket spend is | |
|generally in the form of a co | |
|-payment or, in some cases, a | |
|co-insurance, which is | |
|designed, principally, to | |
|encourage patients to use | |
|generic medicines.Concurrently,| |
|many markets are adopting the | |
|use of Health Technology | |
|Assessment (HTA) to provide a | |
|rigorous evaluation of the | |
|clinical efficacy of a product,| |
|at or post launch. HTA | |
|evaluations are also | |
|increasingly being used to | |
|assess the clinical as well as | |
|the cost effectiveness of | |
|products in a particular health| |
|system. This comes as payers | |
|and policy makers attempt to | |
|drive increased efficiencies in| |
|the use and choice of | |
|pharmaceutical products.A | |
|summary of the principal | |
|aspects of price regulation and| |
|how price pressures are | |
|affecting our business in our | |
|most important markets is set | |
|out in the Geographical Review | |
|from page 77 and these economic| |
|pressures are also further | |
|discussed below in the | |
|following risk factor. | |
+-------------------------------+----------------------------------------------+
|Economic, regulatory and |Impact |
|political pressures | |
+-------------------------------+----------------------------------------------+
|We face continued economic, |It is not possible to accurately estimate the |
|regulatory and political |financial impact of the potential consequences|
|pressures to limit or reduce |resulting from the Affordable Care Act or |
|the cost of our products.In |related legislative changes when taken |
|2010, the US passed the |together with the number of other market and |
|Affordable Care Act, a |industry related factors that can also result |
|comprehensive health reform |in similar impacts. While the overall |
|package with provisions taking |reduction in our profit before tax for the |
|effect between 2010 and 2014. |year due to higher minimum Medicaid rebates on|
|The law expands insurance |prescription drugs, discounts on branded |
|coverage, establishes new |pharmaceutical sales to Medicare Part D |
|national entities focused on |beneficiaries and an industry-wide excise fee |
|health system reforms and calls|was $750 million, this reflects only the |
|on the pharmaceutical industry |limited number of known, quantifiable and |
|and other healthcare industries|isolatable effects of these legislative |
|to offset spending increases |developments. Other potential indirect or |
|through ‘pay-fors’. In terms of|associated consequences of these legislative |
|specific provisions impacting |developments, which continue to evolve and |
|our industry, the law mandates |which cannot be estimated could have similar |
|higher rebates and discounts on|impacts. These include broader changes in |
|branded drugs for certain |access to, or eligibility for, coverage under |
|Medicare and Medicaid patients |Medicare, Medicaid or similar governmental |
|as well as an industry-wide |programmes, such as the recent proposals to |
|excise tax. The law also |limit Medicare benefits, which could |
|includes several health system |indirectly impact our pricing or sales of |
|delivery reforms that will be |prescription products within the private |
|implemented over the next three|sector.These continued disparities in pricing |
|years, including the |systems could lead to marked price |
|establishment of a new |differentials between markets, which increase |
|comparative effectiveness |the pricing pressure affecting the industry. |
|research organisation, the |The importation of pharmaceutical products |
|Patient-Centered Outcomes |from countries where prices are low due to |
|Research Institute and an |government price controls or other market |
|Independent Payment Advisory |dynamics, to countries where prices for those |
|Board with broad authority to |products are higher, is already prevalent and |
|propose to cut Medicare |may increase. In particular, as discussed in |
|expenditures.The health reform |the Pricing pressure section on page 18, |
|legislation expands the patient|Germany, Spain, Portugal and Greece have all |
|population eligible for |introduced a number of short-term measures to |
|Medicaid and provides new |lower healthcare spending, including price |
|insurance coverage for |cuts or increased mandatory rebates, which |
|individuals through state |could have a material adverse effect on our |
|-operated health insurance |financial condition and results of operations.|
|exchanges. Large employers have| |
|typically offered generous | |
|health insurance benefits, but | |
|many are struggling with | |
|increasing health insurance | |
|premiums and may therefore opt | |
|to shift employee coverage into| |
|the health insurance exchanges,| |
|which will be operational by | |
|2014. The pharmaceutical | |
|industry could be adversely | |
|impacted by such shifts if the | |
|health insurance exchanges do | |
|not offer a prescription drug | |
|benefit that is as robust as | |
|benefits historically provided | |
|by large employers.In the EU, | |
|efforts by the European | |
|Commission to reduce | |
|inconsistencies and to improve | |
|standards in the disparate | |
|national regulatory systems | |
|have met with little immediate | |
|success. The industry continues| |
|to be exposed in Europe to a | |
|range of disparate pricing | |
|systems, ad hoc cost | |
|-containment measures and | |
|reference pricing mechanisms, | |
|which impact prices.Further | |
|information regarding these | |
|pressures is contained in the | |
|Regulatory requirements and | |
|Pricing pressure sections from | |
|page 17. | |
+-------------------------------+----------------------------------------------+
|Biosimilars |Impact |
+-------------------------------+----------------------------------------------+
|Various regulatory authorities |While it is uncertain when any such |
|are implementing or considering|abbreviated approval processes may be fully |
|abbreviated approval processes |adopted, particularly for more complex protein|
|for biosimilars (similar |molecules such as MAbs, any such processes |
|versions of existing biologics,|could materially adversely affect the future |
|also referred to as ‘similar |commercial prospects for patented biologics, |
|biological medicinal products’,|such as the ones that we produce. |
|‘follow-on biologics’ and | |
|‘follow-on protein products’) | |
|that would compete with | |
|patented biologics.For example,| |
|in 2010, the US enacted the | |
|Biologics Price Competition and| |
|Innovation Act within the | |
|Affordable Care Act, which | |
|contains general directives for| |
|biosimilar applications. The | |
|FDA sought stakeholder input on| |
|specific issues and challenges | |
|in implementing an abbreviated | |
|biosimilar approval pathway and| |
|further guidance is expected to| |
|be issued in the first quarter | |
|of 2012. In addition, the FDA | |
|and the industry have reached | |
|agreement on biosimilar user | |
|fees. In Europe, the EMA | |
|published a draft guideline on | |
|similar biological medicinal | |
|products containing MAbs. This | |
|draft guideline will likely be | |
|finalised in 2012 and is | |
|expected to include more | |
|clarification around the | |
|definition of biosimilars. | |
+-------------------------------+----------------------------------------------+
|Increasing implementation and |Impact |
|enforcement of more stringent | |
|anti-bribery and anti | |
|-corruption legislation | |
+-------------------------------+----------------------------------------------+
|There is an increasing focus |We devote significant resources to the |
|globally on the implementation |considerable challenge of compliance with this|
|and enforcement of anti-bribery|legislation, including in emerging and |
|and anti-corruption |developing markets, at considerable cost. |
|legislation. For example, the |Investigations from governmental agencies |
|UK Bribery Act came into force |require additional resources. Despite taking |
|in July. This act has extensive|significant measures to prevent breaches of |
|extra-territorial application, |applicable anti-bribery and anti-corruption |
|implements significant changes |laws by our personnel, breaches may result in |
|to existing UK anti-bribery |the imposition of significant penalties, such |
|legislation and broadens the |as fines, the requirement to comply with |
|scope of statutory offences and|monitoring or self-reporting obligations or |
|the potential applicable |debarment or exclusion from government sales |
|penalties, including, |or reimbursement programmes, any of which |
|organisational liability for |could materially adversely affect our |
|any bribe paid by persons or |financial condition and results of operations |
|entities associated with an |and reputation. |
|organisation where the | |
|organisation failed to have | |
|adequate preventative | |
|procedures in place at the time| |
|of the offence. There is also | |
|an increase in the maximum | |
|applicable penalties for | |
|bribery, including up to 10 | |
|years imprisonment and | |
|unlimited fines. There have | |
|also been increased enforcement| |
|efforts in the UK by the | |
|Serious Fraud Office and, in | |
|the US, there has been | |
|significant enforcement | |
|activity in respect of the | |
|Foreign Corrupt Practices Act | |
|by the SEC and US Department of| |
|Justice against US companies | |
|and non-US companies listed in | |
|the US.We are the subject of | |
|current anti-corruption | |
|investigations and there can be| |
|no assurance that we will not, | |
|from time to time, continue to | |
|be subject to informal | |
|inquiries and formal | |
|investigations from | |
|governmental agencies. In the | |
|context of our business, | |
|governmental officials interact| |
|with us in a variety of roles | |
|that are important to our | |
|operations, such as in the | |
|capacity of a regulator, | |
|partner or healthcare payer, | |
|reimburser or prescriber, among| |
|others. | |
+-------------------------------+----------------------------------------------+
|Any expected gains from |Impact |
|productivity initiatives are | |
|uncertain | |
+-------------------------------+----------------------------------------------+
|We continue to implement |If inappropriately managed, the expected value|
|various productivity |of these initiatives could be lost through low|
|initiatives and restructuring |employee engagement and reduced productivity, |
|programmes with the aim of |increased absence and attrition levels, and |
|enhancing the long-term |industrial action.Our failure to successfully |
|efficiency of the business. |implement these planned cost reduction |
|However, anticipated cost |measures, either through the successful |
|savings and other benefits from|conclusion of employee relations processes |
|these programmes are based on |(including consultation, engagement, talent |
|estimates and the actual |management, recruitment and retention), or the|
|savings may vary significantly.|possibility that these efforts do not generate|
|In particular, these cost |the level of cost savings we anticipate, could|
|reduction measures are based on|materially adversely affect our results of |
|current conditions and do not |operations and financial condition. |
|take into account any future | |
|changes to the pharmaceutical | |
|industry or our operations, | |
|including new business | |
|developments, wage or price | |
|increases. | |
+-------------------------------+----------------------------------------------+
|Failure of information |Impact |
|technology | |
+-------------------------------+----------------------------------------------+
|We are dependent on effective |Any significant disruption of these IT systems|
|IT systems. These systems |or failure to integrate new and existing IT |
|support key business functions |systems could materially adversely affect our |
|such as our R&D, manufacturing |financial condition and results of operations.|
|and sales capabilities, and are| |
|an important means of internal | |
|and external communication. | |
+-------------------------------+----------------------------------------------+
|Failure of outsourcing |Impact |
+-------------------------------+----------------------------------------------+
|We have outsourced a number of |Failure of the outsource provider to deliver |
|business critical operations to|timely services and to the required level of |
|third party providers. This |quality could materially adversely affect our |
|includes certain R&D processes,|financial condition and results of operations |
|IS/IT systems, human resources,|and adversely impact our ability to meet |
|finance and accounting |business targets and maintain a good |
|services.In 2011, we terminated|reputation within the industry and with |
|our existing outsource |stakeholders. It may also result in non |
|relationship for IT |-compliance with applicable laws and |
|infrastructure services and |regulations.A failure to successfully manage |
|transitioned to a new multi |and effect the transfer of the provision of |
|-sourced operating model. This |the IT infrastructure services in-house and to|
|includes bringing critical |the new outsourcing providers could create |
|strategic and control |disruption which could materially adversely |
|activities back into |affect our financial condition and results of |
|AstraZeneca. |operations. |
+-------------------------------+----------------------------------------------+
Supply chain and delivery risks
+---------------------+-------------------------------------------------------+
|Manufacturing |Impact |
|biologics | |
+---------------------+-------------------------------------------------------+
|Manufacturing |Slight deviations in any part of the manufacturing |
|biologics, especially|process may result in lot failure, product recalls or |
|in large quantities, |spoilage, for example due to contamination. |
|is complex and may | |
|require the use of | |
|innovative | |
|technologies to | |
|handle living micro | |
|-organisms and | |
|facilities | |
|specifically designed| |
|and validated for | |
|this purpose, with | |
|sophisticated quality| |
|assurance and control| |
|procedures. | |
+---------------------+-------------------------------------------------------+
|Reliance on third |Impact |
|parties for goods | |
+---------------------+-------------------------------------------------------+
|We increasingly rely |Third party supply failure could materially adversely |
|on third parties for |affect our financial condition and results of |
|the timely supply of |operations. This may lead to significant delays and/or |
|goods, such as |difficulties in obtaining goods and services on |
|specified raw |commercially acceptable terms.Loss of access to |
|materials (for |sufficient sources of such materials may interrupt or |
|example, the active |prevent our research activities as planned and/or |
|pharmaceutical |increase our costs. Further information is contained in|
|ingredient in some of|the Managing sourcing risk section on page 39. |
|our medicines), | |
|equipment, formulated| |
|drugs and packaging, | |
|all of which are key | |
|to our | |
|operations.Unexpected| |
|events and/or events | |
|beyond our control | |
|could result in the | |
|failure of the supply| |
|of goods. For | |
|example, suppliers of| |
|key goods we rely on | |
|may cease to trade. | |
|In addition, we may | |
|have limited supply | |
|of biological | |
|materials, such as | |
|cells, animal | |
|products or by | |
|-products. | |
|Furthermore, | |
|government | |
|regulations in | |
|multiple | |
|jurisdictions could | |
|result in restricted | |
|access to, use or | |
|transport of, such | |
|materials. | |
+---------------------+-------------------------------------------------------+
Legal, regulatory and compliance risks
+----------------+--------------------------------------------------------------
+
|Adverse outcome |Impact
|
|of litigation |
|
|and/or |
|
|governmental |
|
|investigations |
|
+----------------+--------------------------------------------------------------
+
|We may be |Investigations or legal proceedings, regardless of their
|
|subject to |outcome, could be costly, divert management attention, or
|
|legal |damage our reputation and demand for our products.
|
|proceedings and |Unfavourable resolution of current and similar future
|
|governmental |proceedings against us could subject us to criminal
liability,|
|investigations. |fines, penalties or other monetary or non-monetary remedies;
|
|Litigation, |require us to make significant provisions in our accounts
|
|particularly in |relating to legal proceedings; and could materially adversely
|
|the US, is |affect our financial condition and results of operations.
|
|inherently |
|
|unpredictable |
|
|and |
|
|unexpectedly |
|
|high awards for |
|
|damages can |
|
|result from an |
|
|adverse |
|
|verdict. In |
|
|many cases, |
|
|plaintiffs may |
|
|claim |
|
|compensatory, |
|
|punitive and |
|
|statutory |
|
|damages in |
|
|extremely high |
|
|amounts. In |
|
|particular, the |
|
|marketing, |
|
|promotional, |
|
|clinical and |
|
|pricing |
|
|practices of |
|
|pharmaceutical |
|
|manufacturers, |
|
|as well as the |
|
|manner in which |
|
|manufacturers |
|
|interact with |
|
|purchasers, |
|
|prescribers, |
|
|and patients, |
|
|are subject to |
|
|extensive |
|
|regulation, |
|
|litigation and |
|
|governmental |
|
|investigation. |
|
|Many companies, |
|
|including |
|
|AstraZeneca, |
|
|have been |
|
|subject to |
|
|claims related |
|
|to these |
|
|practices |
|
|asserted by |
|
|federal and |
|
|state |
|
|governmental |
|
|authorities and |
|
|private payers |
|
|and consumers |
|
|which have |
|
|resulted in |
|
|substantial |
|
|expense and |
|
|other |
|
|significant |
|
|consequences. |
|
|Note 25 to the |
|
|Financial |
|
|Statements from |
|
|page 181 |
|
|describes the |
|
|material legal |
|
|proceedings in |
|
|which we are |
|
|currently |
|
|involved. |
|
+----------------+--------------------------------------------------------------
+
|Substantial |Impact
|
|product |
|
|liability |
|
|claims |
|
+----------------+--------------------------------------------------------------
+
|Pharmaceutical |Substantial product liability claims that result in court
|
|companies have, |decisions against us or in the settlement of proceedings
could|
|historically, |materially adversely affect our financial condition and
|
|been subject to |results of operations, particularly where such circumstances
|
|large product |are not covered by insurance. Further details of our Seroquel
|
|liability |product liability litigation are set out in Note 25 to the
|
|damages claims, |Financial Statements from page 181.
|
|settlements and |
|
|awards for |
|
|injuries |
|
|allegedly |
|
|caused by the |
|
|use of their |
|
|products. |
|
|Adverse |
|
|publicity |
|
|relating to the |
|
|safety of a |
|
|product or of |
|
|other competing |
|
|products may |
|
|increase the |
|
|risk of product |
|
|liability |
|
|claims. |
|
+----------------+--------------------------------------------------------------
+
|Failure to |Impact
|
|adhere to |
|
|applicable |
|
|laws, rules and |
|
|regulations |
|
+----------------+--------------------------------------------------------------
+
|Any failure to |This could materially adversely affect the conduct of our
|
|comply with |business.For example, once a product has been approved for
|
|applicable |marketing by regulatory authorities, it is subject to
|
|laws, rules and |continuing control and regulation, such as the manner of its
|
|regulations may |manufacture, distribution, marketing and safety surveillance.
|
|result in civil |In addition, any amendments that are made to the
|
|and/or criminal |manufacturing, distribution, marketing and safety
surveillance|
|legal |processes of our products may require additional regulatory
|
|proceedings |approvals, which could result in significant additional costs
|
|being filed |and/or disruption to these processes. Such amendments may be
|
|against us, or |imposed on us as a result of the continuing inspections to
|
|in us becoming |which we are subject or may be made at our discretion. It is
|
|subject to |possible, for example, that regulatory issues concerning
|
|regulatory |compliance with current Good Manufacturing Practice or safety
|
|sanctions. |monitoring regulations for pharmaceutical products (often
|
|Regulatory |referred to as pharmacovigilance) could arise and lead to
loss|
|authorities |of product licences, product recalls and seizures,
|
|have wide |interruption of production leading to product shortages and
|
|-ranging |delays in new product approvals pending resolution of the
|
|administrative |issues.
|
|powers to deal |
|
|with any |
|
|failure to |
|
|comply with |
|
|continuing |
|
|regulatory |
|
|oversight (and |
|
|this could |
|
|affect us, |
|
|whether such |
|
|failure is our |
|
|own or that of |
|
|our third party |
|
|contractors). |
|
+----------------+--------------------------------------------------------------
+
|Environmental/oc|Impact
|
|cupational |
|
|health and |
|
|safety |
|
|liabilities |
|
+----------------+--------------------------------------------------------------
+
|We have |While we carefully manage these liabilities, if a significant
|
|environmental |non-compliance issue, environmental, occupational health or
|
|and/or |safety incident for which we are responsible were to arise,
|
|occupational |this could result in us being liable to pay compensation,
|
|health and |fines or remediation costs. In some circumstances, such
|
|safety related |liability could materially adversely affect our financial
|
|liabilities at |condition and results of operations. In addition, our
|
|some currently |financial provisions for any obligations that we may have
|
|or formerly |relating to environmental or occupational health and safety
|
|owned, leased |liabilities may be insufficient if the assumptions underlying
|
|and third party |the provisions, including our assumptions regarding the
|
|sites, the most |portion of waste at a site for which we are responsible,
prove|
|significant of |incorrect or if we are held responsible for additional
|
|which are |contamination or occupational health and safety related
|
|detailed in |claims.
|
|Note 25 to the |
|
|Financial |
|
|Statements from |
|
|page 181. |
|
+----------------+--------------------------------------------------------------
+
Economic and financial risks
+---------------+--------------------------------------------------------------+
|Adverse impact |Impact |
|of a sustained | |
|economic | |
|downturn | |
+---------------+--------------------------------------------------------------+
|A variety of |While we have adopted cash management and treasury policies to|
|significant |manage this risk (see Financial risk management policies |
|risks may arise|section on page 93), we cannot be certain that these will be |
|from a |completely effective in particular in the event of a global |
|sustained |liquidity crisis. In addition, open positions where we are |
|global economic|owed money and deposits with financial institutions cannot be |
|downturn. |guaranteed to be recoverable. Additionally, if we need access |
|Additional |to external sources of financing to sustain and/or grow our |
|pressure from |business, such as the debt or equity capital financial |
|governments and|markets, this may not be available on commercially acceptable |
|other |terms, if at all, in the event of a severe and/or sustained |
|healthcare |economic downturn. This may, for instance, be the case in the |
|payers on |event of any default by the Group on its debt obligations, |
|medicine prices|which may materially adversely affect our ability to secure |
|and volumes of |debt funding in the future or generally on our financial |
|sales in |condition. Further information on debt-funding arrangements is|
|response to |contained in the Financial risk management policies section on|
|recessionary |page 93. |
|pressures on | |
|budgets may | |
|cause a | |
|slowdown or a | |
|decline in | |
|growth in some | |
|markets. In | |
|some cases, | |
|those | |
|governments | |
|most severely | |
|impacted by the| |
|economic | |
|downturn may | |
|seek | |
|alternative | |
|ways to settle | |
|their debts | |
|through, for | |
|example, the | |
|issuance of | |
|government | |
|bonds which | |
|might trade at | |
|a discount to | |
|the value of | |
|the debt. In | |
|addition, our | |
|customers may | |
|cease to trade,| |
|which may | |
|result in | |
|losses from | |
|writing off | |
|debts.We are | |
|highly | |
|dependent on | |
|being able to | |
|access a | |
|sustainable | |
|flow of liquid | |
|funds due to | |
|the high fixed | |
|costs of | |
|operating our | |
|business and | |
|the long and | |
|uncertain | |
|development | |
|cycles of our | |
|products. In a | |
|sustained | |
|economic | |
|downturn, | |
|financial | |
|institutions | |
|with whom we | |
|deal may cease | |
|to trade and | |
|there can be no| |
|guarantee that | |
|we will be able| |
|to access | |
|monies owed to | |
|us without a | |
|protracted, | |
|expensive and | |
|uncertain | |
|process, if at | |
|all.Our cash | |
|investments are| |
|managed | |
|centrally and | |
|more than 95% | |
|of deposits are| |
|invested | |
|directly in | |
|short-term, | |
|liquid US | |
|dollar funds | |
|and US Treasury| |
|Bills. | |
|Therefore, our | |
|major credit | |
|exposure is US | |
|sovereign | |
|default risk. | |
+---------------+--------------------------------------------------------------+
|Impact of |Impact |
|fluctuations in| |
|exchange rates | |
+---------------+--------------------------------------------------------------+
|As a global |Movements in the exchange rates used to translate foreign |
|business, |currencies into US dollars may materially adversely affect our|
|currency |financial condition and results of operations. Additionally, |
|fluctuations |some of our subsidiaries import and export goods and services |
|can |in currencies other than their own functional currency and so |
|significantly |the results of such subsidiaries could be affected by currency|
|affect our |fluctuations arising between the transaction dates and the |
|results of |settlement dates for these transactions. See Note 23 to the |
|operations, |Financial Statements from page 171. |
|which are | |
|reported in US | |
|dollars. | |
|Approximately | |
|40% of our | |
|global 2011 | |
|sales were in | |
|the US, which | |
|is expected to | |
|remain our | |
|largest single | |
|market for the | |
|foreseeable | |
|future. Sales | |
|in other | |
|countries are | |
|predominantly | |
|in currencies | |
|other than the | |
|US dollar, | |
|including the | |
|euro, Japanese | |
|yen, Australian| |
|dollar and | |
|Canadian | |
|dollar. We have| |
|a growing | |
|exposure to | |
|emerging market| |
|currencies, | |
|where some have| |
|exchange | |
|controls in | |
|place, but for | |
|others the | |
|exchange rates | |
|are also linked| |
|to the US | |
|dollar. Major | |
|components of | |
|our cost base | |
|are located in | |
|the UK and | |
|Sweden, where | |
|an aggregate of| |
|approximately | |
|26.7% of our | |
|employees are | |
|based. | |
+---------------+--------------------------------------------------------------+
|Limited third |Impact |
|party insurance| |
|coverage | |
+---------------+--------------------------------------------------------------+
|Recent |If such denial of coverage is ultimately upheld, this could |
|insurance loss |result in material additional charges to our earnings. An |
|experience in |example of a dispute with insurers relating to the |
|our industry, |availability of insurance coverage and in relation to which |
|including |costs incurred by the Group may not ultimately be recovered |
|product |through such coverage is included in Note 25 to the Financial |
|liability |Statements in the Seroquel product liability section on page |
|exposures, has |187. |
|increased the | |
|cost of, and | |
|narrowed the | |
|coverage | |
|afforded by, | |
|pharmaceutical | |
|companies’ | |
|product | |
|liability | |
|insurance. To | |
|contain | |
|insurance costs| |
|in recent | |
|years, we have | |
|continued to | |
|adjust our | |
|coverage | |
|profile, | |
|accepting a | |
|greater degree | |
|of uninsured | |
|exposure. The | |
|Group has not | |
|held product | |
|liability | |
|insurance since| |
|February 2006. | |
|In addition, | |
|where claims | |
|are made under | |
|insurance | |
|policies, | |
|insurers may | |
|reserve the | |
|right to deny | |
|coverage on | |
|various | |
|grounds. | |
+---------------+--------------------------------------------------------------+
|Taxation |Impact |
+---------------+--------------------------------------------------------------+
|The integrated |The resolution of these disputes can result in a reallocation |
|nature of our |of profits between jurisdictions and an increase or decrease |
|worldwide |in related tax costs, and has the potential to affect our cash|
|operations can |flows and EPS. Claims, regardless of their merits or their |
|produce |outcome, are costly, divert management attention and may |
|conflicting |adversely affect our reputation.If any of these double tax |
|claims from |treaties should be withdrawn or amended, especially in a |
|revenue |territory where a member of the Group is involved in a |
|authorities as |taxation dispute with a tax authority in relation to cross |
|to the profits |-border transactions, such withdrawal or amendment could |
|to be taxed in |materially adversely affect our financial condition and |
|individual |results of operations, as could a negative outcome of a tax |
|territories.The|dispute or a failure by the tax authorities to agree through |
|majority of the|competent authority proceedings. See the Financial risk |
|jurisdictions |management policies section on page 93 for tax risk management|
|in which we |policies and Note 25 to the Financial Statements on page 189 |
|operate have |for details of current tax disputes. |
|double tax | |
|treaties with | |
|other foreign | |
|jurisdictions, | |
|which enable us| |
|to ensure that | |
|our revenues | |
|and capital | |
|gains do not | |
|incur a double | |
|tax charge. | |
+---------------+--------------------------------------------------------------+
+-----------+------------------------------------------------------------------+
|Pensions |Impact |
+-----------+------------------------------------------------------------------+
|Our pension|Sustained falls in these asset values will put a strain on funding|
|obligations|which may result in requirements for additional cash, restricting |
|are backed |cash available for strategic business growth. Similarly, if the |
|by assets |liabilities rise as a result of a sustained low interest rate |
|invested |environment, there will be a strain on funding from the business. |
|across the |The likely increase in the IAS 19 accounting deficit generated by |
|broad |any of these factors may cause the ratings agencies to review our |
|investment |credit rating, with the potential to negatively affect our ability|
|market. Our|to raise debt. See Note 18 to the Financial Statements from page |
|most |165 for further details of the Group’s pension obligations. |
|significant| |
|obligations| |
|relate to | |
|the UK | |
|pension | |
|fund. | |
+-----------+------------------------------------------------------------------+
APPENDIX C
This statement relates to and is extracted from the Annual Report. It is
repeated here solely for the purpose of complying with rule 6.3.5 of the
Disclosure and Transparency Rules. It is not connected to the information
presented in this announcement or in the Company's fourth quarter and full year
results 2011 announcement that was published on 2 February 2012.
Directors’ responsibility statement pursuant to DTR 4
The Directors confirm that to the best of our knowledge:
· The Financial Statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole.
· The Directors’ Report includes a fair review of the development
and performance of the business and the position of the issuer and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face.
On behalf of the Board of Directors on 2 February 2012
David R Brennan
Director
APPENDIX D
Related party transactions
During the period 1 January 2012 to 2 February 2012, there were no transactions,
loans, or proposed transactions between the Company and any related parties
which were material to either the Company or the related party, or which were
unusual in their nature or conditions (see also Note 27 to the Financial
Statements on page 190).
ADDITIONAL INFORMATION
Trade marks
Trade marks of the AstraZeneca group of companies appear throughout our Annual
Report and are extracted here in italics. AstraZeneca, the AstraZeneca logotype
and the AstraZeneca symbol are all trade marks of the AstraZeneca group of
companies. Trade marks of companies other than AstraZeneca appear with a ™ sign
and include: Abraxane™, a trade mark of Abraxis BioScience, LLC.; Cubicin™, a
trade mark of Cubist Pharmaceuticals, Inc.; CytoFab™, a trade mark of Protherics
Inc.; Kombiglyze XR™ and KomboglyzeTM, trade marks of Bristol-Myers Squibb
Company; Lipitor™, a trade mark of Pfizer Ireland Pharmaceuticals; Onglyza™, a
trade mark of Bristol-Myers Squibb Company; RanmarkTM, a trade mark of Daiichi
Sankyo Company Limited; and Teflaro™, a trade mark of Forest Laboratories, Inc.
Cautionary statement regarding forward-looking statements
The purpose of our Annual Report is to provide information to the members of the
Company. The Company and its Directors, employees, agents and advisors do not
accept or assume responsibility to any other person to whom our Annual Report is
shown or into whose hands it may come and any such responsibility or liability
is expressly disclaimed. In order, among other things, to utilise the ‘safe
harbour’ provisions of the US Private Securities Litigation Reform Act of 1995
and the UK Companies Act 2006, we are providing the following cautionary
statement: Our Annual Report and this extract from our Annual Report contains
certain forward-looking statements with respect to the operations, performance
and financial condition of the Group. Forward-looking statements are statements
relating to the future which are based on information available at the time such
statements are made, including information relating to risks and uncertainties.
Although we believe that the forward-looking statements in our Annual Report are
based on reasonable assumptions, the matters discussed in the forward-looking
statements may be influenced by factors that could cause actual outcomes and
results to be materially different from those expressed or implied by these
statements. The forward-looking statements reflect knowledge and information
available at the date of the preparation of our Annual Report and the Company
undertakes no obligation to update these forward-looking statements. We identify
the forward-looking statements by using the words ‘anticipates’, ‘believes’,
‘expects’, ‘intends’ and similar expressions in such statements. Important
factors that could cause actual results to differ materially from those
contained in forward-looking statements, certain of which are beyond our
control, include, among other things, those factors identified in the Principal
risks and uncertainties section from page 130 of our Annual Report. Nothing in
our Annual Report or this extract should be construed as a profit forecast.
A C N Kemp
Company Secretary
26 March 2012
- ENDS -
ANNUAL FINANCIAL REPORT
| Source: AstraZeneca PLC