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, 2009

	OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	OR

o	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report _____________

For the transition period from _____________ to _____________

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)

Adrian Kemp

AstraZeneca PLC

15 Stanhope Gate, London W1K 1LN

Telephone: +44 20 7304 5000

Facsimile number: +44 20 7304 5196

(Name, Telephone, E-Mail or Facsimile number and Address of Company Contact Person)

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)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

The number of outstanding shares of each class of stock of AstraZeneca PLC as of December 31, 2009 was:

Ordinary Shares of 25¢ each: 1,450,958,562

Redeemable Preference Shares of £1 each: 50,000

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

x Yes o No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

o Yes x No

Note — checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

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.

x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).*

x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x

Accelerated filer o

Non-accelerated filer o

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP o

International Financial Reporting Standards as issued by the International Accounting Standards Board x

Other o

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

o Item 17 o Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes x No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

o Yes o No

* This requirement does not apply to the registrant until its fiscal year ending December 31, 2011.

Pursuant to Rule 12b-23(a) of the Securities Exchange Act of 1934, as amended, the information for the 2009 Form 20-F of AstraZeneca PLC (“AstraZeneca” or the “Company”) set out below is being incorporated by reference from the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated and submitted on March 25, 2010.

References below to major headings include all information under such major headings, including subheadings, unless such reference is a reference to a subheading, in which case such reference includes only the information contained under such subheading. Graphs and tabular data are not included unless specifically identified below. Photographs are also not included.

In addition to the information set out below, the information set forth under the headings “Cautionary statement regarding forward-looking statements”, “Inclusion of reported performance, core financial measures and constant exchange rate growth rates”, “Statements of competitive position, growth rates and sales”, “AstraZeneca websites”, “External/third party websites”, “Definitions”, “Use of terms”, “Statements of dates” and “Figures” on the inside front cover, the paragraph regarding trade marks of the AstraZeneca group on the inside back cover, “Cross-reference to Form 20-F” on page 205 and “Glossary” on pages 206 to 207, in each case of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated 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 (including graphs and tabular data) set forth under the headings “Financial Statements—Notes to the Financial Statements—Note 20—Share capital of the Company” on pages 153 and 154, “Group Financial Record” on page 193 and the first table that appears under “Additional Information—Shareholder Information” on page 199, in each case of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference. The selected financial data incorporated by reference herein is derived from audited financial statements of the Company and its consolidated entities, prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union and as issued by the International Accounting Standards Board, included in the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010.

B. Capitalization and Indebtedness

Not applicable.

C. Reason for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

The information set forth or referenced under the heading “Directors’ Report—Corporate Governance—Risk—Principal risks and uncertainties” on pages 80 to 86 of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

On March 23, 2010, the US healthcare reform bill was signed into law by President Obama. For further discussion as to the proposed US healthcare reforms, please see the information set forth under the heading “—Principal risks and uncertainties” on the pages referenced above of the Company’s “Annual Report and Form 20-F Information 2009”.

ITEM 4 - INFORMATION ON THE COMPANY

A. History and Development of the Company

The information (including tabular data) set forth under the headings “Additional Information—Corporate Information—History and development of the Company” on page 204, “Directors’ Report—Performance—Resources, Skills and Capabilities—Our resources” on pages 25 and 32, “Directors’ Report—Reviews—Financial Review—Financial position, including cash flow and liquidity – 2009—Property, plant and equipment” and “—Cash flow” on pages 39 and 41, respectively, “Directors’ Report—Reviews—Financial Review—Financial position, including cash flow and liquidity – 2008—Property, plant and equipment”, “—Cash flow” and “—Investments, divestments and capital expenditure” on pages 43, 44 and 44, respectively, “Financial Statements—Notes to the Financial Statements—Note 7—Property, plant and equipment” on page 139 and “—Note 22—Acquisitions of business operations” on pages 154 to 156, in each case of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

B. Business Overview

The information (including graphs and tabular data) set forth under the headings “Introduction—Our year in brief” on pages 2 to 3, “Directors’ Report—Performance” on pages 12 to 35 and “—Reviews” on pages 50 to 78, “Additional Information—Development Pipeline” on pages 196 to 198”, “Financial Statements—Notes to the Financial Statements —Note 1—Product revenue information” on page 133, and “—Note 6—Segment Information” on pages 137 to 138 and “Statements of competitive position, growth rates and sales” on the inside front cover, in each case of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

Restructuring Initiatives

As disclosed in the information set forth under the headings referenced above, the Company plans to implement certain restructuring initiatives in its Research and Development (“R&D”) organization from 2010 as part of its ongoing restructuring programs. These R&D initiatives are designed to achieve material efficiency savings in R&D, which will partially mitigate the increase in R&D investment that would be required as projects in the current pipeline progress to the more resource intensive, later phases of development.

Through its previously announced restructuring programs, the Company had realized annualized benefits of US $1.6 billion by the end of 2009, which are expected to grow to approximately US $2.4 billion by the end of 2010. These programs have involved job reductions of 12,600 positions and, to the end of 2009, have resulted in the incurrence of US $2.5 billion in restructuring costs.

Through the Company’s next phase of restructuring plans (which includes the R&D initiatives, as well as completion of previously announced programs and some additional initiatives in supply chain, selling, general and administration), it expects to realize a further US $1.9 billion in estimated annual benefits by the end of 2014. Of this, the R&D initiatives are expected to result in approximately US $1 billion of annual savings, of which 50% is estimated to be cost savings and the other 50% cost avoidance.

The Company expects to incur restructuring costs of US $2.0 billion for the next restructuring phase, of which US $1 billion is estimated to be the cost of implementation of the R&D initiatives (approximately 60% of which is estimated to be cash costs).

The Company’s next phase of restructuring, when fully implemented, may involve up to an additional 10,400 reductions in job positions. Based on preliminary estimates, approximately 3,500 of these 10,400 positions may be affected by the implementation of the R&D initiatives, although after taking account of positions retained and

relocated to other sites, investment in new skills and capabilities and further expansion of Biologics activities, the net reduction due to these initiatives may fall to approximately 1,800 positions.

Results of Horizon Study Evaluating RECENTIN

On March 8, 2010, the Company announced the top-line results of a Phase II/III study evaluating RECENTIN (cediranib) compared with Avastin (bevacizumab) in patients with first-line metastatic colorectal cancer (mCRC). This study, HORIZON III, assessed the efficacy of cediranib compared with bevacizumab, both in combination with chemotherapy. Clinical activity was observed in the cediranib arm of the study and there was no statistically significant difference between treatment arms on the efficacy endpoints examined. However, the efficacy did not meet the pre-specified criteria for the primary endpoint of non-inferiority in progression-free survival.

The spectrum of adverse events associated with cediranib was broadly consistent with previous studies. HORIZON III continues with ongoing collection of overall survival data.

This is the first of two pivotal studies of cediranib in first-line mCRC. The other study, HORIZON II, is assessing the efficacy of cediranib combined with chemotherapy vs. chemotherapy alone, and data are expected in the coming months. Results from both studies will determine the clinical utility, if any, for cediranib in colorectal cancer and decisions regarding regulatory filing. Data from both of these studies will be submitted to a forthcoming medical meeting in the second half of 2010.

Results of a Phase III study with cediranib in treating recurrent glioblastoma are also expected in the first half of 2010. Exploratory evaluations of cediranib in other tumors are also ongoing.

Update on the Company’s Arrangements with Merck

Information on the Company’s arrangements with Merck & Co., Inc. (“Merck”) is set forth under the heading “Financial Statements—Notes to the Financial Statements —Note 25—Arrangements with Merck” on pages 166 to 168 of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010, which is incorporated by reference. Capitalized terms used below and not defined have the meanings ascribed to them in Note 25.

On March 1, 2010, the Company announced that, under the provisions of the agreements relating to the restructuring of the joint venture in the US between the Company and Merck (the “Agreements”), the Company has notified Merck that it will exercise the First Option related to the relinquishment of Merck’s rights over the products not covered by the Partial Retirement (which occurred in March 2008), other than Nexium and Prilosec and the right to receive contingent payments in respect of the authorized generic version of felodipine. Products covered by the First Option include Entocort, Atacand and Plendil, and certain products still in development, including Brilinta, AZD3355, AZD6765 and AZD2327. The Company expects to consummate this option in April 2010, which will result in the payment to Merck of the Appraised Value of US $647 million. As previously disclosed, in accordance with the Agreements, in 2008 a third party appraisal resulted in a calculation 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 Retirement, other than Prilosec and Nexium. Upon consummation of the First Option, contingent payments will cease on the products covered by the First Option. The Company made contingent payments in respect of the products included in the First Option of US $47 million in 2009. Merck’s continuing contingent payment interest in respect of the authorized generic version of felodipine is the result of Ranbaxy Pharmaceuticals, Inc. becoming the exclusive US distributor of this product. Such contingent payments will continue for the duration of this arrangement.

Under the Agreements a Second Option exists whereby the Company has the option to repurchase Merck’s interests in Prilosec and Nexium in the US. Now that the Company has exercised the First Option, the Second Option is exercisable by the Company in 2012, or in 2017, or if combined annual sales of the two products fall below a minimum amount. The Company’s consummation of the Second Option will end the contingent payments in respect of Prilosec and Nexium and will effectively end the Company’s relationship with, and obligations to, Merck (other than some residual manufacturing arrangements). The exercise price for the Second Option is the net present value of the future annual contingent payments on Prilosec and Nexium as determined at the time of

exercise. The Company made contingent payments in respect of Prilosec and Nexium amounting to US $726 million in 2009.

Consummation of the First Option will give rise to additional amortization expense, associated with intangible assets related to relief from contingent payments to Merck for products covered by the First Option, in the range of US $10 million to US $45 million per annum charged to Cost of Goods Sold, with the amount of the charge dependent on the launch status of the covered pipeline compounds. A further amortization expense of approximately US $60 million per annum will be charged to SG&A, related to the ability to exploit these products and to exploit other opportunities in the Cardiovascular and Neuroscience therapy areas that the Company was previously prevented from doing by Merck’s interest in these products. For the purposes of calculating Core financial measures, the Company will exclude only the amortization expense related to therapy area intangibles (i.e., that charged to SG&A) from the Core financial measures calculations.

AstraZeneca and Rigel Pharmaceuticals Sign Worldwide License Agreement for Fostamatinib Disodium

On February 16, 2010, the Company and Rigel Pharmaceuticals, Inc. (“Rigel”) announced an exclusive worldwide license agreement for the global development and commercialization of fostamatinib disodium (R788), Rigel’s late-stage investigational product for rheumatoid arthritis (“RA”) and additional indications. Fostamatinib disodium, which has completed a comprehensive Phase II program, is the furthest developed oral Spleen Tyrosine Kinase (“Syk”) inhibitor being evaluated for RA. Inhibiting Syk is thought to block the intracellular signaling of various immune cells implicated in the destruction of bone and cartilage which is characteristic of RA.

Once the agreement is effective, the Company will make an upfront payment to Rigel of US $100 million with up to an additional US $345 million payable if specified development, regulatory and first commercial sale milestones are achieved. Rigel will also be eligible to receive up to an additional US $800 million of specified sales-related milestone payments if the product achieves considerable levels of commercial success, as well as significant stepped double-digit royalties on net sales worldwide. The Company is responsible for all development, regulatory filings, manufacturing and global commercialization activities in all licensed indications under the contract. Effectiveness of the agreement is contingent on expiration or termination of the waiting period under the US Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

The Company will design a global phase III program, anticipated to begin in the second half of 2010, with the goal of filing new drug applications with the US Food and Drug Administration (the “FDA”) and the European Medicines Agency (EMEA) in 2013. Fostamatinib disodium is being developed as a next generation oral RA therapy in adults who have failed to respond adequately to a traditional disease modifying anti-rheumatic drug (DMARD), such as methotrexate, where a TNF biologic add-on treatment would currently be considered. Under the terms of the agreement, the Company will also receive exclusive rights to Rigel’s portfolio of oral Syk inhibitors, as well as for additional indications for fostamatinib disodium beyond RA.

FDA Approves New Indication for CRESTOR

On February 9, 2010, the Company announced the approval by the FDA of CRESTOR (rosuvastatin calcium) to reduce the risk of stroke, myocardial infarction (heart attack) and arterial revascularization procedures in individuals without clinically evident coronary heart disease but with an increased risk of cardiovascular disease (“CVD”) based on age (men ≥50 and women ≥60), high-sensitivity C-reactive protein (hsCRP) ≥ 2 mg/L, and the presence of at least one additional CVD risk factor, such as hypertension, low HDL-C, smoking, or a family history of premature coronary heart disease.

The FDA approval was based on data from the JUPITER (Justification for the Use of statins in Primary prevention: an Intervention Trial Evaluating Rosuvastatin) study which evaluated the impact of CRESTOR 20 mg on reducing major cardiovascular (CV) events in a previously unstudied population. In JUPITER, CRESTOR significantly reduced the relative risk of heart attack by 54%, stroke by 48%, and arterial revascularization by 46% compared with placebo.

C. Organizational Structure

The information set forth under the headings “Directors’ Report—Corporate Governance—Business Organisation and Corporate Governance—Other matters—Subsidiaries and principal activities” on page 98 and “Financial Statements—Principal Subsidiaries” on page 186, in each case of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

D. Property, Plants and Equipment

The information (including tabular data) set forth under the headings “Directors’ Report—Reviews—Financial Review—Financial position, including cash flow and liquidity – 2009—Property, plant and equipment” and “—Financial position, including cash flow and liquidity – 2008—Property, plant and equipment”, on pages 39 and 43, respectively, “Directors’ Report—Corporate Governance—Risk—Principal risks and uncertainties—Legal, regulatory and compliance risks—Environmental/occupational health and safety liabilities” on page 85, “Financial Statements—Notes to the Financial Statements—Note 25—Commitments and contingent liabilities—Environmental costs and liabilities” on page 168, “—Note 7—Property, plant and equipment” on page 139 and ‘Additional Information—Corporate Information—Property” on page 204, in each case of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

ITEM 4A - UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5 - OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The information (including graphs and tabular data) set forth under the headings “Directors’ Report—Performance—Business Environment—World pharmaceutical markets” on page 13, “Directors’ Report—Reviews—Financial Review” on pages 36 to 49, “—Reviews—Geographical Review” on pages 50 to 54, “—Reviews—Therapy Area Review—Sales by Therapy Area” (comprising tabular data only) on page 55, “—Reviews—Therapy Area Review—Our financial performance” (comprising tabular data only) on pages 57, 61, 63, 66, 69 and 72, “—Reviews—Therapy Area Review—Financial performance 2009/2008” on pages 59, 61, 64, 67, 70 and 74, “Directors’ Report—Performance—Resources, Skills and Capabilities—Research and Development” on pages 22 to 27, “Directors’ Report—Corporate Governance—Risk—Principal risks and uncertainties—Commercialization and business execution risks—Competition, price controls and price reductions” on page 83, “Financial Statements—Notes to the Financial Statements—Note 14—Interest-bearing loans and borrowings” on page 144, “—Note 15—Financial risk management objectives and policies” on pages 144 to 146, “—Note 16—Financial instruments” on pages 146 to 152, “—Note 19—Capital and reserves—Other reserves” on page 153 and “—Note 25—Commitments and contingent liabilities” on pages 166 to 184, in each case of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

On March 23, 2010, the US healthcare reform bill was signed into law by President Obama. For further discussion as to the proposed US healthcare reforms, please see the information set forth under the heading “—Competition, price controls and price reductions” on page 83 referenced above of the Company’s “Annual Report and Form 20-F Information 2009”.

AstraZeneca Reaches Agreement with UK Tax Authorities over Transfer Pricing

Subsequent to approval of the Company’s financial statements for the year ended December 31, 2009 on January 28, 2010, on February 23, 2010 AstraZeneca entered into an agreement with HM Revenue & Customs in the UK (“HMRC”) to settle a long-running transfer pricing dispute and certain other outstanding UK tax matters. The material elements of the transfer pricing dispute are set forth under the headings “Directors’ Report—Reviews—Financial Review—Critical accounting policies and estimates—Taxation” on pages 48 and 49 and “Financial Statements—Notes to the Financial Statements —Note 25—Tax” on page 184, in each case of the Company’s

“Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010, incorporated by reference.

The settlement will result in the Group paying £505 million to resolve all claims made by HMRC in relation to the transfer pricing dispute for the 15-year period from 1996 to the end of 2010. Of this, £450 million (US $720 million at December 31, 2009 exchange rates) is estimated for accounting purposes as being in respect of periods prior to December 31, 2009. As a result of this settlement, the joint referral of this issue to the UK Tax Court by the Company and HMRC, as disclosed in Note 25 of the Financial Statements in Company’s “Annual Report and Form 20-F Information 2009”, will be withdrawn.

The provision for the transfer pricing dispute is included in the total net transfer pricing provision of US $2,327 million disclosed under “Directors’ Report—Reviews—Financial Review—Critical accounting policies and estimates—Taxation” and in Note 25 of the Financial Statements, in each case of the Company’s “Annual Report and Form 20-F Information 2009” on the pages referenced above. The effect of this settlement and developments in other transfer pricing matters is a reduction in the accrual for tax contingencies of US $194 million which has been credited to income in the first quarter of 2010 and a total net transfer pricing provision of US $2,165 million (including the US $720 million resulting from the settlement). The potential for reasonably possible additional losses has also reduced from US $575 million to US $450 million.

ITEM 6 - DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

The information set forth under the headings “Directors’ Report—Corporate Governance—Business Organisation and Corporate Governance—Board of Directors at 31 December” and “—Senior Executive Team at 31 December” on pages 88 and 89, and pages 90 and 91, respectively, “Directors’ Report—Corporate Governance—Directors’ Remuneration Report—Remuneration and terms of employment for Executive Directors and other SET members—Variable performance-related remuneration—Policy on external appointments and retention of fees” on page 110 and “—Directors’ Remuneration Report—Directors’ emoluments in 2009—Directors’ remuneration-US dollars” (last sentence only) on page 113, in each case of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

B. Compensation

The information (including graphs and tabular data) set forth under the headings “Directors’ Report—Corporate Governance—Directors’ Remuneration Report” on pages 101 to 119, “Financial Statements—Notes to the Financial Statements—Note 23—Post-retirement benefits” on pages 156 to 161, “—Note 24—Employee costs and share option plans for employees” on pages 161 to 165 and “—Note 27—Statutory and other information—Key management personnel compensation”, on page 185, in each case of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

C. Board Practices

The information set forth under the headings “Directors’ Report—Corporate Governance—Business Organisation and Corporate Governance—Board of Directors at 31 December” on pages 88 and 89, “—Senior Executive Team at 31 December” on pages 90 and 91, “—Operation of the Board” on pages 92 and 93, —Board Committee membership” (including tabular data) and “—Directors” each on page 93, “—Operation of Board Committees” on pages 94 to 96, “—Principal corporate governance requirements—UK corporate governance requirements” on pages 96 to 97 and “—US corporate governance requirements” on page 97, “Directors’ Report—Corporate Governance—Directors’ Remuneration Report—Variable performance-related remuneration—Service contracts” and “—Non-Executive Directors”, each on page 110, and “—Directors’ Remuneration Report—Audit—Details of Executive Directors’ service contracts at 31 December 2009” and “—Non-Executive Directors’ terms and conditions” (consisting of tabular data), each on page 111, in each case of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

Neither John Buchanan nor Bo Angelin, both of whom are current Non-Executive Directors of the Company, will present themselves for re-election at the Company’s Annual General Meeting in 2010 and both will leave the Company’s Board of Directors at the close of the Annual General Meeting.

D. Employees

The information set forth under the headings “Directors’ Report—Performance—Resources, Skills and Capabilities—People” (comprising the graphical data, the first paragraph, and the information set forth under “Engagement and dialogue” and “Managing the impact of business change” only) on pages 33 and 34 and “Financial Statements—Notes to the Financial Statements— Note 24—Employee costs and share option plans for employees” (including the tabular data) on pages 161 to 165, in each case of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

E. Share Ownership

The information (including graphs and tabular data) set forth under the headings “Financial Statements—Notes to the Financial Statements—Note 24—Employee costs and share option plans for employees” on pages 161 to 165, “Directors’ Report—Corporate Governance—Directors’ Remuneration Report—Directors’ interests in shares” on pages 115 to 119, and “Additional Information—Shareholder Information—Major shareholdings” on pages 200 and 201 and “—Options to purchase securities from registrant or subsidiaries” on page 201, in each case of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

ITEM 7 - MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

The information set forth under the heading “Additional Information—Shareholder Information—Major shareholdings” on pages 200 and 201 of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

B. Related Party Transactions

The information set forth under the headings “Financial Statements—Notes to the Financial Statements—Note 27—Statutory and Other Information—Related party transactions” on page 185 and “Additional Information—Shareholder Information—Related party transactions” on page 201, in each case of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

C. Interests of Experts and Counsel

Not applicable.

ITEM 8 - FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial Information

The information (including graphs and tabular data) set forth under the headings “Directors’ Report—Reviews—Financial Review—Capitalisation and shareholder return—Dividend and share re-purchases” on page 42, “Directors’ Report—Corporate Governance—Business Organisation and Corporate Governance—Other matters—Distributions to shareholders and dividends for 2009” on page 98, “Financial Statements” on pages 124 to 185 (including the information set forth under the subheading “Notes to the Financial Statements”), “Financial Statements—Principal Subsidiaries” on page 186, “Group Financial Record” on page 193, and “Additional Information—Shareholder Information” on pages 199 to 203, in each case of the Company’s “Annual Report and

Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

Please see the information above under Item 5 – “Operating and Financial Review and Prospects—AstraZeneca Reaches Agreement with UK Tax Authorities over Transfer Pricing”, for information as to the settlement between the Company and HM Revenue & Customs in the UK, entered into subsequent to the approval of the Company’s financial statements for the year ended December 31, 2009, in respect of the transfer pricing dispute disclosed under the heading “Financial Statements—Notes to the Financial Statements—Note 25—Commitments and contingent liabilities—Tax” on page 184 of the Company’s “Annual Report and Form 20-F Information 2009”.

On March 18, 2010, a New Jersey state court jury returned a verdict in favor of the Company in the first Seroquel product liability case to go to trial. For further information as to these product liability cases, please see the information under the heading “Financial Statements—Note 25—Commitments and contingent liabilities—Legal proceedings—Seroquel (quetiapine fumarate)—Product liability” on pages 177 and 178 of the Company’s “Annual Report and Form 20-F Information 2009”.

B. Significant Changes

Other than as disclosed herein, since the date of the annual consolidated financial statements included in this Form 20-F dated March 25, 2010, no significant change has occurred.

ITEM 9 - THE OFFER AND LISTING

A. Offer and Listing Details

The information (including graphs and tabular data) set forth under the heading “Additional Information—Shareholder Information” on page 199 of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

In addition, the table below sets forth, for the periods indicated, 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 are as reported by Dow Jones (ADR quotations).

	AstraZeneca
	Ordinary LSE		ADS		Ordinary SSE(1)
	High	Low	High	Low	High	Low
	(GB pence)	(GB pence)	(US$)	(US$)	(SEK)	(SEK)

2010 – February	2,936	2,732	46.87	43.05	340.0	310.1
2010 – January	3,103	2,875	50.40	46.08	363.8	331.0
2009 – December	2,930	2,753	47.00	45.35	339.5	315.0
2009 – November	2,778	2,691	46.38	44.34	319.0	310.1
2009 – October	2,830	2,742	46.19	43.64	323.1	308.0
2009 – September	2,856	2,691	46.02	43.91	333.0	305.0
2009	2,947	2,147	47.54	30.24	356.0	261.5

	AstraZeneca
	Ordinary LSE		ADS		Ordinary SSE(1)
	High	Low	High	Low	High	Low
	(GB pence)	(GB pence)	(US$)	(US$)	(SEK)	(SEK)

2009 – Quarter 4	2,930	2,691	47.00	43.64	339.5	308.0
2009 – Quarter 3	2,878	2,644	47.54	43.01	356.0	305.0
2009 – Quarter 2	2,728	2,276	45.01	33.40	351.0	279.5
2009 – Quarter 1	2,947	2,147	41.60	30.24	331.0	261.5
2008	2,888	1,748	49.85	34.10	340.5	211.5
2008 – Quarter 4	2,888	2,075	44.76	34.10	340.5	253.5
2008 – Quarter 3	2,766	2,130	49.85	43.42	321.5	255.5
2008 – Quarter 2	2,289	1,981	44.57	39.36	268.0	235.5
2008 – Quarter 1	2,345	1,748	45.70	35.50	296.5	211.5
2007	2,984	2,093	59.04	42.82	414.0	272.0
2006	3,529	2,574	66.37	45.12	484.0	352.5
2005	2,837	1,861	49.50	34.72	392.0	243.0

(1)	Principally held in bearer form.

B. Plan of Distribution

Not applicable.

C. Markets

The information set forth under the heading “Additional Information—Shareholder Information—AstraZeneca PLC” on page 199 of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated 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—Corporate Information—Articles” on page 204 of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

C. Material Contracts

Not applicable.

D. Exchange Controls

The information set forth under the headings “Additional Information—Shareholder Information—Exchange controls and other limitations affecting security holders” on page 203 of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

E. Taxation

The information set forth under the headings “Additional Information—Shareholder Information—Taxation for US residents”, “—UK and US income taxation of dividends”, “—Taxation on capital gains”, “—Passive Foreign Investment Company (PFIC) rules”, “—UK inheritance tax” and “—UK stamp duty reserve tax and stamp duty” on pages 202 and 203 of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated 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 “Additional Information—Shareholder Information—Documents on display” on page 202 of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

In addition, we file reports and other information with the United States Securities and Exchange Commission (the “SEC”). You can read and copy these reports and other information at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You can call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. The SEC also maintains a website at www.sec.gov which contains in electronic form each of the reports and other information that we have filed electronically with the SEC.

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 “Directors’ Report—Reviews—Financial Review—Financial risk management” on pages 44 and 45, “Financial Statements—Note 15—Financial risk management objectives and policies” on pages 144 to 146 and “—Note 16—Financial Instruments—Sensitivity analysis” on page 151, in each case of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

ITEM 12 - DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

A. Debt Securities

Not applicable.

B. Warrants and Rights

Not applicable.

C. Other Securities

Not applicable.

D. American Depositary Shares

Fees and Charges Payable by ADR Holders

The Company’s American Depositary Receipt (“ADR”) program is administered by JPMorgan Chase Bank, N.A. (“J.P. Morgan”), as the depositary. The holder of an ADR may have to pay the following fees and charges to J.P. Morgan in connection with ownership of the ADR:

Category	Depositary actions	Associated fee or charge

(a) Depositing or substituting the underlying shares	Issuances against deposits of shares, including deposits and issuances pursuant to a stock dividend or stock split declared by the Company or issuances pursuant to a merger, exchange of securities or any other transaction or event affecting the American Depositary Shares (“ADSs”) or the deposited securities	Up to US $5.00 for each 100 ADSs (or portion thereof) issued or delivered (as the case may be) The depositary may sell (by public or private sale) sufficient securities and property received in respect of share distributions, rights and other distributions prior to such deposit to pay such charge

(b) Receiving or distributing dividends(1)	Cash distributions made pursuant to the deposit agreement	US $0.05 or less per ADS

(c) Selling or exercising rights	Distribution or sale of securities, the fee being in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities	Up to US $5.00 for each 100 ADSs (or portion thereof)

(d) Withdrawing, cancelling or reducing an underlying security	Acceptance of ADSs surrendered for withdrawal, cancellation or reduction of deposited securities	Up to US $5.00 for each 100 ADSs (or portion thereof) surrendered, cancelled or reduced (as the case may be) The depositary may sell (by public or private sale) sufficient securities and property received in respect of share distributions, rights and other distributions prior to such deposit to pay such charge

(e) Transferring, combination or split-up of receipts	Transfer, combination and split-up of ADRs	US $1.50 per ADR

(f) General depositary services, particularly those charged on an annual basis(1)	Services performed by the depositary in administering the ADRs	US $0.05 or less per ADS per calendar year (or portion thereof), payable at the sole discretion of the depositary by billing ADR holders or by deducting such charge from one or more cash dividends or other cash distributions

(g) Fees and expenses of the depositary

Fees and expenses incurred by the depositary or the depositary’s agents on behalf of holders, including in connection with:

· compliance with foreign exchange control regulations or any law or regulation relating to foreign investment

· stock transfer or other taxes and governmental charges

· cable, telex and facsimile transmission and delivery charges

· fees for the transfer or registration of deposited securities in connection with the deposit or withdrawal of deposited securities

· expenses of the depositary in connection with the conversion of foreign currency into US dollars

· any other charge payable by the depositary or the depositary’s agents in connection with the servicing of the shares or other deposited securities (which charge shall be assessed against holders as of the record date or dates set by the depositary)

Expenses payable at the sole discretion of the depositary by billing ADR holders or by deducting such charges from one or more cash dividends or other cash distributions

(1)	J.P. Morgan has agreed that it shall not charge ADR holders any of these fees without the Company’s prior written consent. No such fees have been charged for the year ended December 31, 2009 or from January 1, 2010 to the date hereof.

Fees and Payments Made by the Depositary to us

J.P. Morgan, as ADR depositary, has agreed to reimburse certain expenses related to the Company’s ADR program and incurred by the Company in connection with the program. For the year ended December 31, 2009, the ADR depositary reimbursed to the Company, or paid on its behalf to third parties, a total sum of US $1,813,762 (comprised of reimbursements of US $1,700,000 and payments to third parties of US $113,762, in each case as detailed in the tables below). The ADR depositary also waived certain of its fees for standard costs associated with the administration of the ADR program in a total amount of US $215,000.

The table below sets forth the types of expenses that the ADR depositary has agreed to reimburse and the amounts reimbursed within each such category for the year ended December 31, 2009:

Category of Expenses – Direct Payments		Reimbursement for the year ended December 31, 2009
ADR program expenses, including investor relations costs and legal fees		$1,700,000

Total		$1,700,000

The ADR depositary has paid certain expenses directly to third parties on behalf of the Company and has agreed to waive certain of its fees for standard costs associated with the administration of the ADR program. The table below sets forth those expenses that the ADR depositary paid directly to third parties, and those fees waived, in each case for the year ended December 31, 2009.

Category of Expenses – Indirect Payments		Amount paid for the year ended December 31, 2009
Expenses paid by depositary to third parties on behalf of the Company – NYSE listing fees		$113,762
Fees waived by depositary for standard ADR program costs		$215,000

Total		$328,762

Under certain circumstances, including removal of the ADR depositary or termination of the ADR program by the Company, the Company is required to repay the ADR depositary certain amounts reimbursed and/or expenses paid to or on behalf of the Company. No such repayments were made during the year ended December 31, 2009.

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 “Directors’ Report—Corporate Governance—Business Organisation and Corporate Governance—Operation of Board Committees—Audit Committee” on page 95 (the last three paragraphs of the “Audit Committee” section only), “—Business Organisation and Corporate Governance—Principal corporate governance requirements—UK corporate governance requirements” on page 96 (the second, third, fourth and fifth paragraphs of the “UK corporate governance requirements” section only), “—Principal corporate governance requirements—US corporate governance requirements” on page 97 (the first and second paragraphs of the “US corporate governance requirements” section only) and “Financial Statements—Directors’ Responsibilities for, and Report on, Internal Control over Financial Reporting” on page 122, in each case of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

Management’s Annual Report on Internal Control over Financial Reporting

As required by US regulations, management is responsible for establishing and maintaining adequate internal control over financial reporting for the company, and is required to identify the framework used to evaluate the effectiveness of the Company’s internal control over financial reporting and to assess the effectiveness of such internal control. In this regard, management has made the same assessment and reached the same conclusion as that set forth in the section entitled “Financial Statements—Director’s Responsibilities for, and Report on, Internal

Control over Financial Reporting” on page 122 of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010, which is incorporated herein by reference.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Members, AstraZeneca PLC:

We have audited AstraZeneca PLC’s (“AstraZeneca”) internal control over financial reporting as of 31 December 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). AstraZeneca’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, AstraZeneca maintained, in all material respects, effective internal control over financial reporting as of 31 December 2009, based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial position of AstraZeneca as of 31 December 2009, 2008 and 2007, and the related consolidated statements of comprehensive income, consolidated statements of changes in equity, and consolidated cash flow statements for each of the years in the three-year period ended 31 December 2009, and our report dated 28 January 2010 expressed an unqualified opinion on those consolidated financial statements.

KPMG Audit Plc

Chartered Accountants

8 Salisbury Square

London

EC4Y 8BB

28 January 2010

ITEM 16 – RESERVED

ITEM 16A – AUDIT COMMITTEE FINANCIAL EXPERT

The information set forth in the first paragraph under the heading “Directors’ Report—Corporate Governance—Business Organisation and Corporate Governance—Operation of Board Committees—Audit Committee” on pages 94 and 95 and “—Board Committee membership” (consisting of tabular data) on page 93, in each case of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

ITEM 16B – CODE OF ETHICS

The information set forth under the heading “Directors’ Report—Corporate Governance—Business Organisation and Corporate Governance—Principal corporate governance requirements—Code of Conduct” on page 97 of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

The Company’s Code of Conduct is available at www.astrazeneca.com.

ITEM 16C – PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information (including tabular data) set forth under the heading “Financial Statements—Notes to the Financial Statements—Note 27—Statutory and other information” on page 185 and “Directors’ Report—Corporate Governance—Business Organisation and Corporate Governance—Operation of Board Committees—Audit Committee” on pages 94 and 95, in each case of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated 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.

ITEM 16F – CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

Not applicable.

ITEM 16G – CORPORATE GOVERNANCE

AstraZeneca PLC is a public limited company incorporated in England and Wales, listed on the London Stock Exchange and is subject to the authority of the Financial Services Authority in the UK. As a result, it follows the UK Combined Code on Corporate Governance (the “Combined Code”) in respect of its corporate governance practices. The Company has ADRs listed on the NYSE and, under the NYSE Corporate Governance Standards (the “NYSE Standards”) applicable to listed companies, as a foreign private issuer, the Company is permitted to follow the corporate governance practice of its home country in lieu of certain provisions of the NYSE Standards.

A summary of the significant ways in which the Company’s corporate governance practices differ from those followed by US domestic companies under the NYSE Standards is set forth below.

	NYSE Standards	AstraZeneca Corporate Governance Practice

1.	Under the NYSE Standards, the audit committee is to be directly responsible for the appointment,	Under the Combined Code, a company’s external auditors are appointed by its shareholders. As a result,

	compensation, retention and oversight of a listed company’s external auditor, unless there is a conflicting requirement under the home country laws of the company.	the Company’s audit committee is responsible for making recommendations to the Board of Directors, for the Board of Directors to propose to the Company’s shareholders in general meeting, in relation to the appointment, re-appointment and removal of the external auditors, and for approving the remuneration and terms of engagement of the external auditor.

2.	Under the NYSE Standards, the nominating/corporate governance committee and compensation committee are to be composed entirely of independent directors.	Under the Combined Code, a majority of the members of a company’s nomination committee, and all of the members of its remuneration committee, should be independent non-executive directors. The Company’s Nomination and Governance Committee and Remuneration Committee each includes four members, including the chairman of the Company’s Board of Directors, with the remainder all being considered by the Company’s Board of Directors to be independent in accordance with the principles and criteria of the Combined Code. The Company’s chairman was considered to be independent upon his appointment as chairman (under the Combined Code, the test of independence is not appropriate in relation to the chairman thereafter).


3.	Under the NYSE Standards, the compensation committee is to make recommendations to the listed company’s Board of Directors with respect to non-CEO executive officer compensation and certain other compensation plans which are subject to Board approval.	In compliance with the Combined Code, the Company’s Remuneration Committee determines the Company’s global remuneration frameworks and principles, approves individual salary decisions and related matters for members of the Company’s Board of Directors, Senior Executive Team (“SET”) and the Company Secretary, and reviews annual bonus payments for all executives reporting directly to SET members. While the Remuneration Committee does not make initial recommendations to the Board of Directors in this respect, it does report to the Board of Directors on these matters.

4.	Under the NYSE Standards, shareholders are entitled to vote on all equity compensation plans and material revisions thereto, with certain limited exemptions.	Under the listing rules of the UK Listing Authority (the “UKLA Rules”), with which the Company complies, shareholder approval is required to be obtained by the Company for the adoption of equity compensation plans which are either long-term incentive schemes in which directors of the Company can participate or schemes which may involve the issue of new shares. Under the UKLA Rules, these plans may not be changed to the benefit of the plan participants unless shareholder approval is obtained (with certain minor exceptions, for example, to benefit the administration of the plan or to take account of tax benefits). The UKLA Rules in respect of shareholder approval regarding equity compensation plans, or any material revision thereto, may differ from the NYSE Standards.

Under the NYSE Standards, each listed company Chief Executive Officer must certify to the NYSE each year that he or she is not aware of any violation by the listed company of any NYSE corporate governance listing standards, qualifying the certification to the extent necessary.

As the Company is a foreign private issuer, the Company’s Chief Executive Officer is not required to make this certification. He is, however, required to promptly notify the NYSE in writing after any executive officer of the Company become aware of any non-compliance with any NYSE corporate governance rules applicable to the Company.

The information set forth under the heading “Directors’ Report—Corporate Governance—Business Organisation and Corporate Governance—Principal corporate governance requirements—UK corporate governance requirements” on pages 96 and 97 and “—US corporate governance requirements” (final two paragraphs only) on page 97, in each case of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

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 15.2 hereto “Report of Independent Registered Public Accounting Firm 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 124 to 185 (including the information set forth under the subheading “Notes to the Financial Statements” on pages 133 to 185) and “Principal Subsidiaries” on page 186, in each case of the Company’s “Annual Report and Form 20-F Information 2009” included as exhibit 15.1 to this Form 20-F dated March 25, 2010 is incorporated by reference.

The information set out in the above-referenced financial statements does not constitute the Company’s statutory accounts under the UK Companies Acts for the years ended December 31, 2009, 2008 or 2007. Those accounts have been reported on by the Company’s auditors; their reports were unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985 or under section 498(2) or (3) of the Companies Act 2006. The accounts for 2008 and 2007 have been delivered to the registrar of companies and those for 2009 will be delivered in due course.

ITEM 19 – EXHIBITS

1.1	Memorandum and Articles of Association.(1)

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.(2)

4.2	Agreement for Service between AstraZeneca PLC and Simon Lowth, dated September 27, 2007.(3)

4.3	Agreement for Service between AstraZeneca PLC and John Patterson dated February 14, 2005 (effective as of January 1, 2005).(4)

4.4	Agreement for Service between AstraZeneca PLC and David R. Brennan dated December 16, 2005 (effective as of January 1, 2006).(4)

4.5	Form of Deed of Indemnity for Directors.(5)

7.1	Statement explaining calculation of ratio of earnings to fixed charges.

8.1	List of subsidiaries.

12.1	Certification of David R. Brennan filed pursuant to 17 CFR 240.13a-14(a).

12.2	Certification of Simon Lowth filed pursuant to 17 CFR 240.13a-14(a).

13.1	Certification of David R. Brennan and Simon Lowth furnished pursuant to 17 CFR 240.13a-14(b) and 18 U.S.C. 1350.

15.1	Annual Report and 20-F Information.(6)

15.2	Report of Independent Registered Public Accounting Firm to the members of AstraZeneca PLC by KPMG Audit Plc.

15.3	Consent of KPMG Audit Plc, independent registered public accounting firm.

15.4	Consent of IMS Health.

15.5	Consent of Bureau Veritas HS&E Ltd.

(1)	Incorporated into this Form 20-F by reference to AstraZeneca PLC’s Form 20-F filed March 21, 2005 (File No. 001-11960).

(2)	Incorporated into this Form 20-F by reference to AstraZeneca PLC’s Form 20-F filed March 25, 2003 (File No. 001-11960).

(3)	Incorporated into this Form 20-F by reference to AstraZeneca PLC’s Form 20-F filed March 12, 2008 (File No. 001-11960).

(4)	Incorporated into this Form 20-F by reference to AstraZeneca PLC’s Form 20-F filed March 23, 2006 (File No. 001-11960).

(5)	Incorporated into this Form 20-F by reference to AstraZeneca PLC’s Form 20-F filed March 27, 2007 (File No. 001-11960).

(6)	Certain of the information included within exhibit 15.1, which is provided pursuant to Rule 12b-23(a)(3) of the Securities Exchange Act of 1934, as amended, is incorporated by reference in this Form 20-F, as specified elsewhere in this Form 20-F. With the exception of the items and pages so specified, the Annual Report and Form 20-F Information is not deemed to be filed as part of this Annual Report on form 20-F.

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/ A C N Kemp
	Name:	A C N Kemp
	Title:	Authorised Signatory

London, England

March 25, 2010

RATIO OF EARNINGS TO FIXED CHARGES

Our consolidated ratios of earnings to fixed charges calculated in accordance with IFRS for the twelve month periods ended December 31, 2009, 2008, 2007, 2006 and 2005 are as follows:

		2009				2008				2007				2006				2005
IFRS			19.9				13.5				15.6				92.7				85.6

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. Fixed charges consist of interest on all indebtedness, amortization of debt discount and expense and that portion of rental expense representative of the interest factor.

At December 31, 2009	Country	Percentage of voting share capital held (1)	Principal activity
UK
AstraZeneca UK Limited	England	100	Research and development, manufacturing, marketing
AstraZeneca Treasury Limited	England	100	Treasury
Continental Europe
NV AstraZeneca SA	Belgium	100	Marketing
AstraZeneca Dunkerque Production SCS	France	95	Manufacturing
AstraZeneca SAS	France	100	Research, manufacturing, marketing
AstraZeneca GmbH	Germany	100	Development, manufacturing, marketing
AstraZeneca Holding GmbH	Germany	100	Manufacturing, marketing
AstraZeneca SpA	Italy	100	Marketing
AstraZeneca Farmaceutica Spain SA	Spain	100	Marketing
AstraZeneca AB	Sweden	100	Research and development, manufacturing, marketing
AstraZeneca BV	The Netherlands	100	Marketing
The Americas
AstraZeneca Canada Inc.	Canada	100	Research, marketing
AZ Reinsurance Limited	Cayman Islands	100	Insurance and reinsurance underwriting
IPR Pharmaceuticals Inc.	Puerto Rico	100	Development, manufacturing, marketing
AstraZeneca LP	US	99	Research and development, manufacturing, marketing
AstraZeneca Pharmaceuticals LP	US	100	Research and development, manufacturing, marketing
Zeneca Holdings Inc.	US	100	Manufacturing, marketing
MedImmune, LLC	US	100	Research and development, manufacturing, marketing
Asia, Africa & Australasia
AstraZeneca Pty Limited	Australia	100	Development, manufacturing, marketing
AstraZeneca Pharmaceuticals Co., Limited	China	100	Research and development, manufacturing, marketing
AstraZeneca KK	Japan	80	Manufacturing, marketing

(1) All shares are held indirectly.

The companies and other entities listed above are those whose results or financial position principally affected the figures shown in the Financial Statements of AstraZeneca PLC and its subsidiaries (the “Group”). A full list of subsidiaries, joint ventures and associates will be annexed to AstraZeneca PLC’s next annual return filed with the Registrar of Companies. The country of registration or incorporation is stated alongside each company. The accounting year ends of subsidiaries and associates are December 31, except for Aptium Oncology, Inc. which, owing to local conditions and to avoid undue delay in the preparation of the Financial Statements, is November 30. The Company operates through 282 subsidiaries worldwide. Products are manufactured in 18 countries worldwide and are sold in over 100 countries. The Group Financial Statements consolidate the Financial Statements of the Company and its subsidiaries at December 31, 2009.

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT 2002

I, David R. Brennan, certify that:

I have reviewed this annual report on Form 20-F of AstraZeneca PLC;

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;

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;

The company’s 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)	Evaluated the effectiveness of the company’s 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 company’s 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 company’s internal control over financial reporting; and

The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s 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 company’s 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 company’s internal control over financial reporting.

/s/ David R. Brennan

Chief Executive Officer, AstraZeneca PLC

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT 2002

I, Simon Lowth, certify that:

I have reviewed this annual report on Form 20-F of AstraZeneca PLC;

(a)

(b)

(c)	Evaluated the effectiveness of the company’s 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 company’s 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 company’s internal control over financial reporting; and

(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 company’s 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 company’s internal control over financial reporting.

Chief Financial Officer, AstraZeneca PLC

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, 2009 (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.

David R. Brennan, the Chief Executive Officer and Simon Lowth, the Chief Financial Officer of AstraZeneca PLC, each certifies that, to the best of his knowledge:

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of AstraZeneca PLC.

_/s/ David R. Brennan

Chief Executive Officer, AstraZeneca PLC

Chief Financial Officer, AstraZeneca PLC

Important information for readers of this Annual Report and Form 20-F Information

Cautionary statement regarding forward-looking statements

The purpose of this Annual Report and Form 20-F Information is to provide information to the members of the Company. The Company and its Directors, employees, agents and advisors do not accept or assume responsibility to any other person to whom this Annual Report and Form 20-F Information is shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed. In order, among other things, to utilise the ‘safe harbour’ provisions of the US Private Securities Litigation Reform Act 1995 and the UK Companies Act 2006, we are providing the following cautionary statement: This Annual Report and Form 20-F Information contains certain forward-looking statements with respect to the operations, performance and financial condition of the Group. Forward-looking statements are statements relating to the future which are based on information available at the time such statements are made, including information relating to risks and uncertainties. Although we believe that the forward-looking statements in this Annual Report and Form 20-F Information are based on reasonable assumptions, the matters discussed in the forward-looking statements may be influenced by factors that could cause actual outcomes and results to be materially different from those expressed or implied by these statements. The forward-looking statements reflect knowledge and information available at the date of the preparation of this Annual Report and Form 20-F Information and the Company undertakes no obligation to update these forward-looking statements. We identify the forward-looking statements by using the words ‘anticipates’, ‘believes’, ‘expects’, ‘intends’ and similar expressions such statements. 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, those factors identified in the Principal risks and uncertainties section from page 80 of this document. Nothing in this Annual Report and Form 20-F Information should be construed as a profit forecast.

Inclusion of reported performance, core financial measures and constant exchange rate growth rates

In Our year in brief section on page 2 and throughout the Directors’ Report the following measures are referred

>		Reported performance. Reported performance takes into account all the factors (including those which we cannot influence, principally currency exchange rates) that have affected the results of our business as reflected in our Group Financial Statements prepared in accordance with IFRS as adopted by the EU and as issued by the IASB.

>		Core financial measures. These are non-GAAP measures because unlike Reported performance they cannot be derived directly from the information in the Group’s Financial Statements. These measures are adjusted to exclude certain significant items, such as charges and provisions related to our global restructuring and synergy programmes, amortisation and impairment of the significant intangibles relating to the acquisition of MedImmune in 2007, the amortisation and impairment of the significant intangibles relating to our current and future exit arrangements with Merck in the US, and other specified items. See the Reconciliation of Reported results to Core results table on page 40 for a reconciliation of Reported to Core performance.

Constant exchange rate (CER) growth rates. These are also non-GAAP measures. These measures remove the effects of currency movements (by retranslating the current year’s performance at the

previous year’s exchange rates and adjusting for other exchange effects, including hedging). A reconciliation of Reported results adjusted for the impact of currency movements is provided in the Operating profit (2009 and 2008) table on page 39.

Throughout this Annual Report and Form 20-F Information, growth rates are expressed at CER unless otherwise stated.

AstraZeneca’s determination of non-GAAP measures together with our presentation of them within our financial information may differ from similarly titled non-GAAP measures of other companies.

Statements of competitive position, growth rates and sales

In this Annual Report and Form 20-F Information, except as otherwise stated, market information regarding the position of our business or products relative to its or their competition is based upon published statistical sales data for the 12 months ended 30 September 2009 obtained from IMS Health, a leading supplier of statistical data to the pharmaceutical industry. For the US, dispensed new or total prescription data are taken from the IMS Health National Prescription Audit for the 12 months ended 31 December 2009; such data is not adjusted for Medicaid and similar state rebates. Except as otherwise stated, these market share and industry data from IMS Health have been derived by comparing our sales revenue to competitors’ and total market sales revenues for that period. Except as otherwise stated, growth rates and sales are given at CER. For the purposes of this Annual Report and Form 20-F

Information, unless otherwise stated, references to the world pharmaceutical market or similar phrases are to the 49 countries contained in the IMS Health MIDAS Quantum database, which amounted to approximately 95% (in value) of the countries audited by IMS Health.

AstraZeneca websites

Information on or accessible through our websites, including astrazeneca.com, astrazenecaclinicaltrials.com and medimmune.com, does not form part of and is not incorporated into this document.

External/third party websites

Information on or accessible through any third party or external website does not form part of and is not incorporated into this document.

Definitions

The glossary and the market definitions table from page 206 are intended to provide a useful guide to terms and AstraZeneca’s definition of markets, as well as to acronyms and abbreviations, used in this Annual Report and Form 20-F Information. They are, however, provided solely for the convenience of the reader and should therefore not be relied upon as providing a definitive view of the subject matter to which they relate.

Use of terms

In this Annual Report and Form 20-F Information, unless the context otherwise requires, ‘AstraZeneca’, ‘the Group’, ‘we’, ‘us’ and ‘our’ refer to AstraZeneca PLC and its consolidated entities and any reference to ‘this Annual Report’ is a reference to this Annual Report and Form 20-F Information.

Statements of dates

Except as otherwise stated, references to days and/or months in this Annual Report and Form 20-F Information are references to days and/or months in 2009.

Figures

Figures in parentheses in tables and in the Financial Statements are used to represent negative numbers.

AstraZeneca Annual Report and Form 20-F Information 2009

02Introduction | Our year in brief

Our year in brief

Summary financial
and operational
information for 2009

Financial highlights




Sales growth
7%	3%	7%
2009	2008	2007

AstraZeneca Annual Report and Form 20-F Information 2009

Operational overview

Distributions to shareholders $m


	2009		2008		2007

Dividends		2,977		2,739		2,641

Share re-purchases		–		610		4,170



29%		23%
Crestor up 29% to $4,502 million		Symbicort up 23% to $2,294 million

4		4
Four major regulatory submissions		In-licensing/acquisition of four
		late-stage projects

$1.6bn		6%
Annualised savings of $1.6 billion		Top 6% in the sector in the
from restructuring		Dow Jones Indexes

Sales

>		Crestor sales were up 29% to $4,502 million; Symbicort up 23% to $2,294 million; Seroquel up 12% to $4,866 million; and Arimidex up 7% to $1,921 million. Nexium sales fell by 1% to $4,959 million and Synagis sales fell by 12% to $1,082 million

>		Sales of Toprol-XL and H1N1 influenza (swine flu) vaccine in the US accounted for 3 percentage points of the global revenue growth

>		Emerging Markets growth was 12%, accounting for 13% of total revenue

Pipeline developments include

>		Four major regulatory submissions made

>		Complete Response Letter submitted for fifth regulatory submission

>		In-licensing/acquisition of four late-stage projects

>		89 projects in clinical development

Restructuring programme delivered annualised savings of $1.6 billion in 2009 and expanded to deliver further savings

Positioned in the top 6% in the sector in the Dow Jones World and STOXX (European) Indexes

Up to $1 billion in Ordinary Shares will be re-purchased by the Company during 2010

Note: All growth rates are at CER.

AstraZeneca Annual Report and Form 20-F Information 2009

04Introduction | Chairman’s Statement

Chairman’s Statement

Despite the difficult world economic conditions, 2009 was a successful year for AstraZeneca. Our strong performance and considerable achievement in making a real difference to patient health around the world meant that our shareholders were also able to benefit.

Group sales increased by 7% in 2009 to a total of $32,804 million. Reported operating profit was $11,543 million, up 24%. Reported earnings per share for the full year were $5.19 (2008: $4.20). The Board has recommended a second interim dividend of $1.71, a 14% increase over the second interim dividend awarded in 2008. This brings the dividend for the full year to $2.30 (141.4 pence, SEK 16.84), an increase of 12% from 2008. In 2009, cash distributions to shareholders through dividends totalled $2,977 million.

Meeting patient need lies at the heart of what we do. In 2009, immediate need was met when our people and technology enabled us to develop and be the first to market an H1N1 influenza (swine flu) vaccine in the US. Equally, when generic producers proved unable to supply the market for Toprol-XL, we successfully rebuilt our supply chain to fill the void.

2009 was also a year in which AstraZeneca science was at the forefront of the industry, ensuring that we are able to meet patient need in the longer term. Two of the biggest landmark clinical trials to report in recent years, the Crestor JUPITER and the Brilinta PLATO trials, engaged academic and clinical communities across the globe. We have

made regulatory submissions based on the results of these trials.

Our strategic focus is on innovation-driven medicines that are valued by patients and payers alike. We continue to invest in new medicines and we work to protect our investments by rigorously defending our patent rights and thereby optimising our intellectual property. To this end, AstraZeneca will vigorously defend the challenge to the Crestor US substance patent brought by a number of generic drug manufacturers when the case goes to trial in February 2010.

Worldwide, pharmaceutical industry revenue growth, while positive, is slowing. This is due to pressure on healthcare costs, exacerbated by the current economic downturn, as well as increased competition from generic medicines. We believe pressures on costs are likely to continue, especially in the US.

Nevertheless, the demand for healthcare that will drive the industry’s future growth remains strong, especially from economic and demographic growth in Emerging Markets and the growing number of patients there who can afford our medicines. In response to these developments we have continued to drive change in the business. We are reshaping our presence in Established Markets to ensure we remain competitive and investing in Emerging Markets around the world so that we can benefit from their growth.

We used our assessment of the future for the pharmaceutical sector as the basis for the annual strategy review with David Brennan and his executive team.

We confirmed our commitment to being an integrated, global and innovation-driven prescription-based biopharmaceutical business. While there has already been much change in the business, the review also highlighted the need to redouble our efforts if we are to stay at the forefront of the sector. Our plans for the business are outlined in more detail in David’s Review and the Strategy and Performance section.

In recognition of the Group’s strong balance sheet, sustainable significant cash flow and the Board’s confidence in the strategic direction and long-term prospects for the business, we have adopted a progressive dividend policy, intending to maintain or grow the dividend each year. In order to ensure that long-term management incentives and shareholder interests remain aligned, we are tabling proposals for a new share-based long-term incentive plan for shareholder approval. This has been developed as part of an overall review of executive remuneration. Further information about this plan and the review can be found in the Directors’ Remuneration Report from page 101 and in the Notice of AGM.

During 2009, Håkan Mogren retired from the Board, having been a Director of the Company since its formation in 1999. Before then, he had served as Chief Executive Officer and a Director of Astra AB for more than 10 years. He brought a wealth of experience and sound judgement to the work of the Board which we valued highly. As announced last year, John Patterson also retired in 2009. On behalf of their fellow Directors, I would like to reiterate my thanks to both of them for their service to the Company.

Once again, the Board would like to place on record its appreciation of the leadership shown by David Brennan and his team. On behalf of the Board I would also like to thank AstraZeneca employees around the world for their contribution to what has been a very successful year. Their contribution, which has been the foundation of our past success, is also needed more than ever as we address the challenges to come. I am confident that AstraZeneca has the skills and capabilities to continue that success by harnessing both its own efforts and the efforts of those with whom we work.

Louis Schweitzer
Chairman

AstraZeneca Annual Report and Form 20-F Information 2009

Introduction | CEO’s Review

CEO’s Review

2009 was a year of considerable achievement in which I believe we laid firm foundations for the future success of the business. Underpinning all this is excellent execution of our plans, improved organisational flexibility and a committed workforce.

Operational highlights of the year include four significant regulatory filings for new medicines and two product launches. We agreed four late-stage project collaborations and have 89 projects in clinical development. In addition, sales of Toprol-XL and H1N1 influenza (swine flu) vaccine in the US accounted for three percentage points of the global revenue growth at CER, while growth in Emerging Markets was up 12%, accounting for 13% of total revenue. 2009 was also the year in which we reached an agreement in principle with the US Attorney’s Office to settle claims relating to Seroquel sales and marketing practices and to make a payment of $524 million (including interest).

If we are to bring benefits to patients and create value for shareholders, we need a constant flow of new and innovative medicines. Of the four regulatory filings made in 2009, Brilinta is a treatment for acute coronary syndromes, Certriad is for the treatment of lipid abnormalities and Vimovo is for arthritic pain. The fourth submission was for a fixed-dose combination of Onglyza^™and metformin for treating diabetes. 2009 saw Onglyza^™ launched in the US and in the EU for the treatment of Type 2 diabetes. Iressa, our anti-cancer medicine, was launched in the EU. Of course, in the process of developing new medicines, we experience setbacks as well as successes. The decision

we made during the year to withdraw the regulatory submissions we had made for our anti-cancer medicine, Zactima, came as a disappointment.

As projects leave the development pipeline, we replenish it with new projects that will yield regulatory submissions in future years. We now have 11 projects in Phase III development. Twenty-nine projects entered the pipeline during the year and 53 projects were progressed to their next phase of development. We seek to provide each of these projects with a business case underpinned by a clear scientific rationale and sound financial case.

In strengthening our pipeline we look beyond our own laboratories to access the best science and external sources of innovation. As a result, a significant number of our projects come from our programme of collaboration. These include two of our regulatory filings: Certriad was submitted with Abbott and Vimovo was submitted by our partner Pozen Inc. In addition, Onglyza^™ was the first product of our diabetes collaboration with BMS.

Other collaborations agreed in 2009 included the in-licence from Forest of ceftaroline, a ‘next generation’ anti-infective. We enhanced the value of this programme in December with an agreement to acquire Novexel, a private infection research company. We also agreed in-licensing deals with Nektar and Targacept.

A further focus in 2009 was the continued reshaping of the business to give us the organisational flexibility we need to take advantage of opportunities. Initiatives include outsourcing some of our R&D activities, other

business processes and support services, such as HR. To meet evolving customer needs we are adapting our methods of sales and marketing and altering our supply chains.

Our drive to improve efficiency and effectiveness across AstraZeneca has resulted in further reductions in our workforce. The executive team and I remain committed to ensuring that we manage these changes in the right way. This means that, in meeting the needs of the business, we deal responsibly and sympathetically with affected individuals and the communities in which they live.

We continue to integrate responsible business considerations into everyday decision-making across all our activities, reinforcing personal accountability for compliance with our Code of Conduct through training and monitoring of business practices. We were pleased to have our efforts recognised externally with improved scores in the 2009 Dow Jones Index. Looking ahead, we have identified areas for improvement and will take action to strengthen further our governance and management processes, building on our progress to date and driving continuous improvement throughout the business.

2009 also saw some changes to the executive team. Jan Lundberg, Executive Vice-President, Discovery Research left AstraZeneca in November. We thank him for his significant contribution to the business. Christer Köhler has taken over the role on an interim basis. Bruno Angelici, Executive Vice-President, International Sales and Marketing Organisation, will be leaving AstraZeneca later in 2010. He has made an enormous contribution and we thank him for his sound judgement and strong leadership.

Finally, the achievements of the year would not have been possible without the dedication and hard work of all our employees, to whom I offer my thanks. For many of our employees 2009 was a year of change. The pace of change is not going to let up in 2010. Indeed, it is going to accelerate. I am confident that our staff will respond with the commitment they have shown in the past.

The Strategy and Performance section from page 14 outlines our plans and priorities for 2010 and beyond, which we need to implement to ensure we prosper in the years ahead. In doing so, we will improve the health of patients around the world and thereby create value for our shareholders.

David R Brennan
Chief Executive Officer

AstraZeneca Annual Report and Form 20-F Information 2009

06Introduction | AstraZeneca at a glance

AstraZeneca

at a glance

AstraZeneca is a global, innovation-driven biopharmaceutical business

Our mission is to make the most meaningful difference to the health of patients through great medicines

We do this with a range of medicines designed to improve patients’ health and quality of life around the world

We are committed to developing each activity within our business in a responsible way

Our work is supported by our values and the conduct of employees in working with each other and our stakeholders

We believe that our approach delivers lasting value for patients, society and our shareholders

62,700

62,700 employees worldwide

We are focused on the discovery, development and commercialisation of prescription medicines for six important areas of healthcare

We have a broad product range that includes many leaders in the treatment of the world’s most serious illnesses

We have 10 medicines with sales of more than $1 billion each in 2009

We use our scientific and commercial skills to develop a pipeline of innovative new products to meet medical need


Healthcare area		Key product

Cardiovascular		Crestor (for managing cholesterol levels)

Gastrointestinal		Nexium (for acid reflux)

Infection		Synagis (for RSV, a form of respiratory infection in infants)

Neuroscience		Seroquel (for schizophrenia, bipolar disorder and major depressive disorder)

Oncology		Arimidex (for breast cancer)

Respiratory & Inflammation		Symbicort (for asthma and chronic obstructive pulmonary disease)

$1bn

10 medicines with sales of over $1 billion each in 2009

AstraZeneca Annual Report and Form 20-F Information 2009

Introduction | AstraZeneca at a glance

We are committed to working in a spirit of collaboration to achieve our goal of better health for patients

We recognise the value of collaborative work, and so continually seek to develop new ways of working with others who complement our existing skills, enhance our internal innovation or bring extra value to what we do

Our products rely not only on teamwork within AstraZeneca but on working with doctors, patients and other stakeholders to understand what they need and want

We also work with governments and those who pay for healthcare to ensure our products represent value for money

We work with NGOs and others to improve local healthcare in vulnerable communities around the world

60 major R&D collaborations in the last three years

We have a global reach but local knowledge, being active in over 100 countries, with a growing presence in emerging markets such as China, Brazil, India and Russia

In 2009 we had sales of $15,981 million in North America, $12,471 million in Other Established Markets and $4,352 million in Emerging Markets

Combining our disease area expertise with country-specific knowledge helps us to market and sell medicines that best meet local needs

Of our 62,700 employees worldwide, 47% are in Europe, 31% in the Americas and 22% in Asia, Africa and Australasia

Around 11,600 people work in our R&D organisation and we have 17 principal R&D centres in eight countries, including Sweden, the US and the UK

We have 9,500 employees at 20 manufacturing sites in 16 countries

100+

Active in over 100 countries

AstraZeneca Annual Report and Form 20-F Information 2009

Path to a new medicine

10Directors’ Report

Directors’ Report


Performance
Business Environment			12
Strategy and Performance			14
>Strategy, objectives and 2009 performance			16
Resources, Skills and Capabilities			18
>Our products			18
>Our approach			20
>Research and Development			22
>Working with others			22
>Sales and marketing			28
>Intellectual property			31
>Supply and manufacturing			32
>People			33

Reviews
Financial Review			36
>Measuring performance			37
>Business background and major events affecting 2009			37
>Results of operations – summary analysis of year to 31 December 2009			38
>Financial position, including cash flow and liquidity – 2009			39
>Restructuring and synergy costs			41
>Capitalisation and shareholder return			42
>Future prospects			42
>Results of operations – summary analysis of year to 31 December 2008			42
>Financial position, including cash flow and liquidity – 2008			43
>Financial risk management			44
>Critical accounting policies and estimates			45
>Other accounting information			49
Geographical Review			50
>North America			50
>Rest of World			52
Therapy Area Review			55
>Cardiovascular			56
>Gastrointestinal			60
>Infection			62
>Neuroscience			65
>Oncology			68
>Respiratory & Inflammation			71
Other Businesses			75
Environmental Sustainability			76
In the Global Community			77


Corporate Governance
Risk			79
>Managing risk			79
>Principal risks and uncertainties			80
Business Organisation and Corporate Governance			87
>Business organisation			87
>Board of Directors at 31 December			88
>Senior Executive Team at 31 December			90
>Reserved matters and delegation of authority			92
>Principal corporate governance requirements			96
Directors’ Remuneration Report			101

This Directors’ Report includes information that fulfils the requirements of a business review under the Companies Act 2006.

The Development Pipeline, Shareholder Information and Corporate Information sections from pages 196, 199 and 204, respectively, are incorporated into this Directors’ Report.

Details of the more significant risks to AstraZeneca are set out in the Principal risks and uncertainties section from page 80.

Many of our products are subject to litigation.

Detailed information about material legal proceedings can be found in Note 25 to the Financial Statements from page 166.

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 AstraZeneca’s 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.

The glossary and the market definitions table from page 206 are intended to provide a useful guide to terms and AstraZeneca’s definitions of markets, as well as to acronyms and abbreviations, used in this Directors’ Report.

In this Annual Report and Form 20-F Information, unless the context otherwise requires, ‘AstraZeneca’, ‘the Group’, ‘we’, ‘us’ and ‘our’ refer to AstraZeneca PLC and its consolidated entities and any reference to ‘this Annual Report’ is a reference to this Annual Report and Form 20-F Information.

Except as otherwise stated, references to days and/or months in this Annual Report are references to days and/or months in 2009.

Figures in parentheses in tables and in the Financial Statements are used to represent negative numbers.

Members of the Senior Executive Team address
questions from an audience of employees at a Town
Hall meeting in Westborough, Massachusetts, US.

AstraZeneca Annual Report and Form 20-F Information 2009

12Directors’ Report | Business Environment

Business Environment

AstraZeneca operates in a rapidly changing business environment that presents both opportunities and challenges. Although industry revenue growth is slowing due to continuing pressure on healthcare costs and pricing, as well as increased competition from generic medicines, the demand for healthcare that will drive the industry’s future growth remains strong.

Historically, the pharmaceutical industry has been less exposed than other sectors to changes in global economic conditions, but continued constraints on payers impacted the sector and its prospects in 2009. However, the current economic environment also presents opportunities for the sector, such as strategic alliances with smaller companies seeking funding and development expertise. Indeed, partnering activity across the pharmaceutical sector remained strong during 2009.

World markets

The world pharmaceutical market in 2009 was valued at $709 billion, an increase of 5% over 2008 at CER (maintaining the rate of growth for the period 2007 to 2008). As shown in the figure opposite the 2009 growth rate in North America recovered from its 2008 decline while the 2009 growth rate in Other Established Markets fell back from its 2008 level. On the other hand, Emerging Markets, in particular Emerging Asia Pacific, saw strong double-digit growth.

In 2009 the top five markets in the world remained the US, Japan, France, Germany and Italy, with the US representing 42% of global sales (2008: 42%). Further down the rankings, China moved into sixth place, displacing the UK to eighth place behind Spain.

Growth drivers

Expanding patient populations

The world population has doubled in the last 50 years from three billion to over six billion and is expected to reach nine billion by 2050. In addition, the number of people who can access the highest standards of healthcare continues to increase, particularly among the elderly, who represent a rising proportion of populations in developed nations.

Furthermore, the faster-developing economies, such as China, India and Brazil, continue to offer new opportunities for the industry to supply an expanding number of patients who can benefit from medicines. As shown by the figures, Emerging Markets now represent approximately 85% of the world population and 16% of the total pharmaceutical market. Pharmaceutical industry growth in Emerging Markets was more than triple the rate of growth in Established Markets in 2009.

Unmet medical need

In most Established Markets, ageing populations and certain lifestyle choices drive an increased incidence of chronic diseases such as cancer, cardiovascular/metabolic and respiratory diseases which require long-term management. The prevalence of chronic disease is also increasing in middle-income countries, and is now beginning to have an impact in the least developed countries. Many diseases remain under-diagnosed or sub-optimally treated and, as diagnostic techniques and treatments improve and access to medicines widens, the burden of disease is projected to continue increasing over the next 20 years. In addition, the appearance of new medical challenges such as the H1N1 influenza (swine flu) pandemic potentially adds to the burden.

Advances in science and technology

Existing medicines will continue to be vital in meeting the demand for healthcare, particularly in an increasingly genericised market. In addition, innovation resulting from advances in both the understanding of the key processes involved in the initiation and progression of disease and the application of new technologies will be critical to meeting current and future unmet medical need. As we noted last year, the use of large molecules, or biologics, is becoming an increasingly important driver of innovation. It has been predicted that within the world’s top 100 pharmaceutical products, 50% of sales will come from biologics based on forecasts for 2014. This compares with only 28% in 2008 and 11% in 2000. With advances in the technologies for the design and testing of novel compounds, new opportunities also exist for the use of innovative small molecules as new medicines.

The challenges

Pricing pressure

The growing demand for healthcare continues to increase pressure on payer budgets. Whilst payers may recognise the need to reward innovation, they have a duty to spend their limited financial resources wisely. As a result, cost-containment in healthcare, including containment of pharmaceutical spending, continues to be a focus. This is particularly the case as the current global economic downturn increases cost pressures on healthcare payers and those patients who pay directly for all, or a significant proportion, of the cost of their medicines.

The research-based pharmaceutical industry’s challenge is to manage this downward pressure on the price of its products, whilst continuing to invest in the discovery, development, manufacture and marketing of new medicines. In addition, most of our sales are generated in highly regulated markets where governments exert various levels of control on price and reimbursement.

Multiple pricing systems exist across the globe, which create a complex matrix that must be managed to optimise revenues. This may be further complicated by currency fluctuations within regions. The principal aspects of price regulation in our major markets are described further in the Geographical Review from page 50.

Payers increasingly require that the economic as well as therapeutic value of medicines be demonstrated and that this value be supported by evidence of real outcomes. Meeting these needs across a diverse range of national and local reimbursement systems requires significant additional investment of resources and funds by the industry. Personalised healthcare (PHC) offers one way of increasing the value of medicines to patients, physicians and payers. Under PHC the optimal treatment for each individual, in terms of the choice of medicine and dose, is determined by analysis of the patient’s biochemical or genetic make-up. An example of this approach is the use of a companion diagnostic test to allow use of Iressa for the treatment of lung cancer, specifically in those patients who have an activating mutation of the epidermal growth factor receptor.

R&D productivity

The research-based pharmaceutical industry continues to drive for increased productivity in R&D to ensure a strong pipeline of commercially viable medicines for launch. Companies have addressed this challenge in a variety of ways. Some have sought to increase output with limited incremental cost

AstraZeneca Annual Report and Form 20-F Information 2009

	Directors’ Report \| Business Environment	13
		Performance

and others have restructured R&D functions to promote innovation and entrepreneurship. Others have acquired companies with synergistic development pipelines.

Regulatory requirements

The pharmaceutical industry is one of the most regulated of all industries. Whilst efforts to harmonise regulations globally are increasing, the number and impact of these regulations continue to grow. Since the withdrawal of Vioxx^™, regulators have been applying a more systematic approach to safety assessment and the management of known and emerging risks both before and after a medicine is approved. Today, regulators also require greater amounts of safety data before approval than in the past. This has led to a change in the structure of development programmes and to the need for additional resources to carry them out. For example, companies might initially seek approval for a narrower list of medical indications, or request conditional approvals that may later be expanded through additional studies as part of a medicine’s life-cycle management.

Competition

Our main competitors are other research-based pharmaceutical companies that sell innovative, patent-protected, prescription medicines. Competition also comes from collaborations between traditional pharmaceutical companies and smaller biotechnology and vaccine companies.

Generic versions of drugs that are no longer patent protected also compete in the market. Manufacturers of generic drugs price them at a significantly lower level than the innovator equivalents. This is partly because generic manufacturers do not invest the same amounts in R&D or market development as research-based pharmaceutical companies, and therefore do not need to recoup that investment. Such competition generally occurs when patents expire but can also occur where the validity of patents is being disputed or has been successfully challenged before expiry. In addition, competition can occur when a generic medicine in the same product class as an innovator product (a product which does not yet have a generic equivalent) enters the market and competes to meet the same medical need.

To date, biologics have sustained longer life-cycles than traditional pharmaceuticals and have faced less generic competition. This is because the manufacturing process for biologics is generally more complex than it is for small molecule medicines and it is significantly harder to produce an identical copy of a biologic compared to a small

molecule medicine. However, biologics are now becoming subject to competition from ‘biosimilars’ and, while the regulatory regimes for ‘biosimilars’ are less well established than those for generic small molecule medicines, regulatory authorities in Europe and the US are currently reviewing abbreviated approvals processes.

Further information about the specific risk of the early loss and expiry of patents is explained in the Intellectual property section on page 31 and more general information regarding the principal risks and uncertainties faced by AstraZeneca can be found in the Principal risks and uncertainties section from page 80.

World pharmaceutical markets

Data based on world market sales using AstraZeneca’s market definitions as set out in the market definitions table on page 206. Source: IMS Health.

Expanding patient populations

Source: International Monetary Fund, World Economic Outlook Database, October 2009

Population figures are for 2008

GDP growth is based on real GDP in US dollars for the years 2003-2008

GDP per capita is nominal GDP per capita for 2008.

AstraZeneca Annual Report and Form 20-F Information 2009

14Directors’ Report | Strategy and Performance

Strategy and
Performance

How we did in 2009
and our plans for
the future

“We face near-term challenges
but I am confident that we can
be among the best performers
in this sector.”

Each year, at the beginning of our business planning cycle, we assess the challenges and opportunities presented by the market, stress test our short and long-term planning assumptions, and critically assess our strengths and weaknesses as an organisation. We do so to assure ourselves that, whatever our past successes, the strategic path we are following is the right one for the future.

This section summarises our strategic plans for the future as well as our performance against those plans in 2009.

Our challenge

In our Business Environment section from page 12 we outline the opportunities presented by expanding patient populations in Emerging Markets, unmet medical need and advances in science, as well as the pricing pressure and other challenges facing the pharmaceutical sector. Over the last 10 years, our healthcare revenue has grown from $15 billion to almost $33 billion and our Emerging Markets business has grown from 6% of our global revenue to 13%. Our challenge as a business is to be nimble in seizing the opportunities and managing the risks in order to build our competitive advantage.

We estimate that in the next five years, more than half our current revenue is subject to

potential loss through the ordinary course of patent expiries and loss of Regulatory Exclusivity protecting our products. This loss of intellectual property is an inherent feature of our industry that occurs naturally as part of the cycle of innovation, growth and renewal. It is, however, challenging to be able to synchronise the cycles of patent expiry and portfolio renewal. The goal for our planning process is to ensure that we can continue to sustain the cycle of successful innovation and thus continue to refresh our portfolio of patented products and generate value for shareholders.

Our strategy

The executive team, with the endorsement of the Board, believes that the most value-creating strategy for AstraZeneca is to remain a focused, integrated, innovation-driven, global, prescription-based biopharmaceutical business:

>		focused in that we will continue to be selective about those areas of the industry in which we choose to compete, targeting those product categories where medical innovation or brand equity continues to enable us to make acceptable levels of returns on our investments

>		integrated in that we believe the best way to capture value within this industry is to span the full value chain of discovery, development and commercialisation

AstraZeneca Annual Report and Form 20-F Information 2009

	Directors’ Report \| Strategy and Performance	15
		Performance


>		innovation-driven in that we believe our technology base will continue to deliver innovative products that patients will want and for which payers will pay

>		global in that we believe we have the ability efficiently and effectively to meet healthcare needs in both Established and Emerging Markets.

We believe that there are continued opportunities to create value for those who invest in pharmaceutical innovation and that AstraZeneca has the skills and capabilities to turn these opportunities into long-term value.

Our priorities to 2014

The initiatives we are pursuing in the coming years are in line with those we reported on last year and we do so again overleaf in this Annual Report. These show that we are already on a path of change. Our 2009 review emphasised the need for the pace of that change to accelerate.

Pipeline

While remaining committed to scientific innovation to deliver a flow of new medicines, the need to further improve the productivity of R&D is a central part of our plans. Meeting this challenge will require continued investment in new skills and capabilities. It will also require our R&D organisation to undertake more transformational change than ever before. Our plans include a reduction in the number of disease area targets within our core Therapy Areas, a continued focus on external collaboration, some consolidation of our activities onto a smaller R&D site footprint, and other efficiency measures, subject to consultations with work councils, trades unions and other employee representatives and in accordance with local employment laws.

Our commitment to scientific innovation is coupled with our belief that successful delivery of our plans will require more external collaboration than ever before, including more extensive collaboration with industry and academic partners. External project opportunities will compete alongside in-house developments for funding from our new Portfolio Investment Board which will replace the R&D Executive Committee.

Business growth

Our enhanced programme of external collaboration includes working with payers. We are setting out to build an industry-leading capability in ‘payer partnering’ to ensure that the needs of our customers are clearly understood throughout R&D and included in our decision-making.

In terms of the commercialisation of our products, we will continue to build on our leading positions in Established Markets. Our plans for growth will also build on the investments we have already made in Emerging Markets. In addition to commercialising the current and new product offerings being developed internally, we believe we can drive further growth by selectively supplementing our Emerging Markets portfolio with branded generic products sourced externally and marketed under the AstraZeneca brand.

Business shape

We will continue to use business improvement programmes, such as Lean Sigma, to drive efficiencies across the Group. We will also move further towards a more flexible cost base which will enable us to respond rapidly as our requirements change. To do this we will make greater use of outsourcing and strategic collaborations with other organisations.

Culture and behaviour

We define success not only by what we do but also by how we do it. Acting responsibly ensures we do things in the right way and in line with the expectations of shareholders, customers, payers, regulators and other stakeholders. We will continue to embed a culture of accountability across the Group, nurturing a spirit of innovation in all functions.

Implementation

Good progress has been made in the implementation of previously announced restructuring programmes. This has involved a reduction of 12,600 positions. Annualised benefits of $1.6 billion were realised by the end of 2009, which are on track to grow to around $2.4 billion by the end of 2010.

The next phase of restructuring, which includes completion of the previous programmes, some additional initiatives in supply chain and in selling, general & administration, as well as the R&D initiatives, will result in the realisation of a further $1.9 billion in estimated annual benefits by the end of 2014. These programmes may, when fully implemented, involve up to an additional 10,400 job reductions.

Our performance in 2009

Set out in the next column is more information about how we measure and review our performance on an annual basis. For each of our strategic priority areas, the table overleaf summarises the initiatives we have been undertaking in support of them, our 2010 objectives, our KPIs and our performance against them in 2009.

Measuring our performance

Each business function is subject to an annual budget and target-setting process that includes developing financial and business forecasts, conducting sensitivity and risk analyses and setting relevant performance measures. Regular reviews are undertaken in each part of the business in order to monitor and assess progress against business and budget targets, and to assess key risks and mitigating actions. Longer term, 10-year forecasts are developed as part of our annual strategy review.

Quarterly internal reports provide the Board and SET with shared insight into progress against current year objectives and milestones for longer-term strategic goals. Performance is assessed using quantitative, comparative market, operational and financial measures and qualitative analysis.

In relation to our overall goal of creating enduring value for shareholders by being one of the best-performing pharmaceutical companies, we track shareholder value using the following financial performance metrics: sales growth (operating profit and margins); earnings per share growth; net operating cash flow (before debt repayment and shareholder distributions); shareholder distributions through dividends and share re-purchases; and TSR. We report our performance against those measures on pages 2 and 3 of this Annual Report, and with TSR graphs on page 114.

AstraZeneca Annual Report and Form 20-F Information 2009

16Directors’ Report | Strategy and Performance

Strategy, objectives and 2009 performance


Strategic priority	Initiatives	Objective for three years to end 2010

Strengthen the pipeline

To be one of the fastest and most productive companies in the industry through continuous improvement in our in-house R&D. Seek leading science outside AstraZeneca to broaden our research base and further strengthen our pipeline of new products	Accessing the best potential innovative medicines to meet unmet patient need through > small molecule and biologics R&D > externalisation Embedding culture of continuous improvement through > leading-edge science > collaborations > business efficiency	Deliver two new product launches on average per year from 2010 In order to achieve the above ensure we have 10 or more products in Phase III development or registration
		Achieve a median composite eight-year product development cycle


Grow the business

To maintain our position among the industry leaders through a continued focus on driving commercial excellence	Building on leadership positions in existing markets Expanding presence in important emerging markets	Deliver sales growth in line with market growth to provide a return on our investment
	Driving high standards of sales force effectiveness, marketing excellence and customer support	Profitably launch in-licensed and existing projects

	Developing our brands to maximise patient benefit and commercial potential	Securing new external commercial collaborations


Reshape the business

To create an organisation with the flexibility and financial strength to adapt quickly and effectively within a challenging and rapidly changing business environment	Implementing and expanding restructuring programme	Annual benefits of $2.1 billion from restructuring

	Operations’ asset and sourcing strategy	Maintain margins

	Delivering continuous improvement across R&D through	Improve R&D unit costs by 15%
	> smarter working > business process outsourcing


	G&A strategy	Achieve planned improvement in selling, general and
	Marketing, sales and commercial strategies	administrative (SG&A) costs
	> Western Europe and Emerging Markets resource optimisation plans
	> North America – customer-driven interactions


	Procurement strategy	Procurement savings

Promote a culture of responsibility and accountability

To create an organisation that is recognised not only for the skills, experience and quality of its people, but also for the integrity with which it conducts its business	Maintain/improve levels of employee engagement	Upper quartile industry ranking for employee engagement

	Strengthening leadership development frameworks	Achieve step change in leadership and management capability

	Integrating responsible business considerations into	Ensure that a culture of responsible business, including
	everyday business thinking and decision-making	compliance, is embedded across all our activities

AstraZeneca Annual Report and Form 20-F Information 2009

	Directors’ Report \| Strategy and Performance	17
		Performance


		Measure		2009 performance summary


		Regulatory approvals		Onglyza™ approved in 36 countries; Iressa approved in the EU H1N1 influenza vaccine approved in the US. See Therapy Area Review from page 55

		Projects entering development		29 projects entering development. See Strengthening the pipeline section on page 24

		Value-creating collaborations and business development activities		Major late-stage in-licensing deals signed with Targacept, Forest and Nektar Agreed to acquire Novexel. See Working with others section from page 22

		Major regulatory submissions		Submissions made for Brilinta, Certriad, Vimovo and Onglyza™/metformin; Zactima submission withdrawn H1N1 influenza vaccine approved in the US. See Therapy Area Review from page 55

		Development cycle times for small molecule and biologics/vaccines		On track to deliver 2010 targets. See Improving productivity section from page 24




		Deliver targeted sales and contribution growth (at CER)		Global sales +7% at CER. See 2009 Results of operations section from page 38

		Successful life-cycle projects		Additional approvals in the US for Seroquel and Seroquel XR; presented results of Crestor JUPITER trials and regulatory submissions made in the US and the EU. See Therapy Area Review from page 55

		Successful launches		Onglyza™ launched in the US and the EU; Iressa launched in the EU Symbicort approved in Japan and launched in January 2010. See Therapy Area Review from page 55

		Commercial collaborations		Four major co-promotion collaborations signed (Abbott, Astellas, UCB and Salix). See Working with others section on page 22



		Cost savings		Annualised benefits of $1.6 billion in 2009. See Strategy and Performance section from page 14

		Gross margin		Target exceeded: core gross margin of 83%. See 2009 Results of operations section from page 38

		Operating profit margin		Core operating profit margin of 41.5%. See 2009 Results of operations section from page 38

		Unit cost metrics		Progress towards target. See Improving productivity section from page 24


		SG&A cost growth rates		Core SG&A growth of 5%. See 2009 Results of operations section from page 38


		Cost savings		Delivered savings of $555 million against a target of $500 million



		Levels of employee engagement as measured by our global employee survey (FOCUS)		86% of our employees completed the FOCUS survey, and employee engagement improved by 2 percentage points from 2008. This is above the industry average. See Engagement and dialogue section on page 34

		Improve senior leadership clarity of direction as measured by our FOCUS survey		2009 score improved by 3 percentage points over 2008 to 72% favourable. This follows significant efforts to improve the quality and effectiveness of senior leaders’ communication to the organisation. See Engagement and dialogue section on page 34

		Number of confirmed breaches of external sales and marketing regulations or codes		24 confirmed breaches of external sales and marketing regulations or codes. See Sales and marketing ethics section from page 29

		Greenhouse gas emissions¹		9% reduction in CO₂ emissions. See Climate change section on page 76

		Waste production^{1, 2}		8% reduction in total waste production. See Waste management section on page 76

		Rate of accidents with serious injury¹		2% reduction in accidents with serious injury. See Safety, health and wellbeing section on page 35

		Rate of occupational illness¹		32% increase in cases of occupational illness. See Safety, health and wellbeing section on page 35

		Ranking in Dow Jones Sustainability Indexes		Positioned in the top 6% in the sector in the Dow Jones World and STOXX (European) Indexes


	¹	Data exclude MedImmune.

	²	We have replaced our previous ozone depleting potential (ODP) KPI with waste production, as we believe it is now a more meaningful environmental sustainability indicator for AstraZeneca. ODP data continue to be published on our website, astrazeneca.com/responsibility.

AstraZeneca Annual Report and Form 20-F Information 2009

18Directors’ Report | Resources, Skills and Capabilities

Resources, Skills
and Capabilities

How we deliver
our strategy

70 year track record of
pharmaceutical innovation

We believe that the following resources, skills and capabilities are key to achieving our goals for the longer-term success of our business:

>		a world-class R&D function focused on delivering a range of innovative and differentiated medicines that meet unmet medical need and for which customers are prepared to pay

>		a sales and marketing activity which is truly global in its approach, listens to customers and focuses on their needs

>		a cost-effective supply and manufacturing operation that ensures our customers receive a reliable supply of medicines when they want them.

We also need to have cost-effective and flexible support services and infrastructure to ensure we meet our customers’ needs as efficiently as possible.

To optimise our use of these resources, skills and capabilities, we need to:

>		protect our investment in R&D through a rigorous process of patent protection that optimises our intellectual property






>		have access to the best external sources of innovation to complement and build on our internal skills and capabilities.

Above all, we cannot achieve our goals without AstraZeneca people and the diverse skills and capabilities that a global workforce

brings to our business. In everything we do we seek to act as a responsible business and are committed to developing in a sustainable way.

In this section we describe how we are using our resources, skills and capabilities to deliver our goals.

Our products

We focus on six Therapy Areas:

Cardiovascular, Gastrointestinal, Infection, Neuroscience, Oncology and Respiratory & Inflammation. These represent a significant proportion of the world’s burden of disease.

Our medicines

Our heritage

Backed by our 70 year track record of pharmaceutical innovation, we have a broad range of marketed medicines that continue to make a positive difference in important areas of healthcare.

Our range of medicines includes 10 products each with annual sales of over $1 billion in 2009. Our business growth in the short to medium term is expected to be driven by three factors: (1) our key products Crestor, Seroquel XR and Symbicort; (2) the successful launch of the next wave of products from our pipeline, which includes Onglyza™, Brilinta, Certriad, Vimovo, Recentin, motavizumab, dapagliflozin, zibotentan, NKTR-118, TC-5214, ceftaroline and CAZ104; and (3) from expansion in Emerging Markets, through

organic growth of products from our current portfolio and pipeline but also through selective additions of AstraZeneca branded generics. For further information about our branded generics strategy see the Sales and marketing section from page 28.

A collaborative approach

Our medicines are testament to the combined skills of AstraZeneca people, our collaborators and our commitment to working closely with physicians, patients and others to understand what they need and what they value. Such relationships have helped us develop families of medicines, generation by generation, such as our hormone-based cancer treatments, including Arimidex, which have played a part in increasing the five year survival rate for women with breast cancer from under 70% 50 years ago to around 90% today.

Our collaborations are crucial to what we do and how we do it. For example, a programme of externalisation and our own internal project work has been at the heart of our work since 2006 in developing a world-class diabetes portfolio. From a position where we had no clinical projects in diabetes, we now have a portfolio with three medicines in Phase I studies and a further one in Phase IIb studies. Dapagliflozin is undergoing Phase III studies and is one of the compounds we are developing in collaboration with BMS. In 2009, this collaboration resulted in the approval of Onglyza™ in both the US and EU for the treatment of Type 2 diabetes.

AstraZeneca Annual Report and Form 20-F Information 2009

	Directors’ Report \| Resources, Skills and Capabilities	19
		Performance

Medicines for more patients

Even before a medicine comes to market, we develop programmes which are designed to optimise both the benefit medicines bring to patients’ lives and their commercial potential within the timeframe that patent protection is available to us. We continue to do so throughout the whole life of a medicine. In particular, we continue to look for new disease indications for which a marketed product might have efficacy.

For example, Crestor, our statin for managing cholesterol levels, has been used to treat over 19 million people since its launch in 2003. Subsequent studies showed that Crestor also slows the progress of atherosclerosis (hardening of the arteries) in patients with elevated cholesterol levels. The JUPITER study in 2008 demonstrated a significant reduction in major cardiovascular events (44% compared to placebo) in men (over 50) and women (over 60) with elevated high-sensitivity C-reactive protein but low/normal cholesterol levels. In 2009 regulatory submissions were made in the US and the EU to reflect the significant reductions in such events.

Similarly, we first introduced Seroquel as a treatment for schizophrenia. Subsequent studies have shown that it is also effective in treating both the manic and depressive dimensions of bipolar disorder. Seroquel and Seroquel XR are the only agents approved in the EU to treat all phases of bipolar disorder. In the US, in 2009, Seroquel was approved for the treatment of schizophrenia in adolescents and for the acute treatment of manic episodes associated with bipolar disorder in children and adolescents. Seroquel XR was also approved in the US as an adjunct treatment in adults with major depressive disorder (MDD). Our approach to developing generations of drugs to meet new areas of unmet medical need continues and is illustrated by the announcement of a further collaboration and licence agreement with Targacept for the global development and commercialisation of TC-5214, their late-stage investigational product for MDD.

We also continue to develop better ways in which our medicines can be used. Our Symbicort maintenance and reliever therapy (Symbicort SMART) was the first asthma treatment regime to combine both regular maintenance and as-needed reliever therapies. This allows patients to control daily symptoms and reduce the severity and number of asthma attacks using a single inhaler.

Product performance summary $m


94		97
First approved in 1997,		Symbicort is approved for
Seroquel is now approved		use in 97 countries
in 94 countries

AstraZeneca Annual Report and Form 20-F Information 2009

20Directors’ Report | Resources, Skills and Capabilities

The safety of
patients is a
fundamental
consideration

“Having the best science is
not enough – people with
the capabilities to turn that
knowledge into great medicines
is what brings success.”

Other developments with Symbicort exemplify our approach to optimising the benefit of our medicines for patient health both in terms of bringing benefits to additional patient groups and working with third parties. In 2009, Symbicort Turbuhaler was approved in Japan to treat adult asthma and it was launched in Japan in January 2010. In August, we signed an agreement with Astellas to co-promote Symbicort Turbuhaler in Japan. Symbicort Turbuhaler is also now approved in 96 countries for use in treating chronic obstructive pulmonary disease, including chronic bronchitis and emphysema.

In addition to small molecules we also have a strong capability in biologics. For example, Synagis is routinely used by hospitals for the prevention of serious lower respiratory tract disease caused by respiratory syncytial virus (RSV), a respiratory infection in infants, and has been administered to over one million premature babies. Synagis was the first MAb approved in the US for the prevention of an infectious disease. Since its launch in 1998 it has become the standard of care for RSV prevention.

Our biologics capability is also exemplified by our influenza vaccines, where we have developed technologies that enable innovative ways of reverse-engineering new vaccines. FluMist, the first nasal spray influenza vaccine to be approved in the US, represented the first innovation in flu vaccination in more

than 60 years. Our total product supply of approximately 10 million FluMist doses sold out in 2009. Our technology also enabled us to develop, and to be the first to market in the US, a vaccine designed to prevent H1N1 influenza (swine flu). We received approval for our H1N1 influenza vaccine in September and then contracted with the US Department of Health and Human Services for 42 million doses, which we manufactured and distributed on time and to schedule.

Further information about all our major products can be found in the Therapy Area Review from page 55. Many of our products, for example, Seroquel and Crestor, are the subject of product liability claims and patent challenges. Information about material legal proceedings can be found in Note 25 to the Financial Statements from page 166.

Investing for the future

Within each of our Therapy Areas, the individual disease areas in which we work are agreed using a regular review process that enables us to deploy our resources in the best way to meet our commercial and scientific objectives. We evaluate market opportunities against a set of criteria, including unmet medical need, competitive position and our capabilities. Our R&D Executive Committee, which will be replaced in 2010 by the Portfolio Investment Board (further details of which are set out in the R&D Executive Committee section on page 92) uses the reviews to determine

the levels of investment we will make in different disease areas.

Our approach

Patient safety

The safety of the patients who take our medicines is a fundamental consideration for us. All drugs have potential side effects and we aim to minimise the risks and maximise the benefits of each of our medicines – starting with the discovery of a potential new medicine and continuing throughout its development, launch and marketing.

After launch, we continually monitor the use of all our medicines to ensure that we become aware of any side effects not identified during the development process. This is known as pharmacovigilance and is core to our ongoing responsibility to patients. We have comprehensive and rigorous pharmacovigilance systems in place for detecting and rapidly evaluating such effects, including mechanisms for highlighting those that require immediate attention. We also work to ensure that accurate, well-informed and up-to-date information concerning the safety profile of our drugs is provided to regulators, doctors, other healthcare professionals and, where appropriate, patients. Clinical studies, although extensive, cannot replicate the complete range of patient circumstances. Rare side effects can often only be identified after a medicine has been launched and used in far greater numbers of patients and over longer periods of time.

AstraZeneca Annual Report and Form 20-F Information 2009

	Directors’ Report \| Resources, Skills and Capabilities	21
		Performance

We have an experienced, in-house team of around 350 clinical patient safety professionals working around the world who are dedicated to the task of ensuring that we meet our commitment to patient safety. This number of people is lower than in 2008 because data entry of individual case reports is now managed by an external provider (as described below). At a global level, every medicine in development and on the market is allocated a Global Safety Physician and a team of patient safety scientists. In each of our markets we also have dedicated safety managers with responsibility for patient safety at a local level.

Our two Chief Medical Officers (CMOs) have overall accountability for the benefit/ risk profiles of the products we have in development and those on the market. One CMO is responsible for our small molecule products, the other for our biologics. They provide medical oversight and ensure that appropriate risk assessment processes are in place to enable informed decisions to be made about safety as quickly as possible.

In 2009, we appointed Tata Consultancy Services Sverige AB to manage the data entry process for safety reports relating to AstraZeneca products. This is designed to improve efficiency and consistency of data entry across AstraZeneca, and allow our patient safety teams to focus on case prioritisation, the medical aspects of patient safety and continuing to improve our safety science.

Our commitment to patient safety includes ensuring the security of our medicines throughout their manufacture and supply. We continuously monitor our business environment to identify any new or emerging product security risks and work to ensure that these are managed quickly and effectively. In addition to our internal processes, we use a range of measures against counterfeit medicines and continue to develop our capabilities in this area. These include introducing technologies that make it more difficult for counterfeiters to copy our products; conducting market surveillance and monitoring the supply chain to identify potential counterfeiting operations; responding rapidly to any reports of counterfeit AstraZeneca medicines; and working with regulators, healthcare professionals, distributors, law enforcement agencies and other organisations to protect patient interests. We also participate in a variety of anti-counterfeiting forums and programmes in the public and private sector, including WHO/Interpol’s International Medical Products Anti-Counterfeiting Taskforce and

the Pharmaceutical Security Institute. Further information on counterfeiting can be found in the Product counterfeiting section on page 82.

Pricing our medicines

Continued innovation is required to address unmet medical need. Our challenge is to deliver innovations that bring benefits for patients and society at a level of investment and internal productivity that reflects the downward pressure on pricing.

Our global pricing policy provides the framework for optimising the profitability of all our products in a sustainable way. It balances many different factors, including ensuring appropriate patient access. When setting the price of a medicine, we take into consideration its full value to patients, those who pay for healthcare and society in general. Our pricing also takes account of the fact that, as a publicly owned company, we have a duty to ensure that we continue to deliver an appropriate return on investment to our shareholders.

We continually review our range of medicines (both those on the market and in the pipeline) to identify any that may be regarded as particularly critical to meeting healthcare needs. This may be either because they treat diseases that are (or are becoming) prevalent in developing countries, or because they are potentially a leading or unique therapy addressing an unmet need and offering significant patient benefit in treating a serious or life-threatening condition. In such cases, we aim to provide patient access to these medicines through expanded patient access programmes across all markets, including the US. We also support the concept of differential pricing in this context, provided that safeguards are in place to ensure that differentially priced products are not diverted from patients who need them, to be sold and used in more affluent markets.

Economic benefit

Our medicines play an important role in treating medical needs and in doing so they bring economic as well as therapeutic benefits. Effective treatments can help to save healthcare costs by reducing the need for more expensive care, such as hospital stays or surgery. They also contribute to increased productivity by reducing or preventing the incidence of diseases that keep people away from work.

“Our medicines...
bring economic as well
as therapeutic benefits.”

60
We developed the first innovation in influenza vaccines in over 60 years

AstraZeneca Annual Report and Form 20-F Information 2009

22Directors’ Report | Resources, Skills and Capabilities

“I am passionate about creating a world-class R&D organisation that develops medicines which
make a real difference to the health of people around the world.”

Research and Development

Strategy

Our R&D strategy is centred on delivering sustained business growth through a continuous flow of new and innovative medicines that meet unmet medical need at prices payers find acceptable. Our strategic objective is to deliver a flow of new medicines (two new molecular entities per year on average). In line with our ongoing externalisation strategy, we continue to look beyond our own laboratories, and actively seek acquisitions and alliances with third parties to gain access to the best science and/or technology platforms. In 2009, we completed three Phase III ready in-licence deals (2008: three). In addition, we have acquired Novexel (completion of the acquisition is subject to the expiry or termination of the applicable waiting period under the US Hart-Scott-Rodino Antitrust Improvements Act) thus gaining access to two further compounds; one of which is Phase III ready and the other of which is Phase II ready.

We are creating a knowledge-driven organisation by investing in information sources and tools to allow our scientists to integrate and exploit internal and external knowledge, as well as share this knowledge and enable innovative ways of working across the organisation. This information sharing culture is allowing our pre-clinical and clinical scientists to work together to select high quality targets and compounds and to design clinical studies to establish quickly

whether our compounds could become safe and effective medicines of the future. We are also focused on integrating our tools and databases to develop predictive platforms across R&D.

Our capabilities

AstraZeneca has had a long history of successful research leading to innovative, effective and valued medicines. We recognise the need to build on this tradition and this is reflected in our strategy.

As we develop potential medicines through a structured programme of studies, our focus is on ensuring that they are developed effectively to meet the needs of patients, regulators and payers. We do so by applying the best science to clinical need by designing appropriate programmes that ultimately deliver successful submissions to regulators. To this end, our cross-functional project and product teams bring together all the relevant skills and experience needed to ensure the rapid development of effective new medicines. They also manage the associated risks and ensure that quality and safety remain fundamental considerations at every stage.

Our R&D function has access to leading-edge technologies and capabilities such as stem cells and RNA interference technology which support the development of therapeutic agents across a range of Therapy Areas. Our medicines’ pipeline spans all modalities with the majority of our late-stage pipeline

Working with others

We recognise that we cannot achieve our strategic goals on our own. To deliver successful medicines to market we need to work with doctors, patients and other stakeholders to understand what they need and want. We work with governments and those who pay for healthcare to ensure our products represent value for money. We also look to develop new ways of working with others who complement our existing skills, enhance our internal innovation or bring extra value to what we do. In doing so, we work to ensure that those we work with meet our high ethical standards.

Innovation, value and externalisation

In a world of rapidly advancing science and technology, no pharmaceutical company can rely exclusively on its own resources if it is to stay at the forefront of pharmaceutical innovation. Through our strategy of ‘externalisation’, we seek to expand our product portfolio and geographical presence through, for example, technology licensing arrangements and strategic collaborations and, where appropriate, acquisitions of complementary businesses.

Accessing products through externalisation is a key component of our efforts to both strengthen our pipeline of new products and to access opportunities to drive short-term growth. Our Strategic Planning and Business Development team works closely with our R&D, Global Marketing and Finance teams to deliver this.

We have completed over 60 major externalisation deals in the last three years as well as numerous smaller deals to enhance and strengthen the portfolio. Further details of the current status of a number of the products concerned can be found in the Therapy Area Review from page 55.

Significant late-stage deals completed in 2009 include the in-licence of ceftaroline, a next generation anti-infective, from Forest, and the in-licence of NKTR-118 and NKTR-119 from Nektar to address opioid-induced constipation. In December, we also successfully concluded a major in-licence agreement with Targacept for TC-5214, a late-stage product for major depressive disorder, and acquired Novexel (completion of the acquisition is subject to the expiry or termination of the applicable waiting period under the US Hart-Scott-Rodino Antitrust Improvements Act) to further build the infection portfolio.

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	Directors’ Report \| Resources, Skills and Capabilities	23
		Performance

Early-stage deals help build longer-term strength in the portfolio and in June we concluded a ground-breaking deal with Merck under which the two companies will collaborate to research a novel combination anti-cancer regimen composed of two investigational compounds, MK-2206 from Merck and AZD6244 from AstraZeneca (in-licensed from Array). Other significant early-stage deals included a risk-share collaboration with Jubilant aimed at multiple neuroscience targets, and a further collaboration with the Institute of Cancer Research (UK) and Cancer Research Technology Limited.

During the year we also signed exclusive worldwide licence agreements with Catalyst Biosciences, Inc. to develop novel engineered proteases and with Trellis Bioscience Inc. to develop and commercialise antibodies focused on respiratory syncytial virus.

Deals that will help drive short-term growth include a co-promotion agreement for Abbott’s Trilipix^™ in the US, a commercialisation agreement with Astellas for Symbicort in Japan, a distribution agreement with UCB for Cimzia^™ in Brazil and a co-promotion agreement with Salix for Nexium in the US.

Another component of our externalisation strategy is to maximise value from our portfolio through disposals and out-licensing transactions. In 2009, part of our Swedish OTC (over-the-counter) portfolio was divested to GlaxoSmithKline and rights to ophthalmological indications for a number of AstraZeneca assets were granted to Alcon. Other disposals of note included the out-licence of two pre-clinical oncology assets to Celleron Therapeutics Limited and the divestment of a P38 Inhibitor programme to Flexion Therapeutics AG.

Outsourcing and contract manufacturing

As part of our drive to reshape the business we also outsource certain activities where we believe we can take advantage of third party expertise. Using specialist providers helps us improve efficiency and focus on our core business. Outsourcing also reduces costs and creates a more flexible cost base which can be changed as our needs change.

We have already contracted out a significant portion of our supply and manufacturing activity and are undertaking a programme of outsourcing other services and activities, including some R&D processes, information services, facilities management and other internal support functions.

As part of our effort to ensure we have cost-effective and flexible support services, we signed a seven-year global outsourcing contract in December with NorthgateArinso UK Limited (NGA) for some human resource (HR) services. NGA will begin to manage HR activities, such as payroll and data management, enabling our internal HR organisation to focus on areas where they can most significantly contribute to the success of the business, for example business partnering and ‘centres of expertise’, such as talent management. For more information on our HR services, see the People section from page 33. Earlier in 2009, we signed a five-year contract with Genpact International, Inc. to provide global finance and accounting services and will continue to explore other areas where outsourcing can bring benefits to the business by improving service and reducing cost.

Responsible procurement

Our commitment to responsible business extends to ensuring that we work only with suppliers who embrace standards of ethical behaviour consistent with our own. This is required by our Code of Conduct and applies across the full range of our procurement activities worldwide.

Implementing our approach across the many thousands of suppliers we have around the world is a significant challenge for a global company the size of AstraZeneca. We have made some good progress in recent years and to further strengthen our effort in this area, in 2009 we published a new Global Responsible Procurement Standard. This standard defines our Responsible Procurement Process and provides clear direction about our risk-based approach to integrating ethical standards into our procurement activity worldwide. This includes a requirement to incorporate a responsible business clause in contracts with suppliers.

Training in the new standard was provided for procurement professionals during 2009. For all AstraZeneca employees, our Code of Conduct training now includes a responsible procurement awareness module.

Our Responsible Procurement Process is based on an escalating set of risk-based due diligence activities, applied in a pragmatic way. We assess a supplier’s ethical risk areas and identify whether further assessment is needed to assure us that the supplier has appropriate systems and controls in place to meet our ethical expectations. The same initial assessment process is used for all suppliers and more detailed, specific assessments are then made as required, proportionate to the level of risk a supplier presents. Our process allows us to share issues with suppliers and encourage them to improve their standards, rather than automatically excluding them from our supply chain. However, we will not use suppliers who are unable or unwilling to embrace, in a timely way, standards of ethical behaviour that are consistent with our own.

In 2009, we completed responsible procurement assessments of over 800 of our suppliers (representing over 65% of our total spend on third parties) and implemented further assessments where required. This ongoing assessment programme will continue throughout 2010.

Our existing supplier evaluation procedure requires that comprehensive on-site supplier audits of all our high-risk manufacturing suppliers are conducted at least once every four years. Medium-risk suppliers are audited at the start of the business relationship and additional audits conducted if there are significant changes at a supplier. These Integrated Supplier Evaluation Protocol (ISEP) audits cover a range of risk areas, including product security and waste handling as well as social elements, such as human rights and labour standards. During 2009, we conducted ISEP audits at 51 manufacturing sites at 45 different suppliers (2008: 34 sites at 31 suppliers). The 2008 figures are higher than reported last year because a post year end review identified that more audits had been conducted than reported in 2008.

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24Directors’ Report | Resources, Skills and Capabilities

Development projects – new products and line extensions

comprising small molecules. We also have a pipeline of biological approaches to targeting disease which includes antibodies, antibody derivatives, therapeutic proteins, peptides, and various types of live attenuated and sub-unit vaccines.

Our R&D activities cover the entire life-cycle of a medicine – from the initial discovery of a new chemical/molecular entity, through the rigorous phases of pre-clinical and clinical studies in man. After a medicine’s launch, our life-cycle management process (including line extensions) is designed to ensure both its continued safe use and to explore its potential for treating other diseases or extending its use into additional patient populations.

Our research process starts with the analysis of many thousands of compounds for their potential to become a new medicine. Only a few make it through the various stages and we work continuously to improve the quality of our chemical leads and biological targets, while working to eliminate, at an early stage, those compounds that are unlikely to succeed. We have also invested in a number of key academic collaborations to identify potential new targets, disease mechanisms and technology platforms. We continue to use Lean Sigma-based business improvement programmes. For example, through improvements in novel compound flow, material handling, and enhancement of many key decision-making tests, we have seen significant reductions in the turnaround time of data in drug hunting projects. We have also extended this way of working to a key supplier of compounds from China to improve our joint processes.

We use biomarkers to help identify the efficacy and safety of our compounds. Biomarkers are biological factors or measures that can be used to quantify the progress of a disease and/or the effects of a treatment, although it is not always easy to identify a marker for each molecule.

As responsible participants in the provision of valued medicines for patients we believe strongly in helping to ensure that the right medicines are prescribed to the right patients at the right doses – this is our interpretation of ‘personalised healthcare’. With this in mind we are investing in finding new ways to differentiate patients with apparently similar diagnoses. A successful example of this approach is the recent European regulatory approval of Iressa for patients with lung cancer who have an activating mutation of the epidermal growth factor receptor. As part of this approach we signed a collaboration agreement in December with Dako, a world leader in cancer diagnostics. We will work together with Dako to develop new medicines linked to diagnostic tests to predict which patients are most likely to respond to potential oncology treatments.

Even before clinical studies begin, safety assessment is a critical part of our research. A process including both in vitro and using computer modelling allows for ‘high throughput testing’ for safety early in the stages of selecting the best compounds for development. Our Lean Sigma approach has driven a series of process improvements which have reduced the loss of compounds in late-stage clinical development on account of safety concerns and cut the time

taken to deliver key safety studies, without compromising quality. Testing for safety is also carried out on animals before it is carried out in man. For further information see the Animal research section from page 26.

Strengthening the pipeline

In the short term, we have continued to build on the strong portfolio growth achieved over the last few years. Our portfolio volume in clinical phases has grown by 5% in 2009 and the distribution of the projects between the various phases of development continues to improve. In the medium term, we will continue to drive our pre-clinical and clinical Phase I and II projects towards proof of concept as rapidly as possible. We have a wide range of compounds across all modalities in early development and a total of 44 projects in Phase I, 34 projects in Phase II and 11 projects in Phase III/Registration development and are running 14 significant life-cycle management projects.

Further details are set out in the Development projects chart above and the Pipeline by Therapy Area chart opposite and in the Development Pipeline table from page 196.

Improving productivity

The progress we are making in our drive to increase productivity continues to be reflected in the delivery of projects from the pre-clinical study phase (Discovery) and the growth of our early clinical study (Development) portfolio where we have embedded a culture of Lean Sigma. During 2009, 29 projects were selected for Development (2008: 32).

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		Performance

Throughout 2009, we focused on driving continuous improvement activities across the entire R&D value chain. We maintained and improved the performance gains in cycle times achieved in 2008 for small molecules.

The use of predictive approaches in pre-screening of candidate molecules has had notably increased success rates in some areas in recent years. For example, we have seen failure in early Development due to genotoxicity fall to zero, and failure due to drug metabolism and pharmacokinetics has reduced significantly. Further application of these predictive approaches to the design and simulation of clinical trials using data from previous studies reduced the duration of the clinical trial for one Phase II project by one to two years, and its full projected development cost reduced by over $100 million.

Despite this improvement in productivity, we recognise the need to improve our rate of success in progressing projects from Phase II to Phase III. This is a focus for our future efforts.

Our resources

At the end of 2009, we had a global R&D organisation with around 11,600 people (10,500 full time equivalent employees) at 17 principal centres in eight countries.

Our main small molecule facilities are in the UK (Alderley Park, Macclesfield and Charnwood); Sweden (Lund, MöIndal and Södertälje); and the US (Waltham, Massachusetts and Wilmington, Delaware). Other sites which have a focus on research are in Canada (Montreal, Quebec); France (Reims); and the UK (KuDOS and Arrow Therapeutics’ sites). We have a clinical development facility in Osaka, Japan. Our principal sites for biologics and vaccines are in the US (Gaithersburg, Maryland and Mountain View, California) and the UK (Cambridge).

As part of our strategic expansion in important Emerging Markets, we continue to strengthen our research capabilities in Asia Pacific. Investment continued during 2009 at our ‘Innovation Centre China’ research facility in Shanghai, which opened in 2007. Our research facility in Bangalore also continues to grow

with capital investment supporting increases to R&D resources in India. Both facilities are increasingly involved in Development activities.

In 2009, we invested $4.4 billion in R&D (2008: $5.2 billion; 2007: $5.2 billion), $764 million on acquiring product rights (such as in-licensing), and additionally approved $329 million of R&D capital investment to strengthen our resources in line with our strategic objectives.

Several major capital projects were completed during 2009, and the facilities handed over to the business, including laboratory and office expansions in Boston (US), a new laboratory facility in Macclesfield (UK) and a new manufacturing facility in Mölndal (Sweden). Of the approved capital investment of $329 million, there were no new major small molecule R&D investments authorised during 2009. The focus of the $79 million that has been authorised is on improving and enhancing existing facilities. The remaining $250 million of approved investment was associated with our biologics laboratories in the US and the UK, and influenza vaccine programmes.

Pipeline by Therapy Area at 28 January 2010


^#	Partnered product.

*	Subject to expiry or termination of the applicable waiting period under the US Hart-Scott-Rodino Antitrust Improvements Act.

⁺	Orphan Drug.

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26Directors’ Report | Resources, Skills and Capabilities

Externalisation

Our externalisation strategy continues to focus on enhancing our internal innovation through investment, external collaborations and acquisitions that further strengthen our pipeline of products. Further information on our activities can be found in the Working with others section from page 22.

Our New Opportunities group has continued to seek additional value from our portfolio by facilitating re-profiling across our Therapy Areas and by identifying additional disease areas in which our compounds can meet unmet medical need. For example, in 2009 we concluded a strategic alliance with the ophthalmology company, Alcon, to identify innovative eye care products using AstraZeneca compounds in areas adjacent to our Therapy Areas of focus.

R&D ethics

We are committed to delivering innovation responsibly by setting and working to consistently high ethical standards across all aspects of our R&D worldwide. Compliance with relevant laws and regulations is a minimum baseline and underpins our own global principles and standards, as outlined in our global Bioethics Policy.

Further information about our commitment to responsible research is available on our website, astrazeneca.com/responsibility.

Clinical trials

We conduct an increasing number of our clinical trials at multiple sites in several different countries. A broad geographic span helps us to ensure that those taking part reflect the diversity of patients around the world for whom the new medicine is intended. This approach also helps to identify the types of people for whom the treatment may be most beneficial.

We take a number of factors into account when choosing a trial location. These include the availability of experienced and independent ethics committees and a robust regulatory regime, as well as sufficient numbers of trained healthcare professionals and patients willing to participate in a trial.

When conducting a trial anywhere in the world, we operate to the highest of the standards required by the external international, regional or local regulations, and our own internal standards.

Before a trial begins, we work to make sure that those taking part understand the nature and purpose of the research and that proper procedures for gaining informed consent

are followed (including managing any special circumstances such as different levels of literacy). We also have procedures in place to ensure that the privacy of participants’ health information is protected.

We take very seriously our responsibility to protect trial participants from any unnecessary risks and avoid any serious adverse reactions. Throughout the research process, we continuously review, and make judgements on whether the potential benefits of a new medicine continue to outweigh the risk of side effects.

Whilst all our AstraZeneca clinical studies are conceptually designed and finally interpreted in-house, some of them are run for us by external contract research organisations (CROs). The percentage of studies we place with CROs varies, depending on the number of trials we have underway and the amount of internal resources available to do the work. In 2009, around 24% of patients in our global studies of our small molecule portfolio and around 89% of patients in our biologics studies were monitored by CROs on our behalf.

Our clinical data handling is outsourced to Cognizant Technology Solutions Sweden AB, a business process solution company and during the year, we announced a strategic alliance with Quintiles Limited to provide integrated services for the majority of our clinical pharmacology studies. These sourcing decisions have helped us to promote consistency, drive resource efficiency and, importantly, helped to speed up our internal data interpretation and decision-making.

We remain committed to making information about our clinical trial activities publicly available. We publish information on the registration and results of all new and ongoing AstraZeneca sponsored clinical trials for all products in all phases, including marketed medicines, medicines in development and those whose further development has been discontinued. We post results, irrespective of whether they are favourable or unfavourable to AstraZeneca on public websites, including (for small molecule compounds) on our own dedicated website, astrazenecaclinicaltrials. com. By the end of 2009, we had registered over 1,100 trials and published the results of more than 600 trials.

Animal research

Our pre-clinical research includes animal studies, which continue to play a vital role in the R&D of new medicines. They provide essential information, not available through other methods, about the effects of a potential new therapy on disease and the living body.

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		Performance

Regulatory authorities around the world also require safety data from pre-clinical testing in animals before a new medicine can be tested in man.

We are committed to the responsible use of animals. All our research using animals is carefully considered and justified and, backed by our Bioethics Policy, we continue to drive the application of the 3Rs (Replacement, Reduction and Refinement of animal studies) across our research activity. Wherever possible, we use non-animal methods such as cell culture, computer modelling and ‘high-throughput screening’ that eliminate the need to use animals early in drug development, or reduce the number needed. As part of our drive for continuous improvement, we continue to use statistical design to optimise our studies and reduce the numbers of animals needed. We also work to refine our existing animal models to ensure that the animals we use are exposed to as little pain and stress as possible. We continuously review all our animal studies to make sure that they continue to add value to our research decision-making processes.

The number of animals we use each year depends on the amount of pre-clinical research we are doing and the complexity of the diseases under investigation. We remain focused on making sure that we minimise the use of animals without compromising the quality of the research data. In 2009, we used approximately 393,000 animals in-house (2008: 347,000). In addition, approximately 17,000 animals were used by external contract research organisations on our behalf (2008: 29,000). We believe that this number would be much greater without our active commitment to the 3Rs. We no longer report, as a KPI, the number of animals we use in our research, although we will continue to publish the figures each year. This reflects our commitment to continuous improvement through the application of the 3Rs and good scientific practice, which we believe is the true indicator of our performance. More information about our commitment is available on our website, astrazeneca.com/responsibility.

We only use primates in circumstances where no other species or non-animal methods can provide the safety or clinical benefit information that we are seeking in a study, and where the outcomes of the study are likely to bring significant advances for the development of new medicines. Our expanding biologics capability means that we will be increasing our primate use over time, particularly in the development of MAbs targeted at important areas such as cancer and respiratory disease.

MAbs are highly specific to human physiology, so primates are, in most cases, the only relevant animal model because of their similarity to humans.

In line with our global Bioethics Policy, AstraZeneca does not currently conduct or outsource work using wild caught primates or great ape species. In the rare case where there is a substantial medical need and no credible alternative model is available, exceptions may be considered. However, this will require rigorous secondary ethical and scientific review, in addition to our normal review processes, to challenge the need for the study, followed by appropriate Board level approval.

The welfare of all the animals we use continues to be a top priority. Compliance with relevant laws and regulations is a minimum baseline and underpins our own global Bioethics Policy and standards of animal care and welfare which apply worldwide. Qualified veterinary staff are involved in the development and implementation of our animal welfare programmes and everyone working with laboratory animals is trained and competent in their allocated responsibilities. As well as mandatory inspections by government authorities, we have a formal programme of regular audits carried out by our own qualified staff.

External contract research organisations that conduct animal studies on AstraZeneca’s behalf are also required to comply with our ethical standards, and we conduct regular audits to ensure our requirements are being met.

In November 2008, the European Commission published its proposal to revise the 1986 EU Directive 86/609 (Directive) on the protection of animals used for scientific purposes. We support the need for Europe-wide legislation concerning the use of animals in research and revision of the Directive to reflect advances in science and technology. However, we are contributing to discussions about changes in a number of areas that we believe are necessary to ensure that, alongside the promotion of high standards of animal welfare, the new legislation supports the ability to conduct, in Europe, R&D that addresses patient needs.

Stem cell research

As a company whose success is built on leading-edge science, we continuously monitor and assess new research capabilities to identify opportunities that could help us deliver better medicines for patients worldwide. We believe that stem cell research

may present several such opportunities in enhancing the drug discovery process as well as providing therapeutic options.

Significant scientific progress has been made in the development of stem cell-based research models for improved prediction of safety, metabolism and efficacy of emerging candidate drugs, with promising results. Our interest is in the potential of stem cells to differentiate into normal human cells, such as hepatocytes (liver cells) and cardiac myocytes (heart muscle cells) and use those cells in biological assays. We believe this could represent a significant step forward in increasing the clinical relevance of studies at an earlier stage of development of a potential new medicine and would help us to overcome the current limitations that a restricted supply of human cells presents. However, more work is needed to understand the full potential of this type of research. It is a relatively new area and we do not have all the necessary skills and technologies in-house. We are therefore working with external partners who have expertise and an ethical commitment consistent with our own, such as Cellartis AB (Cellartis), a biotech company focused on applications of human embryonic stem cells, cell technologies and the UK public-private partnership, Stem Cells for Safer Medicines. We also participated in a European Framework Research VI programme working with stem cells. Further collaborations will include the use of induced pluripotent stem cells.

Increasingly, we are also exploring the potential to treat disease by modulation of stem cells within target organs using either small molecules or biological therapies, an exciting new area often referred to as regenerative medicine. Here, we are embarking on several external collaborations, such as the one with Cellartis, combining the best ideas and latest innovation in academic research with our ability to search for new drugs. We are looking for the potential of molecules to direct the fate of stem cells towards therapeutic benefit in diseases such as diabetes and emphysema, thus identifying potentially new candidate drugs. Further investments will follow in this area.

Our commitment to ensuring high ethical standards is reflected in our Human Embryonic Stem Cell Research Policy framework, as set out in our Bioethics Policy, which demands compliance both with external legislation, regulations and guidelines, and with our own codes of practice.

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28Directors’ Report | Resources, Skills and Capabilities

Medicines that
patients will
want and payers
will pay for

“Wherever they are in the world,
those who pay for our medicines
and the patients who use them
must remain the focus of everything we do.”

Sales and marketing

Customer focus

Our international sales and marketing organisation is active in over 100 countries. We have an extensive network focused on growing our business and driving levels of commercial excellence to maintain our position among the industry world leaders. As well as building on our leading positions in North America and Other Established Markets, such as Japan and Western Europe, we continue to increase our strength through strategic investment in Emerging Markets, where GDP growth and changing disease demographics present significant opportunities. See the market definitions table on page 206 for more information on AstraZeneca’s market definitions.

Our Global Marketing function is responsible for developing and leading our global brand strategy. It ensures a strong customer focus and commercial direction in the management of our pipeline and marketed products. At an early stage in the medicine discovery process we define what we believe the profile of a medicine needs to be to work most effectively in combating a particular disease. These disease target product profiles (TPPs) are based on the insights we gain through our relationships with healthcare professionals, patients and others for whom the medicine must add value, including regulators and payers. The attitudes and needs of these groups are key drivers of the development of the TPPs which are used throughout the

life-cycle of a medicine to guide our R&D activity and help shape the Therapy Area and marketing strategies. Early in the development of new products, we also consider how best to demonstrate the value of our medicines to payers.

Emerging Markets growth

During the course of 2009, AstraZeneca continued to execute its ambitious investment strategy across Emerging Markets in large markets such as China, Mexico, Brazil and Russia, as well as in medium-sized and smaller markets where there is significant unmet medical need.

In China (including Hong Kong), as a result of its current strategic focus on ‘Big Cities Big Hospitals’, AstraZeneca is the second largest multinational pharmaceutical company in the prescription market.

Our strategy for Emerging Markets is based upon a rapid expansion of the commercial organisation across areas where we assess there to be significant market potential. In this context we provide our country leaders with the autonomy to tailor their strategies to local customer needs. These local plans are supported by AstraZeneca’s global capabilities, one of which is a highly disciplined approach to sales force management.

To maximise these local opportunities, AstraZeneca has started to launch a range

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		Performance

of branded genericised medicines. These medicines, which are within our key areas of therapy expertise, will make our products available to more patients and at lower price levels than is possible with patent-protected medicines.

As an example, to support our new branded generics business in India, we significantly increased our level of investment, enabling the launch of eight new products of which five were launched in the second half of 2009. This initiative will be rolled out in more than 20 Emerging Markets where we assess there to be potential.

Customer choice in North America

We continue to develop our sales and marketing effort in the US as we strive to best meet our customers’ needs. The focus for 2009 was to ensure that our interactions with healthcare professional (HCP) customers match their desire for more flexible methods to access our products that are not solely dependent on the traditional sales representative.

As a result, two new customer teams have been created to deliver services and information. One team was charged with delivering all the traditional services, but to do so remotely and at a time that matched the HCP’s schedule. The second team simply focused on delivering samples and patient support materials to the HCP’s practice. At the same time, we have expanded our web-based capabilities to improve the way we deliver service over the internet.

The intended result of these changes is to offer customers choices about how we can best meet their needs and the needs of their patients.

Reshaping in Other Established Markets

Across Europe, we have significantly reshaped the organisation in order to stay competitive in an evolving market place. By focusing on core activities and building capabilities around these, we have strengthened focus in the critical area of market access, whilst also being able to significantly improve productivity in the sales force.

Market access is an increasingly important area. In order to develop products that meet the needs of payers we are focusing even more on understanding the priorities and agendas of both payers and healthcare providers. Building on this information, we seek to demonstrate how our products offer value and support cost-effective healthcare.

Eight new products launched
in India in 2009

An effective sales force

In the majority of markets, we sell through wholly-owned local marketing companies. Elsewhere, we sell through distributors or local representative offices. Our products are marketed primarily to physicians (both primary care and specialist) as well as to other healthcare professionals. Marketing efforts are also directed towards explaining the economic as well as the therapeutic benefits of our products to governments and others who pay for healthcare. Face-to-face contact is still the single most effective marketing method but, increasingly, the efforts of our sales force are being complemented by our use of the internet. In the US, where it is an approved and normal practice, we also use direct-to-consumer advertising campaigns for some products.

To improve our commercial effectiveness we are benchmarking with leading industries in the area of customer insight. This helps develop a better understanding of real needs of customers upon which we can plan and act. It allows us to be more focused in our communications with customers.

Our rapid growth in Emerging Markets is driving demand for central commercial support, particularly in respect of sales force effectiveness. Core sales and marketing training programmes have been adapted for, and deployed in, local environments. The main focus of these programmes is to embed core commercial skills and to strengthen sales managers’ coaching and planning skills.

Working in collaboration

The preparations and launch of Onglyza^™, the first brand in the AstraZeneca/BMS diabetes alliance, has brought significant experience and learning to both organisations. The joint work between our companies has improved planning, time to market and execution of the launch. In June, we entered into an agreement under which AstraZeneca obtained the non-exclusive right to co-promote Trilipix^™, alongside Abbott in the US (excluding Puerto Rico). This is the second co-promotion agreement between AstraZeneca and Abbott, the first being for Crestor.

We will continue to explore opportunities to work in collaborations at local or regional levels as a model to improve success. This could either be through getting access to commercial capabilities, such as the collaboration to sell Symbicort with Astellas in Japan, or to strengthen the portfolio, such as the collaboration with UCB for the commercialisation of UCB’s Cimzia^™in Brazil.

More information on our collaborations can be found in the Working with others section from page 22.

Sales and marketing ethics

Driving high ethical standards across all our sales and marketing activity is one of our top priorities. It is an important part of our overall commitment to patient health and safety, and to delivering business success responsibly.

Our business is global and culturally diverse. Societal expectations and legal requirements often vary significantly between the different countries in which we operate. We work to manage these differences effectively and deliver consistently high standards worldwide.

Everyone involved in sales and marketing activities is required to adopt the same core standards, regardless of their particular role or location. These standards are outlined in our Code of Conduct and supporting policies, and more detail is given in our regional and local marketing codes. Our local codes reflect differences in national legislation and healthcare systems. In cases where our standards differ from local law, we adopt whichever standard is higher. Our policies are regularly reviewed and updated, and targeted training is provided for our staff on an ongoing basis.

Compliance with our Code of Conduct and supporting policies is mandatory and monitored by line managers locally, with support from dedicated compliance professionals. We also have a nominated signatory network that works to ensure that our promotional materials meet all applicable internal and external code requirements.

Information concerning instances where our practices may not be up to the standards we require is collected through our various compliance and continuous assurance reporting routes and reviewed by senior management in local and/or regional compliance committees. As appropriate, serious breaches are reviewed by the Board and the Audit Committee. More information

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30Directors’ Report | Resources, Skills and Capabilities

Breaches of external sales and marketing regulations or codes

“Driving high ethical standards across all
our sales and marketing
activity is one of our
top priorities.”

about our compliance and risk assurance processes is contained in the Managing risk section from page 79.

In 2009, we identified a total of 24 confirmed breaches of external sales and marketing regulations or codes globally (2008: 15; 2007: 32). The increase over 2008 is, we believe, largely due to increased self-reporting (ie where we have identified that a breach has occurred and voluntarily reported it to the relevant national authorities). This reflects our continued internal vigilance and determination to identify and follow through on possible breaches of the high standards we set ourselves. The number should also be viewed in the context of the continuing diligence of external code of practice agencies and regulatory authorities in identifying and processing complaints.

We also received a number of approaches about sales and marketing practices from regulatory authorities and other bodies that did not result in any formal ruling. Although these incidents are not included in our KPI number, we did follow-up with appropriate actions to help ensure that all relevant learning is taken fully into account in our future activities.

We take all breaches very seriously and take appropriate action to prevent repeat occurrences. This may include retraining or other corrective action, up to and including dismissal.

In September 2009, AstraZeneca reached an agreement in principle with the US Attorney’s Office to settle claims relating to Seroquel sales and marketing practices and to make a payment of $524 million (including interest).

Final settlement is subject to negotiation of a civil settlement agreement and a corporate integrity agreement. More information can be found in Note 25 to the Financial Statements from page 166.

We will continue to work to strengthen our governance of our sales and marketing activity through 2010, including additional monitoring and audit programmes, and performance measurement. Whilst our current KPI has provided a benchmark against which to measure our performance in recent years, the variations among the national external regulatory frameworks continue to create a challenge for us in interpreting the number of cases of confirmed breaches of external regulations or codes. In addition, a single confirmed breach by AstraZeneca can involve more than one employee failing to meet the standards required and we are aware that there may be failures to meet standards which are not ‘confirmed’ and so will not affect the KPI. We are therefore currently reviewing more meaningful ways in which to measure our performance and plan to introduce a new KPI during 2010 which will drive further improvement and support increased transparency in this key aspect of our activity.

“Patent protection underpins the
research-based pharmaceutical
industry – we recognise it brings
responsibilities as well as privileges.”

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		Performance

Innovative and
differentiated
medicines

Intellectual property

The discovery and development of a new medicine requires a significant investment of resources by research-based pharmaceutical companies over a period of 10 or more years. For this to be a viable investment, the results – new medicines – must be safeguarded from copying with a reasonable amount of certainty for a reasonable period of time.

The principal safeguard in our industry is a well-functioning patent system that recognises our effort and rewards our innovation with appropriate protection, allowing time to generate the revenue we need to re-invest in new pharmaceutical innovation. We are confident of our innovations and therefore commit significant resources to establishing effective patent protection for them, and to defending vigorously our patent and related intellectual property rights if they are challenged.

Patent process

We apply for patent protection relatively early in the R&D process to safeguard our increasing investment. Further innovation will mean that we frequently take out additional patents as we develop a product and its uses. We pursue these patents through patent offices around the world. In some countries, our competitors can challenge our patents in the patent offices, and in all countries competitors can challenge our patents in the courts. We can face challenges early in the patent process and throughout the life of the patent. These challenges can be to the validity of a patent and/or to the effective scope of a patent and are based on ever-evolving legal precedents. There can be no guarantee of success for either party in patent proceedings. For information about third party challenges to the patents protecting our products, see Note 25 to the Financial Statements from page 166.

The generic industry is increasingly challenging innovators’ patents, and almost all leading pharmaceutical products in the US have faced or are facing patent challenges from generic manufacturers. The research-based pharmaceutical industry is also experiencing increased challenges elsewhere in the world, for example in Europe, Canada, Asia and Latin America. Further information about the risk of the early loss and expiry of patents is contained in the Principal risks and uncertainties section from page 80.

Data exclusivity

Regulatory Data Protection (RDP or ‘data exclusivity’) is an important intellectual property right which arises in respect of certain data generated by our research activities, including clinical studies. Data which is required to be submitted to regulatory authorities in order to obtain marketing approvals for our medicines may be protected from use by third parties (such as generic manufacturers) for a specific number of years. The period of such protection differs significantly between countries. We believe in enforcing our rights to RDP and consider it an important protection for our innovations, particularly as patent rights are being increasingly challenged.

Compulsory licensing

Compulsory licensing (the overruling of patent rights to allow patented medicines to be manufactured and sold by other parties) is increasingly being included in the access to medicines debate. We recognise the right of developing countries to use the flexibilities in the World Trade Organization’s TRIPS (Trade-Related Aspects of Intellectual Property Rights) Agreement (including the Doha amendment) in certain limited circumstances, such as a public health emergency. We believe that this should apply only when all other ways of meeting the emergency needs have been considered and where healthcare frameworks and safeguards are in place to ensure that the medicines reach those who need them.

Patent expiries

The following table sets out certain patent expiry dates for our key marketed products. These expiry dates relate to the basic substance patent relevant to that product unless indicated otherwise. The expiry dates shown include any Patent Term Extension and Paediatric Exclusivity periods. Additional patents relating to the stated products may have terms extending beyond the quoted dates.


		US patent expiry

Nexium		2015¹

Crestor		2016

Toprol-XL		Expired

Atacand		2012

Symbicort		2014 (substance combination)

Pulmicort Respules		2019² (formulation)

Arimidex		2010

Zoladex		Expired

Seroquel/Seroquel XR		2012 (substance)/2017 (XR formulation)

Synagis		2015


¹	Licence agreements with Teva and Ranbaxy allow each to launch a generic version in the US from May 2014, subject to regulatory approval.

²	A licence agreement with Teva permits their ongoing US sale of a generic version from December 2009.

AstraZeneca Annual Report and Form 20-F Information 2009

32Directors’ Report | Resources, Skills and Capabilities

“As we drive for ever-greater
efficiency in producing our
medicines, we work harder to
ensure we control the quality
of our products.”

Supply and manufacturing

Core to our continued business success is our ability to provide our customers with a reliable supply of high quality medicines worldwide, when they want them, and to do so in the most cost-effective way.

Operational excellence

We seek to maximise the efficiency of our supply chain through a culture of continuous improvement. We focus on what adds value for our customers and patients, and eliminates waste. Improvements have delivered significant benefits in recent years, including reduced manufacturing lead times and lower stock levels, which both improve our ability to respond to customer needs and reduce inventory costs. Changes have also been achieved without compromising customer service and quality.

We have been applying Lean business improvement tools and ways of working to improve the efficiency of our manufacturing plants for a number of years and have recently started to apply it to the whole of our supply chain. In 2009, we seconded two Lean experts from Jaguar Land Rover to apply their knowledge of efficient car manufacturing techniques to our pharmaceutical supply chain.

Our customer focus means our supply chains change as the needs of our local markets evolve. In 2009, we established regional offices. This included sourcing centres in Shanghai, China and Bangalore, India, which were created to identify local high quality suppliers to support growing market demand. We also established a regional packing strategy to improve our ability to respond to customer requirements, retain control over quality and thereby equip the business for growth in emerging markets.

During 2009, as part of our commitment to strategic sourcing, we sold our Dunkirk active pharmaceutical ingredient (API) facility and entered into a contract manufacture agreement with the purchaser for the supply of certain APIs from that site. As part of our continuous review of our manufacturing assets to make sure that they are being used in the most effective way we also completed the sale of facilities in Caponago, Italy and Porriño, Spain. We closed our manufacturing site at Destelbergen, Belgium and announced our intention to exit from the plant at North Ryde, Australia. We recognise the impact that these changes can have on our employees’ morale and productivity and the increased risk of industrial action. We manage these risks by consulting fully with staff representatives and acting in line with local employment laws. Our human resources policies and processes are also focused on ensuring that the people affected are treated with respect, sensitivity, fairness and integrity. This commitment is covered in the People section from page 33.

Product quality

We are committed to delivering assured product quality that underpins both the safety and efficacy of our medicines.

Manufacturing processes for medicines can be very complex and must observe rigorous standards of quality. Both manufacturing plants and processes are subject to inspections by regulatory authorities to ensure compliance with prescribed standards which can vary between different regulatory authorities. Such authorities have the power to require changes and improvements, to halt production and impose conditions that must be satisfied before production can resume. Regulatory standards, and therefore manufacturing processes, can also change over time.

We hosted inspections from many different regulatory authorities in 2009. All observations are reviewed along with the outcomes of our own internal inspections and improvement actions are put in place as required to ensure ongoing compliance with expectations. If required, we take action to improve quality and enhance compliance across the organisation. The knowledge obtained from the inspections is shared across the Group.

We continue to be actively involved in influencing new product manufacturing regulations, both at national and international levels, through our membership of industry associations primarily in the EU, the US and Japan.

Our resources

At the end of 2009, we had approximately 9,500 people at 20 manufacturing sites in 16 countries working on the supply of our products.

Capital expenditure on supply and manufacturing facilities totalled approximately $360 million¹ in 2009 (2008: $369 million¹; 2007: $336 million¹). As part of our overall risk management, we carefully consider the timing of investment to ensure that secure supply chains are in place for our products. We have a programme in place to provide appropriate supply capabilities for our new products.

In addition to our plant at North Ryde, Australia (from which we have announced our intention to exit), our principal small molecule manufacturing facilities are in the UK (Avlon and Macclesfield); Sweden (Snäckviken and Gärtuna, Södertälje); the US (Newark, Delaware and Westborough, Massachusetts); France (Reims); Japan (Maihara); China (Wuxi) and Puerto Rico (Canovanas). Approximately 600 people work in API supply and 8,000 in formulation and packaging. We operate a small number of sites for the manufacture of active ingredients in the UK and Sweden, complemented by efficient use of sourcing. Our principal tablet and capsule formulation sites are in the UK, Sweden, Puerto Rico and the US, and we also have major formulation sites for the global supply of parenteral and/ or inhalation products in Sweden, France and the UK.

With the addition of a seasonal work force to support the production of the H1N1 influenza vaccine, approximately 870 people are employed at our four principal biologics commercial manufacturing facilities in the US (Frederick, Maryland and Philadelphia, Pennsylvania); the UK (Speke); and the Netherlands (Nijmegen) with capabilities in


¹		Figures adjusted to reflect the impact of the MedImmune acquisition.

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	Directors’ Report \| Resources, Skills and Capabilities	33
		Performance

process development, manufacturing and distribution of biologics, including worldwide supply of MAbs and influenza vaccines. Our biologics production capabilities are scalable, which enables efficient management of our combined small molecule and biologics pipeline.

Managing sourcing risk

Our global procurement policies and integrated risk management processes are aimed at ensuring uninterrupted supply of sufficiently high quality raw materials and other key supplies, all of which are purchased from a range of suppliers. We focus on a range of risks to global supply, such as disasters that remove supply capability or the unavailability of key raw materials, and work to ensure that these risks are effectively mitigated. Contingency plans include the appropriate use 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. We also take steps to ensure the quality of the raw materials that we receive from third parties; for more information see the Product quality section on page 32.

We also take into account reputational risk associated with our use of suppliers and are committed to working only with suppliers that embrace standards of ethical behaviour that are consistent with our own. See the Responsible procurement section from page 23.

People

With nearly 63,000 employees worldwide, we value the diverse skills and capabilities that a global workforce brings to our business. We work continuously to align these skills and capabilities with strategic and operational needs, whilst maintaining high levels of employee engagement and commitment. This means providing employees with effective leadership, clear targets, open lines of communication, learning and development opportunities and a healthy and safe workplace. All this needs to take place in a culture in which diversity is valued and individual success depends solely on personal merit and performance.

AstraZeneca is committed to making full use of the talents and resource of all its workers within the organisation. We therefore have policies in place to ensure that we avoid any discrimination, including discrimination on the grounds of disability. These include recruitment and selection, performance management, career development and promotion, transfer and training (including re-training, if needed, for employees who have become disabled) and reward.

A strategic approach

Our business strategy drives our approach to managing human resources (HR) issues across AstraZeneca. Identifying and building skills and capability for the long term is critical if we are to deliver that strategy successfully. To that end we have been developing a strategic workforce planning (SWP) capability.

SWP generally takes a longer-term view of five to seven years and is designed to ensure we have the right capabilities in the right location at the right time. SWP also addresses issues such as ensuring a diverse workforce and the challenges of attracting and retaining talent globally.

Targets and accountabilities

Clear targets and accountabilities are essential for ensuring that people understand what is expected of them as we deliver our business strategy. The Board and the SET are responsible for setting our high-level strategic objectives and managing performance against these (see the Reserved matters and delegation of authority section on page 92). Managers across AstraZeneca are accountable for working with their teams to develop individual and team performance targets that are aligned to our strategic objectives and against which individual and team contributions are measured and rewarded.

Our focus on optimising performance is reinforced by performance-related bonus and incentive plans. AstraZeneca also encourages employee share ownership by offering the opportunity to participate in various employee share plans, some of which are described in the Directors’ Remuneration Report from page 101 and also in Note 24 to the Financial Statements from page 161.

Learning and development

We encourage and support all our people in achieving their full potential with a range of high quality learning and development (L&D) opportunities around the world.

We are implementing a new global approach, backed by the creation of our global L&D organisation, which aims to ensure that standards of best L&D practice are consistently applied in the most efficient way. During 2009, we have continued to develop and deploy global on-line and other development resources, as we seek to make L&D tools and programmes available to all employees, creating a common platform that increases access to learning and supports self-development across the organisation.

“Our people are the key to our past and future success – we need to nurture our talent and develop the leaders of tomorrow.”

Employees by geographical area


Geographical area			%

A UK			14.3

B Sweden			15.3

C Rest of Europe			17.5

D North America			25.3

E Latin America			6.1

F Africa, Asia and Australasia			21.5

The percentage of employees based in the UK as reported last year, included employees who were a cost to AstraZeneca UK Limited although they were not based in the UK. Only employees based in the UK have been counted for the purposes of the above graph.

AstraZeneca Annual Report and Form 20-F Information 2009

34Directors’ Report | Resources, Skills and Capabilities

During 2009, we implemented a refreshed on-line L&D portal, with access to all core leadership and management development tools. We also launched a number of specific business area websites.

Our leadership development frameworks are focused on six core capabilities, which we believe are essential for strong and effective leadership: passion for customers, strategic thinking, acting decisively, driving performance, working collaboratively, and developing people and the organisation. These capabilities apply to all employees and are used across our HR processes. In 2009, we complemented the core leadership capabilities with the launch of a set of manager accountabilities. These define what we expect from all managers across the dimensions of ethical conduct and compliance, people management and engagement, as well as fiscal and financial awareness. Building line manager capability has been supported by the launch of a number of global learning programmes, which address key elements of people management.

Talent management

To ensure we maintain a flow of effective leaders, we work to identify individuals with the potential for more senior and complex roles. These talent pools provide succession candidates for a range of leadership roles across AstraZeneca that are critical to our continued business success. We regard these individuals as key assets to the organisation and we therefore focus on proactively supporting them to reach their potential with, for example, targeted development opportunities.

Engagement and dialogue

We aim to provide an inclusive environment that encourages open discussion and debate at all levels throughout AstraZeneca. As well as line manager briefings and team meetings, we use a wide range of media to communicate with our employees around the world.

To support our goal of promoting high levels of employee engagement, we also use an annual global employee survey (FOCUS) to track employee opinion across a range of key topic areas. The results, which are communicated to all employees, provide valuable insights that inform strategic planning across the business.

Eighty six percent of our employees participated in our 2009 FOCUS survey, reflecting their continued confidence in this feedback mechanism. Results showed that employee engagement scores which were already very strong had improved compared to 2008 and employees felt that the clarity of

direction provided by senior leaders had also improved. The survey also identified key areas that continue to require attention, in particular the need for further strengthening leadership capability in effective communications and change management. In addition, our scores around work-life balance decreased slightly in some functions. Our leaders take this feedback very seriously and targets that address employee engagement and the effectiveness of senior leadership communications in particular are included in the SET business performance management framework for 2010.

Managing the impact of business change

Our continuing strategic drive to improve efficiency and effectiveness through our previously announced restructuring programmes has resulted in the delivery of a gross reduction of approximately 12,600 positions during the period 2007 to 2009. To ensure that a consistent approach, based on our core values, was and continues to be adopted throughout the programme, specific guidance was provided for the HR teams and line managers throughout the organisation. Differences in the legal frameworks and the customary practice in the different geographies in which we operate is a challenge. The global guidance provided aims to ensure that the same or similar elements are included in local implementation of business change. These include, for example, open communication and consultation with employees, face-to-face meetings, re-deployment support and appropriate financial arrangements. In line with our core values, we expect the people affected to be treated with respect, sensitivity, fairness and integrity at all times. It was therefore encouraging that the engagement scores in our 2009 FOCUS employee survey continued to improve despite business change that typically involves headcount reduction.

Consultation

We work to ensure a level of global consistency in managing employee relations, whilst allowing enough flexibility to support the local markets in building good relations with their workforces that take account of local laws and circumstances. To that end, relations with trades unions are nationally determined and managed locally in line with the applicable legal framework and standards of good practice. Managers throughout AstraZeneca are trained in consultation requirements as well as relevant employment law, where applicable. Training is done at a local level and we have a range of HR and line manager networks for sharing experience and good practice, and promoting alignment across the organisation. At a global level, we have a Head of Employee Relations who supports national management in ensuring that their local

activities are consistent with our high-level principles. As we continue to develop our global platform for managing HR we seek to ensure that the strength of our local management approaches is not undermined.

There are particularly well-developed arrangements for interactions with trades unions and employee representative groups across Europe. Before it became a legal requirement under European law in 1995, both our heritage companies, Astra and Zeneca, had European Consultation Committees (ECCs) in place. Our single AstraZeneca ECC comprises trade union representatives and locally elected employees, and is chaired by a SET member. The committee meets once a year and a sub-committee meets quarterly to discuss, among other things, business developments and any potential impact these may have on the workforce.

We are always striving to improve consultation arrangements. For example, in 2009 the Joint Consultation and Information infrastructure in the UK was changed and a new arrangement was agreed and implemented in full consultation with representatives. The new arrangement enables dialogue, participation and involvement of employees in a process that is more responsive and flexible to changing needs than the one it replaced.

Human rights

AstraZeneca is fully supportive of the principles set out in the United Nations Universal Declaration of Human Rights. Our Code of Conduct and supporting policies outline the high standards of employment practice with which everyone in AstraZeneca is expected to comply, both in spirit and letter, worldwide.

Overall accountability for progressing the human rights agenda within AstraZeneca lies with our Global Human Resources function, supported by our Global Corporate Responsibility Team who co-ordinate with relevant functions to ensure that human rights issues continue to be appropriately integrated into responsible business strategies.

In January 2010, AstraZeneca signed up to the United Nations Global Compact (UNGC), a strategic policy initiative for businesses that are committed to aligning their operations and strategies with 10 universally accepted principles in the areas of human rights, employment, environment and anti-corruption. We are now working within the framework of the 10 UNGC principles to understand how these principles apply to our business, what we are doing well and where more work may be needed.

AstraZeneca Annual Report and Form 20-F Information 2009

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		Performance

More information about our commitment in human rights-related areas is included in this Annual Report including access to medicines, diversity, safety, health and wellbeing, employee relations, sales and marketing practice and working with suppliers. Full details are available on our website, astrazeneca.com/responsibility.

Diversity

With a global workforce comes a rich diversity of skills, capabilities and creativity. We value highly the benefits that such diversity can bring to our individual employees, to our stakeholders and ultimately to our business.

We aim to foster a culture of respect and fairness, where differences are recognised, valued and harnessed, and where individual success depends solely on ability, behaviour, work performance and demonstrated potential. Every manager across AstraZeneca is responsible for ensuring that this happens.

As we continue to reshape our organisation and our global footprint in line with business objectives, our continuing challenge is to ensure that diversity is appropriately supported in our workforce, reflected in our leadership and integrated into business and people strategies.

In 2009, to further strengthen our drive in this area, we appointed a Global Diversity Leader, a new position, whose role is to develop a global Diversity & Inclusion strategy, in partnership with senior leaders who will be accountable for its implementation in the business. We are currently working to identify key areas of strategic focus, considering how best to implement a global strategy with the flexibility needed for local interpretation and implementation, and agreeing KPIs.

As part of this work, during 2009 we identified the need to look more closely at the advancement of women in AstraZeneca. Our data shows that we have 52% of women and 48% of men in our workforce (of the 40,000 people currently in our global HR database) and 24% of 82 senior managers reporting to the SET are women. We are now working with an external expert in this field on a global research project designed to help us better understand some of the causes underlying the data. The outcomes will inform the ongoing development of the Diversity & Inclusion strategy.

Safety, health and wellbeing

Providing a safe workplace and promoting the health and wellbeing of all our people remains a core priority. A safe, healthy working environment not only benefits employees, it supports our business through improved employee engagement, retention and productivity.

We continue to make significant investment in providing a wide range of health and wellbeing improvement programmes across AstraZeneca. These vary according to health risk profile, function and local culture, and include general health initiatives aimed at increasing exercise levels, reducing tobacco use, improving nutrition and managing stress. We also have plans in place to deal with the effect of pandemic flu, including the provision of anti-virals for employees based in areas where adequate supplies may not be available through national treatment regimes.

Work-related stress is currently our greatest single cause of occupational illness, with continued business change, high workloads and interpersonal issues being identified as significant factors. As part of our ongoing efforts in this area, we are adopting an increasingly proactive, risk-based approach, using wellbeing risk assessment tools to identify high-risk areas and target interventions more effectively.

We regret that during 2009, one of our sales representatives in Thailand died in a traffic accident whilst driving on AstraZeneca business. We work hard to identify the root causes of any serious accident and use a range of investigation procedures to help us avoid repetition. Learning is shared with management and staff, and our conclusions about underlying causes are used to improve our management systems.

In recent years, our strengthened efforts to promote driver safety worldwide have delivered some improvements and we are maintaining focus in this important area at all levels of the organisation.

Our long-standing ‘Road Scholars’ scheme in the US (the home to our largest sales force) continues to be a valuable channel for building awareness and improving driver skills. A driver safety objective is now also included in the US performance management framework. Outside the US, our ‘Drive Success’ programme takes into account the different driving environments in the various countries in which we operate and provides a high-level framework of common standards to be adopted by each country. The ‘Drive Success’ programme



¹	Data exclude MedImmune.

²	With and without days lost.

was launched in 2008 across Europe, Latin America, the Middle East and Africa. Roll-out was completed during 2009 with the launch in Asia Pacific, including Japan.

During the year, we also commissioned a global assessment of our driver safety programmes by an external expert in this field, the results of which were presented to the SET. Both programmes were reported to have a solid foundation on which to build. Key findings centred on the need for clear global and local improvement targets and closer alignment of the two programmes. In response, we have developed a set of KPIs and global targets, together with a new Global Driver Safety Standard, all of which will be introduced across the organisation during 2010.

Our KPI for safety, health and wellbeing combines the frequency rates for accidents resulting in serious injuries and new cases of occupational illness into one KPI, with an overall target of a 50% reduction in the combined rates by the end of 2010, compared with a 2001/2002 reference point. The overall serious injury accident rate for AstraZeneca employees decreased by 2% in 2009, whilst the occupational illness rate increased by 32%. This equates to a combined increase of 9% compared to 2008. The occupational illness rate increase is due largely to a number of suspected cases in 2008 being confirmed as work-related during 2009 and therefore included in the 2009 data, rather than in the 2008 data. We remain on track to achieve the targeted 50% reduction by the end of 2010. Data on our performance over the last three years is shown above.

We are currently in the process of finalising a new safety, health and environment strategy, including associated safety and health targets.

AstraZeneca Annual Report and Form 20-F Information 2009

36Directors’ Report | Financial Review


		“Revenue growth and operational efficiencies drove a strong cash performance, reducing net debt well ahead of plan.”

Financial Review

Our global financial
performance and position

Contents



37		Measuring performance
37		Business background and major events affecting 2009
38		Results of operations – summary analysis of year to 31 December 2009
39		Financial position, including cash flow and liquidity – 2009
41		Restructuring and synergy costs
42		Capitalisation and shareholder return
42		Future prospects
42		Results of operations – summary analysis of year to 31 December 2008
43		Financial position, including cash flow and liquidity – 2008
44		Financial risk management
45		Critical accounting policies and estimates
49		Other accounting information

In 2009, revenue increased by 7% in constant currency terms; 3 percentage points of this growth was accounted for by some unanticipated upsides from the performance of Toprol-XL and sales of H1N1 influenza (swine flu) vaccine in the US.

Our Emerging Markets businesses grew strongly, with revenues up 12% in constant currency terms. Core operating margin increased by 5.1 percentage points in constant currency terms, on increased revenue, improved efficiencies throughout the organisation, and some disposal gains within other income.

Cash generation was strong in 2009; cash from operating activities increased by $3 billion. This enabled us to invest in capital and intangible assets to drive future growth and productivity and fund a 12% increase in the full year dividend. Net debt was reduced by $7.7 billion in 2009, well ahead of plan, and we entered 2010 with net funds of $0.5 billion.

Since 2007, our restructuring programme has delivered $1.6 billion in annual savings by the end of 2009, which will grow to $2.4 billion by the end of 2010. The restructuring costs to deliver these benefits have totalled $2.5 billion since inception. The next phase of restructuring is planned to deliver a further $1.9 billion in annual benefits by the end of 2014, with a further $2.0 billion in restructuring costs anticipated between 2010 and 2013.

Looking forward, our plans to manage the business, as the revenue base transitions through this period of market exclusivity losses and new product launches, should generate strong cash flow to provide for the needs of the business and shareholder returns.

Simon Lowth
Chief Financial Officer

AstraZeneca Annual Report and Form 20-F Information 2009

	Directors’ Report \| Financial Review	37
		Reviews

The purpose of this Financial Review is to provide a balanced and comprehensive analysis of the financial performance of the business during 2009, the financial position as at the end of the year and the main business factors and trends which could affect the future financial performance of the business.

All growth rates in this Financial Review are expressed at CER unless noted otherwise.

Measuring performance

The following measures are referred to when reporting on our performance both in absolute terms but more often in comparison to earlier years in this Financial Review:

>		Reported performance. Reported performance takes into account all the factors (including those which we cannot influence, principally currency exchange rates) that have affected the results of our business as reflected in our Group Financial Statements prepared in accordance with IFRS as adopted by the EU and as issued by the IASB.

>		Core financial measures. These are non-GAAP measures because unlike Reported performance they cannot be derived directly from the information in the Group’s Financial Statements. These measures are adjusted to exclude certain significant items, such as charges and provisions related to our global restructuring and synergy programmes, amortisation and impairment of the significant intangibles relating to the acquisition of MedImmune in 2007, the amortisation and impairment of the significant intangibles relating to our current and future exit arrangements with Merck in the US and other specified items. See the Reconciliation of Reported results to Core results table on page 40 for a reconciliation of Reported to Core performance.

>		Constant exchange rate (CER) growth rates. These are also non-GAAP measures. These measures remove the effects of currency movements (by retranslating the current year’s performance at previous year’s exchange rates and adjusting for other exchange effects, including hedging). A reconciliation of the Reported results adjusted for the impact of currency movements is provided in the Operating profit (2009 and 2008) table on page 39.

>		Gross margin and operating profit margin percentages. These measures set out the progression of key performance margins and demonstrate the overall quality of the business.

>		Prescription volumes and trends for key products. These measures can represent the real business growth and the progress of individual products better and more immediately than invoiced sales.

>		Net Funds/Debt. This represents our interest bearing loans and borrowings, less cash and cash equivalents, current investments and derivative financial instruments.

CER measures allow us to focus on the changes in sales and expenses driven by volume, prices and cost levels relative to the prior period. Sales and cost growth expressed in CER allows management to understand the true local movement in sales and costs, in order to compare recent trends and relative return on investment. CER growth rates can be used to analyse sales in a number of ways but, most often, we consider CER growth by products and groups of products, and by countries and regions. CER sales growth can be further analysed into the impact of sales volumes and selling price. Similarly, CER cost growth helps us to focus on the real local change in costs so that we can manage the cost base effectively.

We believe that disclosing Core financial and growth measures in addition to our Reported financial information enhances investors’ ability to evaluate and analyse the underlying financial performance of our ongoing business and the related key business drivers. The adjustments made to our Reported financial information in order to show Core financial measures illustrate clearly and on a year-on-year or period-by-period basis the impact upon our performance caused by factors such as changes in sales and expenses driven by volume, prices and cost levels relative to such prior years or periods.

Further, as shown in the Reconciliation of Reported results to Core results table on page 40, our reconciliation of Reported financial information to Core financial measures includes a breakdown of the items for which our Reported financial information is adjusted and a further breakdown of those items by specific line item as such items are reflected in our Reported income statement, to illustrate the significant items that are excluded from Core financial measures and their impact on our Reported financial information, both as a whole and in respect of specific line items.

Management presents these results externally to meet investors’ requirements for transparency and clarity. Core financial measures are also used internally in the management of our business performance, in our budgeting process and when determining compensation.

Core financial measures are non-GAAP, adjusted measures. All items for which Core financial measures are adjusted are included in our Reported financial information because they represent actual costs of our business in the periods presented. As a result, Core financial measures merely allow investors to differentiate among different kinds of costs and they should not be used in isolation. You should also refer to our Reported financial information in the Operating profit (2009 and 2008) table on page 39, our reconciliation of Core financial measures to Reported financial information in the Reconciliation of Reported results to Core results table on page 40, and to the Results of operations – summary analysis of year to 31 December 2008 section from page 42 for our discussion of comparative Reported growth measures that reflect all of the factors that affect our business. Our determination of non-GAAP measures, together with our presentation of them within this financial information, may differ from similarly titled non-GAAP measures of other companies.

The SET retains strategic management of the costs excluded from Reported financial information in arriving at Core financial measures, tracking their impact on Reported operating profit and EPS, with operational management being delegated on a case-by-case basis to ensure clear accountability and consistency for each cost category.

Business background and major
events affecting 2009

The business background is covered in the Business Environment section, Geographical Review and Therapy Area Review and describes in detail the developments in both our products and geographical regions.

Sales of our products are directly influenced by medical need and are generally paid for by health insurance schemes or national healthcare budgets. Our operating results can be affected by a number of factors other than the delivery of operating plans and normal competition which are:

The adverse impact on pharmaceutical prices as a result of the regulatory environment. For instance, although there is no direct governmental control on prices in the US, action from individual state programmes and health insurance bodies is leading to downward pressures on realised prices. In other parts of the world, there are a variety of price and volume control mechanisms and retrospective rebates based on sales levels that are imposed by governments.

AstraZeneca Annual Report and Form 20-F Information 2009

38Directors’ Report | Financial Review

>		The risk of generic competition following loss of patent protection or patent expiry or an ‘at risk’ launch by a competitor, with the potential adverse effects on sales volumes and prices, for example, the launch of generic competition to both Ethyol and Pulmicort Respules in 2008.

>		The timings of new product launches, which can be influenced by national regulators and the risk that such new products do not succeed as anticipated, together with the rate of sales growth and costs following new product launches.

>		Currency fluctuations. Our functional and reporting currency is the US dollar but we have substantial exposures to other currencies, in particular the euro, Japanese yen, pound sterling and Swedish krona.

>		Macro factors such as greater demand from an ageing population and increasing requirements of servicing Emerging Markets.

Over the longer term, the success of our R&D is crucial, and we devote substantial resources to this area. The benefits of this investment emerge over the long term and there is considerable inherent uncertainty as to whether and when it will generate future products.

The most significant features of our financial results in 2009 are:

>		Reported sales of $32,804 million, representing CER sales growth of 7% (Reported: 4%).

>		Strong performance in Emerging Markets with CER sales growth of 12% (Reported: 2%).

>		Excluded from Core results were specific legal provisions totalling $636 million (which impacted Reported results in the year). $524 million of this has been made in respect of the US Attorney’s Office investigation into sales and marketing practices involving Seroquel and $112 million relates to average wholesale price litigation. These charges are excluded from Core performance results.

>		Operating profit increased by 24% at CER (Reported: 26%). Core operating profit increased by 23% at CER (Reported: 24%). A reconciliation between these measures is included in the Reconciliation of Reported results to Core results table on page 40.

>		EPS of $5.19 represented an increase of 22% at CER (Reported: 24%). Core EPS of $6.32 represented an increase of 23% at CER (Reported: 24%).

>		Net cash inflow from operating activities increased to $11,739 million (2008: $8,742 million).

>		Dividends increased to $2,977 million (2008: $2,739 million).

>		Net funds at 31 December were $535 million, an improvement of $7,709 million on net debt of $7,174 million in the previous year.

>		Total restructuring and synergy costs associated with the global programme to reshape the cost base of the business, were $659 million in 2009 (2008: $881 million). This brings the total restructuring and synergy costs charged to date to $2,506 million.

Results of operations – summary
analysis of year to 31 December 2009

The Sales by Therapy Area (2009 and 2008) table on page 39 shows our sales analysed by Therapy Area. The Operating profit (2009 and 2008) table on page 39 shows operating profit for 2009 compared to 2008. The Reconciliation of Reported results to Core results table on page 40 shows a reconciliation of Reported results to Core results for 2009 and 2008. More details on our sales performance by Therapy Area are given in the Therapy Area Review from page 55 in the Performance 2009 sections.

Sales increased by 4% on a Reported basis and by 7% on a CER basis. Revenue benefited from strong growth of the Toprol-XL franchise in the US, as a result of the withdrawal from the market of two other generic metoprolol succinate products and from US government orders for the H1N1 influenza (swine flu) vaccine; adjusting for these factors, global revenue increased by 4%. AstraZeneca expects this impact to reduce as generic competitors re-enter the market. Revenue in Emerging Markets increased by 12% at CER.

Core gross margin of 83% for the full year was 2.4% higher than last year at CER (Reported: up 3.3%). Lower payments to Merck and continued efficiency gains and mix factors were partially offset by higher royalty payments resulting from higher volumes of sales of relevant products.

Core R&D expenditure was $4,334 million for the full year, 3% lower than last year at CER (Reported: down 15%), as increased investment in biologics was more than offset by the continued productivity initiatives and lower costs associated with late-stage development projects that have progressed to pre-registration.

Core SG&A costs of $9,890 million for the full year were 5% higher than last year at CER (Reported: up 4%). Stronger than expected revenue performance provided the opportunity to drive future growth through accelerated marketing investment for Emerging Markets and currently marketed brands, and to support launch planning for the new products awaiting registration. SG&A expense growth

also included increased legal expenses and impairment of intangible assets related to information systems, which were only partially offset by operational efficiencies.

Core other income of $926 million was $192 million higher than 2008, chiefly as a result of the disposal of the co-promotion rights of Abraxane^™ and Nordic OTC portfolio disposals in the first half of the year.

Impairment charges relating to intangible fixed assets totalled $415 million during the year. Charges totalling $272 million, being the charges arising from impairments in respect of assets relating to our HPV cervical cancer vaccine income stream and other assets capitalised as part of the MedImmune acquisition have been excluded from Core results.

During the year, developments in several legal matters resulted in provisions totalling $636 million. Full details of these matters are included in Note 25 to the Financial Statements from page 166.

Restructuring and synergy costs totalling $659 million, incurred as the Group continues its previously announced efficiency programmes and amortisation totalling $511 million relating to assets capitalised as part of the MedImmune acquisition and the Merck partial retirement, which impacted Reported operating profit, were also excluded from Core performance.

Core operating profit was $13,621 million, an increase of 23% at CER (Reported: 26%). Core operating margin increased by 5.1% to 41.5% of revenue, as a result of sales growth, efficiencies across the cost base, lower R&D spend and the disposals within other income.

Net finance expense was $736 million for the year, versus $463 million in 2008. The principal factors contributing to this increase were the continued reversal of the fair value gain, reduced interest received due to lower interest rates and a higher net interest expense on pension obligations, partially offset by reduced interest payable on lower net debt balances.

Net finance expense included a net fair value loss of $145 million for the year (2008: $130 million gain) as credit spreads have reduced since the previous year end. The net fair value gain of $130 million recorded in the prior year, mainly related to two long-term bonds. These bonds are swapped to floating interest rates and accounted for using the fair value option under IFRS. Under this accounting treatment both the bonds and the related interest rate swaps are measured at fair value, with changes in fair value reported in the income

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		Reviews

Sales by Therapy Area (2009 and 2008)


							2009									2008			2009 compared to 2008
													Growth due
										CER			to exchange						CER			Reported
							Reported			growth			effects			Reported			growth			growth
							$m			$m			$m			$m			%			%

Cardiovascular								8,376			1,737			(324	)		6,963			25			20

Gastrointestinal								6,011			(157	)		(176	)		6,344			(2	)		(5)

Infection and other								2,631			257			(77	)		2,451			10			7

Neuroscience								6,237			566			(166	)		5,837			10			7

Oncology								4,518			(330	)		(106	)		4,954			(7	)		(9)

Respiratory & Inflammation								4,132			234			(230	)		4,128			6			–

Other businesses								899			10			(35	)		924			1			(3)

Total								32,804			2,317			(1,114	)		31,601			7			4

Operating profit (2009 and 2008)

	2009									2008			Percentage of sales						2009 compared to 2008
							Growth due
				CER			to exchange						Reported			Reported			CER			Reported
	Reported			growth			effects			Reported			2009			2008			growth			growth
	$m			$m			$m			$m			%			%			%			%

Sales		32,804			2,317			(1,114	)		31,601									7			4

Cost of sales		(5,775	)		540			283			(6,598	)		(17.6	)		(20.9	)		(8	)		(12)

Gross profit		27,029			2,857			(831	)		25,003			82.4			79.1			11			8

Distribution costs		(298	)		(37	)		30			(291	)		(0.9	)		(0.9	)		13			3

Research and development		(4,409	)		298			472			(5,179	)		(13.5	)		(16.4	)		(6	)		(15)

Selling, general and administrative costs		(11,332	)		(945	)		526			(10,913	)		(34.5	)		(34.6	)		9			4

Other operating income and expense		553			33			(4	)		524			1.7			1.7			6			6

Operating profit		11,543			2,206			193			9,144			35.2			28.9			24			26

Net finance expense		(736	)								(463	)

Profit before tax		10,807									8,681

Taxation		(3,263	)								(2,551	)

Profit for the period		7,544									6,130



Earnings per share ($)		5.19									4.20

Growth rates on line items below operating profit, where meaningful, are given elsewhere in this Annual Report.

statement. The fair value of each instrument reflects changes in market interest rates, which broadly offset, but the fair value of these bonds also reflects changes in credit spreads. The 2008 gain has now reversed fully in 2009 and, as credit spreads continued to reduce in the final quarter of 2009, further losses have been recorded.

The effective tax rate for the year is 30.2%. Excluding the impact of the $636 million legal provisions, the effective tax rate would be 28.8% (2008: 29.4%). A description of our tax exposures is set out in Note 25 to the Financial Statements from page 166.

Core EPS were $6.32, an increase of 23% at CER on 2008, as the increase in Core operating profit was partially offset by increased net finance expense. Reported EPS increased 24% to $5.19.

Total comprehensive income for the year increased by $3,266 million from 2008. This was principally due to an increase in profit for the period of $1,414 million, beneficial exchange rate impacts on consolidation of $1,365 million and reduced actuarial losses of $663 million compared to 2008.

Geographical analysis

We discuss the geographical performances in the Geographic Review from page 50.

Financial position, including cash flow
and liquidity – 2009

All data in this section is on a Reported basis (unless noted otherwise).

Net assets increased by $4,761 million to $20,821 million. The increase due to Group profit of $7,521 million was offset by dividends of $3,026 million. Exchange rate movements arising on consolidation and actuarial losses also reduced net assets during the year.

Property, plant and equipment

Property, plant and equipment increased by $264 million to $7,307 million primarily due to additions of $967 million and exchange rate movements of $391 million offset by depreciation and impairments of $943 million.

Goodwill and intangible assets

Goodwill and intangible assets have increased by $82 million to $22,115 million.

Goodwill principally arose on the acquisition of MedImmune and on the restructuring of our US joint venture with Merck in 1998. No goodwill has been capitalised in 2009.

Intangible assets have reduced by $97 million to $12,226 million. Additions totalled $1,003 million, amortisation was $729 million and impairments totalled $415 million. Exchange rate impacts increased intangible assets by $178 million.

Additions in 2009 included $300 million in respect of milestone payments made under our collaboration agreement with BMS, $200 million in respect of our agreement with Targacept, and $126 million in respect of our agreement with Nektar.

During 2009, impairments totalled $415 million. $150 million was impaired as a result of a reassessment of the licensing income generated by the HPV cervical cancer vaccine. Impairments of other assets acquired with MedImmune totalled $122 million. Impairments related to our acquisition of MedImmune and therefore excluded from our Core results totalled $272 million. In addition, $93 million was written off products in development.

AstraZeneca Annual Report and Form 20-F Information 2009

40Directors’ Report | Financial Review

Reconciliation of Reported results to Core results


				Restructuring and			Merck & MedImmune			Intangible
	Reported			synergy costs			amortisation			impairments			Legal provisions			2009 Core
2009	$m			$m			$m			$m			$m			$m

Gross margin		27,029			188			–			–			–			27,217

Distribution costs		(298	)		–			–			–			–			(298	)

Research and development		(4,409	)		68			–			7			–			(4,334	)

Selling, general and administrative costs		(11,332	)		403			403			–			636			(9,890	)

Other operating income and expense		553			–			108			265			–			926

Operating Profit		11,543			659			511			272			636			13,621

Net interest		(736	)		–			–			–			–			(736	)

Profit before tax		10,807			659			511			272			636			12,885

Taxation		(3,263	)		(199	)		(125	)		(82	)		(34	)		(3,703	)

Profit for the period		7,544			460			386			190			602			9,182



Earnings per share ($)		5.19			0.32			0.27			0.13			0.41			6.32


				Restructuring and			Merck & MedImmune			Intangible
	Reported			synergy costs			amortisation			impairments			Legal provisions			2008 Core
2008	$m			$m			$m			$m			$m			$m

Gross margin		25,003			405			–			–			–			25,408

Distribution costs		(291	)		–			–			–			–			(291	)

Research and development		(5,179	)		166			–			60			–			(4,953	)

Selling, general and administrative costs		(10,913	)		310			406			257			–			(9,940	)

Other operating income and expense		524			–			120			90			–			734

Operating profit		9,144			881			526			407			–			10,958

Net interest		(463	)		–			–			–			–			(463	)

Profit before tax		8,681			881			526			407			–			10,495

Taxation		(2,551	)		(259	)		(125	)		(121	)		–			(3,056	)

Profit for the period		6,130			622			401			286			–			7,439



Earnings per share ($)		4.20			0.43			0.28			0.19			–			5.10


	2009									2008			2009 compared to 2008
							Growth due
				CER			to exchange						CER			Total Core
	Core			growth			effects			Core			growth			growth
2008 to 2009 Core result	$m			$m			$m			$m			%			%

Gross margin		27,217			2,660			(851	)		25,408			10			7

Distribution costs		(298	)		(37	)		30			(291	)		13			3

Research and development		(4,334	)		150			469			(4,953	)		(3	)		(13	)

Selling, general and administrative costs		(9,890	)		(452	)		502			(9,940	)		5			(1	)

Other operating income and expense		926			194			(2	)		734			26			26

Operating Profit		13,621			2,515			148			10,958			23			24

Net interest		(736	)								(463	)

Profit before tax		12,885									10,495

Taxation		(3,703	)								(3,056	)

Profit for the period		9,182									7,439



Earnings per share ($)		6.32									5.10

AstraZeneca no longer has to pay contingent payments on these products. This payment includes $1,656 million in respect of payments on account for rights that will crystallise if we exercise future options. If AstraZeneca does not exercise these options certain rights will remain with Merck resulting in a write-off for any rights not acquired. Further details of this matter are included in Note 25 to the Financial Statements from page 166.

Inventories

Inventories have increased by $114 million to $1,750 million principally due to exchange rate impacts.

Receivables, payables and provisions

Trade and other receivables increased by $448 million to $7,709 million. Exchange rate movements increased receivables by $220 million. The underlying increase of $228 million was driven by increased sales in the final quarter and an increase in insurance recoverables.

As of 31 December, legal defence costs of approximately $656 million (2008: $512 million) have been incurred in connection with Seroquel-related product liability claims. The first $39 million is not covered by insurance. At 31 December, AstraZeneca has recorded an insurance receivable of

$521 million (2008: $426 million) representing the maximum insurance receivable that AstraZeneca can recognise under applicable accounting principles at this time. This may increase over time as AstraZeneca believes that it is more likely than not that the vast majority of costs incurred to date in excess of $39 million will ultimately be recovered through this insurance, although there can be no assurance of additional coverage under the policies, or that the insurance receivable which we have recognised, will be realisable in full.

Trade and other payables increased by $1,604 million primarily due to increases in US

AstraZeneca Annual Report and Form 20-F Information 2009

	Directors’ Report \| Financial Review	41
		Reviews

managed market accruals, accruals in respect of intangibles investments made in the fourth quarter and other accruals. Trade and other payables include $2,618 million in respect of accruals relating to rebates and chargebacks in our US market. These are explained and reconciled fully in the Rebates, chargebacks and returns in the US section from page 45, along with cash discounts and customer returns.

During the year AstraZeneca made a provision of $636 million in respect of various federal and state investigations and civil litigation matters relating to drug marketing and pricing practices. $524 million of this provision has been made in respect of the US Attorney’s Office investigation into sales and marketing practices involving Seroquel with the remainder relating to average wholesale price litigation. Further details on these matters are included in Note 25 to the Financial Statements from page 166.

Tax payable and receivable

Net income tax payable has increased by $885 million to $2,853 million principally due to tax audit provisions, cash tax timing differences and exchange rate movements. Tax receivable largely comprises tax owing to AstraZeneca from certain governments expected to be received on settlements of transfer pricing audits and disputes (see Note 25 to the Financial Statements from page 166).

Retirement benefit obligations

Net retirement benefit obligations increased by $622 million principally as a result of actuarial losses of $569 million and adverse exchange rate effects of $215 million. Approximately 97% of the Group’s obligations are concentrated in three countries. The following table shows the US dollar effect of a 1% change in the discount rate on the retirement benefit obligations in those countries.


	-1%		+1%

UK ($m)		1,129		(973	)

US ($m)		256		(225	)

Sweden ($m)		229		(192	)

Total ($m)		1,614		(1,390	)

Commitments and contingencies

The Group has commitments and contingencies which are accounted for in accordance with the accounting policies described in the Financial Statements in the Accounting Policies section from page 128. The Group also has taxation contingencies. These are described in the Taxation section in the Critical accounting policies section from page 48. These matters are explained fully in Note 25 to the Financial Statements from page 166.

Net funds/(debt)


	2009			2008			2007
	$m			$m			$m

Net (debt)/funds brought forward at 1 January		(7,174	)		(9,112	)		6,537

Earnings before interest, tax, depreciation, amortisation and impairment		13,630			11,764			9,950

Movement in working capital and provisions		1,329			(210	)		(443	)

Tax paid		(2,381	)		(2,209	)		(2,563	)

Interest paid		(639	)		(690	)		(335	)

Other non-cash movements		(200	)		87			901

Net cash available from operating activities		11,739			8,742			7,510

Purchase of intangibles (net)		(355	)		(2,944	)		(549	)

Other capital expenditure (net)		(824	)		(1,057	)		(1,076	)

Acquisitions		–			–			(14,891	)

Investments		(1,179	)		(4,001	)		(16,516	)

Dividends		(2,977	)		(2,739	)		(2,641	)

Net share issues/(re-purchases)		135			(451	)		(3,952	)

Distributions		(2,842	)		(3,190	)		(6,593	)

Other movements		(9	)		387			(50	)

Net funds/(debt) carried forward at 31 December		535			(7,174	)		(9,112	)

Comprised of:
Cash & short term investments		11,598			4,674			6,044

Loans and borrowings		(11,063	)		(11,848	)		(15,156	)

Cash flow

Cash generated from operating activities was $11,739 million in the year, compared with $8,742 million in 2008. The increase of $2,997 million was principally driven by an increase in operating profit before depreciation, amortisation and impairment costs of $1,866 million, offset by a decrease in non-cash items of $287 million, which includes fair value adjustments. An improvement in working capital flows, including short-term provisions of $1,539 million, which also contributed significantly to this increase, arose principally from an increase in returns and chargebacks provisions and the legal provisions made in the year.

Net cash outflows from investing activities were $2,476 million in the year compared with $3,896 million in 2008. The movement of $1,420 million is due primarily to the payment of $2,630 million to Merck in 2008 as part of the partial retirement, and the proceeds from the disposal of the Abraxane^™ co-promotion rights of $269 million received in 2009, countered by an increase in the purchase of short term investments and fixed deposits of $1,372 million.

Cash distributions to shareholders, through dividend payments, were $2,977 million.

Gross debt (including loans, short-term borrowings and overdrafts) was $11,063 million as at 31 December (2008: $11,848 million). Of this debt, $1,926 million is due within one year (2008: $993 million), which we currently anticipate repaying from current cash balances and short term investments of approximately $11.6 billion and business cash flows, without the need to re-finance.

Net funds of $535 million have improved by $7,709 million from net debt of $7,174 million at 31 December 2008.

We continue to believe that, although our future operating cash flows are subject to a number of uncertainties, as specified in the Business background and major events affecting 2009 section from page 37, our cash and funding resources will be sufficient to meet our forecast requirements for the foreseeable future, including developing and launching new products, externalisation, our ongoing capital programme, our restructuring programme, debt servicing and repayment, options arising under the Merck exit arrangements and shareholder distributions.

Restructuring and synergy costs

Driving increased productivity from investments in R&D is a key to portfolio renewal and value creation. Further to this objective, AstraZeneca will undertake additional restructuring within the R&D function. These plans include a reduction in the number of disease area targets within our core therapeutic areas, some consolidation of our activities onto a smaller R&D site footprint, and other efficiency measures, subject to consultations with work councils, trades unions and other employee representatives and in accordance with local employment laws.

The next phase of restructuring which includes the completion of the previous programmes announced in 2007, will also include some additional initiatives in supply chain and in SG&A in addition to the R&D initiatives described above.

AstraZeneca Annual Report and Form 20-F Information 2009

42Directors’ Report | Financial Review

Dividend for 2009


			$		Pence		SEK			Payment date

First interim dividend				0.59		36.0		4.41			14.09.09

Second interim dividend				1.71		105.4		12.43			15.03.10

Total				2.30		141.4		16.84

Summary of shareholder distributions

	Shares				Dividend		Dividend			Shareholder
	re-purchased		Cost		per share		cost			distributions
	(million)		$m		$		$m			$m

2000		9.4		352		0.7		1,236			1,588

2001		23.5		1,080		0.7		1,225			2,305

2002		28.3		1,190		0.7		1,206			2,396

2003		27.2		1,154		0.795		1,350			2,504

2004		50.1		2,212		0.94		1,555			3,767

2005		67.7		3,001		1.3		2,068			5,069

2006		72.2		4,147		1.72		2,649			6,796

2007		79.9		4,170		1.87		2,740			6,910

2008		13.6		610		2.05		2,971			3,581

2009		–		–		2.30		3,336	¹		3,336

Total		371.9		17,916		13.075		20,336			38,252

¹Total dividend cost estimated based upon number of shares in issue at 31 December 2009.

Capitalisation and shareholder return

All data in this section is on a Reported basis.

Capitalisation

The total number of shares in issue at 31 December was 1,451 million. 3.5 million shares were issued in consideration of share option plans and employee share plans for a total of $135 million. Shareholders’ equity increased by a net $4,748 million to $20,660 million at the year end. Minority interests increased to $161 million (2008: $148 million).

Dividend and share re-purchases

In addition the Board has announced a share re-purchase programme.

Future prospects

AstraZeneca is a focused, integrated, innovation-driven, global biopharmaceutical business. AstraZeneca will be selective about those areas of the industry it chooses to compete in, targeting those product categories where medical innovation or brand equity continues to command a premium in the marketplace. AstraZeneca believes the best way to capture value within this industry is to span the full value chain of discovery, development and commercialisation. AstraZeneca believes its technology base will continue to deliver innovative products that patients will need and for which payers will see value. AstraZeneca believes that its ability to meet the health needs of patients

and healthcare systems in both developed and emerging markets is a core capability.

AstraZeneca believes that pursuit of this strategy will continue to build a pipeline of new medicines that will meet the needs of patients and provide attractive returns for shareholders.

The next five years will be challenging for the industry and for AstraZeneca, as its revenue base transitions through a period of exclusivity losses and new product launches.

AstraZeneca believes it would be helpful for investors to understand AstraZeneca’s high-level planning assumptions for revenue evolution, margin structure, cash flow and business reinvestment that will guide its management of the business over the next five years.

For the period 2010 to 2014, AstraZeneca has made certain assumptions for the industry environment. AstraZeneca assumes that the global pharmaceutical industry can grow at least in line with real GDP over the planning horizon. Downward pressure on revenue from government interventions in the marketplace, including certain proposals associated with efforts to enact US healthcare reform, remain a continuing feature of the challenging market environment. However, for the planning period, AstraZeneca assumes no further ‘step-change’ in the evolution of these pressures. As for assumptions specific to the Group, AstraZeneca assumes that there will be no material mergers, acquisitions or disposals. In addition, our plans assume no premature loss of exclusivity for key AstraZeneca products. It is also assumed that exchange rates for our principal currencies will not differ materially from the average rates that prevailed during January 2010.

It is expected that a significant portion of current base revenue will be affected by the loss of market exclusivity on a number of products. Revenue in 2010, for example, will be affected by the expected loss of market exclusivity for Arimidex and for Pulmicort Respules in the US. AstraZeneca aims to grow market share for key franchises that retain exclusivity, and plans to sustain double-digit growth rates in its Emerging Markets business, supported by the selective addition of branded generics to the portfolio.

Results of operations – summary
analysis of year to 31 December 2008

In 2008 sales increased by 7% on a Reported basis and by 3% on a CER basis compared to 2007. Exchange rate movements benefited Reported sales by 4%. More details on our sales performance by Therapy Area are given in the Therapy Area Review from page 55 in the Performance 2008 sections.

Core gross margin of 80.4% in 2008 was 0.8% higher than 2007 at CER (Reported: 79.1%; 0.8% higher). Principal drivers were lower payments to Merck (1.0%), continued efficiency gains and mix factors (1.2%), partially offset by higher royalty payments (0.6%) and intangible asset impairments and other provisions (0.8%).

Core R&D costs of $4,953 million were down 1% at CER in 2008 compared to 2007 (Reported: 0%). The inclusion of a full year of MedImmune expense was offset by improved productivity and efficiency, restructuring benefits, portfolio changes and lower charges relating to intangible asset impairments charged to Core R&D expense.

In 2008, Core SG&A costs of $9,940 million were up 3% at CER (Reported: 4%) due chiefly to the inclusion of a full year of MedImmune costs, increased investment in Emerging Markets and some higher legal expenses.

Core other income of $734 million was $6 million higher in 2008 compared to 2007 (Reported: decreased $204 million) with MedImmune’s licensing and royalty income streams offset by expected lower one-time gains and royalty income.

Impairment charges relating to intangible fixed assets totalled $631 million in 2008. Charges totalling $407 million, including impairments in respect of Ethyol and HPV cervical cancer vaccines, were excluded from Core operating Profit in 2008. Charges totalling $224 million, including $115 million in respect of Pulmicort Respules, were included in Core operating Profit.

AstraZeneca Annual Report and Form 20-F Information 2009

	Directors’ Report \| Financial Review	43
		Reviews

Sales by Therapy Area (2008 and 2007)


							2008									2007			2008 compared to 2007
										CER			Growth due to						CER			Reported
							Reported			growth			exchange effects			Reported			growth			growth
							$m			$m			$m			$m			%			%

Cardiovascular								6,963			29			248			6,686			–			4

Gastrointestinal								6,344			(275	)		176			6,443			(4	)		(2)

Infection and other¹								2,451			706			31			1,714			41			43

Neuroscience								5,837			346			151			5,340			6			9

Oncology								4,954			(109	)		244			4,819			(2	)		3

Respiratory & Inflammation								4,128			278			139			3,711			7			11

Other businesses								924			54			24			846			6			9

Total								31,601			1,029			1,013			29,559			3			7

¹Includes Synagis and FluMist which were acquired in June 2007.
Operating profit (2008 and 2007)
	2008									2007			Percentage of sales						2008 compared to 2007
				CER			Growth due to						Reported			Reported			CER			Reported
	Reported			growth			exchange effects			Reported			2008			2007			growth			growth
	$m			$m			$m			$m			%			%			%			%

Sales		31,601			1,029			1,013			29,559									3			7

Cost of sales		(6,598	)		38			(217	)		(6,419	)		(20.9	)		(21.7	)		(1	)		3

Gross profit		25,003			1,067			796			23,140			79.1			78.3			5			8

Distribution costs		(291	)		(39	)		(4	)		(248	)		(0.9	)		(0.8	)		16			17

Research and development		(5,179	)		(88	)		71			(5,162	)		(16.4	)		(17.5	)		2			–

Selling, general and administrative costs		(10,913	)		(433	)		(116	)		(10,364	)		(34.6	)		(35.1	)		4			5

Other operating income and expense		524			(188	)		(16	)		728			1.7			2.5			(26	)		(28)

Operating profit		9,144			319			731			8,094			28.9			27.4			4			13

Net finance expense		(463	)								(111	)

Profit before tax		8,681									7,983

Taxation		(2,551	)								(2,356	)

Profit for the period		6,130									5,627



Earnings per share ($)		4.20									3.74

Growth rates on line items below operating profit, where meaningful, are given elsewhere in this Annual Report.

In 2008, Core operating profit was up 9% at CER from 2007 (Reported: 13%). CER Core operating margin increased by 1.6% to 34.7% of sales as improvements in gross margin were offset by higher SG&A costs. Reported operating profits, at 28.9%, increased by 1.5% compared with 2007 as a result of improvements in gross margin and R&D efficiencies which more than offset a modest increase in SG&A costs.

Net finance expense was $463 million in 2008 compared to $111 million for 2007.

In 2008, the increase in interest expense was driven by additional borrowings arising as a result of the acquisition of MedImmune in 2007. Our exposure to interest costs was reduced in 2008, from the closing position in 2007, as we moved debt used to finance the purchase of MedImmune from short-term, higher interest rate commercial paper, to longer-term debt financing at lower interest rates. The 2008 net finance expense benefited from a net fair value gain of $130 million relating to two long-term bonds due to widening credit spreads.

In 2008, the effective tax rate was 29.4% (2007: 29.5%).

In 2008, Core EPS were $5.10, an increase of 8% at CER on 2007, as the increase in Core operating profit and the benefit of a lower number of shares outstanding was partially offset by increased net finance expense. Reported EPS increased by 12% to $4.20.

Profit for the period totalled $6,130 million. Adverse exchange rate movements arising on consolidation of $1,336 million and actuarial losses in the year of $1,232 million resulted in a total comprehensive income for the year of $4,224 million.

Financial position, including cash flow
and liquidity – 2008

In 2008, total net assets increased by $1,145 million to $16,060 million. The increase due to Group profit of $6,101 million was offset by dividends of $2,767 million and net share re-purchases of $451 million. Exchange rate movements arising on consolidation and actuarial losses also reduced net assets during 2008.

In March 2008, AstraZeneca paid $2.6 billion to Merck. This payment resulted in AstraZeneca acquiring Merck’s interests in certain AstraZeneca products including Pulmicort, Rhinocort, Symbicort and Toprol-XL and has been included in intangible assets as explained below.

Property, plant and equipment

In 2008, property, plant and equipment fell by $1,255 million to $7,043 million primarily due to depreciation and impairments of $1,182 million and exchange rate movements of $1,131 million offset by additions of $1,113 million.

Goodwill and intangible assets

In 2008, goodwill and intangible assets increased by $846 million to $22,197 million.

The main components within goodwill are the amounts capitalised on the acquisition of MedImmune of $8,757 million and on the restructuring of our US joint venture with Merck in 1998. No significant amounts were capitalised within goodwill in 2008. The total goodwill balance reduced by $10 million in 2008 due to exchange rate movements.

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Intangible assets increased by $856 million to $12,323 million in 2008. Additions totalled $2,941 million, amortisation was $807 million and impairments totalled $631 million. Exchange rate movements in 2008 reduced intangible assets by $603 million.

Additions to intangible assets in 2008 included a payment made to Merck under pre-existing arrangements under which Merck’s interests in our products in the US will be terminated (subject to the exercise of certain options). $994 million of this payment relates to certain AstraZeneca products, including Pulmicort, Rhinocort, Symbicort and Toprol-XL. As a result of the payment AstraZeneca no longer has to pay contingent payments on these products to Merck and has obtained the ability to fully exploit these products and to fully exploit other opportunities in the Respiratory Therapy Area that AstraZeneca was previously prevented from doing by Merck’s interests in these products. The remainder of the payment ($1,656 million) represents payments on account for the product rights that will crystallise if we exercise options in 2010.

In March 2008, a $257 million intangible asset impairment charge was taken as a result of the entry of generic Ethyol, a product capitalised on the acquisition of MedImmune, into the US market. The settlement of the Pulmicort Respules patent litigation triggered an impairment of $115 million. The remaining impairments for 2008 resulted from the termination of projects in development and a charge for $91 million relating to the reassessment of the licensing income expected to be generated by the HPV cervical cancer vaccine. Reported performance for 2008 included impairments in respect of Ethyol, HPV cervical cancer vaccine and other projects in development (principally the return of rights to Infinity Pharmaceuticals) which management believed were not part of Core performance for 2008. As a result, management adjusted for impairments totalling $407 million in presenting Core performance.

Inventories

Inventories decreased in 2008 by $483 million to $1,636 million due to exchange rate movements of $298 million along with an underlying reduction in inventory of $185 million.

Receivables, payables and provisions

Trade and other receivables increased by $593 million to $7,261 million in 2008. Exchange rate movements reduced receivables by $429 million. The underlying increase of $1,022 million was driven by increased sales in Emerging Markets, the extension of major credit terms in the UK and increased insurance recoverables.

In 2008, trade and other payables increased by $130 million, or $675 million after removing the impacts of exchange rate movements, primarily due to increases in US managed market accruals. Trade payables include $2,136 million in respect of accruals relating to rebates and reductions in our US market.

Provisions in 2008 increased by $122 million driven mainly by increases in specific insurance and long-term provisions.

Tax payable and receivable

Net income tax payable in 2008 increased by $667 million to $1,968 million, principally due to tax audit provisions and cash tax timing differences. Net deferred tax liabilities decreased mainly as a result of the impact of actuarial losses suffered in the year, the amortisation and impairment of MedImmune intangible assets, and exchange rate benefits.

Retirement benefit obligations

Net retirement benefit obligations in 2008 increased by $734 million principally as a result of actuarial losses of $1,232 million offset by exchange rate benefits of $434 million. During 2008, approximately 95% of the Group’s obligations were concentrated in three countries.

Cash flow

Cash generated from operating activities was $8,742 million in 2008 compared with $7,510 million in 2007. The increase of $1,232 million was principally driven by an increase in operating profit before depreciation, amortisation and impairment costs of $1,814 million, a decrease in tax payments of $354 million and lower working capital outflows of $233 million, offset by an increase in interest payments of $355 million and a decrease in non-cash items of $814 million, which includes movements on provisions.

Net cash outflows from investing activities were $3,896 million in 2008 compared with $14,887 million in 2007.

In 2008, cash distributions to shareholders were $3,349 million through dividend payments of $2,739 million and share re-purchases of $610 million.

During 2008 we issued a further €500 million, 5.625% 18-month bond as part of our re-financing programme, the proceeds of which were used to re-finance maturing commercial paper.

Gross debt (including loans, short-term borrowings and overdrafts) was $11,848 million at 31 December 2008 (2007: $15,156 million). Of this debt, $993 million was due within one year.

Net debt of $7,174 million decreased in 2008 by $1,938 million from 31 December 2007.

Investments, divestments
and capital expenditure

The major product acquisitions in 2008 reflected our ongoing commitment to strengthening the product pipeline.

In 2007 AstraZeneca acquired MedImmune. On the acquisition of MedImmune, the purchase price for outstanding shares of $13.9 billion was allocated between intangible assets of $8.1 billion (including assets in respect of Synagis and motavizumab RSV franchise, FluMist, Ethyol and products in development), goodwill of $8.8 billion and net liabilities of $3.0 billion. This allocation, based on strict accounting requirements, does not allow for the separate recognition of valuable elements such as buyer-specific synergies, potential additional indications for identified products or the premium attributable to a well-established, highly-regarded business in the innovative biologics market. Such elements are instead subsumed within goodwill, which is not amortised. Further details of this acquisition are included in Note 22 to the Financial Statements from page 154.

Financial risk management

Financial risk management policies
Insurance

Our risk management processes are described in the Managing risk section from page 79. These processes enable us to identify risks that can be partly or entirely mitigated through the use of insurance. We negotiate best available premium rates with insurance providers on the basis of our extensive risk management procedures. In the current insurance market, the 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 to which we pay particular attention include business interruption, Directors’ and Officers’ liability and property damage. Recently, insurance for product liability has not been available on commercially acceptable terms and the Group has not held product liability insurance since February 2006.

Taxation

Tax risk management forms an integrated part of the Group risk management processes. Our tax strategy is to manage tax risks and tax costs in a manner consistent with shareholders’ best long-term interests, taking into account both economic and reputational factors. We draw a distinction between tax

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planning using artificial structures and optimising tax treatment of business transactions, and we engage only in the latter.

Treasury

The principal financial risks to which the Group is exposed are those arising from liquidity, interest rate, foreign currency and credit. The Group has a centralised treasury function to manage these risks in accordance with Board-approved policies. Specifically, liquidity risk is managed through maintaining access to a number of sources of funding to meet anticipated funding requirements, including committed bank facilities and cash resources. Interest rate risk is managed through maintaining a debt portfolio that is weighted towards fixed rates of interest. Accordingly the Group’s net interest charge is not significantly affected by movements in floating rates of interest. We do not currently hedge the impact on earnings and cash flow of changes in exchange rates, with the exception of the currency exposure that arises between the booking and settlement dates on non-local currency purchases and sales by subsidiaries and the external dividend, along with certain non-US dollar debt. Credit risk is managed through setting and monitoring credit limits appropriate for the assessed risk of the counterparty.

Our capital and risk management objectives and policies are described in further detail in Note 15 to the Financial Statements from page 144 and in the Managing risk section from page 79.

Sensitivity analysis of the Group’s exposure to exchange rate and interest rate movements is detailed in Note 16 to the Financial Statements from page 146.

Critical accounting policies
and estimates

Our Financial Statements are prepared in accordance with IFRS as adopted by the EU (adopted IFRS) and as issued by the IASB, and the accounting policies employed are set out in the Accounting Policies section in the Financial Statements from page 128. 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 because the areas are especially subjective or complex. 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

>		Litigation

>		Post-retirement benefits

>		Taxation

>		Segmental reporting.

Revenue recognition

Revenue is recorded at the invoiced amount (excluding inter-company sales and value added taxes) less movements in estimated accruals for rebates and chargebacks given to managed-care and other customers and product returns – a particular feature in the US. The impact in the rest of the world is not significant. It is the Group’s policy to offer a credit note for all returns and to destroy all returned stock in all markets. Cash discounts for prompt payment are also deducted from sales. Revenue is recognised at the point of delivery, which is usually when title passes to the customer either on shipment or on receipt of goods by the customer depending on local trading terms. Income from royalties and from disposals of intellectual property, brands and product lines is included in other operating income.

Rebates, chargebacks and returns in the US At the time of invoicing sales in the US, rebates and chargebacks that we expect to pay, in as little time as two weeks or as much as eight months, are estimated. These rebates typically arise from sales contracts with third party managed-care organisations, hospitals, long-term care facilities, group purchasing organisations and various federal or state programmes (Medicaid ‘best price’ contracts, supplemental rebates etc) and can be classified as follows:

>		Chargebacks, where we enter into arrangements under which certain parties, typically hospitals, the Department of Veterans Affairs and the Department of Defense, are able to buy products from wholesalers at the lower prices we have contracted with them. The chargeback is the difference between the price we invoice to the wholesaler and the contracted price charged by the wholesaler. Chargebacks are paid directly to the wholesalers.

>		Regulatory, including Medicaid and other federal and state programmes, where we pay rebates based on the specific terms of agreements in individual states, which include product usage and information on best prices and average market prices benchmarks.

Contractual, under which entities such as third party managed-care organisations, long-term care facilities and group purchasing organisations are entitled to rebates depending on specified performance provisions, which vary from contract to contract.

The effects of these deductions on our US pharmaceuticals turnover are set out below.

Accrual assumptions are built up on a product-by-product and customer-by-customer basis, taking into account specific contract provisions coupled with expected performance, and are then aggregated into a weighted average rebate accrual rate for each of our products. Accrual rates are reviewed and adjusted on a monthly basis. There may be further adjustments when actual rebates are invoiced based on utilisation information submitted to us (in the case of contractual rebates) and claims/invoices are received (in the case of regulatory rebates and chargebacks). We believe that we have been reasonable in our estimates for future rebates using a similar methodology to that of previous years. Inevitably, however, such estimates involve judgements on aggregate future sales levels, segment mix and the customer’s contractual performance.

Cash discounts are offered to customers to encourage prompt payment. Accruals are calculated based on historical experience and are adjusted to reflect actual experience.

Industry practice in the US allows wholesalers and pharmacies to return unused stocks within six months of, and up to 12 months after, shelf-life expiry. The customer is credited for the returned product by the issuance of a credit note. Returned product is not exchanged for product from inventory and once a return claim has been determined to be valid and a credit note has been issued to the customer, the returned goods are destroyed and not resold. At the point of sale in the US, we estimate the quantity and value of goods which may ultimately be returned. Our returns accruals in the US are based on actual experience. Our estimate is based on the preceding 12 months for established products together with market-related information, such as estimated stock levels at wholesalers and competitor activity, which we receive via third-party information services. For newly launched products, we use rates based on our experience with similar products or a pre-determined percentage.

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Gross to net sales


					2009			2008			2007			2006
					$m			$m			$m			$m

Gross sales						22,641			20,029			18,456			16,577

Chargebacks						(1,841	)		(1,726	)		(1,130	)		(975	)

Regulatory – US government and state programmes						(1,357	)		(1,005	)		(732	)		(532	)

Contractual – Managed-care and group purchasing organisation rebates						(4,753	)		(3,658	)		(3,179	)		(2,413	)

Cash and other discounts						(428	)		(390	)		(356	)		(329	)

Customer returns						(187	)		(48	)		(18	)		(46	)

Other						(196	)		(167	)		(145	)		(256	)

Net sales						13,879			13,035			12,896			12,026

Movement in provisions

								Adjustment						Carried forward
			Brought forward		Provision for			in respect			Returns			at 31 December
			at 1 January 2009		current year			of prior years			and payments			2009
			$m		$m			$m			$m			$m

Chargebacks				359		1,947			(106	)		(1,804	)		396

Regulatory – US government and state programmes				520		1,373			(16	)		(1,102	)		775

Contractual – Managed-care and group purchasing organisation rebates				1,084		4,732			20			(4,389	)		1,447

Cash and other discounts				39		428			–			(426	)		40

Customer returns				77		194			(2	)		(93	)		177

Other				57		198			(2	)		(194	)		59

Total				2,136		8,871			(106	)		(8,009	)		2,895


								Adjustment						Carried forward
			Brought forward		Provision for			in respect			Returns			at 31 December
			at 1 January 2008		current year			of prior years			and payments			2008
			$m		$m			$m			$m			$m

Chargebacks				186		1,745			(19	)		(1,553	)		359

Regulatory – US government and state programmes				428		997			8			(913	)		520

Contractual – Managed-care and group purchasing organisation rebates				900		3,622			36			(3,474	)		1,084

Cash and other discounts				38		390			–			(389	)		39

Customer returns				85		48			–			(56	)		77

Other				53		167			–			(163	)		57

Total				1,690		6,969			25			(6,548	)		2,136


			Additions in					Adjustment						Carried forward
	Brought forward		respect of		Provision for			in respect			Returns			at 31 December
	at 1 January 2007		MedImmune		current year			of prior years			and payments			2007
	$m		$m		$m			$m			$m			$m

Chargebacks		92		2		1,115			15			(1,038	)		186

Regulatory – US government and state programmes		314		69		769			(37	)		(687	)		428

Contractual – Managed-care and group purchasing organisation rebates		635		5		3,100			79			(2,919	)		900

Cash and other discounts		29		1		356			–			(348	)		38

Customer returns		160		1		19			(1	)		(94	)		85

Other		47		–		153			–			(147	)		53

Total		1,277		78		5,512			56			(5,233	)		1,690

For products facing generic competition (such as Ethyol and Toprol-XL in the US) our experience is that we usually lose the ability to estimate the levels of returns from wholesalers with the same degree of precision that we can for products still subject to patent protection. This is because we have limited or no insight into a number of areas – the actual timing of the launch of a generic competitor following regulatory approval of the generic product (for example, a generic manufacturer may or may not have produced adequate pre-launch inventory), the pricing and marketing strategy of the competitor, the take-up of the generic and (in cases where a generic manufacturer has approval to launch just one dose size in a market of several dose sizes) the likely level of switching from one dose to another. Under our accounting policy,

revenue is recognised only when the amount of the revenue can be measured reliably. Our approach in meeting this condition for products facing generic competition will vary from product to product depending on the specific circumstances.

The movements on US pharmaceuticals revenue accruals are set out above.

The adjustments in respect of prior years benefited Reported US pharmaceuticals turnover by 0.24% in 2007, and decreased turnover by 1% in 2008.

We have distribution service agreements with major wholesaler buyers, which serve to reduce the speculative purchasing behaviour of the wholesalers and reduce short-term

fluctuations in the level of inventory they hold. 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.

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 party’s sales or production when arriving at the royalty income to be included. These estimates, which may differ from actual sales or production, do not result in a material impact on Reported other operating income.

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Sales of intangible assets

A consequence of charging all internal R&D expenditure to the income statement in the year in which 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 are included on the balance sheet. As a consequence of regular reviews of product strategy, from time to time we sell such assets and generate income. Sales of product lines are often accompanied by an agreement on our part to continue manufacturing the relevant product for a reasonable period (often about two years) whilst the purchaser constructs its own manufacturing facilities. The contracts typically involve the receipt of an upfront payment, which the contract attributes to the sale of the intangible assets, and ongoing receipts, which the contract attributes to the sale of the product we manufacture. In cases where the transaction has two or more components, we account for the delivered item (for example, the transfer of title to the intangible asset) as a separate unit of accounting and record revenue on delivery of that component provided that we can make a reasonable estimate of the fair value of the undelivered component. Where the fair market value of the undelivered component (for example, a manufacturing agreement) exceeds the contracted price for that component we defer an appropriate element of the upfront consideration and amortise this over the performance period. However, where the fair market value of the undelivered component is equal to or lower than the contracted price for that component we treat the whole of the upfront amount as being attributable to the delivered intangible assets and recognise that part of the revenue upon delivery. No element of the contracted revenue related to the undelivered component is allocated to the sale of the intangible asset. This is because the contracted revenue relating to the undelivered component is contingent on future events (such as sales) and so cannot be anticipated.

Research and Development

Our business is underpinned by our marketed products and development portfolio. The R&D expenditure on internal activities to generate these products is generally charged to the income statement in the year that it is incurred. Purchases of intellectual property and product rights to supplement our R&D portfolio are capitalised as intangible assets. Such intangible assets are amortised from the launch of the underlying products and are tested for impairment both before and after launch. This policy is in line with practice adopted by major pharmaceutical companies.

Impairment testing of goodwill
and intangible assets

We have significant investments in goodwill and intangible assets as a result of acquisitions of businesses and purchases of assets, such as product development and marketing rights.

For the purpose of impairment testing of goodwill, the Group is regarded as a single cash-generating unit.

The recoverable amount is based on value in use, using discounted risk-adjusted projections of the Group’s pre-tax cash flows over 10 years, a period reflecting the average patent-protected lives of our current products. The projections include assumptions about product launches, competition from rival products and pricing policy as well as the possibility of generics entering the market. In setting these assumptions we consider our past experience, external sources of information (including information on expected increases and ageing of the populations in Established Markets and the expanding patient population in newer markets), our knowledge of competitor activity and our assessment of future changes in the pharmaceutical industry. The 10-year period is covered by internal budgets and forecasts. Given that internal budgets and forecasts are prepared for all projections, no general growth rates are used to extrapolate internal budgets and forecasts for the purposes of determining value in use.

In arriving at value in use, we disaggregate our projected pre-tax cash flows into groups reflecting similar risks and tax effects. For each group of cash flows we use an appropriate discount rate reflecting those risks and tax effects. In arriving at the appropriate discount rate for each group of cash flows, we adjust AstraZeneca’s post-tax weighted average cost of capital (7.6% for 2009) to reflect the impact of risks and tax effects. The weighted average pre-tax discount rate we used was approximately 14%.

As a cross-check, we compare our market capitalisation to the book value of our net assets and this indicates significant surplus at 31 December.

No goodwill impairment was identified.

The Group has also performed sensitivity analysis calculations on the projections used and discount rate applied. The Directors have concluded that, given the significant headroom that exists, and the results of the sensitivity analysis performed, there is no significant risk that reasonable changes in key assumptions will cause the carrying value of goodwill to exceed its value in use.

Impairment reviews have been carried out on all intangible assets that are in development (and not being amortised), all major intangible assets acquired during the year, all intangible assets that have had indications of impairment during the year and all intangible assets recognised on the acquisition of MedImmune. Sales forecasts and specific allocated costs (which have both been subject to appropriate senior management sign-off) are discounted using AstraZeneca’s risk-adjusted pre-tax weighted average cost of capital.

The majority of our investments in intangible assets and goodwill arose from the restructuring of the joint venture with Merck in 1998 and 2008, the acquisition of MedImmune in 2007 and the payment to partially retire Merck’s interests in our products in the US in 2008, and we are satisfied that the carrying values are fully justified by estimated future cash flows.

Litigation

In the normal course of business, contingent liabilities may arise from product-specific and general legal proceedings, from guarantees or from environmental liabilities connected with our current or former sites. Where we believe that potential liabilities have a less than 50% probability of crystallising or are very difficult to quantify reliably, we treat them as contingent liabilities. These are not provided for but are disclosed in Note 25 to the Financial Statements from page 166.

In cases that have been settled or adjudicated, or where quantifiable fines and penalties have been assessed and which are not subject to appeal (or other similar forms of relief), or where a loss is probable and we are able to make a reasonable estimate of the loss, we indicate the loss absorbed or the amount of the provision accrued.

AstraZeneca is defending its interests in various federal and state investigations and civil litigation matters relating to drug marketing and pricing practices and in respect of which AstraZeneca has made an aggregate provision of $636 million in the year. $524 million of this provision has been made in respect of the US Attorney’s Office’s investigation into sales and marketing practices involving Seroquel, with the remainder relating to average wholesale price litigation pending in the US federal court. The current status of these matters is described more fully in Note 25 to the Financial Statements from page 166. This provision constitutes our best estimate at this time of the losses expected for these matters.

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Where it is considered that the Group is more likely than not to prevail, legal costs involved in defending the claim are charged to profit as they are incurred. Where it is considered that the Group has a valid contract which provides the right to reimbursement (from insurance or otherwise) of legal costs and/or all or part of any loss incurred or for which a provision has been established, we consider recovery to be virtually certain and the best estimate of the amount expected to be received is recognised as an asset.

At 31 December legal defence costs of approximately $656 million have been incurred in connection with Seroquel-related product liability claims. The first $39 million is not covered by insurance. At 31 December AstraZeneca has recorded an insurance receivable of $521 million (2008: $426 million) representing the maximum insurance receivable that AstraZeneca can recognise under applicable accounting principles at this time. This amount may increase as AstraZeneca believes that it is more likely than not that the vast majority of costs above the $521 million recorded as an insurance receivable will ultimately be recovered through this insurance, although there can be no assurance of additional coverage under the policies, or that the insurance receivable we have recognised will be realisable in full.

Assessments as to whether or not to recognise provisions or assets and of the amounts concerned usually involve a series of complex judgements about future events and can rely heavily on estimates and assumptions. AstraZeneca believes that the provisions recorded are adequate based on currently available information and that the insurance recoveries recorded will be received. However, given the inherent uncertainties involved in assessing the outcomes of these cases and in estimating the amount of the potential losses and the associated insurance recoveries, we could in future periods incur judgments or insurance settlements that could have a material adverse effect on our results in any particular period.

The position could change over time, and there can, therefore, be no assurance that any losses that result from the outcome of any legal proceedings will not exceed the amount of the provisions that have been booked in the accounts.

Although there can be no assurance regarding the outcome of legal proceedings, we do not currently expect them to have a material adverse effect on our financial position, but they could significantly affect our Reported financial results in any particular period.

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 income statement 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 salary (typically averaged over one, three or five years). The UK and US defined benefit schemes were closed to new entrants in 2000. All new employees in these countries are offered defined contribution schemes.

In applying IAS 19 ‘Employee Benefits’, we recognise all actuarial gains and losses immediately through reserves. This methodology results in a less volatile income statement charge than under the alternative approach of recognising actuarial gains and losses over time. Investment decisions in respect of defined benefit schemes are based on underlying actuarial and economic circumstances with the intention of ensuring that the schemes have sufficient assets to meet liabilities as they fall due, rather than meeting accounting requirements. The trustees follow a strategy of awarding mandates to specialist, active investment managers, which results in a broad diversification of investment styles and asset classes. The investment approach is intended to produce less volatility in the plan asset returns.

In assessing the discount rate applied to the obligations, we have used rates on AA corporate bonds with durations corresponding to the maturities of those obligations.

In all cases, the pension costs recorded in the Financial Statements 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.

Taxation

Accruals for tax contingencies require management to make judgements and estimates in relation to tax audit issues and exposures. Amounts accrued are based on management’s interpretation of country-specific tax law and the likelihood of settlement. Tax benefits are not recognised unless the tax positions are probable of being sustained. Once considered to be probable, management reviews each material tax benefit

to assess whether a provision should be taken against full recognition of the benefit on the basis of potential settlement through negotiation and/or litigation. All such provisions are included in creditors due within one year. Any recorded exposure to interest on tax liabilities is provided for in the tax charge.

AstraZeneca faces a number of transfer pricing audits in jurisdictions around the world and, in some cases, is in dispute with the tax authorities. These disputes usually result in taxable Profits being increased in one territory and correspondingly decreased in another. Our balance sheet positions for these matters reflect appropriate corresponding relief in the territories affected. The total net accrual included in the Financial Statements to cover the worldwide exposure to transfer pricing audits is $2,327 million, an increase of $699 million, which is due to a number of new audits, revisions of estimates relating to existing audits, offset by a number of negotiated settlements and exchange rate effects.

Included in the total net accrual are amounts in respect of the following transfer pricing arrangements:

>		AstraZeneca and Her Majesty’s Revenue & Customs (HMRC) have made a joint referral to the UK Court in respect of transfer pricing between our UK operation and one of our overseas operations for the years 1996 to date as there continues to be a material difference between the Group’s and HMRC’s positions. An additional referral in respect of controlled foreign company aspects of the same case was made during 2008. Absent a negotiated settlement, litigation is set to commence in 2010.

>		AstraZeneca has applied for an advance pricing agreement in relation to intra-group transactions between the UK and the US which is being progressed through competent authority proceedings under the relevant double tax treaty.

Management continues to believe that AstraZeneca’s positions on all its transfer pricing audits and disputes are robust and that AstraZeneca is appropriately provided.

For transfer pricing audits where AstraZeneca and the tax authorities are in dispute, AstraZeneca estimates the potential for reasonably possible additional losses above and beyond the amount provided to be up to $575 million. However, management believes that it is unlikely that these additional losses will arise. Of the remaining tax exposures, AstraZeneca does not expect material additional losses. It is not possible to estimate

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Payments due by period

Less than 1 year

1-3 years

3-5 years

Over 5 years

Total

Bank loans and other borrowings

2,512

2,769

834

12,209

18,324

Operating leases

132

128

131

471

Contracted capital expenditure

739

–

739

Total

3,383

2,897

914

12,340

19,534

the timing of tax cash flows in relation to each outcome, however, it is anticipated that a number of significant disputes may be resolved over the next one to two years. Included in the provision is an amount of interest of $565 million.

Segmental reporting

During the year AstraZeneca has adopted IFRS 8 ‘Operating Segments’. IFRS 8 requires an entity to report financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. In addressing these criteria, it was determined that AstraZeneca is engaged in a single business activity of pharmaceuticals and that the Group does not have multiple operating segments. Our biopharmaceuticals business consists of the discovery and development of new products, which are then manufactured, marketed and sold. All of these functional activities take place (and are managed) globally on a highly integrated basis. We do not manage these individual functional areas separately.

We consider that the SET is AstraZeneca’s chief operating decision-making body (as defined by IFRS 8). The operation of the SET is principally driven by the management of the commercial operations, R&D and manufacturing and supply. The SET also includes Finance, Human Resources and General Counsel representation.

All significant operating decisions are taken by the SET. While members of the SET have responsibility for implementation of decisions in their respective areas, operating decision-making is at SET-level as a whole. Where necessary, decisions are implemented through cross-functional sub-committees that consider the group-wide impact of a new decision. For example, product launch decisions would be initially considered by the SET and, on approval, passed to an appropriate sub-team for implementation. The impacts of being able to develop, produce, deliver and commercialise a wide range of pharmaceutical products drive the SET’s decision-making process.

In assessing performance, the SET reviews financial information on an integrated basis for the Group as a whole, substantially in the form of, and on the same basis as, the Group’s IFRS Financial Statements. The high upfront cost of discovering and developing new products, coupled with the relatively insignificant and stable unit cost of production, means that there is not the clear link that exists in many manufacturing businesses between the revenue generated on an individual product sale and the associated cost (and hence margin) generated on a product. Consequently, the profitability of individual drugs or classes of drugs is not considered a key measure of performance for the business and is not monitored by the SET.

Resources are allocated on a group-wide basis according to need. In particular, capital expenditure, in-licensing and R&D resources are allocated between activities on merit, based on overall therapeutic considerations and strategy under the aegis of the Group’s R&D Executive Committee to facilitate a group-wide single combined discovery and development strategy. The Group’s recent acquisitions in the biologics area, MedImmune and Cambridge Antibody Technology Group plc, have been integrated into the existing management structure of AstraZeneca both for allocation of resources and for the purposes of assessment and monitoring of performance. As such, although biologics is a relatively new technological area for the Group, it does not operate as a separate operating segment.

Off-balance sheet transaction
and commitments

We have no off-balance sheet arrangements and our derivative activities are non-speculative. The table above sets out our minimum contractual obligations at the year end.

Other accounting information

New accounting standards

New IFRS which have been issued (both adopted and not yet adopted) are discussed in the Accounting Policies section in the Financial Statements from page 128.

Sarbanes-Oxley Act section 404

As a consequence of our listing on the NYSE, AstraZeneca is required to comply with those provisions of the Sarbanes-Oxley Act applicable to foreign issuers. Section 404 of the Sarbanes-Oxley Act requires companies annually to assess and make public statements about the quality and effectiveness of their internal control over financial reporting.

Our approach to the assessment has been to select key transaction and financial reporting processes in our largest operating units and a number of specialist areas, such as financial consolidation and reporting, treasury operations and taxation, so that, in aggregate, we have covered a significant proportion of each of the key line items in our Financial Statements. Each of these operating units and specialist areas has ensured that its relevant processes and controls are documented to appropriate standards, taking into account, in particular, the guidance provided by the SEC. We have also reviewed the structure and operation of our ‘entity level’ control environment. This refers to the overarching control environment, including structure of reviews, checks and balances that are essential to the management of a well-controlled business.

The Directors have concluded that our internal control over financial reporting is effective at 31 December and the assessment is set out in the Directors’ Responsibilities for, and Report on, Internal Control over Financial Reporting section in the Financial Statements on page 122. KPMG has audited the effectiveness of our internal control over financial reporting and, as noted in the Auditor’s Report on the Financial Statements and on Internal Control over Financial Reporting (Sarbanes-Oxley Act Section 404) on page 123, their report is unqualified.

AstraZeneca Annual Report and Form 20-F Information 2009

50Directors’ Report | Geographical Review

Geographical Review

2009 in brief

Significant growth continues to be delivered by key products: Arimidex (7%), Crestor (29%), Seroquel (12%) and Symbicort (23%). Nexium growth of 9% outside the US.

Despite a continually challenging environment, including pressure from generic medicines, combined sales of Arimidex, Crestor, Nexium, Seroquel and Symbicort were up 10% in the US to 66% of our total US sales.

In North America, despite several key mergers (Merck/Schering-Plough, Pfizer/Wyeth), AstraZeneca maintained its position as the second largest pharmaceutical company in Canada. In the US, AstraZeneca is now the third largest pharmaceutical company. In the US, AstraZeneca grew its audited sales faster than any other pharmaceutical company in the top 10.

Solid sales performance outside the US, up 6%.

Strong brand performance in our Western Europe markets but intense competition and governmental controls over healthcare expenditure.

Emerging Markets delivered strong sales growth, up 12% with Emerging Europe sales up 7% and Emerging Asia Pacific sales (including China) up 15%.

Live attenuated H1N1 influenza (swine flu) vaccine approved. AstraZeneca contracted with the US Department of Health and Human Services to supply 42 million doses of live attenuated H1N1 influenza vaccine at $389 million.

For the first time, the seasonal influenza vaccine, FluMist, sold out of its approximately 10 million dose supply.

For more information regarding our products see the Therapy Area Review from page 55. Details of material legal proceedings can be found in Note 25 to the Financial Statements from page 166 and details of relevant risks are set out in the Principal risks and uncertainties section from page 80.

See the market definitions table on page 206 for information on AstraZeneca’s market definitions.

North America

Sales in the US increased 9% to $14,778 million, benefiting from the 10% growth of our leading brands. Combined sales of those brands, namely Arimidex, Crestor, Nexium, Seroquel (all formulations) and Symbicort, were up 10% to $9,717 million (2008: $8,803 million) and sales of Toprol-XL and its authorised generic increased as a result of supply issues facing its generic competitors. AstraZeneca is currently the third largest pharmaceutical company in the US, with a 6% share of US prescription pharmaceutical sales. Sales for Aptium Oncology, Inc. fell by 1% to $393 million (2008: $395 million) and sales for Astra Tech AB rose by 4% to $83 million (2008: $80 million).

Seroquel maintained its strong position as the number one prescribed atypical anti-psychotic on the market, with sales up 13% to $3,416 million (2008: $3,015 million). Seroquel (all formulations) posted total prescription growth of 2% with an increase of 408,000 prescriptions, driven by strong Seroquel XR prescription growth of 195%. At the end of 2009, Seroquel XR accounted for 11.1% of the Seroquel total prescription volume in the US, up from 3.4% at the end of 2008.

Throughout 2009, Nexium continued to lead the branded proton pump inhibitor (PPI) market for new prescriptions, total prescriptions and total capsules dispensed. Generic lansoprazole and Prevacid OTC 24 Hour were introduced in November, leaving Nexium as the only branded product with significant market share in the PPI class. In the face of continuing generic, OTC and pricing pressures, Nexium sales were down 9% to $2,835 million in 2009 (2008: $3,101 million).

Crestor achieved sales of $2,100 million (2008: $1,678 million) and a total prescription growth of 22.8%. For the second year in a row Crestor was the only branded statin to grow market share despite pressure from generic medicines. In fact, in 2009, Crestor‘s total prescription growth of 22.8% significantly outpaced the market by 17.5% and that of total generic statins by 3.3%. We continue to see increased interest in the clinical profile of Crestor from physicians following receipt of the atherosclerosis indication. Crestor is the fastest growing branded statin prescribed by cardiologists and internists.

In June, AstraZeneca and Abbott submitted an NDA for Certriad for the treatment of mixed dyslipidaemia. AstraZeneca and Abbott have also entered into an agreement under which AstraZeneca obtained the non-exclusive right to co-promote Trilipix^™, alongside Abbott in the US (excluding Puerto Rico), from June. This is the second co-promotion agreement between AstraZeneca and Abbott. In 2008, the companies announced a non-exclusive agreement for Abbott to co-promote Crestor alongside AstraZeneca in the US (excluding Puerto Rico).

Onglyza^™ was launched in August, the first launch in the collaboration with BMS. Execution of the Onglyza^™ launch strategy remains on-target and the number of physicians prescribing the product is growing. Brand awareness is increasing and is in line with expectations.

Sales for Toprol-XL and the authorised generic, which is marketed and distributed by Par Pharmaceutical Companies, Inc. increased 227% to $964 million (2008: $295 million) following the withdrawal from the market of two other generic metoprolol succinate products in early 2009. AstraZeneca worked diligently following these withdrawals to ensure an adequate supply of Toprol-XL and the authorised generic. In September, Watson Pharmaceuticals Inc. received approval for 25mg and 50mg strengths of metoprolol succinate. We expect further generic competition in 2010.

Arimidex continued to perform well with sales up 16% to $878 million (2008: $754 million) for the full year. Arimidex continues to be the market leader in new prescriptions in hormonal treatments for post-menopausal women with hormone receptor positive breast cancer in the US.

Patent protection in the US for the Casodex advanced prostate cancer indication expired in April 2009. In July, multiple generic formulations of Casodex were approved by the FDA and entered the market. As a result, 2009 sales of Casodex declined 49% to $148 million (2008: $292 million).

Sales for Pulmicort Respules were down 21% to $692 million (2008: $874 million) as a result of the ‘at risk’ launch of generic budesonide inhalation suspension by Teva in November 2008. On 25 November 2008, the parties settled the ensuing litigation and in accordance with the settlement agreement, Teva commenced sales of its generic product under an exclusive licence from AstraZeneca on 15 December 2009.

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Our financial performance


	2009							2008							2007		2009 compared to 2008					2008 compared to 2007
					Growth due							Growth due
			CER		to exchange					CER		to exchange					CER		Reported			CER		Reported
	Sales		growth		effect			Sales		growth		effect			Sales		growth		growth			growth		growth
	$m		$m		$m			$m		$m		$m			$m		%		%			%		%

US		14,778		1,268		–			13,510		142		2			13,366		9		9			1		1

Canada		1,203		37		(109	)		1,275		95		35			1,145		3		(6	)		8		11

North America		15,981		1,305		(109	)		14,785		237		37			14,511		9		8			2		2

Western Europe		9,277		257		(723	)		9,743		55		573			9,115		3		(5	)		1		7

Japan		2,341		142		242			1,957		73		223			1,661		7		20			4		18

Australasia		853		98		(88	)		843		107		21			715		12		1			15		18

Other Established Markets		12,471		497		(569	)		12,543		235		817			11,491		4		(1	)		2		9

Emerging Europe		1,091		87		(211	)		1,215		102		85			1,028		7		(10	)		10		18

China		811		168		16			627		136		54			437		27		29			31		43

Emerging Asia Pacific		780		52		(74	)		802		72		(19	)		749		6		(3	)		10		7

Other Emerging		1,670		208		(167	)		1,629		247		39			1,343		13		3			18		21

Emerging Markets		4,352		515		(436	)		4,273		557		159			3,557		12		2			16		20

Total Sales		32,804		2,317		(1,114	)		31,601		1,029		1,013			29,559		7		4			3		7

Symbicort pMDI continued to deliver steady growth in the US with sales up 91% to $488 million (2008: $255 million). It surpassed a 15% total prescription share and a 17% new prescription share of the inhaled corticosteroid/long-acting beta-agonist market. Symbicort pMDI is now prescribed to 26% of all patients who are new to combination therapy. In February 2009, it was approved for the maintenance treatment of airflow obstruction in patients with chronic obstructive pulmonary disease, including chronic bronchitis and emphysema.

Synagis is the only FDA-approved MAb to help protect high-risk babies against severe respiratory syncytial virus (RSV). In 2009, sales in the US were $782 million (2008: $923 million). Sales in the 2009-2010 RSV season started slower than anticipated due to payer pressure as a result of the introduction of more restrictive guidelines regarding the use and dosing of Synagis by the American Academy of Pediatrics and the adoption of these guidelines.

AstraZeneca’s monovalent H1N1 influenza (swine flu) vaccine, which is made using the same technology and process as AstraZeneca’s seasonal influenza vaccine, FluMist, was approved by the FDA in September for the same patient population as FluMist (patients two to 49 years of age). AstraZeneca began shipping product to the US Department of Health and Human Services (HHS) in September. All sales in the US were through the HHS and totalled $389 million.

AstraZeneca has a number of new drug application submissions under review by the regulatory authorities in the US and the EU, including: Crestor (for a new indication, as an sNDA based on the results of the JUPITER study), Vimovo, Certriad, motavizumab and Symbicort pMDI as an sNDA for paediatric use as well as sNDAs for Seroquel XR for generalised anxiety disorder (acute, maintenance and use in elderly), and for the use of Seroquel XR as monotherapy for the treatment of patients with major depressive disorder (acute, maintenance and use in elderly). Further information about the status of these submissions and others is contained in the Therapy Area Review from page 55.

Currently, there is no direct government control of prices for commercial prescription drug sales in the US. However, some publicly funded programmes, such as Medicaid and TRICARE (Department of Veterans Affairs), have statutorily mandated rebates and discounts that have the effect of price controls for these programmes. Additionally, pressure on pricing, availability and utilisation of prescription drugs for both commercial and public payers continues to increase, driven by, among other things, an increased focus on generic alternatives. Primary drivers of increased generic use are budgetary policies within healthcare systems and providers, including the use of ‘generics only’ formularies, and increases in patient co-insurance or co-payments. In 2009, 75% of the prescriptions dispensed in the US were generic. Despite these price pressures and a challenging economic environment, AstraZeneca increased net product sales in 2009 by 9% and IMS Health audited sales for the US market show that AstraZeneca

was the fastest growing branded company in the top 10. While it is unlikely that there will be widespread adoption of a broad national price-control scheme in the near future, there will continue to be increased attention to pharmaceutical prices and their impact on healthcare costs for the foreseeable future.

In 2010, we anticipate there will be continued focus on health reform that may result in the implementation of changes in legislation and regulation. AstraZeneca believes that every American should have affordable health insurance and prescription drug coverage. In reviewing different health reform proposals that Congress is considering, AstraZeneca will ask whether any particular provision:

>		Promotes market competition that leads to improved health outcomes

>		Ensures patient safety is maintained or enhanced

>		Expands coverage for the uninsured

>		Fosters and rewards innovation

>		Provides protection for intellectual property.

For further discussion of the proposed US healthcare reforms, see the Competition, price controls and price reductions section on page 83.

In its fourth year of operation, the Medicare Part D prescription drug programme maintained high levels of enrolment and beneficiary satisfaction. It also achieved prescription volume growth similar to that of other mature markets and provided access to our medicines for a large segment of the patient population. Overall access for AstraZeneca’s products in key accounts was maintained or improved in 2009.

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52Directors’ Report | Geographical Review

We continue our long-standing commitment to educating Medicare beneficiaries and supporting healthcare professionals in all aspects of Medicare Part D through our partnership with the National Council on Aging. This includes a consumer website, My Medicare Matters, which was revised this year to provide detailed, yet easy-to-understand information about Medicare services including Part D for people with commonly diagnosed diseases among the elderly, starting with diabetes, cancer and Alzheimer’s disease and related dementias. Funding from AstraZeneca also supports MyMedicareCommunity.org, an on-line community for healthcare professionals and grass roots organisations serving people with Medicare.

Additionally, through the AZ&Me Prescription Savings Programme, AstraZeneca provides prescription access to financially needy Medicare Part D beneficiaries. AstraZeneca has been providing patient assistance to the uninsured for 30 years. Last year, we provided more than $750 million in savings to approximately 505,000 people without drug coverage (approximately 3.8 million prescriptions).

Canada

Despite the entry of generic forms of Seroquel IR in late 2008, total product sales in Canada increased by 3% to $1,203 million (2008: $1,275 million) and we remain the second largest brand name pharmaceutical company in Canada. Combined sales of Crestor, Nexium, Symbicort and Atacand were up 18% to $872 million (2008: $805 million) with Crestor and Nexium among the top 10 prescription products in Canada by sales. Sales of Seroquel were down 68% to $48 million (2008: $160 million) as a result of generic entry. Crestor maintained its number two ranking in the statin market and was the fastest-growing product in both new and total prescription segments (25.5% and 27.6% growth, respectively). Crestor is also the second largest pharmaceutical product in Canada by sales.

AstraZeneca received a number of important regulatory approvals from Health Canada in 2009, including regulatory approval for Onglyza^™ for the treatment of Type 2 diabetes, Symbicort Turbuhaler for the treatment of chronic obstructive pulmonary disease and Seroquel XR for the treatment of major

depressive disorder. In addition, new tablet strengths (32/12.5mg and 32/25mg) were approved for Atacand Plus.

Key organisational efficiencies were obtained through structural changes, as well as the move to regional shared service models and common North American technology platforms.

A recent study, ‘The Rx&D International Report on Access to Medicines, 2008-2009’ by George Wyatt, highlights that only 55% of innovative medicines receive approval from Canada’s Health Technology Assessment appraisal system compared to an international average of 73%. The Patented Medicine Prices Review Board (PMPRB) has the role of ensuring that prices charged by manufacturers for patented medicines are not excessive. Recent PMPRB guideline changes to be introduced in 2010 have secured a competitive pricing environment for the Canadian pharmaceutical industry.

The provinces have adopted different approaches to pharmaceutical funding, from one end of the continuum in Quebec, with more open access, to more restricted access in British Columbia. Ontario, Alberta and British Columbia have all undertaken reviews of their drug reimbursement system, resulting in the introduction of product listing agreements, the reduction of generic prices and changes to the role of pharmacists. The trend in Canada indicates provinces will continue to introduce policy changes that drive cost savings, while providing reasonable patient access to innovative medicines.

Rest of World

Sales in the Rest of World performed strongly in 2009, up 6% (flat as reported) to $16,823 million (2008: $16,816 million), despite the world economic crisis. Key products (Arimidex, Crestor, Nexium, Seroquel and Symbicort) delivered a strong performance, up 15% (+8% reported) with sales of $7,977 million (2008: $7,413 million). China, Emerging Asia Pacific and Other Emerging markets delivered particularly strong sales, up 14% (+7% reported) with sales of $3,261 million (2008: $3,058 million).

Other Established Markets

Sales in Other Established Markets increased by 4% (-1% reported). The key products driving sales growth in 2009 were Crestor, Symbicort, Nexium and Seroquel.

Western Europe

In our Western Europe markets, we saw good growth of 3% (-5% reported). The weakness of the pound sterling in comparison to the euro resulted in a significant change in the pattern of export trade within the EU with strong sales in the UK (up 27%, +6% reported) more than offsetting sales declines in Italy (down 3%, -9% reported), Spain (down 6%, -11% reported), and the Nordics (ie Sweden, Finland, Denmark and Norway) (down 5%, -16% reported).

Within our Western Europe markets, Crestor has delivered a strong financial performance and has outperformed the market with strong double-digit growth. Likewise, Seroquel has outperformed the market by two times with the successful launch of Seroquel XR and the bipolar indication driving performance. Symbicort has defended its market position and Nexium has moved from second to first place in its class. Arimidex has maintained its position as the leading aromatase inhibitor. Sales of Casodex continue to decline following patent expiries in 2008.

Sales in our Western Europe markets continued to be impacted by government initiatives to contain drug expenditures and by generic erosion of those of our products which have lost patent protection and Regulatory Exclusivity.

We have continued with our programme of resource management in our Western Europe markets and have reduced our cost base by 5% and headcount by over 600 during 2009.

Overall our sales in France were up 2% (-4% reported) to $1,849 million (2008: $1,922 million). The strong performance of Crestor and Nexium, which gained significant market share from competitors, was offset by the continuing impact of patent expiry for Casodex.

In Germany, sales were up 3% (-2% reported) to $1,278 million (2008: $1,307 million) with good growth in Atacand, Symbicort and Seroquel offsetting the continued declines in Nexium, resulting from government restrictions to access, and Casodex following patent expiry.

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As a result of the weak pound sterling and its impact on export sales through parallel trade, in the UK sales were up 27% (+6% reported) to $1,082 million (2008: $1,020 million) driven by Crestor (up 62%, +35% reported), Seroquel (up 64%, +35% reported), Symbicort (up 42%, +18% reported) and Nexium (up 95%, +59% reported).

In Italy, overall sales declined by 3% (-9% reported) to $1,199 million (2008: $1,323 million) as a result of reference pricing and Casodex patent expiry. However, Crestor performed well, increasing its sales by 8% (+3% reported) and Seroquel showed strong growth, increasing sales by 36% (+28% reported).

In Spain, sales were down 6% (-11% reported) to $768 million (2008: $863 million) due to Seroquel (down 17%, -21% reported), Symbicort (down 3%, -9% reported) and Arimidex (down 30%, -33% reported). However, Nexium performed well with sales up 15% (+9% reported).

Most governments in Europe intervene directly to control the price and reimbursement of medicines. The decision-making power of prescribers in Europe has been eroded in favour of a diverse range of payers. While the systems to control pharmaceutical spending vary, they have all had a noticeable negative impact on the uptake and availability of innovative medicines. Several governments have imposed price reductions and increased the use of generic medicines as part of healthcare expenditure control. Several countries are applying strict tests of cost-effectiveness to medicines, which has reduced access for European patients to medicines in areas of high unmet medical need. These and other measures all contribute to an increasingly difficult environment for branded pharmaceuticals in Europe.

Japan

In Japan, strong volume gains of 8.3% increased overall sales by 7% (+20% reported) to $2,341 million (2008: $1,957 million) and allowed us to maintain our twelfth place position in the market. This was achieved despite a decline of 5% (+6% reported) of Casodex, our largest product in Japan, following the launch of generic competitors in May 2009. The key drivers of growth were the continued success of Crestor (up 58%, +76% reported), the continued growth of Losec (up 8%, +20% reported) and the increased penetration of Seroquel (up 25%, +39% reported).

In addition, future growth prospects received a boost in 2009 with the approval of Symbicort Turbuhaler for the Japanese market. Symbicort Turbuhaler was launched in January 2010 into an asthma market where the proportion of patients treated by inhaled corticosteroids is growing but lags behind other major markets by five to 10 years. Symbicort Turbuhaler is being promoted in Japan by both AstraZeneca and Astellas.

In Japan there is formal central government control of prices by the Ministry of Health, Labour and Welfare (MHLW) and the pricing and reimbursement system has been stable in recent years. Regular price revisions are imposed in April every other year that reduce the reimbursement price of almost all products. Accordingly, prices were not revised in 2009, but will be in 2010. At the same time, it is expected that in April 2010, a new pricing rule will be adopted on a trial basis to reward the development of innovative new products. Under this rule, new products with a below industry-average doctor margin will be subject to either a zero or a significantly reduced price revision, as long as the manufacturer has demonstrated appropriate progress in developing unapproved products and indications requested by the government. The long-term objective of the Japanese government is to raise generic volume share from 20.9% in 2008 to 30% by 2012; recent reforms have supported this goal by making the substitution of a generic product for a branded product easier.

Australasia

In Australia and New Zealand, we delivered a strong sales performance with sales up 12% (+1% reported) to $853 million (2008: $843 million), driven mainly by sales growth for Crestor, Atacand, Nexium, Seroquel and Symbicort. These five brands grew by 26% (+14% reported). Crestor‘s performance in Australia has been particularly strong, gaining over 6% volume market share in the year.

Emerging Markets

In the Emerging Markets, sales increased by 12% (+2% reported) to $4,352 million (2008: $4,273 million), accounting for nearly 49% of total sales growth outside the US. Sales in Emerging Europe were up 7% (-10% reported) to $1,091 million (2008: $1,215 million). Sales in China (excluding Hong Kong) increased by 27% (+29% reported) to $811 million (2008: $627 million).

In many of the larger markets, such as Brazil and Mexico, patients tend to pay directly for prescription medicines and consequently these markets are at less risk of direct government interventions on pricing and reimbursement. In other markets such as South Korea, Taiwan and Turkey where governments do pay for medicines, we are seeing measures to reduce the cost of prescriptions in line with the systems in Europe, Canada and Australia.

Emerging Europe

As part of our ongoing growth strategy, we have significantly increased our presence in the Russian market and sales have grown by 23% (-2% reported) to $180 million (2008: $184 million). The strongest performance has been seen in the cardiovascular (up 61%, +26% reported) and respiratory (up 33%, +6% reported) Therapy Areas.

In Romania, AstraZeneca has increased its market share to 3.3% in a very dynamic prescription market environment. Sales have increased by 51% (+29% reported) to $92 million (2008: $71 million), driven primarily by Crestor (up 54%, +29% reported) and Nexium (up 59%, +36% reported).

In late 2009 the government in Turkey imposed unprecedented levels of price reductions on the pharmaceutical industry. As a result our full-year growth was limited to 6%.

Ukraine, Kazakhstan, Belarus and Georgia have been particularly challenged by the financial crisis, most notably in Ukraine, although the pharmaceutical sector has been less affected than others by the GDP decline.

China

In China, in line with our growth and expansion strategy of the past five years, we have continued to build our presence and sales (excluding Hong Kong) were up 27% (+29% reported) to $811 million (2008: $627 million). We are the second largest multinational pharmaceutical company in the prescription market in China (including Hong Kong) with a growth rate for prescription sales of 29%. Our investment in China increased with further growth in the number of sales representatives, and continued to support our innovation discovery research centre in Shanghai and our several external collaborations.

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54Directors’ Report | Geographical Review

In November, the third edition of China’s National Reimbursable Drugs List (NRDL) was published by the Ministry of Human Resources and Social Security (MHRSS), five years after the publication of the second edition in 2005. 131 new ‘western’ medicines were added to the list, representing a 13% increase. For AstraZeneca Crestor, Nexium i.v., Symbicort and Seloken XR were included on the list for the first time whilst previous restrictions that applied to Arimidex, Casodex and Zoladex were removed. Based on the current guidelines issued by MHRSS, we expect the new list to be operational at the provincial and hospital level in the second half of 2010.

In August, China’s National Essential Drug System (NEDL) was officially launched. This formulary lists 307 essential drugs (205 chemical and biologics and 102 formulated traditional Chinese medicines) which should be used in all government owned healthcare institutions. Seloken and Losec MUPS are listed in the NEDL. The Chinese Government has a target that by the end of 2009, 30% of basic healthcare institutions (ie community health centres and rural hospitals) will stock all drugs listed in the NEDL.

Emerging Asia Pacific

In Emerging Asia Pacific, overall sales were up 6% (-3% reported) to $780 million (2008: $802 million) with double-digit growth in India, Malaysia and Vietnam and a more subdued performance in Thailand, the Philippines and Singapore due to the more pronounced impact of the economic crisis and government interventions in these countries.

Other Emerging markets
Latin America

During 2009, GDP growth in Latin America slowed significantly to -2.1% from 4.2% in 2008, as a result of the global financial crisis. The pharmaceutical market in Latin America grew by 12% compared to 2008 and AstraZeneca’s sales grew 8% (-4% reported) to $1,118 million (2008: $1,159 million), mainly driven by Brazil, Argentina and Venezuela. As a result, our market share grew to 2.4% (2008: 2.3%) in the prescription market, improving our position again from eleventh last year to tenth this year in the regional competitor rankings.

Atacand, Crestor, Nexium, Seroquel and Symbicort showed strong performance, with overall sales up 17% (+5% reported) to $544 million (2008: $516 million). Nexium is our number one prescription product in Latin America, with sales up 4% (-5% reported) to $175 million (2008: $185 million), and is ranked fourth in the top 20 products of the Latin American prescription market. Crestor is our second largest prescription product, with overall sales up 27% (+14% reported) to $146 million (2008: $128 million), and is now number seven in the top 20 Latin American prescription products.

Brazil, Mexico and Venezuela are our three largest markets in the region, with sales up 18% (+4% reported) to $457 million (2008: $440 million), down 9% (-26% reported) to $261 million (2008: $353 million) and up 15% (+15% reported) to $163 million (2008: $142 million), respectively. Mexico in particular has been heavily impacted by the global financial crisis as a result of its reliance on the US economy.

Middle East and Africa (MEA)

During 2009, MEA has achieved strong growth essentially driven by Maghreb and Egypt. Our largest three markets in the region are now South Africa, the Gulf States and Saudi Arabia.

Sales force expansion in MEA over the past few years has directly contributed to this strong performance in the region, with Crestor, Symbicort and Seroquel demonstrating growth. Overall, AstraZeneca’s sales in MEA are growing twice as fast as the pharmaceutical market in MEA.

AstraZeneca Annual Report and Form 20-F Information 2009

	Directors’ Report \| Therapy Area Review	55
		Reviews

Therapy Area Review

This section contains further information about the Therapy Areas in which our efforts are focused: Cardiovascular, Gastrointestinal, Infection, Neuroscience, Oncology, and Respiratory & Inflammation.

We describe the business environment, trends and other factors that have influenced our decision to focus on diseases in these six areas, our strategic objectives for each and our progress towards achieving these objectives. We include information about our marketed medicines and how they are designed to make a meaningful difference for patients, together with an overview of performance during the year. We also report in detail on the potential new products and product life-cycle developments in our pipeline that reflect our commitment to maintaining a flow of innovation that adds value for our shareholders and society.

For a list of all our potential new products and product life-cycle developments see the Development Pipeline table from page 196.

Many of our products are subject to litigation. Detailed information about material legal proceedings can be found in Note 25 to the Financial Statements from page 166. Details of relevant risks are set out in the Principal risks and uncertainties section from page 80.

Projects in Phase III

Projects in Phase II

Projects in Phase I

Projects in pre-clinical


¹	Includes Synagis and FluMist which were acquired in June 2007.

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56Directors’ Report | Therapy Area Review

Cardiovascular

In brief

Onglyza^™ has been launched in the US, Canada, Mexico, Germany, the UK and Denmark and has been approved in Argentina, Brazil, India and all other EU countries.

Crestor sales up 29% to $4.5 billion. Crestor approval has broadened to every EU country with launches in Germany and Spain in 2009.

Crestor was approved in the US for the treatment of paediatric patients from 10 to 17 years of age with heterozygous familial hypercholesterolemia based on the PLUTO study. This study fulfilled our paediatric exclusivity obligations, which resulted in Paediatric Exclusivity being granted in July, which will provide an additional six months of exclusivity to market Crestor in the US.

Crestor filings were submitted in the US and the EU as well as other markets seeking an outcomes indication and labelling based on the JUPITER study which demonstrated a significant reduction in major cardiovascular (CV) events (44% compared to placebo) in men (over 50) and women (over 60) with elevated high-sensitivity C-reactive protein but low/normal cholesterol levels.

The parties concluded discovery in the Crestor consolidated ANDA patent litigations filed in the US District Court for the District of Delaware. The actions involve eight generic drug manufacturers challenging the patent covering the active ingredient for Crestor. The Court decided numerous pre-trial motions, including a denial of AstraZeneca’s and the licensor’s (Shionogi) motion for summary judgment in respect of alleged inequitable conduct. The Court amended the pre-trial schedule, re-setting the beginning trial date to 22 February 2010.

In Canada, previously reported Patented Medicines (Notice of Compliance) Regulations proceedings in respect of Crestor continued and others were commenced in response to Notices of Allegation from further generic manufacturers.

Atacand sales up 5% to $1.4 billion.

Toprol-XL US sales up 227% for the full year.

MAA filed for Brilinta/Brilique (ticagrelor) in October and an NDA in November.

In December, AstraZeneca and BMS submitted an NDA for the once-daily fixed-dose combination of Onglyza^™ (saxagliptin) and metformin.

US submission for Certriad, a fixed-dose combination of Crestor (rosuvastatin calcium) and Abbott’s Trilipix^™ (fenofibric acid), for the treatment of mixed dyslipidaemia.

An NDA for Axanum, a single capsule of Nexium and aspirin, was filed in April.

Our marketed products

Crestor¹ (rosuvastatin calcium) is a statin for the treatment of dyslipidaemia and hypercholesterolemia, and to slow the progression of atherosclerosis.

Atacand² (candesartan cilexetil) is an angiotensin II antagonist for the 1st line treatment of hypertension and symptomatic heart failure.

Seloken/Toprol-XL (metoprolol succinate) is a beta-blocker once-daily tablet for 24-hour control of hypertension and for use in heart failure and angina.

Tenormin (atenolol) is a cardioselective beta-blocker for hypertension, angina pectoris and other CV disorders.

Zestril³ (lisinopril dihydrate) is an ACE inhibitor used for the treatment of a wide range of CV diseases, including hypertension.

Plendil (felodipine) is a calcium antagonist for the treatment of hypertension and angina.

Onglyza^™4 (saxagliptin) is a dipeptidyl peptidase IV inhibitor for the treatment of Type 2 diabetes.


¹	Licensed from Shionogi & Co. Ltd.

²	Licensed from Takeda Chemicals Industries Ltd.

³	Licensed from Merck & Co., Inc.

⁴	Co-developed and co-commercialised with Bristol-Myers Squibb Company.

Our strategic objectives

An estimated 17.5 million people died from cardiovascular (CV) disease in 2005, 7.6 million due to heart attacks, despite improvements in the quality of diagnosis and treatment. Direct and indirect costs of treating coronary heart disease were estimated to be 192 billion in Europe in 2008¹ and $313 billion in the US in 2009².

Backed by over 40 years’ experience, AstraZeneca is a world leader in CV medicines. We aim to build on our strong position, focusing on the growth areas of atherosclerosis (hardening of the arteries), thrombosis (blood clotting), diabetes and atrial fibrillation.

Hypertension, atherosclerosis
and dyslipidaemia

High blood pressure (hypertension) and abnormal levels of blood cholesterol (dyslipidaemia) damage the arterial wall and thereby lead to atherosclerosis. CV events driven by atherosclerotic disease remain the leading cause of death in the western world. Lipid-modifying therapy, primarily statins, is a cornerstone for the treatment of atherosclerosis. Within the lipid-modifying market, generics are taking a significant share of the market and it is anticipated that generic atorvastatin (Lipitor^™) will be available late in 2011.

Our focus

Our key marketed products

Since its launch in 2003, our statin, Crestor, has continued to gain market share, based on its differentiated profile in managing cholesterol levels and its unique recent label indication for treating atherosclerosis. Crestor approval has broadened to every EU country with launches in Germany and Spain in 2009.

Fewer than half of the people thought to have high levels of low-density lipoprotein cholesterol (LDL-C) ‘bad cholesterol’ get diagnosed and treated and, of those people, only about half reach their physician’s recommended cholesterol target using existing treatments. Crestor is the most effective statin in lowering LDL-C and the majority of patients reach their LDL-C goals using the usual 10mg starting dose. Crestor also produces an increase in high-density lipoprotein cholesterol (HDL-C) ‘good cholesterol’, across a range of doses. At its usual 10mg starting dose, Crestor has been shown, versus placebo, to reduce LDL-C by up to 52% and raise HDL-C by up to 14%, with eight out of 10 patients reaching their lipid goals.

In December, the FDA approved Crestor for use as an adjunct to diet for slowing the progression of atherosclerosis in patients with elevated cholesterol. Crestor is the only statin with an atherosclerosis indication in the US which is not limited by disease severity or restricted to patients with coronary heart disease.

Atacand, first launched in 1997, is approved for the treatment of hypertension in over 100 countries and for symptomatic heart failure in 70 countries. Atacand is an angiotensin II antagonist, and this class of medicine is the fastest-growing segment of the global hypertension market. Atacand Plus (candesartan cilexetil/hydrochlorothiazide) is a fixed-dose combination of Atacand and the diuretic hydrochlorothiazide, indicated for the treatment of hypertension in patients who require more than one hypertensive therapy. Atacand Plus is approved in 88 countries. In 2008, AstraZeneca sought approval in Europe and other markets for two additional dose strengths of Atacand Plus. In 2009, the new strengths of Atacand Plus (32mg/12.5mg and 32mg/25mg) were approved in Canada, Australia, Sweden and nine other markets. Further approvals and launches are anticipated in 2010.


¹	European cardiovascular disease statistics, 2008 edition, Steven Allender et al, British Foundation Health Promotion Research Group.

²	National Heart, Lung, and Blood Institute. Fact Book, Fiscal Year 2008, hlbi.nih.gov/about/factbook/ FactBookFinal.pdf.

AstraZeneca Annual Report and Form 20-F Information 2009

	Directors’ Report \| Therapy Area Review	57
		Reviews

Our financial performance


	2009								2008							2007		2009 compared to 2008						2008 compared to 2007
						Growth due								Growth due
			CER			to exchange					CER			to exchange				CER			Reported			CER			Reported
	Sales		growth			effect			Sales		growth			effect		Sales		growth			growth			growth			growth
	$m		$m			$m			$m		$m			$m		$m		%			%			%			%

Seloken/Toprol-XL¹		1,443		677			(41	)		807		(667	)		36		1,438		84			79			(46	)		(44)

Crestor		4,502		1,048			(143	)		3,597		714			87		2,796		29			25			26			29

Atacand		1,436		67			(102	)		1,471		123			61		1,287		5			(2	)		10			14

Plendil		241		(20	)		(7	)		268		(18	)		15		271		(7	)		(10	)		(7	)		(1)

Tenormin		296		(15	)		(2	)		313		(17	)		22		308		(5	)		(5	)		(6	)		2

Zestril		184		(40	)		(12	)		236		(72	)		13		295		(17	)		(22	)		(24	)		(20)

Onglyza^™		11		11			–			–		–			–		–		n/m			n/m			n/m			n/m

Other		263		9			(17	)		271		(34	)		14		291		3			(3	)		(12	)		(7)

Total		8,376		1,737			(324	)		6,963		29			248		6,686		25			20			–			4


¹Includes sales of the authorised generic of Toprol-XL to Par Pharmaceutical Companies, Inc.

Therapy area world market
(MAT/Q3/09)


Market sectors	$bn

A High blood pressure		51.1

B Abnormal levels of blood cholesterol		35.4

C Diabetes		28.5

D Thrombosis		23.0

E Other		21.7

CV is the single largest therapy area in the global healthcare market with a worldwide market value of $160 billion.

CV disease remains the greatest risk to life for adults, accounting for 17 million deaths worldwide each year. In the US, 23 million people suffer from diabetes and two in five people with diabetes still have poor lipid profiles, one in three have poor blood pressure control and one in five have poor glucose control.

160bn

CV is the single largest therapy area
in the global healthcare market.
Worldwide market value of $160 billion

Following an sNDA submission in April 2009, the FDA has approved Atacand for the treatment of hypertension in children one to 17 years of age. This sNDA submission has also resulted in the granting of an additional six-month period of exclusivity to market Atacand in the US.

Clinical studies of our key
marketed products

GALAXY, our long-term global clinical research programme for Crestor, which investigates links between optimal lipid control, atherosclerosis and CV morbidity and mortality, has completed a number of studies involving over 65,000 patients in over 55 countries. Some of the studies undertaken as part of the GALAXY programme are referred to below, namely the JUPITER, PLUTO, AURORA, SATURN and PLANETS I and II studies.

Regulatory submissions for Crestor based on the JUPITER study results, details of which were included in our 2008 Annual Report and Form 20-F Information, are under review in the US and the EU as well as in other markets with approvals in Malaysia and Colombia. The JUPITER study was the subject of an FDA Advisory Committee in December with the Committee voting positively on the benefit/risk profile demonstrated in the study. A decision by the FDA on the submission is expected in the first quarter of 2010.

The PLUTO study evaluated the efficacy and safety of Crestor in patients 10 to 17 years of age with heterozygous familial hypercholesterolemia. Completion of the PLUTO study fulfilled our paediatric exclusivity requirements in the US and resulted in an additional six-month period of exclusivity to market Crestor in the US being granted in July. In October, a successful paediatric registration for Crestor was achieved.

The AURORA study, published in April 2009, evaluated the effects of Crestor 10mg and placebo on survival and major CV events in patients with end-stage renal disease on chronic hemodialysis and demonstrated that Crestor had no positive impact on such patients. The findings of the AURORA study are consistent with other previously published results with other statins and suggest that the CV disease present in chronic hemodialysis patients is different from other clinical settings and is not positively impacted by statin treatment.

Ongoing studies of Crestor include the SATURN study and the PLANETS I and II studies. The SATURN study, which is designed to measure the impact of Crestor 40mg and atorvastatin (Lipitor^™) 80mg on the progression of atherosclerosis in high-risk patients, is expected to report in 2011. The PLANETS I and II studies, which are designed to compare the efficacy and safety of Crestor 10mg and 40mg to atorvastatin (Lipitor^™) 80mg in patients with proteinuric renal disease in diabetics and nondiabetics, respectively, are expected to report in the first half of 2010.

In the pipeline

We continue the search for the next major therapy to reduce atherosclerotic risk. In collaboration with Abbott, we are developing an investigational compound, Certriad, a fixed-dose combination of the active ingredients in Crestor (rosuvastatin calcium) and Abbott’s Trilipix^™ (fenofibric acid). An NDA submission in respect of Certriad for the treatment of mixed dyslipidaemia was announced jointly by both companies in June.

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58Directors’ Report | Therapy Area Review

Certriad is a potential new approach to help patients with mixed dyslipidaemia achieve their treatment goals using a single capsule, which targets all three major blood lipids: LDL-C, HDL-C and triglycerides. Study results presented in 2008 showed that this combination provides greater benefit across multiple lipid parameters than the individual monotherapies, with significantly improved HDL-C and triglycerides compared to Crestor therapy alone, and significantly improved LDL-C compared to Trilipix^™ alone.

In 2009, AstraZeneca and the University of Virginia entered into a strategic research collaboration to enhance development of new treatments primarily for coronary artery disease with a secondary focus on peripheral vascular disease. The collaborative pre-clinical research projects will focus on identifying disease mechanisms and biological targets that have the potential to be starting points for successful and commercially viable treatments for these diseases, both major causes of CV morbidity and mortality worldwide.

Diabetes

The number of people affected by Type 2 diabetes continues to grow, predominantly driven by obesity. Type 2 diabetes is a chronic progressive disease and patients often require multiple medications to control their condition. There are a number of established oral generic and branded classes, such as sulfonylureas and thiazolidinediones; however, newer classes such as oral dipeptidyl peptidase IV inhibitors are entering the market successfully by offering effective blood sugar control and improved tolerability. Several new classes of drugs are in development in this area. CV safety has been given particular emphasis in recent regulatory reviews and guidance documents provided by the FDA. Additional patient safety requirements for new medicines can also be anticipated from other regulatory authorities.

Our focus
Our key marketed products

The collaboration on a worldwide basis¹between AstraZeneca and BMS to develop and commercialise two compounds discovered by BMS (Onglyza^™ (saxagliptin) and dapagliflozin) for the treatment of Type 2 diabetes continues to make good progress.

During 2009, Onglyza^™ was launched in the US, Canada, Mexico, Germany, the UK and Denmark and was approved in Argentina, Brazil, India and the EU. A large worldwide study assessing CV events will be conducted as a US post-marketing requirement.

In the pipeline

In December, AstraZeneca and BMS submitted an NDA for the once-daily fixed-dose combination of Onglyza^™(saxagliptin) and metformin.

Dapagliflozin is a potential oral anti-diabetic, which belongs to the novel class of sodium-glucose co-transporter 2 inhibitors. It is designed to be used both as monotherapy and in combination with other therapies for Type 2 diabetes. Early Phase III data demonstrate that, when compared to a placebo, 24 weeks’ treatment with dapagliflozin improved blood glucose parameters, resulted in weight loss and was well tolerated in patients with Type 2 diabetes. The extensive Phase III programme is ongoing.

Our activities in the glucokinase activator (GKA) area continued during 2009, and Phase II studies for AZD1656 are ongoing. The GKA mechanism of action induces insulin release from the pancreas and reduces glucose output from the liver, with marked blood glucose reducing effects in situations of hyperglycaemia.

During 2009, we also progressed our AZD4017, AZD8329 and AZD7867 projects into early clinical testing. These potential medicines aim to increase insulin sensitivity and thereby induce better glycaemic control with beneficial effects on body weight and blood lipids.

In December, AstraZeneca concluded an agreement with Biovitrum AB (publ) (Biovitrum) for the acquisition of all Biovitrum’s rights to its leptin modulator programme aimed at treating obesity. The leptin modulator programme is currently in pre-clinical development.

Acute coronary syndromes

Acute coronary syndromes (ACS) is an umbrella term for sudden chest pain and other symptoms due to insufficient blood supply (ischaemia) to the heart muscles. ACS is the acute culmination of ischemic heart disease, the leading cause of death worldwide (WHO 2008). There remains a significant need to improve outcomes and reduce the costs of treating ACS.

Our focus
In the pipeline

Brilinta/Brilique (ticagrelor) is the first reversibly binding, oral, adenosine diphosphate receptor antagonist being developed to reduce the risk of blood clots and thrombotic events in patients diagnosed with ACS. In August, AstraZeneca announced results from the Phase III study, PLATO, a head-to-head

18,624 patient outcomes study of ticagrelor plus aspirin versus the active comparator, clopidogrel (Plavix^™/Iscover^™), plus aspirin. The PLATO study was designed to establish whether ticagrelor could achieve meaningful CV and safety endpoints in ACS patients. The PLATO study included all the major ACS patient types (unstable angina, ST segment elevation myocardial infarction and non-ST segment elevation myocardial infarction) and followed patients who underwent invasive procedures (eg stent placement or surgery) or were managed with prescription medication.

The data from the PLATO study suggests that ticagrelor has achieved greater efficacy in the primary endpoint, reduction of CV events (CV death, heart attack, stroke), over clopidogrel without an increase in major bleeding. This efficacy endpoint was driven by a statistically significant reduction in both CV deaths and heart attacks with no difference in strokes. Ticagrelor is the first investigational antiplatelet that has demonstrated a reduction in CV death versus clopidogrel in patients with ACS. The reduction in the risk of CV events with ticagrelor occurred early and this benefit increased over time compared to clopidogrel.

The PLATO trial design prospectively identified 66 subgroups. The findings from 62 of the 66 subgroups were consistent with the results of the overall study population. Given the large number of subgroups evaluated, the four inconsistent findings may have been due to chance. One of the four subgroups showed a difference in efficacy results between patients in North America and those enrolled elsewhere. Alongside explanation by the play of chance, this raised questions of whether geographic differences between populations of patients or practice patterns influenced the effects of the randomised treatments. While no definitive explanation has been found to date, further analyses suggest a possible association between aspirin dose and the primary efficacy results, such that reduced efficacy was observed with ticagrelor and increasing aspirin doses. AstraZeneca and the PLATO investigators are continuing to explore these and other hypotheses, as well as other follow-on analyses of the PLATO trial data set, and plan to publish in due course.

AstraZeneca filed an MAA for ticagrelor in October and an NDA in November.

Axanum is a single capsule of aspirin (acetylsalicylic acid (ASA)) (75-325mg) and Nexium. Low-dose ASA (75-325mg) is the mainstay therapy for patients who are at high


¹	The collaboration for saxagliptin excludes Japan.

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	Directors’ Report \| Therapy Area Review	59
		Reviews

risk of having a CV event such as a heart attack or stroke. Patients report that low-dose ASA treatment can cause gastrointestinal (GI) problems and up to 30% of patients with upper GI problems (ie complications and symptoms) caused by the use of low-dose ASA discontinue or take deliberate breaks from their low-dose ASA treatment due to GI problems, which leaves them without adequate CV protection and puts them at greater risk of having a CV event. The risk of a CV event increases as early as 10 days from the discontinuation of the treatment.

An NDA in respect of Axanum was submitted to the FDA in April 2009 for risk reduction of peptic ulcers associated with low-dose ASA (75-325mg) therapy in patients at risk. The proposed labelling also includes the approved low-dose ASA indications. The submission was based on the results of the OBERON and ASTERIX studies evaluating the safety and efficacy of Nexium in reducing the risk of gastric and/or duodenal ulcers in patients taking low-dose ASA (75-325mg) continuously during the studies, which is defined as at least five days per week.

The data from the recent OBERON study, a double-blind, randomised, prospective analysis of 2,426 patients taking low-dose ASA (75-325mg), revealed that each of Nexium 20mg and 40mg reduced the cumulative proportion of patients with peptic ulcers after 26 weeks of treatment by 80-85% compared to placebo. Upper GI symptoms were assessed showing that the proportion of patients treated with Nexium with upper GI symptoms was significantly lower than in the placebo arm.

The ASTERIX study was a randomised, double-blind, placebo-controlled, study in 991 patients. Patients were randomised to treatment with either once-daily Nexium 20mg or placebo for six months while continuing to take their low-dose ASA therapy. After six months, Nexium was shown to reduce the risk of developing an ulcer by 70%.

Atrial fibrillation

Atrial fibrillation (AF) is the most common cardiac arrhythmia. Rhythm-control therapy to control the symptoms of AF is dominated by generic amiodarone, which is effective at maintaining patients in normal heart rhythm but very poorly tolerated. AF is associated with an increased risk of cerebral embolism resulting in stroke and disability. To reduce the risk of such AF-related complications, anti-coagulation with vitamin K antagonists can be used. New anti-coagulation therapies with improved convenience are emerging.

Our focus
In the pipeline

For the control of heart rhythm in AF, our focus is on atrial-specific agents as a way to reduce the risk of pro-arrhythmic effects. Our first compound in this area is in pre-clinical development. During 2009, the development of AZD1305, a combined ion-channel blocker which was in Phase II concept testing, was discontinued due to an emerging unfavourable benefit/risk profile.

Our oral, direct thrombin inhibitor (AZD0837) is ready to be taken into Phase III testing for the prevention of strokes and other embolic events in AF patients, using a once-daily extended release formulation that provides a sustained anti-coagulation effect throughout the dosing interval. AstraZeneca is considering the potential for AZD0837 in a number of indications as well as evaluating potential collaborations with third parties for its future development.

Litigation

Detailed information about material legal proceedings relating to our CV products can be found in Note 25 to the Financial Statements from page 166.

Financial performance 2009/2008

Performance 2009

Reported performance

CV sales were up 20% as reported to $8,376 million (2008: $6,963 million). Strong growth from Crestor, driven by the promotion of the atherosclerosis indication, and substantially increased sales of Toprol-XL and the authorised generic version of the drug in the US were the major contributors to growth in CV sales.

Performance – CER growth rates

CV sales were up 25% from 2008 at CER.

Crestor sales increased by 29% to $4,502 million. US sales for Crestor for the full year increased by 25% to $2,100 million. The total prescription share of Crestor in the US statin market increased to 11.3% in December 2009 from 9.9% in December 2008, and it was the only branded statin to gain market share. Crestor sales outside the US were up 33% for the full year to $2,402 million, over half of global sales for the product. Sales of Crestor were up 24% in our Western Europe markets to $968 million and 58% in Japan, driving sales growth in Other Established Markets and Canada up 33% in total. Sales of Crestor in Emerging Markets increased by 32%.

Sales of Seloken/Toprol-XL and its authorised generic increased by 84% to $1,443 million in 2009, as a result of increased sales of Toprol-XL and its authorised generic in the US. Sales in the US increased by 227% to $964 million following the withdrawal from the market of two other generic metoprolol succinate products in early 2009. However, we expect further generic competition in 2010.

Sales of Atacand in the US for the full year were unchanged from 2008 at $263 million, and account for 18% of global Atacand sales. Atacand sales outside the US were up 5% to $1,173 million, with a 3% increase in Other Established Markets and Canada and a 13% increase in Emerging Markets.

Alliance revenue from the Onglyza^™collaboration with BMS totalled $11 million in 2009.

Performance 2008

Reported performance

CV sales were up 4% as reported to $6,963 million (2007: $6,686 million). Strong growth from Crestor, fuelled by the promotion of the atherosclerosis indication, and increased sales of Atacand offset the continuing significant declines in Seloken/Toprol-XL.

Performance – CER growth rates

CV sales were unchanged from 2007 at CER. Crestor sales increased by 26% to $3,597 million. US sales for Crestor for the full year increased by 18% to $1,678 million. Crestor total prescription share in the US statin market increased to 9.9% in December 2008 from 8.6% in December 2007, and was the only branded statin to gain market share. Crestor sales outside the US were up 34% for the full year to $1,919 million, over half of global sales for the product. Sales of Crestor were up 16% in our Western Europe markets to $836 million and 93% in Japan. Sales of Crestor in Emerging Markets increased by 41%.

Sales of Toprol-XL and authorised generic sales of the drug in the US were down 70% for the full year to $295 million. For the full year, Seloken sales outside the US were up 1% to $512 million.

US sales for Atacand for the full year increased 1% to $262 million. Atacand sales outside the US were up 12% to $1,209 million, a 10% increase in Other Established Markets and Canada, and an 18% increase in Emerging Markets.

AstraZeneca Annual Report and Form 20-F Information 2009

60Directors’ Report | Therapy Area Review

Gastrointestinal

In brief

Sales of Nexium $5 billion, down 1%.

Nexium oral and intravenous was approved in the EU and other markets for the short-term maintenance of haemostasis and prevention of re-bleeding in patients following therapeutic endoscopy for acute bleeding gastric or duodenal ulcers.

An sNDA for Nexium was submitted for risk reduction of peptic ulcers associated with low-dose acetylsalicylic acid therapy in patients at risk.

Losec/Prilosec sales $946 million, declining in the EU and the US due to continuing generic erosion. Overall sales down 10%; Japan sales increased 8%; China sales increased 21%.

A Danish court issued an injunction against sales of generic esomeprazole magnesium by Sandoz A/S (Sandoz). The injunction prohibits Sandoz from selling, offering for sale or marketing the pharmaceutical products ‘Esomeprazole Sandoz’ and other pharmaceutical products containing esomeprazole magnesium with an optical purity of equal or greater to 99.8% enantionmeric excess in Denmark.

AstraZeneca filed applications in Austria seeking interlocutory injunctions to restrain Hexal Pharma GmbH and 1A Pharma GmbH, both companies in the Sandoz group, from marketing products containing generic esomeprazole magnesium in Austria.

AstraZeneca initiated legal proceedings in Portugal to suspend approvals for Sandoz’s generic esomeprazole. In October the court granted AstraZeneca a preliminary injunction against Sandoz, suspending the efficacy of the marketing and price approvals for Sandoz’s generic esomeprazole. The decision has been appealed by the Portuguese authorities.

In January 2010, AstraZeneca settled US Nexium patent litigation against Teva Pharmaceuticals Ltd (Teva Pharma) and affiliates. AstraZeneca has granted Teva Pharma a licence to enter the US market with its generic esomeprazole, subject to regulatory approval, on 27 May 2014, or earlier in certain circumstances. Teva Pharma conceded validity/enforceability of all patents in Teva Pharma’s US Nexium patent litigations and that Teva Pharma’s proposed generic esomeprazole would infringe six US Nexium patents.

Patent litigation continuing in the US against other generic manufacturers following an ANDA relating to Nexium.

In Canada, Patented Medicines (Notice of Compliance) Regulations proceedings involving Apotex relating to Nexium continued. A hearing is scheduled to commence on 31 May 2010.

Our marketed products

Nexium (esomeprazole) is the first proton pump inhibitor (PPI) for the treatment of acid-related diseases to offer clinical improvements over other PPIs and other treatments.

Losec/Prilosec (omeprazole) is used for the short-term and long-term treatment of acid-related diseases.

Entocort (budesonide) is a locally acting corticosteroid for the treatment of inflammatory bowel disease.

Our strategic objectives

We aim to maintain our strong position in gastrointestinal (GI) treatments by continuing to focus on PPIs. New Nexium line extensions include prevention of re-bleeding in patients with peptic ulcer bleeding and prevention of low-dose aspirin associated peptic ulcers. Our R&D is focused on finding new, innovative ways for treating acid-related disease.

Our focus

Our key marketed products

Nexium is marketed in approximately 100 countries and is available in oral (tablet/ capsules and oral suspension) and intravenous (i.v.) dosage forms for the treatment of acid-related diseases. Nexium is an effective short-term and long-term therapy for patients with gastro-oesophageal reflux disease (GERD). Nexium is also approved for the treatment of GERD in children one to 17 years of age. For the treatment of active peptic 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 therapy. In Europe and other markets, Nexium is approved for the healing and prevention of ulcers associated with NSAID therapy, including cyclooxygenase 2 selective inhibitors. In the US, Nexium is approved for reducing the risk of gastric ulcers associated with continuous NSAID therapy in patients at risk of developing gastric ulcers. Nexium is also approved in the US, the EU, Canada and Australia for the treatment of patients with the rare gastric disorder, Zollinger-Ellison syndrome. Following treatment with Nexium i.v., oral Nexium is approved in the EU and other markets for the maintenance of haemostasis and prevention of re-bleeding of gastric or duodenal ulcers.

Nexium i.v., which is used when oral administration is not suitable for the treatment of GERD and upper GI side effects induced by NSAIDs, is approved in 86 countries including the US and all EU countries. Nexium i.v. is also approved in the EU and other markets for the short-term maintenance of haemostasis and prevention of re-bleeding in patients following therapeutic endoscopy for acute bleeding gastric or duodenal ulcers.

Losec/Prilosec was first launched in 1988 and is approved for the treatment of GERD. We continue to maintain certain patent property covering Losec/Prilosec.

Losec/Prilosec is available both as a prescription-only medication and, in some countries, as an OTC medication where it offers consumers a more effective self-medication option for the treatment of heartburn compared to antacids and H2 receptor antagonists. In 2009, an agreement to license rights for Losec for OTC use to Bayer Consumer Care AG was announced. This agreement will extend the number of markets in which Losec is available as an OTC product.

In November, the FDA issued a Public Health Advisory to consumers and Information for Healthcare Professionals about the label update to Plavix^™ (clopidogrel) about interactions with Prilosec and Prilosec OTC and potentially with other medicines that inhibit the CYP2C19 enzyme, including Nexium. AstraZeneca has full confidence in the overall benefit/risk and safety profile of Losec/Prilosec and Nexium. We will continue to evaluate thoroughly the safety and effectiveness of Losec/Prilosec and Nexium in accordance with AstraZeneca’s procedures. AstraZeneca is involved in ongoing dialogue with the FDA, the EMEA and the CHMP about any pharmacological interaction and its clinical relevance.

Entocort is approved for the treatment of two types of inflammatory bowel disease. Entocort capsules are approved for use both as an acute treatment of and for maintenance of remission for mild to moderate Crohn’s disease. Entocort enema is approved in some markets for the treatment of ulcerative colitis. Entocort has better tolerability compared to other corticosteroids in the treatment of both conditions. In Crohn’s disease, Entocort also has greater efficacy than aminosalicylic acid medicines.

Clinical studies of key marketed products

Data from the LOTUS study (a multinational, randomised study of 554 patients) in which Nexium was compared to surgery for the management of GERD has now reported five years of follow-up. The results show that both therapies are very effective, with proportions of patients still in remission above 90% and with both therapies being well tolerated. The paediatric GERD programme in the youngest age group of zero to one year of age has been completed and submissions to regulatory authorities have commenced.

AstraZeneca Annual Report and Form 20-F Information 2009

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		Reviews

Our financial performance


	2009								2008							2007		2009 compared to 2008						2008 compared to 2007
						Growth due								Growth due
			CER			to exchange					CER			to exchange				CER			Reported			CER			Reported
	Sales		growth			effect			Sales		growth			effect		Sales		growth			growth			growth			growth
	$m		$m			$m			$m		$m			$m		$m		%			%			%			%

Nexium		4,959		(73	)		(168	)		5,200		(121	)		105		5,216		(1	)		(5	)		(2	)		–

Losec/Prilosec		946		(105	)		(4	)		1,055		(156	)		68		1,143		(10	)		(10	)		(14	)		(8)

Other		106		21			(4	)		89		2			3		84		24			19			2			6

Total		6,011		(157	)		(176	)		6,344		(275	)		176		6,443		(2	)		(5	)		(4	)		(2)

Therapy area world market
(MAT/Q3/09)


Market sectors	$bn

A PPI		26.0

B Other		13.0

The GI world market is valued at $39 billion, with the PPI market accounting for $26 billion.

In the West (ie Europe and North America) between 10-20% of adults suffer from GERD. The prevalence of GERD in Asia is lower, but increasing. Despite effective PPI treatments, around 40% of patients do not achieve full relief from symptoms.

39bn

The GI world market is valued at $39 billion, with the proton pump inhibitor market accounting for $26 billion

AstraZeneca conducted two studies, OBERON and ASTERIX, to evaluate the safety and efficacy of Nexium in the prevention of gastric and/or duodenal ulcers in patients who take low-dose aspirin (acetylsalicylic acid (ASA)) (75-325mg) continuously during the studies, which is defined as at least five days per week. The results of these studies are described in more detail in the Cardiovascular section from page 56. In April 2009, AstraZeneca submitted an sNDA for the low-dose ASA (75-325mg) indication for Nexium and an NDA for the new product Axanum based upon the findings in these studies.

In the pipeline

Our research activities focus on reflux inhibitors and hypersensitivity therapy. Our lead compound, lesogaberan (AZD3355), is undergoing clinical studies in Phase II. Follow-up compounds are in different stages up to Phase II testing.

Litigation

Detailed information about material legal proceedings relating to our GI products can be found in Note 25 to the Financial Statements from page 166.

Financial performance 2009/2008

Performance 2009

Reported performance

GI sales for 2009 were down 5% on a reported basis to $6,011 million from $6,344 million in 2008.

Performance – CER growth rates

GI sales fell by 2% at CER.

Global Nexium sales were down 1% to $4,959 million from $5,200 million the previous year. The decline was driven by the decrease in the US of 9% to $2,835 million, however this was largely mitigated by sales outside the US increasing by 9% to $2,124 million. In the US, dispensed retail tablet volumes decreased by less than 1% despite increased generic and OTC competition. In respect of Nexium, there was growth in Canada (11%), Western Europe (7%) and Emerging Markets (15%).

For the full year, sales of Losec/Prilosec fell 10% to $946 million. Prilosec sales in the US were down 63% as a result of continued generic erosion. Outside the US, Losec sales were flat, despite increases in China (21%) and Japan (8%).

Performance 2008

Reported performance

GI sales for 2008 were down 2% on a reported basis to $6,344 million from $6,443 million in 2007.

Performance – CER growth rates

GI sales fell by 4% at CER. Growth in Canada (9%), Japan (5%) and Emerging Markets (20%) more than offset the 5% decline in sales in our Western Europe markets.

Nexium sales were down 2%, excluding the effects of exchange, to $5,200 million from $5,216 million the previous year. The decline was driven by the decrease in the US of 8% to $3,101 million, however, this was largely mitigated by sales outside the US increasing by 9% to $2,099 million. In the US, dispensed retail tablet volumes increased (2%) and Nexium was the only major PPI brand to do so in 2008.

For the full year, sales of Losec/Prilosec fell 14% to $1,055 million. Prilosec sales in the US were down 25% as a result of generic competition for the 40mg dosage form in the second half of the year. Outside the US, Losec sales declined by 11%, despite increases in China (19%) and Japan (5%).

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62Directors’ Report | Therapy Area Review

Infection

In brief

Synagis sales of $1.1 billion; in the US $782 million.

Merrem/Meronem sales of $872 million, up 5%.

H1N1 influenza (swine flu) vaccine successfully developed and delivered to the US Department of Health and Human Services (HHS) (sales $389 million).

FluMist sales of $145 million.

Filed formal regulatory reply to the motavizumab Complete Response Letter.

In-licence of ceftaroline from Forest outside the US, Canada and Japan.

Acquired the infection research company Novexel (completion of the acquisition is subject to the expiry or termination of the applicable waiting period under the US Hart-Scott-Rodino Antitrust Improvements Act).

Expanded collaboration with Forest to include two antibiotic development programmes: ceftazidime/NXL-104 (CAZ104) and ceftaroline/ NXL-104 (CEF104).

Our marketed products

Synagis (palivizumab) is a humanised MAb used for the prevention of serious lower respiratory tract disease caused by respiratory syncytial virus (RSV) in paediatric patients at high risk of acquiring RSV disease.

Merrem/Meronem¹ (meropenem) is a carbapenem anti-bacterial used for the treatment of serious infections in hospitalised patients.

FluMist (influenza virus vaccine live, intranasal) is a live, attenuated, trivalent influenza virus vaccine approved for active immunisation of people two to 49 years of age against influenza disease caused by influenza virus subtypes A and B contained in the vaccine.

H1N1 influenza (swine flu) vaccine was successfully developed and delivered to the HHS and is indicated for the active immunisation of individuals two to 49 years of age against influenza caused by pandemic H1N1 virus.

Cubicin^™2 (daptomycin) is a cyclic lipopeptide anti-bacterial used for the treatment of serious infections in hospitalised patients.


¹	Licensed from Dainippon Sumitomo Pharma Co., Ltd.

²	Licensed from Cubist Pharmaceuticals, Inc.

Our strategic objectives

We aim to build a leading franchise in the treatment of infectious diseases through continued commercialisation of brands such as Synagis, Merrem and FluMist, effective use of our structural and genomic-based discovery technologies and antibody platforms, and continued research into novel approaches in areas of unmet medical need.

Resistant bacterial infections

World demand for antibiotics remains high due to escalating resistance and the increased risk of serious infections in both immunosuppressed patients and ageing populations. Many bacterial infections currently have few satisfactory treatment options prompting demand for new and better therapies. The in-licensing from Forest of ceftaroline, ceftazidime/NXL-104 (CAZ104) and ceftaroline/NXL-104 (CEF104) adds to the strong AstraZeneca portfolio and reinforces our commitment to treating resistant bacterial infections.

Our focus

Our key marketed products

Merrem/Meronem is the leading carbapenem anti-bacterial and has a growing share of the intravenous antibiotic market because of its activity against bacteria resistant to many other agents. Cubicin^™ is used for the treatment of serious Gram-positive infections in hospitalised patients and is sold by AstraZeneca in selected territories in Asia and the Middle East.

In the pipeline

During 2009, we licensed ceftaroline from Forest and will be responsible for its registration and marketing outside the US, Canada and Japan. Four Phase III studies have been completed for ceftaroline, with NDA filings made in December and MAA filings anticipated in 2010. Ceftaroline has demonstrated activity against a number of infections and multi-drug resistant pathogens, including MRSA.

In December we acquired Novexel (completion of the acquisition is subject to the expiry or termination of the applicable waiting period under the US Hart-Scott-Rodino Antitrust Improvements Act), a private infection research company in France, and we will collaborate with Forest on the future co-development and commercialisation of two antibiotic development programmes, CAZ104 and CEF104. CAZ104 is a combination of NXL-104 and ceftazidime, a third generation cephalosporin to which resistance has emerged. It is expected to move into Phase III development in late 2010 for serious infections requiring intensive care unit stays such as

intra-abdominal, urinary tract and hospital acquired pneumonia. CEF104 is a combination of NXL-104 and ceftaroline, which is expected to move into Phase II development in late 2010 in indications where a mixed Gram-negative and Gram-positive profile can be of use, such as skin and diabetic foot infections.

To meet the high and growing need for new and better therapies for resistant bacterial infections we have also built an anti-bacterials discovery capability that places AstraZeneca among the industry leaders with the capability to create novel mechanism anti-bacterials. Out of this work, a candidate anti-bacterial drug, AZD9742, with a novel mechanism of action entered Phase I testing late in 2009.

Respiratory syncytial virus

Approximately half of all infants are infected with respiratory syncytial virus (RSV) during the first year of life and nearly all children in the US have been infected by the time they reach their second birthday. Unlike other viral infections, there is no complete and durable immunity created by RSV, so repeated infection is likely and common. Premature babies (earlier than 36 weeks gestational age, especially those less than 32 weeks) and babies with chronic lung disease or congenital heart disease are at an even greater risk of contracting severe RSV disease than full-term babies.

Our focus

Our key marketed products

Synagis is used for the prevention of serious lower respiratory tract disease caused by RSV in children at high risk of the disease. It was the first MAb approved in the US for an infectious disease and since its launch in 1998 it has become the standard of care for RSV prevention. Synagis remains the only immunoprophylaxis in the marketplace indicated for the prevention of RSV in paediatric patients at high risk of RSV. Synagis is administered by intra-muscular injection.

In the pipeline

We filed a biological licence application with the FDA for an improved anti-RSV MAb, motavizumab, and received a Complete Response Letter in 2008. We filed a formal regulatory reply to the Complete Response Letter in December 2009. We do not believe that further clinical studies will be required by the FDA for marketing approval.

In addition, an intranasal vaccine is being developed for the prevention of lower respiratory tract illness caused by RSV and parainfluenza virus-3 (PIV3) in infants. There are two RSV vaccine programmes: MEDI-559 and MEDI-534. We are conducting several

AstraZeneca Annual Report and Form 20-F Information 2009

	Directors’ Report \| Therapy Area Review	63
		Reviews

Our financial performance


	2009								2008							2007		2009 compared to 2008						2008 compared to 2007
						Growth due								Growth due
			CER			to exchange					CER			to exchange				CER			Reported			CER			Reported
	Sales		growth			effect			Sales		growth			effect		Sales		growth			growth			growth			growth
	$m		$m			$m			$m		$m			$m		$m		%			%			%			%

Merrem		872		44			(69	)		897		97			27		773		5			(3	)		13			16

Synagis¹		1,082		(148	)		–			1,230		612			–		618		(12	)		(12	)		n/m			n/m

FluMist¹		145		41			–			104		51			–		53		39			39			n/m			n/m

H1N1 influenza vaccine		389		389			–			–		–			–		–		n/m			n/m			n/m			n/m

Other		143		(69	)		(8	)		220		(54	)		4		270		(31	)		(35	)		(20	)		(19)

Total		2,631		257			(77	)		2,451		706			31		1,714		10			7			41			43


¹	Acquired in June 2007.

Therapy area world market
(MAT/Q3/09)


Market sectors	$bn

A Anti-bacterials		35.2

B Anti-virals		22.1

C Others		20.6

The world infection market is valued at $78 billion, with anti-bacterials accounting for approximately 45% and anti-virals for 28%.

World demand for antibiotics remains high, due to escalating resistance and the increased risk of serious infections in both immunosuppressed patients and ageing populations. Approximately half of all infants are infected with RSV during the first year of life. Seasonal influenza results in three to five million cases of severe illness and up to a half a million deaths globally each year.

78bn

The world infection market is valued at $78 billion, with anti-bacterials accounting for approximately 45% and anti-virals for 28%

Phase I and Phase I/II studies for these vaccines, both alone and in collaboration with the US National Institute of Allergy and Infectious Diseases.

Influenza virus

Influenza is the most common vaccine-preventable disease in the developed world. According to WHO estimates, seasonal influenza results in three to five million cases of severe illness and up to half a million deaths globally each year, primarily among the elderly. Rates of infection are highest among children, with school-aged children significantly contributing to the spread of the disease. Influenza also has socio-economic consequences related to both direct and indirect healthcare costs, including hospitalisations, work absence and loss of work productivity when either a caregiver or child is sick with influenza.

Our focus

Our key marketed products

FluMist is the first live, attenuated nasally delivered vaccine approved in the US for the prevention of disease caused by influenza virus subtypes A and B in eligible children and adults, two to 49 years of age. Beginning in the 2009/2010 season, the Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices in the US voted to expand recommendations for routine seasonal influenza vaccination to include all school-age children up to 18 years of age. In 2009, FluMist was approved for marketing in South Korea, Hong Kong and Israel. Applications are under review in Canada, Mexico and the EU. The total product supply of approximately 10 million seasonal FluMist doses sold out in 2009.

In response to the novel H1N1 influenza (swine flu) pandemic need in 2009, the US Department of Health and Human Services (HHS) awarded AstraZeneca a contract to develop and manufacture 42 million doses of influenza A (H1N1) 2009 monovalent vaccine. The total contract value is approximately $389 million. The monovalent H1N1 influenza

vaccine, which is made using the same technology and process as FluMist, was approved by the FDA in September for the same patient population as FluMist. AstraZeneca began shipping product to the HHS in September.

In the pipeline

We continually strive to seek ways to improve our influenza vaccine. Each year we conduct clinical studies enabling us to develop and release a new vaccine for that year’s influenza virus. In addition, we are investigating the potential of a quadravalent live attenuated influenza vaccine and have two studies for this underway.

Hepatitis C virus

Hepatitis C virus (HCV) infects an estimated 170 million people worldwide and the current market for HCV therapy exceeds $2 billion annually. However, therapy for the strains that predominate in the US and Western Europe requires 12 months’ treatment and produces a durable cure in only 50% of patients. Key opinion leaders expect the current standard of treatment (interferon plus ribavirin) to change to a form of combination therapy involving one or more new mechanism of action direct-acting anti-virals and there are several small and large pharmaceutical companies with varying HCV pipelines focused on such therapies. A future paradigm of combinations of anti-virals as standard care offers the opportunity for several new therapies to be widely used.

Our focus

In the pipeline

Projects in development include AZD7295, a novel HCV compound, currently in Phase II.

Sepsis

Sepsis is a life-threatening condition resulting from uncontrolled severe infections, which affects an estimated three million people a year worldwide. Few industry pipelines are focused on the development of products specifically for registration for the treatment of sepsis or septic shock.

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64Directors’ Report | Therapy Area Review

Our focus

In the pipeline

The development programme for CytoFab^™, an anti-TNFα polyclonal antibody, our potential treatment for severe sepsis licensed from Protherics Inc. (now part of the BTG plc group), continues in Phase II development. CytoFab^™ has the potential to be one of a limited number of medicines specifically developed for patients with severe sepsis.

Tuberculosis

Tuberculosis (TB) remains a worldwide threat and is newly diagnosed in over eight million people worldwide every year. It is one of the greatest causes of death from infectious disease in the developing world.

Our focus

As part of our commitment to make a contribution to improving health in the developing world, we are working to find a new, improved treatment for TB. We have a dedicated research facility in Bangalore, India that is focused on finding a treatment for TB that will act on drug-resistant strains, simplify the treatment regime (current regimes are complex and lengthy, meaning many patients give up before the infection is fully treated) and will be compatible with HIV/AIDS therapies (TB and HIV/AIDS form a lethal combination, each speeding the other’s progress). Over 80 scientists in Bangalore are working closely with our infection research centre in Boston, US as well as with academic leaders in the field, and they have full access to all AstraZeneca’s platform technologies, such as ‘high throughput screening’ and compound libraries. It is a complex area of research but a candidate drug, AZD5847, entered Phase I studies late in 2009.

Litigation

Detailed information about material legal proceedings relating to our Infection products can be found in Note 25 to the Financial Statements from page 166.

Financial performance 2009/2008

Performance 2009

Reported performance

Total Infection sales increased on a reported basis by 7% to $2,631 million. H1N1 influenza vaccine sales were $389 million.

Performance – CER growth rates

Infection sales were up 10% at CER. This was driven by sales of $389 million for the H1N1 influenza vaccine to the US government and continued growth in Merrem/Meronem (5%) and FluMist (39%), which more than offset the 12% decline in Synagis sales.

Worldwide sales of Synagis in the fourth quarter were $401 million, a 21% decrease from the same period in 2008, driven by a decrease of 31% of US Synagis sales for the fourth quarter. This decline in the US is a result of the adoption of new guidelines published by the American Academy of Pediatrics restricting the usage of Synagis at the start of the 2009/2010 RSV season.

FluMist sales were $145 million for the full year.

Performance 2008

Reported performance

Total Infection sales increased on a reported basis by 43% to $2,451 million as a full year of Synagis and FluMist sales were taken in the Group for the first time, and Merrem/Meronem sales enjoyed another year of good growth.

Performance – CER growth rates

Infection sales were up 41% at CER.

For the full year, Synagis sales were $1,230 million. Synagis sales in 2007 were $618 million, but this only reflected sales since the acquisition of MedImmune in June 2007. Worldwide sales of Synagis in the fourth quarter were $506 million, a 5% increase over the same period in 2007 when the product was included in sales.

FluMist sales were $104 million for the full year. In contrast to 2008, all of 2007’s FluMist sales of $53 million were realised in the fourth quarter as a result of the timing of regulatory approvals for the new formulation and expanded label.

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Neuroscience

In brief

Total Seroquel sales up 12% to $4.9 billion.

Seroquel has been granted Paediatric Exclusivity in the US as a result of studies conducted in children and adolescents, which will provide an additional six months of exclusivity to market Seroquel in the US.

In December, the FDA approved Seroquel XR as an adjunctive treatment to anti-depressants in adults with major depressive disorder (MDD). AstraZeneca also received a Complete Response Letter for its Seroquel XR submission for MDD as acute and maintenance monotherapy in adults and for acute therapy in the elderly.

In September, Seroquel XR and Seroquel were approved under the European Mutual Recognition Procedure for the prevention of recurrence in bipolar disorder.

In December, the FDA approved Seroquel for the treatment of schizophrenia in adolescents 13 to 17 years of age as monotherapy, and for the acute treatment of manic episodes associated with bipolar I disorder in children and adolescents 10 to 17 years of age, both as monotherapy and as an adjunct to lithium or divalproex.

The EU submission for Seroquel XR for the treatment of MDD received a negative opinion in May but has been referred to the CHMP and the outcome is anticipated in the first quarter of 2010.

Seroquel XR submissions for generalised anxiety disorder (GAD) received a Complete Response Letter from the FDA in February 2009 (adult population) and in September (elderly population).

Global development and licence agreement with Targacept for Targacept’s late-stage compound TC-5214.

In-licence of NKTR-118 and NKTR-119 from Nektar.

AstraZeneca established several neuroscience research collaborations in 2009, amongst which is a collaboration with Jubilant in the areas of chemical lead generation and lead optimisation to support our efforts in analgesia and neurology.

The US Court of Appeals affirmed a Summary Judgment Motion granted to AstraZeneca in the patent infringement actions commenced against two generic drug manufacturers in the US following the filing of ANDAs relating to Seroquel.

Three consolidated ANDA patent infringement lawsuits, previously filed in the US against Handa, Accord and Biovail, proceed in discovery. The three ANDAs seek approval to market generic copies of Seroquel XR before the expiry of its patents.

Personal injury actions in the US and Canada involving Seroquel are being defended vigorously, with successful results to date in the US.

Agreement in principle reached with the US Attorney’s Office to settle claims relating to Seroquel sales and marketing practices and to make a payment of $524 million (including interest). Final settlement is subject to negotiation of a civil settlement agreement and a corporate integrity agreement. Other litigation and government investigations regarding sales and marketing practices are being defended vigorously.

Our marketed products

Seroquel (quetiapine fumarate) is an atypical anti-psychotic drug approved for the treatment of schizophrenia and bipolar disorder (mania, depression and maintenance). Seroquel XR (an extended release formulation of quetiapine fumarate) is generally approved for the treatment of schizophrenia, bipolar disorder and in some territories for MDD and GAD. Approved use for Seroquel and Seroquel XR varies based on territory.

Zomig (zolmitriptan) is used for the treatment of migraines with or without aura.

Diprivan (propofol) is an intravenous general anaesthetic used in the induction and maintenance of anaesthesia, light sedation for diagnostic procedures and for intensive care sedation.

Naropin (ropivacaine) is a long-acting local anaesthetic, replacing the previous standard treatment of bupivacaine.

Xylocaine (lidocaine) is a widely used short-acting local anaesthetic.

EMLA (lidocaine + prilocaine) is a local anaesthetic for topical application.

Our strategic objectives

Disorders of the central nervous system (CNS) represent the number one disease burden today in high-income countries¹. In many other world regions, including Asia, the prevalence of CNS disorders is expected to grow substantially² as the standard of living increases. We aim to strengthen our position in neuroscience through further growth of Seroquel and Seroquel XR and by the successful introduction of a range of new medicines aimed at significant medical need in psychiatry, analgesia (pain control) and cognition, including Alzheimer’s disease and attention deficit hyperactivity disorder.

Psychiatry

Most branded schizophrenia products will face generic competition in the period 2012 to 2015, with major current atypical anti-psychotic patents expiring by 2018. Future demand will be for products with significantly improved efficacy and tolerability. The depression and anxiety markets are currently dominated by generic selective serotonin re-uptake inhibitors and serotonin norepinephrine re-uptake inhibitors. As growth in the US slows, the Japanese and other Asian markets continue to expand due to increased diagnosis and use of pharmacological treatments in response to both targeted government programmes and wider acceptance of pharmacological treatments. Generic growth is anticipated over the next five years as patents expire, which will make market entry for new innovative products more difficult in the medium and longer term.

It will be increasingly important to develop new medicines addressing the needs of specific patient segments, and to work closely with the specialists in the medical community and the public health sector to address the growing burden of psychiatric disease on society.

Our focus

Our key marketed products

Seroquel is a leading atypical anti-psychotic treatment for schizophrenia and bipolar disorder. Seroquel remains the most commonly prescribed atypical anti-psychotic treatment in the US, where it is the only atypical anti-psychotic approved as monotherapy treatment for both bipolar depression and bipolar mania as well as the leading atypical brand globally by sales value.

First launched in 1997, Seroquel is now approved in 94 countries. Seroquel XR, an extended release formulation that offers patients and doctors a once-daily treatment, was launched in the US for the treatment of schizophrenia in 2007 and is now approved in 63 countries for schizophrenia, 38 countries for bipolar mania, 37 countries for bipolar depression and eight countries, including the US, for bipolar maintenance, in three markets for major depressive disorder (MDD), and in one market for generalised anxiety disorder (GAD).

In January 2009, the FDA granted a six-month Paediatric Exclusivity to Seroquel for its licensed indications, based on studies that we conducted in adolescents with schizophrenia, and in children and adolescents with bipolar mania. The six-month Paediatric Exclusivity will extend the exclusivity to market Seroquel in the US to March 2012.

In September, Seroquel and Seroquel XR were approved in the EU for the prevention of recurrence of bipolar disorder in patients whose manic, mixed or depressive episode has responded to treatment with Seroquel or Seroquel XR. Following this new indication, Seroquel and Seroquel XR are the only agents approved in the EU to treat all phases of bipolar disorder, acute depressive episodes, acute manic episodes and maintenance treatment to prevent recurrence of any mood event in bipolar disorder.

In 2008, regulatory submissions were made for the use of Seroquel XR in MDD and GAD. In December 2008, the FDA approved Seroquel XR as an adjunctive treatment to anti-depressants in adults with MDD. The FDA also issued Complete Response Letters in December 2009 for the monotherapy submissions as acute and maintenance therapy in adults and acute therapy in the elderly. The MDD application in the EU was rejected in May and AstraZeneca has now


¹	WHO ranking 2008, disease burden measured by disability adjusted life years.

²	Brookmeyer R et al, Alzheimer’s & Dementia 2007; Arthritis Foundation, American Chronic Pain Foundation, Reforming Chinese Healthcare through Public-Private Partnership, Swiss Re May 2007.

AstraZeneca Annual Report and Form 20-F Information 2009

66Directors’ Report | Therapy Area Review

Our financial performance


	2009								2008							2007		2009 compared to 2008						2008 compared to 2007
						Growth due								Growth due
			CER			to exchange					CER			to exchange				CER			Reported			CER			Reported
	Sales		growth			effect			Sales		growth			effect		Sales		growth			growth			growth			growth
	$m		$m			$m			$m		$m			$m		$m		%			%			%			%

Seroquel		4,866		521			(107	)		4,452		346			79		4,027		12			9			9			11

Diprivan		290		18			(6	)		278		(3	)		18		263		6			4			(1	)		6
Zomig		434		2			(16	)		448		(3	)		17		434		–			(3	)		(1	)		3

Local anaesthetics		599		27			(33	)		605		13			35		557		4			(1	)		2			9

Other		48		(2	)		(4	)		54		(7	)		2		59		(4	)		(11	)		(12	)		(8	)

Total		6,237		566			(166	)		5,837		346			151		5,340		10			7			6			9

Therapy area world market
(MAT/Q3/09)


Market sectors	$bn

A Psychiatry		56.7

B Neurology		40.1

C Analgesia		29.9

D Anaesthesia		4.9

The neuroscience world market totals $132 billion. The medical need in neuroscience is significant.

Depression and anxiety disorders remain under-diagnosed and under-treated, with 15% of the population suffering from major depression at least once in their lives. Schizophrenia affects around 1% of the adult population, and 17 million people suffer from bipolar disorder across the major markets. Chronic pain is the most common reason for seeking medical care. Alzheimer’s disease affects approximately 24 million people worldwide (predicted to reach 40 million by 2020) and current therapy does not significantly change the course of this progressive neuro-degenerative disorder.

132bn

The neuroscience world market
totals $132 billion

referred the application to the CHMP, with the outcome anticipated in early 2010.

Complete Response Letters for the Seroquel XR GAD submission were received from the FDA in February 2009 (adult population) and September (elderly population). The application was considered unfavourably by an FDA Advisory Committee in April 2009; dialogue with the FDA remains ongoing.

In December, the FDA approved Seroquel for the treatment of schizophrenia in adolescents 13 to 17 years of age as monotherapy, and for the acute treatment of manic episodes associated with bipolar disorder in children and adolescents 10 to 17 years of age, both as monotherapy and as an adjunct to lithium or divalproex.

In the pipeline

AstraZeneca and Targacept have entered into a strategic collaboration and licence agreement for the global development and commercialisation of Targacept’s late-stage compound, TC-5214. TC-5214 is being developed as an adjunct to anti-depressant therapy in adults with MDD who do not respond adequately to 1st line anti-depressant treatment. TC-5214, which recently completed a Phase IIb study, is a nicotinic ion channel blocker that is thought to treat depression by modulating the activity of various neuronal nicotinic receptor subtypes. AstraZeneca and Targacept will jointly design a global Phase III clinical programme, anticipated to begin in mid-2010, with the goal of filing an NDA in 2012.

We have progressed AZD8418 into Phase I and AZD8529 into Phase II for the treatment of schizophrenia. AZD7268 entered into Phase II for the treatment of depression and anxiety. Development of AZD7325 was discontinued.

In 2009, AstraZeneca entered into a number of research collaborations, including those mentioned below. AstraZeneca has entered into a research collaboration with Jubilant in the area of new chemical lead generation and optimisation effectiveness to support our efforts

in analgesia and neurology. AstraZeneca has also entered into a collaboration with PsychoGenics, Inc. to support behaviour profiling of new medicines across several disease areas. Furthermore, AstraZeneca has entered into a research agreement with Duke University to identify novel strategies and targets for better treatment of bipolar disorder using optogenetics.

Analgesia and anaesthesia
(pain control)

Major unmet need remains for improvements in both efficacy and tolerability in the neuropathic pain market, including addressing the needs of specific patient segments such as those with debilitating conditions, for example mechanical hypersensitivity. It is believed that advances in the understanding of the mechanisms which lead to neuropathic pain will allow for improved patient segmentation and, potentially, this could increase the success rate of research in this condition.

The osteoarthritis (OA) market is steadily growing, due to ageing populations and novel agents entering the market. However, the established use of branded generic treatment makes market entry more difficult. Biologics are an emerging treatment option for OA, and this is an area in which we have an active interest through our biologics activities.

Our focus
Our key marketed products

In 2009, Zomig nasal spray was approved for the acute treatment of migraine attacks in adolescents (12 to 17 years of age) in 14 member states in the EU.

Diprivan is the world’s best-selling intravenous general anaesthetic. A complete changeover to Diprivan EDTA, a microbial-resistant formulation, will be effective from 2010.

EMLA submissions/approvals of patch presentation have continued, particularly in Europe. In Japan, EMLA is out-licensed to Sato Pharmaceuticals Co., Ltd. which expects to file a Japanese new drug application for EMLA cream in 2010.

AstraZeneca Annual Report and Form 20-F Information 2009

	Directors’ Report \| Therapy Area Review	67
		Reviews

In the pipeline

Vimovo (PN400) is a fixed-dose combination tablet of enteric-coated naproxen and immediate release esomeprazole which uses proprietary technology licensed from Pozen Inc. through a collaboration established in August 2006. It is being developed for the relief of signs and symptoms of OA, rheumatoid arthritis and ankylosing spondylitis in patients at risk of developing NSAID-associated gastric ulcers. Risk factors for the NSAID-associated gastric ulcers include age, a documented history of gastric ulcers, or concomitant use of low-dose aspirin. OA is the most common form of arthritis and the most common cause of chronic pain, affecting nearly 151 million individuals worldwide. The PN400 Phase III studies demonstrated that patients at risk of developing NSAID-associated gastric ulcers taking PN400 experienced significantly fewer endoscopically confirmed gastric ulcers compared with patients taking enteric-coated naproxen (500mg) alone. An NDA was filed in June. The FDA has confirmed that the proposed trade name for PN400, Vimovo, is acceptable and that it will be re-reviewed 90 days prior to the approval of the NDA. A regulatory filing in the EU was submitted in October.

In September, AstraZeneca licensed two potential products, NKTR-118 and NKTR-119, from Nektar. NKTR-118, an oral peripherally-acting opioid antagonist, is in clinical development for the treatment of opioid induced constipation (OIC), which is the key gastrointestinal (GI) side effect of opioid treatment for pain, for which there are limited therapeutic treatment options. Data from a Phase II study demonstrated that oral NKTR-118 improved lower GI dysfunction by increasing the frequency of bowel movements in patients with OIC, while simultaneously preserving opioid-mediated pain relief. NKTR-119 is an earlier-stage programme that combines NKTR-118 with an opioid, with the goal of treating pain without the side effect of constipation traditionally associated with opioid therapy.

AZD2423 has progressed into Phase I studies and AZD2066 has entered into Phase II studies for the treatment of neuropathic (caused by nerve damage) pain. AZD3043, a short-acting anaesthetic, has entered Phase I studies. Additionally, we have extended our research collaboration with the University of Heidelberg to further understanding of the pathophysiology of chronic pain conditions.

Cognition

Alzheimer’s disease (AD) remains one of the largest areas of unmet medical need and also one of high risk for neuroscience product development, due in part to the challenges

of establishing efficacy in clinical studies. Current treatments, which physicians consider inadequate, target the symptoms, not the underlying cause, of the disease. Growth in this area is strong (20% to 40% across the world) but all existing marketed treatments will face patent expiry by 2015. Disease modification, delivered through biologics and/or small molecule treatments, is clearly the hope for AD patients. Along with better diagnostics, it is expected to allow for earlier intervention and better clinical outcomes, but the first wave of disease modifiers is still several years away.

Attention deficit hyperactivity disorder (ADHD) affects 22 million children worldwide³ (plus another several million adults). While there are a number of treatments available today, which work well for many of these young patients, they also carry certain risks because a great majority of them are psycho-stimulants (mostly amphetamines and methylphenidate). We continue to work on treatment options that would offer strong efficacy without the challenges that current treatments bring. We also hope to offer new options to adult ADHD patients, many of whom remain undiagnosed or untreated today.

Our focus
In the pipeline

The current portfolio of potential medicines in this area includes six development programmes, of which three are in clinical evaluation in AD, ADHD and cognitive disorders in schizophrenia (CDS). In addition to developing molecules for cognitive disorders, we continue to progress one development phase molecule for the treatment of other neurodegenerative diseases.

Through our collaboration with the Karolinska Institute in Sweden, the Banner Alzheimer’s Institute in Phoenix, Arizona and others, our R&D capabilities in positron emission tomography (PET) imaging of the human brain continue to progress. AstraZeneca’s amyloid PET ligands may enable us to detect AD early and to assess drug effects in AD. We have discovered and taken into patient studies two C-11 amyloid PET ligands, which are being developed as research biomarkers. Additionally, a collaboration with the Mental Health Research Institute in Australia has been initiated to develop new ways of identifying AD patients at early stages of the disease.

Compounds in clinical evaluation include products deriving from our relationship with Targacept (AZD3480, TC-5619 and AZD1446). AZD3480, a neuronal nicotinic receptor agent, is currently in Phase II clinical testing in ADHD. In 2009, Targacept announced top-line results from a Phase IIa ADHD study in which the primary outcome measure was met. TC-5619

has entered a Phase IIa study in CDS. AZD1446 has entered Phase IIa studies in ADHD and AD.

Litigation

Detailed information about material legal proceedings in respect of our Neuroscience products can be found in Note 25 to the Financial Statements from page 166.

Financial performance 2009/2008

Performance 2009

Reported performance

Neuroscience sales on a reported basis grew by 7% to $6,237 million in 2009 from $5,837 million in 2008.

Performance – CER growth rates

Neuroscience sales grew by 10% to $6,237 million from $5,837 million last year.

US sales for Seroquel (all formulations) for the full year were $3,416 million, 13% ahead of last year. Seroquel (all formulations) remains the market leader in the US anti-psychotic market, with a total prescription share of 31.3% in December 2009.

For the full year, Seroquel (all formulations) sales outside the US increased by 8% to $1,450 million. In the Rest of World (ie excluding the US and Canada) value and volume growth for Seroquel were well ahead of the atypical anti-psychotic market.

Sales of Zomig for the full year were down 3% in the US to $182 million. Sales outside the US were up 3% to $252 million.

Performance 2008

Reported performance

Neuroscience sales grew by 9% in 2008, up to $5,837 million from $5,340 million in 2007. All geographic areas experienced growth and Seroquel (all formulations) grew strongly by 11%.

Performance – CER growth rates

Neuroscience sales grew by 6% to $5,837 million from $5,340 million in 2007.

US sales for Seroquel (all formulations) for the full year were $3,015 million. For the full year, Seroquel (all formulations) sales outside the US increased by 8% to $1,437 million. In the Rest of World (ie excluding the US and Canada) value and volume growth for Seroquel were well ahead of the atypical anti-psychotic market in all regions.

Sales of Zomig for the full year were up 6% in the US to $187 million. Sales outside the US were down 5% to $261 million.


³	Decision Resources 2008.

AstraZeneca Annual Report and Form 20-F Information 2009

68Directors’ Report | Therapy Area Review

Oncology

In brief

Arimidex sales up 7% to $1.9 billion and continues to be the leading branded hormonal therapy for early breast cancer in the US, Japan, Spain, the UK and France.

Zoladex sales $1.1 billion, flat from the previous year.

Casodex sales $0.8 billion, down 34%, following expiry of patents in all major territories.

Iressa was approved in the EU for the treatment of adults with locally advanced or metastatic non-small cell lung cancer (NSCLC) with activating mutations of the epidermal growth factor receptor-tyrosine kinase (EGFR-TK).

Faslodex 500mg has been shown to be more efficacious than Faslodex 250mg at treating breast cancer and regulatory submissions to change the dose have been made in the EU and the US, together with the first filing in Japan.

Withdrawal of the US and the EU regulatory submissions for Zactima in NSCLC in October but clinical studies continue in a number of other types of cancer.

Registration studies ongoing for Recentin in first line colorectal cancer and recurrent glioblastoma multiforme and NSCLC.

Registration studies ongoing for zibotentan (ZD4054) in castrate resistant prostate cancer.

Olaparib (AZD2281) is in ongoing Phase II studies for the treatment of certain types of breast and ovarian cancer. Olaparib will progress to Phase III development in breast cancer with genetic DNA repair deficits.

Teva Parenteral Medicines (Teva Par) has challenged our patents for Faslodex. In January 2010, AstraZeneca filed a patent infringement action against Teva Par in the US District Court for the District of Delaware.

Our marketed products

Arimidex (anastrozole) is an aromatase inhibitor for the treatment of early breast cancer.

Zoladex (goserelin acetate implant), in one- and three-month depots, is a luteinising hormone-releasing hormone agonist for the treatment of prostate cancer, breast cancer and certain benign gynaecological disorders.

Casodex (bicalutamide) is an anti-androgen therapy for the treatment of prostate cancer.

Iressa (gefitinib) is an EGFR-TK inhibitor that acts to block signals for cancer cell growth and survival in NSCLC.

Faslodex (fulvestrant) is an injectable oestrogen receptor antagonist for the treatment of breast cancer.

Nolvadex (tamoxifen citrate) remains a widely prescribed breast cancer treatment outside the US.

Our strategic objectives

We aim to build on our position as a world leader in cancer treatment through continued sales of Arimidex, the launch of a more efficacious dose of Faslodex (Faslodex 500mg), the growth of Iressa and the successful introduction of novel therapeutic approaches currently in development, including both small molecule drugs and biologics, targeted at defined patient populations with high unmet medical need.

Cancer

Our focus

Our key marketed products

Arimidex continues to be the leading branded hormonal therapy for patients with early breast cancer in the US, Japan, Spain, the UK and France, and is also approved in a number of markets in Europe for a switch indication for patients who have already received two to three years of tamoxifen. This success is largely based on the extensive long-term efficacy and safety results of the ATAC study, which showed Arimidex to be significantly superior to tamoxifen at preventing breast cancer recurrence during and beyond the five-year treatment course. Breast cancer recurrence is defined as loco-regional recurrence, distant recurrence or contra-lateral breast cancer.

Faslodex 250mg is now approved in 70 markets and offers an additional hormonal therapy option for patients with hormone-receptor positive advanced breast cancer, delaying the need for cytotoxic chemotherapy. It is a once-monthly injection approved for the 2nd line treatment of hormone-receptor positive advanced breast cancer in post-menopausal women.

Casodex is used as a 50mg tablet for the treatment of advanced prostate cancer, and as a 150mg tablet for the treatment of locally advanced prostate cancer.

Zoladex, a luteinising hormone-releasing hormone (LHRH) agonist, is approved in 120 countries. It is approved for the treatment of prostate cancer, breast cancer and certain benign gynaecological disorders. In non-metastatic prostate cancer, Zoladex has been shown to improve overall survival, both when used in addition to radical prostatectomy and when used in addition to radiotherapy. The 10-year follow-up results of a study for the European Organisation for Research and Treatment of Cancer confirmed the long-term survival benefits of Zoladex when used as adjuvant to radiotherapy in patients with locally advanced prostate cancer.

In breast cancer, Zoladex is widely approved for use in advanced breast cancer in pre-menopausal women. In a number of countries, Zoladex is also approved for the adjuvant treatment of early stage pre-menopausal breast cancer as an alternative to and/or in addition to chemotherapy. Zoladex offers proven survival benefits for breast cancer patients with a favourable tolerability profile.

Competition in the LHRH agonist market is expected to increase in Europe during 2010, with the anticipated launches of generic goserelin. This follows the launch of generic goserelin (one-month depot) in Germany and the UK in 2009.

Iressa is approved in 66 countries and is the leading epidermal growth factor receptor-tyrosine kinase (EGFR-TK) inhibitor in Japan and the Asia Pacific region where it is marketed for pre-treated advanced non-small cell lung cancer (NSCLC). Based on data from the Phase III INTEREST study, which compared Iressa with docetaxel in pre-treated NSCLC, and the Phase III IPASS study, which compared Iressa with doublet chemotherapy (carboplatin/paclitaxel) in 1st line NSCLC patients, a marketing authorisation for Iressa for the treatment of EGFR mutation-positive advanced NSCLC patients (all lines of therapy) was granted by the EMEA in June, followed by the European launch in July. AstraZeneca is consulting with other regulatory authorities regarding the data from the IPASS study and is progressing submissions worldwide.

We have various distribution and marketing arrangements for branded Ethyol. In the US, Ben Venue Laboratories, Inc. is authorised to distribute Ethyol. Outside the US, our two main distribution partners are Pinnacle Biologics, Inc. for our Western Europe markets, Turkey and Israel, and Scherico Ltd for various other countries.

In the pipeline

Zactima (vandetanib) is a potential new oral anti-cancer therapy, which has a unique anti-cancer profile through two clinically proven mechanisms. It blocks the development of a tumour’s blood supply (anti-angiogenesis) and blocks the growth and survival of the tumour itself (anti-EGFR). Vandetanib also inhibits RET (rearranged during transfection)-kinase activity, an important growth driver in certain types of thyroid cancer. In June, AstraZeneca made submissions to the FDA and the EMEA for the use of vandetanib 100mg in combination with chemotherapy in patients with advanced NSCLC. In October, these submissions were

AstraZeneca Annual Report and Form 20-F Information 2009

	Directors’ Report \| Therapy Area Review	69
		Reviews

Our financial performance


	2009								2008							2007		2009 compared to 2008						2008 compared to 2007
						Growth due								Growth due
			CER			to exchange					CER			to exchange				CER			Reported			CER			Reported
	Sales		growth			effect			Sales		growth			effect		Sales		growth			growth			growth			growth
	$m		$m			$m			$m		$m			$m		$m		%			%			%			%

Casodex		844		(424	)		10			1,258		(161	)		84		1,335		(34	)		(33	)		(12	)		(6	)

Arimidex		1,921		129			(65	)		1,857		69			58		1,730		7			3			4			7

Zoladex		1,086		–			(52	)		1,138		(31	)		65		1,104		–			(5	)		(3	)		3

Iressa		297		20			12			265		8			19		238		8			12			3			11

Faslodex		262		26			(13	)		249		25			10		214		10			5			12			16

Nolvadex		88		–			3			85		(5	)		7		83		–			4			(6	)		2

Abraxane^™		–		(64	)		–			64		2			–		62		(100	)		(100	)		3			3

Ethyol		15		(13	)		–			28		(15	)		–		43		(46	)		(46	)		n/m			n/m

Other		5		(4	)		(1	)		10		(1	)		1		10		(40	)		(50	)		(10	)		–

Total		4,518		(330	)		(106	)		4,954		(109	)		244		4,819		(7	)		(9	)		(2	)		3

Therapy area world market
(MAT/Q3/09)


Market sectors	$bn

A Chemotherapy		18.2

B Monoclonal antibodies		14.4

C Hormonal therapies		8.8

D Small molecule TKIs		7.2

The world market value for cancer therapies is $49 billion and continues to grow.

An increasing number of large research-based pharmaceutical and biotech companies have a stated ambition to build their business in oncology. For several years there has been a substantial increase in cancer-based clinical study activity. According to IMS data, value growth in oncology will continue at double digit compound annual growth rates and is, therefore, well above the growth rates of other therapy areas.

49bn

The world market value for cancer therapies is $49 billion and continues to grow

withdrawn. The decision to withdraw these submissions was based on an updated analysis that demonstrated no overall survival advantage when vandetanib was added to chemotherapy as well as preliminary feedback from regulatory authorities that the submissions based on progression-free survival as the primary endpoint might not be sufficient for approval.

The ZEPHYR study of vandetanib 300mg monotherapy versus placebo in patients who have previously progressed on EGFR-TK inhibitor treatment did not meet its primary endpoint of overall survival. This completes the Phase III development of vandetanib. AstraZeneca has no current plans to make regulatory submissions in respect of vandetanib for the treatment of NSCLC.

The ZETA study met its primary endpoint, showing that vandetanib 300mg significantly extends progression-free survival in patients with advanced medullary thyroid cancer. The safety profile of vandetanib in the ZETA study was manageable, which is similar to the findings of other studies. Medullary thyroid cancer is a rare cancer with no currently approved treatment. AstraZeneca will be discussing the data from the ZETA study with regulatory authorities.

Results from the CONFIRM study demonstrate that Faslodex 500mg offers a superior benefit/risk profile to Faslodex 250mg for the treatment of breast cancer. This data has formed the basis of regulatory submissions across the globe.

Recentin (cediranib) is a highly potent anti-angiogenic agent that inhibits all three vascular endothelial growth factor receptors and is suitable for once-daily oral dosing. It is currently in Phase III development in first line colorectal cancer (CRC) and recurrent glioblastoma (rGBM).

Patient recruitment for the HORIZON CRC programme completed last year and the Phase III REGAL study in rGBM comparing Recentin monotherapy versus lomustine +/- Recentin finished enrolling patients in the third quarter of 2009. Recruitment in the BR29 study investigating Recentin at 20mg plus carboplatin/paclitaxel versus carboplatin/ paclitaxel alone in NSCLC is ongoing. The initial read-outs for Phase III of the HORIZON and REGAL studies are expected in the first half of 2010.

Encouraging Phase II data for Recentin in renal cancer, prostate cancer, alveolar soft part sarcoma, NSCLC and rGBM were also presented in 2009.

Zibotentan (ZD4054) is an oral once-daily potent and specific endothelin A-receptor antagonist. Data from Phase II studies suggested that in men with metastatic castrate resistant prostate cancer (CRPC), zibotentan 10mg demonstrated a promising survival benefit and a generally well-tolerated side effect profile. Zibotentan 10mg is now in Phase III development. The Phase III ENTHUSE studies are investigating efficacy in metastatic CRPC, both as monotherapy and in combination with docetaxel, and in non-metastatic CRPC.

Olaparib (AZD2281) is an oral poly-ADP-ribose-polymerase inhibitor, a new class of drug which potentially offers an innovative therapeutic approach to treating cancers by targeting a weakness in DNA repair inherent in many tumour cells. Olaparib is currently being evaluated in Phase II studies for the treatment of certain types of breast and ovarian cancer. The initial Phase III programme which is planned to start in mid 2010 focuses on breast cancer with genetic DNA repair deficits.

AstraZeneca Annual Report and Form 20-F Information 2009

70Directors’ Report | Therapy Area Review

Our early oncology pipeline includes a range of novel compounds that target signalling pathways believed to be pivotal in cancer cell growth, tumour invasion, DNA repair mechanisms and survival. Phase II data from AZD6244, a potent MEK (mitogen-activated protein kinase 1) inhibitor licensed from Array, showed biological activity in lung cancer and melanoma. In June, a deal was signed with Merck relating to a combination of AstraZeneca’s AZD6244 and Merck’s MK-2206. AZD6244 has been shown to affect MEK, an important signal that promotes cancer cell growth and survival; while Merck’s MK-2206 is a novel AKT kinase inhibitor, which acts on a complementary signalling pathway in cancer cells. By using a combination of both of these compounds, the aim is to explore the potential effect of blocking multiple points along a signalling pathway thereby preventing tumour growth.

In December, AstraZeneca entered into a master collaboration agreement with Dako to develop companion diagnostic tests for selected cancer treatments. This agreement forms part of AstraZeneca’s personalised healthcare strategy, and will have benefits for more than 10 of AstraZeneca’s oncology drug projects in early development.

AZD8055, AZD8931, AZD1480 and AZD4547 are all undergoing Phase I studies. AZD1152, an aurora kinase inhibitor, has shown activity in acute myelogenous leukaemia and will complete Phase II studies in mid-2010. We are also developing potential new cancer treatments using biological approaches with highly defined molecular targets for patient populations with unmet medical need and currently have four Phase I studies ongoing with biologics.

Our early biologics pipeline consists of MAbs directed against processes central to tumour progression. We are also developing MAbs that enhance the ability of a patient’s own immune system to kill cancer cells.

CAT-8015 is a biologic being investigated for the treatment of blood-based malignancies, including lymphoma and leukaemia. It targets a common protein receptor found on the majority of ß-cell cancers. In 2009, Phase I development for CAT-8015 continued to move forward in ß-cell lymphoma and leukaemia.

In 2009, three additional oncology antibody programmes entered into Phase I studies targeting a variety of advanced solid tumours using different pathways such as insulin-like growth factors and specific cell surface receptors.

In 2009, AstraZeneca discontinued its development of blinatumomab (MT-103/ MEDI-538) in the US and returned the North American licence rights for blinatumomab to Micromet, Inc.

In 2009, AstraZeneca entered into a research collaboration with the Institute of Cancer Research (UK) and Cancer Research Technology Limited to jointly discover inhibitors of targets on a novel pathway which is thought to be important in a range of tumour types.

Litigation

Detailed information about material legal proceedings relating to our Oncology products can be found in Note 25 to the Financial Statements from page 166.

Financial performance 2009/2008

Performance 2009

Reported performance

Oncology sales decreased by 9% on a reported basis to $4,518 million down from $4,954 million in 2008.

Performance – CER growth rates

Oncology sales were down 7% at CER. Arimidex sales were up 7% to $1,921 million. In the US, Arimidex sales were up 16% to $878 million. Outside the US, sales were flat at $1,043 million.

Casodex sales decreased by 34% to $844 million, with sales in the US down by 49% and sales outside the US down by 29% due to continued erosion from generic competition.

Iressa sales for the year were up 8% with growth in China (11%), Western Europe (250%) and Japan (10%).

Faslodex sales were up 10% with a 5% increase in the US and a 15% increase outside the US.

Performance 2008

Reported performance

Oncology sales increased by 3% on a reported basis to $4,954 million up from $4,819 million in 2007.

Performance – CER growth rates

Oncology sales were down 2% at CER. Arimidex sales were up 4% to $1,857 million. In the US, Arimidex sales were up 9% to $754 million. Outside the US, Arimidex sales increased by 1% to $1,103 million.

Casodex sales decreased by 12% to $1,258 million, with sales in the US down by 2% and sales outside the US down by 15%.

Iressa sales for the year were up 3% as growth in Emerging Markets more than offset the 3% decline in sales in Japan.

Faslodex sales were up 12% with a 5% increase in the US and an 18% increase outside the US.

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		Reviews

Respiratory & Inflammation

In brief

Total Symbicort sales $2.3 billion, up 23%.

Symbicort pMDI licensed for long-term maintenance treatment of asthma in the US. The chronic obstructive pulmonary disease (COPD) indication was approved by the FDA in February 2009. An additional programme for paediatric asthma indication has been submitted to the FDA and a Complete Response Letter was received in April. AstraZeneca has responded to the Complete Response Letter with a proposed programme to address the FDA questions.

Outside the US, Symbicort SMART is now approved for use in managing asthma in 96 countries.

Outside the US, Symbicort Turbuhaler is now approved for the treatment of COPD in 96 countries.

In October, Symbicort Turbuhaler was approved in Japan for the treatment of adult asthma and it was launched in Japan in January 2010. AstraZeneca and Astellas have entered into an agreement for the co-promotion of Symbicort Turbuhaler in Japan.

Total Pulmicort sales of $1,310 million and is now approved in 116 countries.

With settlement of AstraZeneca’s Pulmicort Respules patent infringement litigation against Teva in November 2008, Teva obtained an exclusive licence to sell generic Pulmicort Respules in the US from 15 December 2009 on payment of royalties to AstraZeneca. Teva launched its licensed product in December. AstraZeneca sales of Pulmicort Respules continue despite Teva’s entry.

Following FDA approval of Apotex’s generic version of Pulmicort Respules in March 2009, AstraZeneca obtained a preliminary injunction against Apotex, Inc. and Apotex Corp. (Apotex) preventing an at-risk launch of the product until further order of the Court. Apotex appealed the decision. Other patent infringement litigation in relation to Pulmicort Respules against Breath Limited continues.

Our marketed products

Symbicort pMDI (budesonide/formoterol in a pressurised metered-dose inhaler) is used for the maintenance treatment of asthma and COPD in the US.

Symbicort SMART (our Symbicort Maintenance and Reliever Therapy) is approved for maintenance and reliever therapy in persistent asthma.

Symbicort Turbuhaler (budesonide/formoterol in a dry powder inhaler) is a combination of an inhaled corticosteroid and a fast onset, long-acting bronchodilator used for the treatment of asthma and COPD.

Pulmicort (budesonide) is a corticosteroid anti-inflammatory inhalation drug that helps prevent symptoms and improves the control of asthma.

Pulmicort Respules (budesonide inhalation suspension) is the first nebulised corticosteroid in the US for the treatment of asthma in children as young as 12 months.

Rhinocort (budesonide) is a nasal steroid treatment for allergic rhinitis (hay fever), perennial rhinitis and nasal polyps.

Oxis (formoterol) is a fast onset, long-acting beta-agonist used for the treatment of asthma and COPD.

Accolate (zafirlukast) is an oral leukotriene receptor antagonist used for the treatment of asthma.

Our strategic objectives

We aim to build on our strong position in the respiratory field through the growth of key products, particularly Symbicort, with new indications and market launches, including chronic obstructive pulmonary disease (COPD), as well as through developing a strong pipeline of novel small molecule and biologics approaches to COPD and asthma. We aspire to enter the rheumatology market predominantly through our biologics pipeline.

COPD and asthma

According to WHO, COPD is currently the fourth leading cause of death worldwide, with future increases anticipated. Current treatment has recently demonstrated some survival benefit but the prognosis of the COPD patient remains poor. In asthma, morbidity and mortality remain important issues and disease normalisation is not achieved by any treatment.

The typical treatment for both COPD and asthma is a fixed-dose combination of an inhaled corticosteroid (ICS) with a long-acting beta-agonist (LABA) (for example Symbicort) or for COPD specifically, an inhaled long-acting muscarinic antagonist (LAMA). Other major asthma treatments include monotherapy ICSs, oral leukotriene receptor antagonists and/ or oral steroids for severe disease and (in combination with antibiotics) for exacerbations.

While there are not many significant new treatment modalities on the horizon for asthma and COPD, some pharmaceutical companies have once- and twice-daily ICS/ LABAs in late-stage development and the first regulatory approvals for a new LABA and a novel anti-inflammatory mechanism, an oral phosphodiesterase 4 inhibitor, have been seen this year. Significant new product classes impacting the asthma market are unlikely before 2015. However, specifically for the treatment of COPD, the new product class of fixed combination LABA/LAMA is estimated to impact the market in early 2013. Longer term, novel anti-inflammatory compounds and/or anti-proteases, alone or in combinations of LABAs or LAMAs aimed mainly at the prevention and/or treatment of COPD exacerbations, are likely to appear on the market. Generic ICS/LABA combinations may be available from the early part of this decade.

Our focus

Our key marketed products

Symbicort Turbuhaler improves symptoms and provides a clinically important improvement in the health of many patients with either asthma or COPD by providing rapid, effective control and effective reduction of exacerbations.

In October, Symbicort Turbuhaler was approved in Japan for the treatment of adult asthma and it was launched in Japan in January 2010. AstraZeneca and Astellas have entered into an agreement for the co-promotion of Symbicort Turbuhaler in Japan.

Symbicort pMDI (pressurised metered dose inhaler) is approved, in the US, for the long-term maintenance treatment of asthma in patients 12 years of age and older and was launched in the US in 2007. The COPD indication was approved and launched in the US in early 2009. In December 2008, the Joint Advisory Committees of the FDA completed a review of the benefits and risks of asthma medications containing LABAs. The Advisory Committees concluded that the benefits of Symbicort pMDI outweigh the risks in adult and adolescent asthma patients. However, a final decision has not yet been communicated by the FDA.

An sNDA for Symbicort pMDI in paediatric asthma was submitted in 2008. AstraZeneca received a Complete Response Letter in April 2009 for this application and has since submitted a response outlining an additional programme to address the FDA’s questions.

AstraZeneca Annual Report and Form 20-F Information 2009

72Directors’ Report | Therapy Area Review

Our financial performance


	2009								2008							2007		2009 compared to 2008						2008 compared to 2007
						Growth due								Growth due
			CER			to exchange					CER			to exchange				CER			Reported			CER			Reported
	Sales		growth			effect			Sales		growth			effect		Sales		growth			growth			growth			growth
	$m		$m			$m			$m		$m			$m		$m		%			%			%			%

Pulmicort		1,310		(155	)		(30	)		1,495		7			34		1,454		(10	)		(12	)		–			3

Symbicort		2,294		456			(166	)		2,004		346			83		1,575		23			14			22			27

Rhinocort		264		(47	)		(11	)		322		(41	)		9		354		(15	)		(18	)		(12	)		(9	)

Oxis		63		–			(8	)		71		(21	)		6		86		–			(11	)		(24	)		(17	)

Accolate		66		(6	)		(1	)		73		(4	)		1		76		(8	)		(10	)		(5	)		(4	)

Other		135		(14	)		(14	)		163		(9	)		6		166		(9	)		(17	)		(5	)		(2	)

Total		4,132		234			(230	)		4,128		278			139		3,711		6			–			7			11

Therapy area world market
(MAT/Q3/09)


Market sectors	$bn

A Asthma		17.1

B COPD		9.8

C Rhinitis		7.3

D Other		19.8

The prescription respiratory world market value is $54 billion.

WHO estimates that 300 million people worldwide suffer from asthma and more than 200 million have COPD, which is currently the fourth leading cause of death worldwide with further increases anticipated in future decades.

54bn

The prescription respiratory world market value is $54 billion

Symbicort SMART provides increased asthma control and simplifies asthma management through the use of only one inhaler for both maintenance and relief of asthma symptoms. As well as being a cost-effective treatment for many healthcare payers, the Symbicort SMART approach can also result in lower ICS and oral steroid use compared to other treatment options.

Pulmicort remains the world’s leading inhaled corticosteroid for the treatment of asthma and is available in several forms. Teva now has an exclusive licence to sell generic Pulmicort Respules in the US.

Rhinocort combines powerful efficacy with rapid onset of action and minimal side effects and is available as a once-daily treatment for allergic rhinitis (hay fever), perennial rhinitis and nasal polyps in the Rhinocort Aqua (nasal spray) and the Turbuhaler (dry powder inhaler) forms.

Oxis is added to the treatment regimen for asthma and COPD when corticosteroid treatment alone is not adequate. Oxis is also indicated for symptom relief in COPD.

Clinical studies of our
key marketed products

During 2009, the data from the SUN study, the second pivotal Symbicort pMDI study, was published. This study is part of the COPD NDA submission. The study confirmed the clinical benefits of Symbicort pMDI in moderate and severe COPD patients and showed that Symbicort pMDI 160/4.5 two inhalations twice-daily had a greater improvement in pre-dose forced expiratory volume I tests averaged over the treatment period compared with formoterol and placebo. In addition, several other important clinical studies in COPD were published showing the benefit of early onset effect relieving morning symptoms as well as improved outcomes when added to LAMAs.

Clinical data from the CLIMB study demonstrated that Symbicort added to Spiriva^™ (tiotropium) provided greater clinical improvements than tiotropium alone over a 12-week treatment period. Results from the CLIMB study also showed that the occurrence of severe COPD exacerbations was reduced by as much as 62% in patients where Symbicort was added to tiotropium compared to patients on tiotropium alone. Furthermore, the CLIMB study showed that patients treated with the Symbicort/tiotropium inhaled combination experienced benefits.

In the pipeline

AZD9668, currently in Phase IIb studies, is an oral inhibitor of neutrophil elastase, an enzyme strongly implicated in the inflammatory process, mucus hypersecretion and matrix degradation that drives the signs and symptoms of and disease progression in COPD.

Alongside this novel approach and building on our capabilities in combinations and device development demonstrated through our experience with Symbicort, we are aiming to improve further the mainstay of treatment for all COPD patients by combining two long-acting bronchodilators, AZD3199 and AZD9164, in one inhaler. The individual compounds are currently in Phase II studies (AZD3199 is in Phase IIb studies). Patients should benefit from improved symptom control, as well as from the reduction in the complications arising from multiple dosing or inhaler devices and the combination supports the recommendations of the international guidelines for the treatment of COPD for maximal bronchodilation as 1st line therapy.

AZD1981, a prostanoid receptor CRTh2 antagonist currently in Phase IIa studies, is a potential new oral small molecule approach to treating uncontrolled asthma. AZD1981 is expected to prevent the recruitment and activation of Th2 cells and eosinophils, which are both increased in asthma.

AstraZeneca Annual Report and Form 20-F Information 2009

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AZD8848 is a novel small molecule toll-like receptor-7 agonist in Phase II studies for the treatment of asthma being developed in collaboration with Dainippon Sumitomo Pharmaceuticals Co. Ltd (Dainippon Sumitomo).

MEDI-563 is an investigational approach that may help treat inadequately controlled asthma by targeting the interleukin-5 (IL-5) receptor, blocking the binding of IL-5 to the receptor and depleting the cells expressing the IL-5 receptor, typically eosinophils, which are thought to play a key role in the pathology of asthma. In addition, two Phase II studies are ongoing to assess the ability of MEDI-563 to reduce the asthmatic relapse rate following an acute care episode, as well as its ability to reduce the rate of asthma exacerbations overall.

In 2009, we initiated a Phase IIb study to determine the chronic dosing of MEDI-528 (an anti-IL-9 MAb) on asthma exacerbations in moderate to severe asthma.

CAT-354 targets interleukine-13, one of the key cytokines implicated in asthma pathogenesis. In 2009, we initiated a Phase IIa study to investigate the potential of a subcutaneous injection form of CAT-354 to treat patients with moderate to severe persistent asthma who are inadequately controlled despite current standard of care.

In addition, the early pipeline for respiratory biologics was bolstered by the entry of three new development programmes targeting COPD, which will likely progress to human studies in late 2010.

The early biologic pipeline has been reshaped to focus more on COPD, looking for novel strategies to inhibit exacerbations in COPD, which include regulation of inflammatory cell migration and activation with MAbs directed to antigens.

Strategic collaboration activity continues to be important to our respiratory pipeline. Our collaboration with Dynavax Technologies Corporation (Dynavax), which began in 2006, continues to pursue opportunities in the field of toll-like receptor-9 with immunostimulatory DNA sequences. Our collaborations with Dainippon Sumitomo (referred to above) and Dynavax both aim to find treatments for the normalisation of disease in asthma and the prevention of exacerbations in COPD.

Our 2007 discovery alliance with Argenta Discovery Limited aimed at identifying improved bronchodilators to treat COPD continues and is now entirely focused on the combined anti-muscarinic and beta-2 adrenergic agonists. AstraZeneca continues to develop the LAMA compounds identified in the collaboration.

Our three-year research collaboration with Silence Therapeutics A.G. (Silence), established in 2007, is continuing. In 2008, we entered into a new collaboration with Silence focused on the development of a range of novel approaches for the delivery of siRNA molecules, which allows both Silence and AstraZeneca to commercialise the novel delivery systems which we develop together.

AstraZeneca announced in July that it had terminated the licence agreement with MAP Pharmaceuticals, Inc. (MAP), regarding unit dose budesonide (UDB). UDB, an investigational treatment for paediatric asthma, was the subject of an initial Phase III clinical study conducted by MAP. In February 2009, MAP announced that the study failed to meet its primary endpoints. In light of the clinical study results, AstraZeneca exercised its right to terminate the licence agreement.

Rheumatology

Rheumatoid arthritis (RA) is currently treated with generic disease-modifying anti-rheumatic agents and, where the relevant criteria are met, biologic disease-modifiers. There remains a need for novel effective treatments since only about a third of patients treated with biologics achieve their treatment goals. The RA therapy market will experience modest annual growth over the 2008-2018 forecast period, as sales increase from $8.2 billion to $13.1 billion. In 2008, sales of the biologic tumour necrosis factor (TNF) alpha blockers accounted for 80% of major-market RA sales. Launches of additional TNF blockers are ongoing, and use of other biologic approaches, currently reserved for TNF failures, is expected to increase. Targeted novel oral drugs aimed at patients that currently choose not to take, are ineligible for or do not respond to biologics, are in development to provide anti-TNF-like efficacy with safety benefits and more convenient dosing. (Source: Decision Resources 2009).

Current treatment of systemic lupus erythematosus (SLE) focuses on controlling disease flares, preventing renal failure and suppressing symptoms to an acceptable level while minimising toxicity. Despite considerable recent development activity, no targeted disease-modifying agents have yet been successfully launched for SLE. Most emerging biologic agents will likely be used initially in combination with corticosteroids or immunosuppressants to provide incremental benefit and/or allow reduced doses or numbers of these agents.

Our focus

In the pipeline

In 2009, we invested in several novel multi-functional MAbs in inflammatory and autoimmune conditions.

MEDI-545 is a MAb which targets interferon-alpha, which regulates processes involved in autoimmune diseases. In 2009, we completed enrolment for a Phase IIa study in patients with SLE and a Phase I study in patients with active dermatomyositis or polymyositis.

CAM-3001 (licensed from CSL Limited) is a MAb in Phase I development with potential to help patients with RA through targeting the alpha sub-unit of the granulocyte-macrophage colony stimulating factor receptor.

In 2009, we initiated a Phase I study in scleroderma for a MAb, which targets the anti-interferon alpha receptor. We also filed an initial new drug application for a MAb which targets the CD-19 receptor.

AZD9056 and AZD5672, which were in Phase II development, have been terminated. AstraZeneca continues to explore approaches and mechanisms which have the potential to improve therapy and to deliver better outcomes for patients with rheumatological conditions.

Litigation

Detailed information about material legal proceedings in respect of our Respiratory & Inflammation products can be found in Note 25 to the Financial Statements from page 166.

AstraZeneca Annual Report and Form 20-F Information 2009

74Directors’ Report | Therapy Area Review

Financial performance 2009/2008

Performance 2009

Reported performance

Respiratory & Inflammation (R&I) sales were $4,132 million, almost level with the $4,128 million in 2008.

Performance – CER growth rates

R&I sales grew by 6% at CER.

Total sales of Symbicort grew by 23% to $2,294 million. In the US, sales of Symbicort pMDI were $488 million, up 91%. This strong growth is lead by physicians’ increasing use of Symbicort pMDI, particularly in those patients newly starting fixed combination therapy. For these patients, more than one in three prescriptions written by specialists and more than one in four prescriptions written by primary care physicians, is for Symbicort pMDI. Symbicort (Turbuhaler and SMART) sales outside the US in the year were $1,806 million, up 13%.

Total sales for Pulmicort were down 10% to $1,310 million. Total US sales for Pulmicort for the full year were down 18% to $804 million due to generic competition for Pulmicort Respules. Pulmicort Respules accounted for around 86% of total Pulmicort sales in the US. Total sales of Pulmicort outside the US were up 4% for the full year to $506 million.

Performance 2008

Reported performance

Sales in R&I increased by 11% to $4,128 million from $3,711 million in 2007.

Performance – CER growth rates

R&I sales grew by 7% at CER.

Total sales of Symbicort grew by 22% to $2,004 million. In the US, sales of Symbicort pMDI were $255 million. Symbicort

(Turbuhaler and SMART) sales outside the US in the year were $1,749 million, up 9%.

Total Pulmicort sales were flat at $1,495 million, with US sales up 2% as the generic competition from the Teva product affected quarter four sales. US sales for Pulmicort were down 15% to $260 million in the fourth quarter of 2008 and Pulmicort Respules sales were down 18% as a result of the ‘at risk’ launch of generic budesonide inhalation suspension (BIS) on 18 November 2008. The patent litigation between Teva and AstraZeneca was subsequently settled on 25 November 2008. The agreement allows Teva to commence sales of BIS under an exclusive licence from AstraZeneca beginning on 15 December 2009. The agreement also provided that any product already shipped by Teva would remain in the market to be further distributed and dispensed. As a result, Teva products accounted for nearly 15% of total prescriptions for BIS products dispensed during the fourth quarter of 2008, including a 40% share in December 2008. US sales for Pulmicort for the full year were $982 million. Pulmicort Respules accounted for around 90% of total Pulmicort sales in the US. Total sales of Pulmicort outside the US were down 2% for the full year to $513 million.

AstraZeneca Annual Report and Form 20-F Information 2009

	Directors’ Report \| Other Businesses	75
		Reviews

Other Businesses

Astra Tech

Astra Tech AB (Astra Tech) is engaged in the research, development, manufacture and marketing of medical devices and implants for use in healthcare, primarily in urology, surgery and odontology. Astra Tech has two main business divisions: Astra Tech Dental, which is responsible for the odontology area of the business, and Astra Tech Healthcare, which is responsible for the surgery and urology areas of the business. Astra Tech has a leading position in several countries in Europe and is expanding its operations in key markets, particularly in the US, Japan and South East Asia.

All product lines showed continued good sales growth in 2009. The downturn in the world economy has had a dramatic impact on the dental implant market, which is estimated to have declined by 5% during 2009. However, Astra Tech Dental has performed well in this declining market, growing its implant sales and increasing its market share in several key markets. In pursuit of the growth strategy for Astra Tech Dental, the sales and marketing organisation for dental implants was further strengthened and adapted to the prevailing market conditions. The downturn in the world economy has had no significant impact on the market for Astra Tech Healthcare products.

Since Astra Tech’s acquisition of Atlantis Components Inc. (Atlantis) in 2007, Astra Tech has introduced the Atlantis product range into most European markets and the market response has been very favourable. The European manufacturing facility for Atlantis products, which Astra Tech opened in late 2008, is now in full operation, meeting an increasing demand from the European market. The acquisition of Atlantis has given Astra Tech a strong platform for development within digital dentistry, offering an important opportunity for continued growth for the dental implants product line.

Major investments have been made in new production equipment for the manufacturing of new LoFric catheter products, which will be launched early in 2010.

The Astra Tech training and education programme has been further developed and, in combination with its state-of-the-art centre for training and education at its headquarters, advanced international education programmes and seminars are continuously being offered to existing and potential customers. Further investments have been made in R&D, clinical research and new production facilities to strengthen the product portfolio.

Aptium Oncology

For more than 25 years, Aptium Oncology, Inc. (Aptium Oncology) has been developing and managing hospital-based outpatient cancer centres in the US. Ownership of Aptium Oncology provides AstraZeneca with a unique window into the provider sector of the US oncology market and, through Aptium Oncology’s network of over 175 physicians, access to many opinion leaders in the field of oncology who can help to shape early phase drug development decisions. It is also involved in clinical study delivery for a number of our pipeline products and provides scientific advice and staff training for oncology teams.

In 2009, Aptium Oncology continued to perform well in its cancer centre management business with positive profit and cash flow contributions. As anticipated, in the second half of the year, two of Aptium Oncology’s long-term management contracts expired. In both cases, Aptium Oncology successfully established the infrastructure and services to allow the hospitals to manage independently their programmes after 15 and 25 years, respectively.

During 2009, Aptium Oncology continued to refine its business model to adapt to the ever-changing dynamics of the US healthcare industry. Aptium Oncology remains focused on growth and its consultancy business continues to lay the groundwork for new management relationships although, due to the loss of the long-term management contracts referred to above, Aptium Oncology’s growth will be from a lower base.

Clinical research is an integral part of care delivery at Aptium Oncology’s cancer centres and an area of strategic strength for the company. Aptium Oncology’s Gastrointestinal Cancer Consortium, established in 2008, has been successful in bringing together eight leading US academic institutions to speed up the process of finding and testing active new compounds for patients with gastrointestinal cancers. In 2010, Aptium Oncology plans to create a similar consortium focused on multiple myeloma.

AstraZeneca Annual Report and Form 20-F Information 2009

76Directors’ Report | Environmental Sustainability

Environmental Sustainability

In this section, we describe our commitment in key areas of environmental sustainability – managing our impact on climate change, managing our waste and understanding the potential impact of pharmaceuticals in the environment. More information about our work in these areas and in others, such as resource efficiency, biodiversity and emissions to air and water, can be found on our website, astrazeneca.com/responsibility.

Our current set of five-year targets and objectives takes us to the end of 2010. We are in the process of finalising a new environmental sustainability strategy, including associated targets and objectives, which will drive our continued commitment in this important area.

Climate change

We continue to work hard to manage our impact on climate change without compromising our ability to deliver new medicines that make a difference in important areas of healthcare.

We believe that our primary responsibility is to reduce our carbon footprint by, amongst other things, improving our energy efficiency and pursuing lower-carbon alternatives to fossil fuels. The use of carbon offset or other third party reduction credits to address residual emissions is something we will not consider as an alternative to driving our own efforts to reduce emissions.

In common with most businesses, our emissions arise from the energy we use at our facilities and from the various means of transport we use. Our carbon footprint is also affected by some of our respiratory therapies, specifically our pressurised metered dose inhaler (pMDI) products which rely on propellants such as hydrofluoroalkane, which is a greenhouse gas, to deliver the medicine to the airways. Patients who are unable to use our Turbuhaler dry powder inhaler, which does not require propellants, need these pMDI products. We believe that the expanded treatment choice and potential benefits that they offer outweigh the potential impact on the environment.

We continue to drive the management of our carbon footprint across key areas of business activity. For example, recognising the significant global warming emissions from business road travel for sales and marketing activities, we are maintaining a strong focus in this area. We are working with our fleet management and leasing

suppliers to introduce fleet reporting to track the CO₂ emissions of new and existing fleet vehicles and are introducing CO₂ caps on new car acquisitions in our major markets. We also continue to invest in advanced driver training to improve both safety and fuel efficiency associated with driving. Other areas in which we are pursuing further improvement include the implementation of green technology principles in our process design and exploration of the potential for further investment in low carbon and renewable energy options at our sites.

Our current climate change targets, approved by the Board in 2005, aim to ensure that our absolute emissions in 2010 will be no greater than they were at the start of the decade and 55% less than they were in 1990. This requires substantial efforts to be made across our business to produce, by the end of 2010, an absolute reduction of 12% in global warming emissions from all sources other than pMDIs, when compared with 2005. We have made good progress in recent years in reducing greenhouse gas emissions and, in 2009, our total emissions from all sources were 9% lower than in 2008. For data on our performance over the last three years see opposite.

Across all our activity, we work with our partners to share learning and foster best practice. We are also increasingly participating in the global debate on what business can do to help mitigate global warming and adapt to the unavoidable consequences of climate change.

Waste management

The management of waste associated with our activities is another key element of our environmental sustainability strategy. We are working to reduce our total waste index to meet our 2010 improvement target (40% by the end of 2010 from a 2001/2002 reference point).

Our waste is categorised as ‘hazardous waste’ or ‘other waste’ according to national legislation, which varies in its definitions. The majority of our hazardous waste consists of solvent and aqueous streams from manufacturing activities. Other waste includes general waste from our facilities around the world.

Our primary objective is waste prevention. Where this is not practical, we focus on waste minimisation and appropriate treatment or disposal to maximise the reuse and recycling of materials, including energy recovery from the incineration of waste streams. Programmes designed to reduce the amount of waste we generate include the continual improvement of existing production processes, minimising


¹	Data exclude MedImmune.

²	The 2008 and 2007 figures have been revised due to improved data capture.

³	We have replaced the ozone depleting potential (ODP) KPI with waste production as we believe this is now a more meaningful KPI. ODP data continue to be published on our website, astrazeneca.com/responsibility.

the environmental burden of new production processes under development, integration of environmental considerations in purchasing and internal waste awareness programmes. For data on our performance over the last three years see above.

Pharmaceuticals in the environment

We understand, and take seriously, concerns about the detection of trace amounts of pharmaceutical residues in the environment. We work continuously to improve our understanding of the science and how pharmaceuticals interact with the environment and the risks that they may pose.

The presence of trace amounts of pharmaceuticals in the environment (PIE) resulting from patient excretion is an inevitable result of the way most current medicines work: pharmaceuticals need to be stable enough to have a useful shelf-life and oral dosage forms must be robust enough, in most cases, to pass through the stomach intact.

We are committed to identifying any potential adverse effects on the environment that our medicines might have and responsibly balancing these against the benefits that these medicines bring to patients’ lives.

AstraZeneca Annual Report and Form 20-F Information 2009

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We actively engage and partner with other pharmaceutical companies, NGOs, scientists, regulators, patients and prescribers to share learning and experience and to promote responsible management of PIE issues, in line with current scientific knowledge.

Dedicated research

The levels of pharmaceutical residues detected in the environment are generally extremely low and are unlikely to pose a risk to human health. For example, the levels detected in drinking water are so low that, to ingest one single patient dose, someone would have to drink more water than is possible in a lifetime. However, whilst improving all the time, understanding of the potential for long-term effects of PIE, for example to aquatic life, requires further research.

This is an ongoing priority for our scientists at our Environmental Laboratory in Brixham, UK, who are at the forefront of this field of science, working both independently and in collaboration with other companies, leading academics and regulatory bodies to advance PIE-related research. Work at Brixham is focused on improving our understanding of the processes leading to the breakdown and removal of pharmaceutical residues in sewage treatment plants and the wider environment, and improving the predictability of the potential adverse environmental effects through the development of novel ecotoxicological test methodologies.

Product stewardship

We conduct environmental risk assessments for all our new, and many of our established, products in accordance with applicable regulations. Going beyond the regulatory requirements, we have also reviewed the environmental risk assessments for many of our older established products and, where appropriate, have undertaken additional voluntary testing to refine the assessments.

We have also introduced Environmental Risk Management Plans that will accompany all new medicines throughout their life-cycle. These plans enable all available environmental data to be taken into account at key decision points during drug discovery and development, and to provide early warning of medicines that could pose a potential risk to the environment.

We make environmental risk data for our existing products publicly available via the Swedish Doctors Prescribing Guide website (fass.se), using the voluntary disclosure system introduced by the Swedish Association of the Pharmaceutical Industry. AstraZeneca has a leading role in developing the guidance for this activity.

In the Global Community

Wherever AstraZeneca is located worldwide, we aim to make a positive contribution to our local communities through sponsorships, charitable donations and other initiatives that help to make a difference. Our activities are focused on bringing sustainable benefit in ways that are consistent with our business of improving health and quality of life, and of promoting the value of science among young people.

In January 2009, we launched a revised and strengthened global Community Support Policy to provide an enhanced platform for capturing, aligning and maximising the benefit of our community support commitments worldwide. Targeted training for all relevant staff is being provided. As well as community support, the policy describes the requirements regarding product donations and support to patient groups and other healthcare organisations.

In 2009, we spent a total of $882 million (2008: $718 million) on community sponsorships and charitable donations worldwide, including our product donation and patient assistance programmes which make our medicines available free of charge or at reduced prices. Our expanded patient assistance programmes in the US contributed to a total commitment of $786 million worth of product donations valued at an average wholesale price (2008: $646 million). The increase is because more people enrolled in our US AZ&Me patient assistance programme and used more medicines in 2009 due, we believe, to the economic recession. Our community support spend ($96 million) included a contribution during the year of $25 million to the AstraZeneca HealthCare Foundation for its cardiovascular programme which is focused on improving cardiovascular health in the US.

We also contribute where possible to disaster relief efforts. During 2009, when typhoons Ketsana and Parma hit the Philippines, causing widespread devastation, we donated medicines to the relief effort and 15 of our employees did voluntary work with the Philippine army, helping over 1,000 flood victims. We responded similarly with donations to the local relief effort when earthquakes hit Indonesia and, when typhoon

Morakot struck Taiwan, AstraZeneca Asia Pacific made a $200,000 donation to the local Red Cross.

At a global level, we also made a further contribution of $240,000 to the Red Cross Centre in Kuala Lumpur, Malaysia, established in 2006 by the Red Cross with $700,000 of funding from AstraZeneca. The Centre continues to play an important role in disaster relief in the Asia Pacific region. With prepositioned emergency supplies, the Centre was able to respond quickly to the events in 2009, distributing hygiene kits to thousands of people in need in the affected areas. Our 2009 donation, coupled with one of $200,000 that we made in 2008, has enabled the Red Cross to maintain appropriate levels of emergency relief stock at the Centre.

In January 2010, following the earthquake in Haiti, we donated medicines and contributed a total of $500,000 to the British Red Cross Emergency Appeal. We also committed an additional $500,000 to support a longer-term disaster recovery programme that will give the people of Haiti the help they need to re-build their lives and their communities.

In the developing world

Whilst we remain committed to making a contribution to improving healthcare in the developing world, we believe that real progress can only be made through the commitment of all the related stakeholders, including governments, NGOs and the international community, as well as the private sector. Only by working together can sustainable improvements be achieved.

The medicines in our range today are not for the treatment of tuberculosis (TB), HIV/AIDS and malaria, currently the developing world’s most significant disease challenges, but we are applying our skills and resources to helping in other ways. Our contribution centres on two main areas of activity – dedicated TB research and working in partnership to help strengthen local health capabilities.

Dedicated TB research

Our dedicated research facility in Bangalore, India is focused on finding a new, improved treatment for TB, which is a major cause of illness and death worldwide, especially in Asia and Africa. AstraZeneca is the only major pharmaceutical company with a research programme in India totally dedicated to TB. Further information can be found in the Therapy Area Review in the Infection section on page 64.

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Working in partnership

In some parts of the developing world, the availability of medicines is not always the main challenge. Access to healthcare also depends on having a functional healthcare system, trained healthcare workers and effective supply and distribution mechanisms in place to ensure that medicines are used to their full effect as part of overall health management. To help meet these challenges, alongside our ongoing TB research, we partner with NGOs and other organisations working with local communities to strengthen their frameworks for delivering healthcare in TB and other disease areas in a sustainable way.

Key principles for our partnerships are that they lead to positive, measurable outcomes, can be scaled up and potentially replicated to improve outcomes for a greater number, and can deliver a sustainable framework that can ultimately be owned and managed locally, without the need for our support. We also aim to ensure that such partnerships can contribute to our business development, by enabling us to understand better the health needs of, and to build important relationships in, markets of the future.

Our current partnerships are primarily focused on helping hard-hit communities in Asia and Africa to combat TB, which is on the increase in these regions, but we also have some programmes in other disease areas and in other countries.

Our long-standing partnership with the British Red Cross and Red Crescent Societies includes support to community-based programmes in Central Asia that are helping to combat TB and to improve the quality of life of people living with TB and TB/HIV co-infection in the hard-hit areas of Turkmenistan, Kyrgyzstan and Kazakhstan. To date, these programmes have helped over 10,000 people living with TB or TB/HIV to complete their TB treatment, with treatment completion rates reaching 89%, 92% and 73% in Turkmenistan, Kyrgyzstan and Kazakhstan, respectively. Alongside this, the Red Crescent Society has delivered TB awareness campaigns that have reached over two million people in the region. The long-term presence of the Red Crescent Society in Central Asia has enabled the organisation to build effective and far reaching community programmes. These activities continue to contribute to a reduction in TB incidence and mortality in Central Asia.

Our partnership with the African Medical and Research Foundation is focused on developing a model for the integrated management of TB, HIV/AIDS and malaria at both national and local levels in Uganda, where there is a high incidence of all three diseases. This integrated management approach has not been widely addressed previously and we are one of the few organisations involved in such work. A pilot programme is now underway in the high incidence areas of the Luwero and Kiboga districts of central Uganda. Key targets include increasing laboratory diagnostic capacity and improving community-based healthcare management. Progress to date includes the completion and handover to local district management teams of three new laboratories and the establishment of 144 village health teams, with a total of over 750 people trained in health promotion in their local communities.

In Ethiopia, our partnership with Axios is focused on building local capability in managing breast cancer, which is the second most common cancer among young women in that country. The project has focused on strengthening diagnosis and treatment capabilities, including the creation of previously unavailable treatment protocols and standardised reporting guidelines for use across the country. Benefits to the patient have included reduced time between diagnosis and surgery (from 12-18 months in 2006 to three to six months in 2009).

Our support to Voluntary Service Overseas (VSO) includes working in partnership to help them further develop their strategy and framework for delivering their health goals. We also fund VSO volunteers working to build local healthcare capabilities in under-served communities across Africa and Asia. Alongside this, our employees are able to volunteer for placements in appropriate countries to support VSO, drawing on the broad range of skills they can offer in human resources, finance, information technology and communications, as well as health and medicine.

More information about these partnerships and our other activities worldwide is available on our website, astrazeneca.com/responsibility.

Engaging at international level

As part of our focus on TB, we actively engage in international efforts to help in the fight against this devastating disease.

AstraZeneca participates in the Gates Global Health CEO Roundtable, the purpose of which is to bring together the world’s leading pharmaceutical companies with the Bill & Melinda Gates Foundation to leverage our respective areas of strength and expertise in the pursuit of global health priorities. We will continue to partner with the Bill & Melinda Gates Foundation on TB in a variety of projects spanning early phase drug discovery through to development of suitable regulatory pathways for new agents.

During 2009, we also continued our involvement with the Stop TB Partnership, which aims to forge a more effective response to TB, and strengthen strategic impact, by engaging a broad range of stakeholders, including the private sector, foundations, academic and research institutions, the media, NGOs and civil society.

AstraZeneca is the only major pharmaceutical company involved in the New Medicines for TB project, begun in 2006. Funded by a grant from the EU Framework VI programme and consisting of around 15 groups of Europe’s most prominent scientists and researchers in the field, this consortium seeks to combine academic and pharmaceutical skills to further the discovery of new therapies for TB.

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Risk

In this section we describe our key risk management and assurance mechanisms, and the principal risks and uncertainties which we currently consider to be material to our business in that they may have a significant effect on our financial condition, results of operations and/or reputation. Specific risks and uncertainties are also discussed at various points in this Directors’ Report, where relevant.

Managing risk

As a global, innovation-driven biopharmaceutical company, we face a diverse range of risks and uncertainties that may adversely affect our business. Our approach to risk management is designed to encourage clear decision-making as to which risks we accept and which risks we manage to an acceptable level, in each case informed by an understanding of the commercial, financial, compliance and reputational implications of these risks.

We work continuously to ensure that we have effective risk management processes in place to support the delivery of our strategic objectives, the material needs of our stakeholders and our core values. We monitor our business activities and our external and internal environments for new and emerging risks to ensure that these are proactively managed at the appropriate level as they arise.

The Board believes that the processes and accountabilities which are in place (and described below in further detail) provide it with adequate information on the key risks and uncertainties facing the business. Further information about the risks and uncertainties facing the business are set out in the Principal risks and uncertainties section from page 80.

Embedded in business processes

We strive to ensure sound risk management is embedded within our business and performance management processes.

Annually, the Group develops a long-term business plan to support the delivery of its strategy. Each area for which a SET member is responsible (SET function) is required to provide a comprehensive assessment of its risks as part of the annual business planning process. The CEO and the CFO undertake quarterly business reviews (QBRs) in respect of each SET

function at which the key risks relating to the relevant SET function are reviewed. Underpinning this review, the managers of the key areas within each SET function are required, prior to the QBRs, to provide quarterly updates on their key risks which are then consolidated into the relevant SET function list of key risks for review at the QBRs. The top 10 risks of each SET function are then aggregated into a Group risk register. The purpose of the risk review is threefold: (i) to identify and measure risks; (ii) to define and review plans to mitigate risks we do not wish to take; and (iii) to define and review plans to manage those risks we do wish to take. A risk management standard, guidelines and supporting tools are in place to support the managers in the effective identification, management, mitigation and reporting of risks.

Our approach to risk management includes the development of business resilience plans to provide for situations where specific risks have the potential to severely impact our business. Global business resilience plans covering crisis management, business continuity and emergency responses are in place, supported by the training of relevant business managers and crisis simulation activities.

One of our strategic priorities, ‘Promote a culture of responsibility and accountability’, involves the continued nurturing of a culture of responsibility and accountability. Our Code of Conduct and our Global Policies and Standards set mandatory minimum standards of responsible behaviour for all employees. In addition, all employees receive annual training on the requirements of our Code of Conduct, as well as more specific targeted training on particular policies and standards. Employees are encouraged to raise questions on the practical application of these standards and to report suspected breaches and incidents of non-compliance through the reporting channels described in our Code of Conduct. During 2009, we developed and launched a combined Compliance and Corporate Responsibility (CR) ‘Responsible Business’ scorecard with defined objectives and accountabilities, to track performance consistently across all SET functions and enable quarterly reporting to the SET, the Audit Committee and Professor Dame Nancy Rothwell (the Non-Executive Director responsible for overseeing CR within the Group), as well as annual reporting to the Board and the SET.

Key responsibilities

Management of risk

Day-to-day management of risk is delegated from the Board to the CEO and through the SET to line managers. SET management areas are accountable for establishing an appropriate line management-led process and for providing the resources for supporting effective risk management.

Line and project management are accountable for the management of risk within the context of their functional or cross-functional remit or project. Line managers have primary responsibility for identifying and managing risk and for putting in place appropriate controls and procedures to monitor their effectiveness.

Oversight and monitoring

The Board is responsible for overseeing and monitoring the effectiveness of the risk management processes implemented by management. Specialist risk and compliance functions (including Group Internal Audit (GIA)) support the Board by providing advice and monitoring and testing the adequacy of the processes.

Our compliance organisation comprises a wide range of specialist groups whose work includes liaising with line management and the SET to develop systems and processes for managing risk in specific regulated areas to ensure ongoing legal and regulatory compliance. These groups include: Good Laboratory; Clinical and Manufacturing Compliance; Safety, Health and Environment; Medical and Regulatory Affairs; Financial Control and Compliance; Information Security and Data Privacy; Sales and Marketing Compliance; and Security.

We have a dedicated Global CR team who are part of the Group Public Affairs function and whose work includes public policy and reputation management. The Global CR team leads the development of our CR strategy and the alignment of tactical delivery. The team works closely with senior leaders across AstraZeneca, and with our Global Compliance function, to ensure that the CR risks and opportunities are identified and managed appropriately, in line with business objectives, and to ensure compliance with all relevant policies and standards inclusive of the 16 Principles of our Code of Conduct. identified risks are mapped to AstraZeneca’s risk ‘taxonomy’, which provides a structured disaggregation of the potential strategic, operational, control/compliance and reputational risks facing AstraZeneca.

Management reporting and assurance

The Audit Committee is a Committee of the Board currently comprising five Non-Executive Directors and is accountable, amongst other things, for assessing the adequacy and effectiveness of the risk management systems and processes implemented by management. In addition to the reports it receives from the GIA function, the Audit Committee also regularly receives reports from: (i) the Global Compliance function

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(including quarterly reports addressing key compliance risks, performance against the ‘Responsible Business’ scorecard, compliance incidents and updates on key compliance initiatives); (ii) the Financial Control and Compliance Group; (iii) the external auditor; and (iv) management (including the performance management and monitoring processes and a Group-level risk summary from the annual business planning process and the QBRs), on a range of financial reporting, risk, governance, compliance and business areas. Amongst other things, the Audit Committee reviews and reports to the Board at each Board meeting on the overall framework of risk management and internal controls and is responsible for promptly bringing to the Board’s attention any significant concerns about the conduct, results or outcome of internal audits. The Audit Committee also regularly receives reports relating to calls made by employees to the AZethics and MedImmune helplines. For further information on the Audit Committee see the Audit Committee section from page 94.

GIA is an independent assurance and advisory function that reports to and is accountable to the Audit Committee. GIA’s budget, resources and programme of audits are approved by the Audit Committee on an annual basis and the findings from its audit work are reported to and are discussed at each meeting of the Audit Committee. A core part of the audit work carried out by GIA includes assessing the effectiveness of selected aspects of AstraZeneca’s risk control framework, including the effectiveness of other assurance and compliance functions within the business. During 2009, GIA assessed the effectiveness of a number of core compliance and operational processes operating within the business as well as the effectiveness of risk mitigation plans in a number of high risk and/ or business critical areas.

Principal risks and uncertainties

The pharmaceutical sector is inherently risky and a variety of risks and uncertainties may affect our business. Here we summarise, under the headings Product pipeline risks; Commercialisation and business execution risks; Supply chain and delivery risks; Legal, regulatory and compliance risks; and Economic and financial risks, the principal risks and uncertainties which we currently consider to be material to our business in that they may have a significant effect on our financial condition, results of operations and/ or reputation. These risks are not listed in any assumed order of priority. Other risks, unknown or not currently considered material, could have a similar effect. We believe that

the forward-looking statements about AstraZeneca in this Annual Report, identified by words such as ‘anticipates’, ‘believes’, ‘expects’ and ‘intends’, are based on reasonable assumptions. However, forward-looking statements involve inherent risks and uncertainties such as those summarised below because they relate to events and depend upon circumstances that will occur in the future, and may be influenced by factors beyond our control and/or may have actual outcomes materially different from our expectations.

Product pipeline risks

Failure to meet development targets

The development of any pharmaceutical product candidate is a complex, risky and time-intensive process involving significant financial, R&D and other resources, which may fail at any stage of the process due to a number of factors, including:

>		Failure to obtain the required regulatory or marketing approvals for the product candidate or the facilities in which it is manufactured.

>		Unfavourable data from key studies.

>		Adverse reactions to the product candidate or indications of other safety concerns.

>		Failure of R&D to develop new product candidates.

>		Failure to demonstrate adequately cost-effective benefits to regulators.

>		The emergence of competing products.

A succession of negative drug project results and a failure to reduce development timelines effectively could adversely affect the reputation of our R&D capabilities. Furthermore, the failure of R&D to yield new products that achieve commercial success is likely to have a material adverse effect on our financial condition and results of operations.

Production and release schedules for biologics may be more significantly impacted by regulatory processes than other products due to more complex and stringent regulation on biologics development, marketing and manufacturing. In addition, various legislative and regulatory authorities are considering whether an abbreviated approval process is appropriate for biosimilars or follow-on biologics (similar versions of existing biologics). While it is uncertain when, or if, any such process may be adopted or how it would relate to intellectual property rights in connection with pipeline biologics, any such process could have a material adverse effect on the future commercial prospects for patented biologics.

Difficulties of obtaining and maintaining regulatory approvals for new products

We are subject to strict controls on the manufacture, labelling, distribution and marketing of our pharmaceutical products. The requirements to obtain regulatory approval based on a product’s safety, efficacy and quality before it can be marketed for a specified therapeutic indication or indications in a particular country, and to maintain and to comply with licences and other regulations relating to its manufacture, are particularly important. The submission of an application to regulatory authorities (which are different, with different requirements, in each region or country) may or may not lead to approval to market the product. Regulators can refuse to grant approval or may require additional data before approval is given, even though the medicine may already be launched in other parts of the world. The countries that constitute key markets for our pharmaceutical products include the US, the countries of the EU and Japan. The approval of a product is required by the relevant regulatory authority in each country, although a single pan-EU marketing authorisation approval can be obtained through a centralised procedure.

In recent years, companies sponsoring new drug applications and regulatory authorities have been under increased public pressure to apply more conservative benefit/risk criteria before a pharmaceutical product is approved. In addition, third party interpretation of publicly available data on our marketed products has the potential to influence the approval status or labelling of a currently approved and marketed product. Further, predicting when a product will be approved for marketing remains challenging. For example, a review of the FDA performance data indicates that for NDAs approved in 2008, the average review time (ie the time from submission to approval) increased from 2007, in part due to the FDA failing to meet the review time targets for NDAs specified under the Prescription Drug User Fee Act IV and the final 2009 data, once available, is expected to continue this trend. Delays in regulatory reviews could impact the timing of a new product launch. For example, the approval of motavizumab and the additional indications for Symbicort and Seroquel XR have been delayed by Complete Response Letters which requested further information in relation to the biologics licence application for motavizumab and the sNDAs for Symbicort and Seroquel XR.

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Failure to obtain patent protection

Our policy is to protect our investment in R&D by applying for appropriate intellectual property protection in respect of our inventions and innovations; this is a key business priority. Our ability to obtain patents and other proprietary rights in relation to our products is, therefore, an important element of our ability to create long-term value for the business.

Many of the countries in which we operate are still developing their patent laws for pharmaceuticals and there is more uncertainty regarding the patent protection available now and in the foreseeable future in these countries than in countries with well developed intellectual property regimes. In addition, certain countries may seek to limit protection for existing patents – see the Patent litigation and early loss of intellectual property rights section on page 82. Limitations on the availability of patent protection in certain countries in which we operate could have a material adverse effect on the pricing and sales of our products and, consequently, could materially adversely affect our revenues from them. More information about protecting our intellectual property is contained in the Intellectual property section on page 31.

Delay to new product launches

Our 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 studies, the manufacture of pre-launch stocks of the products, investment in marketing materials ahead of a product launch, sales force training and the timing of anticipated future revenue streams from commercial sales of new products. These launch dates are primarily driven by the development programmes that we run and the demands of the regulatory authorities in the approvals process, as well as pricing negotiation in some countries. Delays to anticipated launch dates can result from a number of factors including adverse findings in pre-clinical or clinical studies, regulatory demands, competitor activity and technology transfer. Significant delays to anticipated launch dates of new products could have a material adverse effect on our financial condition and results of operations. For example, for the launch of products that are seasonal in nature, delays for regulatory approval or manufacturing difficulties can have the effect of delaying launch to the next season which, in turn, may significantly reduce the return on costs incurred in preparing for the launch for that season. In addition, a delay in the launch may give rise to increased costs if, for example, marketing and sales efforts need to be rescheduled or protracted for longer than expected.

Strategic alliances formed as part
of our externalisation strategy may
be unsuccessful

We seek technology licensing arrangements and strategic collaborations to expand our product portfolio and geographical presence as part of our business strategy. Examples of such recent strategic arrangements and collaborations include:

>		In conjunction with our agreement to acquire Novexel (subject to expiry or termination of the applicable waiting period under the US Hart-Scott-Rodino Antitrust Improvements Act), an agreement with Forest to co-develop and co-commercialise ceftazidime and ceftaroline, next generation anti-infectives

>		Worldwide licensing agreement with Nektar granting AstraZeneca rights to a late-stage product for the treatment of opioid-induced constipation together with rights to an early programme to deliver products for the treatment of pain without constipation side effects

>		Collaboration with Merck to investigate a novel combination anti-cancer regimen

>		Collaboration with Targacept for the global development and commercialisation of Targacept’s late-stage compound TC-5214

>		Agreement with Cancer Research Technology Limited and The Institute of Cancer Research (UK) to discover and develop potential new anti-cancer drugs.

Such licensing arrangements and strategic collaborations are key to enable us to grow and strengthen the business. If we fail to complete these types of collaborative projects in a timely manner, on a cost-effective basis, or at all, we may not realise the expected benefits of any such collaborative projects. The success of such current and future arrangements is largely dependent on the technology and other intellectual property we acquire and the resources, efforts and skills of our partners. There is a risk that these collaborative projects may be unsuccessful. Disputes and difficulties in such relationships may arise, often due to conflicting priorities or conflicts of interest of the parties, which may erode or eliminate the benefits of these alliances if, for example, the agreements are terminated; insufficient financial or other resources are made available to the alliances; intellectual property is negatively impacted; obligations are not performed as expected; controls and commercial limitations are imposed over the marketing and promotion of the collaboration products; or challenges in achieving commercial success of the product are encountered during the development process. Also, under many of our strategic alliances, we make milestone payments well in advance of the commercialisation of the

products, with no assurance that we will recoup these payments. If these types of transactions are unsuccessful, this may have a material adverse effect on our financial condition and results of operations.

Furthermore, we experience strong competition from other pharmaceutical companies in respect of licensing arrangements and strategic collaborations, which means that we may be unsuccessful in establishing some of our intended collaborative projects. If we are unsuccessful in establishing such collaborative projects in the future, this may have a material adverse effect on our financial condition and results of operations.

Commercialisation and
business execution risks

Challenges to achieving commercial success of new products

The successful launch of a new pharmaceutical product involves substantial investment in sales and marketing activities, launch stocks and other items. The commercial success of our new medicines is of particular importance to us in order to replace sales lost as and when patent protection ceases. 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 our financial condition and results of operations. We may ultimately be unable to achieve commercial success for any number of reasons, including:

>		Inability to manufacture sufficient quantities of the product candidate for development or commercialisation activities in a timely and cost-efficient manner

>		Excessive costs of, or difficulty in, manufacturing

>		Erosion of patent term and other intellectual property rights, and infringement of those rights and the intellectual property rights owned by third parties

>		Failure to show value or a differentiated profile for our products.

As a result, we cannot be certain that compounds currently under development will achieve success.

In addition, the methods of distributing and marketing biologics could have a material impact on the revenue we are able to generate from the sales of products such as Synagis and FluMist. The commercialisation of biologics is often more complex than for traditional pharmaceutical products. This is primarily due to differences in the mode of administration, the technical aspects of the product, and the rapidly changing distribution and reimbursement environments.

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Performance of new products

Although we carry out numerous and extensive clinical studies on all our products before they are launched, for a new product it can be difficult, for a period following its launch, to establish from available data a complete assessment of its eventual efficacy and/or safety in broader clinical use on the market. Due to the relatively short time that a product has been tested and the relatively small number of patients who have taken the product in clinical studies, the available data may be immature. Simple extrapolation of the data may not be accurate and could lead to a misleading interpretation of the likely future commercial performance of a new product.

Product counterfeiting

Counterfeit medicines may contain harmful substances, the wrong dose of the active pharmaceutical ingredient (API) or no API at all. Counterfeit medicines are a danger to patients in all parts of the world. The International Medical Products Anti-Counterfeiting Taskforce (IMPACT) of WHO estimates that up to 30% of medicines in emerging economies are counterfeit, a percentage which is exceeded in parts of Latin America, Asia and Africa. By contrast, in established economies with effective regulatory systems, counterfeit medicines represent less than 1% of the market by market value. Public loss of confidence in the integrity of pharmaceutical products as a result of counterfeiting could materially adversely affect our reputation and financial performance. In addition, undue or misplaced concern about the issue might induce some patients to stop taking their medicines, with consequential risks to their health.

Developing our business
in emerging markets

The development of our business in emerging markets may be a critical factor in determining our future ability to sustain or increase the level of our global product revenues. Challenges that arise in relation to the development of the business in emerging markets include more volatile economic conditions, competition from companies that are already present in the market, the need to identify correctly and to leverage appropriate opportunities for sales and marketing, poor protection of intellectual property, inadequate protection against crime (including counterfeiting, corruption and fraud), inadvertent breaches of local law/regulation, not being able to recruit sufficient personnel with appropriate skills and experience, and interventions by national governments or regulators to restrict access to a market and/or to introduce

adverse price controls. The failure to exploit potential opportunities appropriately in emerging markets may have a material adverse effect on our financial condition and results of operations.

Expiry of intellectual property rights

Pharmaceutical products, diagnostic and medical devices are normally only protected from competition from copying during the period of protection under patent rights or related intellectual property rights such as Regulatory Data Protection. Following expiry of such rights, the product is generally open to competition from generic copies. Products under patent protection or within the period of Regulatory Data Protection generally generate significantly higher revenues than those not protected by such rights. See the Intellectual property section on page 31 for a table of certain patent expiry dates for our key marketed products.

Patent litigation and early loss
of intellectual property rights

Any of the intellectual property rights protecting our products may be subjected to intellectual property litigation by third parties and/or be affected by validity challenges in patent offices. In either case, however, we expect that the greater number of challenges will be directed to our more valuable products. Despite our efforts to establish and defend robust patent protection for our products, we may not succeed in such challenges to our patents. If we are not successful in maintaining exclusive rights to market one or more of our major products, particularly in the US where we have our highest revenue and margins, our revenue and margins could be materially adversely affected.

In particular, generic drug manufacturers are seeking to market generic versions of many of our more important products prior to the expiry of our patents and Regulatory Exclusivity periods. For example, we are currently facing challenges from multiple generic manufacturers to certain of our patents for Nexium and Crestor, two of our best-selling products in the US, our largest market. If such challenges succeed and generic products are launched, or launched ‘at risk’ on the expectation that challenges to our intellectual property will be successful, this may have a material adverse effect on our financial condition and results of operations. In 2009, US sales for Nexium and Crestor were $2,835 million and $2,100 million, respectively. The more significant patent litigation relating to our products is described in Note 25 to the Financial Statements from page 166.

In addition to patent challenges by generic drug manufacturers seeking to market generic copies of our products, other third parties owning patents, including research-based pharmaceutical companies, may assert their intellectual property rights against our products or activities or processes related to our products. Consequently, there are risks that we may be found to infringe the patents of others, and managing such infringement disputes can be costly. We may be liable for damages or royalties or, alternatively, we may need to obtain costly licences or stop manufacturing, using or selling our products. These risks may be greater in respect of biologics and vaccines where intellectual property protection is sometimes not so clear. In the event of such risks arising we may be able to mitigate them through, for example, acquiring licences or making modifications to cease the infringement and permit commercialisation of our products but there is no certainty that any such action will be possible and any such action may entail significant costs. Details of significant claims that AstraZeneca is infringing third party intellectual property rights can be found in Note 25 to the Financial Statements from page 166.

In addition to the challenges to our patented products from manufacturers of generic or other patented pharmaceutical products, there is a risk that some countries, particularly some of those in the developing world, may seek to impose limitations on the availability of patent protection for pharmaceutical products, or on the extent to which such protection may be obtained and/or enforced, within their jurisdictions. As a result, generic manufacturers in these countries may be increasingly and more easily able to introduce competing products to the market earlier than they would have been able to had more robust patent protection been available.

Combined with patent protection and Regulatory Exclusivities, products protected by a valid trade mark usually generate higher revenues than those without a trade mark. We believe that we have robust trade mark protection for our products but cannot be certain that we would be able to defend any challenge successfully.

Expiry or earlier loss of patents
covering competing products

The expiry or earlier loss of patents covering others’ innovator products may lead to the availability of generic products in the same product class as our currently patented products earlier than anticipated. Such events could have a material adverse effect on our

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financial condition and results of operations. For example, the loss/expiry of patent rights covering major products in the US, such as Lipitor^™ or Advair Diskus^™ before 2012 may adversely affect the growth of our still-patented products in the same product class (ie Crestor and Symbicort) in that market.

Competition, price controls
and price reductions

All our products compete directly with other products marketed either by major research-based pharmaceutical companies or by generic pharmaceutical manufacturers. These competitors may invest greater resources in the marketing of their products than we do depending on the relative priority of these competitor products within their company’s portfolio. Generic versions of products are often sold at lower prices than branded products because they do not have to recoup the significant cost of R&D investment. Also, generic pharmaceutical companies do not generally invest the same amounts in education services for healthcare professionals as research-based pharmaceutical companies, so the sales of their generic products do not need to cover these costs. Industry consolidation has resulted in a small number of very large companies, some of which have acquired generic businesses. This trend, if it continues, could materially adversely affect our competitive position, whilst consolidation among our customers may increase price pressures. All our patented products, including Nexium, Crestor, Seroquel and Symbicort, are subject to price pressure from competition from generic products in the same product class.

In most of our key markets there is continued economic, regulatory and political pressure to limit or reduce the cost of pharmaceutical products. A summary of the principal aspects of price regulation and how price pressures are affecting our business in our most important markets is set out in the Geographical Review from page 50.

In the US realised prices are being depressed through the use of a range of cost-control tools, such as restricted lists, or formularies, employing generic first strategies, and requiring physicians to obtain prior approval for the use of a branded medicine. These mechanisms put pressure on manufacturers to reduce prices and to limit access to branded products. Many of these mechanisms shift a greater proportion of the cost of medicines onto the individual via out-of-pocket payments at the pharmacy counter. The patient out-of-pocket spend is generally in the form of a co-payment or in some cases

a co-insurance; which is designed, amongst other reasons, to encourage patients to use generic medicines. Many of these management tools are also employed by institutional customers in response to the current cost-containment environment and these increasingly restrictive reimbursement policies could have a material adverse effect on our financial condition and results of operations.

In the US, new legislation is possible that may allow the commercial importation of drugs into the US from selected countries. The adoption of such legislation could result in an increase in the volume of cross-border product movements which could have a material adverse effect on our financial condition and results of operations.

The US House of Representatives and Senate have passed their respective healthcare reform bills. However, Republican Scott Brown’s upset Senate race win, in Massachusetts, has dramatically altered the course of health reform negotiations by ending the Democrats’ filibuster-proof 60 vote majority in the US Senate. Democratic leaders insist they plan to press ahead with health reform, while continuing to debate the best way to proceed.

Certain aspects of comprehensive health reform would cause a significant change in the US pharmaceutical market, for example through mandating higher rebates and discounts on branded drugs for certain Medicare and Medicaid patients, increased financial obligations through other federal payer programmes and an industry-wide excise tax. These and other changes, such as whether further cost-containment measures would need to be incorporated in the final bill to finance the reform of the US healthcare system, could have a material adverse effect on our results of operations and financial condition.

In the EU, efforts by the European Commission to reduce inconsistencies and to improve standards and best practice in the disparate national regulatory systems have met with little immediate success. The industry is, therefore, exposed to greater application of reference pricing mechanisms and ad hoc national cost-containment measures on prices. This can lead to marked price differentials between countries and the consequent cross-border movement of products. The importation of pharmaceutical products from countries where prices are low due to government price controls or other market dynamics, to countries where prices for those products are higher, may increase.

We expect that pressures on pricing will continue and may increase. Due to these pressures, there can be no certainty that we will be able to charge prices for a product that, in a particular country or in the aggregate, enable us to earn an adequate return on our investment in that product.

Any expected gains from productivity initiatives are uncertain

We are implementing various productivity initiatives and restructuring programmes, with the aim of enhancing the long-term efficiency of the business. However, the anticipated cost savings and other benefits are based on preliminary estimates and the actual savings may vary significantly. In particular, these cost reduction measures are based on current conditions and do not take into account any future changes to the pharmaceutical industry or our operations, including new business developments, wage and price increases and other factors. If inappropriately managed, the expected value of the initiative can be lost through low employee morale and hence productivity, increased absence levels and industrial action. Our failure to successfully implement these planned cost reduction measures, either through the successful conclusion of employee relations processes (including consultation and engagement, talent management and recruitment and retention), or the possibility that these efforts do not generate the level of cost savings we anticipate, could have a material adverse effect on our results of operations and financial condition. See the People section from page 33 for information about mitigating the risk of significant business change.

Acquisitions may be unsuccessful

The Group seeks to acquire complementary businesses as part of its business strategy. The integration of an acquired business could involve incurring significant debt and unknown or contingent liabilities, as well as having a negative effect on our reported results of operations from acquisition-related charges, amortisation of expenses related to intangibles and charges for impairment of long-term assets. These effects, individually or in combination, could cause a deterioration in our credit rating and/or increased borrowing costs and interest expense. We could also experience difficulties in integrating geographically separated organisations, systems and facilities, and personnel with different organisational cultures. Integration of an acquired business may also divert management resources that would otherwise be available for the continuing development of our existing business. The integration

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84Directors’ Report | Risk

process may result in business disruption, the loss of key employees, slower execution of various work processes, compliance failures due to a change in applicable regulatory requirements and other issues such as a failure to integrate information technology and other systems. In addition, if liabilities are uncovered in an acquired business, the Group may suffer losses and may not have remedies against the seller or third parties.

Failure to manage a crisis

We handle chemical and biological materials, operate research and manufacturing plants and distribute products worldwide. Major disruption to our business and damage to our reputation may be triggered by an operational incident or by actions by our employees or third parties. In these circumstances, a plan for addressing operational and other issues should ensure a timely response and the ability to resume business as usual. Failure to institute proper communication to internal and external stakeholders and to mobilise a rapid operational response could have a material adverse effect on our financial condition and results of operations. Further information about our business resilience plans and processes are contained in the Managing risk section from page 79.

Failure of information technology

We are dependent on effective IT systems. These systems support key business functions such as our R&D, manufacturing and sales capabilities, and are an important means of internal and external communication. Any significant disruption of these IT systems or failure to integrate new and existing IT systems could have a material adverse effect on our financial condition and results of operations.

Failure of outsourcing

We have outsourced a number of business critical operations to third party providers. Failure of the outsource provider to deliver services in a timely manner and to the required level of quality could have an adverse impact on our ability to meet business targets and maintain a good reputation within the industry and with stakeholders. It may also result in non-compliance with applicable laws and regulations. Failure to adequately manage the risk associated with outsourcing could have a material adverse effect on our financial condition and results of operations.

Supply chain and delivery risks

Manufacturing biologics

Manufacturing biologics, especially in large quantities, is often complex and may require the use of innovative technologies to handle living micro-organisms and facilities specifically designed and validated for this purpose, with sophisticated quality assurance and control procedures. Slight deviations in any part of the manufacturing process may result in lot failure, product recalls or spoilage, for example due to contamination.

Reliance on third parties
for goods and services

Like most, if not all, major research-based pharmaceutical companies we increasingly rely on third parties for the timely supply of goods, such as specified raw materials, equipment, formulated drugs and packaging, and services, all of which are key to our operations.

However, events beyond our control could result in the failure of supplies of goods and services, which could have a material adverse effect on our financial condition and results of operations. For example, suppliers of some of the key goods and services we rely upon may cease to trade. The consequence of this may be significant delays and/or difficulties in obtaining goods and services on commercially acceptable terms, or even at all.

In addition, we may have limited access to and/or supply of biological materials, such as cells, animal products or by-products. Furthermore, government regulations in multiple jurisdictions could result in restricted access to, use or transport of such materials. Loss of access to sufficient sources of such materials, or tighter restrictions on the use of such materials may interrupt or prevent our research activities as planned and/or increase our costs. We seek to mitigate these risks as described in the Managing sourcing risk section on page 33. We actively manage these third party relationships to ensure continuity of supplies on time and to our required specifications. Recently, we have established sourcing centres in China and India to identify high quality suppliers in those regions. Further information is contained in the Managing sourcing risk section on page 33.

Legal, regulatory and compliance risks

Adverse outcome of litigation and/or governmental investigations

We may be subject to any number of legal proceedings and/or governmental investigations. Note 25 to the Financial Statements includes information about material legal proceedings in which we are currently involved. Such investigations or legal proceedings, regardless of their outcome, could be costly, divert management attention, or damage our reputation and demand for our products.

Litigation, particularly in the US, is inherently unpredictable, and unexpectedly high awards of damages can result if AstraZeneca receives an adverse verdict. In many cases, particularly in the US, the practice of the plaintiff bar is to claim damages – compensatory, punitive and statutory – in extremely high amounts. Accordingly, it is difficult to quantify the potential exposure to claims in proceedings of the type referred to in Note 25 to the Financial Statements. Unfavourable resolution of current and similar future proceedings could have a material adverse effect on our financial condition and results of operations, particularly where such circumstances are not covered by insurance. We may become subject to fines, penalties and other monetary and/or non-monetary sanctions and/or may be required to make significant provisions in our accounts related to legal proceedings and/or governmental investigations, which would reduce earnings.

Legal proceedings regarding
business practices

The marketing, promotional, clinical and pricing practices of pharmaceutical manufacturers, as well as the manner in which manufacturers interact with purchasers, prescribers, and patients, are subject to extensive regulation and litigation. Many companies, including AstraZeneca, have been subject to claims related to these practices asserted by federal and state governmental authorities and private payers and consumers. These have resulted in substantial expense and other significant consequences to AstraZeneca. For example, see Note 25 to the Financial Statements for a discussion of litigation and investigations regarding US sales and marketing practices, as well as pricing litigation. It is possible that additional such claims could be made in the future. As a general matter, these types of claims can result in criminal liability, fines, penalties, or other monetary or non-monetary remedies.

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	Directors’ Report \| Risk	85
		Corporate Governance

Substantial product liability claims

Given the widespread impact that prescription drugs may have on the health of large patient populations, pharmaceutical, biopharmaceutical 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. Adverse publicity relating to the safety of a product or of other competing products may increase the risk of product liability claims. Substantial product liability claims that result in court decisions against us or in the settlement of proceedings could have a material adverse effect on our financial condition and results of operations, particularly where such circumstances are not covered by insurance. We are currently subject to extensive product liability litigation in relation to Seroquel, and further details about this are set out in Note 25 to the Financial Statements. Information about our approach to patient safety is set out in the Patient safety section from page 20.

Failure to adhere to applicable laws,
rules and regulations

We operate globally in complex legal and regulatory environments. Any failure to comply with applicable laws, rules and regulations in these jurisdictions may result in civil and/or criminal legal proceedings being filed against us, or in us becoming subject to regulatory sanctions, which could have a material adverse effect on the conduct of our business, our financial condition and results of operations. Regulatory authorities have wide-ranging administrative powers to deal with any failure to comply with continuing regulatory oversight (and this could affect us, whether such failure is our own or that of third parties with whom we have relationships). As these laws, rules and regulations change or as governmental interpretation of those laws, rules and regulations evolves, prior conduct may no longer be sufficient to ensure ongoing compliance.

For example, once a product has been approved for marketing by regulatory authorities, it is subject to continuing control and regulation, such as the manner of its manufacture, distribution, marketing and safety surveillance. In addition, any amendments that are made to the manufacturing, distribution, marketing and safety surveillance processes of our products may require additional regulatory

approvals, which could result in significant additional costs and/or disruption to these processes. Such amendments may be imposed on us as a result of the continuing inspections to which we are subject or that may be made at our discretion. It is possible, for example, that regulatory issues concerning compliance with current Good Manufacturing Practice (cGMP) regulations for pharmaceutical products could arise and lead to product recalls and seizures, interruption of production leading to product shortages, and delays in the approvals of new products pending resolution of the cGMP issues.

Environmental/occupational health
and safety liabilities

We have environmental and/or occupational health and safety related liabilities at some currently or formerly owned, leased and third party sites, the most significant of which are detailed in Note 25 to the Financial Statements. These liabilities are carefully managed by designated technical, legal and business personnel and there is no reason for us to believe that associated current and expected expenditure and/or risks are likely to have a material adverse effect on our financial condition and results of operations as a general matter, but, to the extent that they exceed applicable provisions, they could have a material adverse effect on our financial condition 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 an effect.

A significant non-compliance issue or other environmental or occupational health or safety incident for which we were responsible could result in us being liable to pay compensation, fines or remediation costs. In some circumstances, such liability could have a material adverse effect on our financial condition and results of operations. In addition, our financial provisions for any obligations that we may have relating to environmental or occupational health and safety liabilities may be insufficient if the assumptions underlying the provisions, including our assumptions regarding the portion of waste at a site for which we are responsible, prove incorrect, or if we are held responsible for additional contamination or occupational health and safety related claims.

Economic and financial risks

Adverse impact of a sustained
economic downturn

A variety of significant risks may arise from a sustained global economic downturn, including those referred to here. Additional pressure from governments and other healthcare payers on medicine prices and volumes of sales in response to recessionary pressures on budgets may cause a slowdown or a decline in growth in some markets. In addition, the Group’s customers may cease to trade, which in turn may result in losses from writing-off debts. Further, we are highly dependent on being able to access a sustainable flow of liquid funds due to the high fixed costs of operating a global research-based pharmaceuticals business and the long and uncertain development cycles for our products. In a sustained and/or severe economic downturn, financial institutions that hold our cash and other short-term deposits may cease to trade and there can be no guarantee that we will be able to access our assets without a protracted, expensive and uncertain process, if at all. Although we have adopted conservative cash management and treasury policies to mitigate this risk (further information on which is contained in the Financial risk management policies section on page 44) we cannot be certain that these will be completely effective should a number of major financial institutions cease to trade. Additionally, if we need access to external sources of financing to sustain and/or grow our business, such as the debt or equity capital financial markets, this may not be available on commercially acceptable terms, if at all, in the event of a severe and/or sustained economic downturn. This may particularly be the case in the event of any default by the Group on its debt obligations, which may have materially adverse consequences on our ability to secure debt funding in the future or generally on our financial condition. Further information on debt-funding arrangements is contained in the financial risk management policies section on page 44.

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86 Directors’ Report | Risk

Impact of fluctuations in exchange rates

As a global business, currency fluctuations can significantly affect our results of operations, which are accounted for in US dollars. Approximately 49% of our global 2009 sales were in North America with a significant proportion of that figure being in respect of US sales, which is expected to remain our largest single market for the foreseeable future. Sales in other countries are predominantly in currencies other than the US dollar, including the euro, Japanese yen, Australian dollar and Canadian dollar. We also have a growing exposure to emerging market currencies, although the exchange rates of some of these currencies are linked to the US dollar. Major components of our cost base are located in the UK and Sweden, where an aggregate of approximately 30% 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 our financial condition and results of operations. Additionally, some of our subsidiaries import and export goods and services in currencies other than their own functional currency and so the results of such subsidiaries could be affected by currency fluctuations arising between the transaction dates and the settlement dates for these transactions. Further information is contained in Note 15 to the Financial Statements from page 144.

Credit and return on
substantial investments

As part of its normal operations, the Group will hold significant cash balances. The amount of cash held at any point reflects the level of cash flow generated by the business and the timing of the use of that cash. The majority of excess cash is centralised within the Group treasury function for investment and as such is subject to counterparty risk on the principal invested. See the Financial risk management policies section on page 44 for details of how the Group seeks to mitigate this risk.

Limited third party insurance coverage

Recent insurance loss experience in the pharmaceutical industry, including product liability exposures, has increased the cost of, and narrowed the coverage afforded by, pharmaceutical companies’ product liability insurance. In order to contain insurance costs in recent years, we have continued to adjust our coverage profile, accepting a greater degree of uninsured exposure. The Group has not held product liability insurance since February 2006. In addition, where claims are made under insurance policies, insurers may reserve the right to deny coverage on various grounds. If such denial of coverage is ultimately upheld, this could result in material additional charges to our earnings. An example of a dispute with insurers relating to the availability of insurance coverage and in relation to which costs incurred by the Group may not ultimately be recovered through such coverage is included in Note 25 to the Financial Statements in the Seroquel – product liability section.

Taxation

The integrated nature of our worldwide operations can produce conflicting claims from revenue authorities as to the profits to be taxed in individual territories. The resolution of these disputes can result in a reallocation of profits between jurisdictions and an increase or decrease in related tax costs, and has the potential to affect our cash flows and EPS. Claims, regardless of their merits or their outcome, are costly, divert management attention and may adversely affect our reputation.

The majority of the jurisdictions in which we operate have double tax treaties with other foreign jurisdictions, which enable us to ensure that our revenues and capital gains do not incur a double tax charge. If any of these double tax treaties should be withdrawn or amended, especially in a territory where a member of the Group is involved in a taxation dispute with a tax authority in relation to cross-border transactions, such withdrawal or amendment could have a material adverse effect on our financial condition and results of operations, as could a negative outcome

of a tax dispute or a failure by the tax authorities to agree through competent authority proceedings. See the Financial risk management policies section on page 44 for further details of risk mitigation and Note 25 to the Financial Statements for details of current tax disputes.

Pensions

A particular risk relates to the Group’s pension obligations, the single largest of which is the UK Pension Fund. The obligations are backed by assets invested across the broad investment market. Sustained falls in these assets will put a strain on funding which may result in requirements for additional cash, restricting cash available for strategic business growth. Similarly, if the liabilities rise, there will be a strain on funding from the business. The likely increase in the IAS19 accounting deficit generated by any of these may cause the ratings agencies to review our credit rating, with the potential to affect negatively our ability to raise debt. See Note 23 to the Financial Statements from page 156 for further details on the Group’s pension obligations.

AstraZeneca Annual Report and Form 20-F Information 2009

	Directors’ Report \| Business Organisation and Corporate Governance	87
		Corporate Governance

Business Organisation
and Corporate Governance

Business organisation

This section briefly describes how the Group is organised, including the overall structure and principal roles and responsibilities of the Board, its committees and the SET.

Board composition, processes
and responsibilities

The Board comprises two Executive Directors (the CEO and the CFO) and 10 Non-Executive Directors. The membership of the Board at 31 December 2009 and information about individual Directors is contained in the Board of Directors section from page 88.

All Directors are collectively responsible for the success of the Group. In addition, the Non-Executive Directors are responsible for exercising independent, objective judgement in respect of Board decisions and for scrutinising and challenging management. The Non-Executive Directors also have various responsibilities concerning the integrity of financial information, internal controls and risk management.

Board of Directors

Balance of Non-Executive Directors
and Executive Directors



A Independent Non-Executive Directors¹			8

B Executive Directors			2

C Non-Independent Non-Executive Director¹			1

D Non-Executive Chairman			1

¹ As determined by the Board in accordance with the Combined Code.

Length of tenure of
Non-Executive Directors


A 0-3 years			3

B 3-6 years			2

C 6-9 years			4

D 9+ years			1

Gender split
of Directors



A Male			9

B Female			3

Geographical mix of
Non-Executive Directors


A UK			4

B Rest of Europe			4

C US			2

AstraZeneca Annual Report and Form 20-F Information 2009

88Directors’ Report | Board of Directors

Board of Directors

at 31 December

01 Louis Schweitzer (67)

Non-Executive Chairman, Chairman of the
Nomination and Governance Committee
and Remuneration Committee Member

Appointed as a Director 11 March 2004 and as Chairman 1 January 2005. Non-Executive Chairman of Renault SA 2005-2009. Chairman and Chief Executive Officer of Renault SA 1992-2005. Non-Executive Director of BNP-Paribas, Veolia Environnement SA (senior Non-Executive Director) and L’Oréal SA. Non-Executive Chairman of Volvo AB and Journal Le Monde SA.

02 David Brennan (56)

Executive Director and Chief Executive Officer

Appointed as a Director 14 March 2005 and as CEO 1 January 2006. Chairman of the Executive Board of the Pharmaceutical Research and Manufacturers of America (PhRMA). Vice-President of the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA). Board Member of the European Federation of Pharmaceutical Industries and Associations (EFPIA). Commissioner of the UK Commission for Employment and Skills (UKCES). Chairman of the Board of the Southeastern Pennsylvania Chapter of the American Heart Association 2004-2006.

Other officers of the Company at 31 December included members of the SET, as set out in the Senior Executive Team at 31 December section from page 90 and Adrian Kemp, Company Secretary (appointed on 1 January 2009).

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	Directors’ Report \| Board of Directors	89
		Corporate Governance

03 Simon Lowth (48)

Executive Director and Chief Financial Officer

Appointed as a Director and as CFO 5 November 2007. Director of Finance and Strategy, Scottish Power plc (ScottishPower) 2005-2007 and Executive Director, Corporate Strategy and Development, ScottishPower 2003-2005. Director – Head of UK Industrial Practice, McKinsey & Company 2000-2003. Effective from 1 May 2010, Non-Executive Director of Standard Chartered PLC.

04 Michele Hooper (58)

Senior independent Non-Executive Director,
Audit Committee Member and Nomination
and Governance Committee Member

Appointed as a Director 1 July 2003 and as senior independent Non-Executive Director 26 April 2007. President and Chief Executive Officer, Directors’ Council. President and Chief Executive Officer, Stadtlander Drug Company 1998-1999. Corporate Vice-President and President, International Businesses of Caremark International Inc. 1992-1998. Non-Executive Director of UnitedHealth Group Inc., PPG Industries, Inc. and Warner Music Group, Inc.

05 Bo Angelin (60)

Non-Executive Director and
Science Committee Member

Appointed as a Director 24 July 2007. Professor of Clinical Metabolism at Karolinska Institutet and Head of the Department of Endocrinology, Metabolism and Diabetes at the Karolinska University Hospital in Stockholm, Sweden. Member of the Nobel Assembly and of the Swedish Royal Academy of Sciences. Member of the Medical Nobel Institute. Prior appointments include Chairman of the Nobel Committee for Physiology and Medicine.

06 John Buchanan (66)

Non-Executive Director, Chairman of the Audit Committee and Remuneration Committee Member

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 Director of BHP Billiton Plc. Senior Independent Director and Deputy Chairman of Vodafone Group Plc. Chairman of Smith & Nephew plc. Chairman of International Chamber of Commerce (UK). Member of the Advisory Board of Ondra Bank.

07 Jean-Philippe Courtois (49)

Non-Executive Director and Audit Committee Member

Appointed as a Director 18 February 2008. President, Microsoft International and Senior Vice-President, Microsoft Corporation. CEO Microsoft EMEA 2003-2005. President Microsoft EMEA 2000-2003. Corporate Vice-President, Microsoft Worldwide Customer Marketing 1998-2000. Administrator for PlaNet Finance and representative at the Institut Montaigne.

08 Jane Henney (62)

Non-Executive Director, Audit Committee Member, Nomination and Governance Committee Member and Science Committee Member

Appointed as a Director 24 September 2001. Currently Professor of Medicine, University of Cincinnati. Prior appointments include: Senior Vice-President and Provost for Health Affairs, University of Cincinnati Academic Health Center; Commissioner of Food and Drugs, FDA; Vice-President for Health Sciences, University of New Mexico; Deputy Commissioner for Operations, FDA; Vice-Chancellor for Health Programs and Policy, University of Kansas; Deputy Director, US National Cancer Institute. Non-Executive Director of AmerisourceBergen Corporation and CIGNA Corporation. Other board appointments include The Commonwealth Fund and China Medical Board.

09 Rudy Markham (63)

Non-Executive Director and
Audit Committee Member

Appointed as a Director 12 September 2008. Chairman and Non-Executive Director of Moorfields Eye Hospital Foundation Trust. Non-Executive Director of United Parcel Services Inc., Financial Reporting Council, Standard Chartered PLC and Legal & General plc. Non-Executive member of the Board of the UK Foreign and Commonwealth Office. Fellow of the Chartered Institute of Management Accountants and Fellow of the Association of Corporate Treasurers.

10 Dame Nancy Rothwell (54)

Non-Executive Director, Chairman of the Science Committee and Remuneration Committee Member

Appointed as a Director 27 April 2006. Also has responsibility for overseeing Corporate Responsibility. MRC Research Professor and Deputy President and Deputy Vice-Chancellor at the University of Manchester. Vice-President and Council member of the Royal Society; President of the Society of Biology. Prior appointments include: Trustee of Cancer Research UK and the Campaign for Medical Progress; Chair of the Research Defence Society; Chair of the Wellcome Trust Public Engagement Strategy Panel; President of the British Neuroscience Association; and Council member of the Medical Research Council and the Biotechnology and Biological Sciences Research Council.

11 John Varley (53)

Non-Executive Director, Chairman of the Remuneration Committee and Nomination and Governance Committee Member

Appointed as a Director 26 July 2006. Executive Director of Barclays Bank plc and Barclays plc since 1998 and Group Chief Executive since 2004. Chairman of Business Action on Homelessness and President of the Employers’ Forum on Disability and member of the International Advisory Panel of the Monetary Authority of Singapore. Honorary President of the UK Drug Policy Commission. Treasurer and Trustee of St. Dunstan’s and Trustee of Thornton Smith & Plevins Young People’s Trust.

12 Marcus Wallenberg (53)

Non-Executive Director

Appointed as a Director 6 April 1999. Formerly a Director of Astra AB (appointed 18 May 1989). Chairman of Skandinaviska Enskilda Banken AB, Electrolux AB and Saab AB. Vice-Chairman of Telefonaktiebolaget L M Ericsson (publ). Non-Executive Director of Stora Enso Oyj and the Knut and Alice Wallenberg Foundation. Board member of Temasek Holdings (Private) Limited. Honorary Chairman of International Chamber of Commerce.

AstraZeneca Annual Report and Form 20-F Information 2009

90Directors’ Report | Senior Executive Team

Senior Executive Team

at 31 December

01 David Brennan

Chief Executive Officer

David was appointed Chief Executive Officer of AstraZeneca in January 2006. From 2001 until then, David was President and Chief Executive Officer of the Company’s North American subsidiary.

David began his career in 1975 at Merck, where he started as a sales representative in the US Division and later worked in sales and marketing management in the US and International divisions. He joined Astra Merck in 1992 and helped to build the joint venture into a multi-billion dollar business in the US.

He is an alumnus of Gettysburg College where he studied Business Administration.

For further information on David, see the Board of Directors at 31 December section from page 88.

02 Simon Lowth

Chief Financial Officer

Simon joined AstraZeneca as an Executive Director and Chief Financial Officer in November 2007. He was previously at ScottishPower where he was Finance Director. Simon left ScottishPower following completion of the sale to Iberdrola.

His move to ScottishPower followed 15 years’ experience with the global management consultancy, McKinsey & Company where he advised leading multinational companies on a wide range of strategic, financial and operational issues.

Simon has an engineering degree from Cambridge University and an MBA from London Business School.

For further information on Simon, see the Board of Directors at 31 December section from page 88.

AstraZeneca Annual Report and Form 20-F Information 2009

	Directors’ Report \| Senior Executive Team	91
		Corporate Governance

03 Bruno Angelici¹

Executive Vice-President, International Sales
and Marketing Organisation (until 31 December)

From 2001 until 31 December 2009, Bruno was responsible for Europe, Japan, Asia Pacific, Latin America, Middle East and Africa. Before this he served as President of AstraZeneca Japan. Bruno originally joined AstraZeneca in 1989 as President of ICI Pharma France. He began his career in the food industry and then joined Baxter Healthcare where he became Managing Director for Baxter in France.

He holds an MBA from the Kellogg School of Management, Chicago, is a member of the Supervisory Board of Wolters Kluwer and is President of the Supervisory Board of Reims Management School. He was received into the Légion d’honneur in December 2009.

Bruno will be leaving AstraZeneca in 2010.

04 Anders Ekblom

Executive Vice-President, Development

Before he took over responsibility for Global Drug Development, Anders was responsible for Global Clinical Development, the largest single function in R&D, operating across medicine development and life-cycle management. He joined Astra in 1993 from the Karolinska Institute and Karolinska Hospital in Stockholm, where he was a senior lecturer and Director for the Perianesthetic Unit.

Anders is President of AstraZeneca Sverige AB, and Director of Albireo Ltd. He is an Associate Professor of Physiology at the Karolinska Institute, a medical doctor qualified in anaesthesiology and intensive care, and a doctor of dental surgery. He has long been active in both basic and clinical research resulting in over 60 original publications in peer-reviewed journals and book chapters.

05 Christer Köhler

Interim Executive Vice-President,
Discovery Research

Christer was appointed to his current role in November. He joined Astra in 1979 and held a number of R&D positions before joining Hoffmann-La Roche in Basel, Switzerland in 1992 as Global Head CNS Discovery. He returned to Astra Arcus and became Global Vice-President and Head of CNS & Pain Research in 1999 and has since been a member of the global R&D leadership team.

Christer trained at the University of Bergen Medical School where he also obtained his PhD. He conducted postdoctoral studies in Lausanne, Switzerland and the Salk Institute, San Diego US. He became adjunct Professor of Neurobiology at the University of Bergen in 1984. He has published over 150 scientific papers in different areas of neuroscience and pharmacology.

06 Jeff Pott

General Counsel

Jeff was appointed General Counsel from 1 January 2009 and has overall responsibility for all aspects of AstraZeneca’s Legal and Intellectual Property function.

He joined AstraZeneca in 1996 and has worked in various litigation roles, where he has had responsibility for intellectual property, anti-trust and product liability litigation. Prior to joining AstraZeneca, Jeff spent five years at US legal firm Drinker Biddle and Reath, where he specialised in pharmaceutical product liability litigation and anti-trust advice and litigation.

Jeff received his bachelor’s degree in Political Science from Wheaton College and his Jurus Doctor Degree from Villanova University School of Law.

07 David Smith

Executive Vice-President, Operations

David joined AstraZeneca in 2006 as Executive Vice-President, Operations. He leads AstraZeneca’s global manufacturing and supply organisation and is also responsible for the AstraZeneca Group Safety, Health and Environment, Regulatory Compliance, Purchasing and Engineering functions. As of 27 January 2010, David has assumed overall responsibility for Corporate Information Services.

David spent his early career in pharmaceuticals, initially with the Wellcome Foundation in the UK. He subsequently spent nine years in the consumer goods sector working for Estée Lauder in New York and Timberland as Senior Vice-President Global Supply Chain. In 2003, he returned to the pharmaceutical sector and joined Novartis and was based in Switzerland.

08 Lynn Tetrault

Executive Vice-President, Human Resources
and Corporate Affairs

Lynn was appointed Executive Vice-President, Human Resources and Corporate Affairs in 2007 having already been appointed Vice-President Corporate Affairs. She had previously been Vice-President of Human Resources for Global Drug Development and was Vice-President of Human Resources for the US subsidiary of AstraZeneca following the merger between Astra and Zeneca.

Lynn started her career in private law practice where she specialised in general corporate and healthcare law. She joined Astra USA in 1993 as Associate General Counsel in the company’s legal department.

Lynn received her bachelor’s degree from Princeton University and her law degree from the University of Virginia Law School.

09 Tony Zook¹

Chief Executive Officer, North America,
President, MedImmune and Executive
Vice-President, Commercial Operations

Tony has responsibility for our worldwide sales and marketing activities, including Global Marketing. He took up this newly created post on 1 January 2010 in addition to his continuing responsibilities as Executive Vice-President, North America and President of MedImmune. He joined Astra USA in 1997 as Vice-President, Marketing and Sales, having begun his pharmaceutical career at Berlex Laboratories.

Tony earned a bachelor’s degree in biology from Frostburg University, and an associate’s degree in chemical engineering from Pennsylvania State University. He is a member of the board for First State Innovation, the Pennsylvania Division of the American Cancer Society and is a member of the Board of Trustees for the Healthcare Leadership Council.


¹	Changes affecting the positions of Bruno Angelici and Tony Zook in 2010 are described in the Reserved matters and delegation of authority section on page 92.

AstraZeneca Annual Report and Form 20-F Information 2009

92 Directors’ Report | Business Organisation and Corporate Governance

Reserved matters and
delegation of authority

The Board maintains and regularly reviews a full list of matters and decisions that are reserved to, and can only be approved by, the Board. These include the appointment, termination and remuneration of any Director; the annual budget; any item of fixed capital expenditure or any proposal for the acquisition or disposal of an investment or business which exceeds $150 million; raising of capital or loans by the Company (subject to certain exceptions); any guarantee in respect of any borrowing of the Company; and allotting shares of the Company. The matters that have not been expressly reserved to the Board are either delegated by the Board to its committees or to the CEO.

The CEO is responsible to the Board for the management, development and performance of the Group’s business in relation to those matters in respect of which he has been delegated authority from the Board. In exercising his authority, the CEO acts with the primary aim of enhancing long-term shareholder value and within the framework of the Group’s policies and routine reporting requirements.

Although the CEO retains full responsibility for the authority delegated to him by the Board, the CEO has established and chairs the SET (pictured in the Board of Directors at 31 December section from page 88), which is the vehicle through which he exercises certain of that authority in respect of the Group’s business. The SET normally meets once a month to consider and decide major business issues. Typically, it also reviews, in advance of submission to the Board, those matters that are to be submitted to the Board for review and decision.

In November, Jan Lundberg, Executive Vice-President, Discovery Research resigned to take up a position at another company. He left the Company on 31 December. On 13 November, Christer Köhler was appointed Interim Executive Vice-President, Discovery Research.

Bruno Angelici completed his role as Executive Vice-President, International Sales and Marketing Organisation on 31 December and will leave the Company in 2010 after nine years’ service as a member of the SET and 20 years with the Company in total. With effect from 1 January 2010, Tony Zook was appointed to the newly-created role of Executive Vice-President, Commercial Operations. In this role, he will have responsibility for worldwide sales and marketing activities.

Board and Committee meeting attendance in 2009


	Number of meetings attended/(number of meetings Director was eligible to attend in 2009)
										Nomination and
				Audit			Remuneration			Governance
Name	Board			Committee			Committee			Committee

Bo Angelin		8	(8)		–			–			–

David Brennan		8	(8)		–			–			–

John Buchanan		5	(8)		3	(4)		3	(6)		–

Jean-Philippe Courtois		7	(8)		4	(4)		–			–

Jane Henney		7	(8)		3	(4)		–			2	(2)

Michele Hooper		8	(8)		4	(4)		–			2	(2)

Simon Lowth		8	(8)		–			–			–

Rudy Markham		7	(8)		4	(4)		–			–

Håkan Mogren¹		1	(2)		–			–			0	(1)

John Patterson²		1	(1)		–			–			–

Nancy Rothwell		6	(8)		–			6	(6)		–

Louis Schweitzer		8	(8)		–			6	(6)		2	(2)

John Varley		8	(8)		–			6	(6)		2	(2)

Marcus Wallenberg		6	(8)		–			–			–


¹	Håkan Mogren retired from the Board on 30 April 2009.

²	John Patterson retired from the Board on 31 March 2009.

The roles of the Board, the Board’s committees, the Chairman, the CEO and the SET are documented, as are the Board’s delegated authorities and reserved powers, the means of operation of the business and the roles of corporate functions.

R&D Executive Committee

The R&D Executive Committee oversees and prioritises the portfolio of both small molecule and biological discovery and development projects across the Group (whether originating from our own R&D activities or from external sources). On an annual basis it takes a view across all Therapy Areas and makes decisions based on unmet medical need, commercial and scientific opportunity, competitive position and capability mix. It is also charged with overseeing a portfolio review process intended to ensure that internal and external opportunities are reviewed using the same criteria and that there is a clear externalisation strategy aligned with the disease area strategies.

During 2009 the R&D Executive Committee comprised the Interim Executive Vice-President, Discovery Research; the Executive Vice-President, Development; the Executive Vice-President, Research and Development, MedImmune; the Executive Vice-President, Clinical Research and Chief Medical Officer, MedImmune; the Chief Executive Officer, North America/President, MedImmune/ Executive Vice-President, Commercial Operations; the Senior Vice-President, Strategic Planning and Business Development; the Vice-President, R&D Finance; and the Vice-President, Development Projects.

In 2010, the R&D Executive Committee will be replaced by the Portfolio Investment Board, which will be chaired by the CEO, and will include the CFO, the Executive Vice-President, Development, the Executive Vice-President, Commercial Operations and other members of senior management. The Portfolio Investment Board will be accountable for all R&D investments within the Group and will be charged with delivering a pipeline of products capable of generating attractive returns on invested capital and driving shareholder value.

Operation of the Board

The Board is responsible for the Group’s corporate governance, sets the Group’s strategy and policies, has overall responsibility for the oversight of risk and also monitors progress towards meeting its objectives and annual plans. The Board discharges these responsibilities through a programme of meetings that includes a formal, annual strategy review. The Board also assesses whether or not and to what extent its obligations to the Company’s shareholders and others are understood and met. This includes regular reviews of the Group’s financial performance and critical business issues.

In the view of the Board, at least half of the Board are, for the purposes of the Combined Code and the corporate governance listing standards of the NYSE (Listing Standards), independent Non-Executive Directors.

Prior to the publication of this Annual Report, the Board conducted the annual evaluation of its own performance and that of its committees. This was carried out internally, using a series of web-based questionnaires that covered a range of topics, including the

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nature and level of the Board’s interaction with the Group’s management; the quality, quantity and scope of information which flows to the Board from management, and the way in which it flows; the content of 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 Board’s committees. Overall, it was concluded that the Board and its committees were operating in an effective and constructive manner.

As part of the assessment process, each Non-Executive Director received feedback about his or her individual performance. The Non-Executive Directors reviewed the performance of the CEO and CFO in their absence. In addition, the Board, under the chairmanship of the senior independent Non-Executive Director, reviewed the performance of the Chairman in his absence. Each Director continues to perform effectively and demonstrate commitment to the role.

Board matters

As part of the business of each meeting of the Board, the CEO typically submits a progress report on each key business area, giving details of progress against the goals the Board has approved and their activities. To ensure that the Board has good visibility of the key operating decisions of the business, members of the SET routinely attend Board meetings on a rotational basis and the Board regularly meets and consults other senior employees throughout the year. The Board also receives accounting and other management information about the Group’s resources, presentations from internal and external speakers on legal, governance and regulatory developments and external perspectives. At the end of Board meetings, the Non-Executive Directors usually meet without the Executive Directors present, to review and discuss any matters that have arisen during the meeting and/or such other matters as may appear to the Non-Executive Directors to be relevant in properly discharging their duty to act independently.

The Company Secretary is responsible to the Chairman for ensuring that all Board and Board Committee meetings are properly conducted, that the Directors receive appropriate information prior to meetings to enable them to make an effective contribution, and that governance requirements are considered and implemented.

The Board held six scheduled and two ad hoc meetings in 2009. It also held a strategy review day, which was attended by all the SET members. With the exception of the

Board Committee membership


	Audit	Remuneration	Governance	Science
Name	Committee	Committee	Committee	Committee	Independent¹

Bo Angelin	x	x	x	ü	ü

David Brennan	x	x	x	x	–

John Buchanan	Chair	ü	x	x	ü

Jean-Philippe Courtois	ü	x	x	x	ü

Jane Henney	ü	x	ü	ü	ü

Michele Hooper²	ü	x	ü	x	ü

Simon Lowth	x	x	x	x	–

Rudy Markham	ü	x	x	x	ü

Håkan Mogren³	x	x	ü	x	x

John Patterson⁴	x	x	x	ü	–

Nancy Rothwell	x	ü	x	Chair	ü

Louis Schweitzer	x	ü	Chair	x	–⁵

John Varley	x	Chair	ü	x	ü

Marcus Wallenberg	x	x	x	x	x


¹	As determined by the Board for Combined Code purposes.

²	Michele Hooper is the senior independent Non-Executive Director.

³	Håkan Mogren retired from the Board on 30 April 2009.

⁴	John Patterson retired from the Board on 31 March 2009.

⁵	Louis Schweitzer was considered independent by the Board upon his appointment as Chairman; in accordance with the Combined Code, the test of independence is not appropriate to the Chairman after his appointment.

September Board meeting and the strategy day, which were held in Södertälje, Sweden, all of the meetings were held in London, UK or by telephone. The Board is currently scheduled to meet six times and hold a strategy review day in 2010, and will meet at such other times as may be required to conduct business.

On those occasions when a Board or Board Committee member was unavoidably absent from a meeting, for example through illness or where a meeting clashed with his/her existing commitments, he/she still received and reviewed the papers for the meeting and provided verbal or written input ahead of the meeting, typically through the Chairman of the Board or the Chairman of the Board Committee, so that his/her views were made known and considered at the meeting.

In addition, given the nature of the business to be conducted, some Board meetings were convened at short notice, which made it difficult for some Directors to attend due to prior commitments.

As well as their work in relation to formal Board and Board Committee meetings, the Non-Executive Directors also continued to commit time throughout the year to meetings and telephone calls with various levels of executive management, visits to AstraZeneca’s sites throughout the world and, for new Non-Executive Directors, induction sessions, meetings and site visits. In 2009, for example, various Non-Executive Directors made individual visits to AstraZeneca’s sites in the UK, Sweden, the US, Canada, China, Japan and Vietnam.

In January 2010, on his appointment as Non-Executive Chairman of Volvo AB, the Chairman consulted the Company and considered this new commitment against his ability to continue to commit sufficient time to the Company; it is not anticipated that his availability for the Company will be reduced.

Directors

In accordance with Article 65 of the Articles, all Directors retire at each AGM and may offer themselves for re-election by shareholders. Accordingly, all of the Directors will retire at the AGM in April 2010. The Notice of AGM will give details of those Directors presenting themselves for re-election. The Board reviews annually the status of succession to senior positions, including those at Board level, and ensures it has regular contact with, and access to, succession candidates.

During 2009:

>		John Patterson, Executive Director, Development retired from the Board on 31 March 2009.

>		Håkan Mogren, Non-Executive Deputy Chairman, retired from the Board on 30 April 2009.

For information relating to the appointment process for new Directors see the Nomination and Governance Committee section from page 95.

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Newly appointed Directors are provided with comprehensive documentation, setting out their obligations and duties as Directors. They also typically attend tailored induction programmes that take account of their individual skills and experience. To develop an understanding of major shareholders’ views about the Company, the Non-Executive Directors (together with the rest of the Board) regularly receive reports and presentations from the Company’s brokers and meet with senior managers throughout the year. Moreover, the Directors actively encourage shareholders to attend the AGM and ask questions.

The Company maintained directors’ and officers’ liability insurance cover throughout 2009. The Directors are also able to obtain independent legal advice at the expense of the Company, as necessary, in their capacity as Directors.

The Company has entered into a deed of indemnity in favour of each Board member since 2006. These deeds of indemnity are still in force and provide that the Company shall indemnify the Directors to the fullest extent permitted by law and the Articles, in respect of all losses arising out of, or in connection with, the execution of their powers, duties and responsibilities, as Directors of the Company or any of its subsidiaries. This is in line with current market practice and helps the Company attract and retain high-quality, skilled Directors.

Operation of Board Committees

The Board has delegated certain responsibilities to the Audit, Remuneration, Nomination and Governance, and Science Committees. The Board provides adequate resources to enable each committee to undertake its duties. Further details of the role, membership and terms of reference for each committee are set out below. In addition to the standing committees of the Board, there may from time to time be constituted ad hoc committees for specific projects or tasks. In these cases, the scope and responsibilities of the committee is documented.

Audit Committee

The current members of the Audit Committee are John Buchanan (Audit Committee Chairman), Jane Henney, Michele Hooper (senior independent Non-Executive Director), Jean-Philippe Courtois and Rudy Markham. They are all Non-Executive Directors. The Board considers each member to be independent under the Combined Code and under the general guidance and specific criteria of the Listing Standards concerning the composition of audit committees applicable to non-US companies. In April

2009, the Company submitted the required annual written affirmation to the NYSE confirming its full compliance with those standards. For the purposes of the Combined Code, the Board remains satisfied that at least one member of the Audit Committee has recent and relevant financial experience. At its meeting in December 2009, the Board determined that Michele Hooper and Rudy Markham are audit committee financial experts for the purposes of the Sarbanes-Oxley Act. The Deputy Company Secretary acts as secretary to this committee.

The core terms of reference of the Audit Committee continue to include reviewing and reporting to the Board on:

>		Matters relating to the audit plans of the external auditor and GIA as well as oversight of the work of the Global Compliance function.

>		The Group’s overall framework for internal control over financial reporting and for other internal controls and processes.

>		The Group’s overall framework for risk management, particularly financial risks.

>		The accounting policies and practices of the Group.

>		The annual and quarterly financial reporting carried out by the Group.

The Audit Committee is responsible for notifying the Board of any significant concerns of the external auditor or the Vice-President, Group Internal Audit (GIA) arising from their audit work, any matters that may materially affect or impair the independence of the external auditor, any significant deficiencies or material weaknesses in the design or operation of the Group’s internal control over financial reporting or other internal controls, and any serious issues of non-compliance.

The Audit Committee oversees the establishment, implementation and maintenance of the Code of Conduct and other related policies. It has established procedures for the receipt and handling of complaints concerning accounting or audit matters. It recommends to the Board the appointment of the external auditor, subject to the approval of the Company’s shareholders at a general meeting. Shareholders in a general meeting authorise the Directors to fix the remuneration of the external auditor. The Audit Committee reviews and approves the appointment and any dismissal of the Vice-President, GIA.

The Audit Committee maintains policies and procedures for the pre-approval of all audit services and permitted non-audit services undertaken by the external auditor, the principal purpose of which is to ensure that

the independence of the external auditor is not impaired. The policies and procedures cover three categories of work – audit services, audit-related services and tax services. The policies define the type of work that falls within each of these categories and the non-audit services that the external auditor is prohibited from performing under the rules of the SEC and other relevant UK and US professional and regulatory requirements. The pre-approval procedures permit certain audit, audit-related and tax services to be performed by the external auditor during the year, subject to fee limits agreed with the Audit Committee in advance. The CFO (supported by the Senior Vice-President, Group Finance) monitors the status of all services being provided by the external auditor. The procedures also deal with placing non-audit work out for tender, where appropriate. Authority to approve work in excess of the pre-agreed fee limits is delegated to the Chairman of the Audit Committee in the first instance. A standing agenda item at Audit Committee meetings covers the operation of the pre-approval procedures and regular reports are provided to the full Audit Committee.

The Audit Committee’s terms of reference are available on our website, astrazeneca.com and on request from the Company Secretary.

The Audit Committee held four scheduled meetings in 2009. The individual attendance record of members of the Audit Committee is set out in the Board and Committee meeting attendance in 2009 table on page 92.

Following each Audit Committee meeting, the Chairman of the Audit Committee (or the senior independent Non-Executive Director in the absence of the Chairman of the Audit Committee) reported to the Board on the principal matters covered at the meeting and minutes of the meetings were circulated to all Board members.

During 2009, members of the Audit Committee met individual managers or groups of managers on a number of occasions, which helped the members gain a deeper insight into areas relevant to the Audit Committee’s work and provided an opportunity to discuss specific areas of interest.

During the year, in line with its normal practice, the Audit Committee also held a number of private meetings, without management present, with the Vice-President, GIA, the Global Compliance Officer and the lead partners from the Company’s external audit firm. The purpose of these meetings was to

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facilitate free and open discussions between the Audit Committee members and those individuals, separately from the main sessions of the Audit Committee, which were attended by the CFO and the Senior Vice-President, Group Finance.

During 2009 and January 2010, the business considered and discussed by the Audit Committee included the matters referred to below:

>		The Group’s financial disclosures were reviewed and various accounting matters considered.

>		Reports were received from the external auditor concerning its audit of the Financial Statements of the Group and from management, GIA, Global Compliance and the external auditor on the effectiveness of the Group’s system of internal controls and, in particular, its internal control over financial reporting. This included review and discussion of the results of the Group’s ‘continuous assurance’ and annual ‘letter of assurance’ processes (described further below in the UK corporate governance requirements section from page 96). The Audit Committee also reviewed quarterly activity reports of audit work carried out by GIA and the status of follow-up actions with management as well as reports from the Global Compliance function.

>		The systems and processes that management has developed pertaining to risk identification, classification and mitigation.

>		Continuing work to comply with the applicable provisions of the Sarbanes-Oxley Act. In particular, the Audit Committee regularly reviewed the status of compliance with the programme of internal controls over financial reporting implemented pursuant to section 404 of the Sarbanes-Oxley Act; further information about this is set out in the Sarbanes-Oxley Act section 404 section on page 49.

>		Data about calls made by employees via the AZethics telephone lines and other routes regarding potential breaches of the Code of Conduct together with the results of enquiries into these matters.

>		The succession of the Vice-President, GIA.

>		Accounting issues relevant to litigation and taxation matters.

>		Reports from the Group Treasury function and, in particular, the Group’s liquidity and cash position and the appropriateness of its cash management policies in the context of the current economic situation.

>		Other reports concerning the GIA, Global Compliance and Finance functions, including the internal audit plan and progress and plans of the Global Compliance Officer.

>		The amount of audit and non-audit fees of the external auditor throughout 2009. The Audit Committee was satisfied throughout the year that the objectivity and independence of the external auditor were not in any way impaired by the nature of the non-audit work undertaken by the external auditor during the year, the level of non-audit fees charged for such work or any other facts or circumstances. Further information about the audit and non-audit fees for the year is disclosed in Note 27 to the Financial Statements on page 185.

>		A review and assessment of the Audit Committee’s performance which concluded that such performance was satisfactory.

In line with best practice, the Group will periodically consider how the audit requirements of the Group are best served in the context of business need and the prevailing external environment and, against the background of this review, will from time to time undertake a formal tendering programme with audit firms of appropriate size and calibre. Following discussions at a meeting in January 2010, the Audit Committee unanimously recommended to the Board that a resolution for the re-appointment of KPMG as the Company’s external auditor be proposed to shareholders at the AGM in April 2010. Based on its experience of working with external auditors, the Audit Committee believes that the quality of the interaction with and level of service received from KPMG were key factors supporting this recommendation. The Audit Committee was also satisfied that, notwithstanding the length of tenure of KPMG, KPMG met the independence criteria under the relevant statutory, regulatory and ethical standards applicable to auditors. Consistent with current market practice, KPMG’s services to the Group are provided pursuant to terms of engagement which are reviewed by the Audit Committee. These terms of engagement do not include any contractual obligations under which the Directors would be prevented from appointing a different audit firm were they to consider this to be in the best interests of the Group. The Audit Committee, through management, continues to maintain contact and dialogue with other major audit firms who are familiar with the Group’s business for succession purposes as required. This is reported to the Audit Committee in order to ensure a smooth transition from the current auditor, should this be necessary.

At the same meeting, the CEO and the CFO presented to the Audit Committee their conclusions following the evaluation of the effectiveness of the Group’s disclosure

controls and procedures required by Item 15(a) of Form 20-F at 31 December 2009. Based on their evaluation, the CEO and the CFO concluded that, as at that date, the Group maintains an effective system of disclosure controls and procedures.

There was no change in the Group’s internal control over financial reporting that occurred during the period covered by this Annual Report that has materially affected, or is reasonably likely to materially affect, the Group’s internal control over financial reporting.

The Audit Committee is currently scheduled to meet four times in 2010 and will meet at such other times as may be required.

Remuneration Committee

The principal role of the Remuneration Committee continues to be to consider, on behalf of the Board, the remuneration (including pension rights and compensation payments) of Executive Directors, the Chairman and senior executives. More information is set out in the Directors’ Remuneration Report from page 101.

Nomination and Governance Committee

The Nomination and Governance Committee’s core role continues to be (after appropriate consultation with the Chairman and the CEO) to recommend to the Board any new appointments of Directors. Any decisions relating to the appointment of Directors are made by the entire Board based on the merits of the candidates and the relevance of their background and experience, measured against objective criteria, with care taken to ensure that appointees have enough time to devote to the job. The Nomination and Governance Committee also advises the Board periodically on significant developments in corporate governance and the Company’s compliance with the Combined Code.

During 2009, the members of the Nomination and Governance Committee were Louis Schweitzer (Nomination and Governance Committee Chairman), Håkan Mogren (until his retirement from the Board on 30 April 2009), Jane Henney, Michele Hooper and John Varley. They are all Non-Executive Directors. The Board considers all current members of the Nomination and Governance Committee to be independent (Louis Schweitzer was considered by the Board to be independent upon his appointment as Chairman; in accordance with the Combined Code, the test of independence is not appropriate in relation to the Chairman after his appointment). The Company Secretary acts as secretary to this committee.

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The Nomination and Governance Committee met twice in 2009. The individual attendance record of members of the Nomination and Governance Committee is set out in the Board and Committee meeting attendance in 2009 table on page 92. During 2009, the Nomination and Governance Committee reviewed the knowledge, experience and balance of the Board overall and considered its likely future requirements given the strategic and business objectives of the Group. In addition, the Nomination and Governance Committee received reports about the various corporate governance reviews and proposals that were a feature of 2009, and carefully monitored developments and their potential impact on the Group.

The Nomination and Governance Committee’s terms of reference are available on our website, astrazeneca.com.

Science Committee

The Science Committee’s core role continues to be to provide assurance to the Board regarding the quality, integrity and competitiveness of the Company’s science-based R&D activities. It does not review individual projects. The Science Committee, together with external experts, where appropriate, does review important bioethical issues faced by the Group and assists in the formulation of, and agrees on behalf of the Board, appropriate policies in relation to such issues. In addition, the Science Committee is responsible for considering general future trends in medical science and technology, and any new areas of science or medicine in which the Group may be interested.

During 2009, the members of the Science Committee, all of whom have a knowledge of, or an interest in, life sciences, were Nancy Rothwell (Science Committee Chairman), Jane Henney, Bo Angelin, all Non-Executive Directors, and Jan Lundberg (until his resignation in November), John Patterson (until his retirement from the Board on 31 March 2009), Anders Ekblom and Christer Köhler (from his appointment as Interim Executive Vice-President, Discovery Research in November). The Vice-President, Business Performance and Continuous Improvement, R&D also attends all meetings and acts as secretary to this committee.

The Science Committee met twice in 2009. Its remit is available on the Company’s website, astrazeneca.com.

Principal corporate
governance requirements

UK corporate governance requirements

The Board has prepared this Annual Report with reference to the Combined Code and related guidance published in June 2008 by the Financial Reporting Council (FRC). It describes the way in which the Company is applying all the main and supporting principles of good governance in the Combined Code as described below. The Company has complied throughout the accounting period and is also continuing to comply with all of the provisions of the Combined Code. The Combined Code is publically available on the FRC website, frc.co.uk.

The Board has overall responsibility for the Group’s system of internal controls and risk management policies and is also responsible for reviewing their effectiveness. During 2009, the Directors have continued to review the effectiveness of the Group’s system of controls, risk management and the Group’s high-level internal control arrangements. These reviews have included an assessment of internal controls, and in particular, internal, financial, operational and compliance controls and risk management and their effectiveness, supported by management assurance of the maintenance of control, reports from GIA, as well as the external auditor on matters identified in the course of its statutory audit work. The system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable (not necessarily absolute) assurance of effective operation and compliance with laws and regulations.

Underpinning 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, their compliance with Group policies and relevant laws and regulations (including the industry’s regulatory requirements), and that they have reported any control weaknesses through the Group’s ‘continuous assurance’ process.

The internal control framework has been in operation for the whole of the year under review and continues to operate up to the date of the approval of this Annual Report. The Directors believe that the Group maintains an effective, embedded system of internal controls and complies with the Turnbull Report guidance and, in the view of the Directors, no significant failings have been identified in the system.

Further information on the ways in which we manage our business risks is set out in the Managing risk section from page 79 and a list of the principal risks and uncertainties is set out in the Principal risks and uncertainties section from page 80.

During 2009, the Board considered the independence of each Non-Executive Director. With the exception of Marcus Wallenberg, the Board considers that all of the Non-Executive Directors are independent. Louis Schweitzer was considered by the Board to be independent upon his appointment as Chairman; in accordance with the Combined Code, the test of independence is not appropriate in relation to the Chairman after his appointment.

Marcus Wallenberg was appointed as a Director of Astra in May 1989 and subsequently became a Director of the Company in 1999. Until September 2005, he was a member of the board of directors and the Chief Executive Officer of Investor AB, which has a 3.55% interest in the issued share capital of the Company as at 28 January 2010. Wallenberg family foundations remain Investor AB’s largest shareholders in terms of votes controlled. For these reasons, the Board does not believe that Marcus Wallenberg can be determined independent under the Combined Code. However, the Board believes that he has brought, and continues to bring, considerable business experience and makes a valuable contribution to the work of the Board.

The Board has also considered, in particular, the position of Michele Hooper who joined the board of UnitedHealth Group as a Non-Executive Director in 2007. The Board’s approval of this appointment was conditional upon Michele Hooper resigning from the board of UnitedHealth Group in the event of a conflict or non-independence. It is the Board’s view that Michele Hooper is independent and that she discharges her duties in a properly independent manner, constructively and appropriately challenging the Executive Directors and the Board.

Jane Henney is a Non-Executive Director of AmerisourceBergen Corporation and CIGNA Corporation, both of which are customers of the Group in the US. The Board has considered these relationships and concluded that they did not compromise her independence.

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		Corporate Governance

The position of senior independent Non-Executive Director of the Company was established in 2002. Michele Hooper (who was appointed as a Non-Executive Director in 2003) became the Company’s senior independent Non-Executive Director in April 2007.

At the AGM in 2008, a resolution was passed to amend the Articles to enable the Directors to authorise any situation in which a Director has an interest that conflicts or has the potential to conflict with the Company’s interests and which would otherwise be a breach of the Director’s duty, under section 175 of the Companies Act 2006. The Board has a formal system in place for Directors to declare such situations to be considered for authorisation by those Directors who have no interest in the matter being considered. In deciding whether to authorise a situation, the non-conflicted Directors must act in the way they consider, in good faith, would be most likely to promote the success of the Company, and they may impose limits or conditions when giving the authorisation, or subsequently, if they think this is appropriate. Situations considered by the Board and authorisations given are recorded in the Board minutes and in a register of conflicts maintained by the Company Secretary and reviewed annually by the Board. The Board considers that this system continues to operate effectively.

The disclosures that fulfil the requirements of a corporate governance statement under the Disclosure and Transparency Rules can be found in this Corporate Governance section of the Directors’ Report and in other parts of this Annual Report as listed below, each of which is incorporated into this Corporate Governance section by reference:

>		Significant holders of the Company’s shares (contained in the Shareholder Information section from page 199).

>		Articles (contained in the Corporate Information section on page 204).

>		Amendments to the Company’s Articles (contained in the Corporate Information section on page 204).

US corporate governance requirements

The Company’s ADSs are traded on the NYSE and, accordingly, the Company is subject to the reporting and other requirements of the SEC applicable to foreign private issuers. Section 404 of the Sarbanes-Oxley Act requires companies to include in their annual report on Form 20-F filed with the SEC, a report by management stating its responsibility for establishing internal control over financial reporting and to assess annually the effectiveness of such

internal control. The Company has complied with those provisions of the Sarbanes-Oxley Act applicable to foreign private issuers. The Board continues to believe that the Group has 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. The Company has established a Disclosure Committee, further details of which can be found in the Disclosure Policy and Disclosure Committee section on page 98.

The Directors’ assessment of the effectiveness of the internal control over financial reporting is set out in the Directors’ Responsibilities for, and Report on, Internal Control over Financial Reporting section in the Financial Statements on page 122.

The Company must disclose any significant ways in which its corporate governance practices differ from those followed by US companies under the Listing Standards. In addition, the Company must comply fully with the provisions of the Listing Standards relating to the composition, responsibilities and operation of audit committees. These provisions incorporate the rules concerning audit committees implemented by the SEC under the Sarbanes-Oxley Act.

The Company has reviewed the corporate governance practices required to be followed by US companies under the Listing Standards and its corporate governance practices are generally consistent with those standards.

Code of Conduct

The Code of Conduct, which is available on our website, astrazeneca.com, applies to all Directors, officers, full-time, part-time, contractor and temporary staff at all levels in every country where we operate. It has been translated into over 40 languages and every employee has a copy in his/her local language. It is designed to provide clear direction as to how the Company’s commitment to honesty and integrity is to be translated into consistent actions across all areas of the business. Compliance with the Code of Conduct and with the standards detailed by the Group in support of it is mandatory. The same applies to the laws and regulations of the countries in which we work and do business, as well as applicable national and international codes, and the Group seeks to operate to the highest of these standards.

The Code of Conduct also includes information on how to report possible violations of the Code of Conduct through the appropriate channels, including the

AZethics telephone lines and the new global website, AZethics.com. Anyone who raises a possible breach in good faith will be supported by management and will not be subject to retaliation, which would itself be considered a serious violation of the Code of Conduct. We review all alleged compliance breaches and concerns, and we investigate and report on them to the Audit Committee, as appropriate.

During 2009, 289 reports of alleged compliance breaches or other ethical concerns were made via the telephone helplines, AZethics.com website or Global Compliance e-mail or postal addresses described in the Code of Conduct. The number of reports via the equivalent channels in 2008 was 206. We believe that the increase in the number of reports via these channels is due, in part, to our efforts to enhance these reporting channels and, in part, to an increased awareness of the Code of Conduct and the accompanying training and communications.

As with the Code of Conduct, our Global Policies apply to all members of the Group. Like the Code of Conduct, the Global Policies provide clear and comprehensive guidance, in plain language, to all managers and employees as to their accountabilities in key ethical, compliance and corporate responsibility risk areas.

A critical element of the effectiveness of the Code of Conduct and Global Policies is to deliver clear training and education to employees on an ongoing basis.

A Group Finance Code of Conduct complements the Code of Conduct. It applies to the CEO, the CFO, the Group’s principal accounting officers (including key Finance staff in major overseas subsidiaries) and all Finance function employees, and it reinforces the importance of the integrity of the Group’s Financial Statements, of the reliability of the accounting records on which they are based and of the robustness of the relevant controls and processes.

Compliance and Group Internal Audit

The role of the Global Compliance function is to help embed a culture of ethics and integrity in the Group. Global Compliance works closely with GIA, with whom it provides joint assurance reporting to the Audit Committee. The key priorities for our Global Compliance function for 2009/2010 are closely aligned with the Group’s strategic priorities. During 2010, the Global Compliance function will continue to focus on ensuring the delivery of an aligned approach to compliance that addresses key risk areas across the business.

AstraZeneca Annual Report and Form 20-F Information 2009

98Directors’ Report | Business Organisation and Corporate Governance

During 2009, the Global Compliance Committee met quarterly. The remit of the committee is to oversee and co-ordinate implementation of an effective global compliance programme and evaluate its effectiveness. It does this by assessing key compliance risks within and across the SET functions; working with GIA to ensure co-ordination of compliance auditing and monitoring; reviewing results; and addressing significant policy violations and identifying trends.

Global Compliance provides direct assurance to the Audit Committee on matters concerning compliance issues, with a particular focus on compliance with IFPMA, EFPIA and PhRMA codes. Complementing this, GIA carries out a range of audits that include compliance-related audits and reviews of the assurance activities of other Company assurance functions. The results from these activities are reported to the Audit Committee.

GIA is an independent appraisal function that derives its authority from the Board through the Audit Committee. Its primary role is to provide reasonable and objective assurance to the Directors about the adequacy and effectiveness of the Group’s risk management and control framework and the internal controls over key business risks, including financial controls and compliance with laws, regulations and policies.

GIA seeks to discharge the responsibilities set down in its charter by reviewing:

>		The processes for ensuring that key business risks are effectively managed.

>		The financial and operational controls that help to ensure that the Group’s assets are properly safeguarded from losses, including fraud.

>		The controls that help to ensure the reliability and integrity of management information systems.

>		The processes for ensuring compliance with policies and procedures, external legislation and regulation.

>		On an ad hoc basis, whether value for money is obtained (in terms of efficient use of the Group’s resources).

GIA acts as a source of constructive advice and best practice, assisting senior management to improve governance, control, compliance and risk management.

Disclosure Policy and
Disclosure Committee

The Group’s Disclosure Policy provides a framework for the handling and disclosure of inside information and other information of interest to shareholders and the investment community. It also defines the role of the Disclosure Committee. During 2009, the members of the Disclosure Committee were: the CFO; the Executive Vice-President, Development; the General Counsel; the Vice-President, Corporate Affairs; the Vice-President, Investor Relations; and the Senior Vice-President, Group Finance. The Deputy Company Secretary acts as secretary to this committee. The Disclosure Committee meets regularly to assist and inform the decisions of the CEO concerning inside information and its disclosure. Periodically, it reviews the Group’s disclosure controls and procedures and its own operation as part of work carried out to enable management and the Board to assure themselves that appropriate processes are operating for the Company’s planned disclosures, such as its quarterly results announcements and scheduled investor relations events. In addition, the Disclosure Committee members are members of the steering group that reviews the drafts of, and the process for preparing, this Annual Report.

Disclosure of information to auditors

The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditors are unaware; and each Director has taken all the steps that he/she ought to have taken as a Director to make himself/herself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.

Other matters

Subsidiaries and principal activities

The Company is the holding company for a group of subsidiaries whose principal activities are described in this Directors’ Report. Principal subsidiaries and their locations are given in the Principal Subsidiaries section in the Financial Statements on page 186.

Branches and countries in which the
Group conducts business

In accordance with the Companies Act 2006, we disclose below the members of the Group that have representative or scientific branches/offices outside the UK:

>		AstraZeneca UK Limited: Albania, Algeria, Angola, Armenia, Azerbaijan, Bosnia and Herzegovina, Bulgaria, Chile, Costa Rica, Croatia, Cuba, Georgia, Ghana (scientific office), Ireland, Jordan, Kazakhstan, Kenya (scientific office), Macedonia, Romania, Russia, Serbia and Montenegro, Slovenia and Ukraine.

>		AstraZeneca AB: Egypt (scientific office), Latvia, Saudi Arabia (scientific office) and Slovakia.

>		AstraZeneca Export and Trading AB: Estonia, Lithuania, Romania and the United Arab Emirates.

>		AstraZeneca Singapore Pte Limited: Cambodia and Vietnam.

Distributions to shareholders and
dividends for 2009

The Company’s stated distribution policy comprises both a regular cash dividend and a share re-purchase component, further details of which are set out in the Capitalisation and shareholder return section in the Financial Review on page 42 and Notes 20 and 21 to the Financial Statements from pages 153 and 154, respectively.

The Company’s dividends for 2009 of $2.30 (141.4 pence, SEK 16.84) per Ordinary Share amount to, in aggregate, a total dividend payment to shareholders of $3,336 million.

Two of the Group’s employee share trusts, AstraZeneca Share Trust Limited and AstraZeneca Quest Limited, waive their right to a dividend on the Ordinary Shares that they hold and instead receive a nominal dividend.

A shareholders’ resolution was passed at the 2009 AGM authorising the Company to purchase its own shares. However, no share re-purchases took place in 2009. The Company will seek a renewal of its current permission from shareholders to purchase its own shares at the AGM on 29 April 2010.

During the Company’s share re-purchase programmes that operated between 1999 and 2008, a total of 376.3 million Ordinary Shares were re-purchased, and subsequently cancelled, at an average price of 2661 pence per share for a consideration, including expenses, of $18,099 million.

AstraZeneca Annual Report and Form 20-F Information 2009

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		Corporate Governance

Going concern accounting basis

Information on the business environment in which the Group operates, including the factors underpinning the industry’s future growth prospects, are included in the Business Environment section from page 12. Details of the product portfolio of the Group, our approach to product development and a summary of our development pipeline are included in the Research and Development section from page 22. Additional information on our Therapy Areas and a more detailed table of our development pipeline is included in the Therapy Area Review from page 55.

The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review. In addition, Notes 15 and 16 to the Financial Statements from pages 144 and 146, respectively, include the Group’s objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities and its exposures to credit, market and liquidity risk. Further details of the Group’s cash balances and borrowings are included in Notes 13 and 14 to the Financial Statements from pages 143 and 144, respectively.

The Group has considerable financial resources available. At 31 December 2009, the Group had $12.3 billion in financial resources (cash balances of $9.9 billion and committed undrawn bank facilities of $4.25 billion, with $1.9 billion of debt due within one year). The Group’s revenues are largely derived from sales of products which are covered by patents and for which, in the short term at least, demand is relatively unaffected by changes in the global economy. In addition, the Group has a wide diversity of customers and suppliers across different geographic areas. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing this Annual Report and the Financial Statements.

Changes in share capital

Changes in the Company’s Ordinary Share capital during 2009, including details of the allotment of new shares under the Company’s share plans, are given in Note 20 to the Financial Statements from page 153.

Directors’ shareholdings

The Articles require each Director to be the beneficial owner of Ordinary Shares in the Company with an aggregate nominal value of $125 (which currently represent at least 500 shares). Such holding must be obtained within two months of the date of the Director’s appointment. At 31 December 2009, all of the Directors complied with this requirement and full details of each Director’s interests in shares of the Company are set out in the Directors’ interests in shares section on page 115. Information about the shareholding expectations of the Remuneration Committee (in respect of Executive Directors and SET members) and the Board (in respect of Non-Executive Directors) is also set out in the Directors’ Remuneration Report on pages 108 and 110, respectively.

Shareholder communications

In its financial and business reporting to shareholders and other interested parties by means of quarterly, half-year and full-year reports, the Board aims to present a balanced and understandable assessment of the Group’s financial position and prospects.

The Company makes available to shareholders information about the Company through a range of media, including a fully integrated html corporate website, astrazeneca.com, containing a wide range of information of interest to institutional and private investors. The Company considers its website to be an important means of communication with its shareholders. The Company has been authorised by shareholders to place shareholder communications (such as the Notice of AGM and this Annual Report) on its corporate website in lieu of sending paper copies to shareholders (unless specifically requested by shareholders). Whilst recognising and respecting the fact that some of our stakeholders may have different preferences regarding the manner in which they receive information about the Company, we will continue to promote the benefits of electronic communication given the advantages that this has over traditional paper-based communications both in terms of the configurability and accessibility of the information that is provided and the consequent cost savings and reduction in environmental impact associated with reduced printing and distribution costs.

The Company has frequent discussions with institutional shareholders on a range of issues affecting its performance. These include individual meetings with some of the Company’s largest institutional shareholders to seek their views and any concerns can be reported to the Board. In addition, the Company responds to individual ad hoc requests for discussions from institutional shareholders and analysts. The Group’s Investor Relations department acts as a main point of contact for investors throughout the year. The senior independent Non-Executive Director is also available to shareholders if they have concerns that contact through the normal channels of Chairman, CEO, CFO and/ or the Group Investor Relations department has failed to resolve, or in relation to which such contact is inappropriate. All shareholders, including private investors, have an opportunity at the AGM to put questions to members of the Board on matters relating to the Group’s operation and performance. Formal notification of the AGM is sent to shareholders at least one month in advance. The Chairmen of the Board’s committees ordinarily attend the AGM to answer questions raised by shareholders. In line with the Combined Code, details of proxy voting by shareholders, including votes withheld, are given at the AGM and are placed on our website following the AGM.

Political donations

Neither the Company nor its subsidiaries made any EU political donations or incurred any EU political expenditure in 2009 and they do not intend to do so in the future in respect of which shareholder authority is required, or for which disclosure in this Annual Report is required, under the Companies Act 2006.

However, to enable the Company and its subsidiaries to continue to support interest groups or lobbying organisations concerned with the review of government policy or law reform without inadvertently breaching the Companies Act 2006, which defines political donations and other political expenditure in broad terms, a resolution will be put to shareholders at the 2010 AGM, similar to that passed at the AGM on 30 April 2009, to authorise the Company and its subsidiaries to make: (i) donations to political parties; (ii) donations to political organisations other than political parties; and (iii) incur political expenditure, up to an aggregate limit of $250,000.

AstraZeneca Annual Report and Form 20-F Information 2009

100Directors’ Report | Business Organisation and Corporate Governance

In 2009, the Group’s US legal entities made contributions amounting in aggregate to $733,687 (2008: $815,838) to state political party committees and to campaign committees of various state candidates affiliated with the major parties in accordance with pre-established guidelines. No corporate donations were made at the federal level and all contributions were made only where allowed by US federal and state law. US citizens or individuals holding valid green cards exercised decision-making over the contributions and the funds were not provided or reimbursed by any non-US legal entity. Such contributions do not constitute political donations or political expenditure for the purposes of the Companies Act 2006 and were made without any involvement of persons or entities outside the US.

Significant agreements

There are no significant agreements to which the Company is a party that take effect, alter or terminate on a change of control of the Company following a takeover bid.

There are no persons, with whom the Company has contractual or other arrangements, who are deemed by the Directors to be essential to the business of the Company.

Use of financial instruments

Notes 15 and 16 to the Financial Statements, from pages 144 and 146 respectively, include further information on the Group’s use of financial instruments.

Creditor payment policy

It is not Group policy formally to comply with the Confederation of British Industry’s code of practice on the prompt payment of suppliers. It is, however, Group policy to agree to appropriate payment terms with all suppliers when agreeing to 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 Company’s subsidiaries to trade creditors at the balance

sheet date was equivalent to 56 days’ average purchases (2008: 46 days). The methodology for this calculation has been amended in 2009 whereby rebates and chargeback accruals, previously included in this calculation, have been removed. The Company believes that as these amounts arise typically from our revenue arrangements, principally in the US, this methodology more accurately reflects time taken on average to repay creditors. The comparative calculation for the prior year is also presented under the new methodology. A considerable part of the trade creditors balance relates to the Merck account in the US, which has particularly long contractual payment terms. By removing this balance and other items not directly related to trade purchases in the US, a more accurate average of 47 days is obtained (2008: 40 days).

The Company has no external trade creditors.

Annual General Meeting

The Company’s AGM will be held on 29 April 2010. The meeting place will be in London. A Notice of AGM will be sent to all registered holders of Ordinary Shares and, where requested, to the beneficial holders of shares.

External auditor

A resolution will be proposed at the AGM on 29 April 2010 for the re-appointment of KPMG as auditor of the Company.

The external auditor has undertaken various non-audit work for the Company during 2009. More information about this work and the audit and non-audit fees paid by the Company are set out in Note 27 to the Financial Statements on page 185. 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 Committee section from page 94, 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 2009.

Bureau Veritas

Bureau Veritas UK Limited (Bureau Veritas) has provided external assurance on corporate responsibility related information within this Annual Report and of the detailed content of the ‘Responsibility’ section of our website. Bureau Veritas has found the information provided within this Annual Report to be accurate and reliable (based on the evidence provided and subject to the scope, objectives and limitations defined in the full assurance statement). The full assurance statement which contains detailed scope, methodology, overall opinion and recommendations can be found on AstraZeneca’s website, astrazeneca.com; web page content assured by Bureau Veritas is marked at the bottom of each page.

Bureau Veritas is an independent professional services company that specialises in quality, health, safety, social and environmental management with a long history of providing independent assurance services, and an annual turnover in 2008 of €2.6 billion.

On behalf of the Board

A C N Kemp

Company Secretary

28 January 2010

AstraZeneca Annual Report and Form 20-F Information 2009

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		Corporate Governance

My introduction to the 2009 Directors’ Remuneration Report seeks to give context to the pages that follow.

As we indicated in last year’s Directors’ Remuneration Report, the Remuneration Committee has undertaken and completed a review of Executive Director and SET member remuneration during the course of the year. As part of this process, we have consulted a number of institutional investors, and are grateful for their contribution to the development of our proposals.

We have concluded that the fundamental principles that underpin the Company’s approach to remuneration remain appropriate for the business and our current strategy. At the same time, we now have the opportunity, by developing our compensation structures, to build on the historical financial success of the Group, to invest for the future, and to focus on stewardship and shareholder value-creation over the long term.

We are therefore proposing to reshape the Group’s long-term incentive arrangements, not to increase the overall value of the package, but to recognise that AstraZeneca operates in a uniquely long-term industry. We aim to strengthen thereby the alignment between the time horizons over which our business investment decisions are taken and those to which our share incentive programmes relate.

You will see that we are proposing the introduction of a new share plan (to operate alongside the existing Performance Share Plan and simultaneous with the cessation of further grants of options under the Share Option Plan) with an eight-year time horizon. Shareholders have been receptive to a long-term plan of this nature, conditional on sustainable financial performance and delivery of shareholder returns. At the same time, our discussions with investors have recognised that the long-term nature of the plan means that the Remuneration Committee should retain some flexibility as to the operation of the plan to ensure that this combination of

incentive structures supports the best interests of the business and shareholders over the medium and long term.

The 2009 Directors’ Remuneration Report which follows describes the key principles that have informed the Remuneration Committee’s thinking, and provides a summary of the proposals themselves. We will seek shareholder approval for the new share plan at the AGM on 29 April 2010. Detailed plan terms, along with the specific performance requirements that will apply to the initial awards, will be set out in the circular sent to shareholders in advance of the AGM.

These proposals will facilitate the delivery of AstraZeneca’s business strategy. They explicitly reflect the discussions that we have had with shareholders. On behalf of the Remuneration Committee, I commend them to you.

John Varley
Non-Executive Director
Chairman of the Remuneration Committee

Directors’
Remuneration
Report

This Directors’ Remuneration Report (Report) has been prepared in accordance with the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (Regulations) and meets the relevant requirements of the Financial Services Authority’s Listing Rules. As required by the Regulations, a resolution to approve this Report will be proposed at the AGM on 29 April 2010.

The following sections of this Report, up to and including the Non-Executive Directors section on page 110, were not subject to audit by KPMG.

Remuneration Committee membership and meetings

The members of the Remuneration Committee (Committee) are John Varley (Chairman of the Committee), John Buchanan, Louis Schweitzer and Nancy Rothwell. They are all Non-Executive Directors. The Board considers them all to be independent (Louis Schweitzer was considered by the Board to be independent upon his appointment as Chairman; in accordance with the Combined Code, the test of independence is not appropriate in relation to the Chairman after his appointment). The independence of the Non-Executive Directors is discussed in more detail in the Business Organisation and Corporate Governance section from page 87. The Company Secretary acts as the secretary to the Committee.

The Committee met six times in 2009. The individual attendance record of members of the Committee is set out in the Board and Committee meeting attendance in 2009 table on page 92.

At the invitation of the Committee, except where their own remuneration was being discussed, David Brennan (CEO); Lynn Tetrault (Executive Vice-President, Human Resources and Corporate Affairs); Simon Appleby (Vice-President, Performance and Reward); and Viv Gill (Vice-President, Global Compensation) attended Committee meetings in 2009 and provided advice

and services that materially assisted the Committee. On one occasion in 2009, the Committee invited Simon Lowth (CFO) to attend a meeting to provide background information about performance measures that materially assisted the Committee in connection with its review of long-term incentive (LTI) arrangements for SET members. This was part of the overall review of the remuneration of SET members, including that of Executive Directors, which began in 2009 and is referred to in more detail below.

The Committee retains Carol Arrowsmith of Deloitte LLP (Deloitte) who provided independent advice on various matters it considered in 2009. During the year, Deloitte also provided taxation advice and other non-audit services to the Company.

Committee terms of reference and key activities during the year

Committee terms of reference

A copy of the Committee’s terms of reference is available on the Company’s website, astrazeneca.com, or by request from the Company Secretary.

The role of the Committee is to develop and deploy remuneration policies and practices for senior management, and for the Group more broadly, that support the implementation of our business strategy and which thereby help the organisation to create value for shareholders over time.

AstraZeneca Annual Report and Form 20-F Information 2009

102Directors’ Report | Directors’ Remuneration Report

The Committee has responsibility for determining on behalf of the Board the individual compensation paid to Executive Directors and SET members. It takes responsibility on behalf of the Board for reviewing the design and operation of total compensation structures and practices across AstraZeneca. In this regard, the Committee’s approval is required in relation to, amongst other things, decisions regarding:

>		The eligibility, structure, award/grant levels, performance metrics and targets, costs and final vesting levels under LTI plans for Directors, other SET members and the Company Secretary.

>		Annual bonus payments for Executive Directors, other SET members and senior executives below SET level.

>		The pension entitlements of Executive Directors and other SET members.

>		The Chairman of the Board’s remuneration (which is approved by the other members of the Committee and the senior independent Non-Executive Director).

>		Any single payment or award over $1 million.

>		Shareholding guidelines for Executive Directors and other SET members.

>		The contractual terms and conditions of, and any potential or actual payments arising on termination to, Executive Directors, other SET members and the Company Secretary so as to ensure that they are fair to the individual and the Company, that failure is not rewarded and that the duty to mitigate loss is fully recognised.

The Committee will again conduct a review of its terms of reference during 2010, taking advice as appropriate from its external adviser.

Key activities during the year

The Committee considered the following principal matters during 2009:

The strategic review of the remuneration and incentive framework for Executive Directors and other SET members. This has represented a considerable proportion of the Committee’s activities and focus during the course of the year. As part of its review, the Committee has undertaken a significant consultation with major shareholders and institutional investor organisations.

>		A review of the terms of senior executives’ remuneration packages on appointment, promotion and termination.

>		The assessment of Company and individual performance against performance targets to determine the level of executive bonuses for 2008 and to set executive bonus performance targets for 2009.

>		The approval of awards made under the Group’s main LTI plans: the AstraZeneca Performance Share Plan (PSP); the AstraZeneca Share Option Plan (SOP); and the AstraZeneca Pharmaceuticals LP Restricted Stock Unit Award Plan (RSU Plan) to SET members and other participants.

>		A review of the Company’s governance arrangements for global compensation matters.

>		A benchmarking review of the Committee’s activities and policies against institutional investor guidelines.

>		A review of the pension entitlements of Executive Directors and other SET members.

>		A review of the impact on compensation policies and practices of the current economic environment, including ensuring the appropriate degree of risk adjustment to aggregate and individual compensation decisions.

>		The preparation, review and approval of this Report.

Review of SET remuneration

The 2008 Directors’ Remuneration Report explained that the Company would undertake a review of total remuneration for SET members (including Executive Directors) during 2009. This review is now drawing to a close and has led to the development of the forward-looking remuneration policy disclosed in this Report.

There were a number of factors that prompted this review:

When the PSP was approved by shareholders at the AGM in early 2005 (following the last full-scale review of executive remuneration), the Committee undertook to review its operation within a period of five years, and to take into account the views of the Company’s shareholders and the needs of the business at that time.

>		Shareholder approval to operate the SOP expires during May 2010. This provided the Company with a natural opportunity to review the current approach to remuneration, pay policies and incentive structures and to consider how these may best be developed to support the business strategy going forward.

>		The Committee is aware that the subject of executive remuneration is much on the minds of shareholders and that, since its last review, a great deal has changed both in the general market and the corporate governance landscape and in the shape of, and strategic challenges faced by, the global pharmaceutical industry.

In conducting this review, the Committee has been mindful of shareholder views and expectations, and has sought to give major shareholders an opportunity to influence the direction of the proposals by dialogue during the course of the review.

Key remuneration principles

The Committee concluded that the following objectives should continue to define its approach to the formation and execution of AstraZeneca’s remuneration policy:

>		All aspects of executive remuneration should be developed in the context of shareholder views on ‘best practice’ and be designed to help AstraZeneca create sustainable growth in shareholder value by the successful implementation of strategy.

>		Reward structures and performance measures should support a strong performance culture enabling delivery of the business strategy, where all employees have a clear understanding of the Group’s objectives, how their work will impact those objectives and how they will benefit from delivering high levels of performance.

>		Base pay and total compensation positioning against the market should be appropriate to attract and develop high-calibre talent and SET remuneration should continue to be referenced to competitive levels of remuneration in the relevant local markets.

Additionally, some specific objectives have been established as a consequence of the review. These support the introduction of a new incentive structure to allow us to rebalance our LTI framework and include the following:

AstraZeneca Annual Report and Form 20-F Information 2009

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		Corporate Governance

>		A clear desire in the business, supported by the Committee, to move towards a longer-term framework which will strengthen alignment with the inherently long-term nature of pharmaceutical drug development.

>		Revised LTI structures, designed to provide a clear focus for the business to outperform our industry peers over time, to deliver operational efficiency and to engender a strong sense of stewardship that will deliver long-term sustainable shareholder value.

No other element of Executive Director or SET remuneration will change as a consequence of the review. In particular, there is no intention to increase the overall quantum of short-term bonus or long-term reward opportunity and the annual incentive structure remains unchanged.

The review has also concluded that the shareholding guidelines for Executive Directors and other SET members will be increased from current levels and, as such, the shareholding requirement for the CEO is being increased to 200% of base salary (from 100%) and the requirement for all other Executive Directors and SET members will be increased to 125% of base salary (from 100%).

Long-term share plans

The SOP will expire during 2010 and the review has concluded that no further grants will be made under the SOP.

From 2010 onwards, and subject to shareholder approval of the new share plan, it is proposed that the long-term share interests of Executive Directors and other SET members will be provided through two complementary share plans as detailed below.

The PSP will continue to operate. However, performance conditions will be rebalanced so that the current relative TSR performance condition will apply in respect of one half of any award made under the PSP (as opposed to 100%, as under the current terms of the PSP). The other half of the award will be subject to a new cash flow performance measure that will improve the focus on operational management of the business that is consistent with generating value for shareholders. We have chosen a cash flow measure because it will encompass all elements of operational and financial performance, represents a strong proxy through time for shareholder value-creation and is a key measure for the Group. In conjunction with this new measure, the TSR performance condition will continue to strengthen the focus on outperformance of competitors.

Shareholder approval will be sought at the AGM in April 2010 for the introduction of a new share plan called the AstraZeneca Investment Plan (AZIP) (to operate alongside the existing PSP) with an eight-year time horizon. Shareholders have been receptive to a long-term plan of this nature, conditional on sustainable shareholder returns and financial performance. Such a plan will provide annual awards to Executive Directors and other SET members which must be held for a total of eight years and are subject to a four-year performance requirement from the date of award.

The greater weighting within the LTI opportunity will be given to awards under the PSP. For 2010, awards under the PSP will be positioned so that interests under this plan can deliver 75% of the overall expected value from long-term remuneration. 25% of the overall long-term opportunity for 2010 will therefore be delivered through the AZIP. The Committee will keep under review the appropriateness of this weighting.

The combination of awards under these two plans will fundamentally improve the alignment between the time horizons over which our business investment decisions are taken and those to which our long-term remuneration vehicles relate.

Performance conditions for the PSP

To date, awards to Executive Directors and other SET members under the PSP were subject to a TSR-only performance condition.

For awards to be made in 2010 under the PSP, it is intended that:

50% of the award will be based on relative TSR against a selected peer group of global pharmaceutical companies, of which:

	–		25% of the maximum award will vest for performance at the median of the peer group; and

	–		75% of the maximum award will vest for upper quartile performance; the Committee will retain its existing discretion to determine the amount of vesting for performance significantly above upper quartile, up to 100% of the maximum award.

50% of the award will vest subject to the achievement of a free cash flow target, which will operate as a cumulative cash flow target over a three-year performance period.

This free cash flow measure has been chosen because it encompasses a number of important elements of operational and financial performance and helps to align executives’ rewards with shareholder value-creation. The level of vesting of this element will be based on a sliding scale against a target that is intended to represent a significant challenge for the business. It is intended that the Committee should have the discretion to adjust, but on an exceptional basis only, the free cash flow target during the performance period for material factors that might otherwise distort the performance measure in either direction. This is so that performance can be assessed against targets that have been set on a consistent basis. For example, adjustments may be required to reflect exchange rate movements, significant acquisitions or divestments and major legal and taxation settlements. Any major adjustments to the calculation will be disclosed to shareholders. There will be no retesting of performance. Further information about the applicable free cash flow target will be set out in the Notice of AGM and shareholders’ circular.

Performance requirement for awards under the AZIP

The AZIP will be aligned to AstraZeneca’s targeted product development cycle, reflecting the long term investment horizons that are a feature of the industry. The performance requirements attached to awards under the AZIP will be a combination of dividend and dividend cover tests, assessed over a period of up to four financial years beginning at the start of the first financial year of the Company in which the award is granted. A subsequent sale restriction will apply over a period that extends to the full eight-year period, during which time forfeiture provisions will usually apply. Accordingly, participants will not generally be able to realise value until the full eight-year period has elapsed.

The Committee’s intention in its choice of proposed performance tests has been to establish a performance requirement that motivates financial business performance that will generate returns for shareholders on a sustainable basis over an extended time period. Further details relating to the proposed performance requirement and targets for 2010 awards will be provided in the Notice of AGM and shareholders’ circular.

AstraZeneca Annual Report and Form 20-F Information 2009

104Directors’ Report | Directors’ Remuneration Report

Components of remuneration


Component of remuneration	Role within the remuneration framework	Summary of Policy	Applies to

Base salary (fixed)	Base fixed remuneration.	Based on conditions in the relevant geographic market and recognising the value of an individual’s sustained personal performance and contribution to the business, taking account of the market rate for an individual’s skills and experience. Benchmarked against external comparators.	All employees



Pension arrangements (fixed)	Provision of retirement benefits.	Benchmarked against the relevant local employment market.	All employees



Benefits (fixed)	Provision of standard non-cash employment benefits, such as healthcare, insurances and, for certain employees, facilitated car purchase arrangements.	Cost-effective and compatible with relevant welfare arrangements and local market norms.	All employees



Short-term bonus (variable)	An annual cash incentive opportunity determined by reference to Group, functional and individual performance, measured over a single financial year of the Company and taking into account external expectations of performance.	Differs by market, but the Group performance measures ensure that all eligible employees receive an element of reward based on the Company’s overall financial performance. The functional goals are agreed by the Committee at the start of the year and are derived from the business scorecard, the key elements of which are set out in the Strategy, objectives and 2009 performance table from page 16, and are monitored as part of the quarterly business review (QBR) process. Individual goals are based on annual objectives, which are linked to functional goals.	All eligible employees



Deferred bonus plan (variable)	Aligns SET members’ interests with those of shareholders.	SET members must defer a proportion of their short-term bonus (currently one-third of pre-tax bonus for Executive Directors and one-sixth for other SET members) into Ordinary Shares or ADSs for a three-year period.	SET members



LTI plans (variable) – for more information on these plans see the LTI plans section from page 107	Long-term equity incentive awards to provide individual executives and employees with total compensation opportunities that are competitive against local market practice, for the achievement of operational excellence, strong financial performance and actions that are closely aligned with the interests of shareholders. Subject to shareholder approval, the primary LTI plans in which SET members participate from 2010 will be the PSP and the AZIP.	AstraZeneca Performance Share Plan. AstraZeneca Investment Plan (from 2010, subject to shareholder approval). Share Option Plan (final awards made in 2009). Global Restricted Share Plan (from 2010, replacing existing restricted stock unit plans).	SET members and other senior executives SET members Senior management and SET members Eligible employees globally



Other share plans	‘All employee’ share participation arrangements, including some that are tax-approved, for example in the UK.	Examples include the Share Incentive Plan and Savings-Related Share Option Plan (UK)¹.	Eligible employees



Shareholding guidelines	Aligning SET members’ interests with those of shareholders.	The current expectation is for SET members to hold shares with a value equivalent to their base salary. From 2010, the CEO will be expected to hold shares equivalent to 200% of base salary and the CFO and other SET members will be expected to hold 125% of base salary in shares.	SET members



Overall approach	When assessing the overall value of a SET member’s remuneration the Committee considers, both separately and in aggregate, each component of the SET member’s total remuneration.

¹Further information on these plans is provided in Note 24 to the Financial Statements from page 161.

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2010 proposed components of SET remuneration

2009 components of remuneration

During 2009, the remuneration components for all Group employees (including those of SET members) comprised fixed and variable performance-related elements. Summaries of these elements are included in the table on page 104.

The way in which these elements of remuneration are combined and applied varies according to a range of factors, including specific business needs and practices in different markets, although, in general, the more senior the role within the business, the greater the proportion of total remuneration is made up of variable performance-related elements. The Committee seeks to ensure that the overall proportion of variable pay to which Executive Directors and other SET members may become entitled forms a significant part of their overall remuneration opportunity. The Committee’s objective for senior management is to ensure that such variable pay is linked to a range of measures designed to promote both individual and team behaviour and performance in a way that supports the success of AstraZeneca and

creates value for its shareholders. Such measures are designed to stretch and challenge the relevant individuals whilst at the same time giving them an opportunity to participate as shareholders in the creation of long-term economic value.

The Company has continued to take into account the wider business environment and employment conditions across the Group. In particular, no base pay increases were awarded in respect of the 2009 calendar year to Executive Directors or other SET members whose responsibilities were unchanged. In addition, award opportunities under the Group’s LTI plan framework have been held at a consistent level since the adoption of the PSP in 2005.

For 2010, the Company will continue to benchmark against appropriate comparator companies and will assess whether or not and to what extent the overall opportunities for remuneration offered by the current structure of remuneration remain appropriate in the context of changes within the business and the external environment in which it operates.

Remuneration and terms of employment for Executive Directors and other SET members

Illustration of fixed and variable performance-related remuneration

Based on AstraZeneca’s remuneration policy, the Components of remuneration – expected value basis charts below illustrate the potential weighting given to fixed and variable performance-related elements of the remuneration package at Executive Director level. Variable performance-related elements of the package are shown on an ‘expected value’ basis, and in the event that performance conditions are not met, such elements would not deliver any value. The ‘expected value’ approach considers the range of possible outcomes and the probability attached to each, in order to provide a value that represents the average that would be delivered if the arrangements were operated over many years. The ‘expected value’ for bonus payment is taken to be the target payout level.

Fixed remuneration

Both Executive Directors’ terms and conditions are UK-based and are benchmarked against external UK comparators, apart from David Brennan’s pension and health insurance arrangements, which are described below.

Base salary

The base salary for Executive Directors and other SET members is determined by the Committee. Salary decisions reflect the experience and performance of the individuals to whom they apply, taking account of market competitiveness and the level of increases applicable to employees in the wider Group. The Committee has again decided that in the case of the CEO and those SET members (other than the CFO) whose responsibilities are unchanged, there will be no salary increases for 2010. For Executive Directors and other SET members, the policy has been to position salaries at the median of the relevant market. In accordance with this policy, and given that his base salary has remained at the same level since he was appointed as an Executive Director in 2007, Simon Lowth (CFO) has been awarded a base salary increase, effective from 2010, illustrated in the table opposite.

The base salaries of Executive Directors are set out opposite.

Components of remuneration – expected value basis

Chief Executive Officer


Fixed	%		Variable	%

A Base Salary		22	B Bonus		22

			C PSP		42

			D AZIP		14

Chief Financial Officer


Fixed	%		Variable	%

A Base Salary		29	B Bonus		26

			C PSP		34

			D AZIP		11

Executive Directors’ base salaries in 2009 and 2010


	Annual salary in 2009		Annual salary in 2010		Increase
Executive Director	£		£		%

David Brennan		972,900		972,900		–

John Patterson¹		540,000		n/a		n/a

Simon Lowth		550,000		620,000		13


¹	John Patterson retired from the Board on 31 March 2009.

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Pension arrangements

The table in the Defined benefit arrangements section on page 113 gives details of the changes in the value of the Executive Directors’ accrued pensions during 2009.

CEO’s pension arrangements

David Brennan is a member of the AstraZeneca US Defined Benefit Pension Plan (US DBP), by virtue of his membership of pension plans applicable to legacy Astra Merck employees. On his appointment to the Board, the rules of the US DBP were amended so as to remove bonus payments from the calculation of his pensionable pay. Benefits for members of the US DBP are delivered on a tax-qualified basis, with accrued benefits that exceed specific limits under the plan’s formula and the US Tax Code being delivered through a supplementary, non-qualified plan.

The normal pension age under the US DBP is 65. However, on leaving or retiring from employment, David Brennan is eligible to take a pension or lump sum equivalent based on accrued service and final pensionable pay (ie without actuarial reduction) due to his satisfaction of a condition in the pension plan relating to the combined age and service exceeding 85 years, as previously disclosed.

David Brennan’s participation in the US DBP is subject to a service cap at 35 years’ service, which will be attained in January 2011, after which no further service accrual can be earned.

Members and, in the event of death, surviving spouses/dependants can elect, in relation to those benefits delivered on a tax-qualified basis under the US DBP, to take pensions in lump sum form based on actuarial valuation. Members or spouses/dependants may not make such an election in relation to any supplementary non-qualified benefits.

In addition, David Brennan (as a US citizen) is a contributing member of the US 401(k) savings plan¹. He also contributes to an associated non-qualified plan, as described in the Defined contribution arrangements section on page 113.

In the event of a US participant becoming incapacitated then permanent health insurance cover will provide continuation of a proportion of salary, subject to the satisfaction of certain medical criteria. In the event of the death of a participant prior to retirement, a life assurance policy will provide surviving spouses/dependants with a lump sum equivalent to one times salary (such salary being capped at the maximum pensionable salary under the plan).

UK Executive Directors’
pension arrangements

UK Executive Directors have the option to participate in a UK pension plan according to their eligibility, or to take a cash allowance in lieu of pension. The cash allowance is consistent with the appropriate value of the alternative gross pension benefit.

John Patterson (formerly Executive Director, Development) elected to take the cash allowance in lieu of pension for the option year 1 July 2008 to 30 June 2009 (as detailed in the Defined contribution arrangements section on page 113).

In respect of pension accrued up to his retirement, he remained a member of the AstraZeneca main UK defined benefit pension plan (AstraZeneca Pension Fund). The normal pension age under this plan is 62. However, a member’s accrued pension is available from age 60 without any actuarial reduction. John Patterson retired from the AstraZeneca Pension Fund on 6 April 2009 aged 61 and was eligible to take a pension based on accrued service and final pensionable pay. He opted to take a commutation lump sum on retirement, in lieu of part of his pension entitlement. This lump sum was calculated and granted in accordance with the rules of the AstraZeneca Pension Fund and amounted to £785,000. This reduced his pension entitlement after commutation to £303,000 per annum.

Pensions in payment are increased annually in line with inflation, as measured by the UK Retail Prices Index, up to a maximum of 5%.

Simon Lowth (CFO) is eligible to join the AstraZeneca main UK defined contribution pension plan (UK Defined Contribution Plan) at a company contribution rate of 24% of annual base salary or, alternatively, to take the company contribution as a cash allowance. For the option years 1 July 2008 to 30 June 2009 and 1 July 2009 to 30 June 2010, he elected to take the cash allowance (as detailed in the Defined contribution arrangements section on page 113).

In the event of a senior employee in the UK Defined Contribution Plan (or where an alternative cash allowance has been taken) becoming incapacitated, then permanent health insurance cover provides continuation of a proportion of salary subject to the satisfaction of certain medical criteria. In the event of death prior to retirement, dependants are entitled to a pension and/or lump sum secured from a multiple of 10 times salary.

Benefits

In conjunction with the majority of employers, certain benefits are made available to Executive Directors and other SET members via local benefits programmes offered by AstraZeneca. Benefits under these programmes typically include healthcare, insurances and facilitated car purchase arrangements.

Variable performance-
related remuneration

Executive Directors and other SET members are eligible to participate in different elements of variable performance-related pay, which are described below. The decision as to whether or not in any given year they receive any or all of their elements of variable pay is determined by the Committee, which will typically have regard to the performance of the individual and the Group and will consider the elements of variable pay applicable to senior employees in other comparable organisations in making such a determination.

Short-term bonus

Performance criteria

Executive Directors and other SET members are eligible for a short-term bonus. The basis for the payment of any short-term bonus is determined by reference to a range of factors linked to the underlying performance of AstraZeneca’s business, the performance of the functional area for which the individual is responsible and the performance of the individual in his or her role.

Structure and assessment of performance

As set out in the 2008 Directors’ Remuneration Report, following a review by the Committee in 2008 of the performance criteria for the determination of annual bonuses for Executive Directors and other SET members, the performance criteria were adjusted in 2009 to align more closely with the current objectives and measures that are used by the business, and this approach will continue to apply for 2010. For 2010, the bonus ranges are the same as for 2009. The bonus deferral requirements, described in more detail below, are also unchanged for 2010. Executive Directors’ and other SET members’ bonuses for 2009 were based on performance criteria linked to the following targets:


¹	The 401(k) savings plan is a qualified plan to which eligible employees may make salary-deferral contributions on a post-tax and/or pre-tax basis. Employers may also make matching or non-elective contributions to the plan. There is a supplementary non-qualified plan in place for all eligible employees whose earnings exceed specific limits.

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>		60% by reference to EPS, cash flow targets and the objectives in each of the strategic priority areas identified by the Board for the business, the key elements of which are set out in the Strategy, objectives and 2009 performance table from page 16 and which are monitored as part of the QBR against targets set by the Committee at the beginning of the year and taking into account external expectations of performance; and

>		40% by reference to individual measures and initiatives which link to the business objectives relevant to the individual’s functional accountability (or, in the case of the CEO, the average of these individual outcomes).

These measures reinforce AstraZeneca’s emphasis on individual and business accountability. The key measures referred to above are clearly set out in the Strategy, objectives and 2009 performance table from page 16, whereby Group and functional objectives and measures are managed in a robust and consistent way and assessed by the SET as part of the QBR. The outcome of this process is rigorously scrutinised by the Board.

Bonus ranges for 2010

For 2010, the bonus ranges for each Executive Director are shown below and are the same as for 2009.

Bonus outcomes for 2009

In assessing bonuses for 2009, the Committee took into account the strong EPS (excluding restructuring and synergy costs) and cash flow performance, which in both cases significantly exceeded budget, together with overall business and financial outcomes and relevant functional performance against clear measures and initiatives set at the beginning of the bonus year. The key elements of these strategic priorities and business objectives are set out in the Strategy, objectives and 2009 performance table from page 16, in

relation to the following categories, which the Committee believes are consistent with delivering shareholder value:

>		Strengthen the pipeline

>		Grow the business

>		Reshape the business

>		Promote a culture of responsibility and accountability.

When assessing the performance of the business in these categories, the Committee noted that during 2009 there had been three significant regulatory approvals across various jurisdictions, four regulatory submissions, the agreement of three major late-stage in-licensing deals and the announcement of four co-promotion collaborations. These achievements were underpinned by a continuing emphasis on reshaping the business and annualising the benefits from restructuring, the strong sales performance of the Group despite the ongoing challenging economic environment and a level of employee engagement which was above the industry average.

Having assessed the Company’s performance against all the measures set out above, the Committee is satisfied that the bonus payments that have been earned against stretching performance targets are fully justified.

The bonus outcomes for the Executive Directors for 2009 are shown in the table below.

Bonus share deferral requirements

Consistent with best practice, the Committee has put in place a requirement that certain proportions of any short-term bonus payment (as specified below) be deferred and invested into Ordinary Shares or ADSs. Broadly, these are acquired on the open market at the prevailing market price and held for a period of three years from the date of acquisition before being delivered to individual Executive

Directors and other SET members. This arrangement is one of the ways in which, over time, Executive Directors and other SET members will be able to build up a significant shareholding in the Company. The proportion currently deferred into shares is one-third of the pre-tax bonus for Executive Directors and one-sixth for other SET members. On leaving, participants would normally have to wait for the shares to be released at the end of the three-year period. For Executive Directors and other SET members who cease employment for reasons other than that of good leaver (for example, those who are dismissed), the deferred bonus award will lapse, unless the Committee decides otherwise before the cessation of employment.

LTI plans

During 2009, Executive Directors and other SET members were eligible to be granted share option awards under the SOP and performance share awards under the PSP. The grant of such options and award of such shares were determined by the Committee, as were the performance targets that apply to their vesting and/or exercise. The PSP and the SOP were intended to align the interests of Executive Directors and other SET members with those of shareholders. For share option awards granted under the SOP, it is the expectation of the Committee that Executive Directors and other SET members will retain the net number of shares from the exercise of options for a period of not less than six months from the date of exercise. As described above, no further share option awards will be granted under the SOP and this plan will expire at the end of its 10-year life in May 2010. The Company will not be seeking re-approval of the SOP by shareholders. Those share option awards granted to date under the SOP will remain exercisable until those options lapse. For further information on the SOP, see the AstraZeneca Share Option Plan section on page 109.

Bonus ranges for 2010


	Bonus range for 2010
Executive Director	%

David Brennan		0–180

Simon Lowth		0–150

Bonus outcomes for 2009


	Short-term bonus (delivered as a combination of cash and shares,
	as shown in the Directors’ emoluments in 2009 section from page 111)¹
Executive Director	£000%		of salary

David Brennan		1,751		180

John Patterson²		187		138

Simon Lowth		825		150


¹	Bonuses for Executive Directors are not pensionable.

²	John Patterson’s bonus for 2009 was considered by the Committee in January 2010 and his bonus was based on his eligible earnings for the period in 2009 prior to his retirement on 31 March 2009.

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Shareholding guidelines

For Executive Directors and other SET members, the Committee has established target shareholding guidelines, under which it is expected that they build up their own shareholding in the Company. For 2009, the Committee’s expectation was a shareholding with a market value approximately equivalent to their base salary. As a result of the review of the remuneration of SET members carried out in 2009, the Committee concluded that the target should be increased from 2010, such that the CEO will be expected to hold shares in the Company with a market value approximately equivalent to 200% of his base salary. For other Executive Directors and SET members, the guideline is a shareholding with a market value approximately equivalent to 125% of their base salaries. It is expected that these shareholding targets will be reached over a period of five years through shares delivered from the various LTI plans as well as the deferred part of the short-term bonus (described above).

AstraZeneca Performance Share Plan

The PSP was approved by shareholders at the AGM in 2005 and provides for the grant of performance share awards (Share Awards) over Ordinary Shares or ADSs (together, Shares).

Basis of participation
The Committee is responsible for setting the policy for the way in which the PSP should operate, including agreeing performance targets, identifying which employees should be invited to participate in the PSP and the level of Share Awards. Participation is highly selective and tends only to include senior employees on the basis of their performance. Share Awards are not pensionable and may not generally be assigned or transferred.

Generally, Share Awards can be granted at any time (although in practice they are awarded annually), but not during a close or prohibited period of the Company. In 2009, the main grant of Share Awards was made on 27 March, with other Share Awards approved by the Committee in relation to, for example, new appointments, promotions or assignments being granted on 28 August. The value of Shares subject to a Share Award is determined by reference to the market price of Shares over the three-day period immediately preceding the date of grant.

Details of Share Awards granted to Executive Directors are shown in the Performance Share Plan table on page 116.

Performance conditions

Save in exceptional circumstances, which are prescribed in the PSP rules, the vesting of Share Awards is contingent on the satisfaction of specified performance targets and continued employment with the Group. In addition to the satisfaction of these performance targets, Share Awards will generally not vest until the third anniversary of the date of grant, although Share Awards may vest in part on a time pro-rated basis where a participant ceases to be in relevant employment under certain circumstances during the vesting period, to the extent that the performance targets have been met.

Performance period and vesting dates

In the case of all Share Awards granted to date, the performance target relates to the three-year period commencing on 1 January of the year of grant. Therefore, for the Share Awards made in 2009, the performance period runs from 1 January 2009 to 31 December 2011. The vesting date is the third anniversary of the date of grant.

Performance targets

For all Share Awards granted so far to Executive Directors and other SET members, including Share Awards granted in 2009, the performance target is the Company’s TSR over the relevant three-year period compared with the TSR of a selected peer group of pharmaceutical companies for the same period. For share awards granted up to and including 2007 these companies were: Abbott Laboratories, Inc., BMS, Eli Lilly & Company, GlaxoSmithKline plc, Johnson & Johnson, Merck, Novartis AG, Pfizer Inc., F. Hoffmann-La Roche Ltd, Sanofi-Aventis, Schering-Plough Corporation and Wyeth Inc. As a result of corporate actions in the pharmaceutical sector during 2009, Schering-Plough Corporation and Wyeth Inc. have been removed from the peer group. As a result of this, the Committee has decided the following in relation to outstanding unvested awards:

>		Share Awards in 2007: the TSR performance for Schering-Plough Corporation and Wyeth Inc. was adjusted from a date a week before the announcement of the relevant corporate action to the end of the relevant performance period so as to track the TSR of the acquiring companies (Merck in the case of Schering-Plough and Pfizer Inc. in the case of Wyeth Inc.).

>		Share Awards in 2008 and 2009: Schering-Plough Corporation and Wyeth Inc. were removed from the peer group thus reducing the size of the peer group to 10 companies (excluding AstraZeneca).

For these awards, AstraZeneca’s TSR will be compared with the TSR for the 10 companies remaining in the peer group in respect of the relevant performance period.

TSR measures share price growth and dividends re-invested in respect of a notional number of shares, from the beginning of the relevant performance period to the end of it, and ranks the companies in the selected comparator group by reference to their TSR achieved over that period. The rank which the Company’s TSR achieves over the performance period will determine how many Shares will vest under the relevant Share Award. For the purposes of future communications to shareholders and PSP participants, payouts against performance in relation to TSR for all existing and future Share Awards will be expressed as a percentage of the maximum Share Award currently payable, shown within a range of 0 to 100%. This new presentation is shown in the table below.


TSR ranking	Vesting percentage
of the Company	(%)

Below median		0

Median		25

Upper quartile		75

Between median and upper quartile	Pro rata

Significantly above upper quartile	Up to 100

To alleviate any short-term volatility, the return index is averaged in the TSR calculations for each company over the three months prior to the start and end of the relevant performance period.

In addition to the TSR performance target being met for each Share Award as set out above, the Committee also has to satisfy itself that achievement of the TSR performance target is a genuine reflection of the Company’s underlying financial performance and has the discretion to prevent Share Awards from vesting or only to allow them to partially vest where this appears to the Committee to be warranted.

At the discretion of the Committee, more than 75% of the maximum Share Award may vest, up to the limit of the maximum award, if the Company’s TSR performance is substantially better than that of the upper quartile of the comparator group. For Share Awards to vest at this level, the Company would need to have sustained a level of performance significantly in excess of upper quartile over a period of years and the Committee would need to be satisfied that this was warranted. The number of any additional Shares that may vest in this way may not exceed 25% of the total number of Shares made the subject of a Share Award on the date of grant.

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For those Share Awards to be made in 2010, as described above, 50% of the Share Awards will continue to be based on relative TSR against a selected peer group of pharmaceutical companies. The remaining 50% will vest subject to performance against an adjusted free cash flow target. In respect of these awards, the relevant peer group for the TSR measure will be: Abbott Laboratories, Inc., BMS, Eli Lilly & Company, GlaxoSmithKline plc, Johnson & Johnson, Merck, Novartis AG, Pfizer Inc., F. Hoffmann-La Roche Ltd and Sanofi-Aventis. Further information about the applicable free cash flow target will be set out in the Notice of AGM and shareholders’ circular.

Individual limit

In respect of any financial year of the Company, the maximum market value of Shares that may be put under a Share Award in respect of an employee is 500% of that employee’s base salary.

The actual individual limits that apply under the PSP, subject to this maximum, are set by the Committee from time to time.

Performance under the PSP in 2009

The TSR graphs on page 114 show, for each Share Award, how the Company’s TSR performance has compared with the TSR for the companies in the comparator group from the first day of the relevant performance period to 31 December 2009 and how the Company ranks against those other peer companies on this basis. We will continue to report on the performance of each Share Award against the relevant performance target during the relevant vesting period.

Change of control provisions

On a change of control of the Company as a result of a general offer to acquire all of the Ordinary Shares in the Company, Share Awards will vest pro-rata to the time elapsed between the date of grant of the Share Award and the date of the change of control to the extent that the relevant performance targets have been met up to the date of the change of control (or the most practicable earlier date). The Committee will, however, have discretion to take into account any other factors it believes to be relevant in determining the extent to which Share Awards will vest in these circumstances.

AstraZeneca Share Option Plan

The SOP was approved by shareholders at the AGM in 2000 and provided for the grant of share option awards (Option Awards) over Shares. The SOP was approved for a period of 10 years and will expire in May 2010. The Company will not be seeking re-approval of the SOP by shareholders.

Basis of participation

The Committee was responsible for setting the policy for the way in which the SOP should operate, including agreeing performance targets and identifying which employees should be invited to participate and the level of Option Awards. Participation was highly selective and tended only to include senior employees on the basis of their performance (except in the US where for reasons of custom and practice, participation in the SOP was more widespread). Option Awards were not pensionable and may not generally be assigned or transferred.

In 2009, the main grant of Option Awards was made on 27 March, with other Option Awards approved by the Committee in relation to, for example, new appointments, promotions or assignments being granted on 28 August. The exercise price was fixed by reference to the market price of Shares over the three-day period immediately preceding the date of grant.

Details of Option Awards granted to Executive Directors are shown in the Share options table on page 118.

Performance conditions

The SOP rules require that the Committee, before agreeing to grant an Option Award to Executive Directors and others, considers whether or not the underlying performance of the Company justifies a grant. In addition, it must also be satisfied that each individual nominated is performing to the necessary standard.

In agreeing grants of Option Awards in 2009, the Committee took into account strong underlying financial performance and progress towards achieving longer-term goals.

The Committee also sought and received assurances that each individual proposed for the grant of an Option Award has been performing in a manner that justified a grant to them. There was some variation in the level of grants being proposed between individuals, to reflect differing levels of performance and their seniority within the business.

As well as taking into account these performance considerations at the point of granting Option Awards, the Committee imposed performance conditions in respect of the exercise of such Option Awards by SET members (including the Executive Directors) which, in the view of the Committee, were considered appropriately stretching. In order for Option Awards to vest, the EPS of the Group must increase at least in line with the UK Retail Prices Index plus 5% per annum on average, over a three year period, the

base figure being the EPS for the financial year preceding the date of grant, with no retesting. In addition, since the review of executive remuneration in 2004, the Committee has included a condition that, if an event occurs which causes material reputational damage to the Company, such that it is not appropriate for the Option Awards to vest and become exercisable, the Committee can make a determination to reflect this.

Change of control provisions

On a change of control of the Company as a result of a general offer to acquire all of the Ordinary Shares in the Company, any unvested Option Awards vest immediately following the change of control. All outstanding vested Option Awards can be exercised during the period of six months from the date of the change of control. The Company will use its reasonable endeavours to ensure that any Shares acquired from an exercise following a change of control are subject to the same terms as shares of the same class that were acquired under the general offer. Unexercised Option Awards will lapse at the end of the six-month period following a change of control or, if the Option Award is exchanged for an option relating to shares in a different company, the date of exchange, whichever is earlier.

Dilution

The dilutive effect of the grants of Option Awards on the Company’s issued share capital was also considered by the Committee, in accordance with its commitment, reflecting the guidance of the Association of British Insurers, that the percentage of the issued share capital that could be allocated under all of the Company’s employee share plans over a period of 10 years should be under 10%. This commitment is applied by the Committee in practice as a limit, on average, of under 1% per annum. The Committee concluded that a grant of Option Awards to those SOP participants and individual Executive Directors proposed for a grant was appropriate given the level of performance achieved. None of the other LTI plans currently operated by the Company have a dilutive effect because they do not involve the issue and allotment of new Ordinary Shares but rather rely on the market purchase of Ordinary Shares or ADSs that have already been issued.

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Restricted Stock Unit Plans

The RSU Plan was introduced in 2007 and provides for the grant of restricted stock unit awards to selected employees (predominantly in the US). The MedImmune, Inc. Restricted Stock Unit Award Plan (MedImmune RSU Plan) was introduced in 2008 to make restricted stock unit awards to employees of MedImmune. The RSU Plan and MedImmune RSU Plan are used in conjunction with the SOP to provide a mix of restricted stock units and share options. Restricted stock unit awards typically vest on the third anniversary of the date of grant and are contingent on continued employment with AstraZeneca. In 2009, restricted stock unit awards were made under the RSU Plan and the MedImmune Plan on 27 March. Neither the RSU Plan nor the MedImmune RSU Plan are used to make restricted stock unit awards to Executive Directors or other SET members, nor may they operate in respect of newly issued Shares or Ordinary Shares transferred from treasury.

Global Restricted Stock Plan

It is the intention of the Committee that during 2010 two currently operated restricted stock plans (the RSU Plan and the MedImmune RSU Plan) applicable to below SET-level employees will be discontinued. They will be replaced by a single new Global Restricted Stock Plan (GRSP) (again operated only for below SET-level employees and on broadly similar terms to the existing plans) for the purposes of simplifying the administration and operation of restricted stock awards. Awards granted under the GRSP will not involve the issue and allotment of new Ordinary Shares but rather rely on the market purchase of Ordinary Shares or ADSs that have already been issued. There is no intention to increase the overall quantum of awards applicable to target employees through the introduction of the GRSP.

Restricted Share Plan

The AstraZeneca Restricted Share Plan (RSP) was introduced in 2008 and provides for the grant of restricted share awards (RS Awards) to key employees, excluding Executive Directors. RS Awards are made on an ad hoc basis with variable vesting dates and may not operate in respect of newly issued Shares or Ordinary Shares transferred from treasury. The RSP has been used twice in 2009 to make RS Awards to 12 employees. The Committee has responsibility for agreeing any RS Awards under the RSP and for setting the policy for the way in which the RSP should operate.

Zeneca 1994 Executive Share
Option Scheme

The Zeneca 1994 Executive Share Option Scheme (Zeneca Plan) was replaced by the SOP. The last grant of options under the Zeneca Plan was in March 2000. Certain Executive Directors and other SET members have options outstanding under the Zeneca Plan, all of which are exercisable, the performance conditions having been satisfied. A description of the Zeneca Plan can be found in Note 24 to the Financial Statements from page 161.

Other plans

In addition to the plans described above, the Company operates a Share Incentive Plan and a Savings-Related Share Option Plan in the UK, both of which are HM Revenue & Customs approved plans. Certain Executive Directors and other SET members are eligible to participate in these plans, more detailed descriptions of which can be found in Note 24 to the Financial Statements.

Service contracts

Details of the service contracts for each of the Executive Directors, including their notice periods, are set out below. Either the Company or the Executive Director may terminate the service contract on 12 months’ notice. It is the Board’s intention that, in the event of early termination of an Executive Director’s employment, any compensation payable under his/her service contract should not exceed the salary and benefits that would have been received had the contractual notice period been worked and this may be further reduced in line with the Executive Director’s duty to mitigate losses. None of the Executive Directors has any provision in their service contracts giving them a right to liquidated damages or an automatic entitlement to bonus for the duration of their notice period. Compensation for any bonus entitlement will be assessed initially as ‘on target’ but subject to adjustment by the Committee to take account of the particular circumstances of the termination.

Policy on external appointments and
retention of fees

Subject to the specific approval of the Board in each case, Executive Directors and other SET members may accept external appointments as non-executive directors of other companies and retain any related fees paid to them, provided always that such external appointments are not considered by

the Board to prevent or reduce the ability of the executive to perform his or her role within the Group to the required standard. Such appointments are seen as a way in which executives can gain a broader business experience and, in turn, benefit the Company.

John Patterson retired as an Executive Director on 31 March 2009. During 2009, he continued to serve as a non-executive director of Cobham plc. In respect of such position, he retained the fees paid to him for his services which, during the period from 1 January to 31 March, amounted to £16,875.

Non-Executive Directors

None of the Non-Executive Directors has a service contract but all have letters of appointment. The effective dates of appointment for each of the Non-Executive Directors are set out in the table opposite. In accordance with the Company’s Articles, following their appointment, Directors must retire at each AGM and may present themselves for election or re-election. None of the Non-Executive Directors has any provision in their letter of appointment giving them a right to compensation payable upon early termination of their appointment. They are not eligible for performance-related bonuses or the grant of share options. No pension contributions are made on their behalf. None of the Non-Executive Directors has participated or will participate in any decision made by the Board in relation to the determination of their own fees. The Chairman’s annual fee is £325,000, and the annual fees applicable to other Non-Executive Directors are set out opposite. In addition to the mandatory shareholding requirement imposed on all Directors under the Articles described in the Directors’ shareholding section on page 99, in December 2008 the Board agreed that each Non-Executive Director should also be encouraged to build up, over time, a shareholding in the Company with a value approximately equivalent to the basic annual fee for a Non-Executive Director (£60,000) or, in the case of the Chairman, approximately equivalent to his annual fee (£325,000).

Audit

The Directors’ emoluments in 2009 disclosed in the Directors’ emoluments in 2009 section from page 111 and the details of the Directors’ interests in Ordinary Shares disclosed in the Directors’ interests in shares section on page 115, have been audited by KPMG.

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		Corporate Governance

Details of Executive Directors’ service contracts at 31 December 2009

Date of

Unexpired term at

Notice

Executive Director¹

service contract

31 December 2009

period

David Brennan

1 January 2006

12 months

Simon Lowth

5 November 2007

12 months


¹Neither of the Executive Directors has any provision in their service contracts giving them a right to liquidated damages or an automatic entitlement to a bonus for the duration of their notice period.

Non-Executive Directors’ terms and conditions


		Effective date of
Non-Executive Director^{1, 2}		appointment

Bo Angelin		24 July 2007

John Buchanan		25 April 2002

Jean-Philippe Courtois		18 February 2008

Jane Henney		24 September 2001

Michele Hooper		1 July 2003

Rudy Markham		12 September 2008

Dame Nancy Rothwell		27 April 2006

Louis Schweitzer		11 March 2004

John Varley		26 July 2006

Marcus Wallenberg		6 April 1999


¹None of the letters of appointment applicable to Non-Executive Directors confers upon them any right to compensation payable on early termination of their appointment.

²Pursuant to the Articles, the continued appointment of each Non-Executive Director is subject to their election or re-election at each AGM.

Non-Executive Directors’ fees


	£

Basic Fee		60,000

Senior independent Non-Executive Director	(an additional) 25,000

Membership of the Audit Committee or the Remuneration Committee		15,000

Chairman of the Audit Committee or the Remuneration Committee	(an additional) 20,000

Membership of the Science Committee		10,000

Chairman of the Science Committee	(an additional) 7,000

Directors’ emoluments in 2009

The aggregate remuneration, excluding pension contributions and the value of shares under option and shares subject to Share Awards, paid to or accrued for all Directors for services in all capacities during the year ended 31 December 2009 was £6.2 million ($9.6 million). The remuneration of individual Directors is set out below in pounds sterling and US dollars. All salaries, fees, bonuses and other benefits for Directors are established in pounds sterling.

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112Directors’ Report | Directors’ Remuneration Report

Directors’ remuneration – pounds sterling


	Salary		Bonus		Bonus		Taxable		Other payments		Total		Total		Total
	and fees		Cash		Shares¹		benefits		and allowances		2009		2008		2007
Name	£000		£000		£000		£000		£000		£000		£000		£000

Louis Schweitzer		325		–		–		–		–		325		303		260

David Brennan		973³		1,167		584		26		436²		3,186		2,506		2,150

Simon Lowth		550		550		275		8		43⁴		1,426⁸		1,304		172

Bo Angelin		70		–		–		–		–		70		63		21

John Buchanan		110		–		–		–		–		110		96		69

Jean-Philippe Courtois		75		–		–		–		–		75		58		–

Jane Henney		85		–		–		–		–		85		76		57

Michele Hooper		100		–		–		–		–		100		90		64

Rudy Markham		75		–		–		–		–		75		23		–

Nancy Rothwell		92		–		–		–		–		92		80		54

John Varley		95		–		–		–		–		95		83		56

Marcus Wallenberg		60		–		–		–		–		60		53		40

Former Directors
John Patterson⁶		135		187		–		3		121⁵		446⁸		1,081		982

Håkan Mogren⁷		33		–		–		–		–		33		100		100

Others		–		–		–		–		–		–		–		463

Total		2,778		1,904		859		37		600		6,178		5,916		4,488

Directors’ remuneration – US dollars

Salary

Bonus

Taxable

Other payments

Total

Total

and fees

Cash

Shares¹

benefits

and allowances

2009

2008

2007

Name

$000

$000

$000

Louis Schweitzer

504

–

504

567

520

David Brennan

1,508³

1,808

905

676²

4,937

4,692

4,300

Simon Lowth

852

426

67⁴

2,209⁸

2,442

345

Bo Angelin

108

–

108

118

John Buchanan

170

–

170

180

138

Jean-Philippe Courtois

116

–

116

109

–

Jane Henney

132

–

132

142

114

Michele Hooper

155

–

155

169

128

Rudy Markham

116

–

116

–

Nancy Rothwell

143

–

143

150

108

John Varley

147

–

147

155

113

Marcus Wallenberg

–

Former Directors

John Patterson⁶

209

290

–

188⁵

692⁸

2,024

1,965

Håkan Mogren⁷

–

187

200

Others

–

929

Total

4,304

2,950

1,331

931

9,573

11,077

8,982


¹These figures represent that portion of the 2009 bonuses required to be deferred into Shares to be held for a three-year period, as explained in the Bonus share deferral requirements section on page 107.

²Relates to relocation allowances, a car allowance and cash payments in respect of dividends accrued on vesting of LTI share plan awards.

³This figure includes a sum of $83,000/£54,000 in respect of member contributions to the AstraZeneca Executive Deferred Compensation Plan which were paid into the plan by means of a salary sacrifice (see the Defined contribution arrangements section on page 113 for further details).

⁴Relates to remaining cash following selection of benefits within AstraZeneca’s UK flexible benefits programme.

⁵Relates to cash payments in respect of dividends accrued on vesting of LTI share plan awards and remaining cash following selection of benefits within AstraZeneca’s UK flexible benefits programme.

⁶Part-year only as ceased to be a Director on 31 March 2009.

⁷Part-year only as ceased to be a Director on 30 April 2009.

⁸Does not include a cash allowance received in lieu of pension (see the Defined contribution arrangements section on page 113 for further details).

For John Patterson, member contributions to the AstraZeneca Pension Fund of only a minimal amount for 2009 were paid through salary sacrifice, and as such no employee contributions are shown above or included within emoluments.

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In the tables on this page and on the previous page, salaries have been converted between pounds sterling and US dollars at the average exchange rate for the year in question. These rates were:


	GBP/USD

2009		0.645

2008		0.534

2007		0.500

Executive Directors were also granted Share Awards and Option Awards. Details of share options granted to, and exercised by, Directors and the aggregate of gains realised on the exercise of options, and of awards under the LTI plans, in the year are given in the Share options section on page 118 and in the Gains by Directors on exercise of share options section on page 119.

No Director has a family relationship with any other Director.

Pensions

Defined benefit arrangements

Pensions are payable to Directors in pounds sterling, with the exception of David Brennan’s, whose pension is payable in US dollars. For ease of understanding, the table below has been presented in both pounds sterling and US dollars using the exchange rates for 2009 set out above. Except where otherwise stated, figures for John Patterson (a former Executive Director) reflect the period to 31 March 2009 when he retired as a Director.


	David		John		David		John
	Brennan		Patterson		Brennan		Patterson
	£000		£000		$000		$000

Defined benefit arrangements
1. Accrued pension at 1 January 2009		822		365		1,275		566

2. Increase in accrued pension during year as a result of inflation		–		–		–		–

3. Adjustment to accrued pension as a result of salary increase relative to inflation		77		–		119		–

4. Increase in accrued pension as a result of additional service		16		–		25		–

5. Accrued pension at 31 December 2009		915		365		1,419		566

6. Employee contributions during 2009		–		–		–		–

7. Transfer value of accrued pension at 31 December 2008		11,249		8,288		17,441		12,850

8. Transfer value of accrued pension at 31 December 2009¹		12,850		9,124		19,922		14,146

9. Change in transfer value during the period less employee contributions		1,600		836		2,481		1,296

10. Age at 31 December 2009		56⁴/₁₂		61²/₁₂		56⁴/₁₂		61²/₁₂

11. Pensionable service (years) at 31 December 2009		34		33¹⁰/₁₂		34		33¹⁰/₁₂


¹The transfer value of John Patterson’s accrued pension is calculated as at 6 April 2009, the date on which he retired from the AstraZeneca Pension Fund.

John Patterson opted to take a commutation lump sum on 6 April 2009 in lieu of part of his pension entitlement. This lump sum was calculated and granted in accordance with the rules of the plan and amounted to £785,000 ($1,218,000). This reduced his pension entitlement after commutation to £303,000 per annum ($470,000).

For John Patterson, transfer values are calculated on the market related basis used by the AstraZeneca Pension Fund, in accordance with current UK legislation.

For David Brennan, transfer values are calculated to be consistent with the value of the lump sum distribution equivalent to his deferred accrued pension annuity. The minimum permissible value of such a lump sum distribution was modified in 2008.

Defined contribution arrangements

In addition to the defined benefit arrangements set out in the Defined benefit arrangements section above, David Brennan participates in a 401(k) plan. He also participates in AstraZeneca’s Executive Deferred Compensation Plan (EDCP) which is operated as a supplemental non-qualified plan in respect of US employees should annual contributions exceed the limit applicable to contributions under the qualified 401(k) plan. Total employer matching contributions of $98,000 (£64,000) were made to his 401(k) plan and EDCP during 2009 (2008: $14,000 (£7,000)). David Brennan also made member contributions of $83,000 (£54,000) by way of salary sacrifice to the EDCP (2008: $nil). Additionally, in January 2009, David Brennan, along with other eligible participants in the EDCP, received an automatic one-off excess match employer contribution in respect of his eligible earnings for 2008 under the EDCP. This amounted to $110,000 (£70,000) relating to the 2008 plan year, $77,000 (£41,000) of which was disclosed in the 2008 Directors’ Remuneration Report.

In addition to the defined benefit arrangements as described in the Defined benefit arrangements section above, John Patterson chose to receive a cash allowance in lieu of pension, which during 2009 amounted to £42,000 ($65,000) (2008: £84,000 ($157,000)).

As described in the UK Executive Directors’ pension arrangements section on page 106, Simon Lowth chose to receive a cash allowance in lieu of pension, which during 2009 amounted to £132,000 ($205,000) (2008: £132,000 ($247,000)).

Transactions with Directors

There were no material recorded transactions between the Company and the Directors during 2009 or 2008.

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114Directors’ Report | Directors’ Remuneration Report

Total shareholder return

The Regulations require the inclusion of a graph showing total shareholder return (TSR) over a five-year period in respect of a holding of the Company’s shares, plotted against TSR in respect of a hypothetical holding of shares of a similar kind and number by reference to which a broad equity market index is calculated. The Company is a member of the FTSE 100 Index and consequently, for the purposes of this graph, which is set out opposite, we have selected the FTSE 100 Index as the appropriate index. This graph is re-based to 100 at the start of the rolling five-year period. We have also included a ‘Pharma Peers Average’ (excluding Schering-Plough Corporation and Wyeth Inc.), which reflects the TSR of the same comparator group used for the PSP graphs opposite.

The PSP requires that the TSR in respect of a holding of the Company’s shares over the relevant performance period be compared with the TSR of a peer group of pharmaceutical companies (as described in the Performance targets section on page 108). The graphs opposite show how the Company’s TSR performance has compared with the TSR for the relevant companies in the comparator group from the first day in the relevant three-year performance period in respect of each Share Award to 31 December 2009 and how the Company ranks against those other companies on this basis.

To alleviate any short-term volatility, the return index is averaged in the TSR calculations for each company over the three months prior to the start of the relevant performance period (as stipulated in the PSP) and, for the purposes of the graphs opposite, over the last three months of 2009.

TSR over a five-year period

TSR – AstraZeneca compared with peer group 1 Jan 2007 to 31 Dec 2009
(for the 2007 award) %

TSR – AstraZeneca compared with peer group 1 Jan 2008 to 31 Dec 2009
(for the 2008 award) %

TSR – AstraZeneca compared with peer group 1 Jan 2009 to 31 Dec 2009
(for the 2009 award) %

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Directors’ interests in shares

Beneficial interests

The table below shows any change in the interests of the Directors (including the interests of their Connected Persons, as such term is defined in the Financial Services and Markets Act 2000) in Ordinary Shares from 1 January 2009 to 31 December 2009 or on the date of resignation of such Director (if earlier). All such interests were beneficial except as otherwise stated. However, interests in Ordinary Shares or ADSs that are the subject of Share Awards under the PSP and/or the AstraZeneca Deferred Bonus Plan discussed elsewhere, are not included in the table below but are shown in the Performance Share Plan and Deferred Bonus Plan tables on pages 116 and 117, respectively. None of the Directors has a beneficial interest in the shares of any of the Company’s subsidiaries. Between 31 December 2009 and 28 January 2010, there was no change in the interests in Ordinary Shares shown in the table below.


	Beneficial interest in Ordinary Shares at		Change to		Beneficial interest in Ordinary Shares at
Name	1 January 2009 or (if later) appointment date		beneficial interest		31 December 2009 or (if earlier) resignation date

Louis Schweitzer		4,000		1,356		5,356

Håkan Mogren¹		62,164		–		62,164

David Brennan		112,848		15,527²		128,375³

Simon Lowth		850		–		850

John Patterson⁴		8,640		20,877		29,517

Bo Angelin		500		287		787

John Buchanan		2,500		–		2,500

Jean-Philippe Courtois		500		2,135		2,635

Jane Henney		500		287		787

Michele Hooper		500		1,200		1,700

Rudy Markham		1,137		283		1,420

Nancy Rothwell		500		287		787

John Varley		500		–		500

Marcus Wallenberg		67,264		–		67,264


¹Part-year only as ceased to be a Director on 30 April 2009.

²This figure represents the difference between the net number of ADSs acquired by David Brennan from the vestings of his 2006 Share Awards under the PSP and the AstraZeneca Deferred Bonus Plan and the net reduction in his notional beneficial interest in ADSs held within the unitised stock plans (see separate tables and footnotes below).

³The total number of Ordinary Shares and ADSs in which David Brennan has an interest (including potential interests in unreleased shares held in Company plans as detailed in the tables below) has increased in 2009 by 67,968 to 576,790 as at 31 December 2009.

⁴Part-year only as ceased to be a Director on 31 March 2009.

Unitised stock plans

David Brennan, in common with other participating executives in the US, has interests which were awarded to him prior to him becoming CEO in the following plans: the AstraZeneca Executive Deferral Plan, the AstraZeneca Executive Deferred Compensation Plan and the AstraZeneca Savings and Security Plan. These are unitised stock plans into which the value of certain previous share incentive awards has been deferred (and are not incentive awards in their own right). Participants hold units in each plan, which represents a long-term equity interest in the Company. A unit comprises part cash and part ADSs. The overall unit value can be determined daily by taking the market value of the underlying ADSs and adding the cash position. The ADSs held within these units carry both voting and dividend rights. David Brennan is deemed to have a notional beneficial interest in these ADSs, calculated by reference to the fund value and the closing price of ADSs. Therefore, the number of ADSs in which a notional beneficial interest arises can vary daily as a consequence of stock price movements.


Unitised stock plan	ADSs held at 1 January 2009		Net ADSs acquired/(disposed) during 2009			ADSs held at 31 December 2009

AstraZeneca Executive Deferral Plan		40,940		(5,034	)¹		35,906

AstraZeneca Executive Deferred Compensation Plan		32,003		(32,003	)¹		–

AstraZeneca Savings and Security Plan		7,700		403			8,103


¹These figures relate to scheduled distributions in February 2009.

No Director or senior executive beneficially owns, or has options over, 1% or more of the issued share capital of the Company, nor do they have different voting rights to other shareholders.

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Performance Share Plan

The interests of Directors at 31 December 2009 in Shares that are the subject of Share Awards under the PSP are not included in the table on the previous page but are shown below:


				Award price		Price on vesting date
	Number of shares			pence		pence		Grant date¹		Vesting date¹		Performance period¹

David Brennan
2006 Share Award		73,109			2975		2287		24.03.06		24.03.09		01.01.06 – 31.12.08

2006 Share Award – Part 2		19,092			2848		2604		19.05.06		19.05.09		01.01.06 – 31.12.08

2007 Share Award		107,051			2744				30.03.07		30.03.10		01.01.07 – 31.12.09

2008 Share Award		161,546			1882				28.03.08		28.03.11		01.01.08 – 31.12.10

Total at 1 January 2009		360,798

Partial vesting of 2006 Share Award²		(65,067	)³				2287

Partial lapse of 2006 Share Award		(8,042	)

Partial vesting of 2006 Share Award – Part 2²		(16,992	)⁴				2604

Partial lapse of 2006 Share Award – Part 2		(2,100	)

2009 Share Award		133,347			2280				27.03.09		27.03.12		01.01.09 – 31.12.11

Total at 31 December 2009		401,944

John Patterson
2006 Share Award		32,319			2975		2287		24.03.06		24.03.09		01.01.06 – 31.12.08

2007 Share Award		36,785			2744				30.03.07		30.03.10		01.01.07 – 31.12.09

2008 Share Award		57,385			1882				28.03.08		28.03.11		01.01.08 – 31.12.10

Total at 1 January 2009		126,489

Partial vesting of 2006 Share Award²		(28,764	)⁵				2287

Partial lapse of 2006 Share Award		(3,555	)

Pro-rata forfeiture of 2007 Share Award		(12,183	)⁶

Pro-rata forfeiture of 2008 Share Award		(38,047	)⁶

Total at 31 March 2009		43,940	⁷

Simon Lowth
2007 Share Award		15,554			2210				16.11.07		16.11.10		01.01.07 – 31.12.09

2008 Share Award		58,448			1882				28.03.08		28.03.11		01.01.08 – 31.12.10

Total at 1 January 2009		74,002

2009 Share Award		54,276			2280				27.03.09		27.03.12		01.01.09 – 31.12.11

Total at 31 December 2009		128,278


¹UK date convention applies.

²Share Awards granted in 2006 vested in 2009 at 89% based on the outcome of the performance conditions and targets (which are set out in the AstraZeneca Performance Share Plan section from page 108).

³Following certain mandatory tax deductions, David Brennan became beneficially interested in a net number of 38,389 Ordinary Shares.

⁴Following certain mandatory tax deductions, David Brennan became beneficially interested in a net number of 10,025 Ordinary Shares.

⁵Following certain mandatory tax deductions, John Patterson became beneficially interested in a net number of 16,970 Ordinary Shares.

⁶In accordance with the PSP rules.

⁷The remaining 24,602 Shares of the 2007 Share Award and 19,338 Shares of the 2008 Share Award will vest on the relevant scheduled vesting date subject to the achievement of the performance conditions measured over the whole of the relevant performance period (as set out in the AstraZeneca Performance Share Plan – Performance conditions section on page 108).

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		Corporate Governance

Deferred bonus plan

As described in the Bonus share deferral requirements section on page 107, there is a requirement for Executive Directors and SET members to defer a certain proportion of any short-term bonus payments into Ordinary Shares or ADSs. The proportion of bonus currently deferred into Ordinary Shares or ADSs is one-third of the pre-tax bonus for Executive Directors and one-sixth for all other SET members. The interests of Directors and former Directors at 31 December 2009, or on the date of resignation (if earlier), in Ordinary Shares or ADSs that are the subject of awards under these arrangements are not included in the table on the previous page but are shown below:


				Award price		Price on vesting date
	Number of shares			pence		pence		Grant date¹		Vesting date¹

David Brennan
2006 Award		6,352			2639		2415		24.02.06		24.02.09

2007 Award		12,014			2911				23.02.07		23.02.10

2008 Award		16,810			1999				25.02.08		25.02.11

Total at 1 January 2009		35,176

Vesting of 2006 Award		(6,352	)²				2415

2009 Award		17,992			2400				25.02.09		25.02.12

Total at 31 December 2009		46,816

John Patterson
2006 Award		6,623			2639		2415		24.02.06		24.02.09

2007 Award		5,600			2911				23.02.07		23.02.10

2008 Award		7,810			1999				25.02.08		25.02.11

Total at 1 January 2009		20,033

Vesting of 2006 Award		(6,623	)³				2415

2009 Award		7,256			2400				25.02.09		25.02.12

Total at 31 March 2009		20,666	⁴

Simon Lowth
2008 Award		1,340			1999				25.02.08		25.02.11

Total at 1 January 2009		1,340

2009 Award		9,775			2400				25.02.09		25.02.12

Total at 31 December 2009		11,115


¹UK date convention applies.

²Following certain mandatory tax deductions, David Brennan became beneficially interested in a net number of 3,747 Ordinary Shares.

³Following certain mandatory tax deductions, John Patterson became beneficially interested in a net number of 3,907 Ordinary Shares.

⁴In accordance with the plan rules on leavers, John Patterson’s 2007, 2008 and 2009 awards will vest on the relevant scheduled vesting date.

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118Directors’ Report | Directors’ Remuneration Report

Share options

The interests of Directors, and of former Directors who served during 2009, in options to subscribe for Ordinary Shares, granted under the SOP, the AstraZeneca Savings-Related Share Option Plan and the Zeneca Plan, are included in the following table. No options were exercised during 2009. All grants in 2009 were made under the SOP, unless otherwise indicated.

Number of Ordinary

Exercise price per

First day

Last day

Shares under option¹

Ordinary Share²

exercisable^{3, 4}

Håkan Mogren
At 1 January 2009

244,896

2848p

13.12.02

24.03.13

– market price above option price

139,530

2499p

13.12.02

24.03.13

– market price at or below option price

105,366

3309p

23.08.03

27.03.12

At 30 April 2009

⁵

244,896

2848p

13.12.02

24.03.13

– market price above option price

65,551

2231p

25.03.06

24.03.13

– market price at or below option price

179,345

3073p

13.12.02

27.03.12

David Brennan
At 1 January 2009 – options over Ordinary Shares

432,959

2410p

24.03.09

27.03.18

– market price above option price (Ordinary Shares)

322,318

2226p

30.03.10

27.03.18

– market price at or below option price (Ordinary Shares)

110,641

2949p

24.03.09

18.05.16

Granted 27 March 2009 (Ordinary Shares)

160,016

2280p

27.03.12

26.03.19

At 31 December 2009 – options over Ordinary Shares

592,975

2375p

24.03.09

26.03.19

– market price above option price (Ordinary Shares)

505,244

2271p

19.05.09

26.03.19

– market price at or below option price (Ordinary Shares)

87,731

2975p

24.03.09

23.03.16

At 1 January 2009 – options over ADSs

355,246

$45.22

16.03.03

23.03.15

– market price above option price (ADSs)

110,987

$40.35

24.03.08

23.03.15

– market price at or below option price (ADSs)

244,259

$47.44

16.03.03

25.03.14

At 31 December 2009 – options over ADSs

355,246

$45.22

16.03.03

23.03.15

– market price above option price (ADSs)

210,255

$42.91

26.03.07

23.03.15

– market price at or below option price (ADSs)

144,991

$48.58

29.03.04

27.03.12

Simon Lowth
At 1 January 2009

88,803

1951p

16.11.10

27.03.18

– market price above option price

88,803

1951p

16.11.10

27.03.18

– market price at or below option price

–

n/a

Granted 27 March 2009

65,131

2280p

27.03.12

26.03.19

At 31 December 2009

153,934

2090p

16.11.10

26.03.19

– market price above option price

153,934

2090p

16.11.10

26.03.19

– market price at or below option price

–

n/a

John Patterson
At 1 January 2009

305,396

2544p

25.03.02

27.03.18

– market price above option price

213,606

2279p

25.03.02

27.03.18

– market price at or below option price

91,790

3163p

23.08.03

23.03.16

Lapsed

(2,916

)

2674p

25.03.02

24.03.09

At 31 March 2009

⁶

302,480

2543p

16.03.03

27.03.18

– market price above option price

122,213

1991p

24.03.08

27.03.18

– market price at or below option price

180,267

2917p

16.03.03

29.03.17


¹Vesting is subject to satisfying the relevant performance conditions set out in each of the relevant share option plans. Further information on the performance conditions applicable to SOP is set out in the AstraZeneca Share Option Plan – Performance conditions section on page 109. As a Save-As-You-Earn scheme, the AstraZeneca Savings-Related Share Option Plan is not subject to any performance conditions. Awards granted under the Zeneca Plan are no longer subject to any performance conditions.

²Exercise prices are weighted averages.

³First and last exercise dates of groups of options, within which period there are shorter exercise periods.

⁴UK date convention applies.

⁵Håkan Mogren ceased to be a Director on 30 April 2009.

⁶John Patterson ceased to be a Director on 31 March 2009.

AstraZeneca Annual Report and Form 20-F Information 2009

	Directors’ Report \| Directors’ Remuneration Report	119
		Corporate Governance

Gains by Directors on exercise of share options

The aggregate amount of gains made by Directors on the exercise of share options during the year and the two previous years is set out below. No options were exercised during 2009.


	Gains made by Directors		Gains made by the
	on the exercise of share options		highest paid Director
Year	$		$

2009		–		–

2008		1,764.96		–

2007		783,858.08		–


During 2009, the market price of Ordinary Shares or ADSs was as follows:

	Ordinary Share/ADS market price		Range of the Ordinary Share/ADS
Stock Exchange	as at 31 December 2009		market price during 2009

London		2910.5p	2147p to 2947p

Stockholm	307.00 SEK		261.50 SEK to 356.00 SEK

New York		$46.94		$30.24 to $47.54

On behalf of the Board

A C N Kemp
Company Secretary

28 January 2010

AstraZeneca Annual Report and Form 20-F Information 2009

122Financial Statements

Preparation of the Financial Statements
and Directors’ Responsibilities

The Directors are responsible for preparing the Annual Report and Form 20-F Information and the Group and Parent Company Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and Parent Company Financial Statements for each financial year. Under that law they are required to prepare the Group Financial Statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the Parent Company Financial Statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice).

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of their profit or loss for that period. In preparing each of the Group and Parent Company Financial Statements, the Directors are required to:

>		Select suitable accounting policies and then apply them consistently.

>		Make judgements and estimates that are reasonable and prudent.

>		For the Group Financial Statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU.

>		For the Parent Company Financial Statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Parent Company Financial Statements.

>		Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Parent Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors’ responsibility statement pursuant to DTR 4

The Directors confirm that to the best of our knowledge:

>		The Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole.

>		The Directors’ Report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

On behalf of the Board of Directors on 28 January 2010:

David R Brennan
Director

Directors’ Responsibilities for, and Report on,
Internal Control over Financial Reporting

The Directors are responsible for establishing and maintaining adequate internal control over financial reporting. AstraZeneca’s internal control over financial reporting is designed to provide reasonable assurance over the reliability of financial reporting and the preparation of consolidated financial statements in accordance with generally accepted accounting principles.

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

The Directors assessed the effectiveness of AstraZeneca’s internal control over financial reporting as at 31 December 2009 based on the criteria set forth by the Committee of

Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Based on this assessment, the Directors believe that, as at 31 December 2009, the internal control over financial reporting is effective based on those criteria.

KPMG Audit Plc, an independent registered public accounting firm, has audited the effectiveness of internal control over financial reporting as at 31 December 2009 and, as explained on page 123, has issued an unqualified report thereon.

AstraZeneca Annual Report and Form 20-F Information 2009

Financial Statements

123

Auditor’s Reports on the Financial Statements
and on Internal Control over Financial Reporting
(Sarbanes-Oxley Act Section 404)

The report set out below is provided in compliance with International Standards on Auditing (UK and Ireland). KPMG Audit Plc has also issued reports in accordance with auditing standards of the Public Company Accounting Oversight Board in the US, which will be included in the Annual Report on Form 20-F to be filed with the US Securities

and Exchange Commission. Those reports are unqualified and include opinions on the Group Financial Statements and on the effectiveness of internal control over financial reporting as at 31 December 2009 (Sarbanes-Oxley Act Section 404). The Directors’ statement on internal control over financial reporting is set out on page 122.

KPMG Audit Plc has also reported separately on the Company Financial Statements of AstraZeneca PLC and on the information in the Directors’ Remuneration Report that is described as having been audited. This audit report is set out on page 187.

Independent Auditor’s Report to the
Members of AstraZeneca PLC

We have audited the Group Financial Statements of AstraZeneca PLC for the year ended 31 December 2009 set out on pages 124 to 186. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities
of directors and auditors

As explained more fully in the Directors’ Responsibilities Statement set out on page 122, the Directors are responsible for the preparation of the Group Financial Statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the Group Financial Statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

Scope of the audit of the
financial statements

A description of the scope of an audit of financial statements is provided on the APB’s website, frc.org.uk/apb/scope/UKP.

Opinion on financial statements

In our opinion, the Group Financial Statements:

>		Give a true and fair view of the state of the Group’s affairs as at 31 December 2009 and of its profit for the year then ended.

>		Have been properly prepared in accordance with IFRSs as adopted by the EU.

>		Have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation.

Separate opinion in relation to IFRSs
as issued by the IASB

As explained in the Accounting Policies section to the Group Financial Statements set out on pages 128 to 132, the Group, in addition to complying with its legal obligation to apply IFRSs as adopted by the European Union, has also applied IFRSs as issued by the International Accounting Standards Board (IASB).

In our opinion, the Group Financial Statements comply with IFRSs as issued by the IASB.

Opinion on other matter prescribed
by the Companies Act 2006

In our opinion the information given in the Directors’ Report for the financial year for which the Group Financial Statements are prepared is consistent with the Group Financial Statements.

Matters on which we are required
to report by exception

We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion:

>		Certain disclosures of Directors’ Remuneration specified by law are not made.

>		We have not received all the information and explanations we require for our audit.

Under the Listing Rules we are required to review:

>		The Directors’ Statement, set out on pages 128 and 129, in relation to going concern.

>		The part of the corporate governance statement relating to the Company’s compliance with the nine provisions of the June 2008 Combined Code specified for our review.

Other matters

We have reported separately on the Parent Company Financial Statements of AstraZeneca PLC for the year ended 31 December 2009 and on the information in the Directors’ Remuneration Report that is described as having been audited.

Jimmy Daboo
Senior Statutory Auditor

For and on behalf of KPMG Audit Plc
Statutory Auditor
Chartered Accountants
8 Salisbury Square, London, EC4Y 8BB

28 January 2010

AstraZeneca Annual Report and Form 20-F Information 2009

124Financial Statements

Consolidated Statement of Comprehensive Income
for the year ended 31 December


			2009			2008			2007
	Notes		$m			$m			$m

Revenue		1		32,804			31,601			29,559

Cost of sales				(5,775	)		(6,598	)		(6,419	)

Gross profit				27,029			25,003			23,140

Distribution costs				(298	)		(291	)		(248	)

Research and development				(4,409	)		(5,179	)		(5,162	)

Selling, general and administrative costs		2		(11,332	)		(10,913	)		(10,364	)

Other operating income and expense		2		553			524			728

Operating profit		2		11,543			9,144			8,094

Finance income		3		462			854			959

Finance expense		3		(1,198	)		(1,317	)		(1,070	)

Profit before tax				10,807			8,681			7,983

Taxation		4		(3,263	)		(2,551	)		(2,356	)

Profit for the period				7,544			6,130			5,627


Other Comprehensive Income:
Foreign exchange arising on consolidation				388			(1,336	)		492

Foreign exchange differences on borrowings forming net investment hedges				(68	)		291			(40	)

Gain/(loss) on cash flow hedge in connection with debt issue				1			1			(21	)

Net available for sale gains/(losses) taken to equity				2			2			(9	)

Actuarial loss for the period				(569	)		(1,232	)		(113	)

Income tax relating to components of Other Comprehensive Income		4		192			368			33

Other Comprehensive Income for the period, net of tax				(54	)		(1,906	)		342

Total Comprehensive Income for the period				7,490			4,224			5,969

Profit attributable to:

Owners of the Parent				7,521			6,101			5,595

Non-controlling interests				23			29			32

Total Comprehensive Income attributable to:

Owners of the Parent				7,467			4,176			5,934

Non-controlling interests				23			48			35

Basic earnings per $0.25 Ordinary Share		5		$5.19			$4.20			$3.74

Diluted earnings per $0.25 Ordinary Share		5		$5.19			$4.20			$3.73

Weighted average number of Ordinary Shares in issue (millions)		5		1,448			1,453			1,495

Diluted weighted average number of Ordinary Shares in issue (millions)		5		1,450			1,453			1,498

Dividends declared and paid in the period		21		3,026			2,767			2,658

All activities were in respect of continuing operations.

$m means millions of US dollars.

AstraZeneca Annual Report and Form 20-F Information 2009

Financial Statements

125

Consolidated Statement of Financial Position
at 31 December


			2009			2008			2007
	Notes		$m			$m			$m

Assets

Non-current assets

Property, plant and equipment		7		7,307			7,043			8,298

Goodwill		8		9,889			9,874			9,884

Intangible assets		9		12,226			12,323			11,467

Derivative financial instruments		16		262			449			117

Other investments		10		184			156			182

Deferred tax assets		4		1,292			1,236			1,044

				31,160			31,081			30,992

Current assets

Inventories		11		1,750			1,636			2,119

Trade and other receivables		12		7,709			7,261			6,668

Other investments		10		1,484			105			91

Derivative financial instruments		16		24			–			–

Income tax receivable				2,875			2,581			2,251

Cash and cash equivalents		13		9,918			4,286			5,867

				23,760			15,869			16,996

Total assets				54,920			46,950			47,988

Liabilities

Current liabilities

Interest-bearing loans and borrowings		14		(1,926	)		(993	)		(4,280	)

Trade and other payables		17		(8,687	)		(7,178	)		(6,968	)

Derivative financial instruments		16		(90	)		(95	)		(31	)

Provisions		18		(1,209	)		(600	)		(387	)

Income tax payable				(5,728	)		(4,549	)		(3,552	)

				(17,640	)		(13,415	)		(15,218	)

Non-current liabilities

Interest-bearing loans and borrowings		14		(9,137	)		(10,855	)		(10,876	)

Derivative financial instruments		16		–			(71	)		–

Deferred tax liabilities		4		(3,247	)		(3,126	)		(4,119	)

Retirement benefit obligations		23		(3,354	)		(2,732	)		(1,998	)

Provisions		18		(477	)		(542	)		(633	)

Other payables		17		(244	)		(149	)		(229	)

				(16,459	)		(17,475	)		(17,855	)

Total liabilities				(34,099	)		(30,890	)		(33,073	)

Net assets				20,821			16,060			14,915

Equity

Capital and reserves attributable to equity holders of the Company

Share capital		20		363			362			364

Share premium account		19		2,180			2,046			1,888

Capital redemption reserve		19		94			94			91

Merger reserve		19		433			433			433

Other reserves		19		1,392			1,405			1,378

Retained earnings		19		16,198			11,572			10,624

				20,660			15,912			14,778

Non-controlling interests		19		161			148			137

Total equity		19		20,821			16,060			14,915

The Financial Statements on pages 124 to 186 were approved by the Board of Directors on 28 January 2010 and were signed on its behalf by:


David R Brennan		Simon Lowth

Director		Director

AstraZeneca Annual Report and Form 20-F Information 2009

126Financial Statements

Consolidated Statement of Changes in Equity
for the year ended 31 December

Capital

Non-

premium

redemption

Merger

Other

Retained

controlling

Total

capital

account

reserve

reserves

earnings

Total

interests

equity

At 1 January 2007

383

1,671

433

1,398

11,348

15,304

112

15,416

Profit for the period

–

5,595

5,627

Other comprehensive income

–

339

342

Transfer to other reserves¹

–

(20

)

–

Transactions with owners

Dividends

–

(2,658

)

(2,658

)

–

(2,658

)

Issue of Ordinary Shares

217

–

218

–

218

Re-purchase of Ordinary Shares

(20

)

–

(4,170

)

(4,170

)

–

(4,170

)

Share-based payments

–

150

–

150

Transfer from non-controlling interests to payables

–

(10

)

(10

)

Net movement

(19

)

217

–

(20

)

(724

)

(526

)

(501

)

At 31 December 2007

364

1,888

433

1,378

10,624

14,778

137

14,915

Profit for the period

–

6,101

6,130

Other comprehensive income

–

(1,925

)

(1,925

)

(1,906

)

Transfer to other reserves¹

–

(27

)

–

Transactions with owners

Dividends

–

(2,767

)

(2,767

)

–

(2,767

)

Issue of Ordinary Shares

158

–

159

–

159

Re-purchase of Ordinary Shares

)

–

(610

)

(610

)

–

(610

)

Share-based payments

–

176

–

176

Transfer from non-controlling interests to payables

–

(11

)

(11

)

Dividend paid by subsidiary to non-controlling interest

–

(26

)

(26

)

Net movement

)

158

–

948

1,134

1,145

At 31 December 2008

362

2,046

433

1,405

11,572

15,912

148

16,060

Profit for the period

–

7,521

7,544

Other comprehensive income

–

(54

)

(54

)

–

(54

)

Transfer to other reserves¹

–

(13

)

–

Transactions with owners

Dividends

–

(3,026

)

(3,026

)

–

(3,026

)

Issue of Ordinary Shares

134

–

135

–

135

Share-based payments

–

172

–

172

Transfer from non-controlling interests to payables

–

)

Dividend paid by subsidiary to non-controlling interest

–

)

Net movement

134

–

(13

)

4,626

4,748

4,761

At 31 December 2009

363

2,180

433

1,392

16,198

20,660

161

20,821

¹Amounts charged or credited to other reserves relate to exchange adjustments arising on goodwill.

AstraZeneca Annual Report and Form 20-F Information 2009

Financial Statements

127

Consolidated Statement of Cash Flows
for the year ended 31 December


			2009			2008			2007
	Notes		$m			$m			$m

Cash flows from operating activities

Profit before tax				10,807			8,681			7,983

Finance income and expense		3		736			463			111

Depreciation, amortisation and impairment				2,087			2,620			1,856

Increase in trade and other receivables				(256	)		(1,032	)		(717	)

Decrease in inventories				6			185			442

Increase/(decrease) in trade and other payables and provisions				1,579			637			(168	)

Other non-cash movements				(200	)		87			901

Cash generated from operations				14,759			11,641			10,408

Interest paid				(639	)		(690	)		(335	)

Tax paid				(2,381	)		(2,209	)		(2,563	)

Net cash inflow from operating activities				11,739			8,742			7,510

Cash flows from investing activities

Acquisitions of business operations		22		–			–			(14,891	)

Movement in short term investments and fixed deposits				(1,371	)		1			894

Purchase of property, plant and equipment				(962	)		(1,095	)		(1,130	)

Disposal of property, plant and equipment				138			38			54

Purchase of intangible assets				(624	)		(2,944	)		(549	)

Disposal of intangible assets				269			–			–

Purchase of non-current asset investments				(31	)		(40	)		(35	)

Disposal of non-current asset investments				3			32			421

Interest received				113			149			358

Payments made by subsidiaries to non-controlling interests				(11	)		(37	)		(9	)

Net cash outflow from investing activities				(2,476	)		(3,896	)		(14,887	)

Net cash inflow/(outflow) before financing activities				9,263			4,846			(7,377	)

Cash flows from financing activities

Proceeds from issue of share capital				135			159			218

Re-purchase of shares				–			(610	)		(4,170	)

Issue of loans				–			787			9,692

Repayment of loans				(650	)		–			(1,165	)

Dividends paid				(2,977	)		(2,739	)		(2,641	)

Movement in short term borrowings				(137	)		(3,959	)		4,117

Net cash (outflow)/inflow from financing activities				(3,629	)		(6,362	)		6,051

Net increase/(decrease) in cash and cash equivalents in the period				5,634			(1,516	)		(1,326	)

Cash and cash equivalents at beginning of the period				4,123			5,727			6,989

Exchange rate effects				71			(88	)		64

Cash and cash equivalents at the end of the period		13		9,828			4,123			5,727

AstraZeneca Annual Report and Form 20-F Information 2009

128Financial Statements

Accounting
Policies

Basis of accounting and preparation
of financial information

The Consolidated Financial Statements have been prepared under the historical cost convention, modified to include revaluation to fair value of certain financial instruments as described below, in accordance with the Companies Act 2006 and International Financial Reporting Standards (IFRSs) as adopted by the European Union (‘adopted IFRS’) in response to the IAS regulation (EC 1606/2002). The Consolidated Financial Statements also comply fully with IFRSs as issued by the International Accounting Standards Board.

The Company has applied IAS 1 ‘Presentation of Financial Statements (revised 2007)’ which has introduced a number of terminology changes (including titles for the financial statements) and has resulted in a number of changes in presentation and disclosure. The revised standard has had no impact on the Group’s profit for the period, net assets or cash flows.

During the year the Company has adopted IFRS 8 ‘Operating Segments’. IFRS 8 requires an entity to report financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. In addressing these criteria, it was determined that AstraZeneca is engaged in a single business activity of pharmaceuticals and that the Group does not have multiple operating segments. Our pharmaceuticals business consists of the discovery and development of new products, which are then manufactured, marketed and sold. All of these functional activities take place (and are managed) globally on a highly integrated basis. We do not manage these individual functional areas separately.

We consider that the Senior Executive Team (SET) is AstraZeneca’s chief operating decision-making body (as defined by IFRS 8). The operation of the SET is principally driven by the management of the commercial operations, research and development, and manufacturing and supply. The SET also includes Finance, HR and General Counsel representation.

All significant operating decisions are taken by the SET. While members of the SET have responsibility for implementation of decisions in their respective areas, operating decision-making is at SET level as a whole. Where necessary these are implemented through cross-functional sub-committees that consider the group-wide impact of a new decision. For example, product launch decisions would be initially considered by the SET and, on approval, passed to an appropriate sub-team for implementation. The impacts of being able to develop, produce, deliver and commercialise a wide range of pharmaceutical products drive the SET decision-making process.

In assessing performance, the SET reviews financial information on an integrated basis for the Group as a whole, substantially in the form of, and on the same basis as, the Group’s IFRS Financial Statements. The high upfront cost of discovering and developing new products coupled with the relatively insignificant and stable unit cost of production means that there is not the clear link that exists in many manufacturing businesses between the revenue generated on an individual product sale and the associated cost and hence margin generated on a product. Consequently the profitability of individual drugs or classes of drugs is not considered a key measure of performance for the business and is not monitored by the SET.

Resources are allocated on a group-wide basis according to need. In particular, capital expenditure, in-licensing, and research and development resources are allocated between activities on merit, based on overall therapeutic considerations and strategy under the aegis of the Group’s Research & Development Executive Committee to facilitate a group-wide single combined discovery and development strategy. The Group’s recent acquisitions in the biologics area, MedImmune and Cambridge Antibody Technology Group plc, have been integrated into the existing management structure of AstraZeneca both for allocation of resources and for assessment and monitoring of performance purposes. As such, although biologics is a relatively new technological area for the Group, it does not operate as a separate operating segment.

The amendments to IFRS 7 ‘Improving Disclosures about Financial Instruments’ have been adopted and have resulted in additional disclosure.

IFRS 2 ‘Amendment regarding Vesting Conditions and Cancellations’, IAS 23 ‘Borrowing Costs (revised 2007)’, Amendments to IAS 36 ‘Impairment of Assets’, Amendments to IAS 19 ‘Employee Benefits’, Amendments to IAS 38 ‘Intangible Assets’ and Amendments to IAS 32 ‘Financial Instruments: Presentation’ and IAS 1 ‘Presentation of Financial Statements’ have all been adopted, none of which have had a significant effect on the Group’s profit for the period, net assets or cash flows.

IFRIC 13 ‘Customer loyalty programmes’, IFRIC 15 ‘Agreements for the Construction of Real Estate’ and IFRIC 16 ‘Hedges of a Net Investment in a Foreign Operation’ have all been adopted but have had no impact on the overall reported results.

The Company has elected to prepare the Company Financial Statements in accordance with UK Accounting Standards. These are presented on pages 188 to 192 and the accounting policies in respect of Company information are set out on page 189.

The Consolidated Financial Statements are presented in US dollars, which is the Company’s functional currency.

In preparing their individual financial statements, the accounting policies of some overseas subsidiaries do not conform with adopted IFRSs. Therefore, where appropriate, adjustments are made in order to present the Group Financial Statements on a consistent basis.

Basis for preparation of financial statements on a going concern basis

Information on the business environment AstraZeneca operates in, including the factors underpinning the industry’s future growth prospects, are included in the Directors’ Report. Details of the product portfolio of the Group, our approach to product development and our development pipeline are covered in detail with additional information by Therapy Area in the Directors’ Report.

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129

and hedging activities and its exposures to credit, market and liquidity risk. Further details of the Group’s cash balances and borrowings are included in Notes 13 and 14 of the Financial Statements.

The Group has considerable financial resources available. As at 31 December 2009, the Group has $12.3 billion in financial resources (cash balances of $9.9 billion and committed bank facilities of $4.25 billion, with $1.9 billion of debt due within one year). The Group’s revenues are largely derived from sales of products which are covered by patents and for which, historically at least, demand has been relatively unaffected by changes in the general economy. In addition, the Group has a wide diversity of customers and suppliers across different geographic areas. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and Financial Statements.

Estimates and judgements

The preparation of the Financial Statements in conformity with generally accepted accounting principles requires management to make estimates and judgements that affect the reported amounts of 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.

Judgements include classification of transactions between profit and the consolidated statement of financial position, whilst estimates focus on areas such as carrying values and estimated lives.

AstraZeneca’s management considers the following to be the most important accounting policies in the context of the Group’s operations.

The accounting policy descriptions set out the areas where judgement needs exercising, the most significant of which are revenue recognition, research and development, business combinations and goodwill, litigation and environmental liabilities, employee benefits, taxation and share-based payments.

Further information on critical judgements made in applying accounting policies, including details of significant methods and assumptions used, is included in Notes 6, 8, 9, 16, 22, 23, 24 and 25. The financial risk management policies are detailed in Note 15.

Revenue

Revenues comprise sales and income under co-promotion and co-development agreements.

Income under co-promotion and co-development agreements is recognised when it is earned as defined in the contract and can be reliably estimated. In general this is upon the sale of the co-promoted/ developed product or upon the delivery of a promotional or developmental service.

Revenues exclude inter-company revenues and value-added taxes and represent net invoice value less estimated rebates, returns and settlement discounts. Revenues are recognised when the significant risks and rewards of ownership have been transferred to a third party. In general this is upon delivery of the products to wholesalers. In markets where returns are significant (currently only in the US), estimates of returns are accounted for at the point revenue is recognised. In markets where returns are not significant they are recorded when returned.

When a product faces generic competition particular attention is given to the possible levels of returns and, in cases where the circumstances are such that the level of returns (and, hence, revenue) cannot be measured reliably, revenues are only recognised when the right of return expires which is generally on ultimate prescription of the product to patients.

For the US market we estimate the quantity and value of goods which may ultimately be returned at the point of sale. Our returns accruals are based on actual experience over the preceding 12 months for established products together with market-related information such as estimated stock levels at wholesalers and competitor activity which we receive via third-party information services. For newly launched products, we use rates based on our experience with similar products or a pre-determined percentage.

Research and development

Research expenditure is recognised in profit in the year in which it is incurred.

Internal development expenditure is capitalised only if it meets the recognition criteria of IAS 38 ‘Intangible Assets’. Where regulatory and other uncertainties are such that the criteria are not met the expenditure is recognised in profit and this is almost invariably the case prior to approval of the drug by the relevant regulatory authority. Where, however, recognition criteria are met, intangible assets are capitalised and amortised on a straight-line basis over their useful economic lives from product launch. As at 31 December 2009, no amounts have met recognition criteria.

Payments to in-license products and compounds from external third parties, generally taking the form of up-front payments and milestones, are capitalised. Since these products and compounds will only generate sales and cash inflows following launch, if it is in AstraZeneca’s control to do so, our policy is to minimise the period between final approval and launch. These assets are amortised, generally on a straight-line basis, over their useful economic lives from product launch. Under this policy, it is not possible to determine precise economic lives for individual classes of intangible assets. However, lives range from three years to 20 years. These assets are not used in the research and development activities of other products.

Intangible assets relating to products in development (both internally generated and externally acquired) are subject to impairment testing annually. All intangible assets are tested for impairment when there are indications that the carrying value may not be recoverable. Any impairment losses are recognised immediately in profit. Intangible assets relating to products which fail during development (or for which development ceases for other reasons) are tested for impairment at the point of termination and are written down to their fair value (which is usually zero).

Business combinations and goodwill

On the acquisition of a business, fair values are attributed to the identifiable assets and liabilities and contingent liabilities unless the fair value cannot be measured reliably in which case the value is subsumed into goodwill. Where fair values of acquired contingent liabilities cannot be measured reliably, the assumed contingent liability is not recognised but is disclosed in the same manner as other contingent liabilities. Goodwill is the difference between consideration paid and the fair value of net assets acquired.

AstraZeneca Annual Report and Form 20-F Information 2009

130Financial Statements

Goodwill arising on acquisitions is capitalised and subject to an impairment review, both annually and when there is an indication that the carrying value may not be recoverable. Between 1 January 1998 and 31 December 2002, goodwill was amortised over its estimated useful life; such amortisation ceased on 31 December 2002.

The Group’s policy up to and including 1997 was to eliminate goodwill arising upon acquisitions against reserves. Under IFRS 1 ‘First-time Adoption of International Financial Reporting Standards’ and IFRS 3 ‘Business Combinations’, such goodwill will remain eliminated against reserves.

Employee benefits

The Group accounts for pensions and other employee benefits (principally healthcare) under IAS 19 ‘Employee Benefits’. In respect of defined benefit plans, obligations are measured at discounted present value whilst plan assets are measured at fair value. The operating and financing costs of such plans are recognised separately in profit; current service costs are spread systematically over the lives of employees and financing costs are recognised in full in the periods in which they arise. Actuarial gains and losses are recognised immediately in other comprehensive income.

Where the calculation results in a benefit to the Group, the recognised asset is limited to the present value of any available future refunds from the plan or reductions in future contributions to the plan. Payments to defined contribution plans are recognised in profit as they fall due.

Taxation

The current tax payable is based on taxable profit for the year. Taxable profit differs from Reported profit because it excludes items that are never taxable or tax deductible. The Group’s current tax assets and liabilities are calculated using tax rates that have been enacted or substantively enacted by the reporting date.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the asset can be utilised. This requires judgements to be made in respect of the availability of future taxable income.

No deferred tax asset or liability is recognised in respect of temporary differences associated with investments in subsidiaries, branches and joint ventures where the Group is able to control the timing of reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

The Group’s deferred tax assets and liabilities are calculated using tax rates that are expected to apply in the period when the liability is settled or the asset realised based on tax rates that have been enacted or substantively enacted by the reporting date.

Accruals for tax contingencies require management to make judgements and estimates of ultimate exposures in relation to tax audit issues. Tax benefits are not recognised unless the tax positions will probably be sustained. Once considered to be probable, management reviews each material tax benefit to assess whether a provision should be taken against full recognition of that benefit on the basis of potential settlement through negotiation and/or litigation. All provisions are included in current liabilities. Any recorded exposure to interest on tax liabilities is provided for in the tax charge. See Note 25 for further details.

Share-based payments

All plans are assessed and have been classified as equity settled. The grant date fair value of employee share option awards is generally calculated using the Black-Scholes model. In accordance with IFRS 2 ‘Share-based Payment’, the resulting cost is recognised in profit over the vesting period of the options, being the period in which the services are received. The value of the charge is adjusted to reflect expected and actual levels of awards vesting, except where the failure to vest is as a result of not meeting a market condition. Cancellations of equity instruments are treated as an acceleration of the vesting period and any outstanding charge is recognised in profit immediately.

Property, plant and equipment

The Group’s policy is to write off the difference between the cost of each item of property, plant and equipment and its residual value systematically over its estimated useful life. Assets under construction are not depreciated.

Reviews are made annually of the estimated remaining lives and residual values of individual productive assets, taking account of commercial and technological obsolescence as well as normal wear and tear. Under this

policy it becomes impractical to calculate average asset lives exactly. However, the total lives range from approximately 10 to 50 years for buildings, and three to 13 years for plant and equipment. All items of property, plant and equipment are tested for impairment when there are indications that the carrying value may not be recoverable. Any impairment losses are recognised immediately in profit.

Borrowing costs

The Group has no borrowing costs with respect to the acquisition or construction of qualifying assets. All other borrowing costs are recognised in profit as incurred and in accordance with the effective interest rate method.

Leases

Rentals under operating leases are charged to profit on a straight-line basis.

Subsidiaries

A subsidiary is an entity controlled, directly or indirectly, by AstraZeneca PLC. Control is regarded as the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

The financial results of subsidiaries are consolidated from the date control is obtained until the date that control ceases.

Inventories

Inventories are stated at the lower of cost and net realisable value. The first in, first out or an average method of valuation is used. For finished goods and work in progress, cost includes directly attributable costs and certain overhead expenses (including depreciation). Selling expenses and certain other overhead expenses (principally central administration costs) are excluded. Net realisable value is determined as estimated selling price less all estimated costs of completion and costs to be incurred in selling and distribution.

Write-downs of inventory occur in the general course of business and are recognised in cost of sales.

Trade and other receivables

Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest rate method, less any impairment losses.

Trade and other payables

Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest rate method.

AstraZeneca Annual Report and Form 20-F Information 2009

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131

Financial instruments

The Group’s financial instruments include interests in leases and rights and obligations under employee benefit plans which are dealt with in specific accounting policies.

The Group’s other financial instruments include:

>		Cash and cash equivalents

>		Fixed deposits

>		Other investments

>		Loans and borrowings

>		Derivatives.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, current balances with banks and similar institutions and highly liquid investments with maturities of three months or less when acquired. They are readily convertible into known amounts of cash and are held at amortised cost.

Fixed deposits

Fixed deposits, comprising principally funds held with banks and other financial institutions, are initially measured at fair value (including direct transaction costs) and are subsequently remeasured to amortised cost using the effective interest rate method at each reporting date. Changes in carrying value are recognised in profit.

Other investments

Where investments have been classified as held for trading, they are measured initially at fair value and subsequently at fair value. Changes in fair value are recognised in profit.

In all other circumstances, the investments are initially measured at fair value (including direct transaction costs) and are subsequently remeasured to fair value at each reporting date. Changes in carrying value due to changes in exchange rates or impairments are recognised in profit. All other changes in fair value are recognised in other comprehensive income.

Impairments are recorded in profit when there is a decline in the value of an investment that is deemed to be other than temporary. On disposal of the investment, the cumulative amount recognised in other comprehensive income is recognised in profit as part of the gain or loss on disposal.

Bank and other borrowings

The Group uses derivatives, principally interest rate swaps, to hedge the interest rate exposure inherent in a portion of its fixed interest rate debt. In such cases the Group will either designate the debt as fair value through profit or loss when certain criteria are met or as the hedged item under a fair value hedge.

If the debt instrument is designated as fair value through profit, the debt is initially measured at fair value (with direct transaction costs being included in profit as an expense) and is remeasured to fair value at each reporting date with changes in carrying value being recognised in profit (along with changes in the fair value of the related derivative). Such a designation has been made where this significantly reduces an accounting mismatch which would result from recognising gains and losses on different bases.

If the debt is designated as the hedged item under a fair value hedge, the debt is initially measured at fair value (with direct transaction costs being amortised over the life of the bonds), and is remeasured for fair value changes in respect of the hedged risk at each reporting date with changes in carrying value being recognised in profit (along with changes in the fair value of the related derivative).

If certain criteria are met, non-US dollar denominated loans are designated as net investment hedges of foreign operations. Exchange differences arising on retranslation of net investments and of foreign currency loans which are designated in an effective net investment hedge relationship, are recognised in other comprehensive income. All other exchange differences giving rise to changes in the carrying value of foreign currency loans and overdrafts are recognised in profit.

Other interest-bearing loans are initially measured at fair value (including direct transaction costs) and are subsequently remeasured to amortised cost using the effective interest rate method at each reporting date. Changes in carrying value are recognised in profit.

Derivatives

Derivatives are initially measured at fair value (with direct transaction costs being included in profit as an expense) and are subsequently remeasured to fair value at each reporting date. Changes in carrying value are recognised in profit.

Foreign currencies

Foreign currency transactions, being transactions denominated in a currency other than an individual Group entity’s functional currency, are translated into the relevant functional currencies of individual Group entities at average rates for the relevant monthly accounting periods, which approximate to actual rates.

Monetary assets, arising from foreign currency transactions, are retranslated at exchange rates prevailing at the reporting date. Exchange gains and losses on loans and on short-term foreign currency borrowings and deposits are included within finance expense. Exchange differences on all other foreign currency transactions are taken to operating profit in the individual Group entity’s accounting records.

Non-monetary items arising from foreign currency transactions are not retranslated in the individual Group entity’s accounting records.

In the Consolidated Financial Statements, income and expense items for Group entities with a functional currency other than US dollars, are translated into US dollars at average exchange rates, which approximate to actual rates, for the relevant accounting periods. Assets and liabilities are translated at the US exchange rates prevailing at the reporting date. Exchange differences arising on consolidation are taken in other comprehensive income.

Exchange differences arising on retranslation of net investments in subsidiaries and of foreign currency loans which are designated in an effective hedge relationship are taken in other comprehensive income in the Consolidated Financial Statements. Gains and losses accumulated in the translation reserve will be recycled to profit when the foreign operation is sold.

Litigation and environmental 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, including related legal costs, can be estimated reliably. In other cases, appropriate disclosures are included.

Where it is considered that the Group is more likely than not to prevail, legal costs involved in defending the claim are charged to profit as they are incurred.

AstraZeneca Annual Report and Form 20-F Information 2009

132Financial Statements

Where it is considered that the Group has a valid contract which provides the right to reimbursement (from insurance or otherwise) of legal costs and/or all or part of any loss incurred or for which a provision has been established, the best estimate of the amount expected to be received is recognised as an asset.

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 and where it is probable that expenditure on remedial work will be required and a reliable estimate can be made of the cost. Provisions are discounted where the effect is material.

Impairment

The carrying value of non-financial assets, other than inventories and deferred tax assets, are reviewed at least annually to determine whether there is any indication of impairment. For goodwill, intangible assets under development and for any other assets where such indication exists, the asset’s recoverable amount is estimated based on the greater of its value in use and its fair value less cost to sell. In assessing value in use, the estimated future cash flows, adjusted for the risks specific to each asset, are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the general risks affecting the pharmaceutical industry. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash flows of other assets. Impairment losses are recognised in profit.

International accounting transition

On transition to using adopted IFRS in the year ended 31 December 2005, the Company took advantage of several optional exemptions available in IFRS 1 ‘First-time Adoption of International Financial Reporting Standards’. The major impacts which are of continuing importance are detailed below:

Business combinations – IFRS 3 ‘Business Combinations’ has been applied from 1 January 2003, the date of transition, rather than being applied fully retrospectively. As a result, the combination of Astra and Zeneca is still accounted for as a merger, rather than through purchase accounting. If purchase accounting had been adopted, Zeneca would have been deemed to have acquired Astra.

Cumulative exchange differences – the Group chose to set the cumulative exchange difference reserve at 1 January 2003 to zero.

Accounting standards
and interpretations issued
but not yet adopted

A revised IFRS 3 ‘Business Combinations’ was issued in January 2008. The following changes will be relevant to the Group’s operations:

>		Contingent consideration will be measured at fair value, with subsequent changes to the fair value being recognised in profit.

>		Transaction costs, other than share and debt issue costs, will be expensed as incurred.

>		Any pre-existing interest in the acquiree will be measured at fair value with the gain or loss recognised in profit.

>		Any non-controlling (minority) interest will be measured at either fair value, or at its proportionate interest in the identifiable assets and liabilities of the acquiree, on a transaction-by-transaction basis.

The revised Standard is effective for AstraZeneca business combinations on or after 1 January 2010 and will be applied prospectively from that date.

An amendment to IAS 27 ‘Consolidated and Separate Financial Statements (2008)’ was issued in January 2008. The amendment requires changes in ownership interests in a subsidiary, while maintaining control, to be recognised as an equity transaction. If control of a subsidiary is lost, any retained interest is measured at fair value with the gain or loss recognised in profit. The amendment is effective for accounting periods beginning on or after 1 July 2009 and will not have a significant impact upon the net results, net assets or disclosures of AstraZeneca.

A revised IFRS 1 ‘First-time Adoption of International Financial Reporting Standards’ was issued in November 2008 and will have no impact on AstraZeneca.

IFRS 9 ‘Financial Instruments’ was issued in November 2009. It is applicable to financial assets and requires classification and measurement in either the amortised cost or the fair value category. It is effective for accounting periods beginning on or after 1 January 2013. The adoption of IFRS 9 is not expected to have a significant impact upon the net results or net assets of AstraZeneca.

An amendment to IFRS 5 ‘Non-current Assets Held for Sale and Discontinued Operations’ was issued in May 2008 and provides clarification that assets and liabilities of a subsidiary should be classified as held for sale if the Parent is committed to a plan involving loss of control of the subsidiary, regardless of whether the entity will retain a non-controlling interest after the sale. The amendment is effective for accounting periods beginning on or after 1 July 2009 and will not have a significant impact upon the net results, net assets or disclosures of AstraZeneca.

The amendment to IAS 39 ‘Financial Instruments: Recognition and Measurement – Eligible Hedged Items’ deals with two situations where diversity in practice exists on the designation of inflation as a hedged risk and the treatment of ‘one-sided’ risks on hedged items. The amendment is effective for accounting periods beginning on or after 1 July 2009. The amendment is not expected to have a significant impact upon the net results, net assets or disclosures of AstraZeneca.

Revised IFRS 3 ‘Business Combinations’ was endorsed by the EU during 2009. The amendments to IAS 27 ‘Consolidated and Separate Financial Statements (2008)’, IAS 39 ‘Financial Instruments: Recognition and Measurement – Eligible Hedged Items’ and IFRS 5 ‘Non-current Assets Held for Sale and Discontinued Operations’ were endorsed by the EU in 2009. IFRS 9 ‘Financial Instruments’ has not yet been endorsed by the EU.

The following IFRIC interpretations have been issued but are not yet adopted by AstraZeneca:

>		Amendments to IFRIC 14 ‘Prepayments of a Minimum Funding Requirement’.

>		IFRIC 17 ‘Distributions of Non-cash Assets to Owners’.

>		IFRIC 19 ‘Extinguishing Financial Liabilities with Equity Instruments’.

The interpretations are effective for accounting periods commencing on or after 1 January 2011, 1 July 2009 and 1 July 2010 respectively. IFRIC 17 is not expected to have a significant impact upon adoption.

There is no impact expected from any other standards that are available for early adoption but that have not been adopted.

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Financial Statements

133

Notes to the Financial Statements

1 Product revenue information


	2009		2008		2007
	$m		$m		$m

Gastrointestinal:

Nexium		4,959		5,200		5,216

Losec/Prilosec		946		1,055		1,143

Others		106		89		84

Total Gastrointestinal		6,011		6,344		6,443

Cardiovascular:

Crestor		4,502		3,597		2,796

Seloken/Toprol-XL		1,443		807		1,438

Atacand		1,436		1,471		1,287

Zestril		184		236		295

Plendil		241		268		271

Onglyza^™		11		–		–

Others		559		584		599

Total Cardiovascular		8,376		6,963		6,686

Respiratory:

Symbicort		2,294		2,004		1,575

Pulmicort		1,310		1,495		1,454

Rhinocort		264		322		354

Oxis		63		71		86

Others		201		236		242

Total Respiratory		4,132		4,128		3,711

Oncology:

Arimidex		1,921		1,857		1,730

Casodex		844		1,258		1,335

Zoladex		1,086		1,138		1,104

Iressa		297		265		238

Faslodex		262		249		214

Nolvadex		88		85		83

Abraxane^™		–		64		62

Ethyol		15		28		43

Others		5		10		10

Total Oncology		4,518		4,954		4,819

Neuroscience:

Seroquel		4,866		4,452		4,027

Local anaesthetics		599		605		557

Zomig		434		448		434

Diprivan		290		278		263

Others		48		54		59

Total Neuroscience		6,237		5,837		5,340

Infection and Other:

Merrem		872		897		773

Synagis		1,082		1,230		618

FluMist		145		104		53

H1N1 Influenza Vaccine		389		–		–

Other Products		143		220		270

Total Infection and Other		2,631		2,451		1,714


Aptium Oncology		393		395		402

Astra Tech		506		529		444

Total		32,804		31,601		29,559

AstraZeneca Annual Report and Form 20-F Information 2009

134Financial Statements

2 Operating profit

Operating profit includes the following items:

Selling, general and administrative costs

AstraZeneca is defending its interests in various federal and state investigations and civil litigation matters relating to drug marketing and pricing practices and in respect of which the Company has made provisions in aggregate of $636m during 2009. $524m of this has been made in respect of the US Attorney’s Office investigation into sales and marketing practices involving Seroquel and $112m relates to average wholesale price litigation. The current status of these matters is described in Note 25. These provisions constitute our best estimate at the time of losses expected for these matters.

Other operating income and expense


	2009			2008			2007
	$m			$m			$m

Royalties

Income		255			288			236

Amortisation		(79	)		(84	)		–

Impairment		(150	)		(91	)		–

Net gain on disposal of property, plant and equipment		8			6			9

Gains on disposal of product rights		170			–			–

Net gain/(loss) on disposal of other intangible assets		1			(17	)		(1	)

Gains on divestments of non-core products		216			118			192

Impairment of intangible assets relating to future licensing and contractual income		(115	)		–			–

Other income		265			304			310

Other expense		(18	)		–			(18	)

Other operating income and expense		553			524			728

Royalty amortisation relates to income streams acquired with MedImmune. The amortisation in 2007 ($53m) was posted to SG&A and not adjusted.

Restructuring and synergy costs

During 2009 the Group continued the restructuring and synergy programmes approved by the SET and announced in 2007 and 2008. In addition, the Group announced further programmes during the year. The tables below show the costs that have been charged in respect of these programmes by cost category and type. Severance provisions are detailed in Note 18.


	2009		2008		2007
	$m		$m		$m

Cost of sales		188		405		415

Research and development		68		166		73

Selling, general and administrative costs		403		310		478

Total charge		659		881		966


	2009		2008		2007
	$m		$m		$m

Severance costs		262		499		678

Accelerated depreciation and impairment		148		219		203

Other		249		163		85

Total charge		659		881		966

3 Finance income and expense


	2009		2008		2007
	$m		$m		$m

Finance income

Returns on fixed deposits and equity securities		20		15		52

Returns on short-term deposits		22		127		298

Expected return on post-employment defined benefit plan assets		388		584		573

Fair value gains on debt, interest rate swaps and investments		1		128		36

Net exchange gains		31		–		–

Total		462		854		959

AstraZeneca Annual Report and Form 20-F Information 2009

Financial Statements

135

3 Finance income and expense continued


	2009			2008			2007
	$m			$m			$m

Finance expense
Interest on debt and commercial paper		(542	)		(664	)		(513)

Interest on overdrafts and other financing costs		(18	)		(50	)		(9)

Interest on post-employment defined benefit plan liabilities		(493	)		(589	)		(539)

Fair value charges on debt, interest rate swaps and investments		(145	)		(2	)		(6)

Net exchange losses		–			(12	)		(3)

Total		(1,198	)		(1,317	)		(1,070)

Net finance expense		(736	)		(463	)		(111)

The amount of exchange gains and losses recognised in profit, other than those arising on financial instruments measured at fair value through profit or loss in accordance with IAS 39 (see Note 16), is a gain of $31m (2008: loss of $12m; 2007: loss of $3m).

4 Taxation

Taxation recognised in the profit for the period in the consolidated statement of comprehensive income is as follows:


	2009		2008			2007
	$m		$m			$m

Current tax expense

Current year		2,854		2,946			1,890

Adjustment for prior years		251		130			261

		3,105		3,076			2,151

Deferred tax expense

Origination and reversal of temporary differences		98		(486	)		379

Adjustment to prior years		60		(39	)		(174)

		158		(525	)		205

Taxation recognised in the profit for the period		3,263		2,551			2,356

Taxation relating to components of other comprehensive income is as follows:


	2009		2008			2007
	$m		$m			$m

Current and deferred tax

Foreign exchange arising on consolidation		16		20			32

Actuarial loss for the period		158		340			35

Share-based payments		17		9			(8)

Deferred tax impact of reduction in UK tax rate		–		–			(28)

Other		1		(1	)		2

Taxation relating to components of other comprehensive income		192		368			33

Taxation has been provided at current rates on the profits earned for the periods covered by the Group Financial Statements. The 2009, 2008 and 2007 prior period current tax adjustments relate mainly to tax accrual to tax return adjustments, an increase in provisions in respect of a number of transfer pricing audits and double tax relief. The 2009, 2008 and 2007 prior year deferred tax adjustments relate to tax accrual to tax return adjustments and the recognition of previously unrecognised deferred tax assets. 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 considered permanently employed in the businesses of these companies. Unremitted earnings may be liable to overseas taxes and/or UK taxation (after allowing for double taxation relief) if distributed as dividends. The aggregate amount of temporary differences associated with investments in subsidiaries and branches for which deferred tax liabilities have not been recognised totalled approximately $14,846m at 31 December 2009 (2008: $8,449m; 2007: $12,639m).

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 regulations and tax rates imposed. A number of material items currently under audit and negotiation are set out in detail in Note 25.

AstraZeneca Annual Report and Form 20-F Information 2009

136Financial Statements

4 Taxation continued

Tax reconciliation to UK statutory rate

The table shown below reconciles the UK statutory tax charge to the Group’s total tax charge.


	2009			2008			2007
	$m			$m			$m

Profit before tax		10,807			8,681			7,983

Notional taxation charge at UK corporation tax rate of 28% (28.5% for 2008, 30% for 2007)		3,026			2,474			2,395

Differences in effective overseas tax rates		(212	)		(8	)		(105)

Deferred tax credit relating to reduction in Swedish, UK and other tax rates¹		–			(70	)		(57)

Unrecognised deferred tax asset		2			(7	)		(1)

Items not deductible for tax purposes		156			119			70

Items not chargeable for tax purposes		(20	)		(48	)		(33)

Adjustments in respect of prior periods		311			91			87

Total tax charge for the year		3,263			2,551			2,356

¹The 2008 item relates to the reduction in the Swedish statutory corporation tax rate from 28% to 26.3% effective from 1 January 2009. The majority of the 2007 item relates to the reduction in the UK statutory corporation tax rate from 30% to 28%.

Deferred tax

Deferred tax assets and liabilities and the movements during the year, before offset of balances within countries, are as follows:


							Pension			Inter-															Losses and
	Property,						and post-			company												Deferred			tax credits
	plant and			Intangible			retirement			inventory			Untaxed			Accrued			Share			capital			carried
	equipment			assets			benefits			transfers			reserves¹			expenses			schemes			gains			forward			Other			Total
	$m			$m			$m			$m			$m			$m			$m			$m			$m			$m			$m

Deferred tax assets at 1 January 2007		37			2			604			853			–			323			113			–			57			28			2,017

Deferred tax liabilities at 1 January 2007		(502	)		(819	)		–			–			(881	)		–			–			(99	)		–			(55	)		(2,356)

Net deferred tax balance at 1 January 2007²		(465	)		(817	)		604			853			(881	)		323			113			(99	)		57			(27	)		(339)

Taxation expense		(130	)		201			(99	)		(71	)		(225	)		190			(45	)		12			(96	)		58			(205)

Other comprehensive income		–			–			8			–			–			–			(8	)		–			–			–			–

Acquisition of subsidiary undertaking³		3			(2,973	)		–			58			–			74			–			–			369			(29	)		(2,498)

Exchange		(35	)		(5	)		15			46			(65	)		11			2			(1	)		–			(1	)		(33)

Net deferred tax balance at 31 December 2007		(627	)		(3,594	)		528			886			(1,171	)		598			62			(88	)		330			1			(3,075)

Deferred tax assets at 31 December 2007		66			59			531			907			–			611			62			–			330			71			2,637

Deferred tax liabilities at 31 December 2007		(693	)		(3,653	)		(3	)		(21	)		(1,171	)		(13	)		–			(88	)		–			(70	)		(5,712)

Net deferred tax balance at 31 December 2007²		(627	)		(3,594	)		528			886			(1,171	)		598			62			(88	)		330			1			(3,075)

Taxation expense		122			375			24			55			(119	)		37			43			–			12			(24	)		525

Other comprehensive income		–			–			340			–			–			–			9			–			–			(1	)		348

Exchange		168			130			(113	)		(35	)		199			(37	)		(14	)		24			(7	)		(3	)		312

Net deferred tax balance at 31 December 2008		(337	)		(3,089	)		779			906			(1,091	)		598			100			(64	)		335			(27	)		(1,890)

Deferred tax assets at 31 December 2008		136			42			786			935			–			598			100			–			335			45			2,977

Deferred tax liabilities at 31 December 2008		(473	)		(3,131	)		(7	)		(29	)		(1,091	)		–			–			(64	)		–			(72	)		(4,867)

Net deferred tax balance at 31 December 2008		(337	)		(3,089	)		779			906			(1,091	)		598			100			(64	)		335			(27	)		(1,890)

Taxation expense		175			232			(61	)		17			(303	)		(146	)		5			–			(100	)		23			(158)

Other comprehensive income		–			–			140			–			–			–			17			–			–			–			157

Exchange		(46	)		(36	)		54			29			(80	)		18			7			(7	)		(4	)		1			(64)

Net deferred tax balance at 31 December 2009		(208	)		(2,893	)		912			952			(1,474	)		470			129			(71	)		231			(3	)		(1,955)

Deferred tax assets at 31 December 2009		266			47			918			968			–			553			129			–			231			34			3,146

Deferred tax liabilities at 31 December 2009		(474	)		(2,940	)		(6	)		(16	)		(1,474	)		(83	)		–			(71	)		–			(37	)		(5,101)

Net deferred tax balance at 31 December 2009		(208	)		(2,893	)		912			952			(1,474	)		470			129			(71	)		231			(3	)		(1,955)


	2009			2008			2007
Analysed in the Statement of Financial Position, after offset of balances within countries, as:	$m			$m			$m

Deferred tax assets		1,292			1,236			1,044

Deferred tax liabilities		(3,247	)		(3,126	)		(4,119)

Net deferred tax balance		(1,955	)		(1,890	)		(3,075)

¹Untaxed reserves relate to taxable profits where the tax liability is deferred to later periods.

²During 2008, the Group carried out a review of its deferred tax balances resulting in a reclassification of a deferred tax liability of $284m from property, plant and equipment to intangible assets as at 31 December 2007 ($328m as at 1 January 2007).

³The deferred tax liability of $2,498m relates to MedImmune and other acquisitions.

Unrecognised deferred tax assets

Deferred tax assets of $104m have not been recognised in respect of deductible temporary differences (2008: $80m; 2007: $106m) because it is not probable that future taxable profit will be available against which the Group can utilise the benefits therefrom.

AstraZeneca Annual Report and Form 20-F Information 2009

Financial Statements

137

5 Earnings per $0.25 Ordinary Share


	2009		2008		2007

Profit for the financial year attributable to equity holders ($m)		7,521		6,101		5,595

Basic earnings per Ordinary Share		$5.19		$4.20		$3.74

Diluted earnings per Ordinary Share		$5.19		$4.20		$3.73

Weighted average number of Ordinary Shares in issue for basic earnings (millions)		1,448		1,453		1,495

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

Diluted weighted average number of Ordinary Shares in issue (millions)		1,450		1,453		1,498

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 24. The earnings figures used in the calculations above are post-tax.

6 Segment information

AstraZeneca is engaged in a single business activity of pharmaceuticals and the Group does not have multiple operating segments. Our pharmaceuticals business consists of the discovery and development of new products, which are then manufactured, marketed and sold. All of these functional activities take place (and are managed) globally on a highly integrated basis. We do not manage these individual functional areas separately. We consider that the Senior Executive Team (SET) is AstraZeneca’s chief operating decision making body (as defined by IFRS 8). All significant operating decisions are taken by SET. In assessing performance, the SET reviews financial information on an integrated basis for the Group as a whole, substantially in the form of, and on the same basis as, the Group’s IFRS Financial Statements. Resources are allocated on a group-wide basis according to need. In particular, capital expenditure, in-licensing, and research and development resources are allocated between activities on merit, based on overall therapeutic considerations and strategy under the aegis of the Group’s Research & Development Executive Committee to facilitate a group-wide single combined discovery and development strategy.

Geographic areas

The tables below show information by geographic area and, for revenue and property, plant and equipment, material countries. The figures show the revenue, operating profit and profit before tax made by companies located in that area/country, together with segment assets, segment assets acquired, net operating assets and property, plant and equipment owned by the same companies; export sales and the related profit are included in the area/country from which those sales were made.


	Revenue
	2009			2008			2007
	$m			$m			$m

UK

External		1,809			1,910			1,981

Intra-Group		9,056			8,460			6,506

		10,865			10,370			8,487

Continental Europe

Belgium		353			380			387

France		1,880			1,945			1,806

Germany		1,197			1,225			1,164

Italy		1,012			1,145			1,111

Spain		742			832			840

Sweden		1,070			1,135			985

Others		2,622			2,696			2,291

Intra-Group		4,944			3,895			4,123

		13,820			13,253			12,707

The Americas

Canada		1,188			1,269			1,145

US		14,994			13,657			13,404

Others		1,113			1,155			872

Intra-Group		1,962			1,169			786

		19,257			17,250			16,207

Asia, Africa & Australasia

Australia		790			763			631

Japan		2,214			1,861			1,585

China		811			627			403

Others		1,009			1,001			954

Intra-Group		80			78			56

		4,904			4,330			3,629

Continuing operations		48,846			45,203			41,030

Intra-Group eliminations		(16,042	)		(13,602	)		(11,471)

		32,804			31,601			29,559

Export sales from the UK totalled $9,864m for the year ended 31 December 2009 (2008: $9,439m; 2007: $7,546m). Intra-Group pricing is determined on an arm’s-length basis.

AstraZeneca Annual Report and Form 20-F Information 2009

138Financial Statements

6 Segment information continued


	Operating profit						Profit before tax
	2009		2008		2007		2009		2008		2007
Profit from	$m		$m		$m		$m		$m		$m

UK		3,124		2,907		2,060		2,813		2,612		1,828

Continental Europe		4,809		3,136		2,894		4,821		3,233		2,964

The Americas		3,265		2,705		2,734		2,832		2,440		2,781

Asia, Africa & Australasia		345		396		406		341		396		410

Continuing operations		11,543		9,144		8,094		10,807		8,681		7,983


	Non-current assets¹						Total assets
	2009		2008		2007		2009		2008		2007
	$m		$m		$m		$m		$m		$m

UK		3,810		3,524		4,808		17,092		9,870		12,574

Continental Europe		3,966		3,674		4,709		6,706		6,275		7,400

The Americas		21,354		21,762		19,887		28,397		28,290		25,775

Asia, Africa & Australasia		476		436		427		2,725		2,515		2,239

Continuing operations		29,606		29,396		29,831		54,920		46,950		47,988


	Assets acquired²						Net operating assets³
	2009		2008		2007		2009		2008		2007
	$m		$m		$m		$m		$m		$m

UK		537		440		929		4,473		4,234		5,043

Continental Europe		643		295		624		4,094		3,683		4,972

The Americas		711		3,252		17,858		19,186		21,033		19,742

Asia, Africa & Australasia		79		67		48		1,707		1,732		1,510

Continuing operations		1,970		4,054		19,459		29,460		30,682		31,267

¹Non-current assets exclude deferred tax assets and derivative financial instruments.

²Included in ‘assets acquired’ are those assets that are expected to be used during more than one period (property, plant and equipment, goodwill and intangible assets).

³‘Net operating assets’ exclude short-term investments, cash, short-term borrowings, loans, retirement benefit obligations and non-operating receivables and payables.


	Property, plant and equipment
	2009		2008		2007
	$m		$m		$m

UK		1,901		1,750		2,490

Sweden		1,700		1,722		2,204

US		2,386		2,200		1,915

Rest of the world		1,320		1,371		1,689

Continuing operations		7,307		7,043		8,298

Geographic markets

The table below shows revenue in each geographic market in which customers are located.


	2009		2008		2007
	$m		$m		$m

UK		1,057		994		1,003

Continental Europe		9,286		9,937		9,138

The Americas		17,096		15,945		15,459

Asia, Africa & Australasia		5,365		4,725		3,959

Continuing operations		32,804		31,601		29,559

Revenue is recognised at the point of delivery, which is usually when title passes to the wholesaler. Transactions with two wholesalers individually represented greater than 10% of total revenue (2008: 2, 2007: 2). The value of these transactions, recorded as revenue was $4,319m and $4,228m (2008: $3,936m and $3,900m, 2007: $4,101m and $4,236m).

AstraZeneca Annual Report and Form 20-F Information 2009

Financial Statements

139

7 Property, plant and equipment


										Total property,
	Land and			Plant and			Assets in course			plant and
	buildings			equipment			of construction			equipment
	$m			$m			$m			$m

Cost

At 1 January 2007		5,082			9,363			463			14,908

Capital expenditure		53			304			812			1,169

Additions through business combinations		302			122			176			600

Transfer of assets into use		151			470			(621	)		–

Disposals and other movements		(23	)		(555	)		(16	)		(594)

Exchange adjustments		254			470			28			752

At 31 December 2007		5,819			10,174			842			16,835

Capital expenditure		49			239			825			1,113

Transfer of assets into use		275			404			(679	)		–

Disposals and other movements		(123	)		(558	)		(25	)		(706)

Exchange adjustments		(803	)		(1,725	)		(100	)		(2,628)

At 31 December 2008		5,217			8,534			863			14,614

Capital expenditure		8			209			750			967

Transfer of assets into use		218			388			(606	)		–

Disposals and other movements		(400	)		(937	)		(20	)		(1,357)

Exchange adjustments		293			609			42			944

At 31 December 2009		5,336			8,803			1,029			15,168

Depreciation
At 1 January 2007		1,656			5,799			–			7,455

Charge for year		227			849			–			1,076

Impairment		39			65			2			106

Disposals and other movements		(3	)		(498	)		(1	)		(502)

Exchange adjustments		96			306			–			402

At 31 December 2007		2,015			6,521			1			8,537

Charge for year		247			812			–			1,059

Impairment		91			32			–			123

Disposals and other movements		(120	)		(529	)		(2	)		(651)

Exchange adjustments		(303	)		(1,192	)		(2	)		(1,497)

At 31 December 2008		1,930			5,644			(3	)		7,571

Charge for year		219			674			–			893

Impairment		44			6			–			50

Disposals and other movements		(343	)		(859	)		(4	)		(1,206)

Exchange adjustments		117			434			2			553

At 31 December 2009		1,967			5,899			(5	)		7,861

Net book value
At 31 December 2007		3,804			3,653			841			8,298

At 31 December 2008		3,287			2,890			866			7,043

At 31 December 2009		3,369			2,904			1,034			7,307

Impairment charges in 2009 are due to the productivity initiatives in the global supply chain in Italy and research and development in Canada. These costs were recognised in cost of sales and research and development respectively.

Impairment charges in 2008 were due to the productivity initiatives in the global supply chain in France and research and development in Canada. These costs were recognised in cost of sales and research and development respectively.

Impairment charges in 2007 were due to the productivity initiatives in the global supply chain in Germany and the write-down of business support assets. These costs were recognised in cost of sales and general and administrative expenses respectively.


	2009		2008		2007
	$m		$m		$m

The net book value of land and buildings comprised:
Freeholds		3,369		3,287		3,804

AstraZeneca Annual Report and Form 20-F Information 2009

140Financial Statements

8 Goodwill


	2009		2008			2007
	$m		$m			$m

Cost
At 1 January		10,211		10,225			1,430

Additions through business combinations		–		–			8,757

Exchange adjustments		17		(14	)		38

At 31 December		10,228		10,211			10,225

Amortisation and impairment losses
At 1 January		337		341			333

Exchange adjustments		2		(4	)		8

At 31 December		339		337			341

Net book value at 31 December		9,889		9,874			9,884

For the purpose of impairment testing of goodwill, the Group is regarded as a single cash-generating unit.

The recoverable amount is based on value in use using discounted risk-adjusted projections of the Group’s pre-tax cash flows over 10 years, a period reflecting the average patent-protected lives of our current products. The projections include assumptions about product launches, competition from rival products and pricing policy as well as the possibility of generics entering the market. In setting these assumptions we consider our past experience, external sources of information (including information on expected increases and ageing of the populations in our established markets and the expanding patient population in newer markets), our knowledge of competitor activity and our assessment of future changes in the pharmaceutical industry. The 10-year period is covered by internal budgets and forecasts. Given that internal budgets and forecasts are prepared for all projections, no general growth rates are used to extrapolate internal budgets and forecasts for the purposes of determining value in use. No terminal value is included as these cash flows are more than sufficient to establish that an impairment does not exist.

In arriving at value in use, we disaggregate our projected pre-tax cash flows into groups reflecting similar risks and tax effects. For each group of cash flows we use an appropriate discount rate reflecting those risks and tax effects. In arriving at the appropriate discount rate for each group of cash flows, we adjust AstraZeneca’s post-tax weighted average cost of capital (7.6% for 2009, 7.6% for 2008) to reflect the impact of relevant industry risks, the time value of money and tax effects. The weighted average pre-tax discount rate we used was approximately 11% (11% for 2008).

As a further check, we compare our market capitalisation to the book value of our net assets and this indicates significant surplus at 31 December 2009 (and 31 December 2008).

No goodwill impairment was identified.

The Group has also performed sensitivity analysis calculations on the projections used and discount rate applied. The Directors have concluded that, given the significant headroom that exists, and the results of the sensitivity analysis performed, there is no significant risk that reasonable changes in any key assumptions would cause the carrying value of goodwill to exceed its value in use.

AstraZeneca Annual Report and Form 20-F Information 2009

Financial Statements

141

9 Intangible assets


	Product, marketing						Software
	and distribution rights			Other intangibles			development costs			Total
	$m			$m			$m			$m

Cost

At 1 January 2007		4,173			910			786			5,869

Additions – through business combinations		6,946			1,477			–			8,423

Additions – separately acquired		299			33			178			510

Disposals		(52	)		(82	)		–			(134	)

Exchange adjustments		183			47			12			242

At 31 December 2007		11,549			2,385			976			14,910

Additions – separately acquired		2,743			20			178			2,941

Disposals		–			(33	)		(30	)		(63	)

Exchange adjustments		(770	)		(197	)		(133	)		(1,100	)

At 31 December 2008		13,522			2,175			991			16,688

Additions – separately acquired		764			46			193			1,003

Disposals		(200	)		(1	)		–			(201	)

Exchange adjustments		267			84			28			379

At 31 December 2009		14,353			2,304			1,212			17,869

Amortisation and impairment losses

At 1 January 2007		1,859			443			460			2,762

Amortisation for year		364			112			78			554

Disposals		(52	)		(81	)		–			(133	)

Impairment		98			22			–			120

Exchange adjustments		104			32			4			140

At 31 December 2007		2,373			528			542			3,443

Amortisation for year		529			182			96			807

Disposals		–			(9	)		(10	)		(19	)

Impairment		516			91			24			631

Exchange adjustments		(357	)		(104	)		(36	)		(497	)

At 31 December 2008		3,061			688			616			4,365

Amortisation for year		481			162			86			729

Disposals		(67	)		–			–			(67	)

Impairment		93			273			49			415

Exchange adjustments		159			25			17			201

At 31 December 2009		3,727			1,148			768			5,643

Net book value

At 31 December 2007		9,176			1,857			434			11,467

At 31 December 2008		10,461			1,487			375			12,323

At 31 December 2009		10,626			1,156			444			12,226

Other intangibles consist mainly of licensing and rights to contractual income streams.

Amortisation charges are recognised in profit as follows:


	Product, marketing				Software
	and distribution rights		Other intangibles		development costs		Total
	$m		$m		$m		$m

Year ended 31 December 2007

Selling, general and administrative costs		364		27		78		469

Other operating income and expense		–		85		–		85

		364		112		78		554

Year ended 31 December 2008

Cost of sales		39		–		–		39

Research and development		10		–		–		10

Selling, general and administrative costs		480		35		96		611

Other operating income and expense		–		147		–		147

		529		182		96		807

Year ended 31 December 2009

Cost of sales		48		–		–		48

Selling, general and administrative costs		433		27		86		546

Other operating income and expense		–		135		–		135

		481		162		86		729

AstraZeneca Annual Report and Form 20-F Information 2009

142Financial Statements

9 Intangible assets continued

Impairment charges are recognised in profit as follows:


	Product, marketing				Software
	and distribution rights		Other intangibles		development cost		Total
	$m		$m		$m		$m

Year ended 31 December 2007

Research and development		98		22		–		120

Year ended 31 December 2008
Cost of sales		115		–		–		115

Research and development		144		–		–		144

Selling, general and administrative costs		257		–		24		281

Other operating income and expense		–		91		–		91

		516		91		24		631

Year ended 31 December 2009
Research and development		93		7		–		100

Selling, general and administrative costs		–		1		49		50

Other operating income and expense		–		265		–		265

		93		273		49		415

Amortisation and impairment charges

The write down in value of the intangible assets in relation to these income streams was determined based on value in use calculations using discounted risk-adjusted projections of the products’ expected cash flows over a period reflecting the patent-protected lives of the individual products. The full period of projections is covered by internal budgets and forecasts. In arriving at the appropriate discount rate to use for each product, we adjust AstraZeneca’s post-tax weighted average cost of capital (7.6% for 2009; 7.6% in 2008) to reflect the impact of risks and tax effects specific to the individual products. The weighted average pre-tax discount rate we used was approximately 14% (2008: 14%).

The 2009 impairment of product marketing and distribution rights results from the termination of development projects during the year. The 2009 impairment of other intangibles results from a reassessment of the future royalties expected to be received relating to the HPV cervical cancer vaccine and a reassessment of other future licensing and contractual income expected to be earned within our biologics business.

The 2008 impairment of product, marketing and distribution rights results, in part, from the settlement of the Pulmicort Respules patent litigation with Teva ($115m) and the ‘at risk’ launch of a generic competitor to Ethyol ($257m). The 2008 impairment of other intangibles results from a reassessment of the future royalties expected to be received relating to the HPV cervical cancer vaccine. These impairment charges were determined using value in use calculations applying the same considerations as above. The post-tax weighted average cost of capital was 7.6%. The remaining $144m impairment of product, marketing and distribution rights results from the termination of projects in development during the year.

The impairment in 2007 was in relation to the termination of a product in development acquired with MedImmune and four collaboration agreements.

Significant assets

Carrying value

Remaining amortisation

Description

period

Intangible assets arising from joint venture with Merck¹

Product, marketing and distribution rights

227

4 and 8 years

Advance payment¹

Product, marketing and distribution rights

516

9 years

Partial retirement (non-refundable deposit)¹

Product, marketing and distribution rights

1,656

Not amortised

Partial retirement¹

Product, marketing and distribution rights

792

12-18 years

Intangible assets arising from the acquisition of CAT²

Product, marketing and distribution rights

409

6 and 11 years

Intangible assets arising from the acquisition of KuDOS²

Product, marketing and distribution rights

285

Not amortised

RSV franchise assets arising from the acquisition of MedImmune³

Product, marketing and distribution rights

4,884

16-22 years

Intangible assets arising from the acquisition of MedImmune³

Licensing and contractual income

720

2-10 years

Intangible assets arising from the acquisition of MedImmune³

Product, marketing and distribution rights

637

22 years

Intangible assets arising from the collaboration with BMS⁴

Product, marketing and distribution rights

416

13-14 years

¹These assets are associated with the restructuring of the joint venture with Merck & Co., Inc. Further information can be found in Note 25.

²Assets in development are not amortised but are tested annually for impairment.

³An allocation of the cost of these assets to Therapy Area is given in Note 22.

⁴These assets arise from the collaboration agreement with BMS for Onglyza^™.

AstraZeneca Annual Report and Form 20-F Information 2009

Financial Statements

143

10 Other investments


	2009		2008		2007
	$m		$m		$m

Non-current investments

Equity securities available for sale		184		156		182

		184		156		182

Current investments

Equity securities held for trading		18		51		31

Fixed deposits		1,466		54		60

		1,484		105		91

Impairment charges of $18m in respect of available for sale securities are included in other operating income and expense in profit (2008: $25m; 2007: $18m).

11 Inventories


	2009		2008		2007
	$m		$m		$m

Raw materials and consumables		445		409		579

Inventories in process		726		631		806

Finished goods and goods for re-sale		579		596		734

		1,750		1,636		2,119

Inventory write-offs in the year amounted to $83m (2008: $51m; 2007: $95m).

12 Trade and other receivables


	2009			2008			2007
	$m			$m			$m

Amounts due within one year

Trade receivables		5,863			5,657			5,415

Less: Amounts provided for doubtful debts (Note 16)		(81	)		(99	)		(89)

		5,782			5,558			5,326

Other receivables		1,170			978			593

Prepayments and accrued income		580			552			510

		7,532			7,088			6,429

Amounts due after more than one year

Other receivables		27			44			54

Prepayments and accrued income		150			129			185

		177			173			239

		7,709			7,261			6,668

Provision for doubtful debts

Balance at beginning of year		99			89			52

Income statement (credit)/charge		(20	)		23			34

Amounts utilised, exchange and other movements		2			(13	)		3

Balance at end of year		81			99			89

13 Cash and cash equivalents


	2009			2008			2007
	$m			$m			$m

Cash at bank and in hand		1,077			1,039			1,403

Short term deposits		8,841			3,247			4,464

Cash and cash equivalents		9,918			4,286			5,867

Unsecured bank overdrafts		(90	)		(163	)		(140)

Cash and cash equivalents in the cash flow statement		9,828			4,123			5,727

The Group’s insurance subsidiaries hold cash and short term investments totalling $173m (2008: $400m; 2007: $347m), of which $49m (2008: $278m; 2007: $257m) is required to meet insurance solvency requirements and which, as a result, is not readily available for the general purposes of the Group.

AstraZeneca Annual Report and Form 20-F Information 2009

144Financial Statements

14 Interest-bearing loans and borrowings


		Repayment		2009		2008		2007
		dates		$m		$m		$m

Current liabilities

Bank overdrafts		On demand			90		163		140

Floating rate note	US dollars		2009		–		650		–

4.625% Non-callable bond	Euros		2010		1,073		–		–

5.625% Non-callable bond	Euros		2010		717		–		–

Other loans		Within one year			46		180		4,140

					1,926		993		4,280

Non-current liabilities

Floating rate note	US dollars		2009		–		–		649

4.625% Non-callable bond	Euros		2010		–		1,053		1,099

5.625% Non-callable bond	Euros		2010		–		702		–

5.4% Callable bond	US dollars		2012		1,805		1,823		1,765

5.4% Callable bond	US dollars		2014		821		789		767

5.125% Non-callable bond	Euros		2015		1,072		1,051		1,099

5.9% Callable bond	US dollars		2017		1,818		1,896		1,768

7% Guaranteed debentures	US dollars		2023		346		324		323

5.75% Non-callable bond	Pounds sterling		2031		558		501		691

6.45% Callable bond	US dollars		2037		2,717		2,716		2,715

					9,137		10,855		10,876

All loans and borrowings above are unsecured.

15 Financial risk management objectives and policies

The Group’s principal financial instruments, other than derivatives, comprise bank overdrafts, loans, current and non-current investments, cash and short-term deposits. The main purpose of these financial instruments is to manage the Group’s funding and liquidity requirements. The Group has other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.

The principal financial risks to which the Group is exposed are those of liquidity, interest rate, foreign currency and credit. Each of these is managed in accordance with Board-approved policies. These policies are set out below.

The Group uses foreign currency borrowings, foreign currency forwards and options, interest rate swaps and forward rate agreements for the purpose of hedging its foreign currency and interest rate risks. The Group may designate certain financial instruments as either fair-value hedges or net investment hedges in accordance with IAS 39. Key controls applied to transactions in derivative financial instruments are: to use only instruments where good market liquidity exists, to revalue all financial instruments regularly using current market rates and to sell options only to offset previously purchased options. The Group does not use derivative financial instruments for speculative purposes.

Capital management

The capital structure of the Group consists of shareholders’ equity (Note 20), debt (Note 14) and cash (Note 13). For the foreseeable future, the Board will maintain a capital structure that supports the Group’s strategic objectives through:

>		Managing funding and liquidity risk.

>		Optimising shareholder return.

>		Maintaining a strong investment-grade credit rating.

Funding and liquidity risk are reviewed regularly by the Board and managed in accordance with policies described below.

The Board’s distribution policy comprises both a regular cash dividend and subject to business needs, a share re-purchase component. The Board regularly reviews its shareholders’ return strategy, and in 2009 adopted a progressive dividend policy, whereby the Board intends to maintain or grow the dividend each year, targeting an average dividend cover of 2 times (ie a payout ratio of 50%), based on reported earnings, (before restructuring costs). In addition, after providing for business investment, funding the progressive dividend policy and meeting debt service obligations, the Board will regularly assess the opportunity to return cash in excess of these requirements to shareholders through share re-purchases.

The Group’s net debt position (loans and borrowings net of cash and cash equivalents, current investments and derivative financial instruments) has reduced from $7,174m at the beginning of the year to a net funds position of $535m at 31 December 2009 as a result of strong net operating cash in flows. The Group’s policy is to manage its debt level so as to maintain a strong investment-grade credit rating. The Group’s current long-term credit rating is A1 by Moody’s and AA- by Standard and Poor’s, both with a stable outlook.

AstraZeneca Annual Report and Form 20-F Information 2009

Financial Statements

145

15 Financial risk management objectives and policies continued

Liquidity risk

The Board reviews the Group’s ongoing liquidity risks annually as part of the planning process and on an ad hoc basis. The Board considers short-term requirements against available sources of funding taking into account forecast cash flow. The Group manages liquidity risk by maintaining access to a number of sources of funding which are sufficient to meet anticipated funding requirements. Specifically, the Group uses US commercial paper, committed bank facilities and cash resources to manage short-term liquidity and manages long-term liquidity by raising funds through the capital markets.

In addition to cash and cash equivalents of $9,918m, fixed deposits of $1,466m less overdrafts of $90m at 31 December 2009, the Group has committed bank facilities of $4.25bn available to manage liquidity. At 31 December 2009, the Group has issued $3,420m under an EMTN programme, and $7,507m under a SEC-registered programme. The Company regularly monitors the credit standing of the banking group and currently does not anticipate any issue with drawing on the committed facilities should this be necessary. The committed facilities consist of $3.6bn maturing in October 2012 and $0.65bn maturing between October and December 2010 and were undrawn at 31 December 2009.

Market risk
Interest rate risk

The Group maintains a mix of fixed and floating rate debt. The portion of fixed rate debt was approved by the Board and any variation requires Board approval. A significant portion of the long-term debt entered into in 2007 in order to finance the acquisition of MedImmune has been held at fixed rates of interest. The Group uses interest rate swaps and forward rate agreements to manage this mix.

At 31 December 2009, the Group held interest rate swaps with a notional value of $2.5bn, converting the 5.4% callable bond maturing in 2014, and the 7% guaranteed debentures payable in 2023 to floating rates and partially converting the 5.4% callable bond maturing in 2012 and the 5.9% callable bond maturing in 2017 to floating rates. No new interest rate swaps were entered into during 2009. At 31 December 2009 swaps with a notional value of $1.5bn were designated as fair-value hedges and swaps with a notional value of $1.0bn related to debt designated as fair value through profit or loss. Designated hedges are expected to be effective and therefore the impact of ineffectiveness on profit is not expected to be material. The accounting treatment for fair-value hedges and debt designated as fair value through profit or loss is disclosed in the Accounting Policies section from page 128.

The majority of the Group’s cash balances are held with third party fund managers with floating rates of interest being earned.

Foreign currency risk

The US dollar is the Group’s most significant currency. As a consequence, the Group results are presented in US dollars and exposures are managed against US dollars accordingly.

Translational

Approximately 54% of Group external sales in 2009 were denominated in currencies other than the US dollar, while a significant proportion of manufacturing and research and development costs were denominated in sterling and Swedish krona. Surplus cash generated by business units is substantially converted to, and held centrally in US dollars. As a result, operating profit and total cash flow in US dollars will be affected by movements in exchange rates.

This currency exposure is managed centrally based on forecast cash flows for the currencies of Swedish krona, sterling, euro, Australian dollar, Canadian dollar and Japanese yen. The impact of movements in exchange rates is mitigated significantly by the correlations which exist between the major currencies to which the Group is exposed and the US dollar. Monitoring of currency exposures and correlations is undertaken on a regular basis and hedging is subject to pre-execution approval.

Where there is non-US dollar debt and an underlying net investment of that amount in the same currency, the Group applies net investment hedging. The €500m January 2010 bond and the €750m November 2010 bond were issued in non-US dollar currencies to match investors’ appetite but currency swaps were transacted to convert them into fixed-rate US dollar instruments. As at 31 December 2009, after currency swaps, 5.0% of interest-bearing loans and borrowings were denominated in sterling and 9.7% of interest-bearing loans and borrowings were denominated in euros. Exchange differences on the re-translation of debt designated as net investment hedges are recognised in other comprehensive income to the extent that the hedge is effective. Any ineffectiveness is taken to profit. Exchange differences on foreign currency borrowings not designated in a hedge relationship are taken to profit.

Transactional

The transaction exposures that arise from non-local currency sales and purchases by subsidiaries are, where practicable, fully hedged using forward foreign exchange contracts. In addition, the Group’s external dividend, which is paid principally in sterling and Swedish krona, is fully hedged from announcement to payment date. Foreign exchange gains and losses on forward contracts transacted for transactional hedging are taken to profit.

Credit risk

The Group is exposed to credit risk on financial assets, such as cash balances (including fixed deposits and cash and cash equivalents), derivative instruments, trade and other receivables. The Group is also exposed in its net asset position to its own credit risk in respect of the 2023 debentures and 2014 bonds which are accounted for at fair value through profit and loss.

AstraZeneca Annual Report and Form 20-F Information 2009

146Financial Statements

15 Financial risk management objectives and policies continued

Trade and other receivables

Trade receivable exposures are managed locally in the operating units where they arise and credit limits are set as deemed appropriate for the customer. The Group is exposed to customers ranging from government-backed agencies and large private wholesalers to privately owned pharmacies, and the underlying local economic and sovereign risks vary throughout the world. Where appropriate, the Group endeavours to minimise risks by the use of trade finance instruments such as letters of credit and insurance. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of specific trade and other receivables where it is deemed that a receivable may not be recoverable. When the debt is deemed irrecoverable, the allowance account is written off against the underlying receivable. The maximum exposure to credit risk for trade receivables and concentrations of credit risk are disclosed in Note 16.

Other financial assets

The Group may hold significant cash balances as part of its normal operations, with the amount of cash held at any point reflecting the level of cash flow generated by the business and the timing of the use of that cash. The majority of excess cash is centralised within the group treasury entity and is subject to counterparty risk on the principal invested. This risk is mitigated though a policy of prioritising security and liquidity over return, and as such cash is only invested in high credit quality investments. Counterparty limits are set according to the assessed risk of each counterparty and exposures are monitored against these limits on a regular basis. The majority of the Group’s cash is invested in US Treasury bills, US Treasury funds, AAA-rated liquidity funds and short-term bank deposits.

The most significant concentration of financial credit risk at 31 December 2009 was $4,636m invested in US Treasury funds and $3,699m in US Treasury bills, which each bear credit exposure to the US government. There were no other significant concentrations of financial credit risk at the reporting date. All financial derivatives are transacted with commercial banks, in line with standard market practice. During the year the Group has entered into agreements with some bank counterparties whereby the parties agree to post cash collateral for the benefit of the other equivalent to the market valuation of the derivative positions above a predetermined threshold. The carrying value of such cash collateral held by the Group at 31 December 2009 was $2m. The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments recorded, in the Statement of Financial Position.

16 Financial instruments

Derivative financial instruments

Set out below is a summary of the derivative financial instruments included in the Statement of Financial Position at 31 December 2009, 31 December 2008 and 31 December 2007.

Non-current assets

Current assets

Current liabilities

Non-current liabilities

Total

Designated in a fair-value hedge

135

–

135

Related to instruments designated at fair value through profit or loss

127

–

127

Other derivatives

–

(90

)

–

(66

)

31 December 2009

262

(90

)

–

196


	Non-current assets		Current assets		Current liabilities			Non-current liabilities			Total
	$m		$m		$m			$m			$m

Designated in a fair-value hedge		229		–		–			–			229

Related to instruments designated at fair value through profit or loss		220		–		–			–			220

Other derivatives		–		–		(95	)		(71	)		(166	)

31 December 2008		449		–		(95	)		(71	)		283

Non-current assets

Current assets

Current liabilities

Non-current liabilities

Total

Designated in a fair-value hedge

–

Related to instruments designated at fair value through profit or loss

–

Other derivatives

–

(31

)

–

(31

)

31 December 2007

117

–

(31

)

–

To conform to the current basis of presentation, the Consolidated Statements of Financial Position at 31 December 2008 and 31 December 2007 have been adjusted to reflect changes to the classification of derivative financial instruments at those dates. The adjustments have increased total assets at 31 December 2008 by $166m and at 31 December 2007 by $31m and have decreased current assets at 31 December 2008 by $283m and at 31 December 2007 by $86m. The adjustments have had no effect on net assets or net income for the year.

AstraZeneca Annual Report and Form 20-F Information 2009

Financial Statements

147

16 Financial instruments continued

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 Group’s financial assets and financial liabilities at 31 December 2009, 31 December 2008 and 31 December 2007. None of the financial assets or financial liabilities have been reclassified during the year.

Instruments

Other

Instruments in a

designated

derivatives

Available

Held for

Amortised

Total

hedge relationship¹

at fair value²

at fair value³

for sale

trading

cost

carrying value

Fair value

2009

Cash and cash equivalents

–

9,918

9,918

9,918

Overdrafts

–

(90

)

(90

)

(90)

Loans due within one year

–

(1,836

)

(1,836

)

(1,867)

Loans due after more than one year

(1,629

)

(1,167

)

–

(6,341

)

(9,137

)

(9,832)

Derivative financial instruments

135

127

(66

)

–

196

196

Other investments

–

184

1,466

1,668

1,668

Other financial assets

–

6,979

6,979

6,979

Other financial liabilities

–

(8,872

)

(8,872

)

(8,872)

2008

Cash and cash equivalents

–

4,286

4,286

4,286

Overdrafts

–

(163

)

(163

)

(163)

Loans due within one year

–

(830

)

(830

)

(830)

Loans due after more than one year

(1,727

)

(1,113

)

–

(8,015

)

(10,855

)

(11,238)

Derivative financial instruments

229

220

(166

)

–

283

283

Other investments

–

156

260

260

Other financial assets

–

6,580

6,580

6,580

Other financial liabilities

–

(7,239

)

(7,239

)

(7,239)

2007

Cash and cash equivalents

–

5,867

5,867

5,867

Overdrafts

–

(140

)

(140

)

(140)

Loans due within one year

–

(4,140

)

(4,140

)

(4,140)

Loans due after more than one year

(1,544

)

(1,090

)

–

(8,242

)

(10,876

)

(11,235)

Derivative financial instruments

(31

)

–

Other investments

–

182

273

273

Other financial assets

–

5,973

5,973

5,973

Other financial liabilities

–

(7,057

)

(7,057

)

(7,057)

¹Includes borrowings and derivatives designated as hedged items in fair-value hedge relationships with respect to interest rate risk.

²Includes borrowings designated at fair value through profit or loss and related derivatives.

³Derivatives not designated in hedge relationships or related to financial instruments designated at fair value through profit or loss.

Other financial assets represent trade and other receivables (Note 12) excluding prepayments and accrued income. Other financial liabilities represent trade and other payables (Note 17) excluding deferred income.

Credit risk decreased the fair value of the bonds designated as fair value through profit or loss by $145m for the year and increased the fair value by $35m since designation. Changes in credit risk had no material effect on any other financial assets and liabilities recognised at fair value in the Financial Statements. The change in fair value attributable to changes in credit risk is calculated as the change in fair value not attributable to market risk.

The methods and assumptions used to estimate the fair values of financial instruments together with their carrying values are as follows:

>		Cash and overdrafts – held on the Statement of Financial Position at amortised costs. Fair value approximates to carrying value.

>		Loans due within one year and after more than one year – the fair value of fixed-rate publicly traded debt is based on year-end quoted market prices; the fair value of floating rate debt is nominal value, as mark to market differences would be minimal given the frequency of resets. The carrying value of loans designated at fair value through profit or loss is the fair value. For loans designated in a fair-value hedge relationship, carrying value is initially measured at fair value and remeasured for fair-value changes in respect of the hedged risk at each reporting date. All other loans are held at amortised cost.

>		Derivative financial instruments – consists of interest rate swaps (included in designated as fair value through profit or loss if related to debt designated at fair value, or instruments in a hedge relationship as a fair-value hedge or other derivatives), forward foreign exchange contracts and foreign currency option contracts (included in other derivatives). All derivatives are held at fair value.

	–		Interest rate swaps – the fair value is estimated using appropriate zero coupon curve valuation techniques to discount future contractual cash flows based on rates current at year end.

	–		Forward foreign exchange contracts – the majority of contracts for existing transactions had maturities of six months or less from year end. The fair value of forward foreign exchange contracts is estimated by discounting the future contractual cash flows using appropriate yield curves based on market forward foreign exchange rates at the year end.

	–		Foreign currency option contracts – the fair value of option contracts is estimated using Black-Scholes valuation techniques.

AstraZeneca Annual Report and Form 20-F Information 2009

148Financial Statements

16 Financial instruments continued

>		Other investments – held on the Statement of Financial Position at fair value. These include equity securities held on the Statement of Financial Position as other investments (Note 10). The fair value of listed investments is based on year end quoted market prices. For unlisted investments, carrying values approximate fair value.

>		Other financial assets and other financial liabilities – held on the Statement of Financial Position at amortised costs with carrying value being a reasonable approximation of fair value.

The interest rates used to discount future cash flows, where applicable, are based on market swap curves at the reporting date, and were as follows:

2009

2008

2007

Derivatives

2.0% to 4.6%

3.8% to 4.6%

4.3% to 5.1%

Loans and borrowings

2.0% to 4.6%

3.8% to 4.6%

4.3% to 5.1%

Fair value hierarchy

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

>	Level 1:	quoted prices (unadjusted) in active markets for identical assets or liabilities.

>	Level 2:	inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie, as prices) or indirectly (ie, derived from prices).

>	Level 3:	inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Level 1

Level 2

Level 3

Total

31 December 2009

Equity securities available for sale

–

143

184

Equity securities held for trading

–

Derivative assets

–

286

–

286

Assets

286

143

488

Borrowing designated at fair value through profit or loss

(1,167

)

–

(1,167)

Derivative liabilities

–

(90

)

–

(90)

Liabilities

(1,167

)

(90

)

–

(1,257)

Equity securities available for sale which are analysed at Level 3 represent investments in private biotech companies. The fair values of these are approximated as cost. Hence, value is adjusted only for permanent impairment and for no other movement.

Net gains and losses on financial assets and financial liabilities


	2009			2008			2007
	$m			$m			$m

Included in operating profit

Gains/(losses) on forward foreign exchange contracts		114			(399	)		(59)

(Losses)/gains on receivables and payables		(141	)		391			74

Losses on investments designated at fair value through profit or loss		–			–			(1)

Losses on available for sale current investments		(18	)		(25	)		(21)

		(45	)		(33	)		(7)

Included in finance income and expense

Interest and fair value adjustments in respect of debt designated at fair value through profit or loss, net of derivatives		(169	)		87			(22)

Interest and changes in carrying values of debt designated as hedged items, net of derivatives		(35	)		(64	)		(28)

Interest and fair value changes on fixed and short-term deposits and equity securities		43			140			344

Interest on debt, overdrafts and commercial paper held at amortised cost		(501	)		(609	)		(436)

Exchange gains/(losses) on financial assets and liabilities		31			(12	)		(3)

		(631	)		(458	)		(145)

Included in other comprehensive income

Foreign exchange differences on borrowings forming net investment hedges		(68	)		291			(40)

Gain/(loss) on cash flow hedge in connection with debt issue		1			1			(21)

Available for sale gains/(losses) taken to equity		2			2			(9)

		(65	)		294			(70)

AstraZeneca Annual Report and Form 20-F Information 2009

Financial Statements

149

16 Financial instruments continued

$95m fair value losses on interest rate fair value hedging instruments and $97m fair value gains on the related hedged items have been included within interest and changes in carrying values of debt designated as hedged items, net of derivatives. All fair value hedge relationships were effective during the year. The accounting treatment for fair value hedges is disclosed in the Accounting Policies.

$94m fair value losses on derivatives related to debt instruments designated at fair value through profit or loss and $53m fair value losses on debt instruments designated at fair value through profit or loss have been included within interest and fair value adjustments in respect of debt designated at fair value through profit or loss, net of derivatives. The accounting treatment for debt designated at fair value through profit or loss is disclosed in the Accounting Policies section from page 128. The loss on cash flow hedge in connection with debt issue included in other comprehensive income relates to the amortisation of a loss on a cash flow hedge of a prospective debt issue which was taken directly to reserves in 2007. The total loss is being amortised through profit over the remaining life of the underlying debt instrument.

Ineffectiveness on the net investment hedge taken to profit was $nil (2008: $nil; 2007: $nil). The accounting treatment for net investment hedges is disclosed in the Accounting Policies section from page 128.

Liquidity risk

The maturity profile of the anticipated future contractual cash flows including interest in relation to the Group’s financial liabilities, on an undiscounted basis and which, therefore, differs from both the carrying value and fair value, is as follows:


	Bank								Total								Total
	overdrafts						Trade		non-derivative								derivative
	and other						and other		financial			Interest			Currency		financial
	loans			Bonds			payables		instruments			rate swaps			swaps		instruments			Total
	$m			$m			$m		$m			$m			$m		$m			$m

Within one year		139			2,373			8,687		11,199			(117	)		89		(28	)		11,171

In one to two years		–			523			185		708			(117	)		–		(117	)		591

In two to three years		–			2,246			–		2,246			(116	)		–		(116	)		2,130

In three to four years		–			429			–		429			(86	)		–		(86	)		343

In four to five years		–			405			–		405			(64	)		–		(64	)		341

In more than five years		–			12,209			–		12,209			(239	)		–		(239	)		11,970

		139			18,185			8,872		27,196			(739	)		89		(650	)		26,546

Effect of interest		(3	)		(7,467	)		–		(7,470	)		739			–		739			(6,731)

Effect of discounting, fair values and issue costs		–			209			–		209			(262	)		1		(261	)		(52)

31 December 2009		136			10,927			8,872		19,935			(262	)		90		(172	)		19,763


	Bank								Total								Total
	overdrafts						Trade		non-derivative								derivative
	and other						and other		financial			Interest			Currency		financial
	loans			Bonds			payables		instruments			rate swaps			swaps		instruments			Total
	$m			$m			$m		$m			$m			$m		$m			$m

Within one year		345			1,271			7,178		8,794			(60	)		–		(60	)		8,734

In one to two years		–			2,335			61		2,396			(60	)		66		6			2,402

In two to three years		–			465			–		465			(59	)		–		(59	)		406

In three to four years		–			2,241			–		2,241			(59	)		–		(59	)		2,182

In four to five years		–			424			–		424			(46	)		–		(46	)		378

In more than five years		–			12,478			–		12,478			(163	)		–		(163	)		12,315

		345			19,214			7,239		26,798			(447	)		66		(381	)		26,417

Effect of interest		(2	)		(7,956	)		–		(7,958	)		447			–		447			(7,511)

Effect of discounting, fair values and issue costs		–			247			–		247			(449	)		5		(444	)		(197)

31 December 2008		343			11,505			7,239		19,087			(449	)		71		(378	)		18,709


	Bank								Total								Total
	overdrafts						Trade		non-derivative								derivative
	and other						and other		financial			Interest			Currency		financial
	loans			Bonds			payables		instruments			rate swaps			swaps		instruments			Total
	$m			$m			$m		$m			$m			$m		$m			$m

Within one year		4,305			619			6,968		11,892			–			–		–			11,892

In one to two years		–			1,259			89		1,348			–			–		–			1,348

In two to three years		–			1,679			–		1,679			–			–		–			1,679

In three to four years		–			532			–		532			–			–		–			532

In four to five years		–			2,255			–		2,255			–			–		–			2,255

In more than five years		–			13,356			–		13,356			(25	)		–		(25	)		13,331

		4,305			19,700			7,057		31,062			(25	)		–		(25	)		31,037

Effect of interest		(25	)		(8,857	)		–		(8,882	)		25			–		25			(8,857)

Effect of discounting, fair values and issue costs		–			33			–		33			(117	)		–		(117	)		(84)

31 December 2007		4,280			10,876			7,057		22,213			(117	)		–		(117	)		22,096

Where interest payments are on a floating-rate basis it is assumed that rates will remain unchanged from the last business day of each year ended 31 December. For details of how liquidity risk is managed and for details of cash and cash equivalents, fixed deposits and committed bank facilities available to manage liquidity risk refer to Note 15.

It is not expected that the cash flows in the maturity profile could occur significantly earlier or at significantly different amounts.

AstraZeneca Annual Report and Form 20-F Information 2009

150Financial Statements

16 Financial instruments continued

Market risk
Interest rate risk

The interest rate profile of the Group’s interest-bearing financial instruments, as at 31 December 2009, 31 December 2008 and 31 December 2007 is set out below. In the case of non-current financial liabilities, the classification includes the impact of interest rate swaps which convert the debt to floating rate.

2009

2008

2007

Total

Fixed rate

Floating rate

Total

Fixed rate

Floating rate

Total

Fixed rate

Floating rate

Financial liabilities

Interest-bearing loans and borrowings

Current

1,926

1,790

136

993

–

993

4,280

–

4,280

Non-current

9,137

6,340

2,797

10,855

8,015

2,840

10,876

7,594

3,282

11,063

8,130

2,933

11,848

8,015

3,833

15,156

7,594

7,562

Financial assets

Fixed deposits

1,466

–

1,466

–

Cash and cash equivalents

9,918

–

9,918

4,286

–

4,286

5,867

–

5,867

11,384

–

11,384

4,340

–

4,340

5,927

–

5,927

In addition to the financial assets above, there are $7,376m (2008: $7,070m; 2007: $6,272m) of other current and non-current asset investments and other financial assets on which no interest is received.

Foreign currency risk
Translational

In 2009, the US Dollar was generally stronger than in the prior year against our six principal currency exposures: sterling (GBP), Swedish krona (SEK), euro (EUR), Australian dollar (AUD), Japanese yen (JPY) and Canadian dollar (CAD). The weakness of our cost currencies sterling and Swedish krona relative to the euro which is our main non-US dollar income currency has resulted in a small net benefit for the Group. During the year a series of option-based currency hedges were executed to protect the Group from adverse exchange rate movements and all matured during the period without being exercised. The cost of executing these hedges is recorded through profit.

Transactional

100% of the Group’s major transactional currency exposures on working capital balances, which typically extend for up to three months, are hedged, where practicable, using forward foreign exchange contracts against individual Group companies’ reporting currency.

The table below sets out the principal foreign exchange contracts outstanding at 31 December 2009, 31 December 2008 and 31 December 2007 along with the underlying gross exposure as defined above.


	GBP			SEK			EUR			AUD			JPY			CAD
2009	$m			$m			$m			$m			$m			$m

Gross exposure		(124	)		(811	)		556			75			197			43

Forward exchange contracts		124			811			(556	)		(75	)		(197	)		(43)

Net exposure		–			–			–			–			–			–


2008

Gross exposure		(676	)		(444	)		505			57			166			49

Forward exchange contracts		690			445			(512	)		(52	)		(166	)		(24)

Net exposure		14			1			(7	)		5			–			25


2007

Gross exposure		(536	)		(476	)		627			24			168			57

Forward exchange contracts		530			494			(627	)		(24	)		(168	)		(57)

Net exposure		(6	)		18			–			–			–			–

AstraZeneca Annual Report and Form 20-F Information 2009

Financial Statements

151

16 Financial instruments continued

Sensitivity analysis

The sensitivity analysis set out below summarises the sensitivity of the market value of our financial instruments to hypothetical changes in market rates and prices. 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. For long-term debt, an increase in interest rates results in a decline in the fair value of debt.

The sensitivity analysis assumes an instantaneous 100 basis point change in interest rates in all currencies from their levels at 31 December 2009, with all other variables held constant. Based on the composition of our long-term debt portfolio as at 31 December 2009, a 1% increase in interest rates would result in an additional $32m in interest expense being incurred per year. The exchange rate sensitivity analysis assumes an instantaneous 10% change in foreign currency exchange rates from their levels at 31 December 2009, 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.

Each incremental 10% movement in foreign currency exchange rates would have approximately the same effect as the initial 10% detailed in the table below.

31 December 2009


	Interest rates					Exchange rates
	+1%		-1%			+10%			-10%

Increase/(decrease) in fair value of financial instruments		602		(709	)		137			(137)

Impact on profit: gain/(loss)		–		–			(134	)		134

Impact on equity: gain/(loss)		–		–			271			(271)

31 December 2008


	Interest rates					Exchange rates
	+1%		-1%			+10%			-10%

Increase/(decrease) in fair value of financial instruments		587		(706	)		217			(217)

Impact on profit: gain/(loss)		–		–			(57	)		57

Impact on equity: gain/(loss)		–		–			274			(274)

31 December 2007


	Interest rates					Exchange rates
	+1%		-1%			+10%			-10%

Increase/(decrease) in fair value of financial instruments		666		(779	)		165			(165)

Impact on profit: gain/(loss)		–		–			(37	)		37

Impact on equity: gain/(loss)		–		–			202			(202)

There has been no change in the methods and assumptions used in preparing the above sensitivity analysis over the three-year period.

Credit risk

The carrying amount of financial assets, being cash and cash equivalents, derivative assets, other investments and other financial assets (consisting of trade and other receivables) represent the maximum credit exposure.

The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:


	2009		2008		2007
	$m		$m		$m

US		2,229		2,032		1,961

UK		482		459		425

Sweden		245		226		260

Euro zone countries		762		833		901

Other European countries		295		257		247

Japan		950		955		771

Other countries		819		796		761

		5,782		5,558		5,326

In the US, sales to three wholesalers accounted for approximately 81% of US sales (2008: three wholesalers accounted for approximately 81%; 2007: three wholesalers accounted for approximately 82%).

AstraZeneca Annual Report and Form 20-F Information 2009

152Financial Statements

16 Financial instruments continued

The ageing of trade receivables at the reporting date was:


	2009		2008		2007
	$m		$m		$m

Not past due		5,542		5,262		4,930

Overdue but renegotiated		–		3		120

Past due 0-90 days		65		106		79

Past due 90-180 days		75		60		99

Past due > 180 days		100		127		98

		5,782		5,558		5,326


	2009			2008			2007
	$m			$m			$m

Movements in provisions for trade receivables

Balance at beginning of year		99			89			52

Income statement (credit)/charge		(20	)		23			34

Amounts utilised, exchange and other movements		2			(13	)		3

Balance at end of year		81			99			89

The allowance for impairment has been calculated based on past experience and is in relation to specific customers. Given the profile of our customers, including large wholesalers and government-backed agencies, no further credit risk has been identified with the trade receivables not past due other than those balances for which an allowance has been made.

17 Trade and other payables


	2009		2008		2007
	$m		$m		$m

Current liabilities
Trade payables		2,316		1,940		1,983

Value added and payroll taxes and social security		342		371		434

Rebates and chargebacks		2,618		1,963		1,514

Other payables		1,038		1,026		865

Accruals		2,373		1,878		2,172

		8,687		7,178		6,968

Non-current liabilities
Other payables		244		149		229

Included in other payables are amounts totalling $259m (2008: $227m; 2007: $209m) to meet insurance obligations of the Group’s insurance subsidiaries. These amounts are net of intra-group set-off.

18 Provisions for liabilities and charges


	Severance			Environmental			Employee benefits			Legal			Other provisions			Total
	$m			$m			$m			$m			$m			$m

At 1 January 2007		31			95			109			–			131			366

Charge for year		620			48			4			25			33			730

Cash paid		(25	)		(32	)		(23	)		–			(25	)		(105)

Exchange and other movements		17			–			10			–			2			29

At 31 December 2007		643			111			100			25			141			1,020

Charge/(credit) for year		469			37			(23	)		–			164			647

Cash paid		(405	)		(39	)		(1	)		–			(12	)		(457)

Exchange and other movements		(88	)		21			8			–			(9	)		(68)

At 31 December 2008		619			130			84			25			284			1,142

Charge for year		309			6			12			636			101			1,064

Cash paid		(341	)		(23	)		–			(13	)		(34	)		(411)

Reversals		(89	)		–			–			–			(28	)		(117)

Exchange and other movements		13			(1	)		(1	)		–			(3	)		8

At 31 December 2009		511			112			95			648			320			1,686


	2009		2008		2007
	$m		$m		$m

Due within one year		1,209		600		387

Due after more than one year		477		542		633

		1,686		1,142		1,020

AstraZeneca Annual Report and Form 20-F Information 2009

Financial Statements

153

18 Provisions for liabilities and charges continued

AstraZeneca is undergoing a global restructuring initiative which involves rationalisation of the Global Supply Chain, European Sales and Marketing, Information Services and Business Support infrastructure and Research and Development. Employee costs in connection with the initiatives are recognised in severance provisions. This is a three-year programme expected to be substantially completed by the end of 2010.

Details of the environmental and legal provisions are provided in Note 25.

Employee benefit provisions include the executive deferred bonus plan. Further details are included in Note 24.

Other provisions comprise amounts relating to specific legal and constructive obligations and disputes.

No provision has been released or applied for any purpose other than that for which it was established.

19 Capital and reserves


	2009			2008			2007
Cumulative translation differences included within retained earnings	$m			$m			$m

Balance at beginning of year		1,323			2,414			1,945

Foreign exchange arising on consolidation		388			(1,355	)		489

Exchange adjustments on goodwill (recorded against other reserves)		13			(27	)		20

Foreign exchange on borrowings		(68	)		291			(40)

Net exchange movement in retained earnings		333			(1,091	)		469

Balance at end of year		1,656			1,323			2,414

Other reserves

The other reserves arose from the cancellation of £1,255m of share premium account by the Company in 1993 and the redenomination of share capital ($157m) in 1999. The reserves are available for writing off goodwill arising on consolidation and, subject to guarantees given to preserve creditors as at the date of the court order, are available for distribution.

Retained earnings

The cumulative amount of goodwill written off directly to reserves resulting from acquisitions, net of disposals, amounted to $667m (2008: $654m; 2007: $681m) using year end rates of exchange. At 31 December 2009, 24,178 shares, at a cost of $1m, have been deducted from retained earnings (2008: nil shares, at a cost of $nil; 2007: nil shares, at a cost of $nil).

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 might 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 4).

20 Share capital of the Company

Authorised

Allotted, called-up and fully paid

2009

2008

2007

Issued Ordinary Shares ($0.25 each)

363

362

364

Unissued Ordinary Shares ($0.25 each)

237

–

Redeemable Preference Shares (£1 each – £50,000)

–

600

363

362

364

The total authorised number of Ordinary Shares at 31 December 2009 was 2,400,000,000, of which 1,450,958,562 Ordinary Shares were in issue.

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 the number of Ordinary Shares during the year can be summarised as follows:


	No. of shares (million)
	2009		2008

At 1 January		1,447		1,457

Issues of shares		4		4

Re-purchase of shares		–		(14)

At 31 December		1,451		1,447

AstraZeneca Annual Report and Form 20-F Information 2009

154Financial Statements

20 Share capital of the Company continued

Share re-purchases

During the year, the Company did not re-purchase nor cancel any Ordinary Shares (2008: 13,597,940 Ordinary Shares at an average price of 2397 pence per share).

Share schemes

A total of 3,477,014 Ordinary Shares were issued during the year in respect of share schemes (2008: 4,078,635 Ordinary Shares). Details of movements in the number of Ordinary Shares under option are shown in Note 24; details of options granted to Directors are shown in the Directors’ Remuneration Report from page 101.

Shares held by subsidiaries

No shares in the Company were held by subsidiaries in any year.

21 Dividends to shareholders


	2009		2008		2007		2009		2008		2007
	Per share		Per share		Per share		$m		$m		$m

Final		$1.500		$1.350		$1.230		2,171		1,967		1,885

Interim		$0.590		$0.550		$0.520		855		800		773

		$2.090		$1.900		$1.750		3,026		2,767		2,658

The second interim dividend, to be confirmed as final, is $1.71 per share and $2,481m in total. This will be payable on 15 March 2010.

On payment of the dividends, exchange gains of $17m (2008: gains of $28m; 2007: gains of $17m) arose. These exchange gains and losses are included in Note 3.

22 Acquisitions of business operations

There were no acquisitions made during either the year ended 31 December 2009, or the year ended 31 December 2008.

Details with regard to acquisitions made during the year ended 31 December 2007 are set out below:

MedImmune

On 1 June 2007, AstraZeneca announced the successful tender offer for all the outstanding shares of common stock of MedImmune, a world-leading biotechnology company with proven biologics discovery and development strength, pipeline and leading biomanufacturing capability. At that date, approximately 96.0% of the outstanding shares were successfully tendered; the remaining shares were acquired by 18 June 2007. The financial results of MedImmune have been consolidated into the Group’s results from 1 June 2007.

Cash consideration of $13.9bn was paid for the outstanding shares. After taking account of the cash and investments acquired, together with the settlement of MedImmune’s convertible debt and outstanding share options, the total cash paid to acquire MedImmune was $15.6bn.

In most business acquisitions, there is a part of the cost that is not capable of being attributed in accounting terms to identifiable assets and liabilities acquired and is therefore recognised as goodwill. In the case of the acquisition of MedImmune, this goodwill is underpinned by a number of elements, which individually cannot be quantified. Most significant amongst these is the premium attributable to a pre-existing, well positioned business in the innovation-intensive, high-growth biologics market with a highly skilled workforce and established reputation. Other important elements include buyer-specific synergies, potential additional indications for identified products and the core technological capabilities and knowledge base of the company.

MedImmune contributed $714m of turnover in the year of acquisition. After amortisation, net investments/interest costs (including interest costs of external financing of $446m) and tax, the loss attributable to MedImmune in the year of acquisition was $410m. If the acquisition had taken effect at the beginning of the reporting period (1 January 2007), on a pro forma basis the revenue, profit before tax and profit after tax of the combined Group for 2007 would have been $30,127m, $7,576m and $5,351m, respectively. Basic and diluted earnings per share for the combined Group in 2007 would have been $3.56 and $3.55, respectively. This pro forma information has been prepared taking into account amortisation, interest costs and related tax effects but does not purport to represent the results of the combined Group that actually would have occurred had the acquisition taken place on 1 January 2007 and should not be taken to be representative of future results.

AstraZeneca Annual Report and Form 20-F Information 2009

Financial Statements

155

22 Acquisitions of business operations continued


				Fair value
	Book value			adjustment			Fair value
	$m			$m			$m

Non-current assets
Intangible assets		193			7,882			8,075

Property, plant and equipment		523			70			593

Other		550			(17	)		533

		1,266			7,935			9,201

Current assets		1,439			115			1,554

Current liabilities		(326	)		39			(287)

Additional obligations related to convertible debt and share options		–			(1,724	)		(1,724)

Non-current liabilities

Interest-bearing loans and borrowings		(1,165	)		–			(1,165)

Other payables		(73	)		–			(73)

Deferred tax assets/(liabilities)		314			(2,694	)		(2,380)

		(924	)		(2,694	)		(3,618)

Total assets acquired		1,455			3,671			5,126

Goodwill								8,757

Total consideration for outstanding shares								13,883

Additional payments related to convertible debt, share options and other acquisition obligations								1,770

Total consideration								15,653

The total consideration for outstanding shares includes $29m of directly attributable costs.

The intangible assets acquired included: (a) product, marketing and distribution rights relating to currently marketed products or franchises (principally in respect of the Synagis and motavizumab RSV franchise, FluMist and Ethyol); (b) product marketing and distribution rights relating to products in development (principally motavizumab); and (c) distribution rights relating to out-licensed products (principally the HPV cervical cancer vaccine). The combined acquisitions fair value of $8,075m comprised $6,570m relating to the Infection Therapy Area, $1,425m relating to the Oncology Therapy Area and $80m relating to the Respiratory & Inflammation Therapy Area. The carrying value of these assets is summarised in Note 9.

Other acquisitions


				Fair value
	Book value			adjustment			Fair value
	$m			$m			$m

Non-current assets
Intangible assets		–			347			347

Property, plant and equipment		7			–			7

		7			347			354

Current assets		12			–			12

Current liabilities		(19	)		–			(19)

Non-current liabilities

Other payables		(9	)		–			(9)

Deferred tax liabilities		–			(118	)		(118)

		(9	)		(118	)		(127)

Total assets acquired		(9	)		229			220

Goodwill								–

Total consideration								220

The total consideration includes $3m of directly attributable costs.

AstraZeneca Annual Report and Form 20-F Information 2009

156Financial Statements

22 Acquisitions of business operations continued

Arrow Therapeutics Limited

On 28 February 2007, the Company acquired 100% of the issued share capital of Arrow Therapeutics Limited for cash consideration of $147m. Arrow Therapeutics Limited is a UK biotechnology company, focused on the discovery and development of anti-viral therapies. The acquisition provides a widely recognised expert group and technology platform in an area of research that complements internal capabilities in the Therapy Area of infection and anti-bacterials.

Arrow Therapeutics Limited had revenue of $nil and a loss of $26m for 2007 of which $nil of revenue and $17m of loss related to the period between acquisition and 31 December 2007.

Atlantis Components Inc.

On 10 October 2007, a Company subsidiary, Astra Tech AB, acquired 100% of the issued share capital of Atlantis Components Inc. for cash consideration of $71m.

Atlantis Components Inc. is a US dental business whose principal activity is the design and manufacture of bespoke dental implant abutments. The intangible asset acquired is the specialist CAD/CAM technology used to design and manufacture customised dental implant abutments. The acquisition further strengthens Astra Tech AB’s product portfolio in the field of dental implants.

The revenue and loss in 2007, for both the period since acquisition and full year, are immaterial.

Cash flows


	MedImmune			Other			Total
	$m			$m			$m

Total consideration		15,653			220			15,873

Cash and cash equivalents included in undertaking acquired		(979	)		(3	)		(982	)

Net cash consideration		14,674			217			14,891

23 Post-retirement benefits

Pensions

Background

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 charge is fixed at a set level or is a set percentage of employees’ pay. However, several plans, mainly in the UK, the US and Sweden, are ‘defined benefit’, where benefits are based on employees’ length of service and average final salary (typically averaged over one, three or five years). The major defined benefit plans, apart from the collectively bargained Swedish plan (which is still open to employees born before 1979), have been closed to new entrants since 2000.

The major defined benefit plans are funded through legally separate, fiduciary-administered funds. 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 the assets together with future contributions should be sufficient to meet future obligations. The funding is monitored rigorously by the Company and appropriate fiduciaries specifically with reference to the Company’s credit rating, market capitalisation and cash flows.

Post-retirement scheme deficit

The assets and obligations of the defined benefit schemes operated by the Group at 31 December 2009, as calculated in accordance with IAS 19 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’ obligations is derived from cash flow projections over long periods and is therefore inherently uncertain.


	Value at 31 December 2009									Value at 31 December 2008
	UK			Rest of Group			Total			UK			Rest of Group			Total
	$m			$m			$m			$m			$m			$m

Scheme assets
Equities		2,309			1,241			3,550			1,461			960			2,421

Bonds		2,279			903			3,182			1,935			772			2,707

Others		265			258			523			439			281			720

Total fair value of assets		4,853			2,402			7,255			3,835			2,013			5,848

Present value of scheme obligations		(7,055	)		(3,591	)		(10,646	)		(5,029	)		(3,591	)		(8,620	)

Past service cost not yet recognised		–			37			37			–			40			40

Deficit in the scheme as recognised in the Statement of Financial Position		(2,202	)		(1,152	)		(3,354	)		(1,194	)		(1,538	)		(2,732	)

AstraZeneca Annual Report and Form 20-F Information 2009

Financial Statements

157

23 Post-retirement benefits continued

Financing Principles

96.9% of the Group’s defined benefit obligations at 31 December 2009 are in schemes within the UK, the US, Sweden or Germany. In these countries the pension obligations are funded with reference to the following financing principles:

>		The Group has a fundamental belief in funding the benefits it promises to employees.

>		The Group considers its pension arrangements in the context of its broader capital structure. In general it does not believe in committing excessive capital for funding whilst it has better uses of capital within the business nor does it wish to generate surpluses.

>		The pension funds are not part of the Group’s core business. Pension funds may take rewarded risks with the investments underlying the funding, subject to adequate controls and the expected rewards outweighing the risks.

>		The Group recognises that deciding to hold certain investments may cause volatility in the funding position. The Group would not wish to amend its contribution level for relatively small deviations from its preferred funding level, because it is expected that there will be short-term volatility, but it is prepared to react appropriately to more significant deviations.

>		In the event that local regulations require an additional level of financing, the Group would consider the use of alternative methods of providing this that do not require immediate cash funding but help mitigate exposure of the pension arrangement to the credit risk of the Group.

These principles are appropriate to AstraZeneca’s business at the present date; should circumstances change they may require review.

The Company has developed a funding framework to implement these principles. This determines the cash contributions payable to the pension funds, but does not affect the IAS 19 liabilities. To reduce the risk of committing excess capital to pension funds, liabilities are based on the expected return on the actual pension assets, rather than a corporate bond yield. At present this puts a different value on the liabilities than IAS 19.

With regard to the Group’s UK defined benefit fund, the above principles are modified in light of the UK regulatory requirements and resulting discussions with the Pension Fund Trustee. The most recent full actuarial valuation was carried out at 31 March 2008.

Under the agreed funding principles for the UK, cash contributions will be paid to the fund to target a level of assets in excess of the current expected cost of providing benefits. In addition, the Company will make contributions to an escrow account which will be held outside of the pension fund. The escrow account assets will be payable to the fund in agreed circumstances, for example, in the event of the Company and Trustee agreeing a change to the current long term investment strategy.

The market value of the fund’s assets at the valuation date was £2,994m ($5,951m equivalent), representing 87% of the fund’s actuarially assessed liabilities as valued in accordance with the fund’s technical provisions. The escrow fund held an additional £33m at the valuation date. During 2009, it was agreed to fund the shortfall by making a transfer of current escrow assets to the fund and by establishing a new funding schedule, making regular payments over seven years of about £42m per annum to the escrow and £132m per annum to the fund. This includes the contributions required to meet the benefits accruing of about £60m per annum. In addition, £90m per annum is being paid to the escrow for two years until the next valuation to cover the losses on the fund’s investments since the valuation date as a result of the market downturn.

Under the agreed funding principles, the key assumptions as at 31 March 2008 for contributions to both the fund and escrow account are as follows: long-term UK price inflation set at 3.5% pa, salary increases at 3.5% pa, pension increases at 3.5% pa and investment returns at 7.1% pa (pre-retirement) and 5.96% pa (post-retirement).

On 28 January 2010, AstraZeneca announced that from 1 February 2010 the Company would commence consultation with its UK employees’ representatives on proposals regarding changes affecting the Group’s UK pension scheme. The Company does not propose to close the defined benefit fund to existing members, but proposes to freeze pensionable pay at its 30 June 2010 level. Employees who choose to leave the defined benefit fund will be offered funding which they may contribute to a new Group Self Invested Personal Pension Plan. Should the proposals proceed, implementation is planned from 1 July 2010, following which a review of the funding implications will be completed.

Rest of Group

The IAS 19 positions as at 31 December 2009 are shown below for each of the other countries with significant defined benefit plans. These plans account for 91% of the Group’s defined benefit obligations outside of the UK. In principle, these plans are funded in line with the financing principles and contributions paid as prescribed by the funding framework.

>		The US defined benefits programme was actuarially revalued at 31 December 2009, when plan obligations were $1,834m and plan assets were $1,412m. This includes obligations in respect of the non-qualified plan which is largely unfunded.

>		The Swedish defined benefits programme was actuarially revalued at 31 December 2009, when plan obligations were estimated to amount to $1,191m and plan assets were $687m.

>		The German defined benefits programme was actuarially revalued at 31 December 2009, when plan obligations amounted to $237m and plan assets were $27m.

On current bases, it is expected that contributions (excluding those in respect of past service cost) during the year ended 31 December 2010 to the four main countries will be $311m.

AstraZeneca Annual Report and Form 20-F Information 2009


				Contents

	02			Introduction

	02			Our year in brief
	04			Chairman’s Statement
	05			CEO’s Review
	06			AstraZeneca at a glance
	08			Path to a new medicine

	10			Directors’ Report

				Performance
	12			Business Environment
	14			Strategy and Performance
	18			Resources, Skills and Capabilities

				Reviews
	36			Financial Review
	50			Geographical Review
	55			Therapy Area Review
	75			Other Businesses
	76			Environmental Sustainability
	77			In the Global Community

				Corporate Governance
	79			Risk
	87			Business Organisation and Corporate Governance
	101			Directors’ Remuneration Report

	120			Financial Statements

	194			Additional Information

	196			Development Pipeline
	199			Shareholder Information
	204			Corporate Information
	205			Cross-reference to Form 20-F
	206			Glossary
	208			Index


Preparation of the Financial Statements and Directors’ Responsibilities		122
Directors’ Responsibilities for, and Report on, Internal Control over Financial Reporting		122
Auditor’s Reports on the Financial Statements and on Internal Control over Financial Reporting (Sarbanes-Oxley Act Section 404)		123
Independent Auditor’s Report to the Members of AstraZeneca PLC (Group)		123
Consolidated Statement of Comprehensive Income for the year ended 31 December		124
Consolidated Statement of Financial Position at 31 December		125
Consolidated Statement of Changes in Equity for the year ended 31 December		126
Consolidated Statement of Cash Flows for the year ended 31 December		127
Accounting Policies (Group)		128
Notes to the Financial Statements (Group)		133
1	Product revenue information	133
2	Operating profit	134
3	Finance income and expense	134
4	Taxation	135
5	Earnings per $0.25 Ordinary Share	137
6	Segment information	137
7	Property, plant and equipment	139
8	Goodwill	140
9	Intangible assets	141
10	Other investments	143
11	Inventories	143
12	Trade and other receivables	143
13	Cash and cash equivalents	143
14	Interest-bearing loans and borrowings	144


15	Financial risk management objectives and policies	144
16	Financial instruments	146
17	Trade and other payables	152
18	Provisions for liabilities and charges	152
19	Capital and reserves	153
20	Share capital of the Company	153
21	Dividends to shareholders	154
22	Acquisitions of business operations	154
23	Post-retirement benefits	156
24	Employee costs and share option plans for employees	161
25	Commitments and contingent liabilities	166
26	Leases	185
27	Statutory and other information	185
Principal Subsidiaries Independent Auditor’s Report to the		186
Members of AstraZeneca PLC		187
Company Balance Sheet		188
Accounting Policies (Company)		189
Notes to the Company Financial Statements		190
1	Fixed asset investments	190
2	Non-trade creditors	190
3	Loans	190
4	Reserves	191
5	Reconciliation of movement in shareholders’ funds	191
6	Share capital	191
7	Litigation and environmental liabilities	192
8	Statutory and other information	192
Group Financial Record		193


	Life expectancy assumption for a male member retiring at age 65
Country	2009		2029		2008		2028

UK		23.8		25.8		23.8		25.8

US		19.6		21.1		19.6		21.1

Sweden		20.4		22.4		20.4		22.4

Germany		17.7		20.5		17.7		20.5


	Effect of change in medical cost assumption increase/(decrease)
	2009					2008
	+1%		-1%			+1%		–1%

Current service and interest cost of net periodic post-employment medical costs ($m)		4		(3	)		4		(3	)

Accumulated post-employment benefit obligation for medical costs ($m)		32		(28	)		28		(28	)


Employees	2009		2008		2007

UK		10,600		11,000		11,800

Continental Europe		21,200		23,100		25,600

The Americas		19,800		20,900		20,200

Asia, Africa & Australasia		12,300		11,100		10,300

Continuing operations		63,900		66,100		67,900


	Shares		WAFV¹
	’000		pence

Shares awarded in June 2005		312		1121

Shares awarded in March 2006		280		1486

Shares awarded in May 2006		19		1424

Shares awarded in March 2007		1,611		1372

Shares awarded in August 2007		68		1217

Shares awarded in November 2007		16		1105

Shares awarded in March 2008		1,338		941

Shares awarded in August 2008		14		1326

Shares awarded in March 2009		1,190		1140

Shares awarded in August 2009		8		1424


	Units		WAFV¹
	’000		$

Units awarded in March 2007		755		26.90

Units awarded in November 2007		270		21.56

Units awarded in March 2008		1,313		18.88

Units awarded in March 2009		1,283		16.70

(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).


	AstraZeneca Share Option Plan						1994 Scheme						SAYE Schemes
	Options				WAEP¹		Options				WAEP¹		Options				WAEP¹
	’000				pence		’000				pence		’000				pence

Movements during 2007
Options granted		7,312				2737		–				–		1,074				2164

Options exercised		(2,770	)			2648		(321	)			2426		(1,327	)			1785

Options forfeited		(1,706	)			2745		(95	)			2603		(238	)			2528

Weighted average fair value of options granted during the year						682												616

At 31 December 2007
Options outstanding		42,560				2451		1,490				2364		2,720				2226

Movements during 2008
Options granted		14,858				1887		–				–		483				2398

Options exercised		(2,577	)			2204		(99	)			2620		(675	)			2062

Options forfeited		(2,273	)			2622		(106	)			2594		(388	)			2291

Weighted average fair value of options granted during the year						404												499

At 31 December 2008
Options outstanding		52,568				2978		1,285				2934		2,140				2304

Movements during 2009

Options granted		15,246				2281		–				–		351				2563

Options exercised		(2,275	)			2213		(317	)			2670		(286	)			2258

Options forfeited		(3,141	)			2604		(51	)			2688		(169	)			2340

Weighted average fair value of options granted during the year						423												425

At 31 December 2009
Options outstanding		62,398				2601		917				2734		2,036				2349



Range of exercise prices					1882 to												2164 to
						3934						2714						3001

Weighted average remaining contractual life				2,240 days						75 days						1,086 days

Options exercisable		29,376				2737		917				2714		105				2658

>		A payment to Merck in the event of a business combination between Astra and a third party in order for Merck to relinquish certain claims to that third party’s products.

>		Annual contingent payments.

>		Termination arrangements which cause Merck to relinquish its interests in AstraZeneca’s products and activities in stages, some of which are mandatory and others optional.

>		the Advance Payment;

>		the Partial Retirement;

>		the True-Up;

>		the Loan Note Receivable;

>		the First Option;

>		the Second Option.

>		Currently, from the substantial freedom over products acquired or discovered post-merger.

>		On occurrence of each stage of such arrangements, from enhanced contributions from, and substantial freedom over, those products that have already been launched (for example, Pulmicort, Symbicort, Rhinocort and Atacand), and those that are in development.

>		Economic benefits include relief from contingent payments, anticipated cost savings from cessation of manufacturing arrangements and other cost efficiencies, together with the strategic advantages of increased freedom to operate.

>		AstraZeneca and HMRC have made a joint referral to the UK Court in respect of transfer pricing between our UK and one of our overseas operations for the years 1996 to date as there continues to be a material difference between the Group’s and HMRC’s positions. An additional referral in respect of controlled foreign company aspects of the same case was made during 2008. Absent a negotiated settlement, litigation is set to commence in 2010.

>		AstraZeneca has applied for an advance pricing agreement in relation to intra-group transactions between the UK and the US which is being progressed through competent authority proceedings under the relevant double tax treaty.


		Percentage of voting
At 31 December 2009	Country	share capital held		Principal activity

UK
AstraZeneca UK Limited	England		100	Research and development, manufacturing, marketing

AstraZeneca Treasury Limited	England		100	Treasury


Continental Europe
NV AstraZeneca SA	Belgium		100	Marketing

AstraZeneca Dunkerque Production SCS	France		95	Manufacturing

AstraZeneca SAS	France		100	Research, manufacturing, marketing

AstraZeneca GmbH	Germany		100	Development, manufacturing, marketing

AstraZeneca Holding GmbH	Germany		100	Manufacturing, marketing

AstraZeneca SpA	Italy		100	Marketing

AstraZeneca Farmaceutica Spain SA	Spain		100	Marketing

AstraZeneca AB	Sweden		100	Research and development, manufacturing, marketing

AstraZeneca BV	The Netherlands		100	Marketing


The Americas
AstraZeneca Canada Inc.	Canada		100	Research, marketing

AZ Reinsurance Limited	Cayman Islands		100	Insurance and reinsurance underwriting

IPR Pharmaceuticals Inc.	Puerto Rico		100	Development, manufacturing, marketing

AstraZeneca LP	US		99	Research and development, manufacturing, marketing

AstraZeneca Pharmaceuticals LP	US		100	Research and development, manufacturing, marketing

Zeneca Holdings Inc.	US		100	Manufacturing, marketing

MedImmune, LLC	US		100	Research and development, manufacturing, marketing


Asia, Africa & Australasia
AstraZeneca Pty Limited	Australia		100	Development, manufacturing, marketing

AstraZeneca Pharmaceuticals Co., Limited	China		100	Research and development, manufacturing, marketing

AstraZeneca KK	Japan		80	Manufacturing, marketing

>		The part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.

>		The information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the Parent Company Financial Statements.

>		Adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us.
>		The Parent Company Financial Statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or


>		Certain disclosures of Directors’ Remuneration specified by law are not made; or

>		We have not received all the information and explanations we require for our audit.


	Investments in subsidiaries
	Shares		Loans			Total
	$m		$m			$m

Cost and net book value at 1 January 2009		16,188		10,539			26,727

Transfer to current assets		–		(1,757	)		(1,757)

Capital contribution – UITF 44		179		–			179

Exchange		–		76			76

Amortisation		–		5			5

Cost and net book value at 31 December 2009		16,367		8,863			25,230


	2009		2008
	$m		$m

Loans or instalments thereof are repayable:

After five years from balance sheet date		6,373		7,041

From two to five years		2,492		1,742

From one to two years		–		1,755

Within one year		1,790		650

Total unsecured		10,655		11,188


	2009			2008
	$m			$m

At beginning of year		23,343			22,946

Net profit for the financial year		2,658			3,436

Dividends		(3,026	)		(2,767	)

Gain on cash flow hedge in anticipation of debt issue		1			1

Share-based payment		179			178

Issue of AstraZeneca PLC Ordinary Shares		135			159

Re-purchase of AstraZeneca PLC Ordinary Shares		–			(610	)

Net (decrease)/increase in shareholders’ funds		(53	)		397

Shareholders’ funds at end of year		23,290			23,343


	No. of shares
	(million)		$m

At 1 January 2009		1,447		362

Issues of shares		4		1

At 31 December 2009		1,451		363


Development Pipeline			196
Shareholder Information			199
Corporate Information			204
Cross-reference to Form 20-F			205
Glossary			206
Index			208


				Estimated filing date
Therapy area	Compound	Mechanism	Areas under investigation	MAA	NDA

Phase I projects

Cardiovascular	AZD6482	PI3K-beta inhibitor	thrombosis

	AZD4017	11BHSD inhibitor	diabetes/obesity

	AZD6714	GK activator	diabetes

	AZD8329	11BHSD inhibitor	diabetes/obesity

	AZD7687	diacylglycerol acyl transferase –1 inhibitor	diabetes/obesity

Gastrointestinal	AZD2066	metabotropic glutamate receptor 5 antagonist	GERD

	AZD2516	metabotropic glutamate receptor 5 antagonist	GERD

Infection	MEDI-534	RSV/PIV-3 vaccine	RSV/PIV prophylaxis

	MEDI-560	PIV-3 vaccine	intranasal immunisation

	MEDI-550	pandemic influenza virus vaccine	pandemic influenza vaccine

	MEDI-557	YTE – extended half-life RSV MAb	RSV prophylaxis

	MEDI-559	RSV vaccine	RSV prophylaxis

	AZD5847	Oxazolidinone anti-bacterial inhibitor	tuberculosis

	AZD9742	BTGT4 IV	MRSA

	CEF104 1^#	beta lactamase inhibitor/cephalosporin	MRSA

Neuroscience	AZD3241	myeloperoxidase (MPO) inhibitor	Parkinson’s disease

	AZD6280	GABA receptor subtype partial agonist	anxiety

	AZD2516	metabotropic glutamate receptor 5 antagonist	chronic neuropathic pain

	AZD3043^#	GABA-A receptor modulator	short acting sedative and anaesthetic

	AZD8418	glutamatergic modulator	schizophrenia

	AZD2423	chemokine antagonist	chronic neuropathic pain

Oncology	AZD4769	EGFR tyrosine kinase inhibitor	solid tumours

	AZD8931	erbB kinase inhibitor	solid tumours

	AZD7762	CHK1 kinase inhibitor	solid tumours

	AZD8330^# (ARRY-424704)	MEK inhibitor	solid tumours

	CAT-8015	recombinant immunotoxin	haematological malignancies

	AZD8055	TOR kinase inhibitor	range of tumours

	MEDI-573	IGF	solid tumours

	MEDI-575	PDGFR-alpha	solid tumours

	AZD1480	JAK2 inhibitor	myeloproliferative diseases /solid tumours

	AZD4547	FGFR tyrosine kinase inhibitor	solid tumours

	MEDI-547^#	EphA2 conjugate	solid tumours

	AZD2014	MTOR inhibitor	solid tumours

	AZD6244	MEK/AKT inhibitor	solid tumours

	(ARRY-142886)/MK2206^#

Respiratory &	CAM-3001^#	anti-GM-CSFR	rheumatoid arthritis

Inflammation	AZD8566	CCR5	COPD

	AZD8075	CRTh2 antagonist	asthma/COPD

	AZD5985	CRTh2 antagonist	asthma/COPD

	AZD2551	protease inhibitor	COPD

	AZD5423	iSEGRA	COPD

	AZD5122	CXCR2	COPD

	AZD8683	Muscarinic antagonist	COPD

	AZD5069	CXCR2	COPD

	MEDI-546^#	anti-IFNaR MAb	scleroderma


By size of account	2009
No. of shares	%

1 – 250		0.5

251 – 500		0.7

501 – 1,000		0.8

1,001 – 5,000		1.1

5,001 – 10,000		0.2

10,001 – 50,000		1.1

50,001 – 1,000,000		13.0

Over 1,000,000¹		82.6

Issued share capital		100.0

>		For shares listed on the LSE the reported high and low middle market closing quotations are derived from the Daily Official List.

>		For shares listed on the SSE the high and low closing sales prices are as stated in the Official List.

>		For ADSs listed on the NYSE the reported high and low sales prices are as reported by Dow Jones (ADR quotations).


		Ordinary LSE				ADS				Ordinary SSE¹
		High		Low		High		Low		High		Low
		(pence)		(pence)		(US$)		(US$)		(SEK)		(SEK)

2008	– Quarter 1		2345.0		1748.0		45.70		35.50		296.5		211.5

	– Quarter 2		2289.0		1981.0		44.57		39.36		268.0		235.5

	– Quarter 3		2766.0		2130.0		49.85		43.42		321.5		255.5

	– Quarter 4		2888.0		2075.0		44.76		34.10		340.5		253.5

2009	– Quarter 1		2947.0		2147.0		41.60		30.24		331.0		261.5

	– Quarter 2		2728.0		2276.0		45.01		33.40		351.0		279.5

	– July		2878.0		2644.0		47.54		43.01		356.0		336.0

	– August		2869.0		2722.5		47.31		45.24		338.0		326.0

	– September		2856.0		2691.0		46.02		43.91		333.0		305.0

	– October		2830.0		2742.0		46.19		43.64		323.1		308.0

	– November		2778.0		2690.5		46.38		44.34		319.0		310.1

	– December		2930.0		2753.0		47.00		45.35		339.5		315.0


			Date of	Percentage
			disclosure	of issued
Shareholder	Number of shares		to Company¹	share capital

BlackRock, Inc.		100,885,181	8 Dec 2009		6.94	%

Invesco Limited		72,776,277	6 Oct 2009		5.01	%

Axa SA		56,991,117	3 Feb 2009		3.92	%

Investor AB		51,587,810	3 Feb 2009		3.55	%

Legal & General Investment Management Limited		67,398,874	3 Feb 2009		4.64	%


	Percentage of issued share capital
Shareholder	28 Jan 2010		29 Jan 2009		31 Jan 2008		31 Jan 2007

BlackRock, Inc.		6.94%		–		–		–

Invesco Limited		5.01%		–		–		–

Axa SA		3.92%		4.90%		4.87%		–

Investor AB		3.55%		4.38%		4.36%		4.14%

Legal & General Investment Management Limited		4.64%		4.09%		4.06%		3.43%

Capital Research and Management Company		–		4.92%		4.89%		11.70%

Wellington Management Co., LLP		–		4.18%		4.16%		3.95%

Barclays PLC		–		4.26%		4.24%		4.03%


			Percentage
Title of class	Amount owned		of class

Ordinary Shares		300,474		0.02	%


	Subscription price
Number of shares	pence		Normal expiry date

63,251,333		1882 – 3487		2010 – 2019