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0000950103-04-000383.txt : 20040312
0000950103-04-000383.hdr.sgml : 20040312
20040312165937
ACCESSION NUMBER: 0000950103-04-000383
CONFORMED SUBMISSION TYPE: 20-F
PUBLIC DOCUMENT COUNT: 19
CONFORMED PERIOD OF REPORT: 20031231
FILED AS OF DATE: 20040312
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ASTRAZENECA PLC
CENTRAL INDEX KEY: 0000901832
STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834]
IRS NUMBER: 000000000
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 20-F
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-11960
FILM NUMBER: 04666776
BUSINESS ADDRESS:
STREET 1: ZENECA GROUP PLC
STREET 2: 15 STANHOPE GATE - LEGAL DEPARTMENT
CITY: LONDON W1Y 6LN ENGLA
STATE: X0
ZIP: 00000
MAIL ADDRESS:
STREET 1: ZENECA GROUP PLC
STREET 2: 15 STANHOPE GATE - LEGAL DEPARTMENT
CITY: LONDON W1Y 6LN ENGLA
STATE: X0
ZIP: 00000
FORMER COMPANY:
FORMER CONFORMED NAME: ZENECA GROUP PLC
DATE OF NAME CHANGE: 19930422
20-F
1
mar0904_20f.htm
Form20-F
As filed with the Securities and
Exchange Commission on March 12,
2004
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One) |
o |
REGISTRATION STATEMENT
PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
|
OR |
|
|
x |
ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
|
|
For the fiscal year ended: December
31, 2003 |
|
|
|
OR |
|
|
o |
TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 001-11960
ASTRAZENECA PLC
(Exact Name of Registrant as Specified
in Its Charter)
England
(Jurisdiction of Incorporation or Organization)
15 Stanhope Gate, London W1K 1LN
(Address of Principal Executive Offices)
Securities registered or to be registered
pursuant to Section 12(b) of the Act:
Title of each class |
Name of each exchange on which
registered |
|
|
American Depositary Shares, each
representing one Ordinary Share of 25¢ each |
The New York Stock Exchange |
Ordinary Shares of 25¢ each |
The New York Stock Exchange* |
|
* |
Not
for trading, but only in connection with the registration of American Depositary
Shares representing such Ordinary Shares pursuant to the requirements of
the Securities and Exchange Commission. |
|
Securities registered or to be registered
pursuant to Section 12(g) of the Act: |
None |
|
(Title of Class) |
|
Securities for which there is a reporting
obligation pursuant to Section 15(d) of the Act: |
None |
|
(Title of Class) |
|
The number of issued shares
of each class of stock of AstraZeneca PLC as of March 12,
2004 was: |
|
Ordinary Shares of 25¢ each: 1,683,517,030
Redeemable
Preference Shares of £1 each: 50,000 |
|
|
Indicate
by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. |
|
|
|
|
|
Yes |
x |
No |
o |
Not Applicable |
|
|
|
|
|
Indicate by check mark which financial statement
item the registrant has elected to follow. |
|
Pursuant to Rule 12b-23(a)
of the Securities Exchange Act of 1934, as amended, the information for the
2003 Form 20-F of AstraZeneca PLC (the Company) set out below is
being incorporated by reference from
-
the Companys
Annual Report and Form 20-F Information 2003 filed as an exhibit
to its Report on Form 6-K dated February 26, 2004; and
-
the Companys Board Announcement filed as an exhibit to its Report
on Form 6-K dated March 11, 2004.
References below to major
headings include all information under such major headings, including subheadings,
unless such reference is part of a reference to a subheading, in which case such
reference includes only the information contained under such subheading. Graphs
and tabular data in the margins are not included unless specifically identified
below.
The information set forth
under headings Use of Terms, Cautionary statement regarding
forward looking statements, Trade Marks, Statements of
competitive position, Statements of growth rates, and AstraZeneca
website on the inside front cover of the Companys Annual Report
and Form 20-F Information 2003 filed as an exhibit to its Report on Form
6-K dated February 26, 2004 is incorporated herein by reference.
PART 1
ITEM 1 - IDENTITY OF DIRECTORS, SENIOR MANAGEMENT
AND ADVISERS
Not applicable.
ITEM 2 - OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3 - KEY INFORMATION
A. Selected Financial
Data
The information set forth
under the headings Financial Highlights on page 5, Group Financial
Record UK GAAP on pages 124 to 125 and Shareholder Information on
page 127 of the Companys Annual Report and Form 20-F Information
2003 filed as an exhibit to its Report on Form 6-K dated February 26, 2004
is incorporated herein by reference.
B. Capitalization
and Indebtedness
The following table sets
forth, on a UK GAAP basis, our capitalization and indebtedness as at December
31, 2003.
|
December 31,
2003 |
|
|
|
$ million |
Creditors due within one year |
|
|
Short-term borrowings |
152 |
|
Current installments of loans |
|
|
Other creditors |
7,543 |
|
|
|
|
|
7,695 |
|
|
|
|
Creditors due after more than one year |
|
|
Loans |
303 |
|
Other creditors |
52 |
|
|
|
|
|
355 |
|
Shareholders equity |
|
|
Called-up share capital |
423 |
|
Share premium account |
449 |
|
Capital redemption reserve |
23 |
|
Merger reserve |
433 |
|
Other reserves |
1,401 |
|
Profit and loss account |
10,449 |
|
|
|
|
Minority equity interests |
79 |
|
|
|
|
Shareholders funds and minority interests |
13,257 |
|
|
|
|
Total capitalization |
21,307 |
|
|
|
|
Notes
In the period January 1,
2004 to February 29, 2004, the Company issued 433,063 new Ordinary Shares of
$0.25 each under its employee share plans and cancelled 7,650,000 Ordinary Shares
of $0.25 each following their re-purchase by the Company under its share re-purchase
programme. On February 29, 2004, the total number of Ordinary Shares in issue
was 1,685,478,009.
All indebtedness is unsecured. Guarantees which
have been given in the ordinary course of business, for which no security has
been given, are not expected to result in any material loss.
C. Reason for the
Offer and Use of Proceeds
Not applicable.
D. Risk Factors
The information set forth
under the heading Risk Factors on pages 135 to 137 of the Companys Annual
Report and Form 20-F Information 2003 filed as an exhibit to its Report
on Form 6-K dated February 26, 2004 is incorporated herein by reference.
ITEM 4 - INFORMATION ON THE COMPANY
A. History and
Development of the Company
The information set forth
under the headings Additional Information History
and development of the Company on page 140, Investments, divestments
and capital expenditure on page 34 and on page 41 and Financial Statements Notes
to the Financial Statements Note 9 Tangible fixed assets on
page 77, Financial Statements Notes to the Financial Statements Note
24 Acquisitions of subsidiaries and purchases of minority interests on
page 87 and Financial Statements Notes to the Financial Statements Note
25 Disposal of business operations on page 88 of the Companys Annual
Report and Form 20-F Information 2003 filed as an exhibit to its Report
on Form 6-K dated February 26, 2004 is incorporated herein by reference.
B. Business Overview
The information (including
graphs and tabular data) set forth under the headings Strategy on
page 8, Operational Review on pages 9 to 29, Financial Statements Notes
to the Financial Statements Note 8 Segment
information on
pages 75 to 76 and Statements of Competitive Position on the inside
front cover of the Companys Annual Report and Form 20-F Information
2003 filed as an exhibit to its Report on Form 6-K dated February 26, 2004
is incorporated herein by reference.
C. Organizational
Structure
The information set forth
under the headings Directors Report on page 43 and Principal
Subsidiaries on page 112 of the Companys Annual Report and
Form 20-F Information 2003 filed as an exhibit to its Report on Form 6-K
dated February 26, 2004 is incorporated herein by reference.
D. Property, Plants
and Equipment
The information set forth
under the headings Operational Review Main
Facilities on page 28 and Financial Statements Notes
to the Financial Statements Note 31 Assets pledged, commitments
and contingent liabilities Environmental
costs and liabilities on page 101 of the Companys Annual Report
and Form 20-F Information 2003 filed as an exhibit to its Report on Form
6-K dated February 26, 2004 is incorporated herein by reference.
ITEM 5 - OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The information (including
graphs and tabular data) set forth under the headings Financial Review
on pages 31 to 42, Operational Review
Research and Development on pages 9 to 29, and Financial Statements
Notes to the Financial Statements Note 18 Financial Instruments
on pages 81 to 84 of the Companys Annual Report and Form 20-F Information
2003 filed as an exhibit to its Report on Form 6-K dated February 26,
2004 is incorporated herein by reference.
ITEM 6 - DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and
Senior Management
The
information set forth under the headings Board of Directors on pages
6 and 7 and Directors Remuneration
Report External appointments and retention
of fees on page 54 of the Companys Annual Report and Form
20-F Information 2003 filed as an exhibit to its Report on Form 6-K dated
February 26, 2004 is incorporated herein by reference.
The Companys
Press Release filed as an exhibit to its Report on Form 6-K dated
March 11, 2004 is incorporated herein by reference.
B. Compensation
The information set forth
under the headings Directors Remuneration Report on pages 50
to 59, Financial Statements Notes
to the Financial Statements Note
29 Post-retirement benefits on pages 90 to 94 and of the Companys Annual
Report and Form 20-F Information 2003 filed as an exhibit to its Report
on Form 6-K dated February 26, 2004 is incorporated herein by reference.
C. Board Practices
The information set forth
under the headings Board of Directors on pages 6 and 7, Directors Report on
pages 43 to 48, Audit Committees Report on pages 48 to 50 and Directors Remuneration
Report on pages 50 to 59 of the Companys Annual Report and
Form 20-F Information 2003 filed as an exhibit to its Report on Form 6-K
dated February 26, 2004 is incorporated herein by reference.
D. Employees
The information set forth
under the headings Directors Report Employees on
page 47 and Financial Statements Notes
to the Financial Statements Note 30 Employee costs and
share option plans for employees
on pages 95 to 99 of the Companys Annual
Report and Form 20-F Information 2003 filed as an exhibit to its Report
on Form 6-K dated February 26, 2004 is incorporated herein by reference.
E. Share Ownership
The information set forth under the headings Financial
Statements Notes to the Financial Statements Note 30 Employee
costs and share option plans for employees on pages 95 to 99, Directors
Remuneration Report on pages 50 to 59 and Shareholder Information Title
of class and Options to purchase
securities from registrant or subsidiaries on pages 129 and 130 of the
Companys Annual Report and Form 20-F Information 2003 filed
as an exhibit to its Report on Form 6-K dated February 26, 2004 is incorporated
herein by reference.
ITEM 7 - MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
The information set forth
under the heading Shareholder Information Major Shareholdings on
page 126 of the Companys Annual Report and Form 20-F Information
2003 filed as an exhibit to its Report on Form 6-K dated February 26, 2004
is incorporated herein by reference.
B. Related Party
Transactions
The
information set forth under the heading Financial
Statements Notes to the Financial Statements Note 33 Statutory
and other information on page 107 of the Companys Annual Report
and Form 20-F Information 2003 filed as
an exhibit to its Report on Form 6-K dated February 26, 2004 is incorporated
herein by reference.
C. Interests of
Experts and Counsel
Not applicable.
ITEM 8 - FINANCIAL INFORMATION
The information (including
graphs and tabular data) set forth under the headings Financial Statements
on pages 62 to 112 (including the information set forth under the subheading
Notes to the Financial Statements), Principal Subsidiaries
on page 112, Additional Information for US investors on page 113-123,
Group Financial Record UK GAAP
on pages 124 and 125, Group Financial Record
US GAAP on page 126 and Shareholder Information on pages 127
to 134 of the Companys Annual Report and Form 20-F Information 2003
filed as an exhibit to its Report on Form 6-K dated February 26, 2004 is incorporated
herein by reference.
ITEM 9 - THE OFFER AND LISTING
A. Offer and Listing
Details
The information set forth
under the heading Shareholder Information on pages 127 to 130 of
the Companys Annual Report and Form 20-F Information 2003 filed
as an exhibit to its Report on Form 6-K dated February 26, 2004 is incorporated
herein by reference.
B. Plan of Distribution
Not applicable.
C. Markets
The information set forth
under the heading Shareholder Information on pages 127 to 130 of
the Companys Annual Report and Form 20-F Information 2003 filed
as an exhibit to its Report on Form 6-K dated February 26, 2004 is incorporated
herein by reference.
D. Selling Shareholders
Not applicable.
E. Dilution
Not
applicable.
F. Expenses of
the Issue
Not applicable.
ITEM 10 - ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Memorandum and
Articles of Association
The information set forth under the heading Additional
Information Memorandum and Articles of Association on page 140 of the Companys Annual
Report and Form 20-F Information 2003 filed as an exhibit to its Report
on Form 6-K dated February 26, 2004 is incorporated herein by reference.
C. Material
Contracts Not
applicable.
D. Exchange Controls
The information set forth
under the heading Shareholder Information Exchange
controls and other limitations affecting security holders on page 132 of
the Companys Annual Report and Form 20-F Information 2003 filed
as an exhibit to its Report on Form 6-K dated February 26, 2004 is incorporated
herein by reference.
E. Taxation
The information set forth
under the heading Shareholder Information - Taxation for US residents on
page 131 of the Companys Annual Report and Form 20-F Information
2003 filed as an exhibit to its Report on Form 6-K dated February 26, 2004
is incorporated herein by reference.
F. Dividends and
Paying Agents
Not applicable.
G. Statement by
Experts
Not applicable.
H. Documents on
Display
The information set forth
under the heading Shareholder Information Documents
on display on page 130 of the Companys Annual Report and Form
20-F Information 2003 filed as an exhibit to its Report on Form 6-K dated
February 26, 2004 is incorporated herein by reference.
I. Subsidiary Information
Not applicable.
ITEM 11 - QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The information (including
graphs and tabular data) set forth under the headings Financial Review
- Treasury on pages 35 and 36, Financial Review Sensitivity analysis 31
December 2003 on page 35 and Financial Review Sensitivity
analysis 31 December 2002 on page 35 of the Companys Annual
Report and Form 20-F Information 2003 filed as an exhibit to its Report
on Form 6-K dated February 26, 2004 is incorporated herein by reference.
ITEM 12 - DESCRIPTION OF SECURITIES OTHER THAN EQUITY
SECURITIES
Not applicable.
PART II
ITEM 13 - DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
(a) There has been no
material default in payment of principal, interest, a sinking or purchase fund
installment, or any other material default with respect to any indebtedness of
the Company or any of its significant subsidiaries.
(b) There have been no
arrears in the payment of dividends on, and no material delinquency with respect
to, any class of preferred stock of any significant subsidiary of the Company.
ITEM 14 - MATERIAL MODIFICATIONS TO THE RIGHTS OF
SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM 15 - CONTROLS AND PROCEDURES
The information set
forth under the heading Audit Committees Report on pages 48
and 50 of the Companys Annual Report and Form 20-F Information 2003
filed as an exhibit to its Report on Form 6-K dated February 26, 2004 is incorporated
herein by reference.
ITEM 16 RESERVED
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
The information set forth
under the heading Audit Committees Report on page 48 of the
Companys Annual Report and Form 20-F Information 2003 filed
as an exhibit to its Report on Form 6-K dated February 26, 2004 is incorporated
herein by reference.
ITEM 16.B CODE OF ETHICS
The information set forth
under the heading Directors Report Code of Conduct on page
46 of the Companys Annual Report and Form 20-F Information 2003 filed
as an exhibit to its Report on Form 6-K dated February 26, 2004 is incorporated
herein by reference.
ITEM 16C PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information set
forth under the headings Audit Committees Report on pages
48 to 50 and Financial Statements Notes to the Financial Statements
Note 33 Statutory and other information on page 107 of the
Companys Annual Report and Form 20-F Information 2003 filed
as an exhibit to its Report on Form 6-K dated February 26, 2004 is incorporated
herein by reference.
ITEM 16D EXEMPTIONS FROM THE LISTING STANDARDS
FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E PURCHASES OF EQUITY SECURITIES BY
THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.
PART III
ITEM 17 - FINANCIAL STATEMENTS
The Company has responded to Item 18 in lieu of this
item.
ITEM 18 - FINANCIAL STATEMENTS
The information set
forth in Exhibit 14.2 hereto Auditor report to the members of AstraZeneca
PLC by KPMG Audit Plc is incorporated in this section by reference. The
information (including graphs and tabular data) set forth under the headings
Financial Statements on pages 62 to 112 (including the information
set forth under the subheading Notes to the Financial Statements),
Principal Subsidiaries on page 112, Additional Information for
US Investors on pages 113 to 123,
Group Financial Record UK GAAP
on pages 124 and 125,
Group Financial Record US GAAP on
page 126 and Shareholder Information on pages 127 and 134 of the Companys Annual
Report and Form 20-F Information 2003 filed as an exhibit to its Report
on Form 6-K dated February 26, 2004 is incorporated herein by reference.
ITEM 19 - EXHIBITS
1.1 |
|
Memorandum and Articles of Association.* |
|
|
|
4.1 |
|
Master Restructuring Agreement dated
as of June 19, 1998 between Astra AB, Merck & Co., Inc., Astra Merck
Inc., Astra USA, Inc., KB USA, L.P., Astra Merck Enterprises, Inc., KBI Sub
Inc., Merck Holdings, Inc. and Astra Pharmaceuticals, L.P.* |
|
|
|
4.2 |
|
Amendment to the Agreement for Service
between AstraZeneca Plc and Sir T.F.W. McKillop, dated February 4, 2003.* |
|
|
|
4.3 |
|
Amendment to the Agreement for Service
between AstraZeneca Plc and Mr. J.R. Symonds, dated February 4, 2003.* |
|
|
|
4.4 |
|
Amendment to the Agreement for Service
between AstraZeneca Plc and Dr. H. Mogren, dated February 4, 2003.* |
|
|
|
7.1 |
|
Statement explaining calculation of
ratio of earnings to fixed charges. |
|
|
|
8.1 |
|
List of subsidiaries. |
|
|
|
12.1 |
|
Certification of Sir Tom McKillop filed
pursuant to 17 CFR 240.13a-14(a). |
|
|
|
12.2 |
|
Certification of J.R. Symonds filed
pursuant to 17 CFR 240.13a-14(a). |
|
|
|
13.1 |
|
Certification of Sir Tom McKillop and
J.R. Symonds furnished pursuant to 17CFR 240.13a-14(b) and 18 U.S.C. 1350. |
|
|
|
14.1 |
|
Pursuant to Rule 12-b-23(a) of the
Securities Exchange Act of 1934, as amended, the information incorporated
into this Form 20-F by reference to the Companys Annual Report
and Form 20-F Information 2003 filed as an exhibit to its Report on
Form 6-K dated February 26, 2004, is attached as an exhibit hereto. |
* Incorporated into this Form 20-F by reference to
AstraZeneca PLCs Form 20-F filed March 25, 2003.
14.2 |
|
Auditor report to the members of AstraZeneca
PLC by KPMG Audit Plc. |
|
|
|
14.3 |
|
Consent of KPMG Audit Plc, independent
accountants to the Company. |
|
|
|
14.4 |
|
Consent of IMS Health. |
SIGNATURE
The registrant hereby
certifies that it meets all of the requirements for filing on Form 20-F and that
it has duly caused and authorized the undersigned to sign this annual report
on its behalf.
AstraZeneca PLC |
|
|
|
By: |
/s/ Adrian C N Kemp |
|
|
|
Name: |
Adrian C N Kemp |
|
Title: |
Authorised Signatory |
London, England
March 12, 2004
EX-7.1
3
mar0904_ex07-1.htm
EXHIBIT 7.1
EXHIBIT
7.1
RATIO
OF EARNINGS TO FIXED CHARGES
Our
consolidated ratios of earnings to fixed charges calculated in accordance with
UK GAAP and US GAAP for the year-end twelve month period ended December 31,
2003, 2002, 2001, 2000 and 1999 are as follows:
|
Twelve
Months Ended
December 31, |
|
|
|
2003
|
2002
|
2001
|
2000
|
1999
|
UK
GAAP |
|
103 |
.5 |
45 |
.6 |
42 |
.8 |
25 |
.2 |
10 |
.1 |
US GAAP |
|
78 |
.9 |
36 |
.7 |
25 |
.0 |
15 |
.5 |
(19 |
.3) |
For
the purpose of computing these ratios, earnings consist of the income from
continuing ordinary activities before taxation of Group companies and income
received from companies owned 50% or less, plus fixed charges (excluding
capitalized interest). Fixed charges consist of interest (including capitalized
interest) on all indebtedness, amortization of debt discount and expense and
that portion of rental expense representative of the interest factor.
EX-8.1
4
mar0904_ex08-1.htm
exhibit.8.1
EXHIBIT 8.1
Principal Subsidiaries
|
|
Percentage of voting |
|
|
At 31 December 2003 |
Country |
share capital held |
|
Principal activity |
|
|
|
|
|
UK |
|
|
|
|
AstraZeneca UK Limited |
England |
100 |
# |
Research and development, |
|
|
|
|
production, marketing |
|
|
|
|
|
AstraZeneca Insurance Company Limited |
England |
100 |
|
Insurance and reinsurance |
|
|
|
|
underwriting |
|
|
|
|
|
AstraZeneca Treasury Limited |
England |
100 |
|
Treasury |
|
|
|
|
|
|
|
|
|
|
Continental Europe |
|
|
|
|
|
|
|
|
|
NV AstraZeneca SA |
Belgium |
100 |
|
Marketing |
|
|
|
|
|
AstraZeneca Dunkerque Production SCS |
France |
100 |
|
Production |
|
|
|
|
|
AstraZeneca SA |
France |
100 |
|
Research, production,
marketing |
|
|
|
|
|
AstraZeneca GmbH |
Germany |
100 |
|
Development, production,
marketing |
|
|
|
|
|
AstraZeneca Holding GmbH |
Germany |
100 |
|
Production, marketing |
|
|
|
|
|
AstraZeneca SpA |
Italy |
100 |
|
Production, marketing |
|
|
|
|
|
AstraZeneca Farmaceutica Spain SA |
Spain |
100 |
|
Production, marketing |
|
|
|
|
|
AstraZeneca AB |
Sweden |
100 |
|
Research and development, |
|
|
|
|
production, marketing |
|
|
|
|
|
AstraZeneca BV |
The Netherlands |
100 |
|
Marketing |
|
|
|
|
|
|
|
|
|
|
The Americas |
|
|
|
|
|
|
|
|
|
AstraZeneca Canada Inc. |
Canada |
100 |
|
Research, production,
marketing |
|
|
|
|
|
IPR Pharmaceuticals Inc. |
Puerto Rico |
100 |
|
Development, production,
marketing |
|
|
|
|
|
AstraZeneca LP |
US |
99 |
|
Research and development, |
|
|
|
|
production, marketing |
|
|
|
|
|
AstraZeneca Pharmaceuticals LP |
US |
100 |
|
Research and development, |
|
|
|
|
production, marketing |
|
|
|
|
|
Zeneca Holdings Inc. |
US |
100 |
|
Production, marketing |
|
|
|
|
|
|
|
|
|
|
Asia, Africa & Australasia |
|
|
|
|
|
|
|
|
|
AstraZeneca Pty Limited |
Australia |
100 |
|
Development, production,
marketing |
|
|
|
|
|
AstraZeneca KK |
Japan |
80 |
|
Production, marketing |
|
|
|
|
|
EX-12.1
5
mar0904_ex12-1.htm
EXHINIT 12.1
EXHIBIT
12.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT 2002
I,
Thomas Fulton Wilson McKillop, certify that:
1. |
|
I have reviewed this annual report on Form 20-F of AstraZeneca
PLC; |
|
|
|
2. |
|
Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
|
3. |
|
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the company as of, and for,
the periods presented in this report; |
4. |
|
The companys other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have: |
(a) |
|
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information
relating to the company, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared; |
(b) |
|
[Reserved][Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986] |
(c) |
|
Evaluated
the effectiveness of the companys disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation;
and |
(d) |
|
Disclosed in this report any change in the companys internal control over financial
reporting that occurred during the period covered by the annual report that has materially
affected, or is reasonably likely to materially affect, the companys internal
control over financial reporting; and |
5. |
|
The companys other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
companys auditors and the audit committee of the companys board of
directors (or persons performing the equivalent functions): |
(a) |
|
All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the companys ability to record, process, summarize and report financial information;
and |
(b) |
|
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the companys internal control over financial reporting. |
March 12, 2004
/s/ SIR TOM MCKILLOP
Sir Thomas McKillop, Chief Executive, AstraZeneca PLC
EX-12.2
6
mar0904_ex12-2.htm
EXHIBIT 12.2
EXHIBIT
12.2
CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT 2002
I,
Jonathan Richard Symonds, certify that:
1. |
|
I have reviewed this annual report on Form 20-F of AstraZeneca
PLC; |
|
|
|
2. |
|
Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
|
3. |
|
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the company as of, and for,
the periods presented in this report; |
4. |
|
The companys other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have: |
(a) |
|
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information
relating to the company, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared; |
(b) |
|
[Reserved][Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986] |
(c) |
|
Evaluated
the effectiveness of the companys disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation;
and |
(d) |
|
Disclosed in this report any change in the companys internal control over financial
reporting that occurred during the period covered by the annual report that has materially
affected, or is reasonably likely to materially affect, the companys internal
control over financial reporting; and |
5. |
|
The companys other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
companys auditors and the audit committee of the companys board of
directors (or persons performing the equivalent functions): |
(a) |
|
All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the companys ability to record, process, summarize and report financial information;
and |
(b) |
|
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the companys internal control over financial reporting. |
March
12, 2004
/s/ J.R. SYMONDS
J.R. Symonds, Chief Financial Officer, AstraZeneca PLC
EX-13.1
7
mar0904_ex13-1.htm
exhibit 13.1
EXHIBIT
13.1
CERTIFICATION
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(SUBSECTIONS (a) and (b) OF SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES
CODE)
The
certification set forth below is being submitted in connection with the
Annual Report on Form 20-F for the year ended December 31, 2003 (the Report)
for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities
Exchange Act of 1934 (the Exchange Act) and Section 1350 of Chapter
63 of Title 18 of the United States Code.
Sir
Thomas Fulton Wilson McKillop, the Chief Executive Officer and Jonathan Richard
Symonds, the Chief Financial Officer of AstraZeneca PLC, each certifies that,
to the best of their knowledge:
1. |
|
the
Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange
Act; and |
2. |
|
the
information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of AstraZeneca PLC. |
March
12, 2004
/s/ SIR TOM
MCKILLOP
Sir Thomas McKillop, Chief Executive, AstraZeneca PLC
/s/ J.R.
SYMONDS
J.R. Symonds, Chief Financial Officer, AstraZeneca PLC
EX-14.1
8
mar0904_ex14-1.htm
EXHIBIT 14.1
The following information has been given to The Stock Exchange, London and is furnished pursuant to General Instruction B to the General Instructions to Form 6-K:
AstraZeneca PLC Annual Report and Form 20-F Information 2003
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Annual Report and
Form 20-F Information
2003 |
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AstraZeneca Annual Report and Form 20-F Information 2003 |
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AstraZeneca Annual Report and
Form 20-F Information 2003 |
Contents |
Contents
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 Report and Form 20-F Information
2003, unless the context otherwise requires, AstraZeneca, the Group, the Company, we, us and our refer
to AstraZeneca PLC and its consolidated entities.
Statements of competitive position
Except as otherwise stated, market information in this Annual Report and Form 20-F Information 2003 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 2003, or the month of November 2003, obtained from IMS Health, a leading supplier of statistical data to the pharmaceutical industry. Except as otherwise stated, this market share and industry data from
IMS Health has 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 Report and Form 20-F Information 2003 are given at constant exchange rates (CER).
AstraZeneca website
Information on our website, astrazeneca.com, does not form part of this document.
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 Report and Form 20-F Information
2003 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.
©AstraZeneca PLC 2004
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AstraZeneca Annual Report and
Form 20-F
Information 2003 |
Key Achievements |
01 |
|
Key Achievements
|
|
> |
At constant exchange rates, total sales for the year were unchanged whilst absorbing the loss of $2.6 billion in US sales of Losec/Prilosec, Zestril and Nolvadex following anticipated patent expiries. |
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> |
Operating profit was down 11% due to planned investments in R&D and SG&A required to launch new products and complete the product portfolio transformation. |
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> |
Dividend increased by 13.6% to 79.5 cents for the full year. |
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> |
Sales for key growth and launch products increased by 45% to $8.2 billion and now represent 44% of total sales. |
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> |
Nexium sales reached $3.3 billion, up 62%. |
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> |
Seroquel sales reached $1.5 billion, up 27%. Approvals for use of Seroquel in the treatment of
acute bipolar mania were received in the US and Europe. |
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> |
Symbicort sales reached $549 million, up 61%. Symbicort also gained first approval in Europe for
use in the treatment of chronic obstructive pulmonary disease. |
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> |
Arimidex is moving rapidly towards replacing tamoxifen as the standard of care in breast cancer. Sales up 46% to $519 million. |
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> |
Rapid uptake of Iressa since first launch in Japan in 2002 and in the US in 2003, with over 100,000 patients treated since launch. 2003
sales reached $228 million. |
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> |
Crestor sales reached $129 million. We estimate that more than 1.5 million prescriptions had been written for, and over 750,000 patients had been treated with,
Crestor by the end of January 2004. |
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> |
Exanta received its first regulatory approval (in France) in December 2003. Regulatory submissions were made in the US and Europe for key chronic indications,
including prevention of stroke associated with atrial fibrillation. |
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> |
R&D investment totalled $3.5 billion. We now have 12 projects in phase 2 development and 28 projects in phase 3. |
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> |
Continued enhancement of supply and manufacturing processes led to improved customer service levels and reduced manufacturing lead times which consequently reduced the requirement for stock
build-up. |
Continuing Operations before Exceptional Items
|
2003 |
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2002 |
|
% growth CER |
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Sales $m |
18,849 |
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17,841 |
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Operating profit $m |
4,111 |
|
4,356 |
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11 |
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Earnings per
share $ |
1.78 |
|
1.84 |
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9 |
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Group earnings per share $
(statutory FRS 3) |
1.78 |
|
1.64 |
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+3 |
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Dividend for 2003
|
$ |
|
Pence |
|
SEK |
|
Payment date |
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First interim dividend |
0.255 |
|
15.9 |
|
2.07 |
|
6 October 2003 |
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Second interim dividend |
0.540 |
|
29.4 |
|
3.91 |
|
6 April 2004 |
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Total dividend |
0.795 |
|
45.3 |
|
5.98 |
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AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Global Market Overview |
03 |
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Global Market
Overview |
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World markets
In 2003, worldwide sales of pharmaceutical products totalled $430 billion, representing an 8% growth (at constant exchange rates), compared to 10% in 2002. This lower growth is largely due to the performance of the US
market, which accounts for around half of the worlds pharmaceutical expenditure. Whilst the US had a market growth rate of around 10%, this represented a decrease from
2002 (14%). A lower number of new product launches, patent expiries for several high sales products, together with pricing pressure have contributed to this decrease.
In Japan, the worlds second largest pharmaceutical market with 12% of world revenues, sales grew 2% reflecting the increasingly tough
pricing environment in that country.
In Europe (27% of world revenues, 8% growth), the variations in regulatory frameworks were reflected in the considerably varied growth rates within the region including France with growth of 5%, Germany 6%, Italy 5%,
Spain 12%, Turkey 37% and UK 10%.
China, which delivered 20% pharmaceutical market growth in 2003, Korea, Mexico and India are increasing in importance for the future.
Pharmaceuticals as part of healthcare
Expenditure on healthcare typically represents between 6% and 14% of a countrys gross domestic product (GDP), with developed nations
towards the top end and developing nations spending less. Pharmaceuticals as a proportion of this expenditure is usually between 10% and 20% and therefore, is in most cases still less than 2% of GDP even in developed nations. Pharmaceuticals offer
many advantages over other forms of treatment for illness and are progressively replacing in-patient care, particularly for cardiovascular and central nervous system conditions, and they are the principal treatment for illnesses such as diabetes,
asthma, gastric ulcers, skin complaints and many infectious diseases.
Doctors are still the key decision makers in relation to which treatments should be prescribed for their patients. As the economic burden of funding therapies increases, payers, including governments, health insurers,
managed care organisations and employers are increasing their influence over the choices doctors make and health economics are an increasingly important element in prescribing patterns.
Growth drivers and limiters
Increasing populations and the rising percentage of elderly people are strong growth drivers for the pharmaceutical industry. In addition there are still major areas of unmet medical need since many diseases, such as
Alzheimers Disease and many cancers have no effective therapies, or are under diagnosed or sub-optimally treated. Scientific advances and new forms of communication,
such as the internet, are also growth drivers.
Limiting the industrys growth is the increasing pressure to contain healthcare costs from governments and other payers, which affects
the pricing and/or the willingness to pay for certain therapies. This has led to a rise in the requirement for co-pay arrangements where patients contribute towards the cost of their therapies. Cost pressure is also driven by governments worldwide facing the challenge of providing more funding for the
healthcare of the elderly. A significant example of a response to this challenge is the enactment of the Medicare Prescription Drug, Improvement, and Modernization Act in the US in 2003. Also in the US, the high costs of pharmaceuticals for
uninsured senior citizens have led to increased cross border movement of products from Canada where prices are lower. Differential pricing across the world has long been a feature of the pharmaceutical industry but is now particularly evident in the
US, especially for the uninsured who have to pay the full cost for their medicines, and this increased awareness of different pricing structures is contributing to a growing resentment of the industry.
Across the industry there has been a reduction in the number of new chemical entities (NCEs) being developed, in part as a result of investment in new technologies taking longer than anticipated to deliver new
medicines, although there is evidence of an increase in NCEs entering development in 2003. The increased cost of providing more demanding safety and efficacy studies required by regulators and the effect of patent expiries for a significant number
of companies products have
also been contributory factors to limited growth.
The industry also faces issues that may curtail its ability to generate attractive return on investment from the growing obligations of corporate social and environmental responsibility and the threat of weakening
intellectual property rights.
Future pharmaceuticals market
There
are early signs of increasing numbers of potential products coming into development
and despite the cost containment pressures, dip in R&D productivity and
imminent patent expiries of some major products, the pharmaceutical market
overall is forecast to grow by around 7% per annum to 2007. The companies
that do best in this difficult environment will be those that combine real
innovation with optimum operating efficiency.
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AstraZeneca Annual Report
and
Form 20-F Information 2003
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Financial Highlights |
05
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Financial
Highlights |
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Key growth and launch products
Atacand, Arimidex, Casodex, Crestor,
Faslodex,
Iressa, Nexium, Seroquel, Symbicort, Zomig
*Sales growth in the key product sales table sets out underlying
performance which shows growth at constant exchange rates to
reflect the volume
and price changes of the individual products by
excluding the effects of
exchange.
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06 |
AstraZeneca
Annual Report and
Form 20-F Information 2003
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Board of Directors
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Board of Directors
at 31 December 2003 |
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Percy Barnevik
Non-Executive Chairman
Håkan Mogren
Non-Executive Deputy Chairman
Jane Henney
Non-Executive Director
Karl von der Heyden
Non-Executive Director
Sir
Tom McKillop
Executive Director
Chief Executive
Sir Peter Bonfield
Senior Non-Executive Director
Marcus Wallenberg
Non-Executive Director
John Buchanan
Non-Executive Director
Erna Möller
Non-Executive Director
Jonathan
Symonds
Executive Director
Chief Financial Officer
Dame Bridget Ogilvie
Non-Executive Director
Michele Hooper
Non-Executive Director
Joe Jimenez
Non-Executive Director
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AstraZeneca Annual Report and
Form
20-F Information 2003 |
Board of Directors |
07 |
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Percy
Barnevik (62)
Non-Executive Chairman
Chairman of the Nomination
Committee
Appointed as a Director 6 April 1999. 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 Advisory
Councils in Korea, India and the Investment Council advising the South African
Government. Member of the Business Council of American CEOs.
Member of the Advisory Board, Centre for European
Reform, UK.
Håkan Mogren
(59)
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 S.A., Groupe Danone and Norsk Hydro ASA. Director of the Marianne
and Marcus Wallenberg Foundation.
Jane Henney (56)
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. Member of the Board of Trustees
of the Commonwealth Fund and the Scripps Research Institute. Member of
the Medical & Scientific Advisory Board of MPM Capital.
Karl von der Heyden
(67)
Non-Executive Director
Chairman of the Audit Committee
Appointed as a Director 1 October 1998. Executive
Vice-President 1989-1992 and Co-Chairman and Chief Executive Officer 1993 of
RJR Nabisco. President and Chief Executive Officer of Metallgesellschaft Corp.
1993-1994. Vice-Chairman of PepsiCo, Inc. 1996-2001. Non-Executive Director
of Federated Department Stores Inc., ARAMARK Inc. and Exult, Inc. |
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Sir
Tom McKillop (60)
Executive
Director and Chief Executive
Appointed as a Director 1 January 1996.
Non-Executive Director of Lloyds TSB Group plc. 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 North West Science Council.
Sir
Peter Bonfield CBE, FREng (59)
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 Citigroup
International Advisory Board.
Marcus
Wallenberg (47)
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 (60)
Non-Executive Director
Member of the Audit Committee
and 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 (63)
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. |
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Jonathan
Symonds (44)
Executive
Director and Chief Financial
Officer
Appointed as a Director 1 October 1997. Also
has overall responsibility for Information Services. Non-Executive Director
of QinetiQ Group plc. Member of the UK Accounting Standards Board. Chairman
of The Hundred Group of Finance Directors in the UK.
Dame Bridget Ogilvie
(65)
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. Non-Executive
Director of the Manchester Technology Fund Limited. 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.
Michele Hooper (52)
Non-Executive Director
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 (44)
Non-Executive Director
Member of 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 Hain Celestial Group, Inc.
Other officers of the Company at 31
December 2003 included members of the Senior Executive Team, as set
out on page 45, and:
Graeme Musker
Group Secretary
and Solicitor
Appointed as Company Secretary
6 June
1993. |
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08 |
AstraZeneca Annual Report and
Form
20-F Information 2003 |
Strategy |
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Strategy |
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We aspire
to be the best in all areas of our business within a culture based on
innovation combined with the disciplined and responsible approach required
to achieve industry leading productivity. |
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By discovering, developing,
manufacturing and marketing differentiated medicines that make a real
contribution to human health, AstraZeneca aims to create enduring value
for shareholders and society, and deliver a sustained financial performance
that will match the best in the industry. |
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>
> |
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 |
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Our strategy for sustainable
growth is: |
|
> |
Pursuing value creating investment in
significant targeted licensing and acquisition opportunities |
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> |
Expansion
of the development pipeline through continuously improved in-house discovery
processes complemented by external collaborations and partnerships |
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> |
Continuing to
improve productivity in pursuit of operational excellence in all our
activities |
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> |
Successful delivery to market of the next
wave of differentiated products currently in late stage development |
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> |
Delivering our
core values through a responsible approach to business |
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> |
Realising the full potential of our therapies
through investment in projects that will extend their use and bring benefits
to new patient populations |
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Key Products
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Cardiovascular |
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Gastrointestinal |
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Oncology |
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Atacand1 (candesartan
cilexetil) angiotensin
II antagonist for hypertension |
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Losec/Prilosec (omeprazole) proton
pump inhibitor for acid related diseases |
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Arimidex (anastrozole) aromatase
inhibitor for breast cancer |
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Crestor2 (rosuvastatin) HMG-CoA
reductase inhibitor (statin) for dyslipidaemia |
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Losec MUPS omeprazole
in tablet form |
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Casodex(bicalutamide)anti-androgen for prostate cancer |
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Exanta (ximelagatran) oral
direct thrombin inhibitor for prevention of thrombosis in association
with major orthopaedic surgery |
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Nexium (esomeprazole) proton
pump inhibitor for acid related diseases |
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Faslodex
(fulvestrant) oestrogen
receptor antagonist with no agonist effects for breast cancer |
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Plendil (felodipine) calcium
antagonist for hypertension and angina |
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Iressa (gefitinib) signal
transduction inhibitor for non-small cell lung cancer |
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Seloken/Toprol-XL (metoprolol) beta
blocker for hypertension, angina, heart failure and other uses |
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Nolvadex (tamoxifen) anti-oestrogen for breast cancer |
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Zestril3 (lisinopril) angiotensin
converting enzyme inhibitor for hypertension, heart failure and diabetic
nephropathy |
|
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Zoladex(goserelin) LHRH
agonist for prostate and pre-menopausal breast cancer, certain benign gynaecological
disorders and assisted reproduction |
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Respiratory and Inflammation |
|
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Neuroscience |
|
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Infection |
|
Accolate (zafirlukast) oral
leukotriene receptor antagonist for control of asthma
|
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|
Diprivan (propofol) intravenous
general anaesthetic for induction/maintenance of anaesthesia and sedation
of intensive care patients |
|
|
Merrem/Meronem4 (meropenem) ultra
broad spectrum injectable antibiotic for serious bacterial infection |
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|
Oxis (formoterol) inhaled
fast onset long-acting bronchodilator for relief of asthma symptoms |
|
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Naropin (ropivacaine) local
anaesthetic for surgical anaesthesia and acute pain management |
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Pulmicort (budesonide) inhaled
anti-inflammatory for asthma control |
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Seroquel (quetiapine) atypical
anti-psychotic for schizophrenia and other psychotic disorders |
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Rhinocort (budesonide) topical
nasal anti-inflammatory for control of rhinitis |
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Xylocaine (lidocaine) local
anaesthetic for use in surgery and dentistry |
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Symbicort (budesonide/formoterol) inhaled
combination of anti-inflammatory and fast onset long-acting bronchodilator
in a single inhaler |
|
|
Zomig (zolmitriptan) for
the treatment of acute migraine with or without aura |
|
|
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|
|
|
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.
Back to Contents
|
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Operational Review |
09 |
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Operational Review |
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The growing demand for new medicines is driven by increasing populations and improved life expectancy as modern medicine supports an ageing population. According to the latest information available from the World
Health Organisation (www.WHO.int), the greatest burden of disease is in the non-communicable disease sector where diseases such as unipolar depression, schizophrenia, diabetes, ischaemic heart disease, cerebrovascular disease and asthma have all
increased over the last five years. Communicable diseases are also increasing due primarily to HIV/AIDS and tuberculosis.
AstraZeneca focuses its skills, experience and resources on six therapy areas: Cardiovascular, Gastrointestinal, Neuroscience, Oncology, Respiratory and Inflammation, and Infection which represent the majority of the
worldwide burden of disease. We have a powerful range of products that meet patient needs in our chosen areas of activity including some significant areas of hitherto unmet medical need. We are committed to delivering new, medically important and
commercially successful products to the market every year.
This Operational Review (pages 9 to 30) provides detailed information about our research, development, manufacturing and marketing activities worldwide and our performance in 2003.
Contents |
Page |
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Therapy areas: |
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Cardiovascular |
10 |
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Gastrointestinal |
12 |
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Neuroscience |
14 |
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Oncology |
16 |
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Respiratory and Inflammation |
18 |
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Infection |
20 |
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Geographic Review |
21 |
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Research and Development |
23 |
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Commercialisation and PortfolioManagement |
26 |
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Supply and Manufacturing |
27 |
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Other Businesses, Main Facilities and Intellectual Property |
28 |
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Industry Regulation |
29 |
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Corporate Responsibility |
30 |
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> |
We spend around |
> |
Collaborations with leading |
> |
We have over 60,000 |
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$14 million each working |
|
academic centres and |
|
employees worldwide: |
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day on research and |
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biotechnology companies |
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development (total R&D |
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and the in-licensing of |
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35,000 in Europe |
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spend in 2003: $3.5 billion) |
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innovative products and |
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technologies complement |
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18,000 in the Americas |
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> |
We employ 11,600 |
|
our in-house capabilities and |
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|
people in research and |
|
play a key role in |
|
|
8,000 in Asia, Africa |
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development at 11 R&D |
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strengthening our portfolio |
|
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and Australasia |
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centres in seven countries: |
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Sweden, the UK, the US, |
> |
We have 31 manufacturing |
> |
We sell in over 100 countries |
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Canada, France, India |
|
sites in 20 countries |
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and Japan |
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> |
Along with our commitment |
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> |
Around 16,000 people |
|
to competitiveness and |
|
|
> |
Our strong R&D pipeline |
|
worldwide work in supply |
|
high performance, we will |
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|
includes a number of |
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and manufacturing, including |
|
continue to be led by our |
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significant innovations |
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some 13,000 people in |
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core values to achieve |
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formulation and packaging, |
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sustainable success |
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> |
We have 12 projects in |
|
and 1,750 in active |
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phase 2 and 28 projects |
|
pharmaceutical ingredient |
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in phase 3 development, |
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supply |
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as shown on page 24 |
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Back to Contents
10 |
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Operational Review |
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Cardiovascular (CV) |
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We are a world leader in CV medicines, backed by over 40 years experience. We aim to build on our strong position, focusing in the short to medium term on the growth segments of hypertension,
dyslipidaemia, thrombosis and type 2 diabetes.
|
|
Therapy
area overview |
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> |
CV world market value: $98 billion. |
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> |
CV diseases account for 17 million deaths globally each year, making it the greatest risk to life for most adults. |
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> |
CV is the single largest therapy area in the global healthcare market. |
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> |
The statin market has a world market value of $22 billion. |
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2003
in brief |
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> |
Crestor available in 25 markets including the US by the end of January 2004. |
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> |
Over 750,000 patients treated with Crestor by the end of January 2004. |
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> |
Seloken/Toprol-XL sales grew by an underlying 38% and exceeded $1 billion. |
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> |
First approval for Exanta in France. US and EU filings submitted. |
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> |
Erosion of Zestril sales following patent expiries in 2002. |
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Products
Crestor (rosuvastatin) is a member of the class of products known as statins. During 2003, Crestor gained regulatory approval in more than 40 countries, including 13 European markets, the US and Canada.
In multiple clinical studies, Crestor has been shown to be more effective in lowering low density lipoprotein (LDL-C) than other
prescribed statins. Additionally, Crestor produces a significant increase in high density lipoprotein (HDL-C), an effect that is maintained across the 10-40mg dose
range. By the end of January 2004, we estimate that more than 1.5 million prescriptions were written for Crestor and over 750,000 patients had taken Crestor. Along with the extensive clinical trial database this experience demonstrates that Crestor is well tolerated in clinical use, with a safety profile in line with other marketed statins.
Our extensive, long term global clinical research initiative known as the GALAXY programme, including studies which investigate cardiovascular risk reduction and patient outcomes with Crestor, is now well underway. More than 30,000 patients are involved, two studies have been completed and 14 studies are ongoing in important medical areas including heart failure, end
stage renal disease, acute coronary syndrome and regression of atherosclerosis.
By the end of January 2004, Crestor was launched in 25 countries including the US, Canada, the UK and the Netherlands. Further launches
are planned throughout 2004 including in Japan, Italy and France.
Atacand (candesartan
cilexetil) is an angiotensin II antagonist for the first line treatment of hypertension.
The Atacand
family of products shows a strong market acceptance and competes in the fastest
growing sector of the global hypertension market (angiotensin II antagonists plain and combinations with diuretic). During 2003,
the CHARM programme, a comprehensive clinical study programme in heart failure,
was published, showing significant reduction in cardiovascular mortality and
hospitalisation for heart failure in patients treated with Atacand.
The beneficial effect was regardless of age, sex and background treatment (also
additive to the effect seen with angiotensin converting enzyme (ACE) inhibition).
Initial regulatory approvals for the new indication of heart failure are currently
anticipated during 2004. The results of the CHARM programme will further differentiate Atacand within its drug class. The clinical
programme investigating the effect of Atacand on retinopathy in diabetic patients (DIRECT) continued during 2003.
Seloken ZOK/Toprol-XL (metoprolol), a once daily tablet for 24 hour control of blood pressure and for use in heart failure, is the worlds leading product by sales in the beta blocker (plain
and combinations with diuretic) class.
Plendil (felodipine) is a calcium antagonist for the treatment of hypertension and angina.
Zestril (lisinopril dihydrate), an ACE inhibitor, is used for the treatment of a wide range of CV diseases, including hypertension.
Information regarding patent challenges for Seloken/Toprol-XL and Plendil is set out on page 104.
Pipeline
We aim to broaden our CV portfolio into the areas of thromboembolism, dyslipidaemia, type 2 diabetes/metabolic syndrome, atrial fibrillation and vascular disease prevention.
Exanta, the first new oral anti-coagulant in almost 60 years, is a novel oral direct thrombin inhibitor targeted to
prevent and treat the formation of blood clots (thrombosis). Exanta has been subject to the largest clinical study development programme in anti-coagulation to date,
involving around 30,000 patients, and providing extensive outcome data. Several clinical studies with Exanta in prevention of stroke in patients with atrial
fibrillation (SPORTIF III and SPORTIF V) and treatment of venous thromboembolism (VTE) (THRIVE Treatment) were presented during 2003. Liver enzyme elevations have been seen in a small proportion of patients treated with Exanta in chronic studies and are typically transient (occurring within the first two to six months), not associated with specific symptoms and tend to return towards normal whether or not
treatment is continued. All data from the extensive clinical study programme has been shared with regulatory authorities to support a full evaluation of the benefit-risk profile for Exanta. The practical benefits of Exanta include fixed oral administration, rapid onset of action, low potential for drug/food and drug/drug
interactions and no need for routine blood coagulation monitoring. A
Back to Contents
|
AstraZeneca Annual
Report and
Form 20-F Information 2003 |
Operational Review |
11
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Sales growth
is shown in both reported and underlying performance. Reported performance
takes into account all the factors (including those which we cannot
influence, principally currency exchange rates) that have affected
the results of our business. Underlying performance shows sales growth
at constant exchange rates (CER) to reflect the volume and price changes
of the geographic and therapy areas and individual products by excluding
the effects of exchange. A description of the calculation of this measure
is set out in the Financial Review on page 31, together with the reasons
for its use.
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Key product performance |
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2003 |
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|
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2002 |
|
2001 |
|
|
2003 compared to 2002 |
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|
2002 compared to 2001 |
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Sales $m |
|
Growth underlying $m |
|
Growth due to exchange effects $m |
|
Sales $m |
|
Growth underlying $m |
|
Growth due to exchange effects $m |
|
Sales $m |
|
|
Growth underlying % |
|
Growth reported % |
|
|
Growth underlying % |
|
Growth reported % |
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|
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Seloken |
1,280 |
|
340 |
|
39 |
|
901 |
|
187 |
|
3 |
|
711 |
|
|
38 |
|
42 |
|
|
27 |
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Atacand |
750 |
|
121 |
|
60 |
|
569 |
|
148 |
|
11 |
|
410 |
|
|
21 |
|
32 |
|
|
36 |
|
39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plendil |
540 |
|
25 |
|
26 |
|
489 |
|
21 |
|
5 |
|
463 |
|
|
5 |
|
10 |
|
|
5 |
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zestril |
478 |
|
(446 |
) |
47 |
|
877 |
|
(195 |
) |
5 |
|
1,067 |
|
|
(50 |
) |
(45 |
) |
|
(18 |
) |
(18 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tenormin |
342 |
|
(53 |
) |
25 |
|
370 |
|
(28 |
) |
(6 |
) |
404 |
|
|
(15 |
) |
(8 |
) |
|
(7 |
) |
(8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crestor |
129 |
|
122 |
|
7 |
|
|
|
|
|
|
|
|
|
|
n/m |
|
n/m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
391 |
|
(17 |
) |
45 |
|
363 |
|
(79 |
) |
14 |
|
428 |
|
|
(4 |
) |
8 |
|
|
(18 |
) |
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
3,910 |
|
92 |
|
249 |
|
3,569 |
|
54 |
|
32 |
|
3,483 |
|
|
3 |
|
10 |
|
|
1 |
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
phase 2 study (ESTEEM) also indicates that Exanta provides additional benefits when added to standard therapy (including aspirin) in
prevention of major CV events in patients following a heart attack.
Exanta received its first regulatory approval for the prevention of VTE in major elective orthopaedic (hip or knee replacement) surgery in December 2003 in France. First
regulatory submissions for the chronic indications in the US, Canada and Europe were made in December 2003. The filing in the US also includes prevention of VTE in major elective orthopaedic (knee replacement) surgery.
Galida is a treatment for insulin resistance related glucose and lipid abnormalities associated with type 2 diabetes/metabolic syndrome. It is in phase 3 development
for the treatment of diabetes.
Our further research in thrombosis includes AZD6140, an oral anti-platelet therapy which is in phase 2. Novel research in atrial
fibrillation includes AZD7009, an atrial repolarisation delaying agent, which is in phase 2 and AZD0837 and AZD0303 (both for thrombosis) which are in phase 1 and in pre-clinical development respectively. AZD9684 (a carboxy peptidase-U inhibitor for thrombosis) is in phase 1. AZD7806 and AZD8294 (in the dyslipidaemia area) and AZD4619 and AZD6610, for the treatment of metabolic disorders (diabetes mellitus and dyslipidaemia), are all in pre-clinical development.
Performance 2003
Reported performance
Reported growth for CV was 10% with sales of $3,910 million, an increase of $341 million from $3,569 million, notwithstanding the anticipated erosion of Zestril sales
following patent expiry.
Underlying performance
Excluding exchange effects of $249 million, CV underlying sales growth was $92 million or 3%. Sales in the US exceeded $1.6 billion.
Global sales of Seloken/Toprol-XL exceeded $1
billion for the first time, on continued strong growth in the US (up 47%), where total prescriptions increased by 25%, and market share of total beta blocker prescriptions of Seloken/Toprol-XL
reached 26.2% in December, up 2.6 percentage points compared to 2002. Despite destocking in the last quarter, wholesaler inventories remained higher than normal at the year end.
Atacand sales increased by 28% in the US, and by 18% in the markets outside the US, which account for nearly two-thirds of global Atacand sales. US sales growth exceeded growth in total prescriptions, indicating some increase in wholesaler inventories.
Crestor sales were $129 million, including $62 million in the US. The early launch markets for Crestor included the Netherlands, Canada and the UK. Based on recent market research data, Crestor share of total prescriptions in these markets has reached
8.2% (the Netherlands), 6.9% (Canada), and 2.9% (UK) respectively, with shares of the dynamic segment (new and switch therapies only) considerably higher. In the US, Crestor was launched in mid-September. In the week ending 16 January 2004, Crestor share of new prescriptions in the US statin market was 4.6%, a good start
in a highly competitive market. Crestor dynamic share of new statin treatments (new and switch therapy only) in the US is 13.7%.
Lisinopril, the active ingredient in Zestril, lost patent protection in most major markets during 2002. The major part of anticipated
sales erosion has taken place during 2003, with sales falling by 50% to $478 million from $877 million. In the US, generic lisinopril held an 80% share of sales by the end of 2003.
Plendil sales rose by 5%, to $540 million. Continuing the trend of the last two years, growth in the US, where sales were up 13% to $237 million, was offset by lower sales
in the rest of the world.
Performance 2002
Reported performance
CV sales grew by 2% to $3.6 billion in 2002, an increase of $86 million compared to 2001.
Underlying performance
CV sales growth included $32 million of exchange effects. Underlying sales increased by 1%.
Atacand sales grew by 36% to $569 million with an increase in the US of 37% to $206 million.
Prescriptions grew strongly forSeloken/Toprol-XL in the US generating sales of $617 million, an increase of 43% and a
market share of 25%. Worldwide sales grew by 27% from $711 million to $901 million.
Erosion of Zestril sales commenced during the second half following patent expiry in the US, the UK and Japan, falling by 18% from
$1,067 million to $877 million.
Plendil sales rose by 5% to $489 million. As in 2001, growth in the US (up 6% to $209 million) was offset by falling sales in the rest of the world.
Back to Contents
12 |
AstraZeneca
Annual Report and
Form 20-F Information 2003 |
Operational Review |
|
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Gastrointestinal (GI)
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We aim to maintain our number one position in GI treatments through continued market penetration for Nexium worldwide, coupled with high quality innovation and productivity in the research and development of new GI therapies.
|
Therapy
area overview |
|
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|
> |
World market value: PPI:
$19.1
billion. |
|
|
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|
> |
40% of adults in the western world regularly experience heartburn and 10% have gastro-oesophageal reflux disease (GERD). |
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> |
Helicobacter pylori (H.pylori) is the major cause of peptic ulcer disease and is a risk factor for gastric cancer. Prevalence rate of H.pylori infection in the population is 40%. |
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> |
Irritable bowel syndrome (IBS) is an increasingly common complaint which is inadequately treated. Prevalence rate in the population is 20%. |
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> |
Inflammatory bowel disease (IBD) is another area of significant unmet medical need. |
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|
2003 in brief |
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> |
Nexium launch in the US is one of the most successful pharmaceutical launches ever. |
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|
> |
Global sales of Nexium exceeded $3 billion (62% underlying growth). |
|
|
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|
> |
US court judgement inLosec/Prilosec litigation challenges confirmed by the US Appeals Court. |
|
|
|
Products
Nexium (esomeprazole) is the first proton pump inhibitor (PPI) to offer significant clinical improvements over Losec/Prilosec
and its main competitors, lansoprazole and pantoprazole. Nexium has been evaluated in clinical studies involving over 68,000
patients in 57 countries. It offers more effective acid inhibition than all other PPIs and, in the treatment of reflux oesophagitis, provides healing and symptom relief in more patients and in a shorter period of time than Losec/Prilosec, lansoprazole or pantoprazole. It is an effective, long term therapy for patients with GERD, with or without oesophagitis. For the treatment of active duodenal ulcer disease,
seven day Nexium triple therapy (in combination with two antibiotics for the eradication of H.pylori) heals most patients without the need for follow up
anti-secretory monotherapy.
Nexium is used to treat a wide range of patients, including both newly diagnosed and also patients switched from other therapies such as omeprazole, other PPIs and
H2-receptor antagonists.
Nexium continues to establish a new improved treatment standard. It was first launched in Sweden in August 2000 and it is now available in 100 markets, including the US,
Canada and all European countries. It has been well received by patients and physicians alike and over 145 million patient treatments had been administered by the end of 2003.
Regulatory filings for Nexium for the treatment (symptom resolution) of side effects from non-steroidal anti-inflammatory drugs (NSAID)
and a parenteral formulation were made in 2003. First regulatory approval and launch of parenteral Nexium were achieved in 2003. The parenteral form of
Nexium was approved in Europe in late 2003 as a dosage form when oral administration is not applicable for the treatment of GERD and it was confirmed that the side
effect NSAID indication is within the existing treatment usage.
Losec/Prilosec (omeprazole), the first PPI, set a new global standard in the short and long term treatment of acid-related diseases in the 1980s and 1990s. Patients
have benefited from over 720 million treatments with Losec/Prilosec since launch. Losec MUPS, a tablet formulation, has been launched in 57 markets.
Patent protection for omeprazole, the active ingredient in Losec/Prilosec, has expired. In a small number of countries, including some
major markets, patent term extensions or supplementary protection certificates have been granted for the active ingredient.
In October 2002, the US Court for the Southern District of New York ruled that three out of four generic manufacturers sued by AstraZeneca infringed certain patents, including formulation patents for omeprazole, the
active ingredient in Losec/Prilosec. This decision was upheld by the US Appeals Court in late 2003. The first US generic omeprazole product was launched in December
2002. Three further generic versions were launched in the US during 2003. Further information about the status of omeprazole patents and patent litigation is set out on pages 102 and 103.
In July 2003, the European Commission served a Statement of Objections on the Company, referring to alleged infringements of European competition law relating to certain omeprazole intellectual property rights and
associated litigation, details of which are set out on page 103.
Entocort (budesonide) is a locally acting corticosteroid for the treatment of IBD with better tolerability than other corticosteroids and greater efficacy than
aminosalicylic acid medicines.
Pipeline
In addition to exploring new areas of clinical use for Nexium and further strengthening the scope of its use in current areas, we focus
on developing novel approaches to treating GERD, H.pylori, peptic ulcer disease, IBD and other gastrointestinal diseases, such as functional dyspepsia and IBS.
AZD0865 is a compound in a new class, potassium-competitive acid blockers, that has potential to provide faster, more effective and reliable inhibition of gastric acid
secretion than PPIs in the treatment of acid-related diseases, such as GERD. It is now in phase 2.
AZD3355 and AZD9343, which are in pre-clinical development, are reflux inhibitors offering
a potential breakthrough in the treatment of GERD through a new, targeted approach (other than inhibition of acid secretion) by inhibition of transient relaxations of the lower oesophageal sphincter.
Back to Contents
|
AstraZeneca Annual Report and
Form 20-F Information 2003 |
Operational Review |
13 |
|
|
|
|
|
|
|
|
Sales growth is shown in both reported and
underlying performance. Reported performance takes into account all the
factors (including
those which we cannot influence, principally currency exchange rates) that
have affected the results of our business. Underlying performance shows
sales growth
at constant exchange rates (CER) to reflect the volume and price changes of
the geographic and therapy areas and individual products by excluding the
effects
of exchange. A description of the calculation of this measure is set out in
the Financial Review on page 31, together with the reasons for its use.
Key
product performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
|
2003
compared to 2002 |
|
|
2002
compared to 2001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growth |
|
|
|
|
|
Growth |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
due
to |
|
|
due
to |
|
|
|
|
|
|
|
Growth |
exchange |
|
Growth |
exchange |
|
Growth |
Growth |
|
Growth |
Growth |
Sales |
underlying |
effects |
Sales |
underlying |
effects |
Sales |
underlying |
reported |
|
underlying |
reported |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
% |
% |
|
% |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nexium |
3,302 |
|
1,225 |
|
99 |
|
1,978 |
|
1,395 |
|
15 |
|
568 |
|
|
62 |
|
67 |
|
|
n/m |
|
n/m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losec/Prilosec |
2,565 |
|
(2,259 |
) |
201 |
|
4,623 |
|
(985 |
) |
30 |
|
5,578 |
|
|
(49 |
) |
(45 |
) |
|
(18 |
) |
(17 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
76 |
|
8 |
|
5 |
|
63 |
|
17 |
|
2 |
|
44 |
|
|
13 |
|
21 |
|
|
38 |
|
43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
5,943 |
|
(1,026 |
) |
305 |
|
6,664 |
|
427 |
|
47 |
|
6,190 |
|
|
(16 |
) |
(11 |
) |
|
7 |
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AZD7371 is
being evaluated in clinical studies for the treatment of functional GI disorders
in phase 1.
Performance 2003
Reported performance
Reported sales in the GI therapy area fell
by 11%, $721 million, to $5,943 million as increases in Nexium
sales were offset by declines in Losec/Prilosec
sales following patent expiries. Our world leading position in GI was
nevertheless maintained.
Underlying performance
Exchange effects on sales in 2003 amounted
to $305 million. As a consequence, the underlying sales decline at 16%, was
higher than reported.
Global sales performance for Nexium
was strong, particularly in the US where
total prescriptions for Nexium overtook those for Losec/Prilosec
during the year. Sales of Nexium in the US for the full year increased
by 62% to $2,477 million. Total prescriptions for Nexium were up 46%
and its share of total prescriptions in the US PPI market grew by nearly five
percentage points over the course of the year, to 25.3%. It is the most prescribed
PPI among gastro-enterologists in the US and overall the second most prescribed
PPI in the US market. It is the leading product to which patients switch from
other treatments in the anti-secretory category. This performance in the US
was attributed to the strong clinical data available to support the sales
force, Managed Care Access and a nationwide, direct-to-consumer advertising
programme.
Sales of Nexium
outside the US increased by 60% for the
full year, with excellent growth in the major markets in Europe, particularly
France, Germany and the UK, and a strong performance in Australia. On 14 January
2004 the Company announced that the European Mutual Recognition Procedure
for the intravenous formulation of
Nexium had
been successfully completed. An application for approval in the US is under
review by the US Food and Drug Administration (FDA). The global PPI market
continues to grow strongly (around 15% per annum). Nexium share of
the PPI market across major markets was 24% in November 2003.
Losec/Prilosec sales
were down by 49% for the year. The 70% decline in the US was broadly in line
with the prescription trend. At the end of the year Losec/Prilosec
brand share of total omeprazole prescriptions in the US was 27.4% as four
more generic versions of omeprazole entered the market and Proctor & Gamble
launched the first over-the-counter (OTC) version of the brand Losec/Prilosec
OTC. Outside the US sales fell by 16%, although there was strong growth
in Japan where sales increased by 39% from $92 million to $138 million.
Performance
2002
Reported
performance
GI sales grew by 8% from $6,190
million in 2001 to $6,664 million in 2002.
Underlying
performance
Excluding exchange effects,
GI growth was 7%.
Nexium sales
in the US totalled $1.5 billion and in December 2002 accounted for a 21% share
of new prescriptions in the US PPI market. In the rest of the world, sales
were $453 million by the
end of the year Nexium had
been launched in 76 countries. Losec/Prilosec sales fell by 18% to
$4.6 billion. The US decline of 21% was broadly in line with the prescription
trend. Generic competition entered the US market in December 2002. Outside
the US sales fell by 12%, despite strong growth in Japan (up 40% to $92 million)
and Australia (up 25% to $95 million).
Back to Contents
14 |
AstraZeneca Annual Report and
Form 20-F Information 2003 |
Operational Review |
|
|
|
|
|
|
|
|
|
|
|
|
|
Neuroscience |
|
|
|
|
|
|
|
|
|
|
|
We aim to be a leader in neuroscience,
by continuing to deliver a range of life changing medicines in the three key
areas of psychiatry, analgesia and neurology and by maintaining our world
leading position in anaesthesia.
|
Therapy
area overview |
|
|
> |
Neuroscience world market
value: over $85 billion. |
|
Psychiatry
(market value: $37
billion) |
> |
More than six million people
suffer from schizophrenia and 17 million suffer from bipolar disorder
in the major markets. |
|
Neurology
(market value: $20
billion) |
> |
Migraine is one of the 20
leading causes of disability in the world. Stroke is the third leading
cause of death and one of the major causes of serious long term disability
among adults in the US. |
|
Analgesia
(market value: $25
billion) |
> |
Over 46% of adults in the
western world suffer from chronic pain. Pain management is the most common
reason for seeking medical care. |
|
Anaesthesia
(market value: $3 billion) |
> |
Each year more than 26 million
people in the US undergo medical treatment requiring anaesthesia. |
|
|
|
|
2003
in brief |
|
|
> |
Seroquel sales
grew by an underlying 27% to $1.5 billion. |
|
|
> |
Seroquel widely
approved in Europe and the US for the treatment of bipolar mania. |
|
|
> |
Zomig Nasal Spray
launched in the US and Europe. |
|
|
Products
Seroquel (quetiapine)
is an atypical anti-psychotic for the treatment of schizophrenia as an established
first line, first choice treatment for a broad range of symptoms. It combines
excellent efficacy with unique patient tolerability in terms of dose independent
low level of extrapyramidal symptoms providing schizophrenia patients with
benefits in mood symptoms.
This profile has led to the
increased usage of Seroquel,
substantially exceeding market growth across the globe. Seroquel is
the only leading atypical to be gaining market share. In January 2004, the
weekly new US prescriptions for Seroquel exceeded those written for
olanzapine for the first time.
Seroquel is
now widely approved in Europe and the US for the treatment of bipolar mania
offering clinicians rapid control of their patients manic symptoms including psychosis, aggression/agitation
with no emergent depression and a superior side effect profile.
Zomig (zolmitriptan)
is indicated for the treatment of migraine with or without aura which offers
migraine sufferers rapid, reliable relief of headache pain and other migraine
symptoms and is well tolerated. Available in over 80 countries, it is the
leading second-generation triptan with a unique range of formulations to provide
rapid migraine relief.
Zomig Nasal Spray
is a new formulation in a convenient device,
which delivers fast pain relief. The nasal spray has been successfully launched
in Europe and the US. Launch in Japan is expected in 2004.
Zomig Rapimelt is
a rapidly dispersible formulation offering patients a convenient, orange
flavoured
melt-in-the-mouth tablet that now accounts for more than 30% of Zomig sales.
Diprivan (propofol),
the worlds largest
selling general anaesthetic, is used in the induction and maintenance
of anaesthesia
and for intensive care sedation. More than 90% of total Diprivan
sales consist of Diprivan EDTA,
a microbial resistant formulation, which is approved in the majority of
markets.
Naropin (ropivacaine)
is the best selling, long-acting local anaesthetic. With its improved safety
and mobility profile, it is
replacing the previous standard
treatment of bupivacaine in major markets.
Xylocaine (lidocaine)
continues to be the worlds
most widely used local anaesthetic after 50 years on the market.
Information regarding legal
proceedings in relation to Seroquel
is set out on page 104.
Pipeline
We are focused on unmet medical needs in
three key areas.
Psychiatry
Further developments of Seroquel
are planned to show the full spectrum of
clinical benefit in those suffering from mood disorders. In addition, new
formulations are being developed to expand the treatment options available
for patients.
AR-A2 is
a novel 5HT1B autoreceptor antagonist in phase 2 for the treatment of depression
and anxiety and AZD5455 is
a pre-clinical candidate drug with a novel mechanism of action for treating
anxiety.
We have discontinued the development of AZD1134
as a result of its failure to meet the
target profile.
The collaboration with Shanghai Jiaotong
University on neurogenetics, established in 2001, continues to progress
well.
Analgesia
In pain control, our research focus is nociceptive
pain (caused by tissue damage) and neuropathic pain (caused by nerve damage).
Our pipeline includes AZD4282
in phase 1 for the treatment of neuropathic
pain.
We have discontinued the development of AZD3582
and AZD4717 as a result of their
failure to meet our target profile and have returned all rights to these compounds
to NicOx.
Neurology
Cerovive (previously
known as NXY059) is a nitrone with free radical trapping properties under
development for the treatment of acute ischaemic stroke, a disease with substantial
unmet need for new effective therapies. Pre-clinical data show that Cerovive
preserves function and brain tissue, otherwise irreversibly damaged,
when administered after the onset of permanent ischaemia in a model of
Back to Contents
|
AstraZeneca Annual Report
and
Form 20-F Information 2003
|
Operational Review |
15 |
|
|
|
|
Sales growth is shown in both reported
and underlying performance. Reported performance takes into account all
the factors (including those which we cannot influence, principally currency
exchange rates) that have affected the results of our business. Underlying
performance shows sales growth at constant exchange rates (CER) to reflect
the volume and price changes of the geographic and therapy areas and
individual products by excluding the effects of exchange. A description
of the calculation of this measure is set out in the Financial Review
on page 31, together with the reasons for its use. |
|
|
|
Key product performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
|
2003
compared to 2002 |
|
|
2002
compared to 2001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growth |
|
|
|
|
|
Growth |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
due to |
|
|
due to |
|
|
|
|
|
|
|
Growth |
exchange |
|
Growth |
exchange |
|
Growth |
Growth |
|
Growth |
Growth |
Sales |
underlying |
effects |
Sales |
underlying |
effects |
Sales |
underlying |
reported |
|
underlying |
reported |
$m |
$m |
$m |
$m |
$m |
$m |
$m |
% |
% |
|
% |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seroquel |
1,487 |
|
304 |
|
38 |
|
1,145 |
|
457 |
|
3 |
|
685 |
|
|
27 |
|
30 |
|
|
67 |
|
67 |
|
|
|
|
|
|
|
|
|
Local anaesthetics |
466 |
|
|
|
34 |
|
432 |
|
|
|
(2 |
) |
434 |
|
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diprivan |
458 |
|
(7 |
) |
22 |
|
443 |
|
(12 |
) |
(1 |
) |
456 |
|
|
(2 |
) |
3 |
|
|
(3 |
) |
(3 |
) |
|
|
|
|
|
|
|
|
Zomig |
349 |
|
(3 |
) |
24 |
|
328 |
|
52 |
|
3 |
|
273 |
|
|
(1 |
) |
6 |
|
|
19 |
|
20 |
|
|
|
|
|
|
|
|
|
Other |
73 |
|
(5 |
) |
8 |
|
70 |
|
(80 |
) |
1 |
|
149 |
|
|
(7 |
) |
4 |
|
|
(54 |
) |
(54 |
) |
|
|
|
|
|
|
|
|
Total |
2,833 |
|
289 |
|
126 |
|
2,418 |
|
417 |
|
4 |
|
1,997 |
|
|
12 |
|
17 |
|
|
21 |
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
acute stroke. We have commenced two major phase
3 trials known as the SAINT (Stroke Acute Ischaemic NXY Treatment)
trials, which will compare the efficacy and safety of a 72 hour intravenous
infusion of Cerovive given within six hours of the onset of symptoms versus placebo.
ZD0947, a novel non-muscarinic approach to overactive bladder, which is a common condition, is currently in phase 2.
AZD0328, AZD2858 and AZD3102 are new candidate drugs with novel mechanisms of action for
the treatment of Alzheimers
disease, a core strategic focus of our research. Alzheimers disease, the
most common cause of dementia, affects more than 45 million people in the US.
Our collaboration with NPS
Pharmaceuticals continues to progress well with early and late phase pre-clinical projects on metabotropic glutamate receptors covering all major neuroscience disease indications.
We have discontinued the development of AZD5106 as a result of its failure to meet the target profile.
Performance 2003
Reported performance
Reported growth for Neuroscience was 17%, with sales up $415 million from $2,418 million in 2002 to $2,833 million in 2003. The performance of Seroquel accounted for the majority of this increase.
Underlying performance
In the US, sales grew strongly by 14% to $1.7 billion. In the rest of the world sales also grew strongly by 10% to deliver global sales of $2.8 billion, a combined growth of 12% worldwide.
In the US, Seroquel sales reached $1,134 million for the full year, an increase of 22%. Total prescriptions for Seroquel in the US were up 34% for the year. The share of total prescriptions for Seroquel in the US
anti-psychotic market reached a new high at 21.2% in December, up 3.4 percentage points compared to 2002. Seroquel was the only product among the three leading brands
to increase its market share in 2003. Sales growth in the last quarter of the year was lower than the underlying prescription trend implying some reduction in wholesaler stocking.
Sales of Seroquel in markets outside the US increased 45% for the full year. Sales in Europe were up 40%, and sales in Japan rose 67%.
Japan is now the second largest market for Seroquel where it is sold by Fujisawa and continued growth is anticipated through the development of new claims, new
indications, new formulations and increasing penetration of a growing schizophrenia market.
Zomig sales for the full year fell by 1% to $349 million (global market share remains at 16%); growth was 7% outside the US, whilst sales were down 8% in the US.
Rapimelt continued to grow strongly in southern Europe and Japan and now contributes more than half of brand sales in these markets. Zomig Nasal Spray launches continue and the introduction of this formulation in the US helped drive sales in the last quarter.
Sales of Diprivan worldwide, at $458 million, fell by 2%. The rate of decline since patent expiry has slowed.
Performance 2002
Reported performance
Neuroscience sales increased by 21% to $2,418 million in 2002, an overall increase of $421 million.
Underlying performance
Underlying sales growth was also 21%, with minimal exchange effects.
Seroquel sales grew strongly by 67% to $1.1 billion. US sales also grew by 67% to $927 million. Market share of new prescriptions in the US market was 19.2% by the end of
the year, up 3.7 percentage points in the year making it the only major anti-psychotic with increasing share in this key market.
Zomig sales grew by 19% to $328 million (a global market share of 16%) with the bulk of the increase arising in Japan (up 67% to $14 million), France (up 29% to $60 million)
and the US (up 20% to $177 million).
The sales increase for Diprivan in the US (up 3% to $216 million) was the result of growth in the underlying demand for propofol.
However, global sales fell by 3% to $443 million.
Back to Contents
16 |
AstraZeneca Annual Report
and
Form 20-F Information 2003
|
Operational Review |
|
|
We aim to maintain our position as a world leader in cancer treatment through continued growth for Casodex, Arimidex and Zoladex, further launches of newer products, Faslodex and Iressa and
the successful introduction of novel approaches currently in the pipeline.
Therapy area overview |
|
|
> |
World market value: cancer therapies: $18 billion. |
|
|
> |
Globally, over 12 million people are diagnosed with cancer each year. |
|
|
> |
Cancer is predicted to be the
leading cause of death in the US by 2005. |
|
|
|
|
2003
in brief |
|
|
> |
Rapid uptake of Iressa since
first launch in Japan in 2002 and the US in 2003. Over 100,000 patients
treated since
launch. |
|
|
> |
Positive opinion on approvability
of Faslodex from
the CPMP in 2003. |
|
|
> |
Arimidex rapidly
moving towards replacing tamoxifen as the standard of care in breast
cancer. |
|
|
> |
Anticipated erosion of Nolvadex sales
following expiration of US marketing exclusivity in early 2003. |
|
|
Products
Casodex (bicalutamide) is the worlds
leading anti-androgen therapy for the treatment of prostate cancer. Recent growth
of Casodex has largely been driven by its use to treat early stage prostate cancer (EPC). Casodex 150mg has received regulatory approval for the treatment of EPC in over 50 markets to date. In the US, in 2002 the FDA did not approve this new indication. It is under review in
several other markets. Elsewhere, the rapid uptake of Casodex in EPC as a favoured therapy is a demonstration of physicians growing confidence in the efficacy and tolerability
profile of Casodex as a treatment in all stages of
prostate cancer.
Zoladex (goserelin acetate) is one of the worlds
best selling luteinising-hormone releasing hormone (LHRH) agonists for the treatment
of prostate cancer, breast cancer and gynaecological disorders. It has been approved
in 24 countries for the adjuvant treatment of early stage pre-menopausal breast
cancer, as an alternative to
and/or in addition to chemotherapy. Zoladex offers the proven disease free survival benefits of cytotoxics but with improved patient tolerability. In prostate cancer,
Zoladex in the adjuvant setting is the only LHRH agonist shown to improve overall survival following radical prostatectomy or radiotherapy.
Iressa (gefitinib) is a novel anti-cancer agent that acts to block signals for cancer cell growth and survival. Clinical trials with Iressa as monotherapy for non-small cell lung cancer (NSCLC) showed response rates and disease control in approximately half of patients and symptomatic benefit in over 40% of patients
treated. Regulatory filings based on monotherapy began in December 2001. Since first launch in Japan in 2002, uptake of Iressa has been rapid, reflecting the high
unmet need in NSCLC and the significant benefit seen with Iressa. In the US, the FDA granted Iressa approval in May 2003, conditional upon conduct of further specified studies, and it is now approved in more than 15 countries. We are pursuing monotherapy submissions for Iressa
in all other major markets, including Europe where filing was submitted in the first quarter of 2003 and definitive clinical studies are underway to secure unconditional approval in the US. To date, over
100,000 patients have been treated with Iressa. In Japan, reporting of interstitial lung disease associated with Iressa
has
stabilised at 3%, a rate comparable to other therapies. By contrast, the reported rate is below 0.5% outside Japan.
Arimidex (anastrozole) is the worlds
leading aromatase inhibitor. The ATAC study in breast cancer, first reported
in December 2001 and then subsequently updated in December 2002, showed that Arimidex is significantly more effective in prolonging
disease-free survival and has important tolerability benefits compared with tamoxifen. Based on the ATAC study, Arimidex is rapidly moving towards replacing tamoxifen
as the standard of care in breast cancer. Regulatory approvals for Arimidex in the adjuvant treatment of early breast cancer in post-menopausal women have been
granted in 57 markets including the US, Europe and Japan. Early breast cancer represents a major new market for Arimidex and is driving significant growth. Recent
data from a major trial has shown significant improvements in efficacy and tolerability for women who switch therapy from tamoxifen to Arimidex before their standard
five year course is complete. Arimidex is also approved for the treatment of advanced breast cancer in post-menopausal women based on demonstrated advantages over
tamoxifen and megestrol acetate.
Faslodex (fulvestrant) is a new type of endocrine therapy, an oestrogen receptor antagonist, with no agonist effects, that down regulates the oestrogen receptor. It
was launched in the US in May 2002 and subsequently in Brazil in July 2003, for the second line treatment of hormone receptor positive advanced breast cancer in post-menopausal women. Due to its novel mode of action, Faslodex offers an effective, well tolerated treatment option for patients, with the compliance and convenience benefits of a once monthly injection. In November 2003, the Committee for
Proprietary Medicinal Products (CPMP) gave a positive opinion on the approvability of Faslodex in Europe. We currently expect to receive European approval in early
2004.
Nolvadex (tamoxifen citrate) remains the worlds
most commonly prescribed breast cancer therapy and the first medication approved
in the US for reducing the incidence of breast cancer in women at high risk of
developing the disease. US marketing exclusivity for tamoxifen expired during
2003.
|
AstraZeneca Annual Report and
Form
20-F Information 2003 |
Operational Review |
17 |
|
|
|
|
Sales growth is shown in both reported
and underlying performance. Reported performance takes into account all
the factors (including those which we cannot influence, principally currency
exchange rates) that have affected the results of our business. Underlying
performance shows sales growth at constant exchange rates (CER) to reflect
the volume and price changes of the geographic and therapy areas and
individual products by excluding the effects of exchange. A description
of the calculation of this measure is set out in the Financial Review
on page 31, together with the reasons for its use. |
|
|
|
|
|
Key product performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
|
2003 compared to 2002 |
|
|
2002 compared to 2001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growth |
|
|
|
|
|
Growth |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
due to |
|
|
|
|
|
due to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growth |
|
exchange |
|
|
|
Growth |
|
exchange |
|
|
|
|
Growth |
|
Growth |
|
|
Growth |
|
Growth |
|
Sales |
|
underlying |
|
effects |
|
Sales |
|
underlying |
|
effects |
|
Sales |
|
|
underlying |
|
reported |
|
|
underlying |
|
reported |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
% |
|
% |
|
|
% |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zoladex |
869 |
|
6 |
|
69 |
|
794 |
|
80 |
|
(4 |
) |
718 |
|
|
|
|
9 |
|
|
12 |
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casodex |
854 |
|
140 |
|
70 |
|
644 |
|
81 |
|
2 |
|
561 |
|
|
22 |
|
33 |
|
|
15 |
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arimidex |
519 |
|
152 |
|
36 |
|
331 |
|
141 |
|
2 |
|
188 |
|
|
46 |
|
57 |
|
|
75 |
|
76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Iressa |
228 |
|
152 |
|
9 |
|
67 |
|
69 |
|
(2 |
) |
|
|
|
227 |
|
240 |
|
|
n/m |
|
n/m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nolvadex |
178 |
|
(314 |
) |
12 |
|
480 |
|
(134 |
) |
(4 |
) |
618 |
|
|
(66 |
) |
(63 |
) |
|
(21 |
) |
(22 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Faslodex |
77 |
|
42 |
|
|
|
35 |
|
35 |
|
|
|
|
|
|
120 |
|
120 |
|
|
n/m |
|
n/m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
18 |
|
(1 |
) |
1 |
|
18 |
|
(8 |
) |
|
|
26 |
|
|
(6 |
) |
|
|
|
(31 |
) |
(31 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
2,743 |
|
177 |
|
197 |
|
2,369 |
|
264 |
|
(6 |
) |
2,111 |
|
|
8 |
|
16 |
|
|
12 |
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pipeline
We focus on the development of new agents and novel approaches across a wide range of cancers that include targeting tumour vasculature to control tumour growth, invasion and spread. The potential of Iressa to show benefits in a number of tumours in addition to expanding use of Iressa in NSCLC is
being investigated with particular focus on head and neck, breast and colorectal cancers.
ZD6474 and AZD2171 are anti-angiogenics in phase 2 and phase 1 respectively which target
the growth of blood vessels of tumours. AZD9935 is another anti-angiogenic in pre-clinical development.
ZD6126 is a vascular targeting agent in phase 2 which targets and destroys the vasculature of tumours, working to destroy the tumour from within. AZD4440, another vascular targeting agent, is in pre-clinical development. ZD4054 is an endothelin
antagonist in phase 2 that works by targeting the endothelin A receptor, inhibiting tumour cell proliferation.
AZD0530 and AZD0424, anti-invasives in phase 1 and pre-clinical respectively, are designed
to prevent tumours from spreading. AZD3409 is a prenylation inhibitor in phase 1 designed to inhibit the proliferation of cancer cells. AZD5438 is a novel selective cyclin dependent kinase inhibitor in phase 1 targeted at proliferating tumour cells. AZD1152, an aurora kinase inhibitor designed to target cell division in proliferating tumours, is now in pre-clinical development. AZD6244, also in
pre-clinical development, is a selective MEK inhibitor targeting proliferating tumour cells.
Performance 2003
Reported performance
Oncologys
reported sales growth was 16% as revenues grew by $374 million from $2,369 million
to $2,743 million.
Underlying performance
Oncology sales grew by 8% to $2,743 million with growth from Casodex, Arimidex
and Iressa offsetting the decline in Nolvadex.
Casodex sales outside the US increased by 23%, driven by good growth in Europe (up 20%) and Japan (up 28%). Growth in Europe and Japan is driven by the expanding use of
Casodex in early stage disease. In the US (where the market for anti-androgen therapy of advanced prostate cancer is maturing) the underlying demand is broadly
unchanged with Casodex share of total prescriptions in this market being 83% in December. US sales growth of 18% is principally a reflection of wholesaler destocking
in 2002.
Sales of Arimidex increased by 47% in the US and by 45% in the rest of the world, including a 61% increase in Japan.
Sales of Iressa reached $228 million during the year including sales in Japan of $101 million. Iressa sales in the US since launch in May 2003 totalled $102 million. In December, more than 7,300 retail prescriptions were dispensed in the US, bringing the total for the year to over
42,000.
Faslodex sales of $77 million reflect a steady increase in usage for the treatment of advanced breast cancer in the US market.
Underlying sales of Zoladex were maintained at $869 million. US sales of Nolvadex
declined by $296 million to
$41 million following patent expiry in February 2003. Sales of Nolvadex elsewhere were $137 million.
Performance 2002
Reported performance
Sales grew by $258 million to $2,369 million in 2002, an increase of 12%.
Underlying performance
Minimal exchange effects meant that underlying sales growth was unchanged from reported performance at 12%.
Sales of Casodex outside the US increased by 42% to $464 million in 2002. Prescriptions for Casodex grew by some 5% in the US market. The reported sales decline in the US of 23% to $180 million reflected an adverse comparison against wholesaler stockbuilding which occurred at the
end of 2001.
Arimidex enhanced its leading position in the aromatase inhibitor market. Monthly prescriptions in the US doubled since December 2001, driving the 127% increase in US sales
for the year to $134 million. Sales outside the US increased by 51%.
Sales of Faslodex reached $35 million after eight months in the US, representing the most successful US launch of a hormonal agent for
breast cancer in the last 20 years.
Sales of Iressa for the treatment of inoperable or recurrent NSCLC reached $67 million. Zoladex was the leading oncology product with $794 million sales and growth of 12%. US revenues for Nolvadex fell 27% to $337 million, as sales of our tamoxifen products fell as a result of the expiry of our distribution agreement with Barr Laboratories.
Back to Contents
18 |
AstraZeneca Annual
Report and
Form 20-F Information 2003 |
Operational Review |
|
|
|
|
|
|
Respiratory and Inflammation
(R&I) |
|
|
We aim to build on our leading position in asthma treatment through the growth of key products, particularly Symbicort, new indications and market launches and the successful introduction of novel approaches to other areas of inflammatory disease such as chronic obstructive pulmonary disease (COPD) and rheumatoid
arthritis.
Therapy area overview |
|
|
> |
R&I world market value: over $30 billion. |
|
|
> |
The World Health Organisation
estimates that 100 million people
worldwide suffer from asthma and
that
COPD is the fourth greatest
cause of death globally. |
|
|
2003 in brief |
|
|
> |
Clinical data confirm efficacy and
safety
of Symbicort as
an adjustable maintenance treatment for
asthma. |
|
|
> |
Filing submitted in Europe for
Symbicort as
a single inhaler
treatment of asthma. |
|
|
> |
First approval for Symbicort for
COPD
in Europe. |
Products
Symbicort (budesonide/formoterol) is an innovative and effective asthma treatment that offers easily adjustable dosing. This will enable doctors to tailor a
patients treatment of this
variable disease with a single inhaler for all situations; for baseline therapy
for increasing the dose during worsening attacks as well as for acute situations,
thereby achieving greater efficacy than with fixed doses. It is a combination
of the inhaled corticosteroid, budesonide, and the fast onset, long-acting bronchodilator,
formoterol, in the Turbuhaler dry powder inhaler. Symbicort Turbuhaler is approved in 85 countries and launched in 62
countries. Encouraging clinical results confirm the efficacy and safety of Symbicort as an adjustable maintenance treatment for asthma providing superior asthma
control compared to traditional fixed dose treatment. Phase 3 trials in asthma are progressing in the US. In 2003 Symbicort became the first fixed combination of
inhaled corticosteroid and fast onset, long-acting bronchodilator approved for COPD in Europe.
In November 2003 a regulatory application in Europe was submitted for the new asthma treatment concept Symbicort Single inhaler Therapy
(SiT), which is a further development of Symbicort adjustable maintenance dosing.
Pulmicort (budesonide) is a corticosteroid anti-inflammatory inhalation drug that helps prevent symptoms and improves the control of asthma. Pulmicort remains one of the worlds
leading asthma medicines and is available in several forms, including
the Turbuhaler dry powder inhaler, a pressurised metered dose inhaler and the Respules suspension for the treatment of children. The START study is a five year global trial and the largest of its kind involving more than 6,000 patients in 31 countries, with the objective of evaluating whether early intervention with
inhaled glucocorticosteroids will affect the evolution of newly diagnosed asthma. The first three year clinical results of the study demonstrate the benefits of Pulmicort showing high efficacy and a good safety profile in the early treatment of asthma in adults and children preventing serious attacks.
Pulmicort Respules is the first and only nebulised corticosteroid in the US for children as young as 12 months. It has
grown strongly as a result of its beneficial profile and it has strengthened its position as the inhaled corticosteroid of choice for the treatment of children under five with asthma.
Oxis (formoterol) is a beta-agonist asthma therapy with a fast onset and long-acting clinical effect for the relief of asthma symptoms when corticosteroid treatment
is not adequate. The RELIEF study, comparing Oxis to salbutamol/albuterol for exacerbation and asthma symptom control, was published in November 2003. Encompassing
more than 18,000 patients, the study showed that Oxis is a more effective reliever therapy and at least as safe as salbutamol/albuterol.
Rhinocort (budesonide) is a nasal steroid treatment for allergic rhinitis (hay fever), perennial rhinitis and nasal polyps. It combines powerful efficacy with rapid
onset of action and minimal side effects and is available as a once daily treatment in the Rhinocort Aqua pressurised metered dose inhaler and the Turbuhaler dry powder inhaler forms.
Accolate (zafirlukast) is an oral leukotriene receptor antagonist for the treatment of asthma available in most markets.
Pipeline
Symbicort phase 3 development is progressing in the US in the pressurised metered dose inhaler for asthma and COPD.
Development of Symbicort to further enhance its competitive differentiation in asthma is underway.
Four new compounds have entered pre-clinical development. They are targeted at asthma (AZD3778, AZD2098, AZD1981) and COPD (AZD6067). Compounds currently in clinical development include AZD8309 and AZD9056, each of which have novel mechanisms of action and are targeted at rheumatoid
arthritis. AZD3342,
AZD0902, AZD8309 and AZD9056 are all in pre-clinical development for COPD. AZD0902 for rheumatoid arthritis and AZD9056
and AZD8955, for osteoarthritis are also in pre-clinical development.
We have discontinued the development of AZD7140 and AZD0275 as a result of their failure to meet the target profile.
Back to Contents
|
AstraZeneca Annual
Report and
Form 20-F Information 2003 |
Operational Review |
19 |
|
|
|
|
Sales growth is shown in both reported
and underlying performance. Reported performance takes into account all
the factors (including those which we cannot influence, principally currency
exchange rates) that have affected the results of our business. Underlying
performance shows sales growth at constant exchange rates (CER) to reflect
the volume and price changes of the geographic and therapy areas and
individual products by excluding the effects of exchange. A description
of the calculation of this measure is set out in the Financial Review
on page 31, together with the reasons for its use. |
|
|
|
|
|
Key product performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
|
2003 compared to 2002 |
|
|
2002 compared to 2001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growth |
|
|
|
|
|
Growth |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
due to |
|
|
|
|
|
due to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growth |
|
exchange |
|
|
|
Growth |
|
exchange |
|
|
|
|
Growth |
|
Growth |
|
|
Growth |
|
Growth |
|
Sales |
|
underlying |
|
effects |
|
Sales |
|
underlying |
|
effects |
|
Sales |
|
|
underlying |
|
reported |
|
|
underlying |
|
reported |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
% |
|
% |
|
|
% |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pulmicort |
968 |
|
101 |
|
55 |
|
812 |
|
36 |
|
10 |
|
766 |
|
|
12 |
|
19 |
|
|
5 |
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Symbicort |
549 |
|
180 |
|
70 |
|
299 |
|
206 |
|
10 |
|
83 |
|
|
61 |
|
84 |
|
|
248 |
|
260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rhinocort |
364 |
|
56 |
|
9 |
|
299 |
|
33 |
|
1 |
|
265 |
|
|
19 |
|
22 |
|
|
13 |
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oxis |
120 |
|
(14 |
) |
14 |
|
120 |
|
(11 |
) |
4 |
|
127 |
|
|
(12 |
) |
|
|
|
(9 |
) |
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accolate |
107 |
|
(40 |
) |
3 |
|
144 |
|
2 |
|
(1 |
) |
143 |
|
|
(28 |
) |
(26 |
) |
|
2 |
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
153 |
|
(8 |
) |
17 |
|
144 |
|
(14 |
) |
3 |
|
155 |
|
|
(6 |
) |
6 |
|
|
(9 |
) |
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
2,261 |
|
275 |
|
168 |
|
1,818 |
|
252 |
|
27 |
|
1,539 |
|
|
15 |
|
24 |
|
|
16 |
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance 2003
Reported performance
Reported growth for R&I was
24%. Sales increased
from $1,818 million to $2,261 million, with Pulmicort and Symbicort driving the improvement.
Underlying performance
After excluding exchange effects
of $168 million, R&I
sales grew by 15% during 2003.
Symbicort sales for the full year increased 61% to $549 million, as the product continues to gain share in the rapidly growing market for fixed combination asthma
treatments. Launches for the COPD indication as well as promotion of its specific adjustable maintenance dose regimen for asthma treatment, are fuelling this growth.
Pulmicort sales for the full year increased by 12% as a result of growth in the US market (up 41%). Pulmicort Respules
accounts for most of this growth, with total prescriptions in the US market up 32% for the year.
Rhinocort sales in the US were up 27%, as growth in Rhinocort Aqua (58%) continues to more
than offset the sales lost from the discontinuation of the Rhinocort Nasal Inhaler formulation.The sales growth in the US accounts for almost all of the global
increase of 19% in Rhinocort sales.
Performance 2002
Reported performance
Reported sales grew by 18% from $1,539 million in 2001 to $1,818 million in 2002.
Underlying performance
After adjusting for the positive benefits of exchange of $27 million, sales increased by 16%.
Symbicort sales for the year were $299 million, an increase of nearly 250%.
Pulmicort Turbuhaler sales globally reflect the declining inhaled bronchial steroid market in the face of growing acceptance of combination products. However, this was more
than offset by the 75% growth of Pulmicort Respules in the US, enabling Pulmicort to achieve a 5% global sales increase for the full year to $812 million.
Rhinocort sales in the US increased by 19% for the year to $211 million, fuelled chiefly by share gains for Rhinocort
Aqua, which increased revenue by 39%. Sales were flat in the rest of the world resulting in a global 13% increase in the Rhinocort franchise sales to $299 million in 2002.
Back to Contents
20 |
AstraZeneca Annual
Report and
Form 20-F Information 2003 |
Operational Review |
|
|
|
|
|
Infection |
Sales growth
is shown in both reported and underlying performance. Reported performance
takes
into account all the factors
(including those which we cannot influence, principally currency exchange
rates) that have affected the results of
our business. Underlying performance shows sales growth at constant
exchange rates (CER) to reflect the volume and
price changes of the geographic and therapy areas and individual products
by excluding the effects of exchange. A
description of the calculation of this measure is set out in the Financial
Review on page 31, together with the reasons for
its use. |
|
|
|
|
We aim to build a franchise
in the treatment of infectious diseases by increasing sales of Merrem and by exploiting our traditional, structural and genomic-based
technologies.
Key product performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
|
|
|
|
2002 |
|
2001 |
|
|
2003 compared to 2002 |
|
|
2002 compared to 2001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
$m |
|
Growth
underlying
$m |
|
Growth
due to
exchange
effects
$m |
|
Sales
$m |
|
Growth
underlying
$m |
|
Growth
due to
exchange
effects
$m |
|
Sales
$m |
|
|
Growth
underlying
% |
|
Growth
reported
% |
|
|
Growth
underlying
% |
|
Growth
reported
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merrem |
346 |
|
46 |
|
15 |
|
285 |
|
59 |
|
(1 |
) |
227 |
|
|
16 |
|
21 |
|
|
26 |
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
130 |
|
(36 |
) |
11 |
|
155 |
|
(17 |
) |
1 |
|
171 |
|
|
(24 |
) |
(17 |
) |
|
(9 |
) |
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
476 |
|
10 |
|
26 |
|
440 |
|
42 |
|
|
|
398 |
|
|
2 |
|
8 |
|
|
11 |
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Therapy area overview |
|
|
> |
Infection world market value: $46 billion. |
|
|
> |
Infectious diseases cause more than 11 million deaths each year. |
|
|
> |
World demand for antibiotics
remains high due to escalating resistance and the increased risk of serious
infections. |
|
|
2003 in brief |
|
|
> |
Steady underlying growth for Merrem in
the US (7%) and globally (16%). |
|
|
> |
New laboratories opened
in Bangalore, India, dedicated to finding a new treatment for tuberculosis. |
Products
Merrem/Meronem (meropenem) is an intravenous carbapenem antibiotic for the treatment of serious hospital acquired infections. Clinical studies are in place to support
a supplementary new drug application in the US in 2004 aimed at securing an indication for skin and skin structure infections in 2005.
Pipeline
Our R&D facility in Boston,
US is progressing a range of projects using traditional, structural and genomic
based technologies to deliver
innovative antibacterial agents to the infection pipeline.
In June 2003, our new R&D facility opened in Bangalore,
India. Work there is dedicated to finding a new treatment for tuberculosis, an
infectious disease that is newly diagnosed in approximately two million people
every year in India and over eight million people worldwide.
Performance 2003
Reported performance
Sales grew by 8% on a reported basis, rising by $36 million from $440 million to $476 million.
Underlying performance
Sales of Merrem grew steadily by a further 16% for the year to $346 million. Growth was largely attributable to sales outside the US,
which were up 19% to $283 million. In the US sales grew by 7% to $63 million.
Performance 2002
Reported performance
Infection sales rose from $398 million in 2001 to $440 million in 2002, a reported increase of 11%.
Underlying performance
The underlying performance of 11% growth was driven by sales of Merrem which grew by 26% for the full year to $285 million, chiefly on
the 31% increase in sales outside the US. In the US sales grew by 9% to $59 million. Other infection products declined by 9%.
Back to Contents
|
AstraZeneca Annual Report and Form 20-F Information 2003 |
Operational Review |
21 |
|
|
|
|
Geographic Review |
Sales growth is shown in
both reported and underlying performance. Reported performance takes
into account all the factors (including those which we cannot
influence, principally currency exchange rates) that have affected the
results of our business. Underlying
performance shows sales growth at constant exchange rates (CER) to reflect
the volume and price changes of the
geographic and therapy areas and individual products by excluding the
effects of exchange. A description of the calculation
of this measure is set out in the Financial Review on page 31, together
with the reasons for its use. |
|
Geographic sales performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
|
|
|
|
2002 |
|
2001 |
|
|
2003
compared to 2002 |
|
|
2002
compared to 2001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales $m |
|
Growth underlying $m |
|
Growth due to exchange effects $m |
|
Sales $m |
|
Growth underlying $m |
|
Growth due to exchange effects $m |
|
Sales $m |
|
|
Growth underlying % |
|
Growth reported % |
|
|
Growth underlying % |
|
Growth reported % |
|
|
|
|
|
|
|
|
|
US |
8,747 |
|
(608 |
) |
4 |
|
9,351 |
|
868 |
|
|
|
8,483 |
|
|
(6 |
) |
(6 |
) |
|
10 |
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe |
6,709 |
|
75 |
|
939 |
|
5,695 |
|
244 |
|
213 |
|
5,238 |
|
|
2 |
|
18 |
|
|
5 |
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japan |
1,189 |
|
129 |
|
83 |
|
977 |
|
181 |
|
(55 |
) |
851 |
|
|
14 |
|
22 |
|
|
21 |
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROW |
2,204 |
|
294 |
|
92 |
|
1,818 |
|
215 |
|
(47 |
) |
1,650 |
|
|
16 |
|
21 |
|
|
13 |
|
10 |
|
|
|
|
|
|
|
|
|
Total |
18,849 |
|
(110 |
) |
1,118 |
|
17,841 |
|
1,508 |
|
111 |
|
16,222 |
|
|
|
|
6 |
|
|
9 |
|
10 |
|
|
|
|
|
|
|
|
|
|
North America
US
Sales fell by 6% ($604 million) in
2003 from $9,351 million to $8,747 million following the loss of $2,646 million
in sales to generic competition for Losec/Prilosec, Zestril and
Nolvadex. The US
remains the worlds
largest market for pharmaceuticals and US consumers continue to drive demand
and reward innovation especially for medicines that prolong, or improve the quality
of, life. Our sales in the US of $8.7 billion reflect our commitment to driving
growth in this key market. The US represents 46% of our
total sales. AstraZeneca is currently the fifth largest pharmaceutical company
in the US with our sales representing a 5% share of US prescription pharmaceutical
sales. Underpinning our success in the highly competitive US market were the
top-tier
performances of Nexium, Seroquel and Toprol-XL,
with combined sales of $4.5 billion. Nexium surpassed the $2 billion sales
mark and now holds the position of the fastest growing PPI in terms of total
prescriptions in a highly competitive market. Total US sales were $2,477 million
for 2003 ($1,525 million for 2002) and total Group sales were $3,302 million
for 2003 ($1,978 million for
2002). Toprol-XL became the most prescribed anti-hypertensive among cardiologists
and Seroquel continued to gain share in the atypical anti-psychotic market.
Other key growth products, including Arimidex, Pulmicort Respules and
Rhinocort Aqua,
outperformed the market in both sales and prescriptions. As expected, sales of Losec/Prilosec continued
to decline as four more generic versions of omeprazole entered the market and
Proctor & Gamble launched the first
over-the-counter (OTC) version of the brand
Losec/Prilosec OTC. Iressa was
launched in May and has become an important medicine in the treatment of non-small
cell lung cancer. Crestor was launched in September into the intensely
competitive
lipid-lowering market and is now already the third
largest statin in the US for patients who took statin therapy for the first time
or who switched from another statin. We submitted our regulatory package for
Exanta for
chronic indications to the FDA in December 2003.
Our US sales force of 5,700 people is the sixth largest in the US. Investment in technology, strategic realignment and award winning training has significantly increased productivity and customer satisfaction.
During 2003 we entered into an arrangement whereby, from January 2004, a third party will manage the promotion, marketing and distribution of all Zomig formulations to provide greater field force coverage in this key market.
In 2003, we settled the investigation into the sales and marketing of Zoladex between
1993 and 1996 with the Department of Health &
Human Services. This involved the payment of $355 million and, under the terms of the settlement, the Company pleaded guilty to one count of violating the Prescription Drug Marketing Act. In addition, our sales and marketing function and all other
relevant employees received additional code of conduct and policy training as part of the Corporate Integrity Agreement with the Office of Inspector General of the US Department of Health & Human
Services. Further information is set out on page
104.
Efficiency and effectiveness
In 2003, we undertook and completed a number of projects focused on efficiency and effectiveness.
We restructured our commercial organisation from a therapy area to a brandled structure, adding new business units dedicated to emerging brands and mature
products. We consolidated the number of advertising agencies we use, resulting in substantial cost-savings for the business.
We also established a new External Scientific Affairs function dedicated to enhancing relationships with key opinion leaders, academic and healthcare institutions and importantly, the FDA. Plans are also underway to
locate an office close to the FDA to share scientific expertise on areas of common interest to the FDA.
Passage of a Medicare prescription drug benefit
In November 2003, the US Congress passed bipartisan legislation to add a prescription drug benefit to the Medicare programme. This new legislation is the first major change to Medicare in nearly 40 years. The drug
benefit programme will take full effect in January 2006 although discount cards will be available in 2004 and 2005. We believe aspects of the law will have a positive incremental impact on patients and the industry in 2004. The final regulations for
the laws implementation in
2006 and market forces will ultimately determine the full effect on our business.
We anticipate that the issue of cross border movement of products into the US and coverage for the uninsured will remain contentious among politicians, the media and special interest groups during 2004. We will
continue to provide free and discounted medicines to qualifying patients through our Prescription Partnership Programmes. State Medicaid programmes will continue to be a challenge to the market in the US but innovative partnering opportunities with
key states are in development to mitigate downward pressures on reimbursement.
Back to Contents
22 |
|
AstraZeneca Annual Report and
Form 20-F Information 2003 |
|
Operational Review |
|
|
|
|
|
|
|
|
|
|
Geographic Review continued |
|
|
|
|
|
|
|
|
|
|
Canada
In 2003, underlying sales growth in
Canada was 14% (reported growth of 25%) with total sales of US$712 million.
We rank number three in Canada with a 7% market share. Canada was the first
market to launch
Crestor and it has already achieved 45% of new prescriptions in the
private payer market. Iressa was also launched in late 2003. Symbicort and Nexium continued
their strong performance as they both built market share. Atacand and Seroquel continued
to enjoy double digit growth with underlying increases of 29% and 42% (reported
growth of 44% and 55%) respectively. The oncology group grew 13% due to the continued
success of Casodex and Arimidex. AstraZeneca ranks number one in
Canada in oncology with a 21% market share.
Rest of the World
Europe
The market environment in Europe is increasingly challenging with governmental initiatives being taken to cut prices, particularly in Germany, Italy and the Netherlands. Generic substitution in Europe is being
encouraged through legislation and in 2003, this has been particularly emphasised in France and the Netherlands. AstraZeneca is ranked fifth in the European pharmaceutical market with a market share of 5%. Sales reached $6.7 billion for the year
resulting in an underlying 2% increase in Europe (18% reported growth). Strong sales performance in France (up 9% on an underlying basis and 28% on a reported basis to $1.5 billion) and Spain (up 12% on an underlying basis and 32% on a reported
basis to $616 million) offset declining sales in the UK, the Netherlands and Sweden. Our increased focus in central and eastern Europe has resulted in a strong growth (19%) ahead of market growth for 2003.
Our sales growth in Europe was driven particularly by Nexium (+55% underlying, +80% reported), Symbicort (+53% underlying, +77% reported), Casodex (+20% underlying, +40% reported), Arimidex (+40% underlying, +63% reported) and Seroquel (+40% underlying, +60% reported) which
offset the impact of patent expiries, specifically Losec/Prilosec, Plendil and
Zestril in the UK, Sweden and the Netherlands. The underlying decrease in sales in Europe of these three products amounted to $390 million of which Losec/Prilosec alone accounted for $305 million. This decrease was offset by the
effects of exchange of $210 million and $149
million, respectively.
Crestor has exceeded expectations in most countries where it has been launched. In sales value, Crestor is, after seven months, the most successful product launch ever in the UK and the Netherlands. We have also seen strong uptake of market share for total prescriptions, particularly in the Netherlands, Ireland and Finland.
The transformation of our portfolio due to strong contribution of new products and the fast development of central and eastern European markets constitute a solid platform for future growth.
Japan
We continued to be the fastest growing major pharmaceutical company in Japan. AstraZeneca was ranked 14th by sales at the end of 2003. Sales reached $1,189 million, up from $977 million in 2002. A strongly performing
product range in oncology including Arimidex, Casodex and Iressa, plus continued strong growth in Losec/Prilosec (up 39% on an underlying basis and 50% on a
reported basis) drove an underlying 14% sales growth and a reported growth of 22%. After a weak first quarter, Iressa sales in Japan grew steadily in 2003. The growth
is based on growing experience in Japanese patients and increasing confidence in second line treatment among oncology specialists. We have initiated a number of studies to further investigate the use of Iressa in Japan and will continue to work with the Ministry of Health, Labour and Welfare to ensure that Iressa is used appropriately in all patients who can be expected to benefit from the drug.
Asia Pacific (excluding Japan)
During 2003 we have achieved continued strong sales growth in the region despite the impact of the SARS outbreak earlier in the year. Sales reached $918 million with an underlying growth rate of 18%. Our continued
investment in China, which resulted in above market performance (+37% on both underlying and reported basis), included increased manufacturing and commercial capability. Strong growth also continued in South Korea and India. Across the region the GI
portfolio performed strongly. In Australia, Nexium sales grew strongly (+229% underlying, +279% reported) and its market share reached 25% in December.
Crestor and Iressa were
successfully launched in a number of markets in Asia Pacific during 2003. This region represents an area of potential continued high growth for the future.
Latin America
The region has during 2003 continued to grow strongly with 17% underlying growth (6% on a reported basis) and sales reaching $515 million. Mexico with 24% underlying growth (12% reported) and Venezuela with 44%
underlying growth (15% reported) provided strong sales growth with AstraZeneca being the fastest growing major pharmaceutical company in those countries. In Brazil, Chile, Uruguay and Peru, we grew significantly above market growth.
Crestor was successfully launched in, among others, Mexico, Argentina and Venezuela and it rapidly achieved a 24% volume market share in Mexico six months after its
launch.
Back to Contents
|
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Operational Review |
23 |
|
|
|
Research
and Development (R&D) |
|
|
R&D continues to focus on improving the
productivity and efficiency of new drug discovery and development. We are
simplifying our processes and continually review our plans and decision-making.
We have streamlined portfolio reviews and target our strategic investment
on areas directly linked to increased quality and output of new products.
In Discovery, we aim to increase the output of high quality candidate drugs (CDs) with a lower risk of failure in development. In Development, we aim to develop better drugs faster.
During 2003 we significantly increased the number of new Discovery projects, delivered a more consistent flow of good quality CDs, progressed a greater number of products to a robust clinical proof of principle stage
and increased the number of drugs reaching human testing.
As described in the Development Pipeline table on pages 24 and 25, we now have 12 projects in phase 2 and 28 projects in phase 3 development.
AstraZeneca employs around 11,600 people in R&D. We have six major 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. In 2003, our R&D
investment totalled $3.5 billion.
R&D remains an integrated, project driven organisation.
Our approach is therapy area led with scientific, medical, technical and ethical
input and control being provided by large, multi-skilled Discovery and Development
organisations. This offers a number of advantages including sharing of best practice
in terms of science and technology and efficient use of resources across a multi-site,
global organisation.
We remain focused on meeting our objectives of delivering new, medically important and commercially successful products to the market every year.
Discovery
Our Discovery organisation consists of highly skilled scientists working together across boundaries to gain critical mass
efficiencies and exchange of ideas and project opportunities.
Specialised groups in Safety Assessment and Process R&D
work across all research areas, starting in Discovery and following projects
through to Development and lifecycle management initiatives. Our
strategic effort to significantly upgrade the links between clinical medicine
and basic science (Discovery-Medicine)
is already proving to be valuable to the drug discovery process. Discovery-Medicine
helps us gain a better understanding of human diseases and how future drugs will
work to prevent and treat those diseases. We also continue to introduce more
stringent safety and drug metabolism/pharmacokinetic testing earlier in the
process, in order that CDs chosen for development are more likely to succeed.
During 2003, a further 15 CDs were selected (11 in 2002) and, in addition, 10 early development projects reached the stage of human testing (six in 2002).
Our global knowledge exchange system, which serves all Discovery sites maximises the benefits of the latest communication and informatics technologies. Our global Enabling Science and Technology group continues to
support all research areas with skills in compound management, natural product screening, structural chemistry, bio-imaging, genetics, transgenics, protein science and informatics. New enabling technologies for drug searching have been introduced
and a global compound collection enhancement project is ongoing.
We continue to invest in R&D facilities in line with
our strategy. New or upgraded laboratory facilities were opened in 2003 in Sweden,
the UK, the US and India. Recruitment of highly skilled new staff continues alongside
the ongoing training and development of existing employees.
Development
Our Development organisation consists of people skilled in clinical research, regulatory affairs and pharmaceutical development. We believe that efficiencies are achieved from global working applied flexibly across the
business. Our therapy area led product teams represent a matrix of all relevant functional skills and experience needed for robust, rapid drug development.
Our product focus in 2003 was to complete the development programmes and deliver the regulatory support required for the approval of Exanta and approval and launch of Crestor and Iressa. We also placed
high priority on successful delivery of lifecycle management programmes designed to optimise growth of key marketed products including Nexium, Seroquel and Symbicort.
We continue to focus on improving our productivity and speed of product development. Significant e-based clinical and regulatory systems were introduced in 2003 that significantly increase the speed of access to data
worldwide and reduce regulatory file preparation and submission timelines. These activities will be continued and extended.
Collaborations
To
complement our in-house R&D capabilities, over
200 new collaborations have been entered into in 2003 with leading academic centres
and biotechnology companies.
We entered into a collaboration with Abgenix Inc. with the aim of discovering fully humanised monoclonal antibodies for the treatment of cancer. This arrangement is complementary to our major activity in small molecules and will allow us to tackle a
broader range of targets. Abgenix will provide antibody expertise and will take projects into clinical trials. We will provide the cancer expertise that will guide the choice of targets, the properties required out of the candidate drugs and
clinical development.
Other examples of external collaborations include those with the University of Dundee and the University of Gratz as well as with, among others, Sumitomo Pharmaceuticals Co., Ltd., NeoGenesis Pharmaceuticals, Inc.,
Cytokinetics, Inc., Biosignal Inc. and Array Biopharma.
Back to Contents
24 |
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Operational Review |
|
|
|
|
Development
Pipeline |
|
|
Compound |
Mechanism |
Areas under investigation |
Phase |
|
Estimated filing date |
|
|
|
|
|
|
|
|
|
|
|
|
|
PC |
1 |
2 |
3 |
|
MAA |
|
NDA |
|
Cardiovascular |
|
|
|
|
|
|
|
|
|
|
|
|
NCEs |
|
|
|
|
|
|
|
|
|
|
|
|
Exanta |
thrombin inhibitor |
prevention of VTE |
|
|
|
|
|
Approved* |
|
Filed |
|
|
Exanta SC formulation |
thrombin inhibitor (sc) |
prevention of VTE |
|
|
|
|
|
Approved* |
|
>2006 |
|
|
Galida |
PPAR agonist |
diabetes /metabolic syndrome |
|
|
|
|
|
2006 |
|
2006 |
|
|
AZD6140 |
ADP receptor antagonist |
arterial thrombosis |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
AZD7009 |
ARDA |
atrial fibrillation |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
AZD9684 |
CPU inhibitor |
thrombosis |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
AZD0837 |
thrombin inhibitor |
thrombosis |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
AZD7806 |
IBAT inhibitor |
dyslipidaemia |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
AZD6610 |
|
dyslipidaemia |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
AZD4619 |
|
dyslipidaemia |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
AZD0303 |
|
thrombosis |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
AZD8294 |
|
dyslipidaemia |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
Line Extensions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Atacand |
angiotensin II antagonist |
CHF outcomes (CHARM study) |
|
|
|
|
|
2Q 2004 |
|
2Q 2004 |
|
|
|
|
diabetic retinopathy |
|
|
|
|
|
2006 |
|
2006 |
|
|
Crestor |
statin |
atheroma |
|
|
|
|
|
2006 |
|
2006 |
|
|
|
|
outcomes CHF |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
|
outcomes renal |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
Seloken/Toprol-XL |
beta blocker |
HCTZ combination |
|
|
|
|
|
|
|
1H 2005 |
|
|
Exanta |
thrombin inhibitor |
prevention of stroke in AF |
|
|
|
|
|
Filed |
|
Filed |
|
|
|
|
treatment of VTE
|
|
|
|
|
|
Filed |
|
>2006 |
|
|
|
|
arterial/post MI |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
* France, Reference
Member State for the EU Mutual Recognition Procedure. |
|
|
|
|
|
|
|
|
|
|
|
|
Gastrointestinal |
|
|
|
|
|
|
|
|
|
|
|
|
NCEs |
|
|
|
|
|
|
|
|
|
|
|
|
AZD0865 |
potassium-competitive acid blocker |
acid related GI disease |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
AZD3355 |
inhibitor of TLESR |
GERD |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
AZD7371 |
|
functional GI disorders |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
AZD9343 |
inhibitor of TLESR |
GERD |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
Line Extensions |
|
|
|
|
|
|
|
|
|
|
|
Nexium |
proton pump inhibitor |
NSAID GI side effects symptom resolution |
|
|
|
|
|
Promotable* |
|
Filed |
|
|
|
|
parenteral formulation |
|
|
|
|
|
Approved |
|
Filed |
|
|
|
|
NSAID GI side effects healing and prevention |
|
|
|
|
|
Filed |
|
Filed |
|
|
|
|
extra-oesophageal reflux disease |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
*Authorities stated
these symptoms were already captured within the GERD label. Text stating No
clinical interaction with naproxen or rofecoxib was approved. |
|
|
|
|
|
|
|
|
|
|
|
|
Infection |
|
|
|
|
|
|
|
|
|
|
|
|
Line Extensions |
|
|
|
|
|
|
|
|
|
|
|
|
Merrem |
carbapenem
antibiotic |
skin and
soft tissue infections |
|
|
|
|
|
|
|
2Q 2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neuroscience |
|
|
|
|
|
|
|
|
|
|
|
|
NCEs |
|
|
|
|
|
|
|
|
|
|
|
|
Cerovive |
free radical trapping agent |
stroke |
|
|
|
|
|
2006 |
|
2006 |
|
previously NXY059 |
|
|
|
|
|
|
|
|
|
|
|
|
ZD0947 |
K+ channel opener |
overactive bladder |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
AR-A2 |
5HT1Bantagonist |
anxiety/depression |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
AZD4282 |
NMDA antagonist |
neuropathic pain |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
AZD4750 |
chemokine receptor inhibitor |
multiple sclerosis |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
AZD5455 |
|
anxiety disorders |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
AZD0328 |
alpha-7 nicotinic receptor agonist |
Alzheimers disease |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
AZD2858 |
|
Alzheimers disease |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
AZD3102 |
|
Alzheimers disease |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
Line Extensions |
|
|
|
|
|
|
|
|
|
|
|
|
Zomig |
5-HT1B/1Dreceptor agonist |
nasal spray |
|
|
|
|
|
Launched |
|
Launched |
|
|
Seroquel |
D2/5HT2antagonist |
bipolar mania |
|
|
|
|
|
Approved |
|
Approved |
|
|
|
|
sustained release |
|
|
|
|
|
2H 2005 |
|
2H 2005 |
|
|
|
|
bipolar maintenance |
|
|
|
|
|
2006 |
|
2006 |
|
|
|
|
bipolar depression |
|
|
|
|
|
2006 |
|
2006 |
|
|
|
|
granules |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
Back to Contents
|
AstraZeneca Annual Report
and
Form 20-F Information 2003
|
Operational Review |
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compound |
|
Mechanism |
|
Areas under investigation |
Phase |
|
Estimated filing date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PC |
1 |
2 |
3 |
|
MAA |
|
NDA |
|
|
Oncology |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NCEs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Faslodex |
|
oestrogen receptor antagonist |
|
2nd line advanced breast cancer |
|
|
|
|
|
Filed |
|
Launched |
|
|
|
Iressa |
|
EGFR-TK inhibitor |
|
NSCLC |
|
|
|
|
|
Filed |
|
Launched |
|
|
|
ZD6474 |
|
angiogenesis inhibitor (VEGFR-TKI) |
|
solid tumours |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
ZD4054 |
|
endothelin A receptor antagonist |
|
solid tumours |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
ZD6126 |
|
vascular targeting agent |
|
solid tumours |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
AZD2171 |
|
angiogenesis inhibitor (VEGFR-TKI) |
|
solid tumours and haematological malignancies |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
AZD3409 |
|
farnesyl-transferase inhibitor |
|
solid tumours |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
AZD0530 |
|
SRC kinase inhibitor |
|
solid tumours |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
AZD5438 |
|
selective cyclin dependent kinase inhibitor |
|
solid tumours |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
AZD4440 |
|
vascular targeting agent |
|
solid tumours |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
AZD9935 |
|
angiogenesis inhibitor (VEGFR-TKI) |
|
solid tumours |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
AZD0424 |
|
SRC kinase inhibitor |
|
solid tumours |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
AZD1152 |
|
aurora kinase inhibitor |
|
solid tumours |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
AZD6244 |
|
MEK inhibitor |
|
solid tumours |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
Line Extensions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Faslodex |
|
oestrogen receptor antagonist |
|
1st line advanced breast cancer |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
Iressa |
|
EGFR-TK inhibitor |
|
head and neck cancer |
|
|
|
|
|
2006 |
|
2006 |
|
|
|
|
|
|
|
breast cancer |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
|
|
|
|
colorectal cancer |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
Respiratory and Inflammation
|
|
NCEs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AZD9056 |
|
ion
channel blocker |
|
rheumatoid
arthritis |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
AZD8309 |
|
chemokine
receptor antagonist |
|
rheumatoid
arthritis |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
AZD8309 |
|
chemokine
receptor antagonist |
|
COPD |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
AZD9056 |
|
ion
channel blocker |
|
COPD |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
AZD3342 |
|
protease
inhibitor |
|
COPD |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
AZD0902 |
|
ion
channel blocker |
|
COPD |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
AZD0902 |
|
ion
channel blocker |
|
rheumatoid
arthritis |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
AZD9056 |
|
ion
channel blocker |
|
osteoarthritis |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
AZD8955 |
|
collagenase
inhibitor |
|
osteoarthritis |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
AZD3778 |
|
|
|
asthma/rhinitis |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
AZD6067 |
|
|
|
COPD |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
AZD2098 |
|
|
|
asthma |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
AZD1981 |
|
|
|
asthma |
|
|
|
|
|
>2006 |
|
>2006 |
|
|
|
Line Extensions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Symbicort Turbuhaler |
|
inhaled steroid/fast
onset,
long-acting beta2 agonist |
|
single therapy
for asthma |
|
|
|
|
|
Filed |
|
|
|
|
|
Symbicort pMDI |
|
inhaled steroid/fast
onset,
long-acting beta2 agonist |
|
asthma |
|
|
|
|
|
2Q 2004 |
|
2005 |
|
|
|
|
|
|
|
COPD |
|
|
|
|
|
2Q 2004 |
|
>2006 |
|
|
|
|
|
|
|
Comments
As disclosure of compound information is balanced
by the business need to maintain confidentiality, some compound information
has not been disclosed at this time.
Compounds
in development are displayed by phase. |
|
|
|
|
|
|
|
|
|
Abbreviations:
5HT
5-hydroxytryptamine (serotonin)
5HT1B
1B subtype of 5HT receptor
5HT1D
1D subtype of 5HT receptor
5HT2
2 subtype of 5HT receptor
ADP
adenoside diphosphate
AF
atrial fibrillation
ARDA
atrial repolarisation delaying agent
CHF congestive
heart failure
COPD
chronic obstructive pulmonary disease
CPU
carboxy peptidase-U
D2
2 subtype of dopamine receptor
EGFR-TKI
epidermal growth factor receptor-tyrosine kinase inhibitor
GERD gastro-oesophageal reflux disease
GI gastrointestinal
HCTZ hydrochlorothiazide
IBAT ilial bile acid transport
K+ potassium
MAA marketing authorisation application (Europe) |
|
MEK
mitogen activated (extra-cellular
signal-regulated kinase) kinase
MI myocardial infarction
NCE new chemical entity
NDA new drug application (US)
NMDA N-methyl-D-aspartate
NSAID non-steroidal anti-inflammatory drug
NSCLC non-small cell lung cancer
PC pre-clinical: candidate drug accepted for development but
not yet administered to man
pMDI pressurised metered dose inhaler
PPAR peroxisome proliferator-activated receptor
sc
subcutaneous
TLESR transient lower oesophageal sphincter relaxations
VEGFR-TKI vascular endothelial cell growth factor receptor-tyrosine kinase
inhibitor
VTE venous thromboembolism
>2006 not earlier
than 2007 |
|
Discontinued
projects:
AZD1134
anxiety/depression
AZD3582
acute/chronic nociceptive pain
AZD4717 acute/chronic
nociceptive pain
AZD5106 overactive
bladder
AZD0275 rheumatoid
arthritis/COPD
AZD7140 rheumatoid
arthritis/COPD
Oxis pMDI
asthma |
Back to Contents
26 |
AstraZeneca
Annual Report and
Form 20-F Information 2003 |
Operational
Review |
|
|
|
|
Commercialisation
and Portfolio Management |
|
|
AstraZeneca continues to have one of the
most competitive product portfolios in the pharmaceutical industry, supported
by a robust new product development pipeline. Maintaining the quality of
AstraZenecas portfolio
requires careful prioritisation to manage both the progression of promising
compounds from development to market place and to maximise the value of
high
potential marketed products.
We are committed to organic growth, but in common with other leading pharmaceutical companies, our licensing activities seek to bring in new products and/or technologies and to support growth products in a
cost-effective manner.
The proven ability to bring major primary care products
to market, replacing revenues lost due to patent expiry, is integral to the ongoing
success of the Company. Product Strategy & Licensing (PS&L) provides
commercial leadership, while working closely with R&D and our major marketing
companies, to manage the commercial aspects of drug development and to co-ordinate
our global product marketing strategy.
To ensure the success of our medicines, we must address
unmet medical needs, find novel solutions, minimise technical risk and maximise
commercial opportunity. PS&L is responsible for selecting the appropriate
products for investment, developing effective marketing platforms to create market
place awareness in time for new product launches and directing the creation and
delivery of product marketing strategies that successfully align global and national
plans.
Target product profiles (TPPs) for each new product are
clearly defined at a very early stage in Discovery in order to both set parameters
for R&D activity and to help shape the marketing strategy of the Company.
Among the factors considered in developing a TPP are product features and benefits,
medical and health outcomes information, positioning, demonstration of value
and the competitive environment.
We have clearly defined lifecycle management
programmes for all our products, which maximise not just the commercial potential
of the brands, but also the value they bring to patients lives. In addition,
our customer base has broadened over the past year and our marketing
programmes have widened accordingly
to take account of every aspect of building global brands.
Our products have to bear scrutiny
in relation to clinical efficacy and safety as well as value and ease of use
for patients. Efficient pharmaceutical development requires transparent, quality
assured processes which are acceptable to regulatory authorities plus the
use of complementary new technologies and strategic outsourcing. We use internet-enabled
processes and external partnerships to simplify the processes for our clinical
trials, and internally, we exploit best use of document exchange sites and
intranets to share knowledge and improve effectiveness and efficiency.
The internet also efficiently
expands our channels of communication with patients and doctors. We use e-business
opportunities to strengthen our relationships with key stakeholders and to
improve our overall speed and effectiveness.
We are also utilising our knowledge
and expertise to share medical and disease information and best practice with
health professionals and, where allowed, with patients themselves.
To maximise the potential for
empowering patients and patient groups, we have developed an e-learning programme
which provides our marketing companies with a comprehensive range of resources
with which to share disease and therapy information with healthcare practitioners,
leading medical specialists and patients. In addition, a portfolio of online
learning modules has been developed for employee use, deepening our own knowledge
and awareness of key disease areas to better serve our customers.
We monitor market and industry
trends to assess implications for our sector and for AstraZeneca in particular.
Besides being driven by external environmental factors such as advances in
science and technology, unmet medical needs and an ageing population, we need
to meet future challenges such as pricing pressures and access to medicines.
A sharp focus on threats and opportunities ensures we continue to deliver
a commercially successful result from a pharmaceuticals business that maintains
its competitive
position by developing new, innovative and cost-effective
products from our R&D and in-licensing activities, which add value for
healthcare professionals and our patients.
Our products are marketed primarily to physicians (both general and specialist) as well as to other healthcare professionals. Marketing efforts are also directed towards explaining the economic and therapeutic benefits
of our products to governments and healthcare buying groups, for example, managed care organisations in the US, trust hospitals and budget-holding medical groups in the UK and other organisations which pay for healthcare costs in various countries.
In the US, we invest a significant amount of money in direct-to-consumer advertising campaigns for certain of our products.
AstraZenecas
principal competitors are other international, research-based pharmaceutical
and biotechnology companies which also sell branded, patent protected, prescription
pharmaceuticals.
Following patent expiry, our products also compete with
generic pharmaceuticals. Competition with generic pharmaceuticals is principally
on price since generic pharmaceutical companies typically incur only limited
R&D costs compared to those of research-based companies such as AstraZeneca.
Our ability to maintain and enhance our competitive position
in our chosen therapy areas depends mainly on our development of new, innovative,
cost-effective products from our R&D and in-licensing activities, the
manufacture and supply of products to high quality standards and the effective
marketing of products to our global customer groups.
Back to Contents
|
AstraZeneca Annual Report and
Form 20-F Information 2003 |
Operational Review |
27 |
|
|
|
|
|
|
|
|
|
|
|
|
Supply and Manufacturing
|
|
|
|
|
|
|
|
|
|
|
|
With 31 manufacturing sites in 20 countries
and almost 16,000 employees worldwide, our Operations organisation provides
secure, high quality, cost-effective supply of AstraZenecas product
range globally. We measure our performance using four key metrics: customer
service, supply capability, cost efficiency and licence to operate.
Customer service
The fast and effective introduction of new
products is key to success. Our supply chains are designed to maximise flexibility.
For example, in the US, Crestor
was available to wholesalers within three
days of FDA approval and the majority of retail stores were stocked within
nine days. All other major products and line extensions were also successfully
supported with supplies available to meet market demand. Process improvements,
additional capacity investments and the effective use of external contractors
ensure the secure and effective supply of established products. As part of
our overall risk management, we carefully consider the timing of investment
relating to the launch of new products. Secure supply chains are in place
for all products in late stage development.
Supply capability
Our strategy remains to operate a small
number of sites for the manufacture of active ingredients and combine it with
effective
use of outsourcing. AstraZeneca has active ingredient sites in the UK, Puerto
Rico, Sweden and France and a bulk drug purification plant in Germany. Around
1,750 people are employed in active pharmaceutical ingredient supply.
AstraZenecas major products include Nexium,
Crestor, Seroquel and Losec/Prilosec and
these are manufactured in the US, the UK, Puerto Rico, Sweden and France.
Principal formulation sites for tablets and
capsules operate in six countries the UK, Sweden, Puerto Rico, France,
Germany and the US. There are also major formulation sites for the global
supply of parenteral and inhalation products in Sweden, France and the UK.
Packaging is undertaken at a large number of locations, both at AstraZeneca
sites and at contractors facilities, located close to our marketing
companies to ensure rapid and responsive product supply. Around 13,000 people
are employed in formulation and packaging.
Capital expenditure on supply
and manufacturing facilities totalled $496 million in 2003. New plant
included
additional active ingredient capacity for Crestor
in the UK, formulation capacity for Crestor
in Puerto Rico and additional capacity for Pulmicort in the US.
Plans are in place to expand capacity in the US, France, Sweden and Puerto
Rico to meet the growing demands of our product portfolio including Symbicort,
Pulmicort Respules and Crestor.
Raw
materials
AstraZenecas
global purchasing policies and processes together with our business interruption
risk management
(BIRM) process are aimed at ensuring the supply of raw materials, manufacturing
equipment and other key supplies, all of which are purchased from a range
of suppliers. The BIRM process systematically examines a range of risk scenarios
to global supply, such as disasters that remove supply capability or the
unavailability
of key raw materials and ensures that these risks are mitigated by the implementation
of contingency plans, including the appointment of dual or multiple suppliers
and maintenance of appropriate stock levels. Although the price of raw materials
may fluctuate from time to time, our global purchasing policies seek to avoid
such fluctuations becoming material to our business.
Cost
efficiency
2003 saw the continued implementation
of the new AstraZeneca supply system which has demonstrated benefits in the
first year of operation, with higher customer service levels, reduced manufacturing
lead times and consequently reduced requirements for the build up of stock.
The programme was implemented in the US, the UK and Sweden and will be extended
to the rest of the supply network in 2004. Due primarily to exchange effects,
underlying improvements in stock levels are not readily apparent from the
published financial statements.
Cost efficiencies are also driven
by continuous review of our manufacturing assets to make sure that they are
being used most effectively, whilst preserving the flexibility we need to
respond to fluctuations in demand. A number of older units were closed during
the year and our facility in Sanda (Japan) was sold. A decision was also taken
to close a sterile production facility in Canada. We will continue to make
further adjustments to our manufacturing
base to ensure optimum utilisation of production
facilities.
The new supply system has also increased
the focus on managing costs throughout the product lifecycle. Product supply
chains are being modelled with a view to targeting cost of goods reductions
through improving yields, undertaking process changes and adjusting buying
patterns to reduce material costs. Stock levels and stock turns are also being
modelled for major products with a view to targeting stock reductions to improve
working capital utilisation.
Licence to operate
We are committed to delivering a secure basis
for assured product quality that ensures both the safety and efficacy of our
medicines. As part of this, the outcomes of routine internal inspections as
well as those by regulatory authorities are rigorously reviewed and, if required,
actions taken to further enhance compliance. Device presentations of inhalation
products present manufacturing challenges and where appropriate, like other
manufacturers, we keep these under review with relevant regulators. The results
of all external inspections carried out during 2003 were satisfactory and
we did not experience any delays to 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. AstraZenecas manufacturing
sites operate under various licensing regimes and we are focused on meeting
all regulatory requirements and current good practice standards. There are
currently no environmental issues that constrain AstraZeneca from fully utilising
any sites. We are making steady progress against our targets for the reduction
of waste and energy usage and the level of accidents with injury is falling.
Our aim for continuous improvement includes learning from incidences of non-compliance
and sharing best practice to further promote high standards.
Further information and statistics about
our SHE performance can be found in the separate 2003 Corporate Responsibility
Summary Report or on our website: astrazeneca.com.
Back to Contents
28 |
AstraZeneca Annual Report and
Form 20-F Information 2003 |
Operational Review |
|
|
|
|
|
|
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|
Other Businesses |
Main Facilities |
Intellectual
Property |
|
|
|
|
|
|
|
|
Astra Tech
Astra
Tech is engaged in the R&D, manufacture
and marketing of medical devices and implants for use in healthcare, primarily
in urology and odontology, as well as in surgery and diagnostic radiology.
Astra Tech has a leading position in several countries in Europe and is
expanding
its operations in key markets, particularly in the US.
All products showed good sales growth, in
particular the Dental Implant System, which is gaining market share in several
key markets. Further investments have been made in R&D, clinical research
and new production facilities to strengthen the product portfolio and in the
US in sales and marketing.
Salick Health Care
Salick Health Care (SHC) is a leading provider
of outpatient oncology management and consulting services. Ownership of SHC
provides AstraZeneca with a unique window on the provider sector of the US
oncology market and access to many leading oncologists.
SHC manages full-service outpatient comprehensive
cancer centres in affiliation with major teaching and community hospitals
in California, Florida and New York and is affiliated with a large network
of over 120 physicians, working in specialised areas such as medical, radiation
and surgical oncology.
In 2003, SHC continued to perform well in
its cancer centre management business with positive profit and cash contributions
and is actively pursuing new growth opportunities. During the year, SHC announced
a long term agreement for the provision of services to NYU Hospitals Center
and signed an agreement with Boca Raton Community Hospital in Florida for
management of a Lynn Regional Cancer Center facility.
SHC also continued the development of its
innovative clinical research network to improve patient care and cancer
treatment.
The SHC Research Network is conducting a growing number of centrally co-ordinated
phase 2 and 3 clinical trials.
AstraZeneca owns and operates
numerous production, marketing and R&D facilities worldwide. Our corporate
headquarters are in London, UK and our R&D headquarters are in Södertälje,
Sweden.
Our principal R&D facilities
are in the UK (Alderley Park and Charnwood); Sweden (Lund, MöIndal
and Södertälje); the US (Boston, Massachusetts and Wilmington,
Delaware); Canada (Montreal, Quebec); and India (Bangalore). Other R&D
activity is carried out at Macclesfield and Avlon in the UK and Reims
in France.
Out of a total 31 manufacturing
sites in 20 countries, our principal manufacturing facilities are in the UK
(Avlon and Macclesfield); Sweden (Snäckviken and Gartuna, Södertälje);
the US (Newark, Delaware and Westborough, Massachusetts); Australia (North
Ryde, New South Wales); France (Dunkirk, Monts and Reims); Germany (Plankstadt
and Wedel); Italy (Caponago); Japan (Maihara) and Puerto Rico (Canovanas,
Guayama and Carolina).
Bulk drug production is concentrated
in the UK, Sweden, France and Puerto Rico.
Substantially all of our properties
are held freehold, free of material encumbrances and we believe such properties
are adequate for their purposes.
During 2003, AstraZeneca invested $3.5 billion
in R&D activities. Obtaining adequate protection for the intellectual
property associated with these activities continues to be a key business imperative.
The range of protection includes patents, trade marks, design registrations,
copyrights and internet domain name registrations.
Our policy is to seek patent and/or other
appropriate intellectual property protection for all of the inventions and
innovations of significant commercial value, which arise from our drug discovery,
development, manufacturing, marketing and other business activities. It is
also our policy to apply for intellectual property protection for all inventions
and innovations being created as a result of the investments in R&D throughout
the AstraZeneca organisation.
This policy is designed to provide each of
our new products with an effective portfolio of valid, enforceable patent
and other intellectual property rights in all significant markets to protect
unauthorised competition during commercialisation. This shield of intellectual
property rights extends to those areas of target identification, genomics
and other research technologies in which we invest significant resources.
The adequacy of the patent, design, trade mark and domain name portfolio for
individual products is kept under review during product development, clinical
evaluation and marketing so that, wherever possible, additional protection
may be sought for new applications and other developments. The therapy area
focus of our R&D operating model allows appropriate intellectual property
strategies to be formulated and regularly updated from an early stage in product
development.
We vigorously defend our intellectual property
rights, including taking appropriate infringement action in various courts
throughout the world.
Back to Contents
|
AstraZeneca Annual Report and
Form 20-F Information 2003 |
Operational Review |
29 |
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|
Industry Regulation
|
|
|
|
|
|
|
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|
Our products are subject to numerous regulations
concerning their safety and efficacy. In many cases, governments also fix
their price and/or restrict access to reimbursement. The degree and scope
of regulation varies according to the product and countries concerned. Regulations
governing prescription pharmaceuticals are stringent and manufacture and marketing
are normally conditional upon regulatory approval. Registration processes
are complex and time-consuming and involve significant expenditure. Regulation
is concerned not only with a products chemical composition, but also
with matters such as manufacturing, handling, packaging, labelling, distribution,
promotion and marketing.
AstraZeneca routinely participates in various
industry associations and other bodies which, among other things, seek to
ensure that those implementing legislation and regulations affecting pharmaceutical
companies are fully informed as to its impact.
Product regulation
Before a pharmaceutical product is approved
for marketing, it must undergo exhaustive and lengthy clinical trials. The
process of developing a new pharmaceutical product, from discovery to launch
in the market, can take up to 12 years, but this period varies considerably
in different cases and countries. The time taken from submission of an application
for marketing approval to launch of the product is typically one to two years.
After a product has been approved and launched,
it is a condition of the product licence that all aspects relating to its
safety, efficacy and quality must be kept under review. Depending on the country,
fines and other penalties may be imposed for failure to adhere to the conditions
of product licences. In extreme cases, the product licence may be revoked
resulting in withdrawal of the product from sale. Promotional and marketing
activities are also tightly controlled by regulations and self-regulating
codes of ethical marketing practices.
During the marketing of a product, strict
procedures must be in place to monitor, evaluate and report any potential
adverse reactions. Where adverse reactions occur or it is judged that they
may occur, changes may be required to prescribing advice and to the product
licences. In extreme cases, the product licence may be revoked resulting in
withdrawal of the product from sale.
Manufacturing plants and processes
are subject to periodic external inspection by regulators as part of their
monitoring procedures to ensure that manufacturers are complying with prescribed
standards of operation.
Price
regulation
Prescription medicines are subject to
government controls on price and reimbursement which operate in most countries
in which we sell our products. This can result in large price differentials
between markets, which may be further aggravated by currency fluctuations.
US
Currently, there is no direct government control
of prices for non-government drug sales in the US. Federal legislation mandates
minimum discounts to US government agencies purchasing drugs for the active
military, military veterans and other selected populations. Providing these
substantial discounts to the US government is also a condition for the manufacturers
drugs to be reimbursed by state Medicaid programmes and an additional rebate
is required if manufacturer price increases after 1990 exceed the increase
in inflation.
In addition, certain states
have taken action to require additional manufacturer rebates on Medicaid drug
utilisation for the indigent population.
The Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 was signed into law in December.
The legislation adds a prescription drug benefit for Medicare beneficiaries
in 2006 and makes discount cards available in 2004 and 2005.
Europe
Most governments in Europe control the price
and reimbursement of medicines after taking into account the medical, financial
and social impact of a product. This budget-based approach reflects increasing
constraints in overall healthcare spending. Governments increasingly require
more assurance of value in their expenditures on medicines.
In several European countries,
the pricing and reimbursement systems are being reviewed, with the aim of
controlling and limiting drug budgets. This is an ongoing process that puts
a downward pressure on pricing and reimbursement of medicines in Europe.
Japan
There is formal central government control
of prices in Japan. New product prices are determined primarily by comparison
with existing product classes. All existing products are subject to a price
review based on the market price at least every two years. In addition, products
with generic competition are forced to further reduce prices by 4-6%. Regulations
introduced in 2000 included an overseas price referencing system, under which
prices can be adjusted according to the average price of four major countries
(the US, the UK, Germany and France). Generally, if the US pricing environment
remains unchanged, these regulations are likely to have a positive impact
on pharmaceutical prices in Japan.
Product regulation:
Astra Tech
Product registration and certified quality
management systems form the basis of the regulatory environment relating to
medical devices. In Europe, compliance with regulatory requirements involves
the implementation and maintenance of a quality management system and, for
certain products, a design dossier review. Medical devices in the US are regulated
through a product registration requirement. Astra Tech continues to maintain
a European and US compliant quality management system.
Product regulation:
Salick Health Care (SHC)
The healthcare facilities to which SHC provides
administrative and management services on behalf of certain hospitals are
subject to extensive US federal, state and local legislation and regulations,
such as those relating to the reimbursement and control of healthcare costs.
The largest single component of SHC revenue continues to be fees that are
affected by the reimbursement rates for healthcare services, which are set
or regulated by federal or state authorities.
Back to Contents
30 |
AstraZeneca Annual Report and
Form 20-F Information 2003 |
Operational Review |
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Corporate Responsibility
(CR) |
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The trust and confidence of all our stakeholders,
together with our reputation, are among our most valuable assets. Along with
our commitment to competitiveness and performance, we will continue to be
led by our core values to achieve sustainable success.
Management
Good corporate responsibility depends on the
right level of commitment from all employees, led by the AstraZeneca Board
and Senior Executive Team, who approve the strategic direction, and our senior
management, who are accountable for the development and implementation of
appropriate programmes in their areas of responsibility. During 2003, we continued
to integrate CR into business processes and consolidate the framework for
local implementation of our global standards to ensure consistent and appropriate
behaviour worldwide. Based on the global CR policy, local implementation programmes
are required to take account of regional, site or functional priorities and
objectives.
Monitoring progress
We have for some time had processes in place
for monitoring our economic, environmental, safety and health performance.
More recently, we have been focusing on developing key performance indicators
(KPIs) in other areas of social responsibility. We are continually exploring
the ways in which we can meaningfully benchmark our performance.
Auditing compliance
In 2003, we included a formal requirement to
develop local CR implementation plans in our annual compliance report by senior
management to the AstraZeneca Board (the letter of assurance).
Alongside this, we are expanding our established safety, health and environment
audit programme to include additional areas of CR. In 2003, 11 out of a total
of 14 site audits included CR.
Corporate governance
During the year, we reviewed and refined our
corporate governance controls to ensure that we are meeting new laws and regulatory
requirements, including the ability to meet the appropriate executive certification
requirements of the Sarbanes-Oxley legislation in the US and the changes introduced
in 2003 by the revised Combined Code on Corporate Governance of the UK Financial
Reporting Council.
AstraZenecas senior Non-Executive Director,
Sir Peter Bonfield, was nominated
in 2002 as the contact for investors
wishing to raise high level concerns about any potential corporate governance
issues.
We also reviewed, re-published
and widely circulated internally our Code of Conduct (see page 138) to make
sure that our stated codes of practice continue to be appropriate. Compliance
with the Code of Conduct is mandatory and is monitored through the annual
letter of assurance process and Group Internal Audit reviews.
The Code of Conduct includes
procedures for employees to raise integrity concerns, including a confidential
telephone helpline number.
Priority
action planning
Stakeholder expectations are constantly evolving
and we continuously monitor our internal and external environment for issues
relating to our business that affect or concern society today. We use a formal
risk assessment process to identify both the opportunities and the challenges
that these issues present and to plan the actions needed to ensure our response
is appropriate and consistent. During the year, we added sales and marketing
practices to our CR Priority Action Plan to ensure they continue to receive
the appropriate high level of attention and that we develop ways of improving
our global reporting in this area. The settlement of the Zoladex
investigation in the US (see page 104)
strengthened our commitment to delivering high standards of ethical behaviour
in the marketing of our medicines worldwide.
Access
to medicines
Each of AstraZenecas development products
is reviewed independently in relation to pricing and access in all markets,
so that plans can be put in place early for those which may be regarded as
essential medicines, either because they address diseases prevalent in developing
countries or because they are potentially a leading or unique product in their
class, offering significant patient benefit in a serious or life threatening
condition. In these circumstances, we aim to make arrangements to ensure patient
access to these medicines through charitable donations, expanded access programmes
or differential pricing.
While we support the concept
of differential pricing in this context, we continue to seek safeguards that
differentially priced products are not diverted from the patients
who need them, to be sold and used in more
affluent markets. Differential pricing can only be of benefit in countries
where healthcare systems can deliver medicines to the patients that need them
and ensure that they are used appropriately.
Research into neglected diseases of the developing
world is essential to the effective treatment of these diseases in the future.
AstraZeneca has recently made a substantial investment in new research facilities
in Bangalore, India that are focused on finding a new treatment for tuberculosis,
a major and increasing threat to life in developing countries. Should we be
successful in identifying a potential new medicine, a key priority will be
to develop it in partnership with governments, local organisations and international
bodies, in order to achieve the earliest possible approval according to global
standards. We hope that we can then again work in partnership with the relevant
global and local organisations to ensure that any new treatment reaches the
patients who need it.
In all cases of facilitating access to our
medicines, we can only be successful if we can ensure that the product is
not diverted away from those who need it and that we retain intellectual property
rights, which enable us to protect our core business and provide for future
investment in the discovery and development of new medicines for a wide range
of diseases.
Our product donations and patient assistance
programmes make products available free of charge or at reduced prices. In
2003, our commitment in this area totalled $724 million at average wholesale
price.
Community support
We aim to make a positive contribution to our
local communities through charitable donations and sponsorships that help
to make a difference. In particular, we make contributions that are consistent
with our business of improving health and quality of life and which promote
the value of science among young people.
In 2003, our spend on community support totalled
$22 million, including charitable donations of over $5 million.
More information is available in the separate
2003 Corporate Responsibility Summary Report and on our website: astrazeneca.com.
Back to Contents
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AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Review |
31
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Financial
Review |
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Introduction |
The purpose of the Financial Review, together
with the individual product performance in the relevant therapy area
sections in the Operational Review on pages 9 to 30, is to provide understanding
and analysis of our results for the year 2003 and of the progress made
since 2002. It also provides details of material changes in financial
performance between 2002 and 2001. The Financial Review describes: |
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> |
Non-GAAP measures; page 31 |
> |
Business background and major events influencing
2003; page 31 |
> |
Future prospects; page 32 |
> |
Sales by therapy area and operating profit
2001-2003 in tabular form; pages 32 and 41 |
> |
Results of operations summary
analysis of year to 31 December 2003; page 32 |
> |
Financial position; page 33 |
> |
Liquidity and capital resources; page
34 |
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Financial policies; page 34 |
> |
Critical accounting policies and estimates;
page 36 |
> |
Off balance sheet transactions, contingent
liabilities and commitments; page 38 |
> |
New accounting standards; page 40 |
> |
International accounting; page 40. |
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Additionally, in accordance with US requirements: |
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Results of operations summary
analysis of year to 31 December 2002; page 40 |
> |
US GAAP information 2001-2003; page 42. |
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Non-GAAP measures |
Growth rates in sales and operating profit,
both in US dollar and percentage terms, are not referred to specifically
in the Financial Statements but are discussed extensively elsewhere in
this document. We measure, in part, our performance using financial growth
rates and, accordingly, include them in our discussions here. External
stakeholders, such as business analysts, also use these measures. In
particular, to monitor performance internally, we use constant exchange
rate or underlying growth, a non-GAAP measure which, unlike actual growth,
cannot be derived directly from the information in the financial statements.
This measure removes the effects of currency movements to focus on the
changes in
product sales and expenses |
driven by volume, prices
and cost levels relative to the prior period. We believe that these measures
provide one of the most important insights into how our business is performing
and our discussions in the underlying performance sections of this review
use them. However, we recognise that these measures should not be used
in isolation and, accordingly, we also discuss the comparable GAAP actual
growth measures which reflect all the factors that affect our business
in the reported performance sections of this document. Underlying growth
is calculated by retranslating the current year performance at the previous
years
exchange rates and adjusting for other exchange effects, including hedging. |
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Business background
and major events influencing 2003 |
The business background is
described in the Operational Review sections of this report. The following
comments highlight how these and other factors affect our financial performance. |
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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. |
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Our operating results in
both the short and long term can be affected by a number of factors other
than normal competition: |
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The risk of loss or expiration of patents
and the potential adverse affect on sales volumes and prices from generic
competition; |
> |
The rate of sales growth and costs associated
with new product launches, the timings of those launches and the risk
that such new products do not succeed as anticipated; |
> |
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 |
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levels which are imposed by governments;
and |
> |
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. |
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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. |
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We discuss below the business events which
were the most significant for our financial results. |
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In the last two years, our
key challenge has been to effect a portfolio transformation whereby sales
lost to patent
expiries are replaced by new products and a new portfolio profile created.
In 2003, the effect of this product portfolio transformation and prioritisation
is clearly demonstrated by the fact that an underlying $3.0 billion ($2.8
billion on a reported basis) of sales lost to generic competition (Losec/Prilosec, Zestril and Nolvadex)
have been compensated by the performance of our key growth and launch products.
Sales from these growth and launch products amounted to $8.2 billion in
2003. |
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The US continues to be our largest market
accounting for 46% of sales compared with 52% in 2002. This decline is
due, in part, to Losec/Prilosec and Zestril facing
generic competition for the whole of 2003, whilst the exclusivity Nolvadex enjoyed
expired in February 2003. In the case of Losec/ Prilosec,
supply constraints on generic producers during the first half of the year
meant that their erosion of our market share, whilst significant, was restricted.
However, combined with the effect of patients switching to Nexium, Losec/Prilosec sales
declined by 70% compared with 2002. Zestril sales
fell by 79% compared to 2002, a year which itself was lower than 2001 by
24%. Nolvadex sales
fell by 88% to $41 million. |
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In Europe, underlying sales grew by 2%
(reported growth of 18% including |
Back to Contents
32 |
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Review |
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Financial
Review continued |
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exchange effects of $939 million) and generated over 35% of our total sales, up from 32% in 2002. The weakening of the US dollar against the euro and other major European currencies contributed to this sales share
increase. In Japan, underlying sales growth was 14% (reported growth of 22% including exchange effects of $83 million), accounting for over 6% of our sales whilst sales in the rest of the world grew by an underlying 16% (reported growth of 21%
including exchange effects of $92 million). Further details are set out in the table on page 21.
Increased investment has continued
in R&D and in selling and marketing activities. In both areas, prioritisation
of resources across the portfolio is actively managed to avoid committing
resources before opportunities are clear. R&D spend was particularly focused
on completing the development programmes for Crestor,
Iressa and
Exanta.
Selling and marketing resources were prioritised to recently launched and
growth products such as Nexium,
Crestor,
Symbicort and
Seroquel.
Although we have increased investment, this has been accompanied by cost containment
initiatives which have restricted underlying cost growth in these areas to
just under 6%.
In 2003, we disposed of our Quorn business, Marlow
Foods. Further details are set out on page 88. We continue to have operations through Astra Tech (medical equipment) and Salick Health Care (healthcare services) and through our non-core joint venture, Advanta. Salick and Astra Tech have seen strong
underlying performances in 2003 with sales growing by 21% and 12% (reported growth of 21% and 33%), respectively.
In 2002, we took a $350 million exceptional charge in respect of the US Department of Justice investigation into the sales and marketing of Zoladex in the US as we were in the process of negotiating with federal and state authorities a potential settlement of the criminal and civil actions. These negotiations were concluded successfully in the first half of this year, and a
settlement of $355 million was made, with the extra $5 million charged to operating profit before exceptional items in 2003. Further details are set out on page 104.
Future prospects
Continued good performance from newer products should deliver strong sales and profit growth over the next several years as the impact of generic erosion on the
business diminishes. We believe that our financial performance over this period is likely to rank amongst the best in the global peer group of large pharmaceutical companies.
Results of operations summary analysis of year to 31 December 2003
The tables on this page show our sales by therapy area and operating profit for 2003 compared to 2002.
Reported performance
Our sales increased by 6% compared to 2002, rising from $17,841 million to $18,849 million. Operating profit before exceptional items fell from $4,356 million to $4,111 million, a decrease of 6%.
2003 saw our portfolio transformation
substantially completed. We absorbed the full year effects of generic competition
for Losec/Prilosec,
Zestril and
Nolvadex and,
following the launch of Crestor and
the planned launch of Exanta, the
elements to drive sales and earnings growth in 2004 and beyond will be in
place.
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Sales by therapy area (2003 and
2002) |
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2003
$m |
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Growth
underlying
$m |
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Growth
due to
exchange
effects
$m |
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2002
$m |
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Growth
underlying
% |
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Growth
reported
% |
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Cardiovascular |
3,910 |
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92 |
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249 |
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3,569 |
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3 |
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10 |
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Gastrointestinal |
5,943 |
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(1,026 |
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305 |
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6,664 |
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(16 |
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(11 |
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Infection |
476 |
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10 |
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26 |
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440 |
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2 |
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8 |
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Neuroscience |
2,833 |
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289 |
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126 |
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2,418 |
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12 |
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17 |
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Oncology |
2,743 |
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177 |
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197 |
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2,369 |
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8 |
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16 |
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Respiratory and Inflammation |
2,261 |
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275 |
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168 |
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1,818 |
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15 |
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24 |
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Other pharma |
152 |
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75 |
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12 |
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65 |
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115 |
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134 |
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Others |
531 |
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(2 |
) |
35 |
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498 |
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7 |
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Total |
18,849 |
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(110 |
) |
1,118 |
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17,841 |
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6 |
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Operating profit (2003 and 2002)
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2003
$m |
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Growth
underlying
$m |
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Growth
due to
exchange
effects
$m |
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2002
$m |
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Growth
underlying
% |
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Growth
reported
% |
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Sales |
18,849 |
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(110 |
) |
1,118 |
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17,841 |
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6 |
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Cost of sales |
(4,469 |
) |
211 |
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(160 |
) |
(4,520 |
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(5 |
) |
(1 |
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Other operating costs |
(10,469 |
) |
(537 |
) |
(724 |
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(9,208 |
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6 |
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(14 |
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Other operating income |
200 |
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(55 |
) |
12 |
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243 |
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(23 |
) |
(18 |
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Operating profit |
4,111 |
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(491 |
) |
246 |
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4,356 |
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(11 |
) |
(6 |
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Back to Contents
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AstraZeneca Annual Report and
Form 20-F Information 2003 |
Financial Review |
33 |
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Underlying performance
Sales
After the effects of changing product
mix, and excluding the effects of exchange, our underlying sales remained
virtually unchanged. Our sales performance was affected by the loss of $3.0
billion underlying sales in Losec/Prilosec,
Zestril and Nolvadex
which was compensated by strong performances
elsewhere in the portfolio. In particular underlying sales for key growth
and launch products increased by $2.4 billion (up 45%) to $8.2 billion.
Gastrointestinal is still our
largest therapy area, accounting for over 31% of total sales (down from over
37% in 2002); continued strong growth from Nexium,
where sales grew by 62% to $3.3 billion,
restricted the declines seen in the Losec/Prilosec area.
In Cardiovascular, Crestor
sales were $129 million for the full year
and Seloken/Toprol-XL sales exceeded the $1 billion mark for the
first time (up 38% to $1,280 million); these performances more than offset the
50% decline in Zestril sales resulting in an overall underlying performance
up 3%.
Despite the generic erosion of
Nolvadex in
the US, Oncology sales increased by 8% with Arimidex (up 46% to $519
million), Iressa (up 227% to $228 million) and Casodex (up 22%
to $854 million) all mitigating the fall in Nolvadex sales (down 66%
to $178 million).
Neuroscience growth was 12% driven
by a 27% increase in Seroquel
sales whilst Respiratory and Inflammation
performance improved by 15% with the most significant performance from Symbicort
(up 61%).
Although wholesaler stocking patterns
continue to have an impact on the quarterly phasing of sales, for the year as
a whole we estimate that changes in excess wholesaler inventories had little
or no effect on sales growth. At the year end, we estimate that excess wholesaler
inventories were well under $100 million.
We discuss the performances of
the therapy areas and the individual products in those areas in more detail
in the appropriate sections of the Operational Review.
Geographic analysis
In
the US, sales declined by 6% for the full year but, excluding the three products
which faced generic erosion Losec/Prilosec,
Zestril and
Nolvadex increased
36%. Growth products with strong performances included Nexium
(up 62%), Seloken/ Toprol-XL (up
47%) and Seroquel (up 22%). In addition, Iressa and Crestor
were launched in the US in 2003.
Sales in Europe increased 2% for
the full year, as strong sales growth for Nexium
(up 55%), Symbicort (up 53%), Seroquel
(up 40%), and the oncology products (up 18%) more than offset declines
in Losec/Prilosec, Zestril
and Pulmicort. Sales volumes increased
by 5% but overall prices were lower by 3%. Performance in Europe was also
affected by the significant increase in movements of products between countries,
usually from southern Europe where prices tend to be lower than in northern
Europe.
Sales in Japan were up 14% for
the full year, as a result of increases in Losec/Prilosec
(up 39%), Seroquel (up 67%), and a
strong oncology portfolio (up 16%).
We discuss the geographic performances
in more detail in the appropriate sections of the Geographic Review.
Operating margin and
retained profit
Underlying
operating profit declined by 11%. Operating margin fell from 24.4% to 21.8%.
Currency had a neutral effect
on operating margin. Although positive on gross margin, the effect was negative
on SG&A and R&D costs. Gross margin increased 1.6 percentage points
from 74.7% to 76.3% as a result of three factors reduced payments to
Merck following the lower proportion of sales of Merck linked products improved
margin by 1.7 percentage points; underlying costs of sales declined by 0.7
percentage
points, and the remainder was due to exchange benefits. These factors were
marginally offset by a provision for disposal of a surplus manufacturing facility.
In aggregate R&D and SG&A
grew by 5.8%, in underlying terms, with currency movements adding 8%. Against
unchanged sales, both R&D and SG&A increased as a percentage of sales
and exchange added 0.6 percentage points to these lines in combination. R&D
increased 1.1 percentage points to 18.3% with spending including several up-front
payments on collaboration agreements. SG&A grew by 2.8 percentage points
to 36.4% as a result of the launches of Crestor
and some field force increases in Europe
and Japan.
Other income was $43 million lower
principally due to the gain on disposal of Sular in the first quarter of 2002.
Net interest and dividend income
was $91 million, benefiting in comparison with 2002 as several small exchange
and market revaluation losses were absent in 2003.
The effective tax rate for the
year was 27.2% compared to 26.8% in 2002. In the fourth quarter we concluded
a negotiated settlement with the UK and the US governments covering all tax
liabilities potentially arising from transfer pricing in respect of ex-Zeneca
products for the years 1987 to 2001. This settlement had been provided for in
previous years and had no impact on the 2003 tax charge. The increase in effective
tax rate from 2002 reflects, amongst other things, a changing mix of countries
where profit was earned.
Dividend
and share re-purchases
We paid a first interim dividend
for 2003 on 6 October 2003 of $0.255 per Ordinary Share. A second interim dividend
for 2003 of $0.540 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 $0.795 for the year. In 2003, we
re-purchased 27.2 million Ordinary Shares for cancellation at a total cost of
$1,154 million. It is our intention that dividends will increase broadly in
line with earnings growth whilst bringing dividend cover to around the middle
of the two to three times range.
Financial position
All data in this section is on
an actual basis (unless noted otherwise).
The net book value of our assets
increased from $11,226 million at 31 December 2002 to $13,257 million at 31
December 2003. The increase was driven primarily by retained profit after dividends
of $1,686 million, and exchange benefits of $1,427 million less share re-purchases
of $1,154 million.
Tangible fixed assets
Capital expenditure totalled $1,239
million, with major investments in Nexium
manufacturing and R&D facilities.
Underlying expenditure was lower
than 2002, particularly in the UK and the US. Depreciation of $986 million was
significantly higher than 2002 due
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AstraZeneca Annual Report
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Financial Review |
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principally to exchange. The net
book value of tangible fixed assets rose from $6,597 million to $7,536 million,
including exchange effects of $827 million.
Goodwill and intangible
fixed assets
Additions to goodwill and intangible
assets amounted to $113 million, whilst amortisation totalled $304 million.
After the effects of exchange, however, the carrying value of goodwill and intangible
assets rose from $2,807 million to $2,884 million.
Stocks
Stock levels rose from $2,593
million at the end of 2002 to $3,022 million at the current year end. The vast
majority of this increase can be attributed to exchange although stocks increased
by $131 million in support of Crestor
launches and other rapidly growing products
offset by declines in stocks of mature products.
Debtors and creditors
Debtors increased from $4,845
million to $5,960 million. Exchange accounted for about $400 million of this
increase. The underlying working capital balance increased due to higher invoiced
sales in the US in December and a higher proportion of sales from Europe where
average credit terms are longer than in the US. In addition, there were increased
pension prepayments in the UK, the US and Sweden and higher tax balances.
Creditors have fallen from $7,733
million to $7,595 million. The decrease was due to the payment of $355 million
(of which $350 million had been provided for at the end of 2002) in respect
of the US Department of Justice Zoladex
investigation, the final payment for the
purchase of certain marketing rights of $129 million, lower amounts due to Merck
and the settlement of several one-off items such as commitments to pension funds
in the US and Sweden. There were offsetting increases from higher tax balances
and exchange effects.
Net funds
At the end of 2003 our net funds
stood at $3,496 million after settlement of the 6.3% guaranteed notes of $284
million. Net funds have declined by $348 million due almost entirely to lower
operating cash inflows.
Liquidity and
capital resources
All data in this section is on
an actual basis (unless noted otherwise).
Cash flow
We continue to be a highly cash
generative business. Although future operating cash flows may be affected by
a number of factors as outlined in the business background section on page 31,
we believe our cash resources will be sufficient for our present requirements
and include sufficient cash for our existing capital programme, share re-purchases
and any costs of launching new products.
Cash generated from operating
activities before exceptional cash outflows was $4,617 million compared with
$5,686 million in 2002. This decrease was primarily a result of a $1,101 million
outflow on working capital $540 million in debtors, $430 million in creditors
and $131 million in stock. This was principally a consequence of factors set
out in the discussions on stocks and debtors and creditors above. The stronger
European and Japanese currencies also increased the cash flow effect compared
to 2002. Cash expenditure on exceptional items was $391 million compared with
$93 million in 2002, following the payment of $355 million in settlement of
the Zoladex investigation.
Tax paid was $886 million and includes the transfer pricing settlement.
Capital expenditure, including
new fixed asset investments and intangible assets, totalled $1,597 million.
Although this is similar to cash expenditure in 2002, it reflects slightly lower
expenditure on tangible fixed assets, offset by exchange and higher fixed asset
investments. The cash inflow in respect of the disposal of Marlow Foods contributed
$80 million in the year.
After accounting for dividends
paid of $1,222 million, net share re-purchases of $1,107 million and exchange
of $82 million there is a $348 million decrease in net cash funds, which totalled
$3,496 million at 31 December 2003.
Undrawn uncommitted bank facilities
at 31 December 2003 totalled $485 million with maturities ranging from one to
two years. Future operating cash flows may be affected by a number of factors
as outlined on page 31.
Capitalisation
The
share re-purchase programme begun in 1999 was extended in 2001 and is an
integral part of the Companys
financial management. The original plan was to re-
purchase $4 billion of shares
by the end of 2003 and this has now been completed. We have re-purchased 27.2
million shares in 2003 for $1,154 million, bringing the total number of shares
re-purchased since the start of the programme to 92.8 million at a cumulative
cost of $3,959 million. The number of shares in issue at year end was 1,693
million. The Board has approved a new programme of share re-purchases of $4
billion to be completed by the end of 2005, assuming continued market access
and the absence of strategic uses for cash.
Our reserves were increased by
$1,427 million due to the effect of exchange rate movements (after tax) on translation
of non-dollar denominated assets and liabilities. Shareholders funds increased
by a net $2,006 million to $13,178 million at year end. Minority interests increased
from $54 million at 31 December 2002 to $79 million at 31 December 2003.
Investments, divestments
and capital expenditure
There were no significant acquisitions
in 2003. We disposed of Marlow Foods in the first half of the year resulting
in net cash proceeds of $80 million.
Cash expenditure on fixed assets
was $1,597 million and included a $100 million investment in preference shares
in Abgenix Inc., as part of an oncology research collaboration agreement. The
final $129 million instalment of an agreement signed in 1998 to re-purchase
marketing rights was made. Capital expenditure was financed from internal resources.
Financial policies
Insurance
Our
risk management processes are described in the Directors Report on page
45. An outcome of these processes is that they enable us to identify risks which
can be partly or entirely
mitigated through use of insurance or which we can self-insure. We negotiate
best available premium rates with insurance providers on the basis of our extensive
risk management procedures. In the current insurance market, level of cover
is decreasing whilst premium rates are increasing. Rather than simply paying
higher premiums for lower cover, we focus our insurance resources on the most
critical areas, or where there is a legal requirement, and where we can get
best value for money. Risks which we give particular attention to include product
liability, business
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AstraZeneca Annual Report
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Financial Review |
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interruption, directors and officers liability,
and
property damage.
Taxation
We operate in a number of countries worldwide and, as a consequence, are subject to many tax jurisdictions and rules. We manage our tax exposures through, amongst other things, efficient corporate structures and
transfer pricing policies.
Treasury
Our financial policies covering the management of cash, borrowings and foreign exchange are deliberately conservative and intended to support our objective of building shareholder value by managing and controlling our
financial risks. Our treasury operations are conducted in accordance with policies and procedures approved by the Board. The treasury activities are managed centrally from London and over 90% of our cash and short term investments is managed
directly from London. With only limited and specifically
approved exceptions, all currency and interest rate hedging is conducted from London. Operating units benefit from local currency billing which has the effect of consolidating their foreign exchange exposures to
central treasury.
Foreign exchange
The US dollar is our most significant
currency. As a consequence, we have chosen to account for our results in US dollars
and manage
our exposures against US dollars accordingly. Approximately half of our sales
in 2003 were denominated in currencies other than the US dollar, while a significant
proportion of our manufacturing and R&D costs are denominated in sterling
and Swedish krona. As a result, our operating profit in US dollars can be affected
by movements in exchange rates. The significant weakening of the US dollar against
sterling, the Swedish krona and the euro which was seen towards the end of 2002
has continued in 2003. This has had the effect of increasing the dollar value
of our
European sales compared with the previous year whilst our UK and Swedish costs have also increased correspondingly. The overall effect of currency movements in 2003 has been to increase reported (compared to
underlying) sales and operating profit by 6% and 5%, respectively. Our approach to managing currency exposures to mitigate these and other currency effects is described below.
Currency exposure is managed centrally using 12 month currency cash flow forecasts for our major currencies of Swedish kronor, sterling and euros and monthly updated foreign currency working capital forecasts reported
by subsidiaries. We use derivative financial instruments, principally currency options and forward foreign exchange contracts, to hedge our currency exposure. It is our policy not to engage in any speculative transactions nor to hedge actively
through the financial markets currency translation exposures arising from the consolidation of our non-US
Ratios |
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|
|
|
|
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As at end and for the year ended
31 December |
2003 |
|
2002 |
|
2001 |
|
|
|
|
|
|
|
|
Return on shareholders equity
(%) |
24.9 |
|
27.3 |
|
30.6 |
|
|
|
|
|
|
|
|
Equity/assets ratio (%) |
56.1 |
|
51.8 |
|
51.8 |
|
|
|
|
|
|
|
|
Net funds/equity ratio (%) |
26.4 |
|
34.4 |
|
29.9 |
|
|
|
|
|
|
|
|
Number of employees |
61,900 |
|
59,700 |
|
54,600 |
|
|
|
|
|
|
|
|
Sensitivity analysis 31
December 2003
|
Market
value change favourable/(unfavourable) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value 31 December 2003 |
|
Interest rate movement |
|
Exchange rate movement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$m |
|
+1% $m |
|
1% $m |
|
+10% $m |
|
10% $m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and short term investments |
|
|
4,039 |
|
(2 |
) |
2 |
|
(37 |
) |
37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term debt |
|
|
(371 |
) |
24 |
|
(30 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and currency swaps |
|
|
56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forwards |
|
|
(7 |
) |
|
|
|
|
71 |
|
(71 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange options |
|
|
148 |
|
|
|
|
|
(114 |
) |
162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22 |
|
(28 |
) |
(80 |
) |
128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sensitivity analysis 31
December 2002
|
|
|
|
|
|
|
Market
value change favourable/(unfavourable) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value 31
December 2002
|
|
Interest
rate movement
|
|
Exchange
rate movement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$m |
|
+1% $m |
|
1% $m |
|
+10% $m |
|
10% $m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and short term investments |
|
|
4,793 |
|
(7 |
) |
7 |
|
(29 |
) |
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term debt |
|
|
(733 |
) |
26 |
|
(32 |
) |
3 |
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and currency swaps |
|
|
82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forwards |
|
|
(9 |
) |
|
|
|
|
(3 |
) |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange options |
|
|
97 |
|
|
|
|
|
(10 |
) |
150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19 |
|
(25 |
) |
(39 |
) |
179 |
|
|
|
|
|
|
|
|
|
|
|
|
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AstraZeneca Annual Report
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Financial Review |
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dollar subsidiaries. Key controls, applied to transactions in derivative financial instruments, are to use only instruments where good market liquidity exists, to revalue all financial instruments daily using current
market rates and to sell options only to offset previously purchased options. The transaction exposures that arise from non-local currency intercompany sales and transactions with third parties of our subsidiaries are, where practicable, fully
hedged using forward foreign exchange contracts and purchased currency options. Longer term forecast cash flow currency exposure is managed by forecasting cash flows by major currency for 12 months forward on a monthly rolling basis. Our policy in
2003 was to limit the potential downside by hedging 50%, subject to variation within authorised limits, using a mixture of purchased currency options and forward exchange contracts. In 2003, the US dollar depreciated against all major currencies. It
is estimated that the effect of currency movements was to increase our continuing business sales by $1,118 million and to increase our operating profit by $246 million. At the end of 2003, contracts relating to 2004 cash flows had a value of $52
million (see Note 18 to the Financial Statements). In 2004, the policy has been modified to cover 95% of 12 month forward cash flows but only those currency movements outside specified limits. Within these limits, we are now effectively
unhedged.
Interest rate risk
The management of our liquid assets and loans are co-ordinated and controlled centrally by our treasury operations. We have significant positive cash flows and the liquidity of major subsidiaries is co-ordinated in
cash pools and concentrated daily in London. Interest rate risk is managed according to a benchmark reflecting 90 days duration of net liquid funds. Our liquid funds are primarily invested in US dollars. Our debt has an average maturity of 20 years
and all borrowings with a maturity of more than one year are denominated in US dollars and have been swapped from fixed rate into floating rate debt.
Credit exposure
Our exposure to financial counterparty credit risk is controlled by our treasury team centrally by establishing and monitoring counterparty limits. Our centrally managed funds are invested almost entirely with
counterparties whose credit rating is A or
better. Trade debtor exposures are managed locally in the operating units where
they arise. We are exposed to customers ranging from large private wholesalers
to government backed agencies and the underlying local economic and sovereign
risks vary
throughout the world. Where appropriate, we endeavour to minimise risks by the
use of trade finance instruments such as letters of credit and insurance.
Funding risk
We have significant net funds to finance the ongoing working capital and capital investment requirements of our operations. Group Treasury continue to monitor global debt markets and intend to put structures in place
to access these should future market conditions be favourable or there is a need for additional funds.
Sensitivity analysis
The sensitivity analysis, set out in this review on page 35, summarises the sensitivity of the market value of our financial instruments to hypothetical changes in market rates and prices. Changes to the value of the
financial instruments are normally offset by our underlying assets and liabilities. The range of variables chosen for the sensitivity analysis reflects our view of changes which are reasonably possible over a one year period. Market values are the
present value of future cash flows based on market rates and prices at the valuation date. Market values for interest rate risk are calculated using third party systems which model the present value of the instruments based on the market conditions
at the valuation date. For long term debt, a favourable change in market value results in a decline in the absolute value of debt. For other financial instruments, a favourable change in market value results in an increase in the absolute
value.
The sensitivity analysis on page 35 assumes an instantaneous 100 basis point change in interest rates in all currencies from their levels at 31 December 2003, with all other variables held constant. Based on the
composition of our long term debt portfolio as at 31 December 2003 (which is predominantly floating rate), a 1% increase in interest rates would result in an additional $3 million in interest being incurred per year. The exchange rate sensitivity
analysis on page 35 assumes an instantaneous 10% change in foreign currency exchange rates from their levels at 31 December 2003, with
all other variables held constant. The +10% case assumes a 10% strengthening of the US dollar against all other currencies and the 10%
case assumes a 10% weakening of the US dollar.
Critical accounting policies and estimates
Our Financial Statements are prepared in accordance with accounting principles generally accepted in the UK (UK
GAAP) and the accounting policies employed are set out under the heading Financial
Statements Accounting Policies on pages 66 and 67. In applying these
policies, we make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities.
The actual outcome could differ from those estimates. Some of these policies
require a high level of judgement, either
because the areas are especially subjective or due to their complexity. We believe
that the most critical accounting policies and significant areas of judgement
and estimation are in revenue recognition, research and development, goodwill
and intangible assets, post-retirement benefits, share option compensation and
provisions for contingent liabilities.
Revenue recognition Revenue represents sales of products (net of estimated rebates) to external third parties and excludes intercompany income and value added taxes. We also
receive income from royalties and from sales of intellectual property, brands and product lines which are included in other operating income.
> |
Sales of products to third parties: |
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Sales revenue is recorded as turnover in |
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our Financial Statements and valued at |
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the invoiced amount (excluding sales |
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and value added taxes) less estimated |
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provisions for product returns and |
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rebates given to managed care and |
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other customers a particular feature
in |
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the US. Cash discounts for prompt |
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payment are also deducted from sales. |
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Revenue is recognised when title |
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passes to the customer which is usually |
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either on shipment or on receipt of |
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goods by the wholesaler depending on |
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local trading terms. Industry practice in |
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the US allows wholesalers and |
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pharmacies to return unused |
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inventories within six months of shelf-life |
|
expiry. At point of sale, we estimate the |
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quantity and value of goods which may |
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AstraZeneca Annual Report and
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Financial Review |
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ultimately be returned. Our returns provisions
are based on actual experience over the preceding 12 months, although in certain
situations, for example, a new product launch or at patent expiry, further
judgement may be required. When products face generic competition, we give
particular attention to the possible level of returns. Overall, we believe
that our estimates are reasonable.
Similarly, at the time of invoicing sales,
rebates which could be paid out over the following six to nine months
are
estimated. These rebates typically arise from sales contracts with managed
care organisations and hospitals and from Medicaid best price
contracts. The estimates are made on a customer by customer basis taking
into account specific contract provisions and are reviewed each month. We
believe
that we have been reasonable in our estimates for future rebates using similar
methodology to that of 2002. Inevitably, however, such estimates involve
judgements
on future sales levels and the extent to which customers will access different
incentive levels. Experience has shown
that these estimates have been substantially accurate in the past.
A further feature of the US market is that
sales can also be significantly influenced by wholesaler buying patterns.
Wholesalers often place orders which are significantly
larger than their normal levels of demand ahead of anticipated price increases
or they may seek to build up or run down their inventory levels for other
reasons. If such speculative orders are shipped shortly before a quarter or
year end it can result in revenue being recorded in the current financial
period in respect of the following periods underlying demand and distortion
of the financial results from one period to the next. We track wholesaler
inventory levels by product using our own and third party estimates and, where
we believe such distortions occur, we disclose in the Annual Report for each
product where shipments may be out of line with underlying prescription trends.
We do not offer any incentives to encourage wholesaler speculative buying
and attempt, where possible, to restrict shipments to underlying demand when
such
speculation occurs. During 2003,
we began negotiations with wholesalers to enter into inventory management
agreements (IMAs) with the aim of minimising inventory movements
caused by speculative purchasing. Two contracts are being entered into and
more may be completed during 2004. We offer cash discounts on prompt settlement
of invoices and, once again, this is a particular feature in the US, although
it is seen elsewhere. We deduct cash discounts from revenue.
> |
Royalty income:
Royalty income is recorded under other operating income in the Financial
Statements. Royalties tend to be linked to levels of sales or production
by a third party. At the time of preparing the Financial Statements, we
may have to estimate the third partys sales or production when arriving
at the royalty income to be included. These estimates, which may differ
from actual sales, do not result in a material impact on reported other
operating income. |
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> |
Sales of intangible assets
(such as intellectual property, brands and goodwill):
A consequence of charging all R&D expenditure to the profit and loss
account in the year that it is incurred (which is normal practice in the
pharmaceutical industry) is that we own valuable intangible assets which
are not recorded on the balance sheet. We also own acquired intangible
assets, which may be included on the balance sheet (see Research
and development below). As a consequence of regular reviews of product
strategy, from time to time we sell such assets and generate income. In
a simple situation, the recognition of income may be easily defined but
often the transfer of title can require ongoing commitment by us (for
example, ongoing manufacturing arrangements, technology transfer and transfer
of product licences). In these circumstances, the recognition of revenue
may be deferred over the period of our ongoing commitment. Profits or
losses from the sale of product related intangible assets are classified
in other operating income and are stated after taking account of product
disposal costs, the valuation of which includes a degree of judgement. |
Research and development Our
business is underpinned by our marketed products and development portfolio.
The R&D expenditure to generate these products is charged to the profit
and loss account in the year that it is incurred. This policy is in line with
practice adopted by all major pharmaceutical companies.
Purchase of, for example, intellectual property
and product rights to supplement our R&D portfolio can lead to differing
accounting treatment depending on our assessment of the nature of the acquisition
and the degree of risk involved. For example, payments in respect of rights
to a compound in early stage development would normally be expensed immediately
against income on the basis that, at this point, the probability of the compound
successfully reaching the market place is still low. Payments in respect of
rights to a compound in late stages of development, however, or to one already
being marketed, would probably be capitalised as an intangible asset (see
Goodwill and intangible assets below) as the prospect of success
is much greater.
Goodwill and intangible assets
We have significant investments in goodwill
and intangible assets as a result of acquisitions of businesses and purchases
of such assets as product development and marketing rights. Under UK GAAP,
these are amortised over their estimated useful lives. Changes in these
lives
would result in different effects on the profit and loss account. We estimate
that a one year reduction in the estimated useful lives of goodwill and
intangible
assets would increase the annual amortisation charge by $60 million. A substantial
part of our investments in intangible assets and goodwill relate to the
restructuring
of the Astra-Merck joint venture in 1998 and we are satisfied that the carrying
values are fully justified by estimated future earnings. Goodwill and intangible
assets are reviewed for impairment where there are indications that their
carrying values may not be recoverable and any impairments are charged to
the profit and loss account. Tests for impairment are based on discounted
cash flow projections, which require us to estimate both future cash flows
and an appropriate risk-adjusted discount rate. Such estimates are inherently
subjective. No impairments to goodwill or intangible assets (2002 $nil,
2001
$nil) were identified in 2003. Under UK GAAP, the merger of Astra and Zeneca
in 1999 was recorded as a merger of equals (pooling of interests).
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38 |
AstraZeneca Annual Report and
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Financial
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Under US GAAP, the merger has been accounted
for as the acquisition of Astra by Zeneca as discussed in more detail under
US GAAP information 2001 2003 on page 113.
Contingent liabilities In
the normal course of business, contingent liabilities may arise from environmental
liabilities connected with our current or former sites, from product specific
and general legal proceedings, or from guarantees. Where we believe that potential
liabilities have a low probability of crystallising or are very difficult
to quantify reliably, we treat these as contingent liabilities. These are
not provided for but are disclosed in the notes. Further details of these
are set out in Note 31 on page 100. Although there can be no assurance regarding
the outcome of legal proceedings, we do not expect them to have a materially
adverse effect on our financial position or profitability. We also have significant
commitments which are not currently recognised in the balance sheet arising
from our relationship with Merck. These are described more fully in Off-balance sheet transactions, contingent liabilities
and commitments.
Post-retirement benefits We
account for the pension costs relating to the UK retirement plans under SSAP
24 and under local accounting practices for non-UK subsidiaries due to the
cost and difficulty of obtaining SSAP 24 information for non-UK schemes. In
all cases, the pension costs are assessed in accordance with the advice of
independent qualified actuaries but require the exercise of significant judgement
in relation to assumptions for future salary and pension increases, long term
price inflation and investment returns. SSAP 24 permits flexibility in the
actuarial assumptions and bases to be used and the application of different
assumptions could have a significant effect on the amounts reflected in the
Financial Statements. We consider that the assumptions and bases detailed
in Note
29 are appropriate for the business.
The off-balance sheet aspects of post-retirement benefits are discussed on
page 39.
On pages 90 to 94, we also provide
additional disclosures in accordance with FRS 17. Had FRS 17 been applied
in 2003, the charge to profit and loss for the major defined benefit schemes
would have been approximately $247 million.
FRS 17 becomes fully operational
from 1 January 2005. However, from that date the consolidated financial statements
are scheduled to be prepared under international accounting principles, as
discussed on page 40. Although amendments are proposed to the existing international
standard to allow companies to adopt similar principles to FRS 17, these amendments
have not been published.
Share option compensation
Through the Remuneration Committee we offer
share options to certain employees as part of their compensation and benefits
packages, designed to improve alignment of the interests of employees with
shareholders. Details of these are given in Note 30. It is likely that, at
some point, international, UK and US accounting standards will require share
option grants to be valued and charged against income. At present, US GAAP
requires some share option costs to be charged to the profit and loss account
and stipulates disclosure of the cost should all eligible options be expensed
(as set out on page 118). Should a requirement to expense share options be
introduced, we estimate an additional charge of approximately $154 million
would arise. This charge has been calculated using the Black-Scholes model
as a valuation basis. Whilst this model is appropriate in valuing traded options,
it is less so for employee grants as it does not take into account the restrictive
features of such options. This would result in a charge
to the profit and loss account but would
have no impact either on our net assets or on our current or future cash
flows.
Off-balance sheet transactions,
contingent liabilities and commitments
Details of our contingent liabilities and commitments
are set out in Note 31 to the Financial Statements. We have no off-balance
sheet entities and our hedging activities are non-speculative. The table below
sets out our minimum contractual obligations at the year end.
Arrangements with
Merck
Introduction
In 1982, Astra AB set up a joint venture with
Merck & Co., Inc. for the purposes of selling, marketing and distributing
certain Astra products in the US. In 1998, this joint venture was restructured
(the restructuring). Under the restructuring, a US limited partnership,
in which Merck is the limited partner and we are the general partner, was
set up and we obtained control of the joint ventures business subject
to certain limited partner and other rights held by Merck and its affiliates.
The restructuring agreements provide for the following ongoing payment and
termination arrangements:
> |
Annual contingent payments |
> |
Partial Redemption |
> |
First Option |
> |
Second Option |
In addition, included in the assets and liabilities
covered by the restructuring is a loan note receivable by us from Merck with
face value of $1.4 billion. Each of these elements is discussed in further
detail below.
Under the terms of the 1998 restructuring,
the merger in 1999 between Astra and Zeneca triggered two one-time payments
from us to Merck:
> |
a Lump Sum Payment of $809
million, which was charged to the profit and |
Contractual obligations
|
Payments due
by period |
|
|
|
|
|
Less than |
|
|
|
|
|
|
|
|
|
1 year |
1-3 years |
3-5 years |
Over 5 years |
Total |
$m |
$m |
$m |
$m |
$m |
|
|
|
|
|
|
|
|
|
|
|
Bank loans and other borrowings |
152 |
|
|
|
|
|
303 |
|
455 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases |
112 |
|
96 |
|
53 |
|
80 |
|
341 |
|
|
|
|
|
|
|
|
|
|
|
|
Merck arrangements |
180 |
|
430 |
|
225 |
|
4,677 |
|
5,512 |
|
|
|
|
|
|
|
|
|
|
|
|
Other |
382 |
|
39 |
|
|
|
|
|
421 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
826 |
|
565 |
|
278 |
|
5,060 |
|
6,729 |
|
|
|
|
|
|
|
|
|
|
|
|
Back to Contents
|
AstraZeneca Annual Report and
Form 20-F Information 2003 |
Financial Review |
39
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loss account, as a result of which Merck
relinquished any rights to Zeneca products; and |
|
|
> |
an Advance Payment of $967 million. This
Advance Payment was calculated as the then net present value of $2.8
billion discounted from 2008 to the date of payment at a rate of 13%
per annum and causes Merck to relinquish any rights, including contingent
payments on future sales, to Astra products with no existing or pending
US patents at the time of the merger. As the Advance Payment provides
us with relief from future payments, this amount has been capitalised
as an intangible asset and is being amortised over 20 years. The Advance
Payment is subject to a true-up in 2008, as discussed under First
Option below. |
Annual contingent payments
We make ongoing payments to Merck based on sales of certain of our products in the US (the contingent
payments on the agreement products). As a result of the 1999
merger, these contingent payments (excluding those in respect of Prilosec and Nexium) cannot be less than annual minimum sums between 2002 and 2007 ranging from $125 million to $225 million. Our payments have exceeded the minimum level in 2003 and 2002 and we have no
reason to believe that the annual payments in the future will fall below the minimum obligations.
Partial Redemption
In 2008, there will be a partial redemption of Mercks
limited partnership interest which will end Mercks rights to contingent
payments in respect of certain of the agreement products by distribution
to Merck of an amount calculated as a multiple of the average annual contingent
payments from 2005 to 2007 on the relevant products, plus $750
million.
First Option
In 2008, a calculation will be made of the Appraised Value, being the net present value of the future contingent payments in respect of all agreement products not covered by the Partial Redemption, other than
Prilosec and Nexium. Payment of this amount to Merck in 2008 is, however,
contingent on Mercks exercise
of the First Option. Exercise of the First Option will require us to re-purchase
Mercks interest in these products. Should Merck not exercise
this option in 2008, we may exercise it in 2010 for a sum equal to the 2008 Appraised Value. If neither Merck nor we exercise the option, the contingent payment arrangements in respect of these agreement products will
continue and the Appraised Value will not be paid.
In addition, in 2008 there will be a true-up of the Advance Payment. The calculation of this will be based on a multiple of the average annual contingent payments from 2005 to 2007 in respect of all the agreement
products with the exception of Prilosec and Nexium (subject to a minimum of $6.6
billion), plus other defined amounts (totalling $912 million). It is then reduced by the Appraised Value (whether paid or not), the Partial Redemption and the Advance Payment (at its undiscounted amount of $2.8 billion) to determine the true-up
amount. The true-up will be settled in 2008 irrespective of whether the First Option is exercised and this could result in a further payment by us to Merck or a payment by Merck to us.
Should Merck exercise the First Option in 2008, we will make payments in respect of the Partial Redemption, the First Option and the true-up totalling a minimum of $4.7 billion. If we exercise the First Option in 2010,
the combined effect will involve a minimum aggregate amount payable to Merck in 2008 and 2010 of the same amount.
Loan note receivable
In 2008, at the same time as the settlement of the Partial Redemption and the true-up, Merck will settle the loan note receivable by paying us $1.4 billion.
Second Option
A Second Option exists whereby we have the option to re-purchase Mercks
interests in Prilosec
and Nexium in the US. This option is exercisable by us two years after the exercise of the First Option, whether the First
Option is exercised in either 2008 or 2010. Exercise of the Second Option by us at a later date is also provided for in 2017 or if combined annual sales of the two products fall below a minimum amount provided, in each case, that the First Option
has been exercised. The exercise price for the Second Option is the fair value of these product rights as determined at the time of exercise.
If the Second Option is exercised, Merck will have no further rights to contingent payments from us.
Accounting treatment
The precise amount of settlements with Merck under the Partial Redemption and the First Option cannot be determined at this time, as some of the payments are calculated based on trading performance between 2005 and
2007, and another is contingent upon Merck exercising the First Option. If Merck exercises the First Option in 2008, the net minimum payment to be made to Merck, being the combined payments of $4.7 billion less the repayment of the loan note of $1.4
billion, would be $3.3 billion.
In accounting for the restructuring in 1998, the loan note was included in the determination of the fair values of the assets and liabilities acquired. The loan note was ascribed a fair value of zero on acquisition and
on the balance sheet because we estimate that the net minimum payment of $3.3 billion equated to the fair value of the trading rights to be acquired under the Partial Redemption and First Option.
We consider that the payments described under the headings above, including the Second Option, represent the acquisition of future trading rights as they relieve us of the obligations to make contingent payments to
Merck these reliefs will
commence from the dates the payments are made. Accordingly, the future acquisition of these trading rights will be reflected in the Financial Statements only when the payments are made. The trading rights will be accounted for under the extant guidance when the
payments are made, with allocations to intangibles and goodwill, as appropriate.
The annual contingent payments are expensed as incurred.
Post-retirement benefits
We offer post-retirement benefit plans which cover many of our employees around the world. In keeping with local terms and conditions, most of these plans are defined contribution in nature where the resulting profit
and loss account charge is fixed at a set level or is a set percentage of employees pay.
However, several plans, mainly in the UK, which has by far the largest single
scheme, the US and Sweden, are defined benefit plans where benefits are based
on employees length of service and final pensionable pay. The UK and US
schemes were closed to new entrants in 2000. All new employees in these countries
are offered defined contribution schemes.
Back to Contents
40 |
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Review |
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Financial Review continued |
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Under FRS 17, the disclosures on page 92 highlight a deficit of $883 million, after deferred tax, for the major Group post-retirement defined benefit schemes. FRS 17 prescribes detailed rules for the calculation of
scheme assets and liabilities and indicates the net accounting surplus or deficit that exists at the balance sheet date. Fluctuations in investment conditions and/or FRS 17 prescribed assumptions can result in significant volatility in the surplus or deficit. Pension and other post-retirement schemes, however, are managed over the long
term. Investment and liability decisions are based on underlying actuarial and economic circumstance with the intention of ensuring that the schemes have sufficient assets to meet liabilities as they fall due, rather than meeting accounting
requirements. This actuarial approach tends to produce less volatility than is likely under FRS 17.
The overall deficit in the major defined benefit schemes
increased from $1,233 million at 31 December 2002 to $1,313 million at 31 December
2003. This increase is due primarily to the effects of changes in underlying
assumptions with regard to scheme liabilities. Exchange has also had an effect.
For example, in the largest scheme, in the UK, plan assets have increased in
sterling from £2,048 million to £2,385 million, reflecting strong
performance
(the plans investment return
was 13.4%, 2.6% higher than the benchmark derived from aggregating individual
investment managers objectives) and a one-off cash contribution of £100 million in November. Liabilities have increased from £2,555 million to £2,875 million. As a result, the deficit has
fallen from £507 million to £490 million. At the last actuarial valuation
at 31 March 2003, the market value of the UK funds assets represented 89.1%
of
its liabilities as valued on the actuarys funding basis. The one-off contribution
we made, referred to above, brought the solvency ratio to around 95%. The trustee
manages both investments and liabilities closely and follows a strategy of awarding
mandates to specialist, active investment managers. We have indicated our intention
to restore full solvency over a period of around 15 years.
New accounting standards
New UK or US applicable accounting standards which have been issued (both adopted and not yet adopted) are discussed on pages 60 and 114 respectively.
International accounting
Under current European proposals, we will
be required to adopt International Financial Reporting Standards (IFRSs)
and International Accounting Standards (IASs) in the preparation
of our Financial Statements from 2005 onwards. The international standard setter,
the International Accounting Standards Board (IASB), has undertaken
an extensive exercise to develop new standards and improve existing ones. This
work is ongoing and publication of the resulting standards will be completed
in early 2004. At present, these new standards are not operational and under
the current international standards, in our opinion, our net profit and shareholders funds
are not significantly different from those presented under UK GAAP.
Our project to manage the transition of financial reporting from UK GAAP to international accounting has completed initial assessments of the impact on our results and net assets. As noted above, the IFRSs which will
be mandatory in 2005 have not all been issued and, accordingly, it is not possible to discuss with certainty all the details of the effects of the transition at present. In addition, certain IFRSs may be issued before 2005 that we may decide to
adopt early and the effects of these adoptions, if any, cannot be quantified at present. However, we believe that the major areas of impact on our net profit and shareholders funds
will be share-based payments, goodwill amortisation, deferred tax and pensions.
The following information is provided in accordance with US requirements.
Results of operations summary
analysis of year to 31 December 2002
The tables on page 41 show our sales by therapy area and operating profit for 2002 compared to 2001.
Reported performance
Our sales grew by $1,619 million to a total of $17,841 million in 2002, an increase of 10%. Operating costs rose by $1,419 million resulting in an improvement in operating profit before exceptional items of $200
million or 5%. The weaker US dollar increased our reported sales growth by 1% whilst there was no significant currency effect on operating profit growth. Earnings per share after exceptional items decreased from $1.65 to $1.64.
Underlying performance
After adjusting for beneficial exchange effects of $111 million, our sales increased by 9% from $16,222 million in 2001 to $17,841 million in 2002. Operating profit before exceptional items rose by 5%. Earnings per
share before exceptional items grew by 7% from $1.73 to $1.84.
Our sales growth for the year was impacted significantly by the decline in our Losec/Prilosec sales, which fell by 18%. If this effect
is excluded, the sales growth is 23%, strong evidence of the positive underlying momentum of our business. This growth was fuelled by a trebling of Nexium sales which
more than offset the declines in Losec/Prilosec resulting in a 7% growth in Gastrointestinal sales. This was complemented by strong performances from the Neuroscience
(up 21%), Respiratory (up 16%) and Oncology (up 12%) product ranges. Generic competition for Zestril resulted in a sales growth for Cardiovascular products of just
1%.
The successful launches of Faslodex in the US, Iressa in Japan and Symbicort outside the US, combined with Nexium sales, generated nearly $2.4 billion in sales in 2002 (up from $651 million in 2001). Five other growth products we highlight in our portfolio Casodex, Arimidex, Atacand, Seroquel, and Zomig grew by another $900 million (to just over $3 billion in aggregate).
We discuss the performances of the therapy areas and the individual products in those areas in more detail in the appropriate sections of the Operational Review.
Geographic analysis
In the US, sales increased by 10% for the full year.
Excluding Prilosec, sales growth was 33%, with excellent performances
from Nexium , Seroquel, Toprol-XL, Pulmicort Respules and Arimidex.
Strong sales performance in France (up 13% to $1,140 million) and Italy (up
16% to $765 million) more than offset declining sales in Germany and the UK,
resulting in a 5% increase in Europe for the full year. Sales growth was driven
by Nexium, Symbicort, Casodex and Seroquel.
A strongly performing product range in Oncology (including the excellent uptake
for Iressa) and continued strong growth in Losec (up 40%) fuelled
the 21% sales growth in Japan for the full year. Sales reached $977 million in
2002, up from
$851 million in 2001.
Back to Contents
|
AstraZeneca Annual Report and
Form
20-F Information 2003 |
Financial Review |
41 |
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We discuss the geographic performances in more
detail in the appropriate sections of the Geographic Review on pages 21 to
22.
Operating margin and retained profit
Operating profit before exceptional items increased by
5% to $4,356 million. Operating margin of 24.4% was 1.2 percentage points below
the prior year. Currency impacts reduced margin by 0.3 points whilst the other
0.9 points reduction was largely due to lower other operating income. Elsewhere,
improved product mix and lower Merck payments reduced cost of sales by 0.6 points
to 25.3% of sales whilst SG&A growth was broadly in line with sales growth. R&D
increased by 0.6 points to 17.2% of sales, principally due to the growth in clinical trial costs. In aggregate, underlying R&D and SG&A
grew by around 10%. Other operating income fell from $368 million to $243 million
reflecting both lower
royalty income and product disposal gains.
As discussed previously, the US Department of Justice conducted a civil and criminal investigation into the sale and marketing of Zoladex (goserelin acetate implant)
and at the end of 2002, the Company and federal and state authorities were in the process of negotiating a
potential settlement of the civil and criminal claims at issue in the investigation. As a result, although no final agreement had been concluded, we believed it appropriate to accrue $350 million to cover estimated
settlement costs as an exceptional item.
Interest and dividend income was $31 million (2001 $113 million) for the full year and included the effects of some small exchange and revaluation losses.
Excluding exceptional items, the effective tax rate for the full year 2002 was 26.8% compared with 28.4% for 2001. No tax relief was provided on the exceptional item charge in 2002.
Financial position
The net book value of our assets increased from $9,629 million at 31 December 2001 to $11,226 million at 31 December 2002. The increase was driven by the net profit for the year of $2,836 million and consolidation
translation gains of $1,110 million, offset by re-purchases of shares and the 2002 dividends, amounting to $1,190 million and $1,206 million, respectively.
Cash flow
Before exceptional cash expenditure, we
generated $5,686 million cash inflow from operations in 2002, significantly higher than the corresponding figure of $4,130 million in 2001. Higher profits before depreciation and amortisation contributed $300 million
and there were significant working capital inflows, particularly from stocks and creditors. Expenditure on exceptional items was $275 million lower than in 2001 as the integration and synergy programmes reached their conclusion. Tax cash outflows at
$795 million were marginally higher than 2001 whilst cash inflows from interest fell to $35 million as a result of lower returns. We applied the remaining cash in continuing our share re-purchase programme (up $110 million from 2001 to $1,190
million), continued investment in fixed assets (broadly similar to 2001 at $1,608 million) and dividends ($1,234 million). As a result, our net cash inflow before non-equity financing was $902 million compared to an outflow in 2001 of $691
million.
Investments, divestments and capital expenditure
There were no significant acquisitions or disposals in 2002. Our cash expenditure in 2002 on fixed assets (including intangible assets, goodwill and fixed asset investments) totalled $1,543 million (net of
Sales by therapy area
(2002 and 2001) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growth |
|
|
|
|
|
|
|
|
|
|
|
|
due to |
|
|
|
|
|
|
|
|
Growth |
|
Growth |
|
exchange |
|
|
|
Growth |
|
Growth |
|
|
2002 |
|
underlying |
|
effects |
|
2001 |
|
underlying |
|
reported |
|
|
$m |
|
$m |
|
$m |
|
$m |
|
% |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cardiovascular |
3,569 |
|
54 |
|
32 |
|
3,483 |
|
1 |
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gastrointestinal |
6,664 |
|
427 |
|
47 |
|
6,190 |
|
7 |
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Infection |
440 |
|
42 |
|
|
|
398 |
|
11 |
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neuroscience |
2,418 |
|
417 |
|
4 |
|
1,997 |
|
21 |
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oncology |
2,369 |
|
264 |
|
(6 |
) |
2,111 |
|
12 |
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Respiratory and Inflammation |
1,818 |
|
252 |
|
27 |
|
1,539 |
|
16 |
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other pharma |
65 |
|
(13 |
) |
(3 |
) |
81 |
|
(17 |
) |
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Others |
498 |
|
65 |
|
10 |
|
423 |
|
15 |
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
17,841 |
|
1,508 |
|
111 |
|
16,222 |
|
9 |
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
excluding exceptional items (2002 and 2001) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growth |
|
|
|
|
|
|
|
|
|
|
|
|
due to |
|
|
|
|
|
|
|
|
|
|
Growth |
|
exchange |
|
|
|
Growth |
|
Growth |
|
|
2002 |
|
underlying |
|
effects |
|
2001 |
|
underlying |
|
reported |
|
|
$m |
|
$m |
|
$m |
|
$m |
|
% |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
17,841 |
|
1,508 |
|
111 |
|
16,222 |
|
9 |
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
(4,520 |
) |
(302 |
) |
(20 |
) |
(4,198 |
) |
7 |
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating costs |
(9,208 |
) |
(842 |
) |
(130 |
) |
(8,236 |
) |
10 |
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating income |
243 |
|
(140 |
) |
15 |
|
368 |
|
(38 |
) |
(34 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
4,356 |
|
224 |
|
(24 |
) |
4,156 |
|
5 |
|
5 |
|
|
|
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Back to Contents
42 |
AstraZeneca
Annual Report and
Form 20-F Information 2003 |
Financial
Review |
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Financial Review continued |
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disposals of $66 million). This expenditure was broadly similar to the last two years and includes the elements discussed above together with a further instalment to purchase marketing rights of $146 million. The
capital expenditures are financed from internally generated funds.
US GAAP information 2001 2003
Our Financial Statements have been prepared in accordance
with UK GAAP which differs in certain significant respects from US GAAP. In particular,
under US GAAP, the AstraZeneca merger has been accounted for as a purchase accounting
acquisition of Astra AB (Astra) by Zeneca Group PLC (Zeneca). Although there
are several differences between our net income and assets under UK and US GAAP,
the difference in accounting for the merger with Astra represents
substantially all of the adjustments.
Results of continuing operations (US GAAP)
2003 compared with 2002
Sales from continuing operations rose from $17,841 million to $18,849 million. Strong performances from key growth and launch products, together with exchange effects, compensated for lost sales from patent expired
products.
Net income and earnings per share were largely unchanged from 2002 at $2,268 million and $1.33, respectively. Higher amortisation and share-based payment charges and lower gains from deferred income and derivative
financial instruments were offset by lower tax and the absence of the Zoladex exceptional costs.
The annual impairment tests on our US GAAP goodwill balances resulted in no impairments at 31 December 2003.
Further details of the impact of the differences between UK GAAP and US GAAP are set out in the Additional Information for US Investors on pages 113 to 123.
2002 compared with 2001
The US GAAP treatment of the merger under purchase accounting gave rise to additional goodwill and intangible assets with net book values at 31 December 2002 of $12,692 million and of $7,479 million, respectively.
Following the adoption of SFAS 142, we no longer amortise the goodwill, but perform annual impairment tests on all our US GAAP goodwill balances. These tests show that our US GAAP goodwill balances were not impaired at 31 December 2002.
Sales from continuing operations rose from $16,222 million in 2001 to $17,841 million in 2002. The principal drivers of this growth were improved performances from Nexium, Symbicort and Seroquel, offset by falls in
Zestril and Losec/Prilosec.
Net income under US GAAP has increased from $1,397 million to $2,307 million. These increases are as a result of both higher sales and the cessation of amortisation of goodwill. We estimate that the latter has improved
profit by $755 million.
Taxation
Taxation in 2003 amounted to $965 million, an effective rate of 30%, about 1% lower than 2002.
In 2002, total taxation amounted to $1,035 million, an effective rate of 31% compared with 44.8% in 2001. The cessation of amortisation of goodwill, which did not attract tax relief, was the major factor in the rate
improvement.
Cash flow
Operating activities in 2003 resulted in a cash inflow of $3,416 million, down from $4,833 million in 2002. Working capital increases and exceptional item costs (primarily the Zoladex investigation settlement) were the main reasons behind the decline. Total cash outflow in respect of investing activities was $746 million; inflows from liquidation of short term
investments of $771 million and the sale of Marlow Foods
reduced the costs of fixed asset investing of $1,597 million. The financing outflows represented absorption of funds in respect of dividends ($1,222 million), share repurchases ($1,154 million) and loan repayments of
$345 million.
In 2002, operating activities produced cash inflows of $4,833 million after tax outflows of $795 million and interest inflows of $46 million. There was a cash outflow in respect of investing activities of $2,349
million, reflecting further investment in short term investments and fixed deposits. Financing cash outflows absorbed $2,506 million through the share re-purchase programme ($1,190 million) and dividends ($1,234 million).
In 2001, operating activities generated net cash of $3,126 million after exceptional cash outflows of $368 million. There was a cash outflow in respect of investing activities of $1,327 million, comprising mainly of
capital expenditure of $1,582 million. Financing cash outflows totalled $2,195 million, the principal payments being in respect of the share re-purchase programme ($1,080 million) and equity dividends ($1,236 million).
Net assets
Net assets at 31 December 2003, in accordance with US GAAP, are significantly higher than those under UK GAAP as a result of the acquisition accounting for Astra. The goodwill arising on the acquisition of Astra had a
net book value of $14.3 billion ($12.7 billion at 31 December 2002) and fixed asset adjustments added $7.7 billion ($7.7 billion at 31 December 2002). These effects were partly offset by approximately $2.3 billion ($2.3 billion in 2002) of other
adjustments being principally deferred tax liabilities related to the acquisition. Of our net asset value under US GAAP at 31 December 2003 of $33.7 billion, $17.6 billion is attributable to fixed assets, $15.3 billion to goodwill and $3.2 billion
to deferred tax. The movement from 2002 was as a result of exchange offset by amortisation.
Income, shareholders equity
and cash flow under US GAAP |
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2003 |
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2002 |
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2001 |
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$m |
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Operating income |
3,233 |
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3,342 |
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2,474 |
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Net income for the year |
2,268 |
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2,307 |
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1,397 |
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Shareholders equity |
33,654 |
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30,183 |
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27,402 |
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Decrease in cash |
(4 |
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(22 |
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AstraZeneca PLC is the holding company for a group of subsidiaries whose principal activities are described in the Operational and Financial Reviews on pages 9 to 42, which are incorporated in this report by reference.
Principal subsidiaries and their locations are given on page 112.
The Companys dividend for 2003 of $0.795 (45.3 pence, SEK 5.98) per Ordinary Share amounts to a total dividend payment to shareholders
of $1,350 million.
The Directors believe that the Company and its subsidiaries have adequate resources to continue in operational existence for the foreseeable future and therefore continue to adopt the going concern basis in preparing
the Financial Statements.
Changes in the Companys Ordinary Share capital during 2003, including details of the allotment of new shares under the
Companys share plans, are given in Note 35 to the Financial Statements.
Board of Directors
Details of members of the Board at 31 December 2003 are set out on pages 6 and 7.
The Board met six times during 2003. Each meeting was attended by all of its members except that Michele Hooper, Joe Jimenez and Erna Möller
were unable to attend the September meeting and Jane Henney was unable to attend
the October meeting due to other commitments.The Board is currently scheduled
to meet six times in 2004.
Board changes
Åke Stavling, Executive Director, left the Company at the end of January 2003.
In July 2003, the Board appointed Michele Hooper and Joe Jimenez as Non-Executive Directors.
At the end of August 2003, Håkan Mogren ceased to be Executive Deputy Chairman and became Non-Executive Deputy Chairman.
Election and re-election of Directors
All of the Directors will retire under Article 65 of the Companys
Articles of Association at the Annual General Meeting (AGM) in April 2004. The
Notice of AGM will give details of
those Directors presenting themselves for election or re-election at the AGM.
Mandatory shareholding for Directors
The Companys
Articles of Association require each Director to be the beneficial owner of Ordinary
Shares in the Company with an aggregate nominal value of $125 (500 shares). Such
holding must be obtained within two months of the date of the Directors
appointment. All of the Directors comply with this requirement and full details
of each Directors interests in shares of the Company are set out in the
Directors Remuneration Report on pages 50 to 59.
Annual General Meeting
The Companys AGM will be held on 29 April
2004. 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. It applies for reporting years beginning on or after 1 November
2003.
Although the Company is not strictly required to report against the revised Combined Code until its Directors Report for 2004, the Board
did review the revised Combined Code at its meeting in October 2003 and has prepared this Directors Report with reference to the revised Combined Code.
The Company is applying all of the main and supporting principles of good governance in the revised 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 revised Combined Code.
The US Sarbanes-Oxley Act of 2002
AstraZeneca PLC American Depositary Shares are traded on the New York Stock Exchange (NYSE) and the Company is subject to the reporting and other requirements of the US Securities and Exchange Commission (SEC)
applicable to
foreign issuers. The US Sarbanes-Oxley Act came into force at the end of July 2002. As a result of its NYSE listing, the Company is subject to those provisions of the Act applicable to foreign issuers.
The Company either already complies with or will comply with those provisions of the Act applicable to foreign issuers as and when they become effective. The Board believes that, prior to the Act coming into force, the
Company already had a sound corporate governance framework, good processes for the accurate and timely reporting of its financial position and results of operations and an effective and robust system of internal controls. Consequently, the
Companys approach to compliance with the Act has principally involved the development and adjustment of its existing corporate governance framework and associated
processes concerning reporting, internal controls and other relevant matters.
Particular work relevant to the Act undertaken in the last 12 months included revisions to the AstraZeneca Code of Conduct, certain changes to the Companys disclosure controls and procedures, Disclosure Policy and the operation of the Disclosure Committee and various developments concerning the Audit Committee and its work. All of these matters are described in more detail below.
The Company also started the work necessary to enable it to comply in due course with the SEC rules which implement section 404 of the Act. Following the implementation of this section of the Act, the management of companies will be required to
state its responsibility for establishing and maintaining an adequate internal control structure and procedures for financial reporting and annually assess the effectiveness of that structure and those procedures. The external auditor will be
required to attest to and report on managements assessment. These provisions become effective for the Company in 2005 and preparatory work will continue during
2004.
The New York Stock Exchange
In November 2003, the SEC approved the NYSEs
new corporate governance listing standards. The Company, as a foreign issuer
with American Depositary Shares listed on the NYSE, is generally obliged to disclose
any significant ways in which its corporate governance practices differ from
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these standards. The exception to this is that the Company must comply fully with the provisions of the listing standards which relate to the composition, responsibilities and operation of audit committees. These
provisions incorporate the rules concerning audit committees implemented by the SEC under the US Sarbanes-Oxley Act of 2002.
The Company has reviewed the NYSEs new listing standards and believes that its corporate governance practices are generally consistent
with the standards, with one exception. The standards state that non-executive directors must have regularly scheduled meetings without the directors involved in the management of the company present. Other than meetings of those Board committees
comprised only of Non-Executive Directors, the Companys Non-Executive Directors have not to date held scheduled, formal meetings without the Executive Directors of the
Company present.
The Companys Audit Committee complies with the provisions of the listing standards which relate to the composition, responsibilities and
operation of audit committees. More detailed information about the Audit Committee and its work during 2003 are set out in the Audit Committees Report on pages 48 to
50.
Disclosure Policy
The Companys original Disclosure Policy approved by the Board in October 2002 principally provided a framework for the handling and
disclosure of price sensitive information. The Chief Financial Officer, the Group Secretary and Solicitor and the Vice-President, Corporate Affairs are the members of the Disclosure Committee. During 2003, the Disclosure Committee met regularly to
assist and inform the decisions of the Chief Executive concerning price sensitive information and its disclosure. Also during the year, the Companys disclosure
controls and procedures, Disclosure Policy and the operation of the Disclosure Committee were reviewed. A number of changes were approved by the Board in January 2004. These changes were designed to enhance the role of the Senior Executive Team
concerning disclosure controls and procedures and assist the Disclosure Committees role in assuring that appropriate processes are operating for the
Companys planned disclosures, such as its quarterly results announcements
and annual business review days.
Board structure and processes
Board composition, responsibilities and appointments
The Board comprises Executive and Non-Executive Directors. In the view of the Board, the majority of Board members excluding the Chairman are independent Non-Executive Directors. The differing roles of Executive
Directors and Non-Executive Directors are clearly delineated, with both having fiduciary duties towards shareholders and all being collectively responsible for the success of the Company. However, Executive Directors have direct responsibility for
business operations whereas the Non-Executive Directors have a responsibility to bring independent, objective judgement to bear on Board decisions. This includes constructively challenging management and helping to develop the Companys strategy. The Non-Executive Directors scrutinise the performance of management and have various responsibilities concerning the integrity of financial information, internal
controls and risk management. To help maintain a strong executive presence on the Board in addition to the two Executive Directors (the Chief Executive and the Chief Financial Officer), Board meetings are attended by two members of the Senior
Executive Team.
The Board sets the Companys strategy and policies and monitors progress towards meeting its objectives. It also assesses whether its
obligations to the Companys shareholders and others are understood and met. This includes regular reviews of the Companys financial performance and critical business issues. The Board met six times in 2003.
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.
At its meeting in December 2003, the Board reviewed and assessed how it operates. This included consideration and discussion of the nature and level of its interaction with the Companys management; the quality, quantity and coverage of information which flows to the Board from management; the balance of the Boards time spent considering strategic issues compared to other matters; the content of Board meetings and presentations to Board
meetings; the composition of the Board; the practical arrangements for the work of the Board; and the work and operation of the Boards
committees. Overall, Board members concluded that the Board and its committees were operating in an effective and constructive manner.
At the same meeting, the Chairman also reported to the Board on his conversations with each Non-Executive Director about their individual performance and that of the Board as a whole, which took place during the fourth
quarter of 2003. The Chairman then left the meeting while Sir Peter Bonfield, senior Non-Executive Director, led a review of the Chairmans performance. On the
Chairmans return to the meeting, the Board reviewed the performance of the Chief Executive and the Chief Financial Officer who, in each case, left the meeting while
the review took place.
The Company maintained directors and officers
liability insurance cover throughout 2003. Cover was renewed at the beginning of 2004.
Independence of Directors under the
UK Combined Code
At its meeting to review the revised Combined Code in October 2003, the Board considered the independence of each Non-Executive Director. With the exception of two of them as set out below and the Chairman, the Board
considers that all of the Non-Executive Directors are independent in character and judgement and that there are no relationships or circumstances which are likely to affect their independent judgement.
For the reasons explained below, the
Board does not believe that Håkan
Mogren, Non-Executive Deputy Chairman or Marcus Wallenberg can be determined
independent under the revised Combined Code.
However, the Board believes that both
Dr Mogren and Mr Wallenberg bring considerable business experience and make
valuable contributions to the work of the Board.
Dr Mogren was previously the Chief
Executive Officer of Astra AB and Executive Deputy Chairman of the Company. Both Dr Mogren and Mr Wallenberg are members of the Board of Directors of Investor AB, a company which, at 31 December 2003, had a 5% holding
in the Ordinary Shares of the Company. This holding represents a
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significant proportion of Investor ABs
overall investment portfolio. Additionally, Mr Wallenberg is the Chief Executive
Officer of
Investor AB.
The Board also considered, in particular, the positions of Sir Peter Bonfield, senior Non-Executive Director and Erna Möller.
For the
reasons explained below, it is the Boards view that Sir Peter and Professor
Möller are
independent. Both Directors discharge their duties in a properly independent
manner and constructively and appropriately challenge the Executive Directors
and the Board.
Sir Peter is a Non-Executive Director of Telefonaktiebolaget LM Ericsson. Marcus Wallenberg is also a Non-Executive Director of Ericsson. Investor AB, of which Mr Wallenberg is Chief Executive Officer, holds
approximately 5% of Ericssons
shares (representing approximately 38% of the voting rights). The Board is satisfied
that Sir Peters presence on the Ericsson Board results from his broad experience
of the global telecommunications industry and not from any connection with Investor
AB or the Wallenberg family. The Board also had regard to the length of time
which Sir Peter has served as a Non-Executive Director of the Company (he was
first appointed in 1995). As the position was only established in 2002, the Board
wishes Sir Peter to continue in his current
role as the senior Non-Executive Director of the Company for two or three years
more to provide further continuity, subject to his re-election at Annual General
Meetings.
Professor Möller
is the Chief Executive Officer of the Board of the Knut and Alice Wallenberg
Foundation, a charitable foundation in Sweden which supports scientific research
and educational programmes by awarding financial grants to individuals or institutions.
Although one of the Foundations
principal investments is in Investor AB, all investment decisions of the Foundation
are made by its investment committee of which Professor Möller is not a
member. Her role, as Chief Executive Officer of the Board, is principally to
lead the scrutiny of applications for grants and maintain close contacts with
scientific and educational institutions in Sweden to develop the work of the
Foundation.
Chief Executive and the Senior Executive Team
The Chief Executive, Sir Tom McKillop, has delegated authority from, and is responsible to, the Board for directing and promoting the profitable operation and development of the Company, consistent with the primary aim
of enhancing long term shareholder value.
The Chief Executive is responsible to the Board for the management and performance of the Companys
businesses within the framework of Company policies, reserved powers and routine
reporting requirements. He is obliged to refer certain major matters (defined
in the formal delegation of the Boards
authority) back to the Board. The roles of the Board, the Boards committees,
the Chairman, the Chief Executive and the Senior Executive Team are documented,
as are the
Companys delegated authorities and reserved powers, the means of operation
of the business and the roles of corporate functions.
The Chief Executive has established and chairs the Senior Executive Team. While the Chief Executive retains full responsibility for the authority delegated to him by the Board, the Senior Executive Team is the vehicle
through which he exercises that authority in respect of the Companys
business (including Salick Health Care and Astra Tech).
The members of the Senior Executive Team are Jonathan
Symonds, Chief Financial Officer; 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; John Patterson, Executive
Vice-President, Product Strategy & Licensing and Business Development; Martin
Nicklasson, Executive Vice-President, Development; Barrie Thorpe, Executive Vice-President,
Operations; and Tony Bloxham, Executive Vice-President, Human Resources.
The Senior Executive Team normally meets once a month to consider and decide all major business issues. It also usually reviews those matters which are of a size or importance to require the attention of, or which are
reserved to, the Board before such matters are submitted to the Board for review and decision.
Each business function is subject to an annual budget and target-setting process including forecasts for the following two years together with a sensitivity and risk analysis, quarterly updates of the forecast for the
current year and regular reporting. Performance reviews are undertaken in each part of the business regularly. The Companys
quarterly business performance management system uses a broad range of measures
that link directly to the achievement of key business priorities. Treasury operations
are centralised, operate within defined limits and are subject to regular reporting
requirements and Audit Committee
reviews.
Internal controls and management of risk
The Board has overall responsibility for the Companys
system of internal controls which aims to safeguard shareholders investments
and the Companys assets, 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.
Since the publication in September 1999 by the Institute of Chartered Accountants in England and Wales of the Turnbull Report, Internal
Control: Guidance for Directors on the Combined Code, the Directors have
continued to review the effectiveness of the Groups system of non-financial
controls, including operational and compliance controls, risk management and
the Companys high level internal control arrangements. These reviews have
included an assessment of internal controls, and in particular internal financial
controls, by the internal audit function, management assurance of the maintenance
of control and reports from the external auditor on matters identified in the
course of its statutory audit work. A key part of these reviews is an annual letter
of
assurance process by which responsible managers confirm the adequacy of
their systems of internal financial and non-financial controls,
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their compliance with Company policies (including
those relating to safety, health and the environment), local laws and regulations
(including the industrys regulatory requirements) and report any control
weaknesses identified in the past year. The Directors believe that the Company
maintains an effective embedded system of internal controls and complies
with the Turnbull Report
guidance.
The Company views the careful management of risk as a key management activity. Managing business risks to deliver opportunities is a key element of all activities. This is done using a simple and flexible framework
which provides a consistent and sustained way of implementing the Companys
values. These business risks, which may be strategic, operational, reputational,
financial or environmental, should be understood and visible. The business context
determines in each situation the level of acceptable risk and controls.
Much of the Companys
work in the area of risk management is facilitated by the Risk Advisory Group
consisting of representatives from each business function. Its role is advisory
and is to assist senior management to identify and assess the main risks faced
by the Companys business in a co-ordinated
manner, to assess, identify and document the Companys risk profile and
to ensure that the business focuses on critical business issues. It is chaired
by the Chief Financial Officer and reports twice a year to the Senior Executive
Team. The Risk Advisory Groups reports on the Companys risk profile
are reviewed by both the Audit Committee and the Board.
Under the auspices of the Risk Advisory Group, the Company has developed and is establishing an integrated risk management framework with the aim of continuing to ensure that the business understands the key risks it
faces, especially cross-functional risks, has an embedded risk management approach to all of its activities, links risk management to business performance reporting and seeks continuous improvement in the management of risk by sharing best practice
throughout the organisation.
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 act with due skill, care, diligence and fairness in the conduct
of business. The Companys management recognises that such standards make
a significant contribution to the overall control environment and seeks, by
its words and actions, to reinforce them throughout the business. In particular,
all employees are required to comply with the letter and spirit of the AstraZeneca
Code of Conduct and with the high ethical standards detailed by the Company
in support of it.
During the year, the Code of Conduct was reviewed and revised. The amended version was approved by the Board in July 2003. The revised AstraZeneca Code of Conduct is set out in full on pages 138 and 139. It is an
important demonstration of the Companys
uncompromising commitment to honesty and integrity. To coincide with the launch
of the new Code of Conduct, the Company also updated and extended its procedures
for raising integrity concerns which include a confidential helpline for employees
worldwide. In September 2003, the Company adopted a Finance Code of Conduct which
complements the main AstraZeneca Code of Conduct
and applies to the Chief Executive, the Chief Financial Officer and the Company s
principal accounting officers. The Finance Code of Conduct also applies to all
Finance function employees and reinforces the importance of the integrity of
the Companys accounts, the reliability of the accounting records on which
they are based
and the robustness of the relevant controls and processes.
Group Internal Audit
Group Internal Audit (GIA) is an independent appraisal function which derives its authority from the Board through the Audit Committee. Its primary role is to provide reasonable and objective assurance about the
adequacy and effectiveness of the Companys
financial control framework and risk management.
GIA seeks to discharge the responsibilities set down in its charter by reviewing the processes which ensure that business risks are effectively managed; reviewing the financial and operational controls which help to
ensure that the Companys assets
are properly safeguarded from losses, including fraud; reviewing the controls
which help to ensure the reliability and integrity of management information
systems; reviewing the processes which ensure
compliance with corporate objectives, policies and procedures and external legislation and regulation (other than those relating to safety, health and the environment and product regulatory compliance which are the
responsibility of other audit functions); and on an ad hoc basis, reviewing that value for money is obtained.
GIA also acts as a source of constructive advice and best practice, assisting senior management with its responsibility to improve the processes by which business risks are identified and managed and to report and
advise on the proper and effective use of resources.
External auditor
A resolution will be proposed at the AGM on 29 April 2004 for the re-appointment of KPMG Audit Plc, London as auditor of the Company.
The external auditor has undertaken various non-audit work for the Company during 2003. More information about this work and the fees paid by the Company for it are set out in Note 33 to the Financial Statements on
page 107. The external auditor is not engaged by the Company to carry out any non-audit work on which it might, in the future, be required to express an audit opinion. As explained more fully in the Audit Committees Report on pages 48 to 50, the Audit Committee has established
pre-approval policies and procedures for audit and non-audit work permitted to
be carried out by the external auditor and has carefully monitored the objectivity
and independence of the external auditor throughout 2003.
Board committees
Audit Committee
Full details about the Audit Committee, its composition, remit and work during 2003 can be found in the Audit Committees
Report on pages
48 to 50.
Remuneration Committee
The members of the Remuneration
Committee are Sir Peter Bonfield (Chairman of the Committee), John Buchanan and Erna Möller.
They are all Non-Executive Directors. The
Board considers them all to be independent.
The remit of the Remuneration Committee is, primarily, to recommend for decision by the Board the fundamental remuneration policy for the Company and to ensure the proper operation of all plans for employees
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involving the Companys
shares. More particularly, it makes specific proposals in respect of the remuneration
packages of individual
Executive Directors and the Companys most senior executives.
Further information about the membership and work of the Remuneration Committee and the Companys
remuneration policy and practice is set
out in the Directors Remuneration Report on pages 50 to 59.
Nomination Committee
The members of the Nomination Committee are Percy Barnevik (Chairman of the Committee), Håkan
Mogren, Sir Peter Bonfield, Jane Henney and Joe Jimenez. Mr Jimenez was appointed
as a member of the Nomination Committee in December 2003. They are all Non-Executive
Directors. With the exception of the Chairman and Dr Mogren, for the reasons
explained above, the Board considers them all
to be independent.
The remit of the Nomination Committee is, primarily, to lead the process for and to make proposals to the Board for any new appointments as Directors of the Company. The remit of the Nomination Committee is available
on the Companys website: astrazeneca.com.
During 2003, the Nomination Committee held regular meetings. Each meeting was
attended by all of its members. In particular, it considered the appointment
to the Board of two additional Non-Executive Directors.
External search consultants assisted with this work. The Nomination Committee unanimously recommended to the Board that Michele Hooper and Joe Jimenez be appointed as Non-Executive Directors.
As with all new Non-Executive Directors, a series of induction meetings with various senior managers were arranged for Ms Hooper and Mr Jimenez following their appointments to the Board.
Science Committee
In July 2003, the Board established a Science Committee. The members of the Science Committee are Jane Henney, Erna Möller
and Dame
Bridget Ogilvie.
The remit of the Science Committee is, on behalf of the Board, to review and assess the international competitiveness and quality of science within the Company. The Executive Vice-President, Discovery Research and the
Chief Scientist and Head
of Project Evaluation normally attend meetings of the Science Committee.
Shareholders
In its financial reporting to shareholders
and other interested parties by means of annual and quarterly reports, the Board
aims to present a balanced and understandable assessment of the Companys
financial position and prospects.
The Company maintains a corporate website containing a wide range of information of interest to institutional and private investors: astrazeneca.com.
The Company has frequent discussions with institutional
shareholders on a range of issues affecting its performance. These include
meetings following the announcement of the annual results with the Companys
largest institutional shareholders on an individual basis. In addition, the
Company responds to individual ad hoc requests for discussions from institutional
shareholders. The senior Non-Executive Director is available to shareholders
if they have concerns which contact through the normal channels of Chairman,
Chief Executive or Chief Financial Officer has failed to resolve or for which
such contact is
inappropriate.
All shareholders, including private investors,
have an opportunity to put questions to members of the Board on matters relating
to the Companys operation and performance at the AGM.
Employees
The core values of the Company are respect for the individual and diversity; openness, honesty, trust and support for each other; integrity and high ethical standards; and leadership by example at all levels.
The Company maintains an open management style and involves its employees both in daily decisions which affect them and longer term matters. The Company is fully committed to keeping all of its employees informed about
their work unit and the wider business, as well as discussing the implications of major business changes and other relevant matters. Key business priorities are communicated throughout the organisation and form part of the basis for the
Companys employee bonus and
incentive plans. Details of employees share plans appear
in Note 30 to the Financial Statements.
In line with legal requirements and cultural standards, more formal national and business level employee consultation arrangements exist in some countries, including the UK. There is a forum for employee consultation
at European level, chaired by the Chief Executive, in which employee representatives from 19 countries participate. The Company also has a variety of constructive relationships with trade unions across its worldwide operations including formal
recognition and active dialogue where appropriate.
The Company believes that every employee should be treated with the same respect and dignity. It values the rich diversity and creative potential of people with differing backgrounds and abilities and encourages a
culture of equal opportunities in which personal success depends on personal merit and performance. It is Company policy that there should be no discrimination against any person for any reason. All judgements about people for the purposes of
recruitment, development and promotion are made solely on the basis of their ability and potential in relation to the needs of the job. Every manager is responsible for implementing this policy.
It is Company policy that people with disabilities should have the same consideration as others with respect to recruitment, retention and personal development. Depending on their skills and abilities, people with
disabilities enjoy the same career prospects as other employees and the same scope for realising potential. The Company also takes all reasonable steps to ensure that its working environments can accommodate special needs.
Other stakeholders
The Company aims to set, promote and maintain high standards of corporate responsibility wherever it operates. Dame Bridget Ogilvie, Non-Executive Director, is the Board member responsible for this area and oversees
the work of a cross-functional committee. The Company has established systems to monitor its performance.
Policies and standards relating to corporate responsibility are maintained and widely communicated within the organisation. In 2003, the Company was again included in the FTSE4Good and the Dow Jones Sustainability
Indexes. The Company publishes and sends to shareholders a separate Corporate Responsibility
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Annual Report and Form 20-F Information 2003 |
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Audit Committee s
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Audit
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Directors Report continued |
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Summary Report. More detailed information about the Companys
approach to this area of its business can be found on its website:
astrazeneca.com.
It is not Company policy formally to comply with the Confederation of British Industrys
code of practice on the prompt payment of suppliers. It is, however, Company
policy to agree appropriate payment terms with all suppliers when agreeing the
terms of each transaction, to ensure that those suppliers are made aware of the
terms of payment and, subject to their compliance,
abide by the terms of payment. The total amount of money owed by the Companys
subsidiaries to trade creditors at the balance sheet date was equivalent to 75
days average purchases. No equivalent disclosure is provided in respect
of the Company as it has no external creditors.
Purchase of own shares
The Companys
stated distribution policy contains both a regular dividend cash flow and a share
re-purchase component to give the Company more flexibility in managing its capital
structure over time. In August 1999, the Company announced a $2 billion share
re-purchase programme to be completed by the end of 2002. This programme was
completed ahead of schedule in the second quarter of
2002. In January 2002, the Company announced an additional $2 billion re-purchase
programme which was completed on schedule by the end of 2003.
During 2003, the Company purchased 27.2 million of its own Ordinary Shares with a nominal value of $0.25 each for an aggregate cost of $1,154 million. Following the purchase of these shares, they were all cancelled as
required by applicable English law. This number of shares represents 1.6% of the Companys
total issued share capital at 31 December 2003.
Since the beginning of the re-purchase programme in 1999, the Company has purchased for cancellation in total 92.8 million of its own Ordinary Shares with a nominal value of $0.25 each for an aggregate cost of $3,959
million. This number of shares represents 5.5% of the Companys
total issued share capital at 31 December 2003.
The Company continues to maintain robust controls in respect of all aspects of the share re-purchase programme to ensure
compliance with English law and the Listing
Rules of the UK Listing Authority. In particular, the Companys Disclosure
Committee meets to ensure that the Company does not purchase its own shares
during prohibited periods. At the AGM on 29 April 2004, the Company will seek
a renewal of its current permission from shareholders to purchase its own shares.
Political donations
Under the UKs
Political Parties, Elections and Referendums Act 2000, shareholder authority
is required for political donations to be made or political expenditure to be
incurred by the Company or its subsidiaries in the European Union. Neither the
Company nor its subsidiaries made any donations or incurred any expenditure in
2003 in the European Union in respect of which
shareholder authority or disclosure in this Directors Report is required
under the Act. Neither the Company nor its subsidiaries intend to make any such
donations or incur any such expenditure in the European Union in the foreseeable
future. However, the Act defines political organisation widely and,
for example, interest groups or lobbying organisations concerned with the review
of government policy or law reform may be caught by the definition.
To enable the Company to continue to support such organisations without inadvertently breaching the Act, a resolution will, in the same way as last year, be proposed at the AGM on 29 April 2004 authorising the Company
to make donations or incur expenditure in the European Union up to an aggregate limit of $150,000.
In 2003, AstraZenecas
US legal entities made contributions amounting in aggregate to $258,000 (2002
$275,000) to state political party committees and to campaign committees of various
state candidates affiliated with the major parties. All contributions were made
only where allowed by state law. American nationals exercised decision-making
over the contributions and the funds were
not provided or reimbursed by any non-US corporation.
On behalf of
the Board
G H R Musker
Group Secretary and Solicitor
29 January 2004
The members of the Audit Committee are Karl
von der Heyden (Chairman of the Committee), John Buchanan, Jane Henney, Dame
Bridget Ogilvie and Marcus Wallenberg. They are all Non-Executive Directors.
With the exception of Mr Wallenberg for the reasons explained above, the Board
considers them all to be independent under the UKs revised Combined Code.
The Board remains satisfied that various members of the Audit Committee have recent and relevant financial experience. At its meeting in December 2003, the Board determined that Mr von der Heyden and Dr Buchanan are
audit committee financial experts for the purposes of the US
Sarbanes-Oxley Act of 2002.
During the year, the remit of the Audit Committee was reviewed and revised. The amended version was approved by the Board in December 2003. The revisions did not introduce fundamental changes to the remit but rather
clarified and set out more fully the existing responsibilities of the Audit Committee. The new core remit of the Audit Committee is to review and report to the Board on:
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the scope of and plans for audits of the Company by the external auditor and the internal audit function; |
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the implementation of the external and internal audit plans and the handling of any material issues arising from those audits; |
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the Companys overall
framework for internal control over financial reporting and its financial
reporting
processes; |
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the Companys overall
framework for other internal controls; |
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the Companys overall
framework for risk management with particular emphasis on financial risks; |
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the accounting policies and practices of the Company; and |
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the annual and quarterly financial reporting carried out by the Company. |
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AstraZeneca Annual Report and
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Audit Committees Report |
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The Audit Committee is also charged with promptly
bringing to the attention of the Board:
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any significant concerns
of the external auditor about the conduct, results or overall outcome
of the annual audit of the Company; |
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any significant concerns
of the Chief Internal Auditor about the conduct, results or outcome of
internal audits; |
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any matters which may significantly
affect or impair the independence of the external auditor; |
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any significant deficiencies
or material weaknesses in the design or operation of the Companys
internal control over financial reporting; |
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any significant deficiencies
or material weaknesses in the design or operation of the Companys
other internal controls and any significant breaches of those internal
controls; and |
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any serious issues of non-compliance. |
The Audit Committee also oversees the establishment,
implementation and maintenance of the Code of Conduct and establishes procedures
for the receipt and handling of complaints concerning accounting or audit
matters; appoints and agrees the compensation for the external auditor subject,
in each case, to the approval of the Companys shareholders in general
meeting and, if necessary, recommends to the Board that a resolution be proposed
at a general meeting of the Company authorising the removal of the external
auditor; and reviews and approves the appointment and any dismissal of the
Chief Internal Auditor.
The full revised remit of the Audit Committee
is available on the Companys website: astrazeneca.com.
As a result of a significantly increased
workload, due mainly to the implementation of the US Sarbanes-Oxley Act of
2002, the Audit Committee met seven times in 2003 compared to four meetings
in 2002. It is currently scheduled to meet seven times in 2004. Each meeting
of the Audit Committee in 2003 was attended by all five of its members except
that Dr Buchanan was unable to attend the January meetings due
to prior engagements. At the
invitation of the Audit Committee, the Chairman of the Board, a Non-Executive
Director, attended all of its meetings in 2003.
During the year, in line with its normal practice,
the Audit Committee also held a number of private meetings, without management
present, with both the Companys Chief Internal Auditor and the lead
partner from the Companys external audit firm. The purpose of these
meetings was to facilitate free and open discussions between the Audit Committee
members and the Chief Internal Auditor and the external lead audit partner,
independent of the main sessions of the Audit Committee attended by the Chief
Financial Officer and the Group Financial Controller.
During 2003, the business considered
and discussed by the Audit Committee included:
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the financial disclosures
contained in the Companys annual and quarterly reports to shareholders
and other interested parties; |
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various accounting matters,
including the Companys critical accounting policies, raised by management
and the external auditor in the context of the financial disclosures; |
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reports from management
on the Companys risk profile and the assessment and management of
risk; |
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reports from management,
the internal audit function and the external auditor on the effectiveness
of the Companys system of internal controls and, in particular,
internal financial controls; these included a review and discussion of
the results of the Companys letter of assurance process
for 2003 and reviews of quarterly activity reports from the internal audit
function and the status of follow-up actions with management; |
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the review of and revisions
to the AstraZeneca Code of Conduct (described in more detail in the Directors
Report); the Audit Committee took a particular interest in the updated
procedures for raising integrity concerns and the confidential helpline
for employees worldwide; in July 2003, the Audit Committee approved procedures
for the handling of complaints received by the Company |
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regarding accounting, internal
accounting controls or auditing matters and for the confidential, anonymous
submission by employees of concerns regarding questionable accounting
or auditing matters; |
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a review of the Companys
US sales and marketing compliance programme, including the five year Corporate
Integrity Agreement between the Company and the Office of Inspector General
for the US Department of Health and Human Services signed in 2003; |
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proposals from the internal
audit function and the external auditor about their audit programmes for
2003; |
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a review at the beginning
of 2003 of the performance of the external auditor which resulted in the
Audit Committee unanimously recommending that a resolution for the re-appointment
of KPMG Audit Plc as the Companys external auditor be proposed to
shareholders at the AGM in April 2003; |
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the succession plans for
the rotation of the global lead audit partner of the external auditor;
in July 2003, the Audit Committee met and had discussions with a number
of succession candidates proposed by the external auditor; the new lead
audit partner selected following those discussions meets with the full
approval of the Audit Committee and will succeed the current lead audit
partner in April 2004; |
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a report from the Companys
Treasury function about its operations and approach to risk management; |
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the pre-approval of all
audit services and permitted non-audit services undertaken by the external
auditor; in April 2003, the Audit Committee approved certain pre-approval
policies and procedures for three categories of work audit services,
audit-related services and tax services and a standing agenda item
at Audit Committee meetings now covers the operation of these procedures; |
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the amount of audit and
non-audit fees of the external auditor; the Audit Committee was satisfied
throughout the year that the objectivity and |
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50 |
AstraZeneca Annual Report and
Form 20-F Information 2003 |
Directors Remuneration
Report |
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independence of the external
auditor were not in any way impaired by either the nature of the non-audit
work undertaken by the external auditor during the year, the level of
non-audit fees charged for such work or any other facts or circumstances;
full details of the audit and non-audit fees for the year are disclosed
in Note 33 to the Financial Statements; and |
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the impact of the US Sarbanes-Oxley
Act of 2002 on the Company and, in particular, on the operation of the
Audit Committee and its relationship with the external auditor; this included
periodic reviews of the Companys state of compliance with applicable
provisions of the Act. |
At the scheduled meeting of the Audit Committee
held at the end of January 2004, the Chief Executive and the Chief Financial
Officer presented to Audit Committee members their conclusions following the
evaluation of the effectiveness of the Companys disclosure controls
and procedures required by Item 15(a) of Form 20-F. Based on their evaluation,
the Chief Executive and the Chief Financial Officer concluded that the Company
maintains an effective system of disclosure controls and procedures.
There was no change in the Companys
internal control over financial reporting that occurred during the period
covered by this Annual Report and Form 20-F Information that has materially
affected, or is reasonably likely to materially affect, the Companys
internal control over financial reporting.
On behalf of the Audit Committee
K M von der Heyden Non-Executive Director and Chairman of the Audit Committee
29 January 2004
At the Annual General Meeting
on 29 April 2004, a resolution will be proposed to approve the Directors
Remuneration Report.
Remuneration
Committee
The members of the Remuneration Committee
are Sir Peter Bonfield (Chairman of the Committee), John Buchanan and Erna
Möller. They are all Non-Executive Directors. The Board considers them
all to be independent.
The remit of the Remuneration
Committee is, primarily, to recommend for decision by the Board the fundamental
remuneration policy for the Company and to ensure the proper operation of
all plans for employees involving the Companys shares. More particularly,
it makes specific proposals in respect of the remuneration packages of individual
Executive Directors and the Companys most senior executives. A copy
of the Remuneration Committees remit is available on the Companys
website: astrazeneca.com.
The Remuneration Committee met
four times during 2003. Each meeting was attended by all three of its members.
At the invitation of the Remuneration Committee, the Chairman of the Board,
a Non-Executive Director, attended all of its meetings in 2003. At the request
of the Remuneration Committee, Sir Tom McKillop, Chief Executive and Peter
Brown, Vice-President, Global Compensation and Benefits, as well as the Secretary
of the Remuneration Committee, Graeme Musker, attended all of its meetings
and provided advice and services which materially assisted the Remuneration
Committee during 2003. In doing so, Mr Brown drew on various sources of data
concerning directors and executives salaries, bonus levels and
other incentives including general pharmaceutical industry reports and surveys,
as well as surveys specifically carried out for the Company. These included
certain surveys prepared for the Company by Towers Perrin. During 2003, Towers
Perrin also provided global share plan administration services to the Company
and consultancy services to the Companys US business.
Overall
remuneration policy and purpose
The Company is committed to maintaining a
dynamic performance culture in which every employee champions the growth
of
shareholder value, is clear about the Companys
objectives, knows how their work impacts on those objectives and that they
will benefit from achieving high levels of performance.
The Board has confirmed that the Companys overall remuneration policy
and purpose is:
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to attract and retain people
of the quality necessary to sustain the Company as one of the best pharmaceutical
companies in the world; and |
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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:
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to closely align individual
and team reward with business performance at each level; |
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to encourage employees to
perform to their fullest capacity; |
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to encourage employees to
align their interests with those of shareholders; |
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to support managers
responsibility to achieve business performance through people and for
them to recognise superior performance, in the short and longer term; |
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to be as locally focused
and flexible as is practicable and beneficial; |
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to be competitive and cost-effective
in each of the relevant employment markets; and |
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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:
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to ensure a proper balance
of fixed and variable performance-related components, linked to short
and longer term objectives; and |
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to reflect market competitiveness
taking account of the total value of all of the benefit components. |
The principal components contained in the
total remuneration package, for employees as a whole, are:
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annual salary based
on conditions in the relevant geographic market, with the provision to
recognise, in addition, the |
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and
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Directors Remuneration
Report |
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value of individuals sustained personal performance, resulting from their ability and
experience; |
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annual bonus a lump sum payment related to the targeted achievement of corporate, functional and individual goals,
measured over a year within a specific plan; the corporate goals are derived from the annual budget 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; |
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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; |
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pension arrangements which are appropriate to the relevant market; |
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other benefits such as holidays and sickness benefit which are cost-effective and compatible with the relevant national welfare arrangements; and |
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share participation various plans provide the opportunity for employees to take a personal stake in the
Companys wealth as shareholders. |
The way in which these elements are combined and applied varies depending, for example, on market need and practice in various countries.
For each Executive Director, the individual components are:
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annual salary the
actual salary for each of the Executive Directors is determined by the
Remuneration Committee on behalf of the Board; 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; |
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short term bonus: |
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the Chief Executive is eligible
for an annual bonus related solely to the achievement of the targeted
performance of earnings per share; the bonus payable is on a scale of
0-100% of salary and 50% of salary is payable for the achievement of target
performance; as referred to |
above, this
is derived from the budget set by the Board and takes into account external
expectations of performance; |
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the Deputy Chairman was
also eligible for this annual bonus related solely to earnings per share
for that part of 2003 during which he served as an Executive Director
(1 January 2003 until 31 August 2003); |
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the Chief Financial Officer
is 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 is on a scale of 0-100% of salary and 50% of salary is payable
for the achievement of target business performance; 80% of the bonus relates
to the achievement of the earnings per share target and 20% to the other
performance measures; |
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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 this is described in more detail below; and |
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pension arrangements
the table on page 56 gives details of the changes in the value
of the Executive Directors accrued pensions during 2003: |
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UK Executive Directors
pension arrangements the Chief Executive is a member of the Companys
main UK defined benefit pension plan; the normal pension age under this
plan is 62; however, a members accrued pension is available from
age 60 without any actuarial reduction; in addition the accrued pension
is available, unreduced, from age 57 if the Company consents to a request
for early retirement and from age 50 if the retirement is at the Companys
request; |
On death in retirement, the accrued pension is guaranteed payable for the first five years of retirement and then reduces to two-thirds of this amount should there be a surviving spouse or other dependent; any member
may choose higher or lower levels of survivors pensions at retirement, subject to Inland Revenue limits, in return for an adjustment to their own pension of equivalent
actuarial value; pensions are also payable to dependent children; in the event of a senior employee becoming incapacitated from performing his work 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, dependents 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 benefits derived from equivalence are shown in the table on page 56 as if the scheme was a defined benefit arrangement;
the Company contribution in 2003 in respect of the pension element was $193,000;
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AstraZeneca Annual Report
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Form 20-F Information 2003 |
Directors Remuneration
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Directors Remuneration
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Swedish Executive Directors pension arrangements normally, Swedish Executive Directors participate in the collectively bargained ITP pension plan, which provides pensions, dependents pensions and
lump sums on death in service; in respect of those Swedish Directors or former Directors, namely Håkan Mogren and Åke Stavling, whose pensionable earnings are or were in excess of the earnings limit imposed by the Swedish Communal Tax Law (Kommunalskattelagen), supplementary pension commitments are
made; the Company has agreed to pay 70% of pensionable salary from age 60 to age 65 and 50% of such earnings from age 65; the ITP provisions are included in this additional commitment; paid in pension capital may also be used in the event of
retirement or termination before the age of 60; in the event of long term illness then a pension is payable immediately as if such person had reached the normal retirement age, of 70% of current pensionable salary; on death in retirement the accrued
pension is payable to a surviving spouse or other dependent; in the event of death prior to retirement the accrued pension is payable to a surviving spouse or other dependent plus a capital sum of three times pensionable salary less $100,000 if
married or two times pensionable salary less $100,000 if not. |
Other customary benefits
(such as a car and health benefits) are also made available. This happens
by way of the
Executive Directors participation in the Company s flexible
benefits arrangements, which apply to the vast majority of the Company s
UK and Swedish employees.
Measurement
of performance
Each year, as referred to above
both short term and longer term objectives are agreed with the Board and
regularly monitored in respect of both individual business functions and
integrated corporate strategy. Performance against these objectives determines
functional bonuses and, separately, whether or not share
options will be granted.
In respect of bonuses in 2003, relevant factors considered included the delivery of higher earnings per share than had been anticipated both by the Board and externally at the start of the year, the sales performance
of newer products, new product approvals and emerging benefits from efficiency and effectiveness projects. Going forward, the corporate goals will reflect the Companys statement that financial performance over the next several years is likely to
rank among the best in the global peer group of large capitalisation pharmaceutical companies.
AstraZeneca Share Option Plan
The AstraZeneca Share Option Plan was approved at the AGM in 2000 following prior consultation with major shareholders. Its design took account of the overall competitiveness of the Companys remuneration arrangements for senior executives and US employees in the context of the Companys
peers
in the pharmaceutical industry.
The Remuneration Committee must on every occasion, before agreeing the grant of options to Executive Directors and others, be satisfied that the most recent and also the underlying performance of the Company justifies
the grant; in addition it must be satisfied that the necessary performance has been achieved by each individual.
In agreeing grants of options in 2003, the Remuneration
Committee took into account, in particular, very successful progress in the previous
year in the transformation of the Companys product portfolio in view of the potential reduction
in sales resulting from the loss of patent protection for key products. Against
a background of increased regulatory demands and costs, the Company had set
clear strategic targets to be achieved in the reference period: to increase sales
of new and growth products; to extend the application of existing products; to
launch new products and to achieve key milestones in making
further new products ready for launch. These targets were achieved. For example: Nexium,
launched in 2001, achieved sales of close to $2 billion in 2002 and
Seroquel reached sales of over $1 billion for the first time; new indications
or formulations for Arimidex, Casodex and Zomig were launched
in 2002; Iressa and Faslodex were launched and key milestones were
passed in respect of
Crestor and Exanta.
The dilutive effect of the proposed grants of
options on the Companys issued share capital was also considered by the
Remuneration Committee, particularly in the light of the letter sent to shareholders
in 2000 by the then Chairman of the Remuneration Committee ahead of the approval
of the plan at the AGM in which it was stated that the percentage of the issued
share capital
which could be allocated under all of the Companys employee share plans
over a period of ten years should be under 10%; this commitment is applied by
the Remuneration Committee in practice as a limit, on average, of under 1% per
annum.
The Remuneration Committee concluded that a grant of options to those plan participants and individual Executive Directors proposed for a grant was appropriate given the level of performance achieved.
Since the Companys
AGM in 2003, a number of the Companys larger shareholders (particularly
those who expressed concern in respect of the Directors Remuneration Report
for 2002) have been consulted about
the Companys remuneration arrangements for its Executive Directors and
senior employees, including the Companys use of employee share plans. While
there are no apparent concerns on the overall levels of remuneration, concern
has been expressed about the fact that the AstraZeneca Share Option Plan currently
involves the consideration of performance criteria on grant, as described above,
rather than the fulfilment of performance conditions before options can be exercised.
The dialogue with shareholders will continue. In particular, in accordance with
the arrangements agreed with
shareholders in 2000, the Remuneration Committee intends to review the AstraZeneca
Share Option Plan during 2004.
A graph is set out on page 57 illustrating the Companys
total shareholder return (TSR) over the last five years against the FTSE 100
Index. Although the Company does not use TSR as a formal measure of performance
for its share plans, it is an important measure used in the Companys overall
business
performance assessment process.
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AstraZeneca Annual Report
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Form 20-F Information 2003 |
Directors Remuneration
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Executive Directors service
contracts
The service contracts of the current Executive Directors provide for a notice period of one year. For new Executive Directors, the Board would aim to negotiate a one year notice period. In exceptional circumstances,
the initial notice period may be for longer than one year. In those circumstances, the Board would explain to shareholders the reasons why it believed a longer notice period was necessary and it would be the Boards intention that it should be reduced to one year subsequently.
At the time of the AGM on 29 April 2004, the unexpired term of Executive Directors service
contracts will be a maximum of one year. The details of the Executive Directors individual
service contracts are set out in the table below.
In the event of the termination of an Executive Directors
service contract, depending upon the circumstances the Company may be liable
to provide compensation to the Executive Director equivalent to the benefits
which he or she would have received during the contractual notice period. For
current Executive Directors, it is the Companys expectation that any such
liability would be calculated on the basis of one years base salary, target
bonus and other benefits. The Companys policy in the event of the termination
of an Executive Directors service contract is to avoid any liability to
the Executive Director in excess of his or her contractual entitlement and aim
to ensure that any liability is mitigated to the fullest extent possible.
Leaving arrangements for Åke
Stavling
Åke
Stavling, Executive Director, left the Company at the end of January 2003. Mr
Stavlings
leaving arrangements were considered and approved by the Remuneration Committee,
based on existing contracts and practice. These are summarised below.
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As disclosed in the Directors Remuneration
Report for 2002, Mr Stavling is receiving compensation from |
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the Company which is being
paid on a monthly basis from his leaving date 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. |
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All other allowances, bonuses and benefits ceased on Mr Stavling leaving the Company at the end of January 2003. |
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> |
On leaving the Company, options held by Mr Stavling over 80,516 Ordinary Shares in the Company vested and became exercisable; these options had been granted to him since April 1999 at various prices
in the normal course of operation of the Zeneca 1994 Executive Share Option Scheme and the AstraZeneca Share Option Plan; if not exercised, they will lapse on 31 January 2005. |
|
|
> |
In May 2003, there were released to Mr Stavling from retention 7,624 Ordinary Shares in the Company which he was awarded in 2000 under the Zeneca Executive Performance Bonus Scheme in respect of his
bonus for 1999. |
|
|
> |
In November 2003, there were released to Mr Stavling 533 Ordinary Shares in the Company which were allocated to him in November 2000 on the demerger of Zeneca Agrochemicals in respect of executive
share options he held on 10 November 2000. |
|
|
> |
Share options held by Mr Stavling under the Astra Shareholder Value Incentive Plan were not affected by his leaving the Company and details are disclosed on page 59 in the normal way. |
|
|
> |
From age 60, the pension arrangements previously disclosed by the Company in respect of Mr Stavling will apply. |
Arrangements for Håkan
Mogren ceasing to be an Executive Director
From April 1999, Håkan
Mogren was Executive Deputy Chairman of the Company. At the end of August 2003,
he ceased to be an Executive Director and employee of the Company and became
Non-Executive Deputy Chairman. As a result, certain arrangements concerning Dr
Mogrens remuneration were considered and
approved by the Remuneration Committee, based on existing contracts and practice.
These are summarised below.
> |
From 1 January 2003 until 31 August 2003, Dr Mogren received the emoluments to which he was entitled as Executive Deputy Chairman, the details of which are disclosed on pages 55 and 56 in the normal
way; these included an annual bonus which was calculated pro rata for the period of his employment by the Company in 2003. |
|
|
> |
Following his change in status
to Non-Executive Deputy Chairman at the end of August 2003, Dr Mogren
is receiving compensation from the Company which is being paid on a monthly
basis from 1 September 2003 until the end of August 2004; the amount of
this compensation is equivalent to one years base annual salary
which is derived from his service
contract. |
|
|
> |
All allowances, bonuses and benefits ended on Dr Mogren ceasing to be an Executive Director and employee of the Company at the end of August 2003 with the exception of his existing health insurance
cover and life insurance arrangements which will continue until age 60. |
|
|
> |
Although Dr Mogren ceased to be an employee of the Company on 31 August 2003, he has continued as a Director of the Company and consequently, under the relevant plan rules, options over Ordinary
Shares previously granted to him at various |
Details of Executive Directors service
contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Director |
|
Date of service contract |
|
Unexpired term at
31 December 2003 |
|
Notice period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sir Tom McKillop |
|
11.01.96 |
|
One year |
|
One year |
|
|
|
|
|
|
|
|
|
Jonathan Symonds |
|
20.05.98 |
|
One year |
|
One year |
|
|
|
|
|
|
|
|
|
Back to Contents
54 |
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Directors Remuneration
Report |
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|
Directors Remuneration
Report continued |
|
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|
prices in the normal course of operation of the Astra Shareholder Value Incentive Plan, the Zeneca 1994 Executive Share Option Scheme and the AstraZeneca Share Option Plan were not
affected by his change of status to Non-Executive Deputy Chairman. |
|
|
> |
The same applies to both the Ordinary Shares in the Company which he was awarded in 2000 under the Zeneca Executive Performance Bonus Scheme in respect of his bonus for 1999 and the Ordinary Shares
in the Company which were allocated to him in November 2000 on the demerger of Zeneca Agrochemicals in respect of executive share options he held on 10 November 2000. These Ordinary Shares were released to him in May and November 2003 respectively.
More details about share options and the releases of shares are disclosed on pages 57 to 59. |
As a Non-Executive Director, Dr Mogren will not be entitled to any future performance related bonuses, grants of share options or pension contributions. From age 60, subject to his re-election as a Director at AGMs, Dr
Mogrens fee as Non-Executive
Deputy Chairman will be £100,000 per annum. From age 60, the pension arrangements
previously disclosed by the Company in respect of
Dr Mogren will apply.
During 2003, Dr Mogren purchased certain furnishings from the Company on arms
length terms. The total value of the transaction concerned was SEK618,000. The
value of the items purchased was assessed by independent valuers.
Position of the Non-Executive Directors
None of the Non-Executive Directors has a service contract. They are not eligible for performance-related bonuses or the grant of share options. No pension contributions are made on their behalf.
External appointments and retention of fees
With the specific approval of the Board in each case, Executive Directors may accept external appointments as non-executive directors of other companies and retain any related fees paid to them.
Sir Tom McKillop, Chief Executive, served as a Non-Executive Director of Lloyds TSB Group plc throughout 2003 and retained the fees paid to him for this service. In 2003,
the total amount of such fees paid to him was £49,000.
Jonathan Symonds, Chief Financial Officer, served as
a Non-Executive Director of QinetiQ Group plc throughout 2003 and retained the
fees paid to him for this service. In 2003, the total amount of such fees paid
to him
was £33,000. With effect from
1 September 2003, Mr Symonds also
receives and retains
fees of £15,000 per annum for his position as a member of the UK Accounting
Standards Board.
Directors emoluments in 2003
The Directors emoluments
in 2003 are disclosed on pages 55 to 56.
Directors interests in shares
Details of the Directors interests
in the Companys
Ordinary Shares are disclosed on pages 57 to 59.
Audit
The Directors emoluments
in 2003 and the details of the Directors interests in the Companys
Ordinary Shares disclosed on pages 55 to 59 have been audited by the Companys
external auditor.
Back to Contents
|
AstraZeneca Annual Report and Form 20-F Information 2003 |
Directors Remuneration Report |
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors emoluments in 2003
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 2003 was £11 million
($18 million) (including £250,000 ($403,000) to the Chairman). Remuneration
of individual Directors is set out below in sterling and US dollars. Among
those Directors who receive their remuneration in sterling are the Chairman,
the Non-Executive
Deputy Chairman, the senior Non-Executive Director, the Chief Executive and
the Chief Financial Officer.
Sterling |
Salary
and fees
£000 |
|
Bonuses
£000 |
|
Taxable
benefits
£000 |
|
Other
£000 |
|
Total 2003
£000 |
|
Total
2002
£000 |
|
Total
2001
£000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percy Barnevik |
250 |
|
|
|
|
|
|
|
250 |
|
250 |
|
250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Håkan Mogren |
461 |
|
450 |
|
51 |
|
284 |
ø |
1,246 |
|
1,347 |
|
1,104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sir Tom McKillop |
885 |
|
860 |
|
1 |
|
44 |
* |
1,790 |
|
1,479 |
|
1,304 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan Symonds |
534 |
|
451 |
|
6 |
|
80 |
|
1,071 |
|
909 |
|
815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sir Peter Bonfield |
74 |
|
|
|
|
|
|
|
74 |
|
46 |
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Buchanan |
53 |
|
|
|
|
|
|
|
53 |
|
33 |
** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jane Henney |
49 |
|
|
|
|
|
|
|
49 |
|
60 |
|
9 |
** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karl von der Heyden |
55 |
|
|
|
|
|
|
|
55 |
|
47 |
|
41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michele Hooper |
19 |
** |
|
|
|
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joe Jimenez |
19 |
** |
|
|
|
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Erna Möller |
49 |
|
|
|
|
|
|
|
49 |
|
62 |
|
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dame Bridget Ogilvie |
49 |
|
|
|
|
|
|
|
49 |
|
62 |
|
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marcus Wallenberg |
46 |
|
|
|
|
|
|
|
46 |
|
42 |
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Åke Stavling |
81 |
+ |
|
|
6 |
|
402 |
ø |
489 |
|
835 |
|
712 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others |
|
|
|
|
|
|
|
|
|
|
621 |
|
702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
2,624 |
|
1,761 |
|
64 |
|
810 |
|
5,259 |
|
5,793 |
|
5,123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Relates to relocation allowances; Payment for pension related tax liabilities; + Includes settlement on retirement
of accrued holiday entitlement; |
|
Includes provision for accommodation in the UK; ø Compensation payment and for accommodation related tax
liabilities; ** Part year only. |
|
|
US dollars |
Salary
and fees
$000 |
|
Bonuses
$000 |
|
Taxable
benefits
$000 |
|
Other
$000 |
|
Total 2003 $000 |
|
Total
2002
$000 |
|
Total
2001
$000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percy Barnevik |
403 |
|
|
|
|
|
|
|
403 |
|
373 |
|
368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Håkan Mogren |
743 |
|
725 |
|
82 |
|
458 |
ø |
2,008 |
|
2,010 |
|
1,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sir Tom McKillop |
1,427 |
|
1,387 |
|
1 |
|
71 |
* |
2,886 |
|
2,208 |
|
1,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan Symonds |
861 |
|
727 |
|
9 |
|
129 |
|
1,726 |
|
1,357 |
|
1,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sir Peter Bonfield |
119 |
|
|
|
|
|
|
|
119 |
|
68 |
|
56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Buchanan |
86 |
|
|
|
|
|
|
|
86 |
|
49 |
** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jane Henney |
79 |
|
|
|
|
|
|
|
79 |
|
90 |
|
13 |
** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karl von der Heyden |
89 |
|
|
|
|
|
|
|
89 |
|
70 |
|
60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michele Hooper |
31 |
** |
|
|
|
|
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joe Jimenez |
31 |
** |
|
|
|
|
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Erna Möller |
79 |
|
|
|
|
|
|
|
79 |
|
93 |
|
81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dame Bridget Ogilvie |
79 |
|
|
|
|
|
|
|
79 |
|
93 |
|
81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marcus Wallenberg |
74 |
|
|
|
|
|
|
|
74 |
|
63 |
|
56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Åke Stavling |
131 |
+ |
|
|
9 |
|
648 |
ø |
788 |
|
1,246 |
|
1,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others |
|
|
|
|
|
|
|
|
|
|
927 |
|
1,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
4,232 |
|
2,839 |
|
101 |
|
1,306 |
|
8,478 |
|
8,647 |
|
7,534 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Relates to relocation allowances; Payment for pension related tax liabilities; + Includes settlement on retirement
of accrued holiday entitlement; |
|
Includes provision for accommodation in the UK; ø Compensation payment and for accommodation related tax
liabilities; ** Part year only. |
As described in the previous section, compensation
payments to Håkan Mogren and Åke Stavling were £225,000 ($363,000) and £399,000
($643,000) respectively and are included within Other in the above tables.
Back to Contents
56 |
|
AstraZeneca
Annual Report and
Form 20-F Information 2003 |
|
Directors
Remuneration Report |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors Remuneration
Report continued |
|
|
|
|
|
Directors emoluments
in 2003 (continued)
The remuneration of Directors is or was in the case of former Directors (with minor exceptions) established and paid in either Swedish kronor or sterling and has been converted into US dollars in the second table on
page 55 at the average exchange rate for the year in question. These rates were:
|
|
GBP/USD |
|
SEK/USD |
|
|
|
|
|
|
|
2001 |
|
0.68 |
|
10.79 |
|
|
|
|
|
|
|
2002 |
|
0.67 |
|
9.86 |
|
|
|
|
|
|
|
2003 |
|
0.62 |
|
8.30 |
|
|
|
|
|
|
|
Some Directors and officers were also granted
options to subscribe for Ordinary Shares under the Companys share option
plans. Details of share options granted to, and exercised by, Directors and
the aggregate of gains realised on exercised options in the year are given
on pages 58 and 59.
No Director or officer has a family relationship with any other Director or officer.
Transactions with Directors
During the year there were no material recorded transactions between the Company and the Directors.
Executive Directors Pension Arrangements (per annum) |
Sir Tom McKillop
$000 |
|
Jonathan Symonds
$000 |
|
Håkan Mogren
$000 |
|
Åke Stavling $000 |
|
|
|
|
|
|
|
|
|
|
Defined Benefit Arrangements |
|
|
|
|
|
|
|
|
1 |
. |
Accrued pension at 1 January 2003 |
874 |
|
317 |
|
1,060 |
|
543 |
|
|
|
|
|
|
|
|
|
|
|
|
2 |
. |
Increase in accrued pension |
|
|
|
|
|
|
|
|
|
|
during year as a result of inflation |
24 |
|
9 |
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
. |
Adjustment to accrued pension as a result |
|
|
|
|
|
|
|
|
|
|
of salary increase relative to inflation |
2 |
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
. |
Increase in accrued pension as a |
|
|
|
|
|
|
|
|
|
|
result of additional service |
28 |
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
. |
Accrued pension at 31 December 2003 |
928 |
|
345 |
|
1,080 |
* |
543 |
+ |
|
|
|
|
|
|
|
|
|
|
|
6 |
. |
Employee contributions during year |
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7 |
. |
Transfer value of accrued pension |
|
|
|
|
|
|
|
|
|
|
at 31 December 2002 |
15,648 |
|
2,486 |
|
10,055 |
|
4,976 |
|
|
|
|
|
|
|
|
|
|
|
|
8 |
. |
Transfer value of accrued pension |
|
|
|
|
|
|
|
|
|
|
at 31 December 2003 |
17,376 |
|
3,031 |
|
10,896 |
* |
5,003 |
+ |
|
|
|
|
|
|
|
|
|
|
|
9 |
. |
Change in transfer value during |
|
|
|
|
|
|
|
|
|
|
the period less employee contributions |
1,728 |
|
513 |
|
841 |
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
. |
Age at 31 December 2003 |
609 /12 |
|
4410 /12 |
|
5811 /12 |
* |
58 |
+ |
|
|
|
|
|
|
|
|
|
|
|
11 |
. |
Pensionable service (years) |
343 /12 |
|
234 /12 |
|
3011 /12 |
* |
30 |
+ |
|
|
|
|
|
|
|
|
|
|
|
|
Accrued pension payable between the age of 60 and 65. Once 65 the pension payable is reduced by 2/7ths (or 28.6%) from the figures shown. |
* |
On leaving service at 31 August 2003 |
+ |
On leaving service at 31 January 2003 |
Pensions are payable to Directors in either Swedish kronor or sterling. For ease of understanding, the whole table has been presented using the exchange rates for 2003 set out above.
Back to Contents
|
AstraZeneca Annual Report and
Form 20-F Information 2003 |
Directors Remuneration
Report |
57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Graph showing total shareholder
return
The UK Directors Remuneration Report Regulations
2002 require the inclusion in the Directors Remuneration Report of a graph
showing total shareholder return (TSR) over a five year period in respect of
a holding of the Companys shares, plotted against TSR in respect of a
hypothetical holding of shares of a similar kind and number by reference to
which a broad equity market index is calculated. This illustrates the Companys
TSR performance against the broad equity market index selected. For the purposes
of this graph, set out below, we have selected the FTSE 100 Index as the appropriate
index.
Directors interests
in shares
The interests at 31 December 2003 or on date
of retirement of the persons who on that date were Directors (including the
interests of their families) in shares and debentures of AstraZeneca PLC are
shown below, all of which were beneficial except as otherwise stated. None of
the Directors has a beneficial interest in the shares of any of the Companys
subsidiaries.
|
Interest in |
|
|
|
|
|
Interest in |
|
|
|
Ordinary Shares, |
|
|
Ordinary Shares, |
|
including shares |
Shares held |
|
including shares |
Shares held |
held in trust, |
in trust at |
|
held in trust, |
in trust at |
at 1 Jan 2003 |
1 Jan 2003 |
Net shares |
at 31 Dec 2003 |
31 Dec 2003 |
or appointment |
or appointment |
acquired/ |
or resignation |
or resignation |
date |
date |
(disposed) |
date |
date |
|
|
|
|
|
|
|
|
|
|
|
Percy Barnevik |
100,000 |
|
|
|
(50,000 |
) |
50,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Håkan Mogren |
65,974 |
|
10,234 |
|
(3,810 |
) |
62,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sir Tom McKillop |
74,443 |
|
13,424 |
|
3,392 |
|
77,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan Symonds |
13,828 |
|
7,788 |
|
(2,899 |
) |
10,929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sir Peter Bonfield |
500 |
|
|
|
|
|
500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Buchanan |
500 |
|
|
|
|
|
500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jane Henney |
500 |
|
|
|
|
|
500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karl von der Heyden |
20,000 |
|
|
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michele Hooper |
|
|
|
|
500 |
|
500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joe Jimenez |
|
|
|
|
500 |
|
500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Erna Möller |
2,718 |
|
|
|
|
|
2,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dame Bridget Ogilvie |
500 |
|
|
|
|
|
500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marcus Wallenberg |
74,504 |
|
|
|
|
|
74,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Directors |
|
|
|
|
|
|
|
|
|
|
Åke Stavling |
9,139 |
|
8,157 |
|
|
|
9,139 |
|
8,157 |
|
|
|
|
|
|
|
|
|
|
|
|
No Director or senior executive beneficially
owns, or has options over, 1% or more of the outstanding shares of the Company,
nor do they have different voting rights to other shareholders.
Shares held in trust at 1 January 2003 above
include both long term incentive bonus shares appropriated under the Zeneca
Executive Performance Bonus Scheme and also shares allocated on the demerger
of Zeneca Agrochemicals, in respect of executive share options held on 10 November
2000. In respect of the latter, the shares were released and became beneficially
owned by Directors on 13 November 2003.
Back to Contents
58 |
AstraZeneca Annual Report and
Form 20-F Information 2003 |
Directors
Remuneration Report |
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors
Remuneration Report continued |
|
|
|
|
|
|
|
|
|
|
Directors
interests in shares (continued)
The interests of Directors and former Directors
in options to subscribe for Ordinary Shares of the Company, which include options
granted under the AstraZeneca Savings-Related Share Option Scheme, together
with options granted and exercised during the year are included in the following
table:
|
|
|
|
|
|
Exercise |
|
Market price |
|
|
|
|
|
|
|
|
|
No. of shares |
|
price |
|
at date of |
|
First date |
|
Last date |
|
|
|
|
|
under option |
|
per share |
|
exercise |
|
exercisable |
* |
exercisable |
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Håkan Mogren |
|
At 1 Jan 2003 |
|
179,345 |
|
3073 |
p |
|
|
13.12.02 |
|
27.03.12 |
|
|
|
market price above
option price |
|
|
|
|
|
|
|
|
|
|
|
|
|
market price below
option price |
|
179,345 |
|
3073 |
p |
|
|
13.12.02 |
|
27.03.12 |
|
|
|
Granted |
|
65,551 |
|
2231 |
p |
|
|
25.03.06 |
|
24.03.13 |
|
|
|
At 31 Dec 2003 |
|
244,896 |
|
2848 |
p |
|
|
13.12.02 |
|
24.03.13 |
|
|
|
market price above
option price |
|
65,551 |
|
2231 |
p |
|
|
25.03.06 |
|
24.03.13 |
|
|
|
market price below
option price |
|
179,345 |
|
3073 |
p |
|
|
13.12.02 |
|
27.03.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sir Tom McKillop |
|
At 1 Jan 2003 |
|
339,068 |
|
2604 |
p |
|
|
05.04.97 |
|
27.03.12 |
|
|
|
market price above
option price |
|
93,508 |
|
1236 |
p |
|
|
05.04.97 |
|
03.04.07 |
|
|
|
market price below
option price |
|
245,560 |
|
3125 |
p |
|
|
26.03.01 |
|
27.03.12 |
|
|
|
Granted |
|
128,498 |
|
2231 |
p |
|
|
25.03.06 |
|
24.03.13 |
|
|
|
Exercised |
|
1,900 |
|
748 |
p |
2840 |
p |
05.04.97 |
|
04.04.04 |
|
|
|
Exercised |
|
12,424 |
|
826 |
p |
2866 |
p |
17.08.97 |
|
16.08.04 |
|
|
|
At 31 Dec 2003 |
|
453,242 |
|
2555 |
p |
|
|
27.03.98 |
|
24.03.13 |
|
|
|
market price above
option price |
|
256,350 |
|
2013 |
p |
|
|
27.03.98 |
|
24.03.13 |
|
|
|
market price below
option price |
|
196,892 |
|
3260 |
p |
|
|
16.03.03 |
|
27.03.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan Symonds |
|
At 1 Jan 2003 |
|
160,376 |
|
2828 |
p |
|
|
01.10.00 |
|
27.03.12 |
|
|
|
market price above
option price |
|
30,656 |
|
2055 |
p |
|
|
01.10.00 |
|
30.09.07 |
|
|
|
market price below
option price |
|
129,720 |
|
3011 |
p |
|
|
20.08.01 |
|
27.03.12 |
|
|
|
Granted |
|
48,012 |
|
2231 |
p |
|
|
25.03.06 |
|
24.03.13 |
|
|
|
At 31 Dec 2003 |
|
208,388 |
|
2691 |
p |
|
|
01.10.00 |
|
24.03.13 |
|
|
|
market price above
option price |
|
121,444 |
|
2271 |
p |
|
|
01.10.00 |
|
24.03.13 |
|
|
|
market price below
option price |
|
86,944 |
|
3277 |
p |
|
|
23.08.03 |
|
27.03.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Åke Stavling |
|
At 1 Jan 2003 |
|
111,217 |
|
3014 |
p |
|
|
26.05.02 |
|
27.03.12 |
|
|
|
market price above
option price |
|
|
|
|
|
|
|
|
|
|
|
|
|
market price below
option price |
|
111,217 |
|
3014 |
p |
|
|
26.05.02 |
|
27.03.12 |
|
|
|
At 31 Jan 2003 |
|
111,217 |
|
3014 |
p |
|
|
26.05.02 |
|
31.01.05 |
|
|
|
market price above
option price |
|
|
|
|
|
|
|
|
|
|
|
|
|
market price below
option price |
|
111,217 |
|
3014 |
p |
|
|
26.05.02 |
|
31.01.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise prices are weighted
averages. |
* |
First and last exercise dates
of groups of options, within which periods there are shorter exercise periods. |
Back to Contents
|
AstraZeneca Annual
Report and
Form 20-F Information 2003 |
Directors Remuneration Report |
59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In addition to the above, the following Directors or former Directors held options under the Astra Shareholder Value Incentive Plan which were converted into options over AstraZeneca shares on completion of the merger
based on an exchange ratio of 0.5045 AstraZeneca options for each Astra option held. No further options have been or will be granted under the scheme:
Astra SVIP Options
|
|
|
|
No. of |
|
Exercise |
|
Market price |
|
|
|
|
|
|
|
|
|
shares |
|
price |
at date of |
|
First date |
|
Last date |
|
|
|
|
|
under option |
|
per share |
exercise |
|
exercisable |
* |
exercisable |
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Håkan Mogren |
|
At 1 Jan 2003 |
|
25,080 |
|
389.68SEK |
|
|
|
06.04.99 |
|
23.01.06 |
|
|
|
market price above option price |
|
|
|
|
|
|
|
|
|
|
|
|
|
market price below option price |
|
25,080 |
|
389.68SEK |
|
|
|
06.04.99 |
|
23.01.06 |
|
|
|
Sold |
|
8,792 |
|
316.13SEK |
|
358.00SEK |
|
06.04.99 |
|
09.01.04 |
|
|
|
At 31 Dec 2003 |
|
16,288 |
|
429.38SEK |
|
|
|
06.04.99 |
|
23.01.06 |
|
|
|
market price above option price |
|
|
|
|
|
|
|
|
|
|
|
|
|
market price below option price |
|
16,288 |
|
429.38SEK |
|
|
|
06.04.99 |
|
23.01.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Åke Stavling |
|
At 1 Jan 2003 |
|
8,143 |
|
429.38SEK |
|
|
|
06.04.99 |
|
23.01.06 |
|
|
|
market price above option price |
|
|
|
|
|
|
|
|
|
|
|
|
|
market price below option price |
|
8,143 |
|
429.38SEK |
|
|
|
06.04.99 |
|
23.01.06 |
|
|
|
At 31 Jan 2003 |
|
8,143 |
|
429.38SEK |
|
|
|
06.04.99 |
|
23.01.06 |
|
|
|
market price above option price |
|
|
|
|
|
|
|
|
|
|
|
|
|
market price below option price |
|
8,143 |
|
429.38SEK |
|
|
|
06.04.99 |
|
23.01.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise prices are weighted averages. |
* |
First and last exercise dates of groups of options, within which periods there are shorter exercise periods. |
The aggregate amount of gains made by Directors on the exercise of share options during the year amounted to $0.5 million (2002 $0.4 million, 2001 $0.02 million) and the gains made by the highest paid Director were
$470,000 (2002 $nil, 2001 $13,000). The market price of shares trading on the London Stock Exchange at 31 December 2003 was 2680 pence and the range during 2003 was 1820 pence to 2868 pence. The market price of shares trading on the Stockholm Stock
Exchange at 31 December 2003 was 350.50 SEK and the range during 2003 was 245.00 SEK to 382.00 SEK. The Register of Directors Interests (which is open to inspection)
contains full details of Directors shareholdings and options to subscribe for Ordinary Shares.
On behalf of the Board
G H R Musker
Group Secretary and Solicitor
29 January 2004
Back to Contents
60 |
AstraZeneca
Annual Report and
Form 20-F Information 2003 |
Financial
Statements |
|
|
|
|
|
|
|
|
|
Preparation of the Financial
Statements
and Directors Responsibilities |
|
|
|
|
|
|
|
|
|
|
The Directors are required by UK company
law to prepare for each accounting period financial statements which
give a true and fair view of the state of affairs of the Group and the
Company as at the end of the accounting period and of the profit or loss
for that period. In preparing the financial statements, the Directors
are required to select and apply consistently suitable accounting policies
and make reasonable and prudent judgements and estimates. Applicable
accounting standards also have to be followed and a statement made to
that effect in the financial statements, subject to any material departures
being disclosed and explained in the notes to the financial statements.
The Directors are required to prepare the financial statements on a going
concern basis unless it is inappropriate to presume that the Group will
continue in business. The Directors are responsible for ensuring proper
accounting records are kept which disclose with reasonable accuracy at
any time the financial position of the Company and enable them to ensure
that the financial statements comply with the Companies Act 1985. They
are also responsible for taking reasonable steps to safeguard the assets
of the Company and prevent and detect fraud and other irregularities. |
|
|
|
|
|
|
|
|
|
|
|
Basis of Consolidation
and
Presentation of Financial
Information |
|
|
|
|
|
|
|
The preparation of the Financial Statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the Financial Statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
No new accounting standards have been
adopted this year. |
|
|
Back to Contents
62 |
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Statements |
|
|
|
|
Group
Profit and Loss Account for the year ended 31 December |
|
|
|
|
|
Before |
|
|
|
|
|
|
|
|
exceptional |
|
Exceptional |
|
2003 |
|
|
|
|
items |
|
items |
|
Total |
|
|
Notes |
|
$m |
|
$m |
|
$m |
|
|
|
Group turnover |
|
|
18,849 |
|
|
|
18,849 |
|
|
|
Operating costs |
1 |
|
(14,938 |
) |
|
|
(14,938 |
) |
|
|
Other operating income |
1 |
|
200 |
|
|
|
200 |
|
|
|
Group operating profit |
1 |
|
4,111 |
|
|
|
4,111 |
|
|
|
Share ofoperating profits
of joint ventures and associates |
2 |
|
|
|
|
|
|
|
|
|
Profits on sale of fixed assets |
3 |
|
|
|
|
|
|
|
|
|
Dividend income |
|
|
2 |
|
|
|
2 |
|
|
|
Profit on ordinary activities
before interest |
|
|
4,113 |
|
|
|
4,113 |
|
|
|
Net interest |
4 |
|
89 |
|
|
|
89 |
|
|
|
Profit on ordinary activities
before taxation |
|
|
4,202 |
|
|
|
4,202 |
|
|
|
Taxation |
5 |
|
(1,143 |
) |
|
|
(1,143 |
) |
|
|
Profit on ordinary activities
after taxation |
|
|
3,059 |
|
|
|
3,059 |
|
|
|
Attributable to minorities |
|
|
(23 |
) |
|
|
(23 |
) |
|
|
Net profit for the financial
year |
|
|
3,036 |
|
|
|
3,036 |
|
|
|
Dividends to shareholders |
6 |
|
|
|
|
|
(1,350 |
) |
|
|
Profit retained for the
financial year |
|
|
|
|
|
|
1,686 |
|
|
|
Earnings per $0.25 Ordinary
Share before exceptional items |
7 |
|
$1.78 |
|
|
|
$1.78 |
|
|
|
Earnings per $0.25 Ordinary
Share (basic) |
7 |
|
$1.78 |
|
|
|
$1.78 |
|
|
|
Earnings per $0.25 Ordinary
Share (diluted) |
7 |
|
$1.78 |
|
|
|
$1.78 |
|
|
|
Weighted average number of
Ordinary Shares in issue (millions) |
7 |
|
|
|
|
|
$1,709 |
|
|
|
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 |
|
|
|
|
|
|
|
2003 |
|
|
Notes |
|
$m |
|
|
|
Net profit for the financial year |
|
|
3,036 |
|
|
|
Foreign exchange adjustments on consolidation |
20 |
|
1,361 |
|
|
|
Tax on foreign exchange adjustments on consolidation |
20 |
|
66 |
|
|
|
Translation differences on foreign currency borrowings |
20 |
|
|
|
|
|
Tax on translation differences on foreign currency borrowings |
20 |
|
|
|
|
|
Total recognised gains and losses relating to the financial year |
|
|
4,463 |
|
|
|
$m means millions of US dollars |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Back to Contents
|
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Statements |
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before |
|
|
|
|
|
|
Before |
|
|
|
|
|
exceptional |
Exceptional |
2002 |
exceptional |
Exceptional |
2001 |
items |
items |
Total |
items |
items |
Total |
$m |
$m |
$m |
$m |
$m |
$m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,841 |
|
|
|
17,841 |
|
|
16,222 |
|
|
|
16,222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,728 |
) |
(350 |
) |
(14,078 |
) |
|
(12,434 |
) |
(202 |
) |
(12,636 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
243 |
|
|
|
243 |
|
|
368 |
|
|
|
368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,356 |
|
(350 |
) |
4,006 |
|
|
4,156 |
|
(202 |
) |
3,954 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 |
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
1 |
|
|
8 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,357 |
|
(350 |
) |
4,007 |
|
|
4,164 |
|
(192 |
) |
3,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 |
|
|
|
30 |
|
|
105 |
|
|
|
105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,387 |
|
(350 |
) |
4,037 |
|
|
4,269 |
|
(192 |
) |
4,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,177 |
) |
|
|
(1,177 |
) |
|
(1,214 |
) |
54 |
|
(1,160 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,210 |
|
(350 |
) |
2,860 |
|
|
3,055 |
|
(138 |
) |
2,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24 |
) |
|
|
(24 |
) |
|
(11 |
) |
|
|
(11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,186 |
|
(350 |
) |
2,836 |
|
|
3,044 |
|
(138 |
) |
2,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,206 |
) |
|
|
|
|
|
(1,225 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,630 |
|
|
|
|
|
|
1,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1.84 |
|
|
|
$1.84 |
|
|
$1.73 |
|
|
|
$1.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1.84 |
|
($0.20 |
) |
$1.64 |
|
|
$1.73 |
|
($0.08 |
) |
$1.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1.84 |
|
($0.20 |
) |
$1.64 |
|
|
$1.73 |
|
($0.08 |
) |
$1.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,733 |
|
|
|
|
|
|
1,758 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002 |
|
|
2001 |
|
$m |
$m |
|
|
|
|
|
|
|
2,836 |
|
|
2,906 |
|
|
|
|
|
|
|
|
971 |
|
|
(466 |
) |
|
|
|
|
|
|
|
135 |
|
|
(36 |
) |
|
|
|
|
|
|
|
6 |
|
|
18 |
|
|
|
|
|
|
|
|
(2 |
) |
|
(6 |
) |
|
|
|
|
|
|
|
3,946 |
|
|
2,416 |
|
|
|
|
|
|
|
Back to Contents
64 |
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
Balance Sheet
at 31 December |
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
Notes |
$m |
$m |
|
|
|
|
|
|
|
Fixed assets |
|
|
|
|
|
|
Tangible fixed assets |
9 |
|
7,536 |
|
6,597 |
|
|
|
|
|
|
|
|
Goodwill and intangible assets |
10 |
|
2,884 |
|
2,807 |
|
|
|
|
|
|
|
|
Fixed asset investments |
11 |
|
220 |
|
46 |
|
|
|
|
|
|
|
|
|
|
|
10,640 |
|
9,450 |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Stocks |
12 |
|
3,022 |
|
2,593 |
|
|
|
|
|
|
|
|
Debtors |
13 |
|
5,960 |
|
4,845 |
|
|
|
|
|
|
|
|
Short term investments |
14 |
|
3,218 |
|
3,962 |
|
|
|
|
|
|
|
|
Cash |
|
|
733 |
|
726 |
|
|
|
|
|
|
|
|
|
|
|
12,933 |
|
12,126 |
|
|
|
|
|
|
|
|
Total assets |
|
|
23,573 |
|
21,576 |
|
|
|
|
|
|
|
|
Creditors due within one year |
|
|
|
|
|
|
Short term borrowings and overdrafts |
15 |
|
(152 |
) |
(202 |
) |
|
|
|
|
|
|
|
Current instalments of loans |
17 |
|
|
|
(314 |
) |
|
|
|
|
|
|
|
Other creditors |
16 |
|
(7,543 |
) |
(7,699 |
) |
|
|
|
|
|
|
|
|
|
|
(7,695 |
) |
(8,215 |
) |
|
|
|
|
|
|
|
Net current assets |
|
|
5,238 |
|
3,911 |
|
|
|
|
|
|
|
|
Total assets less current liabilities |
|
|
15,878 |
|
13,361 |
|
|
|
|
|
|
|
|
Creditors due after more than one year |
|
|
|
|
|
|
Loans |
17 |
|
(303 |
) |
(328 |
) |
|
|
|
|
|
|
|
Other creditors |
16 |
|
(52 |
) |
(34 |
) |
|
|
|
|
|
|
|
|
|
|
(355 |
) |
(362 |
) |
|
|
|
|
|
|
|
Provisions for liabilities and charges |
19 |
|
(2,266 |
) |
(1,773 |
) |
|
|
|
|
|
|
|
Net assets |
|
|
13,257 |
|
11,226 |
|
|
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
|
|
Called-up share capital |
35 |
|
423 |
|
429 |
|
|
|
|
|
|
|
|
Share premium account |
21 |
|
449 |
|
403 |
|
|
|
|
|
|
|
|
Capital redemption reserve |
21 |
|
23 |
|
16 |
|
|
|
|
|
|
|
|
Merger reserve |
21 |
|
433 |
|
433 |
|
|
|
|
|
|
|
|
Other reserves |
21 |
|
1,401 |
|
1,440 |
|
|
|
|
|
|
|
|
Profit and loss account |
21 |
|
10,449 |
|
8,451 |
|
|
|
|
|
|
|
|
Shareholders funds equity
interests |
20 |
|
13,178 |
|
11,172 |
|
|
|
|
|
|
|
|
Minority equity interests |
|
|
79 |
|
54 |
|
|
|
|
|
|
|
|
Shareholders funds and minority
interests |
|
|
13,257 |
|
11,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Financial Statements on
pages 62 to 123 were approved by the Board of Directors on 29 January 2004
and were signed on its behalf by: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sir Tom McKillop |
Jonathan Symonds |
Director |
Director |
Back to Contents
|
AstraZeneca Annual Report and
Form
20-F Information 2003 |
Financial Statements |
65 |
|
|
|
|
|
|
|
|
|
|
|
|
Statement of
Group Cash Flow
for the year ended 31 December |
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
|
Notes |
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
|
|
Cash flow from operating activities |
|
|
|
|
|
|
|
|
Net cash inflow from trading operations |
22 |
|
4,617 |
|
5,686 |
|
4,130 |
|
|
|
|
|
|
|
|
|
|
Outflow related to exceptional items |
23 |
|
(391 |
) |
(93 |
) |
(368 |
) |
|
|
|
|
|
|
|
|
|
Net cash inflow from operating activities |
|
|
4,226 |
|
5,593 |
|
3,762 |
|
|
|
|
|
|
|
|
|
|
Returns on investments and servicing of finance |
|
|
|
|
|
|
|
|
Interest received |
|
|
117 |
|
142 |
|
232 |
|
|
|
|
|
|
|
|
|
|
Interest paid |
|
|
(32 |
) |
(96 |
) |
(84 |
) |
|
|
|
|
|
|
|
|
|
Dividends received |
|
|
2 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
Dividends paid by subsidiaries to minority interests |
|
|
(11 |
) |
(11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76 |
|
35 |
|
156 |
|
|
|
|
|
|
|
|
|
|
Tax paid |
|
|
(886 |
) |
(795 |
) |
(792 |
) |
|
|
|
|
|
|
|
|
|
Capital expenditure and financial investment |
|
|
|
|
|
|
|
|
Cash expenditure on tangible fixed assets |
9 |
|
(1,282 |
) |
(1,340 |
) |
(1,385 |
) |
|
|
|
|
|
|
|
|
|
Cash expenditure on intangible assets |
|
|
(233 |
) |
(268 |
) |
(197 |
) |
|
|
|
|
|
|
|
|
|
Cash expenditure on fixed asset investments |
|
|
(120 |
) |
(1 |
) |
(5 |
) |
|
|
|
|
|
|
|
|
|
Disposals of fixed assets |
|
|
38 |
|
66 |
|
44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,597 |
) |
(1,543 |
) |
(1,543 |
) |
|
|
|
|
|
|
|
|
|
Acquisitions and disposals |
|
|
|
|
|
|
|
|
Acquisitions of subsidiaries and purchases of minority interests |
24 |
|
|
|
|
|
(44 |
) |
|
|
|
|
|
|
|
|
|
Disposals of business operations |
25 |
|
80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80 |
|
|
|
(44 |
) |
|
|
|
|
|
|
|
|
|
Equity dividends paid to shareholders |
|
|
(1,222 |
) |
(1,234 |
) |
(1,236 |
) |
|
|
|
|
|
|
|
|
|
Net cash inflow before management of liquid resources and financing |
27 |
|
677 |
|
2,056 |
|
303 |
|
|
|
|
|
|
|
|
|
|
Management of liquid resources and financing |
|
|
|
|
|
|
|
|
Movement in short term investments and fixed deposits (net) |
27 |
|
771 |
|
(806 |
) |
260 |
|
|
|
|
|
|
|
|
|
|
Financing |
28 |
|
(345 |
) |
(118 |
) |
35 |
|
|
|
|
|
|
|
|
|
|
Net share re-purchases |
28 |
|
(1,107 |
) |
(1,154 |
) |
(994 |
) |
|
|
|
|
|
|
|
|
|
Decrease in cash in the year |
26 |
|
(4 |
) |
(22 |
) |
(396 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash outflow/(inflow) from decrease/(increase) in loans and short term borrowings |
|
|
345 |
|
118 |
|
(35 |
) |
|
|
|
|
|
|
|
|
|
Cash outflow/(inflow) from increase/(decrease) in short term investments |
|
|
(771 |
) |
806 |
|
(260 |
) |
|
|
|
|
|
|
|
|
|
Change in net funds resulting from cash flows |
|
|
(430 |
) |
902 |
|
(691 |
) |
|
|
|
|
|
|
|
|
|
Exchange movements |
|
|
82 |
|
75 |
|
(47 |
) |
|
|
|
|
|
|
|
|
|
Movement in net funds |
|
|
(348 |
) |
977 |
|
(738 |
) |
|
|
|
|
|
|
|
|
|
Back to Contents
66 |
AstraZeneca
Annual Report and
Form 20-F Information 2003 |
Financial Statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounting Policies |
|
|
|
|
|
|
|
|
|
|
|
Basis of accounting
The Financial Statements are
prepared under the historical cost convention, modified to include
the revaluation to market value of certain current asset investments
held by Group subsidiaries as described below, in accordance with
the Companies Act 1985 and UK generally accepted accounting principles
(UK GAAP). Where there are significant differences to US GAAP these
have been described in the US GAAP section on pages 113 to 123. The
following paragraphs describe the main accounting policies under
UK GAAP. The accounting policies of some overseas subsidiaries and
associated undertakings do not conform with UK GAAP and, where appropriate,
adjustments are made on consolidation in order to present the Group
Financial Statements on a consistent basis.
Critical
accounting policies
AstraZenecas
management considers the following to be the most important accounting
policies in the context of the Groups operations.
Turnover
Turnover excludes intercompany
turnover and value added taxes and represents net invoice value less
estimated rebates, returns and settlement discounts. Revenue is recognised
at the point at which title passes.
Research and development
Research and development expenditure
is charged to profit in the year in which it is incurred.
Goodwill and intangible assets
On the acquisition of a business,
fair values are attributed to the net assets acquired. Goodwill arises
where the fair value of the consideration given for a business exceeds
the fair value of such net assets. Goodwill arising on acquisitions
since 1998 is capitalised and amortised over its estimated useful
life (generally not exceeding 20 years). Goodwill is reviewed for
impairment when there are indications that the carrying value may
not be recoverable. The Groups
policy up to and including 1997 was to eliminate goodwill arising
upon acquisitions against reserves. Such goodwill will remain eliminated
against reserves until disposal or termination of the previously
acquired business (including the planned disposal or termination
when there are indications that the value of the goodwill has been
permanently impaired), when the profit or loss on disposal or termination
will be |
|
calculated
after charging the gross amount, at current exchange rates, of any
such goodwill.
Intangible assets,
including patents acquired, are capitalised and amortised over their
estimated useful lives (generally not exceeding 20 years), in line
with the benefits accruing. If related products fail, the remaining
unamortised amounts are immediately written off to revenue expense.
Finance costs and internally developed intangible assets are not
capitalised. All intangible assets are reviewed for impairment when
there are indications that the carrying value may not be recoverable.
Post-retirement
benefits
The pension costs
relating to UK retirement plans are assessed in accordance with the
advice of independent qualified actuaries. The amounts so determined
include the regular cost of providing the benefits under the plans
which it is intended should remain as a level percentage of current
and expected future earnings of the employees covered under the plans.
Variations from the regular pension cost are spread on a systematic
basis over the estimated average remaining service lives of current
employees in the plans. Retirement plans of non-UK subsidiaries are
accounted for in accordance with local conditions and practice. With
minor exceptions, these subsidiaries recognise the expected cost
of providing pensions on a systematic basis over the average remaining
service lives of employees in accordance with the advice of independent
qualified actuaries. The costs of providing post-retirement benefits
other than pensions, principally healthcare, are charged to the profit
and loss account on a consistent basis over the average service lives
of employees. Such costs are assessed in accordance with the advice
of independent qualified actuaries. AstraZeneca has adopted the disclosure
requirements of FRS 17.
Other
accounting policies
Foreign currencies
Profit and loss
accounts in foreign currencies are translated into US dollars at
average rates for the relevant accounting periods. Assets and liabilities
are translated at exchange rates prevailing at the date of the Group
balance sheet.
Exchange gains
and losses on short term foreign currency borrowings and deposits
are included within net interest payable. Exchange differences on
all other |
|
transactions, except
relevant foreign currency loans, are taken to operating profit. In
the consolidated Financial Statements exchange differences arising
on consolidation of the net investments in subsidiaries, joint ventures
and associates together with those on relevant foreign currency loans
are taken directly to reserves via the statement of total recognised
gains and losses.
Taxation
The charge for taxation is based
on the profits for the year and takes into account taxation deferred
because of timing differences between the treatment of certain items
for taxation and for accounting purposes. Full provision is made
for the tax effects of these differences. No provision is made for
unremitted earnings of foreign subsidiaries where there is no commitment
to remit such earnings, nor is provision made for rolled over capital
gains. The deferred tax balances are not discounted.
Tangible fixed assets
AstraZenecas
policy is to write off the difference between the cost of each tangible
fixed asset and its residual value evenly over its estimated remaining
life. Reviews are made periodically of the estimated remaining lives
of individual productive assets, taking account of commercial and technological
obsolescence as well as normal wear and tear. Under this policy it
becomes impracticable to calculate average asset lives exactly. However,
the total lives range from approximately 13 to 50 years for buildings,
and three to 15 years for plant and equipment. All tangible fixed assets
are reviewed for impairment when there are indications that the carrying
value may not be recoverable.
Leases
Assets held under finance leases
are capitalised and included in tangible fixed assets at fair value.
Each asset is depreciated over the shorter of the lease term or its
useful life. The obligations related to finance leases, net of finance
charges in respect of future periods, are included, as appropriate,
under creditors due within, or creditors due after, one year. The
interest element of the rental obligation is allocated to accounting
periods during the lease term to reflect a constant rate of interest
on the remaining balance of the obligation for each accounting period.
Rentals under operating leases are charged to the profit and loss
account as incurred. |
Back to Contents
|
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Statements |
67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
An associate is an undertaking,
not being a subsidiary or joint venture, in which AstraZeneca has a participating
interest and over whose commercial and financial policy decisions AstraZeneca
exercises significant influence.
A joint venture is an entity
in which
AstraZeneca holds an interest
on a long term basis and which is jointly controlled by AstraZeneca and
one or more other venturers under a contractual arrangement.
AstraZenecas
share of the profits less losses of all significant joint ventures and
associates is included in the Group profit and loss account on the equity
accounting basis or, in the case of joint ventures, the gross equity accounting
basis. The holding value of significant associates and joint ventures
in the Group balance sheet is calculated by reference to AstraZenecas
equity in the net assets of such associates and joint ventures, as shown
by the most recent accounts available, adjusted where appropriate and
including goodwill on acquisitions made since 1 January 1998.
Fixed asset investments are stated
at cost and reviewed for impairment if there are indications that the
carrying value may not be recoverable.
Current asset investments held
by the Groups insurance
company subsidiaries, to the extent that they are actively matched against
insurance liabilities, are valued at market value and unrealised gains
and losses are taken directly to reserves via the statement of total recognised
gains and losses. Realised gains and losses are taken to the profit and
loss account.
Contingent liabilities
Through the normal course of business,
AstraZeneca is involved in legal disputes the settlement of which may
involve cost to the Group. Provision is made where an adverse outcome
is probable and associated costs can be estimated reliably.
AstraZeneca is exposed to environmental
liabilities relating to its past operations, principally in respect of
soil and groundwater remediation costs. Provisions for these costs are
made when there is a present obligation, it is probable that expenditure
on remedial work will be required and a reliable estimate can be made
of the cost.
|
|
Stock valuation
Stocks are stated at the lower
of cost or net realisable value. The first in, first out or an average
method of valuation is used. In determining cost, depreciation is included
but selling expenses and certain overhead expenses (principally central
administration costs) are excluded. Net realisable value is determined
as estimated selling price less costs of disposal.
Principal financial
instruments
Forward foreign exchange contracts
for existing transactions are revalued to year end spot rates and the
gains/losses arising are recognised in the Group profit and loss account.
Interest differentials are amortised on a straight line basis over the
life of the contract.
The gains/losses
on forward foreign exchange contracts and currency option contracts hedging
anticipated exposures are deferred until the date the underlying transaction
being hedged is completed.
Interest rate swaps
are accounted for on an accruals basis. Cross-currency swaps are translated
at year end exchange rates; gains/losses arising are included in the measurement
of the related liabilities and dealt with in the Group profit and loss
account or reserves as appropriate.
|
|
Back to Contents
68 |
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial
Statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to the Financial
Statements continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before |
|
|
|
|
|
|
exceptional |
|
Exceptional |
|
2003 |
|
|
items |
|
items |
|
Total |
|
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
Group turnover |
18,849 |
|
|
|
18,849 |
|
|
|
|
|
|
|
|
Operating costs |
|
|
|
|
|
|
Cost of sales |
(4,469 |
) |
|
|
(4,469 |
) |
|
|
|
|
|
|
|
Distribution costs |
(162 |
) |
|
|
(162 |
) |
|
|
|
|
|
|
|
Research and development |
(3,451 |
) |
|
|
(3,451 |
) |
|
|
|
|
|
|
|
Selling, general and administrative expenses |
(6,856 |
) |
|
|
(6,856 |
) |
|
|
|
|
|
|
|
|
(14,938 |
) |
|
|
(14,938 |
) |
|
|
|
|
|
|
|
Other operating income |
|
|
|
|
|
|
Royalties |
90 |
|
|
|
90 |
|
|
|
|
|
|
|
|
Other income |
110 |
|
|
|
110 |
|
|
|
|
|
|
|
|
|
200 |
|
|
|
200 |
|
|
|
|
|
|
|
|
Other income includes gains arising from
disposals under ongoing product rationalisation programmes. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Group operating profit |
4,111 |
|
|
|
4,111 |
|
|
|
|
|
|
|
|
Charges included above |
|
|
|
|
|
|
for depreciation |
(986 |
) |
|
|
(986 |
) |
|
|
|
|
|
|
|
for amortisation |
(304 |
) |
|
|
(304 |
) |
|
|
|
|
|
|
|
Gross profit, as defined by the Companies
Act 1985 |
14,380 |
|
|
|
14,380 |
|
|
|
|
|
|
|
|
2 |
Share of turnover
and operating profits of joint ventures and associates |
|
Continuing |
|
Exceptional |
|
2003 |
|
|
operations |
|
items |
|
Total |
|
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
Share of joint venture turnover |
208 |
|
|
|
208 |
|
|
|
|
|
|
|
|
|
There was no
share of operating profits of joint ventures or associates attributable
to the Group. |
Back to Contents
|
AstraZeneca Annual Report and
Form 20-F Information 2003 |
Financial Statements |
69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before |
|
|
|
|
|
|
Before |
|
|
|
|
|
exceptional |
Exceptional |
2002 |
exceptional |
Exceptional |
2001 |
items |
items |
Total |
items |
items |
Total |
$m |
$m |
$m |
$m |
$m |
$m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,841 |
|
|
|
17,841 |
|
|
16,222 |
|
|
|
16,222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,520 |
) |
|
|
(4,520 |
) |
|
(4,198 |
) |
(34 |
) |
(4,232 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(141 |
) |
|
|
(141 |
) |
|
(122 |
) |
|
|
(122 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,069 |
) |
|
|
(3,069 |
) |
|
(2,687 |
) |
(86 |
) |
(2,773 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,998 |
) |
(350 |
) |
(6,348 |
) |
|
(5,427 |
) |
(82 |
) |
(5,509 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,728 |
) |
(350 |
) |
(14,078 |
) |
|
(12,434 |
) |
(202 |
) |
(12,636 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113 |
|
|
|
113 |
|
|
154 |
|
|
|
154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130 |
|
|
|
130 |
|
|
214 |
|
|
|
214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
243 |
|
|
|
243 |
|
|
368 |
|
|
|
368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,356 |
|
(350 |
) |
4,006 |
|
|
4,156 |
|
(202 |
) |
3,954 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(705 |
) |
|
|
(705 |
) |
|
(605 |
) |
(12 |
) |
(617 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(255 |
) |
|
|
(255 |
) |
|
(255 |
) |
|
|
(255 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,321 |
|
|
|
13,321 |
|
|
12,024 |
|
(34 |
) |
11,990 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing |
|
Exceptional |
|
2002 |
|
|
Continuing |
|
Exceptional |
|
2001 |
|
operations |
items |
Total |
operations |
items |
Total |
$m |
$m |
$m |
$m |
$m |
$m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
191 |
|
|
|
191 |
|
|
183 |
|
|
|
183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Back to Contents
70 |
AstraZeneca Annual Report and
Form 20-F Information 2003 |
Financial
Statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to
the Financial Statements continued
|
|
|
|
|
|
|
|
|
|
|
3 Exceptional
items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
Accrual related to Zoladex
investigation |
|
|
(350 |
) |
|
|
|
|
|
|
|
|
|
Integration and synergy costs |
|
|
|
|
(202 |
) |
|
|
|
|
|
|
|
Exceptional items included in operating
profit |
|
|
(350 |
) |
(202 |
) |
|
|
|
|
|
|
|
Profit on sale of fixed assets |
|
|
|
|
10 |
|
|
|
|
|
|
|
|
Total exceptional items before taxation |
|
|
(350 |
) |
(192 |
) |
|
|
|
|
|
|
|
Net taxation credit |
|
|
|
|
54 |
|
|
|
|
|
|
|
|
Total exceptional items after taxation |
|
|
(350 |
) |
(138 |
) |
|
|
|
|
|
|
|
|
There were no exceptional
items in 2003. |
|
As set out in more detail
in Note 31, the Company announced on 20 June 2003 a settlement of the US
Department of Justice investigation into the US sales and marketing practices
for Zoladex (goserelin acetate
implant). Negotiations towards this settlement were sufficiently advanced
to recognise an exceptional charge of $350m at 31 December 2002. The difference
between the final settlement of $355m and the 2002 exceptional charge of
$350m amounting to $5m has been charged to operating profit before exceptional
items in 2003. |
|
The integration and synergy
programme initiated in 1999 was completed during 2001, with final exceptional
charges of $202m, principally for manpower related costs, IT costs and contractors.
The cumulative charges were $1,388m. |
|
4 Net
interest |
|
|
2003 |
|
2002 |
|
2001 |
|
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
Interest receivable and similar income
from investments |
|
|
|
|
|
|
Securities |
21 |
|
21 |
|
19 |
|
|
|
|
|
|
|
|
Short term deposits |
75 |
|
90 |
|
179 |
|
|
|
|
|
|
|
|
Exchange gains |
19 |
|
6 |
|
1 |
|
|
|
|
|
|
|
|
|
115 |
|
117 |
|
199 |
|
|
|
|
|
|
|
|
Interest payable and similar charges |
|
|
|
|
|
|
Loan interest |
(7 |
) |
(10 |
) |
(32 |
) |
|
|
|
|
|
|
|
Interest on short term borrowings and other
financing costs |
(16 |
) |
(51 |
) |
(35 |
) |
|
|
|
|
|
|
|
Discount on liability |
(3 |
) |
(10 |
) |
(15 |
) |
|
|
|
|
|
|
|
Exchange losses |
|
|
(16 |
) |
(12 |
) |
|
|
|
|
|
|
|
|
(26 |
) |
(87 |
) |
(94 |
) |
|
|
|
|
|
|
|
Net interest receivable |
89 |
|
30 |
|
105 |
|
|
|
|
|
|
|
|
Back to Contents
|
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Statements |
71 |
|
|
|
|
|
|
5 |
Taxation |
|
|
Profit on ordinary activities before
taxation, as shown in the Group profit and loss account, was as follows: |
|
2003 $m |
|
2002 $m |
|
2001 $m |
|
|
|
|
|
|
|
|
UK |
879 |
|
741 |
|
618 |
|
|
|
|
|
|
|
|
Overseas |
3,323 |
|
3,296 |
|
3,459 |
|
|
|
|
|
|
|
|
|
4,202 |
|
4,037 |
|
4,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes on profit on ordinary activities
were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
UK taxation |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporation tax |
142 |
|
165 |
|
147 |
|
|
|
|
|
|
|
|
Double taxation relief |
(23 |
) |
(29 |
) |
(37 |
) |
|
|
|
|
|
|
|
Deferred taxation |
102 |
|
24 |
|
53 |
|
|
|
|
|
|
|
|
|
221 |
|
160 |
|
163 |
|
|
|
|
|
|
|
|
Overseas taxation |
|
|
|
|
|
|
|
|
|
|
|
|
|
Overseas taxes |
783 |
|
929 |
|
739 |
|
|
|
|
|
|
|
|
Adjustments in respect of prior periods |
26 |
|
(51 |
) |
(17 |
) |
|
|
|
|
|
|
|
Deferred taxation |
113 |
|
139 |
|
275 |
|
|
|
|
|
|
|
|
|
922 |
|
1,017 |
|
997 |
|
|
|
|
|
|
|
|
Tax on profit on ordinary activities |
1,143 |
|
1,177 |
|
1,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK and overseas taxation has been provided
at current rates on the profits earned for the periods covered by the Group
Financial Statements. To the extent that dividends remitted from overseas
subsidiaries, joint ventures and associates are expected to result in additional
taxes, appropriate amounts have been provided for. No deferred tax has
been provided for unremitted earnings of Group companies overseas as these
are, in the main, considered permanently employed in the businesses of
these companies and, in the case of joint ventures and associates, the
taxes would not be material. Cumulative unremitted earnings of overseas
subsidiaries and related undertakings totalled approximately $9,381m at
31 December 2003 (2002 $9,141m). Unremitted earnings may be liable to overseas
taxes and/or UK taxation (after allowing for double taxation relief) if
they were to be distributed as dividends. |
|
|
|
|
|
|
|
Exceptional items included in tax on ordinary
activities: |
|
|
|
|
|
|
|
2003
$m
|
|
2002
$m
|
|
2001
$m
|
|
|
|
|
|
|
|
|
Tax credit on exceptional items* |
|
|
|
|
(54 |
) |
|
|
|
|
|
|
|
* Includes deferred tax relief of $nil
(2002 $nil, 2001 $23m). |
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of total recognised gains
and losses
In certain circumstances, tax
charges or credits on currency differences on borrowings are taken
to reserves via the statement of total recognised gains and losses.
The tax charge on such currency translation differences amounted to
$nil in 2003 (2002 $2m, 2001 $6m) and has been reported in the statement
of total recognised gains and losses. The tax credit on other consolidation
exchange adjustments taken to reserves amounted to $66m (2002 $135m,
2001 charge of $36m).
Factors affecting future
tax charges
As a group involved in
worldwide operations, AstraZeneca is subject to several factors that
may affect future tax charges, principally the levels and mix of profitability
in different jurisdictions, transfer pricing policies and tax levels
imposed. In 2003, a settlement was negotiated with the UK and US governments
covering all liabilities potentially arising from transfer pricing in
respect of ex-Zeneca products for the years 1987 to 2001. The settlement
had been provided for in previous years and had no impact on the 2003
tax charge. |
|
Back to Contents
72 |
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Statements |
|
|
|
|
Notes to
the Financial Statements continued |
|
|
5 |
Taxation (continued) |
|
|
Tax reconciliation
to UK statutory rate
The table shown below reconciles
the UK statutory tax charge to the Groups
current tax charge on profit on ordinary activities before
taxation. |
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
Profit on ordinary activities before taxation |
4,202 |
|
4,037 |
|
4,077 |
|
|
|
|
|
|
|
|
Notional taxation charge at UK corporation
tax rate of 30% (30% for 2002, 30% for 2001) |
1,261 |
|
1,211 |
|
1,223 |
|
|
|
|
|
|
|
|
Differences in effective overseas tax rates |
159 |
|
141 |
|
108 |
|
|
|
|
|
|
|
|
Capital allowances/tax reliefs in excess of depreciation |
(291 |
) |
(291 |
) |
(401 |
) |
|
|
|
|
|
|
|
Untaxed reserves |
(51 |
) |
(75 |
) |
(11 |
) |
|
|
|
|
|
|
|
Other timing differences |
(168 |
) |
35 |
|
(88 |
) |
|
|
|
|
|
|
|
Items not deductible for tax purposes |
80 |
|
49 |
|
48 |
|
|
|
|
|
|
|
|
Items not chargeable for tax purposes |
(88 |
) |
(110 |
) |
(58 |
) |
|
|
|
|
|
|
|
Adjustments in respect of prior periods |
26 |
|
(51 |
) |
(17 |
) |
|
|
|
|
|
|
|
Exceptional items |
|
|
105 |
|
28 |
|
|
|
|
|
|
|
|
Current tax charge for the year |
928 |
|
1,014 |
|
832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
Deferred taxation (liability)/asset movement |
|
|
|
|
|
|
At beginning of year |
(359 |
) |
(212 |
) |
96 |
|
|
|
|
|
|
|
|
Profit and loss account |
(215 |
) |
(163 |
) |
(328 |
) |
|
|
|
|
|
|
|
Statement of total recognised gains and losses |
|
|
155 |
|
(19 |
) |
|
|
|
|
|
|
|
Disposal of subsidiary undertakings |
13 |
|
|
|
|
|
|
|
|
|
|
|
|
Exchange |
(132 |
) |
(139 |
) |
39 |
|
|
|
|
|
|
|
|
At end of year |
(693 |
) |
(359 |
) |
(212 |
) |
|
|
|
|
|
|
|
Debtors amount due within one year (Note 13) |
732 |
|
625 |
|
550 |
|
|
|
|
|
|
|
|
Debtors amount due after more than one year (Note 13) |
165 |
|
226 |
|
146 |
|
|
|
|
|
|
|
|
Provisions (Note 19) |
(1,590 |
) |
(1,210 |
) |
(908 |
) |
|
|
|
|
|
|
|
|
(693 |
) |
(359 |
) |
(212 |
) |
|
|
|
|
|
|
|
Back to Contents
|
AstraZeneca Annual Report and
Form 20-F Information 2003
|
Financial Statements |
73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 Taxation
(continued) |
|
|
|
|
|
|
|
|
|
Deferred taxation |
|
|
|
|
The amounts of deferred taxation
accounted for in the Group balance sheet, before netting off of balances
within countries, comprised the following deferred tax liabilities and assets:
|
|
|
|
|
|
|
2003 |
|
2002 |
|
|
$m |
|
$m |
|
|
Deferred tax liabilities |
|
|
|
|
UK fixed assets |
501 |
|
429 |
|
|
Non-UK fixed assets |
735 |
|
570 |
|
|
Interest accruals |
18 |
|
13 |
|
|
Untaxed reserves |
137 |
|
86 |
|
|
Pension and post-retirement benefits |
86 |
|
46 |
|
|
Other |
175 |
|
53 |
|
|
|
1,652 |
|
1,197 |
|
|
Deferred tax assets |
|
|
|
|
Intercompany inventory transfers |
527 |
|
496 |
|
|
Non-UK fixed assets |
28 |
|
|
|
|
Merger, integration and restructuring charges |
|
|
16 |
|
|
Accrued expenses |
238 |
|
243 |
|
|
Pension and post-retirement benefits |
55 |
|
26 |
|
|
Other |
111 |
|
57 |
|
|
|
959 |
|
838 |
|
|
Deferred tax liability (net) |
(693 |
) |
(359 |
) |
|
|
No provision has been made,
in accordance with FRS19, for rolled over gains amounting to $140m (2002
$126m, 2001 $75m). |
Back to Contents
74 |
AstraZeneca
Annual Report and
Form 20-F Information 2003 |
Financial
Statements |
|
|
|
|
Notes to the
Financial Statements continued
|
|
|
6 Dividends
to shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
2003 |
|
2002 |
|
2001 |
|
|
|
Per |
|
|
Per |
|
|
Per |
|
|
|
|
|
|
|
|
|
share |
|
|
share |
|
|
share |
|
$m |
|
$m |
|
$m |
|
|
Interim, paid on 6 October 2003 |
$ |
0.255 |
|
$ |
0.23 |
|
$ |
0.23 |
|
436 |
|
398 |
|
405 |
|
|
Second interim, to be confirmed as final, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
payable 6 April 2004 |
$ |
0.540 |
|
$ |
0.47 |
|
$ |
0.47 |
|
914 |
|
808 |
|
820 |
|
|
|
$ |
0.795 |
|
$ |
0.70 |
|
$ |
0.70 |
|
1,350 |
|
1,206 |
|
1,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7 Earnings
per $0.25 Ordinary Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
|
2002 |
|
|
2001 |
|
|
Net profit for the financial year before
exceptional items ($m) |
|
3,036 |
|
|
3,186 |
|
|
3,044 |
|
|
Exceptional items after tax ($m) (see Note
3) |
|
|
|
|
(350 |
) |
|
(138 |
) |
|
Net profit for the financial year ($m) |
|
3,036 |
|
|
2,836 |
|
|
2,906 |
|
|
Earnings per Ordinary Share before exceptional
items |
$ |
1.78 |
|
$ |
1.84 |
|
$ |
1.73 |
|
|
Loss per Ordinary Share on exceptional
items |
|
|
|
$ |
(0.20 |
) |
$ |
(0.08 |
) |
|
Earnings per Ordinary Share |
$ |
1.78 |
|
$ |
1.64 |
|
$ |
1.65 |
|
|
Diluted earnings per Ordinary Share before
exceptional items |
$ |
1.78 |
|
$ |
1.84 |
|
$ |
1.73 |
|
|
Diluted loss per Ordinary Share on exceptional
items |
|
|
|
$ |
(0.20 |
) |
$ |
(0.08 |
) |
|
Diluted earnings per Ordinary Share |
$ |
1.78 |
|
$ |
1.64 |
|
$ |
1.65 |
|
|
Weighted average number of Ordinary Shares
in issue for basic earnings (millions) |
|
1,709 |
|
|
1,733 |
|
|
1,758 |
|
|
Dilutive impact of share options outstanding
(millions) |
|
3 |
|
|
2 |
|
|
3 |
|
|
Diluted average number of Ordinary Shares
in issue (millions) |
|
1,712 |
|
|
1,735 |
|
|
1,761 |
|
|
|
There are no options, warrants
or rights outstanding in respect of unissued shares except for employee
share option schemes. The number of options outstanding and the weighted
average exercise price of these options is shown in Note 30. 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. |
Back to Contents
|
AstraZeneca Annual
Report and
Form 20-F Information 2003 |
Financial Statements |
75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8 |
Segment information |
|
|
The Groups activities are predominantly
in one class of business, pharmaceuticals. There are no other significant
classes of business,
either singularly or in aggregate. |
|
|
Geographic areas |
The tables below show information
by geographic area and, for turnover and tangible fixed assets, material
countries. The figures show the turnover, operating profit and profit
on ordinary activities before interest and taxation made by companies
located in that area/country, together with net operating assets and
tangible fixed assets owned by the same companies; export sales and
the related profit are included in the areas/country from which those
sales were
made. |
|
|
|
|
|
|
|
Turnover |
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
UK |
|
|
|
|
|
|
External |
928 |
|
872 |
|
954 |
|
|
|
|
|
|
|
|
Intra-Group |
3,060 |
|
3,092 |
|
2,449 |
|
|
|
|
|
|
|
|
|
3,988 |
|
3,964 |
|
3,403 |
|
|
|
|
|
|
|
|
Continental Europe |
|
|
|
|
|
|
Belgium |
260 |
|
225 |
|
223 |
|
|
|
|
|
|
|
|
France |
1,420 |
|
1,111 |
|
928 |
|
|
|
|
|
|
|
|
Germany |
852 |
|
682 |
|
666 |
|
|
|
|
|
|
|
|
Italy |
824 |
|
676 |
|
576 |
|
|
|
|
|
|
|
|
The Netherlands |
174 |
|
226 |
|
307 |
|
|
|
|
|
|
|
|
Spain |
606 |
|
461 |
|
352 |
|
|
|
|
|
|
|
|
Sweden |
685 |
|
619 |
|
559 |
|
|
|
|
|
|
|
|
Others |
1,227 |
|
1,028 |
|
868 |
|
|
|
|
|
|
|
|
Intra-Group |
2,606 |
|
1,646 |
|
1,494 |
|
|
|
|
|
|
|
|
|
8,654 |
|
6,674 |
|
5,973 |
|
|
|
|
|
|
|
|
The Americas |
|
|
|
|
|
|
Canada |
712 |
|
570 |
|
525 |
|
|
|
|
|
|
|
|
US |
8,720 |
|
9,325 |
|
8,465 |
|
|
|
|
|
|
|
|
North America |
9,432 |
|
9,895 |
|
8,990 |
|
|
|
|
|
|
|
|
Others |
339 |
|
334 |
|
315 |
|
|
|
|
|
|
|
|
Intra-Group |
375 |
|
235 |
|
223 |
|
|
|
|
|
|
|
|
|
10,146 |
|
10,464 |
|
9,528 |
|
|
|
|
|
|
|
|
Asia, Africa & Australasia |
|
|
|
|
|
|
Australia |
364 |
|
273 |
|
221 |
|
|
|
|
|
|
|
|
Japan |
1,136 |
|
960 |
|
830 |
|
|
|
|
|
|
|
|
Others |
602 |
|
479 |
|
433 |
|
|
|
|
|
|
|
|
Intra-Group |
35 |
|
30 |
|
160 |
|
|
|
|
|
|
|
|
|
2,137 |
|
1,742 |
|
1,644 |
|
|
|
|
|
|
|
|
Continuing operations |
24,925 |
|
22,844 |
|
20,548 |
|
|
|
|
|
|
|
|
Intra-Group eliminations |
(6,076 |
) |
(5,003 |
) |
(4,326 |
) |
|
|
|
|
|
|
|
|
18,849 |
|
17,841 |
|
16,222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Export sales from the UK totalled $3,490m
for the year ended 31 December 2003 (2002 $3,368m, 2001 $2,664m). In the
US, sales to five wholesalers accounted for 87% of our US sales. |
|
Back to Contents
76 |
AstraZeneca Annual Report and
Form 20-F Information 2003 |
Financial
Statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to the Financial Statements continued |
|
|
|
|
|
|
|
|
|
|
8 |
Segment information (continued) |
|
|
|
|
|
|
|
|
|
Profit on ordinary |
|
|
|
|
Operating profit |
|
|
|
activities before |
|
|
|
|
after exceptional items |
|
|
|
interest and taxation |
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
2003 |
|
2002 |
|
2001 |
|
Profit from |
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK |
810 |
|
672 |
|
520 |
|
812 |
|
673 |
|
523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continental Europe |
2,241 |
|
1,689 |
|
1,400 |
|
2,241 |
|
1,689 |
|
1,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Americas |
816 |
|
1,473 |
|
1,904 |
|
816 |
|
1,473 |
|
1,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia, Africa & Australasia |
244 |
|
172 |
|
130 |
|
244 |
|
172 |
|
130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
4,111 |
|
4,006 |
|
3,954 |
|
4,113 |
|
4,007 |
|
3,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating assets* |
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
UK |
4,146 |
|
3,101 |
|
2,558 |
|
|
|
|
|
|
|
|
Continental Europe |
5,771 |
|
4,805 |
|
4,940 |
|
|
|
|
|
|
|
|
The Americas |
1,931 |
|
1,004 |
|
614 |
|
|
|
|
|
|
|
|
Asia, Africa & Australasia |
1,033 |
|
958 |
|
696 |
|
|
|
|
|
|
|
|
Continuing operations |
12,881 |
|
9,868 |
|
8,808 |
|
|
|
|
|
|
|
|
* |
Net operating assets exclude short term
investments, cash, short term borrowings, loans and non-operating debtors
and creditors. |
|
|
|
|
|
|
|
|
Tangible fixed assets |
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
UK |
2,502 |
|
2,319 |
|
1,881 |
|
|
|
|
|
|
|
|
Sweden |
2,122 |
|
1,626 |
|
1,251 |
|
|
|
|
|
|
|
|
US |
1,095 |
|
1,031 |
|
895 |
|
|
|
|
|
|
|
|
Others |
1,817 |
|
1,621 |
|
1,382 |
|
|
|
|
|
|
|
|
Continuing operations |
7,536 |
|
6,597 |
|
5,409 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographic markets |
|
|
|
|
|
|
The table below shows turnover in each geographic
market in which customers are located. |
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
UK |
532 |
|
623 |
|
759 |
|
|
|
|
|
|
|
|
Continental Europe |
6,177 |
|
5,072 |
|
4,477 |
|
|
|
|
|
|
|
|
The Americas |
9,835 |
|
10,287 |
|
9,353 |
|
|
|
|
|
|
|
|
Asia, Africa & Australasia |
2,305 |
|
1,859 |
|
1,633 |
|
|
|
|
|
|
|
|
Continuing operations |
18,849 |
|
17,841 |
|
16,222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Back to Contents
|
AstraZeneca Annual Report and
Form
20-F Information 2003 |
Financial Statements |
77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
in
course of
construction
$m |
|
Total
tangible
assets
$m |
|
|
Land
and
buildings
$m |
|
Plant
and
equipment
$m |
|
|
|
|
|
|
|
|
|
|
Cost |
|
|
|
|
|
|
|
|
At beginning of year |
3,145 |
|
6,600 |
|
1,298 |
|
11,043 |
|
|
|
|
|
|
|
|
|
|
Exchange adjustments |
448 |
|
904 |
|
133 |
|
1,485 |
|
|
|
|
|
|
|
|
|
|
Capital expenditure |
67 |
|
208 |
|
964 |
|
1,239 |
|
|
|
|
|
|
|
|
|
|
Transfer of assets into use |
510 |
|
915 |
|
(1,425 |
) |
|
|
|
|
|
|
|
|
|
|
|
Disposals and other movements |
(42 |
) |
(663 |
) |
(22 |
) |
(727 |
) |
|
|
|
|
|
|
|
|
|
At end of year |
4,128 |
|
7,964 |
|
948 |
|
13,040 |
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
At beginning of year |
895 |
|
3,551 |
|
|
|
4,446 |
|
|
|
|
|
|
|
|
|
|
Exchange adjustments |
129 |
|
529 |
|
|
|
658 |
|
|
|
|
|
|
|
|
|
|
Charge for year |
150 |
|
836 |
|
|
|
986 |
|
|
|
|
|
|
|
|
|
|
Disposals and other movements |
(35 |
) |
(551 |
) |
|
|
(586 |
) |
|
|
|
|
|
|
|
|
|
At end of year |
1,139 |
|
4,365 |
|
|
|
5,504 |
|
|
|
|
|
|
|
|
|
|
Net book value at 31 December 2003 |
2,989 |
|
3,599 |
|
948 |
|
7,536 |
|
|
|
|
|
|
|
|
|
|
Net book value at 31 December 2002 |
2,250 |
|
3,049 |
|
1,298 |
|
6,597 |
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure in the year of $1,239m
(2002 $1,342m) did not include any capitalised finance leases (2002 $nil).
Cash expenditure on tangible fixed assets was $1,282m (2002 $1,340m,
2001 $1,385m). |
|
|
2003
$m |
|
2002
$m |
|
|
|
|
|
|
The net book value of land and buildings comprised |
|
|
|
|
Freeholds |
2,956 |
|
2,220 |
|
|
|
|
|
|
Long leases (over 50 years unexpired) |
32 |
|
29 |
|
|
|
|
|
|
Short leases |
1 |
|
1 |
|
|
|
|
|
|
|
2,989 |
|
2,250 |
|
|
|
|
|
|
|
|
10 |
Goodwill and intangible assets |
|
|
|
Goodwill
$m |
|
Intangible
assets
$m |
|
Total
$m |
|
|
|
|
|
|
|
|
Cost |
|
|
|
|
|
|
At beginning of year |
1,102 |
|
3,117 |
|
4,219 |
|
|
|
|
|
|
|
|
Exchange adjustments |
52 |
|
474 |
|
526 |
|
|
|
|
|
|
|
|
Additions |
1 |
|
112 |
|
113 |
|
|
|
|
|
|
|
|
Disposals and other movements |
|
|
(81 |
) |
(81 |
) |
|
|
|
|
|
|
|
At end of year |
1,155 |
|
3,622 |
|
4,777 |
|
|
|
|
|
|
|
|
Amortisation |
|
|
|
|
|
|
At beginning of year |
249 |
|
1,163 |
|
1,412 |
|
|
|
|
|
|
|
|
Exchange adjustments |
14 |
|
238 |
|
252 |
|
|
|
|
|
|
|
|
Charge for year |
59 |
|
245 |
|
304 |
|
|
|
|
|
|
|
|
Disposals and other movements |
|
|
(75 |
) |
(75 |
) |
|
|
|
|
|
|
|
At end of year |
322 |
|
1,571 |
|
1,893 |
|
|
|
|
|
|
|
|
Net book value at 31 December 2003 |
833 |
|
2,051 |
|
2,884 |
|
|
|
|
|
|
|
|
Net book value at 31 December 2002 |
853 |
|
1,954 |
|
2,807 |
|
|
|
|
|
|
|
|
Back to Contents
78 |
AstraZeneca Annual Report and
Form 20-F Information 2003 |
Financial Statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to the Financial Statements continued |
|
|
|
|
|
|
|
|
11 |
Fixed asset investments |
|
|
|
Joint
ventures
$m |
|
Other
investments
$m |
|
Total
$m |
|
|
|
|
|
|
|
|
Cost |
|
|
|
|
|
|
At beginning of year |
134 |
|
46 |
|
180 |
|
|
|
|
|
|
|
|
Additions |
|
|
120 |
|
120 |
|
|
|
|
|
|
|
|
Disposals and other movements, including exchange |
|
|
54 |
|
54 |
|
|
|
|
|
|
|
|
At end of year |
134 |
|
220 |
|
354 |
|
|
|
|
|
|
|
|
Share of post-acquisition reserves |
|
|
|
|
|
|
At beginning and end of year |
(134 |
) |
|
|
(134 |
) |
|
|
|
|
|
|
|
Net book value at 31 December 2003 |
|
|
220 |
|
220 |
|
|
|
|
|
|
|
|
Net book value at 31 December 2002 |
|
|
46 |
|
46 |
|
|
|
|
|
|
|
|
|
The fair values of other investments
are not materially different from their carrying values. At 31 December
2003, the Groups
share
ownership trusts held 1,668,299 Ordinary Shares. |
|
Share of joint venture assets and liabilities |
|
2003
$m |
|
2002
$m |
|
|
|
|
|
|
Gross assets |
174 |
|
107 |
|
|
|
|
|
|
Gross liabilities |
(174 |
) |
(107 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003
$m |
|
2002
$m |
|
|
|
|
|
|
Raw materials and consumables |
715 |
|
756 |
|
|
|
|
|
|
Stocks in process |
1,206 |
|
1,071 |
|
|
|
|
|
|
Finished goods and goods for resale |
1,101 |
|
766 |
|
|
|
|
|
|
|
3,022 |
|
2,593 |
|
|
|
|
|
|
The 2002 stock analysis has been recategorised. |
Back to Contents
|
AstraZeneca Annual Report and
Form 20-F Information 2003 |
Financial Statements |
79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Debtors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
|
$m |
|
$m |
|
|
|
|
|
|
Amounts due within one year |
|
|
|
|
Trade debtors |
3,260 |
|
2,701 |
|
|
|
|
|
|
Less: Amounts provided for doubtful debts |
(57 |
) |
(56 |
) |
|
|
|
|
|
|
3,203 |
|
2,645 |
|
|
|
|
|
|
Deferred taxation (Note 5) |
732 |
|
625 |
|
|
|
|
|
|
Other debtors |
508 |
|
658 |
|
|
|
|
|
|
Prepayments and accrued income* |
1,093 |
|
519 |
|
|
|
|
|
|
|
5,536 |
|
4,447 |
|
|
|
|
|
|
Amounts due after more than one year |
|
|
|
|
Deferred taxation (Note 5) |
165 |
|
226 |
|
|
|
|
|
|
Other debtors |
32 |
|
16 |
|
|
|
|
|
|
Prepayments and accrued income* |
227 |
|
156 |
|
|
|
|
|
|
|
424 |
|
398 |
|
|
|
|
|
|
|
5,960 |
|
4,845 |
|
|
|
|
|
|
* Figures include prepaid
pension costs (Note 29). |
|
|
|
|
|
|
|
|
|
|
|
Provisions for doubtful
debts |
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
Balance at beginning of year |
56 |
|
42 |
|
39 |
|
|
|
|
|
|
|
|
Profit and loss account charge |
8 |
|
11 |
|
4 |
|
|
|
|
|
|
|
|
Amounts utilised and other movements |
(7 |
) |
3 |
|
(1 |
) |
|
|
|
|
|
|
|
Balance at end of year |
57 |
|
56 |
|
42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
14 Short
term investments |
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
|
$m |
|
$m |
|
|
|
|
|
|
Listed debt securities |
3 |
|
144 |
|
|
|
|
|
|
Other listed investments |
54 |
|
46 |
|
|
|
|
|
|
Investment securities |
57 |
|
190 |
|
|
|
|
|
|
Fixed deposits |
3,161 |
|
3,772 |
|
|
|
|
|
|
|
3,218 |
|
3,962 |
|
|
|
|
|
|
|
|
|
|
|
The Groups insurance
subsidiaries hold cash and short term investments totalling $298m (2002
$173m), of which $195m (2002 $120m) is required to meet insurance solvency
requirements and which, as a result, is not readily available for the
general purposes of the Group. At 31 December 2002 $126m of short term
investments shown above were committed as security against deferred payments
due under a contractual obligation of the Group (see Note 31). The obligation
was settled in 2003. The market value of other listed investments was
$140m (2002 $137m) at the year end. |
|
|
|
|
|
15 Short
term borrowings and overdrafts |
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
|
$m |
|
$m |
|
|
|
|
|
|
Bank borrowings |
|
|
|
|
Fixed securities |
7 |
|
11 |
|
|
|
|
|
|
Unsecured |
145 |
|
191 |
|
|
|
|
|
|
|
152 |
|
202 |
|
|
|
|
|
|
Back to Contents
80 |
AstraZeneca Annual Report and
Form 20-F Information 2003 |
Financial
Statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to the
Financial Statements continued
|
|
|
|
|
|
|
|
|
|
|
16 Other
creditors |
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
|
$m |
|
$m |
|
|
|
|
|
|
Amounts due within one year |
|
|
|
|
Trade creditors |
3,086 |
|
3,171 |
|
|
|
|
|
|
Corporate taxation |
1,353 |
|
1,191 |
|
|
|
|
|
|
Value added and payroll taxes and social
security |
255 |
|
167 |
|
|
|
|
|
|
Other creditors |
946 |
|
1,507 |
|
|
|
|
|
|
Accruals |
989 |
|
855 |
|
|
|
|
|
|
Dividends to shareholders |
914 |
|
808 |
|
|
|
|
|
|
|
7,543 |
|
7,699 |
|
|
|
|
|
|
Amounts due after more than one year |
|
|
|
|
Other creditors |
52 |
|
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in other creditors
are amounts totalling $59m (2002 $189m) to meet insurance obligations
of the Groups insurance subsidiaries. Also in other creditors are
amounts due within one year in connection with the Groups exceptional
charges including $54m (2002 $61m) in respect of the Agrochemicals demerger
and Specialties disposal. |
|
|
|
|
|
|
|
17 Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment |
|
2003 |
|
2002 |
|
|
dates |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
Secured loans |
|
|
|
|
|
|
Secured by fixed charge |
2007 |
|
|
|
19 |
|
|
|
|
|
|
|
|
Total secured |
|
|
|
|
19 |
|
|
|
|
|
|
|
|
Unsecured loans |
|
|
|
|
|
|
US dollars |
|
|
|
|
|
|
6.3% Guaranteed notes |
2003 |
|
|
|
284 |
|
|
|
|
|
|
|
|
7% Guaranteed debentures |
2023 |
|
295 |
|
295 |
|
|
|
|
|
|
|
|
Others |
2003/2013 |
|
8 |
|
44 |
|
|
|
|
|
|
|
|
Total unsecured |
|
|
303 |
|
623 |
|
|
|
|
|
|
|
|
Total loans |
|
|
303 |
|
642 |
|
|
|
|
|
|
|
|
Less: current instalments of loans |
|
|
|
|
(314 |
) |
|
|
|
|
|
|
|
Loans due after more than one year |
|
|
303 |
|
328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the above table loans are
shown after taking account of associated cross-currency swaps (see Note
18). |
|
Loans from banks included
in the table above amounted to $nil (2002 $40m) of which $nil (2002 $19m)
was secured. |
|
Back to Contents
|
AstraZeneca Annual Report and
Form 20-F
Information 2003 |
Financial Statements |
81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18 |
Financial instruments |
|
|
A discussion of the Groups
objective, policy and strategy in respect of risk management and the
use of financial instruments is included in the Financial Review on pages
31 to 42. The following disclosures exclude all short term, trade related
debtors and creditors. |
|
|
Interest rate risks of financial
assets and liabilities |
The interest rate profile, after
taking into account interest and cross-currency swaps, of the financial
assets and liabilities of the Group as at 31 December 2003 was: |
|
|
|
|
|
|
|
Financial |
|
|
|
Weighted |
|
Weighted |
|
|
|
|
|
|
assets/liabilities |
|
|
|
average |
|
average |
|
|
|
|
|
|
on which |
|
|
|
fixed |
|
period for |
|
|
Floating |
|
Fixed |
|
no interest is |
|
|
|
interest |
|
which rate |
|
|
rate |
|
rate |
|
paid/received |
|
Total |
|
rate |
|
is fixed |
|
|
$m |
|
$m |
|
$m |
|
$m |
|
% |
|
Years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
US dollar |
430 |
|
8 |
|
|
|
438 |
|
11.5 |
|
9.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
17 |
|
|
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
447 |
|
8 |
|
|
|
455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
US dollar |
3,542 |
|
|
|
111 |
|
3,653 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro |
8 |
|
|
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sterling |
176 |
|
|
|
141 |
|
317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEK |
43 |
|
|
|
22 |
|
65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
128 |
|
|
|
|
|
128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,897 |
|
|
|
274 |
|
4,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The floating rate financial liabilities
comprise largely of fixed rate debt that has been swapped into floating
rate debt. The long dated $300m US dollar bond reverts back to a fixed
rate in 2009. The financial liabilities also include $152m of short term
bank borrowings and overdrafts, bearing interest at rates fixed by reference
to local interbank rates. |
|
The financial assets principally
comprise cash on overnight deposit and short term investments with
an average maturity of 29 days. These include deposits where the interest
rate is fixed until maturity but, as the original maturity is less
than one year, they are classified as floating rate financial instruments.
The main benchmark rates for euro and US dollar financial assets are
the relevant LIBID rates. Financial assets include $220m of other fixed
asset
investments on which no interest is received. |
Back to Contents
82 |
AstraZeneca
Annual Report and
Form 20-F Information 2003 |
Financial Statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to the
Financial Statements continued |
|
|
|
|
|
|
|
|
18 |
Financial instruments (continued) |
|
|
Currency
exposures |
100%
of the Groups major
transactional currency exposures on working capital balances, which
typically extend for up to three months, are hedged using forward foreign
exchange contracts. As a result, as at 31 December 2003 and 31 December
2002, there were no material monetary assets or liabilities in currencies
other than the functional currencies of the Group companies concerned,
having taken into account the effect of forward exchange currency contracts
that
have been used to match foreign currency exposures. |
|
|
Additionally, in 2003 and 2002,
approximately 50% of forecast future foreign currency transaction exposures
extending for 12 months were selectively hedged. The policy has been
modified in 2004 to cover movements outside specified limits on 95%
of these transaction exposures. The principal currency exposures (sterling,
Swedish kronor (SEK), euros, Australian dollars (AUD), Canadian dollars
(CAD) and Japanese yen) were hedged using a mixture of purchased currency
options and forward foreign exchange contracts. As at 31 December 2003,
the forecast future foreign currency transaction exposures were: |
|
|
|
2003 |
|
2002 |
|
Forecast |
Forecast |
exposures |
exposures |
$m |
$m |
|
|
|
|
|
Sterling payables |
2,517 |
|
2,374 |
|
|
|
|
|
|
SEK payables |
1,422 |
|
1,006 |
|
|
|
|
|
|
Euro receivables |
2,194 |
|
1,780 |
|
|
|
|
|
|
Yen receivables |
444 |
|
306 |
|
|
|
|
|
|
AUD receivables |
255 |
|
201 |
|
|
|
|
|
|
CAD receivables |
482 |
|
336 |
|
|
|
|
|
|
|
Maturity of financial liabilities |
The maturity profile of the Groups
financial liabilities, other than short term creditors such as trade
creditors
and accruals, at 31
December 2003 was as follows: |
|
|
2003 |
|
2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis by year of repayment |
Loans |
|
Other |
|
Total |
|
Loans |
|
Other |
|
Total |
|
$m |
$m |
$m |
$m |
$m |
$m |
|
|
|
|
|
|
|
|
|
|
|
|
|
After five years |
303 |
|
|
|
303 |
|
308 |
|
|
|
308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From five to four years |
|
|
|
|
|
|
13 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From four to three years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From three to two years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From two to one years |
|
|
|
|
|
|
7 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after more than one year |
303 |
|
|
|
303 |
|
328 |
|
|
|
328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due within one year |
|
|
152 |
|
152 |
|
314 |
|
328 |
|
642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
303 |
|
152 |
|
455 |
|
642 |
|
328 |
|
970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other financial liabilities comprise short
term borrowings and, at 31 December 2002, deferred payments to re-acquire
certain distribution rights. |
Back to Contents
|
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Statements |
83 |
|
|
|
|
|
|
18 Financial
instruments (continued) |
|
|
|
|
Borrowing
facilities |
The
Group currently relies on its cash balances and short term investments
of $3,742m and long term debt of $303m to manage liquidity risk. As
a consequence, all committed bank lines have been cancelled. |
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
|
$m |
|
$m |
|
|
|
Expiring in one year or less |
|
|
75 |
|
|
|
Expiring in more than one year but not more than two years |
|
|
|
|
|
|
Expiring in more than two years |
|
|
|
|
|
|
|
|
|
75 |
|
|
|
|
|
|
|
|
Fair values of financial assets
and financial liabilities |
|
|
|
|
Set out below is a comparison
by category of carrying values and fair values of all the Groups
financial assets and financial
liabilities as at 31 December
2003 and 31 December 2002. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
2003 |
|
2002 |
|
2002 |
|
|
Carrying |
|
Fair |
|
Carrying |
|
Fair |
|
|
value |
|
value |
|
value |
|
value |
|
|
$m |
|
$m |
|
$m |
|
$m |
|
|
|
Primary financial instruments |
|
|
|
|
|
|
|
|
Short term borrowings and overdrafts |
(152 |
) |
(152 |
) |
(202 |
) |
(202 |
) |
|
|
Loans |
(303 |
) |
(371 |
) |
(657 |
) |
(733 |
) |
|
|
Cash |
733 |
|
733 |
|
726 |
|
726 |
|
|
|
Short term investments |
3,218 |
|
3,306 |
|
3,962 |
|
4,067 |
|
|
|
Fixed asset investments |
220 |
|
217 |
|
46 |
|
46 |
|
|
|
Derivative financial instruments
held to manage
the interest rate and currency profile |
|
|
|
|
|
|
|
|
Cross-currency swaps and interest rate
swaps |
|
|
56 |
|
15 |
|
82 |
|
|
|
Derivative
financial instruments held or issued to hedge
the currency exposure on existing transactions |
|
|
|
|
|
|
|
|
Forward foreign exchange contracts |
12 |
|
12 |
|
(9 |
) |
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
Derivative
financial instruments held or issued to hedge
the currency exposure on expected future transactions |
|
|
|
|
|
|
|
|
Forward foreign exchange contracts |
|
|
(19 |
) |
|
|
|
|
|
|
Foreign currency option contracts |
77 |
|
148 |
|
56 |
|
97 |
|
|
|
|
|
|
|
|
|
|
|
|
In addition to
the primary financial instruments above, at 31 December 2002 the Group
had financial liabilities of $126m comprising deferred payments due ($129m
before discounting). The Group had a standby letter of credit covering
these financial liabilities which was collateralised by high grade government
securities. The liabilities were settled in 2003 and the standby letter
of credit cancelled at the same time. |
|
|
Back to Contents
84 |
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Statements |
|
|
|
|
Notes
to the Financial Statements continued |
|
|
18 Financial
instruments (continued) |
|
The methods
and assumptions used to estimate the fair values of financial instruments
are as follows: |
|
|
a. |
Short term investments the
fair value of listed investments is based on year end quoted market prices.
For unlisted
investments carrying values approximate fair value. |
|
|
b. |
Fixed asset investments (excluding
equity investments in joint ventures and associates) the fair value
of listed investments is based on year end quoted market prices. For unlisted
investments carrying values approximate fair value. |
|
|
c. |
Loans the fair value
of publicly traded debt is based on year end quoted market prices; the
fair value of floating rate debt is nominal value, as mark to market differences
would be minimal given frequency of resets; the fair value of remaining
debt is estimated using appropriate zero coupon valuation techniques based
on rates current at year end. |
|
|
d. |
Forward foreign exchange contracts the
Group has forward foreign exchange contracts to sell currency for the
purpose of hedging non-dollar commercial transaction exposures which existed
at the date of the balance sheet and to hedge anticipated, but not firmly
committed, non-dollar commercial transactions for 2004. The majority of
the contracts for existing
transactions had a maturity of six months or less from year end. The fair value
of forward foreign exchange contracts is based on market forward foreign
exchange rates at year end. |
|
|
e. |
Foreign currency option contracts the
Group has foreign currency option contracts to hedge anticipated, but
not firmly committed, non-dollar commercial transactions for 2004. The
fair value of option contracts is estimated using Black-Scholes valuation
techniques as adapted by Garman and Kohlhagen. |
|
|
f. |
Interest rate and cross-currency
swaps AstraZeneca uses interest rate and cross-currency swaps to
hedge the
Groups exposure to fluctuations in interest rates and foreign exchange
movements on borrowings in accordance with a formal risk management strategy.
The fair value is estimated using appropriate zero coupon valuation techniques
based on rates current at year end. |
|
The above
financial instruments are subject to credit and market risk. AstraZeneca
contains credit risk through the use of counterparty and product specific
credit limits and by ongoing review procedures. All financial instruments
are transacted with commercial banks and, in line with standard market
practice, are not backed with cash collateral. The notional principal
values of off balance sheet financial instruments do not represent amounts
exchanged by the parties and are not a measure of the credit risk to
the Group of these instruments. The credit risk of these instruments
is limited to the positive fair values of such contracts. |
|
Market
risk is the sensitivity of the value of financial instruments to changes
in related currency and interest rates. The Group is not exposed to material
market risk because gains and losses on the derivative financial instruments
are largely offset by gains and losses on the underlying assets, liabilities
and transactions subject to hedge. |
|
Hedges
The Groups
policy was to hedge 100% of transactional currency exposures and approximately
50% of forecast future transaction exposures using forward foreign exchange
contracts and foreign currency option contracts. It also uses cross-currency
and interest
rate swaps to manage its borrowings profile. |
|
Gains and
losses on instruments used for hedging are not recognised until the exposure
that is being hedged is itself recognised. Unrecognised gains and losses
on instruments used for hedging are as follows: |
|
|
|
|
|
Total net |
|
|
Gains |
|
Losses |
|
gains |
|
|
$m |
|
$m |
|
$m |
|
|
|
Unrecognised gains and losses on hedges at 1 January 2003 |
108 |
|
|
|
108 |
|
|
|
Gains and losses arising in previous years that were recognised in 2003 |
57 |
|
|
|
57 |
|
|
|
Gains and losses arising in previous years that were not recognised in 2003 |
51 |
|
|
|
51 |
|
|
|
Unrecognised gains and losses on hedges at 31 December 2003 |
129 |
|
(21 |
) |
108 |
|
|
|
Gains and losses expected to be recognised in 2004 |
89 |
|
(21 |
) |
68 |
|
|
|
Gains and losses expected to be recognised in 2005 or later |
40 |
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Back to Contents
|
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Statements |
85 |
|
|
|
|
|
|
19 Provisions
for liabilities and charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Environmental, |
|
|
|
|
|
|
|
|
litigation |
|
|
|
|
|
|
Employee |
|
|
|
and other |
|
Deferred |
|
|
|
|
benefits |
|
Pensions |
|
provisions |
|
taxation |
|
Total |
|
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
|
At 1 January 2002 |
172 |
|
357 |
|
163 |
|
908 |
|
1,600 |
|
|
|
Profit and loss account |
|
|
89 |
|
43 |
|
305 |
|
437 |
|
|
|
Net amounts paid or becoming
current |
(44 |
) |
(235 |
) |
(42 |
) |
|
|
(321 |
) |
|
|
Other movements, including
exchange |
11 |
|
23 |
|
26 |
|
(3 |
) |
57 |
|
|
|
At 31 December 2002 |
139 |
|
234 |
|
190 |
|
1,210 |
|
1,773 |
|
|
|
Profit and loss account |
50 |
|
72 |
|
48 |
|
232 |
|
402 |
|
|
|
Net amounts paid or becoming
current |
(57 |
) |
(57 |
) |
(65 |
) |
|
|
(179 |
) |
|
|
Other movements, including
exchange |
58 |
|
34 |
|
30 |
|
148 |
|
270 |
|
|
|
At 31 December 2003 |
190 |
|
283 |
|
203 |
|
1,590 |
|
2,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee benefit
provisions comprise post-retirement and other employee benefit provisions.
Further details of environmental provisions are given in Note 31. |
|
No provision
has been released or applied for any purpose other than that for which
it was established. |
|
20 Reconciliation
of movements in shareholders funds |
|
|
|
2003 |
|
2002 |
|
2001 |
|
|
$m |
|
$m |
|
$m |
|
|
|
Shareholders funds at beginning of year |
11,172 |
|
9,586 |
|
9,389 |
|
|
|
Net profit for the financial year |
3,036 |
|
2,836 |
|
2,906 |
|
|
|
Dividends |
(1,350 |
) |
(1,206 |
) |
(1,225 |
) |
|
|
Profit retained for the financial year |
1,686 |
|
1,630 |
|
1,681 |
|
|
|
Issues of AstraZeneca PLC Ordinary Shares |
47 |
|
36 |
|
86 |
|
|
|
Re-purchase of AstraZeneca PLC Ordinary Shares |
(1,154 |
) |
(1,190 |
) |
(1,080 |
) |
|
|
Foreign exchange adjustments on consolidation, net of tax |
1,427 |
|
1,106 |
|
(502 |
) |
|
|
Translation differences on foreign currency borrowings |
|
|
6 |
|
18 |
|
|
|
Tax on translation differences on foreign currency borrowings |
|
|
(2 |
) |
(6 |
) |
|
|
Net addition to shareholders funds |
2,006 |
|
1,586 |
|
197 |
|
|
|
Shareholders funds at end of year |
13,178 |
|
11,172 |
|
9,586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Back to Contents
86 |
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Statements |
|
|
|
|
Notes
to the Financial Statements continued |
|
|
21 Reserves |
|
|
|
|
|
|
|
|
Share
premium
account
$m |
|
Capital
redemption
reserve
$m |
|
Merger reserve
$m |
|
Other reserves
$m
|
|
Joint ventures
and associates
$m |
|
Profit
and
loss account
$m |
|
Total
$m |
|
|
|
At 31 December 2000 |
235 |
|
3 |
|
433 |
|
1,634 |
|
(183 |
) |
6,825 |
|
8,947 |
|
|
|
Profit retained for year |
|
|
|
|
|
|
|
|
|
|
1,681 |
|
1,681 |
|
|
|
Share premiums |
86 |
|
|
|
|
|
|
|
|
|
|
|
86 |
|
|
|
Transfer between reserves |
13 |
|
|
|
|
|
|
|
|
|
(13 |
) |
|
|
|
|
Re-purchase of shares |
|
|
6 |
|
|
|
|
|
|
|
(1,080 |
) |
(1,074 |
) |
|
|
Exchange adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
19 |
|
|
|
(19 |
) |
|
|
|
|
Foreign exchange adjustments
on consolidation, net of tax |
|
|
|
|
|
|
|
|
|
|
(502 |
) |
(502 |
) |
|
|
On foreign currency borrowings |
|
|
|
|
|
|
|
|
|
|
18 |
|
18 |
|
|
|
Foreign currency borrowings tax effect |
|
|
|
|
|
|
|
|
|
|
(6 |
) |
(6 |
) |
|
|
|
|
|
|
|
|
|
19 |
|
|
|
(509 |
) |
(490 |
) |
|
|
Net movements |
99 |
|
6 |
|
|
|
19 |
|
|
|
79 |
|
203 |
|
|
|
At 31 December 2001 |
334 |
|
9 |
|
433 |
|
1,653 |
|
(183 |
) |
6,904 |
|
9,150 |
|
|
|
Profit retained for year |
|
|
|
|
|
|
|
|
|
|
1,630 |
|
1,630 |
|
|
|
Share premiums |
36 |
|
|
|
|
|
|
|
|
|
|
|
36 |
|
|
|
Transfer between reserves |
33 |
|
|
|
|
|
|
|
|
|
(33 |
) |
|
|
|
|
Re-purchase of shares |
|
|
7 |
|
|
|
|
|
|
|
(1,190 |
) |
(1,183 |
) |
|
|
Exchange adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
(30 |
) |
|
|
30 |
|
|
|
|
|
Foreign exchange adjustments on consolidation, net of tax |
|
|
|
|
|
|
|
|
|
1,106 |
|
1,106 |
|
|
|
On foreign currency borrowings |
|
|
|
|
|
|
|
|
|
|
6 |
|
6 |
|
|
|
Foreign currency borrowings tax effect |
|
|
|
|
|
|
|
|
|
|
(2 |
) |
(2 |
) |
|
|
|
|
|
|
|
|
|
(30 |
) |
|
|
1,140 |
|
1,110 |
|
|
|
Net movements |
69 |
|
7 |
|
|
|
(30 |
) |
|
|
1,547 |
|
1,593 |
|
|
|
At 31 December 2002 |
403 |
|
16 |
|
433 |
|
1,623 |
|
(183 |
) |
8,451 |
|
10,743 |
|
|
|
Profit retained for year |
|
|
|
|
|
|
|
|
|
|
1,686 |
|
1,686 |
|
|
|
Share premiums |
46 |
|
|
|
|
|
|
|
|
|
|
|
46 |
|
|
|
Re-purchase of shares |
|
|
7 |
|
|
|
|
|
|
|
(1,154 |
) |
(1,147 |
) |
|
|
Exchange adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
(39 |
) |
|
|
39 |
|
|
|
|
|
Foreign exchange adjustments on consolidation, net of tax |
|
|
|
|
|
|
|
|
|
1,427 |
|
1,427 |
|
|
|
|
|
|
|
|
|
|
(39 |
) |
|
|
1,466 |
|
1,427 |
|
|
|
Net movements |
46 |
|
7 |
|
|
|
(39 |
) |
|
|
1,998 |
|
2,012 |
|
|
|
At 31 December 2003 |
449 |
|
23 |
|
433 |
|
1,584 |
|
(183 |
) |
10,449 |
|
12,755 |
|
|
|
|
|
The cumulative amount of goodwill
resulting from acquisitions, net of disposals, prior to the adoption of
FRS 10 in 1998, amounted to $656m (2002 $617m, 2001 $587m) using year end
rates of exchange. |
|
|
|
There are no significant
statutory or contractual restrictions on the distribution of current
profits of subsidiaries, joint ventures or associates; undistributed
profits of prior years are, in the main, permanently employed in the
businesses of these companies. The undistributed income of AstraZeneca
companies overseas may be liable to overseas taxes and/or UK taxation
(after allowing for double taxation relief) if they were to be distributed
as dividends (see
Note 5). |
|
|
|
|
|
Back to Contents
|
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Statements |
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22 Net
cash inflow from trading operations |
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
$m |
$m |
$m |
|
|
|
|
|
|
|
Operating profit before exceptional items |
4,111 |
|
4,356 |
|
4,156 |
|
|
|
|
|
|
|
|
Depreciation and amortisation |
1,290 |
|
960 |
|
860 |
|
|
|
|
|
|
|
|
Stocks (increase)/decrease |
(131 |
) |
101 |
|
(417 |
) |
|
|
|
|
|
|
|
Debtors (increase)/decrease |
(540 |
) |
(198 |
) |
138 |
|
|
|
|
|
|
|
|
Creditors increase/(decrease) |
(430 |
) |
402 |
|
(727 |
) |
|
|
|
|
|
|
|
Other non-cash movements |
317 |
|
65 |
|
120 |
|
|
|
|
|
|
|
|
|
4,617 |
|
5,686 |
|
4,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23 Cash
flows related to exceptional items |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current period cash flow related to exceptional items and merger |
2003 |
|
2002 |
|
2001 |
|
related payments, before associated tax charge/relief |
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
Synergy and integration costs |
(25 |
) |
(68 |
) |
(312 |
) |
|
|
|
|
|
|
|
Zoladex OIG settlement |
(355 |
) |
|
|
|
|
|
|
|
|
|
|
|
Costs relating to disposals and demerger of other businesses |
(11 |
) |
(25 |
) |
(56 |
) |
|
|
|
|
|
|
|
Outflow related to exceptional items |
(391 |
) |
(93 |
) |
(368 |
) |
|
|
|
|
|
|
|
Proceeds from disposal of fixed assets accounted for as exceptional |
|
|
|
|
10 |
|
|
|
|
|
|
|
|
Exceptional items cash flow |
(391 |
) |
(93 |
) |
(358 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24 Acquisitions
of subsidiaries and purchases of minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
There were no
significant business acquisitions in any of the years presented. All acquisitions
have been accounted for by the purchase method of accounting. |
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
Total |
Total |
Total |
fair |
fair |
fair |
value |
value |
value |
$m |
$m |
$m |
|
|
|
|
|
|
|
Fixed assets |
|
|
|
|
4 |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
26 |
|
|
|
|
|
|
|
|
Creditors due within one year |
|
|
|
|
(16 |
) |
|
|
|
|
|
|
|
Provisions for liabilities and charges |
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
Fair value of net assets acquired |
|
|
|
|
13 |
|
|
|
|
|
|
|
|
Goodwill acquired |
|
|
|
|
41 |
|
|
|
|
|
|
|
|
Consideration for subsidiaries and operations acquired |
|
|
|
|
54 |
|
|
|
|
|
|
|
|
Purchases of minority interests |
|
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
47 |
|
|
|
|
|
|
|
|
Less: |
|
|
|
|
|
|
Cash included in undertaking acquired |
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
Net cash consideration |
|
|
|
|
44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets and liabilities were
adjusted to their fair values based on external valuations and internal
assessments. There were no significant differences between book and fair
values in respect of the acquisitions
made. |
|
Back to Contents
88 |
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
to the Financial Statements continued |
|
|
|
|
|
|
|
|
25 Disposal
of business operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
$m |
$m |
$m |
|
|
|
|
|
|
|
Fixed assets |
70 |
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
34 |
|
|
|
|
|
|
|
|
|
|
|
|
Creditors due within one year |
(17 |
) |
|
|
|
|
|
|
|
|
|
|
|
Book value of net assets disposed |
87 |
|
|
|
|
|
|
|
|
|
|
|
|
Less: |
|
|
|
|
|
|
Cash included in undertakings disposed |
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash consideration |
80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The sale consideration received
is in relation to the sale of Marlow Foods Limited, which was completed
on 23 May 2003. Marlow Foods Limited results have been consolidated for
the period up to disposal. Prior to its disposal, Marlow Foods Limited
contributed $6m to operating cash flows and absorbed $1m in respect of
fixed capital expenditure. There was no gain or loss on disposal. |
|
|
|
26 Reconciliation
of net cash flow to movement in net funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
$m |
$m |
$m |
|
|
|
|
|
|
|
Decrease in cash |
(4 |
) |
(22 |
) |
(396 |
) |
|
|
|
|
|
|
|
Cash outflow/(inflow) from decrease/(increase) in loans and short term borrowings |
345 |
|
118 |
|
(35 |
) |
|
|
|
|
|
|
|
Cash outflow/(inflow) from increase/(decrease) in short term investments |
(771 |
) |
806 |
|
(260 |
) |
|
|
|
|
|
|
|
Change in net funds resulting from cash flows |
(430 |
) |
902 |
|
(691 |
) |
|
|
|
|
|
|
|
Exchange movements |
82 |
|
75 |
|
(47 |
) |
|
|
|
|
|
|
|
Movement in net funds |
(348 |
) |
977 |
|
(738 |
) |
|
|
|
|
|
|
|
Net funds at 1 January |
3,844 |
|
2,867 |
|
3,605 |
|
|
|
|
|
|
|
|
Net funds at 31 December |
3,496 |
|
3,844 |
|
2,867 |
|
|
|
|
|
|
|
|
Back to Contents
|
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Statements |
89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27 Analysis
of net funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At |
|
|
|
|
|
|
|
At |
|
|
1 Jan |
|
Cash |
|
Other |
|
Exchange |
|
31 Dec |
|
|
2003 |
|
flow |
|
non-cash |
|
movements |
|
2003 |
|
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
|
|
|
|
Loans due after one year |
(328 |
) |
25 |
|
|
|
|
|
(303 |
) |
|
|
|
|
|
|
|
|
|
|
|
Current instalments of
loans |
(314 |
) |
320 |
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
(642 |
) |
345 |
|
|
|
(6 |
) |
(303 |
) |
|
|
|
|
|
|
|
|
|
|
|
Short term investments |
3,962 |
|
(771 |
) |
|
|
27 |
|
3,218 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
726 |
|
(55 |
) |
|
|
62 |
|
733 |
|
|
|
|
|
|
|
|
|
|
|
|
Short term borrowings and
overdrafts |
(202 |
) |
51 |
|
|
|
(1 |
) |
(152 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
4,486 |
|
(775 |
) |
|
|
88 |
|
3,799 |
|
|
|
|
|
|
|
|
|
|
|
|
Net funds |
3,844 |
|
(430 |
) |
|
|
82 |
|
3,496 |
|
|
|
|
|
|
|
|
|
|
|
|
Financing items included in cash movements
above: |
|
|
|
|
|
|
|
|
|
|
Issue of
AstraZeneca PLC Ordinary Shares |
|
|
(47 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Re-purchase
of AstraZeneca PLC Ordinary Shares |
|
|
1,154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash inflow before management
of liquid resources and financing |
|
|
677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28 Financing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
|
Notes |
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
|
|
Issues of AstraZeneca PLC Ordinary Shares |
27 |
|
47 |
|
36 |
|
86 |
|
|
|
|
|
|
|
|
|
|
Re-purchase of AstraZeneca PLC Ordinary
Shares |
27 |
|
(1,154 |
) |
(1,190 |
) |
(1,080 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(1,107 |
) |
(1,154 |
) |
(994 |
) |
|
|
|
|
|
|
|
|
|
New loans |
|
|
|
|
|
|
220 |
|
|
|
|
|
|
|
|
|
|
Loans repaid |
|
|
(345 |
) |
(105 |
) |
(192 |
) |
|
|
|
|
|
|
|
|
|
Net (decrease)/increase in short term
borrowings |
|
|
|
|
(13 |
) |
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(345 |
) |
(118 |
) |
35 |
|
|
|
|
|
|
|
|
|
|
Net cash outflow from financing |
|
|
(1,452 |
) |
(1,272 |
) |
(959 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no major non-cash
financing transactions in any year. |
|
Back to Contents
90 |
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to
the Financial Statements continued |
|
|
|
|
|
|
|
|
|
|
29 Post-retirement
benefits
|
|
Pensions |
Background |
The Group continues to account for
pension costs in its primary Financial Statements in accordance with
the UK Statement of Standard Accounting Practice No.24 Pension
Costs (SSAP 24). In addition, disclosures have been presented
below in accordance with Financial Reporting Standard No.17 Retirement
Benefits (FRS 17).
|
|
The Company and most of its subsidiaries offer
retirement plans which cover the majority of employees in the Group.
Many of these plans are defined contribution where the company
contribution and resulting profit and loss account charge is fixed at
a set level or is a set percentage of employees pay. However, several
plans, mainly in the UK, US and Sweden, are defined benefit,
where benefits are based on employees length of service and final
pensionable pay. All of the major plans are funded through legally separate
trustee administered funds. The major defined benefit plans, apart from
the Swedish plan, have been closed to new entrants since 2000. The cash
funding of the plans, which may from time to time involve special payments,
is designed, in consultation with independent qualified actuaries, to
ensure that present and future contributions should be sufficient to
meet future liabilities. |
|
SSAP 24 |
The cost of defined benefit plan pensions
in a year can notionally be divided into the regular cost and variations
from the regular cost. Under SSAP 24 the regular cost is based on actuarial
assumptions and charged to the profit and loss account in the year
it is incurred whilst any variations, which arise where the experience
of the scheme varies from the assumptions made by the actuary, are
charged or credited over the estimated remaining service lives of the
employees. Costs of defined contribution plan pensions are charged
to the profit and loss account immediately. On these bases, the total
pension cost for the Group under SSAP 24 for 2003 was $272m (2002 $220m,
2001 $194m). In the Group balance sheet at 31 December 2003, accrued
pension costs included in other creditors amounted to $143m (2002 $53m);
prepaid pension costs of $628m (2002 $268m) are included in debtors.
Provisions for unfunded pension obligations, included in provisions,
amounted to $283m (2002 $235m).
|
|
With regard to the Groups main UK defined
benefit fund, the latest actuarial valuation was carried out at 31 March
2003 and the pension cost assessed using the projected unit credit method.
The key accounting assumptions for the purposes of SSAP 24 were that,
against a background of long term UK price inflation averaging 2.4% pa,
investment returns would average 6.6% pa, salary increases 3.7% pa and
pension increases 2.4% pa. The market value of the funds assets
at the valuation date was £2,043m ($3,640m equivalent), representing
89.1% of the liabilities using these assumptions. The cost for accounting
purposes equates to 21.1% of pensionable salaries. At the same time,
the valuation was carried out for ongoing funding purposes, with assumptions
slightly more conservative than those used for SSAP 24 purposes. The
market value of the funds assets at the valuation date represents
87.4% of the liabilities on a funding basis. The Company had indicated
to the trustee of the UK fund its intention to target a solvency ratio
of 91% following the March 2003 actuarial valuation, and this has been
exceeded with a $165m cash contribution in 2003. At the time the contribution
was made in November, the solvency ratio was 95%. The longer term aim
is to restore solvency over a period of around 15 years. Any cash contributions
made to the fund are treated as prepayments and taken into account in
the actuarially assessed contributions to the fund charged to the profit
and loss account. |
|
The US defined benefits programme was actuarially
revalued at 31 December 2003 when plan obligations were estimated to
amount to $925m and plan assets were $1,079m. The US typically makes
contributions to mitigate for plan benefit deficits on a regular basis. |
|
The Swedish defined benefits programme was
actuarially revalued at 31 December 2003 when plan obligations were estimated
to amount to $440m and plan assets were $441m. |
Back to Contents
|
AstraZeneca Annual Report and
Form 20-F Information 2003 |
Financial Statements |
91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29 Post-retirement
benefits (continued) |
|
Post-retirement benefits
other than pensions
|
In the US, and to a lesser extent in
some other countries, AstraZenecas employment practices include
the provision of healthcare and life insurance benefits for retired employees.
Some 5,478 retired employees and covered dependants currently benefit
from these provisions and some 14,176 current employees will be eligible
on retirement. AstraZeneca accrues for the present value of such retiree
obligations over the working life of the employee. |
|
The cost of post-retirement
benefits other than pensions for the Group in 2003 was $10m (2002 $22m,
2001 $16m). Provisions and creditors set aside for the benefit obligations
at 31 December 2003 amounted to $28m (2002 $32m, 2001 $248m). Other than
these provisions and creditors there were plan assets amounting to $194m
in the US at 31 December 2003. These benefit plans have been included in
the disclosure of post-retirement benefits under FRS 17. |
|
FRS 17
|
Full implementation of
FRS 17 had originally been intended for accounting periods ending on or
after 22 June 2003 but has been deferred by the Accounting Standards Board
until accounting periods commencing on or after 1 January 2005. However,
the requirements for disclosure under FRS 17 between its issue and full
implementation dates remain and this information is set out below. When
fully adopted, the objective of FRS 17 is to reflect the fair value of
post-retirement plan assets and liabilities and associated charges in
the Financial Statements. FRS 17 specifies how key assumptions should
be formulated and applied; these assumptions are often different to the
funding bases established by the pension funds trustees or actuaries.
The accounting requirements of FRS 17 are broadly as follows:
|
|
> |
Post-retirement
scheme assets are valued at market values at the balance sheet date; |
> |
Post-retirement
scheme liabilities are measured using a projected unit method and discounted
at the current rate of return on high quality corporate bonds of equivalent
term and currency to the liability; and |
> |
The movement
in the scheme surplus/deficit (excluding contributions) will be split between
operating charges and financing items in the profit and loss account and,
in the statement of total recognised gains and losses, actuarial gains and
losses. |
|
|
Financial
assumptions |
Qualified
independent actuaries have updated the actuarial valuations of the major
defined benefit schemes operated by the Group to 31 December 2003. The assumptions
used by the actuaries are the best estimates chosen from a range of possible
actuarial assumptions which, due to the long term nature of the scheme,
may not necessarily be borne out in practice. These assumptions were as
follows: |
|
|
|
|
|
2003 |
|
|
|
2002 |
|
|
|
|
|
|
|
|
|
|
|
Rest of |
|
|
|
Rest of |
|
|
|
UK |
|
Group |
|
UK |
|
Group |
|
|
|
|
|
|
|
|
|
|
Inflation assumption |
2.6% |
|
2.3% |
|
2.2% |
|
2.1% |
|
|
|
|
|
|
|
|
|
|
Rate of increase in salaries |
3.9% |
|
4.3% |
|
4.0% |
|
4.0% |
|
|
|
|
|
|
|
|
|
|
Rate of increase in pensions
in payment |
2.6% |
|
0.6% |
|
2.2% |
|
0.5% |
|
|
|
|
|
|
|
|
|
|
Discount rate |
5.4% |
|
5.3% |
|
5.6% |
|
5.8% |
|
|
|
|
|
|
|
|
|
|
Long term rate of return expected
at 31 December |
|
|
|
|
|
|
|
|
|
Equities |
8.3% |
|
8.7% |
|
8.3% |
|
8.4% |
|
|
|
|
|
|
|
|
|
|
|
Bonds |
5.1% |
|
5.8% |
|
4.9% |
|
6.1% |
|
|
|
|
|
|
|
|
|
|
|
Others |
4.2% |
|
3.9% |
|
3.7% |
|
3.6% |
|
|
|
|
|
|
|
|
|
|
Back to Contents
92 |
AstraZeneca Annual Report and
Form 20-F Information 2003 |
Financial
Statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to the
Financial Statements continued
|
|
|
|
|
|
|
|
|
|
|
29 Post-retirement
benefits (continued) |
|
Post-retirement
scheme deficit |
The post-retirement scheme
deficit set out below under FRS 17 is as if this standard were fully applied.
However, under the current accounting methodology (SSAP 24) there are prepayments
and provisions (including deferred tax) within the balance sheet at 31 December
2003 that must be taken into account in calculating the effect on net assets
of this deficit in the event of a restatement under FRS 17. |
|
The assets and liabilities of the major
defined benefit schemes operated by the Group at 31 December 2003 as calculated
in accordance with FRS 17 are shown below. The fair values of the schemes
assets are not intended to be realised in the short term and may be subject
to significant change before they are realised. The present value of the
schemes liabilities is derived from cash flow projections over long
periods and are thus inherently uncertain. If FRS 17 had been adopted
for the year ended 31 December 2003, the Groups reported net assets
(see page 64) would be reduced by $1,057m (7.9%) to $12,200m. Further
explanation of this adjustment is included below:
|
|
|
Value at 31
December 2003 |
|
Value at 31 December
2002 |
|
|
|
|
|
|
|
|
|
Rest of |
|
|
|
|
|
Rest of |
|
|
|
|
UK |
|
Group |
|
Total |
|
UK |
|
Group |
|
Total |
|
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scheme assets |
|
|
|
|
|
|
|
|
|
|
|
|
Equities |
1,779 |
|
1,157 |
|
2,936 |
|
1,186 |
|
708 |
|
1,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds |
2,430 |
|
485 |
|
2,915 |
|
2,097 |
|
464 |
|
2,561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others |
109 |
|
74 |
|
183 |
|
75 |
|
102 |
|
177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value of assets |
4,318 |
|
1,716 |
|
6,034 |
|
3,358 |
|
1,274 |
|
4,632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of scheme liabilities |
(5,232 |
) |
(2,115 |
) |
(7,347 |
) |
(4,200 |
) |
(1,665 |
) |
(5,865 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit in the scheme |
(914 |
) |
(399 |
) |
(1,313 |
) |
(842 |
) |
(391 |
) |
(1,233 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Related deferred tax asset |
274 |
|
156 |
|
430 |
|
253 |
|
151 |
|
404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net post-retirement deficit under FRS
17 |
(640 |
) |
(243 |
) |
(883 |
) |
(589 |
) |
(240 |
) |
(829 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for assets and provisions
under SSAP 24 |
|
|
|
|
|
|
|
|
|
|
|
|
Prepayment, net of related deferred tax |
(203 |
) |
(203 |
) |
(406 |
) |
(70 |
) |
(107 |
) |
(177 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual, net of deferred tax |
19 |
|
58 |
|
77 |
|
|
|
36 |
|
36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision, net of deferred tax |
|
|
155 |
|
155 |
|
12 |
|
116 |
|
128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted post-retirement deficit, net
of related deferred tax |
(824 |
) |
(233 |
) |
(1,057 |
) |
(647 |
) |
(195 |
) |
(842 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets as currently disclosed (see
page 64) |
|
|
|
|
13,257 |
|
|
|
|
|
11,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets as adjusted if FRS 17 were
fully adopted |
|
|
|
|
12,200 |
|
|
|
|
|
10,384 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The present value of the
UK schemes liabilities has increased to $5,232m from $4,200m in 2002.
This increase has been driven in part by the changes in financial assumptions
detailed on page 91. There has also been an adverse exchange effect of approximately
$320m on these liabilities during the year. |
Back to Contents
|
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Statements |
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29 Post-retirement
benefits (continued) |
|
Profit and loss account disclosures
On
full compliance with FRS 17, on the basis of the above assumptions, the
amounts that would have been charged to the consolidated profit and loss
account and statement of total recognised gains and losses, in respect
of defined benefit schemes for the year ended 31 December 2003 are set
out below: |
|
|
|
|
|
|
2003 |
|
|
|
|
|
2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rest of |
|
|
|
|
|
Rest of |
|
|
|
UK |
Group |
Total |
UK |
Group |
Total |
$m |
$m |
$m |
$m |
$m |
$m |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
|
|
|
|
|
|
|
|
|
|
|
Current service cost |
(110 |
) |
(88 |
) |
(198 |
) |
(100 |
) |
(69 |
) |
(169 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Past service costs |
|
|
|
|
|
|
(2 |
) |
8 |
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement and curtailment |
|
|
|
|
|
|
|
|
24 |
|
24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating charge |
(110 |
) |
(88 |
) |
(198 |
) |
(102 |
) |
(37 |
) |
(139 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance expense |
|
|
|
|
|
|
|
|
|
|
|
|
Expected return on post-retirement scheme assets |
211 |
|
87 |
|
298 |
|
197 |
|
52 |
|
249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on post-retirement scheme liabilities |
(239 |
) |
(108 |
) |
(347 |
) |
(210 |
) |
(98 |
) |
(308 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net return |
(28 |
) |
(21 |
) |
(49 |
) |
(13 |
) |
(46 |
) |
(59 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before taxation |
(138 |
) |
(109 |
) |
(247 |
) |
(115 |
) |
(83 |
) |
(198 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated statement of total recognised |
|
|
|
|
|
|
|
|
|
|
|
|
gains and losses |
|
|
|
|
|
|
|
|
|
|
|
|
Actual return less expected return |
|
|
|
|
|
|
|
|
|
|
|
|
on the post-retirement schemes assets |
210 |
|
86 |
|
296 |
|
(301 |
) |
(91 |
) |
(392 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Experience (losses)/gains arising on |
|
|
|
|
|
|
|
|
|
|
|
|
the post-retirement schemes liabilities |
(6 |
) |
(33 |
) |
(39 |
) |
(108 |
) |
8 |
|
(100 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in assumptions underlying the present |
|
|
|
|
|
|
|
|
|
|
|
|
value of the post-retirement schemes liabilities |
(350 |
) |
(116 |
) |
(466 |
) |
58 |
|
(27 |
) |
31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss recognised |
(146 |
) |
(63 |
) |
(209 |
) |
(351 |
) |
(110 |
) |
(461 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Back to Contents
94 |
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to the
Financial Statements continued |
|
|
|
|
|
|
|
|
29 Post-retirement
benefits (continued) |
|
Additional disclosures for the year
ended 31 December 2003 |
|
|
|
|
|
|
2003 |
|
|
|
|
|
2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rest of |
|
|
|
|
|
Rest of |
|
|
|
|
UK |
|
Group |
|
Total |
|
UK |
|
Group |
|
Total |
|
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Difference between the expected and actual |
|
|
|
|
|
|
|
|
|
|
|
|
return on scheme assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Amount |
210 |
|
86 |
|
296 |
|
(301 |
) |
(91 |
) |
(392 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of scheme assets |
4.9 |
% |
5.0 |
% |
4.9 |
% |
9.0 |
% |
7.1 |
% |
8.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Experience gains and losses on scheme liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Amount |
(6 |
) |
(33 |
) |
(39 |
) |
(108 |
) |
8 |
|
(100 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of the present value of scheme liabilities |
0.1 |
% |
1.6 |
% |
0.5 |
% |
2.6 |
% |
0.5 |
% |
1.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amount recognised in statement of total |
|
|
|
|
|
|
|
|
|
|
|
|
recognised gains and losses: |
|
|
|
|
|
|
|
|
|
|
|
|
Amount |
(146 |
) |
(63 |
) |
(209 |
) |
(351 |
) |
(110 |
) |
(461 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of the present value of scheme liabilities |
2.8 |
% |
3.0 |
% |
2.8 |
% |
8.4 |
% |
6.6 |
% |
7.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Movement in post-retirement scheme deficit
during the year ended 31 December 2003 |
|
|
|
|
|
2003 |
|
|
|
|
|
2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rest of |
|
|
|
|
|
Rest of |
|
|
|
|
UK |
|
Group |
|
Total |
|
UK |
|
Group |
|
Total |
|
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficits in schemes at beginning of the year |
(842 |
) |
(391 |
) |
(1,233 |
) |
(424 |
) |
(718 |
) |
(1,142 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current service cost |
(110 |
) |
(88 |
) |
(198 |
) |
(100 |
) |
(69 |
) |
(169 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions |
299 |
|
207 |
|
506 |
|
125 |
|
567 |
|
692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Past service cost |
|
|
|
|
|
|
(2 |
) |
8 |
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement and curtailment |
|
|
|
|
|
|
|
|
24 |
|
24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other finance income |
(28 |
) |
(21 |
) |
(49 |
) |
(13 |
) |
(46 |
) |
(59 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss |
(146 |
) |
(63 |
) |
(209 |
) |
(351 |
) |
(110 |
) |
(461 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange |
(87 |
) |
(43 |
) |
(130 |
) |
(77 |
) |
(47 |
) |
(124 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficits in schemes at end of the year |
(914 |
) |
(399 |
) |
(1,313 |
) |
(842 |
) |
(391 |
) |
(1,233 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted post-retirement deficit, net of deferred tax |
|
|
|
|
(1,057 |
) |
|
|
|
|
(842 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in the deficit during 2003
reflects changes in assumptions in calculating liabilities (principally
in the UK funds) and exchange movements offset by contributions made
to the funds and better actual returns on plan assets than expected. |
|
Reserves note for the year ended 31
December 2003 |
|
|
|
|
|
|
2003 |
|
2002 |
|
|
Total |
|
Total |
|
|
$m |
|
$m |
|
|
|
|
|
|
Profit and loss reserve excluding post-retirement liability |
10,449 |
|
8,451 |
|
|
|
|
|
|
Post-retirement reserve |
(1,057 |
) |
(842 |
) |
|
|
|
|
|
Profit and loss reserve under FRS17 |
9,392 |
|
7,609 |
|
|
|
|
|
|
Back to Contents
|
AstraZeneca Annual Report and
Form
20-F Information 2003 |
Financial Statements |
95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 |
Employee costs and share option
plans for employees |
|
|
Employee
costs |
The average number of people employed
by the Group is set out in the table below. In accordance with the
Companies Act 1985, this includes part-time employees: |
|
|
Employees |
2003 |
|
2002 |
|
2001 |
|
|
|
|
|
|
|
|
Average number of people employed by the Group in: |
|
|
|
|
|
|
UK |
10,800 |
|
10,700 |
|
10,200 |
|
|
|
|
|
|
|
|
Continental Europe |
23,600 |
|
23,300 |
|
19,900 |
|
|
|
|
|
|
|
|
The Americas |
17,900 |
|
17,800 |
|
16,700 |
|
|
|
|
|
|
|
|
Asia, Africa & Australasia |
8,100 |
|
7,200 |
|
5,800 |
|
|
|
|
|
|
|
|
Continuing operations |
60,400 |
|
59,000 |
|
52,600 |
|
|
|
|
|
|
|
|
|
The number of people employed by the Group
at the end of 2003 was 61,900 (2002 59,700, 2001 54,600). |
|
The costs incurred during the
year in respect of these employees were: |
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
$m |
$m |
$m |
|
|
|
|
|
|
|
Salaries |
3,587 |
|
3,022 |
|
2,701 |
|
|
|
|
|
|
|
|
Social security costs |
526 |
|
505 |
|
465 |
|
|
|
|
|
|
|
|
Pension costs |
272 |
|
220 |
|
194 |
|
|
|
|
|
|
|
|
Other employment costs |
360 |
|
246 |
|
182 |
|
|
|
|
|
|
|
|
|
4,745 |
|
3,993 |
|
3,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee costs above do not include severance
costs. |
|
The Directors believe that, together
with the basic salary system, the Groups
employee incentive schemes provide competitive and market-related packages
to motivate employees. They should also align the interests of employees
with those of shareholders, as a whole, through long term share ownership
in the Company.
The Groups current UK, Swedish and US schemes are described below; other
arrangements apply elsewhere. |
|
The AstraZeneca UK Performance
Bonus Plan |
Employees of participating AstraZeneca
UK companies are invited to participate in this bonus plan which rewards
good performance at corporate, function/business and individual/team
levels. Depending upon performance and upon which level it is measured,
bonuses may be paid partly in the form of Ordinary Shares in the Company
(under the Inland Revenue approved AstraZeneca All-Employee Share Plan
and up to a maximum annual value of £3,000) and partly in cash.
A tax efficient share retention scheme, under which employees leave
their bonus shares in trust for three to five years, forms part of
the All-Employee Share Plan. In 2002, for the first time the Company
offered UK employees the opportunity to buy Partnership Shares (Ordinary
Shares) under the All-Employee Share Plan. Employees may invest up
to £125 per month over a 12 month accumulation period and purchase
Partnership Shares in the Company with the total proceeds at the end
of the period. The purchase price for the shares is the lower of the
price at the beginning or the end of the 12 month period. A tax efficient
share retention scheme is also available in respect of Partnership
Shares. At the Companys AGM in 2002, shareholders approved the issue of new
shares for the purposes of the All-Employee Share Plan. |
|
The AstraZeneca Executive Annual
Bonus Scheme |
This scheme is a performance bonus
scheme for Directors and senior employees who do not participate in
the AstraZeneca UK Performance Bonus Plan. Annual bonuses are paid
in cash and reflect both corporate and individual performance measures.
The Remuneration Committee has discretion to reduce or withhold bonuses
if business performance falls sufficiently short of expectations in
any year such as to make the payment of bonuses inappropriate. |
|
The AstraZeneca Savings-Related
Share Option Scheme and the AstraZeneca Savings-Related Share Option
Plan |
UK employees may make regular
monthly savings contributions over a three or five year period and
may apply for options to acquire AstraZeneca Ordinary Shares. Further
details are set out below. |
|
Back to Contents
96 |
AstraZeneca
Annual Report and
Form 20-F Information 2003 |
Financial Statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to the
Financial Statements continued |
|
|
|
|
|
|
|
|
30 |
Employee costs and share option
plans for employees (continued) |
|
|
The AstraZeneca Share Option
Plan |
This is a share option plan for
employees of participating AstraZeneca Group companies which was approved
by shareholders at the Companys
AGM in 2000. The first grant of options occurred in August 2000. The
main grant of options in 2003 under the plan was in March, with a further,
smaller grant in August. The Remuneration Committee sets the policy for
the Companys operation of the plan. Further details are set out
below. |
|
Sweden |
In Sweden an all employee performance
bonus plan is in operation. The plan rewards good performance at corporate,
function and individual/team level. Bonuses for corporate and function
performance are always paid in the form of AstraZeneca Ordinary Shares.
Bonuses for individual/team performance may be paid in Ordinary Shares
or in cash, at the employees
discretion. Existing Ordinary Shares are used to pay bonuses awarded
under the plan. These are purchased in the market. They must be left
in trust for three years. The AstraZeneca Executive Annual Bonus Scheme
and the AstraZeneca Share Option Plan both operate in respect of relevant
AstraZeneca employees in Sweden. |
|
US |
In the US, there are two senior
staff incentive schemes, under which either AstraZeneca ADSs or stock
appreciation rights related to AstraZeneca ADSs are awarded to participants.
There are currently approximately 100 participants in these schemes.
AstraZeneca ADSs necessary to satisfy the awards under these schemes
are purchased in the market and no subscriptions for new Ordinary Shares
have been involved. The AstraZeneca Share Option Plan operates in respect
of
relevant AstraZeneca employees in the US. |
|
Share option plans |
At 31 December 2003, there were
options outstanding under the Zeneca 1993 Senior Staff Share Option
Scheme, the Zeneca 1994 Executive Share Option Scheme, the Astra Shareholder
Value Incentive Plan, the AstraZeneca Savings-Related Share Option
Scheme, the AstraZeneca Savings-Related Share Option Plan and the AstraZeneca
Share Option Plan. |
|
(1) Summary of the Zeneca 1993
Senior Staff Share Option Scheme |
|
The Zeneca 1993 Senior Staff Share
Option Scheme was introduced at the time of the demerger of Zeneca
from ICI in 1993. The last date for the grant of options was 19 May
1994 and the scheme was replaced by the Zeneca 1994 Executive Share
Option Scheme. Options are satisfied by the issue of new Ordinary Shares.
All remaining options will lapse in April 2004 if not exercised before
then. |
|
(2) Summary of the Zeneca 1994
Executive Share Option Scheme |
|
The Zeneca 1994 Executive Share
Option Scheme was introduced in 1994. The last date for the grant of
options was 16 March 2000 and the scheme has been replaced by the AstraZeneca
Share Option Plan. |
|
Options granted under the 1994
scheme are normally exercisable between three and 10 years following
grant, provided the relevant performance condition has been satisfied.
Options are satisfied by the issue of new
Ordinary Shares. |
|
The performance condition applicable
to the 1994 scheme was that earnings per share must have grown by at
least the increase in the UK Retail Price Index over three years plus
3% per annum. Satisfaction of this condition was tested annually by
reference to the audited financial statements. All options granted
under the 1994 scheme have become exercisable, the performance conditions
having been satisfied. |
|
(3) Summary of the Astra Shareholder
Value Incentive Plan |
|
In 1996, Astra established a stock
option plan for some 100 Astra employees in key senior positions. The
plan is no longer used for the grant of options and has been superseded
by the AstraZeneca Share Option
Plan. |
|
On completion of the merger with
Zeneca, options in Astra shares granted under the plan were replaced
by options to acquire a number of AstraZeneca Ordinary Shares based
on the exchange ratio used in the exchange offers used to effect the
AstraZeneca merger. The ratio of AstraZeneca options granted in respect
of former Astra options was 0.5045 AstraZeneca options for each Astra
option held. |
|
Back to Contents
|
AstraZeneca Annual Report and
Form 20-F
Information 2003 |
Financial Statements |
97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 |
Employee costs and share option plans for employees (continued) |
|
|
(4) |
Summary of the AstraZeneca Savings-Related Share Option Scheme and the AstraZeneca Savings-Related Share Option Plan |
|
The AstraZeneca Savings-Related Share Option Scheme was approved by shareholders in 1994 for a period of 10 years. The last grant of options under this scheme was made in September
2002. |
|
In 2003, shareholders approved the AstraZeneca Savings-Related Share Option Plan for a period of 10 years. The first grant of options under this plan was made in September
2003. |
|
The following sections apply to both the AstraZeneca Savings-Related Share Option Scheme and the AstraZeneca Savings-Related Share Option Plan, which have broadly similar
rules. |
|
Eligibility
UK resident employees of participating AstraZeneca companies are automatically eligible to participate. |
|
Grant of options
Invitations to apply for options may be issued within six weeks after the announcement by the Company of its results for any
period and at other times in circumstances considered to be exceptional by the Directors. No invitations may be issued later than 10 years after the approval of the scheme by shareholders. |
|
Options may only be granted to employees who enter into UK Inland Revenue approved savings contracts with the savings body nominated by the Company, under which monthly savings of a
fixed amount (currently not less than £5 nor more than £250) are made over a period of three or five years. The number of Ordinary Shares over which an option is granted will be such that the total amount payable on its exercise will be
the proceeds on maturity of the related savings contract. No payment will be required for the grant of an option. Options are not transferable. |
|
Individual participation
Monthly savings by an employee under all savings contracts linked to options granted under any SAYE scheme may not
exceed £250 or such lower amounts as may be determined by the Directors. |
|
Acquisition price
The price per Ordinary Share payable upon the exercise of an option will not normally be less than the higher of: |
|
|
(a) |
90% of the arithmetical average of the middle-market quotations for an Ordinary Share on the London Stock Exchange on three consecutive dealing days shortly before the date on which invitations to
apply for options are issued (provided that no such day may fall before the Company last announced its results for any period) or such other dealing day or days falling within the six week period for the issue of invitations as the Directors may
decide; and |
|
|
(b) |
the nominal value of an Ordinary Share (unless the option is expressed to relate only to existing Ordinary Shares). |
|
|
Exercise of options |
An option will normally be
exercisable only for six months commencing on the third or fifth anniversary
of the commencement of the related savings contract. Options are satisfied
by the issue of new Ordinary
Shares. |
|
|
Options normally lapse on cessation
of employment. Exercise is, however, permitted for a limited period (irrespective
of the period during which the option has been held) following cessation
of employment in certain compassionate circumstances or where an option
has been held for more than three years (except on dismissal for misconduct)
and on an amalgamation, take-over or winding-up of the Company. |
|
|
AstraZeneca has chosen to avail
itself of the exemption to application of UITF17 to its SAYE schemes. |
Back to Contents
98 |
AstraZeneca Annual Report and
Form
20-F Information 2003 |
Financial
Statements |
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Notes to the
Financial Statements continued |
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30 |
Employee costs and share option plans for employees (continued) |
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(5) |
Summary of the AstraZeneca Share Option Plan |
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Eligibility
Any AstraZeneca employee may be recommended from time to time for the grant of an option. The Remuneration Committee sets the
policy for the Companys operation of the plan including as regards which employees will be eligible to participate. |
|
Grant of options
Options may be granted at any time other than during a close period. No options may be granted after the fifth anniversary of
the approval of the plan by shareholders until the Remuneration Committee has reviewed the plan. |
|
The grant of options is supervised by the Remuneration Committee which is comprised wholly of Non-Executive Directors. No payment is required for the grant of an option. Options are not
transferable. |
|
Options may be granted over AstraZeneca Ordinary Shares or ADSs. |
|
Acquisition price
The price per Ordinary Share payable upon the exercise of an option will not be less than an amount equal to the average of
the middle-market closing price on the date of grant for an Ordinary Share of the Company on the London Stock Exchange on the three consecutive dealing days immediately before the date of grant (or as otherwise agreed with the Inland Revenue). Where
the option is an option to subscribe, the price payable upon exercise cannot be less than the nominal value of an Ordinary Share of the Company. |
|
Exercise of options
An option will normally be exercisable between three and 10 years following its grant provided any relevant performance
condition has been satisfied. Options may be satisfied by the issue of new Ordinary Shares or by existing Ordinary Shares purchased in the market. |
|
The Remuneration Committee sets the policy for the Companys operation of the plan including as regards
whether any performance target(s) will apply to the grant and/or exercise of each eligible employees option. |
|
Options normally lapse on cessation of employment. Exercise is, however, permitted for a limited period following cessation of employment either for reasons of injury or disability,
redundancy or retirement, or at the discretion of the Remuneration Committee, and on an amalgamation, take-over or winding-up of the Company. |
Back to Contents
|
AstraZeneca Annual Report and
Form 20-F Information 2003 |
Financial Statements |
99 |
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30 Employee
costs and share option plans for employees (continued) |
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AstraZeneca
Share Option Plan |
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1994 Scheme |
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SAYE Scheme |
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ASVIP |
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Shares |
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under |
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Options |
WAEP* |
Options |
WAEP* |
Options |
WAEP |
* |
option |
WAEP |
* |
’000 |
pence |
’000 |
pence |
’000 |
pence |
|
’000 |
SEK |
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At 1 January 2001 |
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Options outstanding |
712 |
|
3093 |
|
10,987 |
|
2588 |
|
3,826 |
|
2074 |
|
1,090 |
|
370 |
|
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Movements during 2001 |
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Options granted |
10,984 |
|
3245 |
|
|
|
|
|
649 |
|
2971 |
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|
|
|
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|
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Options exercised |
(1 |
) |
3093 |
|
(592 |
) |
1687 |
|
(1,125 |
) |
1583 |
|
(117 |
) |
328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Options forfeited |
(296 |
) |
3231 |
|
(457 |
) |
2709 |
|
(551 |
) |
2181 |
|
(8 |
) |
306 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options lapsed |
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
Weighted average fair value of options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
granted during the year |
|
|
653 |
|
|
|
|
|
|
|
495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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At 31 December 2001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding |
11,399 |
|
3236 |
|
9,938 |
|
2636 |
|
2,799 |
|
2459 |
|
965 |
|
375 |
|
|
|
|
|
|
|
|
|
|
|
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|
Movements during 2002 |
|
|
|
|
|
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Options granted |
10,658 |
|
3462 |
|
|
|
|
|
2,721 |
|
1756 |
|
|
|
|
|
|
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|
|
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|
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|
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|
Options exercised |
(22 |
) |
3214 |
|
(243 |
) |
2175 |
|
(469 |
) |
1888 |
|
(206 |
) |
317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options forfeited |
(637 |
) |
3298 |
|
(406 |
) |
2654 |
|
(986 |
) |
2735 |
|
|
|
|
|
|
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Options lapsed |
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|
Weighted average fair value of options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
granted during the year |
|
|
1186 |
|
|
|
|
|
|
|
559 |
|
|
|
|
|
|
|
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|
|
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At 31 December 2002 |
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|
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|
|
|
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|
Options outstanding |
21,398 |
|
3347 |
|
9,289 |
|
2647 |
|
4,065 |
|
1987 |
|
759 |
|
391 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
Movements during 2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Options granted |
15,505 |
|
2232 |
|
|
|
|
|
551 |
|
2211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Options exercised |
(52 |
) |
2468 |
|
(358 |
) |
2423 |
|
(382 |
) |
2137 |
|
(151 |
) |
311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options forfeited |
(1,163 |
) |
3001 |
|
(571 |
) |
2695 |
|
(282 |
) |
2192 |
|
(1 |
) |
318 |
|
|
|
|
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|
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|
|
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|
|
Options lapsed |
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|
Weighted average fair value of options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
granted during the year |
|
|
583 |
|
|
|
|
|
|
|
658 |
|
|
|
|
|
|
|
|
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At 31 December 2003 |
|
|
|
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|
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|
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|
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|
|
Options outstanding |
35,688 |
|
2874 |
|
8,360 |
|
2654 |
|
3,952 |
|
1988 |
|
607 |
|
411 |
|
|
|
|
|
|
|
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|
|
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|
Range of exercise prices |
|
|
1913p to |
|
|
|
891p to |
|
|
|
1756p to |
|
|
|
316SEK to |
|
|
|
|
3487p |
|
|
|
2749p |
|
|
|
2971p |
|
|
|
442SEK |
|
|
|
|
|
|
|
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|
|
|
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|
|
|
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|
|
Weighted average remaining |
|
|
|
|
|
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|
|
|
|
|
|
|
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|
|
contractual life |
|
|
3,054 days |
|
|
|
2,184 days |
|
|
|
1,272 days |
|
|
|
521 days |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable |
1,670 |
|
3150 |
|
8,360 |
|
2654 |
|
90 |
|
2568 |
|
607 |
|
411 |
|
|
|
|
|
|
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|
|
|
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|
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|
|
* Weighted
average exercise price |
|
|
In addition to the schemes
disclosed above at 31 December 2003 there were 750 options outstanding issued
under the Zeneca 1993 Senior Staff Share Option Scheme with a weighted average
exercise price of 748p. |
Back to Contents
100 |
AstraZeneca Annual Report and
Form 20-F Information 2003 |
Financial Statements |
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|
Notes to the
Financial Statements continued |
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|
31 Assets
pledged, commitments and contingent liabilities |
|
|
2003 |
|
2002 |
|
2001 |
|
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
Assets pledged |
|
|
|
|
|
|
Mortgages and other assets pledged |
|
|
90 |
|
118 |
|
|
|
|
|
|
|
|
Commitments |
|
|
|
|
|
|
Contracts placed for future capital expenditure
not provided for in these accounts |
421 |
|
500 |
|
515 |
|
|
|
|
|
|
|
|
|
Included in the above
total are contracts related to certain product purchase and licence agreements
with deferred consideration obligations, the amounts of which are variable
depending upon particular milestone achievements. Sales of the
products to which these milestones relate could give rise to additional
payments, contingent upon the sales levels achieved. Guarantees and contingencies
arising in the ordinary course of business, for which no security has been
given, are not expected to result in any material financial loss. |
|
Commitments
|
In 1982 Astra AB set up a joint venture
with Merck & Co., Inc. for the purposes of selling, marketing and
distributing certain Astra products in the US. In 1998, this joint venture
was restructured (the restructuring). Under the restructuring,
a US limited partnership, in which Merck is the limited partner and AstraZeneca
is the general partner, was set up and AstraZeneca obtained control of
the joint ventures business subject to certain limited partner and
other rights held by Merck and its affiliates. The restructuring agreements
provide for the following ongoing payment and termination arrangements: |
|
> |
Annual contingent payments |
> |
Partial Redemption |
> |
First Option |
> |
Second Option |
|
|
In addition,
included in the assets and liabilities covered by the restructuring is
a loan note receivable by AstraZeneca from Merck with a face value of
$1.4bn. Each of these elements is discussed in further detail below. |
|
Under the
terms of the 1998 restructuring, the merger in 1999 between Astra and
Zeneca triggered two one-time payments from AstraZeneca to Merck: |
|
|
a Lump Sum Payment of $809m,
which was charged to the profit and loss account, as a result of which Merck
relinquished any rights to Zeneca products; and |
|
|
|
an Advance Payment of $967m.
This Advance Payment was calculated as the then net present value of $2.8bn
discounted from 2008 to the date of payment at a rate of 13% per annum and
causes Merck to relinquish any rights, including contingent payments on
future sales, to Astra products with no existing or pending US patents at
the time of the merger. As the Advance Payment provides AstraZeneca with
relief from future payments, this amount has been capitalised as an intangible
asset and is being amortised over 20 years. The Advance Payment is subject
to a true-up in 2008, as discussed under First Option below. |
|
|
Annual
contingent payments |
AstraZeneca makes
ongoing payments to Merck based on sales of certain of its products in the
US (the contingent payments on the agreement products).
As a result of the 1999 merger, these contingent payments (excluding those
in respect of Prilosec
and Nexium) cannot be less than
annual minimum sums between 2002 and 2007 ranging from $125m to $225m. The
payments have exceeded the minimum level in 2003 and 2002 and AstraZeneca
has no reason to believe that the annual payments in the future will fall
below the minimum obligations. |
|
Partial
Redemption |
In 2008, there
will be a partial redemption of Mercks limited partnership interest
which will end Mercks rights to contingent payments in respect
of certain of the agreement products by distribution to Merck of
an amount calculated as a multiple of the average annual contingent payments
from 2005 to 2007 on the relevant products, plus $750m. |
|
First
Option |
In 2008, a
calculation will be made of the Appraised Value, being the net present
value of the future contingent payments in respect of all agreement products
not covered by the Partial Redemption, other than Prilosec
and Nexium. Payment of this
amount to Merck in 2008 is, however, contingent on Mercks
exercise of the First Option. Exercise of the First Option will require
AstraZeneca to re-purchase Mercks interest in these products. Should
Merck not exercise this option in 2008, AstraZeneca may exercise it in
2010 for a sum equal to the 2008 Appraised Value. If neither Merck nor
AstraZeneca exercise the option, the contingent payment arrangements in
respect of these agreement products will continue and the Appraised Value
will not be paid. |
|
Back to Contents
|
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Statements |
101
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|
31 Assets
pledged, commitments and contingent liabilities (continued) |
|
In addition, in 2008 there will
be a true-up of the Advance Payment. The calculation of this will be
based on a multiple of the average annual contingent payments from
2005 to 2007 in respect of all the agreement products with the exception
of Prilosec and Nexium (subject to a minimum of $6.6bn),
plus other defined amounts (totalling $912m). It is then reduced by
the Appraised Value (whether paid or not), the Partial Redemption and
the Advance Payment (at its undiscounted amount of $2.8bn) to determine
the true-up amount. The true-up will be settled in 2008 irrespective
of whether the First Option is exercised and this could result in a
further payment by AstraZeneca to Merck or a payment by Merck to AstraZeneca. |
|
Should Merck exercise the First
Option in 2008, AstraZeneca will make payments in respect of the Partial
Redemption, the First Option and the true-up totalling a minimum of
$4.7bn. If AstraZeneca exercises the First Option in 2010, the combined
effect will involve a minimum aggregate amount payable to Merck in
2008 and 2010 of the same amount. |
|
Loan Note Receivable
In 2008, at the
same time as the settlement of the Partial Redemption and the true-up, Merck
will settle the loan note receivable by paying AstraZeneca $1.4bn. |
|
Second Option
A Second Option exists whereby
AstraZeneca has the option to re-purchase Mercks
interests in Prilosec and Nexium in
the US. This option is exercisable by AstraZeneca two years after the exercise
of the First Option, whether the First Option is exercised in either 2008
or 2010. Exercise of the Second Option by AstraZeneca at a later date is
also provided for in 2017 or if combined annual sales of the two products
fall below a minimum amount provided, in each case, that the First Option
has been exercised. The exercise price for the Second Option is the fair
value of these product rights as determined at the time of exercise. |
|
If the Second Option is exercised,
Merck will have no further rights to contingent payments from AstraZeneca. |
|
Environmental
costs and liabilities
The Groups
expenditure on environmental protection, including both capital and revenue
items, relates to costs which are necessary for meeting current good practice
standards
and legal and regulatory requirements for processes and products. |
|
They are an integral part of normal
ongoing expenditure for maintaining the Groups
R&D and manufacturing capacity and product ranges and are not separated
from overall operating and development costs. There are no known changes
in legal, regulatory or other requirements resulting in material changes
to the levels of expenditure for 2001, 2002 or 2003. |
|
In addition to expenditure for
meeting current and foreseen environmental protection requirements,
the Group incurs substantial costs in investigating and cleaning up
land and groundwater contamination. In particular, AstraZeneca and/or
its affiliates have environmental liabilities at some currently or
formerly owned, leased and third party sites in the US and Europe. |
|
In the US, the AstraZeneca affiliate,
Zeneca Inc., and/or its indemnitees, have been named as potentially
responsible parties (PRPs) or defendants at approximately 13 sites
where Zeneca Inc. is likely to incur future investigation, remediation
or operation and maintenance costs under federal or state, statutory
or common law environmental liability allocations schemes. Similarly,
the AstraZeneca affiliate, Stauffer Management Company LLC (SMC), which
was established in 1987 to own and manage certain assets of Stauffer
Chemical Company acquired that year, and/or its indemnitees, have been
named as PRPs or defendants at approximately 29 sites where SMC is
likely to incur future investigation, remediation or operation and
maintenance costs under federal or state, statutory or common law environmental
liability allocations schemes. In Europe and other parts of the world
outside the US, AstraZeneca is likely to incur costs at three currently
owned sites and has given indemnities to third parties in respect of
approximately 45 other sites. These environmental liabilities arise
almost entirely from legacy operations that are not part of our current
pharmaceuticals business and, at most of these sites, remediation,
where required, is either completed or nearing completion. In the aggregate,
however, significant expenditure on clean up and monitoring is likely
to be required. |
|
We have made provisions for the
estimated costs of future environmental investigation, remediation
and operation and maintenance activity beyond normal ongoing expenditure
for maintaining the Groups R&D and manufacturing capacity and product ranges
where it is probable that we will incur such costs and we can estimate
such costs reliably. With respect to such estimated, future costs,
we had provisions at 31 December 2003 in the aggregate of approximately
$145m, of which approximately $122m relates to the US. These provisions
do not include possible, additional costs that are not currently probable,
nor do these provisions include costs that, by agreement, will be borne
by viable third party indemnitors. In addition, these provisions: (1)
include, where appropriate, unasserted claims where future costs are
nonetheless probable (at owned sites, for example); (2) are based,
where applicable, on liability allocation or cost sharing agreements
that we believe are enforceable against viable third parties; (3) reflect
expected insurance recoveries where an insurer has agreed to provide
an indemnity; and (4) typically cover a time period of five years (with
the exception of operation and maintenance activity, which can last
for decades). We are not presently aware of any circumstances or uncertainties
regarding the viability of liable third parties, indemnitors or insurers
that would cause us to alter these provisions. |
|
Back to Contents
102 |
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Statements |
|
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|
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|
|
Notes to the Financial
Statements continued |
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31 Assets
pledged, commitments and contingent liabilities (continued) |
|
It is possible that the Company,
or its affiliates, could incur future environmental costs beyond the
extent of our current provisions. The extent of such possible, additional
costs is inherently difficult to estimate due to a number of factors,
including, but not limited to: (1) the nature and extent of claims
that may be asserted in the future; (2) whether the Company or any
of its affiliates has or will have any legal obligation with respect
to asserted or unasserted claims; (3) the type of remedial action,
if any, that may be selected at sites where the remedy is presently
not known; (4) the potential for recoveries from or allocation of liability
to third parties; (5) the length of time that the environmental investigation,
remediation and liability allocation process can take; and (6) the
nature of any future environmental legal or regulatory changes that
affect the operation of our pharmaceuticals business. Notwithstanding
and subject to the foregoing, we estimate that potential additional
loss, for future environmental investigation, remediation and operation
and maintenance activity above and beyond our provisions, could be,
in the aggregate, in the order of $30m to $50m. |
|
Legal proceedings
AstraZeneca is involved in
various legal proceedings considered typical to its businesses, including
litigation relating to employment, product liability, commercial disputes,
infringement of intellectual property rights and the validity of certain
patents. The more significant matters are discussed below. |
|
Diprivan (propofol)
In August 2002, AstraZeneca
LP received a letter from ESI Lederle, a division of Wyeth, informing AstraZeneca
of Wyeths intention to
market a generic version of Diprivan prior
to the expiration of AstraZenecas
patents covering the current formulation. AstraZeneca filed a patent infringement
action against Wyeth in the US District Court for the Southern District of
New York. Through a series of transactions, the holder of the relevant abbreviated
new drug
application and now defendant in AstraZenecas suit is Mayne Pharma (USA)
Inc. (formerly called Faulding Pharmaceutical Co.). Faulding/Mayne responded
to
AstraZenecas complaint and filed counterclaims alleging non-infringement
and invalidity. Discovery is scheduled to close in June 2004. The trial is expected
to be held
no earlier than the fourth quarter of 2004. |
|
Losec/Prilosec (omeprazole)
In June 1997, the German Federal
Patent Court declared invalid a previously granted supplementary protection
certificate which extended protection for omeprazole, the active ingredient
contained in Losec, from 1999 to 2003. The decision was appealed and
in February 2000, at AstraZenecas
request, the German Supreme Court decided to refer the case to the European
Court of Justice (ECJ) for a preliminary ruling. In December 2003, the ECJ
ruled against AstraZeneca on all questions. Consequently, the German omeprazole
supplementary protection certificate is confirmed invalid. The case did not
involve any financial claims. |
|
In March 2000, the German Federal
Patent Court declared that AstraZenecas
formulation patent for omeprazole was invalid. The decision has been
appealed to the German Supreme Court, which will hear the case in March
2004. As a consequence, all pending infringement actions in Germany
have been stayed awaiting the outcome of the appeal. There is one interlocutory
injunction in force against ratiopharm GmbH based on the formulation
patent. If the final decision on the validity of the formulation patent
goes against AstraZeneca, ratiopharm may claim damages for lost sales
due to the interlocutory injunction. |
|
In 1998, Astra filed suits in
the US against Andrx Pharmaceuticals, Inc. and Genpharm, Inc. This
followed the filing of abbreviated new drug applications by Andrx and
Genpharm with the US Food and Drug Administration (FDA) concerning
the two companies intention
to market generic omeprazole products in the US. During 1999, Astra
also filed suits against Kremers Urban Development Company and Schwarz
Pharma, Inc., and against Cheminor Drugs Ltd., Reddy-Cheminor Inc.
and Schein Pharmaceuticals, Inc. During 2000, AstraZeneca filed further
suits against Lek Pharmaceutical and Chemical Company d.d., Impax Laboratories
Inc., Eon Labs Manufacturing Inc. and Mylan Pharmaceuticals Inc. During
2001, AstraZeneca filed further suits against Torpharm, Inc. and Zenith
Goldline Pharmaceuticals, Inc. (now known as Ivax Pharmaceuticals,
Inc.). The basis for the proceedings is that the actions of all the
companies infringe several patents relating to
omeprazole (Prilosec in
the US). The cases are proceeding under the US Hatch-Waxman legislation. Anti-trust
counterclaims have been filed by Andrx, Torpharm, Impax, Eon and Lek. |
|
The trial against Andrx, Genpharm,
Kremers Urban Development Company and Cheminor started in December
2001 and ended in July 2002. In October 2002, the US District Court
for the Southern District of New York ruled that two AstraZeneca patents
(230
and 505) relating to the formulation of omeprazole are valid until 2007,
that Andrx, Genpharm and Cheminor all infringed both patents but that Kremers
Urban Development Company did not infringe either patent. The court did not rule
on the 281 patent relating to a manufacturing process for omeprazole formulations
in respect of which AstraZeneca has sued Andrx only. AstraZeneca appealed the
judgement with regard to non-infringement and Kremers Urban Development Company,
Andrx, Genpharm and Cheminor appealed the decision with regard to infringement
and validity of the patents. The appeal hearings took place in December 2003
and the original decision of the lower court was affirmed by the appeal court
in all
respects. |
|
In April 2001, Andrx filed a case
in the US District Court for the Southern District of New York against
AstraZeneca, Merck & Co., Inc. and the FDA alleging that the listing
of certain patents in the
FDAs Orange Book was improper
and constituted violations of certain provisions of the Sherman Act, the US federal
anti-trust legislation, and a state statute analogous to the federal anti-trust
laws. Andrx seeks injunctive relief compelling the parties to delist omeprazole-related
patents it claims were improperly listed in the Orange Book and prohibiting the
defendants from using patents to delay the effective
date of the FDAs approval of Andrxs ANDA for omeprazole. AstraZeneca
and Merck have
filed motions to dismiss the case, which are pending. |
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Financial Statements |
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31 Assets
pledged, commitments and contingent liabilities (continued)
In October 2000, the Federal Court
of Australia (Full Court) handed down a patent ruling pertaining to
omeprazole in connection with a dispute between AstraZeneca and the
generic company, Alphapharm Pty Ltd. The court declared that AstraZenecas formulation
patent was invalid. In November 2001, AstraZeneca applied for special
leave to appeal the decision to the High Court of Australia and this
application was granted in December 2001. The appeal was heard by
the High Court in May 2002 and in December 2002 the High Court reversed
the judgement of the lower court. The High Court ruled that AstraZenecas
formulation patent is valid and that the case should be returned
to the lower court for determination of the remaining issues. In
July 2003, the case was settled.
During 2000, AstraZeneca was granted
interlocutory injunctions based on certain of AstraZenecas
omeprazole patents and supplementary protection certificates against
the generic company, Scandinavian Pharmaceuticals-Generics AB (Scand
Pharm), in Denmark and Norway. In October 2001, Oslo City Court in
Norway found that Scand Pharm had infringed AstraZenecas formulation
patent for omeprazole. At the same time, the court declared AstraZenecas
formulation patent valid. As a result of the Norwegian case, Scand
Pharm cannot sell its omeprazole product in Norway. Furthermore,
it is also prevented from selling its omeprazole product in Denmark
pending the outcome of the main action in the Danish case. If the
final decisions in these cases are against AstraZeneca, Scand Pharm
may claim damages for lost sales due to the interlocutory injunctions.
In the Netherlands, Pharmachemie BV
filed a claim against two AstraZeneca companies in 2002 alleging that
AstraZeneca had misused its exclusive rights in the Netherlands in
relation to the expiration date for AstraZenecas
supplementary protection certificate for omeprazole. AstraZeneca
denied the allegations. In February 2003, the case was withdrawn
by Pharmachemie.
AstraZeneca has been and continues
to be involved in numerous proceedings in Canada involving Genpharm,
Reddy Cheminor, Rhoxalpharma and Apotex. These cases relate to omeprazole
capsules or omeprazole magnesium tablets and involve various patents.
AstraZeneca could potentially be liable for damages in some cases.
However, there are no financial claims currently being made against
AstraZeneca in Canada in any litigation in respect of omeprazole capsules
or omeprazole magnesium tablets.
In February 2000, the European Commission
commenced an investigation relating to certain omeprazole intellectual
property rights, and associated regulatory and patent infringement litigation.
The investigation is pursuant to Article 82 of the EC Treaty, which prohibits
an abuse of a dominant position. The investigation was precipitated by
a complaint by a party to a number of patent and other proceedings involving
AstraZeneca. AstraZeneca has, in accordance with its corporate policy,
co-operated with the Commission. In July 2003, the Commission served
a Statement of Objections on AstraZeneca, referring to alleged infringements
regarding the obtaining of supplementary protection certificates for
omeprazole in certain European countries; and regarding AstraZenecas
replacement of omeprazole capsules by omeprazole MUPS (tablets) and
withdrawal of capsule marketing authorisations in three European countries.
AstraZeneca has replied fully to the Commission, explaining why its
actions were in AstraZenecas view lawful. The Commission is considering
AstraZenecas submission, and an oral hearing is scheduled to
take place. If, ultimately, (and subject to any appeals to the Court
of First Instance and the European Court of Justice) it is held that
Article 82 has been infringed, then there may be a liability to fines
and/or other measures which can be imposed by the Commission. There
could also be liability for alleged losses incurred by aggrieved third
parties. It is not possible, at the present time, to quantify any such
liabilities as no fines have to date been imposed and no claims for
damages have been received. Moreover, bearing in mind the timescales
of proceedings, including appeals, there may well be a considerable
period before any such liabilities are finally established (even if,
which is denied, any such liabilities exist).
Nolvadex (tamoxifen)
AstraZeneca is a co-defendant with Barr
Laboratories, Inc. in numerous purported class actions filed in federal
and state courts throughout the US. All of the state court actions were
removed to federal court and have been consolidated, along with all of
the cases originally filed in federal court, in a federal multi-district
litigation proceeding pending in the US District Court for the Eastern
District of New York. Some of the cases were filed by plaintiffs representing
a putative class of consumers who purchased tamoxifen. The other cases
were filed on behalf of a putative class of third
party payers (including health maintenance organisations, insurers
and other managed care providers and health plans) that have reimbursed
or otherwise paid for prescriptions of tamoxifen. The plaintiffs allege
that they paid supra-competitive and monopolistic prices for
tamoxifen as a result of the settlement of patent litigation between
Zeneca and Barr in 1993. The plaintiffs seek injunctive relief, treble
damages under the anti-trust laws, disgorgement and restitution. In April
2002, AstraZeneca filed a motion to dismiss the cases for failure to
state a cause of action. In May 2003, the US District Court for the Eastern
District of New York granted AstraZenecas motion to dismiss. The
plaintiffs have appealed the decision.
In August 2002, AstraZenecas
US distribution agreement with Barr Laboratories, Inc. for non-branded
tamoxifen expired, as did AstraZenecas
patent for Nolvadex (tamoxifen).
At the same time, a six month period of market exclusivity, awarded by
the US Food and Drug Administration in connection with the successful
completion of certain paediatric testing with the product, commenced.
Barr thereafter commenced litigation against the FDA in the US District
Court for the District of Columbia, challenging the FDAs
refusal to grant Barr final approval for its own generic tamoxifen prior
to expiration of AstraZenecas exclusivity period. Barr also declined
AstraZenecas offer to extend the distribution agreement through
the end of the exclusivity period. Therefore, in October 2002, AstraZeneca
began shipping its own non-branded tamoxifen to customers to ensure an
uninterrupted supply to patients. In December 2002, the Court held that
Barr could not obtain final FDA approval for its own generic tamoxifen
prior to the expiration of AstraZenecas paediatric exclusivity
for Nolvadex.
In January 2003, |
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and
Form 20-F Information 2003 |
Financial Statements |
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Notes to
the Financial Statements continued |
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31 Assets
pledged, commitments and contingent liabilities (continued)
Barr made a claim that AstraZeneca
improperly thwarted Barrs
entry into the tamoxifen market and caused Barr monetary damages.
AstraZeneca disputes the claim.
Plendil (felodipine)
In August 2000, AstraZeneca LP received
a letter from Mutual Pharmaceutical Co., Inc. informing AstraZeneca
of Mutuals
intention to market a generic version of AstraZenecas Plendil extended
release tablets (felodipine) prior to the expiration of AstraZenecas
patent covering the extended release formulation. AstraZeneca filed
a patent infringement action against Mutual in the US District Court
for the Eastern District of Pennsylvania. Mutual responded and filed
counterclaims alleging non-infringement and invalidity. In March 2003,
the District Court granted summary judgement in favour of AstraZeneca
as to the infringement claim holding that Mutual infringed AstraZenecas
formulation patent. In August 2003, the District Court granted summary
judgement in favour of AstraZeneca as to the validity claim holding
that AstraZenecas patent is valid. Mutual has filed a notice
of appeal as to both of these decisions to the US District Court of
Appeals for the Federal Circuit.
Seroquel (quetiapine
fumarate)
AstraZeneca PLC and AstraZeneca Pharmaceuticals
LP have been named as defendants in the case of Susan Zehel-Miller
et al. v. AstraZenaca [sic], AstraZenaca Pharmaceuticals, LP [sic],
a putative class action suit filed in August 2003 in the US District
Court for the Middle District of Florida. The named plaintiffs are
seeking damages and injunctive relief on behalf of a purported class consisting
of all persons in the United States who purchased and/or used Seroquel.
Although the scope of the allegations in the complaint is very broad,
the primary focus appears to be the contention that the Company failed
to provide adequate warnings in connection with an alleged association
between Seroquel and
the onset of diabetes. AstraZeneca denies the material allegations
of the plaintiffs complaint
and is vigorously defending the litigation.
Toprol-XL (metoprolol
succinate)
In March 2003, AstraZeneca LP received
a letter from KV Pharmaceutical Company informing AstraZeneca of KVs intent to
market a generic version of Toprol-XL tablets
in the 200mg dosage prior to the expiration of AstraZenecas
patents covering the substance and its formulation, the latest of which
expires in March 2008. AstraZeneca filed a patent infringement action
against KV in the US District Court for the Eastern District of Missouri.
KV responded and filed counterclaims alleging non-infringement and
invalidity. Discovery is scheduled to close in August 2004. The trial
is scheduled for April 2005.
In July 2003, AstraZeneca received
a similar letter from KV with respect to the 100mg dosage of Toprol-XL tablets.
AstraZeneca filed another patent infringement complaint against KV
in the same court. KV filed counterclaims alleging non-infringement
and invalidity. This case has been consolidated with the initial case.
In December 2003, AstraZeneca received
a letter from Andrx Pharmaceuticals LLC with notification that Andrx
has filed an abbreviated new drug application to market a generic form
of Toprol-XL extended release tablets in the 50mg dose which
it intends to sell prior to the expiration of AstraZenecas
patents listed in the FDAs Orange Book, the latest of which
expires in March 2008. Andrx claims that each of the listed patents
are invalid and/or not infringed. AstraZeneca is considering whether
to file a suit for patent infringement against Andrx.
Zestril (lisinopril)
In 1986, AstraZenecas
predecessor company and Merck & Co., Inc. entered into licence
agreements under which AstraZeneca was granted the right to make, use
and sell lisinopril (Zestril),
in return for which AstraZeneca agreed to pay royalties to Merck. In
April 2002, AstraZeneca commenced arbitration proceedings against Merck
under one of the licence agreements. In the arbitration, AstraZeneca
sought repayment of approximately $38m of prior royalty amounts and
a prospective reduction in the royalty rate going forward. The case
was settled in May 2003. Under the settlement agreement, Merck paid
$37m to AstraZeneca and the parties agreed that the royalty rate going
forward would not be reduced.
Zoladex (goserelin
acetate implant) investigation
In June 2003, AstraZeneca announced
the settlement of a multi-year investigation into US sales and marketing
practices for Zoladex, a treatment for prostate cancer. Under
the terms of the settlement, AstraZeneca Pharmaceuticals LP admitted
to having violated the Prescription Drug Marketing Act by providing
free samples of Zoladex to physicians during the period 1993
to 1996, with the understanding that these physicians would bill Medicare
for reimbursement. AstraZeneca also settled, without admitting liability,
civil claims involving allegations that the Company provided inducements
to physicians to purchase Zoladex and for improperly setting
and reporting its price. The total payment associated with the settlement
was $355m. This amount included funds set aside to cover individual
settlement agreements with the states involving related claims. As
previously disclosed by the Company, in 2002 it accrued $350m to cover
these settlement costs.
The settlement also provides for a
five-year Corporate Integrity Agreement with the Office of Inspector
General (OIG) for the Department of Health and Human Services under
which AstraZeneca Pharmaceuticals LP is required, among other obligations,
to keep in place its current compliance programme and provide periodic
reports to the OIG on the status of compliance activities. |
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AstraZeneca
Annual Report and
Form 20-F Information
2003
|
Financial Statements |
105
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31 Assets
pledged, commitments and contingent liabilities (continued)
Average wholesale
price class action litigation
In January 2002, AstraZeneca
was named as a defendant along with 24 other pharmaceutical manufacturers
in a class action suit, in Massachusetts, brought on behalf
of a putative class of plaintiffs alleged to have overpaid for prescription
drugs as a result of inflated wholesale list prices. The suit seeks
to recover unspecified damages. AstraZeneca has also been named as
a co-defendant with various other pharmaceutical manufacturers in
similar suits filed in seven other states. Most of these suits have
been consolidated with the Massachusetts action for pre-trial purposes
pursuant to federal multi-district litigation procedures. AstraZeneca
believes that it has meritorious defences to all of these claims.
Notice of
state Attorneys General investigations into Medicaid price reporting
In December 2003, AstraZeneca
received notices from multiple US state Attorney General Offices requiring
the Company to retain records relating to Medicaid average manufacturer
price and best price calculations. Similar notices have been received
by other manufacturer co-defendants in the average wholesale price
class action litigation referred to above. These notices appear to
have been intended to address proposed regulations (42 CFR Part 447.534(h))
limiting a manufacturers
record retention obligations for government price reporting data to
a three year period. The notices from the Attorneys General indicate
that the states are investigating the accuracy of AstraZenecas
average manufacturer price and best price disclosures and request that
the Company retains relevant records beyond the three year limit of
the proposed regulations.
US Federal
Trade Commission Nexium investigation
As previously disclosed by
the Company, in January 2003 AstraZeneca received a Civil Investigative
Demand from the US Federal Trade Commission (FTC) for certain information
concerning AstraZenecas advertising and marketing of Nexium.
In July 2003, the FTC closed its investigation without action.
Retail pharmacies/drug
purchasers actions
Since October 1993, several
thousand retail pharmacies and certain retail drug purchasers have
commenced purported class actions and individual actions in various
federal and state courts throughout the US alleging that, with respect
to brand name prescription drugs, manufacturers and wholesalers engaged
in discriminatory pricing practices, discriminatory discounting and
rebate practices, and/or conspired with one another to fix prices and
artificially maintain high prices to the plaintiffs in restraint of
trade and commerce. More than 20 brand name prescription drug manufacturers
and eight wholesalers have been named defendants in some or all of
these suits.
In January 2003, an Alabama
state court granted AstraZenecas
motion to dismiss the consumer action pending in Alabama. The plaintiffs time
to appeal that order of dismissal has expired. AstraZeneca has settled
or been dismissed from all of the cases except for a retail case
pending in the Northern District of Illinois. AstraZeneca has consistently
denied liability and continues to believe it has meritorious defences
to the remaining claims.
Additional
government investigations into drug marketing practices
As is true for most, if not
all, major prescription pharmaceutical companies operating in the US,
AstraZeneca is currently involved in multiple additional US federal
and state criminal and civil investigations into drug marketing and
pricing practices. AstraZeneca has received subpoenas from the US Attorneys
Office in Boston requesting production of documents relating to the
sale and promotion of Prilosec to
the New England Medical Center in Boston. A separate subpoena from
the same office requests documents relating to the sale and marketing
of products to an individual physician in Worcester, Massachusetts
and certain physicians and entities affiliated with that physician.
AstraZeneca has also received a subpoena from the Massachusetts Attorney
Generals Office seeking documents relating to the sale and promotion
of five products (Prilosec, Seroquel, Rhinocort
Aqua, Toprol-XL and Zestril) within Massachusetts.
AstraZeneca has received an investigative demand from the Missouri
Attorney Generals
Office seeking documents and information relating to agreements with
drug retailers doing business within Missouri. AstraZeneca is co-operating
with these investigations. It is not possible to predict the outcome
of any of these investigations, which could include the payment of
damages and the imposition of fines, penalties and administrative remedies.
General
With respect to each of the
legal proceedings described above, other than those which have been
disposed of, we are unable to make estimates of the loss or range of
losses at this stage. We also do not believe that disclosure of the
amount sought by plaintiffs, if that is known, would be meaningful
with respect to those legal proceedings. This is due to a number of
factors including for example, the stage of the proceedings (in many
cases trial dates have not been set) and overall length and extent
of legal discovery, the entitlement of the parties to an action to
appeal a decision, clarity as to theories of liability, damages and
governing law, uncertainties in timing of litigation, and the possible
need for further legal proceedings to establish the appropriate amount
of damages, if any. However, although there can be no assurance regarding
the outcome of any of the legal proceedings or investigations referred
to in this Note 31 to the Financial Statements, we do not expect them
to have a materially adverse effect on our financial position or profitability. |
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106 |
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AstraZeneca
Annual Report and
Form 20-F Information
2003
|
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Notes
to the Financial Statements continued |
|
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32 Leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total rentals under operating leases
charged to profit and loss account were as follows: |
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
Hire of plant and machinery |
21 |
|
23 |
|
25 |
|
|
|
|
|
|
|
|
Other |
73 |
|
96 |
|
76 |
|
|
|
|
|
|
|
|
|
94 |
|
119 |
|
101 |
|
|
|
|
|
|
|
|
|
Commitments under operating
leases to pay rentals during the year following the year of these Financial
Statements analysed according to the period in which each lease expires
were as follows: |
|
Land and buildings |
|
|
|
Other assets |
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2003 |
|
2002 |
|
|
$m |
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
|
|
Expiring within one year |
9 |
|
5 |
|
13 |
|
11 |
|
|
|
|
|
|
|
|
|
|
Expiring in years two to five |
23 |
|
25 |
|
26 |
|
15 |
|
|
|
|
|
|
|
|
|
|
Expiring thereafter |
38 |
|
32 |
|
3 |
|
2 |
|
|
|
|
|
|
|
|
|
|
|
70 |
|
62 |
|
42 |
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
The future minimum lease payments
under operating leases that have initial or remaining terms in excess
of one year at 31 December 2003 were as follows: |
|
|
Operating leases |
|
|
|
|
|
2003 |
|
2002 |
|
|
$m |
|
$m |
|
|
|
|
|
|
Obligations under leases comprise |
|
|
|
|
Rentals due within one year |
112 |
|
90 |
|
|
|
|
|
|
Rentals due after more than one year |
|
|
|
|
After five years from balance sheet date |
80 |
|
94 |
|
|
|
|
|
|
From four to five years |
25 |
|
21 |
|
|
|
|
|
|
From three to four years |
28 |
|
27 |
|
|
|
|
|
|
From two to three years |
40 |
|
38 |
|
|
|
|
|
|
From one to two years |
56 |
|
47 |
|
|
|
|
|
|
|
229 |
|
227 |
|
|
|
|
|
|
|
341 |
|
317 |
|
|
|
|
|
|
|
|
|
|
|
The Group had no commitments (2002
$nil) under finance leases at the balance sheet date which were due to
commence thereafter. |
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AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Statements |
107
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33 Statutory
and other information |
|
|
|
|
|
|
|
|
|
|
2003 |
2002 |
2001 |
|
|
$m |
$m |
$m |
|
|
|
|
|
|
Audit fees KPMG Audit Plc and
its associates |
|
|
|
|
Audit services |
5.4 |
3.5 |
2.5 |
|
|
|
|
|
|
Further assurance services |
2.1 |
1.5 |
1.8 |
|
|
|
|
|
|
Taxation services |
1.8 |
1.8 |
2.1 |
|
|
|
|
|
|
Other services |
|
0.2 |
1.3 |
|
|
|
|
|
|
|
9.3 |
7.0 |
7.7 |
|
|
|
|
|
|
Audit fees others |
|
0.1 |
0.1 |
|
|
|
|
|
|
|
9.3 |
7.1 |
7.8 |
|
|
|
|
|
|
|
|
|
|
|
Audit services include $4.9m for the
audit of the Group, of which $1,600 is in respect of the parent company
(2002 $1,600, 2001 $1,600), and a further $0.5m for other services required
by statute or regulation. Fees for further assurance services include
employee pension fund and other benefit plan audit services together
with control reviews associated with new systems implementations. Taxation
services consist of tax compliance services and tax advice. Other services
in prior years consist principally of consulting projects and support.
$0.5m (2002 $0.4m, 2001 $3.2m) of the
total fees for further assurance, taxation and other services were charged
in the UK.
Related party transactions
The Group had no material related party
transactions which might reasonably be expected to influence decisions
made by the users of these Financial Statements.
Subsequent events
No significant change has occurred since
the date of the annual Financial Statements. |
|
Back to Contents
108 |
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to
the Financial Statements continued |
|
|
|
|
|
|
|
|
|
|
34 Company information
Company Balance
Sheet |
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
At 31 December |
Notes |
|
$m |
|
m |
|
|
|
|
|
|
|
|
Fixed assets |
|
|
|
|
|
|
Fixed asset investments |
34 |
|
6,940 |
|
7,236 |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Debtors other |
|
|
7 |
|
|
|
|
|
|
|
|
|
|
Debtors amounts owed by subsidiaries |
|
|
25,339 |
|
27,104 |
|
|
|
|
|
|
|
|
|
|
|
25,346 |
|
27,104 |
|
|
|
|
|
|
|
|
Total assets |
|
|
32,286 |
|
34,340 |
|
|
|
|
|
|
|
|
Creditors due within one year |
|
|
|
|
|
|
Non-trade creditors |
34 |
|
(3,120 |
) |
(2,961 |
) |
|
|
|
|
|
|
|
Net current assets |
|
|
22,226 |
|
24,143 |
|
|
|
|
|
|
|
|
Total assets less current liabilities |
|
|
29,166 |
|
31,379 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Creditors due after more than one
year |
|
|
|
|
|
|
Loans owed to subsidiaries |
34 |
|
(295 |
) |
(295 |
) |
|
|
|
|
|
|
|
Net assets |
|
|
28,871 |
|
31,084 |
|
|
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
|
|
Called-up share capital |
35 |
|
423 |
|
429 |
|
|
|
|
|
|
|
|
Share premium account |
34 |
|
449 |
|
403 |
|
|
|
|
|
|
|
|
Capital redemption reserve |
34 |
|
23 |
|
16 |
|
|
|
|
|
|
|
|
Other reserves |
34 |
|
1,841 |
|
1,841 |
|
|
|
|
|
|
|
|
Profit and loss account |
34 |
|
26,135 |
|
28,395 |
|
|
|
|
|
|
|
|
Shareholders funds equity
interests |
|
|
28,871 |
|
31,084 |
|
|
|
|
|
|
|
|
The Financial Statements on pages 62 to
123 were approved by the Board of Directors on 29 January 2004 and were
signed on its behalf by: |
|
Sir Tom McKillop |
Jonathan
Symonds |
Director |
Director |
|
|
Back to Contents
|
AstraZeneca
Annual Report and
Form 20-F Information
2003
|
Financial Statements |
109
|
|
|
|
|
|
|
|
|
|
34 Company information (continued) |
|
Deferred taxation |
|
The parent company had no deferred
tax assets or liabilities (actual or potential) at 31 December 2003. |
|
|
|
Investments in subsidiaries |
|
|
|
|
|
|
Fixed asset investments |
Shares |
|
Loans |
|
Total |
|
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
Cost at beginning of year |
6,645 |
|
591 |
|
7,236 |
|
|
|
|
|
|
|
|
Additions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposals and other movements |
|
|
(296 |
) |
(296 |
) |
|
|
|
|
|
|
|
Net book value at 31 December 2003 |
6,645 |
|
295 |
|
6,940 |
|
|
|
|
|
|
|
|
Net book value at 31 December 2002 |
6,645 |
|
591 |
|
7,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-trade creditors |
2003 |
|
2002 |
|
|
$m |
|
$m |
|
|
|
|
|
|
Amounts due within one year |
|
|
|
|
Short term borrowings (unsecured) |
3 |
|
3 |
|
|
|
|
|
|
Other creditors |
154 |
|
50 |
|
|
|
|
|
|
Amounts owed to subsidiaries |
2,049 |
|
2,100 |
|
|
|
|
|
|
Dividends to shareholders |
914 |
|
808 |
|
|
|
|
|
|
|
3,120 |
|
2,961 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans owed to subsidiaries |
Repayment |
|
2003 |
|
2002 |
|
|
Dates |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
Loans (unsecured) |
|
|
|
|
|
|
US dollars |
|
|
|
|
|
|
6.58% loan |
2003 |
|
|
|
295 |
|
|
|
|
|
|
|
|
7.2% loan |
2023 |
|
295 |
|
295 |
|
|
|
|
|
|
|
|
Total loans |
|
|
295 |
|
590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans or instalments thereof are repayable: |
|
|
|
|
|
|
After five years from balance sheet date |
|
|
295 |
|
295 |
|
|
|
|
|
|
|
|
From two to five years |
|
|
|
|
|
|
|
|
|
|
|
|
|
From one to two years |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unsecured |
|
|
295 |
|
295 |
|
|
|
|
|
|
|
|
Total due within one year |
|
|
|
|
295 |
|
|
|
|
|
|
|
|
Total loans |
|
|
295 |
|
590 |
|
|
|
|
|
|
|
|
Back to Contents
110 |
|
AstraZeneca
Annual Report and
Form 20-F Information
2003
|
|
|
|
|
|
|
|
Notes
to the Financial Statements continued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34 Company
information (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share |
|
Capital |
|
|
|
Profit |
|
|
|
|
|
|
premium |
|
redemption |
|
Other |
|
and loss |
|
2003 |
|
2002 |
|
Reserves |
account |
|
reserve |
|
reserves |
|
account |
|
Total |
|
Total |
|
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At beginning of year |
403 |
|
16 |
|
1,841 |
|
28,395 |
|
30,655 |
|
32,873 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit for the year |
|
|
|
|
|
|
244 |
|
244 |
|
102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
|
|
|
|
(1,350 |
) |
(1,350 |
) |
(1,206 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Share re-purchase |
|
|
7 |
|
|
|
(1,154 |
) |
(1,147 |
) |
(1,183 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Share premiums |
46 |
|
|
|
|
|
|
|
46 |
|
69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At end of year |
449 |
|
23 |
|
1,841 |
|
26,135 |
|
28,448 |
|
30,655 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributable reserves at end of year |
|
|
|
|
489 |
|
1,103 |
|
1,592 |
|
2,057 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As permitted by section 230 of the Companies
Act 1985, the Company has not presented its profit and loss account. |
|
|
|
|
|
|
At 31 December 2003 $25,032m (31
December 2002 $26,781m) of the profit and loss account reserve was not
available for distribution. The majority of this non-distributable amount
relates to profit arising on the sale of Astra AB to a subsidiary in
1999, which becomes distributable as the underlying receivable is settled
in cash. During 2003, $1,749m of the profit was realised by repayment.
Subsequent to the year end a further $1,124m was repaid on 27 January
2004 resulting in additional distributable reserves not included in the
figures above. Included in other reserves is a special reserve of $157m,
arising on the redenomination of share capital in 1999. |
|
|
2003 |
|
2002 |
|
Reconciliation
of movement in shareholders funds |
$m |
|
$m |
|
|
|
|
|
|
Shareholders funds at beginning of
year |
31,084 |
|
33,309 |
|
|
|
|
|
|
Net profit for the financial year |
244 |
|
102 |
|
|
|
|
|
|
Dividends |
(1,350 |
) |
(1,206 |
) |
|
|
|
|
|
Issues of AstraZeneca PLC Ordinary Shares |
47 |
|
69 |
|
|
|
|
|
|
Re-purchase of AstraZeneca PLC Ordinary Shares |
(1,154 |
) |
(1,190 |
) |
|
|
|
|
|
Net reduction in shareholders funds |
(2,213 |
) |
(2,225 |
) |
|
|
|
|
|
Shareholders funds at
end of year |
28,871 |
|
31,084 |
|
|
|
|
|
|
Back to Contents
|
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Financial Statements |
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35 Called-up share capital of parent company
|
|
|
Allotted, called-up |
|
|
Authorised |
|
and fully paid |
|
|
|
|
|
|
|
|
|
2003 |
|
2003 |
|
2002 |
|
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
Ordinary Shares ($0.25 each) |
423 |
|
423 |
|
429 |
|
|
|
|
|
|
|
|
Unissued Ordinary Shares ($0.25 each) |
177 |
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Preference Shares (£1 each £50,000) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
600 |
|
423 |
|
429 |
|
|
|
|
|
|
|
|
The Redeemable Preference Shares carry limited
class voting rights and no dividend rights. This class of shares is capable
of redemption at par at the option of the Company on the giving of seven days written
notice to the registered holder of the shares.
The movements in share capital during the year can be summarised as follows:
|
No. of shares |
|
|
|
|
(million) |
|
$m |
|
|
|
|
|
|
At beginning of year |
1,719 |
|
429 |
|
|
|
|
|
|
Issues of shares |
1 |
|
1 |
|
|
|
|
|
|
Re-purchase of shares |
(27 |
) |
(7 |
) |
|
|
|
|
|
At 31 December 2003 |
1,693 |
|
423 |
|
|
|
|
|
|
Share buy-back
During the year the Company purchased, and subsequently
cancelled, 27,211,500 Ordinary Shares at an average price of 2535 pence per share
for a consideration, including expenses, of $1,154m. The excess of the consideration
over the nominal value has been charged against the profit and loss account reserve.
Share schemes
A total of 1,240,117 Ordinary Shares were issued
during the year in respect of share schemes. Details of movements in the number
of Ordinary Shares under option are shown in Note 30; details of options granted
to
Directors are shown in the Directors Remuneration
Report.
Back to Contents
112 |
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Principal Subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of voting |
|
|
At 31 December 2003 |
Country |
share capital held |
|
Principal activity |
|
|
|
|
|
UK |
|
|
|
|
AstraZeneca UK Limited |
England |
100 |
# |
Research and development, |
|
|
|
|
production, marketing |
|
|
|
|
|
AstraZeneca Insurance Company Limited |
England |
100 |
|
Insurance and reinsurance underwriting |
|
|
|
|
|
AstraZeneca Treasury Limited |
England |
100 |
|
Treasury |
|
|
|
|
|
|
|
|
|
|
Continental Europe |
|
|
|
|
NV AstraZeneca SA |
Belgium |
100 |
|
Marketing |
|
|
|
|
|
AstraZeneca Dunkerque Production SCS |
France |
100 |
|
Production |
|
|
|
|
|
AstraZeneca SA |
France |
100 |
|
Research, production, marketing |
|
|
|
|
|
AstraZeneca GmbH |
Germany |
100 |
|
Development, production, marketing |
|
|
|
|
|
AstraZeneca Holding GmbH |
Germany |
100 |
|
Production, marketing |
|
|
|
|
|
AstraZeneca SpA |
Italy |
100 |
|
Production, marketing |
|
|
|
|
|
AstraZeneca Farmaceutica Spain SA |
Spain |
100 |
|
Production, marketing |
|
|
|
|
|
AstraZeneca AB |
Sweden |
100 |
|
Research and development, |
|
|
|
|
production, marketing |
|
|
|
|
|
AstraZeneca BV |
The Netherlands |
100 |
|
Marketing |
|
|
|
|
|
|
|
|
|
|
The Americas |
|
|
|
|
AstraZeneca Canada Inc. |
Canada |
100 |
|
Research, production, marketing |
|
|
|
|
|
IPR Pharmaceuticals Inc. |
Puerto Rico |
100 |
|
Development, production, marketing |
|
|
|
|
|
AstraZeneca LP |
US |
99 |
|
Research and development, |
|
|
|
|
production, marketing |
|
|
|
|
|
AstraZeneca Pharmaceuticals LP |
US |
100 |
|
Research and development, |
|
|
|
|
production, marketing |
|
|
|
|
|
Zeneca Holdings Inc. |
US |
100 |
|
Production, marketing |
|
|
|
|
|
|
|
|
|
|
Asia, Africa & Australasia |
|
|
|
|
AstraZeneca Pty Limited |
Australia |
100 |
|
Development, production, marketing |
|
|
|
|
|
AstraZeneca KK |
Japan |
80 |
|
Production, marketing |
|
|
|
|
|
# Shares held directly |
|
|
|
|
The companies and other entities listed above
are those whose results or financial position principally affected the figures
shown in the Groups annual Financial Statements. A full list of subsidiaries,
joint ventures and associates will be annexed to the Companys next annual
return filed with the Registrar of Companies. The country of registration or
incorporation is stated alongside each company. The accounting dates of subsidiaries
and associates are 31 December, except for Salick Health Care, Inc. which,
owing to local conditions
and to avoid undue delay in the preparation of the Financial Statements, is 30
November. AstraZeneca operates through 234 subsidiaries worldwide. The Group
Financial Statements consolidate the Financial Statements of AstraZeneca PLC
and its subsidiaries at 31 December 2003. Products are manufactured in some
20 countries worldwide and are sold in over 100 countries.
Back to Contents
|
AstraZeneca Annual Report and Form 20-F Information 2003 |
Additional Information
for US Investors |
113 |
|
|
|
|
|
|
Additional
Information for US Investors |
|
Introduction
The accompanying consolidated Financial Statements included in this Annual Report are prepared in accordance with UK GAAP. There are certain significant differences between UK GAAP and US GAAP which affect
AstraZenecas net income and
shareholders equity and, on pages 113 to 123, additional
information under US GAAP is set out as follows:
> |
summary of differences between UK and US GAAP accounting principles; page 113 |
|
|
> |
net income; page 116 |
|
|
> |
US GAAP condensed consolidated statement of operations; page 117 |
|
|
> |
US GAAP statement of comprehensive income; page 117 |
|
|
> |
stock compensation; page 118 |
|
|
> |
pension and post-retirement benefits; page 119 |
|
|
> |
taxation; page 121 |
|
|
> |
shareholders equity;
page 122 |
|
|
> |
acquired intangible assets and goodwill; page 122 |
|
|
> |
US GAAP condensed consolidated statement of cash flows; page 123 |
Differences between UK and US accounting principles
Purchase accounting adjustments
Under UK GAAP, the merger of Astra and Zeneca was accounted for as a merger
of equals (pooling-of-interests). Under US GAAP the merger was accounted
for as the acquisition of Astra by Zeneca using purchase accounting.
Under purchase accounting, the cost of the investment is calculated at the market
value of the shares issued together with other incidental costs and the assets
and liabilities of the acquired entity are recorded at fair value. As a result
of the fair value exercise, increases in the values of Astras tangible
fixed assets and inventory were recognised and values attributed to their in-process
research and development, existing products and assembled workforce, together
with appropriate deferred taxation effects. The difference between the cost of
investment and the fair value of the assets
and liabilities of Astra
was recorded as goodwill. The amount allocated to in-process research and
development was, as required by US GAAP, expensed immediately in the first
reporting period after the business combination. Fair value adjustments
to the recorded amount of inventory were expensed in the period the inventory
was utilised. Additional amortisation and depreciation have also been recorded
in respect of the fair value adjustments to tangible and intangible assets
and the resulting goodwill.
In the consolidated Financial
Statements prepared under UK GAAP, goodwill arising on acquisitions made
prior to 1 January 1998 accounted for under the purchase method has been
eliminated against shareholders equity.
Under the requirements of UK
Financial Reporting Standard
10 Goodwill and Intangible
Assets, goodwill on acquisitions made after 1 January 1998 is capitalised
and amortised over its estimated useful life which is generally presumed
not to exceed 20 years. UK GAAP requires that on subsequent disposal or
termination of a previously acquired business, any goodwill previously
taken directly to shareholders equity is then charged in the income
statement against the profit or loss on disposal or termination. Up until
1 January 2002, under US GAAP, goodwill was required to be capitalised
and amortised. Now, instead of being amortised, goodwill is tested annually
for impairment. Amortisation charged under UK GAAP is added back in the
reconciliation of net income. The intangible recognised as assembled workforce
has been reclassified as goodwill.
Identifiable intangible
assets, which principally include patents, know-how and
product registrations, are amortised over their estimated useful lives
which vary between five years and 20 years with a weighted average life
of approximately 13 years.
At 31 December 2003 and
2002, shareholders equity
includes capitalised goodwill of $15,306m and $13,647m respectively (net
of amortisation and impairment of $2,596m and $2,314m) and capitalised
identifiable intangible assets of $9,536m and $9,526m respectively (net
of amortisation and impairment of $6,739m and $4,807m). Goodwill on businesses
disposed of is charged to the gain or loss on disposal.
On disposal of a business, the gain or loss under US GAAP may differ from that under UK GAAP due principally to goodwill capitalised and amortised, together with the appropriate share of other differences between UK
and US accounting principles recognised previously.
Capitalisation of interest
AstraZeneca does not capitalise interest in its UK GAAP Financial Statements. US GAAP requires interest incurred as part of the cost of constructing fixed assets to be capitalised and amortised over the life of the
asset.
Dividends
Under UK GAAP, Ordinary Share dividends proposed are provided for in the year in respect of which they are recommended by the Board of Directors for approval by the shareholders. Under US GAAP, such dividends are not
provided for until declared by the Board.
Deferred taxation
Deferred taxation is provided on a full liability basis under US GAAP, which permits deferred tax assets to be recognised if their realisation is considered to be more likely than not. Under current UK GAAP, full
provision is also made although there are a number of different bases on which this calculation is made, for example rolled over capital gains.
Pension and post-retirement benefits
There are four main differences between current UK GAAP and US GAAP in accounting for pension costs:
(i) |
US GAAP requires measurements of plan assets and obligations to be made as at the date of the financial statements or a date not more than three months prior to that date. Under UK GAAP,
calculations may be based on the results of the latest actuarial valuation; |
|
|
(ii) |
US GAAP mandates a particular
actuarial method the projected unit credit method and requires
that each significant assumption necessary to determine annual pension
costs reflects best estimates solely with regard to that individual assumption.
UK GAAP does not mandate a particular method, but requires that the method
and assumptions taken as a whole should be compatible and lead to the
actuarys best estimate of the cost of
providing the benefits promised; |
Back to Contents
114 |
|
AstraZeneca
Annual Report and
Form 20-F Information
2003 |
Additional
Information
for US Investors |
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Additional
Information for US Investors continued |
|
Differences between UK and US accounting principles (continued)
(iii) |
under US GAAP, a negative
pension cost may arise where a significant unrecognised net asset or gain
exists at the time of implementation. This is required to be amortised
on a straight-line basis over the average remaining service period of
employees. Under UK GAAP, AstraZenecas policy is not to recognise
pension credits in its Financial Statements unless a refund of, or reduction
in, contributions is likely; and |
(iv) |
under US GAAP, a minimum pension liability is recognised through other comprehensive income in certain circumstances when there is a deficit of plan assets relative to the accumulated benefits
obligation. Under UK GAAP, there is no such requirement. |
Restructuring costs
Under UK GAAP, provisions are made for restructuring costs once a detailed formal plan is in place and valid expectations have been raised in those affected that the restructuring will be carried out. US GAAP requires
a number of specific criteria to be met before such costs can be recognised as an expense. Among these are the requirements that costs associated with exit or disposal activities are recognised when the costs are incurred rather than at the date of
commitment to an exit or disposal plan. To the extent that restructuring costs are related to the activities of the acquired company, US GAAP allows them to be recognised as a liability upon acquisition.
Software costs
Under UK GAAP, AstraZeneca capitalises certain defined software costs and amortises these over five years. Under US GAAP, software costs are generally capitalised and amortised over three to five years.
Foreign exchange
Under UK GAAP, unrealised gains and losses on foreign currency transactions to hedge anticipated, but not firmly committed, foreign currency transactions may be deferred and accounted for at the same time as the
anticipated transactions. Under US GAAP, such deferral is not permitted except in certain defined circumstances.
Derivative instruments and hedging activities
Under US GAAP, all derivative instruments should be recognised as assets or liabilities in the balance sheet at fair value. Gains and losses are recognised in net income unless they are regarded as hedges. Under UK
GAAP, these instruments are measured at cost and gains or losses deferred until the underlying transactions occur.
Deferred income
Under UK GAAP, profits or losses from the sale of product related intangible assets are generally taken to other operating income at disposal and are stated after taking account of product disposal costs and costs of
minor outstanding obligations. Under US GAAP, such profits are deferred and recognised in the income statement in subsequent periods until all disposal obligations and commitments have been completed.
Current assets and liabilities
In the Groups
Financial Statements prepared under UK GAAP, no cost is accrued for the share
options awarded to employees under the AstraZeneca Share Option Plan and the
AstraZeneca Savings-Related Share Option Plan as the exercise price is equivalent
to the market value at the date of grant. Under US GAAP, the cost is calculated
as the difference between the option price and
the market price at the date of grant or, for variable plans, at the end of the
reporting period (until measurement date). Under the requirements of APB Opinion
No. 25 any compensation cost would be amortised over the period from the date
the options are granted to the date they are first exercisable. Under US GAAP,
in the net income reconciliation, the Group has adjusted for stock compensation
costs calculated under APB Opinion No. 25.
Statement of cash flows: Basis of preparation
AstraZenecas
statement of Group cash flow is prepared in accordance with UK Financial Reporting
Standard 1 (Revised 1996) (FRS 1),
whose objective and principles are similar to those set out in SFAS 95, Statement
of Cash Flows. The principal differences between the standards relate to
classification. Under FRS 1, the Company presents its cash flows for (a) operating
activities; (b) dividends received from joint ventures and associates; (c) returns
on investments and servicing of finance;
(d) |
tax paid; (e) capital expenditure and financial investment; (f) acquisitions and disposals; (g) dividends paid to shareholders; |
(h) |
management of liquid resources; and |
(i) |
financing. SFAS 95 requires only three categories of cash flow activity being |
(a) |
operating; (b) investing; and (c) financing. |
|
Cash flows from taxation, returns on investments and servicing of finance and dividends received from joint ventures and associates under FRS 1 would be included as operating activities
under SFAS 95; capital expenditure and financial investment and acquisitions and disposals would be included as investing activities; and distributions would be included as a financing activity under SFAS 95. Under FRS 1 cash comprises cash in hand
and deposits repayable on demand, less overdrafts repayable on demand; and liquid resources comprise current asset investments held as readily disposable stores of value. Under SFAS 95 cash equivalents, comprising short term highly liquid
investments, generally with original maturities of three months or less, are grouped together with cash; short term borrowings repayable on demand would not be included within cash and cash equivalents and movements on those borrowings would be
included in financing activities. |
|
New accounting standards
SFAS 143 Accounting
for Asset
Retirement Obligation addresses the accounting and reporting for obligations
associated with the retirement of long-lived assets and the associated asset
retirement costs. It is effective for accounting periods beginning on or after
15 June 2002. The adoption of SFAS 143 did not have a material effect on the
results or net assets of AstraZeneca. |
|
SFAS 146 Accounting
for Costs Associated with Exit or Disposal Activities, issued on
30 July 2002, requires costs associated with exit or disposal activities
to be recognised when the costs are incurred rather than at the date of
commitment to an exit or disposal plan. The provisions are effective for
disposals initiated after 31 December 2002 and restatement of prior periods
is not required. The adoption of SFAS 146 did not have a material effect
on the results or net assets of AstraZeneca and
there was no impact on prior periods. |
Back to Contents
|
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Additional Information
for US Investors |
115
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New accounting standards
(continued)
SFAS No. 148 Accounting
for Stock Based Compensation Transition and Disclosure an
Amendment of FASB Statement No. 123 permits two additional transition
methods for entities that change from the intrinsic method to the fair
value based method of accounting for stock-based employee compensation.
The statement also requires new disclosures (including the ramp-up
effect of adopting fair value based accounting for stock-based employee
compensation on reported results) and that those effects be disclosed
more prominently by specifying the form, content and location of those
disclosures. The transition guidance and annual disclosure provisions
of SFAS No. 148 are effective for fiscal years ending after 15 December
2002. AstraZeneca has not adopted the fair value based method of accounting
for stock-based employee compensation and, therefore, is not subject
to the transition provisions of SFAS No. 148.
SFAS No. 149 Amendment
of Statement 133 on Derivative Instruments and Hedging Activities that
was issued on 30 April 2003, amends and clarifies accounting for certain
derivative instruments (particularly contracts with certain embedded
derivative instruments) and hedging activities under SFAS No. 133 Accounting
for Derivative Instruments and Hedging Activities. Except where
its provisions clarify SFAS No. 133 implementation issues previously
effective, the standard applies prospectively for contracts entered
into, and hedging activities designated after, 30 June 2003. The adoption
of SFAS No. 149 did not have a material effect on the results or net
assets of AstraZeneca. |
|
FIN No. 46R Consolidation
of Variable Interest Entities is intended to address perceived
weaknesses in accounting for special purpose or off-balance sheet entities
and provides guidance on identifying the party with a controlling financial
interest resulting from arrangements or financial interests as opposed
to voting rights. If a party has a controlling financial interest in
a variable interest entity (VIE) then the assets, liabilities
and results of the VIE should be included in the consolidated financial
statements of the party. FIN46R applied to all VIEs or potential VIEs
referred to as special purpose entities for periods ending on or after
15 December 2003. Adoption for all other entities is required for periods
ending on or after 15 March 2004. FIN46R has not, and is not expected
to have, a material effect on the results or net assets of AstraZeneca.
SFAS No. 132 (Revised
2003) Employers Disclosures
about Pensions and Other Post-Retirement Benefits was issued
on 23 December 2003 and is effective, subject to certain exemptions,
for fiscal years ending on or after 15 December 2003. AstraZeneca
has complied with the new requirements in this Annual Report and
Form 20-F Information. |
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Back to Contents
116 |
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Additional Information
for US Investors |
|
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Additional
Information for US Investors continued |
|
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Differences between UK and US accounting
principles (continued)
Net income
As a result of the significant difference
between the UK GAAP and US GAAP treatment of the combination of Astra
and Zeneca in the year of acquisition, and in the results of preceding
periods, condensed statements of operations and cash flow under US
GAAP have been prepared for the benefit of US investors.
The following is a summary of the
material adjustments to net income and shareholders equity
which would have been required if US GAAP had been applied instead
of UK GAAP. |
|
|
2003 |
|
2002 |
|
2001 |
|
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
Net income, as shown in the consolidated
statements of income before exceptional items |
3,036 |
|
3,186 |
|
3,044 |
|
|
|
|
|
|
|
|
Exceptional items after tax |
|
|
(350 |
) |
(138 |
) |
|
|
|
|
|
|
|
Net income for the period under UK
GAAP |
3,036 |
|
2,836 |
|
2,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to conform
to US GAAP
Purchase accounting adjustments
(including goodwill and intangibles) |
|
|
|
|
|
|
Deemed
acquisition of Astra |
|
|
|
|
|
|
Amortisation
and other acquisition adjustments |
(952 |
) |
(864 |
) |
(1,514 |
) |
|
|
|
|
|
|
|
Others |
59 |
|
55 |
|
|
|
|
|
|
|
|
|
|
Capitalisation, less disposals
and amortisation of interest |
17 |
|
46 |
|
57 |
|
|
|
|
|
|
|
|
Deferred taxation |
|
|
|
|
|
|
On
fair values of Astra |
266 |
|
239 |
|
249 |
|
|
|
|
|
|
|
|
Others |
(91 |
) |
(99 |
) |
(198 |
) |
|
|
|
|
|
|
|
Pension and other post-retirement
benefits expense |
(43 |
) |
(46 |
) |
(29 |
) |
|
|
|
|
|
|
|
Software costs |
(18 |
) |
(46 |
) |
(10 |
) |
|
|
|
|
|
|
|
Restructuring costs |
|
|
|
|
(22 |
) |
|
|
|
|
|
|
|
Share based compensation |
(12 |
) |
33 |
|
(7 |
) |
|
|
|
|
|
|
|
Fair value of derivative
financial instruments |
10 |
|
93 |
|
18 |
|
|
|
|
|
|
|
|
Deferred income recognition |
14 |
|
61 |
|
(75 |
) |
|
|
|
|
|
|
|
Unrealised losses on foreign
exchange and others |
(18 |
) |
(1 |
) |
(10 |
) |
|
|
|
|
|
|
|
Net income before cumulative
effect of change in accounting policy |
2,268 |
|
2,307 |
|
1,365 |
|
|
|
|
|
|
|
|
Cumulative effect of change
in accounting policy, net of tax, on adoption of SFAS No. 133 |
|
|
|
|
32 |
|
|
|
|
|
|
|
|
Net income in accordance
with US GAAP |
2,268 |
|
2,307 |
|
1,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Back to Contents
|
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Additional Information
for US Investors |
117
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|
|
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|
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|
|
|
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|
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|
|
|
|
|
|
|
|
Differences between UK and US accounting principles (continued)
US GAAP Condensed Consolidated Statement of Operations
|
|
2003 |
|
2002 |
|
2001 |
|
For the years ended 31 December |
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
Sales |
18,849 |
|
17,841 |
|
16,222 |
|
|
|
|
|
|
|
|
|
Cost of sales |
(4,469 |
) |
(4,520 |
) |
(4,198 |
) |
|
|
|
|
|
|
|
|
Distribution costs |
(162 |
) |
(141 |
) |
(122 |
) |
|
|
|
|
|
|
|
|
Research and development |
(3,451 |
) |
(3,069 |
) |
(2,687 |
) |
|
|
|
|
|
|
|
Selling, general and administrative expenses |
(6,941 |
) |
(6,165 |
) |
(5,219 |
) |
|
|
|
|
|
|
|
Acquisition related costs |
|
|
|
|
(224 |
) |
|
|
|
|
|
|
|
Amortisation of intangibles and goodwill |
(881 |
) |
(1,052 |
) |
(1,769 |
) |
|
|
|
|
|
|
|
Other income |
225 |
|
308 |
|
283 |
|
|
|
|
|
|
|
|
|
Operating income |
3,170 |
|
3,202 |
|
2,286 |
|
|
|
|
|
|
|
|
Net interest income |
63 |
|
140 |
|
188 |
|
|
|
|
|
|
|
|
Income from continuing
operations before taxation |
3,233 |
|
3,342 |
|
2,474 |
|
|
|
|
|
|
|
|
|
Taxes on income from continuing operations |
(965 |
) |
(1,035 |
) |
(1,109 |
) |
|
|
|
|
|
|
|
Net income from continuing
operations |
2,268 |
|
2,307 |
|
1,365 |
|
|
|
|
|
|
|
|
|
Net income before cumulative
effect of change in accounting policy |
2,268 |
|
2,307 |
|
1,365 |
|
|
|
|
|
|
|
|
|
Cumulative effect of change in accounting policy on adoption of SFAS No. 133 |
|
|
|
|
32 |
|
|
|
|
|
|
|
|
Net income for the year |
2,268 |
|
2,307 |
|
1,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of $0.25 Ordinary Shares in issue (millions) |
1,709 |
|
1,733 |
|
1,758 |
|
|
|
|
|
|
|
|
Dilutive impact of share options outstanding (millions) |
3 |
|
2 |
|
3 |
|
|
|
|
|
|
|
|
Diluted weighted average number
of $0.25 Ordinary Shares in
accordance with US GAAP (millions) |
1,712 |
|
1,735 |
|
1,761 |
|
|
|
|
|
|
|
|
Net income per $0.25 Ordinary
Share and ADS before change in accounting policy in
accordance with US
GAAP basic and diluted |
$1.33 |
|
$1.33 |
|
$0.77 |
|
|
|
|
|
|
|
|
Net income per $0.25 Ordinary
Share and ADS after change in
accounting policy in accordance with US GAAP basic
and diluted |
$1.33 |
|
$1.33 |
|
$0.79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US GAAP Statement of Comprehensive Income |
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
For the years ended 31 December |
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
Net income for the year |
2,268 |
|
2,307 |
|
1,397 |
|
|
|
|
|
|
|
|
Exchange gains/(losses) net of tax |
3,635 |
|
2,919 |
|
(1,473 |
) |
|
|
|
|
|
|
|
Other movements, net of tax |
(100 |
) |
(73 |
) |
|
|
|
|
|
|
|
|
|
Total Comprehensive Income |
5,803 |
|
5,153 |
|
(76 |
) |
|
|
|
|
|
|
|
|
Other movements in 2003 include the recognition
of a minimum liability under SFAS No. 87 Employers Accounting for
Pensions of $177m. Tax effects on exchange gains/(losses) were $(297)m
and on other
movements $67m.
The cumulative exchange gains and losses (net of tax) on the translation of foreign
currency financial statements under US GAAP are set out in the following note:
|
2003 |
|
2002 |
|
2001 |
|
For the years ended 31 December |
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
Balance at 1 January |
(1,399 |
) |
(4,318 |
) |
(2,845 |
) |
|
|
|
|
|
|
|
Movement in year |
3,635 |
|
2,919 |
|
(1,473 |
) |
|
|
|
|
|
|
|
Balance at 31 December |
2,236 |
|
(1,399 |
) |
(4,318 |
) |
|
|
|
|
|
|
|
|
The cumulative other movements (net of tax) at 31 December 2003 was a charge of $154m (2002 $73m, 2001 $nil).
Back to Contents
118 |
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Additional Information
for US Investors |
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
Information for US Investors continued |
|
|
|
|
|
|
|
|
|
|
Differences between UK and US accounting principles (continued)
Stock compensation
In the Groups
Financial Statements prepared under UK GAAP, no cost is accrued for the share
options awarded to employees under the AstraZeneca Share Option Plan, and the
AstraZeneca Savings-Related Share Option Plan as the exercise price is equivalent
to the market value at the date of grant. Under US GAAP the cost is calculated
as the difference between the option price and
the market price at the date of grant or, for variable plans, at the end of the
reporting period (until measurement date). Under the requirements of APB Opinion
No. 25 any compensation cost would be amortised over the period from the date
the options are granted to the date they are first exercisable. Under US GAAP
in the net income reconciliation, the Group has adjusted for stock compensation
costs as calculated under APB Opinion No. 25. SFAS No.123 Accounting for
Stock-Based Compensation sets out an alternative methodology for recognising
the compensation cost based on the fair value at grant date. Had the Group adopted
this methodology, the incremental effect on net income under US GAAP is shown
below:
|
|
2003 |
|
2002 |
|
2001 |
|
|
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
|
Net income under
US GAAP as reported |
2,268 |
|
2,307 |
|
1,397 |
|
|
|
|
|
|
|
|
|
Compensation cost under APB
No. 25 |
12 |
|
(33 |
) |
7 |
|
|
|
|
|
|
|
|
|
Compensation cost under
SFAS No. 123 |
(154 |
) |
(122 |
) |
(83 |
) |
|
|
|
|
|
|
|
|
Pro forma net income |
|
2,126 |
|
2,152 |
|
1,321 |
|
|
|
|
|
|
|
|
|
Pro forma net income per $0.25
Ordinary Share and
ADS in accordance with US GAAP
(basic and diluted):
As reported |
$1.33 |
|
$1.33 |
|
$0.79 |
|
|
|
|
|
|
|
|
|
Pro forma |
|
$1.24 |
|
$1.24 |
|
$0.75 |
|
|
|
|
|
|
|
|
|
|
The fair value of options granted is estimated, based on the stock price at the grant date, using the Black-Scholes option pricing model with the following assumptions:
|
2003 |
|
2002 |
|
2001 |
|
|
|
|
|
|
|
|
Dividend yield |
2.0% |
|
1.6% |
|
1.5% |
|
|
|
|
|
|
|
|
Expected volatility |
25.0% |
|
30.0% |
|
20.0% |
|
|
|
|
|
|
|
|
Risk-free interest rate |
4.3% |
|
5.2% |
|
4.2% |
|
|
|
|
|
|
|
|
Expected lives: AstraZeneca Share Option Plan |
6.0 years |
|
6.0 years |
|
6.0 years |
|
|
|
|
|
|
|
|
Expected lives: SAYE Plan |
4.3 years |
|
4.3 years |
|
4.3 years |
|
|
|
|
|
|
|
|
|
In the initial phase-in period, the effects of applying SFAS No.123 for disclosing compensation cost may not be representative of the effects on pro forma net income and earnings per share for future years.
Back to Contents
|
AstraZeneca
Annual Report and
Form 20-F Information
2003
|
Additional Information
for US Investors |
119
|
|
|
|
|
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|
|
Differences between UK and
US accounting principles (continued) |
|
|
|
Pension and post-retirement benefits |
|
|
|
|
|
|
|
|
For the purposes of
US GAAP, the pension costs of the major UK retirement plan and of the
retirement plans of the major non-UK subsidiaries have been restated
in the following tables in accordance with the requirements of SFAS 132.
These plans comprise a substantial portion of the actuarial liabilities
of all AstraZeneca retirement plans. The changes in projected benefit
obligations, plan assets and details of the funded status of these retirement
plans, together with the changes in the accumulated other post-retirement
benefit obligations, under SFAS 132 are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
Pension |
|
post-retirement |
|
|
|
|
benefits |
|
|
|
benefits |
|
|
|
|
|
|
Change in projected benefit obligation |
2003 |
|
2002 |
|
2003 |
|
2002 |
|
|
$m |
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year |
5,026 |
|
4,337 |
|
210 |
|
205 |
|
|
|
|
|
|
|
|
|
|
Service cost |
123 |
|
114 |
|
9 |
|
8 |
|
|
|
|
|
|
|
|
|
|
Interest cost |
290 |
|
263 |
|
14 |
|
14 |
|
|
|
|
|
|
|
|
|
|
Participant contributions |
22 |
|
18 |
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss |
508 |
|
80 |
|
24 |
|
23 |
|
|
|
|
|
|
|
|
|
|
Special termination benefits |
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement and curtailment |
4 |
|
|
|
|
|
(24 |
) |
|
|
|
|
|
|
|
|
|
Benefits paid |
(226 |
) |
(206 |
) |
(19 |
) |
(19 |
) |
|
|
|
|
|
|
|
|
|
Exchange |
495 |
|
408 |
|
3 |
|
3 |
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year |
6,242 |
|
5,026 |
|
242 |
|
210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
Pension
|
|
post-retirement
|
|
|
|
|
benefits
|
|
|
|
benefits
|
|
|
|
|
|
|
Change in plan assets |
2003 |
|
2002 |
|
2003 |
|
2002 |
|
|
$m |
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
|
|
Fair value at beginning of year |
4,038 |
|
3,753 |
|
133 |
|
|
|
|
|
|
|
|
|
|
|
|
Actual return on plan assets |
551 |
|
(142 |
) |
35 |
|
(16 |
) |
|
|
|
|
|
|
|
|
|
Group contribution |
383 |
|
284 |
|
43 |
|
161 |
|
|
|
|
|
|
|
|
|
|
Participant contributions |
22 |
|
18 |
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
Settlement and curtailment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits paid |
(226 |
) |
(206 |
) |
(17 |
) |
(12 |
) |
|
|
|
|
|
|
|
|
|
Exchange |
406 |
|
331 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year |
5,174 |
|
4,038 |
|
195 |
|
133 |
|
|
|
|
|
|
|
|
|
|
Funded status of plans |
(1,068 |
) |
(988 |
) |
(47 |
) |
(77 |
) |
|
|
|
|
|
|
|
|
|
Unrecognised net loss |
1,220 |
|
938 |
|
65 |
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost not recognised |
35 |
|
29 |
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
Unrecognised net obligation on implementation |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
187 |
|
(18 |
) |
9 |
|
(77 |
) |
|
|
|
|
|
|
|
|
|
Adjustments to recognise minimum liability: |
|
|
|
|
|
|
|
|
Intangible assets |
(39 |
) |
(45 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income |
(221 |
) |
(45 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued benefit asset/(liability) |
(73 |
) |
(108 |
) |
9 |
|
(77 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2003, the projected
benefit obligation, accumulated benefit obligation and fair value of the
plan assets in respect of the pension plans above with accumulated benefit
obligations in excess of plan assets were $5,287m, $4,524m and $4,249m,
(2002 $4,249m, $3,557m and $3,296m) respectively. The total accumulated
benefit obligations for the pension plans was $5,318m (2002 $4,214m). The
measurement date for the plan assets and benefit obligations set out above
was 31 December 2003. Contributions to the plans in 2004 are estimated
to be $111m. |
|
Back to Contents
120 |
|
AstraZeneca
Annual Report and
Form 20-F Information
2003
|
Additional
Information
for US Investors
|
|
|
|
|
|
|
Additional
Information for US Investors continued |
|
|
|
Differences between UK and
US accounting principles (continued) |
|
|
|
Assumed discount rates
and rates of increase in remuneration used in calculating the projected
benefit obligations together with long term rates of return on plan assets
vary according to the economic conditions of the country in which the
retirement plans are situated. The weighted average rates used for calculation
of year end benefit obligations and forecast benefit cost in the main
retirement plans and other benefit obligations for SFAS 132 purposes
were as
follows: |
|
|
|
|
Pension benefits |
|
Other
post-retirement benefits |
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
2003 |
|
2002 |
|
2001 |
|
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
5.5 |
|
5.8 |
|
6.0 |
|
5.9 |
|
6.6 |
|
7.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term rate of increase in remuneration |
4.0 |
|
4.1 |
|
4.4 |
|
5.0 |
|
4.8 |
|
n/a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected long term return on assets |
6.6 |
|
6.4 |
|
6.5 |
|
7.8 |
|
7.8 |
|
n/a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Group has assumed a long term rate of
increase in healthcare costs of 10%, reducing to 5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
benefits
|
|
Other
post-retirement benefits
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
2001 |
|
2003 |
|
2002 |
|
2001 |
|
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic cost |
|
|
|
|
|
|
|
|
|
|
|
|
Service cost present value of benefits |
|
|
|
|
|
|
|
|
|
|
|
|
accruing during the year |
123 |
|
114 |
|
102 |
|
9 |
|
8 |
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost on projected benefit obligations |
290 |
|
263 |
|
243 |
|
14 |
|
14 |
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected return on assets |
(280 |
) |
(263 |
) |
(242 |
) |
(14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amortisation and deferral |
34 |
|
28 |
|
39 |
|
2 |
|
(1 |
) |
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic cost for the year |
167 |
|
142 |
|
142 |
|
11 |
|
21 |
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
It is estimated that a one percentage point
change in the weighted average healthcare costs trend would have the following
effects on the accumulated benefit obligation and net periodic cost at
31 December 2003: |
|
|
One
percentage point |
|
|
|
|
|
Increase |
|
Decrease |
|
|
$m |
|
$m |
|
|
|
|
|
|
Accumulated benefit obligation |
13 |
|
(11 |
) |
|
|
|
|
|
Net periodic cost |
2 |
|
(2 |
) |
|
|
|
|
|
|
|
The weighted average allocation of pension
and other post-retirement plan assets was as follows: |
|
|
|
|
|
2003 |
|
2002 |
|
|
% |
|
% |
|
|
|
|
|
|
Equities |
49.2 |
|
40.6 |
|
|
|
|
|
|
Bonds |
48.8 |
|
56.5 |
|
|
|
|
|
|
Other |
2.0 |
|
2.9 |
|
|
|
|
|
|
|
|
|
The benefits expected to be paid in the
future are as follows: |
|
|
|
|
|
|
$m |
|
|
|
|
2004 |
267 |
|
|
|
|
2005 |
275 |
|
|
|
|
2006 |
284 |
|
|
|
|
2007 |
293 |
|
|
|
|
2008 |
302 |
|
|
|
|
2009 2013 |
1,695 |
|
|
|
|
Back to Contents
|
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Additional Information
for US Investors
|
121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Differences between UK and US accounting principles (continued)
Taxation
|
2003 |
|
2002 |
|
2001 |
|
Years ended 31 December |
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
Taxes on income from continuing operations |
|
|
|
|
|
|
UK taxation |
|
|
|
|
|
|
Corporation
tax |
138 |
|
165 |
|
147 |
|
|
|
|
|
|
|
|
Double taxation
relief |
(23 |
) |
(7 |
) |
(4 |
) |
|
|
|
|
|
|
|
Deferred taxation |
88 |
|
40 |
|
10 |
|
|
|
|
|
|
|
|
Overseas taxation |
|
|
|
|
|
|
Overseas taxes |
878 |
|
921 |
|
831 |
|
|
|
|
|
|
|
|
Adjustments
in respect of prior periods |
35 |
|
(51 |
) |
30 |
|
|
|
|
|
|
|
|
Deferred taxation |
(151 |
) |
(33 |
) |
95 |
|
|
|
|
|
|
|
|
Share of taxation of joint ventures and
associates |
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes on income from continuing operations |
965 |
|
1,035 |
|
1,109 |
|
|
|
|
|
|
|
|
The table below reconciles the UK statutory
tax charge to the Groups actual charge on income from continuing operations.
|
2003 |
|
2002 |
|
2001 |
|
Years ended 31 December |
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
Income on continuing operations |
3,233 |
|
3,342 |
|
2,506 |
|
|
|
|
|
|
|
|
Taxation charge at UK corporation tax rate of 30% for 2003 (30% for 2002, 30% for 2001) |
970 |
|
1,002 |
|
751 |
|
|
|
|
|
|
|
|
Differences in effective overseas tax rates |
(41 |
) |
6 |
|
48 |
|
|
|
|
|
|
|
|
Items not deductible for tax purposes |
89 |
|
83 |
|
352 |
|
|
|
|
|
|
|
|
Items not chargeable for tax purposes |
(88 |
) |
(110 |
) |
(76 |
) |
|
|
|
|
|
|
|
Adjustments in respect of prior periods |
35 |
|
(51 |
) |
30 |
|
|
|
|
|
|
|
|
Exceptional items |
|
|
105 |
|
4 |
|
|
|
|
|
|
|
|
Tax on income from continuing operations |
965 |
|
1,035 |
|
1,109 |
|
|
|
|
|
|
|
|
In 2003, claims amounting to $95m (2002 $43m) for tax relief arising as a result of a restructuring of the AMI joint venture in 1998 were made. Under US GAAP, these reliefs are adjusted against the goodwill arising on
the restructuring and included in other adjustments.
Back to Contents
122 |
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Additional Information
for US Investors |
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
Information for US Investors continued |
|
|
|
|
|
|
Differences between UK and US accounting principles (continued)
Shareholders equity |
2003 |
|
2002 |
|
|
$m |
|
$m |
|
|
|
|
|
|
Total shareholders equity under UK
GAAP |
13,178 |
|
11,172 |
|
|
|
|
|
|
|
|
|
|
|
Adjustments to conform to
US GAAP
Purchase accounting adjustments (including
goodwill and intangibles) |
|
|
|
|
Deemed acquisition of Astra |
|
|
|
|
Goodwill |
14,311 |
|
12,692 |
|
|
|
|
|
|
Tangible and intangible fixed assets |
7,661 |
|
7,707 |
|
|
|
|
|
|
Others |
145 |
|
86 |
|
|
|
|
|
|
Capitalisation, less disposals
and amortisation of interest |
255 |
|
238 |
|
|
|
|
|
|
Deferred taxation |
|
|
|
|
On fair value of Astra |
(2,313 |
) |
(2,305 |
) |
|
|
|
|
|
Others |
(207 |
) |
(159 |
) |
|
|
|
|
|
Dividend |
914 |
|
808 |
|
|
|
|
|
|
Pension and other post-retirement
benefits expense |
(534 |
) |
(295 |
) |
|
|
|
|
|
Software costs capitalised |
46 |
|
64 |
|
|
|
|
|
|
Fair value of derivative
financial instruments |
109 |
|
99 |
|
|
|
|
|
|
Deferred income recognition |
|
|
(14 |
) |
|
|
|
|
|
Others |
89 |
|
90 |
|
|
|
|
|
|
Shareholders equity
in accordance with US GAAP |
33,654 |
|
30,183 |
|
|
|
|
|
|
Acquired intangible assets
Details of the carrying amounts of intangible
fixed assets and past and projected amortisation expenses are set out below.
|
|
|
2003 |
|
|
|
2002 |
|
|
|
|
|
|
|
Gross
carrying
amount
$m |
|
Accumulated
amortisation
$m |
|
Gross
carrying
amount
$m |
|
Accumulated
amortisation
$m |
|
|
|
|
|
|
|
|
|
|
Product rights |
13,733 |
|
(5,274 |
) |
12,058 |
|
(3,672 |
) |
|
|
|
|
|
|
|
|
|
Marketing and distribution rights |
1,659 |
|
(831 |
) |
1,513 |
|
(600 |
) |
|
|
|
|
|
|
|
|
|
Software |
462 |
|
(305 |
) |
354 |
|
(241 |
) |
|
|
|
|
|
|
|
|
|
Others |
421 |
|
(329 |
) |
408 |
|
(294 |
) |
|
|
|
|
|
|
|
|
|
Total |
16,275 |
|
(6,739 |
) |
14,333 |
|
(4,807 |
) |
|
|
|
|
|
|
|
|
|
Aggregate amortisation expense
|
$m |
|
|
|
|
For year ended 31 December 2003 |
1,245 |
|
|
|
|
For year ended 31 December 2002 |
1,154 |
|
|
|
|
For year ended 31 December 2001 |
1,135 |
|
|
|
|
|
Estimated amortisation expense
|
$m |
|
|
|
|
For year ended 31 December 2004 |
1,228 |
|
|
|
|
For year ended 31 December 2005 |
1,228 |
|
|
|
|
For year ended 31 December 2006 |
1,216 |
|
|
|
|
For year ended 31 December 2007 |
1,128 |
|
|
|
|
For year ended 31 December 2008 |
1,128 |
|
|
|
|
|
Back to Contents
|
AstraZeneca
Annual Report and
Form 20-F Information
2003
|
Additional Information
for US Investors |
123
|
|
|
|
|
|
|
|
|
Differences between UK and US accounting principles (continued)
The weighted average amortisation period in respect of each class of intangible asset is as follows:
Product rights |
13 years |
|
Marketing and distribution rights |
16 years |
|
Software |
4 years |
|
Other |
8 years |
|
Goodwill
The changes in the carrying amount of goodwill for the two years ended 31 December 2003 were as follows:
|
$m |
|
|
|
|
Balance as at 1 January 2002 |
11,943 |
|
|
|
|
Acquired |
62 |
|
|
|
|
Reclassification of assembled workforce (on adoption of SFAS 141) |
364 |
|
|
|
|
Exchange adjustments |
1,278 |
|
|
|
|
Balance as at 1 January 2003 |
13,647 |
|
|
|
|
Acquired |
1 |
|
|
|
|
Exchange adjustments |
1,658 |
|
|
|
|
Balance as at 31 December 2003 |
15,306 |
|
|
|
|
Adoption of SFAS 142 in 2002 resulted in the cessation of amortisation of goodwill. Had goodwill not been amortised in 2001, net income would have increased from $1,397m to $2,125m with a corresponding increase in
basic and diluted earnings per share from $0.77 to $1.21.
US GAAP Condensed Consolidated Statement of Cash Flows
|
2003 |
|
2002 |
|
2001 |
|
For the years ended 31 December |
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
Cash flows from operating activities |
3,416 |
|
4,833 |
|
3,126 |
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
Movement in short term investments and fixed deposits |
771 |
|
(806 |
) |
260 |
|
|
|
|
|
|
|
|
New fixed asset investments |
(120 |
) |
(1 |
) |
(5 |
) |
|
|
|
|
|
|
|
Disposal of fixed assets |
38 |
|
66 |
|
44 |
|
|
|
|
|
|
|
|
Acquisitions and disposals |
80 |
|
|
|
(44 |
) |
|
|
|
|
|
|
|
Capital expenditure |
(1,515 |
) |
(1,608 |
) |
(1,582 |
) |
|
|
|
|
|
|
|
Net cash outflows from investing activities |
(746 |
) |
(2,349 |
) |
(1,327 |
) |
|
|
|
|
|
|
|
Net cash flow before financing |
2,670 |
|
2,484 |
|
1,799 |
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
Equity dividends paid |
(1,222 |
) |
(1,234 |
) |
(1,236 |
) |
|
|
|
|
|
|
|
Re-purchase of AstraZeneca PLC Ordinary Shares |
(1,107 |
) |
(1,154 |
) |
(994 |
) |
|
|
|
|
|
|
|
Net (decrease)/increase in short term borrowings |
|
|
(13 |
) |
7 |
|
|
|
|
|
|
|
|
Loans (repaid)/new loans |
(345 |
) |
(105 |
) |
28 |
|
|
|
|
|
|
|
|
Net cash outflows from financing activities |
(2,674 |
) |
(2,506 |
) |
(2,195 |
) |
|
|
|
|
|
|
|
Decrease in cash |
(4 |
) |
(22 |
) |
(396 |
) |
|
|
|
|
|
|
|
Cash: |
|
|
|
|
|
|
At 1 January |
524 |
|
510 |
|
908 |
|
|
|
|
|
|
|
|
Decrease in cash |
(4 |
) |
(22 |
) |
(396 |
) |
|
|
|
|
|
|
|
Exchange movements |
61 |
|
36 |
|
(2 |
) |
|
|
|
|
|
|
|
At 31 December |
581 |
|
524 |
|
510 |
|
|
|
|
|
|
|
|
Interest paid was $32m in 2003, $96m in 2002 and $84m in 2001. Interest received was $117m in 2003, $142m in 2002 and $232m in 2001. Tax paid was $886m in 2003, $795m in 2002 and $792m in 2001.
Back to Contents
124 |
|
AstraZeneca
Annual Report and
Form 20-F Information
2003
|
Group Financial
Record UK
GAAP
|
|
|
|
|
|
|
Group
Financial Record UK
GAAP |
|
For the years ended 31 December |
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
|
|
|
|
Turnover and profits |
|
|
|
|
|
|
|
|
|
|
Group turnover |
18,257 |
|
17,882 |
|
16,222 |
|
17,841 |
|
18,849 |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
(5,849 |
) |
(5,270 |
) |
(4,232 |
) |
(4,520 |
) |
(4,469 |
) |
|
|
|
|
|
|
|
|
|
|
|
Distribution costs |
(343 |
) |
(286 |
) |
(122 |
) |
(141 |
) |
(162 |
) |
|
|
|
|
|
|
|
|
|
|
|
Research and development |
(2,923 |
) |
(2,893 |
) |
(2,773 |
) |
(3,069 |
) |
(3,451 |
) |
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
(6,585 |
) |
(5,691 |
) |
(5,509 |
) |
(6,348 |
) |
(6,856 |
) |
|
|
|
|
|
|
|
|
|
|
|
Other income |
189 |
|
266 |
|
368 |
|
243 |
|
200 |
|
|
|
|
|
|
|
|
|
|
|
|
Group operating profit |
2,746 |
|
4,008 |
|
3,954 |
|
4,006 |
|
4,111 |
|
|
|
|
|
|
|
|
|
|
|
|
Group operating profit before exceptional items |
3,908 |
|
4,330 |
|
4,156 |
|
4,356 |
|
4,111 |
|
|
|
|
|
|
|
|
|
|
|
|
Exceptional items charged to operating profit |
(1,162 |
) |
(322 |
) |
(202 |
) |
(350 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of operating profit of joint ventures and associates |
(7 |
) |
(149 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exceptional items |
(776 |
) |
(150 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profits on sale of fixed assets |
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend income |
|
|
3 |
|
8 |
|
1 |
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
Net interest |
(4 |
) |
135 |
|
105 |
|
30 |
|
89 |
|
|
|
|
|
|
|
|
|
|
|
|
Profit on ordinary activities before taxation |
1,959 |
|
3,847 |
|
4,077 |
|
4,037 |
|
4,202 |
|
|
|
|
|
|
|
|
|
|
|
|
Taxation |
(661 |
) |
(1,560 |
) |
(1,160 |
) |
(1,177 |
) |
(1,143 |
) |
|
|
|
|
|
|
|
|
|
|
|
Profit on ordinary activities after taxation |
1,298 |
|
2,287 |
|
2,917 |
|
2,860 |
|
3,059 |
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to minorities |
(1 |
) |
(10 |
) |
(11 |
) |
(24 |
) |
(23 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net profit for the financial year |
1,297 |
|
2,277 |
|
2,906 |
|
2,836 |
|
3,036 |
|
|
|
|
|
|
|
|
|
|
|
|
Return on sales |
|
|
|
|
|
|
|
|
|
|
Group operating profit before exceptional items as a percentage of sales |
21.4 |
% |
24.2 |
% |
25.6 |
% |
24.4 |
% |
21.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to fixed charges (UK GAAP) |
10.1 |
|
25.2 |
|
42.8 |
|
45.6 |
|
103.5 |
|
|
|
|
|
|
|
|
|
|
|
|
Back to Contents
|
AstraZeneca
Annual Report and
Form 20-F Information
2003
|
Group Financial
Report UK
GAAP |
125
|
|
|
|
|
|
|
|
|
At 31 December |
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet |
|
|
|
|
|
|
|
|
|
|
Fixed assets (tangible and intangible) and goodwill |
9,717 |
|
7,908 |
|
8,109 |
|
9,404 |
|
10,420 |
|
|
|
|
|
|
|
|
|
|
|
|
Fixed asset investments |
185 |
|
11 |
|
23 |
|
46 |
|
220 |
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
10,393 |
|
10,938 |
|
10,364 |
|
12,126 |
|
12,933 |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
20,295 |
|
18,857 |
|
18,496 |
|
21,576 |
|
23,573 |
|
|
|
|
|
|
|
|
|
|
|
|
Creditors due within one year |
(7,019 |
) |
(6,897 |
) |
(6,480 |
) |
(8,215 |
) |
(7,695 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total assets less current liabilities |
13,276 |
|
11,960 |
|
12,016 |
|
13,361 |
|
15,878 |
|
|
|
|
|
|
|
|
|
|
|
|
Creditors due after more than one year |
(1,202 |
) |
(927 |
) |
(787 |
) |
(362 |
) |
(355 |
) |
|
|
|
|
|
|
|
|
|
|
|
Provisions for liabilities and charges |
(1,765 |
) |
(1,617 |
) |
(1,600 |
) |
(1,773 |
) |
(2,266 |
) |
|
|
|
|
|
|
|
|
|
|
|
Minority equity interests |
46 |
|
27 |
|
43 |
|
54 |
|
79 |
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders funds equity interests |
10,263 |
|
9,389 |
|
9,586 |
|
11,172 |
|
13,178 |
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders funds and minority interests |
10,309 |
|
9,416 |
|
9,629 |
|
11,226 |
|
13,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended 31 December |
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow |
|
|
|
|
|
|
|
|
|
|
Net cash inflow from operating activities |
3,113 |
|
4,183 |
|
3,762 |
|
5,593 |
|
4,226 |
|
|
|
|
|
|
|
|
|
|
|
|
Dividends received from joint ventures and associates |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Returns on investments and servicing of finance |
29 |
|
19 |
|
156 |
|
35 |
|
76 |
|
|
|
|
|
|
|
|
|
|
|
|
Tax paid |
(1,020 |
) |
(648 |
) |
(792 |
) |
(795 |
) |
(886 |
) |
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure and financial investment |
(2,731 |
) |
(1,426 |
) |
(1,543 |
) |
(1,543 |
) |
(1,597 |
) |
|
|
|
|
|
|
|
|
|
|
|
Acquisitions and disposals |
1,978 |
|
740 |
|
(44 |
) |
|
|
80 |
|
|
|
|
|
|
|
|
|
|
|
|
Equity dividends paid to shareholders |
(1,216 |
) |
(1,220 |
) |
(1,236 |
) |
(1,234 |
) |
(1,222 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash inflow before management of liquid resources and financing |
156 |
|
1,648 |
|
303 |
|
2,056 |
|
677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Back to Contents
126 |
|
AstraZeneca
Annual Report and
Form 20-F Information
2003
|
Group Financial
Record US
GAAP
|
|
|
|
|
|
|
Group
Financial Record US
GAAP |
|
Group Financial Record US
GAAP
The selected financial data set out below for
each of the years in the five year period ended 31 December 2003, has been extracted
or derived from audited Financial Statements.
The selected financial data should be read in conjunction with, and are qualified
in their entirety by reference to, the Financial Statements of AstraZeneca and
the notes thereto, which are included elsewhere in this
document.
Consolidated income statement data |
|
|
|
|
|
|
|
|
|
|
For the years ended 31 December |
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) from operations ($m) |
(3,539 |
) |
865 |
|
1,397 |
|
2,307 |
|
2,268 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) from operations per Ordinary Share |
($2.26 |
) |
$0.49 |
|
$0.79 |
|
$1.33 |
|
$1.33 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income/(loss) from operations per Ordinary Share |
($2.26 |
) |
$0.49 |
|
$0.79 |
|
$1.33 |
|
$1.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) from operations had SFAS No. 142 been adopted |
(2,833 |
) |
1,716 |
|
2,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net and diluted income/(loss) per Ordinary Share |
|
|
|
|
|
|
|
|
|
|
from operations had SFAS No. 142 been adopted |
($1.81 |
) |
$0.97 |
|
$1.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to fixed charges |
|
|
|
|
|
|
|
|
|
|
For the Group with estimated material |
|
|
|
|
|
|
|
|
|
|
adjustments to accord with US GAAP |
(19.3 |
) |
15.5 |
|
25.0 |
|
36.7 |
|
78.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated balance sheet data |
|
|
|
|
|
|
|
|
|
|
At 31 December |
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
|
$m |
|
$m |
|
$m |
|
$m |
|
$m |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
46,640 |
|
41,500 |
|
38,081 |
|
42,578 |
|
45,378 |
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity |
33,735 |
|
29,707 |
|
27,402 |
|
30,183 |
|
33,654 |
|
|
|
|
|
|
|
|
|
|
|
|
Merger accounting
For the purpose of US GAAP, the merger has been
regarded as a purchase accounting acquisition of Astra by Zeneca.
Ratio of earnings to fixed charges (UK and US GAAP)
For the purpose of computing these ratios, earnings
consist of the income from continuing ordinary activities before taxation of
Group companies and income received from companies owned 50% or less, plus fixed
charges (excluding capitalised interest). Fixed charges consist of interest (including
capitalised interest) on all indebtedness, amortisation of debt discount and
expense and that portion of rental expense representative of the interest factor.
The comparative figures have been restated from those previously disclosed to
reflect the reclassification of the operations of Specialties and Agrochemicals
as discontinued.
Back to Contents
|
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Shareholder Information |
127 |
|
|
|
|
|
|
|
|
|
|
|
|
Shareholder Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AstraZeneca |
1999* |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
|
|
Ordinary Shares in issue millions |
|
|
|
|
|
|
|
|
|
|
At year end |
1,775 |
|
1,766 |
|
1,745 |
|
1,719 |
|
1,693 |
|
|
|
Weighted average for year |
1,776 |
|
1,768 |
|
1,758 |
|
1,733 |
|
1,709 |
|
|
|
Stock market price per $0.25 Ordinary Share
|
|
|
|
|
|
|
|
|
|
|
Highest (pence) |
2946 |
|
3600 |
|
3555 |
|
3625 |
|
2868 |
|
|
|
Lowest (pence) |
2208 |
|
1926 |
|
2880 |
|
1799 |
|
1820 |
|
|
|
At year end (pence) |
2568 |
|
3375 |
|
3098 |
|
2220 |
|
2680 |
|
|
|
Earnings per $0.25 Ordinary Share before exceptional items |
$1.63 |
|
$1.62 |
|
$1.73 |
|
$1.84 |
|
$1.78 |
|
|
|
Earnings per $0.25 Ordinary Share (basic) |
$0.73 |
|
$1.30 |
|
$1.65 |
|
$1.64 |
|
$1.78 |
|
|
|
Earnings per $0.25 Ordinary Share (diluted) |
$0.73 |
|
$1.30 |
|
$1.65 |
|
$1.64 |
|
$1.78 |
|
|
|
Dividends |
$0.70 |
|
$0.70 |
|
$0.70 |
|
$0.70 |
|
$0.795 |
|
|
|
* For the period 1 January
1999 to 31 December 1999 (except for stock market prices which are for
the period from 6 April
1999 to 31 December 1999)
In
addition, shareholders received a distribution of shares in Syngenta AG as
a dividend in specie in respect of the demerger of Zeneca
Agrochemicals |
|
Zeneca |
1999* |
|
|
|
|
|
|
Ordinary Shares in issue millions
|
|
|
|
At period end |
953 |
|
|
|
|
|
|
Weighted average for period |
951 |
|
|
|
|
|
|
Stock market price per
25 pence Ordinary Share |
|
|
|
Highest (pence) |
3037 |
|
|
|
|
|
|
Lowest (pence) |
2406 |
|
|
|
|
|
|
At period end (pence) |
3037 |
|
|
|
|
|
|
* For the period from 1 January 1999 to 6 April 1999 |
|
|
|
|
|
|
|
Astra |
1999* |
|
|
|
|
|
|
Ordinary Shares in issue millions |
|
|
|
At period end |
1,643 |
|
|
|
|
|
|
Weighted average for period |
1,643 |
|
|
|
|
|
|
Stock market price per
Astra A Share |
|
|
|
Highest (SEK) |
190 |
|
|
|
|
|
|
Lowest (SEK) |
154 |
|
|
|
|
|
|
At period end (SEK) |
190 |
|
|
|
|
|
|
Stock market price per
Astra B Share |
|
|
|
Highest (SEK) |
190 |
|
|
|
|
|
|
Lowest (SEK) |
154 |
|
|
|
|
|
|
At period end (SEK) |
190 |
|
|
|
|
|
|
* For the period from 1 January 1999 to 6 April 1999 |
|
|
|
Percentage analysis at 31 December 2003 of issued share capital
By size of account |
2003 |
|
No. of shares |
% |
|
|
|
|
1 250 |
0.6 |
|
|
|
|
251 500 |
0.8 |
|
|
|
|
501 1,000 |
1.1 |
|
|
|
|
1,001 5,000 |
1.6 |
|
|
|
|
5,001 10,000 |
0.3 |
|
|
|
|
10,001 50,000 |
1.3 |
|
|
|
|
50,001 1,000,000 |
12.5 |
|
|
|
|
over 1,000,000 |
81.8 |
|
|
|
|
Issued share capital |
100.0 |
|
|
|
|
Includes VPC and ADR holdings |
|
|
At 31 December 2003, AstraZeneca PLC had 169,971 registered holders of 1,692,694,946 Ordinary Shares of $0.25 each. In addition, there were approximately 41,000 holders of American Depositary Receipts (ADRs)
representing 7.53% of the issued share capital and 161,000 holders of shares held under the VPC Services Agreement representing 22.13% of the issued share capital. The ADRs, each of which is equivalent to one Ordinary Share, are issued by JPMorgan
Chase Bank.
Back to Contents
128
|
AstraZeneca Annual Report
and
Form 20-F Information 2003 |
Shareholder Information |
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|
|
|
|
|
|
|
|
|
|
Shareholder
Information continued |
|
|
|
|
|
|
AstraZeneca PLC
Since April 1999, following the AstraZeneca merger, the principal markets for trading in the shares of AstraZeneca PLC are the London, Stockholm and New York Stock Exchanges. The table below sets forth, for the four
quarters of 2002 and for the first two quarters and last six months of 2003 the reported high and low share prices of AstraZeneca PLC, on the following bases:
> |
for shares listed on the London
Stock Exchange (LSE) the reported high and low middle market
closing quotations are derived from The Daily Official List; |
|
|
> |
for shares listed on the Stockholm
Stock Exchange (SSE) the high and low closing sales prices
are as stated in the Official List; |
|
|
> |
for American Depositary Shares
(ADS) listed on the New York Stock Exchange the reported high
and low sales prices are as reported by Dow Jones (ADR quotations). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AstraZeneca |
|
|
|
|
|
Ordinary LSE |
|
|
|
ADS |
|
|
|
Ordinary SSE* |
|
|
|
|
|
High |
|
Low |
|
High |
|
Low |
|
High |
|
Low |
|
|
|
(pence) |
|
(pence) |
|
(US$) |
|
(US$) |
|
(SEK) |
|
(SEK) |
|
|
|
2002 |
Quarter 1 |
3625 |
|
3051 |
|
52.00 |
|
43.72 |
|
541 |
|
455.5 |
|
|
|
|
Quarter 2 |
3574 |
|
2634 |
|
52.04 |
|
39.12 |
|
536 |
|
366 |
|
|
|
|
Quarter 3 |
2680 |
|
1799 |
|
41.30 |
|
28.00 |
|
392 |
|
255 |
|
|
|
|
Quarter 4 |
2540 |
|
1947 |
|
40.48 |
|
30.16 |
|
365 |
|
279 |
|
|
|
2003 |
Quarter 1 |
2268 |
|
1820 |
|
35.75 |
|
29.98 |
|
311.5 |
|
245 |
|
|
|
|
Quarter 2 |
2696 |
|
2185 |
|
45.67 |
|
34.35 |
|
355 |
|
288 |
|
|
|
|
July |
2565 |
|
2370 |
|
42.56 |
|
38.80 |
|
347 |
|
316.5 |
|
|
|
|
August |
2603 |
|
2387 |
|
42.45 |
|
38.45 |
|
350 |
|
312 |
|
|
|
|
September |
2695 |
|
2485 |
|
43.76 |
|
39.75 |
|
355.5 |
|
328 |
|
|
|
|
October |
2868 |
|
2577 |
|
49.47 |
|
44.10 |
|
382 |
|
331.5 |
|
|
|
|
November |
2845 |
|
2639 |
|
48.07 |
|
45.35 |
|
377 |
|
343 |
|
|
|
|
December |
2696 |
|
2551 |
|
48.45 |
|
45.10 |
|
354 |
|
328 |
|
|
|
*Principally
held in bearer form |
|
During 2003 AstraZenecas share re-purchase
programme which was introduced in 1999 continued with the re-purchase and
subsequent cancellation of 27.2 million shares at a total cost of $1,154m,
representing 1.6 per cent of the total issued share capital of the Company.
The average price paid per share in 2003 was 2535 pence. Between 1999 and
2002 a total of 65.6 million
Ordinary Shares were re-purchased, and subsequently cancelled, at an average
price of 2856 pence per share for a consideration, including expenses, of
$2,805m. The excess of the consideration over the nominal value was charged
against the profit and loss account reserve. Shares issued in respect of
share schemes totalled 1.2 million.
In 1999 in connection with the merger, AstraZenecas
share capital was redenominated into US dollars. On 6 April 1999, Zeneca shares
were cancelled and US dollar shares issued, credited as fully paid on the basis
of one dollar share for each Zeneca share then held. This was achieved by a reduction
of capital under section 135 of the Companies Act 1985. Upon the reduction of
capital
becoming effective, all issued and unissued Zeneca shares were cancelled and
the sum arising as a result thereof credited to a special reserve which was converted
into US dollars at the rate of exchange prevailing on the record date. This US
dollar
reserve was then applied in paying up at par newly created US dollar shares.
At the same time as the US dollar shares were issued,
the Company issued £50,000 Redeemable Preference Shares for cash at par.
The Redeemable Preference Shares carry limited class voting rights and no dividend
rights. This class of shares is also capable of redemption at par at the option
of the Company on the giving of seven days written
notice to the registered holder of
the shares.
A total of 826 million AstraZeneca shares were issued to Astra shareholders who accepted the merger offer before the final closing date, 21 May 1999. AstraZeneca received acceptances from Astra shareholders
representing 99.6 per cent of Astras
shares and the remaining 0.4 per cent was acquired in 2000 for cash.
Back to Contents
|
AstraZeneca
Annual Report and
Form 20-F Information
2003
|
Shareholder Information |
129
|
|
|
|
|
|
|
|
|
Major shareholdings |
On 28 January 2004 the following
had disclosed an interest in the issued Ordinary Share capital of the Company
in accordance with the requirements of Sections 198-208 of the Companies
Act 1985: |
|
|
|
Date of |
|
Percentage |
|
|
|
|
disclosure |
|
of issued |
|
Shareholder |
Number of shares |
|
to Company |
* |
share capital |
|
|
|
|
|
|
|
|
The Capital Group Companies, Inc. |
254,143,676 |
|
23 Jan 2004 |
|
15.01% |
|
|
|
|
|
|
|
|
Investor AB |
91,545,308 |
|
16 Apr 1999 |
|
5.41% |
|
|
|
|
|
|
|
|
Putnam Investment Management, LLC |
|
|
|
|
|
|
and The Putnam Advisory Company, LLC |
52,643,485 |
|
8 Feb 2002 |
|
3.11% |
|
|
|
|
|
|
|
|
Legal & General Investment Management Limited |
52,518,020 |
|
13 Jun 2002 |
|
3.10% |
|
|
|
|
|
|
|
|
No other person held a notifiable interest in shares, comprising 3% or more of the issued Ordinary Share capital of the Company, appearing in the register of interests in shares maintained under the provisions of
Section 211 of the Companies Act 1985.
* Since the date of disclosure to the Company, the interest of any person listed
above in the Ordinary Shares of the Company may have increased or decreased.
No requirement to notify the Company of any increase or decrease would have arisen
unless the holding moved up or down through a whole number percentage level.
The percentage level may increase (on the cancellation of shares following a
re-purchase of shares under the Companys share re-purchase programme) or decrease (on the issue
of new shares under any of the Companys share
plans).
Significant changes in the percentage ownership held by major shareholders during
the past three years are set out below. Major shareholders do not have different
voting rights.
|
|
|
|
|
|
Percentage of issued share capital |
|
|
|
|
|
|
|
|
|
Shareholder |
28 Jan 2004 |
|
29 Jan 2003 |
|
|
17 Feb 2002 |
|
|
9 Feb 2001 |
|
|
|
|
|
|
|
|
|
|
|
|
The Capital Group Companies, Inc. |
15.01% |
|
11.92% |
|
|
11.09% |
|
|
10.02% |
|
|
|
|
|
|
|
|
|
|
|
|
Investor AB |
5.41% |
|
5.33% |
|
|
5.25% |
|
|
5.18% |
|
|
|
|
|
|
|
|
|
|
|
|
Putnam Investment Management, LLC |
|
|
|
|
|
|
|
|
|
|
and The Putnam Advisory Company, LLC |
3.11% |
|
3.06% |
|
|
3.02% |
|
|
<3.00% |
|
|
|
|
|
|
|
|
|
|
|
|
Legal & General Investment Management Limited |
3.10% |
|
3.06% |
|
|
<3.00% |
|
|
<3.00% |
|
|
|
|
|
|
|
|
|
|
|
|
AstraZeneca PLC American Depositary Shares (each representing one Ordinary Share) evidenced by American Depositary Receipts issued by JPMorgan Chase Bank, as depositary, are listed on the New York Stock Exchange. As of
28 January 2004, the proportion of Ordinary Shares represented by American Depositary Shares was 7.55% of the Ordinary Shares outstanding.
Number of registered holders of Ordinary Shares as of 28 January 2004: |
In the US |
849 |
|
Total |
169,520 |
|
|
|
|
Number of record holders of American Depositary Receipts as of 28 January 2004: |
In the US |
3,045 |
|
Total |
3,077 |
|
So far as the Company is aware, it is neither directly nor indirectly owned nor controlled by one or more corporations or by any government.
As of 28 January 2004, the total amount of the Companys
voting securities owned by Directors and Officers of the Company was:
Title of class |
Amount owned |
Percent of class |
|
|
($0.25 shares) |
|
|
|
|
|
|
Ordinary Shares |
454,319 |
0.03% |
|
|
|
|
|
The Company does not know of any arrangements, the operation of which might result in a change in the control of the Company.
Back to Contents
130 |
|
AstraZeneca
Annual Report and
Form 20-F Information
2003
|
Shareholder
Information
|
|
|
|
|
|
|
Shareholder
Information continued |
|
Related party transactions
During the period 1 January 2004 to 28 January
2004, there were no transactions, loans, or proposed transactions between the
Company and any related parties which were material to either the Company or
the related party, or which were unusual in their nature or conditions. (See
also Note 33 Statutory and other information).
Options to
purchase securities from
registrant or subsidiaries |
(a) |
As of 28 January 2004, options
outstanding to subscribe for Ordinary Shares of $0.25 of the Company were: |
|
|
Number of shares |
Subscription price |
Normal expiry date |
|
|
47,628,173 |
748p3487p |
20042013 |
|
|
|
|
|
|
|
The weighted average subscription
price of options outstanding at 28 January 2004 was 2763p. All options
were granted under
Company employee schemes. |
|
|
(b) |
Included in paragraph (a)
are options granted
to Directors and Officers of AstraZeneca as follows: |
|
|
Number of shares |
Subscription price |
Normal expiry date |
|
|
1,943,103 |
891p3487p |
20052013 |
|
|
(c) |
Included in paragraph (b) are options granted to individually named Directors. Details of these option holdings as at 31 December 2003 are shown in the Directors Remuneration Report. |
|
|
|
During the period 1 January
2004 to 28 January 2004, no Director exercised any options.
|
Dividend payments
The record date for the second interim dividend
for 2003 payable on 6 April 2004 (in the UK, the US and Sweden) is 20 February
2004. Shares trade ex-dividend on the London and Stockholm Stock Exchanges
from 18 February 2004 and ADRs trade ex-dividend on the New York Stock Exchange
from the same date. From 2004, 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 2004 payable on 20 September
2004 (in the UK, the US and Sweden) is 13 August 2004.
Shareview
AstraZenecas
shareholders with internet access may visit www.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 of the advantages
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, www.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 www.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 UARs 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 www.uar.co.uk.
Results
Unaudited trading results of AstraZeneca in
respect of the first three months of 2004 will be published on 29 April 2004
and results in respect of the first six months of 2004 will be published on 22
July 2004.
Documents on display
The Memorandum and Articles of Association of
the Company and other documents concerning the Company which are referred to
in this document may be inspected at the Companys registered office at 15 Stanhope Gate, London W1K 1LN.
Back to Contents
|
AstraZeneca
Annual Report and
Form 20-F Information
2003
|
Shareholder Information |
131
|
|
|
|
|
|
|
|
|
Taxation for US residents
The following summary of the material UK and certain US tax consequences of ownership of Ordinary Shares or ADRs held as capital assets by US resident shareholders is based on current UK and US federal income tax law,
including the new US/UK double taxation convention relating to income and capital gains, which entered into force on 31 March 2003 (the Convention)
and the prior US/UK double taxation convention relating to income and capital
gains (the Prior
Convention), and practice. This discussion is also based in part on representations
of JPMorgan Chase Bank as Depositary for ADRs and assumes that each obligation
in the deposit agreement among the Company, the Depositary and the holders from
time to time of ADRs and any related agreement will be performed in accordance
with its terms. The US Treasury has expressed concerns that parties to whom ADRs
are
pre-released may be taking actions that are inconsistent with the claiming, by
US holders of ADRs, of foreign tax credits for US federal income tax purposes.
Accordingly, the analysis of the creditability of UK taxes described below could
be
affected by future actions that may be taken by the US Treasury.
UK and US income taxes and tax treaties affecting remittance of dividends
Under the Prior Convention, US resident individuals who were the beneficial owners of dividends on Ordinary Shares, or ADRs representing Ordinary Shares, in UK corporations were generally entitled to a tax credit
payment in respect of dividends equal to one-ninth (1/9th) of the dividend paid (the Tax
Credit Amount). This tax credit payment was reduced by a UK withholding
(the UK withholding) of up to 15% of the gross dividend paid. Therefore,
a US holder would not actually receive any payment of this credit.
US resident corporate shareholders are generally treated in the same way as individuals provided that either alone, or together with associated corporations, they do not control directly or indirectly 10% or more of
the voting shares of the Company and do not constitute investment or holding companies, 25% or more of the capital of which is owned, directly or indirectly, by persons that are not individuals resident in, and are not nationals of, the US.
Under the Convention, US resident shareholders are no longer entitled to the Tax Credit Amount because the Convention does not provide for that entitlement. The Convention applies to dividend payments after 1 May 2003.
However, if a US resident shareholder would have been entitled to greater benefits under the Prior Convention, the US resident shareholder may elect to continue to apply the Prior Convention until May 2004.
For US federal income tax purposes, the dividend paid and, if a US resident shareholder elects under the Prior Convention to claim a foreign tax credit with respect to the UK withholding, the associated Tax Credit
Amount are includible in gross income by US resident shareholders and, for foreign tax credit limitation purposes, are foreign source income, treated separately, together with other items of passive
income (or, in the case of certain holders, financial services income).
The UK withholding is treated as a foreign income tax which may, subject to certain
limitations and restrictions, be
eligible for credit against a US resident shareholders US federal income
tax liability (or deductible by such shareholders in computing their taxable
income) for a US resident shareholder who elects to include the associated Tax
Credit Amount in income.
Under recently enacted US legislation, dividends received by US resident non-corporate holders of Ordinary Shares or ADRs may be subject to US federal income tax at lower rates than other types of ordinary income if
certain conditions are met. US resident shareholders should consult their own tax advisors regarding the applications of this new legislation to their particular circumstances.
Taxation on capital gains
Under the Convention each contracting state may in general tax capital gains in accordance with the provisions of its domestic law. Under present UK law, individuals who are neither resident nor ordinarily resident in
the UK, and companies which are not resident in the UK will not be liable to UK tax on capital gains made on the disposal of their Ordinary Shares or ADRs, unless such Ordinary Shares or ADRs are held in connection with a trade, profession or
vocation carried on in the UK through a branch or agency.
A US resident shareholder will recognise a capital gain or loss for US federal income tax purposes on the sale or exchange of the Ordinary Shares or ADRs in the same manner as such holder would on the sale or exchange
of any other shares held as capital assets. As a result, a US resident shareholder will generally recognise a capital gain or loss for US federal income tax purposes equal to the difference between the amount realised and such holders adjusted basis in the Ordinary Shares or ADRs.
The gain or loss will generally be US source income or loss. US resident shareholders
should consult their own tax advisors about the treatment of capital gains, which
may be taxed at lower rates than ordinary income for non-corporate taxpayers
and capital losses, the deductibility of which may be limited.
UK inheritance tax
Under the current Double Taxation (Estates) Convention (the Estate
Tax Convention) between the US and the UK, Ordinary Shares or ADRs held
by an individual shareholder who is domiciled for the purposes of the Estate
Tax Convention in the US, and is not for the purposes of the Estate Tax Convention
a national of the UK, will generally not be subject to the UK inheritance tax
on the individuals death or on a chargeable gift of
the Ordinary Shares or ADRs during the individuals lifetime provided that
any applicable US federal gift or estate tax liability is paid, unless the Ordinary
Shares or ADRs are part of the business property of a permanent establishment
of the individual in the UK or, in the case of a shareholder who performs independent
personal services, pertain to a fixed base situated in the UK. Where the ADRs
or Ordinary
Shares have been placed in trust by a settlor who, at the time of settlement,
was a US resident shareholder, the ADRs or Ordinary Shares will generally not
be subject to UK inheritance tax unless the settlor, at the time of settlement,
was not domiciled in the US and was a UK national. In the exceptional case where
the Ordinary Shares or ADRs are subject both to UK inheritance tax and to US
federal gift or estate tax, the Estate Tax Convention generally provides for
double taxation to be
relieved by means of credit relief.
Back to Contents
132 |
|
AstraZeneca
Annual Report and
Form 20-F Information
2003
|
Shareholder
Information
|
|
|
|
|
|
|
Shareholder
Information continued |
|
Exchange controls and other limitations affecting security holders
(a) |
There are no governmental laws, decrees or regulations in the UK restricting the import or export of capital or affecting the remittance of dividends, interest or other payments to non-resident
holders of Ordinary Shares or ADRs. However, a 1.5% stamp duty reserve tax is payable upon the deposit of Ordinary Shares in connection with the creation of, but not subsequent dealing in, ADRs. This is in lieu of the normal 0.5% stamp duty on all
purchases of Ordinary Shares. |
|
|
(b) |
There are no limitations under
English law or the Companys Memorandum and Articles of Association
on the right of non-resident or foreign owners to be the registered holders
of and to vote Ordinary Shares or to be registered holders of notes or
debentures of Zeneca Wilmington Inc. or AstraZeneca PLC. |
Exchange rates
For the periods up to April 1999, Astra accounted for and reported its results in Swedish kronor, whereas Zeneca accounted for and reported its results in sterling. Consistent with AstraZenecas decision to publish its Financial Statements in US
dollars, the financial information in this document has been translated from
kronor and sterling into US dollars at the following
applicable exchange rates:
|
|
SEK/USD |
|
USD/GBP |
|
Average rates (profit and loss account, cash flow) |
|
|
|
|
|
1995 |
|
7.1100 |
|
1.5796 |
|
|
|
|
|
|
|
1996 |
|
6.7000 |
|
1.5525 |
|
|
|
|
|
|
|
1997 |
|
7.6225 |
|
1.6386 |
|
|
|
|
|
|
|
1998 |
|
7.9384 |
|
1.6603 |
|
|
|
|
|
|
|
1999 |
|
8.2189 |
|
1.6247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year spot rates (balance sheet) |
|
|
|
|
|
1995 |
|
6.6500 |
|
1.5500 |
|
|
|
|
|
|
|
1996 |
|
6.8400 |
|
1.6900 |
|
|
|
|
|
|
|
1997 |
|
7.8500 |
|
1.6600 |
|
|
|
|
|
|
|
1998 |
|
8.0400 |
|
1.6600 |
|
|
|
|
|
|
|
1999 |
|
8.5130 |
|
1.6185 |
|
|
|
|
|
|
|
The following information relating to average and spot exchange rates used by AstraZeneca is provided for convenience:
|
|
SEK/USD |
|
USD/GBP |
|
Average rates (profit and loss account, cash flow) |
|
|
|
|
|
2001 |
|
10.3235 |
|
1.4447 |
|
|
|
|
|
|
|
2002 |
|
9.8558 |
|
1.4817 |
|
|
|
|
|
|
|
2003 |
|
8.3013 |
|
1.6233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year spot rates (balance sheet) |
|
|
|
|
|
2001 |
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10.5420 |
|
1.4501 |
|
|
|
|
|
|
|
2002 |
|
8.7700 |
|
1.6093 |
|
|
|
|
|
|
|
2003 |
|
7.1932 |
|
1.7815 |
|
|
|
|
|
|
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AstraZeneca
Annual Report and
Form 20-F Information
2003
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Shareholder Information |
133
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Definitions |
In this Annual Report and Form 20-F Information
the following words and expressions shall, unless the context otherwise
requires, have the following meanings: |
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ADR |
American Depositary Receipt evidencing title to an ADS |
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ADS |
American Depositary Share representing one underlying Ordinary Share |
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Depositary |
JPMorgan Chase Bank, as depositary under the deposit agreement pursuant to which the |
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ADRs are issued |
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Directors |
The Directors of the Company |
|
Company |
AstraZeneca PLC |
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AstraZeneca, AstraZeneca Group |
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or the Group |
The Company and its subsidiaries |
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Ordinary Shares |
Ordinary Shares of $0.25 each in the capital |
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of the Company |
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LSE |
London Stock Exchange Limited |
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NYSE |
New York Stock Exchange, Inc. |
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SSE |
Stockholm Stock Exchange |
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Sterling, £, GBP, pence or p |
References to UK currency |
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SEK, kronor, krona |
References to Swedish currency |
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UK |
United Kingdom of Great Britain and Northern Ireland |
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US dollar, US$, USD or $ |
References to US currency |
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US |
United States of America |
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FDA |
Food and Drug Administration of the US |
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Figures in parentheses in tables and financial statements are used to represent negative numbers.
Except where otherwise indicated, figures included in this report relating to
pharmaceutical product market sizes and market shares are obtained from syndicated
industry sources, primarily IMS Health (IMS), a market research firm internationally
recognised by the pharmaceutical industry. The 2003 market share figures included
in this report are based primarily on data obtained from an online IMS database.
IMS data may differ from that compiled by the Group with respect to its own products.
Of particular significance in this regard are the following: (1) AstraZeneca
publishes its financial results on a financial year and quarterly interim basis,
whereas IMS issues its data on a monthly and quarterly basis; (2) the online
IMS database is updated quarterly and uses the average exchange rates for the
relevant quarter; (3) IMS data from the US is not adjusted for Medicaid and similar
state rebates; and (4) IMS sales data are compiled using actual wholesaler data
and data from statistically representative panels of retail and hospital pharmacies,
which data are then projected by IMS to give figures for
national markets.
References to prevalence of disease have been derived from a variety of sources
and are not intended to be indicative of the current market or any potential
market for AstraZenecas pharmaceutical products since, among other things,
there may be no correlation between the prevalence of a disease and the number
of individuals who are treated for such a
disease.
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AstraZeneca
Annual Report and
Form 20-F Information
2003
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Shareholder
Information
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Shareholder
Information continued |
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Terms used in the Annual Report |
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and Form 20-F Information |
US equivalent or brief description |
Accruals |
Accrued expenses |
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Allotted |
Issued |
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Bank borrowings |
Payable to banks |
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Called-up share capital |
Issued share capital |
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Capital allowances |
Tax term equivalent to US tax depreciation allowances |
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Creditors |
Liabilities/payables |
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Current instalments of loans |
Long term debt due within one year |
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Debtors |
Receivables and prepaid expenses |
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Earnings |
Net income |
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Finance lease |
Capital lease |
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Fixed asset investments |
Non-current investments |
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Freehold |
Ownership with absolute rights in perpetuity |
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Interest receivable |
Interest income |
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Interest payable |
Interest expense |
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Loans |
Long term debt |
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Prepayments |
Prepaid expenses |
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Profit |
Income |
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Profit and loss account |
Income statement/consolidated statement of income |
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Reserves |
Retained earnings |
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Short term investments |
Redeemable securities and short term deposits |
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Share premium account |
Premiums paid in excess of par value of Ordinary Shares |
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Statement of total recognised |
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gains and losses |
Statement of comprehensive income |
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Stocks |
Inventories |
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Tangible fixed assets |
Property, plant and equipment |
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Turnover |
Sales/revenues |
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AstraZeneca
Annual Report and
Form 20-F Information
2003
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Risk Factors |
135
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Risk
Factors |
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Risk of loss or expiration of patents, marketing exclusivity or trade marks
Scientific development and technological innovation
is crucial if AstraZeneca is to deliver long term market success. In the pharmaceutical
market, a drug, diagnostic or medical device is normally only subject to competition
from alternative products, in the same therapy area, during the period of patent
protection or other types of marketing exclusivity, but once patent protection
or other types of marketing exclusivity has expired the product is generally
open to competition from generic copy products. Products under patent protection
or other types of marketing exclusivity usually generate significantly higher
revenues than those not protected by patents or other types of marketing exclusivity.
We
believe that we have patent protection for many of our most important products.
For example, during 2003, sales in the US of Losec/Prilosec, Zestril and Nolvadex
fell by $2.6bn following anticipated patent expiries or the end of marketing exclusivity.
Increasingly, manufacturers of generic pharmaceutical products whether based
in developing countries, such as those in Asia, or elsewhere in the world seek
to challenge our patents or other types of marketing exclusivity in order to
allow access to the market for their own generic products.
For example, AstraZeneca was involved in litigation in the US and elsewhere during
2003 relating to omeprazole, the active ingredient in Losec/Prilosec,
concerning the infringement of certain patents, including formulation patents,
by generic manufacturers. Patent litigation relating to other of our products
is described in Note 31 to the Financial Statements.
In addition to challenges to our patented products from manufacturers of generic
pharmaceutical products, there is a risk that some countries, particularly those
in the developing world, may seek to impose limitations on the availability of
patent protection for pharmaceutical products, or the extent to which such protection
may be obtained, within their jurisdictions.
Trade mark protection for our products is also an important element of our overall
product marketing programmes. Combined with patent protection or other types
of marketing exclusivity, products protected by a valid trade
mark usually generate
significantly higher revenues than those
not protected by a trade mark. We believe that we have trade mark protection
for many of our most important products. However, trade mark protection may
expire or be challenged by third parties.
Limitations on the availability of patent protection in developing countries
or the expiration or loss of certain patents, marketing exclusivity or trade
marks would have an adverse effect on pricing and sales with respect to these
products and, consequently, could result in a material adverse effect on AstraZenecas
financial condition and results of operations.
Impact of fluctuations in exchange rates
The results of AstraZenecas
operations are accounted for in US dollars. Approximately 52% of our 2003 sales
were in the Americas (comprised of the US, Canada and Latin America) with a significant
proportion of that figure being in respect of US sales. The US is, and is expected
to remain, our largest and potentially fastest growing major market. Sales in
certain other
countries are also in US dollars, or in currencies whose exchange rates are linked
to the US dollar. Major components of our cost base are, however, located in
Europe, where an aggregate of approximately 60% of our employees are based. Movements
in the exchange rates used to translate foreign currencies into US dollars may
therefore have a material adverse effect on AstraZenecas financial condition
and results of
operations.
Certain subsidiaries of AstraZeneca import and export goods and services in currencies
other than their own functional currency, although we minimise this practice.
The results of such subsidiaries could, therefore, be affected by currency fluctuations
arising between the transaction dates and the settlement dates for those transactions.
We hedge these exposures through financial instruments in the form of forward
contracts and currency swaps. The notional principal amount of financial instruments
used to hedge these exposures, principally forward foreign exchange contracts
and purchased currency options, at 31 December 2003 was $89m. We have policies
that seek to mitigate the effect of exchange rate fluctuations on the value of
foreign currency cash flows and in turn their effects on the results of the various
subsidiaries, but do not seek to remove all such risks. In general, a unilateral
strengthening of the US dollar adversely affects our reported results whereas
a
weakening of the US dollar is generally favourable. We cannot ensure that exchange
rate fluctuations will not have a material adverse effect on AstraZenecas
financial condition and results of operations in the future.
Risk that R&D will not yield new products that
achieve commercial success
As a result of the complexities and uncertainties
associated with pharmaceutical research, it cannot be ensured that compounds
currently under development will achieve success in laboratory, animal or clinical
trials and ultimately be granted the regulatory approvals needed to market such
products successfully. For example, in 2003, development of a number of our products
was discontinued due to failure to meet our target profile: these included AZD1134,
a serotonin antagonist for treating anxiety/depression; AZD3582 and AZD4717,
both COX inhibiting nitric oxide donators for the treatment of acute/chronic
nociceptive pain; AZD5106 for the treatment of overactive bladder; and AZD0275
and AZD7140 both for the treatment of rheumatoid arthritis and chronic obstructive
pulmonary disease. There can be no absolute assurances regarding the development
and commercial success of any of the products in our current pipeline. The commercial
success of pipeline products is of particular importance to us in view of the
recent expiry of patent protection in major markets for a number of our key current
products.
Competition, price controls and price reductions
The principal markets for our pharmaceutical
products are the Americas, the countries of the European Union and Japan. These
markets are highly competitive. We compete in all of them, and elsewhere in the
world, against major prescription pharmaceutical companies which, in many cases,
are able to match or exceed the resources which we have available to us, particularly
in the areas of R&D and marketing investment. Recent industry consolidation
has resulted in the formation of a small number of very large companies with
which we compete as well. Some of our most important products for future growth,
such as Crestor, will compete directly with similar products marketed
by some of these companies. Increasingly, we also compete directly with biotechnology
companies and companies which manufacture generic versions of our products following
the
expiry or loss of patent or other marketing exclusivity.
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AstraZeneca
Annual Report and
Form 20-F Information
2003
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Risk Factors
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Risk
Factors continued |
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In most of the principal markets in which we sell our products, there is continued economic, regulatory and political pressure to limit the cost of pharmaceutical products. Certain groups have been involved in exerting
price pressure on pharmaceutical companies to ensure medicines are affordable to those who need them.
Currently there is no direct government control of prices for non-government
sales in the US. In 1990, however, federal legislation was enacted which required
drug manufacturers to agree to substantial rebates in order
for the manufacturers drugs
to be reimbursed by state Medicaid programmes, and an additional rebate if manufacturer
price increases after 1990 exceed the increase in inflation. In addition, certain
states have taken action to require further manufacturer rebates on Medicaid
drug utilisation and for other state pharmaceutical assistance programmes. Congress
also has enacted statutes that place a ceiling on the
price manufacturers may charge US government agencies, thereby causing a substantial
discount, as well as establishing a minimum discount (comparable to the Medicaid
rebate) on manufacturers sales to certain clinics and hospitals that serve
the poor and other populations with special needs. These government initiatives
together with competitive market pressures have contributed to restraints on
realised
prices.
Recently introduced and future US legislation concerning the Medicaid and Medicare
programmes are likely to significantly affect our US business. It is difficult
to predict with certainty the actual effect on our business of such changes to
the legislation.
In addition, realised prices are being depressed by pressure from managed care
and institutional purchasers who use cost considerations to restrict the sale
of preferred drugs that their physicians may prescribe as well as other competitive
activity. Such limited lists or formularies may force manufacturers either to
reduce prices or be excluded from the list, thereby losing all the sales revenue
from patients covered by that formulary. The use of strict formularies by institutional
customers is increasing rapidly in response to the current cost-containment environment,
resulting in lower margins on such sales.
Some governments in Europe, notably Italy and Spain, set price controls having
regard to the medical, economic and social impact of
the product. In other European countries, primarily Germany, the UK, the Netherlands
and, more recently, France, governments are exerting a strong downward pressure
on prices by incentives and sanctions to encourage doctors to prescribe cost-effectively.
Efforts by the European Commission to harmonise the disparate national systems
have met with little immediate success, leaving the industry exposed to ad hoc
national cost-containment measures on prices and the consequent parallel trading
of products from markets with prices depressed by governments into those where
higher prices prevail.
The importation of pharmaceutical products from European countries where prices
are low to those where prices for those products are higher may increase. The
accession of additional countries from central and eastern Europe to the European
Union could result in significant increases in the parallel trading of pharmaceutical
products. Cross border movements of pharmaceutical products into North America,
in particular the movement of products from Canada into the US, may increase
despite the need to meet current or future safety requirements imposed by regulatory
authorities. The effects of any increase in the volume of this parallel trade
or these cross border movements could result in a material adverse effect on
AstraZenecas financial
condition and results of operations.
There is formal central government control of prices in Japan. New product prices
are determined primarily by comparison with existing products for the same medical
condition. All existing products are subject to a price review at least every
two years. Regulations introduced in 2000 included provisions allowing a drugs
price to be set according to the average price of the product in four major countries
(the US, the UK, Germany and France).
Taxation
The UK is party to various double tax treaties
with foreign jurisdictions which enable AstraZenecas
revenues and capital gains to escape a double tax charge to both UK and foreign
jurisdiction tax. If any of these double tax treaties should be withdrawn or
amended, or should any member of the AstraZeneca Group become involved in taxation
disputes with any tax authority, such
withdrawal, amendment or a negative outcome of such disputes could have a material
adverse effect on AstraZenecas financial condition and results of operations.
Risk of substantial product liability claims
Given the widespread impact ethical prescription
drugs may have on the health of large patient populations, pharmaceutical and
medical device companies have, historically, been subject to large product liability
damages claims, settlements and awards for injuries allegedly caused by the use
of their products. Substantial product liability claims that are not covered
by insurance could have a material adverse effect on AstraZenecas financial condition and results of operations.
Risk of reliance on third parties for supplies of materials and services
Like most, if not all, major prescription pharmaceutical
companies, in some of its key business operations, such as the manufacture, formulation
and packaging of products, AstraZeneca relies on third parties for the timely
supply of specified raw materials, equipment, contract manufacturing, formulation
or packaging services and maintenance services. Although we actively manage these third party relationships to ensure continuity
of supplies on time and to our required specifications, some events beyond our
control could result in the complete or partial failure of supplies or in supplies
not being delivered on time. Any such failure could have a material adverse effect
on AstraZenecas
financial condition and results of
operations.
Risk of delay to new product launches
AstraZenecas
continued success depends on the development and successful launch of innovative
new drugs. The anticipated launch dates of major new products have a significant
impact on a number of areas of our business including investment in large clinical
trials, the manufacture of pre-launch stocks of the products and the timing of
anticipated future revenue streams from
commercial sales of the products. Any delay to the anticipated launch dates may
therefore impact AstraZenecas business and operations in a number of ways.
For example,
we had expected our new statin for the treatment of lipid disorders, Crestor, to be launched in the US in the second half of 2002. However, the approval of products
in this class has been subject to additional regulatory scrutiny partly as a result of the previous withdrawal from the market of cerivastatin. Crestor was launched
in the US in September 2003. Significant delay to the anticipated launch dates of new products could have a material adverse effect on
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Annual Report and
Form 20-F Information
2003
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Risk Factors |
137
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AstraZenecas financial condition and results
of operations.
Difficulties of obtaining government regulatory approvals for new products
AstraZeneca is subject to strict controls on the manufacture, labelling, distribution and marketing of pharmaceutical products. The requirement to obtain regulatory approval based on safety, efficacy and quality before
such products may be marketed in a particular country and to maintain and to comply with licences and other regulations relating to their manufacture are particularly important. The submission of an application to a regulatory authority does not
guarantee that approval to market the products will be granted. The countries that constitute material markets for our pharmaceutical products include the US, the countries of the European Union and Japan. Approval of such products is required by
the relevant regulatory authority in each country, although in Europe, single marketing authorisation can govern the approval of products throughout the European Union through a centralised procedure. In addition, each jurisdiction has very high
standards of regulatory approval and, consequently, in most cases, a lengthy approval process. Furthermore, each regulatory authority may impose its own requirements and may refuse to grant, or may require additional data before granting, an
approval even though the relevant product has been approved in another country.
Risk of failure to observe ongoing regulatory oversight
AstraZenecas
products are only licenced following exhaustive regulatory approval processes.
Once a product is licenced it is subject to ongoing control and regulation such
as the manner of its manufacture, distribution and marketing. Regulatory authorities
have wide-ranging administrative powers to deal with any failure to comply with
their ongoing regulatory oversight. These powers
include withdrawal of a licence approval previously granted, product recalls,
seizure of products and other sanctions for non-compliance. Regulatory sanction
following a failure to comply with such ongoing regulatory oversight could have
a material
adverse effect on AstraZenecas financial condition and results of operations.
Performance of new products
Although we carry out numerous and extensive clinical trials on all our products before they are launched, for a new, recently
launched product, it can be difficult, for a period following its launch, to establish from available data a meaningful and reliable assessment of its eventual efficacy and/or safety in clinical use on the market. Due
to the relatively short time that a product has been marketed and the relatively small number of patients who have taken the product, the available data may be immature. Simple extrapolation of the data may not be accurate and could lead to a
misleading interpretation of a new products
likely future commercial performance.
The successful launch of a new pharmaceutical product involves a substantial investment in sales and marketing costs, launch stocks and other items. If a new product does not succeed as anticipated or its rate of sales
growth is slower than anticipated, there is a risk that the costs incurred in launching it could have a material adverse effect on AstraZenecas
financial condition and
results of operations.
Environmental liabilities
AstraZeneca has environmental liabilities at some currently or formerly owned, leased and third party sites in the US as described in more detail on pages 101 to 102. There is no reason for us to believe that current
and expected expenditure and risks occasioned by these circumstances are likely to have a material adverse effect on AstraZenecas
financial position and results of operations although they could, to the extent
that they exceed applicable provisions, have a material adverse effect on AstraZenecas
financial position and results of operations for the relevant period. In addition,
a change in circumstances (including a change in applicable laws or regulations)
may result in such a material adverse effect. Although we take great care to
ensure that we operate our business at all
of our sites within all applicable environmental laws, regulations, licences
and permits, a significant environmental incident for which we were responsible
could result in AstraZeneca being liable to pay compensation, fines or remediation
costs. In some circumstances, such liability could have a material adverse effect
on AstraZenecas financial position and results of operations.
Risks associated with forward-looking statements
This report 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. Forward-looking statements are identified in this report, 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 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.
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AstraZeneca
Annual Report and
Form 20-F Information
2003
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AstraZeneca
Code of Conduct
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AstraZeneca
Code of Conduct |
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Introduction
We are committed to dealing with all our stakeholders with the highest ethical standards, integrity and as responsible corporate citizens. The trust and confidence of all our stakeholders, together with our reputation,
are among the most valuable assets of the Group. Along with our commitment to competitiveness and performance, we will continue to be led by our values to achieve sustainable success.
Every AstraZeneca employee is required to make a personal commitment to follow the Companys
Code of Conduct, as well as the detailed standards issued in support of it, and
uphold our commitment to our values, integrity and corporate responsibility.
We are all privileged to work for one of the best companies
in the world and to ensure we leave a lasting legacy that we can be proud of.
Nothing not
the need to meet targets, or direct orders from a superior should ever
compromise our commitment to honesty and integrity.
Sir Tom McKillop
Chief Executive
Policy
AstraZeneca requires its companies, and their employees, to observe the highest standards of integrity and honesty and act with due skill, care, diligence and fairness in the conduct of business. To this end all
AstraZeneca Companies, and their employees, are required to comply with the laws of all countries in which they operate and with the high ethical standards detailed by AstraZeneca in support of this policy.
Compliance
It is the responsibility of management to ensure that the AstraZeneca Code of Conduct and standards are communicated, understood and acted upon. They are required to positively promote them by personal example and are
not entitled to permit any exceptions to the required behaviour.
All employees should familiarise themselves with the Code of Conduct and must comply with it. Failure to act in compliance with the Code will result in appropriate disciplinary action against both the employee
committing the breach and others who condone it.
The Standards set out in the Code are general and do not address each and every
situation that may confront employees in markets around the world. In appropriate cases, guidance on the application of the Code to particular situations should be sought from management. In addition, Legal Department
and Group Internal Audit are available on a confidential basis as independent sources of advice.
It is the responsibility of each employee to report promptly any violations of the Code of Conduct of which they become aware. Details of the procedures for raising integrity concerns and relevant contact details are
given at the end of this document. AstraZeneca assures individual employees who raise issues that they will be protected from any adverse impact on their employment as a result. AstraZeneca actively encourages employees to raise issues of concern.
Standards of Conduct
Business practices
AstraZeneca Companies, and their employees, must comply with the laws of all countries in which they operate, with appropriate international and national industry codes of practice and with the high ethical standards
specified by AstraZeneca.
It is the responsibility of all employees to ensure, by taking advice where appropriate, that they are fully aware of all relevant laws, regulations, practices and codes of practice, particularly as they relate to
their job.
Employees should ensure that, within their sphere of business activity, AstraZeneca Companies carry out their contractual obligations in a proper and timely manner and are not in breach of contract.
Business practice, and what amounts to improper conduct, varies from country to country and from industry to industry. All employees will comply with (a) the high ethical standards specified by AstraZeneca (b) any
published overall AstraZeneca Code relating to business practices and (c) any international and national codes of practice applicable to the conduct of business in each environment.
Gifts, entertainment and personal favours may only be offered to a third party if modest in value and if they are consistent with customary business practice. No gifts, entertainment or personal favour may be offered
in contravention of any applicable law or code of practice.
No employee should seek or accept a gift, entertainment or personal favour which might reasonably be believed to have any influence on business transactions. An offer of entertainment should not be accepted unless the
offer is within the bounds of accepted business hospitality. Gifts which do not meet the above criteria should be reported to management who shall determine how they shall be dealt with.
AstraZeneca funds will not be used in payments, direct or indirect, to government officials, people participating in government bodies, employees of state organisations or representatives of political parties, for
unlawful or improper purposes.
Equal opportunities
All employees shall be treated with equal respect and dignity and shall be provided with equality of opportunity to develop themselves and their careers.
AstraZeneca is striving to achieve diversity at all levels
of the organisation and values the individuality, diversity and creative potential
that every employee brings to its business and supports the continuous development of their skills
and abilities.
Judgements about people for the purpose of recruitment, development or promotion shall be made solely on the basis of a persons
ability and potential in relation to the needs of the job and shall only take
account of matters relevant to the performance of that job. Overall, success
and advancement within AstraZeneca shall depend solely on personal ability, behaviour
and work
performance.
In some countries these principles may be modified by national legal requirements for affirmative action.
Personal harassment
Personal harassment, such as verbal abuse or sexual harassment, of any employee of AstraZeneca, its suppliers or customers is unacceptable in any form whatsoever.
Any person who believes they have been personally harassed should report the incident and circumstances to their immediate manager or HR manager or other senior manager who will arrange for it to be investigated
impartially and confidentially. AstraZeneca is fully supportive of the principles set forth in the UN Declaration of Human Rights. These include freedom from
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Annual Report and
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2003
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torture and arbitrary arrest, the right to a fair trial and equality before the law.
Political contributions
Any political contributions by AstraZeneca Companies
must be lawful and approved under procedures laid down by the board or governing
body of the company concerned.
Approval should not be given to any political contributions by AstraZeneca Companies
which, by their scale or affiliation, might be seen as excessive or inappropriate.AstraZenecas
accounting procedures require any political contribution to be reported to AstraZeneca
headquarters as part of the annual
consolidation of results.
Conflicts of interest
Employees dealing with AstraZenecas
business must act in the best interests of AstraZeneca and must disregard any
personal preference or
advantage.
Employees should avoid entering into situations in which their personal, family
or financial interests may conflict with those of AstraZeneca. Where any potential
conflict of interest may arise, the employee shall declare that interest and
seek advice from senior management.
Examples of conflict to be declared and resolved include:
> |
having a family interest in a transaction with AstraZeneca or one of its subsidiaries (the Company) or any supplier or customer; |
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hiring of a family member in any capacity; |
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having an interest, directly or through family, in a competitor, supplier or customer of the Company; |
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having an interest, directly or through family, in an organisation that has, or seeks to do business with the Company; |
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acquiring an interest in property (such as real estate, patent rights or securities) where the Company has, or might have, an interest. |
These examples do not extend to normal and proper financial investments in publicly
quoted companies.
Insider information
Employees must not use confidential information
obtained through their employment for personal gain.
It is AstraZeneca policy, and in certain countries a legal requirement carrying
criminal sanctions, that employees in possession of confidential price
sensitive information (in relation to securities) do not make use of such
information to deal in securities of AstraZeneca or provide such information
to third parties for that purpose. The same considerations apply in relation
to confidential price sensitive information relating to other companies
and dealing in their securities.
Property and resources
AstraZeneca resources should be kept securely
and should only be used for the proper advancement of its business and not for
personal gain.
Individuals expending AstraZeneca resources should recognise that they owe a
duty of care to the shareholders of AstraZeneca, who are its ultimate owners.
Commitments and expenditure should only be such as could be justified to shareholders
if the facts were known. This includes any expenses claimed and purchases made
for which reimbursement is sought.
AstraZeneca resources include not only tangible assets such as materials, equipment
and cash, but also intangible assets such as computer systems, trade secrets
and confidential information. Employees should observe global and local guidelines
concerning the classifying and handling of documents and electronic data. The
storage of personal data in an electronic medium may be governed by laws with
which relevant employees should familiarise themselves and comply
with.
Information generated within AstraZeneca, including research and development
and manufacturing data, costs, prices, sales, profits, markets, customers and
methods of doing business, is the property of AstraZeneca and must not, unless
legally required, be disclosed outside AstraZeneca without proper authority.
Policies, delegated authorities and reserved powers
AstraZeneca employees are expected to make themselves
aware of and comply with the letter and spirit of all AstraZeneca policies and
with the reserved powers and delegated authorities established by the Board from
time
to time. Copies of these are available on the Companys
intranet site(s).
The freedoms which individuals have to carry out their jobs must be exercised
within both the letter and spirit of AstraZeneca policies and procedures, reserved
powers and delegated authorities. These are designed to empower people to carry
out their responsibilities within a necessary framework of corporate control
and legal responsibility but are not so voluminous as to prescribe appropriate
action in every circumstance.
Records, disclosures and communications
AstraZeneca PLC and all AstraZeneca Companies
and their employees are required to keep proper accounting and other records
which give a true and fair view of the financial position, results of operations,
transactions, assets and liabilities so as to enable the Company to make full,
fair, accurate, timely and understandable disclosures in all reports it is required
to publish, file or submit to shareholders and regulators and in all other communications
which it
publishes.
All accounting and other records will be maintained in a manner that describes
and documents accurately the Companys
true financial position and results of operations and the true nature of its
business transactions, assets and liabilities. Accounting records will be kept in accordance with AstraZeneca policies, relevant
accounting standards and appropriate generally accepted accounting principles.
Employees must ensure that all reports published, filed or submitted to shareholders
and regulators and all other communications which are published by the Company
are full, fair, accurate, timely and understandable; they must not mislead the
reader in any way nor omit anything necessary to make them full, fair and accurate.
The Chief Executive and the Companys
senior financial
officers have a particular responsibility in this regard.
July 2003
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140 |
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AstraZeneca
Annual Report and
Form 20-F Information
2003
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Additional
Information
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Additional
Information |
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History and development of the Company
AstraZeneca PLC was incorporated in England
and Wales on 17 June 1992 under the Companies Act 1985. It is a public limited
company domiciled in the UK. The Companys registered number is 2723534 and its registered office
is at 15 Stanhope Gate, London W1K 1LN (telephone + 44 (0)20 7304 5000). From
February 1993 until April 1999, the Company was called Zeneca Group PLC. On 6
April 1999, the Company changed its name to AstraZeneca PLC.
The Company was formed when the pharmaceutical, agrochemical and specialty chemical
businesses of Imperial Chemical Industries PLC were demerged in 1993. In 1999,
the Company sold the specialty chemical business. Also in 1999, the Company merged
with Astra AB of Sweden. In 2000, it demerged the agrochemical business and merged
it with the similar agribusiness of Novartis AG to form a new company called
Syngenta AG.
The Company owns and operates numerous R&D, production and marketing facilities
worldwide. Its corporate headquarters are at 15 Stanhope Gate, London W1K 1LN
and its R&D
headquarters are at SE-151 85
Södertälje, Sweden.
Memorandum and Articles of Association
Objects
As is typical of companies registered in England
and Wales, the Companys
objects, which are detailed in the Memorandum of Association, are broad and wide-ranging
and include manufacturing, distributing and trading pharmaceutical products.
Directors
Subject to certain exceptions, Directors do
not have power to vote at Board Meetings on matters in which they have a material
interest.
The quorum for meetings of the Board of Directors is a majority of the full Board,
of whom at least four must be Non-Executive Directors. In the absence of a quorum,
the Directors do not have power to determine compensation arrangements for themselves
or any member of the Board.
The Board of Directors may exercise all the powers of the Company to borrow money.
Variation of these borrowing powers would require the passing of a special resolution
of the Companys shareholders.
Directors are not required to retire at a particular age.
Directors are required to beneficially own Ordinary Shares in the Company of
an aggregate nominal amount of $125. At present, this means they must own at
least 500 shares.
Rights, preferences and restrictions attaching to shares
The share capital of the Company is divided
into 2,400,000,000 Ordinary Shares with a nominal value of $0.25 each and 50,000
Redeemable Preference
Shares with a nominal value of £1.00 each. The rights and restrictions
attaching to the Redeemable Preference Shares differ from those attaching to
Ordinary Shares as follows:
> |
the Redeemable Preference Shares carry no rights to receive dividends; |
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> |
the holders of Redeemable Preference Shares have no rights to receive notices of, attend or vote at general meetings except in certain limited circumstances; they have one vote for every 50,000
Redeemable Preference Shares held; |
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> |
on a distribution of assets of the Company, on a winding-up or other return of capital (subject to certain exceptions), the holders of Redeemable Preference Shares have priority over the holders of
Ordinary Shares to receive the capital paid up on those shares; and |
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> |
subject to the provisions
of theCompanies Act 1985, the Company has the right to redeem the Redeemable
Preference Shares at any time on giving not less than
seven days written notice. |
Action necessary to change the rights of shareholders
In order to vary the rights attached to any
class of shares, the consent in writing of the holders of three quarters in nominal
value of the issued shares of that class or the sanction of an extraordinary
resolution
passed at a general meeting of such holders is required.
Annual general meetings and extraordinary general meetings
Annual general meetings and extraordinary general
meetings where a special resolution is to be passed or a Director is to be appointed
require 21 clear days notice
to
shareholders. All other extraordinary general meetings require 14 clear days notice.
For all general meetings, a quorum of two shareholders present in person or by
proxy is required.
Shareholders and their duly appointed proxies and corporate representatives are
entitled to be admitted to general meetings.
Limitations on the rights to own shares
There are no limitations on the rights to own
shares.
Back to Contents
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AstraZeneca
Annual Report and
Form 20-F Information
2003
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Cross Reference to Form 20-F |
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Cross
Reference to Form 20-F |
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The information in this document that is referenced on this page is included in AstraZenecas Form 20-F for 2003 (2003 Form 20-F) and is filed with the Securities and Exchange Commission (SEC). The 2003 Form 20-F
is the only document intended to be incorporated by reference into any filings by AstraZeneca under the Securities Act of 1933, as amended. References to major headings include all information under such major headings, including subheadings.
References to subheadings include only the information contained under such subheadings. Graphs are not included unless specifically identified. The 2003 Form 20-F has not been approved or disapproved by the SEC nor has the SEC passed comment upon
the accuracy or adequacy of the 2003 Form 20-F. The 2003 Form 20-F filed with the SEC may contain modified information and may be updated from time to time.
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3 |
Key Information |
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A. |
Selected financial data |
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Financial Highlights |
5 |
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Group Financial Record |
124 |
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Shareholder Information |
127 |
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D. |
Risk factors |
135 |
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4 |
Information on the Company |
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A. |
History and development of the Company |
140 |
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Financial Review Investments, divestments |
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and capital expenditure |
34 |
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Note 9 Tangible fixed assets |
77 |
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Note 24 Acquisitions of subsidiaries and |
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purchases of minority interests |
87 |
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Note 25 Disposals of business operations |
88 |
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B. |
Business overview |
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Operational Review |
9 |
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C. |
Organisational structure |
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Directors Report |
43 |
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Principal Subsidiaries |
112 |
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D. |
Property, plant and equipment |
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Operational Review Main Facilities |
28 |
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5 |
Operating and Financial Review and Prospects |
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A-F. |
Financial Review |
31 |
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6 |
Directors, Senior Management and Employees |
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Directors and senior management |
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Board of Directors and Officers of the Company |
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B. |
Compensation |
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Directors Remuneration Report |
50 |
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C. |
Board practices |
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Board of Directors and Officers of the Company |
6 |
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Directors Remuneration Report |
50 |
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Directors Report |
43 |
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Audit Committees Report |
48 |
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D. |
Employees |
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Note 30 Employee costs and share option |
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plans for employees |
95 |
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Directors Report Employees |
47 |
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E. |
Share ownership |
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Directors Remuneration Report |
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Directors Interests in Shares |
57 |
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7 |
Major Shareholders and Related Party Transactions |
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Major shareholders |
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Shareholder Information Major shareholdings |
129 |
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B. |
Related party transactions |
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Shareholder Information Related party |
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transactions |
130 |
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Note 33 Statutory and other information |
107 |
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8 |
Financial Information |
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A. |
Consolidated statements and other |
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financial information |
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Financial Statements (excluding Directors |
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responsibilities on page 60 and Auditors |
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opinion on page 61) |
62 |
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B. |
Significant changes |
n/a |
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9 |
The Offer and Listing |
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A4. |
Price history of stock listed |
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Shareholder Information |
127 |
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C. |
Markets |
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Shareholder Information |
128 |
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10 |
Additional Information |
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B. |
Memorandum and Articles of Association |
140 |
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C. |
Material contracts |
n/a |
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D. |
Exchange controls |
132 |
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E. |
Taxation |
131 |
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H. |
Documents on display |
130 |
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I. |
Subsidiary information |
112 |
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11 |
Quantitative and Qualitative Disclosures |
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about Market Risk |
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Financial Policies Treasury |
35 |
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12 |
Description of Securities other than |
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Equity Securities |
n/a |
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13 |
Defaults, Dividend Arrearages and Delinquencies |
n/a |
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14 |
Material Modifications to the Rights of Security |
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Holders and Use of Proceeds |
n/a |
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15 |
Controls and Procedures |
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Directors Report Internal Controls and |
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Management of Risk |
45 |
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16 |
[Reserved] |
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A. |
Audit committee financial expert |
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Audit Committees Report |
48 |
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B. |
Code of ethics |
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Directors Report Code of Conduct |
46 |
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C. |
Principal accountant fees and services |
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Note 33 Statutory and other information |
107 |
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D. |
Exemptions from the listing standards |
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for audit committees |
n/a |
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18 |
Financial Statements |
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Financial Statements (excluding Directors |
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responsibilities on page 60 and Auditors |
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opinion on page 61) |
62 |
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astrazeneca.com |
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Contact information |
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Registered office
and corporate headquarters
address: |
Registrar and transfer office: |
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AstraZeneca PLC |
Lloyds TSB Registrars |
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15 Stanhope Gate |
The Causeway |
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London
W1K 1LN |
Worthing |
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UK |
West Sussex |
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Tel:
+44 (0)20 7304 5000 |
BN99 6DA |
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Fax:
+44 (0)20 7304 5183 |
UK
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Tel (in the UK): 0870 600 3956 |
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R&D headquarters
address: |
Tel (outside the UK): +44 (0)121 415 7033 |
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AstraZeneca
AB |
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R&D
Headquarters |
Swedish securities registration
centre: VPC AB
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SE-151
85 Södertälje |
PO Box 7822 |
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Sweden |
SE-103 97 Stockholm |
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Tel:
+46 (0)8 553 260 00 |
Sweden |
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Fax:
+46 (0)8
553 290 00 |
Tel: +46 (0)8 402 9000 |
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Investor relations contacts: |
US depositary: |
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UK and
Sweden: As above or e-mail: |
JPMorgan Chase Bank |
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IR@astrazeneca.com |
PO Box 43013 |
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US: |
Providence |
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Investor
Relations |
RI 02940-3013 |
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AstraZeneca
Pharmaceuticals LP |
US |
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1800
Concord Pike |
Tel (toll free in the US): 888 697 8018 |
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PO Box
15438 |
Tel: +1 (781) 575 4328 |
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Wilmington |
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DE
19850-5438 |
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US |
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Tel:
+1 (302) 886 3000 |
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Fax:
+1 (302) 886 2972 |
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