ASTRAZENECA 6-K

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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





Item 1




  Annual Review 2004
astrazeneca.com
01  

The year in brief

AstraZeneca is one of the world’s 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.

> Group sales up 9% at constant exchange rates to $21.4 billion – strong sales performance from key growth products (up 30% to $11.2 billion)
   
> Operating profit up 15% at constant exchange rates to $4.8 billion – EPS pre-exceptional items up 18%
   
> Dividend increased by 18% to $0.94 for the full year
   
> Nexium sales reached $3.9 billion, up 15%
   
> Seroquel sales increased by 33% to just over $2 billion
   
> Symbicort sales totalled $797 million, up 32%
   
> Expanded use of Arimidex in the treatment of early stage breast cancer underpinned 48% increase in sales to $811 million
   
> Crestor sales totalled $908 million despite challenging environment. Sales impacted by allegations regarding the product’s safety. Clinical trials experience and post-marketing surveillance continue to support our belief that the safety profile is in line with other marketed statins
   
> FDA decision not to approve Exanta. In the EU, where Exanta already marketed for acute indications, more data have been requested before approval of use in chronic indication can be considered
   
> Results of ISEL clinical study for Iressa showed no statistically significant increase in survival of overall population. Data suggest survival benefits in patient populations of East Asian origin and non-smokers
   
> R&D investment totalled $3.8 billion. 40% more projects in clinical development (phases 1 and 2) than in 2003. 31 projects in pre-clinical testing (26 in 2003)
   
> Important strategic alliance with Cambridge Antibody Technology to discover and develop human antibody therapeutics in inflammatory disorders
   
> Global clinical trials website on track for launch in the first quarter of 2005. This will provide a detailed, publicly available, scientific, non-promotional summary of clinical trials conducted for products approved since AstraZeneca was formed in 1999
   
> Appointment of Executive Director for Development as part of accelerated significant programme of change to optimise the contribution of our development and regulatory functions
   
Contents



Chairman’s statement 02


Strategy 03


Chief Executive’s review 04


Financial highlights 05


AstraZeneca in brief 05


Discovery 07


Development 08


Development pipeline 09


Sales and marketing 10


Key products 10


Supply 12


Product strategy & licensing 13


People 14


Therapy area review 16




Board of Directors 18


Summary Directors’ report 20


Remuneration policy 22


Summary financial review 24


Summary financial statements 27


Auditor’s statement 27


Group profit and loss account 28


Group balance sheet 30


Statement of Group cash flow 31


Dividends 32


Earnings per share 32


Emoluments of Directors 33


Group financial record 34


Shareholder information 35



 


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02   Annual Review 2004
astrazeneca.com
   

 

Chairman’s statement

‘Leading the Board during AstraZeneca’s 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 world’s 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 year’s 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.

AstraZeneca’s share price performance, and that of other major pharmaceutical companies, were disappointing in 2004 with the AstraZeneca share price in particular affected by the FDA’s 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



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  Annual Review 2004
astrazeneca.com
   

 

‘I look forward to playing my part in ensuring AstraZeneca’s 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 Company’s 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 Company’s future.

Following the Company’s 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.



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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, AstraZeneca’s 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 innovator’s 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

 

 


 


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    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.’
Jonathan Symonds,
Chief Financial Officer

     
Sales $m   R&D investment $m

 
     
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  





AstraZeneca in brief

> 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



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  Annual Review 2004
astrazeneca.com
  07
       
 

Discovery

‘We continue to increase our
efficiency in identifying high
quality compounds with the
potential to become new
medicines.’

Jan Lundberg,
Executive Vice-President,
Discovery Research

   
       
 

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
Our Discovery scientists use leading edge science and technologies to identify new compounds with high potential as new medicines, working across boundaries to exchange ideas, to share best practice and to make the most of the efficiencies that global working offers.

 

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
In today’s world of rapid scientific and technological advance, no company can rely exclusively on its own discovery and development. We work with leading academic centres to broaden the base for disease research and during 2004, we entered into more than 250 new collaborations, including a major strategic alliance with Cambridge Antibody Technology to discover and develop human antibody therapeutics in inflammatory disorders. This complements a similar alliance in cancer research with Abgenix Inc., announced in 2003.

       
       
       
       

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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  















 
Exanta   prevention of VTE   Launched   Filed*    















 
Exanta
SC formulation
  prevention of VTE   Launched   >2007    















 
Galida   diabetes /metabolic syndrome   2007   2007    















 
AZD6140   arterial thrombosis   >2007   >2007        















 
AZD7009   AF – conversion   >2007   >2007        















 
AZD7009   AF – maintenance   >2007   >2007        















 
AZD9684   thrombosis   >2007   >2007        















 
AZD0837   thrombosis   >2007   >2007        















 
AZD7806   dyslipidaemia   >2007   >2007            















 
AZD4619   dyslipidaemia   >2007   >2007            















 
AZD6610   dyslipidaemia/diabetes   >2007   >2007            















 
AZD8294   dyslipidaemia   >2007   >2007                















 
AZD8677   dyslipidaemia/diabetes   >2007   >2007                















 
AZD8450   dyslipidaemia   >2007   >2007                















 
AZD6370   diabetes   >2007   >2007                















 
Gastrointestinal                          















 
AZD0865   acid-related GI disease   2007   2007        















 
AZD7371   functional GI disease   >2007   >2007        















 
AZD3355   GERD   >2007   >2007            















 
AZD9343   GERD   >2007   >2007            















 
AZD5745   acid-related GI disease   >2007   >2007                















 
AZD8081   functional GI disease   >2007   >2007                















 
Neuroscience                          















 
Cerovive   stroke   2H 2006   2H 2006    















 
AZD7371   overactive bladder   >2007   >2007        















 
AZD8129
(AR-A2)
  anxiety/depression   >2007   >2007        















 
AZD4282   neuropathic pain   >2007   >2007            















 
AZD3102   Alzheimer’s disease   >2007   >2007                















 
AZD1080   Alzheimer’s disease   >2007   >2007                















 
AZD9272   neuropathic pain   >2007   >2007                















 
AZD2327   anxiety   >2007   >2007                















 
AZD5904   multiple sclerosis   >2007   >2007                















 
AZD6538   neuropathic pain   >2007   >2007                















 
Oncology                          















 
Iressa    NSCLC   Withdrawn   Launched    















 
ZD6474   solid tumours   >2007   >2007        















 
ZD4054   solid tumours   >2007   >2007        















 
AZD2171   solid tumours   >2007   >2007            















 
AZD3409   solid tumours   >2007   >2007            















 
AZD0530   solid tumours and haematological malignancies   >2007   >2007            















 
AZD5438   solid tumours   >2007   >2007            















 
AZD6244   solid tumours   >2007   >2007            















 
ZD6126   solid tumours   >2007   >2007                















 
AZD4440   solid tumours   >2007   >2007                















 
AZD9935   solid tumours   >2007   >2007                















 
AZD0424   solid tumours   >2007   >2007                















 
AZD1152   solid tumours and haematological malignancies   >2007   >2007                















 
AZD4769   solid tumours   >2007   >2007                















 
AZD3841   solid tumours   >2007   >2007                















 
AZD8931   solid tumours   >2007   >2007                















 
Respiratory and Inflammation                          















 
AZD9056   rheumatoid arthritis   >2007   >2007        















 
AZD9056   osteoarthritis   >2007   >2007        















 
AZD8309   rheumatoid arthritis   >2007   >2007            















 
AZD8955   osteoarthritis   >2007   >2007            















 
AZD8309   COPD   >2007   >2007            















 
AZD3778   asthma/rhinitis   >2007   >2007            















 
AZD9056   COPD   >2007   >2007            















 
AZD3342   COPD   >2007   >2007            















 
AZD6067   COPD   >2007   >2007                















 
AZD2098   asthma   >2007   >2007                















 
AZD1981   asthma   >2007   >2007                















 
AZD0902   rheumatoid arthritis   >2007   >2007                















 
AZD6703   rheumatoid arthritis   >2007   >2007                















 
AZD6357   osteoarthritis   >2007   >2007                















 
AZD7928   COPD   >2007   >2007                















 
AZD2914   COPD   >2007   >2007                















 
AZD2392   asthma/rhinitis   >2007   >2007                















 
AZD1744   asthma/rhinitis   >2007   >2007                















 
AZD5672   rheumatoid arthritis   >2007   >2007                















 
                               
* 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 world’s 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

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
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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



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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.



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  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 world’s 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.

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  Annual Review 2004
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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



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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

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    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.

 

 


 


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20   Annual Review 2004    
astrazeneca.com
         
         
         

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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s strategy and policies and monitors progress towards meeting its objectives. It also assesses whether its obligations to the Company’s shareholders and others are understood and met. This includes regular reviews of the Company’s 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 Company’s management; the quality, quantity and coverage of information which flows to the Board from management; the balance of the Board’s time spent considering strategic issues compared to other matters; the content of Board meetings and presentations to Board meetings; the composition of the Board;


 


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    Annual Review 2004   21
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the practical arrangements for the work of the Board; and the work and operation of the Board’s 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 Chairman’s 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 Company’s 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 Board’s authority) back to the Board. The roles of the Board, the Board’s committees, the Chairman, the Chief Executive and the Senior Executive Team are documented, as are the Company’s 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 Company’s 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 Company’s system of internal controls, which aims to safeguard shareholders’ investments and the Company’s 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 Company’s 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 Company’s full range of policies, standards and guidelines to ensure the hierarchy and content are clear and appropriate for ensuring people’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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.


 


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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 Company’s 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 Company’s 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 Company’s 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.
   

 


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    Annual Review 2004   23
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> Pension arrangements:
     
  >  UK Executive Directors’ pension arrangements – the Chief Executive is a member of the Company’s main UK defined benefit pension plan. The normal pension age under this plan is 62. However, a member’s 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 Company’s 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 survivor’s 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 Company’s flexible benefits arrangements, which extend to the vast majority of the Company’s 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 Company’s 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 individual’s 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.
   

 

 


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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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Mogren’s 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 Stavling’s 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
 

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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.
             

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  Annual Review 2004 25
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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.

In Gastrointestinal, Nexium sales reached $3,883 million for the full year, up 15%. Sales in the US reached $2,716 million on strong growth in dispensed tablet volume (up 20%).

Sales of Cardiovascular products increased by 17% for the full year, chiefly on sales of Crestor. Crestor sales totalled $908 million including $543 million in US sales. In the US, market share has been volatile, as a result of episodic media coverage of challenges to the Crestor safety profile, despite mounting evidence amassed from clinical trials experience and thorough analysis of post-marketing surveillance reports supporting our view that the safety profile of Crestor is in line with that of other marketed statins. We are determined to restore market share momentum, as we have done previously. In addition, discussions with the FDA are ongoing to determine whether there is a realistic prospect of bringing Exanta to the US market following the FDA’s decision in October 2004 not to approve the product.

Oncology sales enjoyed strong growth with a notable performance from Arimidex (up 48%). The disappointing results from a preliminary analysis of the ISEL study into Iressa patients’ survival had little impact on sales outside the US in 2004. In 2005 in the US, we anticipate a rapid reduction in new prescriptions and sales will be recognised on confirmed patient usage while commercial prospects have certainly been reduced in Western markets, the positive results in patients of East Asian origin offer the prospect of a continuing successful business in these important markets. Neuroscience also saw significant growth driven by Seroquel sales which increased by 33% to exceed $2 billion for the first time. Symbicort sales growth of 32% to $797 million was the principal contributor to growth of 8% in Respiratory and Inflammation sales.

In the US, the Inventory Management Agreements (IMAs) entered into during 2004 have successfully reduced wholesaler stock volatility and by the end of the year wholesaler stocks were close to target levels. Adjusting both 2004 and 2003 for wholesaler stock movements, it is estimated that total sales

  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
   
           

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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
We continue to be a highly cash generative business. Although future operating cash flows may be affected by a number of factors as outlined above, we believe our cash resources will be sufficient for our present requirements and include sufficient cash for our existing capital programme, share re-purchase, and any costs of launching new products, as well as the potential buy-out of Merck’s interests in 2008.

Cash generated from operating activities before exceptional cash outflows was $6,069 million compared with $4,617 million in 2003. The increase in cash is due to higher profits and minimal working capital outflows ($9 million in 2004 compared to $1,101 million in 2003). In 2003 all three components of working capital led to substantial cash outflows whereas in 2004 there were inflows on stocks ($129 million) and creditors ($71 million) offset by an outflow on debtors ($209 million). Cash flow from working capital in the fourth quarter was notably strong due mainly to stocks which, when compared with September 2004, fell for the reasons above and debtors, which also fell because sales in December were lower than in September. Cash expenditure on exceptional items was $8 million compared with $391 million in 2003 (which included the payment of $355 million in settlement of the Zoladex investigation). Tax paid for the year was $1,246 million, compared to $886 million in 2003. Tax cash paid in 2004 has increased compared to 2003 due to the greater utilisation of foreign exchange losses in 2003, reduced trading losses brought forward to 2004 and a
 
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
During 2004 we returned $3,590 million in cash to shareholders through a mix of share buybacks and dividends.

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
The setbacks with Exanta and Iressa are disappointing but the business remains robust. We expect continued sales growth, including strong prospects for Nexium, Symbicort, Seroquel, Arimidex and, with restoration of market share progress in the US, for Crestor. This sales growth coupled with disciplined cost management and productivity improvements should lead to good earnings growth in the next three years.

 
continued
   

International accounting
Under European legislation, we are required to adopt International Financial Reporting Standards (IFRSs) and International Accounting Standards (IASs) endorsed by the European Union (EU) in the preparation of our Financial Statements from 2005 onwards.

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.


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  Annual Review 2004 27
  astrazeneca.com
         
Summary financial        
statements   Auditor’s statement    
         

These summary Financial Statements are a summary of information in the Group’s annual Financial Statements, Directors’ Report and Directors’ Remuneration Report and do not contain sufficient information to allow for as full an understanding of the results and state of affairs of the Group as would be provided by the full annual Financial Statements, Directors’ Report and Directors’ Remuneration Report. Shareholders requiring more detailed information have the right to obtain, free of charge, a copy of the Group’s last full Annual Report and Form 20-F Information, available from the Secretary at the registered office of the Company.

The summary 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, Director



Jonathan Symonds, Director

 

Auditor’s statement to the members of AstraZeneca PLC, pursuant to section 251 of the Companies Act 1985
We have examined the summary Financial Statements set out on pages 28 to 33. This statement is made solely to the Company’s members, as a body, in accordance with section 251 of the Companies Act 1985. Our work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in such a statement and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our work, for this statement, or for the opinions we have formed.

Respective responsibilities of Directors and Auditor
The Directors are responsible for preparing the Annual Review 2004 in accordance with applicable United Kingdom law. Our responsibility is to report to you our opinion on the consistency of the summary Financial Statements within the Annual Review 2004 with the full annual Financial Statements, the Directors’ Report and the Directors’ Remuneration Report, and its compliance with the relevant requirements of section 251 of the Companies Act 1985 and the regulations made thereunder. We also read the other information contained in the summary Annual Review and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the summary Financial Statements.

 

Basis of opinion
We conducted our work in accordance with Bulletin 1999/6 ‘The auditor’s statement on the summary financial statement’ issued by the Auditing Practices Board for use in the UK. Our report on the Group’s full annual Financial Statements describes the basis of our audit opinion on those Financial Statements.

Opinion
In our opinion the summary Financial
Statements are consistent with the full annual Financial Statements, the Directors’ Report and the Directors’ Remuneration Report of AstraZeneca PLC for the year ended 31 December 2004 and comply with the applicable requirements of section 251 of the Companies Act 1985, and the regulations made thereunder.

27 January 2005

KPMG Audit Plc
Chartered Accountants
Registered Auditor
8 Salisbury Square
London EC4Y 8BB


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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

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  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  




 

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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    
         
         
         

Back to Contents

  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  












 
                         
                         
             
Earnings per share            
  2004   2003   2002  






 
Net profit for the financial year before exceptional items ($m) 3,527   3,036   3,186  






 
Exceptional items after tax ($m) 286     (350 )






 
Net profit for the financial year ($m) 3,813   3,036   2,836  






 
Earnings per Ordinary Share before exceptional items $2.11   $1.78   $1.84  






 
Earnings/(loss) per Ordinary Share on exceptional items $0.17     ($0.20 )






 
Earnings per Ordinary Share $2.28   $1.78   $1.64  






 
Diluted earnings per Ordinary Share before exceptional items $2.11   $1.78   $1.84  






 
Diluted earnings/(loss) per Ordinary Share on exceptional items $0.17     ($0.20 )






 
Diluted earnings per Ordinary Share $2.28   $1.78   $1.64  






 
Weighted average number of Ordinary Shares in issue for basic earnings (millions) 1,673   1,709   1,733  






 
Dilutive impact of share options outstanding (millions) 2   3   2  






 
Diluted average number of Ordinary Shares in issue (millions) 1,675   1,712   1,735  






 
There are no options, warrants or rights outstanding in respect of unissued shares except for employee share option schemes. The earnings figures used in the calculations above are unchanged for diluted earnings per Ordinary Share. Earnings per Ordinary Share before exceptional items have been calculated to eliminate the impact of exceptional items on the results of the business.
             
             
             

  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.
 
 
 


Back to Contents

   
   
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










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
)










                     
                     

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  Annual Review 2004
astrazeneca.com
35
     
     
Shareholder information    
     
     
AstraZeneca 2000   2001   2002   2003   2004  










 
Ordinary Shares in issuemillions                    
At year end 1,766   1,745   1,719   1,693   1,645  










 
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  










 
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  










 
Earnings per $0.25 Ordinary Share (diluted) $1.30   $1.65   $1.64   $1.78   $2.28  










 
Dividends $0.70 * $0.70   $0.70   $0.795   $0.94  










 
*     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  







 
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
AstraZeneca’s shareholders with internet access may visit shareview.co.uk and register their details to create a portfolio. Shareview is a free and secure on-line service from Lloyds TSB Registrars that gives access to shareholdings including balance movements, indicative share prices and information about recent dividends.

ShareGift
AstraZeneca welcomes and values all its shareholders, no matter how many or how few shares they own. However, shareholders who have only a small number of shares whose value makes it uneconomic to sell them, either now or at some stage in the future, may wish to consider donating them to charity through ShareGift, an independent charity share donation scheme. One feature of the scheme is that there is no gain or loss for capital gains tax purposes on gifts of shares through ShareGift and it may now also be possible to obtain income tax relief on the donation. Further information about ShareGift can be found on its website, sharegift.org, or by contacting ShareGift on 020 7337 0501 or at 46 Grosvenor Street, London W1K 3HN. More information about the tax position on gifts of shares to ShareGift can be obtained from the Inland Revenue whose website address is inlandrevenue.gov.uk. The share transfer form needed to make a donation may be obtained from the AstraZeneca Registrar, Lloyds TSB Registrars whose address can be found on the back cover of this document. ShareGift is administered by The Orr Mackintosh Foundation, registered charity number 1052686.

The Unclaimed Assets Register
AstraZeneca supplies unclaimed dividend data to the Unclaimed Assets Register (UAR) which provides investors who have lost track of shareholdings with an opportunity to search the UAR’s database of unclaimed financial assets on payment of a small, fixed fee. The UAR donates part of the search fee to charity. The UAR can be contacted at Leconfield House, Curzon Street, London W1J 5JA and at uar.co.uk.

 

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
Trade marks of the AstraZeneca group of companies appear throughout this document in italics. AstraZeneca, the AstraZeneca logotype and the AstraZeneca symbol are all trade marks of the AstraZeneca group of companies.

Use of terms
In this Annual Review 2004, unless the context otherwise requires, ‘AstraZeneca’, ‘the Group’, ‘the Company’, ‘we’, ‘us’ and ‘our’ refer to AstraZeneca PLC and its consolidated entities.

Cautionary statement regarding forward-looking statements
In order to utilise the ‘safe harbour’ provisions of the US Private Securities Litigation Reform Act 1995, we are providing the following cautionary statement: This Annual Review 2004 contains certain forward-looking statements about AstraZeneca. Although we believe our expectations are based on reasonable assumptions, any forward-looking statements may be influenced by factors that could cause actual outcomes and results to be materially different from those predicted. We identify the forward-looking statements by using the words ‘anticipates’, ‘believes’, ‘expects’, ‘intends’ and similar expressions in such statements. These forward-looking statements are subject to numerous risks and uncertainties. Important factors that could cause actual results to differ materially from those contained in forward-looking statements, certain of which are beyond our control, include, among other things: the loss or expiration of patents, marketing exclusivity or trade marks; exchange rate fluctuations; the risk that R&D will not yield new products that achieve commercial success; the impact of competition, price controls and price reductions; taxation risks; the risk of substantial product liability claims; the impact of any failure by third parties to supply materials or services; the risk of delay to new product launches; the difficulties of obtaining and maintaining governmental approvals for products; and the risk of environmental liabilities.

 

Statements of competitive position
Except as otherwise stated, market information in this Annual Review 2004 regarding the position of our business or products relative to its or their competition is based upon published statistical data for the 12 months ended 30 September 2004, obtained from IMS Health, a leading supplier of statistical data to the pharmaceutical industry. Except as otherwise stated, these market share and industry data from IMS Health have been derived by comparing our sales revenue to competitors’ and total market sales revenues for that period.

Statements of growth rates
Except as otherwise stated, growth rates in this Annual Review 2004 are given at constant exchange rates (CER).

AstraZeneca websites
Information on our websites, including astrazeneca.com and rosuvastatininformation.com does not form part of this document.

 

 

 

©AstraZeneca PLC 2005

         
         
         

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          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  
             
             



Item 2

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AstraZeneca Corporate Responsibility
Summary Report 2004

For further information visit
astrazeneca.com/responsibility

01

 

 

AstraZeneca is one of the world’s 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 people’s 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 AstraZeneca’s 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 Executive’s 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  


 


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02   AstraZeneca Corporate Responsibility
Summary Report 2004
  For further information visit
astrazeneca.com/responsibility
         
         
Chief Executive’s message        
         
         
         

Sir Tom McKillop

‘We are committed to ensuring
that our actions reflect our
core values. Our reputation
and our continued success
depend on it.’

 

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
The path to a new medicine is long, complex and costly. It may take over ten years of development and only one in ten projects entering development will make it to market. Typically, about $1 billion is invested in research and development before the first dollar of sales is realised. The pharmaceutical industry is responsible for the vast majority of new medicines – no one else has the combination of skills, experience and resources to do all that is needed to deliver real pharmaceutical advances.

Each of AstraZeneca’s 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
In practice, “walking the talk” of our core values means ensuring that CR is consistently embedded throughout the organisation and actively interpreted and managed at a local level. For a company of AstraZeneca’s size, this is a significant task. We are making progress but there is still work to do. An important step forward has been the creation of National CR Committees in the US, the UK and Sweden, where more than 60% of our employees are located. National CR action plans, including local priorities and objectives, are now in place in these three cornerstones of our global presence.

Another significant move was our decision in 2004 to formally integrate CR into the personal targets and performance reviews of all employees, including AstraZeneca’s Senior Executive Team and senior management. This will further support the integration of CR considerations into business strategy development and day-to-day decision-making, actions and behaviours.

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 Executive’s

 


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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 people’s 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.

   



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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.






  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.






  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.    






  Marketing   High ethical standards of marketing   Further develop mechanisms for monitoring and reporting compliance.
  and sales practices   and sales in all countries of operation.    






  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.    






  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.






  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.






  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.    






  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.    






  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.






  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.
           







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  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

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  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 AstraZeneca’s 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 AstraZeneca’s 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



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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 AstraZeneca’s full range of policies, standards and guidelines to ensure that the hierarchy and content are clear and appropriate for ensuring people’s 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