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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
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 |
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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. |
3 |
> | Sales up 3% to $31,601 million. | |
> | Crestorsales up 26% to $3,597 million;Symbicortup 22% to $2,004 million;Seroquelup 9% to $4,452 million; andArimidexup 4% to $1,857 million.Nexiumsales 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 toSeroquel. | |
> | Settlement of USNexiumpatent litigation with enforceability of disputedNexiumpatents conceded. Other patent litigation continuing in the US against generic manufacturers following abbreviated new drug applications relating toNexium. | |
> | New Code of Conduct launched in over 40 languages and all employees trained. | |
6 |
> | Focused on the discovery, development, manufacturing and marketing of prescription pharmaceuticals and biological products for important areas of healthcare: Cardiovascular, Gastrointestinal, Infection, Neuroscience, Oncology, and Respiratory and Inflammation. |
> | Broad product range, including many world leaders and a number of key products:Arimidex,Crestor,Nexium,SeroquelandSymbicort. |
> | Active in over 100 countries with a growing presence in important emerging markets including China; corporate office in London, UK; major R&D sites in Sweden, the UK and the US. |
> | Over 65,000 employees (51% in Europe, 32% in the Americas and 17% in Asia, Africa and Australasia). |
> | Around 12,000 people in our R&D organisation and 17 principal R&D centres in eight countries. |
> | 26 manufacturing sites in 18 countries. |
> | Committed to a responsible approach to business across all activities. |
Sales | Growth | Market value | ||||||||||
$bn | % | % | ||||||||||
Emerging ROW | ||||||||||||
2008 | 108 | 14 | 16 | |||||||||
2007 | 87 | 13 | 14 | |||||||||
2006 | 74 | 12 | 13 | |||||||||
Established ROW | ||||||||||||
2008 | 271 | 5 | 39 | |||||||||
2007 | 232 | 4 | 37 | |||||||||
2006 | 211 | 4 | 37 | |||||||||
North America | ||||||||||||
2008 | 310 | 2 | 45 | |||||||||
2007 | 304 | 7 | 49 | |||||||||
2006 | 284 | 7 | 50 | |||||||||
Growth | Growth | Market Share | Sales | |||||||||||||||||||||
Rank | Rank | MAT/Q3/08 | MAT/Q3/07 | MAT/Q3/08 | MAT/Q3/08 | |||||||||||||||||||
MAT/Q3/08 | MAT/Q3/07 | % | % | % | $bn | |||||||||||||||||||
US | 1 | 1 | 1 | 7 | 42 | 291 | ||||||||||||||||||
Japan | 2 | 2 | 4 | 2 | 9 | 65 | ||||||||||||||||||
France | 3 | 3 | 4 | 5 | 6 | 43 | ||||||||||||||||||
Germany | 4 | 4 | 6 | 3 | 6 | 42 | ||||||||||||||||||
Italy | 5 | 6 | 4 | – | 4 | 26 | ||||||||||||||||||
UK | 6 | 5 | 2 | 5 | 3 | 23 | ||||||||||||||||||
Spain | 7 | 7 | 8 | 8 | 3 | 23 | ||||||||||||||||||
Canada | 8 | 8 | 6 | 7 | 3 | 19 | ||||||||||||||||||
China1 | 9 | 9 | 27 | 21 | 3 | 18 | ||||||||||||||||||
Brazil2 | 10 | 10 | 12 | 10 | 2 | 13 | ||||||||||||||||||
Turkey2 | 11 | 13 | 9 | 18 | 2 | 10 | ||||||||||||||||||
South Korea | 12 | 11 | 11 | 10 | 1 | 10 | ||||||||||||||||||
Australia | 13 | 14 | 11 | 8 | 1 | 9 | ||||||||||||||||||
Mexico2 | 14 | 12 | 4 | 8 | 1 | 9 | ||||||||||||||||||
India2 | 15 | 15 | 13 | 13 | 1 | 7 | ||||||||||||||||||
Poland | 16 | 17 | 9 | 8 | 1 | 7 | ||||||||||||||||||
Netherlands | 17 | 16 | 5 | 8 | 1 | 7 | ||||||||||||||||||
Belgium | 18 | 18 | 8 | 4 | 1 | 6 | ||||||||||||||||||
Greece2 | 19 | 19 | 12 | 18 | 1 | 6 | ||||||||||||||||||
Sweden | 20 | 20 | 6 | 6 | 1 | 4 | ||||||||||||||||||
Data based on world retail and hospital pharmacy sales except: | |
1 | Hospital pharmacy only |
2 | Retail pharmacy only |
MAT = Moving Annual Total | |
Source: IMS Health 2008 MIDAS Quantum |
10 |
> | Increasing and ageing populations in established markets. |
> | Emergence of expanded patient populations in new markets. |
> | Continued unmet medical need. |
> | Continued scientific and technological advance. |
3 | Source: WHO statistics 2008. |
11 |
> | Continued pressure on the price of medicines. |
> | Higher regulatory hurdles for new medicines and new indications. |
> | Competition from research-based and, increasingly, generic pharmaceutical companies. |
STRATEGIC PRIORITY OBJECTIVES MEASURES STRENGTHEN THE PIPELINE To be one of the fastest and most productive companies in the industry through continuous improvement in our research and development (R&D), coupled with externalisation to broaden our research base and further strengthen our pipeline of new products. Achieve a median composite eight-year product development cycle by 2010. Development cycle times and quality for small molecules and biologics. GROW THE BUSINESS To maintain our position among the industry world leaders through a continued focus on driving commercial excellence. Deliver overall sales growth in line with market growth. Sales value growth at CER. RE-SHAPE THE BUSINESS To create an organisation with the flexibility and financial strength to adapt quickly and effectively within a challenging and rapidly changing business environment. Maintain gross profit margin.
on R&D investment. Gross margin and operating margin. PROMOTE A CULTURE OF RESPONSIBILITY AND ACCOUNTABILITY To create an organisation that is recognised not only for the skills, experience and quality of its people, but also for the integrity with which it conducts its business. Achieve upper quartile industry ranking for employee engagement. Employee engagement levels. 13 INITIATIVES 2008 PERFORMANCE SUMMARY Improving R&D quality and speed through leading-edge science, effective risk management and decision-making, and overall business efficiency. 2008 target exceeded for small molecule development cycle times. See page 19. Active and rigorous development of our brands to maximise patient benefit and commercial potential. Global sales +3% at CER. Continued implementation and expansion of our restructuring programme, including: Core gross margin: 80.4% > Reviewing supply and manufacturing
assets. Core operating margin: 34.7% > Driving R&D efficiency. On track to deliver R&D unit cost reduction target of 15% over three years. > Driving sales and marketing resource
optimisation and customer focus. Core SG&A cost growth rate: 3% Restructuring programme continues with benefits now estimated to reach $2.5 billion per annum (up from $1.4 billion); with $2.1 billion in savings expected before 2010, and the balance to be realised by 2013. Strengthening the effectiveness of leaders and our performance management. Global employee survey shows employee engagement is strong, outperforming many other pharmaceutical companies. See page 28. 15 17
AS THERAPEUTIC BENEFIT
Executive Director, Development 19 > The change programme that resulted from our disease area strategy review during 2007 was completed in 2008 with anticipated financial benefits of over $100 million to be delivered by the end of 2009. > During 2008, we centralised and outsourced our clinical data handling to our external partner, Cognizant. This has enabled us to simplify our processes, promote consistency and drive resource efficiencies across our data management. These improvements are also helping to speed our internal data interpretation and decision-making. > Our re-organisation of the Pharmaceutical and Analytical R&D function aims to improve productivity and meet the demands of an increasingly strengthened pipeline better by changing working processes, while retaining our focus on innovation. For example, we have been able to progress a larger number of early projects by reducing the resource per project by more than 50% since 2004. The function has also downsized by 10% while introducing these productivity improvements. > Streamlining of our regulatory function exceeded the target 18% reduction in headcount achieving a 21% reduction by June 2008. 1 Preliminary figures. Final data will be available end March 2009 on our website, astrazeneca.com/responsibility 21 > To establish a series of disease area strategies through joint therapy area strategy teams and to bring them together into a single AstraZeneca portfolio across small molecules and biologics. > To develop enabling strategies to ensure the optimal delivery of the disease area strategic targets, including technology strategies, capital expenditure, capability mix, shape and size and geographic footprint of the R&D organisation. > To work with the Chief Executive Officer and Chief Financial Officer to agree an overall R&D budget for AstraZeneca and, within the R&D Executive Committee, allocate that budget to discovery and development activities across small molecules and biologics. > To conduct a portfolio review process to evaluate all potential new medicines within the business to ensure resource prioritisation and delivery in line with that process. In particular, this process is intended to ensure that internal and external opportunities are reviewed using the same criteria and that there is a clear externalisation strategy, aligned with and complementary to, the disease area strategies, the internal portfolio and local market needs. Estimated filing date Therapy area Compound Mechanism Areas under investigation MAA NDA Cardiovascular AZD6482 PI3K-beta inhibitor thrombosis AZD4017 11BHSD inhibitor diabetes/obesity Gastrointestinal AZD2066 metabotropic glutamate receptor 5 antagonist GERD AZD1386 vanilloid receptor antagonist GERD Infection MEDI-534 RSV/PIV-3 vaccine intranasal immunisation MEDI-560 PIV-3 vaccine intranasal immunisation MEDI-566 pandemic influenza virus vaccine pandemic influenza vaccine AZD9639 (MEDI-564)1 RSV F protein inhibitor RSV treatment CMV Vaccine CMV vaccine cytomegalovirus MEDI-557 YTE – extended half-life RSV MAb RSV prophylaxis MEDI-559 RSV vaccine RSV treatment Neuroscience AZD5904 myeloperoxidase (MPO) inhibitor multiple sclerosis AZD3241 myeloperoxidase (MPO) inhibitor Parkinson’s disease AZD2066 metabotropic glutamate receptor 5 antagonist chronic neuropathic pain AZD6280 GABA receptor subtype partial agonist anxiety TC-56191 neuronal nicotinic receptor agonist cognitive disorders in schizophrenia AZD8529 glutamatergic modulator schizophrenia AZD2516 metabotropic glutamate receptor 5 antagonist chronic neuropathic pain AZD1446 neuronal nicotinic receptor agonist Alzheimer’s disease AZD7268 enkephalinergic receptor modulator depression/anxiety Oncology AZD8931 erbB kinase inhibitor solid tumours AZD7762 CHK1 kinase inhibitor solid tumours AZD8330 (ARRY-424704)1 MEK inhibitor solid tumours CAT-8015 recombinant immunotoxin haematological malignancies MEDI-5381 CD19 B cells leukaemia/lymphoma AZD8055 TOR kinase inhibitor range of tumours AZD6918 TRK inhibitor solid tumours AZD4769 EGFR tyrosine kinase inhibitor solid tumours Respiratory & Pneumococcal vaccine1 pneumococcal vaccine Streptococcus pneumoniae Inflammation CAM-3001 anti-GM-CSFR rheumatoid arthritis AZD8848 asthma AZD8566 CCR5 rheumatoid arthritis AZD8075 CRTh2 antagonist asthma/COPD AZD5985 CRTh2 antagonist asthma/COPD 1 Partnered product. 23 Estimated filing date Therapy area Compound Mechanism Areas under investigation MAA NDA Cardiovascular AZD0837 direct thrombin inhibitor thrombosis 2012 2012 AZD1305 anti-arrhythmic arrhythmias AZD6370 GK activator diabetes AZD1656 GK activator diabetes/obesity Gastrointestinal AZD3355 inhibitor of transient lower oesophageal sphincter relaxations (TLESR) GERD 2011 2011 Infection CytoFab™1 anti-TNF-alpha polyclonal antibody severe sepsis EBV vaccine1 Epstein-Barr virus vaccine post-transplant proliferative disease AZD7295 NS 5a inhibitor hepatitis C Neuroscience AZD34801 neuronal nicotinic receptor agonist Alzheimer’s disease AZD6765 NMDA receptor antagonist depression 2012 2012 AZD1940 CB1 receptor agonist nociceptive and neuropathic pain AZD1386 vanilloid receptor antagonist chronic nociceptive pain AZD2624 NK receptor antagonist schizophrenia AZD2327 enkephalinergic receptor modulator anxiety and depression AZD7325 GABA receptor subtype partial agonist anxiety 2013 2012 Oncology Recentin VEGFR tyrosine kinase inhibitor NSCLC 2013 2013 AZD62441 (ARRY-142886) MEK inhibitor solid tumours 2014 2014 AZD2281 PARP inhibitor breast/ovarian cancer 2012 2012 AZD0530 SRC kinase inhibitor solid tumours and haematological malignancies AZD4877 cell cycle agent haematological malignancies AZD1152 aurora kinase inhibitor haematological malignancies 2011 2011 Respiratory & AZD9056 ion channel blocker (P2X7) rheumatoid arthritis 2012 2012 Inflammation AZD5672 chemokine receptor antagonist (CCR5) rheumatoid arthritis 2012 2012 AZD1981 CRTh2 receptor antagonist asthma/COPD MEDI-528 anti-IL-9 antibody asthma CAT-354 anti-IL-13 antibody asthma AZD9668 neutrophil elastase inhibitor COPD AZD1236 matrix metallo-proteinase inhibitor COPD AZD3199 iLABA asthma/COPD MEDI-563 anti-IL-5R antibody asthma MEDI-545 anti-IFN-alpha antibody SLE, myositis Gastrointestinal Nexium proton pump inhibitor extra-oesophageal reflux disease 3Q 20092 3Q 20092 Infection Motavizumab humanised MAb binding to RSV F protein early and late treatment of RSV in paeds >1 yr Cardiovascular Onglyza™1 DPP-4 inhibitor diabetes Filed Filed Brilinta (AZD6140) ADP receptor antagonist arterial thrombosis 4Q 2009 4Q 2009 Crestor/Trilipix™1 statin + fibrate fixed combination dyslipidaemia 3Q 2009 Dapagliflozin1 SGLT2 inhibitor diabetes 2H 2010 2H 2010 Infection Motavizumab humanised MAb binding to RSV F protein RSV prevention TBD Filed Neuroscience PN4001 naproxen + esomeprazole signs and symptoms of OA, RA and AS 4Q 2009 Mid 2009 Oncology Zactima VEGFR/EGFR tyrosine kinase inhibitor with RET kinase activity NSCLC 2Q 2009 2Q 2009 Recentin VEGFR tyrosine kinase inhibitor CRC 2H 2010 2H 2010 Recentin VEGFR tyrosine kinase inhibitor recurrent glioblastoma 2H 2010 2H 2010 ZD4054 endothelin A receptor antagonist hormone resistant prostate cancer 2011 2011 1 Partnered product. 2 Publication only. Estimated filing date Therapy area Compound Mechanism Areas under investigation MAA NDA Cardiovascular Atacand angiotensin II antagonist diabetic retinopathy Published1 Published1 Atacand Plus angiotensin II antagonist/thiazide diuretic 32/12.5mg, 32/25mg for hypertension Filed Crestor statin outcomes in subjects with elevated CRP 2Q 2009 2Q 2009 Onglyza™/Metformin FDC2 DPP-4 inhibitor + biguanide FDC diabetes 2H 2010 4Q 2009 Dapagliflozin/Metformin FDC2 SGLT2 inhibitor + biguanide FDC diabetes 2011 2011 Gastrointestinal Nexium proton pump inhibitor peptic ulcer bleeding Filed Filed Nexium Low Dose proton pump inhibitor low dose Aspirin™ associated peptic ulcer 3Q 2009 2Q 2009 Aspirin™ Combination Nexium proton pump inhibitor extra-oesophageal reflux disease 3Q 20091 3Q 20091 Infection FluMist live, attenuated, intranasal influenza virus vaccine influenza Filed Launched Neuroscience Seroquel D2/5HT2 antagonist bipolar maintenance Filed Launched Seroquel D2/5HT2 antagonist bipolar depression Approved Launched Seroquel XR D2/5HT2 antagonist major depressive disorder Filed Filed Seroquel XR D2/5HT2 antagonist bipolar mania Approved Approved Seroquel XR D2/5HT2 antagonist bipolar depression Approved Approved Seroquel XR D2/5HT2 antagonist generalised anxiety disorder Filed Filed Oncology Iressa EGFR tyrosine kinase inhibitor NSCLC Filed Zactima VEGFR/EGFR tyrosine kinase inhibitor medullary thyroid cancer 2H 2010 4Q 2009 with RET kinase activity Faslodex oestrogen receptor antagonist first line advanced breast cancer Faslodex oestrogen receptor antagonist adjuvant Respiratory & Inflammation Symbicort pMDI inhaled steroid/fast onset, long-acting ß2 agonist asthma Filed Launched3 Symbicort pMDI inhaled steroid/fast onset, long-acting ß2 agonist COPD Filed Filed Unit Dose Budesonide2,4 inhaled steroid asthma Therapy area Compound Areas under investigation Cardiovascular AZD1175 diabetes/obesity AZD2207 diabetes/obesity Infection AZD2836 hepatitis C Neuroscience AZD3480 cognitive disorders in schizophrenia AZD0328 Alzheimer’s disease AZD1704 analgesia Oncology MEDI-561 (IPI-504) GIST MEDI-561 (IPI-504) solid tumours IPI-493 solid tumours AZD4877 solid tumours AZD1152 solid tumours Respiratory & AZD4818 COPD Inflammation Therapy area Compound Areas under investigation Cardiovascular Crestoroutcomes end
stage renal disease5 renal disease 1 Publication only. 2 Partnered product. 3 US approval based on 12 years and above. 4 Subject to review under the Hart-Scott-Rodino Act. 5 Will proceed to publication.
confidentiality, information in relation to some compounds listed here has not been
disclosed at this time. 25
1 For the AstraZeneca definition of markets
please see the Glossary on page 199. 27
29
Chief Financial Officer 31
major events affecting 2008 32
of year to 31 December 2008 33
flow and liquidity – 2008 34 36 37 37
of year to 31 December 2007 38
and liquidity – 2007 40 41 43 47 > 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 Financial Statements prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and as issued by the International Accounting Standards Board. > Core financial measure. 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 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. See page 34 for a reconciliaton of Core to reported performance. > Constant exchange rate (CER) growth rates. CER is also a non-GAAP measure. This measure removes 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 to reported performance is provided on page 33. > Gross margin and operating profit margin percentages, which set out the progression of key performance margins and demonstrate the overall quality of the business. > Prescription volumes and trends for key products, which can represent the real business growth and the progress of individual products better and more immediately than invoiced sales. > Net debt, representing our interest bearing loans and borrowings less cash and cash equivalents and current investments. > The adverse impact on pharmaceutical prices as a result of the regulatory environment. For instance, although there is no direct governmental control on prices in the US, action from individual state programmes and health insurance bodies are leading to downward pressures on realised prices. In other parts of the world, there are 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 exclusivity or patent expiry or an ‘at risk’ launch by a competitor, with the potential adverse effects on sales volumes and prices, for example, the launch of generic competition to bothEthyolandPulmicort Respulesin 2008 andToprol-XLin 2006. > 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, sterling and Swedish krona. > Macro factors such as greater demand from an ageing population and increasing requirements of servicing Emerging Markets. > Reported sales of $31,601 million, representing CER sales growth of 3% (7% reported). > Strong performance in Emerging Markets with CER sales growth of 16% (20% reported). > Continued strong performance from our five key products (Arimidex,Crestor,Nexium,SeroquelandSymbicort) with sales of $17,110 million, up 9% at CER on prior year sales (12% reported). > Operating profit increased by 4% at CER (13% reported). Core operating profit increased by 9% at CER. > Earnings per share: $4.20, an increase of 2% at CER (12% reported). Core earnings per share were $5.10, an increase of 8% at CER. > Net cash inflow from operating activities increased to $8,742 million (2007: $7,510 million). > The partial retirement of Merck’s interests in certain AstraZeneca products in the US took place on 17 March 2008 through a $2.6 billion net payment to Merck. > Cash distributions to shareholders were $3,349 million (2007: $6,811 million) through dividend payments of $2,739 million (2007: $2,641 million) and share re-purchases of $610 million (2007: $4,170 million). > Net debt decreased to $7,174 million (2007: $9,112 million), a reduction of $1,938 million. > Total restructuring and synergy costs associated with the global programme to reshape the cost base of the business, were $881 million in 2008 (2007: $966 million). This brings the total costs incurred to date to $1,847 million. 33 2008 2007 2008 compared to 2007 CER Growth due to CER Reported Reported growth exchange effect Reported growth growth $m $m $m $m % % Cardiovascular 6,963 29 248 6,686 – 4 Gastrointestinal 6,344 (275 ) 176 6,443 (4 ) (2 ) 2,451 706 31 1,714 41 43 Neuroscience 5,837 346 151 5,340 6 9 Oncology 4,954 (109 ) 244 4,819 (2 ) 3 Respiratory and Inflammation 4,128 278 139 3,711 7 11 Other businesses 924 54 24 846 6 9 31,601 1,029 1,013 29,559 3 7 1 IncludesSynagisandFluMistwhich were acquired in June 2007. 2008 2007 Percentage of sales 2008 compared to 2007 CER Growth due to Reported Reported CER Reported Reported growth exchange effect Reported 2008 2007 growth growth $m $m $m $m % % % % Sales 31,601 1,029 1,013 29,559 3 7 Cost of sales (6,598 ) 38 (217 ) (6,419 ) (20.9 ) (21.7 ) (1 ) 3 Gross profit 25,003 1,067 796 23,140 79.1 78.3 5 8 Distribution costs (291 ) (39 ) (4 ) (248 ) (0.9 ) (0.8 ) 16 17 Research and development (5,179 ) (88 ) 71 (5,162 ) (16.4 ) (17.5 ) 2 – Selling, general and administrative costs (10,913 ) (433 ) (116 ) (10,364 ) (34.6 ) (35.1 ) 4 5 Other operating income and expense 524 (188 ) (16 ) 728 1.7 2.5 (26 ) (28 ) 9,144 319 731 8,094 28.9 27.4 4 13 Net finance expense (463 ) (111 ) Profit before tax 8,681 7,983 Taxation (2,551 ) (2,356 ) 6,130 5,627 Earnings per share 4.20 3.74 Restructuring and synergy MedImmune Ethyol and Merck 2008 Reported costs amortisation other impairments 1 amortisation Core 2008 $m $m $m $m $m $m Gross profit 25,003 405 – – – 25,408 Distribution costs (291 ) – – – – (291 ) Research and development (5,179 ) 166 – 60 – (4,953 ) Selling, general and administrative costs (10,913 ) 310 307 257 99 (9,940 ) Other operating income and expense 524 – 120 90 – 734 9,144 881 427 407 99 10,958 Net finance expense (463 ) – – – – (463 ) Profit before tax 8,681 881 427 407 99 10,495 Taxation (2,551 ) (259 ) (125 ) (121 ) – (3,056 ) 6,130 622 302 286 99 7,439 Earnings per share 4.20 0.43 0.21 0.19 0.07 5.10 Restructuring and synergy MedImmune Ethyol and Merck 2007 Reported costs amortisation other impairments amortisation Core 2007 $m $m $m $m $m $m Gross profit 23,140 415 – – – 23,555 Distribution costs (248 ) – – – – (248 ) Research and development (5,162 ) 73 – – – (5,089 ) Selling, general and administrative costs (10,364 ) 478 255 – 96 (9,535 ) Other operating income and expense 728 – – – – 728 8,094 966 255 – 96 9,411 Net finance expense (111 ) – – – – (111 ) Profit before tax 7,983 966 255 – 96 9,300 Taxation (2,356 ) (285 ) (75 ) – – (2,716 ) 5,627 681 180 – 96 6,584 Earnings per share 3.74 0.46 0.12 – 0.06 4.38 2008 2007 2008 compared to 2007 CER Growth due to CER Total core Core growth exchange effect Core growth growth 2007 to 2008 $m $m $m $m % % Gross profit 25,408 1,057 796 23,555 5 8 Distribution costs (291 ) (39 ) (4 ) (248 ) 16 17 Research and development (4,953 ) 71 65 (5,089 ) (1 ) (3 ) Selling, general and administrative costs (9,940 ) (289 ) (116 ) (9,535 ) 3 4 Other operating income and expense 734 23 (17 ) 728 3 1 10,958 823 724 9,411 9 16 Net finance expense (463 ) (111 ) Profit before tax 10,495 9,300 Taxation (3,056 ) (2,716 ) 7,439 6,584 Earnings per share 5.10 4.38 1 Includes $150 million of impairments against intangible assets, acquired with MedImmune, relating to the return of rights to the heat shock protein 90 (Hsp90) drug candidates IPI-504 (MEDI-561) and the IPI-493 to Infinity Pharmaceuticals and revised forecasts for future royalties related to HPV vaccines. Also included is a $257 million impairment charge forEthyolfollowing the ‘at risk’ launch of a generic competitor. 35 -1% +1% UK ($m) 739 (640 ) US ($m) 226 (199 ) Sweden ($m) 333 (263 ) 2008 2007 $m $m Cash and short-term investments 6,044 7,760 Loans and borrowings (15,156 ) (1,223 ) (9,112 ) 6,537 Earnings before interest, tax, depreciation, amortisation and impairment 11,764 9,950 Movement in working capital (210 ) (443 ) Tax paid (2,209 ) (2,563 ) Interest paid (690 ) (335 ) Other non-cash movements 87 901 8,742 7,510 Purchase of intangibles (2,944 ) (549 ) Other capital expenditure (net) (1,057 ) (1,076 ) Acquisitions – (14,891 ) (4,001 ) (16,516 ) Dividends (2,739 ) (2,641 ) Net share re-purchases (451 ) (3,952 ) (3,190 ) (6,593 ) Other movements 387 (50 ) (7,174 ) (9,112 ) Comprised of: Cash and short-term investments 4,674 6,044 Loans and borrowings (11,848 ) (15,156 ) 37
$ Pence SEK Payment date First interim dividend 0.55 27.8 3.34 15 September 2008 Second interim dividend 1.50 104.8 12.02 16 March 2009 2.05 132.6 15.36
Total
Total Shares Dividend dividend shareholder re-purchased Cost per share cost distributions (million) $m $ $m $m 1999 4.4 183 0.700 1,242 1,425 2000 9.4 352 0.700 1,236 1,588 2001 23.5 1,080 0.700 1,225 2,305 2002 28.3 1,190 0.700 1,206 2,396 2003 27.2 1,154 0.795 1,350 2,504 2004 50.1 2,212 0.940 1,555 3,767 2005 67.7 3,001 1.300 2,068 5,069 2006 72.2 4,147 1.720 2,649 6,796 2007 79.9 4,170 1.870 2,740 6,910 2008 13.6 610 2.050 2,971 1 3,581 1 376.3 18,099 11.475 18,242 36,341 1 Total dividend cost estimated based upon number of shares in issue at 31 December 2008.
2007
2006 2007 compared to 2006
CER Growth due to CER Reported Reported growth exchange effects Reported growth growth $m $m $m $m % % Cardiovascular 6,686 292 276 6,118 5 9 Gastrointestinal 6,443 (379 ) 191 6,631 (6 ) (3 ) Infection and other 1,714 779 60 875 89 96 Neuroscience 5,340 484 152 4,704 10 14 Oncology 4,819 359 198 4,262 8 13 Respiratory and Inflammation 3,711 369 191 3,151 12 18 Others 846 79 33 734 11 15 29,559 1,983 1,101 26,475 7 12
2007 2006 Percentage of sales 2007 compared to 2006
CER Growth due to CER Reported Reported growth exchange effects Reported 2007 2006 growth growth $m $m $m $m % % % % Sales 29,559 1,983 1,101 26,475 7 12 Cost of sales (6,419 ) (703 ) (157 ) (5,559 ) (21.7 ) (21.0 ) 13 15 Gross margin 23,140 1,280 944 20,916 78.3 79.0 6 11 Distribution costs (248 ) (7 ) (15 ) (226 ) (0.8 ) (0.9 ) 3 10 Research and development (5,162 ) (944 ) (316 ) (3,902 ) (17.5 ) (14.7 ) 24 32 Selling, general and administrative costs (10,364 ) (843 ) (425 ) (9,096 ) (35.1 ) (34.4 ) 9 14 Other operating income and expense 728 188 16 524 2.5 2.0 36 39 8,094 (326 ) 204 8,216 27.4 31.0 (4 ) (1 ) 39
Floating rate 2009 $650m Fixed 5.4% 2012 $ 1,750m Fixed 5.9% 2017 $ 1,750m Fixed 6.45% 2037 $ 2,750m Fixed 5.125% 2015 €750m
Fixed 4.625% 2010 €750m Fixed 5.75% 2031 £350m 41
Insurance > Managing funding and liquidity risk > Optimising shareholder return > Maintaining a strong investment grade rating 43 > Revenue recognition > Research and development > Goodwill and intangible assets > Litigation > Post-retirement benefits > Taxation > Share-based compensation. > Chargebacks, where we enter into arrangements under which certain parties, typically hospitals, the Department of Veterans Affairs and the Department of Defense, are able to buy products from wholesalers at the lower prices we have contracted with them. The chargeback is the difference between the price we invoice to the wholesaler and the contracted price charged by the wholesaler. Chargebacks are paid directly to the wholesalers. > Regulatory, including Medicaid and other federal and state programmes, where we pay rebates based on the specific terms of agreements in individual states which include product usage and information on best prices and average market prices benchmarks. > Contractual, under which entities such as third party managed care organisations, long-term care facilities and group purchasing organisations are entitled to rebates depending on specified performance provisions, which vary from contract to contract. 2008 2007 2006 $m $m $m Gross sales 20,029 18,456 16,577 Chargebacks (1,726 ) (1,130 ) (975 ) Regulatory – US government and state programmes (1,005 ) (732 ) (532 ) Contractual – Managed care and group purchasing organisation rebates (3,658 ) (3,179 ) (2,413 ) Cash and other discounts (390 ) (356 ) (329 ) Customer returns (48 ) (18 ) (46 ) Other (167 ) (145 ) (256 ) Net sales 13,035 12,896 12,026 Adjustment Carried forward Brought forward Provision for in respect Returns at 31 December 1 January 2006 current year of prior years and payments 2006 $m $m $m $m $m Chargebacks 185 1,001 (26 ) (1,068 ) 92 Regulatory – US government and state programmes 601 597 (65 ) (819 ) 314 Contractual – Managed care and group purchasing organisation rebates 420 2,367 46 (2,198 ) 635 Cash and other discounts 27 329 – (327 ) 29 Customer returns 167 46 – (53 ) 160 Other 54 256 – (263 ) 47 1,454 4,596 (45 ) (4,728 ) 1,277 Additions in Adjustment Carried forward Brought forward respect of Provision for in respect Returns at 31 December 1 January 2007 MedImmune current year of prior years and payments 2007 $m $m $m $m $m $m Chargebacks 92 2 1,115 15 (1,038 ) 186 Regulatory – US government and state programmes 314 69 769 (37 ) (687 ) 428 Contractual – Managed care and group purchasing organisation rebates 635 5 3,100 79 (2,919 ) 900 Cash and other discounts 29 1 356 – (348 ) 38 Customer returns 160 1 19 (1 ) (94 ) 85 Other 47 – 153 – (147 ) 53 1,277 78 5,512 56 (5,233 ) 1,690 Adjustment Carried forward Brought forward Provision for in respect Returns at 31 December 1 January 2008 current year of prior years and payments 2008 $m $m $m $m $m Chargebacks 186 1,745 (19 ) (1,553 ) 359 Regulatory – US government and state programmes 428 997 8 (913 ) 520 Contractual – Managed care and group purchasing organisation rebates 900 3,622 36 (3,474 ) 1,084 Cash and other discounts 38 390 – (389 ) 39 Customer returns 85 48 – (56 ) 77 Other 53 167 – (163 ) 57 1,690 6,969 25 (6,548 ) 2,136 45 46 > AstraZeneca and Her Majesty’s Revenue & Customs (HMRC) have made a joint referral to the UK Court in respect of transfer pricing between our UK and one of our overseas operations for the years 1996 to date as there continues to be a material difference between the Group’s and HMRC’s positions. An additional referral in respect of controlled foreign company aspects of the same case was made during 2008. Absent a negotiated settlement, litigation is set to commence in 2010. > AstraZeneca has applied for two advance pricing agreements (APAs) in relation to intra-group transactions between the UK and the US and the UK and Japan. Both APAs are being progressed through competent authority proceedings under the relevant double tax treaties. 47 Less than 1 year 1-3 years 3-5 years Over 5 years Total $m $m $m $m $m Bank loans and other borrowings 1,616 2,800 2,665 12,478 19,559 Operating leases 101 131 81 145 458 Contracted capital expenditure 332 – – – 332 Total 2,049 2,931 2,746 12,623 20,349 > Despite a continually challenging environment, including generic pressure, combined sales ofArimidex,Crestor,Nexium,SeroquelandSymbicortup 5% in the US – 65% of our total US sales. > Maintained market position as the second largest brand name pharmaceutical company in Canada. > Solid sales performance in the Rest of World, up 5%. > Strong brand performance in Western Europe but intense competition and governmental controls over healthcare expenditure. > Strong volume growth from key products,Crestor,LosecandSeroquelin Japan. > Emerging Rest of World delivers strong sales growth, up 16% with Emerging Europe sales up 10% and Emerging Asia sales up 10%. > Continued expansion in China, including continued sales growth up 31%. > EU Commission of a Sectoral Inquiry into the pharmaceutical industry continues, with a final report expected in Spring 2009. 49 2008 2007 2006 2008 compared to 2007 2007 compared to 2006 Growth due Growth due CER to exchange CER to exchange CER Reported CER Reported Sales growth effect Sales growth effect Sales growth growth growth growth $m $m $m $m $m $m $m % % % % US 13,510 142 2 13,366 917 – 12,449 1 1 7 7 Canada 1,275 95 35 1,145 54 60 1,031 8 11 5 11 14,785 237 37 14,511 971 60 13,480 2 2 7 8 Western Europe 9,743 55 573 9,115 282 760 8,073 1 7 3 13 Japan 1,957 73 223 1,661 170 (12 ) 1,503 4 18 11 11 Other Established ROW 843 107 21 715 83 77 555 15 18 15 29 12,543 235 817 11,491 535 825 10,131 2 9 5 13 Emerging Europe 1,215 102 85 1,028 102 95 831 10 18 12 24 China 627 136 54 437 91 18 328 31 43 28 33 Emerging Asia Pacific 802 72 (19 ) 749 62 41 646 10 7 10 16 Other Emerging ROW 1,629 247 39 1,343 223 61 1,059 18 21 21 27 4,273 557 159 3,557 478 215 2,864 16 20 17 24 31,601 1,029 1,013 29,559 1,984 1,100 26,475 3 7 7 12 51 > Crestorsales up 26% to $3.6 billion andCrestor is now approved in every EU country. > Crestorstudy demonstrates significant reduction in major cardiovascular events (44% compared to placebo in men and women with elevated hsCRP but low/normal cholesterol levels). > Atacandsales up 10% to $1.5 billion. > Worldwide collaboration with Bristol-Myers Squibb to develop and commercialise dapagliflozin expanded to include Japan. > US submission for fixed dose combination ofCrestorand Abbott’s Trilipix™, for the treatment of mixed dyslypidaemia, anticipated for third quarter 2009. > Toprol-XLUS sales down 70% for the full year. 1 Licensed from Shionogi & Co. Ltd. 2 Licensed from Takeda Chemicals Industries Ltd. 3 Licensed from Merck & Co., Inc.
Our key marketed products 55 2008 2007 2006 2008 compared to 2007 2007 compared to 2006 Growth due Growth due CER to exchange CER to exchange CER Reported CER Reported Sales growth effect Sales growth effect Sales growth growth growth growth $m $m $m $m $m $m $m % % % % 807 (667 ) 36 1,438 (393 ) 36 1,795 (46 ) (44 ) (22 ) (20 ) 3,597 714 87 2,796 673 95 2,028 26 29 33 38 1,471 123 61 1,287 99 78 1,110 10 14 9 16 268 (18 ) 15 271 (20 ) 16 275 (7 ) (1 ) (7 ) (1 ) 313 (17 ) 22 308 (24 ) 12 320 (6 ) 2 (8 ) (4 ) 236 (72 ) 13 295 (30 ) 18 307 (24 ) (20 ) (10 ) (4 ) Other 271 (34 ) 14 291 (14 ) 22 283 (12 ) (7 ) (5 ) 2 6,963 29 248 6,686 291 277 6,118 – 4 5 9
In the pipeline
Reported performance
Reported performance> Sales ofNexium$5.2 billion, down 2%. > Nexiumsubmissions in the EU for the short-term maintenance of haemostasis and prevention of re-bleeding in patients with peptic ulcer bleeding following therapeutic endoscopy and in the US for use in patients with peptic ulcer bleeding following therapeutic endoscopy. > In late 2008, a Complete Response Letter received from the FDA in connection with ourNexiumsubmission for peptic ulcer bleeding. > Losec/Prilosec sales $1.05 billion declining in the EU and US due to continuous generic pressure including the recent patent expiry in Italy. Overall sales down 14%; Japan sales still growing, up 5%. > Settlement of patent litigation in the US brought by AstraZeneca against Ranbaxy, with enforceability of disputedNexiumpatents conceded and an agreement for licensed sales of genericNexiumfrom May 2014. > Other patent litigation continuing in the US against generic manufacturers following abbreviated new drug applications relating toNexium.
REFLUX DISEASE (GERD)
Our key marketed products 2008 2007 2006 2008 compared to 2007 2007 compared to 2006 Growth due Growth due CER to exchange CER to exchange CER Reported CER Reported Sales growth effect Sales growth effect Sales growth growth growth growth $m $m $m $m $m $m $m % % % % 5,200 (121 ) 105 5,216 (104 ) 138 5,182 (2 ) – (2 ) 1 1,055 (156 ) 68 1,143 (277 ) 49 1,371 (14 ) (8 ) (20 ) (17 ) Other 89 2 3 84 2 4 78 2 6 3 8 6,344 (275 ) 176 6,443 (379 ) 191 6,631 (4 ) (2 ) (6 ) (3 )
Reported performance
Reported performance> Merremsales of $897 million, up 13%. > Strong reported growth forMerremof 16% globally; 39% in the US. > Synagissales of $1.23 billion; in the US $923 million. > Biologics Licence Application submitted for motavizumab, an improved anti-respiratory syncytial virus monoclonal antibody. A Complete Response Letter subsequently received from the FDA. > Market authorisation application submitted to European Medicines Agency for Live Attenuated Influenza Vaccine. 1 Licensed from Dainippon Sumitomo Pharma Co., Ltd.
Our key marketed products
Our key marketed products
Our key marketed products 2008 2007 2006 2008 compared to 2007 2007 compared to 2006 Growth due Growth due CER to exchange CER to exchange CER Reported CER Reported Sales growth effect Sales growth effect Sales growth growth growth growth $m $m $m $m $m $m $m % % % % 897 97 27 773 121 48 604 13 16 20 28 1,230 612 – 618 618 – – n/m n/m n/m n/m 104 51 – 53 53 – – n/m n/m n/m n/m Other 220 (54 ) 4 270 (12 ) 11 271 (20 ) (19 ) (4 ) – 2,451 706 31 1,714 780 59 875 41 43 89 96 1 Acquired in June 2007.
In the pipeline
In the pipeline
Reported performance
Reported performance> Seroquelsales up 9% to over $4.45 billion. > Seroquel XRapproved in the US for acute bipolar depression, acute bipolar mania and bipolar maintenance. > Seroquel XRapproved under the European Mutual Recognition Procedure for the treatment of acute bipolar depression and acute bipolar mania in October.Seroquelalso approved at the same time for the treatment of acute bipolar depression. > FDA Complete Response Letter received onSeroquel XRfor Major Depressive Disorder in December. > Regulatory submissions made forSeroquel XRfor the treatment of Major Depressive Disorder and for Generalised Anxiety Disorder in both the US and EU. > 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 toSeroquel. > Separate lawsuits filed in the US against third party manufacturers relating to infringement of theSeroquel XRpatents. > Personal injury actions in the US and Canada involvingSeroquelbeing defended vigorously.
SeroquelandSeroquel XRand by the successful introduction of a range of new medicines aimed at significant medical need in psychiatry, analgesia (pain control) and cognition (including Alzheimer’s disease and cognitive disorders in schizophrenia).
Our key marketed products
We have progressed AZD8529 into Phase I and AZD2624 into Phase II for the treatment of schizophrenia, with AZD2327 entering Phase Ila and AZD6765 and AZD7325 entering into Phase IIb clinical development for the treatment of anxiety and/or depression. 2008 2007 2006 2008 compared to 2007 2007 compared to 2006 Growth due Growth due CER to exchange CER to exchange CER Reported CER Reported Sales growth effect Sales growth effect Sales growth growth growth growth $m $m $m $m $m $m $m % % % % 4,452 346 79 4,027 526 85 3,416 9 11 15 18 278 (3 ) 18 263 (53 ) 12 304 (1 ) 6 (17 ) (13 ) 448 (3 ) 17 434 18 18 398 (1 ) 3 5 9 Local anaesthetics 605 13 35 557 (6 ) 34 529 2 9 (1 ) 5 Other 54 (7 ) 2 59 (1 ) 3 57 (12 ) (8 ) (2 ) 4 5,837 346 151 5,340 484 152 4,704 6 9 10 14
(PAIN CONTROL)
Our key marketed products
In the pipeline 63
Reported performance
Reported performance> Arimidexsales up 4% to $1.86 billion and is the leading branded hormonal breast cancer therapy in the US, Japan and France. > Casodexsales $1.26 billion, down 12%. Expiry of EU marketing exclusivity in 2008. > Zoladexsales $1.14 billion, down 3%. > Results from three Phase IIIZactimatrials in non-small cell lung cancer (NSCLC) showed thatZactima, in combination with standard chemotherapy, brings clinical benefits to patients with previously treated NSCLC. > Results from theIressaPhase III INTEREST study underpin a marketing authorisation application in the EU and the pan-Asian IPASS study met its primary objective showing superior progression-free survival forIressacompared with two chemotherapies in clinically selected patients. > ZD4054 progressed into Phase III development for hormone-resistant prostate cancer. > Registration trials ongoing ofRecentinin first line colorectal cancer and recurrent glioblastoma multiforme.
Our key marketed products1 In November 2008, we entered into an agreement with Abraxis under which Abraxis re-acquired exclusive rights to market Abraxane® in the US. 65 2008 2007 2006 2008 compared to 2007 2007 compared to 2006 Growth due Growth due CER to exchange CER to exchange CER Reported CER Reported Sales growth effect Sales growth effect Sales growth growth growth growth $m $m $m $m $m $m $m % % % % 1,258 (161 ) 84 1,335 74 55 1,206 (12 ) (6 ) 6 11 1,857 69 58 1,730 151 71 1,508 4 7 10 15 1,138 (31 ) 65 1,104 39 57 1,008 (3 ) 3 4 10 265 8 19 238 (1 ) 2 237 3 11 – – 249 25 10 214 18 10 186 12 16 10 15 85 (5 ) 7 83 (8 ) 2 89 (6 ) 2 (9 ) (7 ) 64 2 – 62 44 – 18 3 3 244 244 28 (15 ) – 43 43 – – n/m n/m n/m n/m Other 10 (1 ) 1 10 (1 ) 1 10 (10 ) – (10 ) – 4,954 (109 ) 244 4,819 359 198 4,262 (2 ) 3 8 13
Reported performance
Reported performance> Symbicortsales over $2 billion, up 22%. > Symbicort Rapihaler(pMDI) licensed for long-term maintenance treatment of asthma in the US. Submissions made for use in COPD and paediatric asthma. > Outside the US,Symbicort Turbuhaler SMARTnow approved for use in managing asthma in over 90 countries. > Symbicort Turbuhalernow approved in COPD in over 80 countries. > The Joint Advisory Committee of the FDA concluded that the benefits ofSymbicortoutweigh the risks in adult and adolescent asthma patients. > Continued growth forPulmicortwith sales of $1.49 billion. > Settlement of AstraZeneca’sPulmicort Respulespatent infringement litigation against Teva including an exclusive licence to Teva to sell genericPulmicort Respulesfrom 15 December 2009 with significant royalties for AstraZeneca.
Our key marketed products 2008 2007 2006 2008 compared to 2007 2007 compared to 2006 Growth due Growth due CER to exchange CER to exchange CER Reported CER Reported Sales growth effect Sales growth effect Sales growth growth growth growth $m $m $m $m $m $m $m % % % % 1,495 7 34 1,454 128 34 1,292 – 3 10 13 2,004 346 83 1,575 265 126 1,184 22 27 22 33 322 (41 ) 9 354 (16 ) 10 360 (12 ) (9 ) (4 ) (2 ) 71 (21 ) 6 86 (9 ) 7 88 (24 ) (17 ) (10 ) (2 ) 73 (4 ) 1 76 (6 ) 1 81 (5 ) (4 ) (7 ) (6 ) Other 163 (9 ) 6 166 7 13 146 (5 ) (2 ) 5 14 4,128 278 139 3,711 369 191 3,151 7 11 12 18 69
In the pipeline
Reported performance
Reported performance> Implementation of green technology principles in our process design. > Exploring the potential for further investment in low carbon and renewable energy options at our sites. > Further investment in greener energy supply from external power suppliers. > Implementation of further energy conservation programmes, particularly related to fume cupboards in laboratories. 73 75
marketing exclusivity 77 > We may have limited access to and/or supply of biological materials, such as cells or animal products or by-products. In addition, government regulations in multiple jurisdictions could result in restricted access to, use or transport of such materials. Loss of access to sufficient sources of such materials, or tighter restrictions on the use of such materials may interrupt or prevent our research activities as planned and/or increase our costs. > The development, manufacturing and marketing of biological products are often subject to more complex and stringent regulations than those applicable to other pharmaceutical products. As a result, the production and release schedules for biological products may be more significantly affected by the regulatory process than for other products. In addition, various legislative and regulatory authorities are considering whether an abbreviated approval process is appropriate for biosimilars or follow-on biological products (similar versions of existing biological products). It is uncertain as to when, or if, any such process may be adopted or how such a process would relate to intellectual property rights in connection with marketed or pipeline biological products, but any such process could have a material effect on the future commercial prospects for patented biological products. > Manufacturing biological products, especially in large quantities, is often complex and may require the use of innovative technologies to handle living micro-organisms. Manufacturing biological products requires facilities specifically designed and validated for this purpose, with sophisticated quality assurance and quality control procedures. Slight deviations in any part of the manufacturing process may result in lot failure, product recalls or spoilage, for example due to contamination. > The methods of distributing and marketing biological products could have a material impact on the revenue we are able to generate from the sales of products such asSynagisandFluMist. The commercialisation of biologic products is often more complex than for traditional pharmaceutical products. This is primarily due to differences in mode of administration, technical aspects of the product, and the rapidly changing distribution and reimbursement environments. The tools available to the commercial team can be more limited and time-consuming in that the target physicians who prescribe biologics are often hospital-based specialists who treat patients with rare diseases. Biologics sales forces are usually smaller, more targeted and typically are required to make a more detailed, data-driven sales call. Patient education and awareness also requires a more personalised approach in that broad-based awareness campaigns, such as direct-to-consumer advertising in the US, is often not an efficient means by which to reach a smaller target population. 79 > Failure to obtain the required regulatory approvals for the product candidate or the facilities in which it is manufactured. > Adverse reactions to the product candidate or indications of other safety concerns. > Inability to manufacture sufficient quantities of the product candidate for development or commercialisation activities in a timely and cost-efficient manner. > Unfavourable data from key studies. > Excessive costs of, or difficulty in, manufacturing. > Erosion of patent term and other intellectual property rights, and infringement of those rights and the intellectual property rights owned by third parties. > Failure to show value or a differentiated profile for our products. > Acquisition of MedImmune to accelerate our biologics capability. > Collaboration with Bristol-Myers Squibb Company to develop and commercialise two investigational compounds being studied for the treatment of Type 2 diabetes, saxagliptin and dapagliflozin. > Collaboration with POZEN Inc. to develop a fixed dose combination of enteric coated naproxen and immediate release esomeprazole for chronic pain (PN400), utilising POZEN’s proprietary technology. 81 > Agreement with Abbott for the development of Abbott’s next-generation fenofibrate (ABT-335) andCrestorin a single pill, fixed-dose combination treatment to target all three major blood lipids – LDL-C ‘bad cholesterol’, HDL-C ‘good cholesterol’ and triglycerides. > Collaboration deals with Columbia University and Newcastle University to support our early stage discovery activities.
Chairman of the Nomination
and Governance Committee and
Member of the Remuneration Committee
Member of the Science Committee
Chairman of the Science Committee and
Member of the Remuneration Committee
Member of the Audit Committee
Chief Executive Officer
Chairman of the Remuneration Committee
and Member of the Nomination and
Governance Committee
Member of the Nomination and
Governance Committee
Member of the Audit Committee,
the Nomination and Governance
Committee and the Science Committee
Member of the Audit Committee
Chief Financial Officer
Chairman of the Audit Committee and
Member of the Remuneration Committee
Member of the Audit Committee and the
Nomination and Governance Committee
Member of the Science Committee 85
Vice-President, Global Marketing
Sales and Marketing Organisation
Resources and Corporate Affairs 87 Number of meetings attended/ (number of meetings Director Name was eligible to attend in 2008) Bo Angelin 8 (8) David Brennan 8 (8) John Buchanan 7 (8) 6 (7) Jane Henney 7 (8) Michele Hooper 8 (8) Simon Lowth 8 (8) 3 (3) Håkan Mogren 5 (8) 8 (8) Nancy Rothwell 6 (8) Louis Schweitzer 8 (8) John Varley 6 (8) Marcus Wallenberg 7 (8) 1 Jean-Philippe Courtois was appointed on 18 February 2008 in accordance with the Company’s Articles of Association. 2 Rudy Markham was appointed on 12 September 2008 in accordance with the Company’s Articles of Association. 3 John Patterson will retire on 31 March 2009. > Jean-Philippe Courtois and Rudy Markham were appointed as Non-Executive Directors on 18 February 2008 and 12 September 2008 respectively, in accordance with Article 70 of the Articles. > On 4 November 2008, the Company announced that John Patterson will retire from the Board on 31 March 2009. Nomination Audit Remuneration and Governance Science Name Committee Committee Committee Committee Independent1 Bo Angelin x x x √ √ David Brennan x x x x x John Buchanan Chair √ x x √ √ x x x √ Jane Henney √ x √ √ √ √ x √ x √ Simon Lowth x x x x x √ x x x √ Håkan Mogren x x √ x x John Patterson x x x √ x Nancy Rothwell x √ x Chair √ Louis Schweitzer x √ Chair x N/A 5 John Varley x Chair √ x √ Marcus Wallenberg x x x x x 1 As determined by the Board for UK Combined Code purposes. 2 Appointed 18 February 2008. 3 Michele Hooper is the Senior Non-Executive Director. 4 Appointed 12 September 2008. 5 For the purposes of the UK Combined Code (although determined by the Board to be independent on appointment). 89 > Matters relating to the audit plans of the external auditor and Group Internal Audit (GIA). > The Company’s overall framework for internal control over financial reporting and for other internal controls and processes. > The Company’s overall framework for risk management, particularly financial risks. > The accounting policies and practices of the Company. > The annual and quarterly financial reporting carried out by the Company. > The Company’s financial disclosures were reviewed and various accounting matters considered. 90 > Reports were received from the external auditor concerning its audit of the Financial Statements of the Group and from management, GIA, Global Compliance and the external auditor on the effectiveness of the Company’s system of internal controls and, in particular, its internal control over financial reporting. This included review and discussion of the results of the Company’s ‘continuous assurance’ and annual ‘letter of assurance’ processes (described further below in the UK Corporate Governance Requirement section). The Audit Committee also reviewed quarterly activity reports of audit work carried out by GIA and the status of follow-up actions with management as well as reports from the Global Compliance function. > The Company’s continuing work to comply with the applicable provisions of the US Sarbanes-Oxley Act of 2002. In particular, it regularly reviewed the status of compliance with the programme of internal controls over financial reporting implemented pursuant to section 404 of the Act. Further information about the implementation of section 404 of the Act is set out in the Financial Review on page 47. > A review of data about calls made by employees via the AZethics telephone lines and other routes regarding potential breaches of the Company’s Code of Conduct together with the results of enquiries into these matters. No material issues were reported through this route during the year. > The Audit Committee reviewed reports from the Vice-President, GIA on areas where GIA’s resources could most appropriately be focused and where efficiency savings could be achieved in the context of the strengthening capabilities of the Global Compliance function and the continued work of the Financial Controls and Compliance Group. > Reports from the Group Treasury Function and, in particular, considered the Group’s liquidity and cash position and the appropriateness of its cash management policies in the context of the current economic situation. > Other reports concerning the GIA, global compliance and financial compliance and control and the global finance functions, including the internal audit plan and progress and plans of the Global Compliance Officer. > The amount of audit and non-audit fees of the external auditor throughout 2008. The Audit Committee was satisfied throughout the year that the objectivity and independence of the external auditor were not in any way impaired by either the nature of the non-audit work undertaken by the external auditor during the year, the level of non-audit fees charged for such work or any other facts or circumstances. Further information about the audit and non-audit fees for the year is disclosed in Note 27 to the Financial Statements on page 163. > A review and assessment of the Audit Committee’s performance and it was concluded that this was satisfactory. 91
Governance Committee> To provide assurance to the Board regarding the quality, integrity and competitiveness of the Company’s science-based R&D activities. The Committee aims to assure itself that the approaches and targets adopted throughout the R&D organisation are competitive and an appropriate use of shareholders’ funds, but is not expected to review individual research or licensing projects. > To consider reports from or join any meeting with any relevant external advisory board when the Company is considering entry into new areas of science or medicine. > To review, from time to time, together with other external experts important bioethical issues faced by the Company and to assist in the formulation of, and to agree on behalf of the Board, appropriate policies in relation to such issues. > To consider with external experts, from time to time, future trends in medical science and technology.
US GOVERNANCE REQUIREMENTS 93 > The processes for ensuring that key business risks are effectively managed. > The financial and operational controls that help to ensure that the Group’s assets are properly safeguarded from losses, including fraud. > The controls that help to ensure the reliability and integrity of management information systems. > The processes for ensuring compliance with policies and procedures, external legislation and regulation. > On an ad hoc basis, whether value for money is obtained (in terms of efficient use of the Group’s resources). 95 > Structure of the Company’s share capital and rights and obligations attaching to shares (contained in the Corporate Information section starting on page 197 and Notes to the Financial Statements on page 129). > Significant holders of the Company’s shares (contained in the Shareholder Information section starting on page 190). > Appointment and replacement of Directors (contained in the Corporate Governance section starting on page 83). > Powers of Directors (contained in the Corporate Governance section starting on page 83). > Amendments to the Company’s Articles (contained in the Corporate Information section starting on page 197). > Details of the Company’s employee share schemes (set out on pages 139 to 142).
Company Secretary> Select suitable accounting policies and then apply them consistently. > Make judgements and estimates that are reasonable and prudent. > For the Group Financial Statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU. > For the Company Financial Statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Company Financial Statements. > Prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business. > 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. AUDITOR’S REPORTS ON THE FINANCIAL STATEMENTS AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING (SARBANES-OXLEY ACT SECTION 404) 99 > The Group Financial Statements give a true and fair view, in accordance with IFRSs as adopted by the EU, of the state of the Group’s affairs as at 31 December 2008 and of its profit for the year then ended. > The Group Financial Statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation. > The information given in the Directors’ Report is consistent with the Group Financial Statements.
Chartered Accountants
Registered Auditor
8 Salisbury Square
London EC4Y 8BB
29 January 2009 2008 2007 2006 Notes $m $m $m 31,601 29,559 26,475 Cost of sales (6,598 ) (6,419 ) (5,559 ) 25,003 23,140 20,916 Distribution costs (291 ) (248 ) (226 ) Research and development (5,179 ) (5,162 ) (3,902 ) Selling, general and administrative costs (10,913 ) (10,364 ) (9,096 ) Other operating income and expense 1 524 728 524 1 9,144 8,094 8,216 Finance income 2 854 959 888 Finance expense 2 (1,317 ) (1,070 ) (561 ) 8,681 7,983 8,543 Taxation 3 (2,551 ) (2,356 ) (2,480 ) 6,130 5,627 6,063 Equity holders of the Company 6,101 5,595 6,043 Minority interests 29 32 20 Basic earnings per $0.25 Ordinary Share 4 $4.20 $3.74 $3.86 Diluted earnings per $0.25 Ordinary Share 4 $4.20 $3.73 $3.85 Weighted average number of Ordinary Shares in issue (millions) 4 1,453 1,495 1,564 Diluted weighted average number of Ordinary Shares in issue (millions) 4 1,453 1,498 1,570 Dividends declared and paid in the period 21 2,767 2,658 2,217 2008 2007 2006 Notes $m $m $m Profit for the period 6,130 5,627 6,063 Foreign exchange arising on consolidation (1,336 ) 492 922 Foreign exchange differences on borrowings forming net investment hedges 291 (40 ) – Gain/(loss) on cash flow hedge in connection with debt issue 1 (21 ) – Available for sale gains/(losses) taken to equity 2 (9 ) (20 ) Actuarial loss for the period (1,232 ) (113 ) (108 ) Tax on items taken directly to reserves 3 368 33 137 (1,906 ) 342 931 19 4,224 5,969 6,994 Equity holders of the Company 19 4,176 5,934 6,970 Minority interests 19 48 35 24 2008 2007 2006 Notes $m $m $m Property, plant and equipment 7 7,043 8,298 7,453 Goodwill 8 9,874 9,884 1,097 Intangible assets 9 12,323 11,467 3,107 Other investments 10 156 182 119 Deferred tax assets 3 1,236 1,044 1,220 30,632 30,875 12,996 Inventories 11 1,636 2,119 2,250 Trade and other receivables 12 7,261 6,668 5,561 Other investments 10 388 177 657 Income tax receivable 2,581 2,251 1,365 Cash and cash equivalents 13 4,286 5,867 7,103 16,152 17,082 16,936 46,784 47,957 29,932 Interest bearing loans and borrowings 14 (993 ) (4,280 ) (136 ) Trade and other payables 17 (7,178 ) (6,968 ) (6,295 ) Provisions 18 (600 ) (387 ) (39 ) Income tax payable (4,549 ) (3,552 ) (2,977 ) (13,320 ) (15,187 ) (9,447 ) Interest bearing loans and borrowings 14 (10,855 ) (10,876 ) (1,087 ) Deferred tax liabilities 3 (3,126 ) (4,119 ) (1,559 ) Retirement benefit obligations 23 (2,732 ) (1,998 ) (1,842 ) Provisions 18 (542 ) (633 ) (327 ) Other payables 17 (149 ) (229 ) (254 ) (17,404 ) (17,855 ) (5,069 ) (30,724 ) (33,042 ) (14,516 ) 16,060 14,915 15,416 Share capital 20 362 364 383 Share premium account 19 2,046 1,888 1,671 Capital redemption reserve 19 94 91 71 Merger reserve 19 433 433 433 Other reserves 19 1,405 1,378 1,398 Retained earnings 19 11,572 10,624 11,348 15,912 14,778 15,304 19 148 137 112 19 16,060 14,915 15,416
DirectorSIMON LOWTH
Director 2008 2007 2006 Notes $m $m $m Profit before tax 8,681 7,983 8,543 Finance income and expense 2 463 111 (327 ) Depreciation, amortisation and impairment 2,620 1,856 1,345 Increase in trade and other receivables (1,032 ) (717 ) (470 ) Decrease in inventories 185 442 158 Increase/(decrease) in trade and other payables 637 (168 ) 420 Other non-cash movements 87 901 263 Cash generated from operations 11,641 10,408 9,932 Interest paid (690 ) (335 ) (70 ) Tax paid (2,209 ) (2,563 ) (2,169 ) 8,742 7,510 7,693 Acquisitions of business operations 22 – (14,891 ) (1,148 ) Movement in short term investments and fixed deposits 1 894 1,120 Purchase of property, plant and equipment (1,095 ) (1,130 ) (794 ) Disposal of property, plant and equipment 38 54 35 Purchase of intangible assets (2,944 ) (549 ) (545 ) Disposal of intangible assets – – 661 Purchase of non-current asset investments (40 ) (35 ) (17 ) Disposal of non-current asset investments 32 421 68 Interest received 149 358 352 Payments made by subsidiaries to minority interests (37 ) (9 ) (4 ) (3,896 ) (14,887 ) (272 ) 4,846 (7,377 ) 7,421 Proceeds from issue of share capital 159 218 985 Re-purchase of shares (610 ) (4,170 ) (4,147 ) Issue of loans 787 9,692 – Repayment of loans – (1,165 ) – Dividends paid (2,739 ) (2,641 ) (2,220 ) Movement in short term borrowings (3,959 ) 4,117 16 (6,362 ) 6,051 (5,366 ) (1,516 ) (1,326 ) 2,055 Cash and cash equivalents at beginning of the period 5,727 6,989 4,895 Exchange rate effects (88 ) 64 39 13 4,123 5,727 6,989 105 > Cash and cash equivalents > Fixed deposits > Other investments > Bank and other borrowings > Derivatives > Business combinations – IFRS 3 ‘Business Combinations’ has been applied from 1 January 2003, the date of transition, rather than being applied fully retrospectively. As a result, the combination of Astra and Zeneca is still accounted for as a merger, rather than through purchase accounting. If purchase accounting had been adopted, Zeneca would have been deemed to have acquired Astra. > Cumulative exchange differences – the Group chose to set the cumulative exchange difference reserve at 1 January 2003 to zero. > Contingent consideration will be measured at fair value, with subsequent changes to the fair value being recognised in the income statement. > Transaction costs, other than share and debt issue costs, will be expensed as incurred. > Any pre-existing interest in the acquiree will be measured at fair value with the gain or loss recognised in the income statement. > Any non-controlling (minority) interest will be measured at either fair value, or at its proportionate interest in the identifiable assets and liabilities of the acquiree, on a transaction by transaction basis. 107 2008 2007 2006 $m $m $m 113 236 327 Net gain on disposal of property, plant and equipment 6 9 2 Net loss on disposal of intangible assets (17 ) (1 ) (1 ) Gains on divestments of non-core products 118 192 161 Other income 304 310 115 Other expense – (18 ) (80 ) 524 728 524 1 Royalty income is net of amortisation of intangible assets relating to royalty income streams and in 2008 the impairment of the HPV royalty intangible asset ($91m). 2008 2007 2006 $m $m $m Cost of sales 405 415 – Research and development 166 73 – Selling, general and administrative expenses 310 478 – 881 966 – 2008 2007 2006 $m $m $m Severance costs 499 678 – Accelerated depreciation and impairment 219 203 – Other 163 85 – 881 966 – 2008 2007 2006 $m $m $m Returns on fixed deposits and equity securities 15 52 29 Returns on short-term deposits 127 298 330 Expected return on post-employment defined benefit plan assets 584 573 518 Fair value gains on debt, interest rate swaps and investments 128 36 11 854 959 888 Interest on debt and commercial paper (664 ) (513 ) (59 ) Interest on overdrafts and other financing costs (50 ) (9 ) (13 ) Interest on post-employment defined benefit plan liabilities (589 ) (539 ) (475 ) Fair value charges on debt, interest rate swaps and investments (2 ) (6 ) – Net exchange losses (12 ) (3 ) (14 ) (1,317 ) (1,070 ) (561 ) (463 ) (111 ) 327 109 2008 2007 2006 $m $m $m Current year 2,946 1,890 2,431 Adjustment for prior years 130 261 270 3,076 2,151 2,701 Origination and reversal of temporary differences (486 ) 379 (81 ) Adjustment to prior years (39 ) (174 ) (140 ) (525 ) 205 (221 ) 2,551 2,356 2,480 2008 2007 2006 $m $m $m Profit before tax 8,681 7,983 8,543 2,474 2,395 2,563 Differences in effective overseas tax rates (8 ) (105 ) (156 ) (70 ) (57 ) – Unrecognised deferred tax asset (7 ) (1 ) (6 ) Items not deductible for tax purposes 119 70 58 Items not chargeable for tax purposes (48 ) (33 ) (109 ) Adjustments in respect of prior periods 91 87 130 2,551 2,356 2,480 1 The UK statutory tax rate was reduced from 30% to 28% effective from 1 April 2008 resulting in the effective tax rate for the Group for 2008 being 28.5%. 2 The 2008 item relates to the reduction in the Swedish statutory corporation tax rate from 28% to 26.3% effective from 1 January 2009. The majority of the 2007 item relates to the reduction in the UK statutory corporation tax rate referred to above. Losses Pension Inter- and tax Property, and post- company Deferred credits plant and Intangible retirement inventory Untaxed Accrued Share capital carried equipment assets benefits transfers reserves1 expenses schemes gains forward Other Total $m $m $m $m $m $m $m $m $m $m $m Deferred tax assets at 1 January 2007 37 2 604 853 – 323 113 – 57 28 2,017 Deferred tax liabilities at 1 January 2007 (502 ) (819 ) – – (881 ) – – (99 ) – (55 ) (2,356 ) (465 ) (817 ) 604 853 (881 ) 323 113 (99 ) 57 (27 ) (339 ) Income statement (130 ) 201 (99 ) (71 ) (225 ) 190 (45 ) 12 (96 ) 58 (205 ) Statement of recognised income and expense – – 8 – – – (8 ) – – – – 3 (2,973 ) – 58 – 74 – – 369 (29 ) (2,498 ) Exchange (35 ) (5 ) 15 46 (65 ) 11 2 (1 ) – (1 ) (33 ) (627 ) (3,594 ) 528 886 (1,171 ) 598 62 (88 ) 330 1 (3,075 ) Deferred tax assets at 31 December 2007 66 59 531 907 – 611 62 – 330 71 2,637 Deferred tax liabilities at 31 December 2007 (693 ) (3,653 ) (3 ) (21 ) (1,171 ) (13 ) – (88 ) – (70 ) (5,712 ) (627 ) (3,594 ) 528 886 (1,171 ) 598 62 (88 ) 330 1 (3,075 ) Income statement 122 375 24 55 (119 ) 37 43 – 12 (24 ) 525 Statement of recognised income and expense – – 340 – – – 9 – – (1 ) 348 Exchange 168 130 (113 ) (35 ) 199 (37 ) (14 ) 24 (7 ) (3 ) 312 (337 ) (3,089 ) 779 906 (1,091 ) 598 100 (64 ) 335 (27 ) (1,890 ) Deferred tax assets at 31 December 2008 136 42 786 935 – 598 100 – 335 45 2,977 Deferred tax liabilities at 31 December 2008 (473 ) (3,131 ) (7 ) (29 ) (1,091 ) – – (64 ) – (72 ) (4,867 ) (337 ) (3,089 ) 779 906 (1,091 ) 598 100 (64 ) 335 (27 ) (1,890 ) 2008 2007 2006 Analysed in the balance sheet, after offset of balances within countries, as: $ m $ m $m Deferred tax assets 1,236 1,044 1,220 Deferred tax liabilities (3,126 ) (4,119 ) (1,559 ) (1,890 ) (3,075 ) (339 ) 1 Untaxed reserves relate to taxable profits where the tax liability is deferred to later periods. 2 During 2008, the Group carried out a review of its deferred tax balances resulting in a reclassification of a deferred tax liability of $284m from property, plant and equipment to intangible assets as at 31 December 2007 ($328m as at 1 January 2007). 3 The deferred tax liability of $2,498m relates to MedImmune, Inc. and other acquisitions. 111 2008 2007 2006 Profit for the financial year attributable to equity holders ($m) 6,101 5,595 6,043 Basic earnings per Ordinary Share $4.20 $3.74 $3.86 Diluted earnings per Ordinary Share $4.20 $3.73 $3.85 Weighted average number of Ordinary Shares in issue for basic earnings (millions) 1,453 1,495 1,564 Dilutive impact of share options outstanding (millions) – 3 6 Diluted weighted average number of Ordinary Shares in issue (millions) 1,453 1,498 1,570 Revenue 2008 2007 2006 $m $m $m External 1,910 1,981 1,686 Intra-Group 8,460 6,506 6,123 10,370 8,487 7,809 Belgium 380 387 344 France 1,945 1,806 1,641 Germany 1,225 1,164 1,113 Italy 1,145 1,111 1,075 Spain 832 840 723 Sweden 1,135 985 843 Others 2,696 2,291 1,929 Intra-Group 3,895 4,123 4,314 13,253 12,707 11,982 �� Canada 1,269 1,145 1,031 US 13,657 13,404 12,381 Others 1,155 872 673 Intra-Group 1,169 786 351 17,250 16,207 14,436 Australia 763 631 481 Japan 1,861 1,585 1,433 China 627 403 224 Others 1,001 954 898 Intra-Group 78 56 49 4,330 3,629 3,085 Continuing operations 45,203 41,030 37,312 Intra-Group eliminations (13,602 ) (11,471 ) (10,837 ) 31,601 29,559 26,475 Operating profit Profit before tax 2008 2007 2006 2008 2007 2006 Profit from $m $m $m $m $m $m UK 2,907 2,060 1,852 2,612 1,828 1,936 Continental Europe 3,136 2,894 3,648 3,233 2,964 3,700 The Americas 2,705 2,734 2,437 2,440 2,781 2,627 Asia, Africa & Australasia 396 406 279 396 410 280 Continuing operations 9,144 8,094 8,216 8,681 7,983 8,543 Total assets 2008 2007 2006 $m $m $m UK 9,270 12,003 13,346 Continental Europe 6,229 7,311 6,937 The Americas 26,215 24,175 6,334 Asia, Africa & Australasia 2,489 2,217 1,950 Income tax receivable 2,581 2,251 1,365 Continuing operations 46,784 47,957 29,932 Assets acquired1 Net operating assets2 2008 2007 2006 2008 2007 2006 $m $m $m $m $m $m UK 440 929 2,282 4,234 5,043 4,977 Continental Europe 295 624 440 3,683 4,972 4,820 The Americas 3,252 17,858 292 21,033 19,742 2,081 Asia, Africa & Australasia 67 48 50 1,732 1,510 1,270 Continuing operations 4,054 19,459 3,064 30,682 31,267 13,148 1 Included in ‘assets acquired’ are those assets that are expected to be used during more than one period (property, plant and equipment, goodwill and intangible assets). 2 ‘Net operating assets’ exclude short-term investments, cash, short-term borrowings, loans, retirement benefit obligations and non-operating receivables and payables. Property, plant and equipment 2008 2007 2006 $m $m $m UK 1,750 2,490 2,508 Sweden 1,722 2,204 2,104 US 2,200 1,915 1,172 Rest of the world 1,371 1,689 1,669 Continuing operations 7,043 8,298 7,453 2008 2007 2006 $m $m $m UK 994 1,003 850 Continental Europe 9,937 9,138 8,053 The Americas 15,945 15,459 14,213 Asia, Africa & Australasia 4,725 3,959 3,359 Continuing operations 31,601 29,559 26,475 113 2008 2007 2006 $m $m $m 5,200 5,216 5,182 1,055 1,143 1,371 Others 89 84 78 Total Gastrointestinal 6,344 6,443 6,631 3,597 2,796 2,028 807 1,438 1,795 1,471 1,287 1,110 236 295 307 268 271 275 Others 584 599 603 Total Cardiovascular 6,963 6,686 6,118 2,004 1,575 1,184 1,495 1,454 1,292 322 354 360 71 86 88 Others 236 242 227 Total Respiratory 4,128 3,711 3,151 1,857 1,730 1,508 1,258 1,335 1,206 1,138 1,104 1,008 265 238 237 249 214 186 85 83 89 64 62 18 28 43 – Others 10 10 10 Total Oncology 4,954 4,819 4,262 4,452 4,027 3,416 Local anaesthetics 605 557 529 448 434 398 278 263 304 Others 54 59 57 Total Neuroscience 5,837 5,340 4,704 897 773 604 1,230 618 – 104 53 – Other Products 220 270 271 Total Infection and Other 2,451 1,714 875 Aptium Oncology 395 402 374 Astra Tech 529 444 360 31,601 29,559 26,475 Total property, Land and Plant and Assets in course plant and buildings equipment of construction equipment $m $m $m $m 4,490 8,035 480 13,005 Capital expenditure 23 196 577 796 Additions through business combinations – 26 – 26 Transfer of assets into use 154 494 (648 ) – Disposals and other movements (35 ) (300 ) (3 ) (338 ) Exchange adjustments 450 912 57 1,419 5,082 9,363 463 14,908 Capital expenditure 53 304 812 1,169 Additions through business combinations 302 122 176 600 Transfer of assets into use 151 470 (621 ) – Disposals and other movements (23 ) (555 ) (16 ) (594 ) Exchange adjustments 254 470 28 752 5,819 10,174 842 16,835 Capital expenditure 49 239 825 1,113 Transfer of assets into use 275 404 (679 ) – Disposals and other movements (123 ) (558 ) (25 ) (706 ) Exchange adjustments (803 ) (1,725 ) (100 ) (2,628 ) 5,217 8,534 863 14,614
At 1 January 2006 1,320 4,700 – 6,020 Charge for year 203 747 – 950 Impairment 6 47 – 53 Disposals and other movements (21 ) (277 ) – (298 ) Exchange adjustments 148 582 – 730 1,656 5,799 – 7,455 Charge for year 227 849 – 1,076 Impairment 39 65 2 106 Disposals and other movements (3 ) (498 ) (1 ) (502 ) Exchange adjustments 96 306 – 402 2,015 6,521 1 8,537 Charge for year 247 812 – 1,059 Impairment 91 32 – 123 Disposals and other movements (120 ) (529 ) (2 ) (651 ) Exchange adjustments (303 ) (1,192 ) (2 ) (1,497 ) 1,930 5,644 (3 ) 7,571 At 31 December 2006 3,426 3,564 463 7,453 At 31 December 2007 3,804 3,653 841 8,298 3,287 2,890 866 7,043 115 2008 2007 2006 $m $m $m The net book value of land and buildings comprised: Freeholds 3,287 3,804 3,421 Short leases – – 5 3,287 3,804 3,426 2008 2007 2006 $m $m $m 10,225 1,430 1,280 Additions through business combinations – 8,757 116 Exchange adjustments (14 ) 38 34 10,211 10,225 1,430
At 1 January 341 333 327 Exchange adjustments (4 ) 8 6 337 341 333 9,874 9,884 1,097 Carrying Remaining value amortisation Description $m period Goodwill arising from the acquisition of MedImmune Goodwill 8,757 Not amortised Goodwill in the US Goodwill 707 Not amortised Product, marketing and Software distribution Other development rights intangibles costs Total $m $m $m $m
At 1 January 2006 2,803 503 649 3,955 Additions – through business combinations 1,260 281 – 1,541 Additions – separately acquired 413 51 121 585 Disposals (675 ) (4 ) – (679 ) Exchange adjustments 372 79 16 467 4,173 910 786 5,869 Additions – through business combinations 6,946 1,477 – 8,423 Additions – separately acquired 299 33 178 510 Disposals (52 ) (82 ) – (134 ) Exchange adjustments 183 47 12 242 11,549 2,385 976 14,910 Additions – separately acquired 2,743 20 178 2,941 Disposals – (33 ) (30 ) (63 ) Exchange adjustments (770 ) (197 ) (133 ) (1,100 ) 13,522 2,175 991 16,688
At 1 January 2006 1,433 357 406 2,196 Amortisation for year 250 25 50 325 Disposals (14 ) (4 ) – (18 ) Impairment – 17 – 17 Exchange adjustments 190 48 4 242 1,859 443 460 2,762 Amortisation for year 364 112 78 554 Disposals (52 ) (81 ) – (133 ) Impairment 98 22 – 120 Exchange adjustments 104 32 4 140 2,373 528 542 3,443 Amortisation for year 529 182 96 807 Disposals – (9 ) (10 ) (19 ) Impairment 516 91 24 631 Exchange adjustments (357 ) (104 ) (36 ) (497 ) 3,061 688 616 4,365 At 31 December 2006 2,314 467 326 3,107 At 31 December 2007 9,176 1,857 434 11,467 10,461 1,487 375 12,323 117 Product, Software marketing and Other development distribution rights intangibles costs Total $m $m $m $m Cost of sales 39 – – 39 Research and development 10 – – 10 Selling, general and administrative costs 480 35 96 611 Other operating income and expense – 147 – 147 529 182 96 807 Selling, general and administrative costs 364 27 78 469 Other operating income and expense – 85 – 85 364 112 78 554 Selling, general and administrative costs 250 13 50 313 Other operating income and expense – 12 – 12 250 25 50 325 Product, Software marketing and Other development distribution rights intangibles costs Total $m $m $m $m Cost of sales 115 – – 115 Research and development 144 – – 144 Selling, general and administrative costs 257 – 24 281 Other operating income and expense – 91 – 91 516 91 24 631 Research and development 98 22 – 120 Research and development – 17 – 17 Carrying Remaining value amortisation Description $m period Product, marketing and distribution rights 262 5 and 9 years Product, marketing and distribution rights 528 10 years Product, marketing and distribution rights 1,656 Not amortised Product, marketing and distribution rights 840 13-19 years Intangible assets arising from the acquisition of CAT Product, marketing and distribution rights 398 7 and 12 years 2 Intangible assets arising from the acquisition of KuDOS Product, marketing and distribution rights 285 Not amortised 2 Product, marketing and distribution rights 5,161 17-23 years 2 Licensing and contractual income 1,103 1-12 years 1 These assets are associated with the restructuring of the joint venture with Merck & Co., Inc. Further information can be found in Note 25. 2 Assets in development are not amortised but are tested annually for impairment. 3 An allocation of the cost of these assets to Therapy Area is given in Note 22. 2008 2007 2006 $m $m $m Loans and receivables at fair value through profit or loss – – 37 Equity securities available for sale 156 182 82 156 182 119 Equity securities held for trading 50 31 26 Fixed deposits 54 60 559 Derivative financial instruments 284 86 72 388 177 657 2008 2007 2006 $m $m $m Raw materials and consumables 409 579 541 Inventories in process 631 806 778 Finished goods and goods for re-sale 596 734 931 1,636 2,119 2,250 119 2008 2007 2006 $m $m $m Trade receivables 5,657 5,415 4,340 Less: Amounts provided for doubtful debts (Note 16) (99 ) (89 ) (52 ) 5,558 5,326 4,288 Other receivables 978 593 462 Prepayments and accrued income 552 510 578 7,088 6,429 5,328 Other receivables 44 54 44 Prepayments and accrued income 129 185 189 173 239 233 7,261 6,668 5,561 2008 2007 2006 $m $m $m Cash at bank and in hand 1,039 1,403 684 Short-term deposits 3,247 4,464 6,419 4,286 5,867 7,103 Unsecured bank overdrafts (163 ) (140 ) (114 ) 4,123 5,727 6,989 Repayment 2008 2007 2006 dates $m $m $m Bank overdrafts On demand 163 140 114 Floating Rate Note US dollars 2009 650 – – Other loans Within one year 180 4,140 22 993 4,280 136 Floating Rate Note US dollars 2009 – 649 – 4.625% Non-callable bond Euros 2010 1,053 1,099 – 5.625% Non-callable bond Euros 2010 702 – – 5.4% Callable bond US dollars 2012 1,823 1,765 – 5.4% Callable bond US dollars 2014 789 767 756 5.125% Non-callable bond Euros 2015 1,051 1,099 – 5.9% Callable bond US dollars 2017 1,896 1,768 – 7% Guaranteed debentures US dollars 2023 324 323 331 5.75% Non-callable bond Pounds sterling 2031 501 691 – 6.45% Callable bond US dollars 2037 2,716 2,715 – 10,855 10,876 1,087 > Managing funding and liquidity risk. > Optimising shareholder return. > Maintaining a strong investment grade rating. 121 Designated Derivatives and Total at fair other items at Available Held for Amortised carrying Fair value fair value for sale trading cost value value $m $m $m $m $m $m $m Cash and cash equivalents – – – – 4,286 4,286 4,286 Overdrafts – – – – (163 ) (163 ) (163 ) Loans due within one year – – – – (830 ) (830 ) (830 ) Loans due after more than one year (1,113 ) �� (1,727 ) – – (8,015 ) (10,855 ) (11,238 ) Derivative financial instruments 221 63 – – – 284 284 Other investments – – 156 50 54 260 260 Other financial assets – – – – 6,580 6,580 6,580 Other financial liabilities – – – – (8,381 ) (8,381 ) (8,381 ) Cash and cash equivalents – – – – 5,867 5,867 5,867 Overdrafts – – – – (140 ) (140 ) (140 ) Loans due within one year – – – – (4,140 ) (4,140 ) (4,140 ) Loans due after more than one year (1,090 ) (1,544 ) – – (8,242 ) (10,876 ) (11,235 ) Derivative financial instruments 67 19 – – – 86 86 Other investments – – 182 31 60 273 273 Other financial assets – – – – 5,973 5,973 5,973 Other financial liabilities – – – – (8,070 ) (8,070 ) (8,070 ) Cash and cash equivalents – – – – 7,103 7,103 7,103 Overdrafts – – – – (114 ) (114 ) (114 ) Loans due within one year – – – – (22 ) (22 ) (22 ) Loans due after more than one year (1,087 ) – – – – (1,087 ) (1,087 ) Derivative financial instruments 27 45 – – – 72 72 Other investments 37 – 82 26 559 704 704 Other financial assets – – – – 4,794 4,794 4,794 Other financial liabilities – – – – (6,729 ) (6,729 ) (6,729 ) > Cash and overdrafts – held on the balance sheet at amortised costs. Fair value approximates to carrying value. > Loans due within one year and after more than one year – the fair value of fixed rate publicly traded debt is based on year end quoted market prices; the fair value of floating rate debt is nominal value, as mark to market differences would be minimal given the frequency of resets. The carrying value of loans designated at fair value through profit or loss is the fair value. For loans designated as other items at fair value, carrying value is initially measured at fair value and remeasured for fair value changes in respect of the hedged risk at each balance sheet date. All other loans are held at amortised cost. > Derivative financial instruments – consists of interest rate swaps (included in designated as fair value through profit or loss upon initial recognition or as a fair value hedge), forward foreign exchange contracts and foreign currency option contracts (included in derivatives and other items at fair value). – Interest rate swaps – the fair value is estimated using appropriate zero coupon curve valuation techniques based on rates current at year end. – Forward foreign exchange contracts – the majority of contracts for existing transactions had maturity of six months or less from year end. The fair value of forward foreign exchange contracts is based on market forward foreign exchange rates at the year end. – Foreign currency option contracts – the fair value of option contracts is estimated using Black-Scholes valuation techniques. 123 > Other investments – includes equity securities held on the balance sheet as other investments (Note 10). The fair value of listed investments is based on year end quoted market prices. For unlisted investments, carrying values approximate fair value. > Other financial assets and other financial liabilities – held on the balance sheet at amortised costs with carrying value being a reasonable approximation of fair value. 2008 2007 2006 Derivatives 3.8% to 4.6% 4.3% to 5.1% 4.9% to 5.3% Loans and borrowings 3.8% to 4.6% 4.3% to 5.1% 4.9% to 5.3% 2008 2007 2006 $m $m $m (Losses)/gains on forward foreign exchange contracts (399 ) (59 ) 168 Gains/(losses) on receivables and payables 391 74 (183 ) Losses on investments designated at fair value through profit or loss – (1 ) (13 ) (Losses)/gains on available for sale current investments (25 ) (21 ) 5 (33 ) (7 ) (23 ) Interest and fair value adjustments in respect of debt designated at fair value through profit or loss, net of derivatives 87 (22 ) (59 ) Interest and changes in carrying values of debt designated as hedged items, net of derivatives (64 ) (28 ) – Interest and fair value changes on fixed and short-term deposits and equity securities 140 344 368 Interest on debt, overdrafts and commercial paper held at amortised cost (609 ) (436 ) (11 ) Exchange losses on financial assets and liabilities (12 ) (3 ) (14 ) (458 ) (145 ) 284 Trade, other Bank overdrafts payables and and other loans Bonds provisions Total 31 December 2008 $m $m $m $m Within one year 345 1,271 7,778 9,394 In one to two years – 2,335 601 2,936 In two to three years – 465 – 465 In three to four years – 2,241 – 2,241 In four to five years – 424 – 424 In more than five years – 12,478 – 12,478 345 19,214 8,379 27,938 Effect of interest (2 ) (7,956 ) – (7,958 ) Effect of discounting, fair values and issue costs – 247 – 247 343 11,505 8,379 20,227 Trade, other Bank overdrafts payables and and other loans Bonds provisions Total 31 December 2007 $m $m $m $m Within one year 4,305 619 7,355 12,279 In one to two years – 1,259 715 1,974 In two to three years – 1,679 – 1,679 In three to four years – 532 – 532 In four to five years – 2,255 – 2,255 In more than five years – 13,356 – 13,356 4,305 19,700 8,070 32,075 Effect of interest (25 ) (8,857 ) – (8,882 ) Effect of discounting, fair values and issue costs – 33 – 33 4,280 10,876 8,070 23,226 2008 2007 2006 Total Fixed rate Floating rate Total Fixed rate Floating rate Total Fixed rate Floating rate $m $m $m $m $m $m $m $m $m Interest bearing loans and borrowings Current 993 – 993 4,280 – 4,280 136 – 136 Non-current 10,855 8,015 2,840 10,876 7,594 3,282 1,087 – 1,087 11,848 8,015 3,833 15,156 7,594 7,562 1,223 – 1,223 Fixed deposits 54 – 54 60 – 60 559 – 559 Cash and cash equivalents 4,286 – 4,286 5,867 – 5,867 7,103 – 7,103 4,340 – 4,340 5,927 – 5,927 7,662 – 7,662 125 GBP SEK EUR AUD JPY CAD 2008 $m $m $m $m $m $m (676 ) (444 ) 505 57 166 49 Forward exchange contracts 690 445 (512 ) (52 ) (166 ) (24 ) 14 1 (7 ) 5 – 25 GBP SEK EUR AUD JPY CAD 2007 $m $m $m $m $m $m (536 ) (476 ) 627 24 168 57 Forward exchange contracts 530 494 (627 ) (24 ) (168 ) (57 ) (6 ) 18 – – – – GBP SEK EUR AUD JPY CAD 2006 $m $m $m $m $m $m (429 ) (697 ) 625 37 169 61 Forward exchange contracts 653 1,104 (938 ) (57 ) (279 ) (43 ) 224 407 (313 ) (20 ) (110 ) 18 Interest rates Exchange rates +1% -1% +10% -10% Increase/(decrease) in fair value of financial instruments 587 (706 ) 217 (217 ) Impact on income statement: gain/(loss) – – (57 ) 57 Impact on equity: gain/(loss) – – 274 (274 ) Interest rates Exchange rates +1% -1% +10% -10% Increase/(decrease) in fair value of financial instruments 666 (779 ) 165 (165 ) Impact on income statement: gain/(loss) – – (37 ) 37 Impact on equity: gain/(loss) – – 202 (202 ) Interest rates Exchange rates +1% -1% +10% -10% Increase/(decrease) in fair value of financial instruments – – (185 ) 185 Impact on income statement: gain/(loss) – – (104 ) 104 Impact on equity: gain/(loss) – – (81 ) 81 2008 2007 2006 $m $m $m US 2,032 1,961 1,491 United Kingdom 459 425 397 Sweden 226 260 242 Euro-zone countries 833 901 771 Other European countries 257 247 171 Japan 955 771 647 Other countries 796 761 569 5,558 5,326 4,288 2008 2007 2006 $m $m $m Not past due 5,262 4,930 3,966 Overdue but renegotiated 3 120 86 Past due 0-90 days 106 79 83 Past due 90-180 days 60 99 62 Past due > 180 days 127 98 91 5,558 5,326 4,288 2008 2007 2006 $m $m $m Balance at beginning of year 89 52 45 Income statement charge 23 34 4 Amounts utilised, exchange and other movements (13 ) 3 3 Balance at end of year 99 89 52 127 2008 2007 2006 $m $m $m Trade payables 3,903 3,497 3,482 Value added and payroll taxes and social security 371 434 280 Other payables 1,026 865 1,166 Accruals 1,878 2,172 1,367 7,178 6,968 6,295 Other payables 149 229 254 Employee Other Severance Environmental benefits provisions Total $m $m $m $m $m 62 68 122 102 354 Charge/(credit) for year (1 ) 56 36 (4 ) 87 On acquisition of subsidiary – – – 20 20 Cash paid (36 ) (29 ) (36 ) (5 ) (106 ) Exchange and other movements 6 – (13 ) 18 11 31 95 109 131 366 Charge for year 620 48 4 58 730 Cash paid (25 ) (32 ) (23 ) (25 ) (105 ) Exchange and other movements 17 – 10 2 29 643 111 100 166 1,020 Charge/(credit) for year 469 37 (23 ) 164 647 Cash paid (405 ) (39 ) (1 ) (12 ) (457 ) Exchange and other movements (88 ) 21 8 (9 ) (68 ) 619 130 84 309 1,142 2008 2007 2006 $m $m $m Due within one year 600 387 39 Due after more than one year 542 633 327 1,142 1,020 366 Share Capital Minority Share premium redemption Merger Other Retained equity Total capital account reserve reserve reserves earnings Total interests equity $m $m $m $m $m $m $m $m $m 395 692 53 433 1,345 10,679 13,597 94 13,691 Total recognised income and expense – – – – – 6,970 6,970 24 6,994 – – – – 53 (53 ) – – – Dividends – – – – – (2,217 ) (2,217 ) – (2,217 ) Issue of Ordinary Shares 6 979 – – – – 985 – 985 Re-purchase of Ordinary Shares (18 ) – 18 – – (4,147 ) (4,147 ) – (4,147 ) Share-based payments – – – – – 129 129 – 129 Treasury shares – – – – – (13 ) (13 ) – (13 ) Transfer from minority interests to payables – – – – – – – (6 ) (6 ) (12 ) 979 18 – 53 669 1,707 18 1,725 383 1,671 71 433 1,398 11,348 15,304 112 15,416 Total recognised income and expense – – – – – 5,934 5,934 35 5,969 – – – – (20 ) 20 – – – Dividends – – – – – (2,658 ) (2,658 ) – (2,658 ) Issue of Ordinary Shares 1 217 – – – – 218 – 218 Re-purchase of Ordinary Shares (20 ) – 20 – – (4,170 ) (4,170 ) – (4,170 ) Share-based payments – – – – – 150 150 – 150 Transfer from minority interests to payables – – – – – – – (10 ) (10 ) (19 ) 217 20 – (20 ) (724 ) (526 ) 25 (501 ) 364 1,888 91 433 1,378 10,624 14,778 137 14,915 Total recognised income and expense – – – – – 4,176 4,176 48 4,224 – – – – 27 (27 ) – – – Dividends – – – – – (2,767 ) (2,767 ) – (2,767 ) Issue of Ordinary Shares 1 158 – – – – 159 – 159 Re-purchase of Ordinary Shares (3 ) – 3 – – (610 ) (610 ) – (610 ) Share-based payments – – – – – 176 176 – 176 Transfer from minority interests to payables – – – – – – – (11 ) (11 ) Dividend paid by subsidiary to minority interest – – – – – – – (26 ) (26 ) (2 ) 158 3 – 27 948 1,134 11 1,145 362 2,046 94 433 1,405 11,572 15,912 148 16,060 1 Amounts charged to other reserves relate to exchange adjustments arising on goodwill. 2008 2007 2006 Cumulative translation differences included within retained earnings $m $m $m Balance at beginning of year 2,414 1,945 1,080 Foreign exchange arising on consolidation (1,355 ) 489 918 Exchange adjustments on goodwill (recorded against other reserves) (27 ) 20 (53 ) Foreign exchange on borrowings 291 (40 ) – Net exchange movement in retained earnings (1,091 ) 469 865 Balance at end of year 1,323 2,414 1,945 129 Authorised Allotted, called-up and fully paid 2008 2008 2007 2006 $m $m $m $m Issued Ordinary Shares ($0.25 each) 362 362 364 383 Unissued Ordinary Shares ( $0.25 each) 238 – – – Redeemable Preference Shares (£1 each – £50,000) – – – – 600 362 364 383 No. of shares (million) 2008 2007 At 1 January 1,457 1,532 Issues of shares 4 5 Re-purchase of shares (14 ) (80 ) 1,447 1,457 2008 2007 2006 2008 2007 2006 Per share Per share Per share $m $m $m Final $1.350 $1.230 $0.920 1,967 1,885 1,453 Interim $0.550 $0.520 $0.490 800 773 764 $1.900 $1.750 $1.410 2,767 2,658 2,217 Fair value Book value adjustment Fair value $m $m $m Non-current assets Intangible assets 193 7,882 8,075 Property, plant and equipment 523 70 593 Other 550 (17 ) 533 1,266 7,935 9,201 Current assets 1,439 115 1,554 Current liabilities (326 ) 39 (287 ) Additional obligations related to convertible debt and share options – (1,724 ) (1,724 ) Non-current liabilities Interest bearing loans and borrowings (1,165 ) – (1,165 ) Other payables (73 ) – (73 ) Deferred tax assets/(liabilities) 314 (2,694 ) (2,380 ) (924 ) (2,694 ) (3,618 ) Total assets acquired 1,455 3,671 5,126 Goodwill 8,757 Total consideration for outstanding shares 13,883 Additional payments related to convertible debt, share options and other acquisition obligations 1,770 15,653 131 Fair value Book value adjustment Fair value $m $m $m Non-current assets Intangible assets – 347 347 Property, plant and equipment 7 – 7 7 347 354 Current assets 12 – 12 Current liabilities (19 ) – (19 ) Non-current liabilities Other payables (9 ) – (9 ) Deferred tax liabilities – (118 ) (118 ) (9 ) (118 ) (127 ) Total assets acquired (9 ) 229 220 Goodwill – 220 MedImmune, Inc. Other Total $m $m $m Total consideration 15,653 220 15,873 Cash and cash equivalents included in undertaking acquired (979 ) (3 ) (982 ) 14,674 217 14,891 Fair value Book value adjustment Fair value $m $m $m Non-current assets – 675 675 Intangible assets – other 21 560 581 Property, plant and equipment 24 – 24 Other 20 – 20 65 1,235 1,300 Current assets 336 – 336 Current liabilities (72 ) – (72 ) Non-current liabilities Deferred taxation (5 ) (364 ) (369 ) Other – (20 ) (20 ) (5 ) (384 ) (389 ) Total assets acquired 324 851 1,175 Goodwill – 104 104 Less: Existing non-current asset investment – (163 ) (163 ) Total consideration 324 792 1,116 Exchange – (24 ) (24 ) Settled in loan notes – (18 ) (18 ) 324 750 1,074 Fair value Book value adjustment Fair value $m $m $m Non-current assets Intangible assets – other – 285 285 Property, plant and equipment 2 – 2 2 285 287 Current assets 3 – 3 Current liabilities (11 ) – (11 ) Non-current liabilities Deferred taxation – (85 ) (85 ) Total assets acquired (6 ) 200 194 Goodwill – 12 12 (6 ) 212 206 133 Cambridge Antibody KuDOS Technology Pharmaceuticals Group plc Limited Total $m $m $m Total consideration 1,074 206 1,280 Cash and cash equivalents included in undertaking acquired (129 ) (3 ) (132 ) 945 203 1,148 Value at 31 December 2008 Value at 31 December 2007 UK Rest of Group Total UK Rest of Group Total $m $m $m $m $m $m Equities 1,461 960 2,421 2,581 1,453 4,034 Bonds 1,935 772 2,707 2,517 888 3,405 Others 439 281 720 1,212 303 1,515 3,835 2,013 5,848 6,310 2,644 8,954 (5,029 ) (3,591 ) (8,620 ) (7,644 ) (3,348 ) (10,992 ) – 40 40 – 40 40 (1,194 ) (1,538 ) (2,732 ) (1,334 ) (664 ) (1,998 ) > The Group has a fundamental belief in funding the benefits it promises to employees. > The Group considers its pension arrangements in the context of its broader capital structure. In general it does not believe in committing excessive capital for funding whilst it has better uses of capital within the business nor does it wish to generate surpluses. > The pension funds are not part of the Group’s core business. Pension funds may take rewarded risks with the investments underlying the funding, subject to adequate controls and the expected rewards outweighing the risks. > The Group recognises that deciding to hold certain investments may cause volatility in the funding position. The Group would not wish to amend its contribution level for relatively small deviations from its preferred funding level, because it is expected that there will be short term volatility, but it is prepared to react appropriately to more significant deviations. > In the event that local regulations require an additional level of financing, the Group would consider the use of alternative methods of providing this that do not require immediate cash funding but help mitigate exposure of the pension arrangement to the credit risk of the Group. > The US defined benefits programme was actuarially revalued at 31 December 2008, when plan obligations were $1,724m and plan assets were $1,150m. This includes obligations in respect of the non-qualified plan which is largely unfunded. > The Swedish defined benefits programme was actuarially revalued at 31 December 2008, when plan obligations were estimated to amount to $1,349m and plan assets were $576m. > The German defined benefits programme was actuarially revalued at 31 December 2008, when plan obligations amounted to $198m and plan assets were $27m. 135 2008 2007 UK Rest of Group UK Rest of Group Inflation assumption 2.8% 2.2% 3.3% 2.3% Rate of increase in salaries 3.8% 3.4% 4.5% 3.7% Rate of increase in pensions in payment 2.8% 0.8% 3.3% 0.9% Discount rate 6.2% 4.6% 5.8% 5.4% Long term rate of return expected at 31 December Equities 7.9% 7.7% 8.0% 8.9% Bonds 5.2% 4.9% 5.6% 5.0% Others 6.0% 3.5% 6.5% 4.8% Rate of increase in medical costs 10.0% 10.0% 10.0% 9.0% Life expectancy assumption for a male member retiring at age 65 Country 2008 2028 2007 2027 UK 23.8 25.8 23.7 25.7 US 19.6 21.1 19.6 21.1 Sweden 20.4 22.4 20.4 22.4 Germany 17.7 20.5 17.7 20.5 Effect of change in medical cost assumption increase/(decrease) 2008 2007 +1% -1% +1% -1% Current service and interest cost of net periodic post-employment medical costs ($m) 4 (3 ) 4 (4 ) Accumulated post-employment benefit obligation for medical costs ($m) 28 (28 ) 30 (19 ) 2008 2007 2006 2005 Present value of obligations ($m) (5,029 ) (7,644 ) (7,352 ) (6,309 ) Fair value of plan assets ($m) 3,835 6,310 6,078 5,314 Deficit in the scheme ($m) (1,194 ) (1,334 ) (1,274 ) (995 ) Experience adjustments on: Scheme assets Amount ($m) (1,185 ) (185 ) (259 ) 636 Percentage of scheme assets 30.9 % 2.9 % 4.3 % 12.0 % Scheme obligations Amount ($m) 972 114 71 (539 ) Percentage of scheme obligations 19.3 % 1.5 % 1.0 % 8.5 % Present value of obligations ($m) (3,591 ) (3,348 ) (3,109 ) (2,995 ) Fair value of plan assets ($m) 2,013 2,644 2,493 2,284 Deficit in the scheme ($m) (1,578 ) (704 ) (616 ) (711 ) Experience adjustments on: Scheme assets Amount ($m) (700 ) (24 ) 55 63 Percentage of scheme assets 34.8 % 0.9 % 2.2 % 2.8 % Scheme obligations Amount ($m) (319 ) (18 ) 25 (195 ) Percentage of scheme obligations 8.9 % 0.5 % 0.8 % 6.5 % Present value of obligations ($m) (8,620 ) (10,992 ) (10,461 ) (9,304 ) Fair value of plan assets ($m) 5,848 8,954 8,571 7,598 Deficit in the scheme ($m) (2,772 ) (2,038 ) (1,890 ) (1,706 ) Experience adjustments on: Scheme assets Amount ($m) (1,885 ) (209 ) (204 ) 699 Percentage of scheme assets 32.2 % 2.3 % 2.4 % 9.2 % Scheme obligations Amount ($m) 653 96 96 (734 ) Percentage of scheme obligations 7.6 % 0.9 % 0.9 % 7.9 % 2008 2007 UK Rest of Group UK Rest of Group $m $m $m $m Funded (5,004 ) (3,025 ) (7,616 ) (2,911 ) Unfunded (25 ) (566 ) (28 ) (437 ) Total (5,029 ) (3,591 ) (7,644 ) (3,348 ) 137 2008 2007 UK Rest of Group Total UK Rest of Group Total $m $m $m $m $m $m Current service cost (146 ) (107 ) (253 ) (187 ) (113 ) (300 ) Past service cost (86 ) (28 ) (114 ) (38 ) (6 ) (44 ) Settlements and curtailments 19 28 47 – – – (213 ) (107 ) (320 ) (225 ) (119 ) (344 ) Expected return on post-retirement scheme assets 398 187 585 402 171 573 Interest on post-retirement scheme obligations (416 ) (172 ) (588 ) (379 ) (160 ) (539 ) Net return (18 ) 15 (3 ) 23 11 34 Charge before taxation (231 ) (92 ) (323 ) (202 ) (108 ) (310 ) Difference between the actual return and the expected return on the post-retirement schemes’ assets (1,185 ) (700 ) (1,885 ) (185 ) (24 ) (209 ) Experience gains/(losses) arising on the post-retirement schemes’ obligations 78 4 82 (359 ) (62 ) (421 ) Changes in assumptions underlying the present value of the post-retirement schemes’ obligations 894 (323 ) 571 473 44 517 Actuarial losses recognised (213 ) (1,019 ) (1,232 ) (71 ) (42 ) (113 ) 2008 2007 UK Rest of Group Total UK Rest of Group Total $m $m $m $m $m $m Present value of obligation in schemes at beginning of year (7,644 ) (3,348 ) (10,992 ) (7,352 ) (3,109 ) (10,461 ) Current service cost (146 ) (107 ) (253 ) (187 ) (113 ) (300 ) Past service cost (86 ) (28 ) (114 ) (38 ) (6 ) (44 ) Participant contributions (43 ) (3 ) (46 ) (29 ) (2 ) (31 ) Benefits paid 375 112 487 311 99 410 Other finance expense (416 ) (172 ) (588 ) (379 ) (160 ) (539 ) Expenses 8 – 8 9 – 9 Actuarial gain/(loss) 972 (319 ) 653 114 (18 ) 96 Settlements and curtailments 19 28 47 – – – Exchange 1,932 246 2,178 (93 ) (39 ) (132 ) Present value of obligations in schemes at end of year (5,029 ) (3,591 ) (8,620 ) (7,644 ) (3,348 ) (10,992 ) 2008 2007 UK Rest of Group Total UK Rest of Group Total $m $m $m $m $m $m At beginning of year 6,310 2,644 8,954 6,078 2,493 8,571 Expected return on plan assets 398 187 585 402 171 573 Expenses (8 ) – (8 ) (9 ) – (9 ) Actuarial losses (1,185 ) (700 ) (1,885 ) (185 ) (24 ) (209 ) Exchange (1,583 ) (161 ) (1,744 ) 90 2 92 Employer contributions 235 152 387 216 99 315 Participant contributions 43 3 46 29 2 31 Benefits paid (375 ) (112 ) (487 ) (311 ) (99 ) (410 ) At end of year 3,835 2,013 5,848 6,310 2,644 8,954 2008 2007 2006 $m $m $m At 1 January (479 ) (401 ) (328 ) Actuarial losses �� (1,232 ) (113 ) (108 ) Deferred tax 340 35 35 At 31 December (1,371 ) (479 ) (401 ) Employees 2008 2007 2006 Average number of people employed by the Group in: UK 11,000 11,800 11,800 Continental Europe 23,100 25,600 26,600 The Americas 20,900 20,200 18,200 Asia, Africa & Australasia 11,100 10,300 10,000 Continuing operations 66,100 67,900 66,600 139 2008 2007 2006 $m $m $m Salaries 5,080 5,217 4,580 Social security costs 743 858 832 Pension costs 497 449 390 Other employment costs 596 584 553 6,916 7,108 6,355 Shares WAFV1 '000 pence Shares awarded in June 2005 312 1121 Shares awarded in March 2006 280 1486 Shares awarded in May 2006 19 1424 Shares awarded in March 2007 1,611 1372 Shares awarded in August 2007 68 1217 Shares awarded in November 2007 16 1105 Shares awarded in March 2008 1,338 941 Shares awarded in August 2008 14 1326 Units WAFV1 ’000 $ Units awarded in March 2007 755 26.90 Units awarded in November 2007 270 21.56 Units awarded in March 2008 1,313 18.88 1 Weighted average fair value. 141 Shares WAFV1 ’000 $ Shares awarded in March 2007 38 25.86 Shares awarded in March 2008 2,094 18.88 Shares awarded in August 2008 20 24.46 Units WAFV1 ’000 $ Units awarded in March 2008 130 18.88 Shares WAFV1 ’000 pence Shares awarded in March 2008 51 941 Shares awarded in May 2008 35 2210 1 Weighted average fair value. (a) 90% of the arithmetical average of the middle-market quotations for an Ordinary Share on the London Stock Exchange on three consecutive dealing days shortly before the date on which invitations to apply for options are issued (provided that no such day may fall before the Company last announced its results for any period) or such other dealing day or days falling within the six week period for the issue of invitations, as the Directors may decide; and (b) the nominal value of an Ordinary Share (unless the option is expressed to relate only to existing Ordinary Shares). 143 AstraZeneca Share Option Plan 1994 Scheme SAYE Schemes ASVIP Shares Options WAEP1 Options WAEP1 Options WAEP1 under option WAEP1 ’000 pence ’000 pence ’000 pence ’000 SEK Options outstanding 50,079 2670 5,958 2658 3,438 2053 309 442 Options granted 9,266 2977 – – 280 3001 – – Options exercised (18,543 ) 2708 (4,038 ) 2665 (289 ) 2278 – – Options forfeited (1,078 ) 2669 (14 ) 2862 (218 ) 2473 (309 ) 442 Weighted average fair value of options granted during the year 857 943 Options outstanding 39,724 2428 1,906 2371 3,211 2087 – – Options granted 7,312 2737 – – 1,074 2164 – – Options exercised (2,770 ) 2648 (321 ) 2426 (1,327 ) 1785 – – Options forfeited (1,706 ) 2745 (95 ) 2603 (238 ) 2528 – – Weighted average fair value of options granted during the year 682 616 Options outstanding 42,560 2451 1,490 2364 2,720 2226 – – Options granted 14,858 1887 – – 483 2398 – – Options exercised (2,577 ) 2204 (99 ) �� 2620 (675 ) 2062 – – Options forfeited (2,273 ) 2622 (106 ) 2594 (388 ) 2291 – – Weighted average fair value of options granted during the year 404 499 Options outstanding 52,568 2978 1,285 2934 2,140 2304 – – Range of exercise prices 1882p to 4381p 2505p to 3049p 2164p to 3001p n/a Weighted average remaining contractual life 2,456 days 415 days 1,193 days n/a Options exercisable 24,788 2689 1,285 2702 75 2231 – n/a 1 Weighted average exercise price. 2008 2007 2006 Average share price (pence) 2295 2599 3020 Weighted average exercise price (pence) AstraZeneca Share Option Plan 1887 2737 2977 SAYE schemes 2398 2164 3001 Expected volatility (%) 25.0 25.0 30.0 Dividend yield (%) 3.4 2.6 2.3 Risk-free interest rate (%) 4.3 4.8 4.3 Expected lives: AstraZeneca Share Option Plan (years) 6.0 6.0 6.0 Expected lives: SAYE schemes (years) 4.0 4.3 4.1 2008 2007 2006 $m $m $m Contracts placed for future capital expenditure not provided for in these accounts 332 571 383 > a payment to Merck in the event of a business combination between Astra and a third party in order for Merck to relinquish certain claims to that third party’s products; > annual contingent payments; and > termination arrangements which cause Merck to relinquish its interests in AstraZeneca’s products and activities in stages, some of which are mandatory and others optional. > the Advance Payment; > the Partial Retirement; > the True-Up; > the Loan Note Receivable; > the First Option; and > the Second Option. 145 > Currently, from the substantial freedom over products acquired or discovered post-merger. > On occurrence of each stage of such arrangements, from enhanced contributions from, and substantial freedom over, those products that have already been launched (for example,Pulmicort,Symbicort,RhinocortandAtacand), and those that are in development. > Economic benefits include relief from contingent payments, anticipated cost savings from cessation of manufacturing arrangements and other cost efficiencies, together with the strategic advantages of increased freedom to operate. 147 149 151 153 155
Product liability 157 159 161 > AstraZeneca and Her Majesty’s Revenue & Customs (HMRC) have made a joint referral to the UK Court in respect of transfer pricing between our UK and one of our overseas operations for the years 1996 to date as there continues to be a material difference between the Group’s and HMRC’s positions. An additional referral in respect of controlled foreign company aspects of the same case was made during 2008. Absent a negotiated settlement, litigation is set to commence in 2010. > AstraZeneca has applied for two advance pricing agreements (APA’s) in relation to intra-group transactions between the UK and the US and the UK and Japan. Both APA’s are being progressed through competent authority proceedings under the relevant double tax treaties. 163 2008 2007 2006 $m $m $m 206 210 197 2008 2007 2006 $m $m $m No later than one year 101 103 108 Rentals due after more than one year: Later than five years 145 184 161 Later than one year and not later than five years 212 195 182 357 379 343 458 482 451 2008 2007 2006 $m $m $m Fees payable to KPMG Audit Plc and its associates: Group audit fee 3.2 3.6 3.1 Fees payable to KPMG Audit Plc and its associates for other services: The audit of subsidiaries pursuant to legislation 7.1 6.1 5.4 Other services pursuant to legislation 3.3 3.6 4.1 Taxation 0.9 1.1 1.2 All other services 1.7 0.7 1.0 Fees payable to KPMG Audit Plc in respect of the Group’s pension schemes: The audit of subsidiaries’ pension schemes 0.6 0.6 0.5 16.8 15.7 15.3 2008 2007 2006 $’000 $’000 $’000 Short-term employee benefits 21,973 31,525 21,321 Post-employment benefits 2,290 2,072 3,191 Share-based payments 13,210 11,515 8,417 37,473 45,112 32,929 Percentage of voting At 31 December 2008 Country share capital held Principal activity AstraZeneca UK Limited England 100 Research and development, manufacturing, marketing AstraZeneca Treasury Limited England 100 Treasury NV AstraZeneca SA Belgium 100 Manufacturing, marketing AstraZeneca Dunkerque Production SCS France 100 Manufacturing AstraZeneca SAS France 100 Research, manufacturing, marketing AstraZeneca GmbH Germany 100 Development, manufacturing, marketing AstraZeneca Holding GmbH Germany 100 Manufacturing, marketing AstraZeneca SpA Italy 100 Manufacturing, marketing AstraZeneca Farmaceutica Spain SA Spain 100 Manufacturing, marketing AstraZeneca AB Sweden 100 Research and development, manufacturing, marketing AstraZeneca BV The Netherlands 100 Marketing AstraZeneca Canada Inc. Canada 100 Research, manufacturing, marketing AZ Reinsurance Limited Cayman Islands 100 Insurance and reinsurance underwriting IPR Pharmaceuticals Inc. Puerto Rico 100 Development, manufacturing, marketing AstraZeneca LP US 99 Research and development, manufacturing, marketing AstraZeneca Pharmaceuticals LP US 100 Research and development, manufacturing, marketing Zeneca Holdings Inc. US 100 Manufacturing, marketing MedImmune, LLC US 100 Research and development, manufacturing, marketing AstraZeneca Pty Limited Australia 100 Development, manufacturing, marketing AstraZeneca KK Japan 80 Manufacturing, marketing > The Company Financial Statements give a true and fair view, in accordance with UK Generally Accepted Accounting Practice, of the state of the Company’s affairs as at 31 December 2008. > The Company Financial Statements and the part of the Directors’ Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985. > The information given in the Directors’ Report is consistent with the Company Financial Statements.
Registered Auditor
8 Salisbury Square
London EC4Y 8BB ASTRAZENECA PLC 2007 2008 (restated) At 31 December Notes $m $m Fixed asset investments 1 26,727 31,079 Debtors – other 1 1 Debtors – amounts owed by group undertakings 8,217 6,984 8,218 6,985 34,945 38,064 Non-trade creditors 2 (414 ) (4,353 ) Interest bearing loans and borrowings 3 (650 ) – (1,064 ) (4,353 ) 7,154 2,632 33,881 33,711 Amounts owed to group undertakings 3 (283 ) (283 ) Interest bearing loans and borrowings 3 (10,255 ) (10,482 ) (10,538 ) (10,765 ) 23,343 22,946 Called-up share capital 6 362 364 Share premium account 4 2,046 1,888 Capital redemption reserve 4 94 91 Other reserves 4 2,743 2,565 Profit and loss account 4 18,098 18,038 5 23,343 22,946 SIMON LOWTH Director
The Group Financial Statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and are presented on pages 103 to 107. Investments in subsidiaries Shares Total (restated) Loans (restated) $m $m $m Cost and net book value at 1 January 2008, as previously reported 15,286 15,069 30,355 Prior year adjustment – UITF 44 724 – 724 Restated at beginning of year 16,010 15,069 31,079 Additions 14,700 787 15,487 Disposals (14,700 ) – (14,700 ) Transfer to current assets – (2,045 ) (2,045 ) Capital contribution – UITF 44 178 – 178 Exchange – (372 ) (372 ) Amortisation – 8 8 Repayment of loan – (2,908 ) (2,908 ) 16,188 10,539 26,727 2008 2007 $m $m Short-term borrowings (unsecured) 173 4,123 Other creditors 228 206 Amounts owed to group undertakings 13 24 414 4,353 Repayment 2008 2007 dates $m $m Interest bearing loans and borrowings (unsecured) US dollars Floating Rate Note 2009 650 – Amounts owed to subsidiaries (unsecured) US dollars 7.2% Loan 2023 283 283 Interest bearing loans and borrowings (unsecured) US dollars Floating Rate Note 2009 – 649 5.4% Callable bond 2012 1,742 1,741 5.4% Callable bond 2014 748 747 5.9% Callable bond 2017 1,742 1,741 6.45% Callable bond 2037 2,716 2,715 Euros 4.625% Non-callable bond 2010 1,053 1,099 5.625% Non-callable bond 2010 702 – 5.125% Non-callable bond 2015 1,051 1,099 Pounds sterling 5.75% Non-callable bond 2031 501 691 10,255 10,482 169 2008 2007 $m $m Loans or instalments thereof are repayable: After five years from balance sheet date 7,041 7,276 From two to five years 1,742 2,840 From one to two years 1,755 649 Within one year 650 – Total unsecured 11,188 10,765 Share Capital Other Profit 2007 premium redemption reserves and loss 2008 Total account reserve (restated) account Total (restated) $m $m $m $m $m $m At beginning of year, as previously reported 1,888 91 1,841 18,038 21,858 19,063 Prior year adjustment – UITF 44 – – 724 – 724 569 Restated at beginning of year 1,888 91 2,565 18,038 22,582 19,632 Profit for the year – – – 3,436 3,436 9,407 Dividends – – – (2,767 ) (2,767 ) (2,658 ) Gain/(loss) on cash flow hedge in anticipation of debt issue – – – 1 1 (21 ) Share-based payment – – 178 – 178 155 Share re-purchases – 3 – (610 ) (607 ) (4,150 ) Share premiums 158 – – – 158 217 At end of year 2,046 94 2,743 18,098 22,981 22,582 Distributable reserves at end of year – – 1,841 16,946 18,787 15,819 2007 2008 (restated) $m $m At beginning of year, as previously reported 22,222 19,446 Prior year adjustment – UITF 44 724 569 Restated at beginning of year 22,946 20,015 Net profit for the financial year 3,436 9,407 Dividends (2,767 ) (2,658 ) Gain/(loss) on cash flow hedge in anticipation of debt issue 1 (21 ) Share-based payment 178 155 Issue of AstraZeneca PLC Ordinary Shares 159 218 Re-purchase of AstraZeneca PLC Ordinary Shares (610 ) (4,170 ) Net increase in shareholders’ funds 397 2,931 23,343 22,946 Authorised Allotted, called-up and fully paid 2008 2008 2007 $m $m $m Issued Ordinary Shares ($0.25 each) 362 362 364 Unissued Ordinary Shares ( $0.25 each) 238 – – Redeemable Preference Shares (£1 each – £50,000) – – – 600 362 364 No. of shares (million) $m At 1 January 2008 1,457 364 Issues of shares 4 1 Re-purchase of shares (14 ) (3 ) 1,447 362 2004 2005 2006 2007 2008 For the year ended 31 December $m $m $m $m $m Revenue 21,426 23,950 26,475 29,559 31,601 Cost of sales (5,193 ) (5,356 ) (5,559 ) (6,419 ) (6,598 ) Distribution costs (177 ) (211 ) (226 ) (248 ) (291 ) Research and development (3,467 ) (3,379 ) (3,902 ) (5,162 ) (5,179 ) Selling, general and administrative costs (8,268 ) (8,695 ) (9,096 ) (10,364 ) (10,913 ) Other operating income and expense 226 193 524 728 524 Operating profit 4,547 6,502 8,216 8,094 9,144 Profit on sale of interest in joint venture 219 – – – – Finance income 532 665 888 959 854 Finance expense (454 ) (500 ) (561 ) (1,070 ) (1,317 ) Profit before tax 4,844 6,667 8,543 7,983 8,681 Taxation (1,161 ) (1,943 ) (2,480 ) (2,356 ) (2,551 ) Profit for the period 3,683 4,724 6,063 5,627 6,130 Attributable to: Equity holders of the Company 3,664 4,706 6,043 5,595 6,101 Minority interests 19 18 20 32 29 Earnings per $0.25 Ordinary Share (basic) $2.18 $2.91 $3.86 $3.74 $4.20 Earnings per $0.25 Ordinary Share (diluted) $2.18 $2.91 $3.85 $3.73 $4.20 Dividends $0.835 $1.025 $1.410 $1.750 $1.900 Operating profit as a percentage of revenues 21.2% 27.2% 31.0% 27.4% 28.9% 93.6 85.6 92.7 15.6 13.5 2004 2005 2006 2007 2008 At 31 December $m $m $m $m $m Property, plant and equipment, goodwill and intangible assets 11,147 9,697 11,657 29,649 29,240 Other investments 262 256 119 182 156 Deferred tax assets 1,218 1,117 1,220 1,044 1,236 Current assets 13,025 13,770 16,936 17,082 16,152 Total assets 25,652 24,840 29,932 47,957 46,784 Current liabilities (6,587 ) (6,839 ) (9,447 ) (15,187 ) (13,320 ) Non-current liabilities (4,568 ) (4,310 ) (5,069 ) (17,855 ) (17,404 ) Net assets 14,497 13,691 15,416 14,915 16,060 Share capital 411 395 383 364 362 Reserves attributable to equity holders 13,993 13,202 14,921 14,414 15,550 Minority equity interests 93 94 112 137 148 Total equity and reserves 14,497 13,691 15,416 14,915 16,060 2004 2005 2006 2007 2008 For the year ended 31 December $m $m $m $m $m Net cash inflow/(outflow) from: Operating activities 4,817 6,743 7,693 7,510 8,742 Investing activities 970 (1,182 ) (272 ) (14,887 ) (3,896 ) Financing activities (2,761 ) (4,572 ) (5,366 ) 6,051 (6,362 ) 3,026 989 2,055 (1,326 ) (1,516 )
Chairman of the Remuneration Committee> The terms of senior executives’ packages on appointment, promotion and termination. > As part of a benchmarking of the Committee’s activities and policies, a review of the Company’s compliance with institutional investor guidelines. > A review of guiding principles that inform the Company’s approach to total reward arrangements to ensure that the remuneration strategy supports the business strategy. > Assessment of financial performance against earnings per share (EPS) targets to determine the level of payment of bonuses for 2007 and set EPS targets for 2008. > Prepared, reviewed and approved the Directors’ Remuneration Report. > Approved the awards made under the Group’s main incentive plans (Performance Share Plan and Share Option Plan) to Senior Executive Team (SET) members and other selected participants. > Developed long-term incentive (LTI)
arrangements for a number of subsidiary businesses which contribute towards specific Group strategic and commercial objectives. > Reviewed LTI arrangements in the light of age discrimination legislation. > Proposed remuneration and incentive arrangements to support senior level recruitment. 175 1. The role of the Remuneration Committee is to help the organisation to create value for shareholders over time through the development and deployment of remuneration policies and practices that support the implementation of the business strategy. 2. The Board is committed to maintaining a dynamic performance culture, in which the Group can compete strongly by employing and developing the best talent, and where every employee is clear about the Group’s objectives, how their work will impact on those objectives and how they will benefit from achieving high levels of performance. 3. To underpin these objectives, in addition to fixed remuneration which comprises basic pay, pension, and certain other benefits and which is benchmarked against appropriate external comparators, the majority of employees are eligible to receive an annual cash incentive. This incentive is determined by reference to corporate, team and individual performance. The component based on corporate financial performance is in the form of EPS. Whilst details of bonus plans differ from country to country, the EPS component ensures that all eligible employees receive an element of reward based on the Company’s overall financial performance. In addition, LTI awards are provided to selected senior employees in order to align their interests closely with those of the Company’s shareholders. 4. Pay for performance principles apply throughout the Group and provide a consistent framework within which executive remuneration decisions are made. 5. The Remuneration Committee has responsibility for determining the individual compensation paid to the Chief Executive Officer and members of the SET; and for the approval of any single payment or award over $1,000,000. 6. The Remuneration Committee seeks to ensure that the overall proportion of variable pay (bonuses and share-based awards) to which Directors and members of the SET may become entitled form a significant part of their overall remuneration opportunity. The Remuneration Committee’s objective is to ensure that such variable pay is linked to a range of measures designed to promote both individual and team behaviour and performance in a way that supports the success of AstraZeneca and creates value for shareholders. Such measures are designed to be stretching and challenging to the relevant individuals. 7. The Group’s overall remuneration policy and purpose is to: > Attract and retain people of the quality necessary to sustain AstraZeneca as one of the best pharmaceutical companies in the world. > Enable AstraZeneca to employ the best people and to develop the best talent by recognising and rewarding superior performance. > Motivate these people in order to achieve the level of performance necessary to create sustained growth in shareholder value through time. > Align the interests of employees with those of shareholders. > Align individual and team reward with business performance at each level. > Encourage employees to perform to their fullest capacity. > Create pay structures that are fair, equitable and internally consistent. > Ensure that pay structures are both competitive and cost effective in each of the relevant employment markets. > Ensure proper balance of fixed and variable performance-related pay. > Annual salary – based on conditions in the relevant geographic market and the value of an individual’s sustained personal performance to the business, resulting from their ability and experience. > Pension arrangements – appropriate to the relevant national market. > Benefits (such as healthcare) – cost-effective and compatible with relevant welfare arrangements. > Short-term bonus – a lump sum payment related to the targeted achievement of corporate, functional and individual goals, measured over a year and contained within a specific plan. The corporate goals are derived from the annual financial targets set by the Board and take into account external expectations of performance. The functional goals are agreed by the Remuneration Committee at the start of the year. These functional goals are derived from the Business Scorecard, the key elements of which are set out in the strategy, goals and performance measurement table on page 12, and are monitored thereafter as part of a Quarterly Business Review. Individual goals are based on annual objectives, which are linked to functional goals. > LTI arrangements – for selected groups, targeted at the achievement of strategic objectives closely aligned with the interests of shareholders, namely the AstraZeneca Performance Share Plan (PSP) described on page 179, and the AstraZeneca Share Option Plan described on page 180, and in line with market practice. Some individuals (primarily those based in the US, but excluding Executive Directors) participate in the Restricted Stock Unit Award Plan described on page 180. > Share participation – various plans provide the opportunity for employees to take a personal stake in the Company’s wealth creation as shareholders. These plans are described in Note 24 to the Financial Statements. 176
pension arrangements 177 Annual salary Annual salary in 2008 in 2009 Executive Director £ £ % Increase David Brennan 972,900 972,900 0 540,000 540,000 0 Simon Lowth 550,000 550,000 0 1John Patterson will retire from the Board on 31 March 2009.
pension arrangements
Performance criteria> 50% by reference to EPS targets set at the start of the financial year; > 25% by reference to measures and initiatives as set out in, or derived from, the strategy, goals and performance measurement table on page 12 relevant to the individual’s functional accountability (or, in the case of the Chief Executive Officer, the average of these individual outcomes); and > 25% by a balance of qualitative and quantitative objectives that address overall business performance, the key elements of which are set out in the strategy, goals and performance measurement table on page 12. 2 The 401(k) savings plan is a qualified plan to which eligible employees may make salary-deferral contributions on a post-tax and/or pre-tax basis. Employers may also make matching or non-elective contributions to the plan. There is a supplementary non-qualified plan in place for all eligible employees whose earnings exceed specific limits. > 60% by reference to a group of Corporate objectives comprising: EPS and cash flow targets, together with objectives in each of the strategic priority areas identified by the Board for the business, the key elements of which are set out in the strategy, goals and performance measurement table on page 12; and > 40% by reference to individual measures and initiatives which link to the business objectives relevant to the individual’s functional accountability (or, in the case of the Chief Executive Officer, the average of these individual outcomes). > Strengthen the pipeline. > Grow the business. > Reshape the business. > Promote a culture of responsibility and accountability. Bonus range for 2009 Executive Director % David Brennan 0 – 180 0 – 150 Simon Lowth 0 – 150 1 John Patterson’s bonus for 2009 will be considered by the Remuneration Committee in January 2010, when performance outcomes are known and, to the extent that any bonus is payable, will be based on his eligible earnings for the period in 2009 prior to retirement. Short-term bonus Percentage (delivered as a combination of cash and shares, as shown in the table of emoluments)1 of salary Executive Director £000 % David Brennan 1,295 133 John Patterson 522 97 Simon Lowth 704 128 1 Bonuses for Executive Directors are not pensionable. 179 TSR ranking Vesting percentage of of the Company Shares under Award % Below median 0 Median 30 Upper quartile 100 Between median and upper quartile Pro rata Significantly above upper quartile up to 125
Performance Share Plan in 2008
Share Option Scheme 181 Date of Unexpired term at Notice Executive Director1 service contract 31 December 2008 period David Brennan 1 January 2006 12 months 12 months John Patterson 1 January 2005 12 months 12 months Simon Lowth 5 November 2007 12 months 12 months £ Basic Fee 60,000 Senior Non-Executive Director (an additional) 25,000 Membership of the Audit Committee or the Remuneration Committee 15,000 Chairman of the Audit Committee or the Remuneration Committee (an additional) 20,000 Membership of the Science Committee 10,000 Chairman of the Science Committee (an additional) 7,000 182 Salary Bonuses Taxable Other payments Total Total Total and fees Cash Shares1 benefits and allowances 2008 2007 2006 £000 £000 £000 £000 £000 £000 £000 £000 303 – – – – 303 260 260 David Brennan 973 863 432 21 2173 2,506 2,150 2,663 John Patterson 540 348 174 14 54,5 1,081 982 1,007 Simon Lowth 550 469 235 7 434 1,304 172 – 63 – – – – 63 21 – 96 – – – – 96 69 69 58 – – – – 58 – – 76 – – – – 76 57 57 90 – – – – 90 64 49 23 – – – – 23 – – 100 – – – – 100 100 100 80 – – – – 80 54 30 83 – – – – 83 56 21 53 – – – – 53 40 40 Former Directors – – – – – – 463 1,382 Total 3,088 1,680 841 42 265 5,916 4,488 5,678 1 These figures represent that portion of the 2008 bonuses required to be deferred into shares to be held for a three-year period, as explained on page 178. 2 Fees applicable to all Non-Executive Directors increased during the year, effective from the AGM on 24 April 2008. The revised fees are set out on page 181 of this Report. 3 Relates to relocation allowances, a car allowance and cash payments in respect of dividends accrued on vesting of a 2005 US performance share plan award. 4 Relates to remaining cash following selection of benefits within AstraZeneca’s UK flexible benefits programme. 5 Includes a deduction of £11,000 ($21,000) in respect of member contributions to the AstraZeneca Defined Benefit Programme paid through salary sacrifice (see page 183). 6 Part year only as appointed Director on 18 February 2008. 7 Part year only as appointed Director on 12 September 2008. Salary Bonuses Taxable Other payments Total Total Total and fees Cash Shares1 benefits and allowances 2008 2007 2006 $000 $000 $000 $000 $000 $000 $000 $000 567 – – – – 567 520 475 David Brennan 1,822 1,616 809 39 4063 4,692 4,300 4,865 John Patterson 1,011 652 326 26 94,5 2,024 1,965 1,839 Simon Lowth 1,030 878 440 13 814 2,442 345 – 118 – – – – 118 42 – 180 – – – – 180 138 126 109 – – – – 109 – – 142 – – – – 142 114 104 169 – – – – 169 128 89 43 – – – – 43 – – 187 – – – – 187 200 183 150 – – – – 150 108 56 155 – – – – 155 113 39 99 – – – – 99 80 73 Former Directors – – – – – – 929 2,526 Total 5,782 3,146 1,575 78 496 11,077 8,982 10,375 1 These figures represent that portion of the 2008 bonuses required to be deferred into shares to be held for a three-year period, as explained on page 178. 2 Fees applicable to all Non-Executive Directors increased during the year, effective from the AGM on 24 April 2008. The revised fees are set out on page 181 of this Report. 3 Relates to relocation allowances, a car allowance and cash payments in respect of dividends accrued on vesting of a 2005 US performance share plan award. 4 Relates to remaining cash following selection of benefits within AstraZeneca’s UK flexible benefits programme. 5 Includes a deduction of $21,000 (£11,000) in respect of member contributions to the AstraZeneca Defined Benefit Programme paid through salary sacrifice (see page 183). 6 Part year only as appointed Director on 18 February 2008. 7 Part year only as appointed Director on 12 September 2008. 183 GBP/USD 2006 0.547 2007 0.500 2008 0.534 David John David John Brennan Patterson Brennan Patterson £000 £000 $000 $000 Defined Benefit Arrangements 1. Accrued pension at 1 January 2008 611 335 1,145 627 2. Increase in accrued pension during year as a result of inflation – 17 – 32 3. Adjustment to accrued pension as a result of salary increase relative to inflation 57 7 107 13 4. Increase in accrued pension as a result of additional service 12 6 23 11 5. Accrued pension at 31 December 2008 680 365 1,275 683 6. Employee contributions during 2008 – – – – 7. Transfer value of accrued pension at 31 December 2007 5,325 6,833 9,973 12,797 8. Transfer value of accrued pension at 31 December 2008 9,313 8,288 17,441 15,521 9. Change in transfer value during the period less employee contributions 3,988 1,455 7,468 2,724 10. Age at 31 December 2008 553/12 6011/12 553/12 6011/12 11. Pensionable service (years) as at 31 December 2008 33 337/12 33 337/12 > For John Patterson, transfer values are calculated on the market related basis used by the AstraZeneca UK Pension Plan, in line with the GN11 guidance note published by the Board for Actuarial Standards in the UK. The basis was reviewed during 2008 and this resulted in an increase in his transfer value of £993,000 ($1,860,000). > For David Brennan, transfer values are calculated to be consistent with the value of the lump sum distribution equivalent to his deferred accrued pension annuity. The minimum permissible value of such a lump sum distribution was modified in 2008. > As described on page 176, David Brennan reached age 55 during 2008 at which point he became entitled to receive his benefits immediately on retirement without reduction for payment before normal pension age. This results in a recalculation of his transfer value, which is reflected in this table for 2008. The figures shown above reflect David Brennan’s participation in the AstraZeneca US Defined Benefit Pension Plan (qualified and non-qualified pension plans). > For John Patterson, member contributions of £11,000 ($21,000), being 4% of pensionable salary for the first half of 2008 before he opted for cash in lieu, are paid through salary sacrifice, and as such no employee contributions are shown above or included within emoluments. 185 Beneficial Interest in Ordinary Shares Beneficial Interest in Ordinary Shares Director at 1 January 2008 or (if later) appointment date Change to beneficial interest at 31 December 2008 or (if earlier) resignation date Louis Schweitzer 4,000 – 4,000 Håkan Mogren 62,164 – 62,164 David Brennan 115,644 (2,796 )1 112,8482 Simon Lowth 850 – 850 John Patterson 8,015 625 8,640 Bo Angelin 500 – 500 John Buchanan 2,500 – 2,500 – 500 500 Jane Henney 500 – 500 Michele Hooper 500 – 500 1,137 – 1,137 Nancy Rothwell 500 – 500 John Varley 500 – 500 Marcus Wallenberg 67,264 – 67,264 1 This figure represents the difference between the net number of ADSs acquired by David Brennan from the vesting of his 2005 award under the US Executive Performance Share Plan and the net reduction in his notional beneficial interest in ADSs held within the unitised stock plans (see separate tables and footnotes below). 2 The total number of Ordinary Shares and ADSs in which David Brennan has an interest (including potential interests in unreleased shares held in Company plans as detailed in the tables below) has increased in 2008 by 147,683 to 508,822 as at 31 December 2008. 3 Part year only as appointed Director on 18 February 2008. 4 Part year only as appointed Director on 12 September 2008. ADSs held at Net ADSs ADSs held at Unitised stock plan 1 Jan 2008 acquired/(disposed) during 2008 31 Dec 2008 AstraZeneca Executive Deferral Plan 63,789 (22,849 )1 40,940 AstraZeneca Executive Deferred Compensation Plan 30,382 1,621 32,003 AstraZeneca Savings and Security Plan 6,983 717 7,700 1 This figure relates to a scheduled distribution in February 2008. 186 Award Numbers of shares Award price Grant date1 Vesting date1 Performance period1 David Brennan 2006 Award 73,109 2975p 24.03.06 24.03.09 01.01.06 – 31.12.08 2006 Award 19,092 2848p 19.05.06 19.05.09 01.01.06 – 31.12.08 2007 Award 107,051 2744p 30.03.07 30.03.10 01.01.07 – 31.12.09 Total at 1 Jan 2008 199,252 2008 Award 161,546 1882p 28.03.08 28.03.11 01.01.08 – 31.12.10 Total at 31 Dec 2008 360,798 John Patterson 2005 Award 41,945 2241p 29.06.05 29.06.08 01.01.05 – 31.12.07 2006 Award 32,319 2975p 24.03.06 24.03.09 01.01.06 – 31.12.08 2007 Award 36,785 2744p 30.03.07 30.03.10 01.01.07 – 31.12.09 Total at 1 Jan 2008 111,049 Lapse of 2005 Award (41,945 ) 2008 Award 57,385 1882p 28.03.08 28.03.11 01.01.08 – 31.12.10 Total at 31 Dec 2008 126,489 Simon Lowth 2007 Award 15,554 2210p 16.11.07 16.11.10 01.01.07 – 31.12.09 Total at 1 Jan 2008 15,554 2008 Award 58,448 1882p 28.03.08 28.03.11 01.01.08 – 31.12.10 Total at 31 Dec 2008 74,002 1 UK date convention applies. Award Number of ADSs Award price Grant date1 Vesting date1 Performance period1 David Brennan 2005 Award 27,877 $40.35 24.03.05 24.03.08 01.01.05 – 31.12.07 Total at 1 Jan 2008 27,877 (26,762 )3 Partial lapse of 2005 Award (1,115 ) Total at 31 Dec 2008 – 1 UK date convention applies. 2 Vesting of 2005 Award was paid out in the form of ADSs. The ADS price on the vesting date was $37.63. 3 Following certain mandatory tax deductions, David Brennan became beneficially interested in a net number of 17,715 ADSs. 187 Award Number of shares Award price Grant date1 Vesting date1 David Brennan 2006 Award 6,352 2639p 24.02.06 24.02.09 2007 Award 12,014 2911p 23.02.07 23.02.10 Total at 1 Jan 2008 18,366 2008 Award 16,810 1999p 25.02.08 25.02.11 Total at 31 Dec 2008 35,176 John Patterson 2006 Award 6,623 2639p 24.02.06 24.02.09 2007 Award 5,600 2911p 23.02.07 23.02.10 Total at 1 Jan 2008 12,223 2008 Award 7,810 1999p 25.02.08 25.02.11 Total at 31 Dec 2008 20,033 Simon Lowth Total at 1 Jan 2008 – 2008 Award 1,340 1999p 25.02.08 25.02.11 Total at 31 Dec 2008 1,340 1 UK date convention applies. Number of Ordinary Exercise price per Market price at First day Last day Shares under option Ordinary Share1 date of exercise exercisable2, 3 exercisable2,3 Håkan Mogren At 1 Jan 2008 244,896 2848p 13.12.02 24.03.13 – market price above option price – N/A N/A N/A – market price at or below option price 244,896 2848p 13.12.02 24.03.13 At 31 Dec 2008 244,896 2848p 13.12.02 24.03.13 – market price above option price 139,530 2499p 13.12.02 24.03.13 – market price at or below option price 105,366 3309p 23.08.03 27.03.12 David Brennan At 1 Jan 2008 – options over ADSs 355,246 $45.22 16.03.03 23.03.15 At 1 Jan 2008 – options over Ordinary Shares 239,103 2839p 24.03.09 29.03.17 – market price above option price (ADSs) 110,987 $40.35 24.03.08 23.03.15 – market price above option price (Ordinary Shares) – N/A N/A N/A – market price at or below option price (ADSs) 244,259 $47.44 16.03.03 25.03.14 – market price at or below option price (Ordinary Shares) 239,103 2839p 24.03.09 29.03.17 Granted 193,856 1882p 28.03.11 27.03.18 At 31 Dec 2008 – options over ADSs 355,246 $45.22 16.03.03 23.03.15 At 31 Dec 2008 – options over Ordinary Shares 432,959 2410p 24.03.09 27.03.18 – market price above option price (ADSs) 110,987 $40.35 24.03.08 23.03.15 – market price above option price (Ordinary Shares) 322,318 2226p 30.03.10 27.03.18 – market price at or below option price (ADSs) 244,259 $47.44 16.03.03 25.03.14 – market price at or below option price (Ordinary Shares) 110,641 2949p 24.03.09 18.05.16 Simon Lowth At 1 Jan 2008 18,665 2210p 16.11.10 15.11.17 – market price above option price – N/A N/A N/A – market price at or below option price 18,665 2210p 16.11.10 15.11.17 Granted 70,138 1882p 28.03.11 27.03.18 At 31 Dec 2008 88,803 1951p 16.11.10 27.03.18 – market price above option price 88,803 1951p 16.11.10 27.03.18 – market price at or below option price – N/A N/A N/A John Patterson At 1 Jan 2008 237,159 2735p 25.03.02 29.03.17 – market price above option price 53,282 2129p 01.12.07 23.03.15 – market price at or below option price 183,877 2911p 25.03.02 29.03.17 Granted 68,862 1882p 28.03.11 27.03.18 Exercised 374 1756p 2110p 01.12.07 31.05.08 Exercised 251 2262p 2110p 01.12.07 31.05.08 At 31 Dec 2008 305,396 2544p 25.03.02 27.03.18 – market price above option price 213,606 2279p 25.03.02 27.03.18 – market price at or below option price 91,790 3163p 23.08.03 23.03.16 1 Exercise prices at 1 January and 31 December are weighted averages. 2 First and last exercise dates of groups of options, within which period there are shorter exercise periods. 3 UK date convention applies. Gains made by Directors on Gains made by the exercise of share options the highest paid Director Year $ $ 2008 1,764.96 – 2007 783,858.08 – 2006 2,962,173.19 2,212,636.27 Share market price as Range of the share Stock Exchange at 31 December 2008 market price during 2008 London 2807p 1748p to 2888p Stockholm 307.00 SEK 211.50 SEK to 340.50 SEK New York $41.03 $34.10 to $49.85
Company Secretary AstraZeneca 2004 2005 2006 2007 2008 At year end 1,645 1,581 1,532 1,457 1,447 Weighted average for year 1,673 1,617 1,564 1,495 1,453 Stock market price – per $0.25 Ordinary Share Highest (pence) 2749 2837 3529 2984 2888 Lowest (pence) 1863 1861 2574 2093 1748 At year end (pence) 1889 2829 2744 2164 2807 By size of account 2008 No. of shares % 1 – 250 0.5 251 – 500 0.7 501 – 1,000 0.9 1,001 – 5,000 1.2 5,001 – 10,000 0.2 10,001 – 50,000 1.0 50,001 – 1,000,000 13.6 Over 1,000,0001 81.9 Issued share capital 100.0 1 Includes VPC and ADR holdings. > For shares listed on the London Stock Exchange (LSE) the reported high and low middle market closing quotations are derived from The Daily Official List. > For shares listed on the Stockholm Stock Exchange (SSE) the high and low closing sales prices are as stated in the Official List. > For American Depositary Shares (ADS) listed on the New York Stock Exchange the reported high and low sales prices are as reported by Dow Jones (ADR quotations). Ordinary LSE ADS Ordinary SSE1 High Low High Low High Low (pence) (pence) (US$) (US$) (SEK) (SEK) 2007 – Quarter 1 2984 2734 58.78 53.53 414.0 367.5 – Quarter 2 2953 2567 59.04 51.00 401.0 354.5 – Quarter 3 2770 2278 56.16 45.56 374.5 315.0 – Quarter 4 2589 2093 52.47 42.82 343.5 272.0 2008 – Quarter 1 2345 1748 45.70 35.50 296.5 211.5 – Quarter 2 2289 1981 44.57 39.36 268.0 235.5 – July 2468 2130 48.55 43.42 292.0 255.5 – August 2693 2437 49.85 47.55 314.0 292.0 – September 2766 2415 48.95 43.53 321.5 292.5 – October 2630 2075 44.76 36.50 320.0 253.5 – November 2888 2245 44.38 34.10 340.5 280.5 – December 2807 2420 41.12 35.24 326.0 300.0 1 Principally held in bearer form. 191 Date of Percentage disclosure of issued Shareholder Number of shares to Company1 share capital Capital Research and Management Company 71,261,060 25 Jun 2007 4.92% Axa SA 70,934,559 20 Dec 2007 4.90% Investor AB 63,465,810 11 Feb 2004 4.38% Barclays PLC 61,721,820 18 Dec 2006 4.26% Wellington Management Co., LLP 60,565,299 30 Oct 2006 4.18% Legal & General Investment Management Limited 59,198,535 12 Sept 2007 4.09% 1 Since the date of disclosure to the Company, the interest of any person listed above in the Ordinary Shares of the Company may have increased or decreased. No requirement to notify the Company of any increase or decrease would have arisen unless the holding moved up or down through a whole number percentage level. The percentage level may increase (on the cancellation of shares following a re-purchase of shares under the Company’s share re-purchase programme) or decrease (on the issue of new shares under any of the Company’s share plans). Percentage of issued share capital Shareholder 29 Jan 2009 31 Jan 2008 31 Jan 2007 31 Jan 2006 Capital Research and Management Company 4.92% 4.89% 11.70% 12.57% Axa SA 4.90% 4.87% – – Investor AB 4.38% 4.36% 4.14% 4.01% Barclays PLC 4.26% 4.24% 4.03% 3.20% Wellington Management Co., LLP 4.18% 4.16% 3.95% 4.97% Legal & General Investment Management Limited 4.09% 4.06% 3.43% 3.32% > In the US 794 > Total 128,748 > In the US 2,296 > Total 2,330 Percentage Title of class Amount owned of class Ordinary Shares 294,034 0.02% Number of shares Subscription price Normal expiry date 55,640,140 1882p – 3487p 2009 – 2018 Number of shares Subscription price Normal expiry date 2,428,727 1882p – 3487p 2009 – 2018 First interim: Announced in July and paid in September. Second interim: Announced in January and paid in March. 193 195 SEK/USD USD/GBP Average rates (profit and loss account, cash flow) 1995 7.1100 1.5796 1996 6.7000 1.5525 1997 7.6225 1.6386 1998 7.9384 1.6603 1999 8.2189 1.6247 End of year spot rates (balance sheet) 1995 6.6500 1.5500 1996 6.8400 1.6900 1997 7.8500 1.6600 1998 8.0400 1.6600 1999 8.5130 1.6185 SEK/USD USD/GBP Average rates (income statement, cash flow) 2006 7.4472 1.8265 2007 6.7692 2.0003 2008 6.5130 1.8728 End of year spot rates (balance sheet) 2006 6.8824 1.9626 2007 6.4051 1.9932 2008 7.7740 1.4437 Terms used in the Annual Report and Form 20-F Information US equivalent or brief description Accruals Accrued expenses Allotted Issued Bank borrowings Payable to banks Called-up share capital Issued share capital Creditors Liabilities/payables Current instalments of loans Long term debt due within one year Debtors Receivables and prepaid expenses Earnings Net income Finance lease Capital lease Fixed asset investments Non-current investments Freehold Ownership with absolute rights in perpetuity Interest receivable Interest income Interest payable Interest expense Loans Long term debt Prepayments Prepaid expenses Profit Income Profit and loss account Income statement/consolidated statement of income Reserves Retained earnings Short term investments Redeemable securities and short term deposits Share premium account Premiums paid in excess of par value of Ordinary Shares Statement of recognised income and expense Statement of comprehensive income > The Redeemable Preference Shares carry no rights to receive dividends. > The holders of Redeemable Preference Shares have no rights to receive notices of, attend or vote at general meetings except in certain limited circumstances. They have one vote for every 50,000 Redeemable Preference Shares held. > On a distribution of assets of the Company, on a winding-up or other return of capital (subject to certain exceptions), the holders of Redeemable Preference Shares have priority over the holders of Ordinary Shares to receive the capital paid up on those shares. > Subject to the provisions of the Companies Act 1985, the Company has the right to redeem the Redeemable Preference Shares at any time on giving not less than seven days’ written notice. ITEM PAGE A. Selected financial data Financial Highlights 2 Directors’ Report –
Reporting Our Performance – Financial 15 Group Financial Record 172 Additional Information – Shareholder Information 190 D. Risk Factors Risk – Principal Risks and Uncertainties 76
COMPANY A. History and development of the Company Additional Information – History and development of the Company 197 Financial Review – Investments, divestments and capital expenditure 41 Directors’ Report – Supply and Manufacturing 27 Note 7 – Property, plant and equipment 114 Note 22 – Acquisitions of business operations 130 B. Business overview Directors’ Report 7 C. Organisational structure Directors’ Report – Other Company Disclosures and Information 94 Principal Subsidiaries 164 D. Property, plants and equipment Directors’ Report – Our Resources 17
REVIEW AND PROSPECTS A- F. Directors’ Report 7 Financial Review 31 Note 16 – Financial instruments 122 A. Directors and senior management Directors’ Report – Board of Directors at 31 December 2008 84 B. Compensation Remuneration Report – Directors’ Remuneration Report 174 Note 23 – Post-retirement benefits 133 Note 27 – Statutory and other information 163 ITEM PAGE C. Board practices Directors’ Report – Board of Directors at 31 December 2008 84 Remuneration Report – Directors’ Remuneration Report 174 Directors’ Report – Operation of the Board of Directors 87 Directors’ Report – Operation of Board Committees 88 D. Employees Note 24 – Employee costs and share option plans for employees 138 Directors’ Report – People 28 E. Share ownership Remuneration Report – Directors’ Interests in Shares 185 Note 24 – Employee costs and share option plans for employees 138 A. Major shareholders Additional Information – Major Shareholdings 191 B. Related party transactions Additional Information – Related Party Transactions 192 Note 27 – Statutory and other information 163 A. Consolidated statements and other financial information Financial Statements (excluding Directors’ responsibilities on page 98 and Auditor’s opinion on page 99) 97 B. Significant changes Note 27 – Statutory and other information 163 A4. Price history of listed stock Additional Information – Shareholder Information 190 C. Markets Additional Information – Shareholder Information 190 ITEM PAGE B. Memorandum and Articles
of Association Additional Information – Memorandum and Articles of Association 197 C. Material contracts n/a D. Exchange controls Additional Information – Exchange Controls and other Limitations affecting Security Holders 194 E. Taxation Financial Review – Taxation 46 H. Documents on display Additional Information – Documents on Display 193 I. Subsidiary information Principal Subsidiaries 164
QUALITATIVE DISCLOSURES
ABOUT MARKET RISK Financial Review – Financial Risk Management Policies 41 Directors’ Report – UK Corporate Governance Requirements 91 A. Audit Committee financial expert Directors’ Report – Audit Committee 89 B. Code of ethics Directors’ Report – Code of Conduct 93 C. Principal accountant fees and
services Note 27 – Statutory and other information 163 D. Exemptions from the listing
standards for audit committees n/a E. Purchases of equity securities by
the issuer and affiliated purchasers Note 20 – Share capital of parent company 129 G. Corporate Governance Directors’ Report – Principal UK and US Governance Requirements 91 Financial Statements (excluding Directors’ responsibilities on page 98 and Auditor’s opinion on
page 99) 97 ESTABLISHED REST OF WORLD EMERGING REST OF WORLD Canada Western Europe Japan Other Established Emerging Europe China Emerging Other Emerging Asia Pacific US Canada Austria Japan Australia Czech Republic China India Algeria Belgium New Zealand Estonia Hong Kong Malaysia Argentina Denmark Latvia Philippines Brazil Finland Poland South Korea Central America France Slovakia Taiwan Chile Germany Turkey Thailand Colombia Greece Egypt Holland Lebanon Italy Mexico Norway Morocco Portugal Peru Spain Saudi Arabia Sweden South Africa UK UAE Venezuela Iceland Albania Afghanistan Luxembourg Belarus Bangladesh Bosnia-Herzegovina Brunei Bulgaria Cambodia Croatia Indonesia Georgia Laos Hungary Myanmar Macedonia Nepal Romania Papua New Guinea Russia Serbia/Montenegro Singapore Sri Lanka Vietnam
CONTACT INFORMATION
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 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/
annualreport2008DE 19850-5437 US Tel: +1 (302) 886 3000 Fax: +1 (302) 886 2972 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