ASTRAZENECA ANNUAL REPORT
`AND FORM 20-F INFORMATION 2008
`
`ASTRAZENECA ANNUAL REPORT AND FORM 20-F INFORMATION 2008
`
`SWEDISH CENTRAL SECURITIES DEPOSITORY
`Euroclear Sweden AB
`PO Box 7822
`SE-103 97 Stockholm
`Sweden
`Tel: +46 (0)8 402 9000
`
`US DEPOSITARY
`JPMorgan Chase & Co
`PO Box 64504
`St Paul
`MN 55164-0504
`US
`Tel (toll free in the US):
`800 990 1135
`Tel (outside the US):
`+1 (651) 453 2128
`E-mail: jpmorgan.adr@wellsfargo.com
`
`ASTRAZENECA.COM
`
`This Annual Report and Form 20-F Information
`is also available online at astrazeneca.com/
`annualreport2008
`
`CONTACT INFORMATION
`
`REGISTERED OFFICE AND
`CORPORATE HEADQUARTERS
`AstraZeneca PLC
`15 Stanhope Gate
`London W1K 1LN
`UK
`Tel: +44 (0)20 7304 5000
`Fax: +44 (0)20 7304 5151
`
`INVESTOR RELATIONS
`E-mail:
`IR@astrazeneca.com
`UK: as above
`Sweden:
`AstraZeneca AB
`SE-151 85 Södertälje
`Sweden
`Tel: +46 (0)8 553 260 00
`Fax: +46 (0)8 553 290 00
`US:
`Investor Relations
`AstraZeneca Pharmaceuticals LP
`1800 Concord Pike
`PO Box 15437
`Wilmington
`DE 19850-5437
`US
`Tel: +1 (302) 886 3000
`Fax: +1 (302) 886 2972
`
`REGISTRAR AND TRANSFER OFFICE
`Equiniti Limited
`Aspect House
`Spencer Road
`Lancing
`West Sussex
`BN99 6DA
`UK
`Tel (freephone in the UK):
`0800 389 1580
`Tel (outside the UK):
`+44 (0)121 415 7033
`
`AstraZeneca Exhibit 2102
`Mylan v. AstraZeneca
`IPR2015-01340
`
`Page 1 of 204
`
`

`
`DIRECTORS’ REPORT
`
`8
`
`FINANCIAL STATEMENTS
`
`98
`
`REMUNERATION REPORT
`
`174
`
`INTRODUCTION
`
`AstraZeneca and our year in brief
`Financial highlights
`Chairman’s statement
`Chief Executive Officer’s review
`
`DIRECTORS’ REPORT
`
`2
`
`2
`2
`4
`5
`
`8
`
`8
`9
`
`12
`
`14
`
`Introduction
`Business environment
`Strategy, goals and
`performance measurement
`Measuring our performance >
`
`
`Reporting our performance – >
`15
`Financial and Non-financial
`Resources, skills and capabilities 16
`Medicines >
`
`
`16
`
`Research and development >
`
`17
`
`Development pipeline >
`at 29 January 2009
`
`Sales and marketing >
`
`Intellectual property >
`
`Supply and manufacturing >
`
`People >
`Financial review
`Measuring performance >
`
`
`Business background and >
`major events affecting 2008
`
`Results of operations – >
`summary analysis of year
`to 31 December 2008
`
`Financial position, including >
`cash flow and liquidity – 2008
`34
`
`Restructuring and synergy costs >
`36
`
`Capitalisation and shareholder return > 3 7
`
`
`Future prospects >
`
`37
`
`Results of operations – >
`summary analysis of year to
`31 December 2007
`
`Financial position, including >
`cash flow and liquidity – 2007
`
`Financial risk management >
`
`Critical accounting policies >
`and estimates
`
`Other accounting information >
`
`22
`
`25
`
`26
`
`27
`
`28
`31
`
`31
`
`32
`
`33
`
`38
`
`40
`
`41
`
`43
`
`47
`
`ADDITIONAL INFORMATION
`
`190
`
`IMPORTANT INFORMATION
`FOR READERS OF THIS REPORT
`
`Cautionary statement regarding forward-looking
`statements
`The purpose of this Annual Report and Form 20-F
`Information is to provide information to the members
`of the Company. In order, among other things, to
`utilise the ‘safe harbour’ provisions of the US Private
`Securities Litigation Reform Act 1995 and the UK
`Companies Act 2006, we are providing the following
`cautionary statement: This Annual Report and Form
`20-F Information contains certain forward-looking
`statements with respect to the operations,
`performance and financial condition of the Group.
`Although we believe our expectations are based on
`reasonable assumptions, any forward-looking
`statements, by their nature, involve risks and
`uncertainties and may be influenced by factors
`that could cause actual outcomes and results to
`
`be materially different from those predicted. The
`forward-looking statements reflect knowledge and
`information available at the date of the preparation
`of this Annual Report and Form 20-F Information
`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 on pages 74 to 82 of this document.
`Nothing in this Annual Report and Form 20-F
`Information should be construed as a profit
`forecast.
`
`Inclusion of reported, constant exchange rate
`and core financial measures
`Throughout the Directors’ Report and in the Financial
`Highlights section on page 2 and 3 the following
`measures are referred to:
`
` >
`
`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
`International Financial Reporting Standards as
`adopted by the European Union and as issued by
`the International Accounting Standards Board.
`
`
` Core financial measures. This is a non-GAAP measure >
`because unlike reported performance it cannot be
`derived directly from the information in the Group’s
`Financial Statements. This measure is adjusted to
`exclude certain significant items, such as charges
`
`TRADE MARkS
`Trade marks of the AstraZeneca group of companies
`appear throughout this document 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 ® or ™ sign and include:
`Abraxane®, a registered trade mark of Abraxis
`BioScience, LLC.; Advair Diskus™, a trade mark
`of GlaxoSmithKline group of companies; Aspirin™,
`a trade mark of Bayer AG; Avastin™, a trade mark of
`Genentech, Inc.; BiTE™, a trade mark of Micromet AG;
`Cubicin™, a trade mark of Cubist Pharmaceuticals, Inc.;
`Captisol™, a trade mark of CyDex Pharmaceuticals Inc.;
`CytoFab™, a trade mark of Protherics, Inc.; Enbrel™,
`a trade mark of Amgen group of companies;
`EvaluatePharma®, a trade mark of Evaluate PLC;
`Herceptin™, a trade mark of Genentech, Inc.; Humira™,
`a trade mark of Abbott Biotechnology Ltd; Lean Sigma™,
`a trade mark of Smallpiece Enterprises Limited;
`Lipitor™, a trade mark of Pfizer Ireland Pharmaceuticals;
`Onglyza™, a trade mark of the Bristol-Myers Squibb
`Company; Prinivil™, a trade mark of Merck & Co., Inc.;
`Remicade™, a trade mark of Centocor, Inc.; Seretide™,
`a trade mark of GlaxoSmithKline group of companies;
`Taxotere™, a trade mark of Aventis Pharma SA; TriCor™,
`a trade mark of Fournier Industrie et Santé; Trilipix™,
`a trade mark of Abbott Laboratories; Zocor™, a trade
`mark of Merck & Co., Inc.; and Zyprexa™, a trade mark
`of Eli Lilly and Company.
`
`USE OF TERMS
`In this Annual Report and Form 20-F Information,
`unless the context otherwise requires, ‘AstraZeneca’,
`‘the Group’, ‘we’, ‘us’ and ‘our’ refer to AstraZeneca
`PLC and its consolidated entities.
`
`STATEMENTS OF DATES
`Except as otherwise stated, references to days
`and/or months in this Annual Report and Form 20-F
`Information are references to days and/or months
`in 2008.
`
`Designed by Addison Corporate Marketing Limited.
`
`Page 2 of 204
`
`

`
`INTRODUCTION
`
`DIReCTORs’ RepORT
`
`FINANCIAL sTATeMeNTs
`
`ReMUNeRATION RepORT
`
`ADDITIONAL INFORMATION
`
`1
`
`164
`
`Principal subsidiaries
`Independent auditor’s report to
`the members of AstraZeneca PLC 165
`Company balance sheet
`166
`Accounting policies (Company)
`167
`Notes to the Financial Statements
`(Company)
` 1 Fixed asset investments
` 2 Non-trade creditors
` 3 Loans
` 4 Reserves
` 5
` Reconciliation of movement
`in shareholders’ funds
` 6 Share capital
` 7
` Litigation and
`170
`environmental liabilities
` 8 Statutory and other information 171
`Group financial record
`172
`
`168
`168
`168
`168
`169
`
`169
`170
`
`dIRECToRS’ REmuNERATIoN REpoRT 174
`
`AddITIoNAl INFoRmATIoN
`
`Shareholder information
`Corporate information
`Cross‑reference to Form 20‑F
`Glossary
`
`190
`
`190
`197
`198
`199
`
`101
`
`108
`108
`108
`109
`
`Consolidated statement of
`recognised income and expense
`for the year ended 31 December 100
`Consolidated balance sheet
`at 31 December
`Consolidated cash flow statement
`for the year ended 31 December 102
`Accounting policies
`103
`
`Basis of accounting and preparation >
`of financial information
`103
`Notes to the Financial Statements
`(Group)
` 1 Operating profit
` 2 Finance income and expense
` 3 Taxation
` 4
` Earnings per $0.25
`111
`Ordinary Share
`111
` 5 Segment information
`113
` 6 Product revenue information
` 7 Property, plant and equipment 114
` 8 Goodwill
`115
` 9
`Intangible assets
`116
` 10 Other investments
`118
` 11 Inventories
`118
` 12 Trade and other receivables
`119
` 13 Cash and cash equivalents
`119
` 14 Interest bearing loans
`and borrowings
` 15 Financial risk management
`objectives and policies
` 16 Financial instruments
` 17 Trade and other payables
` 18 Provisions for liabilities
`127
`and charges
`128
` 19 Capital and reserves
` 20 Share capital of parent company 129
` 21 Dividends to shareholders
`129
` 22 Acquisitions of
`business operations
` 23 Post-retirement benefits
` 24 Employee costs and share
`option plans for employees
` 25 Commitments and
`144
`contingent liabilities
`163
` 26 Leases
` 27 Statutory and other information 163
`
`119
`
`120
`122
`127
`
`130
`133
`
`138
`
`48
`48
`50
`53
`
`54
`
`57
`
`59
`
`61
`
`64
`
`67
`70
`71
`72
`74
`
`74
`
`76
`
`83
`
`83
`
`84
`
`86
`
`98
`
`Geographical review
`North America >
`
`
`Rest of World
`herapy area review
`
`Cardiovascular >
`
`Gastrointestinal >
`
`Infection >
`
`Neuroscience >
`
`Oncology >
`
`Respiratory and Inflammation >
`Other businesses
`Environmental sustainability
`In the global community
`Risk
`Managing risk, principal risks >
`
`and uncertainties
`
`Principal risks and uncertainties >
`Business organisation and
`Corporate governance
`Business organisation >
`
`
`Board of Directors at >
`31 December 2008
`
`Chief Executive Officer, >
`delegation of authority
`and Senior Executive Team
`
`>T
`
`FINANCIAl STATEmENTS
`
`98
`
`98
`
`98
`
`Preparation of the
`Financial Statements and
`Directors’ responsibilities
`Directors’ responsibility >
`
`statement pursuant to DTR 4
`Directors’ responsibilities for,
`and report on, internal control
`over financial reporting
`Auditor’s reports on the
`Financial Statements and on internal
`control over financial reporting
`(Sarbanes‑Oxley Act section 404) 99
`Independent auditor’s
`report to the members of
`AstraZeneca PLC (Group)
`Consolidated income statement
`for the year ended 31 December 100
`
`99
`
`and provisions related to restructuring and synergy
`programmes, amortisation and the impairment of
`the significant intangibles arising from corporate
`acquisitions and those related to our current and
`future exit arrangements with Merck in the US,
`and other specified items. A reconciliation between
`reported performance and core performance is
`provided on page 34.
`
` >
`
`Constant exchange rate (CER) growth rates. This is
`also a non-GAAP measure. This measure removes
`the effects of currency movements (by retranslating
`the current year’s performance at previous years’
`exchange rates and adjusting for other exchange
`effects, including hedging). A reconciliation of reported
`results adjusted for the impact of currency movements
`is provided on page 33.
`
`Throughout this Annual Report and Form 20-F
`Information, growth rates are expressed at CER
`unless otherwise stated.
`
`Statements of competitive position,
`growth rates and sales
`In this Annual Report and Form 20-F Information, except
`as otherwise stated, market information regarding the
`position of our business or products relative to its or
`their competition is based upon published statistical
`sales data for the 12 months ended 30 September 2008
`obtained from IMS Health, a leading supplier of statistical
`data to the pharmaceutical industry. For the US,
`dispensed new or total prescription data are taken from
`the IMS Health National Prescription Audit for the 12
`months ended 31 December 2008. Except as otherwise
`stated, these market share and industry data from IMS
`Health have been derived by comparing our sales
`revenue to competitors’ and total market sales revenues
`for that period. Except as otherwise stated, growth rates
`and sales are given at constant exchange rates. For the
`purposes of this Annual Report and Form 20-F
`Information, unless otherwise stated references to the
`world pharmaceutical market or similar phrases are to
`52 countries contained in IMS Health MIDAS Quantum
`
`database, which amounted to approximately 95% (in
`value) of the countries audited by IMS.
`
`AstraZeneca websites
`Information on or accessible through our websites,
`including astrazeneca.com, astrazenecaclinicaltrials.com,
`medimmune.com and cambridgeantibody.com, does
`not form part of this document.
`
`External/third party websites
`Information on or accessible through any third party or
`external website does not form part of this document.
`
`ASTRAZENECA ANNuAl REpoRT ANd FoRm 20-F INFoRmATIoN 2008
`
`Page 3 of 204
`
`

`
`AsTRAZeNeCA AND OUR yeAR IN BRIeF
`
`2
`
`AsTRAZeNeCA Is ONe OF THe WORLD’s
`LeADING pHARMACeUTICAL COMpANIes WITH
`A BROAD RANGe OF MeDICINes DesIGNeD
`TO FIGHT DIseAse IN IMpORTANT AReAs OF
`HeALTHCARe. BACkeD By sTRONG sCIeNCe
`AND WIDe‑RANGING COMMeRCIAL skILLs,
`
`We ARe COMMITTeD TO THe sUsTAINABLe
`DeveLOpMeNT OF OUR BUsINess AND THe
`DeLIveRy OF A FLOW OF NeW MeDICINes
`THAT BRING BeNeFIT FOR pATIeNTs
`AND CReATe eNDURING vALUe FOR OUR
`sHAReHOLDeRs AND sOCIeTy.
`
`FINANCIAL HIGHLIGHTs
`
`SALES $M
`
`OPERATING PROFIT $M
`
`08
`
`07
`
`06
`
`31,601
`
`29,559
`
`26,475
`
`GROWTH
`+3%
`
`+7%
`
`+11%
`
`Core 08
`
`Reported 08
`
`Reported 07
`
`Reported 06
`
`10,958
`
`9,144
`
`8,094
`
`8,216
`
`GROWTH
`+9%
`
`+4%
`
`-4%
`
`+28%
`
`CORE EARNINGS
`PER ORDINARY SHARE $
`
`08
`
`07
`
`06
`
`5.10
`
`4.38
`
`3.92
`
`GROWTH
`+8%
`
`+10%
`
`+33%
`
`DISTRIBUTIONS TO SHAREHOLDERS:
`DIVIDENDS AND SHARE RE-PURCHASES $M
` DIVIDENDS
`SHARE RE-PURCHASES
`08
`2,739 610
`
`07
`
`06
`
`2,641
`
`2,220
`
`4,170
`
`4,147
`
`dIVIdENd FoR 2008
`
`
`
`First interim dividend
`
`Second interim dividend
`
`Total
`
`$
`
`0.55
`
`1.50
`
`2.05
`
`Pence
`
`27.8
`
`104.8
`
`132.6
`
`SEK
`
`3.34
`
`12.02
`
`15.36
`
` Payment date
`
`15 September 2008
`
`16 March 2009
`
`pRoduCT pERFoRmANCE SummARy $m
`
`NEXIUM -2%
`
`SEROQUEL +9%
`
`CRESTOR +26%
`
`08
`
`07
`
`06
`
`5,200
`
`5,216
`
`5,182
`
`08
`
`07
`
`06
`
`4,452
`
`4,027
`
`3,416
`
`08
`
`07
`
`06
`
`PULMICORT +0%
`
`ATACAND +10%
`
`CASODEX -12%
`
`08
`
`07
`
`06
`
`1,495
`
`1,454
`
`1,292
`
`08
`
`07
`
`06
`
`1,471
`
`1,287
`
`1,110
`
`08
`
`07
`
`06
`
`LOSEC/PRILOSEC -14%
`
`MERREM +13%
`
`SELOKEN/TOPROL-XL -46%
`
`08
`
`07
`
`06
`
`1,055
`
`1,143
`
`1,371
`
`08
`
`07
`
`06
`
`897
`
`773
`
`604
`
`08
`
`07
`
`06
`
`3,597
`
`2,796
`
`2,028
`
`1,258
`
`1,335
`
`1,206
`
`807
`
`1,438
`
`1,795
`
`ASTRAZENECA ANNuAl REpoRT ANd FoRm 20-F INFoRmATIoN 2008
`
`Page 4 of 204
`
`

`
`INTRODUCTION
`
`3
`
`REPORTED BASIC EARNINGS
`PER ORDINARY SHARE $
`
`NET CASH FLOW
`FROM OPERATING ACTIVITIES $M
`
`08
`
`07
`
`06
`
`4.20
`
`3.74
`
`3.86
`
`GROWTH
`+2%
`
`-5%
`
`+34%
`
`08
`
`07
`
`06
`
`8,742
`
`7,510
`
`7,693
`
`SYMBICORT +22%
`
`ARIMIDEX +4%
`
`08
`
`07
`
`06
`
`2,004
`
`1,575
`
`1,184
`
`08
`
`07
`
`06
`
`SYNAGIS 1 n/m
`
`ZOLADEX -3%
`
`08
`
`07
`
`FLUMIST 1 n/m
`
`08
`
`07
`
`1 Acquired in June 2007.
`
`1,230
`
`618
`
`08
`
`07
`
`06
`
`104
`
`53
`
`2008 IN bRIEF
`
`
`
` Sales up 3% to $31,601 million. >
`
` >
` sales up 26% to $3,597 million; Symbicort
`Crestor
`up 22% to $2,004 million; Seroquel up 9% to
`$4,452 million; and Arimidex up 4% to $1,857
`million. Nexium sales down 2% to $5,200 million.
`
` Our product portfolio now includes 11 medicines >
`
`with annual sales of more than $1 billion each.
`
` Sales in Emerging Markets reached $4,273 million >
`
`for the full year, up 16%.
`
`
`
` Investment in R&D in line with 2007 at $5.2 billion. >
`
`
`
` Core operating profit up 9% to $10,958 million. >
`
` Core operating margin improved to 34.7% >
`
`of sales on operational efficiencies in all
`functional areas.
`
`
`
` Core EPS for the full year increased by 8% to $5.10. >
`
` Reported EPS for the full year increased by 2%, >
`
`reflecting higher intangible asset impairments
`and a full year of MedImmune amortisation
`compared with 2007.
`
`
`
` Dividend up 10% to $2.05 for the full year. >
`
` Cash distributions to shareholders totalled >
`
`$3,349 million (dividends $2,739 million;
`share re‑purchases $610 million).
`
` Net debt reduced by $1.9 billion on strong cash >
`
`performance and investment discipline.
`
` Eight significant regulatory life‑cycle >
`
`management submissions; two product
`submissions. Phase III pipeline volume remains
`constant. Phase II pipeline increased by over
`50%. Nominated 32 FGLPs and exceeded our
`target for progressing these into man.
`
` New initiatives extend the scope of restructuring >
`
`programme to sustain long‑term competitiveness.
`
` 35 significant business development transactions >
`
`including extensions of existing agreements.
`
` Summary Judgment Motion granted to >
`
`AstraZeneca in the patent infringement actions
`commenced against two generic drug
`manufacturers in the US following abbreviated
`new drug applications relating to Seroquel.
`
` Settlement of US > Nexium patent litigation with
`
`
`enforceability of disputed Nexium patents
`conceded. Other patent litigation continuing
`in the US against generic manufacturers
`following abbreviated new drug applications
`relating to Nexium.
`
` New Code of Conduct launched in over >
`
`40 languages and all employees trained.
`
`Growth rates expressed above are CER growth rates.
`
`1,857
`
`1,730
`
`1,508
`
`1,138
`
`1,104
`
`1,008
`
`ASTRAZENECA ANNuAl REpoRT ANd FoRm 20-F INFoRmATIoN 2008
`
`Page 5 of 204
`
`

`
`We continued to drive sales growth despite
`continuing pricing and intellectual property
`challenges in our Established Markets.
`Managing the impact of challenges from
`generic manufacturers is now a key feature
`of our business. The Board was pleased to
`support the Senior Executive Team strategy
`of settling legal challenges concerning
`Nexium and Pulmicort Respules, rather than
`managing the continued cost and uncertainty
`associated with a sustained legal defence.
`Protecting our intellectual property ensures
`that we can re-invest in the discovery and
`development of the medicines of the future
`and we must manage this important asset
`actively and effectively over the long term.
`
`We continued our investment in fast-growing
`economies to strengthen our platform
`for growth in key Emerging Markets, and,
`alongside the rest of the pharmaceutical
`industry, we continued to drive efficiencies
`across our organisation to support sustained
`shareholder returns.
`
`In conjunction with the Senior Executive
`Team, during 2008 the Board reviewed
`the Group’s strategy. This review reinforced
`our commitment to delivering differentiated
`medicines that make a meaningful difference
`to patients’ lives and to doing so in an efficient,
`focused, cost-effective and responsible
`manner. More information about the work and
`operation of the Board and its Committees
`is set out in the Business Organisation and
`Corporate Governance section of this Report.
`
`In February and September 2008 we
`announced the appointments of Jean-Philippe
`Courtois and Rudy Markham respectively.
`Jean-Philippe’s considerable experience
`with Microsoft in global sales and marketing,
`including Emerging Markets, will be of great
`benefit to the work of the Board. Rudy’s
`considerable experience of over 35 years
`at Unilever, latterly in finance, will also be
`invaluable to the work of the Board and to
`the Audit Committee.
`
`In November 2008, we announced the
`retirement of John Patterson who will leave
`the Company after 34 years of service and
`will retire from the Board on 31 March 2009.
`John has made an important and highly valued
`contribution to the business over the course
`of his career with AstraZeneca and over the
`last five years as a member of the Board.
`
`At the end of 2008, Graeme Musker stepped
`down from his position as Group Secretary
`and Solicitor, and will retire in early 2009.
`The Board appointed Adrian Kemp to the
`position of Company Secretary with effect
`from 1 January 2009. On behalf of the Board,
`I would like to thank Graeme for his 30 years’
`of invaluable service, advice and guidance to
`the Board and the Company.
`
`The Board continues to be confident in the
`strong leadership of David Brennan and his
`Senior Executive Team and would like to
`thank them and all AstraZeneca’s employees
`for their hard work and dedication, which
`underpins the Company’s success.
`
`The fundamentals of the world pharmaceutical
`market remain robust. Although industry
`growth is slowing, mainly due to ever-greater
`pressure on costs and increased generic
`competition, the continued demand for
`healthcare that underpins the industry’s
`future growth prospects remains strong.
`The pharmaceutical industry is also arguably
`less exposed than other sectors to the current
`global economic downturn, although some
`impact may result from increased constraints
`on payers, suppliers and distributors.
`
`Nevertheless, our rapidly changing business
`environment will continue to be a challenging
`one. The companies that will be most
`successful will be those that are able to manage
`the risks and maximise the opportunities
`effectively, through timely and efficient
`investment, appropriate use of intellectual
`property and constructive stakeholder
`engagement. I am confident that AstraZeneca
`is such a company and that, with our clear
`strategy, strong leadership and intense focus
`on execution, we will continue to deliver
`sustainable success, to the benefit of
`patients, shareholders and society.
`
`louIS SCHWEITZER
`Chairman
`
`CHAIRMAN’s sTATeMeNT
`
`4
`
`During 2008, AstraZeneca maintained its
`strong focus on delivering benefit to patients
`and value to shareholders and society through
`industry-leading R&D productivity, commercial
`excellence and operational efficiency.
`
`Group sales increased by 3% in 2008 to
`a total of $31.6 billion. Operating profit was
`$9.1 billion, up 4%. Reported earnings per
`share for the full year were $4.20 ($3.74 in
`2007). The Board has recommended an 11%
`increase in the second interim dividend to
`$1.50 (104.8 pence, SEK 12.02) per Ordinary
`Share. This brings the dividend for the full year
`to $2.05 (132.6 pence, SEK 15.36), an increase
`of 10%. In 2008, cash distributions to
`shareholders, through a combination of
`dividends and share re-purchases totalled
`$3,349 million. Share re-purchases for the full
`year amounted to $610 million. Shareholders
`also benefited in 2008 from an improvement
`in the Company share price. The London-
`listed share price increased by 30% during
`the course of 2008, as compared to a
`decline of 31% for the FTSE 100 index.
`
`During the year, we continued to invest in
`enhancing our R&D capabilities alongside
`accessing high quality opportunities externally.
`This investment is guided by our disease
`area strategy, which reflects both our inherent
`strengths and the areas of greatest unmet
`medical need. We now have a strong
`development portfolio of small molecule and
`biological products targeted at bringing new
`therapeutic approaches to important areas of
`healthcare as quickly and safely as possible.
`In particular, the improvements we have made
`to our cycle times mean that we should
`deliver new medicines to patients even faster.
`
`ASTRAZENECA ANNuAl REpoRT ANd FoRm 20-F INFoRmATIoN 2008
`
`Page 6 of 204
`
`

`
`INTRODUCTION
`
`CHIeF eXeCUTIve OFFICeR’s RevIeW
`
`5
`
`We are committed to delivering on our
`strategy and to changing the way we work
`so we are prepared for the future. 2008 was
`a year of both opportunity and challenge for
`the Company. I am proud to report that we
`delivered some significant successes against
`a tough background of slowing growth rates
`in Established Markets, ever-greater pressure
`on costs and increasing challenge from
`generic manufacturers.
`
`Our strategy is clear. At its simplest, it is to
`create enduring value for shareholders by
`delivering medicines that make a meaningful
`difference to patient health.
`
`Our vision is to be an innovation-driven,
`research-based pharmaceutical company
`focused on human health and capable of
`delivering a consistent flow of innovative and
`differentiated products to patients in markets
`around the world. To achieve this we will make
`sustained investment in an industry-leading,
`externally networked R&D organisation with
`expertise in both small molecule and large
`molecule technologies. We will commercialise
`our products rapidly and globally at affordable
`prices through a world class sales and
`marketing organisation operating in both
`primary and specialty care markets.
`
`Underpinning our research and commercial
`operations will be a supply chain and
`operating infrastructure, through which we are
`aiming to achieve industry-leading efficiency.
`
`Above all, we will seek to apply an investment
`discipline to all of our activities that attaches
`equal weight to delivering patient health and
`creating shareholder wealth. We will only
`invest shareholders’ funds where we see
`attractive returns and the opportunity to
`create enduring shareholder value.
`
`To help the organisation maintain our focus
`on execution, our strategy targets four
`main priorities:
`
`STRENGTHENING ouR pIpElINE
`We are discovering and developing effective
`medicines faster than ever before and the
`considerable progress we have made in
`reducing development cycle times and costs
`has been achieved without compromising on
`safety and quality.
`
`During 2008, we made eight significant
`regulatory submissions across several
`jurisdictions to broaden the use of our
`marketed products Seroquel, Symbicort,
`Iressa and FluMist, as well as two new product
`submissions for motavizumab, an improved
`anti-respiratory syncytial virus monoclonal
`antibody, and Onglyza™, for treating Type 2
`diabetes. We have strengthened our mid-stage
`pipeline and now have 10 projects in Phase
`III development. 32 projects entered the
`pipeline during the year and 44 projects were
`progressed to their next phase of development.
`We now have a total of 144 projects within
`a balanced pipeline of small molecule and
`biological products. This compares with 137
`projects in 2007.
`
`We also continue to pursue high quality
`external opportunities to enhance further our
`in-house capabilities and have completed
`over 40 major deals in the last two years.
`These deals have increased the quality and
`size of our pipeline and improved the prospects
`of consistently launching more new medicines
`each year as the pipeline matures.
`
`GRoWING THE buSINESS
`Backed by our 70 year track record of
`innovation, we have a range of medicines
`on the market that continue to make a
`difference in important areas of healthcare –
`and our commitment to delivering the full
`benefit of these medicines to patients and
`maximising their commercial potential
`remains undiminished.
`
`Highlights of the year included the conclusion
`of a major study of our statin, Crestor, in the
`primary prevention area, which demonstrated
`significant reduction in major cardiovascular
`events – 44% compared to placebo in men
`and women with elevated hsCRP and other
`risk factors but low/normal cholesterol levels,
`a level of cardiovascular risk reduction not
`previously seen in a large placebo controlled
`statin outcome trial.
`
`Seroquel XR has had approvals for acute
`bipolar depression, acute bipolar mania and
`as an adjunct therapy to lithium or divalproex
`for bipolar maintenance treatment in a number
`of major jurisdictions. These approvals for
`new indications put Seroquel XR on track
`to deliver its full therapeutic potential.
`
`In addition, our expertise in regulatory, sales
`and marketing is also helping to bring to
`markets outside the US the biological products
`that MedImmune brought to our range,
`specifically motavizumab and FluMist.
`
`Despite the challenging market conditions,
`we have continued to drive high performance
`and market share gains in our Established
`Markets and increased sales across North
`America, Europe and Japan. I believe our sales
`forces are among the best and we continue
`to evolve our commercial model to ensure
`that we stay at the forefront of best practice
`in meeting the needs of our customers.
`
`We continue to deliver strong, profitable growth
`in our Emerging Markets, while continuing
`our strategic investment in these markets
`aimed at ensuring that we are appropriately
`resourced to deliver the full potential of the
`business opportunities in these developing
`economies. One in seven dollars of our sales
`now comes from Emerging Markets and as
`our presence in these countries matures, and
`as their economies strengthen, I am confident
`that we will be able to increase further
`business efficiency and deliver improved
`profitability in the future.
`
`We received further challenges to some of our
`patents during the year, the details of which
`are set out elsewhere in this Report. We will
`continue to vigorously defend our patents
`to protect the many years of research and
`the considerable investment which have
`delivered the medicines to which those
`patents relate.
`
`bEComING lEAN ANd AGIlE
`We have to be relentless in our pursuit of
`opportunities to drive further efficiencies
`across the value chain. As well as the progress
`delivered in R&D, we have reshaped our
`manufacturing and packing activities to
`improve productivity whilst maintaining high
`standards of quality and security; we have
`established agreements with third parties
`who offer specialist outsourced expertise
`in areas ranging from data management
`to catering; and put even greater focus
`on leveraging efficiencies within our global
`procurement activity.
`
`ASTRAZENECA ANNuAl REpoRT ANd FoRm 20-F INFoRmATIoN 2008
`
`Page 7 of 204
`
`

`
`6
`
`Our continuing drive to improve efficiency
`and effectiveness resulted in further planned
`reductions of our workforce in some areas
`of our business during 2008 and our work
`on these initiatives continues. My
`management teams and I, take these
`changes very seriously and remain
`committed to ensuring that we manage these
`changes in line with our core values.
`Throughout, we have consulted with staff
`representatives and acted in line with local
`labour laws. We have also provided
`appropriate support to help individuals
`pursue their careers beyond AstraZeneca
`and have engaged with communities around
`the affected sites to mitigate the local impact.
`
`doING buSINESS THE RIGHT WAy
`I want AstraZeneca to be valued as a source
`of great medicines, but also to be trusted for
`the way in which we do business. Therefore,
`our strategic focus includes a fourth priority,
`which underpins and supports achievement
`of the first three. We must continue to nurture
`a culture of responsibility and accountability
`across all aspects of our business activity to
`ensure that AstraZeneca continues to be
`welcomed as a trusted member of society.
`
`Our core values are the cornerstone of this
`culture and in 2007, we reviewed and
`expanded our Code of Conduct to provide
`clear direction as to how these high level
`values are to be translated into consistent
`actions across all areas of our business.
`The new Code went into effect in 2008, and
`it was followed by mandatory training during
`the year for everyone in the Company.
`
`During the year, 86% of our employees
`participated in our global employee opinion
`survey. Results showed that employee
`engagement scores – defined as the extent
`to which people are committed to the future
`success of the Company – were very strong,
`and we continue to outperform other
`pharmaceutical companies in this area.
`The results also indicated that people were
`seeing increased levels of co-operation
`between senior leaders, leading to more
`effective global and cross-functional working.
`The survey also identified some key areas
`that continue to require attention, including
`change management, personal development
`and leadership communication. I take this
`feedback very seriously and new targets that
`address these issues have been included in
`the Senior Executive Team’s performance
`goals for 2009.
`
`SENIoR EXECuTIVE TEAm (SET) CHANGES
`I am delighted that we have further
`strengthened the SET through the
`appointments of Anders Ekblom and Jeff
`Pott. Anders was appointed to the role of
`Executive Vice-President, Development with
`effect from 1 January 2009. Jeff has already
`taken up his new role as the Group’s General
`Counsel, having spent a number of years as
`legal counsel within AstraZeneca’s US
`business, most recently with responsibility
`for managing intellectual property litigation
`within the US.
`
`During 2008 we announced that, after a long
`and distinguished career within the Company,
`John Patterson, Executive Director,
`Development, will retire at the en