Pioneering science,
`life-changing medicines
`
`AstraZeneca Annual Report and Form 20-F Information 2013
`
`Page 1 of 240
`
`AstraZeneca Exhibit 2107
`Mylan v. AstraZeneca
`IPR2015-01340
`
`

`

`We are a global, innovation-driven
`biopharmaceutical business.
`We push the boundaries of
`science to deliver medicines that
`transform the lives of people
`around the world.
`Pioneering science,
`life-changing medicines.
`
`This Annual Report is also available on our website,
`www.astrazeneca.com/annualreport2013
`
`Important information for readers
`of this Annual Report For further
`information in relation to the inclusion
`of reported performance, Core financial
`measures and constant exchange
`rate (CER) growth rates as used in
`this Annual Report, please refer to
`the Financial Review on page 74.
`Throughout this Annual Report, growth
`rates are expressed at CER unless
`otherwise stated.
`Definitions The Glossary and the
`Market definitions table from page 232
`are intended to provide a useful guide
`to terms and AstraZeneca’s definitions
`of markets, as well as to acronyms
`and abbreviations, used in this
`Annual Report.
`
`Use of terms In this Annual Report,
`unless the context otherwise requires,
`‘AstraZeneca’, ‘the Group’, ‘we’, ‘us’
`and ‘our’ refer to AstraZeneca PLC
`and its consolidated entities.
`Cautionary statement regarding
`forward-looking statements
`A cautionary statement regarding
`forward-looking statements and other
`essential information relating to this
`Annual Report can be found on the
`inside back cover.
`Directors’ Report The following
`sections make up the Directors’ Report,
`which has been prepared in accordance
`with the requirements of the Companies
`Act 2006:
`
`> Corporate Governance Report
`> Audit Committee Report
`> Development Pipeline
`> Responsible Business
`> Shareholder Information
`> Corporate Information
`Strategic Report The following
`sections make up the Strategic
`Report, which has been prepared
`in accordance with the requirements
`of the Companies Act 2006:
`> AstraZeneca at a glance
`> Chairman’s Statement
`> Chief Executive Officer’s Review
`> Strategy
`> Business Review
`> Therapy Area Review
`> Resources Review
`> Financial Review
`
`Page 2 of 240
`
`

`

`Corporate Governance
`
`Financial Statements
`
`Additional Information
`
`Welcome to the AstraZeneca Annual Report
`and Form 20-F Information 2013.
`
`Strategic Report
`
`2 AstraZeneca at a glance
`6 Chairman’s Statement
`8 Chief Executive Officer’s Review
`10 Strategy
`34 Business Review
`48 Therapy Area Review
`66 Resources Review
`74 Financial Review
`
`What is in our Strategic Report?
`Dear shareholder
`
`Our Strategic Report is designed to help you assess how the Directors performed in 2013
`in promoting the success of your Company for our collective benefit.
`
`It begins with an overview of our performance in 2013 and personal statements from your
`Chairman and Chief Executive Officer. We also describe our business model, explaining
`how each element helps deliver our strategic priorities and adds value.
`
`Corporate
`Governance
`
` Corporate Governance Report
`88
`98 Audit Committee Report
`102 Directors’ Remuneration Report
`
`Business Review
`How our activities span the entire life-cycle
`of a medicine
`
`Life-cycle of a medicine
`
`Page 34
`
`Research and Development
`
`Page 36
`
`Sales and Marketing
`
`Manufacturing and Supply
`
`Page 40
`
`Page 43
`
`Strategy
`Our purpose and strategic priorities and how
`they are brought to life by the way we work.
`How we measure our success and the risks
`we might face
`
`Business model
`Pioneering science,
`life-changing medicines
`
`Our marketplace
`
`Our strategic priorities
`
`Key performance indicators
`
`Risk overview
`
`Governance and
`Remuneration
`Board of Directors and
`Senior Executive Team
`
`Page 10
`
`Page 12
`
`Page 13
`
`Page 16
`
`Page 20
`
`Page 24
`
`Page 26
`
`Page 28
`
`
`
`
`
`Therapy Area Review
`The progress we made in our chosen therapy
`areas in 2013
`
`Resources Review
`The resources we use to achieve our strategy
`
`Employees
`
`Our relationships
`
`Intellectual Property
`
`Our infrastructure
`
`Page 66
`
`Page 70
`
`Page 72
`
`Page 73
`
`Overview
`
`Cardiovascular and
`Metabolic disease
`Oncology
`
`Respiratory, Inflammation
`and Autoimmunity
`Infection, Neuroscience
`and Gastrointestinal
`
`Page 48
`
`Page 52
`
`Page 56
`
`Page 58
`
`Page 61
`
`
`
`
`
`
`
`Financial Review
`A full financial review of 2013
` Page 74
`
`Financial
`Statements
`
`128 Auditor’s Reports
`132 Consolidated Statements
`136 Group Accounting Policies
`141 Notes to the Group Financial
`Statements
`
`Additional
`Information
`
`194 Development Pipeline
`198 Patent Expiries
`199 Risk
`214 Geographical Review
`220 Responsible Business
`222 Financials (Prior year)
`225 Shareholder Information
`230 Corporate Information
`231 Trade Marks
`232 Glossary
`235 Index
`
`AstraZeneca Annual Report and Form 20-F Information 2013
`
`1
`
`Strategic Report
`
`Page 3 of 240
`
`

`

`Strategic Report
`
`AstraZeneca at a glance
`We are a global, innovation-driven biopharmaceutical business.
`
`Financial summary
`$25.7 billion
`
`$8.4 billion
`
`$5.05
`
`Sales down 6% at CER to $25,711 million
`($27,973 million in 2012)
`
`Core operating profit down 23% at CER
`to $8,390 million ($11,159* million in 2012)
`
`Core EPS for the full year decreased by
`23% at CER to $5.05 ($6.83^ in 2012)
`
`$3.0 billion
`
`$3.7 billion
`
`$2.04
`
`Reported operating profit down 51% at CER
`to $3,712 million ($8,148 million in 2012)
`
`Reported EPS for the full year decreased
`by 55% at CER to $2.04 ($4.95† in 2012)
`
`Net cash shareholder distributions
`decreased by 49% to $2,979 million, partly
`as a result of the cessation of the share
`repurchase programme ($5,871 million net
`cash shareholder distributions including
`$2,206 million net share repurchases in 2012)
`
`Our proposition to investors
`
`Pure-play innovation
`
`A focused,
`on-market
`portfolio in three
`core therapy
`areas and
`a strong
`commercial
`presence…
`
`…combined
`with a distinctive
`R&D platform
`and a growing
`late-stage
`pipeline…
`
`…with
`disciplined
`capital
`allocation and
`a commitment
`to a progressive
`dividend.
`
`* Restated for new Core definition (as detailed on page 224).
`^ Restated for new Core definition and adoption of IAS 19 (2011)
`(as detailed on pages 136 and 224).
`† Restated on adoption of IAS 19 (2011) (as detailed on
`page 136).
`
`AstraZeneca is one of only a handful of pure-play biopharmaceutical
`companies to span the entire value chain of a medicine from
`discovery, early- and late-stage development to manufacturing
`and distribution, and the global commercialisation of primary care,
`specialty care-led and specialty care medicines that transform lives.
`
`Our primary focus is on three important areas of healthcare:
`Cardiovascular and Metabolic disease (CVMD); Oncology; and
`Respiratory, Inflammation and Autoimmunity (RIA). We are also active
`in the Infection, Neuroscience and Gastrointestinal (ING) disease areas.
`
`We operate in more than 100 countries and our innovative medicines
`are used by millions of patients worldwide.
`
`We want to be valued as a source of great medicines and trusted
`as a company that delivers business success responsibly. We are
`committed to operating with integrity and high ethical standards
`across all our activities. We push the boundaries of science to deliver
`life-changing medicines.
`
`Our 10 leading medicines by sales value are:
`Cardiovascular and Metabolic disease
`Oncology
`
`More people die annually from cardiovascular diseases than from any
`other cause – an estimated 17.3 million people in 2008 – representing
`30% of all global deaths. Worldwide, 347 million people have diabetes*.
`CVMD medicines represented 34% of our sales in 2013
`
`Cancer is a leading cause of death worldwide and accounted for
`8.2 million deaths in 2012*. Cancer medicines represented 12% of
`our sales in 2013
`
`Crestor
`for managing
`cholesterol levels
`
`2011: $6,622m
`2012: $6,253m
`2013
`$5,622m
`(-8%)
`
`* WHO data.
`* WHO data
`
`2
`
`Seloken/Toprol-XL
`for hypertension, heart
`failure and angina
`
`2011: $986m
`2012: $918m
`2013
`$750m
`(-18%)
`
`Iressa
`for lung cancer
`
`Faslodex
`for breast cancer
`
`2011: $554m
`2012: $611m
`2013
`$647m
`(+11%)
`
`2011: $546m
`2012: $654m
`2013
`$681m
`(+6%)
`
`Zoladex
`for prostate and
`breast cancer
`
`2011: $1,179m
`2012: $1,093m
`2013
`$996m
`(0%)
`
`AstraZeneca Annual Report and Form 20-F Information 2013
`
`Page 4 of 240
`
`

`

`A global science-led company
`51,500*
`
`employees worldwide
`
`1,300*
`
`employees in Russia
`(2.5%)
`
`2,800*
`
`employees in Japan
`(5.5%)
`
`17,900*
`
`employees in Europe
`(excluding Russia)
`(34.8%)
`
`11,200*
`
`employees in
`North America
`(21.7%)
`
`8,000*
`
`employees in China
`(15.5%)
`
`3,100*
`
`employees in Central
`and South America
`(6.0%)
`
`2,100*
`
`employees in
`Middle East and Africa
`(4.1%)
`
`5,100*
`
`employees in Asia Pacific
`(excluding China, Japan and Russia)
`(9.9%)
`
`9,000*
`
`employees work in R&D
`
`* All figures are approximate.
`
`29,600*
`
`employees work in Sales and Marketing
`
`8,700*
`
`employees work in Supply and
`Manufacturing
`
`Respiratory, Inflammation and Autoimmunity Other leading medicines
`
`Some 235 million people suffer from asthma and an estimated 64 million
`people had COPD in 2004*. RIA medicines represented 18% of our sales
`in 2013
`
`Pulmicort
`for asthma and COPD
`
`Symbicort
`for asthma and COPD
`
`Nexium
`for acid-reflux
`
`2011: $892m
`2012: $866m
`2013
`
`$867m
`
`(+1%)
`
`2011: $3,148m
`2012: $3,194m
`2013
`
`$3,483m
`
`(+10%)
`
`2011: $4,429m
`2012: $3,944m
`2013
`
`$3,872
`
`(0%)
`
`Seroquel XR
`for schizophrenia, bipolar
`disorder and major
`depressive disorder
`2011: $1,490m
`2012: $1,509m
`2013
`
`$1,337m
`
`(-12%)
`
`Synagis
`for RSV, a respiratory
`infection in infants
`
`2011: $975m
`2012: $1,038m
`2013
`
`$1,060m
`
`(+2%)
`
`AstraZeneca Annual Report and Form 20-F Information 2013
`
`3
`
`Strategic Report
`
`Corporate Governance
`
`Financial Statements
`
`Additional Information
`
`Page 5 of 240
`
`

`

`Financial overview
`
`Sales
`$m (-6%)
`
`13
`
`12
`
`11
`
`Core operating profit
`$m (-22%)
`
`Core earnings per
`Ordinary Share $ (-23%)
`
`25,711
`
`27,973
`
`33,591
`
`13
`
`12
`
`11
`
`8,390
`
`11,159
`
`13,932
`
`13
`
`12
`
`11
`
`Net cash flow from
`operating activities $m
`
`Reported operating profit
`$m (-51%)
`
`Reported earnings per
`Ordinary Share $ (-55%)
`
`13
`
`12
`
`11
`
`7,400
`
`6,948
`
`7,821
`
`13
`
`12
`
`11
`
`3,712
`
`8,148
`
`12,795
`
`13
`
`12
`
`11
`
`5.05
`
`6.83
`
`7.68
`
`2.04
`
`4.95
`
`7.29
`
`Operational overview
`Achieve Scientific
`Leadership
`99 pipeline projects
` > including 85 in clinical development
`and 14 either approved, launched
`or filed
`
`11 NMEs in Phase III of development
`or under regulatory review
` > almost double compared with 2012
`and achieving our 2016 target volume
`almost three years ahead of schedule
`
`4 NME progressions to Phase III
` > benralizumab, selumetinib, olaparib
`and moxetumomab pasudotox
`
`33 projects successfully progressed
` > to the next stage of development
`(including 14 projects entering first
`human testing)
`
`15 projects withdrawn
`
`Return to Growth
`
`6% reduction in revenue
` > Revenue fell by 9% in the US,
`9% in Europe and 10% in Established
`ROW. Revenue rose by 8% in
`Emerging Markets
`
`$2.2bn loss of exclusivity reduction
` > Some $2.2 billion of revenue decline
`was related to loss of exclusivity on
`brands such as Arimidex, Atacand,
`Crestor, Nexium and Seroquel IR
`
`$1.2bn revenue growth in our five
`growth platforms
` > Brilinta, diabetes, Emerging Markets,
`respiratory and Japan
`
`8% growth in Emerging Markets
` > including 19% growth in China
`
`$1.8bn non-cash, non-Core, pre-tax
`impairment charge
`> incurred as a result of Bydureon sales
`below commercial expectations
`
`Be a Great Place
`to Work
` > To drive accountability and improve
`decision making, we made our
`organisational structure flatter. Seventy
`percent of employees are now within
`six management steps of the CEO,
`compared to 40% of employees within
`six steps in 2012
`
` > A ‘pulse’ survey showed 84%
`employee belief in our strategy, in line
`with the pharmaceutical sector norm
`
` > Employees are now able to connect
`wirelessly across our sites. Further
`IT changes are under way to improve
`performance, and enhance the security
`and privacy of our information
`
`Our year in brief
`
`2013
`
`January
`Changes to the Senior Executive
`Team announced
`March
`Australia Federal Court
`holds Crestor patents invalid.
`US litigation over Crestor
`patent settled
`Announce strategy to Return
`to Growth and Achieve
`Scientific Leadership, as well
`as restructuring and investment
`in strategic R&D centres in the
`US, the UK and Sweden
`
`AstraZeneca and Moderna
`Therapeutics announce exclusive
`agreement to develop pioneering
`messenger RNA Therapeutics
`AstraZeneca and Karolinska
`Institutet announce intention to
`create Integrated Translational
`Research Centre
`June
`Announce decision not to
`proceed with regulatory filings for
`fostamatinib in rheumatoid arthritis
`following top-line results from
`Phase III OSKIRA trials
`
`Cambridge Biomedical Campus
`in the UK selected as location
`of new global R&D centre and
`corporate headquarters
`Top-line results for SAVOR-TIMI 53
`cardiovascular outcomes trial
`of Onglyza
`July
`AstraZeneca and FibroGen agree
`to collaborate to develop and
`commercialise roxadustat
`(FG-4592) for anaemia in chronic
`kidney disease and end-stage
`renal disease
`
`September
`AstraZeneca ranks in top 3%
`in the sector in the Dow Jones
`Sustainability and World Indexes
`with a score of 85%
`Initiation of Phase III clinical
`programme for olaparib
`October
`Initiation of Phase III for
`selumetinib for advanced
`or metastatic non-small
`cell lung cancer
`
`4
`
`AstraZeneca Annual Report and Form 20-F Information 2013
`
`Strategic Report | AstraZeneca at a glance
`
`Page 6 of 240
`
`

`

`Shareholder distributions
`
`Distributions to shareholders $m
`
`Dividends
`Share repurchases1
`Total
`
`2013
`3,461
`–
`3,461
`
`2012
`3,665
`2,6352
`6,300
`
`2011
`3,764
`6,0153
`9,779
`
`Dividend for 2013
`
`First interim dividend
`Second interim dividend
`Total
`
`$
`0.90
`1.90
`2.80
`
`Pence
`59.2
`116.8
`176.0
`
`Payment date
`SEK
`5.92 16 September 2013
`12.41
`24 March 2014
`18.33
`
`Dividend per Ordinary Share $
`
`Dividend per Ordinary Share
`
`2013
`2.80
`
`2012
`2.80
`
`2011
`2.80
`
`1 The share repurchase programme was suspended effective 1 October 2012.
`2 Share repurchases in 2012, net of proceeds from the issue of share capital equal
`to $429 million, were $2,206 million.
`3 Share repurchases in 2011, net of proceeds from the issue of share capital equal
`to $409 million, were $5,606 million.
`
`Strategic R&D centres
`In 2013 we announced our intention to increase our proximity to bioscience clusters and co-locate around three strategic sites
`Gaithersburg, US
`Cambridge, UK
`Mölndal, Sweden
`
`Connections to National Institutes of Health
`and Johns Hopkins University
`
`Connections to the University of Cambridge
`and its world-class bioscience community
`
`Connections to Karolinska Institutet and
`Medicon Valley
`
`Acquisitions
`Over the past three years we have completed more than 150 major business development transactions. In 2013, we announced the
`following acquisitions:
`
`AlphaCore – a biotech company focused
`on a novel approach to CVMD
`
`Omthera – a specialty company working
`on new therapies for dyslipidaemia
`
`Amplimmune – a biologics company
`developing novel therapeutics in cancer
`immunology
`
`Pearl Therapeutics – a company focused
`on respiratory disease
`
`Spirogen – a biotech company focused
`on antibody-drug conjugate technology
`for use in oncology
`
`Acquisition of global diabetes business
`– purchase of BMS’s 50% interest in
`AstraZeneca’s and BMS’s joint diabetes
`business
`
`See the Therapy Area Review from page 48 for more information.
`
`Benralizumab advances to
`Phase III for severe asthma
`Marc Dunoyer appointed CFO
`and Executive Director on
`Simon Lowth’s departure from
`AstraZeneca
`US Court of Appeals for the
`Federal Circuit reverses trial
`court decision that generic
`defendants do not infringe a
`patent protecting Pulmicort
`Respules in the US but affirms
`that another patent is invalid
`
`November
`Announce plans to invest
`$190 million in a new facility to
`produce Zoladex at our global
`manufacturing site in Macclesfield
`in the UK
`December
`Fluenz Tetra is granted marketing
`authorisation by the EC
`FDA Advisory Committee
`recommends metreleptin for the
`treatment of paediatric and adult
`patients with generalised
`
`lipodystrophy, but does not
`recommend for the treatment
`of partial lipodystrophy for the
`proposed indication
`Announce top-line results from
`Phase III monotherapy study
`of lesinurad in gout patients
`Announce agreement to
`acquire BMS’s 50% interest in
`AstraZeneca’s and BMS’s joint
`diabetes business
`
`2014
`
`Following performance below
`commercial expectations in
`relation to Bydureon, incur a
`non-cash, non-Core, pre-tax
`impairment charge of
`approximately $1.8 billion
`January 2014
`FDA approves Farxiga in the US
`for adults with Type 2 diabetes
`EC approves Xigduo in the EU
`for adults with Type 2 diabetes
`
`AstraZeneca Annual Report and Form 20-F Information 2013
`
`5
`
`Strategic Report
`
`Corporate Governance
`
`Financial Statements
`
`Additional Information
`
`Page 7 of 240
`
`

`

`Strategic Report
`
`Chairman’s
`Statement
`
`“ As expected, our financial
`performance in 2013 reflected
`the ongoing impact of the loss
`of exclusivity for several key
`brands, with revenue down
`6% to $25,711 million.”
`
`Dear shareholder
`One of the key responsibilities
`of a board of directors is to set
`a company’s strategy. As the
`CEO outlines in his Review on
`the following pages, and as we
`seek to demonstrate throughout
`this Annual Report, your Board
`has chosen a very clear strategic
`route to follow. It is rooted in our
`heritage as a company focused
`on innovative science to deliver
`great medicines and sets out our
`ambition to lead in science and
`return to growth.
`
`Good governance
`As your Directors review our strategy and
`carry out their other duties, it is my role
`as Chairman to lead the Board effectively.
`To my mind, good governance is at the
`heart of that. So that you can easily see
`how we are governed, we have provided
`a corporate governance overview on page
`26 of this Annual Report. We also briefly
`describe how our governance structure
`supports the delivery of our business
`strategy. You can find more detail in my
`full Corporate Governance Report from
`page 88. On page 24, we have also
`provided an overview of the risks that
`might prevent us from achieving the full
`potential of our strategy.
`
`explaining our business model and goes
`on to describe how each element helps
`deliver our strategic goals. The Strategic
`Report is introduced in more detail
`on page 1.
`
`This year, the Annual Report also includes
`a revised Directors’ Remuneration Report
`from page 102, which is introduced by the
`Chairman of the Remuneration Committee,
`John Varley. A separate Audit Committee
`Report is introduced by the Chairman of
`the Audit Committee, Rudy Markham.
`
`All the changes we have made are also
`intended to reflect our greater than ever
`efforts to make this Annual Report fair,
`balanced and understandable.
`
`Transparent reporting
`Hand in hand with good governance goes
`transparent reporting and this year we have
`made a number of other changes in the
`Annual Report intended to promote this.
`Some have been caused by changes in UK
`reporting regulations, others by changes to
`the Corporate Governance Code and some
`by ever-evolving reporting best practice.
`Significant changes include the introduction
`of a Strategic Report, which starts by
`
`Challenging environment
`Any balanced review of AstraZeneca
`needs to reflect the environment in which
`we operate. The challenging conditions
`which I touched on last year continue.
`The world pharmaceutical market is still
`growing and underlying demographic
`trends remain favourable to long-term
`industry growth. However, many of the
`drivers of demand and supply in the
`industry are under pressure.
`
`6
`
`AstraZeneca Annual Report and Form 20-F Information 2013
`
`Page 8 of 240
`
`

`

`Outlook
`As we look to the future, we expect a
`low-to-mid single digit percentage decline
`in revenue at CER for 2014. In percentage
`terms, Core EPS for 2014 is expected to
`decline in the teens at CER. Following the
`acquisition of BMS’s 50% interest in our
`joint diabetes business, and as the diabetes
`business’s pipeline of new products is
`progressively launched, we expect 2017
`revenues will be broadly in line with 2013
`revenues. This expectation involves a
`number of assumptions, including, among
`other things, Nexium US generic launch
`in May 2014.
`
`Appreciation
`Before closing, and on behalf of the
`Board, I want to thank the employees
`of AstraZeneca whose efforts helped
`us achieve so much in 2013 as we lay
`the foundations for leading in science
`and returning to growth. In particular,
`I want to express my appreciation to
`Pascal and all the members of the SET
`for the leadership they have shown
`and the inspiration they have provided
`to the organisation.
`
`Finally, I would like to thank all my fellow
`Directors for the contribution they have
`made to our discussions throughout a
`busy 2013. We look forward to welcoming
`as many of you as possible to our Annual
`General Meeting in April.
`
`Leif Johansson
`Chairman
`
`Core EPS for 2013 were $5.05, down
`23% on 2012. This decline was greater
`than the decline in revenue primarily
`due to our investment in our key growth
`platforms and strengthened pipeline.
`Reported EPS for the year was down
`55% to $2.04. The impairment of Bydureon
`in the fourth quarter reduced Reported
`EPS by $1.10, resulting in a Reported loss
`per share for the quarter of $0.42.
`
`A responsible company
`I firmly believe that our commitment to
`good financial performance needs to be
`matched by a continued focus on being
`a responsible company, by working with
`integrity and delivering sustainable business
`development. I therefore fully support the
`decision we have made to focus our
`responsible business activities on access
`to healthcare, diversity and reducing our
`environmental impact. It is where I believe
`we are able to implement standards that
`will accelerate our business strategy and
`deliver wider benefits to society.
`
`It is also gratifying to see our current efforts
`recognised by again being listed in the Dow
`Jones Sustainability World Index in 2013,
`with a record-equalling score, and retaining
`our listing on the European Index for the
`sixth year running.
`
`Return to shareholders
`Consistent with our progressive dividend
`policy to maintain or grow the dividend
`each year, the Board has recommended
`a second interim dividend of $1.90. This
`brings the dividend for the full year to
`$2.80 (176.0 pence, SEK 18.33).
`
`The Board regularly reviews our distribution
`policy and overall financial strategy to
`continue to strike a balance between the
`interests of the business, our financial
`creditors and our shareholders. Having
`regard for business investment, funding the
`progressive dividend policy and meeting
`our debt service obligations, we currently
`believe it is appropriate to continue the
`suspension of the share repurchase
`programme which was announced in
`October 2012. We continue to target a
`strong, investment grade credit rating.
`
`On the demand side, we face increased
`competition from generic drugs as some
`of the world’s most successful medicines
`come off patent. In addition, securing
`recognition (through reimbursement
`approval) and reward for innovation
`(through favourable pricing and sales)
`is becoming more difficult in the face of
`intense pricing pressures, particularly
`in Established Markets facing rising
`healthcare costs. On the supply side, the
`industry faces an ongoing R&D productivity
`challenge. R&D costs have risen significantly
`over the past decade, while industry-wide
`probability of success of new medicines,
`though showing some recent signs of
`improvement, has not kept pace.
`
`Loss of exclusivity
`Loss of exclusivity has had, and continues
`to have, a significant impact on AstraZeneca.
`In 2013, loss of exclusivity on brands such
`as Arimidex, Atacand, Crestor, Nexium
`and Seroquel IR in a number of markets
`accounted for a revenue decline of some
`$2.2 billion. Over the coming years, this
`trend will continue as medicines such as
`Crestor, Nexium and Seroquel XR continue
`to lose exclusivity in markets such as the
`US and Europe.
`
`Of course, loss of exclusivity is a normal
`part of an innovative medicine’s life-cycle.
`It comes at the end of the period when a
`new medicine is safeguarded from being
`copied so that we can generate returns
`on the investment we have made, both to
`reinvest in the business and provide an
`appropriate return to you, our owners. A
`well-functioning intellectual property system
`of this type, which rewards innovation, is
`the principal economic safeguard in our
`industry. It underpins our business model,
`which we explore in more detail in the
`Business model section from page 10.
`
`Our performance in 2013
`As expected, our financial performance in
`2013 reflected the ongoing impact of the
`loss of exclusivity for several key brands,
`with revenue down 6% to $25,711 million
`(2012: $27,973 million). Core operating
`profit fell by 22% to $8,390 million (2012:
`$11,159 million). The decline in revenue was,
`in part, offset by our key growth platforms:
`Brilinta, our diabetes franchise, respiratory,
`Emerging Markets and Japan, which
`delivered an incremental $1.2 billion of
`revenue in 2013.
`
`AstraZeneca Annual Report and Form 20-F Information 2013
`
`7
`
`Strategic Report
`
`Corporate Governance
`
`Financial Statements
`
`Additional Information
`
`Page 9 of 240
`
`

`

`Strategic Report
`
`Chief Executive
`Officer’s Review
`
`Dear shareholder
`At our Investor Day in March
`2013, we set out our strategy
`to Achieve Scientific Leadership,
`Return to Growth and ensure
`AstraZeneca is a Great Place
`to Work. A year on, we’ve built
`momentum behind our strategic
`priorities, in particular our
`objective of achieving scientific
`leadership, and started to deliver
`on some of the targets we have
`set ourselves. You can find more
`detail about the progress being
`made throughout this Annual
`Report, together with some
`case studies indicating how
`our pioneering science has
`the potential to transform lives.
`Achieving scientific leadership
`Accelerating and replenishing our portfolio
`in our three core therapy areas is central to
`our mission and vital to our success. I’m
`really pleased by the progress made during
`2013. At the end of the year, we had 99
`projects in our pipeline, of which 85 were
`in the clinical phase of development and 14
`were approved, launched or filed. That total
`included 11 new molecular entities, or
`NMEs, in Phase III of development or
`under regulatory review, almost double
`the number we had at the end of 2012.
`
`Four NMEs that progressed to Phase III
`came from our existing pipeline: olaparib,
`selumetinib and moxetumomab pasudotox
`are potential cancer treatments, while
`benralizumab is for severe asthma. A
`further two NMEs came from transactions
`we undertook during the year: PT003, for
`the treatment of COPD, came to us from
`the acquisition of Pearl Therapeutics and
`Epanova, a novel treatment for dyslipidaemia,
`came from the acquisition of Omthera.
`
`Alongside this, we submitted regulatory
`filings for naloxegol, for opioid-induced
`constipation, in the EU and US, and
`olaparib in the EU. Our diabetes treatment,
`Farxiga, was approved in the US in January
`
`2014, having been approved in the EU in
`2012 under the name Forxiga. Xigduo, also
`for diabetes, was approved in the EU in
`January 2014.
`
`I am particularly excited about the
`progress we made with our early-stage
`pipeline in 2013, including the multiple
`trials that are now under way in our cancer
`immunotherapy portfolio. Collaborations
`and acquisitions further strengthened the
`progress being made, including AlphaCore
`in cardiovascular and metabolic disease
`as well as Amplimmune and Spirogen
`in oncology.
`
`Of course, there is no innovation without risk
`and we discontinued 15 projects during the
`year. This included fostamatinib where the
`results of clinical trials meant we decided
`not to proceed with regulatory filings.
`
`We continue to redeploy resources to
`convert our promising late-stage pipeline
`into medicines that will transform patients’
`lives and fund our growth platforms. Our
`productivity and efficiency programmes
`are providing some of the headroom to
`make those investments possible.
`
`Platforms for growth
`As the Chairman noted, our five growth
`platforms delivered an incremental
`$1.2 billion of revenue in 2013. While
`our focus on these platforms is beginning
`to bear fruit, we have more work to do if
`they are to deliver to their full potential.
`
`Brilinta/Brilique is a key product for
`us and it continues to grow globally.
`However, despite encouraging progress
`in the US, there are challenges that are
`still to be overcome.
`
`Our long-term commitment to diabetes
`was reinforced with the acquisition of
`BMS’s 50% interest in our joint diabetes
`business. The acquisition, which was
`completed in February 2014, included the
`rights for the development, manufacture
`and commercialisation of the business’s
`global diabetes assets. We believe that
`consolidating ownership of this portfolio
`will allow us to serve the needs of people
`with diabetes better. As a result of
`sales below expectations, we incurred
`an impairment charge for Bydureon,
`
`acquired as part of the BMS acquisition
`of Amylin. Nevertheless, we continue
`to have confidence in the commercial
`future of the product.
`
`Overall, diabetes revenues grew globally
`last year and we are stepping up our
`investment and improving execution of
`our plans to take full advantage of our
`unique portfolio.
`
`In our respiratory franchise, Symbicort
`drove growth with a strong performance
`in the US, Japan and Emerging Markets.
`In Japan, our second largest market,
`growth was also helped by the performance
`of Nexium. Emerging Markets revenue
`growth of 8% meant we met our target
`of high single digit growth (at CER), with
`growth in China of 19% over the year.
`
`While our revenue continues to be
`impacted by the loss of exclusivity for key
`brands, reducing by $2.2 billion in 2013,
`the progress being made provides us with
`the confidence that our 2017 revenues
`will be broadly in line with what we achieved
`in 2013.
`
`8
`
`AstraZeneca Annual Report and Form 20-F Information 2013
`
`Page 10 of 240
`
`

`

`“ I am pleased with the momentum
`we built in 2013 against our strategic
`priorities, particularly our objective of
`achieving scientific leadership.”
`
`Great place to work
`Our achievements are, of course, down
`to the people who work at AstraZeneca,
`as well as our partners and collaborators.
`However, I firmly believe that these efforts
`are more productive when we all share
`a common purpose. That is why I attach
`such great importance to the work we did
`during the year both to define our purpose
`as a Group – who we are and the unique
`contribution we make – as well as to define
`the values that describe our fundamental
`beliefs and bring our purpose to life.
`
`Over 30,000 employees registered for our
`‘culture jam’, an online conversation about
`what it means to push the boundaries of
`science to deliver life-changing medicines,
`and about what our values mean in
`practice. It was a defining moment for
`AstraZeneca that demonstrated the
`passion our employees have for the work
`they do.
`
`Alongside this, I am pleased with the
`progress made following our decision
`to invest in three strategic R&D centres,
`including the creation of a new UK-based
`centre in Cambridge. This will bring teams
`together and closer to scientific partners,
`
`helping improve collaboration, as well
`as reducing complexity and eradicating
`unnecessary cost.
`
`Overall progress is reflected in surveys that
`have shown an increasing employee belief
`in our strategic course. This is heartening,
`not least because implementation of our
`strategic priorities has created uncertainty
`for many. For my part, I will continue to
`work to ensure that we undertake the
`necessary changes with respect for the
`individuals concerned.
`
`A great place to work needs great
`leaders and we welcomed many talented
`individuals at all levels in 2013. The year
`also saw two of our SET members leave.
`Simon Lowth left us at the end of October
`after nearly six years at AstraZeneca. He
`made a significant and lasting contribution
`to the business. I will miss him and would
`like to wish him well in the next chapter
`of his career. Also stepping down during
`the year was Lynn Tetrault, who did so
`on health g