FORM 6-K
Report of Foreign Issuer
Pursuant
to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For February 2005
Commission File Number: 001-11960
AstraZeneca PLC
15 Stanhope Gate, London W1K 1LN, England
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F X | Form 40-F |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ______
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ______
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes | No X |
If Yes is marked, indicate below the file number assigned to the Registrant in connection with Rule 12g3-2(b): 82-_____________
AstraZeneca PLC
INDEX TO EXHIBITS
1. | Annual Review 2004 | |
2. | Corporate Responsibility Summary Report 2004 | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AstraZeneca PLC | ||
Date: February 25, 2005 | By: /s/ A C N Kemp | |
Name: A C N Kemp | ||
Title: Assistant Secretary |
Annual
Review 2004 astrazeneca.com |
01 |
The year in brief
AstraZeneca is one of the worlds leading pharmaceutical companies. We focus our skills, experience and resources on six therapy areas: cancer, cardiovascular, gastrointestinal, infection, neuroscience, and respiratory and inflammation important areas of healthcare that represent the majority of the worldwide burden of disease. We have a broad range of products for these areas and a commitment to delivering a flow of new medicines designed to meet the needs of patients and the healthcare professionals who treat them.
02 | Annual
Review 2004 astrazeneca.com |
Chairmans statement
Leading
the Board during AstraZenecas formative years has been an exciting journey.
Percy
Barnevik
2004 was a year of both performance and challenge for AstraZeneca and the pharmaceutical industry in general. Worldwide demand for modern medicines continued to grow, driven by the availability of innovative new medicines, demographics and emerging market opportunities. At the same time, these global drivers are being offset by increased pricing pressure, escalating costs in the development and commercialisation of medicine, and a generally more risk-averse environment as regulators seek to strike an appropriate balance in weighing the risks and benefits of innovation.
For AstraZeneca, the year was characterised not only by good sales growth, productivity gains and continued investment in innovation but also by the disappointments of the US FDA decision not to approve our novel anti-clotting agent, Exanta, the failure to demonstrate an overall survival benefit for the lung cancer product, Iressa, and what we consider to be unfounded speculation about the safety of our lipid-lowering medicine, Crestor.
Growth came from our broad range of products, especially the newer products which are largely free of threat from patent expiry. In addition to strong performances from the established markets, good progress continued to be made in emerging markets such as China and Mexico. Since 2001, we have recruited an additional 2,500 staff to strengthen our presence in emerging markets and AstraZeneca is now one of the fastest growing major pharmaceutical companies in the worlds top eight emerging markets: China, Mexico, Brazil, South Korea, India, Poland, Turkey and Taiwan.
AstraZeneca further emphasised its strategic focus on prescription pharmaceuticals during the year with the divestment of its joint venture interest in the seed company, Advanta BV. Of all the major pharmaceutical companies, AstraZeneca is probably the most focused on prescription medicines, our only other businesses being Astra Tech, the medical device company, and Salick Health Care, which delivers services to cancer care centres.
In such a rapidly changing environment, the Board has been monitoring developments carefully to ensure the appropriateness of our corporate strategy. Particular attention has been paid to the regulatory progress and sales performance of our newer products, the overall composition of our product portfolio and the various productivity initiatives that have been pursued. Success in Research and Development is essential to our strategy and it is good to see the emergence of an impressive early development portfolio with 40% more projects in phase 2 clinical trials than this time last year. We also have more new development candidates emerging from Discovery than ever before. As well as new investments in R&D facilities in Sweden, the UK and the US, we announced a £75 million equity investment and R&D collaboration with Cambridge Antibody Technology to discover and develop human antibody therapeutics. This strategic alliance complements last years oncology alliance with Abgenix Inc. and brings to over 1,700 the number of active R&D collaborations and agreements we now have in place.
The Board has also reviewed its corporate governance including individual Directors performance. A great deal of effort has gone into preparing and implementing the numerous changes required to comply with the increasing demands from external bodies. In preparation for the adoption of new international accounting standards in 2005, AstraZeneca was the first FTSE 100 company to make available to shareholders financial information for 2003 and the first half of 2004 prepared in accordance with the new standards.
AstraZenecas share price performance, and that of other major pharmaceutical companies, were disappointing in 2004 with the AstraZeneca share price in particular affected by the FDAs non-approval of Exanta, the challenges facing Crestor and the recent clinical trial results for Iressa.
The composition of the Board is also undergoing some change. On my retirement at the end of the year, the Board confirmed the appointment of Louis Schweitzer as my successor as Non-Executive Chairman of AstraZeneca with effect from 1 January 2005, following his appointment to the Board in March 2004. Louis Schweitzer is a distinguished industrialist with wide international experience and I congratulate him most warmly on his appointment.
Karl von der Heyden, the Chairman of the Audit Committee, retired at the 2004 AGM after more than five years as a Non-Executive Director. I thank him for his contribution to the Company and, in particular, the role he played in the development of the work of the Audit Committee. John Buchanan succeeded Karl as Chairman of the Audit Committee. Most recently, the Board announced the
appointment of Dr John Patterson, with effect from 1 January 2005, to the Board as Executive Director responsible for Development, emphasising the importance we place on this activity.
My six year engagement with AstraZeneca, from the announcement of the proposed merger in December 1998 to my departure as Chairman at the end of 2004, has been an exciting journey. This includes the fast merger with delivery of promised synergies and, not least, the creation of a cross-border, unified culture. The growth of new products and penetration of developing markets helped bridge the inevitable gap caused by patent expirations of mature products. In spite of recent setbacks in product launches, we have a strong product pipeline underpinning further growth ambitions.
I want to thank my Board colleagues for their valuable support and the Company management, spearheaded by Sir Tom McKillop, for their excellent achievements over these years. I also want to thank all employees and wish them and this fine company every success in the future.
Percy Barnevik
*Abbott
Labs, Aventis, BMS, Eli Lilly, GSK, JNJ, Merck, Novartis, Pfizer, Roche, Sanofi-Aventis,
Schering, Schering-Plough and Wyeth
Source: Thomson Financial Datastream
Annual
Review 2004 astrazeneca.com |
I
look forward to playing my part in ensuring AstraZenecas future success.
Louis
Schweitzer
I am grateful to the AstraZeneca Board for the confidence they have shown in me by electing me as their Chairman. Percy Barnevik as the first Chairman of AstraZeneca has served the Company with distinction. On behalf of the Board, shareholders and AstraZeneca employees, I would like to thank him most warmly for his wise counsel, influence and leadership of the Board.
Since my appointment to the Board in March 2004, I have had the opportunity to get to know my Board colleagues, to meet senior managers in the Company and to get a clear view of the Companys strong financial performance as well as the strategic opportunities and significant challenges facing AstraZeneca. I have been most impressed with what I have seen of the senior management of the Company led by Sir Tom McKillop. I very much look forward to working closely with him and my Board colleagues and playing my part in ensuring the Companys future.
Following the Companys strong financial performance in 2004, the Board has recommended a second interim dividend of $0.645, 34.3 pence, SEK4.497 per Ordinary Share bringing the total dividend for the year to $0.94, 50.3 pence, SEK6.697 per Ordinary Share, an increase in dollar terms of 18.2%.
In 2005, we aim to deliver strong financial performance, characterised by top-tier earnings growth and improved shareholder returns, while continuing to build an innovative and valuable pipeline capable of driving shareholder value over the long term.
Louis Schweitzer
Strategy | |||
AstraZeneca Group Strategy | |||
AstraZeneca aims to create enduring value for society and shareholders, by discovering, developing, manufacturing and marketing differentiated medicines that make a real contribution to human health. Our culture is based on innovation, a responsible way of doing business and performance. | |||
In response to an environment that is becoming even more challenging, we aspire to deliver a level of productivity that matches the best among our peers. We are committed to delivering sustained financial performance, through growth and productivity, that will place AstraZeneca among the best in the industry. | |||
This strategy for sustainable, profitable growth is supported by the following core business priorities, paying heed to the setbacks experienced in 2004: | |||
Sales growth | |||
> | Release of the full potential of our marketed therapies through resource allocation and investment in projects that will extend their use and bring benefits to new patient populations. | ||
> | Further strengthening our commercial skills to drive success in our key markets. | ||
> | Enhancing our presence in important new, emerging markets through organic growth and strategic regional investments. | ||
Step-change in productivity | |||
> | Commitment to vigorously improve productivity in pursuit of operational excellence in all our activities, to be among the most efficient and effective companies in our sector. | ||
> | Developing new business approaches that will meet the changing needs and expectations of regulators, payers, prescribers and patients. | ||
Strong pipeline and active risk management | |||
> | Successful delivery to market of the next wave of differentiated products currently in development. | ||
> | Rigorous management of our portfolio of products in development, to mitigate risks associated with new innovative products and make future growth more robust. | ||
> | Expansion of the development pipeline through continuously improved in-house discovery processes, complemented by external collaborations and partnerships. | ||
> | Pursuit of value-creating investment in significant targeted licensing and acquisition opportunities. | ||
Corporate responsibility | |||
> | Delivery of our core values through a responsible approach to business. | ||
People | |||
> | Delivery of optimised performance and sustainable business outcomes through: | ||
> | Improved organisational effectiveness. | ||
> | Optimised individual and team performance | ||
> | Effective management and development of talent. | ||
> | Improved leadership capability. |
04 | Annual
Review 2004 astrazeneca.com |
Chief Executive's review
I
am confident in our future prospects despite the recent disappointments.
Sir
Tom McKillop
At the start of 2004, the year seemed full of opportunity: AstraZeneca was moving into a new and exciting phase. The excellent foundations created by a successful merger and the subsequent transformation of an ageing product portfolio had set us up for strong growth from our key products. The growth portfolio, including products that were on the range before the merger, such as Seroquel and Arimidex, and newly introduced products, such as Nexium, Crestor, Symbicort and Iressa, provided an excellent opportunity to deliver value to physicians, patients and shareholders alike.
While we made good progress in this respect, building on the success of our gastroenterology, cardiovascular, respiratory, neuroscience and oncology franchises, we also experienced disappointments with Exanta and Iressa and some difficult market conditions with Crestor.
Nexium (2004 sales $3.9 billion) is now recognised as one of the most successful products in our industry and it has continued to grow, both in the important US market and worldwide, despite an increasingly competitive environment. During the year, we added Nexium Intravenous to the product range and the recent, well-publicised problems with the new class of anti-inflammatory drugs, such as Vioxx, offers further opportunities for Nexium, which is approved for the prevention of the gastrointestinal side effects associated with such anti-inflammatory drugs.
Seroquel ($2.0 billion) continues to grow strongly and is increasingly recognised by patients and doctors for its outstanding safety and efficacy profile. During 2004, Seroquel became the leading atypical anti-psychotic therapy in the US market based on monthly new prescriptions and made strong progress in other markets. Important new opportunities to extend the use of Seroquel also emerged with the exciting results from clinical studies in the treatment of bipolar depression and the management of agitation in the elderly.
Our leading range of anti-hormonal cancer therapies continued to make a major contribution to the business and there is considerable scope for further growth. In particular, positive five-year data from the landmark ATAC study have established Arimidex as the agent of choice in the adjuvant treatment of breast cancer, replacing Nolvadex (tamoxifen) as the new gold standard for treatment.
Sales of Iressa ($389 million) grew well in those markets where it is available and, early in the year, exciting science emerged indicating that certain patients with non-small cell lung cancer (NSCLC) carried genetic mutations that appeared to make them particularly sensitive to the beneficial effects of the drug. Disappointingly however, the ISEL study, designed to study the effect of Iressa compared to placebo on survival in refractory NSCLC, failed to meet its primary endpoint of survival in the overall population, although there were statistically significant differences in survival in favour of Iressa in patients of East Asian origin and non-smokers. In the East Asian subgroup there was a near doubling of median survival which is consistent with the positive benefit/risk ratio seen in previous studies in these patients. While sales will continue in all markets where the drug is currently approved, the Company has chosen to suspend promotion in the US until the implications of the ISEL results have been discussed with the regulatory authorities. The application for marketing approval of Iressa in the EU has been withdrawn but we will continue to work with opinion leaders and regulators to determine the most appropriate next steps for this innovative medicine. We are also determined to benefit from this experience with Iressa and apply the learning to the other exciting novel cancer therapies we have in development.
2004 also proved to be a challenging year for two key products in our cardiovascular range. Crestor, our new lipid-lowering drug, first launched in 2003, has now been approved in 67 countries (launched in 56) and achieved sales of $908 million in 2004. Its ability to control lipid disorders more effectively than any other available statin has been well recognised by prescribers but, during the year, the product was the subject of speculation that questioned its safety profile. Patient safety is the highest priority for AstraZeneca and we have worked diligently and transparently to monitor, communicate and mitigate any risk associated with the use of Crestor. We remain confident that the clear benefits of Crestor are achieved with a safety profile in line with that of other marketed members of the class. Our confidence derives from an extensive database involving over 40,000 patients in clinical trials and post-marketing surveillance of more than 15 million prescriptions written and four million patients treated with Crestor.
Exanta, AstraZenecas innovative oral therapy for the treatment of diseases associated with blood clots, was launched in its first markets in 2004 for the prevention of blood clots following orthopaedic surgery. Exanta is the first oral anti-coagulant to be developed for more than 60 years, and its greatest potential is in the chronic prevention of strokes and other events related to blood clots in patients at high risk as a result of the common heart rhythm disorder, atrial fibrillation. During a development programme that involved more than 30,000 patients, we established that the drug had the potential to be an effective alternative to the only existing therapy in this area (warfarin) but also discovered that Exanta had an undesirable impact on the livers of a small percentage of treated patients. Following a review at a public Advisory Committee hearing in Washington in September 2004, the US FDA
decided that AstraZeneca had not established a favourable benefit/risk profile for the drug and did not approve it for use in the US market. In Europe, Exanta is already marketed in many countries for the prevention of clots after orthopaedic surgery, but more clinical data will be required before approval for long term use can be considered.
Despite these setbacks, we remain committed to building our future on science and innovation and believe AstraZeneca has the capacity to succeed in an increasingly competitive healthcare market. We are determined to apply the learning from these recent experiences and ensure that we better manage the risks inherent in this strategy to deliver an innovative and valuable pipeline that will sustain the Company over the long term whilst allowing us to return value to our shareholders in the short term.
The appointment of John Patterson to the Board as Executive Director responsible for Development reflects the importance we attach to our ability to convert science into sales. John has immense experience in drug development and will be working to optimise our capabilities in this critical area.
The Company has, since its creation, placed great emphasis on productivity and this will continue, indeed accelerate, to ensure we are at the forefront of our industry as it goes through a period of considerable change.
The problems encountered in 2004 with Iressa, Crestor and Exanta are, themselves, illustrative of issues that are faced by all who are committed to innovation as a source of progress, the enhancement of quality of life and the creation of value. Innovation, in any field, is associated with risk but in healthcare, in particular, where unmet needs in the developed and developing worlds continue to increase, the innovators contract with society needs to reflect an appropriate balance of benefit to risk.
I would like to express our condolences to all those affected by the tsunami disaster. I am sad to report that, to date, three of our employees are still missing. Our deepest sympathies go to their families and friends. We immediately contributed $600,000 in cash, made our drugs available where appropriate and have created a fund of $1.5 million to help with reconstruction projects being implemented through our local companies in the affected areas.
Finally, I once again thank my colleagues on the Executive Team for their continuing commitment and support and also our employees around the world. Their contribution, their skills and their abilities are the building blocks of our future.
Sir
Tom McKillop
Chief
Executive
Annual
Review 2004 astrazeneca.com |
Financial highlights
With
underlying sales growth of 9% and EPS up 18%, we have delivered top
tier financial performance in 2004. |
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Sales $m | R&D investment $m | |
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Profit
$m |
Earnings
per Ordinary Share $ |
Dividend for 2004 | ||||
$ | Pence | SEK | Payment date | |
First interim dividend | 0.295 | 16.0 | 2.200 | 20 September 2004 |
Second interim dividend | 0.645 | 34.3 | 4.497 | 21 March 2005 |
Total dividend | 0.940 | 50.3 | 6.697 | |
> | We spend around $15 million each working day on research and development (total R&D spend in 2004: $3.8 billion) | > | We have 30 manufacturing sites in 20 countries | ||
> | We employ 11,900 people in research and development at 11 R&D centres in seven countries: Sweden, the UK, the US, Canada, France, India and Japan | > | Around 15,000 people worldwide work in supply and manufacturing, including around 12,400 people in formulation and packaging, and 1,600 in active pharmaceutical ingredient supply | ||
> | We focus on continued innovation and maintaining a flow of new medicines that meet patients needs | > | We have over 64,000 employees worldwide: | ||
| 37,000 in Europe | ||||
| 18,000 in the Americas | ||||
| 9,000 in Asia, Africa and Australasia | ||||
> | We have 17 projects in phase 1, 17 projects in phase 2 and 25 projects in phase 3 development | > | Our products are available in over 100 countries | ||
> | Collaborations with leading academic centres and biotechnology companies, and the in-licensing of innovative products and technologies, complement our in-house capabilities and play a key role in strengthening our portfolio | > | Along with our commitment to competitiveness and high performance, we will continue to be led by our core values to achieve sustainable success |
Annual
Review 2004 astrazeneca.com |
07 | |||
Discovery We
continue to increase our |
||||
Every new medicine is the result of an intensive and focused research process. We examine closely all the possibilities to find the most effective treatment for the disease we are targeting. Thousands of compounds are investigated, only a small number succeed. It is a complex, expensive and risky process (taking over 10 years and typically costing around $1 billion), but it is an exciting and rewarding one. We have a world leading R&D organisation, with over 11,900 people at 11 major centres in seven countries comprising six joint discovery and development facilities in the UK, the US and Sweden; a further four sites in the US, Canada, India and France which focus only on discovery, and a facility in Japan for development only. These resources are complemented by clinical development at 43 sites around the world. We spend around $15 million each working day in the search for new medicines, and we are committed to delivering new, medically important and commercially successful products to market every year. Discovery |
Medical research is more exciting than ever as new technology is applied to understanding what causes disease and how it may be prevented or treated. Our effort in recent years to improve the links between basic science and clinical medicine has helped us to gain a better understanding of human diseases and how future medicines will work against them. We also continue to introduce earlier in the process more stringent, and where possible high throughput, testing of drug safety and how a medicine gets distributed around, and out, of the human body. This helps us to eliminate earlier the candidate drugs (CDs) that are less likely to succeed. During 2004, 18 CDs were selected for development. Partnerships |
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08
Development
Ensuring that our growing range of candidate drugs are developed effectively to meet the future needs of patients is a high priority.
John
Patterson,
Executive
Director, Development*
People in our Development organisation focus on developing better drugs faster. They work globally in therapy area-led product teams that bring together all the relevant functional skills and experience needed for the robust, rapid progress of new medicines and the management of development risks.
We aim to continuously improve the efficiency of our R&D by simplifying our processes, speeding up decision making and investing in areas directly linked to increasing the quality and number of new products. A new clinical organisational structure was announced in October 2004 to support these practices and further enhance productivity. In January 2005, we appointed an Executive Director for Development (a new Board position) as part of our accelerated significant programme of change to review our pipeline and optimise the contribution of our development and regulatory functions.
In 2004, 18 candidate drugs were selected (15 in 2003 and 11 in 2002). By the end of the year, there were 31 projects in the pre-clinical phase and 17 projects in clinical phase 1, 17 projects in clinical phase 2 and 25 projects in clinical phase 3.
During the year we also concentrated on progressing regulatory filings for Exanta and supporting continued launches of new products. We also continue to look at all the ways our existing products can be used or improved to get the most benefit for patients and in 2004 made regulatory submissions for new uses for Nexium, Symbicort and Atacand.
* With effect from 1 January 2005
Annual
Review 2004 astrazeneca.com |
09 |
Development pipeline
Compound | Areas under investigation | Estimated filing date | Stage of development |
Cardiovascular | MAA | NDA | PC | 1 | 2 | 3 | |||||||||
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Exanta | prevention of VTE | Launched | Filed* | ||||||||||||
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Exanta SC formulation |
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Galida | diabetes /metabolic syndrome | 2007 | 2007 | ||||||||||||
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AZD6140 | arterial thrombosis | >2007 | >2007 | ||||||||||||
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AZD7009 | AF conversion | >2007 | >2007 | ||||||||||||
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AZD7009 | AF maintenance | >2007 | >2007 | ||||||||||||
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AZD9684 | thrombosis | >2007 | >2007 | ||||||||||||
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AZD0837 | thrombosis | >2007 | >2007 | ||||||||||||
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AZD7806 | dyslipidaemia | >2007 | >2007 | ||||||||||||
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AZD4619 | dyslipidaemia | >2007 | >2007 | ||||||||||||
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AZD6610 | dyslipidaemia/diabetes | >2007 | >2007 | ||||||||||||
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AZD8294 | dyslipidaemia | >2007 | >2007 | ||||||||||||
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AZD8677 | dyslipidaemia/diabetes | >2007 | >2007 | ||||||||||||
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AZD8450 | dyslipidaemia | >2007 | >2007 | ||||||||||||
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AZD6370 | diabetes | >2007 | >2007 | ||||||||||||
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Gastrointestinal | |||||||||||||||
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AZD0865 | acid-related GI disease | 2007 | 2007 | ||||||||||||
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AZD7371 | functional GI disease | >2007 | >2007 | ||||||||||||
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AZD3355 | GERD | >2007 | >2007 | ||||||||||||
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AZD9343 | GERD | >2007 | >2007 | ||||||||||||
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AZD5745 | acid-related GI disease | >2007 | >2007 | ||||||||||||
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AZD8081 | functional GI disease | >2007 | >2007 | ||||||||||||
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Cerovive | stroke | 2H 2006 | 2H 2006 | ||||||||||||
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AZD7371 | overactive bladder | >2007 | >2007 | ||||||||||||
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AZD8129 (AR-A2) |
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AZD4282 | neuropathic pain | >2007 | >2007 | ||||||||||||
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AZD3102 | Alzheimers disease | >2007 | >2007 | ||||||||||||
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AZD1080 | Alzheimers disease | >2007 | >2007 | ||||||||||||
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AZD9272 | neuropathic pain | >2007 | >2007 | ||||||||||||
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AZD2327 | anxiety | >2007 | >2007 | ||||||||||||
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AZD5904 | multiple sclerosis | >2007 | >2007 | ||||||||||||
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Oncology | |||||||||||||||
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Iressa | NSCLC | Withdrawn | Launched | ||||||||||||
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ZD6474 | solid tumours | >2007 | >2007 | ||||||||||||
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ZD4054 | solid tumours | >2007 | >2007 | ||||||||||||
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AZD2171 | solid tumours | >2007 | >2007 | ||||||||||||
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AZD3409 | solid tumours | >2007 | >2007 | ||||||||||||
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AZD0530 | solid tumours and haematological malignancies | >2007 | >2007 | ||||||||||||
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AZD5438 | solid tumours | >2007 | >2007 | ||||||||||||
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AZD6244 | solid tumours | >2007 | >2007 | ||||||||||||
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ZD6126 | solid tumours | >2007 | >2007 | ||||||||||||
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AZD4440 | solid tumours | >2007 | >2007 | ||||||||||||
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AZD9935 | solid tumours | >2007 | >2007 | ||||||||||||
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AZD0424 | solid tumours | >2007 | >2007 | ||||||||||||
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AZD1152 | solid tumours and haematological malignancies | >2007 | >2007 | ||||||||||||
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AZD4769 | solid tumours | >2007 | >2007 | ||||||||||||
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AZD3841 | solid tumours | >2007 | >2007 | ||||||||||||
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AZD8931 | solid tumours | >2007 | >2007 | ||||||||||||
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Respiratory and Inflammation | |||||||||||||||
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AZD9056 | rheumatoid arthritis | >2007 | >2007 | ||||||||||||
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AZD9056 | osteoarthritis | >2007 | >2007 | ||||||||||||
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AZD8309 | rheumatoid arthritis | >2007 | >2007 | ||||||||||||
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AZD8955 | osteoarthritis | >2007 | >2007 | ||||||||||||
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AZD8309 | COPD | >2007 | >2007 | ||||||||||||
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AZD3778 | asthma/rhinitis | >2007 | >2007 | ||||||||||||
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AZD9056 | COPD | >2007 | >2007 | ||||||||||||
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AZD3342 | COPD | >2007 | >2007 | ||||||||||||
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AZD6067 | COPD | >2007 | >2007 | ||||||||||||
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AZD2098 | asthma | >2007 | >2007 | ||||||||||||
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AZD1981 | asthma | >2007 | >2007 | ||||||||||||
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AZD0902 | rheumatoid arthritis | >2007 | >2007 | ||||||||||||
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AZD6703 | rheumatoid arthritis | >2007 | >2007 | ||||||||||||
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AZD6357 | osteoarthritis | >2007 | >2007 | ||||||||||||
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AZD7928 | COPD | >2007 | >2007 | ||||||||||||
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AZD2914 | COPD | >2007 | >2007 | ||||||||||||
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AZD2392 | asthma/rhinitis | >2007 | >2007 | ||||||||||||
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AZD1744 | asthma/rhinitis | >2007 | >2007 | ||||||||||||
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AZD5672 | rheumatoid arthritis | >2007 | >2007 | ||||||||||||
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* | Discussions are ongoing with the FDA to determine if there is now a realistic prospect of bringing Exanta to the US market. The NDA file remains open. |
10 | Annual
Review 2004 astrazeneca.com |
|
Sales and marketing
‘We
aim to build on our success in Europe and Japan, while increasing our strength
in emerging markets, such as China and Mexico.
Bruno
Angelici, Executive Vice-President, Europe, Japan, Asia Pacific and ROW
We combine our global capabilities with high quality relationships in our local markets and focus on responding quickly and effectively to our customers changing needs. We sell mostly through our own local marketing companies and our products are marketed mainly to physicians and other healthcare professionals.
Our medicines are designed to improve health and quality of life. They bring other benefits too. We also talk to governments and groups that buy healthcare, such as managed care organisations in the US, about the economic as well as the therapeutic advantages of our range. By reducing the incidence of disease or improving the efficiency of treatment, our medicines help to relieve the growing pressure on healthcare systems and budgets.
Success in key markets is a top priority. We aim to build on our leading positions in major markets, especially the US, Japan and Europe, whilst increasing our strength through strategic investment in the small but fast-growing markets of the future the emerging economies, such as China and Mexico.
Our US sales of $9.6 billion in 2004 reflect our commitment to driving growth in this, the worlds largest pharmaceutical market. With a 5% market share, AstraZeneca is the fifth largest pharmaceutical company, by sales in the US. Nexium, Seroquel,
In the US, we aim to effectively manage the challenges of the changing external environment, while making the most of the opportunities presented by the growing demand for innovative medicines. David Brennan, Executive Vice-President, North America
Toprol-XL and Crestor, with combined sales of $5.7 billion, continue to underpin our sales performance in this highly competitive market.
In Europe, pharmaceutical cost control pressure continues to restrict market growth, which is still increasing but at a slower rate. Despite this background, our sales growth outpaced the overall market, with a strong performance from Crestor, Nexium, Seroquel, Arimidex and Symbicort. This performance, coupled with our investment in Central and Eastern Europe, provides a solid basis for future growth in the region. Sales totalled $7.6 billion in 2004 and AstraZeneca ranks fifth in Europe.
In Japan, AstraZeneca was the second fastest growing pharmaceutical company in 2004. A strong performance by Arimidex, Casodex, Zoladex and Iressa, and good growth for Losec, drove sales to $1.4 billion and we now rank 13th by sales in Japan.
Overall sales in Asia Pacific grew by an underlying rate of 18% to $1.2 billion and the region represents an area of high growth potential. In China, we are now the largest multi-national prescription drug company and one of the fastest growing pharmaceutical companies.
Elsewhere, good growth in Latin America (27%) and a $40 million investment in new manufacturing in Egypt further strengthens our platform for regional expansion.
Key products: Cardiovascular | |
Atacand1
(candesartan
cilexetil) angiotensin II antagonist for hypertension Crestor2 (rosuvastatin calcium) HMG-CoA reductase inhibitor (statin) for dyslipidaemia Exanta (ximelagatran) oral direct thrombin inhibitor for prevention of thrombosis in association with major orthopaedic surgery Plendil (felodipine) calcium antagonist for hypertension and angina Seloken/Toprol-XL (metoprolol succinate) beta blocker for hypertension, angina, heart failure and other uses Zestril3 (lisinopril dihydrate) angiotensin converting enzyme inhibitor for hypertension, heart failure and diabetic nephropathy |
|
Key products: Gastrointestinal | |
Losec/Prilosec
(omeprazole)
proton pump inhibitor for acid-related diseases Nexium (esomeprazole magnesium) proton pump inhibitor for acid-related diseases |
|
Key products: Infection | |
Merrem/Meronem4 (meropenem) ultra broad spectrum injectable antibiotic for serious bacterial infection | |
Key products: Neuroscience | |
Diprivan
(propofol)
intravenous general anaesthetic for induction/maintenance of anaesthesia
and sedation of intensive care patients Naropin (ropivacaine) local anaesthetic for surgical anaesthesia and acute pain management Seroquel (quetiapine fumarate) atypical anti-psychotic for schizophrenia and other psychotic disorders Xylocaine (lidocaine) local anaesthetic for use in surgery and dentistry Zomig (zolmitriptan) for the treatment of acute migraine with or without aura |
|
Key products: Oncology | |
Arimidex
(anastrozole)
aromatase inhibitor for breast cancer Casodex (bicalutamide) anti-androgen for prostate cancer Faslodex (fulvestrant) oestrogen receptor antagonist with no agonist effects for breast cancer Iressa (gefitinib) signal transduction inhibitor for non-small cell lung cancer Nolvadex (tamoxifen citrate) anti-oestrogen for breast cancer Zoladex (goserelin acetate) LHRH agonist for prostate and pre-menopausal breast cancer, certain benign gynaecological disorders and assisted reproduction |
|
Key products: Respiratory and Inflammation | |
Accolate
(zafirlukast)
oral leukotriene receptor antagonist for control of asthma Oxis (formoterol) inhaled fast onset long-acting bronchodilator for relief of asthma symptoms Pulmicort (budesonide) inhaled anti-inflammatory for asthma control Rhinocort (budesonide) topical nasal anti-inflammatory for control of rhinitis Symbicort (budesonide/formoterol) inhaled combination of anti-inflammatory and fast onset long-acting bronchodilator in a single inhaler |
|
1 | Licensed from Takeda Chemical Industries Ltd. |
2 | Licensed from Shionogi & Co., Ltd. |
3 | Licensed from Merck & Co., Inc. |
4 | Licensed from Sumitomo Pharmaceuticals Co., Ltd. |
Supply
We have some 15,000 people at 30 manufacturing sites in 20 countries, dedicated to ensuring that we can deliver a secure, high quality, cost-effective supply of our product range worldwide. With a few temporary exceptions, major products and line extensions were successfully supported with supplies available to meet market demand. These included the continued global roll-out of Crestor, the European launches of Exanta and the completion in all major markets of the launch of the Zoladex Safesystem, designed to protect against needlestick injuries when handling the injectable Zoladex therapy. Managing costs is an ongoing priority. 2004 saw the continued implementation across our global network of our new supply system, which is delivering manufacturing efficiency benefits (such as shortened lead times) and improved customer service levels. We continue to invest for the future. Our expenditure on supply and manufacturing facilities totalled $352 million in 2004 and new facilities authorised included formulation capacity for Symbicort in France, for Pulmicort in the US and for Nexium in Sweden. We also continuously review our existing manufacturing assets to make sure they are being used most effectively, whilst preserving the flexibility we need to respond to fluctuations in demand. During 2004, we sold our facility in Karlskoga, Sweden. |
Annual
Review 2004 astrazeneca.com |
13 | ||
A
key aspect of our commitment to top quality customer service is our aim to
provide fast, flexible and reliable supply of all the products in our range.
Barrie
Thorpe, Executive Vice-President, Operations
Ensuring the quality, safety and efficacy of our medicines is a core priority. Reports from internal routine inspections, as well as those by regulatory authorities, are rigorously reviewed and, if required, actions taken to further enhance compliance. The results of all external inspections carried out during 2004 were satisfactory, and we did not experience any delays in product approvals due to regulatory compliance issues at our sites or those of our contractors.
Safety, health and environment (SHE) operating standards are increasingly stringent with regulators placing particular emphasis on environmental issues and the safety of chemicals. Our manufacturing sites operate under various licensing regimes and we are committed to meeting all regulatory requirements as a minimum baseline. There are currently no environmental issues that constrain AstraZeneca from making full use of its sites.
We are making good progress in the reduction of waste and energy use and the level of accidents with injury is falling, although, sadly, there was a fatal accident at one of our manufacturing locations during the year. When any accidents occur, we use a range of investigation procedures to help us understand the causes and avoid repetition. We also work closely with our suppliers to encourage standards similar to our own. More information about our SHE performance can be found in the separate Corporate Responsibility Summary Report 2004 or on our website.
Product strategy & licensing
We operate in an increasingly competitive environment that presents both opportunities and challenges. The pharmaceutical industry continues to grow, driven by increasing populations and improved life expectancy. In addition, there are still major areas of unmet medical need, since many diseases do not have effective therapies, are unsatisfactorily treated or are under diagnosed. Advances in science and technology are also growth drivers. The factors that limit growth include increasing pressure to contain costs from governments and other groups who pay for healthcare. We focus on effectively managing the challenges and maximising the opportunities to ensure sustainable success through the continued development of new, innovative and cost-effective medicines that meet patient needs and add value for society.
Our product strategy and licensing organisation, working closely with our R&D community and our major marketing companies, leads the commercial aspects of drug development and co-ordinates global market strategy. This includes selecting the right products and projects for investment, developing effective marketing platforms for new product launches and directing the creation and delivery of marketing strategies that successfully align global and national plans.
Our rigorous lifecycle management of key marketed brands aims to ensure that we maximise the commercial potential as well as the benefit that new uses for our medicines bring to patients lives.
Our
ability to deliver the commercial potential of our strong range of branded
products in increasingly challenging markets is core to our continued success.
Martin
Nicklasson, Executive Vice-President, Product Strategy & Licensing and
Business Development*
In common with other leading pharmaceutical companies, we also look to strengthen our portfolio with attractive products or technologies from external sources and we continuously monitor the opportunities for licensing partnerships.
e-business
Our
e-business activities focus on strengthening our relationships with our stakeholders
and improving our speed and efficiency. We continue to introduce internet-enabled
programmes that simplify and improve processes, including clinical development
and supply chain systems. To boost our marketing effectiveness, we integrate
e-marketing into our commercial activities worldwide and we have a broad range
of internet-based physician resources in key therapy areas.
Partnering
with patients
As
part of our commitment to exploring all the ways in which we can bring benefit
to patients, we are expanding our thinking beyond medicines to include a focus
on ways in which we can help them get access to the information and services
they need. This includes IT collaborations that will aim to deliver innovative
channels for providing patients with information about their treatment and/or
their disease. Through closer partnership with patients, we aim to build our
understanding of their needs and how we can best respond to them.
* With effect from 1 January 2005
14 | Annual
Review 2004 astrazeneca.com |
People
We
are very proud of our 64,200 employees in 45 countries and value the diversity
of skills and abilities that a global workforce offers. Our future success
will be built on their efforts.
To achieve the levels of performance we need to succeed in a changing and increasingly challenging business environment, during 2004 we initiated a step change in the way we work at AstraZeneca how people are managed, our behaviours, performance, measurement, development and reward.
Our priority has been to ensure we have a performance-driven culture throughout the Company, concentrating on optimising individual and team performance, improving our leadership capability and effectively managing and developing all our talent. We have also introduced a common set of critical behaviours to be adopted across the organisation.
We want everyone at AstraZeneca to have clear, measurable and prioritised objectives aligned with the current business priorities and to have managers with the skills to coach continually for superior performance, and who demonstrate high quality performance management and leadership by example. Good performance will be rewarded. Under performance will be addressed.
We are also strengthening and enhancing the capabilities of our leaders through tailored assignments and individual coaching, complemented by high quality, business-relevant leadership development programmes.
To deliver a flow of world class leaders in the future, we are adopting a consistent approach to identifying and developing people with leadership potential across the Company, backed by strong support from our senior management team.
We have initiated a step change in the way we work at AstraZeneca to achieve the levels of performance we need for future success.
Tony Bloxham, Executive Vice-President, Human Resources
The wellbeing of our people continues to be a fundamental consideration and we have a broad range of initiatives aimed at promoting the health, safety and welfare of all our employees worldwide.
We use a range of communications media to ensure that employees are kept informed and are clear about their individual and team roles and targets. Opportunities to provide feedback are built into all our communications. In addition, every two years we carry out a global employee survey to identify areas of satisfaction and concern and priority attention is given to areas for improvement highlighted by these surveys.
A responsible approach
Alongside our commitment to competitiveness and performance, we continue to be led by our core values to achieve sustainable success.
Wherever we have a presence or an impact, we aim to live up to these core values and deliver standards of ethical behaviour that are consistent with our publicly declared codes of corporate responsibility.
We know that a responsible approach to business is essential to maintaining the trust and confidence of society and ensuring that AstraZeneca continues to be a company that is welcomed by society and for which our employees are proud to work.
The separate Corporate Responsibility (CR) Summary Report 2004 captures the main points of our approach to managing this challenge and provides a brief overview of our 2004 CR performance, including more about our commitment to employees in this respect. Detailed statistics and further information about our performance, policies and principles are available on our website at astrazeneca.com/responsibility.
Life inspiring ideas
The success of our business is based on our commitment to innovation. Backed by our strong science base and extensive manufacturing and commercial skills, we turn good ideas into effective medicines designed to improve the health and quality of life of patients around the world.
In recent years, we have launched a range of important new medicines, including high potential therapies for treating cancer (Casodex, Arimidex and Faslodex), gastrointestinal disease (Nexium), asthma (Symbicort), hypertension (Atacand), high cholesterol (Crestor), migraine (Zomig) and schizophrenia (Seroquel).
We are committed to driving continued achievement in all our activities to ensure a healthy future for our business and added value for all those who benefit from it.
Annual
Review 2004 astrazeneca.com |
||||
Therapy area review | ||||
Cardiovascular
(CV) We are a world leader in cardiovascular medicines, with over 40 years experience and a powerful range of products. Backed by our quality research, we aim to build on our strong position, focusing on important areas of need such as hypertension, diabetes, dyslipidaemia and thrombosis. CV disease accounts for 17 million deaths worldwide each year, making it the greatest risk to life for most adults. Crestor, our new statin for controlling cholesterol levels, is now approved in 67 markets and launched in 56, including the US, Canada and the majority of EU countries By the end of 2004, over 15 million prescriptions had been written for, and over four million patients treated with Crestor. Public Citizen, a US consumer interest organisation, continued to raise allegations concerning the safety of Crestor. Clinical trials experience and post-marketing surveillance continue to support our belief that Crestor has a safety profile in line with other marketed statins. Clinical trial and post marketing data for Crestor are publicly available on a dedicated website, rosuvastatininformation.com, which we launched in September 2004. 2004 saw the first launches of Exanta, our new oral anti-coagulant, for use in preventing blood clots following orthopaedic surgery in 10 countries. In October 2004, the FDA confirmed that it did not approve Exanta for marketing in the US for any of the indications sought. Discussions are ongoing with the FDA to determine whether there is now a realistic prospect of bringing Exanta to the US market. At the end of 2004, we received approval in the EU, and an approvable letter from the FDA, for the use of Atacand in heart failure, based on the results of a comprehensive clinical study programme, CHARM, which showed significant reduction in the number of deaths and hospitalisations for heart failure in patients treated with Atacand. With sales again exceeding $1 billion in 2004, Seloken/Toprol-XL is the worlds leading product by sales in the beta blocker (plain and in combination with diuretic) class. Gastrointestinal (GI) We aim to maintain our number one position in GI treatments through driving continued |
sales
and further development of Nexium.
40% of adults in the western world regularly experience heartburn
and between 10 and 20% have gastro-oesophageal reflux disease
(GERD). The
prevalence of GERD in Asia is lower, but increasing. Nexium continues to establish a new improved treatment standard and this was reflected in its global sales, which exceeded $3.8 billion in 2004. First launched in Sweden in August 2000, it is now available in approximately 100 markets, including the US, Canada and all European countries. It has been well received by patients and physicians alike and close to 250 million patient treatments had been administered by the end of 2004. Its strong performance in the US makes Nexium the most successful pharmaceutical launch ever. An injectable/intravenous formulation of Nexium is now approved in 47 countries, for use when an oral treatment of GERD is not appropriate. In September 2004, approval was granted through the EU Mutual Recognition Procedure for the use of Nexium in the healing and prevention of ulcers associated with non-steroidal anti-inflammatory drug (NSAID) therapy. Approval for the reduction in occurrence of gastric ulcers associated with continuous NSAID therapy in patients at risk for developing gastric ulcers was granted in the US in November 2004. Infection World demand for antibiotics remains high due to escalating resistance and the increased risk of serious infections. Infectious diseases cause more than 11 million deaths each year. 2004 again saw steady sales growth globally for Merrem, our antibiotic for the treatment of serious, hospital-acquired infections. A Supplementary New Drug Application was filed in the US in 2004 aimed at securing an indication for skin and skin structure infections in 2005. Work continues at our research facility in Bangalore, India where we are focused on finding a new treatment for tuberculosis (TB), the single largest cause of adult death from infectious disease in the world. Neuroscience We aim to deliver a range of life-changing medicines in three key areas of psychiatry, analgesia and neurology, and by maintaining our world leading position in anaesthesia. |
Annual
Review 2004 astrazeneca.com |
17 |
Health problems related to the function of the central nervous system, including the brain, are a complex area of significant medical need.
In September 2004, Seroquel became the market leading atypical anti-psychotic in the US in terms of monthly new prescriptions. In Europe, Seroquel is growing two to three times faster than the atypical market, with excellent market share gains, notably in Italy and Germany.
The launch of Seroquel in the US and Europe for the treatment of bipolar mania which affects over 17 million people in the major markets has been very successful, with strong market share growth.
Following successful launches in the US and Europe of Zomig Nasal Spray, a new formulation of our Zomig migraine therapy in a convenient device that delivers fast pain relief, we anticipate launch in Japan in 2005.
Our leading range of anaesthetics continued to perform well. Anaesthesia sales exceeded $1 billion in 2004 including $500 million of Diprivan sales.
Oncology
We aim to maintain our position as a world leader in cancer treatment through further launches for our new products, the successful introduction of novel approaches currently in the pipeline and the continued growth of key products in our portfolio.
Six million people die from cancer every year representing 12% of deaths worldwide.
Iressa, used for the treatment of non-small cell lung cancer, is a highly researched anti-cancer agent that acts to block signals for cancer cell growth and survival. However, in December 2004 initial results from the recent ISEL study showed that statistically, Iressa did not significantly increase survival of the overall population. Data suggest survival benefits in patient populations of East Asian origin and in non-smokers. Iressa is approved in 35 countries including the US and Japan. We a re now in consultation with regulatory authorities to determine the impact of the ISEL data. We have withdrawn the European Marketing Authorisation Application and voluntarily suspended promotion of Iressa in the US. We intend however to continue to make Iressa available for patients whose physicians feel they are benefiting from the drug.
With its novel mode of action, Faslodex offers an effective, well-tolerated additional breast cancer therapy, in a convenient once-monthly injection. Following EU approval in March 2004, Faslodex is now available in Europe as well as the US, Brazil and Argentina for the treatment of advanced breast cancer in post-menopausal women.
Sales of Casodex and Arimidex, for treating prostate and breast cancer respectively, showed continued good growth. Further large-scale clinical study data presented in December 2004 showed that Arimidex is significantly more effective than tamoxifen in prolonging disease-free survival. The same study also showed that women switching from tamoxifen to Arimidex suffer fewer recurrences of their early breast cancer than those who stay on tamoxifen through the standard five-year course of treatment.
Respiratory and Inflammation
Already a leader in the treatment of asthma, we plan to expand our range through the introduction of new uses for our key products and new treatments in other areas of inflammatory disease, such as chronic obstructive pulmonary disease (COPD) and rheumatoid arthritis.
The World Health Organization estimates that 100 million people worldwide suffer from asthma and that COPD is the fourth greatest cause of death worldwide.
Clinical data confirm the efficacy and safety of Symbicort as an adjustable maintenance treatment for asthma, providing superior asthma control compared to traditional Symbicort fixed dose treatment. During the year, we withdrew our regulatory submission in Europe for Symbicort single inhaler therapy (SiT). We aim to submit a regulatory filing in the second half of 2005 for Symbicort SiT containing additional data from further ongoing studies. A regulatory application for approval in Europe of Symbicort pressurised metered dose inhaler for use in asthma and in COPD was made in July 2004.
In the US, sales of Pulmicort Respules continue to grow, further strengthening its position as the inhaled corticosteroid of choice for the treatment of children under five with asthma.
Key product sales: Cardiovascular | ||||||
2004 | 2003 | Underlying | ||||
$m | $m | growth % | ||||
Seloken | 1,387 | 1,280 | 6 | |||
Crestor | 908 | 129 | n/m | |||
Atacand | 879 | 750 | 10 | |||
Plendil | 455 | 540 | (20 | ) | ||
Zestril | 440 | 478 | (15 | ) | ||
Tenormin | 368 | 342 | | |||
Other | 340 | 391 | (20 | ) | ||
Total | 4,777 | 3,910 | 17 |
Key product sales: Gastrointestinal | ||||||
2004 | 2003 | Underlying | ||||
$m | $m | growth % | ||||
Nexium | 3,883 | 3,302 | 15 | |||
Losec/Prilosec | 1,947 | 2,565 | (30 | ) | ||
Other | 88 | 76 | 9 | |||
Total | 5,918 | 5,943 | (4 | ) |
Key product sales: Infection | ||||||
2004 | 2003 | Underlying | ||||
$m | $m | growth % | ||||
Merrem | 423 | 346 | 15 | |||
Other | 116 | 130 | (16 | ) | ||
Total | 539 | 476 | 7 |
Key product sales: Neuroscience | ||||||
2004 |
2003 |
Underlying |
||||
$m |
$m |
growth % |
||||
Seroquel | 2,027 | 1,487 | 33 | |||
Diprivan | 500 | 458 | 5 | |||
Zomig | 356 | 349 | (3 | ) | ||
Local anaesthetics | 542 | 466 | 8 | |||
Other | 71 | 73 | (10 | ) | ||
Total | 3,496 | 2,833 | 19 |
Key
product sales: Oncology |
||||||
2004 | 2003 | Underlying | ||||
$m | $m | growth % | ||||
Casodex | 1,012 | 854 | 11 | |||
Zoladex | 917 | 869 | (1 | ) | ||
Arimidex | 811 | 519 | 48 | |||
Iressa | 389 | 228 | 65 | |||
Nolvadex | 134 | 178 | (31 | ) | ||
Faslodex | 99 | 77 | 28 | |||
Other | 14 | 18 | (28 | ) | ||
Total | 3,376 | 2,743 | 16 |
Key
product sales: Respiratory & Inflammation |
||||||
2004 | 2003 | Underlying | ||||
$m | $m | growth % | ||||
Pulmicort | 1,050 | 968 | 4 | |||
Symbicort | 797 | 549 | 32 | |||
Rhinocort | 361 | 364 | (3 | ) | ||
Accolate | 116 | 107 | 6 | |||
Oxis | 101 | 120 | (24 | ) | ||
Other | 158 | 153 | (5 | ) | ||
Total | 2,583 | 2,261 | 8 |
n/m not meaningful
18 | Annual
Review 2004 astrazeneca.com |
Board of Directors at 31 December 2004
Percy
Barnevik* Non-Executive Chairman |
Sir
Tom McKillop Executive Director Chief Executive |
Jonathan
Symonds Executive Director Chief Financial Officer |
||
Håkan
Mogren Non-Executive Deputy Chairman |
Sir
Peter Bonfield Senior Non-Executive Director |
Jane
Henney Non-Executive Director |
||
Louis
Schweitzer Non-Executive Director** |
Marcus
Wallenberg Non-Executive Director |
Michele
Hooper Non-Executive Director |
||
Dame
Bridget Ogilvie Non-Executive Director |
John
Buchanan Non-Executive Director |
Joe
Jimenez Non-Executive Director |
||
Erna
Möller Non-Executive Director |
* | Retired from the Board on 31 December 2004 |
** | Appointed Non-Executive Chairman with effect from 1 January 2005 |
Annual Review 2004 | 19 | |||
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Percy
Barnevik (63)
Non-Executive Chairman
Chairman
of the Nomination Committee
Appointed
as a Director 6 April 1999. Retired from the Board on 31 December 2004. Honorary
Chairman of Sandvik AB. Non-Executive Director of General Motors Corporation.
Member of the Academies of Engineering Sciences in Sweden and Finland and Honorary
Member of the Royal Academy of Engineering, UK. Member of the International Advisory
Council of the Federation of Korean Industries and the Investment Council advising
the South African Government. Member of the Business Council of American CEOs.
Member of the Advisory Board of the Centre for European Reform, UK.
Håkan
Mogren (60)
Non-Executive
Deputy Chairman
Member of the Nomination Committee
Appointed
as a Director 6 April 1999. Formerly CEO and a Director of Astra AB (appointed
18 May 1988). Chairman of Affibody AB and the Sweden-America Foundation. Vice-Chairman
of Gambro AB. Member of the Board of Directors of Investor AB, Rémy
Cointreau SA, Groupe Danone and Norsk Hydro ASA. Director of the Marianne and
Marcus Wallenberg Foundation.
Louis
Schweitzer (62)
Non-Executive Director
Appointed
as a Director 11 March 2004. Appointed Non-Executive Chairman and Chairman
of the Nomination Committee with effect from 1 January 2005. Chairman and Chief
Executive Officer of Renault SA since May 1992. President of the Management
Board of Renault-Nissan BV since March 2002. Chief Financial Officer and Executive
Vice-President 1988-1992 and President and Chief Operating Officer 1990-1992,
Renault SA. Non-Executive Director of BNP-Paribas, Electricité de France,
Philips Electronics NV, Veolia Environnement and Volvo AB.
Dame
Bridget Ogilvie (66)
Non-Executive Director
Member of the Audit Committee
and the Science Committee
Appointed
as a Director 1 January 1997. Also has responsibility for overseeing corporate
responsibility. Chairman of the Medicines for Malaria Venture and the Association
of Medical Research Charities. Trustee of Cancer Research UK. Chairman of the
Trustees of the AstraZeneca Science Teaching Trust.
Sir
Tom McKillop (61)
Executive
Director and Chief Executive
Appointed
as a Director 1 January 1996. Non-Executive Director of BP p.l.c. and (until
31 December 2004) Lloyds TSB Group plc. Vice-President of the European Federation
of Pharmaceutical Industries and Associations. Pro-Chancellor of the University
of Leicester. Chairman of the British Pharma Group and the Northwest Science
Council.
Sir
Peter Bonfield CBE, FREng (60)
Senior Non-Executive Director
Chairman of the Remuneration Committee and Member of the Nomination Committee
Appointed
as a Director 1 January 1995. Fellow of the Royal Academy of Engineering.
Non-Executive Director of Telefonaktiebolaget LM Ericsson, Mentor Graphics
Corporation and Taiwan Semiconductor Manufacturing Company, Ltd. Vice-President
of The British Quality Foundation. Member of the Citigroup International
Advisory Board. Member of the Sony Corporation Advisory Board.
Non-Executive
Director, Corporate Board of the Department for Constitutional Affairs.
Marcus
Wallenberg (48)
Non-Executive Director
Member
of the Audit Committee
Appointed
as a Director 6 April 1999. Formerly a Director of Astra AB (appointed 18
May 1989). President and Chief Executive Officer of Investor AB. Non-Executive
Vice-Chairman of Saab AB, Skandinaviska Enskilda Banken AB and Telefonaktiebolaget
LM Ericsson. Non-Executive Director of Scania AB, Stora Enso Oyj and the
Knut and Alice Wallenberg Foundation.
John
Buchanan (61)
Non-Executive Director
Chairman
of the Audit Committee and Member of the Remuneration Committee
Appointed
as a Director 25 April 2002. Executive Director and Group Chief Financial
Officer of BP p.l.c. 1996-2002. Member of the UK Accounting Standards Board
1997-2001. Senior Independent Non-Executive Director of BHP Billiton Plc
and Non-Executive Director of Vodafone Group Plc.
Erna
Möller (64)
Non-Executive
Director
Member
of the Remuneration Committee and the Science Committee
Appointed
as a Director 6 April 1999. Formerly a Director of Astra AB (appointed
15 May 1995). Executive Director of the Knut and Alice Wallenberg Foundation.
Professor of Clinical Immunology and Member of the Nobel Assembly and
of the Nobel Committee, Karolinska Institutet. Member of the Royal
Swedish Academy of Engineering Sciences and the Royal Swedish Academy
of Science.
Jonathan
Symonds (45)
Executive
Director and Chief Financial Officer
Appointed
as a Director 1 October 1997. Also has overall responsibility for Information
Services. Non-Executive Director of Diageo plc. Member of the UK Accounting
Standards Board. Chairman of The Hundred Group of Finance Directors in the
UK.
Jane
Henney (57)
Non-Executive Director
Member
of the Audit Committee, the Nomination Committee and the Science Committee
Appointed
as a Director 24 September 2001. Senior Vice-President & Provost for
Health Affairs, University of Cincinnati Medical Center. Commissioner of
Food and Drugs 1998-2001 and Deputy Commissioner for Operations 1992-1994,
US Food and Drug Administration. Deputy Director, US National Cancer Institute
1980-1995. Non-Executive Director of AmerisourceBergen Corporation and CIGNA
Corporation. Member of the Board of Trustees of the Commonwealth Fund and
the China Medical Board.
Michele
Hooper (53)
Non-Executive Director
Member
of the Audit Committee
Appointed
as a Director 1 July 2003. President and Chief Executive Officer of Stadtlander
Drug Company 1998-1999. Corporate Vice-President and President, International
Businesses of Caremark International Inc. 1992-1998. Non-Executive Director
of PPG Industries, Inc., Target Corporation and Davita Inc.
Joe
Jimenez (45)
Non-Executive Director
Member
of the Remuneration Committee and the Nomination Committee
Appointed
as a Director 1 July 2003. Executive Vice-President of H J Heinz Company
and President and Chief Executive Officer of Heinz Europe since 2002. Corporate
Vice-President then Senior Vice-President and President of Heinz North America
1998-2002. Non-Executive Director of Blue Nile, Inc.
Other officers of the Company at 31 December 2004 included members of the Senior Executive Team, as set out on page 21, and:
Graeme
Musker
Group
Secretary and Solicitor
Appointed
as Company Secretary 6 June 1993.
20 | Annual Review 2004 | |||
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Summary Directors' report
Board
of Directors
Details
of members of the Board at 31
December 2004 are set out on pages 18 and 19.
Board
changes
Percy
Barnevik, Non-Executive Chairman, retired from the Board on 31 December 2004.
Louis Schweitzer was appointed Non-Executive Chairman with effect from 1 January 2005. Mr Schweitzer was first appointed to the Board in March 2004 and was elected as a Non-Executive Director for the first time by shareholders at the Annual General Meeting (AGM) in April 2004.
Also with effect from 1 January 2005, John Patterson was appointed as an Executive Director with responsibility for Development.
Karl von der Heyden, Non-Executive Director and Chairman of the Audit Committee, retired from the Board in April 2004, with effect from the end of the AGM. He was succeeded in his role as Chairman of the Audit Committee by John Buchanan, Non-Executive Director.
During 2004, Michele Hooper and Joe Jimenez, both Non-Executive Directors, became members of the Audit Committee and Remuneration Committee respectively.
In March 2004, the Board asked Sir Tom McKillop to extend his term as Chief Executive beyond his planned retirement date of March 2005 and he confirmed his willingness to do so.
Election
and re-election of Directors
All
of the Directors will retire under Article 65 of the Companys Articles
of Association at the AGM in April 2005. The Notice of AGM will give details
of those Directors presenting themselves for election or re-election at the
AGM.
Annual
General Meeting
The
Companys AGM will be held on 28 April 2005. The principal meeting place
will be in London. There will be a simultaneous satellite meeting in Stockholm.
Corporate
governance
UK
Combined Code on Corporate Governance
In
July 2003, the Financial Reporting Council in the UK issued the revised
Combined Code on Corporate Governance which superseded and replaced the
Combined Code published by the Hampel Committee on Corporate Governance
in 1998. The Board has prepared this report with reference to the Combined
Code.
The Company is applying all of the main and supporting principles of good governance in the Combined Code. The way in which these principles are being applied is described below.
The Company is complying with all of the provisions of the Combined Code except with regard to the independence of all members of the Audit Committee.
The
US Sarbanes-Oxley Act of 2002
AstraZeneca
PLC American Depositary Shares are traded on the New York Stock Exchange (NYSE)
and the Company is subject to the reporting and other requirements of the US
Securities and Exchange Commission (SEC) applicable to foreign issuers. The US
Sarbanes-Oxley Act came into force at the end of July 2002. As a result of its
NYSE listing, the Company is subject to those provisions of the Act applicable
to foreign issuers.
The Company either already complies with or will comply with those provisions of the Act applicable to foreign issuers as and when they become effective. The Board believes that, prior to the Act coming into force, the Company already had a sound corporate governance framework, good processes for the accurate and timely reporting of its financial position and results of operations and an effective and robust system of internal controls. Consequently, the Companys approach to compliance with the Act has principally involved the development and adjustment of its existing corporate governance framework and associated processes concerning reporting, internal controls and other relevant matters.
Board
structure and processes
Board composition, responsibilities and appointments
The
Board comprises Executive and Non-Executive Directors. In the view of the Board,
the majority of Board members excluding the Chairman are independent Non-Executive
Directors. The differing roles of Executive Directors and Non-Executive Directors
are clearly delineated, with both having fiduciary duties towards shareholders
and all being collectively responsible for the success of the Company. However,
Executive Directors have direct responsibility for business operations whereas
the Non-Executive Directors have a responsibility to bring independent, objective
judgement to bear on Board decisions. This includes constructively challenging
management and helping to develop the Companys strategy. The
Non-Executive Directors scrutinise the performance of management and have various
responsibilities concerning the integrity of financial information, internal
controls and risk management. To help maintain a strong executive presence
on the Board in addition to the Executive Directors, Board meetings are attended
by two members of the Senior Executive Team on a rotational basis.
The Board sets the Companys strategy and policies and monitors progress towards meeting its objectives. It also assesses whether its obligations to the Companys shareholders and others are understood and met. This includes regular reviews of the Companys financial performance and critical business issues.
There is an established and transparent procedure for appointments of new directors to the Board which is operated by the Nomination Committee. All of the Directors retire at each AGM and may offer themselves for re-election by shareholders. The Board reviews annually the status of succession to senior positions, including those at Board level, and ensures it has regular contact with and access to succession candidates.
At its meeting in December 2004, the Board conducted its annual review and assessment of how it operates. This was done without external facilitation and included consideration and discussion of the nature and level of its interaction with the Companys management; the quality, quantity and coverage of information which flows to the Board from management; the balance of the Boards time spent considering strategic issues compared to other matters; the content of Board meetings and presentations to Board meetings; the composition of the Board;
Annual Review 2004 | 21 | |||
astrazeneca.com | ||||
the practical arrangements for the work of the Board; and the work and operation of the Boards committees. Overall, Board members concluded that the Board and its committees were operating in an effective and constructive manner.
At the same meeting, the Chairman also reported to the Board on his conversations with each Non-Executive Director about their individual performance and that of the Board as a whole, which took place during the fourth quarter of 2004. As the Chairmans retirement was imminent, no formal review of his performance was conducted. The Non-Executive Directors reviewed the performance of the Chief Executive and the Chief Financial Officer in their absence.
Chief
Executive and the Senior Executive Team
The
Chief Executive, Sir Tom McKillop, has delegated authority from, and is
responsible to, the Board for directing and promoting the profitable operation
and development of the Company, consistent with the primary aim of enhancing
long term shareholder value.
The Chief Executive is responsible to the Board for the management and performance of the Companys businesses within the framework of Company policies, reserved powers and routine reporting requirements. He is obliged to refer certain major matters (defined in the formal delegation of the Boards authority) back to the Board. The roles of the Board, the Boards committees, the Chairman, the Chief Executive and the Senior Executive Team are documented, as are the Companys delegated authorities and reserved powers, the means of operation of the business and the roles of corporate functions.
The Chief Executive has established and chairs the Senior Executive Team. While the Chief Executive retains full responsibility for the authority delegated to him by the Board, the Senior Executive Team is the vehicle through which he exercises that authority in respect of the Companys business (including Salick Health Care and Astra Tech).
The members of the Senior Executive Team are Jonathan Symonds, Chief Financial Officer; John Patterson, Executive Director, Development; Bruno Angelici, Executive Vice-President, Europe, Japan, Asia Pacific and ROW; David Brennan, Executive Vice-President, North America; Jan Lundberg, Executive Vice-President, Discovery Research; Martin Nicklasson, Executive Vice-President, Product Strategy & Licensing and Business Development; Barrie Thorpe, Executive Vice-President, Operations; and Tony Bloxham, Executive Vice-President, Human Resources.
Internal
controls and management of risk
The
Board has overall responsibility for the Companys system of internal
controls, which aims to safeguard shareholders investments and the Companys
assets, and to ensure that proper accounting records are maintained and that
the financial information used within the business and for publication is accurate,
reliable and fairly presents the financial position of the Company and the
results of its business operations. The Board is also responsible for reviewing
the effectiveness of the system of internal controls. The system is designed
to provide reasonable assurance of effective operations and compliance with
laws and regulations, although any system of internal controls can only provide
reasonable, not absolute, assurance against material misstatement or loss.
The Company views the careful management of risk as a key management activity. Through the adoption by the Board of a Group Risk & Control Policy and supporting standards, the Company aims to formalise the drive to manage business risks as a key element of all activities. These business risks, which may be strategic, operational, reputational, financial or environmental, should be understood and visible to all managers using a simple and flexible framework. The business context determines in each situation the level of acceptable risk and controls and managers are challenged to recognise and assess this actively and clearly.
Code
of Conduct
The
policy of the Company is to require all of its subsidiaries, and their employees,
to observe the highest ethical standards of integrity and honesty and to act
with due skill, care, diligence and fairness in the conduct of business. The
Companys management recognises that such standards make a significant contribution
to the overall control environment and seeks, by its words and actions, to reinforce
them throughout the business. In particular, all employees are required to comply
with the letter and spirit of the AstraZeneca Code of Conduct and with the high
ethical standards detailed by the Company in support of it.
During 2004, the Senior Executive Team sponsored a review and re-structuring of the Companys full range of policies, standards and guidelines to ensure the hierarchy and content are clear and appropriate for ensuring peoples understanding of what is expected of them at every level in the business. Following formal Board approval early in 2005, the new Group policies will be made available on a dedicated intranet site, the availability and purpose of which will be widely communicated throughout the organisation.
Purchase
of own shares
The
Companys stated distribution policy contains both a regular dividend
cash flow and a share re-purchase component to give the Company more flexibility
in managing its capital structure over time. In August 1999, the Company announced
a $2 billion share re-purchase programme to be completed by the end of 2002.
This programme was completed ahead of schedule in the second quarter of 2002.
In January 2002, the Company announced an additional $2 billion re-purchase
programme which was completed on schedule by the end of 2003. In January 2004,
the Board approved a further $4 billion re-purchase programme to be completed
by the end of 2005.
The Board keeps under continuous review its shareholders return strategy and restates its intention to grow dividends in line with earnings while maintaining dividend cover in the two to three times range. The Board also believes that the share re-purchase programme is a key part of shareholder return that addresses cash flow and potentially surplus capital. In the absence of strategic uses for cash, the Board expects to distribute the free cash flow generated over the next three years through dividends and share re-purchases.
During 2004, the Company purchased 50.1 million of its own Ordinary Shares with a nominal value of $0.25 each for an aggregate cost of $2,212 million. Following the purchase of these shares, they were all cancelled. This number of shares represents 3.0% of the Companys total issued share capital at 31 December 2004.
Since the beginning of the original re-purchase programme in 1999, the Company has purchased for cancellation in total 142.9 million of its own Ordinary Shares with a nominal value of $0.25 each for an aggregate cost of $6,171 million. This number of shares represents 8.7% of the Companys total issued share capital at 31 December 2004.
The Company continues to maintain robust controls in respect of all aspects of the share re-purchase programme to ensure compliance with English law and the Listing Rules of the UK Listing Authority. In particular, the Companys Disclosure Committee meets to ensure that the Company does not purchase its own shares during prohibited periods. At the AGM on 28 April 2005, the Company will seek a renewal of its current permission from shareholders to purchase its own shares.
22 | Annual Review 2004 | |||
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Remuneration policy
Overall
remuneration policy and purpose
The
Company is committed to maintaining a dynamic performance culture in which
every employee champions the growth of shareholder value, is clear about the
Companys objectives, knows how their work impacts on those objectives
and that they will
benefit from achieving high levels of performance.
The Board has confirmed that the Companys overall remuneration policy and purpose is:
> | To attract and retain people of the quality necessary to sustain the Company as one of the best pharmaceutical companies in the world. |
> | To motivate them to achieve the level of performance necessary to create sustained growth in shareholder value. |
In order to achieve this, remuneration policy and practice is designed: | |
> | To closely align individual and team reward with business performance at each level. |
> | To encourage employees to perform to their fullest capacity. |
> | To encourage employees to align their interests with those of shareholders. |
> | To support managers responsibility to achieve business performance through people and for them to recognise superior performance, in the short and longer term. |
> | To be as locally focused and flexible as is practicable and beneficial. |
> | To be competitive and cost-effective in each of the relevant employment markets. |
> | To be as internally consistent as is practicable and beneficial taking due account of market need. |
The cost and value of the components of the remuneration package are considered as a whole and are designed: | |
> | To ensure a proper balance of fixed and variable performance-related components, linked to short and longer term objectives. |
> | To reflect market competitiveness taking account of the total value of all of the benefit components. |
Throughout 2004, the principal components contained in the total remuneration package, for employees as a whole, were:
> | Annual salary based on conditions in the relevant geographic market, with the provision to recognise, in addition, the value of individuals sustained personal performance, resulting from their ability and experience. |
> | Annual 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, and are monitored throughout, the year. |
> | Longer term incentive for selected groups, a longer term incentive targeted at the achievement of strategic objectives with close alignment to the interests of shareholders. |
> | Pension arrangements which are appropriate to the relevant national market. |
> | Other benefits such as holidays and sickness benefit which are cost-effective and compatible with the relevant national welfare arrangements. |
> | Share participation various plans provide the opportunity for employees to take a personal stake in the Companys wealth creation as shareholders. |
The way in which these elements are combined and applied varies depending, for example, on market need and practice in various countries. | |
In 2004, for each Executive Director, the individual components were: | |
> | Annual salary the actual salary for each of the Executive Directors is determined by the Remuneration Committee on behalf of the Board and established in sterling. These salaries reflect the experience and sustained performance of the individuals to whom they apply, as judged annually by the Remuneration Committee, taking account also of market competitiveness and the level of increases applicable to all other employees. |
> | Short term bonus: | |
> | The
Chief Executive was eligible for an annual bonus related solely to
the achievement of the targeted performance of earnings per share.
The bonus payable was on a scale of 0-100% of salary and 50% of salary
was payable for the achievement of target performance. This was derived
from the financial targets set by the Board and took into account external
expectations of performance. The bonus was not pensionable. In the
light of the disappointing setbacks with Exanta and Iressa in
2004, the Remuneration Committee and Sir Tom McKillop agreed a reduction
in his bonus. It was agreed that his bonus for 2004 should be reduced
to a sum equivalent to 50% of the bonus he received in respect of 2003.
This amounts to £430,000 ($782,000). The Remuneration Committee
was also mindful in setting the bonus for 2004 that all employees,
including Sir Tom McKillop, who had an interest in shares throughout
2004, had seen the value of their shares fall significantly during
the year, in common with other shareholders. |
|
> | The Chief Financial Officer was eligible for an annual bonus related to the achievement of both the targeted performance of earnings per share and the achievement of performance measures relevant to his particular area of responsibility. The bonus payable was on a scale of 0-100% of salary and 50% of salary was payable for the achievement of target business performance. 80% of the bonus related to the achievement of the earnings per share target and 20% to the other performance measures. The bonus was not pensionable. | |
> | Longer term incentive Executive Directors are also rewarded for improvement in the share price performance of the Company over a period of years by the grant of share options. The grant of options under the AstraZeneca Share Option Plan is determined by the Remuneration Committee, as are the performance targets that will apply and whether they will apply to the grant and/or exercise of options. | |
Annual Review 2004 | 23 | |||
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> | Pension arrangements: | |
> | UK Executive Directors pension arrangements the Chief Executive is a member of the Companys main UK defined benefit pension plan. The normal pension age under this plan is 62. However, a members accrued pension is available from age 60 without any actuarial reduction. In addition the accrued pension is available, unreduced, from age 57 if the Company consents to a request for early retirement and from age 50 if the retirement is at the Companys request. | |
On death in retirement, the accrued pension is guaranteed payable for the first five years of retirement and then reduces to two-thirds of this amount should there be a surviving spouse or other dependant. Any member may choose higher or lower levels of survivors pensions at retirement, subject to Inland Revenue limits, in return for an adjustment to their own pension of equivalent actuarial value. Pensions are also payable to dependant children. In the event of a senior employee becoming incapacitated, then a pension is payable immediately as if such person had reached normal retirement age (subject to a maximum of 10 years additional service), based on current pensionable salary. In the event of death prior to retirement, dependants are entitled to a pension of two-thirds of the pension that would have been earned had such person remained in service to age 62 plus a capital sum of four times pensionable pay. Pensions in payment are increased annually in line with inflation, as measured by the UK Retail Prices Index, up to a maximum of 5%. | ||
In respect of UK Executive Directors whose pensionable earnings are capped by the earnings limit imposed by the Finance Act 1989, unapproved defined contribution schemes are made available. Currently, only the Chief Financial Officer is affected by this limit. The Company has agreed to pay annually 50% of base salary in excess of the statutory earnings cap for the pension and associated tax liability, with the intention of providing equivalence of benefits with non- | ||
capped UK Executive Directors. If this does not provide equivalence, the Company has agreed to make up the difference. The Company contribution in 2004 in respect of the pension element was £124,000 ($225,000). |
Other customary benefits (such as a car and health benefits) are also made available through participation in the Companys flexible benefits arrangements, which extend to the vast majority of the Companys UK and Swedish employees.
Review
of executive remuneration
In
2000, the Company volunteered a commitment that a review of practice would take
place in five years, taking account of the view of the Companys shareholders
and the needs of the business at that time. This review took place during 2004.
The Remuneration Committee reviewed its basic philosophy and confirmed that in seeking to achieve sustained growth in shareholder value it would demand the highest level of performance from all employees with the Company conducting itself in a fair and moderate way, maintaining the highest standards of social responsibility and corporate governance. In order to achieve this, it must attract and retain Executive Directors and other senior executives of the highest quality, competing for them in the global employment market and providing appropriate rewards directly linked to top performance.
In the last five years, the Company has honoured its promise regarding shareholder dilution. Grants of options under the AstraZeneca Share Option Plan worldwide have amounted to 2.71% (plus 0.45% under the old Zeneca 1994 Executive Share Option Scheme). Dilution under other share plans has been 0.36%.
During this time, the Company has intensified its action to align reward directly with performance. For example, the business performance report has been developed. This contains the short and long term strategic objectives agreed annually with the Board and cascaded down throughout the Company; these are monitored quarterly and determine both short term bonus and long term awards. In addition, the reward of employees at all levels has become increasingly differentiated based on their individual performance.
In the review, the Remuneration Committee confirmed that the reward package of Executive Directors should be primarily benchmarked against major UK based companies with global operations similar to those of AstraZeneca, as opposed to alignment with the global industry practice. However, in appropriately balancing the total package towards the delivery of award for demonstrable performance, bonuses and incentives should provide for upper quartile opportunity for upper quartile performance.
During 2004, the Remuneration Committee sought the views of major shareholders. As it is five years since the last major review, the Committee identified that the competitive market place in major UK companies had developed and shareholder expectations had also changed. The Remuneration Committee has taken the views of shareholders into account in formulating proposals which focus upon performance-related pay and strengthened the links to measures which are aligned to the creation of shareholder value. These proposals, primarily for the Senior Executive Team, are closely aligned to current best practice and include:
> | An increase in the annual bonus opportunity linked to a broader assessment of performance together with a requirement for the Senior Executive Team to defer a portion of their bonus earned into shares for a period of three years. As a result of the most recent consultation, the basis of determining the annual bonus for the Senior Executive Team will be changed. In the past, the whole of the bonus of the Chief Executive and 80% of those of the others was determined by reference to earnings per share. For 2005, 50% will be determined by earnings per share, 25% by measures relating to the individuals particular area of responsibility and 25% by a balance of qualitative and quantitative measures which address the quality of business performance. The Remuneration Committee would reserve the right to modify the bonus outcome if it believed it did not reflect the underlying performance of the business. |
> | The introduction of performance conditions on exercise of options granted under the AstraZeneca Share Option Plan with no re-test facility, in order to bring our policy in line with best practice. |
24 | Annual Review 2004 | |||||
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Remuneration policy continued | Summary financial review | |||||
> | A requirement for executives to hold shares equivalent to one-times salary, and to retain the net number of shares acquired under the AstraZeneca Share Option Plan for at least six months after the option is exercised. | Graph
showing total shareholder return The UK Directors Remuneration Report Regulations 2002 require the inclusion in the Annual Review of a graph showing total shareholder return (TSR) over a five year period in respect of a holding of the Companys shares, plotted against TSR in respect of a hypothetical holding of shares of a similar kind and number by reference to which a broad equity market index is calculated. This illustrates the Companys TSR performance against the broad equity market index selected. The Company is a member of the FTSE 100 Index and consequently, for the purposes of this graph which is set out below, we have selected the FTSE 100 Index as the appropriate index. |
Introduction The purpose of this summary Financial Review, together with the therapy area review, is to provide a balanced and comprehensive analysis of the financial performance of the business during 2004 and the financial position as at the end of the year. |
|||
> | Subject to a shareholder vote at the AGM, the introduction of a new performance share plan based on the Companys total shareholder return relative to a global industry peer group. This test would be underpinned by the requirement of the Remuneration Committee to satisfy itself that any total shareholder return rewarded was a genuine reflection of the Companys underlying performance and it would explain its reasoning in the subsequent Directors Remuneration Report. | Our operations are focused on prescription pharmaceuticals and more than 97% of our sales are made in that sector. Sales of pharmaceutical products tend to be relatively insensitive to general economic circumstances in the short term. They are more directly influenced by medical needs and are generally financed by health insurance schemes or national healthcare budgets. Our operating results in both the short and long term can be affected by a number of factors other than normal competition: |
||||
The
Board and the Remuneration Committee believe that bringing bonus and
long term incentive opportunities closer to the market, subject to
demanding
performance conditions, will appropriately rebalance the proportion of
reward so that variable performance-related pay is dominant and will significantly
improve the Companys ability to attract and retain executives of
the quality necessary to lead AstraZeneca in the future. Arrangements for Håkan Mogren and Åke Stavling Håkan Mogren, formerly Executive Deputy Chairman, ceased to be an Executive Director and employee of the Company and became Non-Executive Deputy Chairman at the end of August 2003. Dr Mogrens remuneration arrangements as a result of this change were considered and approved by the Remuneration Committee in 2003, based on existing contracts and practice, and were fully disclosed in the Directors Remuneration Report for 2003. Under these arrangements, Dr Mogren received compensation from the Company which was paid on a monthly basis until the end of August 2004. The sum received by Dr Mogren in respect of this compensation in 2004 is included in the disclosure of Directors emoluments on page 33. Åke Stavling, formerly an Executive Director, left the Company at the end of January 2003. Mr Stavlings leaving arrangements were considered and approved by the Remuneration Committee in 2002, based on existing contracts and practice, and were fully disclosed in the Directors Remuneration Report for 2003. Under these arrangements, Mr Stavling is receiving compensation from the Company which is being paid on a monthly basis until the end of January 2005. The amount of this compensation is equivalent to two years base annual salary. Mr Stavling was entitled to a notice period of two years under his service contract at the time he left the Company. The sum received by Mr Stavling in respect of this compensation in 2004 is included in the disclosure of Directors emoluments on page 33. |
||||||
Graph
showing total shareholder return 1 January 2000 31 December 2004 Source: Thomson Financial Datastream |
> > > > > |
The
risk of generic competition following loss of patent exclusivity or patent
expiry, with the potential adverse effects on sales volumes and prices. 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. The rate of sales growth and costs following new product launches. The adverse impact on pharmaceutical prices as a result of the regulatory environment. Although there is no direct governmental control on prices in the US, pressures from individual state programmes and health insurance bodies are leading to downward forces 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 which are imposed by governments. Currency fluctuations, which can significantly affect our results. Our functional and reporting currency is US dollars, as this is our single largest currency, but we have substantial exposures to other currencies, in particular significant euro and Japanese yen denominated income and sterling and Swedish krona denominated costs. |
||||
Over
the longer term, the success of our research and development is crucial.
In common with other pharmaceutical companies we devote substantial
resources to R&D, the benefit of which emerges over the long term
and carries considerable uncertainty as to whether it will generate
future products. The business events which were the most significant for our financial results in 2004 are as follows: |
||||||
> | Strong sales performances from our key growth products to $11,161 million (52% of sales), particularly in the second half of the year. | |||||
> | Slowing rate of decline of patent expired products, again in the second half of the year. | |||||
Annual Review 2004 | 25 | |
astrazeneca.com |
Sales by growth, patent expiry and base products $m | ||
21,426 | ||
18,849 | ||
17,841 | ||
Key | ||
Growth (Atacand, Arimidex, Casodex, Crestor, Faslodex, Iressa, Nexium, Seroquel, Symbicort and Zomig) | ||
Patent expiry (Losec, Zestril and Nolvadex) | ||
Base | ||
> | Growth of Crestor sales to $908 million, despite what we believe are unfounded allegations about safety. | of
$2,521 million, 12% of our total sales in 2004. Sales of base products
remained constant, although the relative percentage of total sales
fell from 39% in 2003 to 36% in 2004. |
growth
for 2004 would increase from 9% to 11%. Geographical analysis Underlying sales growth in the US was 10%. However, growth for the full year was estimated to be 15% when adjusted for net wholesaler stock movements in 2003 and 2004. Increased sales of Crestor, Seroquel, Nexium and Arimidex more than offset a further $500 million decline in sales of Prilosec for the year. Sales in Europe were up 3% for the full year, with increased volume partially offset by declining realised prices. The launch roll out for Crestor and good growth for Nexium (up 26%), Symbicort (up 29%), Arimidex (up 48%) and Seroquel (up 45%) more than offset declines in Losec (down 25%) and other mature products. Sales in Japan were up 11% for the full year on strong performance in Oncology products (up 19%) and for Losec (up 24%). Operating margin and retained profit Gross margin decreased by 0.2 percentage points to 76.0% reflecting costs associated with Exanta and Iressa offset by lower Merck payments. R&D and SG&A combined grew by 6%, with R&D growing by 3% and SG&A by 8%. These growth rates have slowed considerably during the year as product launch cost growth reached a plateau and strict cost control continued. Operating margin increased by 0.5 percentage points from 21.8% to 22.3%. The disposal of the Advanta joint venture was completed on 1 September 2004 for a profit of $219 million. Excluding exceptional items, the effective tax rate for the full year 2004 was 27.1%. The post exceptional tax rate was 24.7%. In 2004, a settlement was reached in respect of currency losses arising on intra-group balances in 2000 and a credit of $357 million has been recorded in the statement of total recognised gains and losses. Earnings per share before exceptional items grew by 18% from $1.78 in 2003 to $2.11 in 2004. Financial position All data in this section are on an actual basis (unless noted otherwise). |
||
> | Following a period of high investment in selling and marketing in support of Nexium and Crestor in the first half of 2004, we have reduced our cost growth rate significantly in the second half of the year. | ||||
> | The decision by the FDA not to approve Exanta, whilst not materially affecting sales in 2004, has led us to make provisions against product stocks, goodwill and other assets of $151 million. | ||||
> | Similarly, the preliminary results of the ISEL study on Iressa reported in December 2004 have led to provisions against product stocks and manufacturing assets of $85 million. | ||||
> | In the year, we disposed of our investment in the joint venture Advanta BV, realising an exceptional gain of $219 million. | ||||
Key
Performance Indicators (KPIs) The primary KPIs used by management to understand and manage the financial performance of the business include: |
|||||
> | The analysis of sales growth with products allocated to three groups: growth, base and patent expiry which allow us to understand how the business is regenerating itself in the short term. | ||||
> | Trends in prescription volumes which give insights into the underlying business growth as opposed to invoiced sales which depend on the timing of wholesaler demand. | ||||
> | Cost growth rates, through which we manage the cost base to ensure that it is growing appropriately in relation to sales. | ||||
> | Operating profit margin progression over time, which demonstrates the overall quality of the business. | ||||
Results
of operations Results described in this section exclude the effects of exchange rate movements (unless otherwise stated) to reflect underlying performance. |
|||||
Sales After excluding the effects of exchange, underlying sales for the full year increased by 9%. Global sales of key growth products reached $11,161 million for the full year (up 30%) and now comprise 52% of total sales (compared to 44% in 2003). Patent expiry products declined by 28%, recording sales in aggregate |
|||||
26 |
Annual Review 2004 |
astrazeneca.com |
Summary financial review continued | |
The
net book value of our assets increased from $13,257 million at 31 December
2003 to $14,519 million at 31 December 2004. The increase was driven
primarily by retained profit after dividends of $2,258 million and
exchange benefits of $1,092 million less share re-purchases of $2,212
million. Capital expenditure totalled $1,063 million, compared with
$1,239 million in 2003. Major investments continued, particularly in
R&D facilities. Additions to goodwill and intangible assets amounted
to $151 million and included an intangible arising from the collaboration
agreement with Cambridge Antibody Technology of $34 million. Stock
levels at $3,020 million were unchanged from 2003. Reductions in stock
from tight operational management, high second half sales and provisions
against Exanta and Iressa stocks
were offset by exchange effects. Debtors increased from $5,960 million
to $6,274 million reflecting increased trade debtors from higher sales
in the fourth quarter of 2004 compared with the same period in 2003,
together with exchange effects offset by decreases in tax balances.
Creditors have risen from $7,595 million to $7,718 million increases
in trade creditors, exchange effects and the final dividend were compensated
by decreases in tax balances.
Cash
flow and net funds |
continued | |
reduction in the level of accelerated capital allowances/tax reliefs in excess of depreciation in 2004. Capital expenditure, including new fixed asset investments and intangible assets, totalled $1,296 million. During the year, an SEC-registered shelf debt programme was established with a total capacity of $4 billion and in conjunction with this a $750 million bond, repayable in 2014, was issued. After accounting for dividends paid of $1,378 million, net share re-purchases of $2,110 million and exchange of $34 million, there was a $478 million increase in net cash funds, which totalled $3,974 million at 31 December 2004. Capitalisation
and shareholder return Under the programme of share re-purchases, approved by the Board in January 2004, we have re-purchased and cancelled 50.1 million shares in 2004 at a cost of $2,212 million. Together with the previous programme begun in 1999 the total number of shares re-purchased to date is 142.9 million at a cumulative cost of $6,171 million. Under a new policy approved by the Board in January 2005 we aim to distribute the free cash generated over the next three years to shareholders. We regard our free cash as being cash flow before returns to shareholders and financing. For 2004 free cash was $3,932 million (net cash inflow before management of liquid resources and financing of $2,554 million before $1,378 million dividends paid) compared to $1,899 million in 2003. We paid a first interim dividend for 2004 on 20 September 2004 of $0.295 per Ordinary Share. A second interim dividend for 2004 of $0.645 per Ordinary Share has been declared, which the Annual General Meeting will be asked to confirm as the final dividend. This, together with the first interim dividend, makes a total of $0.940 for the year. It is our intention that dividends will increase broadly in line with earnings growth whilst maintaining dividend cover at around the middle of the two to two and a half times range. Future
prospects |
continued | |
International
accounting Our project to manage the transition of financial reporting from UK GAAP to international accounting has completed the majority of its work. On 25 October 2004 we published information with regard to 2003 and the first half of 2004, whilst on 27 January 2005, we issued data on the remainder of 2004. The changes in income and net assets from UK GAAP to international accounting can be summarised as follows: |
2004 | 2003 | |||
Income | $m | $m | ||
UK GAAP | 3,831 | 3,059 | ||
Share-based payments | (167 | ) | (136 | ) |
Employee benefits | | (15 | ) | |
Business combinations | 49 | 59 | ||
Financial instruments | (128 | ) | (16 | ) |
Income tax | 66 | 82 | ||
Others | 19 | 3 | ||
IFRS/IAS | 3,670 | 3,036 | ||
2004 | 2003 | |||
Net assets | $m | $m | ||
UK GAAP | 14,519 | 13,257 | ||
Share-based payments | (1 | ) | 19 | |
Employee benefits | (1,435 | ) | (1,242 | ) |
Business combinations | 106 | 57 | ||
Financial instruments | 28 | 134 | ||
Income tax | 128 | (8 | ) | |
Dividend | 1,061 | 914 | ||
Others | 112 | 78 | ||
IFRS/IAS | 14,518 | 13,209 | ||
The major areas of ongoing impact on our net profit and shareholders funds are likely to continue to be share-based payments, goodwill amortisation and deferred tax. The reconciliation from UK GAAP income in 2004 was also impacted by one-off gains on financial instruments that have been recognised in earlier years under IFRS/IAS. Further details can be found on our website, astrazeneca.com. The information was prepared on the basis of our best understanding of the standards endorsed by the EU that we will be subject to. |
Annual Review 2004 | 27 | |
astrazeneca.com |
28 | Annual Review 2004 |
astrazeneca.com |
Group Profit and Loss Account | ||||||
for the year ended 31 December | ||||||
Before | ||||||
exceptional | Exceptional | 2004 | ||||
items | items | Total | ||||
$m | $m | $m | ||||
Group turnover | 21,426 | | 21,426 | |||
Operating costs | (16,971 | ) | | (16,971 | ) | |
Other operating income | 315 | | 315 | |||
Group operating profit | 4,770 | | 4,770 | |||
Share of operating profits of joint venture | | | | |||
Profit on sale of interest in joint venture | | 219 | 219 | |||
Dividend income | 6 | | 6 | |||
Profit on ordinary activities before interest | 4,776 | 219 | 4,995 | |||
Net interest | 90 | | 90 | |||
Profit on ordinary activities before taxation | 4,866 | 219 | 5,085 | |||
Taxation | (1,321 | ) | 67 | (1,254 | ) | |
Profit on ordinary activities after taxation | 3,545 | 286 | 3,831 | |||
Attributable to minorities | (18 | ) | | (18 | ) | |
Net profit for the financial year | 3,527 | 286 | 3,813 | |||
Dividends to shareholders | (1,555 | ) | ||||
Profit retained for the financial year | 2,258 | |||||
Earnings per $0.25 Ordinary Share before exceptional items | $2.11 | | $2.11 | |||
Earnings per $0.25 Ordinary Share (basic) | $2.11 | $0.17 | $2.28 | |||
Earnings per $0.25 Ordinary Share (diluted) | $2.11 | $0.17 | $2.28 | |||
Weighted average number of Ordinary Shares in issue (millions) | 1,673 | |||||
All activities were in respect of continuing operations. There were no material differences between reported profits and losses and historical cost profits and losses on ordinary activities before taxation. | ||||||
Group Statement of Total Recognised Gains and Losses | ||||||
for the year ended 31 December |
2004 | ||
$m | ||
Net profit for the financial year | 3,813 | |
Foreign exchange adjustments on consolidation | 713 | |
Tax on foreign exchange adjustments on consolidation | 379 | |
Translation differences on foreign currency borrowings | | |
Tax on translation differences on foreign currency borrowings | | |
Total recognised gains and losses relating to the financial year | 4,905 | |
Tax on foreign exchange adjustments on consolidation in 2004 includes a credit of $357m in respect of foreign exchange losses arising in 2000. | ||
$m means millions of US dollars |
Annual
Review 2004 astrazeneca.com |
29 | |
Before | Before | |||||||||||
exceptional | Exceptional | 2003 | exceptional | Exceptional | 2002 | |||||||
items | items | Total | items | items | Total | |||||||
$m | $m | $m | $m | $m | $m | |||||||
18,849 | | 18,849 | 17,841 | | 17,841 | |||||||
(14,938 | ) | | (14,938 | ) | (13,728 | ) | (350 | ) | (14,078 | ) | ||
200 | | 200 | 243 | | 243 | |||||||
4,111 | | 4,111 | 4,356 | (350 | ) | 4,006 | ||||||
| | | | | | |||||||
| | | | | | |||||||
2 | | 2 | 1 | | 1 | |||||||
4,113 | | 4,113 | 4,357 | (350 | ) | 4,007 | ||||||
89 | | 89 | 30 | | 30 | |||||||
4,202 | | 4,202 | 4,387 | (350 | ) | 4,037 | ||||||
(1,143 | ) | | (1,143 | ) | (1,177 | ) | | (1,177 | ) | |||
3,059 | | 3,059 | 3,210 | (350 | ) | 2,860 | ||||||
(23 | ) | | (23 | ) | (24 | ) | | (24 | ) | |||
3,036 | | 3,036 | 3,186 | (350 | ) | 2,836 | ||||||
(1,350 | ) | (1,206 | ) | |||||||||
1,686 | 1,630 | |||||||||||
$1.78 | | $1.78 | $1.84 | | $1.84 | |||||||
$1.78 | | $1.78 | $1.84 | ($0.20 | ) | $1.64 | ||||||
$1.78 | | $1.78 | $1.84 | ($0.20 | ) | $1.64 | ||||||
1,709 | 1,733 | |||||||||||
2003 | 2002 | |||
$m | $m | |||
3,036 | 2,836 | |||
1,361 | 971 | |||
66 | 135 | |||
| 6 | |||
| (2 | ) | ||
4,463 | 3,946 | |||
30 | Annual
Review 2004 astrazeneca.com |
|
Group Balance Sheet at 31 December |
||||
2004 | 2003 | |||
$m | $m | |||
Fixed assets | ||||
Tangible fixed assets | 8,083 | 7,536 | ||
Goodwill and intangible assets | 2,826 | 2,884 | ||
Fixed asset investments | 267 | 220 | ||
11,176 | 10,640 | |||
Current assets | ||||
Stocks | 3,020 | 3,022 | ||
Debtors | 6,274 | 5,960 | ||
Short term investments | 4,091 | 3,218 | ||
Cash | 1,055 | 733 | ||
14,440 | 12,933 | |||
Total assets | 25,616 | 23,573 | ||
Creditors due within one year | ||||
Short term borrowings and overdrafts | (142 | ) | (152 | ) |
Other creditors | (7,640 | ) | (7,543 | ) |
(7,782 | ) | (7,695 | ) | |
Net current assets | 6,658 | 5,238 | ||
Total assets less current liabilities | 17,834 | 15,878 | ||
Creditors due after more than one year | ||||
Loans | (1,030 | ) | (303 | ) |
Other creditors | (78 | ) | (52 | ) |
(1,108 | ) | (355 | ) | |
Provisions for liabilities and charges | (2,207 | ) | (2,266 | ) |
Net assets | 14,519 | 13,257 | ||
Capital and reserves | ||||
Called-up share capital | 411 | 423 | ||
Share premium account | 550 | 449 | ||
Capital redemption reserve | 36 | 23 | ||
Merger reserve | 433 | 433 | ||
Other reserves | 1,382 | 1,401 | ||
Profit and loss account | 11,606 | 10,449 | ||
Shareholders funds equity interests | 14,418 | 13,178 | ||
Minority equity interests | 101 | 79 | ||
Shareholders funds and minority interests | 14,519 | 13,257 | ||
The Financial Statements on pages 28 to 33 were approved by the Board of Directors on 27 January 2005 and were signed on its behalf by: | ||||
Sir Tom McKillop | Jonathan Symonds | |||
Director | Director | |||
Annual
Review 2004 astrazeneca.com |
31 | |
Statement of Group Cash Flow for the year ended 31 December |
||||||
2004 | 2003 | 2002 | ||||
$m | $m | $m | ||||
Cash flow from operating activities | ||||||
Net cash inflow from trading operations | 6,069 | 4,617 | 5,686 | |||
Cash outflow related to exceptional items | (8 | ) | (391 | ) | (93 | ) |
Net cash inflow from operating activities | 6,061 | 4,226 | 5,593 | |||
Returns on investments and servicing of finance | ||||||
Interest received | 119 | 117 | 142 | |||
Interest paid | (62 | ) | (32 | ) | (96 | ) |
Dividends received | 6 | 2 | | |||
Dividends paid by subsidiaries to minority interests | (5 | ) | (11 | ) | (11 | ) |
58 | 76 | 35 | ||||
Tax paid | (1,246 | ) | (886 | ) | (795 | ) |
Capital expenditure and financial investment | ||||||
Cash expenditure on tangible fixed assets | (1,063 | ) | (1,282 | ) | (1,340 | ) |
Cash expenditure on intangible assets | (151 | ) | (233 | ) | (268 | ) |
Cash expenditure on fixed asset investments | (117 | ) | (120 | ) | (1 | ) |
Disposals of fixed assets | 35 | 38 | 66 | |||
(1,296 | ) | (1,597 | ) | (1,543 | ) | |
Acquisitions and disposals | ||||||
Disposals of business operations | 355 | 80 | | |||
Equity dividends paid to shareholders | (1,378 | ) | (1,222 | ) | (1,234 | ) |
Net cash inflow before management of liquid resources and financing | 2,554 | 677 | 2,056 | |||
Management of liquid resources and financing | ||||||
Movement in short term investments and fixed deposits (net) | (862 | ) | 771 | (806 | ) | |
Financing | 727 | (345 | ) | (118 | ) | |
Net share re-purchases | (2,110 | ) | (1,107 | ) | (1,154 | ) |
Increase/(decrease) in cash in the year | 309 | (4 | ) | (22 | ) | |
Cash (inflow)/outflow from (increase)/decrease in loans and short term borrowings | (727 | ) | 345 | 118 | ||
Cash outflow/(inflow) from increase/(decrease) in short term investments | 862 | (771 | ) | 806 | ||
Change in net funds resulting from cash flows | 444 | (430 | ) | 902 | ||
Exchange movements | 34 | 82 | 75 | |||
Movement in net funds | 478 | (348 | ) | 977 | ||
32 | Annual
Review 2004 astrazeneca.com |
|
Dividends | ||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||
Per | Per | Per | ||||||||||
share | share | share | $m | $m | $m | |||||||
Interim, paid on 20 September 2004 | $0.295 | $0.255 |
$0.230 | 494 | 436 | 398 | ||||||
Second interim, to be confirmed as final, | ||||||||||||
payable 21 March 2005 | $0.645 | $0.540 |
$0.470 | 1,061 | 914 | 808 | ||||||
$0.940 | $0.795 |
$0.700 | 1,555 | 1,350 | 1,206 | |||||||
Annual
Review 2004 astrazeneca.com |
33 |
|
Emoluments of Directors | ||
The aggregate remuneration, excluding pension contributions, paid to or accrued for all Directors and officers of the Company for services in all capacities during the year ended 31 December 2004 was £10 million ($17 million). Remuneration of individual Directors is set out below in sterling and US dollars. All salaries, fees and bonuses for Directors are established in sterling. | ||
Salary | Taxable | Total | Total | Total | ||||||||||
and fees | Bonuses | benefits | Other | 2004 | 2003 | 2002 | ||||||||
Sterling | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |||||||
Percy Barnevik | 250 | | | | 250 | 250 | 250 | |||||||
Sir Tom McKillop | 958 | 430 | 1 | 22 | 1 | 1,411 | 1,790 | 1,479 | ||||||
Jonathan Symonds | 559 | 314 | 7 | 90 | 2 | 970 | 1,071 | 909 | ||||||
Sir Peter Bonfield | 76 | | | | 76 | 74 | 46 | |||||||
John Buchanan | 61 | | | | 61 | 53 | 33 | |||||||
Jane Henney | 54 | | | | 54 | 49 | 60 | |||||||
Michele Hooper | 43 | | | | 43 | 19 | 4 | | ||||||
Joe Jimenez | 43 | | | | 43 | 19 | 4 | | ||||||
Håkan Mogren | 29 | 4 | | | 450 | 3 | 479 | 1,246 | 1,347 | |||||
Erna Möller | 54 | | | | 54 | 49 | 62 | |||||||
Dame Bridget Ogilvie | 54 | | | | 54 | 49 | 62 | |||||||
Louis Schweitzer | 31 | 4 | | | | 31 | | | ||||||
Marcus Wallenberg | 46 | | | | 46 | 46 | 42 | |||||||
Former Directors | ||||||||||||||
Karl von der Heyden | 19 | 4 | | | | 19 | 55 | 47 | ||||||
Åke Stavling | | | | 435 | 3 | 435 | 489 | 835 | ||||||
Others | | | | | | | 621 | |||||||
Total | 2,277 | 744 | 8 | 997 | 4,026 | 5,259 | 5,793 | |||||||
1 Relates to relocation allowances; 2 Payment for pension related tax liabilities; 3 Compensation payment; 4 Part year only. | ||||||||||||||
Salary | Taxable | Total | Total | Total | ||||||||||
and fees | Bonuses | benefits | Other | 2004 | 2003 | 2002 | ||||||||
US dollars | $000 | $000 | $000 | $000 | $000 | $000 | $000 | |||||||
Percy Barnevik | 455 | | | | 455 | 403 | 373 | |||||||
Sir Tom McKillop | 1,742 | 782 | 2 | 40 | 1 | 2,566 | 2,886 | 2,208 | ||||||
Jonathan Symonds | 1,016 | 571 | 13 | 164 | 2 | 1,764 | 1,726 | 1,357 | ||||||
Sir Peter Bonfield | 138 | | | | 138 | 119 | 68 | |||||||
John Buchanan | 111 | | | | 111 | 86 | 49 | |||||||
Jane Henney | 98 | | | | 98 | 79 | 90 | |||||||
Michele Hooper | 78 | | | | 78 | 31 | 4 | | ||||||
Joe Jimenez | 78 | | | | 78 | 31 | 4 | | ||||||
Håkan Mogren | 53 | 4 | | | 818 | 3 | 871 | 2,008 | 2,010 | |||||
Erna Möller | 98 | | | | 98 | 79 | 93 | |||||||
Dame Bridget Ogilvie | 98 | | | | 98 | 79 | 93 | |||||||
Louis Schweitzer | 56 | 4 | | | | 56 | | | ||||||
Marcus Wallenberg | 84 | | | | 84 | 74 | 63 | |||||||
Former Directors | ||||||||||||||
Karl von der Heyden | 35 | 4 | | | | 35 | 89 | 70 | ||||||
Åke Stavling | | | | 791 | 3 | 791 | 788 | 1,246 | ||||||
Others | | | | | | | 927 | |||||||
Total | 4,140 | 1,353 | 15 | 1,813 | 7,321 | 8,478 | 8,647 | |||||||
1 Relates to relocation allowances; 2 Payment for pension related tax liabilities; 3 Compensation payment; 4 Part year only. | ||||||||||||||
As described fully in the AstraZeneca Annual Report and Form 20-F Information 2003 and noted on page 24 of the Annual Review 2004, compensation payments to Håkan Mogren and Åke Stavling were £450,000 ($818,000) and £435,000 ($791,000), respectively and are included within Other in the above tables. | ||||||||||||||
34 | Annual
Review 2004 astrazeneca.com |
Group financial record | |
2000 | 2001 | 2002 | 2003 | 2004 | ||||||
For the years ended 31 December | $m | $m | $m | $m | $m | |||||
|
|
|
|
|
|
|||||
Turnover and profits | ||||||||||
Group turnover | 17,882 | 16,222 | 17,841 | 18,849 | 21,426 | |||||
|
|
|
|
|
|
|||||
Cost of sales | (5,270 | ) | (4,232 | ) | (4,520 | ) | (4,469 | ) | (5,150 | ) |
|
|
|
|
|
|
|||||
Distribution costs | (286 | ) | (122 | ) | (141 | ) | (162 | ) | (177 | ) |
|
|
|
|
|
|
|||||
Research and development | (2,893 | ) | (2,773 | ) | (3,069 | ) | (3,451 | ) | (3,803 | ) |
|
|
|
|
|
|
|||||
Selling, general and administrative expenses | (5,691 | ) | (5,509 | ) | (6,348 | ) | (6,856 | ) | (7,841 | ) |
|
|
|
|
|
|
|||||
Other income | 266 | 368 | 243 | 200 | 315 | |||||
|
|
|
|
|
|
|||||
Group operating profit | 4,008 | 3,954 | 4,006 | 4,111 | 4,770 | |||||
|
|
|
|
|
|
|||||
Group operating profit before exceptional items | 4,330 | 4,156 | 4,356 | 4,111 | 4,770 | |||||
|
|
|
|
|
|
|||||
Exceptional items charged to operating profit | (322 | ) | (202 | ) | (350 | ) | | | ||
|
|
|
|
|
|
|||||
Profit on sale of interest in joint venture | | | | | 219 | |||||
|
|
|
|
|
|
|||||
Share of operating profit of joint ventures and associates | (149 | ) | | | | | ||||
|
|
|
|
|
|
|||||
Exceptional items | (150 | ) | | | | | ||||
|
|
|
|
|
|
|||||
Profits on sale of fixed assets | | 10 | | | | |||||
|
|
|
|
|
|
|||||
Dividend income | 3 | 8 | 1 | 2 | 6 | |||||
|
|
|
|
|
|
|||||
Net interest | 135 | 105 | 30 | 89 | 90 | |||||
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|
|||||
Profit on ordinary activities before taxation | 3,847 | 4,077 | 4,037 | 4,202 | 5,085 | |||||
|
|
|
|
|
|
|||||
Taxation | (1,560 | ) | (1,160 | ) | (1,177 | ) | (1,143 | ) | (1,254 | ) |
|
|
|
|
|
|
|||||
Profit on ordinary activities after taxation | 2,287 | 2,917 | 2,860 | 3,059 | 3,831 | |||||
|
|
|
|
|
|
|||||
Attributable to minorities | (10 | ) | (11 | ) | (24 | ) | (23 | ) | (18 | ) |
|
|
|
|
|
|
|||||
Net profit for the financial year | 2,277 | 2,906 | 2,836 | 3,036 | 3,813 | |||||
|
||||||||||
Return on sales | ||||||||||
Group operating profit before exceptional items as a percentage of sales | 24.2 | % | 25.6 | % | 24.4 | % | 21.8 | % | 22.3 | |
|
||||||||||
Ratio of earnings to fixed charges (UK GAAP) | 25.2 | 42.8 | 45.6 | 103.5 | 98.2 | |||||
|
||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | ||||||
At 31 December | $m | $m | $m | $m | $m | |||||
|
|
|
|
|
|
|||||
Balance sheet | ||||||||||
Fixed assets (tangible and intangible) and goodwill | 7,908 | 8,109 | 9,404 | 10,420 | 10,909 | |||||
|
|
|
|
|
|
|||||
Fixed asset investments | 11 | 23 | 46 | 220 | 267 | |||||
|
|
|
|
|
|
|||||
Current assets | 10,938 | 10,364 | 12,126 | 12,933 | 14,440 | |||||
|
|
|
|
|
|
|||||
Total assets | 18,857 | 18,496 | 21,576 | 23,573 | 25,616 | |||||
|
|
|
|
|
|
|||||
Creditors due within one year | (6,897 | ) | (6,480 | ) | (8,215 | ) | (7,695 | ) | (7,782 | ) |
|
|
|
|
|
|
|||||
Total assets less current liabilities | 11,960 | 12,016 | 13,361 | 15,878 | 17,834 | |||||
|
|
|
|
|
|
|||||
Creditors due after more than one year | (927 | ) | (787 | ) | (362 | ) | (355 | ) | (1,108 | ) |
|
|
|
|
|
|
|||||
Provisions for liabilities and charges | (1,617 | ) | (1,600 | ) | (1,773 | ) | (2,266 | ) | (2,207 | ) |
|
|
|
|
|
|
|||||
Net assets | 9,416 | 9,629 | 11,226 | 13,257 | 14,519 | |||||
|
|
|
|
|
|
|||||
Shareholders funds equity interests | 9,389 | 9,586 | 11,172 | 13,178 | 14,418 | |||||
|
|
|
|
|
|
|||||
Minority equity interests | 27 | 43 | 54 | 79 | 101 | |||||
|
|
|
|
|
|
|||||
Shareholders funds and minority interests | 9,416 | 9,629 | 11,226 | 13,257 | 14,519 | |||||
|
||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | ||||||
For the years ended 31 December | $m | $m | $m | $m | $m | |||||
|
|
|
|
|
|
|||||
Cash flow | ||||||||||
Net cash inflow from operating activities | 4,183 | 3,762 | 5,593 | 4,226 | 6,061 | |||||
|
|
|
|
|
|
|||||
Returns on investments and servicing of finance | 19 | 156 | 35 | 76 | 58 | |||||
|
|
|
|
|
|
|||||
Tax paid | (648 | ) | (792 | ) | (795 | ) | (886 | ) | (1,246 | ) |
|
|
|
|
|
|
|||||
Capital expenditure and financial investment | (1,426 | ) | (1,543 | ) | (1,543 | ) | (1,597 | ) | (1,296 | ) |
|
|
|
|
|
|
|||||
Acquisitions and disposals | 740 | (44 | ) | | 80 | 355 | ||||
|
|
|
|
|
|
|||||
Equity dividends paid to shareholders | (1,220 | ) | (1,236 | ) | (1,234 | ) | (1,222 | ) | (1,378 | ) |
|
|
|
|
|
|
|||||
Net cash inflow before management of liquid resources and financing | 1,648 | 303 | 2,056 | 677 | 2,554 | ) |
||||
|
||||||||||
Annual
Review 2004 astrazeneca.com |
35 | |
Shareholder information | ||
AstraZeneca | 2000 | 2001 | 2002 | 2003 | 2004 | |||||
|
|
|
|
|
||||||
Ordinary Shares in issue millions | ||||||||||
At year end | 1,766 | 1,745 | 1,719 | 1,693 | 1,645 | |||||
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|
|
|
|
||||||
Weighted average for year | 1,768 | 1,758 | 1,733 | 1,709 | 1,673 | |||||
|
|
|
|
|
||||||
Stock market price per $0.25 Ordinary Share | ||||||||||
Highest (pence) | 3600 | 3555 | 3625 | 2868 | 2749 | |||||
|
|
|
|
|
||||||
Lowest (pence) | 1926 | 2880 | 1799 | 1820 | 1863 | |||||
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|
|
|
|
||||||
At year end (pence) | 3375 | 3098 | 2220 | 2680 | 1889 | |||||
|
|
|
|
|
||||||
Earnings per $0.25 Ordinary Share before exceptional items | $1.62 | $1.73 | $1.84 | $1.78 | $2.11 | |||||
|
|
|
|
|
||||||
Earnings per $0.25 Ordinary Share (basic) | $1.30 | $1.65 | $1.64 | $1.78 | $ 2.28 | |||||
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|
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|||||||
Earnings per $0.25 Ordinary Share (diluted) | $1.30 | $1.65 | $1.64 | $1.78 | $2.28 | |||||
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|
||||||
Dividends | $0.70 | * | $0.70 | $0.70 | $0.795 | $0.94 | ||||
|
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|
||||||
* In addition, shareholders received a distribution of shares in Syngenta AG as a dividend in specie in respect of the demerger of Zeneca Agrochemicals. | ||||||||||
Percentage analysis at 31 December 2004 of issued share capital | ||
By size of account | 2004 | |
No. of shares | % | |
1 250 | 0.6 | |
251 500 | 0.8 | |
501 1,000 | 1.0 | |
1,001 5,000 | 1.5 | |
5,001 10,000 | 0.2 | |
10,001 50,000 | 1.2 | |
50,001 1,000,000 | 12.4 | |
over 1,000,000 | 82.3 | |
Issued share capital | 100.0 | |
Includes VPC and ADR holdings | ||
At 31 December 2004, AstraZeneca PLC had 161,077 registered holders of 1,645,051,891 Ordinary Shares of $0.25 each. In addition, there were approximately 45,000 holders of American Depositary Receipts (ADRs) representing 8.82% of the issued share capital and 161,000 holders of shares held under the VPC Services Agreement representing 22.63% of the issued share capital. The ADRs, each of which is equivalent to one Ordinary Share, are issued by JPMorgan Chase Bank. |
Financial calendar 2005 | ||||
28 April 2005 | Annual General Meeting and announcement of first quarter 2005 results | |||
28 July 2005 | Announcement of second quarter and first half 2005 results | |||
27 October 2005 | Announcement of third quarter and nine months 2005 results | |||
Dividend
payments The record date for the second interim dividend for 2004, payable on 21 March 2005 (in the UK, the US and Sweden), is 11 February 2005. Shares trade ex-dividend on the London and Stockholm Stock Exchanges from 9 February 2005 and ADRs trade ex-dividend on the New York Stock Exchange from the same date. From 2005, dividends will normally be paid as follows: |
First interim: | Announced end of July and paid in September. |
Second interim: | Announced end of January and paid in March. |
The record date for the first interim dividend for 2005, payable on 19 September 2005 (in the UK, the US and Sweden), is 12 August 2005. |
2004 dividend | $ | pence | SEK | Payment date | |||
|
|
|
|||||
First interim dividend | 0.295 | 16.0 | 2.200 | 20 September 2004 | |||
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|
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|
||||
Second interim dividend | 0.645 | 34.3 | 4.497 | 21 March 2005 | |||
|
|
|
|
||||
Total dividend | 0.940 | 50.3 | 6.697 | ||||
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||||
36 | Annual
Review 2004 astrazeneca.com |
|||
Shareview ShareGift The
Unclaimed Assets Register |
The contents of this AstraZeneca Annual Review are derived wholly and exclusively from the AstraZeneca Annual Report and Form 20-F Information for the financial year ended 31 December 2004, to which the reader is referred for additional analytical information. Trade
marks Use
of terms Cautionary
statement regarding forward-looking statements |
Statements
of competitive position Statements
of growth rates AstraZeneca
websites
©AstraZeneca PLC 2005 |
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Designed by Addison Corporate Marketing Ltd | |
Contact information | ||||||
Registered office | ||||||
and corporate headquarters address | ||||||
AstraZeneca PLC | ||||||
15 Stanhope Gate | ||||||
London W1K 1LN | ||||||
UK | ||||||
Tel: +44 (0)20 7304 5000 | ||||||
Fax: +44 (0)20 7304 5183 | ||||||
R&D headquarters address | ||||||
AstraZeneca AB | ||||||
R&D Headquarters | ||||||
SE-151 85 Södertälje | ||||||
Sweden | ||||||
Tel: +46 (0)8 553 260 00 | ||||||
Fax: +46 (0)8 553 290 00 | ||||||
Investor relations contacts | ||||||
UK and Sweden: as above or e-mail | ||||||
IR@astrazeneca.com | ||||||
US: | ||||||
Investor Relations | ||||||
AstraZeneca Pharmaceuticals LP | ||||||
1800 Concord Pike | ||||||
PO Box 15438 | ||||||
Wilmington | ||||||
DE 19850-5438 | ||||||
US | ||||||
Tel: +1 (302) 886 3000 | ||||||
Fax: +1 (302) 886 2972 | ||||||
Registrar and transfer office | ||||||
Lloyds TSB Registrars | ||||||
The Causeway | ||||||
Worthing | ||||||
West Sussex | ||||||
BN99 6DA | ||||||
UK | ||||||
Tel (in the UK): 0870 600 3956 | ||||||
Tel (outside the UK): +44 121 415 7033 | ||||||
Swedish securities registration centre | ||||||
VPC AB | ||||||
PO Box 7822 | ||||||
SE-103 97 Stockholm | ||||||
Sweden | ||||||
Tel: +46 (0)8 402 9000 | ||||||
US depositary | ||||||
JPMorgan Chase Bank | ||||||
PO Box 43013 | ||||||
Providence | ||||||
RI 02940-3013 | ||||||
US | ||||||
Tel (toll free in the US): 888 697 8018 | ||||||
Tel: +1 (781) 575 4328 | ||||||
astrazeneca.com | ||||||
AstraZeneca
Corporate Responsibility Summary Report 2004 |
For
further information visit |
01 |
AstraZeneca is one of the worlds leading pharmaceutical companies, with a broad range of innovative medicines for many important areas of healthcare. We employ over 64,000 people worldwide; sell in over 100 countries; manufacture in 20 countries, and have major research facilities in 7 countries.
Our business activities touch many peoples lives, including patients, physicians, employees, investors and the communities around us. We know that a responsible approach to business is essential to maintaining the trust of these groups and ensuring that AstraZeneca continues to be a company that is welcomed by society and for which our employees are proud to work.
At the heart of our commitment to corporate responsibility are AstraZenecas core values. Wherever we have a presence or an impact, we aim to live up to these values and deliver standards of ethical behaviour that are consistent with our publicly declared codes of corporate responsibility.
This Summary Report is designed to capture the main points of our approach to managing this challenge and to provide a brief overview of our 2004 performance in the three areas of sustainable development: economic, environmental and social responsibility.
Detailed statistics and further information about our performance, policies and principles are available on our website at astrazeneca.com/responsibility.
Chief Executives message | 02 | |
|
||
Priority action plan | 04 | |
|
||
Managing our commitment | 07 | |
|
||
Performance summary | 09 | |
|
||
Economic performance | 10 | |
|
||
Environmental performance | 12 | |
|
||
Social performance | 15 | |
|
||
Assurance statement | 20 | |
|
02 | AstraZeneca
Corporate Responsibility Summary Report 2004 |
For
further information visit astrazeneca.com/responsibility |
||
Chief Executives message | ||||
Sir Tom McKillop We
are committed to ensuring |
At AstraZeneca, we consider the value of our products to patients and to society to be at the core of our corporate responsibility (CR) effort. We make our unique contribution through successful research and development of new medicines. Innovation drives progress in society and in the case of pharmaceuticals, innovative research not only brings benefits for patients, improving health and quality of life, it also creates wealth and contributes to the economic development of the communities we serve. We see our core values as central to achieving sustainable success through innovation. We know that we must act appropriately and consistently, wherever we operate. Our reputation and continued success depend on it. Adding
value through innovation Each of AstraZenecas R&D projects has clear targets and must demonstrate benefit to patients, otherwise it is stopped. Sometimes the benefits are incremental and sometimes they can be described as breakthroughs. Clearly, fundamental breakthroughs are exciting, but they are exceedingly rare. Incremental innovation is important too because the first product in a class is almost never the best. Refinement brings quality, reliability and additional benefits. Also, choice is good for patients, who respond differently to different medicines, and for competition, helping to add value for healthcare systems. Very often, the full benefit of a medicine only becomes apparent after long usage and extensive clinical trials for example our own product, Nolvadex, launched to treat breast cancer is now used to help prevent the disease. The inequality of access to healthcare remains one of the biggest challenges the world faces today. The pharmaceutical industry has a significant role to play, but responsibility also rests with governments and other organisations to provide appropriate infrastructures that support good public |
health and the reliable provision of medicines and other aspects of healthcare to those in need. AstraZeneca is committed to playing its part (and you can read more about this on page 18), but I believe that real progress will depend on the acceptance of a shared responsibility and commitment. Delivering
our core values We have also begun to integrate CR into our leadership development programmes and during the year, we launched an intranet site dedicated to providing managers with the tools and guidance they need to put CR into practice at a local level. I was pleased to see that 80% of our people took time to respond to our third two-yearly global employee survey, which took place in 2004 and the results of which helped us to identify areas for further improvement. We are working to develop improvement plans that address the areas highlighted for attention by the survey, which included organisational efficiency, strengthening leadership capabilities and clarity around performance expectations. Our biggest employee safety issue is driving-related accidents a particular problem with so many sales representatives driving extensively on business. Despite our increased focus in this area, we are currently showing little improvement in our driver safety record. I am committed to doing better. Alongside the other work being done in this area and to further promote best practice, during 2004 I gave a special Chief Executives |
award to AstraZeneca in the Czech Republic for the most effective driver safety initiative implemented in the previous year. Examples of best practice such as theirs continue to be shared within the Company to help stimulate further improvement in performance. |
Following the devastating tsunami in December 2004, our first priority was to account for our employees working in the region and those visiting on holiday. I am sad to report that, to date, three of our employees are still missing. Our deepest sympathies and condolences go to their families and friends and to all those affected by this tragic event. AstraZeneca responded immediately to the disaster with cash donations totalling $600,000 and medicines. For the longer term, we have established a fund of a further $1.5 million to provide ongoing support to help those stricken by the disaster rebuild their lives and their communities.
CR is an evolving landscape. We use stakeholder dialogue, external benchmarking and internal risk assessment to make sure we are staying in tune with the issues relating to our business that affect or concern society. During the year, we added clinical trials and pharmaceuticals in the environment to our Global CR Priority Action Plan, and we introduced new key performance indicators for marketing and sales practices and animal welfare, which provide the platform for further strengthening of our global monitoring systems in these areas.
We are committed to transparent, balanced reporting of our CR performance and this year, we have taken a further step with the introduction of a pilot scheme to provide independent assurance of this CR Summary Report and the processes that underpin it. You can read the results of this on page 20.
The pharmaceutical industry faces many challenges to its reputation some justified, some less so. I am convinced that the effective implementation of corporate responsibility and a wider appreciation of the health and economic benefits we bring to patients and society will enable AstraZeneca to promote and safeguard its reputation in an increasingly critical climate of public opinion.
Sir
Tom McKillop
Chief
Executive
AstraZeneca
Corporate Responsibility Summary Report 2004 |
|
AstraZeneca Core Values | |
> | Integrity and high ethical standards |
> | Respect for the individual and diversity |
> | Openness, honesty, trust and support for each other |
> | Leadership by example at all levels |
AstraZeneca Group CR Policy | |
Through the innovation of new medicines, AstraZeneca improves human health and enhances peoples lives. Our activities impact not just on the patients we serve and our investors, but also on our employees and on society as a whole. | |
Our reputation and continued long term success depend on our ability to integrate successfully our financial obligations with our social and environmental responsibilities. In so doing, we will maintain the trust and confidence of our stakeholders and continue to be a company that is welcomed by society and for which our employees are proud to work. | |
AstraZeneca aims to set, promote and maintain high standards of corporate responsibility worldwide, in line with our core values and consistent with our publicly declared code of conduct, which will ensure that: | |
> | Patient benefit and safety continue to be the core priority |
> | Safety, health and environmental issues remain a fundamental company consideration |
> | The individuality, diverse talent and creative potential that every employee brings to the business are fully valued and respected |
> | We maintain high ethical standards in our research and development of new medicines |
> | We maintain high ethical standards of marketing and sales practices in all countries of operation |
> | We make a positive contribution to the communities in which we operate |
> | As a minimum, we meet national and international regulations |
> | Our CR commitments are expanded by encouraging suppliers to embrace standards similar to our own |
> | New and emerging issues relating to CR are dealt with appropriately and effectively |
We will be transparent in our communications about the work we are doing to meet these commitments and drive continuous improvement in our CR performance. Revised and approved by the AstraZeneca Board in January 2005. |
|
04 | AstraZeneca
Corporate Responsibility Summary Report 2004 |
For
further information visit astrazeneca.com/responsibility |
|
Corporate Responsibility Priority Action Plan | |||||
Issue | Objective | Action plan | |||
Integration of CR | CR considerations are included in all | Continued integration of CR into personal performance objectives. | |||
into all activities | relevant strategies and decisions. | ||||
Continued internal communication of policies, framework, management standards | |||||
and guidelines. | |||||
Continued local implementation. | |||||
Continued integration of CR into learning and development (L&D) programmes. | |||||
Continued sampling of employee understanding and opinion. | |||||
|
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|
|
|
|
Corporate governance | Deal with all stakeholders with the | Continued communication of revised Code of Conduct including the procedure | |||
and compliance | highest ethical standards. | for reporting concerns. | |||
Global consistency of implementation | Continued development of audit processes to include CR. | ||||
of CR standards including all new | |||||
governance laws and regulations. | Continued global auditing. | ||||
|
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|
|
Access to medicines | To consider access to medicines when | Communication of our framework for considering access to medicines early in product development. | |||
defining pricing and market access | |||||
strategies for new brands. | Monitor local alignment with global principles. | ||||
Share good practice. | |||||
Diseases of | To consolidate a strategy addressing | Consolidate a plan, bringing together current activities and future plans in this area. | |||
the developing world | diseases of the developing world. | ||||
|
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|
|
Marketing | High ethical standards of marketing | Further develop mechanisms for monitoring and reporting compliance. | |||
and sales practices | and sales in all countries of operation. | ||||
|
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|
|
Human rights | Ensure we consistently live up to | Establish a means of collecting Human Resources data on a consistent global basis. | |||
our core values and our commitment | |||||
to the principles of the UN Declaration | Establish KPIs based on the planned areas of data collection. | ||||
of Human Rights worldwide. | |||||
|
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|
|
|
Diversity | Ensure diversity and inclusion is | Build diversity and inclusion into business performance management processes. | |||
and inclusion | appropriately supported in our global | ||||
workforce and reflected in our leadership. | Focus on minimum standards including talent management, staffing, performance review | ||||
and reward, and learning and development. | |||||
Ensure diversity and inclusion are | |||||
integrated into business and people | Establish a means of collecting Human Resources data on a consistent global basis and | ||||
strategies. | monitor progress. | ||||
|
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|
|
|
|
Animal use | Use the minimum number of animals | ||||
and welfare | to achieve our scientific objectives. | ||||
Maximise the use of non-animal | Introduce site improvement plans covering both animal welfare and replacement, | ||||
methods in drug discovery. | reduction and refinement of animal use at all AstraZeneca sites using animals. | ||||
Enhance the welfare of those animals | Formal programme of animal welfare inspections of sites where studies are conducted by, | ||||
we have to use. | or on behalf of AstraZeneca. | ||||
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Clinical trials | Ensure that our clinical trial programmes | Maintenance of ethical standards. | |||
continue to be safe and appropriate. | |||||
Ensure open communication of | To develop an AstraZeneca global clinical trials website. | ||||
appropriate data. | |||||
|
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|
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Suppliers | Encourage our suppliers to embrace | Global purchasing category management processes to include CR. | |||
CR standards similar to our own and | |||||
work with them to share best practice | CR in Purchasing Guideline to be fully implemented in the US, the UK and Sweden. | ||||
and help them to improve, if appropriate. | |||||
|
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|
|
|
Safety, Health | No hurt, harm or alarm. | Aim to eliminate all injuries and accidents. | |||
& Environment (SHE) | |||||
Be among the industry leaders | Economise on the use of natural resources and work to minimise our impact on the environment. | ||||
in SHE performance. | |||||
As part of the overall CR integration objective, ensure that SHE considerations continue to be | |||||
integrated into all activities across the Group. | |||||
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|
|
Pharmaceuticals in the | Continue to refine our understanding | Continue to work both independently and in collaboration with other organisations | |||
Environment (PiE) | of how our products interact with the | to advance research in this area, particularly with regard to environmental toxicity. | |||
environment and pursue opportunities | |||||
to reduce or eliminate potential adverse | Pursue site-specific opportunities to minimise the amount of product lost to wastewater | ||||
impacts. | during manufacturing activities. | ||||
|
|
|
|
|
|
AstraZeneca
Corporate Responsibility Summary Report 2004 |
For
further information visit astrazeneca.com/responsibility |
05 | ||
KPI (where appropriate) | Progress in 2004 | ||
2 yearly global employee survey plus ad hoc pulse surveys. | Approval of formal integration of CR into personal performance objectives at all levels. | ||
Number of leaders involved in CR L&D training | Third global employee survey. | ||
(new KPI established for 2005 implementation). | |||
National CR Committee established in the UK. | |||
National CR action plans in place in the UK, the US and Sweden. | |||
Launch of online CR Toolkit for managers. | |||
Pilot CR L&D module for leaders. | |||
See pages 7, 8 | |||
|
|||
2 yearly global employee survey. | Continued employee communication/training in revised Code of Conduct. | ||
Number of audits conducted including CR. | 24 integrated SHE/CR audits conducted. | ||
Group policies review to improve understanding of compliance expectations. | |||
Pilot external Summary Report assurance project in place. | |||
See pages 7, 8, 20 | |||
|
|||
Development and launch of global guidelines on access considerations. | |||
See page 18 | |||
Candidate drug identified for development as a new TB treatment | Strategy agreed. | ||
(target: 2006/7). | |||
See page 19 | |||
|
|||
Number of local AstraZeneca codes in place. | 50 of our 53 national companies reviewed and updated their national AstraZeneca Codes | ||
of Marketing and Sales Practices for implementation by end January 2005. The remaining | |||
Number of confirmed breaches of codes or regulations | national company reviews are planned for the first quarter of 2005. All national codes are | ||
(new KPI established for 2005 implementation). | reviewed centrally to ensure compliance with global standards. | ||
See page 16 | |||
|
|||
Under discussion. | Human Resources global database project expanded. | ||
See page 15 | |||
|
|||
% of women at senior levels. | 20% of the 95 senior managers reporting to the AstraZeneca Senior Executive Team | ||
are women. | |||
KPI under discussion. | |||
Globally aligned approach and set of minimum diversity standards agreed. | |||
Human Resources global database project expanded. | |||
See pages 15, 16 | |||
|
|||
Number of animals used. | 2004 figures will be available in the second quarter of 2005 and published on our website. | ||
New key performance indicators introduced (see KPI column). | |||
% sites with approved improvement plans (target: 100%). | |||
Commitment to development of site improvement plans during 2005. | |||
% sites demonstrating positive progress (target: 100%). | |||
100% internal peer review inspections completed. | |||
% of scheduled inspections completed (target: 100%). | |||
86% of scheduled contract research organisation inspections completed. | |||
See page 17 | |||
|
|||
% of products approved since the Company was formed | Continued application of stringent trial review and approval processes and guidelines | ||
in 1999 for which trial data available (new KPI established | for patient safety/privacy. | ||
for 2005 implementation). | |||
Global clinical trials website on track for launch in the first quarter of 2005 and will be | |||
populated with data on a rolling basis. | |||
See page 18 | |||
|
|||
CR in category plans (target: 100% by end 2005). | Implementation of new management processes begun and will continue through 2005. | ||
CR in contracts and master agreements in the US, the UK and Sweden | See page 16 | ||
(target: 100% by end 2005). | |||
|
|||
Accidents with injury (target: 30% reduction by 2005*). | 13% reduction*. | ||
New cases of occupational illness (target: 30% reduction by 2005*). | 41% reduction*. | ||
Unplanned releases to the environment not contained within site | 27% reduction*. | ||
boundary (target: 50% reduction by 2005*). | |||
Total waste produced (target: 10% reduction by 2005*). | 22% reduction*. | ||
Global warming potential (target: 10% reduction by 2005*). | 11% reduction*. | ||
Ozone depletion potential (target: 30% reduction by 2005*). | 35% reduction*. | ||
See pages 12, 13, 15 | |||
|
|||
Under discussion. | In addition to ongoing work in the area, PiE now added to Priority Action Plan. | ||
Discussions of possible KPIs begun. | |||
See page 13 | |||
|
|||
* Against 2001/2002 reference point |
AstraZeneca
Corporate Responsibility Summary Report 2004 |
For
further information visit astrazeneca.com/responsibility |
07 | ||
Effective management of our corporate responsibility depends on the successful integration of our core values into everyday business thinking.
It starts at the top. The AstraZeneca Board approves the strategic direction for CR and we have a Non-Executive Director with responsibility for overseeing CR within the Company. A Global CR Committee leads development of the CR platform and our Senior Executive Team and senior managers are accountable for CR management within their areas, based on the global CR platform and taking account of national, functional and site issues and priorities. Individually, everyone at AstraZeneca has a responsibility to integrate CR considerations into their day-to-day decision-making, actions and behaviours.
The common platform that supports this effort worldwide includes our Group CR Policy, Group CR Standards and Global CR Priority Action Plan, which together provide the framework for understanding and managing the challenges and opportunities associated with our responsibility.
Our Global CR Priority Action Plan (shown on page 4) is reviewed annually to ensure that it continues to address the issues relating to our business that affect or concern society today. We use internal risk assessment, external benchmarking and stakeholder dialogue to inform our thinking on what needs to be included in the Plan. In 2004, we added clinical trials and pharmaceuticals in the environment, and removed Community Support (which continues to be an integral part of our CR commitment, but we completed the priority action of establishing a global database in 2003).
During 2004 we also reviewed and broadened the membership of the Global CR Committee, to ensure that all of our key functions and territories have a voice in the further development of our CR frameworks. In addition, it was agreed that from 2005 onwards, each CR Committee meeting would include an appropriate member of the Senior Executive Team.
Driving
implementation
One
of our top priorities continues to be the integration of CR into all our activities.
The embedding of CR within a company of more than 64,000 employees, across
research and development, manufacturing, commercial and administrative functions
around the world, is no simple task. It takes time and commitment. We are
making progress, but there is more work to do.
A particular focus over the past two years has been the establishment of national CR management systems in the US, the UK and Sweden where more than 60% of our employees are located. National CR Committees were formed in the US and Sweden in 2003 and in 2004 in the UK, CR was integrated into the accountabilities of an existing senior management team with the appropriate cross-functional representation. Objectives that are relevant to the local issues and priorities have now been identified and action plans defined in each of these important business hubs.
Elsewhere in the world, at a meeting of our Asia Pacific marketing company presidents, reputation and CR were high on the agenda to build understanding, discuss objectives and begin the development of a common approach in that region.
An important step in 2004 was the decision to formally integrate CR into a new performance management regime that is being introduced throughout AstraZeneca. In a phased introduction which began in 2004 and which is planned for implementation by 2006/7, relevant CR-related objectives will be included in personal targets and performance reviews. For our Senior Executive Team and senior managers, these will reflect their responsibility for ensuring that management systems and action plans are in place to manage CR in an integrated way across their areas. All employees will be required to have, as a minimum, a performance objective that reflects the need to ensure compliance with relevant AstraZeneca CR-related policies as part of their core role. This move strengthens our effort to ensure that CR is consistently embedded throughout the organisation and actively interpreted and managed at a local level.
Developing
skills
In
support of our core value of leadership by example, we are in the process
of integrating CR into our leadership development programmes and in 2004 we
piloted a CR workshop for managers that aims to raise awareness and build
corporate skills in CR management. The workshop includes interactive team-working
sessions, based around a series of real-life dilemmas that bring CR into the
context of everyday working life. This encourages the sharing of experiences
and helps to promote a common understanding of best practice in living our
values and safeguarding AstraZenecas reputation. The workshop will be
introduced throughout the organisation during 2005. We are also planning a
version that managers can use with their teams to help people better understand
what kinds of issues are associated with CR and how to address those which
are not always straightforward.
Continued
communication
We
encourage constructive dialogue with our stakeholders and others who have
an interest in our activities to make sure we are staying in tune with their
changing expectations and to give us the opportunity to make AstraZenecas
position understood. These dialogues take place at two levels. Corporately,
we focus on the investment community, our employees worldwide, international
governmental and non-governmental organisations, and opinion leaders such
as business and financial media. In our individual markets, we focus on local
employees, national governments, national media, our local communities and
our customers. These two levels of communication are not of course mutually
exclusive and we aim to ensure that feedback on major issues is shared across
AstraZeneca to help build our understanding of the issues relating to our
business that affect or concern these groups.
Shareholders
During
2004, problems encountered with our products Crestor,
Exanta
and
Iressa
affected
AstraZeneca's share price. When communicating disappointing news to shareholders,
and patients and employees, we set out to ensure that our core values of openness,
honesty, integrity and high ethical standards are followed in all announcements.
Such an approach is considered essential to the management of our reputation
at all times. We encourage feedback from shareholders on our reputation both
informally at face-to-face meetings, as well as the more formal assessments
provided by surveys such as the Dow Jones Sustainability Indexes. More information
about our 2004 business performance can be found in the separate 2004 Annual
Report and Form 20-F Information
or in the 2004 Annual Review.
Employees
As
well as line manager briefings and team meetings, we use a wide range of electronic
and printed media to communicate regularly with our employees around the world.
Feedback opportunities are integrated into our internal communication programmes
and we also use a two-yearly global employee survey to identify areas of satisfaction
and concern. (See page 16 for more information about the 2004 survey.)
Government
and non-governmental organisations
Almost
every aspect of our business is subject to regulation or ethical overview.
Our exchanges with governments are aimed at creating a constructive framework
for the development and implementation of policies and regulations that impact
on our industry in a way that delivers good regulation and sound
08 | AstraZeneca
Corporate Responsibility Summary Report 2004 |
For
further information visit astrazeneca.com/responsibility |
operational practices. As buyers of healthcare, national governments are often also our customers as well as being our regulators, and access to medicines that offer benefits to patients and healthcare providers is an important part of our dialogues.
As well as working with the International Red Cross and Red Crescent, we also have discussions with other non-governmental organisations, for example the World Wildlife Fund, and with international bodies such as the World Health Organization.
Customers
Our
day-to-day business activities include regular contact in our local markets
with physicians and other healthcare professionals, government officials and
other groups that buy healthcare. These dialogues are business driven, but
present the opportunity to raise with us any concerns about our approach to
business.
Local
communities
Our
site-based community liaison staff ensure that our local communities are kept
informed of our business activities and plans, and given the opportunity to
raise any concerns.
Both formal and informal stakeholder engagement helped to inform the development of national CR Priority Action Plans in the US, the UK and Sweden during 2003 and 2004. The key issues identified are consistent with those currently listed in the Global Plan. In the US, a particular focus of attention is marketing and sales practices and access to medicines in their country. In the UK, research and development ethics, including animal welfare and clinical trials, are high on the agenda and in Sweden, marketing and sales practices and open communication with employees about CR continue to be important issues.
Evaluating
performance
Performance
measures are key to effective CR management. They help us to understand our
progress and identify areas for improvement. The key performance indicators
(KPIs) that we have in place are listed in the Priority Action Plan on page
4. These include new KPIs for animal use and welfare and for marketing and
sales practices, which will be introduced in 2005 to promote a consistent
approach to monitoring performance globally. We are continually exploring
more ways in which we can benchmark our performance in the area of social
responsibility, where the development of meaningful KPIs continues to be a
challenge for AstraZeneca and industry in general.
We also participate in leading external surveys, such as the Dow Jones Sustainability Indexes,
which are important means of evaluating our performance and understanding better the demands of sustainable development. AstraZeneca is listed in the 2005 Dow Jones Sustainability World Index, used by asset managers globally to guide their socially responsible investment. However, whilst we improved our score over last year, we lost our place in the European Index (Dow Jones STOXX) where competition for places is increasingly fierce.
Corporate
governance and auditing compliance
An
essential part of our corporate responsibility is to continue to operate to
high standards of corporate governance. Auditing compliance is a fundamental
part of this. Our Group Internal Audit function (GIA) works to review, among
other things, compliance with laws, regulations and Group policies. During
2004, 42 of our GIA audits focused on marketing and sales practice. Such audits
are an effective tool in helping to drive consistent standards of practice
worldwide.
GIA also participated in a review and re-structuring of AstraZenecas full range of policies, standards and guidelines to ensure that the hierarchy and content are clear and appropriate for ensuring peoples understanding of what is expected of them at every level. Following formal Board approval in early 2005, the new Group policies have been made widely available to employees through a dedicated intranet site.
GIA is also in the process of reviewing our CR framework to ensure that our governance controls, risk assessment processes and management are robust and appropriate. To date, this review has helped us to identify areas for improvement, including the need to strengthen the functional representation on the Global CR Committee, and to confirm that our continued focus on the int