EX-15.1 10 dp44853_ex1501.htm EXHIBIT 15.1 EX-15.1
Table of Contents

Exhibit 15.1

 

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Table of Contents

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Table of Contents

    

 

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Welcome to the AstraZeneca Annual Report

and Form 20-F Information 2013.

 

What is in our Strategic Report?

Dear shareholder

Our Strategic Report is designed to help you assess how the Directors performed in 2013 in promoting the success of your Company for our collective benefit.

It begins with an overview of our performance in 2013 and personal statements from your Chairman and Chief Executive Officer. We also describe our business model, explaining how each element helps deliver our strategic priorities and adds value.

 

 

 

Strategy

Our purpose and strategic priorities and how they are brought to life by the way we work. How we measure our success and the risks we might face

Business Review

How our activities span the entire life-cycle of a medicine

 

 

Business model

 

  Page 10
 

 

Pioneering science,
life-changing medicines
  Page 12
 

 

 

Our marketplace

 

  Page 13
 

 

 

Our strategic priorities

 

  Page 16
 

 

 

Key Performance Indicators

 

  Page 20
 

 

 

Risk overview

 

  Page 24
 

 

Governance and
Remuneration

 

  Page 26
 

 

Board of Directors and
Senior Executive Team
  Page 28

 

Life-cycle of a medicine

 

  Page 34
 

 

 

Research and Development

 

  Page 36
 

 

 

Sales and Marketing

 

  Page 40
 

 

 

Manufacturing and Supply

 

  Page 43
 
 

 

Therapy Area Review

The progress we made in our chosen therapy areas in 2013

Resources Review

The resources we use to achieve our strategy

 

 

Overview

 

  Page 48
 

 

Cardiovascular and
Metabolic disease
  Page 52
 

 

 

Oncology

 

  Page 56
 

 

Respiratory, Inflammation
and Autoimmunity

 

  Page 58
 

 

Infection, Neuroscience
and Gastrointestinal
  Page 61

 

Employees

 

  Page 66
 

 

 

Our relationships

 

  Page 70
 

 

 

Intellectual Property

 

  Page 72
 

 

 

Our infrastructure

 

  Page 73
 

 

 

 

Financial Review

 

 

A full financial review of 2013

 

 

 

Page 74

 

 

 

 

Strategic Report

 

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2   AstraZeneca at a glance  
6   Chairman’s Statement  
8   Chief Executive Officer’s Review  
10   Strategy  
34   Business Review  
48   Therapy Area Review  
66   Resources Review  
74   Financial Review  
     
     
     
     
     
       
 

 

 

 

 

Corporate

Governance

 

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88   Corporate Governance Report  
98   Audit Committee Report  
102   Directors’ Remuneration Report  
     
     
     
     
     
     
     
     
     
       
 

 

 

 

 

Financial

Statements

 

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128   Auditor’s Reports  
132   Consolidated Statements  
136   Group Accounting Policies  
141   Notes to the Group Financial Statements  
     
     
     
     
     
     
     
       
 

 

 

 

 

Additional

Information

 

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194   Development Pipeline  
198   Patent Expiries  
199   Risk  
214   Geographical Review  
220   Responsible Business  
222   Financials (Prior year)  
225   Shareholder Information  
230   Corporate Information  
231   Trade Marks  
232   Glossary  
235   Index  
     
     
       
 

 

AstraZeneca Annual Report and Form 20-F Information 2013    1


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Strategic Report

 

AstraZeneca at a glance

We are a global, innovation-driven biopharmaceutial business.

Financial summary

 

$25.7 billion

  

$8.4 billion

  

$5.05

Sales down 6% at CER to $25,711 million ($27,973 million in 2012)    Core operating profit down 23% at CER to $8,390 million ($11,159* million in 2012)    Core EPS for the full year decreased by 23% at CER to $5.05 ($6.83^ in 2012)

$3.0 billion

  

$3.7 billion

  

$2.04

Net cash shareholder distributions decreased by 49% to $2,979 million, partly as a result of the cessation of the share repurchase programme ($5,871 million net cash shareholder distributions including

$2,206 million net share repurchases in 2012)

   Reported operating profit down 51% at CER to $3,712 million ($8,148 million in 2012)    Reported EPS for the full year decreased by 55% at CER to $2.04 ($4.95 in 2012)
     

*  Restated for new Core definition (as detailed on page 224).

^  Restated for new Core definition and adoption of IAS 19 (2011) (as detailed on pages 136 and 224).

†Restated on adoption of IAS 19 (2011) (as detailed on page 136).

     
     

 

 

Our proposition to investors

 

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AstraZeneca is one of only a handful of pure-play biopharmaceutical companies to span the entire value chain of a medicine from discovery, early- and late-stage development to manufacturing and distribution, and the global commercialisation of primary care, specialty care-led and specialty care medicines that transform lives.

 

Our primary focus is on three important areas of healthcare: Cardiovascular and Metabolic disease (CVMD); Oncology; and Respiratory, Inflammation and Autoimmunity (RIA). We are also active in the Infection, Neuroscience and Gastrointestinal (ING) disease areas.

 

We operate in more than 100 countries and our innovative medicines are used by millions of patients worldwide.

 

We want to be valued as a source of great medicines and trusted as a company that delivers business success responsibly. We are committed to operating with integrity and high ethical standards across all our activities. We push the boundaries of science to deliver life-changing medicines.

 

 

Our 10 leading medicines by sales value are:

 

 

 

Cardiovascular and Metabolic disease

 

  

 

Oncology

 

 
 
  More people die annually from cardiovascular diseases than from any other cause – an estimated 17.3 million people in 2008 – representing 30% of all global deaths. Worldwide, 347 million people have diabetes*. CVMD medicines represented 34% of our sales in 2013       

Cancer is a leading cause of death worldwide and accounted for

8.2 million deaths in 2012*. Cancer medicines represented 12% of

our sales in 2013

 
 
  Crestor    Seloken/Toprol-XL           Iressa    Faslodex    Zoladex  
  for managing    for hypertension, heart           for lung cancer    for breast cancer    for prostate and  
  cholesterol levels    failure and angina                 breast cancer  
 
  2011: $6,622m    2011: $986m           2011: $554m    2011: $546m    2011: $1,179m  
  2012: $6,253m    2012: $918m           2012: $611m    2012: $654m    2012: $1,093m  
 

 

2013

   2013           2013    2013    2013  
  $5,622m    $750m           $647m    $681m    $996m  
  (-8%)    (-18%)           (+11%)    (+6%)    (0%)  
 

 

*  WHO data.

 

                    

 

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A global science-led company

 

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* All figures are approximate.

 

 

 

Respiratory, Inflammation and Autoimmunity

 

      

 

Other leading medicines

 
 
  Some 235 million people suffer from asthma and an estimated 64 million people had COPD in 2004*. RIA medicines represented 18% of our sales in 2013         
 
  Pulmicort    Symbicort        Nexium    Seroquel XR    Synagis  
  for asthma and COPD    for asthma and COPD        for acid-reflux   

for schizophrenia, bipolar disorder and major depressive disorder

 

   for RSV, a respiratory infection in infants  
  2011: $892m    2011: $3,148m        2011: $4,429m    2011: $1,490m    2011: $975m  
 

2012: $866m

 

  

2012: $3,194m

 

    

2012: $3,944m

 

  

2012: $1,509m

 

  

2012: $1,038m

 

 
  2013    2013        2013    2013    2013  
  $867m    $3,483m        $3,872    $1,337m    $1,060m  
 

(+1%)

 

   (+10%)        (0%)    (-12%)    (+2%)  

 

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Strategic Report | AstraZeneca at a glance

 

Financial overview

 

Sales

$m (-6%)

 

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Net cash flow from

operating activities $m

 

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Core operating profit

$m (-22%)

 

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Reported operating profit

$m (-51%)

 

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Core earnings per

Ordinary Share $ (-23%)

 

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Reported earnings per

Ordinary Share $ (-55%)

 

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Operational overview

 

Achieve Scientific Leadership

Return to Growth

Be a Great Place to Work

 

99 pipeline projects

> including 85 in clinical development and 14 either approved, launched or filed

 

11 NMEs in Phase III of development or under regulatory review

> almost double compared with 2012 and achieving our 2016 target volume almost three years ahead of schedule

 

4 NME progressions to Phase III

> benralizumab, selumetinib, olaparib and moxetumomab pasudotox

 

33 projects successfully progressed

> to the next stage of development (including 14 projects entering first human testing)

 

15 projects withdrawn

 

6% reduction in revenue

> Revenue fell by 9% in the US, 9% in Europe and 10% in Established ROW. Revenue rose by 8% in Emerging Markets

 

$2.2bn loss of exclusivity reduction

> Some $2.2 billion of revenue decline was related to loss of exclusivity on brands such as Arimidex, Atacand, Crestor, Nexium and Seroquel IR.

 

$1.2bn revenue growth in our five growth platforms

> (Brilinta, diabetes, Emerging Markets, respiratory, Japan)

 

8% growth in Emerging Markets

> including 19% growth in China

 

$1.8bn non-cash, non-Core, pre-tax impairment charge

> incurred as a result of Bydureon sales below commercial expectations

 

> To drive accountability and improve decision making, we made our organisational structure flatter. Seventy percent of employees are now within six management steps of the CEO, compared to 40% of employees within six steps in 2012

 

> A ‘pulse’ survey showed 84% employee belief in our strategy, in line with the pharmaceutical sector norm

 

> Employees are now able to connect wirelessly across our sites. Further IT changes are under way to improve performance, and enhance the security and privacy of our information

 

 

 

Our year in brief

 

 

  2013

 

  
                       
      January      

AstraZeneca and Moderna Therapeutics announce exclusive agreement to develop pioneering messenger RNA Therapeutics

 

AstraZeneca and Karolinska Institutet announce intention to create Integrated Translational Research Centre

 

     

Cambridge Biomedical Campus in the UK selected as location of new global R&D centre and corporate headquarters

 

Top-line results for SAVOR-TIMI 53 cardiovascular outcomes trial of Onglyza

      September
     

Changes to the Senior Executive Team announced

 

                 

AstraZeneca ranks in top 3% in the sector in the Dow Jones Sustainability and World Indexes with a score of 85%

 

Initiation of Phase III clinical programme for olaparib

      March                  
     

Australia Federal Court holds Crestor patents invalid. US litigation over Crestor patent settled

 

Announce strategy to Return to Growth and Achieve Scientific Leadership, as well as restructuring and investment in strategic R&D centres in the US, the UK and Sweden

                 
                       
                       
                       
            June       July       October
           

Announce decision not to proceed with regulatory filings for fostamatinib in rheumatoid arthritis following top-line results from Phase III OSKIRA trials

      AstraZeneca and FibroGen agree to collaborate to develop and commercialise roxadustat (FG-4592) for anaemia in chronic kidney disease and end-stage renal disease       Initiation of Phase III for selumetinib for advanced or metastatic non-small cell lung cancer

 

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Shareholder distributions

 

Distributions to shareholders $m

 

     2013        2012        2011  

Dividends

     3,461           3,665           3,764   

Share repurchases1

               2,635 2         6,015 3 

Total

     3,461           6,300           9,779   

Dividend per Ordinary Share $

 

  

    
     2013        2012        2011  

Dividend per Ordinary Share

     2.80           2.80           2.80   

 

Dividend for 2013

 

    $     Pence     SEK     Payment date  

First interim dividend

    0.90        59.2        5.92        16 September 2013   

Second interim dividend

    1.90        116.8        12.41        24 March 2014   

Total

    2.80        176.0        18.33           

 

1  The share repurchase programme was suspended effective 1 October 2012.
2  Share repurchases in 2012, net of proceeds from the issue of share capital equal to $429 million, were $2,206 million.
3  Share repurchases in 2011, net of proceeds from the issue of share capital equal to $409 million, were $5,606 million.
 

 

 

Strategic R&D centres

In 2013 we announced our intention to increase our proximity to bioscience clusters and co-locate around three strategic sites

 

Gaithersburg, US   Cambridge, UK   Mölndal, Sweden
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Connections to National Institutes of Health and Johns Hopkins University   Connections to the University of Cambridge and its world-class bioscience community   Connections to Karolinska Institutet and Medicon Valley

 

 

Acquisitions

Over the past three years we have completed more than 150 major business development transactions. In 2013, we announced the following acquisitions:

 

AlphaCore – a biotech company focused on a novel approach to CVMD

Amplimmune – a biologics company developing novel therapeutics in cancer immunology

Omthera – a specialty company working on new therapies for dyslipidaemia

Pearl Therapeutics – a company focused on respiratory disease

Spirogen – a biotech company focused on antibody-drug conjugate technology for use in oncology

Acquisition of global diabetes business – purchase of BMS’s 50% interest in AstraZeneca’s and BMS’s joint diabetes business

 

See the Therapy Area Review from page 48 for more information.

 

 

 

  2014

 

                     
   

Benralizumab advances to Phase III for severe asthma

 

Marc Dunoyer appointed CFO and Executive Director on Simon Lowth’s departure from AstraZeneca

 

US Court of Appeals for the Federal Circuit reverses trial court decision that generic defendants do not infringe a patent protecting Pulmicort Respules in the US but affirms that another patent is invalid

      November      

ipodystrophy, but does not recommend for the treatment of partial lipodystrophy for the proposed indication

 

Announce top-line results from Phase III monotherapy study of lesinurad in gout patients

 

Announce agreement to acquire BMS’s 50% interest in AstraZeneca’s and BMS’s joint diabetes business

     

Following performance below commercial expectations in relation to Bydureon, incur a non-cash, non-Core, pre-tax impairment charge of approximately $1.8 billion

 

        Announce plans to invest $190 million in a new facility to produce Zoladex at our global manufacturing site in Macclesfield in the UK            
        December             January 2014
       

Fluenz Tetra is granted marketing authorisation by the EC

 

FDA Advisory Committee recommends metreleptin for the treatment of paediatric and adult patients with generalised

           

FDA approves Farxiga in the US for adults with Type 2 diabetes

 

EC approves Xigduo in the EU for adults with Type 2 diabetes

 

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Strategic Report

 

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Dear shareholder

One of the key responsibilities of a board of directors is to set a company’s strategy. As the CEO outlines in his Review on the following pages, and as we seek to demonstrate throughout this Annual Report, your Board has chosen a very clear strategic route to follow. It is rooted in our heritage as a company focused on innovative science to deliver great medicines and sets out our ambition to lead in science and return to growth.

 

Good governance

As your Directors review our strategy and carry out their other duties, it is my role as Chairman to lead the Board effectively. To my mind, good governance is at the heart of that. So that you can easily see how we are governed, we have provided a corporate governance overview on page 26 of this Annual Report. We also briefly describe how our governance structure supports the delivery of our business strategy. You can find more detail in my full Corporate Governance Report from page 88. On page 24, we have also provided an overview of the risks that might prevent us from achieving the full potential of our strategy.

Transparent reporting

Hand in hand with good governance goes transparent reporting and this year we have made a number of other changes in the Annual Report intended to promote this. Some have been caused by changes in UK reporting regulations, others by changes to the Corporate Governance Code and some by ever-evolving reporting best practice. Significant changes include the introduction of a Strategic Report, which starts by

explaining our business model and goes on to describe how each element helps deliver our strategic goals. The Strategic Report is introduced in more detail on page 1.

This year, the Annual Report also includes a revised Directors’ Remuneration Report from page 102, which is introduced by the Chairman of the Remuneration Committee, John Varley. A separate Audit Committee Report is introduced by the Chairman of the Audit Committee, Rudy Markham.

All the changes we have made are also intended to reflect our greater than ever efforts to make this Annual Report fair, balanced and understandable.

Challenging environment

Any balanced review of AstraZeneca needs to reflect the environment in which we operate. The challenging conditions which I touched on last year continue. The world pharmaceutical market is still growing and underlying demographic trends remain favourable to long-term industry growth. However, many of the drivers of demand and supply in the industry are under pressure.

 

 

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On the demand side, we face increased competition from generic drugs as some of the world’s most successful medicines come off patent. In addition, securing recognition (through reimbursement approval) and reward for innovation (through favourable pricing and sales) is becoming more difficult in the face of intense pricing pressures, particularly in Established Markets facing rising healthcare costs. On the supply side, the industry faces an ongoing R&D productivity challenge. R&D costs have risen significantly over the past decade, while industry-wide probability of success of new medicines, though showing some recent signs of improvement, has not kept pace.

Loss of exclusivity

Loss of exclusivity has had, and continues to have, a significant impact on AstraZeneca. In 2013, loss of exclusivity on brands such as Arimidex, Atacand, Crestor, Nexium and Seroquel IR in a number of markets accounted for a revenue decline of some $2.2 billion. Over the coming years, this trend will continue as medicines such as Crestor, Nexium and Seroquel XR continue to lose exclusivity in markets such as the US and Europe.

Of course, loss of exclusivity is a normal part of an innovative medicine’s life-cycle. It comes at the end of the period when a new medicine is safeguarded from being copied so that we can generate returns on the investment we have made, both to reinvest in the business and provide an appropriate return to you, our owners. A well-functioning intellectual property system of this type, which rewards innovation, is the principal economic safeguard in our industry. It underpins our business model, which we explore in more detail in the Business model section from page 10.

Our performance in 2013

As expected, our financial performance in 2013 reflected the ongoing impact of the loss of exclusivity for several key brands, with revenue down 6% to $25,711 million (2012: $27,973 million). Core operating profit fell by 22% to $8,390 million (2012: $11,159 million). The decline in revenue was, in part, offset by our key growth platforms: Brilinta, our diabetes franchise, respiratory, Emerging Markets and Japan, which delivered an incremental $1.2 billion of revenue in 2013.

Core EPS for 2013 were $5.05, down 23% on 2012. This decline was greater than the decline in revenue primarily due to our investment in our key growth platforms and strengthened pipeline. Reported EPS for the year was down 55% to $2.04. The impairment of Bydureon in the fourth quarter reduced Reported EPS by $1.10, resulting in a Reported loss per share for the quarter of $0.42.

A responsible company

I firmly believe that our commitment to good financial performance needs to be matched by a continued focus on being a responsible company, by working with integrity and delivering sustainable business development. I therefore fully support the decision we have made to focus our responsible business activities on access to healthcare, diversity and reducing our environmental impact. It is where I believe we are able to implement standards that will accelerate our business strategy and deliver wider benefits to society.

It is also gratifying to see our current efforts recognised by again being listed in the Dow Jones Sustainability World Index in 2013, with a record-equalling score, and retaining our listing on the European Index for the sixth year running.

Return to shareholders

Consistent with our progressive dividend policy to maintain or grow the dividend each year, the Board has recommended a second interim dividend of $1.90. This brings the dividend for the full year to $2.80 (176.0 pence, SEK 18.33).

The Board regularly reviews our distribution policy and overall financial strategy to continue to strike a balance between the interests of the business, our financial creditors and our shareholders. Having regard for business investment, funding the progressive dividend policy and meeting our debt service obligations, we currently believe it is appropriate to continue the suspension of the share repurchase programme which was announced in October 2012. We continue to target a strong, investment grade credit rating.

Outlook

As we look to the future, we expect a low-to-mid single digit percentage decline in revenue at CER for 2014. In percentage terms, Core EPS for 2014 is expected to decline in the teens at CER. Following the acquisition of BMS’s 50% interest in our joint diabetes business, and as the diabetes business’s pipeline of new products is progressively launched, we expect 2017 revenues will be broadly in line with 2013 revenues. This expectation involves a number of assumptions, including, among other things, Nexium US generic launch in May 2014.

Appreciation

Before closing, and on behalf of the Board, I want to thank the employees of AstraZeneca whose efforts helped us achieve so much in 2013 as we lay the foundations for leading in science and returning to growth. In particular, I want to express my appreciation to Pascal and all the members of the SET for the leadership they have shown and the inspiration they have provided to the organisation.

Finally, I would like to thank all my fellow Directors for the contribution they have made to our discussions throughout a busy 2013. We look forward to welcoming as many of you as possible to our Annual General Meeting in April.

 

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Leif Johansson

Chairman

 

 

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Strategic Report

 

Chief Executive

Officer’s Review

 

Dear shareholder

At our Investor Day in March 2013, we set out our strategy to Achieve Scientific Leadership, Return to Growth and ensure AstraZeneca is a Great Place to Work. A year on, we’ve built momentum behind our strategic priorities, in particular our objective of achieving scientific leadership, and started to deliver on some of the targets we have set ourselves. You can find more detail about the progress being made throughout this Annual Report, together with some case studies indicating how our pioneering science has the potential to transform lives.

Achieving scientific leadership

Accelerating and replenishing our portfolio in our three core therapy areas is central to our mission and vital to our success. I’m really pleased by the progress made during 2013. At the end of the year, we had 99 projects in our pipeline, of which 85 were in the clinical phase of development and 14 were approved, launched or filed. That total included 11 new molecular entities, or NMEs, in Phase III of development or under regulatory review, almost double the number we had at the end of 2012.

Four NMEs that progressed to Phase III came from our existing pipeline: olaparib, selumetinib and moxetumomab pasudotox are potential cancer treatments, while benralizumab is for severe asthma. A further two NMEs came from transactions we undertook during the year: PT003, for the treatment of COPD, came to us from the acquisition of Pearl Therapeutics and Epanova, a novel treatment for dyslipidaemia, came from the acquisition of Omthera.

Alongside this, we submitted regulatory filings for naloxegol, for opioid-induced constipation, in the EU and US, and olaparib in the EU. Our diabetes treatment, Farxiga, was approved in the US in January

2014, having been approved in the EU in 2012 under the name Forxiga. Xigduo, also for diabetes, was approved in the EU in January 2014.

I am particularly excited about the progress we made with our early-stage pipeline in 2013, including the multiple trials that are now under way in our cancer immunotherapy portfolio. Collaborations and acquisitions further strengthened the progress being made, including AlphaCore in cardiovascular and metabolic disease as well as Amplimmune and Spirogen in oncology.

Of course, there is no innovation without risk and we discontinued 15 projects during the year. This included fostamatinib where the results of clinical trials meant we decided not to proceed with regulatory filings.

We continue to redeploy resources to convert our promising late-stage pipeline into medicines that will transform patients’ lives and fund our growth platforms. Our productivity and efficiency programmes are providing some of the headroom to make those investments possible.

Platforms for growth

As the Chairman noted, our five growth platforms delivered an incremental $1.2 billion of revenue in 2013. While our focus on these platforms is beginning to bear fruit, we have more work to do if they are to deliver to their full potential.

Brilinta/Brilique is a key product for us and it continues to grow globally. However, despite encouraging progress in the US, there are challenges that are still to be overcome.

Our long-term commitment to diabetes was reinforced with the acquisition of BMS’s 50% interest in our joint diabetes business. The acquisition, which was completed in February 2014, included the rights for the development, manufacture and commercialisation of the business’s global diabetes assets. We believe that consolidating ownership of this portfolio will allow us to serve the needs of people with diabetes better. As a result of sales below expectations, we incurred an impairment charge for Bydureon,

 

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acquired as part of the BMS acquisition of Amylin. Nevertheless, we continue to have confidence in the commercial future of the product.

Overall, diabetes revenues grew globally last year and we are stepping up our investment and improving execution of our plans to take full advantage of our unique portfolio.

In our respiratory franchise, Symbicort drove growth with a strong performance in the US, Japan and Emerging Markets. In Japan, our second largest market, growth was also helped by the performance of Nexium. Emerging Markets revenue growth of 8% meant we met our target of high single digit growth (at CER), with growth in China of 19% over the year.

While our revenue continues to be impacted by the loss of exclusivity for key brands, reducing by $2.2 billion in 2013, the progress being made provides us with the confidence that our 2017 revenues will be broadly in line with what we achieved in 2013.

 

 

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Great place to work

Our achievements are, of course, down to the people who work at AstraZeneca, as well as our partners and collaborators. However, I firmly believe that these efforts are more productive when we all share a common purpose. That is why I attach such great importance to the work we did during the year both to define our purpose as a Group – who we are and the unique contribution we make – as well as to define the values that describe our fundamental beliefs and bring our purpose to life.

Over 30,000 employees registered for our ‘culture jam’, an online conversation about what it means to push the boundaries of science to deliver life-changing medicines, and about what our values mean in practice. It was a defining moment for AstraZeneca that demonstrated the passion our employees have for the work they do.

Alongside this, I am pleased with the progress made following our decision to invest in three strategic R&D centres, including the creation of a new UK-based centre in Cambridge. This will bring teams together and closer to scientific partners,

helping improve collaboration, as well as reducing complexity and eradicating unnecessary cost.

Overall progress is reflected in surveys that have shown an increasing employee belief in our strategic course. This is heartening, not least because implementation of our strategic priorities has created uncertainty for many. For my part, I will continue to work to ensure that we undertake the necessary changes with respect for the individuals concerned.

A great place to work needs great leaders and we welcomed many talented individuals at all levels in 2013. The year also saw two of our SET members leave. Simon Lowth left us at the end of October after nearly six years at AstraZeneca. He made a significant and lasting contribution to the business. I will miss him and would like to wish him well in the next chapter of his career. Also stepping down during the year was Lynn Tetrault, who did so on health grounds. I wish her a speedy recovery to full health. Lynn also made a significant contribution throughout her long career.

 

In Simon’s place I am pleased to be able to welcome Marc Dunoyer who joined us in June 2013 and took over as Chief Financial Officer in November 2013. While we look for permanent successors, I am grateful to Ruud Dobber, who assumed the portfolio strategy role, and Caroline Hempstead who took over Lynn’s role. They are part of a strong SET team that continues to provide inspirational leadership as we focus the organisation on the continued delivery of our goals.

Looking ahead

As I commented at the start of my Review, I am pleased with the momentum we built in 2013 against our strategic priorities, particularly our objective of achieving scientific leadership. I look forward to reporting on how our journey progresses in 2014 as we seek to build on our successes and realise our ambition for AstraZeneca.

 

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Pascal Soriot

Chief Executive Officer

 

 

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AstraZeneca Annual Report and Form 20-F Information 2013    9


Table of Contents

Strategic Report | Strategy | Business model

 

How we add value

In this section, we describe our business model and the purpose, ambition and values that drive what we do and how we do it.

We outline how we add value, our strategic priorities, how we measure our success and the risks we face. We also describe how we are governed and paid, and how this supports our strategy.

 

 

Our business model

 

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Promoting and rewarding innovation

 

Research and Development

    Creation and acquisition of intellectual property through innovative R&D       Application for patents to protect the intellectual property assets developed in a potential medicine       Clinical development programmes to determine the safety and efficacy of the potential medicine and generate further intellectual    
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Unmet medical need

We are living in a time when underlying demographic trends are favourable to long-term pharmaceutical industry growth, and innovative scientific research continues to deliver new ways of satisfying unmet medical need. However, as the Our marketplace section from page 13 demonstrates, the economic, social and political environment in which we operate presents major challenges, as well as opportunities. Our strategic priorities section from page 16 defines our response to this environment.

Resources

In everything we do, we seek to optimise the value of all our resources. These include both our employees and the relationships we have with our partners, collaborators and suppliers. Our assets also include our intellectual property, our infrastructure and other physical assets. See the Resources Review from page 66 for more information.

Life-cycle of a medicine

We are one of very few pure-play biopharmaceutical companies (that is, not involved in consumer or animal healthcare, diagnostics or medical devices) to span the entire value chain of a medicine from research, early- and late-stage development to manufacturing and distribution, and the global commercialisation of primary care, specialty care-led and specialty care

medicines that transform lives. Our life-cycle management process (including line extensions) is designed to ensure a medicine’s continued safe use and to explore its potential for treating other diseases, or for extending its use into additional patient groups. See the Business Review from page 34 for more on our activities across a medicine’s life-cycle. The Therapy Area Review from page 48 describes our activities across our chosen therapy areas.

Return to shareholders

The revenue we earn from the sale of our medicines generates the cash flow that helps us fund business investment, our progressive dividend policy, and meet our debt service obligations. We aim to strike a balance between the interests of the business, our financial creditors and our shareholders. See the Financial Review from page 74 for more information.

Improved health

We believe that continuous innovation in medical progress is vital to achieving sustainable healthcare. It adds value by:

 

> leading to better health outcomes and transforming patients’ lives
> enabling healthcare systems to save costs and be more efficient
> delivering value beyond the medicines themselves by, for example, improving access to healthcare and healthcare infrastructure
> contributing to the development of the communities in which we operate, via local employment, and partnering.

Promoting and rewarding innovation

The creation and protection of our underlying intellectual property assets, as outlined below, are essential elements of our business model. Developing a new medicine is risky, costly and time consuming. It requires significant investment over 10 or more years before product launch, with no guarantee of success. For this to be viable, the new medicine must be safeguarded from being copied, with a reasonable amount of certainty and for an acceptable period of time, so we can generate the returns to reinvest in the business and provide an appropriate return to shareholders.

The loss of key product patents has affected sales significantly in recent years and will continue to do so. A key goal for our planning process is to ensure we sustain the cycle of successful innovation and so continue to refresh our portfolio of patented products that transform lives and generate shareholder value.

 

 

Sales and Marketing

 

Period of intellectual property protection for an innovative medicine which allows a return to be made on the investment undertaken

     Expiry of intellectual property rights and commoditisation of knowledge which typically sees generic versions of a medicine entering a market   
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Table of Contents

Strategic Report | Strategy

 

Pioneering science,

life-changing medicines

A company’s purpose defines its unique contribution to the world.

 

 

 

 

Purpose

We push the boundaries of science to deliver life-changing medicines.

 
      
  Values  
  >    We follow the science  
     Science is at the heart of our business and is the basis for everything we do. We make decisions based on strong scientific evidence, encourage curiosity and always look to push the boundaries.  
  >    We put patients first  
     Patients are why we come to work every day. We always seek to understand and reflect their needs. We watch the wider healthcare environment and look to apply knowledge and experience from the external environment into our work.  
  >    We play to win  
     Expectations are high. We challenge each other, make courageous choices and set high standards across the board. We work together and use the strengths and diversity both within and beyond AstraZeneca.  
  >    We do the right thing  
     We always take personal accountability for our actions and challenge those that are not in line with our values. We approach every interaction with candour, honesty and integrity.  
  >    We are entrepreneurial  
    

Excellence isn’t always achieved first time, sometimes persistence is required. We seize opportunities, act with urgency and take smart risks. Whether we succeed or fail, there is always a valuable lesson.

 

 

 

 

 

At AstraZeneca we want the way we work, as embodied in our strategy and values, to bring our purpose to life. That is why, in a year when we refreshed our strategic priorities, we also reassessed our purpose and values. This was to make sure that we express clearly our purpose and values and the behaviours necessary to realise our strategic ambitions to Achieve Scientific Leadership, Return to Growth, and Be a Great Place to Work.

To bring our purpose to life for employees, we also took a fresh look at the values that define our beliefs as a company, guide our decision making and underpin our drive for business success. Following a review of our culture and need to deliver a redefined strategy, we identified five values intended to build on our strengths and highlight areas for transformation. Senior leaders and management teams from across the business contributed to the development of these values. We also held an online

culture jam event in November 2013, to enable an organisation-wide, virtual dialogue to share ideas and create understanding of what our refreshed values mean.

Each value has a corresponding set of behaviours, that describe what is required at the individual level to demonstrate them. They apply to all employees and are complemented with manager accountabilities, which define what we expect from our managers.

 

 

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Our marketplace

The pharmaceutical industry has doubled in value since 2000.

 

 

World pharmaceutical market sales

 

World

$bn (2.5%)

 

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US

$bn (-0.4%)

 

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Europe

$bn (1.1%)

 

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Established ROW

$bn (1.3%)

 

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Emerging Markets

$bn (10.7%)

 

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Data based on world market sales using AstraZeneca market definitions as set out in the Market definitions on page 232. Source: IMS Health, IMS Midas Quantum Q3 2013 (including US data). Reported values and growth are based at CER. Value figures are rounded to the nearest billion and growth percentages of total actual value are rounded to the nearest tenth.

 

 

 

Introduction

The pharmaceutical industry has doubled in value since 2000. This growth was powered by a large number of FDA approvals in the second half of the 1990s and the increased use of medicines around the world, driven by the global economic growth of the time. Now, many demand drivers in the industry are under pressure.

Nonetheless, as the figure above shows, the world pharmaceutical market still grew by 2.5% in 2013. While average revenue growth was only 0.36% in Established Markets, Emerging Markets revenue was 30 times higher at 10.7%. The top five pharmaceutical markets in the world remained the US, Japan, Germany, France and China, with the US representing 39.1% of global sales (2012: 40.3%; 2011: 41.1%).

Competition

The industry remains highly competitive. Our competitors are other large research-based pharmaceutical companies that discover, develop and sell innovative, patent-protected prescription medicines and vaccines, as well as smaller biotechnology and vaccine businesses, and companies that produce generic medicines. While many of our peers are confronting similar challenges, these challenges are being met in different ways. For example, while some companies have pursued a focused strategy, others have diversified by acquiring or building branded generics businesses or consumer

portfolios, arguing that this enables them to better meet changing customer needs and smooth shareholder risk.

While most organisations continued to pursue their existing strategies in 2013, there were exceptions, with some companies moving away from diversification. Key industry trends included ongoing efforts to improve R&D innovation and productivity, expansion of geographic scope, especially in Emerging Markets and Japan, and the pursuit of operational efficiency. Business development and partnering increased at all stages of product development.

There continued to be a shift away from the development of new primary care medicines towards oncology, other specialty care drugs and orphan diseases. As an illustration, in 2013, just 30% of the new NMEs approved by the FDA were for primary care medicines.

Growth drivers

Expanding patient populations

The world population is expected to rise from its current level, of some seven billion, to reach nine billion by 2050. In addition, the number of people who can access healthcare continues to increase, particularly among the elderly. Globally, it is estimated that between 2000 and 2050, the number of people aged 60 years and over will increase from 605 million to two billion.

Developing markets now represent approximately 85% of the world population and over 20% of the world’s pharmaceutical revenues. Faster-developing economies, such as China, India and Brazil, offer new opportunities for the pharmaceutical industry to help many more patients benefit from innovative medicines. In 2013, pharmaceutical revenues rose in developing markets while those in established markets were broadly static. As the Estimated pharmaceutical sales and market growth – 2017 diagram overleaf shows, we expect this trend to continue.

Unmet medical need

In most Established Markets, ageing populations and certain lifestyle choices such as smoking, poor diet and lack of exercise are increasing the incidence of non-communicable diseases (NCDs), such as cardiovascular and metabolic diseases, cancer, and respiratory diseases, which require long-term management. In 2008, almost two-thirds of deaths globally were from NCDs, with 80% of these in lower- and middle-income countries. By 2030, it is estimated that the number of people dying from cardiovascular diseases will reach 23.3 million a year, while deaths from cancer will continue rising, to an estimated 13.1 million annually.

 

 

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Strategic Report | Strategy | Our marketplace

 

Estimated pharmaceutical sales1 and market growth2 – 2017

 

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Advances in science and technology

Innovation is critical if we are to address unmet medical need. Existing drugs will continue to be important in meeting the growing demand for healthcare, particularly with the increasing use of generic medication. At the same time, advances in the understanding of diseases and the application of new technologies will be required to deliver new medicines. Such approaches include personalised healthcare (PHC) and predictive science, as well as other new types of therapy. Advances in the technologies for the design and testing of novel compounds herald fresh opportunities for using innovative small molecules as new medicines. The use of large molecules, or biologics, has also become an important source of innovation, with biologics among the most commercially successful new products. Forecasts for 2018 predict that of the world’s top 100 pharmaceutical products, 51% of sales will come from biologics. This compares with only 39% in 2012 and 17% in 2004. Most pharmaceutical companies now pursue R&D in both small molecules and biologics.

The challenges

R&D productivity

Improving R&D productivity is a critical challenge for the pharmaceutical industry. Global investment in pharmaceutical R&D reached an estimated $135 billion in 2013, a 53% increase from $88 billion in 2004. However, the annual growth in R&D spend has slowed in recent years. In contrast to the increase in spending, the FDA approved 27 NMEs in 2013 (2012: 39), which was in line with the annual average of 26 approvals over the past 10 years.

To ensure the industry delivers a sustainable return on R&D investment, it is working to increase the probability of success in developing commercially viable new drugs and is moving to a lower, more flexible

cost base. It does so at a time when regulators and those who pay for our medicines are demanding more and better evidence of comparative effectiveness of compounds, which increases development times and costs.

The industry is using the full range of innovative technologies to achieve and accelerate product approvals. Additionally, greater emphasis is being placed on demonstrating Proof of Concept, which delivers data to show that candidate drugs result in a clinical change with an acceptable endpoint or surrogate in patients.

Regulatory requirements

Our industry continues to be highly regulated. This reflects public demand for safe, effective and high-quality medicines that are responsibly tested, manufactured and commercialised. The nature and geographic scope of our business requires us to maintain important relationships worldwide with health authorities that assess the safety, efficacy and quality of medicines. These include the FDA in the US, the EMA in the EU, the PMDA in Japan and the CFDA in China.

In 2013, the FDA implemented aspects of the Prescription Drug User Fee Act, which was re-authorised in 2012, and EU authorities continued to implement the new pharmacovigilance legislation, also introduced in 2012. These measures share the common goals of protecting patient safety, creating greater transparency in regulation throughout a product’s life-cycle and taking more account of the patient perspective in the regulatory process. There is also a global trend to increase public access to the documentation companies submit to health authorities to support marketing authorisations.

So far as the development of biosimilars is concerned, health authorities continue to face the challenge of developing robust standards to ensure their safety, efficacy and quality. For further information on biosimilars, see the Patent expiries and genericisation section opposite.

There are ongoing efforts to harmonise regulations and achieve global convergence, yet the number of regulations and their impact continue to multiply. Clinical trials that support the registration of products in a regulatory jurisdiction must be relevant to a variety of patient demographics. Programmes using foreign clinical trial data also need to meet each health authority’s requirements and be relevant to their population. Meanwhile, health authorities continue to redefine patient-safety assessment processes. In addition, in emerging pharmaceutical markets, health authorities are developing their own individual requirements and safety initiatives.

The growing complexity and globalisation of clinical studies, and the pressure on industry and healthcare budgets, has led to an increase in consortia, including industry, academia and regulators. These are driving innovation and streamlining regulatory processes, as well as defining and clarifying approval requirements for new technology and approaches, such as PHC. They are also accelerating the development of treatments that address public health priorities.

In another trend, following regulatory approval, the safety and efficacy data of most medicines are being increasingly scrutinised by health technology assessment and/or reimbursement bodies at a national level.

 

 

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However, when applications are supported by strong data and compelling benefit/risk propositions, regulators continue to approve drugs that address unmet medical need.

Pricing pressure

Pricing and reimbursement continues to be highly challenging in many markets. Most pharmaceutical sales are generated in highly regulated markets where governments and private payers, such as insurance companies, exert various levels of control on pricing and reimbursement. Cost-containment, including limitations on pharmaceutical spending, continues to be a focus. A wave of austerity programmes, following the recent global economic downturn, are further constraining healthcare providers and tougher economic conditions constrain those patients who pay directly for medicines. Additional challenges may arise if suppliers and distributors face credit-related difficulties. At the same time, pharmaceutical companies require significant extra resources to demonstrate to payers the economic, as well as therapeutic, value of medicines.

In 2013, pressures on pricing were driven by the implementation of drug price control mechanisms and other regulatory reforms issued the previous year (for example, the Royal Decree in Spain and the Balduzzi Decree in Italy), as well as price renegotiations due to budget pressures, particularly in France and Belgium.

In the US, the Affordable Care Act has already had a direct impact on healthcare activities despite the fact that many of the healthcare coverage expansion provisions of the Affordable Care Act do not take effect until 2014. For example, in 2010 there was an increase in the mandatory Medicaid rebates. In addition, the pharmaceutical industry, including AstraZeneca, is making prescription drugs more affordable to Medicare beneficiaries through, for example, helping to close the coverage gap in the Medicare Part D prescription drug programme. The industry continues to work with policymakers and regulators to help ensure they strike a balance between containing costs, improving outcomes and promoting an environment that fosters medical innovation.

In August 2011, as part of the bipartisan agreement to raise the federal debt ceiling, the US Congress created the Joint Select Committee on Deficit Reduction (Committee). The Committee was empowered to recommend a package of $1.2 trillion in cost savings with the requirement that, if the Committee failed to reach an agreement, the savings would be achieved through across the board spending cuts (sequestration).

The Committee discussions ended without reaching an agreement and the President and Congress were subsequently unable to reach agreement. Thus, sequestration took effect in March 2013 and impacts most federal government healthcare programmes with broad reductions in federal government spending.

In Europe, governments have continued to implement legislation on mandatory discounts, clawbacks and referencing rules, driving prices down, especially in distressed economies such as Greece and Portugal. In Germany, Europe’s largest pharmaceutical market, manufacturers are now required to prove the additional benefit of their drugs over existing alternatives. If the additional benefit is not shown, the drug is transferred to the German reference pricing system where, for each drug group, a single reimbursement level or reference price is set.

In China, pricing practices are high on the agenda of regulatory authorities. 2013 was impacted by the continuation of the triennial maximum retail drug price review which began in 2012, and more pressure is expected. In Japan, biennial cuts are expected to continue. In Latin America, pricing is increasingly controlled by governments, for example in Colombia and Venezuela.

More about the impact of price controls and reductions, and of healthcare reform in the US, can be found in the Principal risks and uncertainties section from page 200. The principal aspects of price regulation in our major markets are described further in the Geographical Review from page 214.

Patent expiries and genericisation

The patents on some of the biggest- selling drugs ever produced are expiring. As a consequence, payers, physicians and patients in Established Markets have increased access to low-price, generic alternatives in many important classes of primary care drugs. For example, for prescriptions dispensed in the US in 2013, generics constituted 86% of the market by volume (2012: 84%).

Patents only protect pharmaceutical products for a finite period and the expiry or early loss of patents often leads to the availability of generics. Generic versions of drugs are very competitive with significantly lower pricing than the innovator equivalents. This is partly due to lower investment by generic manufacturers in R&D and market development. While generic competition has traditionally occurred when patents expire, it can also happen where the validity of patents is disputed or successfully challenged before expiry. Such early challenges have increased with generics

companies increasingly willing to launch products ‘at risk’, for example, prior to the resolution of the relevant patent litigation. This trend is likely to continue, resulting in significant market presence for the generic version during the period in which litigation remains unresolved, even though the courts may subsequently rule that the innovative product is properly protected by a valid patent. The unpredictable nature of patent litigation has led innovators to seek to settle such challenges on terms acceptable to both innovator and generic manufacturer. However, some competition authorities have sought to challenge the scope and/or availability of this type of settlement agreement.

Biologics have, to date, sustained longer life-cycles than traditional small molecule pharmaceuticals and have faced less generic competition. With limited experience to date, the substitution of biosimilars for the original branded product has not followed the same pattern as generic substitution in small molecule products and, as a consequence, erosion of branded market share has not been as rapid. This is also due to a more complex manufacturing process for biologics compared with small molecule medicines. In addition, it is due to the inherent difficulties in producing a biosimilar which, as a biological equivalent, rather than an exact chemical copy, could require additional clinical trials. However, with regulatory authorities in Europe and the US continuing to implement abbreviated approval pathways for biosimilar versions, innovative biologics are likely to become increasingly subject to competition from biosimilars.

Building trust

The pharmaceutical industry faces challenges in building and maintaining trust, particularly with governments and regulators. The past decade has seen a significant increase in the number of settlements between innovator companies and governmental and regulatory authorities for violating various laws. Companies are taking steps to address this reputational challenge by embedding a culture of ethics and integrity, adopting higher standards of governance and improving relationships with employees, shareholders and other stakeholders.

In July 2013, it emerged that a number of companies, including pharmaceutical businesses, were under investigation by the China Public Security Bureau following allegations of bribery and criminal offences. Investigations by the DOJ and SEC under the Foreign Corrupt Practices Act are also continuing.

 

 

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Strategic Report | Strategy

 

Our strategic priorities

Our strategic priorities define how we are responding to the external environment and focusing our efforts and resources to ensure we can deliver our purpose.

 

We believe that biopharmaceuticals remains an attractive business, with strong underlying drivers of demand: expanding and ageing populations; a growing chronic disease burden; and increasing wealth through economic growth, especially in Emerging Markets. While the hurdles to adopting new products have increased, people are still willing to pay for differentiated, innovative medicines that transform lives.

In response to these circumstances and, as we announced at our Investor Day in March 2013, we have made a clear set of choices. We will:

 

> focus our R&D and commercial investments
> prioritise and accelerate promising assets and business development
> transform our innovation model and the way we work.

We will do this through our strategic priorities which are to:

 

1 Achieve Scientific Leadership
2 Return to Growth
3 Be a Great Place to Work.

The table from page 18 examines our strategic priorities in more detail, explains what they mean and how we are implementing them.

Distinctive capabilities

Our chosen priorities reflect our belief that AstraZeneca has the skills and capabilities to take advantage of the opportunities that exist:

Pipeline and science Few pharmaceutical companies can match our combination of capabilities in small molecules, biologics, immunotherapies and protein engineering. These capabilities allow us to produce combination therapies (such as drug antibody conjugates) and customisable molecules, targeted to specific patient populations. We also have good underlying discovery science and strong disease knowledge, research portfolios, and related technology platforms in a number of areas.

Commercial presence Over the past decade, we have developed strong commercial franchises that address oncology, cardiovascular, metabolic and respiratory diseases. We have a significant commercial capability in primary care.

We also have a strong position in China and other Emerging Markets. We combine a global reach with local customer relationships and are pioneering new customer-focused commercial models.

We need to build on these strong foundations. We also have to address some key challenges. AstraZeneca is faced with a number of significant patent expiries in the coming years and we must improve our R&D productivity by delivering more products successfully from our Phase III pipeline. Once medicines are approved for use, we need to improve the way in which we launch products. Organisationally, we need to reduce our costs, change our culture, and simplify and improve the way we work.

Innovation and growth

Our strategic priorities are focused on innovation and returning to growth. They are based on:

 

> science-led innovation
> a broad R&D platform built on three core therapy areas
> a balanced portfolio of specialty and primary care products
> a global commercial presence, with strength in Emerging Markets.

Strategic R&D centres

In March 2013, as part of our strategy, we announced plans to invest in strategic R&D centres in Gaithersburg, Maryland, US, in Cambridge, UK, and in Mölndal, Sweden. Our aim is to improve pipeline productivity and to establish AstraZeneca as a global leader in biopharmaceutical innovation.

The centres are a major investment, designed to locate more of our scientists close to globally recognised bioscience clusters, bring teams together to improve collaboration, and simplify our footprint and so reduce complexity and eliminate unnecessary cost.

In June 2013, we confirmed that our new UK-based global R&D centre and corporate headquarters will be located at the Cambridge Biomedical Campus on the outskirts of the city. The planned investment of around $515 million is expected to be completed by 2016.

It is planned that R&D work will no longer be carried out at our Alderley Park site in the UK. Over the next three years, around

1,600 roles will relocate from Alderley Park, with a significant majority going to the new centre in Cambridge and the remainder to our nearby Macclesfield facility or sites outside the UK. At least 700 non-R&D roles are expected to remain at Alderley Park. We will explore all options to ensure Alderley Park has a successful future.

In the US, a number of roles have already relocated to our facility in Gaithersburg, while most of the others will move during 2014. Our site in Wilmington, Delaware will remain our North America commercial headquarters.

Restructuring

Since 2007, we have undertaken significant efforts to restructure and reshape our business to improve long-term competitiveness. The first phase was completed in 2009. The second phase began in 2010 and the restructuring actions were completed in 2011.

At our Investor Day, we described how we were transforming the way we work to deliver our strategy by simplifying the organisation and its processes, while creating an innovative environment. We continue to drive productivity improvements across the organisation, removing complexity, creating additional headroom to invest in the pipeline and key growth platforms, and ensuring returns to our shareholders.

In March 2013, we announced a restructuring programme which was combined with the third phase of the programme announced in February 2012 to create a combined Phase 4 programme. It initially entailed an estimated global headcount reduction of about 5,050 over the 2013–2016 period. The combined programme of changes was estimated to incur $2.3 billion in one-time restructuring charges, of which $1.7 billion were expected to be cash costs. In 2013, the Company continued to implement the Phase 4 programme, incurring costs of $1.4 billion and delivering approximately $400 million of annualised benefits. The overall Phase 4 programme remains on track to deliver approximately $800 million anticipated annual benefits by the end of 2016. Total costs for this programme are now anticipated to be approximately $200 million higher at $2.5 billion.

 

 

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The Phase 4 programme has been expanded to include additional activities such as a transformation of our IT organisation and infrastructure, the exit of R&D activities in Bangalore, India, and the exit from branded generics in certain Emerging Markets to further reduce costs and increase flexibility. When completed, the expansion of the restructuring programme is expected to deliver a further $300 million in annual benefits by the end of 2016, bringing total anticipated annualised benefits of the Phase 4 programme to $1.1 billion. Total incremental programme costs from these new initiatives are estimated to be $700 million, of which $600 million is cash, bringing the total anticipated cost of our Phase 4 programme to $3.2 billion. The expansion of the programme is estimated to affect approximately 550 positions, bringing the total global headcount reduction under the Phase 4 programme to around 5,600 over the 2013–2016 period.

Final estimates for programme costs, benefits and headcount impact in all functions are subject to completion of the requisite consultation in the various areas, many of which have already begun. Our priority as we undertake these restructuring initiatives is to work with our affected employees on the proposed changes, acting in accordance with relevant local consultation requirements and employment law.

Outlook

As outlined above, our strategy is focused on innovation and returning to growth. In support of this, we have made some choices around our three strategic priorities. We have also been explicit about our immediate priorities, mid-term goals and long-term aspirations.

As we experience a period of patent expiries and declining revenue, our:

 

> Immediate priorities are to drive our on-market revenues through investment in our growth platforms and our portfolio of on-market brands. These include products in our three core therapy areas, and a focus on the Emerging Markets and Japan. We are also pursuing business development and investment in R&D. We have already accelerated a number of projects and progressed them into Phase III development.

 

What differentiates AstraZeneca?

We believe that in implementing our strategic priorities we can achieve the following:

 

  > A differentiated strategy A pure-play innovation/science strategy combined with global commercial scale  

 

  > Growth levers Internal growth platforms (Brilinta, Emerging Markets, our diabetes portfolio, our respiratory franchise and Japan) can return the Company to growth, accelerated by focused business development  

 

  > Pipeline potential We expect our promising Phase II pipeline to advance to a strong late-stage portfolio by 2016  

 

  > Re-focused delivery Re-focusing efforts on three core therapy areas, resources and business development efforts prioritised for growth and innovation  

 

  > Sustainability Bold steps being taken to transform our R&D innovation model, culture and operating model  

 

  > Shareholder returns Productivity improvement and commitment to our progressive dividend policy.  

 

 

Our strategic priorities are focused on innovation and returning to growth

They are to:

1 Achieve Scientific Leadership

2 Return to Growth

3 Be a Great Place to Work

The table overleaf examines our strategic priorities in more detail, explains what they mean and how we are implementing them.

 

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> Mid-term goals to 2016 are to progress our Phase II pipeline and exploit the potential of our biologics portfolio.
> Long-term aspirations to 2020 and beyond, in line with our strategic ambition, is to Achieve Scientific Leadership and sustainable growth, including the launch of two NMEs annually.

Financial expectations

In February 2014, we updated our financial expectations, which superseded all previous guidance and planning assumptions:

> we expect a low-to-mid single digit percentage decline in revenue at CER for 2014, with a marginally lower Core gross margin
> in percentage terms, Core EPS for 2014 is expected to decline in the teens at CER
> we expect revenues in 2017 will be broadly in line with 2013.

These expectations involve a number of assumptions, including, among other things, Nexium US generic launch in May 2014.

 

 

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Strategic Report | Strategy | Our strategic priorities

 

 

1 Achieve Scientific Leadership

 

 

What do we need to do?

 

 

How are we implementing this?

 

 

For more information

 

 

 

Focus on distinctive

science in three core

therapy areas

 

 

We are focusing on Cardiovascular and Metabolic diseases, Oncology, and Respiratory, Inflammation and Autoimmunity, supplemented by an opportunity-driven approach to Infection, Neuroscience and Gastrointestinal diseases

 

We work across biologics, small molecules, immunotherapies and protein engineering

 

 

 

 

Therapy Area Review from page 48

 

Prioritise and

accelerate our pipeline  

 

 

We are accelerating and investing in key projects, advancing promising projects from our Phase II pipeline with more than 20 NMEs. Looking ahead, we will focus our resources on our most promising assets

 

Our aim is for five to seven NME Phase III starts by the end of 2014. In the medium term, we will target one or more NME launches annually and longer term, two NMEs annually

 

 

 

Our Development Pipeline section from page 194

 

Transform our

innovation and

culture model

 

 

We have created two autonomous biotech units, MedImmune and Innovative Medicines and Early Development (IMED), to drive science and innovation. We are recruiting for these organisations. We have also established a clinical development group called Global Medicines Development (GMD)

 

 

 

Research and Development section from page 36

   

 

We are increasing our emphasis on novel science, such as immune-mediated therapy combinations, and PHC

 

Research and Development section from page 36

 

   

 

We are increasing our proximity to bioscience clusters and co-locating around three strategic sites in Gaithersburg, Maryland, US; Cambridge, UK; and Mölndal, Sweden

 

 

 

Our strategic priorities section on page 16

 

2 Return to Growth

 

 

What do we need to do?

 

  How are we implementing this?   For more information

 

Focus on key

growth platforms

 

 

Brilinta – We are working to deliver Brilinta’s potential to reduce the number of cardiovascular deaths, with leadership plans for the US and markets globally, and further clinical studies

 

 

 

Cardiovascular and Metabolic disease section on page 52

 

   

 

Diabetes – We are working to maximise the potential of our broad innovative non-insulin anti-diabetic portfolio to become a leader in the treatment of diabetes

 

 

 

Cardiovascular and Metabolic disease section on page 52

   

 

Emerging Markets – We are refocusing our efforts on innovative medicines; accelerating our investment in Emerging Market capabilities, with a focus on China and 15 top markets; broadening our reach through multi-channel marketing; and transforming our capabilities to support new products, eg market access and patient affordability

 

 

 

Sales and Marketing section on page 40

   

 

Respiratory – We are working to maximise the opportunity of our ‘end-to- end’ strengths in medicines, pipelines and devices to meet significant medical need and the opportunity for growth in asthma and COPD

 

 

 

Respiratory, Inflammation and Autoimmunity section on page 58

 

   

 

Japan – We are building on our leading oncology franchise and working to maximise our success with launches across the diabetes portfolio and with Symbicort, Brilinta, Nexium and Crestor

 

 

 

Sales and Marketing section on page 40

 

Accelerate through business development

 

 

 

We are seeking to accelerate growth through larger scale product in-licensing and partnerships, and with bolt-on acquisitions

 

 

Sales and Marketing section on page 40

 

 

Transform through

specialty care and

biologics

 

 

 

Our development pipeline is now half small molecules and half biologics. We need to convert our strong biologics pipeline into future launches and to create a specialty care product portfolio that balances our historic strength in primary care

 

 

 

Therapy Area Review Overview from page 48

 

 

18    AstraZeneca Annual Report and Form 20-F Information 2013


Table of Contents

    

 

 

3 Be a Great Place to Work

 

 

What do we need to do?

 

 

How are we implementing this?

 

 

For more information

 

 

Focus on simplification

of our business

 

 

We have introduced a flatter organisational structure to drive accountability, and improve decision making and communication

 

We are developing simpler, more efficient processes, such as in business planning

 

 

 

Employees section

from page 66

 

Drive continued

productivity

improvements

 

 

 

We are restructuring and reshaping to deliver our science-led site strategy and improve long-term competitiveness

 

 

Employees section

from page 66

 

Evolve our culture

 

 

We are engaging with employees to promote understanding and belief in our strategy

 

We will retain the best of our existing culture and change those aspects that hold us back by embedding our new values and behaviours in the organisation and in our performance management system

 

We are increasing our focus on talent and leadership development with tailored programmes for leaders throughout the organisation

 

 

Employees section

from page 66

We also need to:

 

 

Achieve our Group Financial Targets

 

 

What do we need to do?

 

 

How are we implementing this?

 

 

For more information

 

 

Drive on-market value

 

 

We are investing in on-market growth platforms to return to growth. We aim to maintain sector-leading productivity by restructuring to create scope for investment and a flexible cost base

 

 

 

Financial Review from page 74

 

Maintain a progressive

dividend

 

 

Our dividend policy is to maintain or grow dividend per share

 

 

Financial Review from page 74

 

Maintain a strong

balance sheet

 

 

 

We target a strong, investment grade credit rating, operational cash balance, and periodic share repurchases

 

 

Financial Review from page 74

 

Our work is supported by:

 

 

Accelerated business development

 

 

Our focus is on strategically aligned value-enhancing business development, notably:

 

 

 

Our relationships

section from

page 70

>   increasing early-stage research deals and academic alliances  
>   exploring value-creating peer collaborations  
>  

pursuing partnering, in-licensing and bolt-on acquisitions to strengthen our core therapy area portfolios

 

 

 

Doing business responsibly

 

 

We are committed to being a responsible company, working with integrity and delivering sustainable business development. We have identified three areas for special focus:

 

 

 

Responsible Business

section from

page 220

>   Access to healthcare  
>   Diversity  
>  

Environment

 

 

 

LOGO

 

 

AstraZeneca Annual Report and Form 20-F Information 2013    19


Table of Contents

Strategic Report | Strategy

 

Key performance indicators

How did we perform against the indicators by

which we measure our success?

 

   

KPI

 

 

2012

 

 

 

Achieve Group Financial Targets

 

 

LOGO

 

See the Financial Review from

page 74 for more information

 

 

Revenue

 

 

 

$27,973 million

   
 

 

Cash flow from operating activities

 

 

 

$6,948 million

   
 

 

Core EPS

 

 

 

$6.83*

   
 

 

Dividend per share**

 

 

 

$2.80

 

 

Achieve Scientific Leadership

 

 

LOGO

 

See the Research and Development section from page 36 and Therapy Area Review from page 48 for more information

 

 

Phase III investment decisions

 

 

Lesinurad entered Phase III clinical development following the acquisition of Ardea. Positive Phase III investment decisions achieved for moxetumomab pasudotox and brodalumab

 

   
 

 

NME major submissions

 

 

Quadrivalent live attenuated influenza vaccine (MEDI3250) MAA; Nexium OTC and dapagliflozin/metformin IR FDC (EU). Casodex oral tablet; Nexium; Helicobacter pylori; and Arimidex Oral Dispersible Film submitted (Japan)

 

   
 

 

External licensing and/or acquisition opportunities in Phase I/II

 

 

Seven opportunities through Amgen (AMG181/MEDI7183, AMG557/ MEDI5872, AMG157/MEDI9929, AMG139/MEDI2070); Gelesis, Inc. (Attiva); Ardelyx, Inc. (AZD1722); and Isis Pharmaceuticals, Inc. (AZD9150)

 

   
 

 

Late-stage external licensing and/or acquisition opportunities

 

 

Five opportunities, including Amgen (brodalumab); Ardea (lesinurad); Amylin (metreleptin); and Ironwood (linaclotide)

 

   
 

 

NME Phase II starts/progressions

 

 

Eight starts – tralokinumab; MEDI7183; AZD5847; AZD5213; AZD3241; fostamatinib; AZD8931; and AZD2115

 

   

 

* Restated for new Core definition and adoption of IAS 19 (2011) (as detailed on pages 136 and 224).
** First and second interim dividend for the year.

 

20    AstraZeneca Annual Report and Form 20-F Information 2013


Table of Contents

    

 

    

 

    

    

 

 

2013

 

 

Commentary

 

 

    

 

      

 

$25,711 million

 

 

The key growth platforms (Brilinta, the diabetes franchise, respiratory, Emerging Markets and Japan) delivered an incremental $1.2 billion of revenue. This was more than offset by the impact of patent expiries, which reduced revenue by $2.2 billion

 

   

 

$7,400 million

 

 

Lower tax and interest payments partially offset the lower operating profit in 2013, after adjusting for impairments and non-cash costs, while working capital movements and a one-off pension fund contribution drove higher outflows in the prior year

 

   

 

$5.05

 

 

The decline in EPS was greater than the decline in revenue primarily due to the expenditure in the Company’s key growth platforms and strengthened pipeline

 

   

 

$2.80

 

 

Met target of holding or growing dividend per share

 

 

    

 

   

 

Three positive decisions for benralizumab, selumetinib and olaparib

 

 

On target to have five to seven projects in Phase III by the end of 2014. Decisions helped us achieve our 2016 target volume for our Phase III pipeline three years ahead of schedule

 

   

 

Three submissions for olaparib (EU) and naloxegol (US and EU)

 

 

Submissions contribute to meeting target of at least one NME launch per year by 2015/2016 and sustainable delivery of two NMEs annually by 2020

 

   

 

Four opportunities through AlphaCore; Amplimmune; Pearl Therapeutics (PT010); and Merck (MK-1775/ AZD1775)

 

 

 

Licensing and/or acquisition opportunities contribute to meeting target of sustainable delivery of two NMEs annually by 2020

   

 

Three opportunities through Pearl Therapeutics (PT003); Omthera (Epanova); and FibroGen (roxadustat/FG-4592)

 

 

Licensing and/or acquisition opportunities helped us achieve our 2016 target volume for our Phase III pipeline three years ahead of schedule and contribute to meeting target of sustainable delivery of two NMEs annually by 2020

 

   

 

Eleven starts, including AZD1722; MEDI2070; AZD4901; tremelimumab; AZD2014; RDEA3170; AZD5069; AZD5213; MEDI8968; and two Phase I expansion projects with patients dosed

 

 

 

Phase II starts and progressions contribute to meeting target of sustainable delivery of two NMEs annually by 2020

 

LOGO

 

 

AstraZeneca Annual Report and Form 20-F Information 2013    21


Table of Contents

Strategic Report | Strategy | Key performance indicators

 

    

 

    

    

 

   

KPI

 

 

2012

 

 

 

Return to Growth

 

 

LOGO

 

See the Geographical Review from

page 214 for more information

 

 

Brilinta

 

 

 

$89 million

   
 

 

Diabetes franchise

 

 

 

$451 million

   
 

 

Emerging Markets

 

 

 

$5,095 million

   
 

 

Respiratory

 

 

 

$4,415 million

   
 

 

Japan

 

 

 

$2,904 million

 

 

Be a Great Place to Work

 

 

LOGO

 

See the Employees section from

page 66 for more information

 

 

Organisational structure – percentage of employees within six management steps of CEO

 

 

 

40%

   
 

 

Employee belief in company strategy

 

 

68%

 

(Source: Global FOCUS all-employee

survey)

 

 

 

Responsible Business

 

 

LOGO

 

See the Responsible Business section

from page 220 for more information

 

 

Dow Jones Sustainability Index ranking

 

 

 

Top 7% of companies

   
 

 

Confirmed breaches of external sales and marketing codes or regulations globally

 

 

 

10 confirmed breaches

   
 

 

Number of supplier audits conducted

 

 

 

482 audits

   

 

22    AstraZeneca Annual Report and Form 20-F Information 2013


Table of Contents

    

 

    

 

    

    

 

      

2013

 

 

Growth (CER) 

 

 

Commentary

 

 

    

 

       
   

 

$283 million sales of Brilinta

 

 

216%

 

 

Brilinta continues to grow globally. The US remains our priority for Brilinta and there are challenges still to be overcome

 

   

 

$787 million sales across diabetes franchise

 

 

75%

 

 

Diabetes revenues grew globally last year and we are stepping up our investment and improving execution of our plans

 

   

 

$5,389 million sales in Emerging Markets

 

 

8%

 

 

Revenue growth met our ambition of high single digit growth (at CER), with growth in China of 19% over the year

 

   

 

$4,677 million sales across respiratory portfolio

 

 

 

7%

 

 

Symbicort drove growth, with a strong performance in the US, Japan and Emerging Markets

 

 

 

$2,485 million sales in Japan

 

 

4%

 

 

Growth at CER was helped by the performance of Symbicort and Nexium

 

 

    

 

       
   

 

70%

     

 

This is a key indicator of our progress in driving accountability and improving decision making and communication

 

 

 

84%

 

(Source: January 2014 pulse survey across a sample of the organisation)

 

 

 

This is a key indicator of employee engagement. Belief level is in line with the pharmaceutical sector norm

 

    

 

       
   

 

Top 3% of companies

     

 

Met target of maintaining position in the Dow Jones Sustainability and World Indexes comprising the top 10% of the largest 2,500 companies with a score of 85%

 

   

 

11 confirmed breaches

     

 

Continue to report and learn lessons from confirmed breaches of external codes arising from external scrutiny and voluntary disclosure by AstraZeneca

 

   

 

61 audits

     

 

Undertaking a risk-based programme of audits across all supplier categories and geographies ensures expectations of suppliers set down in our Global Responsible Procurement Standard are met

 

 

LOGO

 

 

AstraZeneca Annual Report and Form 20-F Information 2013    23


Table of Contents

Strategic Report | Strategy

 

Risk overview

What might challenge the delivery of our strategic priorities?

 

 

Context

 

 

Specific risks we face

 

   

 

Risk: Product pipeline

 

 

 

The development of any pharmaceutical product candidate is a complex, risky and lengthy process involving significant financial, R&D and other resources

 

Each project may fail or be delayed at any stage of the process due to a number of factors

 

 

 

>  Failure to meet development targets

>  Difficulties in obtaining and maintaining regulatory approvals for new products

>  Failure to obtain and enforce effective IP protection

>  Delay to new product launches

>  Strategic alliances and acquisitions may be unsuccessful

 

 

Risk: Commercialisation and business execution

 

 

 

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 replace lost sales following patent expiry

 

We may ultimately be unable to achieve commercial success for any number of reasons

 

 

>  Challenges to achieving commercial success of new products

>  Illegal trade in our products

>  Developing our business in Emerging Markets

>  Expiry or loss of, or limitations to, IP rights

>  Pressures resulting from generic competition

>  Negative effect of patent litigation in respect of IP rights

>  Price controls and reductions

>  Economic, regulatory and political pressures

 

 

 

>  Abbreviated approval processes for biosimilars

>  Increasing implementation and enforcement of more stringent anti-bribery and anti-corruption legislation

>  Any expected gains from productivity initiatives are uncertain

>  Changes in leadership, failure to attract and retain key personnel and failure to successfully engage with our employees

>  Failure of information technology and cybercrime

>  Failure of outsourcing

 

 

Risk: Supply chain and delivery

 

 

 

We may experience difficulties and delays in manufacturing our products, particularly biologics, and there may be a failure in supply from third parties

 

 

 

>  Manufacturing biologics

>  Difficulties and delays in manufacturing, distribution and sale of our products

>  Reliance on third party goods

 

 

Risk: Legal, regulatory and compliance

 

 

 

Any failure to comply with applicable laws, rules and regulations may result in civil and/or criminal legal proceedings, and/or regulatory sanctions

 

 

>  Adverse outcome of litigation and/or governmental investigations

>  Potentially significant product liability claims

>  Failure to adhere to applicable laws, rules and regulations

>  Environmental and occupational health and safety liabilities

>  Misuse of social media platforms and new technology

 

 

 

Risk: Economic and financial

 

 

 

Operating in over 100 countries we are subject to political, socio-economic and financial factors both globally and in individual countries

 

 

>  Adverse impact of a sustained economic downturn

>  Political and socio-economic conditions

>  Impact of fluctuations in exchange rates

>  Limited third party insurance coverage

>  Taxation

>  Pensions

>  Financial expectations

 

   

 

24    AstraZeneca Annual Report and Form 20-F Information 2013


Table of Contents

    

 

We face a diverse range of risks and uncertainties that may adversely affect any one or more parts of our business and prevent us achieving our objectives. Our approach to risk management is designed to encourage clear decision making on which risks we take as a business and how we manage risk, informed by an understanding of the commercial, financial, compliance, legal and reputational implications.

We outline below the main risks that could have a material adverse effect on the business or results of operations. We have also listed how these risks link to our strategic priorities and some of the management actions taken in response. For a more comprehensive description, please see the Risk section from page 199.

 

  Possible           Link to
  impacts      Risk management actions    strategic priority

 

    

 

 

 

>  Reduced long-term growth, revenue and profit

>  Diminished reputation (R&D capability)

    

 

>  Focus on distinctive science in three core therapy areas with strong capabilities

>  Prioritise and accelerate our pipeline

>  Strengthen pipeline through R&D licensing, alliances and scientific partnering

>  Transform our innovation model and culture

>  Focus on simplification

>  Drive continued productivity improvements

>  Active management of IP rights

 

  

 

Achieve Scientific Leadership

 

Return to Growth

 

Be a Great Place to Work

 

Achieve Group Financial Targets

 

 

    

 

 

 

>  Reduction in market share and long-term growth

>  Diminished reputation and employee engagement

>  Loss of revenue, profit and cash flows

    

 

>  Focus on key growth platforms

>  Accelerate through business development and strategic partnerships and alliances

>  Transform through specialty care/biologics

>  Focus on simplification

>  Drive continued productivity improvements

>  Evolve our culture

>  Active management of IP rights

>  Reimbursement and pricing – demonstrating value of medicines/health economics

>  Relocation to strategic science hubs

 

  

 

Return to Growth

 

Be a Great Place to Work

 

Achieve Group Financial Targets

 

    

 

 

 

>  Delays in planned activities

>  Loss of sales and revenue

    

 

>  Quality management systems

>  Contingency plans including dual sourcing, multiple suppliers and stock levels

>  Supplier audit programme

>  Business continuity initiatives, disaster and crisis management, continuity and data recovery and emergency response plans

 

  

 

Return to Growth

 

Achieve Group Financial Targets

 

    

 

 

 

>  Diminished reputation

>  Reduction in profit

    

 

>  Strong ethical and compliance culture and infrastructure incorporating all elements of compliance framework

>  Code of Conduct and Global Policies and Standards provide controls for major risks

>  Training for all Directors/employees

>  Management oversight, compliance monitoring and audit programmes to assure compliance

>  Independent reporting channels for employees to voice any concerns confidentially

>  Robust investigation of alleged breaches, followed by appropriate corrective actions

>  Due diligence reviews on acquisitions and integration plans

 

  

 

Be a Great Place to Work

 

Achieve Group Financial Targets

 

    

 

   

>  Loss of revenue, profit, cash flows and ability to access funding

 

      

>  Strategic/financial management actions eg monitoring and analysis of market conditions, competitors and their strategies

>  Financial risk management

 

  

Achieve Group

Financial Targets

 

LOGO

 

 

AstraZeneca Annual Report and Form 20-F Information 2013    25


Table of Contents

Strategic Report | Strategy

 

Governance and Remuneration

How does the way we are governed support the delivery of our strategy?

 

 

  Governance

 

 

 

   Good governance is crucial to ensuring we are well managed and can deliver our strategic priorities.

 

 
   

 

The Board

 

 
   

 

Chairman: Leif Johansson | Senior independent Non-Executive Director: John Varley

 

 
   

 

All Directors are collectively responsible for the success of AstraZeneca. In addition, the Non-Executive Directors are responsible for exercising independent and objective judgement and for scrutinising and challenging management.

 

The Board is responsible for setting our strategy and policies, for oversight of risk and corporate governance, and for monitoring progress towards meeting our annual plans. It is accountable to our shareholders for the proper conduct of
the business and our long-term success. It represents the interests of all stakeholders.

 

The Board has delegated some of its powers to four principal committees and the CEO.

 

Members of the Board and their biographies are shown on pages 28 to 29.

 

 

 
   

 

Further details from page 88.

 

 
 
   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

Nomination and

   

 

Audit Committee

   

 

Remuneration

   

 

Science Committee

 
   

Governance Committee

 

        Committee      
   

 

Chairman: Leif Johansson

 

   

 

Chairman: Rudy Markham

 

   

 

Chairman: John Varley

 

   

 

Chairman: Nancy Rothwell

 

 
   

 

Talented people are critical to the delivery of the Group’s strategy. The Nomination and Governance Committee’s role is to recommend new Board appointments to the Board and to consider, more broadly, succession planning to senior executive management and Board positions. The Nomination and Governance Committee also advises the Board on significant developments in corporate governance.

 

   

 

To deliver the Group’s strategy we must have sound financial and non-financial controls. The Audit Committee is responsible for reviewing our financial reporting, internal controls, compliance with laws and our relationship with our external auditor, as well as risk management.

 

   

 

We seek to attract, retain and develop the highest-calibre talent while paying no more than is necessary. The Group’s short- and long-term incentive plans are closely linked to our strategic and financial goals, and the delivery of sustainable shareholder value. The Remuneration Committee is responsible for the Group’s remuneration policy, which supports the delivery of our strategy.

 

   

 

Achieving Scientific Leadership is key to our strategic success. The Science Committee provides assurance to the Board regarding the Group’s R&D activities, by reviewing and assessing our approaches in our chosen therapy areas, the scientific technology and R&D capabilities we deploy, the quality and development of our scientists, and our decision making.

 

 
   

Further details from page 93.

 

 

   

Further details from page 92.

 

   

Further details from page 92.

 

   

Further details from page 93.

 

 
 
   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

CEO: Pascal Soriot

 

                         
   

 

The Senior Executive Team (SET) comprises:

 

 
   

 

CEO

 

 

CFO

      9 Executive Vice-Presidents       General Counsel       Chief Compliance Officer  
   

 

The SET is the body through which the CEO exercises the authority delegated to him by the Board. It considers major business issues and makes recommendations to the CEO, and typically also reviews those matters which are to be submitted to the Board for its consideration. The CEO is responsible for establishing and chairing the SET.

 

 
   

Biographies of the members of the SET are shown on pages 30 to 31.

 

 
                   
                   
                   
                   

 

26    AstraZeneca Annual Report and Form 20-F Information 2013


Table of Contents

    

 

 

 

    

 

Key roles
   
LOGO   

Chairman

Leadership, operation and

governance of the Board, ensuring Board effectiveness.

   
LOGO   

CEO

Responsible to the

Board for the management,

development and

performance of the business.

   
LOGO   

Senior Independent

Non-Executive Director

Acts as a sounding board

for the Chairman and an intermediary for other Directors and shareholders

when necessary.

 

 

Gender split

of Directors

 

LOGO

 

 Remuneration

 

 

 

We seek to create sustainable growth in shareholder value by developing and executing a remuneration strategy that supports the successful implementation of our business strategy.

 

 

The progress and success of our strategy will be measured against three key areas: Achieve Scientific Leadership; Return to Growth; and Achieve Group Financial Targets. During 2013, the Remuneration Committee reviewed the Group’s short- and long-term performance incentive plans for the Executive Directors and senior management to ensure that they supported the delivery of these goals.

 

 

 

The key components of AstraZeneca’s remuneration strategy for Executive Directors are set out below. Full details of the Directors’ remuneration are outlined in the Directors’ Remuneration Report from page 102.

 

 
    

 

Item

 

  Policy/link to strategy/performance measures    
   

 

Base pay

 

 

To be sufficient (but no more than necessary) to attract, retain and develop high-calibre talent to achieve our strategy

 

   
   

 

Short Term Incentive  

(STI) plan (annual

bonus)

 

 

The performance measures form a Group scorecard which is closely aligned to our strategy and rewards commercial, scientific and financial success. The measures are considered by the Remuneration Committee and updated annually, and may include metrics linked to the strategic objectives of Achieve Scientific Leadership, Return to Growth, Achieve Group Financial Targets, and Be a Great Place to Work

 

   
   

 

Long Term Incentive

(LTI) plans

 

 

The variable LTI arrangements comprise two plans: the PSP and the AZIP (see below). Currently, LTI awards are granted with a split between the two plans in the ratio 75% PSP and 25% AZIP

 

   
   

 

AstraZeneca

Performance Share

Plan (PSP)

 

 

The PSP performance measures are designed to align to financial and strategic objectives over a three-year performance period. They include:

 

   
      >   external financial metrics, namely Total Shareholder Return (TSR) performance    
      >   internal financial metrics, namely cumulative free cash flow    
      >   Return to Growth measures, which are based on quantitative medium-term sales targets relating to key products and territories    
        >  

Achieve Scientific Leadership measures, which reflect our ability to deliver innovation to the market

 

   
   

 

AstraZeneca

Investment Plan

(AZIP)

 

 

The AZIP performance measures are designed to align senior management’s interests to the Group’s longer-term financial performance over a four-year performance period (with a four-year holding period). They are:

 

   
        >   dividend per share performance    
        >  

dividend cover performance

 

   
         
         
         
         

 

LOGO

 

 

AstraZeneca Annual Report and Form 20-F Information 2013    27


Table of Contents

Strategic Report

 

 

LOGO

 

LOGO

LOGO

 

LOGO

LOGO

 

LOGO

 

Board of Directors

as at 31 December 2013

1 Leif Johansson (62)

Non-Executive Chairman of the Board, Chairman of the Nomination and Governance Committee, and member of the Remuneration Committee

 

Elected as a Director in April 2012 and became Non-Executive Chairman of the Board in June 2012. Leif Johansson is also the Chairman of global telecommunications company, LM Ericsson, a position he has held since April 2011. From 1997 until 2011, he was Chief Executive of AB Volvo, one of the world’s leading manufacturers of trucks, buses, construction equipment, drive systems and aerospace components. He spent a significant part of his early career at AB Electrolux, latterly as Chief Executive from 1994 to 1997. He was a Non-Executive Director of BMS from 1998 to September 2011, serving on the board’s audit committee and compensation and management development committee. He is Chairman of the European Round Table of Industrialists and the International Advisory Board of the Nobel Foundation. He holds board positions at Svenska Cellulosa Aktiebolaget SCA and Ecolean AB. He holds an MSc in engineering from Chalmers University of Technology, Gothenburg, and has been a member of the Royal Swedish Academy of Engineering Sciences since 1994. He became Chairman of the Academy in 2012.

2 Pascal Soriot (54)

Executive Director and Chief Executive Officer

 

Appointed as a Director and CEO in October 2012. From 2010 to September 2012, he served as Chief Operating Officer of Roche AG’s pharmaceuticals division. Prior to that, he was CEO of Genentech, a biologics business, and led its successful merger with Roche. He joined the pharmaceutical industry in 1986 and has worked in senior management roles throughout the world in a number of major companies.

He brings to AstraZeneca a significant breadth of experience in both established and emerging markets, strength of strategic thinking, a successful track record of managing change and putting strategy into operation, and the ability to lead a diverse organisation, having lived in Australia, Japan, the US and Europe. He is a doctor of veterinary medicine (École Nationale Vétérinaire d’Alfort, Maisons-Alfort) and holds an MBA from HEC, Paris.

3 Marc Dunoyer (61)

Executive Director and Chief Financial Officer

 

Appointed as a Director and CFO in November 2013, and served as Executive Vice-President, GPPS from June to October 2013. He qualified as an accountant and joined AstraZeneca during 2013 from GSK, where he was Global Head of Rare Diseases and (concurrently) Chairman, GSK Japan. His career in pharmaceuticals, which has included periods with Roussel Uclaf, Hoechst Marion Roussel as well as GSK, has given him extensive experience of the industry, including finance and accounting; corporate strategy and planning; research and development; sales and marketing; business reorganisation; and business development. He has an MBA from HEC, Paris, and a Bachelor of Laws degree from Paris University.

4 John Varley (57)

Senior independent Non-Executive Director, Chairman of the Remuneration Committee and member of the Nomination and Governance Committee

 

Appointed as a Director in July 2006. John Varley was formerly Group Chief Executive of the Barclays Group, having held a number of senior positions with the bank during his career, including that of Group Finance Director. He brings additional international, executive business leadership experience to the Board. He is also a Non-Executive Director of BlackRock, Inc., Rio Tinto plc and Rio Tinto Limited, as well as being Chairman of Business Action on Homelessness and of Marie Curie Cancer Care.

5 Geneviève Berger (58)

Non-Executive Director and member of the Science Committee

 

Elected as a Director in April 2012. Geneviève Berger is Chief Science Officer at Unilever PLC and a member of the Unilever Leadership Executive. She holds three doctorates – in physics, human biology and medicine. She was appointed Professor of Medicine at Université Pierre et Marie Curie, Paris in 2006. From 2003 to 2008 she was Professor and Hospital Practitioner at l’Hôpital de la Pitié-Salpôtrière, Paris. Her previous positions include Director of the Biotech and Agri-Food Department, then Head of the Technology Directorate at the French Ministry of Research and Technology (1998-2000); Director General, Centre National de la Recherche Scientifique (2000-2003); and Chairman of the Health Advisory Board of the EU Commission (2006-2008). She was a non-executive board member of Unilever from 2007 to 2008 before being appointed to her current position and was a Non-Executive Director of Smith & Nephew plc from 2010 to 2012.

6 Bruce Burlington (65)

Non-Executive Director and member of the Audit Committee and the Science Committee

 

Appointed as a Director in August 2010. Bruce Burlington is a pharmaceutical product development and regulatory affairs consultant and brings extensive experience in those areas to the Board. He is also a non-executive board member of Cangene Corporation and the International Partnership for Microbicides, and a member of the scientific advisory boards of the International Medica Foundation and H. Lundbeck A/S. Previously, he spent 17 years with the FDA, serving as director of its Center for Devices and Radiological Health as well as holding a number of senior roles in the Center for Drug Evaluation and Research. After leaving the FDA, he served in a series of senior executive positions at Wyeth (now part of Pfizer).

 

 

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7 Graham Chipchase (50)

Non-Executive Director and member of the Audit Committee

 

Elected as a Director in April 2012. Graham Chipchase is the Chief Executive of global consumer packaging company, Rexam PLC. He was appointed to the position in 2010 after previous service at Rexam as Group Director, Plastic Packaging (2005-2009) and Group Finance Director (2003-2005). Before joining Rexam, he was Finance Director of Aerospace Services at global engineering group, GKN plc, from 2001 to 2003. After starting his career with Coopers & Lybrand Deloitte, he held a number of finance roles in the industrial gases company, The BOC Group plc (now part of The Linde Group) (1990-2001). He is a Fellow of the Institute of Chartered Accountants in England and Wales and holds an MA (Hons) in chemistry from Oriel College, Oxford.

8 Jean-Philippe Courtois (53)

Non-Executive Director and member of the Audit Committee

 

Appointed as a Director in February 2008. Jean-Philippe Courtois has close to 30 years’ experience in the global technology industry. He is President of Microsoft International and a board member of PlaNet Finance. Previously he was Chief Executive Officer and President of Microsoft EMEA and has served as co-chairman of the World Economic Forum’s Global Digital Divide Initiative Task Force and on the European Commission Information and Communication Technology Task Force. In 2009, he served as an EU Ambassador for the Year of Creativity and Innovation and, in 2011, was named one of ‘Tech’s Top 25’ by The Wall Street Journal Europe.

9 Rudy Markham (67)

Non-Executive Director, Chairman of the Audit Committee, member of the Remuneration Committee and the Nomination and Governance Committee

 

Appointed as a Director in September 2008. Rudy Markham takes a particular interest on behalf of the Board in SHE assurance. He has significant international business and financial experience, having formerly held a number of senior commercial and financial positions worldwide with Unilever, culminating in his appointment as its Chief Financial Officer. He is currently Chairman and Non-Executive Director of Moorfields Eye Hospital NHS Foundation Trust and a non-executive member of the boards of United Parcel Services Inc., Standard Chartered PLC and Legal & General plc. He is also a non-executive member of the board of the UK Foreign and Commonwealth Office, a member of the supervisory board of CSM NV, a Fellow of the Chartered Institute of Management Accountants and a Fellow of the Association of Corporate Treasurers. He served as a Non-Executive Director of the UK Financial Reporting Council from 2007 to 2012.

10 Nancy Rothwell (58)

Non-Executive Director, Chairman of the Science Committee, member of the Remuneration Committee and the Nomination and Governance Committee

 

Appointed as a Director in April 2006. Nancy Rothwell oversees responsible business on behalf of the Board, as is described more fully in the Responsible Business section from page 220. She is a distinguished life scientist and academic and is the President and Vice-Chancellor of The University of Manchester. She is also President of the Society of Biology and Co-Chair of the Prime Minister’s Council for Science and Technology. Previously she has served as President of the British Neuroscience Association and on the councils of the Medical Research Council, the Royal Society, the Biotechnology and Biological Sciences Research Council, the Academy of Medical Sciences, and Cancer Research UK.

11 Shriti Vadera (51)

Non-Executive Director and member of the Audit Committee

 

Appointed as a Director in January 2011. Shriti Vadera has significant experience of emerging markets, and knowledge of global finance and public policy. She is a Non-Executive Director of BHP Billiton Plc and BHP Billiton Limited. She advises investors, governments and companies, and has recently undertaken a range of international assignments such as advising the Republic of Korea as Chair of the G20, the government of Dubai on the restructuring of Dubai World, Temasek Holdings, Singapore on strategy, and a number of banks and investors on the eurozone crisis. She was Minister in the UK government from 2007 to 2009, most latterly in the Cabinet Office and Business Department, working on the government’s response to the financial crisis. From 1999 to 2007, she was on the Council of Economic Advisers, HM Treasury focusing on business and international economic issues. Before that she spent 14 years in investment banking with S G Warburg/UBS in banking, project finance and corporate finance, specialising in emerging markets.

12 Marcus Wallenberg (57)

Non-Executive Director and member of the Science Committee

 

Appointed as a Director in April 1999. Marcus Wallenberg has international business experience across a broad range of industry sectors, including the pharmaceutical industry from his directorship with Astra prior to 1999. He is the Chairman of Skandinaviska Enskilda Banken AB, AB Electrolux, Saab AB, LKAB and Foundation Asset Management AB. He is a member of the boards of Investor AB, Stora Enso Oyj, Temasek Holdings Limited, the Knut and Alice Wallenberg Foundation and EQT Holdings AB.

 

 

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Senior

Executive Team

as at 31 December 2013

1 Pascal Soriot

Chief Executive Officer

 

See page 28.

2 Marc Dunoyer

Chief Financial Officer (from November 2013) Executive Vice-President, GPPS (from June to October 2013)

 

See page 28.

3 Katarina Ageborg

Chief Compliance Officer

 

Katarina Ageborg was appointed Chief Compliance Officer in July 2011 and has overall responsibility for the design, delivery and implementation of AstraZeneca’s compliance responsibilities. Since joining AstraZeneca in 1998, she has held a series of senior legal roles supporting Commercial and Regulatory and most recently led the Global IP function from 2008 to 2011. Before joining AstraZeneca, she established her own law firm in Sweden and worked as a lawyer practising on both civil and criminal cases.

4 Ruud Dobber

Executive Vice-President, Europe Interim Executive Vice-President, GPPS (from December 2013)

 

Ruud Dobber was appointed as Executive Vice-President, Europe in January 2013 and leads AstraZeneca’s commercial operations in Europe. In this capacity, Ruud is responsible for sales, marketing and commercial operations across AstraZeneca’s businesses in the 27 EU member states. He was also appointed Interim Executive Vice-President, GPPS in December 2013. Ruud joined AstraZeneca in 1997 and has held a number of senior commercial roles including Regional Vice-President of AstraZeneca’s European, Middle East and African division and Regional Vice-President for the Group’s Asia Pacific region. Since 2012, Ruud has been an Executive Committee Member of EFPIA. In 2011, he was the Chairman of the Asia division of Pharmaceutical Research and Manufacturers of America. Ruud began his career as a scientist, researching in the field of immunology and ageing. He holds a doctorate in immunology from the University of Leiden in the Netherlands.

5 Caroline Hempstead

Interim Executive Vice-President, Human Resources & Corporate Affairs (from September 2013)

 

Caroline Hempstead joined AstraZeneca in 2007 and was appointed Interim Executive Vice-President, Human Resources & Corporate Affairs in September 2013. In this role, she leads the global Human Resources function as well as Corporate Affairs, which includes internal and external communications, government affairs, community investment and sustainability. After pursuing a commercial training early in her career, Caroline has held a number of senior corporate affairs roles at the London Stock Exchange, Inchcape PLC and Royal Dutch Shell PLC. Caroline has a degree in French from The University of Manchester. Caroline chairs the AstraZeneca Responsible Business Council and sits on the National Advisory Board of the UK charity, Career Academies UK.

6 Paul Hudson

Executive Vice-President, North America

 

Paul Hudson was appointed Executive Vice-President, North America in January 2013 and leads AstraZeneca’s commercial operations in North America. In this capacity, he is accountable for driving growth and maximising the contribution of North America to AstraZeneca’s global business. Paul joined AstraZeneca in 2006 as Vice-President and Primary Care Director, UK. Paul’s most recent role with AstraZeneca was as President of AstraZeneca’s Japanese business. He has served as a Standing Board Member of the Japan Pharmaceuticals Manufacturers Association and EFPIA in Japan. Previously, Paul was President of AstraZeneca’s business in Spain. Before AstraZeneca, he worked for Schering-Plough, where he held senior global marketing roles. Paul received a degree in economics from Manchester Metropolitan University and a DipM from the UK’s Chartered Institute of Marketing.

7 Bahija Jallal

Executive Vice-President, MedImmune

 

Dr Bahija Jallal was appointed Executive Vice-President, MedImmune in January 2013 and is responsible for biologics research activities. Bahija is tasked with advancing the biologic pipeline of drugs. She joined MedImmune as Vice-President, Translational Sciences in 2006 and has held roles of increasing responsibility. Prior to joining AstraZeneca, Bahija worked with Chiron Corporation where she served as Vice-President, Drug Assessment and Development. Bahija received a master’s degree in biology from the Université de Paris VII and her doctorate in physiology from the Université Pierre et Marie Curie, Paris. She conducted her postdoctoral research at the Max-Planck Institute of Biochemistry in Martinsried, Germany. She is a member of the American Association of Cancer Research, the American Association of Science, the Pharmacogenomics Working Group and the Board of Directors of the Association of Women in Science.

 

 

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8 Mark Mallon

Executive Vice-President, International

 

Mark Mallon was appointed as Executive Vice-President, International, in January 2013 and is responsible for the growth and performance of AstraZeneca’s commercial businesses in regions including Asia Pacific, Russia, Latin America, the Middle East and Africa. Since joining AstraZeneca in 1994, Mark has held a number of senior sales and marketing roles, including Regional Vice-President for Asia Pacific, President of AstraZeneca China and head of marketing, sales and commercial operations for AstraZeneca in Japan. Mark has a degree in chemical engineering from the University of Pennsylvania and an MBA in marketing and finance from the Wharton School of Business.

9 Briggs Morrison

Executive Vice-President, GMD

 

Dr Briggs Morrison was appointed Executive Vice-President, GMD in January 2013 and leads our global late-stage development organisation for both small molecules and biologics. He is also the Company’s Chief Medical Officer. He joined AstraZeneca in 2012 from Pfizer, where he was Head of Medical Excellence, overseeing development, medical affairs, safety and regulatory affairs for Pfizer’s human health businesses. Briggs has a track record of successfully developing novel medicines in roles at both Pfizer and Merck. He has a biology degree from Georgetown University and a medical doctorate from the University of Connecticut. Briggs has also undertaken an internship and residency in internal medicine at the Massachusetts General Hospital, a fellowship in medical oncology at the Dana-Farber Cancer Institute and a post-doctoral research fellowship in genetics at Harvard Medical School.

10 Menelas Pangalos

Executive Vice-President, IMED

 

Menelas (Mene) Pangalos was appointed Executive Vice-President, IMED in January 2013 and leads AstraZeneca’s small molecule discovery research and early development activities. Mene joined AstraZeneca from Pfizer, where he was Senior Vice-President and Chief Scientific Officer of Neuroscience Research. Previously, he held senior discovery and neuroscience roles at Wyeth and GSK. He completed his undergraduate degree in biochemistry at the Imperial College of Science and Technology, London and earned a doctorate in neurochemistry from the University of London. He is a Visiting Professor of Neuroscience at King’s College, London. In the UK, Mene sits on the Medical Research Council and the Innovation Board for the Association of the British Pharmaceutical Industry.

11 Jeff Pott

General Counsel

 

Jeff Pott was appointed General Counsel in January 2009 and has overall responsibility for all aspects of AstraZeneca’s Legal and IP function. He joined AstraZeneca in 1995 and has worked in various litigation roles, where he has had responsibility for IP, anti-trust and product liability litigation. Before joining AstraZeneca, he spent five years at the US legal firm Drinker Biddle and Reath LLP, where he specialised in pharmaceutical product liability litigation and anti-trust advice and litigation. He received his bachelor’s degree in political science from Wheaton College and his Juris Doctor Degree from Villanova University School of Law.

12 David Smith

Executive Vice-President, Operations & Information Services

 

David Smith joined AstraZeneca in 2006 as Executive Vice-President, Operations. He leads AstraZeneca’s global manufacturing and supply organisation, is responsible for the Safety, Health and Environment, Regulatory Compliance, Procurement and Engineering functions, and also has overall responsibility for 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 Inc. and Timberland LLC in senior supply chain roles. In 2003, he returned to the pharmaceutical sector, joining Novartis in Switzerland.

 

 

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More people

surviving cancer

Immune-mediated therapies

 

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8.2 million

Cancer is a leading cause of

death worldwide and accounted            

for 8.2 million deaths in 2012*

 

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Life-cycle of a medicine

AstraZeneca is one of only a handful of pure-play biopharmaceutical companies to span the entire value chain of a medicine from research, early- and late-stage development to manufacturing and distribution, and the global commercialisation of primary care, specialty care-led and specialty care medicines that transform lives.

 

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Find potential medicine

 

Identify unmet medical need that represents a potential market opportunity. Explore and conduct pioneering science on the biology of the disease to identify a potential medicine to address those needs and undertake laboratory research to find a medicine that should be potent, selective, and absorbed into and well tolerated by the body

 

Begin the process of seeking patent protection for the potential medicine

 

Collaborate with academia, public research laboratories, biotech companies and pharmaceutical peers to access the best external science and medical opinion

    

Pre-clinical studies

 

Undertake studies in the laboratory and in animals to understand if the potential medicine should be safe to introduce into humans and in what quantities

 

Determine likely efficacy, side effect profile and maximum tolerable dose estimate for humans

 

Regulatory authorities are informed of the proposed trials that are to be conducted within the framework of regulations

    

Phase I

studies

 

Studies designed to understand how the potential medicine is absorbed in the body, distributed around it and excreted. Also identify side effects and determine what doses can be tolerated. These studies typically take place in small groups of healthy human volunteers or, in certain cases, patients

 

As early as Phase I, begin to design a manufacturing route to ensure the manufacturing process is robust and cost efficient

  

Phase II

studies

 

Studies designed to evaluate magnitude of effect and tolerability of the medicine, typically using small- or medium-sized groups of patients, and to determine the optimal dose(s). Establish Proof of Concept

 

Based on the Phase II results, design a Phase III programme to deliver data required for regulatory approval and pricing and/or reimbursement throughout the world

 

At an early stage, incorporate payer considerations to help ensure the economic and therapeutic value of a medicine is understood

  

Phase III

studies

 

Studies, typically in large groups of patients, designed to confirm the efficacy and gather additional information on safety of the medicine and evaluate the overall benefit/risk profile in the specific disease and patient segments in which the medicine will be used

 

Create appropriate branding for the new medicine in preparation for launch

 
                   

 

We focus on distinctive science in three core therapy areas: Cardiovascular and Metabolic disease (CVMD); Oncology; and Respiratory, Inflammation and Autoimmunity (RIA)

 

We believe that few other pharmaceutical companies, if any, can match the combination of capabilities that we have in small molecules, biologics, immunotherapies and protein engineering

 

We have created two autonomous biotech units, MedImmune and IMED, to drive science and innovation in research and early clinical development

 

 

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More information about our activities across the life-cycle of a medicine is contained in this Business Review:

 

 

> Research and Development

 

  Page 36    
 

 

 

> Sales and Marketing

 

  Page 40    
 

 

 

> Manufacturing and Supply

 

  Page 43    

 

Note: This is a high level overview of a medicine’s life-cycle and is illustrative only. It is neither intended to, nor does it, represent the life-cycle of any particular medicine or of every medicine discovered and/or developed by AstraZeneca, or the probability of success or approval of any AstraZeneca medicine.

 

 

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Regulatory submission and pricing

 

Seek approval from regulatory authorities to manufacture, market and sell the medicine

 

Submit package of clinical data which demonstrates the safety profile and efficacy of a medicine to regulatory authorities

 

Regulatory authorities decide whether to grant marketing authorisation based on the medicine’s safety profile, effectiveness and quality

 

If there are gaps in understanding about the medicine at the time of marketing authorisation, regulatory authorities may request further data collection, increasingly in real-world clinical settings

   

Launch new medicine

 

Raise awareness of patient benefit and appropriate use, market and sell medicine

 

Clinicians begin to prescribe medicine and patients begin to benefit

 

Continuously monitor, record and analyse reported side effects. Review need to update the side effect warnings to ensure that patients’ wellbeing is maintained

 

Assess real-world effectiveness, and opportunities to support patients and prescribers, to achieve maximum benefit from the medicine

   

Post-launch research and development

 

Studies to further understand the benefit/risk profile of the medicine in larger and/or additional patient populations

 

Life-cycle management activities to broaden understanding of a medicine’s full potential and work to consider additional diseases or aspects of disease which might be treated by the medicine or better ways of administering the medicine. Submit data packages with requests for line extensions to regulatory authorities for review and approval

   

Patent

expiry and

generic

entry

 

Typically, when

patents protecting

the medicine

expire, generic

versions of the

medicine enter the

market

                 

 

A single late-stage development organisation – GMD – is responsible for all small and large molecule projects delivered by the two early clinical development organisations

We adopt a strategy of investing in the best science, whether it originates internally or externally. Products are added to our pipeline at any stage of development through a mixture of collaboration, in-licensing and acquisition

We are a truly global company, with commercial activities in more than 100 countries

 

 

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Research and Development

 

We are transforming our organisation to drive science and innovation, changing our culture and improving productivity.

 

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“Our strategic approach means we are well positioned to take advantage of our integrated expertise in small molecules, biologics, immunotherapies and protein engineering.”

Bahija Jallal

EVP, MedImmune

Achieve Scientific Leadership

As outlined in the Our strategic priorities section from page 16, achieving scientific leadership is a critical component of our path to success.

During 2013, we:

 

> focused on distinctive science in three core therapy areas
> prioritised our portfolio and accelerated key programmes
> achieved our 2016 target volume for our Phase III pipeline three years ahead of schedule and improved the quality of our Phase II pipeline.

Achieving scientific leadership also requires us to change our culture and transform the way we work. We need to access the best science, whether inside or outside AstraZeneca. We have therefore developed a biotech-style operating model, with two autonomous research and early clinical development science units and a late-stage development organisation. We are collaborating across early- and late-stage development to tap into the best scientific research and develop medicines that transform lives. Our focus on increasing productivity and improving the quality of our pipeline is starting to benefit from our past

investment in key capabilities, such as payer partnering, PHC, predictive science and clinical trial design.

Transforming the way we work includes plans to co-locate teams across small molecules and biologics at our strategic R&D hubs – in Gaithersburg, Maryland, US; Cambridge, UK; and Mölndal, Sweden to ensure seamless delivery of the portfolio from early to late development and into life-cycle management. For more information, see the Strategic R&D centres section on page 5. We have also reshaped our organisation, reducing management layers and process complexity to improve decision making and empower employees. This means our R&D organisation is leaner and more efficient. As outlined in the Managing change section on page 69, we continue to support employees through these changes.

Research and early clinical development

Our two biotech units drive innovation in discovery research and early development. Innovative Medicines and Early Development (IMED) is our small molecule organisation, while MedImmune focuses on biologics. Both units comprise specialist disease area-led Innovative Medicines sections and are accountable for delivery of pipeline projects up to Proof of Concept stage, when they move to our Global Medicines Development (GMD) unit for late-stage development, as described opposite.

Our way of working gives us a distinctive innovation platform comprising small molecules, biologics, therapeutic combinations and PHC approaches. Scientific collaborations, alliances and business development play a critical part in our innovation strategy.

Working collaboratively

To enable us to build the strongest portfolio possible, we are agnostic as to the source of scientific innovation, with a significant proportion of our pipeline derived from external sources. We have significantly enhanced our innovation capability by establishing numerous alliances and licensing opportunities, and completed strategic bolt-on acquisitions.

In Oncology, we forged new partnerships across our small molecule and biologics pipeline. In September 2013, we signed a worldwide licensing agreement with Merck for MK-1775, their oral small molecule inhibitor of WEE-1 kinase. MK-1775 is currently being evaluated in Phase IIb clinical studies in combination with standard-of-care therapies for treating patients with certain types of ovarian cancer. In October 2013, we completed the acquisition of Amplimmune, a biologics company that develops novel therapeutics in cancer immunology, and Spirogen, a biotechnology company specialising in antibody-drug conjugate technology for use in oncology.

Choosing the right therapeutic technology is vital, especially since many targets have proved intractable to traditional small molecule and protein approaches. In March 2013, we entered into an exclusive agreement with Moderna Therapeutics to discover, develop and commercialise pioneering messenger RNA Therapeutics for the treatment of serious cardiovascular, metabolic and renal diseases, and cancer. Messenger RNA Therapeutics are an entirely new treatment approach that enables the body to produce therapeutic protein in vivo, opening up new treatment options for a wide range of diseases that cannot be addressed using existing technologies. See the case study on page 46 for more information.

 

 

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In 2013, we also progressed collaborations with several key biotech and research institutions to develop and access innovative technology. For example, we extended our collaboration with
X-Chem Inc. and plan to use their high-diversity library and highly efficient screening platform to improve the rate and quality of small molecule discovery. A collaboration with the Wyss Institute for Biologically Inspired Engineering at Harvard University will leverage the Institute’s technologies to better predict the safety of drugs in humans.

Innovative approaches

In Oncology, our distinctive innovation platform means we can combine small molecules with biologics, known as immune-mediated cancer therapies (IMT-Cs), a promising therapeutic approach which harnesses the patient’s own immune system to fight cancer. We believe that by developing novel combinations of IMT-Cs, with each other and with small molecules, we can deliver significant improvements in overall survival. See the case study on page 32 for more information.

In January 2014, AstraZeneca announced a research collaboration with Immunocore under which both companies will research and develop Immunocore’s Immune Mobilising Monoclonal T-Cell Receptor Against Cancer (ImmTAC) technology.

A growing appreciation and a deeper understanding of disease diversity is uncovering new therapeutic targets. In Oncology, we work with major organisations, such as the National Cancer Institute in the US, Cancer Research UK and the NN Petrov Institute in Russia, to better understand disease and resistance mechanisms. In 2013, we established the Integrated Cardio Metabolic Centre with the Karolinska Institutet in Sweden to identify and validate novel targets within cardio-metabolic diseases. We also opened the previously announced Manchester Collaborative Centre for Inflammation Research, a unique pre-competitive partnership between The University of Manchester, GSK and AstraZeneca, designed to establish a world-leading translational centre for inflammatory diseases.

Our personalised healthcare strategy

A greater understanding of disease mechanisms leads to more sophisticated diagnostic protocols for tailoring both novel and existing treatments to the needs of individual patients. By the end of 2013, this PHC strategy was applied to 64% of our pipeline. PHC aims to match medicines only to those patients who will benefit from them. Advances in science mean we can increasingly design and use tests to tell us

how an individual patient is likely to respond to a particular medicine before prescribing it for them. In 2013, we partnered with a number of diagnostic companies to co-develop diagnostics at the point of entry into clinical trials: Roche Molecular Systems for selumetinib, AZD5363 and AZD9291; Myriad Genetics for olaparib; and Abbott for volitinib. We also entered into a master collaboration agreement with Qiagen that includes continued support for Iressa.

One promising area for PHC is asthma, a heterogeneous group of conditions with closely related clinical features but diverse underlying causes and molecular phenotypes. By using PHC strategies early in the drug development process, we can target these distinct asthma phenotypes to optimise treatments. One example of this is benralizumab, where we are targeting patients in our Phase III programme with a distinct asthma phenotype. Benralizumab is the first in a series of novel PHC-driven biologic therapies in our portfolio that may represent a critical advance in the development of personalised asthma management.

 

“We are creating a more porous research environment that will help us Achieve Scientific Leadership by fostering collaboration between scientists both within and outside AstraZeneca.”

Menelas Pangalos

EVP, IMED

Open innovation

The creation of a porous research environment, where scientists share ideas more freely, collaborate on projects and drive scientific innovation, is key to our drive to Achieve Scientific Leadership. In October 2013, building on our open innovation agreements with the Medical Research Council in the UK, and the US National Institutes of Health’s new National Center for Advancing Translational Sciences, we announced an agreement with the National Research Program for Biopharmaceuticals of Taiwan to explore new therapeutic uses for 20 of our small molecule and biologic compounds. We also progressed our previously announced Open Innovation partnership with the Science for Life Laboratory, based in Sweden, supporting 10 joint collaborative research projects covering research in metabolic, cardiovascular, inflammatory, cancer and regenerative medicine, and hosted by the Karolinska Institutet and Uppsala University.

Late-stage development

Our late-stage development organisation, GMD, takes projects from the point when it is first decided to progress them through to Phase III development. GMD designs and delivers drug programmes to support the approval, launch and reimbursement of our late-stage projects. It also pursues life-cycle management opportunities for products on the market, finding new indications for medicines so that more patients can benefit. It is responsible for both the small molecule and biologics projects delivered by our two research and early clinical development units, and works in partnership with other companies and organisations to co-develop new medicines which are in-licensed or part of a partnership agreement.

Prioritised pipeline

During 2013, we prioritised and, in several cases, accelerated late-stage development of projects in those disease areas where we believe there is the greatest potential to meet patient need. At the end of 2013, there were 11 NME projects in late-stage development (2012: six), either in Phase III or under regulatory review, including two from the acquisition of Pearl Therapeutics and Omthera. Further information about our development pipeline is given in the Development pipeline section from page 194.

We have increased development collaborations with pharmaceutical partners and work closely with others including Academic Research Organisations (AROs), Clinical Research Organisations (CROs) and technology providers to deliver clinical trial programmes in the most efficient way, while identifying rigorous and innovative means to expand understanding of the benefits and risks of our products throughout their life-cycle, as described below.

Quality and efficiency

We continue to reshape our organisation and implement new operating models and processes to improve our efficiency and quality in delivering late-stage clinical trials. We are upgrading our IT platforms and systems by, for example, introducing a new regulatory information management system, using tools to provide real-time information about the progress of patients enrolled in studies and common platforms for sharing study information globally. We are standardising processes, for example, by adopting common data standards for our clinical trials and through simpler designs for clinical trial protocols we are reducing the number of amendments. We have adopted simpler ways of working, for example by reducing management layers and creating broader roles. We are cutting complexity and making accountabilities clearer.

 

 

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Patients in global AstraZeneca studies

by geographical region in 2013 (%)

 

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Investment in capabilities

We continue to invest in core development capabilities to exploit science, drive performance, bring quality to our decision making and add value. This includes capabilities such as therapy area and disease area expertise, statistical modelling, translational patient safety, payer and real-world evidence, and global medical affairs.

We have also established leading capability and experience in delivering large outcomes trials, which are extensive, multi-country, multi-site studies involving many thousands of patients. Such trials often involve us collaborating with AROs and CROs to find the right patients in a timely way. In 2013, we delivered the SAVOR study to provide information on cardiovascular (CV) safety for Onglyza, a treatment for Type 2 diabetes. This large CV outcomes trial was completed and delivered two years ahead of schedule.

We have strengthened our collaborations with AROs with, for example, ongoing partnerships with the TIMI Study Group (on the Brilinta PEGASUS study), and the Duke Clinical Research Institute and CPC Clinical Research, an academic research organisation affiliate of the University of Colorado (on the Brilinta EUCLID study).

We have invested in ‘intelligent pharmaceuticals’ which explore how we can use science and technology, such as mobile phones and other monitoring devices to provide services beyond a medicine: for example, to provide patients with targeted information about their treatment and reminders about their medication; and physicians and other carers with alerts to prevent problems arising and to avoid the need for hospital or doctor visits. Pilot studies are under way to test new technology approaches.

We have grown our payer and real-world evidence capabilities and are providing the data, analysis and insights to demonstrate the value of our medicines to patients and show how they help to reduce healthcare costs. These studies use observational data, such as electronic medical records and patient surveys, to illustrate the impact of a medicine in the real-world setting. For example, they can show how a medicine can improve outcomes for patients compared to other treatment options, or reduce demand on hospital stays or specialist services.

Delivery through collaboration

We want to make a difference in how we develop drugs, not just for ourselves, but to benefit the industry. We do this through collaboration and partnership.

In 2013, we were active partners in the TransCelerate programme, a collaboration of leading biopharmaceutical companies that have joined forces to solve common R&D challenges, reduce time and cost, and improve quality. The year also saw the introduction of a new pharmaceutical network to rapidly source high-quality comparator drugs for clinical trials to speed up drug development, reduce drug waste and costs, and to continue to ensure the safety of patients in trials and meet all regulatory requirements. In addition, there have been initiatives to introduce common cross-industry processes associated with clinical trial site qualification and training.

We continued to work with the European Innovative Medicines Initiative, which launched two new projects in February 2013 under the ‘New Drugs 4 Bad Bugs’ programme. This advances research into a potential new treatment for Gram-negative bacteria, one of the toughest types of drug-resistant bacteria to treat, and tackles the economic hurdles of bringing new antibiotics to market.

“Our passion is to ensure the swift and ethical development, approval, reimbursement and launch of medicines that transform people’s lives.”

Briggs Morrison

EVP, GMD

Bioethics

We want to be recognised for the high quality of our science and the impact we make on serious diseases, and to be trusted for the way we work. Our standards of bioethics are global and apply to all AstraZeneca research activity, in all locations, whether conducted by us or on our behalf by third parties.

Patient safety

The safety of the patients who take our medicines is of fundamental importance to us. Our objective is to enhance pharmacovigilance awareness – including the use of collaborative programmes to share and use our knowledge and best practice in order to improve reporting and patient safety in developing countries.

All drugs have potential side effects and we aim to minimise the risks and maximise the benefits of each of our medicines. 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 responsibility to patients. We have comprehensive and rigorous systems in place for detecting and rapidly evaluating such effects, including mechanisms for highlighting those that require immediate

 

 

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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.

The pharmacovigilance awareness programme that was developed in 2012 has now been made available to marketing companies. There are also initiatives under way in a number of countries where we are working closely with local health authorities to raise pharmacovigilance awareness.

We have an experienced, in-house team of clinical patient safety professionals dedicated to ensuring that we meet our commitment to patient safety. 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 have dedicated safety managers with responsibility for patient safety at a local level.

Our Chief Medical Officer has overall accountability for the benefit/risk profiles of our products in development and on the market. He provides medical oversight and ensures appropriate risk assessment processes exist to enable informed safety decisions to be made rapidly.

Clinical trials

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

Our global governance process for determining where we locate clinical trials provides the framework for ensuring a consistent approach worldwide. We take several factors into account, including 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.

Before a trial begins, we work to make sure that those taking part understand the nature and purpose of the research and that the proper procedure for gaining informed consent is followed (including managing any special circumstances, such as different levels of literacy). Protecting participants throughout the trial process is a priority and we have strict procedures to ensure they are not exposed to any unnecessary risks.

Clinical trial transparency

AstraZeneca has a long-standing commitment to making information about our clinical research publicly available, to enhance the scientific understanding of how our medicines work. We have a commitment to be transparent, to benefit the medical interest of patients and investigational research participants, and the disclosure requirements set out in our Bioethics Policy exceed the current legal requirements. By 31 December 2013, we had 2,241 registered investigational clinical studies and, in line with our policy or legal requirements, had posted the results and/or clinical study reports and synopses relating to more than half of these on a range of public websites, including our own dedicated clinical trials website, www.astrazenecaclinicaltrials.com.

Since February 2013, we have voluntarily disclosed the research protocol for our clinical trials on www.astrazenecaclinicaltrials.com once a manuscript relating to results of the relevant trial on an investigational or approved product is published in a peer-reviewed medical journal. The posted protocol includes key sections necessary for evaluating the study, but proprietary information in the protocol is edited before posting. This policy also applies to observational studies published in peer-reviewed journals relevant to the efficacy or safety profile of an AstraZeneca product.

Calls for ‘open access’ to clinical data raise complex practical, legal and ethical issues around full disclosure of patient information. Decision makers, as well as academia and industry, have a duty to consider all the implications that could arise from such proposals. These include ensuring scientific rigour, safeguarding patient privacy and protecting innovation and medical progress. We are in active discussions with stakeholders including regulators, legislators, industry and academia about proposals to routinely publish full clinical trial and patient data, in order to identify globally recognised, practicable solutions that deliver real benefits to medical science and to our patients.

 

All our clinical studies are conceptually designed and finally interpreted in-house but a percentage are run for us by contract research organisations. In 2013, around 29% of patients in our small molecule studies and around 64% of those in our biologics studies were monitored by such organisations on our behalf. We contractually require these partners to work to our global standards and conduct risk-based audits to monitor compliance.

Animal research

We continue to promote and embed scientific and technical best practice in animal research.

This includes our commitment to minimise the use of animals in our research without compromising the quality of the research data. Wherever possible, we use non-animal methods, such as computer modelling, that eliminate or reduce the need to use animals early in drug development. We also work to refine our existing methods. This replacement, reduction and refinement of animal studies is known as ‘the 3Rs’. To support our drive for continuous improvement, we work within AstraZeneca and with the wider scientific community to share good practice and 3Rs achievements.

The number of animals we use will continue to vary because use depends on a number of factors, including the amount of pre-clinical research we are doing, the complexity of the diseases under investigation and regulatory requirements. We believe that, without our active commitment to the 3Rs, our animal use would be much greater. In 2013, we used 260,930 animals in-house (2012: 304,751). In addition, 19,676 animals were used by external contract research organisations on our behalf (2012: 14,284).

The welfare of the animals we use is a top priority and our Bioethics Policy applies worldwide. Government authorities inspect our internal animal research facilities. External organisations that conduct animal studies on our behalf are required to comply with our global standards and we undertake activities to ensure our expectations are being met. During 2013, we continued to implement our new Good Statistical Practice global standard, across our internal animal research and some of our external partners.

 

Further information on AstraZeneca’s approach to responsible business can be found in the Responsible Business section from page 220 and on our website, www.astrazeneca.com/responsibility.
 

 

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Sales and Marketing

 

We have a strong global commercial capability and are building on this so that we can better meet the needs of patients.

 

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“We combine a global reach with strong local customer relationships. We are committed to working ethically, in accordance with our values.”

Ruud Dobber

EVP Europe & Interim EVP, GPPS

Organisation and approach

If we are to change the lives of people around the world, we need to ensure the right medicines are available and that patients have access to them. To that end, our sales and marketing teams, which comprised around 29,600 employees at the end of 2013, are active in more than 100 countries. In most countries, our sales are made through wholly-owned local marketing companies. Elsewhere, we sell through distributors or local representative offices.

Our products are marketed largely to primary care and specialist doctors. We aim to meet their needs by having highly accountable local leaders who understand their customers and focus on business growth. Our activities are grouped into three Commercial Regions – North America, Europe and International – as well as Japan, our second largest market. In addition, our GPPS organisation develops global product strategies and drives commercial excellence, ensuring a strong customer focus and commercial direction in managing our pipeline and marketed products. All our efforts are underpinned by a commitment to conducting sales and marketing activity in accordance with our values and to driving commercial success responsibly.

US

AstraZeneca is the third largest prescription-based pharmaceutical company in the US, with a 5.1% market share of US pharmaceuticals by sales value.

Sales in the US in 2013 decreased by 9% to $9,691 million (2012: $10,655 million; 2011: $13,426 million), as loss of exclusivity on Seroquel IR in March 2012 as well as the impact of generic competition was only partially offset by performance across our growth platforms, up $493 million or 29%, including Brilinta, Symbicort and diabetes brands.

The Affordable Care Act, which came into force in March 2010, has had, and is expected to continue to have, a significant impact on our US sales and the US healthcare industry as a whole. In 2013, the overall reduction in our profit before tax for the year due to higher minimum Medicaid rebates on prescription drugs, discounts on branded pharmaceutical sales to Medicare Part D beneficiaries, and an industry-wide excise fee was $933 million (2012: $858 million). See the Geographical Review, from page 214 for more information.

Currently, there is no direct governmental 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 use of prescription drugs for both commercial and public payers continues to increase. This is driven by, among other things, an increased focus on generic alternatives. Budgetary policies within healthcare systems and providers, including the use of ‘generics only’ formularies, and

increases in patient co-insurance or co-payments, are the primary drivers of increased generics use. In 2013, 86% of prescriptions dispensed in the US were generic. While widespread adoption of a broad national price-control scheme in the near future is unlikely, increased focus on pharmaceutical prices and their impact on healthcare costs is likely to continue for the foreseeable future.

For more information on our performance in North America, see the Geographical Review from page 214.

Europe

AstraZeneca’s European business comprises Western and Eastern European markets, which include France, Germany, Italy, the UK, Spain, and the Nordic-Baltic countries. The total European pharmaceutical market was worth $205 billion in 2013. We are the ninth largest pharmaceutical company with a 3.1% market share of prescription sales by value.

In 2013, our sales in Europe were $6.7 billion, down by 9% from 2012. The major external variables affecting sales were the macroeconomic environment, increased government interventions (for example price and volume interventions) and increased trade across markets. The austerity environment also continues in Europe and is accelerating in some markets. We continue to launch innovative medicines across Europe. For more information on our performance in Europe, see the Geographical Review from page 214.

Established Rest of World (ROW)

We are the 10th largest pharmaceutical company in Japan in terms of sales, with an annual growth rate double that of the overall market and above any of the other top 10

 

 

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businesses. Growth is driven by our main primary care brands: Crestor, Symbicort and Nexium. We share the promotion of these three brands with Japanese partners, who also provide distribution for Nexium and Symbicort. We remain one of Japan’s largest oncology businesses and, to maintain this important franchise, recently entered into an agreement to co-promote Janssen’s abiraterone for castration-resistant prostate cancer.

In Canada, Provincial and Territory payers, who represent up to 55% of the market, have developed a structure for pan-Canadian product listings which could be the primary or only access method for new products into the public healthcare system. Private sector payers, representing the remaining 45%, are experimenting with tiered access programmes for large public and private employer groups. Access to reimbursement for new medicines is expected to remain reasonable, but pricing pressure will continue to increase.

AstraZeneca’s sales in Australia and New Zealand declined by 18% in 2013, primarily due to the entry of generic rosuvastatin (Crestor) and generic candesartan (Atacand) into the Australian market. For more information on our performance in Established ROW, see the Geographical Review, from page 214.

Emerging Markets

Emerging Markets, as defined in the Glossary on page 232, comprise a range of countries with the unifying characteristic of a dynamic, growing economy. As outlined in the Our marketplace section on page 13, demand drivers and strong economic fundamentals mean that these countries represent a major growth opportunity for the biopharmaceutical industry.

Emerging Markets are, however, not immune to the impact of the prolonged economic downturn. Market volatility is higher than in Established Markets, with Venezuela, for example, currently beset by political and economic challenges. Regulatory and government interventions also typically present challenges in a number of markets at any one time.

AstraZeneca was the eighth largest multinational pharmaceutical company across the Emerging Markets in 2013 with revenue of $5.4 billion. Within Emerging Markets, there are several particularly good growth opportunities within China, Russia, Africa, parts of Asia (India, Malaysia, Indonesia and Vietnam), and Latin America (Argentina and Chile).

To expand our presence in Emerging Markets, we have established an International Region whose 16,100 employees, almost all of whom are

located within their respective markets, are focused on meeting customers’ needs. The Region’s platforms for growth include our new medicines, notably Brilinta, as well as those for diabetes, and our established portfolio of medicines for cancer, respiratory, cardiovascular and gastrointestinal diseases. To provide information to physicians on this broad portfolio, we are selectively investing in sales capabilities where we see opportunities from unmet patient need, and expanding our reach through multi-channel marketing.

We are also pursuing innovative collaboration opportunities. This includes partnering with other biopharmaceutical companies to access products that complement our own portfolio. For example, the team in China works as part of our global collaboration with FibroGen to develop and commercialise roxadustat (FG-4592), a first-in-class oral compound in development for treating anaemia. For more information on our performance in Emerging Markets, see the Geographical Review from page 214.

 

“Our customers, and their needs, are changing. We are changing too – ensuring we reach and engage with our customers in ways that work best for them.”

Paul Hudson

EVP, North America

Driving commercial success

Our Global Commercial Excellence team delivers innovative commercial capabilities for the benefit of all our customers, via a range of specialist teams. One leverages data and analytics to identify opportunities to improve healthcare, while a second builds on the success of our service, inside sales and nurse educator teams, to ensure we engage customers in innovative ways that work for them. A digital team enhances the content and services we deliver online, while a Commercial Learning Academy seeks to deliver excellence across the range of our global commercial capabilities. Our commercial operations unit strives to deliver these capabilities across the organisation.

In 2013, one area of focus was medical affairs, where we engaged key opinion leaders in our clinical programmes and took a lead in evidence generation, with greater numbers of patients involved in our interventional, real-world evidence, and investigator-sponsored studies.

Pricing our medicines

Our challenge is to deliver innovative medicines that improve health for patients, bring benefits to society and provide an appropriate return on our investment. Our global pricing policy provides the framework to ensure appropriate patient access while optimising the profitability of all our products in a sustainable way. When setting the price of a medicine, we take into consideration its full value to patients, to those who pay for healthcare and to society in general. We also pursue a flexible approach to the pricing of our medicines. For example, we support the concept of differential pricing, provided that appropriate safeguards ensure lower-priced products are not diverted from patients who need them to be sold and used in more affluent markets.

Delivering value for payers

Our medicines play an important role in treating unmet medical need. Health is a fundamental value for patients and society and improving health brings economic as well as therapeutic benefits. Effective treatments can also help to lower healthcare costs by reducing the need for more expensive care, such as hospital stays or surgery, or through preventing people from developing more serious or debilitating diseases that are costly to treat. They also contribute to increased productivity by reducing or preventing the incidence of diseases that prevent people from working.

As outlined in the Pricing pressure section on page 15, there is continued downward pressure on drug pricing and, in the current difficult economic environment, payers expect us to define the value our medicines create. We are acutely aware of the challenges facing those who pay for healthcare and are committed to delivering value, which will allow us to bring our medicines to the patients who need them. Therefore, we work with payers and providers to understand their priorities and requirements and generate evidence of how our products offer value and support cost-effective healthcare delivery.

Increasing access to healthcare

AstraZeneca is committed to increasing access to healthcare for under-served patient populations in a sustainable way. This is a priority for our Responsible Business agenda.

Our access to healthcare strategy comprises three strands:

 

> The first component represents the most important way in which we enable access to our medicines – through our mainstream business.
 

 

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Confirmed external breaches

Breaches of external sales and marketing codes and regulations

 

2013

     11   

2012

     10   

2011

     17   

Corrective actions

In relation to breaches of Code of Conduct and Global Policies by Commercial employees including contract staff

 

      Number of persons  

 Action taken

    2013         2012   

Removed from role1

    187         188   

Formal warning

    568         685   

Guidance and coaching

    1,813         1,808   

Total

    2,568         2,681   

 

1  In the majority of cases, this means dismissal or contract termination, but it can include resignation and demotion.
 

 

 

 

> The second strand captures how we are making it easier for more patients to afford our medicines, particularly in the emerging middle class in Emerging Markets. We will build on the experience of initiatives such as our ‘Faz Bem’ (Wellbeing) programme in Brazil, which provides significant discounts on our medicines and provides other services for patients, and our Patient Access Card schemes in Central and Eastern Europe. For example, Faz Bem expanded by 29% in 2013, which led to us reaching 290,000 more Brazilian patients.
> The final area of focus is in strengthening healthcare capabilities, particularly in developing economies where the price of a medicine may not be the most significant barrier to providing healthcare. Our ambition here is to considerably expand our efforts in Africa to enable far greater access to hypertension medication, and other essential services, for patients who do not have access to medication or other forms of care. In 2014, we will evaluate how we can best do this and with whom we can partner most effectively. We believe that working in partnership with different stakeholders is the most effective and sustainable way to increase access to healthcare.

 

“If we are to fulfil our potential to transform the lives of patients in Emerging Markets, we need to develop sustainable ways of increasing access to healthcare.”

Mark Mallon

EVP, International

Sales and marketing ethics

We are committed to delivering consistently high ethical standards of sales and marketing practice worldwide and to ensuring compliance with our Ethical Interactions Policy. We report publicly on the number of:

 

> confirmed breaches of external sales and marketing codes
> instances of failure to meet our standards by employees in our Commercial Regions, including contract staff
> corrective actions for breaches of our Code of Conduct or supporting policies by Commercial employees, including contract staff.

During 2013, we continued to provide training for employees on the global standards that govern the way we conduct our business around the world. We have comprehensive processes for monitoring compliance with our Code of Conduct and global policies, including dedicated compliance professionals who support our line managers locally in monitoring their staff activities. We also have a network of nominated signatories who review our promotional materials against all applicable requirements. In addition, in 2013, audit professionals conducted compliance audits of a selection of our marketing companies.

As shown in the Confirmed external breaches chart above, we identified 11 confirmed breaches of external sales and marketing regulations or codes in 2013 (2012: 10). There were 1,773 instances of non-compliance with AstraZeneca’s Code of Conduct, Global Policies or related control standards in our Commercial Regions, including contract staff and other third parties, the majority of which were minor (2012: 1,932). We believe that the movement in this number reflects our continued management oversight.

As shown in the Corrective actions table above, following these breaches (and it is important to note that a single breach can involve more than one person failing to meet required standards), we removed 187 people from their role, formally warned 568 others and provided further guidance or coaching on our policies for 1,813 more. The most serious breaches are raised with the Audit Committee.

US Corporate Integrity Agreement and The Physician Payments Sunshine Act reporting

In April 2010, AstraZeneca signed an agreement with the DOJ to settle an investigation relating to the sales and marketing of Seroquel IR. The requirements of the associated CIA between AstraZeneca and the Office of the Inspector General of the US Department of Health and Human Services (OIG) include a number of active monitoring and self-reporting obligations that differ from the self-reporting required by authorities in the rest of the world. To meet these obligations, AstraZeneca provides notices to the OIG describing the outcomes of particular investigations potentially relating to violations of certain laws, as well as a separate annual report to the OIG summarising monitoring and investigation outcomes relevant to the CIA requirements. Under the CIA, AstraZeneca also discloses on a publicly available website certain payments to US physicians and institutions. In addition, with effect from March 2014, AstraZeneca will begin reporting to the US government detailed information relating to payments to physicians and teaching hospitals in the US, as required by The Physician Payments Sunshine Act.

 

Further information on AstraZeneca’s approach to responsible business can be found in the Responsible Business section from page 220 and on our website, www.astrazeneca.com/responsibility.
 

 

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Manufacturing and Supply

 

Our programme of investment in continuous improvement helps us get our medicines to patients as efficiently as possible.

 

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“People who take our medicines rightly expect them to be safe and effective. Our quality management systems are designed to provide that assurance.”

David Smith

EVP, Operations & IS

Our strategy is to balance innovative and efficient in-house manufacturing capabilities with external manufacturing resources, particularly in relation to the early stages of our production process. Where efficiencies can be achieved, we continue to consider using outsourced production but our strategy is to retain the final stages of the production cycle in-house. This balance is designed to give us product integrity and quality assurance while affording us cost efficiency and volume flexibility.

We progressed two key production facilities during 2013 in China (Taizhou), our second facility in the country, and in Russia (Vorsino), which will enable us to better supply our products to both markets locally. These sites are intended to commence phased commercial production in 2014/2015. In 2013, we also announced plans to invest $190 million to construct a new facility at our Macclesfield (UK) facility by 2017, to continue production of Zoladex. The work is led by our global engineering group who put a strong focus on carrying out these projects fully in line with our ethical and safety standards.

Product quality and supply chain

We are committed to delivering product quality that underpins the safety and efficacy of our medicines. We have a comprehensive quality management system in place designed to assure the quality of our products in compliance with relevant regulations.

Continuous improvement

Our continuous improvement programme allows us to improve our systems and minimise the impact of our activities on the environment. We focus on what adds value to our customers and patients, as well as waste elimination. The programme has delivered significant benefits in recent years, including reduced manufacturing lead times and lower average stock levels, both of which improve our ability to respond to customer needs and reduce inventory costs. All improvements are designed to ensure we maintain product quality, safety and customer service.

We have applied Lean production business improvement tools and ways of working to improve the efficiency of our manufacturing plants for a number of years and, in recent years, have applied them to the whole of our supply chain. This has led to improvements in quality, lead times and overall equipment effectiveness. In 2013, we continued to establish more efficient processes, with experts from our global supply chain organisation providing cross-functional support throughout the business.

Regulation and compliance

Facilities and processes for manufacturing medicines must observe rigorous standards of quality. They are subject to inspections by regulatory authorities to ensure compliance with prescribed standards. Regulatory authorities have the power to require improvements to facilities and processes, halt production and impose conditions that must be satisfied before production can resume. Regulatory standards are not harmonised globally and evolve over time.

We hosted 26 independent inspections from 10 different regulatory authorities in 2013. All observations from such inspections are reviewed along with the outcomes of internal audits and subsequent improvement actions are put in place as required to ensure ongoing compliance.

We are actively involved in providing input into evolving regulations, both at national and international levels, through our membership of industry associations. We work actively, for example, with both EFPIA and Pharmaceutical Research and Manufacturers of America on discussions around improving supply chain security and minimising drug shortages.

Our supply and manufacturing strategy is based on our commitment to maintaining the highest ethical standards while complying with internal policies, and laws and regulations. We achieve this by placing compliance responsibility with line managers who are supported by dedicated compliance teams. Independent assurance is provided by our IA function.

 

 

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Supplier audits

 

 Year    Number of
internal audits
     Number of
external
audits
 

2013

     30         31   

2012

     44         438   

2011

     64         687   
     Number of audits by
geographic region 2013
 

Asia Pacific

     28   

Europe

     20   

Americas

     11   

Middle East & Africa

     2   

Total

     61   
 

 

 

 

 

Managing risk

Given our strategy to outsource the majority of API manufacturing, we place particular importance on our global procurement policies and integrated risk management processes to ensure uninterrupted supply of high-quality raw materials. Supplies are purchased from a range of suppliers. We factor in a wide range of potential 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 maintaining appropriate stock levels. Although the price of raw materials may fluctuate, our global purchasing policies seek to avoid such fluctuations becoming material to our business.

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.

As part of our overall risk management, we carefully consider the timing of investment with a view to ensuring that secure supply chains are in place for our products. We also have a programme in place to provide appropriate supply capabilities for our new products.

 

“As a responsible business, we will only work with those companies whose ethical standards are consistent with our own. Our supplier due diligence processes help provide confirmation that they meet our expectations.”

Katarina Ageborg

Chief Compliance Officer

Working with suppliers

We are committed to integrating AstraZeneca’s ethical standards into our procurement activities and decisions worldwide. Our objective is to monitor compliance through our ongoing assessment and programmes, which focus on areas experiencing the greatest challenges. We address challenges with our suppliers and promote improvement through collaboration.

Our Global Responsible Procurement Standard defines one of the key business processes for integrating our ethical standards into our procurement activity and decision making worldwide. The same initial assessment process is used for all suppliers and more detailed, focused assessments are then made, relevant to the service provided. Since the programme began in 2009, we have completed 7,138 assessments of new and existing suppliers, which accounts for approximately 90% of our spend with suppliers.

We categorise suppliers as high, medium or low risk. We focus our auditing efforts on high and medium risk rated suppliers but we also audit some suppliers that we consider to be lower risk, to confirm our performance expectations across all suppliers. In 2013, we continued our audit activity with 61 audits across 25 countries (482 audits in 2012) as set out in the table above. A full audit of all incumbent suppliers was completed in 2012, resulting in only new supplier and reassessment audits taking place in 2013. Improvements to the earlier stages of supplier due diligence, based on lessons learnt since 2009, have allowed an increased level of focus on suppliers categorised as ‘high risk’.

Fifty three percent of suppliers audited demonstrated standards that met our expectations, with a further 41% implementing improvements to address

minor non-compliances. None of the suppliers audited this year will require significant follow-up to confirm they will make the improvements we require. We will not use suppliers who are unable or unwilling to meet our expectations in a timely way. During 2013, we identified and rejected 48 prospective suppliers from consideration during our due diligence process.

Environmental impact

Our targets for 2013 included reducing:

 

> operational greenhouse gas footprint to 794 thousand tonnes CO2 e/yr
> hazardous waste to 0.68 tonnes/$m sales and non-hazardous waste to 0.51 tonnes/employee
> water use to 3.9 million m3.

We work to reduce our greenhouse gas emissions by, among other things, improving our energy efficiency and pursuing lower-carbon alternatives to fossil fuels at our sites. We strive to ensure that our travel and transport activities are as efficient as possible. Our carbon footprint is also affected by some of our respiratory therapies, specifically our pressurised metered-dose inhalers that rely on hydrofluoroalkane (HFA) propellants to deliver the medicine to a patient’s airways. While HFAs have no ozone depletion potential and a third or less of the global warming potential than the chlorofluorocarbons (CFCs) they replace, they are still greenhouse gases. Our target is to reduce our operational greenhouse gas footprint (excluding emissions from patient use of our inhaler therapies) by 20% from our 2010 levels by 2015. In 2013, our operational greenhouse gas footprint totalled 718 thousand tonnes, a reduction of 20% from our 2010 baseline. Further information on carbon reporting is included in the Responsible Business section from page 220.

 

 

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Operational greenhouse gas footprint emissions (thousand tonnes)

 

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Waste production

(thousand tonnes)

 

 

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Water

(million m3)

 

 

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The management of waste is another key aspect of our commitment and we have a 2015 target of a 15% reduction in hazardous and non-hazardous waste from our 2010 levels. Our primary focus is waste prevention, but where this is not practical, we concentrate on waste minimisation and appropriate treatment or disposal to maximise the reuse and recycling of materials and minimise disposal to landfill. In 2013, our total waste was 32.8 thousand tonnes with a tonnes/$m index of 1.3. Our hazardous waste has been reduced by 47% (a reduction of 31% indexed to $m revenues) since 2010, principally due to changing production patterns and a major investment at our manufacturing site in the south west of the UK to enable recycling and reuse of solvent wastes. Our non-hazardous waste indexed against number of staff has not improved due to the significant reductions in our staff numbers since the baseline was set.

We recognise the need to use water responsibly and, where possible, to minimise the use of water in our facilities. To support the delivery of our target to reduce water use by 25% from our 2010 levels by 2015, we now have water conservation plans at our largest sites. In 2013, our water use was 3.7 million m3, a reduction of 19% from our 2010 baseline. Water use indexed to revenues was 140m3/$m (+5% from 2010 baseline).

We are also working to ensure that we measure and report the impact of our external manufacturing activity on the environment, and that our suppliers have appropriate environmental improvement targets. We believe we have captured data for more than 90% of the globally managed outsourced manufacture of key

intermediates and APIs, formulation and packaging for our established brands. The full data is available on our website, www.astrazeneca.com/responsibility.

Our continued commitment to product stewardship is underpinned by our ongoing work to integrate environmental considerations into a medicine’s complete life-cycle, from discovery and development, through manufacturing, commercialisation and to its ultimate disposal. We follow a progressive programme designed to ensure that our manufacturing emissions of APIs do not exceed our own internally defined standards. We confirmed safe discharges at all of our own manufacturing sites in 2010 and have a rolling programme to confirm ongoing compliance. During 2013 we reassessed 12 of our sites to confirm safe discharges. We also follow a progressive approach and internal process to ensure ongoing ecopharmacovigilance for our products. This involves regular reviewing of emerging science and literature to identify any new information that might inform the environmental risk management plans for our products. This is a novel initiative and we published our approach in the Drug Safety journal in July 2013. Further information is available on our website, www.astrazeneca.com/responsibility, including environmental risk assessment data for our medicines.

 

Further information on AstraZeneca’s approach to responsible business can be found in the Responsible Business section from page 220 and on our website, www.astrazeneca.com/responsibility.
Figures have been revised from those previously published to incorporate our biologics capabilities into our targets. The operational greenhouse gas footprint figures have been revised to incorporate improved estimates of road freight and energy data. Our targets for 2011-2015 were set in 2010.
 

 

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AstraZeneca Annual Report and Form 20-F Information 2013    45


Table of Contents

Strategic Report | Pioneering science, life-changing medicines

 

Making hearts

beat longer

Cardiac regeneration

 

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46    AstraZeneca Annual Report and Form 20-F Information 2013


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17.3 million

More people die annually from cardiovascular diseases than from any other cause – an estimated 17.3 million people in 2008*

 

347 million

people worldwide have diabetes*

 

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AstraZeneca Annual Report and Form 20-F Information 2013    47


Table of Contents

Strategic Report | Therapy Area Review

 

Overview

Our Business model section on page 10 demonstrates how we apply our resources and assets across the whole life-cycle of a medicine.

These efforts were detailed in the Business Review. In this Therapy Area Review, we describe how we apply those resources across our chosen therapy areas.

 

As outlined in the Our strategic priorities section from page 16, a key element of our drive to Achieve Scientific Leadership is our decision to focus on distinctive science in three core therapy areas: Cardiovascular and Metabolic disease (CVMD); Oncology; and Respiratory, Inflammation and Autoimmunity (RIA). We will do this by exploiting our unique combination of strengths in biologics and small molecules, immunotherapies and protein engineering technologies. Our approach to Infection, Neuroscience and Gastrointestinal (ING) is opportunity-driven.

This Therapy Area Review reflects the range of our activities. They are led by our GPPS team but draw heavily on the expertise of the whole organisation, so ensuring our science is connected with patients’ needs. We embed these insights into our work based on our interactions with healthcare providers, patients, regulators and payers. This approach helps us to prioritise resources and optimise our portfolio, thereby delivering medicines that customers value and which meet their needs.

Development pipeline

Data in this section is as at 31 December 2013.

Our pipeline includes 99 projects, of which 85 are in the clinical phase of development. As shown in the Development projects table opposite, we now have a total of 33 projects in Phase I (32 NMEs), 27 projects in Phase II (23 NMEs), 19 projects in late-stage development, either in Phase III or under regulatory review (11 NMEs), and are running 20 significant life-cycle management projects. The 27 projects in Phase II include parallel indications for projects which have reached Phase III.

The 19 projects in late-stage development, either in Phase III or under regulatory review include:

 

> 11 NMEs
> Four projects exploring additional indications for these molecules
> Four molecules already approved or launched in at least one major market.

Fourteen projects (inclusive of combination trials) entered first human testing (Phase I) during 2013. For further detailed information, see our Development pipeline table from page 194.

Across the clinical portfolio, 33 projects successfully progressed to their next phase. This excludes two Phase I studies expanded to include patients in 2013, one progression within Phase II and one Phase II start in a new indication. The Pipeline delivery table opposite summarises the year’s key pipeline progressions. Four NMEs commenced Phase III trials as a result of the acceleration of selected quality programmes. Fifteen projects were withdrawn in 2013: 13 projects were withdrawn following poorer than anticipated safety or efficacy results; one was withdrawn for economic reasons; and one because of uncertainty in the scientific hypothesis.

The early clinical pipeline shows a shift toward specialty care, with 80% of programmes in Phase I and II directed at such indications. Our late-stage pipeline was strengthened during 2013 through a combination of internal acceleration of priority programmes and in-licences and acquisitions of externally originated compounds in our core therapy areas. We believe that our investment in the quality of our science and strong governance will allow us to launch a rising number of first-in-class therapies in the next decade.

Our biologics pipeline has matured in recent years resulting in a 50-50 balance of small molecule programmes and biologics in the clinical portfolio. In specialty care we focus on specifically defined or biologically targeted populations, determined by the scientific pathway of the disease and mode of action of the molecule. An increasing number of specialty care products require a diagnostic test for patient eligibility or to achieve the best outcomes. The diseases which specialty care products treat are generally more severe, with the patient population concentrated under the care of a subset of doctors and in specialty

healthcare facilities. Specialty care products generally command higher prices and must deliver higher value. Making them available to the right patients requires tight co-ordination between our commercial, medical and supply chain teams.

For information about the risks inherent in the clinical phase of development, please see the Principal risks and uncertainties section from page 200.

Our products

While the focus of this Therapy Area Review is on our key marketed products, many of our other established products are crucial to certain markets within Emerging Markets and, taken together, represent an important part of AstraZeneca’s business.

For a list of all our potential new products and product life-cycle developments, see the Pipeline by therapy area table on page 50 and the Development pipeline table, from page 194. For details of patent expiries of our key marketed products, see the Patent expiries section on page 198.

Indications for each product described in this Therapy Area Review may vary from country to country. Local prescribing information should be referred to for country-specific indications for any particular product.

Many of our products are subject to litigation. Information about material legal proceedings can be found in Note 25 to the Financial Statements from page 176. Details of relevant risks are set out in the Principal risks and uncertainties section from page 200.

 

 

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Development projects

 

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1  Includes four projects that are either approved or launched in at least one market. Includes four projects that are filed in at least one market.
2  Includes five projects that are either approved or launched in at least one market. Includes one project that is filed in at least one market.
3  Included five projects that were either approved or launched in at least one market.
4  Included eight projects that were filed, approved or launched in at least one market.
5  Included six projects that were filed, approved or launched in at least one market.
6  Included seven life-cycle management projects reintroduced from Brazil, Russia, India, China, Mexico, Turkey and Japan.

Pipeline delivery

 

Milestone   Product   2013 Achievement
Key pipeline progressions (Phase III starts and first regulatory filings)   metreleptin   Biologics License Application accepted and priority review granted by the FDA for metreleptin for the treatment of metabolic disorders associated with inherited or acquired lipodystrophy.
    naloxegol   MAA accepted by EMA and FDA for opioid-induced constipation.
  olaparib   MAA accepted by EMA for maintenance treatment of patients with BRCA mutated platinum- sensitive relapsed serous ovarian cancer.
        Phase III programmes commenced in 1st line BRCA-mutated ovarian cancer (SOLO-1), platinum- sensitive relapsed BRCA-mutated ovarian cancer (SOLO-2), and 2nd line gastric cancer study (GOLD).
    moxetumomab pasudotox   Phase III programme has commenced for hairy cell leukaemia.
    selumetinib   Phase III programme has commenced for 2nd line treatment of locally advanced or metastatic KRAS mutation-positive NSCLC.
    benralizumab   Phase III programme has commenced for severe asthma.

Late-stage licensing/

acquisitions

  Epanova  

Product obtained through acquisition of Omthera.

 

MAA accepted by FDA for treatment of severe hypertriglyceridaemia.

  PT003   Product obtained through acquisition of Pearl Therapeutics.
        Phase III programme commenced for PT003 for COPD.
  roxadustat (FG-4592)   Product obtained through strategic collaboration with FibroGen.
        Programme in late stage but AstraZeneca Phase III programme not dosed yet.
Major market approvals  

Fluenz Tetra (influenza

vaccine live, intra-nasal)

  EMA approval for the prevention of seasonal influenza in children. This is the first and only intra-nasal four-strain influenza vaccine available for children and adolescents from 24 months and up to 18 years of age in Europe.
        
        2014 Achievement
    Farxiga   FDA approval for Farxiga (dapagliflozin) for the treatment of adult patients with Type 2 diabetes.
    Xigduo  

EMA approval for Xigduo (dapagliflozin/metformin hydrochloride) for the treatment of adult patients with Type 2 diabetes.

 

Sales by therapy area

 

     2013            2012            2011  
    

Sales

$m

      

Reported

growth

%

    

CER

growth

%

          

Sales

$m

      

Reported

growth

%

    

CER

growth

%

          

Sales

$m

 

Cardiovascular and Metabolic disease

     8,830           (7      (6            9,531           (7      (4            10,212   

Oncology

     3,193           (9      (2            3,489           (6      (3            3,705   

Respiratory, Inflammation and Autoimmunity

     4,677           6         7               4,415           (1      2               4,468   

Infection, Neuroscience and Gastrointestinal

     9,011           (14      (13            10,490           (28      (27            14,596   

Other businesses*

                                     48           n/m         n/m               610   

Total

     25,711           (8      (6            27,973           (17      (15            33,591   

 

* Represents all other pharmaceutical product sales that are not in the above therapy areas.

 

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AstraZeneca Annual Report and Form 20-F Information 2013    49


Table of Contents

Strategic Report | Therapy Area Review

 

Our growing late stage pipeline

Pipeline by therapy area (as of 31 December 2013)

 

¢ Cardiovascular and Metabolic disease (CVMD)

¢ Oncology

¢ Respiratory, Inflammation and Autoimmunity (RIA)

¢ Infection, Neuroscience and Gastrointestinal (ING)

 

Key – showing movements in 2013

 

+   Addition    F   New filing
  No change    ü   Approved/launched
g   Progression     
 

 

Phase I 32 NMEs

 

 

Phase II 23 NMEs

 

 

 

Small molecule

 

 

 

Large molecule

 

 

Small molecule

     

 

Large molecule

 
   

 

 

 

                             
    AZD1208   —           MEDI6012   —           AZD4901   g            MEDI-551#   —  
                                   
                                   
   

 

 

 

                             
    AZD5363#   —           MEDI0639#   —          

roxadustat

(FG-4592)

 

+  

        MEDI-573#   —  
                                   
   

 

 

 

                             
   

AZD9150#

    

  —           MEDI3617#  

—  

        AZD1722#   g            tremelimumab   +  
                                        
   

 

 

 

                             
   

volitinib#

(AZD6094)

  —           MEDI4736#2   —           AZD5847   —          

benralizumab#

(COPD)

 

—  

                                   
   

 

 

 

                             
    AZD8186   g            MEDI-565#   —           olaparib   —           mavrilimumab#   —  
                             (breast cancer)            
                                        
   

 

 

 

                             
    AZD92912   +           MEDI6469#   —           selumetinib#   —           MEDI-546#   —  
                        (AZD6244) (ARRY-142886)            
                        (various cancers)            
   

 

 

 

                             
    AZD6738   +          

MEDI0680

(AMP-514)

    

  +           AZD2014  

g  

        MEDI7183#   —  
   

 

 

 

                             
    AZD8848#   —           moxetumomab   +           AZD1775#   +           MEDI8968#4   —  
              pasudotox# (pALL)                      
                                   
   

 

 

 

                             
    AZD7624   +           MEDI4736#   +           AZD2115#   —           sifalimumab#   —  
              + tremelimumab                      
                                   
   

 

 

 

                             
    AZD4721   +          

MEDI4736#

+ dabrafenib + trametinib

    

  +           AZD50693  

—  

       

tralokinumab

(asthma/IPF)

 

—  

   

 

 

 

                             
    AZD1419   +           MEDI-551#   —           RDEA3170   g            MEDI2070   g   
                                   
                                   
   

 

 

 

                             
    PT010   +           MEDI5872#  

—  

        AZD5847   —          

brodalumab#

(asthma/psoriatic arthritis)

 

g  

                                   
   

 

 

 

                             
   

ATM AVI

    

  —           MEDI9929#  

—  

        CXL#   —            
                                        
   

 

 

 

                             
   

AZD1419

    

  +           MED550  

—  

        AZD3241   —            
                                        
   

 

 

 

                             
    AZD3293#   —           MEDI-559   —           AZD5213   g             
              (PRVV)           (Tourette’s syndrome/            
                        neuropathic pain)            
   

 

 

 

                             
    AZD6423   +           MEDI4893   +                      
                                   
                                   
   

 

 

 

                             
              MEDI19287   +                      
                                   
                                   
   

 

 

 

                             

 

50    AstraZeneca Annual Report and Form 20-F Information 2013


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“I’m really pleased by the progress made during 2013. At the end of the year, we had 99 projects in our pipeline, of which 85 were in the clinical phase of development and 14 were approved, launched or filed.”

Pascal Soriot

Chief Executive Officer

 

Phase III 7 NMEs

 

 

Line Extensions

 

 

 

Small molecule

 

 

 

Large molecule

 

 

Small molecule

     
   

 

 

 

                           
    Brilinta/Brilique   ü           metreleptin   F           Brilinta/Brilique   —         Caprelsa   g   
                        EUCLID         (differentiated thyroid  
                                cancer)  
   

 

 

 

                           
    Epanova#   F          

moxetumomab

pasudotox#

  g           

Brilinta/Brilique

PEGASUS-TIMI 54

 

—  

     

Faslodex

(1st line advanced

  —  
              (HCL)                   breast cancer)  
   

 

 

 

                           
   

Farxiga/Forxiga

(dapagliflozin)

  ü          

brodalumab#

(COPD)

 

—  

        Brilinta/Brilique SOCRATES   +        

Iressa

(treatment beyond

  —  
                                     progression)  
   

 

 

 

                           
   

Caprelsa

(medullary thyroid

  —          

benralizumab#

(severe asthma)

  g            Brilinta/Brilique THEMIS   +        

Symbicort BAI

(asthma/COPD)

 

—  

    cancer)                              
   

 

 

 

                           
    olaparib   F                     Bydureon EXSCEL   —         Diprivan#   —  
                                      
                                      
   

 

 

 

                           
    olaparib SOLO-1   g                      Bydureon Dual   F         Entocort   —  
                        Chamber Pen          
                                 
   

 

 

 

                           
    olaparib SOLO-2   g                     

Bydureon weekly

suspension

    

 

+  

      linaclotide#   +  
   

 

 

 

                           
    olaparib GOLD   g                      Xigduo   ü         Nexium   —  
                                (peptic-ulcer bleeding)  
                                 
   

 

 

 

                           
    selumetinib#   g                      Farxiga/Forxiga   +          
    (AZD6244)                     (dapagliflozin)          
                        DECLARE          
   

 

 

 

                           
    lesinurad   —                    

Kombiglyze XR/ Komboglyze FDC1

    

 

—  

       
   

 

 

 

                           
    PT003 GFF   +                     saxagliptin/   —          
                        dapagliflozin FDC          
                                      
   

 

 

 

                           
   

CAZ AVI#

(CAZ104)

  —                     Onglyza SAVOR-TIMI 53   —          
    (serious infection)                              
   

 

 

 

                           
   

CAZ AVI#

(CAZ104) (HAP/VAP)

  g                               
                                      
   

 

 

 

                           
   

Zinforo#

(ceftaroline)

  —                              
                                      
   

 

 

 

                           
    naloxegol#   F                              
    (NKTR-118)                              
                                 
   

 

 

 

                           
                       

# Partnered product.

Farxiga in the US; Forxiga in the rest of world.

1   Kombiglyze XR in the US; Komboglyze FDC in the EU.

2   Phase I study expanded to include patients in 2013.

3   Progression within Phase II in 2013.

4   Phase II start in new indication of hidradenitis suppurativa (HS) in 2013.

 

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AstraZeneca Annual Report and Form 20-F Information 2013    51


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Strategic Report | Therapy Area Review

 

 

Cardiovascular and

Metabolic disease

More people die annually from CV diseases than from any other cause – an estimated 17.3 million people, representing 30% of the global total. More than 80% of deaths take place in low- and middle-income countries.

 

Our marketed products

 

 

 

Cardiovascular (CV) disease

> Atacand1 (candesartan cilexetil) is an angiotensin II antagonist used for the 1st line treatment of hypertension and symptomatic heart failure.

 

> Axanum (acetylsalicylic acid (ASA) and esomeprazole) is a fixed-dose combination indicated for prevention of CV events in high-risk CV patients in need of daily low-dose ASA treatment and who are at risk of gastric ulcers.

 

> Brilinta/Brilique (ticagrelor) is an oral antiplatelet for the treatment of acute coronary syndromes (ACS).

 

> Crestor2 (rosuvastatin calcium) is a statin used for the treatment of dyslipidaemia and hypercholesterolemia. In some markets it is also indicated to slow the progression of atherosclerosis and to reduce the risk of first CV events.

 

> Plendil (felodipine) is a calcium antagonist used for the treatment of hypertension and angina.

 

> Seloken/Toprol-XL (metoprolol succinate) is a beta-blocker once-daily tablet used for 24-hour control of hypertension and for use in heart failure and angina.

 

> Tenormin (atenolol) is a cardioselective beta-blocker used for hypertension, angina pectoris and other CV disorders.

 

> Zestril3 (lisinopril dihydrate) is an angiotensin-converting enzyme inhibitor used for the treatment of a wide range of CV diseases, including hypertension.

 

 

1  Licensed from Takeda Chemicals Industries Ltd.
2  Licensed from Shionogi. In December 2013, AstraZeneca and Shionogi announced the extension of the global licence agreement for Crestor and the modification of the royalty structure, effective 1 January 2014.
3  Licensed from Merck.

Metabolic disease

> Byetta (exenatide injection) is an injectable medicine indicated to improve blood sugar (glucose) control along with diet and exercise in adults with Type 2 diabetes mellitus.

 

> Bydureon (exenatide extended release injectable suspension) is an injectable medicine indicated to improve blood sugar (glucose) along with diet and exercise in adults with Type 2 diabetes mellitus.

 

> Forxiga/Farxiga (dapagliflozin) is a selective inhibitor of human sodium-glucose co-transporter 2 (SGLT-2 inhibitor) used to improve glycaemic control in adult patients with Type 2 diabetes mellitus.

 

> Kombiglyze XR (saxagliptin and metformin XR) combines saxagliptin (Onglyza) and metformin extended release metformin (metformin XR) in a once-a-day tablet for the treatment of Type 2 diabetes mellitus.

 

> Komboglyze (saxagliptin and metformin HCl) combines saxagliptin (Onglyza) and metformin immediate release (metformin IR) in a twice-daily tablet for the treatment of Type 2 diabetes mellitus.

 

> Onglyza (saxagliptin) is an oral dipeptidyl peptidase 4 (DPP-4) inhibitor used for the treatment of Type 2 diabetes mellitus.

 

> Symlin (pramlintide acetate) is an injected amylin analogue for the treatment of Type 1 and Type 2 diabetes mellitus in patients with inadequate glycaemic control on mealtime insulin.

 

> Xigduo (dapagliflozin and metformin hydrochloride) combines dapagliflozin (Forxiga), an SGLT-2 inhibitor, and metformin hydrochloride, in a twice-daily tablet to improve glycaemic control in adult patients with Type 2 diabetes mellitus, who are inadequately controlled by metformin alone.

Therapy area world market

(MAT/Q3/13)

 

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$169.8bn

Wordwide market value

 

 

 

 

52    AstraZeneca Annual Report and Form 20-F Information 2013


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Our strategic priorities

AstraZeneca is a leader in the treatment of cardiovascular (CV) and metabolic diseases. We aim to build on our strong position, with a particular focus on thrombosis (blood clotting), atherosclerosis (hardening of the arteries) and metabolic diseases, including diabetes and its complications. Despite improvements in the quality of diagnosis and treatment, unmet medical need remains high. These diseases, together with their complications, continue to grow worldwide (both in Established Markets and Emerging Markets) as a consequence of the spread of a westernised lifestyle. We are developing potential new therapies using a variety of approaches, including small molecules, antibodies, peptides and proteins, to address this growing need.

Our strategy for our CV disease area is to maximise the benefits for patients from our existing portfolio of medicines, such as our statin, Crestor, and ensure we supply Brilinta/Brilique, our oral antiplatelet treatment, to all those who can benefit from it. We also want to optimise the potential of our research and clinical projects for the treatment of conditions such as heart and kidney diseases, atherosclerosis and acute coronary syndromes (ACS). In addition, we are exploring ways to expand our core capabilities to deliver differentiated products, such as research into cardiac regeneration. See the case study on page 46 for more information.

Finally, we are searching for business development transactions that complement our activities. For example, in March 2013, we cemented our long-standing collaboration with the Karolinska Institutet by announcing the creation of a research centre, at the Institutet’s site in Stockholm,

Sweden. The centre will conduct pre-clinical and clinical studies to advance the understanding of CV and metabolic disease pathophysiology and assess new drug targets. Also in March 2013, we announced an exclusive agreement with Moderna Therapeutics to discover, develop and commercialise pioneering messenger RNA Therapeutics for the treatment of serious CV, metabolic and renal diseases.

These transactions will also support our ambitions for our Metabolic disease area, with its focus on diabetes, diabetic nephropathy and obesity. We plan to continue building our base with existing brands and develop our research and clinical projects so we are best able to meet individual patients’ unique sets of medical needs and build a position of leadership in the area.

Cardiovascular disease

Hypertension (high blood pressure) and dyslipidaemia (abnormal levels of blood lipids) damage the arterial wall which may lead to atherosclerosis. Lipid-modifying therapy, primarily statins, is a cornerstone for the treatment of atherosclerosis.

ACS is an umbrella term for sudden chest pain and other symptoms due to insufficient blood supply (ischaemia) to the heart muscle. ACS is the acute manifestation of ischaemic heart disease and is associated with considerable subsequent mortality and morbidity. There remains a significant need to improve patient outcomes and reduce the costs of treating ACS.

Our 2013 focus

Globally, Crestor gained market share (by value) after its launch in 2003 with its differentiated profile in managing cholesterol levels and its more recent label indications for slowing the progression of

atherosclerosis and reducing the risk of CV events in some markets. Crestor is the only statin with an atherosclerosis indication in the US not limited by disease severity or restricted to patients with coronary heart disease. A competitor to Crestor, atorvastatin (Lipitor), was available in generic form in the US from late 2011 and, since May 2012, several generic atorvastatin products have become available.

Fewer than half the people thought to have high levels of low-density lipoprotein cholesterol (LDL-C) (so-called ‘bad cholesterol’) are diagnosed and treated. Of treated patients, only about half reach their doctors’ recommended cholesterol targets using existing treatments. Study data have shown that the usual 10mg starting dose of Crestor is more effective at lowering LDL-C and produces greater achievement of LDL-C goals than commonly prescribed doses of other statins. Crestor also produces an increase in high-density lipoprotein cholesterol (HDL-C) (so-called ‘good cholesterol’) across the dose range and has again been shown to reduce atherosclerotic plaque.

Crestor continues to face increasing challenges from generic products. For instance, competition resulting from the expiration of the Crestor patent in Canada had a significant negative impact on our 2013 financial results. Patents protecting Crestor have been subject to a number of challenges in different jurisdictions. Details of these matters are included in Note 25 to the Financial Statements, from page 176.

While also subject to competition from generics, Atacand continues to be an important treatment option for patients with hypertension and symptomatic heart failure. It is approved for the treatment of

 

 

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hypertension in more than 125 countries and for symptomatic heart failure in more than 70 countries. 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 anti-hypertensive therapy. Atacand Plus is approved in 99 countries.

Brilinta/Brilique is an oral antiplatelet treatment for ACS in a new chemical class called cyclo-pentyl-triazolo-pyrimidines, which are selective adenosine diphospate (ADP) receptor antagonists that act on the P2Y12 ADP-receptor. Brilinta/Brilique remains under regulatory review in nine countries. It has been approved in 100 countries, including the US, Canada and Brazil under the trade name Brilinta, and in the EU, Iceland and Norway under the trade name Brilique. Additional marketing authorisations and regulatory submissions are planned for 2014.

Epanova is a patent-protected, novel, ultra-pure mixture of free fatty acids derived from fish oils, including multiple long-chain omega-3 fatty acids that reduces triglycerides and improves other key lipid parameters. Epanova came into AstraZeneca’s portfolio through the acquisition in July 2013 of Omthera, a specialty pharmaceutical company based in the US, focused on the development and commercialisation of new therapies for dyslipidaemia. In September 2013, the FDA accepted an NDA for Epanova for review.

Clinical studies

Brilinta/Brilique is being investigated in a range of clinical trials under the PARTHENON programme. PARTHENON is an AstraZeneca-funded comprehensive, long-term and evolving global research initiative designed to address unanswered questions in atherothrombotic disease and to investigate the impact of Brilinta/Brilique on reducing CV events and death. The benefit of Brilinta/Brilique on CV thrombotic events, including CV mortality, observed in patients who have had an ACS event, supports continued study in other areas of CV disease.

The current PARTHENON programme is designed to include around 80,000 patients worldwide. Key clinical trials captured within the programme are described below:

 

> PEGASUS-TIMI 54, a 21,000 patient study, continues in more than 30 countries. The study examines the risk/ benefit profile of Brilinta/Brilique plus aspirin to prevent adverse CV events compared with aspirin alone in higher-risk patients who had experienced a heart attack at least one but not more than three years before the study
> EUCLID is a global clinical trial involving 13,500 patients with peripheral arterial disease (PAD), a condition affecting approximately 27 million people in Europe and North America. It began enrolling patients in early 2013 and is evaluating the efficacy of Brilinta/Brilique (monotherapy) compared to clopidogrel (monotherapy) in reducing a composite endpoint of CV death, myocardial infarction (MI) or ischaemic stroke
> SOCRATES is a global clinical trial planned to enrol 9,600 patients who have experienced an acute ischaemic stroke or transient ischaemic attack (TIA). Annually, 15 million people worldwide suffer a stroke. Ischaemic strokes and TIAs occur as a result of an obstruction of a vessel supplying blood to the brain. The SOCRATES study evaluates the efficacy of Brilinta/Brilique monotherapy compared to aspirin in reducing major vascular events
> THEMIS is a global clinical trial involving 17,000 patients with Type 2 diabetes mellitus at high risk of cardiovascular events. The study compares the efficacy of long-term treatment with ticagrelor versus placebo for the prevention of major cardiovascular events in patients without a history of previous MI or stroke, but with documented coronary atherosclerosis.

In 2013, we announced plans to commence the STRENGTH trial, planned to enrol 13,000 patients into a Phase III, double-blind, long-term outcomes study to assess statin residual risk reduction with Epanova in high cardiovascular risk patients with hypertriglyceridaemia (statin treated).

Metabolic disease

Type 2 diabetes mellitus is a chronic progressive disease of epidemic scale, affecting at least 90% of people with diabetes worldwide. The disease continues to grow as a consequence of western lifestyles. It increasingly affects people at a younger age, with many patients requiring multiple medications to control their condition.

There are a number of established oral generic and branded treatments available, such as biguanides and sulfonylureas. However, newer classes such as DPP-4 inhibitors, SGLT-2 inhibitors, and glucagon-like peptide 1 (GLP-1) agonists are successfully entering the market by offering effective blood sugar control. The CV safety of these new classes has been given particular emphasis in recent regulatory reviews and guidance documents provided by the FDA and other regulatory authorities.

Our 2013 focus

In 2013, AstraZeneca continued its worldwide diabetes alliance with BMS to co-develop and co-commercialise two compounds discovered by BMS for the treatment of Type 2 diabetes mellitus: Onglyza and Forxiga. In April 2013, following the completion of BMS’s acquisition of Amylin in August 2012, AstraZeneca and BMS assumed full global commercialisation rights of Amylin’s portfolio of products related to diabetes (and other metabolic diseases) with a primary focus on a franchise of GLP-1 agonists for the treatment of Type 2 diabetes mellitus. The products include Byetta, Bydureon and Symlin. The alliance was the first to offer products in the three newest and fastest growing classes of diabetes treatments: DPP-4, SGLT-2 and GLP-1.

In December 2013, we announced an agreement to acquire the entirety of BMS’s 50% interest in the companies’ joint diabetes business. This secured AstraZeneca the IP rights and other assets for the development, manufacture and commercialisation of these diabetes assets, which include Onglyza, Kombiglyze, Komboglyze, Forxiga/Farxiga, Xigduo, Byetta, Bydureon, metreleptin, and Symlin. The acquisition, which completed in February 2014, consolidated worldwide ownership of the diabetes business within AstraZeneca, allowing us to maximise our primary and specialty care capabilities and geographical reach in this area, especially in Emerging Markets. Approximately 3,900 employees will transfer with the acquisition of this business. The transaction reinforces our long-term commitment to diabetes, a key platform for returning AstraZeneca to growth.

Forxiga (dapagliflozin) is a first-in-class SGLT-2 inhibitor. It was approved in the EU in November 2012 and in the US (where it is called Farxiga) in January 2014. Forxiga/Farxiga is intended to be used as an adjunct to diet and exercise in combination with other glucose-lowering medicinal products, including insulin, or as a monotherapy. Forxiga/Farxiga is now approved in 40 countries with six others under regulatory review. Additional submissions are planned for 2014.

Xigduo (dapagliflozin and metformin hydrochloride) was approved in January 2014 in the EU, for adults aged 18 and over with Type 2 diabetes mellitus as an adjunct to diet and exercise to improve glycaemic control. It is indicated in patients inadequately controlled on their current

 

 

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metformin-based treatment regimen or who are currently being treated with the combination of dapagliflozin and metformin as separate tablets. An NDA for dapagliflozin and metformin hydrochloride (extended release) fixed-dose combination in a once-daily tablet was submitted to the FDA in the fourth quarter of 2013.

Metreleptin is an investigational agent for the treatment of metabolic disorders associated with inherited or acquired lipodystrophy (LD), a rare disease estimated to affect a few thousand people around the world. The FDA has accepted and granted a priority review designation for the Biologics License Application (BLA) for metreleptin and assigned a February 2014 review deadline. In December 2013, the Endocrinologic and Metabolic Drugs Advisory Committee reviewed the BLA for it and voted 11 to one that there is substantial evidence that the benefits of metreleptin outweigh the risks for the treatment of paediatric and adult patients with generalised LD. The committee did not recommend metreleptin in patients with partial LD for the indication currently proposed, by a vote of two to 10. We remain committed to pursuing metreleptin for treatment in patients with metabolic disorders associated with partial LD. Work is ongoing to make metreleptin available outside the US.

In the pipeline

We continue to develop the delivery systems for Bydureon, including a dual chamber pen that will reduce the number of steps required to mix its components. A supplemental new drug application (sNDA) was submitted to the FDA in the third quarter of 2013 and we are expecting a six-month review. We filed for approval of the dual chamber pen in the EU in the fourth quarter of 2013.

We are also developing a once-weekly suspension of Bydureon. Recruitment is complete for the exenatide weekly suspension Phase III programme and the studies are ongoing.

In July 2013, AstraZeneca and FibroGen announced they had entered into a strategic collaboration to develop and commercialise roxadustat (FG-4592), a first-in-class oral compound in late-stage development for the treatment of anaemia associated with chronic kidney disease (CKD) and end-stage renal disease (ESRD). The collaboration focuses on the US, China and all major markets excluding Japan, Europe, the CIS, the Middle East and South Africa, which are covered by an existing agreement between FibroGen and Astellas.

In Phase II clinical studies, roxadustat met its primary objective of demonstrating anaemia correction in treatment-naïve CKD patients not on dialysis, as well as of maintenance of haemoglobin levels and anaemia correction in patients on dialysis. This efficacy was combined with an acceptable safety profile in clinical trials. An extensive roxadustat Phase III development programme for the US is planned along with initial Phase III trials in China, with anticipated regulatory filings in China in 2015 and in the US in 2017.

Clinical studies

With the completion of the SAVOR-TIMI 53 (saxagliptin assessment of vascular outcomes recorded in patients with Type 2 diabetes mellitus) trial in September 2013, Onglyza is now among the most extensively studied anti-diabetic medications. The trial, involving 16,500 adult patients with Type 2 diabetes mellitus, with a history of established CV disease or multiple risk factors, was also designed to fulfil a post-marketing requirement for the FDA.

Within its clinically relevant high CV risk population, SAVOR met the primary safety objective, demonstrating no increased risk for the primary composite endpoint of CV death, non-fatal MI or non-fatal ischaemic stroke, when added to a patient’s current standard of care (with or without other anti-diabetic therapies), as compared to placebo. Onglyza did not meet the primary efficacy endpoint of superiority to placebo for the same composite endpoint. Patients treated with Onglyza experienced improved glycaemic control and reduced development and progression of microalbuminuria over two years as assessed in exploratory analyses. The large size of SAVOR also allowed us to evaluate a broad range of other data of interest. Overall adverse events, serious adverse events and discontinuations were similar to placebo and the rates of pancreatitis and pancreatic cancer were low and balanced between Onglyza and placebo. The major secondary composite endpoint of CV death, non-fatal MI, non-fatal ischaemic stroke or hospitalisation for heart failure, unstable angina or coronary revascularisation was balanced across the two arms. One component of the composite secondary endpoint, hospitalisation for heart failure, occurred more in the Onglyza group compared to placebo. There was no increased rate of hypoglycemia among patients treated with Onglyza compared to placebo when added to metformin monotherapy and higher rates of hypoglycemia only in the Onglyza group compared to the placebo group among patients taking sulfonylureas, agents known to cause hypoglycemia, at baseline.

In April 2013, we initiated DECLARE, a large ongoing CV outcomes trial to understand the impact of Forxiga on CV risk/benefit. The trial is working to determine whether Forxiga (10mg), when added to a patient’s current anti-diabetes therapy, is effective in reducing cardiovascular events such as MI, ischaemic stroke and CV-related death, compared with placebo. The trial is a randomised, double-blind, placebo-controlled trial designed to enrol approximately 17,000 patients. Enrolment began in April 2013 with an anticipated completion date in 2019.

The EXSCEL (EXenatide Study of Cardiovascular Event Lowering) study is designed to determine if there are favourable CV effects of exenatide treatment using Bydureon. The EXSCEL study started in 2010 and is planned to run until 2017. The study has enrolled patients during 2013 and is designed for 9,500 patients.

 

 

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Oncology

Cancer is a leading cause of death worldwide and

accounted for 8.2 million deaths in 2012. About 70%

of deaths occurred in low- and middle-income countries.

 

Our marketed products

 

 

Our strategic priorities

We aim to build on our position as one of the world leaders in cancer treatment with established brands such as Zoladex and Arimidex, growing brands such as Faslodex and Iressa, and the successful introduction of novel therapeutic approaches currently in development. Our future growth will come about by targeting the right treatments at the right patients, using both small molecules and biologics, and taking advantage of cutting-edge science and innovative technologies.

 

Our oncology pipeline includes a range of novel compounds focused on several areas critical to the development and progression of cancer. In particular, we are developing potential new cancer drugs using a variety of biologics approaches directed towards molecular targets with a strong role in cancer progression. These have the potential to eliminate cancer cells in more effective ways. We are also focused on targeting the genetic drivers of cancer and the resistance mechanisms to current therapies, using companion diagnostics to identify the right patients. This strategy is driving the continued growth of Iressa and the rapid development of AZD9291, a third generation epidermal growth factor receptor (EGFR) inhibitor which could have the potential to address the most common resistance mechanism to first generation inhibitors, such as Iressa.

 

Our emphasis on triggering cancer cell death builds on our work in DNA damage response with our olaparib programme. To complement our DNA damage portfolio, we completed our in-licensing of MK-1775 (AZD1775) from Merck in September 2013. AZD1775 is a WEE-1 kinase inhibitor which inhibits a key cell cycle checkpoint and is in early clinical development.

 

In addition, we aim to be a key player in developing immune-mediated cancer therapies (IMT-Cs), a clinically validated

 

>  Arimidex (anastrozole) is an aromatase inhibitor used for the treatment of breast cancer.

 

>  Caprelsa (vandetanib) is a kinase inhibitor indicated for the treatment of symptomatic or progressive medullary thyroid cancer (MTC) in patients with unresectable (non-operable) locally advanced or metastatic disease.

 

>  Casodex (bicalutamide) is an anti-androgen therapy used for the treatment of prostate cancer.

 

>  Faslodex (fulvestrant) is an injectable estrogen receptor antagonist used for the treatment of hormone receptor-positive advanced breast cancer for post-menopausal women whose disease has progressed following treatment with prior endocrine therapy.

 

>  Iressa (gefitinib) is an epidermal growth factor receptor-tyrosine kinase (EGFR-TK) inhibitor that acts to block signals for cancer cell growth and survival in advanced EGFR-TK mutation-positive (EGFR M+) non-small cell lung cancer.

 

>  Nolvadex (tamoxifen citrate) remains a widely used breast cancer treatment outside the US.

 

>  Zoladex (goserelin acetate implant), in one and three month depots1, is a luteinising hormone-releasing hormone (LHRH) agonist used for the treatment of prostate cancer, breast cancer and certain benign gynaecological disorders.

 

 

 

 

 

 

1   Depots are subcutaneous or intra-muscular injections.

 

 

 

Therapy area world market

(MAT/Q3/13)

 

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$64.4bn

 

Wordwide market value

   

 

 

 

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therapeutic approach that may lead to durable and prolonged response rates across a range of tumour types. IMT-Cs harness the power of the patient’s own immune system to fight cancer. We are building a comprehensive programme in this area with a robust pipeline. For more information, see the IMT-C case study on page 32.

In October 2013, we acquired Amplimmune, a biologics company that develops novel therapeutics in cancer immunology, and Spirogen, a biotechnology company specialising in antibody-drug conjugate technology for use in oncology. We also entered into a collaboration agreement with ADC Therapeutics to jointly develop two of its antibody-drug conjugate programmes in pre-clinical development, and made an equity investment in the company.

We aim to be a leader in identifying and developing combination therapies to exploit scientific and biological synergies. With our expertise across both small molecule and biologics research and development, we believe we are well positioned to explore novel combination therapies leading to better outcomes for cancer patients.

Our 2013 focus

Despite generic competition, Arimidex remains a leading global hormonal therapy for patients with early-stage breast cancer. 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.

Zoladex is approved in more than 120 countries 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 to radiotherapy. 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.

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. It is subject to competition from generics.

Iressa was the first EGFR-TK inhibitor to be approved in advanced non-small cell lung cancer and is approved in 89 countries. Iressa is the leading EGFR-TK inhibitor for patients with EGFR M+ advanced non-small cell lung cancer in the European and Asian markets. Iressa is currently not approved in the US. EGFR mutations can be identified by a number of diagnostic tests.

Faslodex 500mg is approved in 75 countries, including the EU member states, the US and Japan. It offers an additional, efficacious, hormonal therapy option and is given by once monthly injections. We are now exploring the efficacy and safety of Faslodex 500mg compared to Arimidex in the 1st line advanced breast cancer setting (hormone-naïve patients) in the Phase III FALCON trial.

Caprelsa fights cancer through two proven mechanisms: by blocking the development of tumour blood supply by inhibiting the vascular endothelial growth factor pathway and by inhibiting the growth and survival of the tumour through EGFR and rearranged during transfection (RET) pathways. Caprelsa was approved by the FDA and

granted orphan drug status in April 2011, and by the EU in February 2012 for the treatment of medullary thyroid cancer in patients with unresectable locally advanced or metastatic disease. Caprelsa is also approved in Canada and remains under review by other regulatory agencies around the world.

In the pipeline

In 2013, we advanced three compounds into Phase III clinical trials. Olaparib, a poly ADP-ribose polymerase (PARP) inhibitor, is currently in Phase III trials for 1st line and platinum-sensitive relapsed BRCA mutated ovarian cancer and 2nd line gastric cancer. Additionally, in September 2013, the EMA accepted a MAA for olaparib (capsules) for the maintenance treatment of patients with BRCA mutated platinum-sensitive relapsed serous ovarian cancer. Selumetinib, a potent mitogen-activated protein kinase (MEK) inhibitor licensed from Array BioPharma Inc., is being studied in a Phase III trial in KRAS mutation-positive advanced non-small cell lung cancer. Moxetumomab pasudotox, a CD22 immunoconjugate, is being studied in a Phase III trial in unresponsive or relapsed hairy cell leukaemia.

Our oncology research pipeline targets both solid tumour and hematologic cancers. Across our small molecule and biologics portfolio, we have three investigational compounds in Phase III clinical trials, six in Phase II clinical trials, and 15 projects in Phase I clinical trials. Additional drug candidates are expected to progress into clinical trials in 2014.

For more information on our Oncology pipeline, see the Research and early clinical development section on page 36.

 

 

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Respiratory, Inflammation

and Autoimmunity

Some 235 million people suffer from asthma

with most asthma-related deaths in low- and

lower-middle income countries.

 

Our marketed products

 

 

Our strategic priorities

We aim to build on our strong position in the respiratory area by delivering innovative inhaled and targeted therapies that address the evolving unmet medical needs of patients with asthma, COPD, and idiopathic pulmonary fibrosis (IPF).

 

In the inflammation and autoimmunity therapy areas we intend to help improve the lives of patients by developing a rheumatology franchise, establishing a foothold through our late-stage programme in gout, and employing a more opportunity- driven approach to dermatology.

 

In addition to novel targeted therapies, our respiratory strategy involves developing unique inhaled therapies.

 

We are also looking at ways to transform how respiratory diseases are managed. We believe a better understanding of biology, patient phenotypes and new drug combinations will help improve clinical outcomes for patients.

 

Asthma and COPD

 

Asthma is a major cause of chronic morbidity and mortality. There is evidence that it has become much more common over the past 20 years. The number of patients whose asthma is not well controlled by current, approved treatments remains a particular unmet medical need.

 

Currently, fixed-dose combinations of an inhaled corticosteroid (ICS) with a long-acting beta2-agonist (LABA) (for example, Symbicort) help treat moderate to severe asthma. However, our R&D efforts focus on targeted therapies to treat more severe, refractory patients who experience severe or frequent exacerbations and a reduced quality of life. Additionally, the population of asthma patients is highly heterogeneous and we are working to better understand patient subtypes and to tailor therapies to the different phenotypes. Please see the case study on page 64 for more information.

 

>  Accolate (zafirlukast) is an oral leukotriene receptor antagonist used for the treatment of asthma.

 

>  Bricanyl Turbuhaler (terbutaline in a dry powder inhaler) is a short-acting beta2-agonist used for the acute treatment of bronchial-obstructive symptoms in asthma and COPD.

 

>  Oxis Turbuhaler (formoterol in a dry powder inhaler) is a fast onset, long-acting beta2-agonist used for the treatment of bronchial-obstructive symptoms in asthma and COPD.

 

>  Pulmicort Turbuhaler (budesonide in a dry powder inhaler) is an inhaled corticosteroid used for maintenance treatment of asthma.

 

>  Pulmicort Respules (budesonide inhalation suspension) is a corticosteroid administered via a nebuliser for the treatment of asthma in both children and adults.

 

>  Rhinocort (budesonide) is a nasal steroid used as a treatment for allergic rhinitis (hay fever), perennial rhinitis and nasal polyps.

 

>  Symbicort pMDI (budesonide/formoterol in a pressurised metered-dose inhaler) is a combination of an inhaled corticosteroid and a fast onset, long-acting beta2-agonist used for maintenance treatment of asthma and COPD, including chronic bronchitis and emphysema in the US, Australia and in a number of other markets.

 

>  Symbicort Turbuhaler (budesonide/ formoterol in a dry powder inhaler) is a combination of an inhaled corticosteroid and a fast onset, long-acting beta2-agonist used for maintenance treatment of asthma and COPD. In asthma, it is also approved for Symbicort Maintenance And Reliever Therapy (Symbicort SMART). Symbicort Turbuhaler is used in most parts of the world outside the US.

 

 

 

 

 

 

 

 

 

Therapy area world market

(MAT/Q3/13)

 

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$95.8bn

 

Wordwide market value

   

 

 

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COPD is a serious lung disease that includes chronic bronchitis and/or emphysema. Medication only has a small impact on the course of the disease and the prognosis for patients remains poor.

The goal of COPD treatment is to slow disease progression and control symptoms. Deterioration of lung function over time usually requires more aggressive treatment, including introducing additional inhaled treatments in an attempt to manage symptoms better. A new class of fixed-dose combinations of a long-acting muscarinic antagonist (LAMA) and a LABA are being developed for COPD and are likely to be positioned as 1st line therapy for symptomatic mild to moderate COPD patients who need effective bronchodilatation and are at lower risk of exacerbations. With the acquisition of Pearl Therapeutics in June 2013, AstraZeneca added a LAMA/LABA combination to its pipeline. ICS/LABA combinations, including Symbicort, are best suited for COPD patients with exacerbations according to recently updated guidelines from the Global Initiative for Chronic Obstructive Lung Disease (GOLD). The GOLD guidelines encourage triple therapy of LAMA/LABA/ ICS when symptoms persist despite treatment with an ICS/LABA. Formulation and device technology acquired from Pearl Therapeutics will also allow us to develop a triple fixed-dose combination in one device which we plan to accelerate into Phase II clinical development in 2014.

Our 2013 focus

The range of Symbicort products improves symptoms and provides a clinically important improvement in the health of many patients with asthma or COPD by providing effective and rapid control of the symptoms, with a long-term maintenance effect.

Pulmicort is one of the world’s leading ICS products for treating asthma and is available in several forms, such as respules. Teva has had an exclusive licence to sell a generic version of Pulmicort Respules in the US since 2009. Pulmicort continues to face increasing challenge from generic products. More information about litigation relating to Pulmicort can be found in Note 25 to the Financial Statements from page 176.

In the pipeline

As outlined above, the acquisition of Pearl Therapeutics has added a LAMA/LABA combination to our Phase III pipeline and a faster route to developing a triple therapy. PT003 is being developed as a twice-daily fixed-dose combination of components that are already approved and marketed in various formulations in many parts of the world – the LAMA glycopyrronium and LABA formoterol (a component of Symbicort). It is the only LAMA/LABA being developed in a pressurised metered-dose inhaler (pMDI), the most widely used inhalation delivery format. Phase III trials began in May 2013. PT010 is a triple combination of LAMA/LABA/ICS given twice-daily from a pMDI device being developed for severe COPD. It is currently in Phase I and has the potential to be among the first products to deliver the three separate therapeutic entities via one inhaler.

Benralizumab is a MAb directed at the interleukin-5 receptor (IL-5R) and depletes eosinophils in the lung, immune cells that have been shown to play an important role in asthma. We have accelerated the initiation of the Phase III asthma programme and in October 2013 we initiated CALIMA, the first of five studies in the Phase III clinical development programme for benralizumab. The CALIMA study aims to determine whether benralizumab reduces the number of exacerbations in patients with severe asthma and elevated eosinophils who remain inadequately controlled despite treatment with inhaled and/or oral corticosteroids.

Other therapies in development for severe asthma include the biologic tralokinumab and the small molecule AZD5069. Tralokinumab is a human antibody targeting IL-13, a key cytokine involved in many aspects of asthma. Tralokinumab has completed Phase II studies in inadequately controlled asthma, and is also currently in Phase II development for the treatment of mild to moderate IPF. AZD5069 is a CXCR2 antagonist in Phase II development for asthma. CXCR2 inhibition prevents the recruitment and activation of neutrophils, a cell type thought to play a central role in asthma and COPD.

Inflammation and Autoimmunity

Gout is the most common form of inflammatory arthritis. It occurs when high levels of uric acid in the blood, known as hyperuricaemia, lead to deposition of needle-like crystals in joints and soft tissues throughout the body, causing inflammation. Hyperuricaemia results when the kidneys do not efficiently remove enough uric acid, or when the body produces too much. In 2013, there were an estimated 15.3 million diagnosed cases of gout in major markets, which include the US, Canada, France, Germany, Italy, Spain, the UK and Japan. This is forecast to increase to 17.7 million in 2021.

Psoriasis is a chronic disease in which the immune system causes the skin cells to grow at an accelerated rate. Instead of being shed, the skin cells pile up, causing painful and itchy, red, scaly patches that can bleed. Up to 12 million patients are diagnosed with psoriasis across the US and Europe each year. Despite various treatment options for moderate to severe plaque psoriasis, many patients do not meet their therapeutic goals, including the resolution of underlying inflammation, clearing of symptoms and improvement

 

 

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Strategic Report | Therapy Area Review | Respiratory, Inflammation and Autoimmunity

 

in quality of life. Biologics are currently used in moderate to severe cases where patients are candidates for, or are unresponsive to, phototherapy or systemic therapy.

Current treatment of systemic lupus erythematosus (SLE) focuses on suppressing symptoms and controlling disease flares and, in the case of lupus nephritis, preventing renal failure. Although a biologic medicine has recently been launched for SLE, most therapies used are off-label and there remains significant unmet medical need. Most emerging biologic agents are likely to be used initially after failure of standard therapies (including corticosteroids and immunosuppressants) or in combination to provide incremental benefit, prevent flares and allow reduction of high-dose chronic steroid use.

Rheumatoid arthritis is currently treated with generic disease-modifying anti-rheumatic agents and, where the relevant criteria are met, biologic disease modifiers. Novel effective treatments are needed as only about a third of patients treated with biologics achieve their treatment goals. We anticipate that the rheumatoid arthritis market will experience modest annual growth over the next decade. Sales of the biologic tumour necrosis factor (TNF) alpha-blockers accounted for 72% of major market rheumatoid arthritis sales in 2012. Use of other biologic approaches is expected to increase due to new entrants, new subcutaneous formulations and use earlier in the treatment pathway. Novel oral drugs targeting intra-cellular signalling pathways may provide anti-TNF-like levels of efficacy and potentially more convenient dosing, especially in patients who are not taking, or are ineligible to take, injectable biologic agents.

In the pipeline

In 2012, AstraZeneca acquired Ardea, a San Diego-based company. Ardea is developing lesinurad, a selective uric acid re-absorption inhibitor (SURI) that inhibits the URAT1 transporter, normalising uric acid excretion and reducing serum uric acid (sUA).

In December 2013, we announced top-line results from LIGHT, a Phase III study investigating the potential of lesinurad as a monotherapy in the small population of gout patients who are intolerant to, or cannot take, one or both xanthine oxidase

inhibitors, allopurinol and febuxostat. In the trial, lesinurad, used as a monotherapy, met the primary endpoint. However, patients in the study were more likely to experience serum creatinine elevations and renal adverse events, including serious events, compared to patients on placebo.

The main Phase III trials in the lesinurad programme are investigating lesinurad in combination with allopurinol in patients not reaching target sUA levels on allopurinol alone (CLEAR1 and CLEAR2), and as a combination therapy with febuxostat in patients with tophaceous gout (CRYSTAL). We believe that combination therapy, addressing both production (xanthine oxidase inhibitors) and excretion (lesinurad) of uric acid may be an effective way to treat gout patients who have not achieved target sUA levels on xanthine oxidase inhibitors alone. The results of the lesinurad combination therapy studies are expected in mid-2014, and regulatory submissions in the US and EU are expected in the second half of 2014.

In August 2013, we decided to progress RDEA3170 as our lead gout molecule in Asia, including Japan and China. RDEA3170 is a next generation SURI and we have begun a programme of work to support submission in Japan and other Asian markets. In pre-clinical and Phase I clinical studies, RDEA3170 showed many of the same attributes as lesinurad but with significantly greater potency against the URAT1 transporter. It is being investigated as a potentially differentiated molecule that could be used earlier in the treatment of gout and in asymptomatic hyperuricaemia. Phase I studies in Japan are complete and a Phase II study will begin in early 2014. In addition, a global Phase II monotherapy programme for RDEA3170 began in August 2013 and has completed recruitment ahead of schedule.

In October 2013, together with Amgen, we announced the initiation of the Phase III programme for brodalumab in moderate to severe psoriasis. The programme includes three Phase III studies evaluating treatment with brodalumab compared with ustekinumab and/or placebo. Brodalumab is a human MAb targeting the interleukin-17 (IL-17) receptor, to treat moderate to severe psoriasis. The Phase II data showed that

the primary and secondary end points were met, including many patients achieving and maintaining total skin clearance with continued brodalumab therapy. Brodalumab is also being investigated in Phase II studies for psoriatic arthritis and asthma. Brodalumab (AMG 827) is one of five MAbs from Amgen’s clinical inflammation portfolio which the two companies have agreed to develop and commercialise jointly. The other four compounds are AMG 139, AMG 157, AMG 181 and AMG 557.

In 2013, we continued to invest in several novel multi-functional MAbs in inflammatory and autoimmune conditions. Sifalimumab, which targets interferon-alpha, continued clinical development with a Phase IIb study in patients with SLE. MEDI-546, which targets the interferon-alpha receptor, continued in a Phase IIb study in patients with SLE. Mavrilimumab, which targets the alpha sub-unit of the granulocyte-macrophage colony-stimulating factor receptor (GM-CSFR), continues in Phase IIb for patients with rheumatoid arthritis and has completed enrolment.

The results of the Phase III OSKIRA programme for fostamatinib, an oral spleen tyrosine kinase inhibitor in development as a treatment for rheumatoid arthritis, did not measure up to the promising results seen earlier in development. Therefore, in June 2013, AstraZeneca decided not to proceed with regulatory filings for fostamatinib and returned the rights to the compound to Rigel Pharmaceuticals.

 

 

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Infection, Neuroscience

and Gastrointestinal

AstraZeneca has a long history in the fields of Infection, Neuroscience and Gastrointestinal (ING) diseases which represent a high area of unmet medical need for patients around the world. Previously managed as three separate therapy areas, in March 2013 we combined them into one area and are investing in them opportunistically. We are developing or commercialising innovative therapies and are also seeking to optimise the potential of our existing medicines. We seek to maximise the access all patients have to our therapies, using innovative approaches in Emerging and Established Markets.

 

 

Infection

 

Our marketed products

 

 

Respiratory syncytial virus (RSV)

  > Synagis (palivizumab) is a humanised MAb used for the prevention of serious lower respiratory tract disease caused by RSV in paediatric patients at high risk of acquiring RSV disease.

Serious bacterial infections

  > Cubicin1 (daptomycin) is a cyclic lipopeptide anti-bacterial used for the treatment of serious infections in hospitalised patients.

 

  > Merrem/Meronem2 (meropenem) is a carbapenem anti-bacterial used for the treatment of serious infections in hospitalised patients.

 

  > Zinforo3 (ceftaroline fosamil) is a novel injectable cephalosporin used in community-acquired pneumonia (CAP) and complicated skin and soft tissue infections (cSSTI).

Influenza virus

  > FluMist/Fluenz (influenza vaccine live, intra-nasal) is an intra-nasal, live, attenuated, trivalent influenza vaccine.

 

  > FluMist Quadrivalent/Fluenz Tetra (influenza vaccine live, intra-nasal) is an intra-nasal, live, attenuated, quadrivalent influenza vaccine.

 

1  Licensed from Cubist Pharmaceuticals, Inc.
2  Licensed from Dainippon Sumitomo Pharmaceuticals Co., Limited.
3  Licensed from Forest.

Our strategic priorities

Infectious diseases are the second leading cause of death worldwide after heart disease. We have one of the industry’s largest anti-bacterial pipelines, and a leading position in the area of respiratory viruses. Based on this strong foundation, we aim to bring innovative life-changing treatments to market and help patients avoid the consequences of infections.

By making effective use of our structural and genomic-based discovery technologies and antibody platforms, vaccines and continued small molecule and biologics research, we plan to deliver novel approaches in areas of unmet medical need.

Influenza virus

Influenza is the most common vaccine-preventable disease in the developed world. According to WHO, seasonal influenza results in three to five million cases of severe illness and up to half a million deaths each year, primarily among the elderly. Rates of infection are, however, highest among children, and school-age children are the main transmitters of the flu virus. Vaccinating children can lower the burden of influenza, both through direct immune protection and through blocking transmission or ‘herd immunity’. The LAIV (live attenuated influenza vaccine) which we developed is recognised as the most effective paediatric influenza vaccine, with studies showing a 50% superior efficacy over TIV (trivalent influenza vaccine) which is the standard of care. Recently published health economy models also show that vaccinating children with LAIV could be the most cost-effective influenza policy strategy.

The latest development in our influenza vaccines is the quadrivalent vaccine, containing one additional B-virus strain for broader protection. The WHO rationale for adding another B-virus strain into the vaccine is to reduce the risk of mismatch between the circulating virus strains and the annual vaccine, which in turn could offer better overall protection. The intra-nasal FluMist Quadrivalent, LAIV, was the first quadrivalent vaccine to be approved globally by the FDA in February

2012. In 2013, FluMist Quadrivalent was supplied to the US and Israel markets and successfully replaced the trivalent FluMist.

In December 2013, the EC granted marketing authorisation for Fluenz Tetra (equivalent to FluMist Quadrivalent), for the prevention of seasonal influenza in eligible children and adolescents aged from two to 18 years. Fluenz Tetra is the first and only intra-nasal, four-strain influenza vaccine available in Europe. Fluenz Tetra will replace Fluenz from the 2014-2015 flu season onwards.

Paediatric influenza prevention and LAIV superiority over TIV was recognised in two major EU public programmes during 2013. In August 2013, the German Standing Committee on Vaccinations (STIKO) recommended the use of LAIV in children aged two to six years with underlying medical conditions as the preferred influenza vaccine. Fluenz is the only available LAIV against seasonal influenza in Germany and this is the first time that a single vaccine has received preferential recommendation by STIKO. In September 2013, immunisation with Fluenz was rolled out in the UK following a 2012 decision by the Joint Committee of Vaccination and Immunisation. The roll-out is the first step in implementing the new nationwide paediatric flu vaccination programme which is expected to ultimately include all children from two to 16 years.

Respiratory syncytial virus (RSV)

Approximately half of all infants worldwide are infected with 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. RSV is the leading cause of hospitalisations and admissions to paediatric intensive care units in the first year of life.

 

 

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Synagis is used for the prevention of serious lower respiratory tract disease caused by RSV in children at high risk of the disease. With approval in 83 countries, we continue to work with our worldwide partner AbbVie to protect vulnerable infants from RSV. Synagis is currently the only MAb approved for the immunoprophylaxis of RSV and is the global standard of care for RSV prevention.

We are developing a live, intra-nasal vaccine for the prevention of lower respiratory tract illness caused by RSV in otherwise healthy infants. The lead vaccine candidate in clinical development is in Phase I.

Serious bacterial infections

Antibiotic or antimicrobial resistance (AMR), has been recognised as one of the greatest threats to human health by world leaders and has recently taken a high position on the global health agenda. As a result, world demand for antibiotics and novel therapeutic approaches remains high and will continue to grow. Many bacterial infections currently have few satisfactory treatment options, prompting demand for new and better therapies.

Zinforo, developed in collaboration with our partner Forest, is one of the latest antibiotics authorised in Europe. Zinforo is the first antibiotic to be approved by the FDA since the introduction of the Infectious Diseases Society of America’s ‘10 x 20’ initiative and is one of only a handful of new antibiotics to have been approved by the EMA and FDA in the last five years. Zinforo is indicated for use as a monotherapy in the treatment of hospitalised adult patients with complicated skin and soft tissue infections (cSSTI) or community-acquired pneumonia. It is the only cephalosporin with methicillin-resistant Staphylococcus aureus (MRSA) efficacy that is approved for the treatment of cSSTI.

Merrem/Meronem remains the leading carbapenem anti-bacterial and is approved in most countries outside Japan, although it is subject to competition from generics in most major markets. It has a growing share of the intravenous antibiotic market because of its activity against multiple drug resistant bacteria.

Our antibacterials portfolio is targeting the most serious indications and pathogens. We continue to work with Forest on joint global development programmes exploiting the full potential of avibactam, including CAZ AVI (a combination of ceftazidime and avibactam), CXL (a combination of ceftaroline and avibactam) and ATM AVI (a combination of aztreonam and avibactam). We are also developing therapies independent of our collaboration with Forest.

Neuroscience

 

Our marketed products

 

 

Psychiatry

  > Seroquel IR (an immediate release formulation of quetiapine fumarate) is an atypical anti-psychotic generally 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, major depressive disorder (MDD) and, on a more limited basis, for generalised anxiety disorder (GAD).

Analgesia and anaesthesia

  > Diprivan (propofol) is an intravenous general anaesthetic used in the induction and maintenance of general anaesthesia, intensive care sedation and conscious sedation for surgical and diagnostic procedures.

 

  > EMLA (lidocaine and prilocaine) is a local anaesthetic for topical application (cream and patch), to prevent pain associated with injections and minor surgical procedures, and to facilitate cleansing/debridement of leg ulcers.

 

  > Naropin (ropivacaine) is a long-acting local anaesthetic for surgical anaesthesia and acute pain management.

 

  > Vimovo1 (naproxen/esomeprazole magnesium) is generally approved for symptomatic relief in the treatment of rheumatoid arthritis, osteoarthritis and ankylosing spondylitis in patients at risk of developing NSAID-associated gastric and/or duodenal ulcers.

 

  > Xylocaine (lidocaine) is a short-acting local anaesthetic for topical and regional anaesthesia.

 

  > Zomig (zolmitriptan) is used for the acute treatment of migraine, plus for the acute treatment of cluster headache in the EU. Zomig is available in three formulations: oral tablet, orally dispersible tablet and nasal spray.

 

1  Licensed from Pozen.

Our strategic priorities

In the neuroscience area, we have a long history in anaesthesia and analgesia, plus a sizeable business in psychiatry rooted in Seroquel IR and Seroquel XR. We are now focused on developing new drug candidates, primarily in Alzheimer’s and Parkinson’s diseases and pain control, that have the potential to offer therapeutic advantages.

While rapid progress is being made in understanding diseases of the brain, some of these debilitating illnesses have few effective treatments and, for others, there continues to be major unmet medical need. In response to this challenge, AstraZeneca created a Neuroscience IMED in 2012, a team of approximately 40 scientists based in Cambridge, Massachusetts, US and Cambridge, UK, two locations strongly associated with neuroscience research. The Neuroscience IMED conducts discovery and development externally through a network of partners in academia and industry. It is designed to merge scientific advances within the biotechnology and academic worlds and to develop their potential through the scientific, commercial and geographical reach of AstraZeneca.

Neurology

Alzheimer’s disease remains one of the largest areas of unmet medical need. Product development in this therapy area is particularly difficult due, in part, to the challenges of establishing efficacy in clinical studies. Current treatments, most of which face patent expiry by 2015, target the symptoms, not the underlying cause, of the disease. Slowing the course of disease progression, through biologics and/or small molecule treatments, is the hope for Alzheimer’s disease patients and for people with other neurodegenerative disorders, such as Parkinson’s disease.

We have initiated multiple collaborations to help advance disease understanding and identify potential new drug targets. In Alzheimer’s disease, we are working with the Karolinska Institutet (Sweden), the Banner Alzheimer’s Institute (US), the National Institute of Radiological Sciences (Japan), Vanderbilt University (US), and an alliance of several academic centres (known as ‘A5’). A new, three-year collaboration with Tufts University (US) targets a range of diseases and disorders of the brain, including Alzheimer’s disease, Parkinson’s disease and autism spectrum disorders. Our collaboration with Vanderbilt University focuses on psychosis and other neuropsychiatric symptoms associated with major brain diseases such as Alzheimer’s disease and schizophrenia.

AZD3241 is in Phase II of development and is a myeloperoxidase (MPO) inhibitor in development to delay progression of disability in patients with idiopathic Parkinson’s disease or multiple system atrophy.

 

 

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AZD3293 is in Phase I of development and is a beta-site amyloid precursor protein cleaving enzyme (BACE) inhibitor in development to slow the course of disease progression of Alzheimer’s disease.

Psychiatry

More than 450 million people worldwide are affected by mental, neurological or behavioural health problems, and more than 350 million people suffer from depression. Yet psychiatric illnesses remain under-diagnosed and under-treated conditions, with a substantial social and economic burden.

Both Seroquel IR (quetiapine fumarate), launched in 1997, and Seroquel XR (quetiapine fumarate extended release), launched in 2007, have been important treatment choices for millions of patients worldwide. Seroquel XR remains a key product. In most markets, the substance patent protecting the active ingredient, quetiapine, expired in March 2012. However, in the majority of European markets, the formulation patent covering Seroquel XR does not expire until 2017. While we remain confident in our IP and are committed to vigorously defending the patent protecting Seroquel XR, it has been subject to a number of challenges and revocations. Details of litigation relating to Seroquel XR are included in Note 25 to the Financial Statements from page 176.

Analgesia and anaesthesia

Our established anaesthesia portfolio consists of a broad range of compounds, including an intravenous general anaesthetic/sedative and local anaesthetics available in various formulations, such as injectables, creams, gels, sprays and suppositories. Although these compounds were developed between 20 and 65 years ago and most no longer benefit from patent protection, they remain important medicines that meet a broad range of patient needs and continue to deliver significant value.

Opioids are the current standard of care for managing moderate to severe pain in many countries. In the five countries that represent approximately 80% of global opioid use (US, UK, France, Germany and Canada), 45 million patients take them to manage chronic pain. Biologics are an emerging treatment option for pain control and we have an active interest in this area. We are exploring treatments in focused pain areas where patients can be selected on the basis of symptomatic characteristics.

Vimovo, 375/20-500/20mg, co-developed by AstraZeneca and Pozen, is a fixed-dose combination of enteric-coated naproxen (an NSAID), and immediate-release esomeprazole, a stomach acid-reducing proton pump inhibitor (PPI). During 2013, we reviewed the investment to commercialise Vimovo around the world given the significant market access and reimbursement challenges that affected the product’s overall performance. We decided to continue to market Vimovo in those markets where we believe it would be most responsive to commercial efforts, such as Canada, and a number of countries in Emerging Markets. We ceased sales promotion of Vimovo in the US and all promotion in the majority of Europe (except Spain and Portugal) from the second quarter of 2013. However, we continue to make the product available to patients in the EU. In November 2013, we announced an agreement for Horizon Pharma to acquire all US rights of Vimovo. We retained the right to commercialise Vimovo in the rest of the world.

Naloxegol (formerly NKTR-118), licensed from Nektar Therapeutics, is an investigational peripherally-acting mu-opioid receptor antagonist (PAMORA), which has been studied in opioid-induced constipation (OIC) in adult patients with chronic non-cancer pain, the most common side effect caused by chronic administration of prescription opioid pain medicines. Over 69 million people worldwide take opioids to help deal with chronic pain. OIC can affect up to 90% of these patients with only 40-50% achieving desired treatment outcomes with current options such as OTC and prescription laxatives. If approved, naloxegol will be an important new treatment option for patients struggling with OIC and has the potential to be the first once-daily oral PAMORA medication to treat the condition. Following top-line results from two Phase III trials and one safety extension trial in patients with non-cancer related pain and OIC, an NDA and an MAA for naloxegol have been accepted by the FDA and EMA respectively. Additional analyses and regulatory consultations are ongoing.

AZD5213 is in Phase II and is a histamine-3 receptor antagonist in development for neuropathic pain.

Gastrointestinal

 

Our marketed products

 

 

 

  > Entocort (budesonide) is a locally-acting corticosteroid used for the treatment of inflammatory bowel disease.

 

  > Losec/Prilosec (omeprazole) is used for the short- and long-term treatment of acid-related diseases.

 

  > Nexium (esomeprazole magnesium) is the first proton pump inhibitor (PPI) used for the treatment of acid-related diseases to offer clinical improvements over other PPIs and other treatments.

Our strategic priorities

Nexium is marketed in more than 125 countries and is available in oral (tablet, capsule and sachet for oral suspension) and intravenous dosage forms, for the treatment of acid-related diseases. Nexium is also approved for use in children from the age of one month in the US and from one year in Europe and other markets. Nexium capsules were launched in Japan in September 2011 after a national development programme.

We aim to maximise the benefits for patients of our current gastrointestinal portfolio by focusing investment on Nexium in Japan and Emerging Markets, including China.

Nexium is generally subject to competition from generics in Europe and we expect the first generic entry in the US in 2014. Patents protecting Nexium have been subject to a number of challenges in different jurisdictions and details of these matters are included in Note 25 to the Financial Statements from page 176. This includes consideration of Hanmi’s US launch of its 505(b)(2) NDA esomeprazole strontium product. AstraZeneca understands that this product is not AB-rated and is not automatically a substitute for Nexium.

In 2012, Pfizer acquired the exclusive global rights to market Nexium for OTC indications worldwide. The NDA submission for Nexium OTC in the US was completed in mid 2013. In August 2013, the EC approved Nexium Control (the marketed name for OTC Nexium in Europe). The commercial launch for OTC Nexium 20mg in the US and Europe is planned for 2014, subject to regulatory approval.

 

 

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Helping people

breathe easier

Personalised asthma treatments

 

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235 million

Some 235 million people suffer from asthma*

 

64 million

An estimated 64 million people had COPD in 2004*

 

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Employees

 

Our ambition is to Be a Great Place to Work by maximising the potential of a talented and diverse workforce.

 

  LOGO
   

“A flatter organisational structure is driving accountability and improving decision making among employees, while our culture jam and pulse survey results demonstrated the level of engagement our employees have with our purpose and strategic ambition.”

 

Caroline Hempstead

Interim EVP, HR & Corporate Affairs

 

 

 

 

Employees by geographical area (%)

 

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We value the talents, skills and capabilities that our global workforce of around 51,500 people in more than 100 countries brings to our business. Our people strategy, which seeks to support AstraZeneca’s overall goals and ambition to Be a Great Place to Work, is built around a number of key areas. These include:

 

>  acquiring and retaining key capabilities and talent

>  developing leadership

>  evolving our culture

>  implementing a new set of values and behaviours.

 

Another aim is to improve the strength and diversity of the talent pipeline and, by driving belief in our strategic priorities, to help build employee engagement. AstraZeneca’s leaders also direct considerable attention to managing change in our global team (see the Managing change section on page 69). We use a range of metrics to track our progress against these priorities, many of which are reported regularly to the SET.

 

Acquiring and retaining key capabilities and talent

During 2013, we hired about 7,800 permanent employees to support our growth platforms (including building our business in Emerging Markets), to continue to build the new capabilities required to implement our strategy successfully, and to replace leavers. We have successfully attracted talent to supplement critical capabilities across the business and to refresh our leadership pipeline in key areas.

 

We focus considerable attention on emerging talent recruitment to secure and develop the long-term potential for the business. For example, we run a global programme to hire recent graduates for our procurement, quality, engineering, IT and supply chain functions. In 2013, we launched a new graduate programme for IMED to complement our established

 

IMED Post Doc Programme that recruits post-doctoral researchers. We invest in internships and thesis work opportunities globally, as well as leading a scheme in China and Japan for MBA students.

 

The composition of our global workforce continues to change, to reflect our focus on Emerging Markets, as shown in our Sales and Marketing workforce composition figure opposite. For example, in 2013, 3,200 new recruits joined us in China. We deploy a range of innovative approaches to help achieve our plans in Emerging Markets and to ensure we have an attractive employer brand and strong global reputation. In 2013, AstraZeneca was featured for the first time in LinkedIn’s InDemand Employer list of the most sought-after employers in the world.

 

The level of voluntary employee turnover increased to 8.1% in 2013, from 7.3% in 2012. In a year of significant organisational change at senior level, we also experienced higher than normal turnover among our high performers. More broadly, our voluntary employee turnover rate among our high performers in 2013 also increased. We continued to invest significant management time in minimising the business risks of employee turnover, particularly in volatile markets. This included regular SET reviews of resignation rates in total, by SET area, by key markets and for significant sites. In addition, we took steps to retain key people and talent such as establishing regular risk assessments and retention plans.

 

Acquisition of BMS’s diabetes interests

In December 2013, AstraZeneca announced an agreement to purchase BMS’s 50% interest in AstraZeneca’s and BMS’s joint diabetes business. This acquisition completed in February 2014. Under the agreement, approximately 3,900 BMS and Amylin employees will transfer to AstraZeneca. These employees are not included in the analysis described in this section or elsewhere in this Annual Report.

 

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Sales and Marketing

workforce composition (%)

 

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Developing leadership

We encourage and support our people in achieving their full potential by providing a range of learning and development (L&D) programmes. These aim to build the capabilities and encourage the behaviours needed to deliver our business strategy.

We have a global approach, supported by our global talent and development organisation, to ensure high standards of L&D practice across AstraZeneca. We continue to develop and deploy instructor-led and online development resources, which we aim to make available to all employees to increase access to learning and support self-development.

We recognise that good leadership plays a critical role in stimulating high levels of performance and engagement. In 2013, we initiated a Group-wide Leadership Development Strategy to strengthen our leadership and make it a differentiating factor in our success. Our ultimate vision is to offer all employees an appropriate, globally consistent leadership development experience that helps inspire an enterprise-wide perspective. In 2013, we launched a customised programme for our Top 150 leaders with Harvard Business School. This will be followed by a programme for the next 600 leaders with the Massachusetts Institute of Technology (MIT). Both programmes help leaders to consider the environment they create, how open and inclusive it can be, and how this can lead to opportunities for innovation.

Changing our culture

Our leadership development frameworks focus on the behaviours we believe are essential for strong and effective leadership. Such behaviours were defined in line with the work completed in 2013, to identify the AstraZeneca values, as outlined in the Pioneering science, life-changing medicines section on page 12.

Each value has a corresponding set of required behaviours which describe what is required at the individual level to demonstrate the values. These behaviours apply to all employees and are complemented with manager accountabilities, which define what we expect from managers.

Maximising our talent

The development of an internal pipeline of future global leaders is as high a priority as the judicious hiring of new leaders. We identify individuals with the potential for senior and complex roles, to provide succession candidates for leadership roles across AstraZeneca. We regard these individuals as key and proactively support them in reaching their potential through, for example, global talent development programmes and targeted development opportunities. The changes to the SET, announced in January 2013, included the promotion of six internal candidates, demonstrating our commitment to developing senior leaders.

We remain committed to making full use of the talents and resource of all our people. We have policies in place to avoid discrimination, including on the grounds of disability. Our policies cover recruitment and selection, performance management, career development and promotion, transfer, training (including re-training, if needed, for people who have become disabled) and reward.

Improving the strength and diversity of the talent pipeline

Our workforce has a diverse range of perspectives, talents and ideas. For a business founded on innovation, this is a source of great strength. Understanding the different needs and perspectives of our stakeholders is central to how we do business and to how we create medicines which make a difference to patients’ lives.

We strive to reflect the diversity of the communities we serve in our workforce and leadership team. As we continue to reshape our organisation and geographic footprint, we aim to ensure diversity and inclusion are integrated in a meaningful way into our business and people strategies.

Our objective is to accelerate diversity and inclusion in its broadest sense appropriately throughout the business, to build accountability, and track progress. As shown in the gender diversity figure overleaf, women make up 50.4% of our global workforce. There are currently three women on our Board (25%) and, below Board level, women account for 40% of managers at Global Career Level F and above.

Our 2015 target is to improve female representation:

 

> at Global Career Level F and above (the highest six bands of our employee population) from 38% (2010) to 43% (2015)
> in the global talent pool from 33% (2010) to 38% (2015).

We also track the countries of origin of our senior leaders, and within our global talent pool, to measure progress over the medium term.

Our progress against these metrics is primarily overseen by the Responsible Business Council (made up of senior leaders from across AstraZeneca) and through business area people strategies and business strategies. See the Responsible Business section from page 220 for more information.

 

 

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Gender diversity

 

Board of Directors

of the Company 12

  SET* 12  

Directors of the

Company’s subsidiaries* 317

 

AstraZeneca

employees 51,500

LOGO   LOGO   LOGO   LOGO

 

* For the purposes of section 414C(8)(c)(ii) of the Companies Act 2006, ‘Senior Managers’ are the SET, the directors  
     of all of the subsidiaries of the Company and other individuals holding named positions within those subsidiaries.  

 

 

We continue to make progress against our diversity and inclusion strategy, as demonstrated, for example, by the Global Insight Exchange programme. This aims to accelerate the development of our leadership culture and talent pipeline through sharing diversity of thought and experience. The programme, which is now in its second year, launched a second cohort in 2013, consisting of 60 coaching pairs of individuals from different leadership levels, functional areas and geographies.

Our progress has been recognised externally. In 2013, we received Opportunity Now’s ‘Global Excellence in Practice Award’ for work in Asia to attract and retain local and global talent with emphasis on gender and local geography diversity. In 2013, we were also included in The Times’ ‘Top 50 Employers for Women in the UK’ list for the first time and, in the US, (based on data submitted in 2011-2012) we were included in the top 10 of the National Association for Female Executives’ list of top 50 companies for female executives in 2013.

Employee engagement

We use a variety of global leadership communication channels to engage employees in our business strategy. These include face-to-face meetings, video conferencing, Yammer (a social media tool) and regular global and business-specific communication campaigns (eg a week dedicated to communicating to employees about our scientific leadership ambitions and projects) to encourage two-way dialogue to take place. In 2013, we ran an online collaborative event, called ‘culture jam’ to discuss and explore our culture and values. The culture jam, with over 30,000 registrations for the event, was designed to be a fully inclusive way of providing employees the opportunity to engage

directly with senior leaders as well as hold virtual discussions with colleagues globally. Locally facilitated offline sessions were run in parallel so that employees could participate in local languages as appropriate, and without the need for computers. The culture jam generated some 25,000 employee questions, stories and comments that will be used to further support and accelerate culture change within the organisation.

We did not hold a global employee survey (FOCUS) in 2013. Instead, we ran two ‘pulse’ surveys across a sample of the organisation. A further survey was carried out in January 2014. The results rated employee understanding of our strategy at 88%, with employee belief in our strategy rising to 84%. In parallel, we ran in-depth pulse surveys on employees affected by the site changes in the UK and the US. We intend to conduct regular employee surveys during 2014. As well as reviewing the pulse survey results, we also track key metrics, such as retention rates, to help assess levels of engagement.

A key element of our new culture and behaviours is a continued focus on performance. By strengthening our focus on setting high-quality objectives aligned to our business strategy, and on ongoing coaching and feedback, we strive so that performance at all levels delivers value. The Board is responsible for setting our high level strategic objectives and monitoring performance against them (see the Operation of the Board section from page 88). Managers are accountable for working with their teams to develop individual and team performance targets, and for ensuring employees understand how they contribute to overall business objectives.

We will continue to empower our leaders to drive performance, hold our managers accountable for understanding and delivering against required standards, and provide the tools to reward outstanding contributions.

Our focus on optimising performance is reinforced by performance-related bonus and incentive plans. AstraZeneca also encourages our people to participate in various employee share plans, some of which are described in the Directors’ Remuneration Report, from page 102, and also in Note 24 to the Financial Statements, from page 173.

Human rights

We are committed to respecting and promoting international human rights in our operations and our sphere of influence. Our objective is to ensure that human rights considerations are appropriately integrated into our policies, processes and practices.

AstraZeneca supports the principles set out in the UN Universal Declaration of Human Rights and the International Labour Organization’s (ILO) standards on child labour and minimum wages, and we are members of the United Nations Global Compact on Human Rights. As reported in 2011, we have carried out labour reviews in 106 countries in which we have employees. These focused on ILO core areas, including freedom of association and collective bargaining, child labour, discrimination, working hours, and wages. The review framework was adapted from the employment section of the Danish Institute for Human Rights assessment tool for pharmaceutical companies, which was developed with our industry’s help and launched in 2010. Results showed that our practices are generally good and consistent across all countries, based on our mandate that our global standards are applied when

 

 

68    AstraZeneca Annual Report and Form 20-F Information 2013


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