What science can do
AstraZeneca Annual Report and Form 20-F Information 2020
Welcome
We are a global, science-led,
patient-focused pharmaceutical
company. We are tireless in
seeking to realise the potential of...
...what
science
can do.
In this Annual Report we report on
the progress we made in 2020 in
pushing the boundaries of science
to deliver life-changing medicines.
Our Strategic Report
How our therapy areas and business
performed in delivering our strategic
priorities in 2020, including our
response to the COVID-19 pandemic.
See our Strategic Report from page 2.
Our Corporate Governance Report
How we are managed and take
decisions, including our report
on Directors’ remuneration.
See our Corporate Governance Report
from page 101.
Our Financial Statements
and Additional Information
Detailed information on our finances,
our marketed medicines and
medicines in development, as well
as information for shareholders.
See our Financial Statements from page 169
and Additional Information from page 245.
Use of terms:
In this Annual Report,
unless the context
otherwise requires,
‘AstraZeneca’, ‘the Group’,
‘we’, ‘us’ and ‘our’ refer to
AstraZeneca PLC and its
consolidated entities.
Front cover image:
Clinical innovation
Digital technologies are
creating never- seen-before
opportunities to capture
real-time data from patients.
AstraZeneca is growing its
digital capabilities across
R&D to explore how we can
better inform our clinical
trials and help patients
prevent, manage or treat
their disease.
Inside front cover image:
Data science & AI are
transforming drug discovery
and development.
Contents
Financial highlights
Total Revenue*
Up 9% at actual rate of exchange to
$26,617 million (up 10% at CER), comprising
Product Sales of $25,890 million (up 10%;
11% at CER) and Collaboration Revenue
of $727 million (down 11%; 11% at CER)
Net cash flow from operating activities
Up 62% at actual rate of exchange
to $4,799 million
2020
2019
2018
$26.6bn
$26,617m
$24,384m
$22,090m
2020
2019
2018
$4.8bn
Reported operating profit
Up 77% at actual rate of exchange
to $5,162 million (up 81% at CER)
Core operating profit
Up 14% at actual rate of exchange
to $7,340 million (up 17% at CER)
2020
2019
2018
$5.2bn
$5,162m
$2,924m
$3,387m
2020
2019
2018
$7.3bn
Reported EPS
Up 137% at actual rate of exchange
to $2.44 (up 142% at CER)
Core EPS
Up 15% at actual rate of exchange
to $4.02 (up 18% at CER)
2020
2019
2018
$2.44
$2.44
$1.03
$1.70
2020
2019
2018
$4.02
$4,799m
$2,969m
$2,618m
$7,340m
$6,436m
$5,672m
$4.02
$3.50
$3.46
Denotes a scale break. Throughout this Annual Report, all
bar chart scales start from zero. We use a scale break where
charts of a different magnitude, but the same unit of
measurement, are presented alongside each other.
For more information in relation to the inclusion of
Reported performance, Core financial measures and
constant exchange rate (CER) growth rates as used in this
Annual Report, see the Financial Review from page 82.
* As detailed from page 181, Total Revenue consists of Product Sales and Collaboration Revenue.
Key
For more information
within this Annual Report
For more information, see
www.astrazeneca.com
BV Denotes sustainability
information independently
assured by Bureau Veritas
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Strategic Report
AstraZeneca at a Glance 2
Chairman’s Statement 4
Chief Executive Officer’s Review 5
Business Model and
Life-cycle of a Medicine 8
Healthcare in a Changing World 12
Our Strategy and
Key Performance Indicators 18
Performance in 2020 24
Therapy Area Review 30
> Oncology 30
> Cardiovascular,
Renal & Metabolism 36
> Respiratory & Immunology 42
> Other Medicines and
COVID-19 47
Business Review 52
Risk Overview 78
Financial Review 82
Corporate Governance
Chairman’s Introduction 102
Corporate Governance
Overview 103
Board of Directors 104
Senior Executive Team 106
Corporate Governance Report 108
Science Committee Report 119
Nomination and Governance
Committee Report 120
Audit Committee Report 122
Directors’ Remuneration Report 131
Remuneration Policy 156
Financial Statements
Preparation of the Financial
Statements and Directors’
Responsibilities 169
Auditors’ Report 170
Consolidated Statements 176
Group Accounting Policies 180
Notes to the Group
Financial Statements 187
Group Subsidiaries
and Holdings 234
Company Statements 238
Company Accounting Policies 240
Notes to the Company
Financial Statements 241
Group Financial Record 243
Additional Information
Development Pipeline 245
Patent Expiries of Key Marketed
Products 251
Risk 254
Shareholder Information 267
Directors’ Report 272
Sustainability: Supplementary
Information 275
Taskforce on Climate-related
Financial Disclosures
Statement 276
Trade Marks 279
Glossary 280
Cautionary Statement Regarding
Forward-looking Statements 284
This Annual Report is also available on our website,
www.astrazeneca.com/annualreport2020
AstraZeneca Annual Report & Form 20-F Information 2020 / Contents
1
AstraZeneca
at a Glance
Inspired by our Values and what science can do,
we are focused on accelerating the delivery of
life-changing medicines that create enduring
value for patients and society.
Our strategic priorities
Our Strategy and Key Performance
Indicators, see from page 18.
A science-led value proposition
Research & Development, see
from page 53 and Development
Pipeline, see from page 245.
Our priorities reflect
how we are working
to deliver our growth
through innovation
strategy and achieve
our Purpose: to
push the boundaries
of science to deliver
life-changing
medicines.
Distinctive R&D
capabilities
Small molecules,
biologics, protein
engineering and
innovative delivery
devices, as well
as new scientific
modalities, new
technologies and
new biology.
1. Deliver Growth and Therapy Area Leadership
2. Accelerate Innovative Science
3. Be a Great Place to Work
171
projects in our development pipeline
2020
2019
2018
171
167
149
Phase I
Phase II
Late-stage development
Life-cycle management
3
7
1
4
5
6
2
9
8
Strategic R&D centres
1. Cambridge, UK (HQ)
2. Gaithersburg, MD, US
3. Gothenburg, Sweden
Other R&D centres and offices
4. South San Francisco, CA, US
5. Boston, MA, US
6. New York, NY, US
7. Alderley Park and Macclesfield, UK
8. Shanghai, China
9. Osaka, Japan
Focus on three main
therapy areas
Therapy Area Review, see from
page 30 and Research &
Development, see from page 53.
Oncology
Our ambition is to
provide cures for
cancer in every form.
We are following the
science to understand
cancer and all its
complexities to
discover, develop and
deliver life-changing
treatments and
increase the potential
for cure.
Cardiovascular,
Renal & Metabolism
Our mission is to
protect the lives
of people from the
consequences of
CVRM diseases.
We are committed
to their seamless
management,
improving patient
outcomes and
decreasing the
mortality rate.
Respiratory &
Immunology
We aim to transform
the treatment of
R&I diseases, with
the bold ambition to
eliminate preventable
attacks and achieve
durable remission or
even cure for millions
of people with these
potentially devastating
conditions.
Other Medicines
and COVID-19
We have medicines
and vaccines in other
disease areas that
have an important
impact for patients.
We are working to
defeat the COVID-19
pandemic by
advancing and
accelerating the
development of
potential medicines.
Diversified portfolio of specialty
and primary care medicines
(Product Sales)
$10,850m
42% of total
2019: $8,667m
2018: $6,028m
$7,096m
27% of total
2019: $6,906m
2018: $6,710m
$5,357m
21% of total
2019: $5,391m
2018: $4,911m
$2,587m
10% of total
2019: $2,601m
2018: $3,400m
Sales growth of 25%
(26% at CER)
Sales growth of 3%
(5% at CER)
Sales decline of 1%
(0% at CER)
Sales decline of 1%
(0% at CER)
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AstraZeneca Annual Report & Form 20-F Information 2020 / Strategic Report
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Oncology. See page 30.
Cardiovascular, Renal & Metabolism. See page 36.
Respiratory & Immunology. See page 42.
Global strength, balanced
presence across regions
(Product Sales)
Commercial, see
from page 57.
Emerging
Markets
US
Europe
$8,679m
34% of total
2019: $8,165m
2018: $6,891m
$8,638m
33% of total
2019: $7,747m
2018: $6,876m
$5,059m
20% of total
2019: $4,350m
2018: $4,459m
Established
Rest of World
$3,514m
14% of total
2019: $3,303m
2018: $2,823m
Sales growth of 6%
(10% at CER)
Sales growth of 12%
(12% at CER)
Sales growth of 16%
(15% at CER)
Sales growth of 6%
(6% at CER)
Commitment to people
A focus on inclusion and
diversity, as well as life-long
learning and development.
People, see from page 68.
76,100
employees
2019: 70,600
2018: 64,600
46.9%
of our senior
roles are filled
by women
92%
of employees
believing strongly
in AstraZeneca’s
future direction
and key priorities
81%
of employees
believing there
is effective
collaboration
between teams
Commitment to society
Improving access to healthcare,
environmental protection and
ethics and transparency,
including delivering our Ambition
Zero Carbon programme.
Sustainability, see from page 72.
Priority
Priority
Priority
1
Access to healthcare
2
Environmental
protection
3
Ethics and
transparency
87%
of employees saying
they understand
their contribution
to our sustainability
priorities
7th overall
Dividends
$3,572m
2019: $3,592m
2018: $3,484m
A List for Climate
and Water Security
World and Europe
constituent
Index Series
constituent
R&D expenditure
(Reported)
$5,991m
2019: $6,059m
2018: $5,932m
Credit rating
(Standard & Poor’s)
Credit rating
(Moody’s)
BBB+
Long term:
CreditWatch
Positive outlook
A3
Long term:
Negative outlook
Capital allocation priorities
After providing for investment
in the business, supporting the
progressive dividend policy and
maintaining a strong, investment-
grade credit rating, we keep under
review potential investment in
immediately earnings-accretive,
value-enhancing opportunities.
Financial Review, see from page 82.
Comprehensive response
to the COVID-19 pandemic
Our response was consistent
with our Values of following
the science, putting patients
first and doing the right thing.
Helped ensure the
safety of patients
and their continued
access to care and
medicines.
Protected our
employees and
critical operations
to ensure the
continued supply
of our medicines.
Contributed to the
process of scientific
innovation to combat
the virus.
Contributed
more broadly to
society, including
emergency relief.
COVID-19 pandemic, see from page 28.
AstraZeneca Annual Report & Form 20-F Information 2020 / AstraZeneca at a Glance
3
Chairman’s
Statement
Despite the significant impact from the COVID-19
pandemic, we delivered double-digit revenue growth in 2020
to leverage improved profitability and cash generation.
“ Our patient-centric
strategy, focus on
innovation and
capital-allocation
priorities remain
unchanged.”
2020 was a year quite unlike any other. It was
also a remarkable year for AstraZeneca as we
pursue our growth through innovation strategy.
Under the excellent leadership of our CEO,
Pascal Soriot, our focus on execution delivered
significant advances, while we also build the
capabilities to progress in a rapidly changing
world and respond to the pandemic.
A year of pandemic
The pandemic has impacted the lives of us all.
Many employees at AstraZeneca have been
working from home but others have continued
to work in our laboratories and factories,
ensuring the continued supply of our
medicines to patients. I am grateful to them,
and all those who worked so hard to ensure
the safety of our places of work and the
wellbeing of employees.
Your Board took the decision early in the
pandemic to conclude our agreement with the
University of Oxford to develop, manufacture
and supply their potential vaccine to prevent
COVID-19. It was a decision that was aligned
to our Purpose and a practical way in which
we were able to help in a time of health crisis.
Operating sustainably
Our decision to develop and supply the
vaccine at no profit during the pandemic
was not taken lightly and brings scrutiny to
what we do and how we do it. However, how
we do things is as important as what we do,
including operating in a sustainable way.
Our commitment to sustainability includes
our Ambition Zero Carbon target which is
our contribution to help tackle the climate
crisis. I am also pleased that this Annual
Report contains our first statement on the
progress we are making against the
requirements of the Taskforce on
Climate-related Financial Disclosures.
Financial sustainability
Of course, if we are to continue to deliver our
pipeline of innovative medicines to patients
around the world, we need to be financially
sustainable. In this regard, our results in 2020
were in line with guidance. We also improved
profitability, while the strategy of sustainable
growth through innovation brought numerous
further benefits for patients. This performance
enabled the Board to reaffirm its commitment
to our progressive dividend policy by keeping
the full-year dividend per share at $2.80.
Our patient-centric strategy, focus on
innovation and capital-allocation priorities
remain unchanged, with sustainable growth
in revenue, profit and cash generation set to
continue. Consequently Total Revenue is
expected to increase by a low-teens
percentage in 2021, accompanied by faster
growth in Core EPS to $4.75 to $5.00.
Our guidance does not include any revenue or
profit impact from sales of COVID-19 Vaccine
AstraZeneca, or any impact from the
proposed acquisition of Alexion which we
believe could accelerate the combined
company’s strategic ambitions and will
improve profitability and strengthen cash flow.
I will write to you later in the year with more
information about this proposed transaction,
ahead of the shareholders’ general meeting
at which your approval to go ahead with it will
be sought.
Succession planning
At the AGM this April, Geneviève Berger and
Graham Chipchase intend to retire from the
Board. By then, each will have served as a
Non-Executive Director for nine years. On
behalf of the Board, I would like to thank them
for their service to AstraZeneca and valuable
contributions to the Board’s work. We will
4
AstraZeneca Annual Report & Form 20-F Information 2020 / Strategic Report
$2.80
Full-year dividend of
$2.80 per share (2019: $2.80)
miss their input and collegiality, although they
each have very able successors for two of
their key roles. Nazneen Rahman has taken
over responsibility from Geneviève for
overseeing sustainability matters on behalf
of the Board and Philip Broadley will succeed
Graham as the senior independent Non-
Executive Director.
I will also have served as a Director for nine
years by April 2021. Typically, non-executive
directors would step down after that period
in line with UK corporate governance best
practice. However, your Board believes it
would be in the best interests of shareholders
for me to continue to serve as Chairman, to
lead the Board’s oversight of completion of
the proposed acquisition of Alexion, and has
asked me to seek re-election at the AGM.
I am honoured and happy to accept the
Board’s request.
During 2020, the Nomination and Governance
Committee and the Board continued to
consider carefully plans for succession to the
senior Board roles of Chairman, CEO and
CFO. We have a clear understanding of the
way in which we intend to sequence
succession over a sensible period of time.
In the meantime, I could not be prouder of
leading AstraZeneca at such an important
time in its history.
Leif Johansson
Chairman
Chief Executive
Officer’s Review
AstraZeneca’s many achievements in 2020 demonstrated
the power of living our Values to push the boundaries of
science to deliver life-changing medicines.
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“ I am confident that
we will continue to
deliver more
progress for patients
and sustained,
compelling results.”
Despite the impact of the COVID-19 pandemic,
our performance in 2020 ensured that we
were able to continue delivering value for
patients and shareholders as well as for
society. The announcement of our proposed
acquisition of Alexion is further evidence of
our intention to drive long-term value creation
for shareholders and make an even bigger
difference to the lives of patients.
Delivering our strategic priorities
As demonstrated throughout this Annual
Report, the value we delivered in 2020 was
made possible through the progress we made
against all our strategic priorities and across
the whole organisation:
1. Deliver Growth and Therapy Area
Leadership: We delivered strong results
in 2020, despite the adverse impact of the
pandemic, with Product Sales up 10%
(11% at CER) to $25,890 million. Sales
grew in all regions, while Total Revenue
from our New Medicines1 improved by
33% (33% at CER) to $13,950 million.
2. Accelerate Innovative Science: We
had remarkable pipeline and regulatory
performances in 2020, with 29 approvals
of new medicines or life-cycle management
indications in major markets. Despite the
occasional setback, which is to be expected,
we also had 14 data or regulatory
designations for accelerated, priority or
other expedited review in major markets.
3. Be a Great Place to Work: 2020 brought
focus to our inclusion and diversity
activities, while employee survey results
confirmed we remained a great place to
work. We also made good progress with
our ambition of leading in sustainability.
Building a sustainable company includes
building financial sustainability. In 2020, that
meant results in line with guidance given
throughout the year and more than half of
Total Revenue coming from our New Medicines.
Our response to the pandemic also included
the repurposing of our existing compounds
and the development of our potential
long-acting antibody (LAAB) combination
against the virus, AZD7442.
COVID-19 and living our Values
I am proud of everyone in AstraZeneca who
achieved so much in the face of the biggest
health crisis the world has encountered in
more than a generation. I am even more
proud of the fact that, despite the pandemic,
employees worked tirelessly to ensure the
safety of patients, and their continued access
to care and medicines. We also focused on
protecting our staff and critical operations.
Working with partners across the world, we
played a leading role in the process of
scientific innovation to combat the virus and
contributed more broadly to society, including
with emergency relief.
As soon as the gene sequence of the
SARS-CoV-2 virus was published in January
2020, our teams worked rapidly to screen
thousands of antibodies and, in just 99 days,
identified a combination of two potent
neutralising antibodies that is designed to
reduce the risk of resistance developed by the
virus and engineered to increase the durability
of the therapy for six to 12 months following a
single administration. By running all our usual
early development processes in parallel rather
than sequentially, we were able to start Phase
I trials of AZD7442 in August and Phase III
trials in October, thereby reducing to months
processes that normally take years.
While delivering our growth through innovation
strategy and responding to the pandemic may
seem different challenges, the key to our
success is the same in both: being true to our
Purpose and living our Values.
We follow the science
Our response to the pandemic was led by
science and included our landmark agreement
with the University of Oxford for the global
development, production and supply of
COVID-19 Vaccine AstraZeneca. We committed
to doing this at no profit during the pandemic and
to providing the broad and equitable supply of
billions of vaccine doses around the world. We
continue to work around the clock to deliver
these as speedily as possible while retaining
the highest of quality standards.
We put patients first
Throughout the pandemic, we put patients
first by working closely with investigators to
find solutions and by accelerating the use of
digital health technologies in R&D to keep
our clinical trials running. For example,
we were able to continue more than 80%
of our studies. We did so by moving to new
ways of working and using digital solutions,
such as electronic consent, remote data
collection and using devices to collect patient
data from home. Our teams also helped
patients continue to receive their treatment.
For example, we made more than 2,400
shipments to patients’ homes in more than
60 studies across 35 countries.
1 Tagrisso, Imfinzi, Lynparza, Calquence, Enhertu, Koselugo, Farxiga,
Brilinta, Lokelma, roxadustat, Fasenra, Bevespi and Breztri.
AstraZeneca Annual Report & Form 20-F Information 2020 / Chief Executive Officer’s Review
5
Chief Executive
Chief Executive
Officer’s Review
Officer’s Review
continued
continued
33%
Total Revenue from New
Medicines improved by 33%
to $13,950 million
29
29 approvals of new medicines or
life-cycle management indications
in major markets
99.9%
Sourced 99.9% of our imported
electricity globally from renewable
sources in 2020
“ I am proud of everyone
in AstraZeneca who
achieved so much in the
face of the biggest health
crisis the world has
encountered in more
than a generation.”
At the same time, we worked hard to
accelerate patient-centred care. In the case
of chronic kidney disease (CKD), only 12%
of cases are currently diagnosed and we
are working with digital partners to increase
awareness, expand early diagnosis and
transform CKD management.
In the case of respiratory diseases, where
patients are at greater risk if they contract
COVID-19, it can typically take seven years for
severe asthma to be diagnosed and treated.
We therefore use digital tools, such as
chatbots which, in 2020, helped more than
200,000 patients self-diagnose and seek
specialist consultation. We are also working
with healthcare systems to remove barriers to
better care and accelerating homecare: the
number of patients self-administering Fasenra
more than doubled in 2020, offering them a
safer way to manage their condition in the
context of a higher vulnerability to COVID-19.
We are entrepreneurial
During the year, by changing the way we work,
we were able to serve an estimated 200,000
new cancer patients against a background
that saw a 40% drop in the number of patients
who would typically be diagnosed with cancer.
Partnering closely with health authorities,
we delivered nearly 20 new launches across
our major markets, including patient-friendly
dosing of Imfinzi in the US and Europe that
halved the number of hospital visits needed
by patients.
Additionally, we sought to reduce the impact
of the pandemic on cancer outcomes by, for
example, launching a ‘New Normal, Same
Cancer’ campaign, which we co-created with
seven leading global patient coalitions, to
encourage patients whose care had been
interrupted to re-engage with the healthcare
system. We also transformed the patient
experience by enabling continuity of care and
connectivity between healthcare practitioners
and patients with the accelerated launch of
HAYA, our fully-integrated oncology patient
care management platform. It has been
launched in Europe and will be deployed more
widely as a result of the positive response.
We play to win
For us, playing to win in 2020 meant working
hard to manage our global supply chain flows
and inventory in order to protect the supply
of medicines to our patients. That included the
challenging management of more than 1,300
global logistics routes and moving available
product as close to the patient as possible,
as borders closed or restrictions were put in
place around the world. It also involved staff
temperature monitoring and carrying out more
than 22,000 COVID-19 assessments to ensure
all our operations sites could remain open.
Overall, our actions allowed us to achieve
outstanding stock availability levels of 99.5%
throughout our global markets.
We do the right thing
Doing the right thing ensures that we are a
great place to work, both through how each
of us contributes to the enterprise and, more
broadly, to society. That includes embracing
the power of diversity and leading the way
to avoid a climate catastrophe. Inclusion and
diversity foster creativity, generate innovation
and drive performance. In 2020, that was
exemplified by colleagues from across
AstraZeneca coming together to create a
comprehensive plan to address racial equity
issues that include the design and enrolment
into clinical trials, as well as how to attract,
retain and develop ethnic minority talent.
Ambition Zero Carbon is our flagship
commitment to help reduce our carbon
footprint – for our health and the health of
the planet. To achieve this, we are following
a greenhouse gas hierarchy of avoiding,
reducing, substituting and, only if necessary,
compensating for our greenhouse gas
emissions. We are making good progress,
which includes sourcing 99.9% of our
imported electricity globally from renewable
sources in 2020.
Appreciation and looking ahead
In closing, I want to thank my colleagues
on the SET and across AstraZeneca. In
particular, I want to congratulate Jeff Pott
who, in addition to his role as General
Counsel, has taken over as Chief Human
Resources Officer from Fiona Cicconi. Fiona
left at the end of 2020 to undertake a similar
role at an iconic technology company and
I want to thank her for her leadership in
making us a great place to work.
Our performance in 2020 marked a significant
step forward for AstraZeneca. We delivered
double-digit revenue growth to leverage
improved profitability and cash generation.
The consistent achievements in the pipeline,
accelerating performance of our business
and the success of the COVID-19 vaccine
demonstrated what we can achieve. The
proposed acquisition of Alexion is intended
to accelerate our commercial and scientific
evolution even further.
Thanks to the focus on an industry-leading
pipeline and consistent execution, I am
confident that we will deliver more progress
for patients and sustained, compelling results.
For more information on our strategy
and 2020 performance, see Our Strategy
and Key Performance Indicators from
page 18 and Performance in 2020 from
page 24.
As a result of our efforts, we delivered
91 on-time launches during the year,
including the successful launch of Imfinzi
in China early in the COVID-19 outbreak.
Pascal Soriot
Chief Executive Officer
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Transforming
our science
We are never complacent about scientific
discovery and development, always pushing
our R&D productivity, searching for new
knowledge and the next breakthrough.
Our strategy guides our business,
supporting us in advancing our
scientific knowledge to extend the
possible and helping shape the future
of healthcare. We are committed to
investing in and embedding four
key areas, which will help us in our
aspiration to create the greatest and
swiftest impact on disease:
For more information, see Research
& Development from page 53.
> Enhancing our understanding of
disease biology with the aim of
treating, preventing, modifying
and even curing complex diseases.
> Discovering new ways to target
the drivers of disease to create the
next generation of therapeutics.
> Better predicting clinical success
to make sure we accelerate
delivery to get the right medicines
to the right patients.
> Pioneering new approaches
to engagement in the clinic
and beyond to deliver a better
experience for the patient and
by doing so, improve outcomes.
Improving
patient
outcomes
See page 67.
Understanding
disease
biology
See page 56.
Predicting
clinical
success
See page 23.
Creating
new
therapies
See page 11.
AstraZeneca Annual Report & Form 20-F Information 2020 / Strategic Report
7
Business Model
and Life‑cycle
of a Medicine
We invest resources to create financial and
non‑financial value, bringing benefits to our
patients, our world and our business.
Who we are
Inspired by our Values and what science can do,
we are focused on accelerating the delivery of
life‑changing medicines that create enduring value
for patients and society.
We are committed to operating in a way that recognises
the interconnection between business growth, the
needs of society and the limitations of our planet.
Our sustainability priorities in access to healthcare,
environmental protection, and ethics and transparency
support the delivery of our business strategy.
Our Purpose
We push the boundaries of science to deliver life‑
changing medicines.
Our Purpose underpins everything we do. It gives
us a reason to come to work every day. It reminds
us why we exist as a company. It helps us deliver
benefits to patients and create value for shareholders.
Our Values
Our Values determine how we work together and
the behaviours that drive our success. They guide
our decision making and define our beliefs.
We follow the science.
Pushing the boundaries of science and working
creatively with partners and collaborators.
We put patients first.
Striving to understand patients’ needs and
considering them in every decision we take.
We play to win.
Building high‑performing, inclusive and diverse
teams and making the right choices to win.
We do the right thing.
Employing high ethical standards when carrying
out all aspects of our business globally.
We are entrepreneurial.
Acting with urgency, bravery, resilience and taking
smart risks.
Our Culture
Our culture is defined by our shared Values and
Purpose. Accompanying this, our commitment to
sustainability, performing as an enterprise team,
lifelong learning and inclusion and diversity makes
us a great place to work.
Business Review, see from page 52.
Why
AstraZeneca?
We are a global pharmaceutical business
and have a science‑led and patient‑focused
value proposition:
>Focus on three main therapy areas:
Oncology; Cardiovascular, Renal &
Metabolism (CVRM); and Respiratory
& Immunology (R&I)
>Diversified portfolio of specialty and
primary care medicines
>Global strength, balanced presence
across regions
>Commitment to people and society
Advanced drug delivery of a
small molecule using a polymer
drug conjugate.
8
AstraZeneca Annual Report & Form 20‑F Information 2020 / Strategic Report
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> Applying our
resources to
meet unmet
medical need
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> Improved health
> Returns to
shareholders
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What we do
Our business activities span the entire life‑cycle of a medicine.
How we create financial value
Investment
We invest in the discovery, development, manufacturing
and commercialisation of our pipeline of innovative small
molecule and biologic prescription medicines, including
targeted business development through collaboration,
in‑licensing and acquisitions.
Revenue generation
We generate revenue from Product Sales of our existing
medicines and new medicine launches, as well as from
our collaboration activities. Our focus is on creating
medicines that facilitate profitable future revenue
generation, while bringing benefits to patients.
Reinvestment
We reinvest in developing the next generation of
innovative medicines and in our business to provide
the platform for future sources of revenue in the face
of losses of key patents.
Life‑cycle of a medicine
Research and development phases – duration: 5–15 years
Launch phase – duration: 5–15 years
1. Find potential medicine
4. Phase II trials
7. Launch new medicine
> Identify unmet medical need and undertake
scientific research to identify potential
new medicines.
> Initiate process of seeking patent protection.
2. Pre‑clinical studies
> Conduct laboratory and animal studies to
understand if the potential medicine is safe to
introduce into humans and in what quantities.
> Determine likely efficacy, side effect profile
and maximum dose estimates.
3. Phase I trials
> Begin clinical trials with small groups of healthy
human volunteers (small molecules) or patients
(biologics) to understand how the potential
medicine is absorbed into the body, distributed
around it and excreted.
> Determine approximate dosage and identify
side effects.
> Conduct studies on small‑ to medium‑sized
groups of patients to test effectiveness and
tolerability of the medicine and determine
optimal dose.
> Design Phase III studies to generate data
needed for regulatory approvals and
pricing/reimbursement globally.
5. Phase III trials
> Engage in trials in a larger group of
patients to gather information about
effectiveness and safety of the medicine
and evaluate the overall benefit/risk profile.
> Initiate branding for the new medicine in
preparation for its launch.
6. Regulatory submission and pricing
> Seek regulatory approvals for
manufacturing, marketing and selling the
medicine.
> Submit clinical data to regulatory
authorities (and, if requested, generate
further data increasingly in real‑world
settings) to demonstrate the safety and
efficacy of the medicine to enable them
to decide whether to grant regulatory
approvals.
> Raise awareness of patient benefit and appropriate
use, market and sell the medicine.
> Clinicians begin to prescribe the 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.
8. Post‑launch research and development
> Conduct 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.
> Consider additional diseases or aspects of disease
to be treated by or better ways of administering
the medicine.
> Submit data packages with requests for life‑cycle
management to regulatory authorities for review
and approval.
Post‑exclusivity – duration: 20+ years
9. Post‑exclusivity
> Patent expiry and generic medicine entry.
> Reinvestment of returns.
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.
AstraZeneca Annual Report & Form 20‑F Information 2020 / Business Model and Life‑cycle of a Medicine
9
Business Model
and Life‑cycle
of a Medicine
continued
What does our business model
require to be successful?
46.9%
of our senior
roles are filled
by women
$6.0bn
invested in our
science in 2020
>76,000
registered holders
of Ordinary Shares
>800
collaborations
worldwide
>100
countries in which
we are active
>100
countries where
we obtained patent
protection
$13.3bn
spent with
suppliers
A talented and diverse workforce
We need to acquire, retain and
develop a talented and diverse
workforce united in pursuit of our
Purpose and Values and fostering
a strong AstraZeneca culture.
A leadership position in science
We need to achieve scientific
leadership if we are to deliver
life‑changing medicines. To that
end, we need to focus on innovative
science, prioritise and accelerate
our pipeline and transform our
innovation and culture model.
Understand our stakeholders
We need to understand the factors
and issues that are most important
to the various stakeholders that we
interact with, and who are impacted
by our business.
Effective collaborations
We need business development,
specifically partnering, which
is an important element of our
business model. It supplements
and strengthens our pipeline and
our efforts to achieve scientific
leadership and leads to improved
outcomes for patients.
Commercialisation skills
We need a strong global commercial
presence and skilled people to
ensure that we can successfully
launch our medicines, that they
are available when needed and
that patients have access to them.
Intellectual property (IP)
We need to create and protect our IP
rights. Developing a new medicine
requires significant investment
over many years, with no guarantee
of success. For our investments to
be viable, we seek to protect new
medicines from being copied for a
reasonable period of time through
patent protection.
A robust supply chain
We need a supply of high‑quality
medicines, whether from one of the
26 Operations sites in 16 countries
in which we manufacture or the
$13.3 billion we spend on the
purchase of goods, services and
active pharmaceutical ingredients
(APIs).
Financial strength
We need to be financially strong,
including having access to equity
and debt financing, to bear the
financial risk of investing in the
entire life‑cycle of a medicine.
$4.8bn
net cash flow
from operating
activities
10
AstraZeneca Annual Report & Form 20‑F Information 2020 / Strategic Report
>120m
Our medicines impact more than
120 million1 patient lives annually
How we add value
Improved health
Continuous scientific
innovation is vital to achieving
sustainable healthcare which
creates value by:
> Improving health outcomes
and transforming the lives
of patients who use our
medicines.
> Enabling healthcare
systems to reduce costs
and increase efficiency.
> Improving access to
healthcare and healthcare
infrastructure.
> Helping develop the
communities in which
we operate through local
employment and partnering.
Financial value
Revenue from our Product
Sales and collaboration
activities generates cash
flow, which helps us:
> Fund our investment in
science and the business
to drive long‑term value.
> Follow our progressive
dividend policy.
> Meet our debt service
obligations.
1
Figure for 2019; excludes COVID-19
Vaccine AstraZeneca.
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Creating the
next generation
of therapeutics
Working with mRNA in
collaboration with Moderna
In our quest to transform disease,
we believe it is essential to target
novel biology we uncover.
We are continuing to design
new ways to target the drivers of
disease to help us create the next
generation of therapeutics – going
beyond traditional small molecules,
monoclonal antibodies and peptides.
By combining our distinctive
medicinal and peptide chemistry
skills and technologies with those
of other leading companies in highly
specialised fields, we are working
towards our goal of addressing the
unmet medical need of patients.
The diversity of technologies
applied in our early pipeline is
exemplified by the increased
number of new modalities entering
clinical development. 30% of our
early pipeline now consists of
new drug modalities, including
oligonucleotides, mRNA, bicyclic
peptides and Anticalin® proteins.
30%
of our early pipeline now consists
of new drug modalities
mRNA is the ‘mediator’ in
the process by which genetic
information contained in DNA
in cells is transferred to make
proteins. The beauty of mRNA‑based
therapy is that it can act locally and
transiently, and does not integrate
into an individual’s genome. Instead,
the aim is to augment the endogenous
processes that prevail naturally in
the body. One of our mRNA therapies
is designed to stimulate the formation
of new blood vessels to protect heart
muscle cells (cardiomyocytes) in
patients with heart failure or after
a heart attack, and other ischaemic
vascular diseases. This asset has
now entered the clinical phase of
development. Another mRNA
therapy in clinical development is
being tested in patients with
advanced solid tumours. In this case,
the therapy is injected directly into
a tumour. Localising treatment in
this manner may prevent systemic
toxicity that may otherwise occur.
For more information,
see Research & Development
from page 53.
AstraZeneca Annual Report & Form 20‑F Information 2020 / Business Model and Life‑cycle of a Medicine
11
Messenger RNA (mRNA)
is a single stranded RNA that
conveys genetic information
from DNA to the ribosome,
where it is translated into
protein products.
Healthcare in
a Changing World
Healthcare systems are having to meet
increasing demand, a task made more
challenging by the impact of COVID-19.
Globally, the demand for healthcare is increasing
and the sector has grown for a number of years.
This growth is anticipated to continue and, as it
does, we are presented with both challenges and
opportunities that require us to adapt, innovate
and build trust.
Recently, our sector’s traditional focus on
treatment has started to shift towards prevention
and early intervention, while social, economic
and political challenges remain in meeting unmet
medical need. At the same time, healthcare
systems are having to address the challenges
posed by COVID-19.
Impact of global trends
Global trends continue to increase the demand for healthcare and
breakthroughs in technology are helping improve health outcomes.
The COVID-19 pandemic has highlighted challenges and accelerated
healthcare innovation and change.
The global economy has undergone a shock
COVID-19 has triggered the deepest global recession in
decades. Although the global economy is growing again
after a 4.3% contraction in 2020, the World Bank noted, in
January 2021, that the pandemic has caused a heavy toll
of deaths and illness, plunged millions into poverty, and
may depress economic activity and incomes for a
prolonged period.
China has been faster to recover than expected, but the
global economy’s recovery to pre-pandemic levels of
activity remains prone to setbacks. In the longer term,
economic growth is shifting east: India, China, Africa and
Southeast Asia will drive 50% of global economic growth
over the next 10 years.
$4.7tn
Global GDP in 2021
forecast to be 5.3%
below pre-pandemic
projections – about
$4.7 trillion
(Source: World Bank)
10%
2020-21 growth
forecast for China
(Source: IMF)
12
AstraZeneca Annual Report & Form 20-F Information 2020 / Strategic Report
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11.2
9.7
8.5
7.8
34
21
Growing and ageing populations
The world’s population is growing and life expectancy is
increasing. By 2050, the number of people aged 60 and
above is expected to reach 2.1 billion; and 80% will be
living in developing regions.
As the number of older people grows faster than the
number of people in all younger age groups, so does the
incidence of non-communicable diseases (NCDs).
Increasing burden of chronic disease
While communicable diseases continue to pose a threat,
especially in emerging markets, chronic and NCDs are
increasing with the impact of urban lifestyle choices,
including smoking, diet and a lack of exercise.
Disability caused by NCDs, rather than early death,
has become an increasingly large share of the global
disease burden.
Digital and technical breakthroughs
Data management in healthcare is moving beyond storing
data, to focusing on extracting insights on population
health management and value-based care to improve
health outcomes and personalised healthcare.
Innovations in technology are allowing people to monitor
their own health and become active participants in
managing their healthcare. For example, Internet of Things
(IoT) applications and technologies are influencing patient
engagement strategies and improving patient interactions
with healthcare systems.
The impact of COVID-19 on a changing world
COVID-19 has highlighted challenges and accelerated
change within the healthcare sector. It has left people
living with NCDs more vulnerable and highlighted the need
for health systems to better respond to those diseases.
It has also accelerated the adoption of digital and social
tools as HCPs sought virtual channels to continue
patient engagement.
Additionally, the pandemic has encouraged the
development and use of localised supply chains,
particularly around medical supplies and pharmaceuticals.
54%
Approximately 54% of people
worldwide now live in cities,
up from 30% in 1950
(Source: UN and Grayline Group)
Estimated world
population (UN, bn)
2100
2050
2030
2020
41m
NCDs kill 41 million people
each year, equivalent to 71%
of all deaths globally
(Source: IQVIA)
Disabilities caused by NCDs
(as % of the total disease burden)
2019
1990
$640bn
The digital health market is
expected to increase nearly
six times in size by 2026 to
nearly $640 billion
(Source: Global Market Insights)
Active global healthcare
IoT devices (bn)
2020 30
2025 75
(Source: Statista)
70%
70% of patients in US, EU,
and Asia deferred or cancelled
scheduled treatment early in
the global pandemic
(Source: Accenture)
Patients treated via telehealth
2019
2020 50–175x more
(Source: McKinsey)
AstraZeneca Annual Report & Form 20-F Information 2020 / Healthcare in a Changing World
13
Healthcare in
a Changing World
continued
A growing pharmaceutical sector
As a result of increased demand for healthcare, the pharmaceutical
sector continues to grow. Global pharmaceutical sales grew by 3.8%
in 2020. Global healthcare spending is projected to increase at an
annual rate of 4.2% from 2019 to 2024.
Global pharmaceutical sales
In 2020, Established Markets saw
an average revenue increase of
3.8% and Emerging Markets
revenue grew at 3.7%. The US,
Japan, China, Germany and
France are the world’s top five
pharmaceutical markets by 2020
sales. In 2020, the US had 48.0%
of global sales (2019: 47.7%;
2018: 48.0%).
World ($bn)
US ($bn)
Europe ($bn)
2020
2019
2018
1,070
1,031
972
2020
2019
2018
514
492
467
2020
2019
2018
211
203
192
$1,070bn (3.8%)
$514bn (4.5%)
$211bn (4.0%)
Established ROW ($bn)
Emerging Markets ($bn)
Denotes a scale break.
2020
2019
2018
117
117
113
2020
2019
2018
$117bn (0.4%)
$228bn (3.7%)
228
220
199
Data based on world market sales using
AstraZeneca market definitions as set out
in the Market definitions, see page 280.
Changes in data subscriptions, exchange
rates and subscription coverage, as well as
restated IQVIA data, have led to the
restatement of total market values for prior
years. Source: IQVIA, IQVIA Star Q3 2020,
IQVIA Midas Quantum Q3 2020 (including
US data). Reported values and growth are
based on CER. Value figures are rounded to
the nearest billion and growth percentages
are rounded to the nearest tenth.
Estimated pharmaceutical sales and market growth to 2024
We expect developing
markets, including Africa, the
Commonwealth of Independent
States (CIS), the Indian
subcontinent and Latin America,
to fuel pharmaceutical growth.
Market growth in China is
expected to remain below
historical levels at a compound
annual growth rate of 4.4%. This
is due to the continued slowdown
of the major hospital sector.
Estimated pharmaceutical sales – 2024.
Data is based on ex-manufacturer prices
at CER. Source: IQVIA
Estimated pharmaceutical market
growth. Data is based on the compound
annual growth rate from 2019 to 2024.
Source: IQVIA Market Prognosis 2020 to
2024 (September 2020 forecast)
North America
EU (Including UK)
Other Europe (Non-EU countries)
$633bn
3.5%
$287bn
3.9%
Japan
Oceania
Southeast Asia and East Asia
$87bn
– 0.7%
Latin America
Africa
$87bn
10.6%
$14bn
2.0%
$29bn
5.6%
CIS
Middle East
Indian subcontinent
China
$24bn
3.8%
$41bn
8.4%
$27bn
9.2%
$232bn
4.5%
$37bn
11.0%
$171bn
4.4%
14
AstraZeneca Annual Report & Form 20-F Information 2020 / Strategic Report
Opportunities and challenges for the sector
In addition to global trends, the pharmaceutical sector faces a number of
opportunities and challenges, as set out below. The strategy section of this
Annual Report includes an overview of how we are responding to this environment.
For more information, see Our Strategy
and Key Performance Indicators from
page 18.
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Innovation
Scientific innovation is critical to addressing unmet
medical need but enhancing R&D productivity is a
constant challenge for the sector.
R&D models are therefore changing in an effort to
be more productive. For example, scientific and
technological breakthroughs in the next generation
of therapeutics have the potential to help accelerate
innovation and are leading to new treatment options.
Such advances include new scientific modalities,
such as ProTACs, in vivo biologics and cell therapy;
new technologies, such as OMICs; and new biology,
such as the microbiome. These have already
resulted in significant numbers of FDA Priority
Reviews and Breakthrough Therapy Designations.
Regulatory environment
Public expectation of safe, effective and high-quality
medicines is reflected in a highly regulated
biopharmaceutical industry. Increased health
authority scrutiny and requirements for more testing
and documentation may prolong the approval
process for new medicines. However, government
policies and regulations have been implemented by
health authorities to stimulate innovation in drug
development and accelerate patient access to
transformative medicines. Facilitated review
pathways relying on reference agency assessments
have been introduced by regulatory authorities in
many developing countries to expedite patient
access to medicines. Continued advances in the
harmonisation of international regulatory
requirements will contribute to faster access to new
medicines for patients and promote public health.
The COVID-19 pandemic has accelerated health
authority consideration and implementation of
innovative approaches that may transform drug
development in the future. These approaches
include: decentralised trials; digital health technology
applications in the conduct of clinical trials to
facilitate remote patient monitoring and eConsent;
the use of real-world data/evidence in regulatory
decision making; risk-based oversight of
manufacturing facilities; expedited review and
approval pathways; remote data and site monitoring;
remote audits and inspections; and heightened
collaboration between global health authorities.
There are uncertainties and challenges, including
how the UK will work with the EU regulatory system
following the UK’s exit from the EU in 2020 and the
approach the UK will take to establish its own
regulatory system outside the EU. Additionally, the
relocation of the EMA from London to Amsterdam
has created some disruption and delay to regulatory
processes. China continues to evolve its regulatory
requirements at a rapid pace, impacting drug
development for that country and globally.
Innovation can also be accelerated through the
use of large volumes of data from disease biology
and genomics, which is driving precision medicine,
while advances in data management and integration
can improve the speed and quality of clinical trials.
Additionally, a better understanding of disease
biology can assist the delivery of new medicines
and new approaches to health, including improved
methods of prevention.
The release of the EU Health Strategy in November
2020 is the first step of an initiative to build a
‘European Health Union’. This strategy will form
the basis of the new pharmaceutical legislative
framework targeted for 2023 that will define how
the EU pharmaceutical industry will be regulated.
In addition, the EU Clinical Trials Regulation which
is intended to create a favourable environment for
conducting clinical trials while maintaining high
standards for patient safety, is expected to be
implemented by the end of 2021.
Identification of Medicinal Products (IDMP)
international standards, intended to uniquely
identify medical products to facilitate public safety
through the exchange of information in the context
of pharmacovigilance and supply chain traceability,
are under consideration by global health authorities.
EMA regulations require adoption of IDMP standards,
presenting a significant challenge to industry as the
requirements are complex.
The regulatory requirements for biosimilar medicines
are better defined, but significant regulatory policies
are still evolving, including transparency of data
regarding the level of evidence to support approval
of biosimilarity labelling claims, standards for
interchangeability and pharmaceutical substitution,
and traceability of pharmacovigilance reports
through naming conventions that permit
differentiation of medicines.
Increased transparency of data used for regulatory
decisions in the EU and Canada requires public
disclosure of patient-level data, significantly
increasing regulatory burdens to ensure privacy
laws are met during disclosure. Increased
transparency policies continue to be evaluated
by regulatory authorities globally.
Link to strategy
Accelerate Innovative Science
For more information, see Risk from
page 254.
“ Continued advances
in the harmonisation
of international
regulatory
requirements will
contribute to faster
access to new
medicines for
patients and promote
public health.”
Link to strategy
Accelerate Innovative Science
For more information, see Risk from
page 254. For more information about
biosimilars, see Loss of exclusivity and
genericisation on the next page.
AstraZeneca Annual Report & Form 20-F Information 2020 / Healthcare in a Changing World
15
Healthcare in
a Changing World
continued
Pricing of medicines
There is continuing downward pressure on pricing
and reimbursement in many markets, including the
US and China. We continue to see examples where
healthcare services (including pharmaceuticals) are
highly regulated by governments, insurers and other
private payers through various controls on pricing
and reimbursement. Implementation of cost-
containment reforms and shifting market dynamics
are further constraining healthcare providers, while
difficult economic conditions burden patients who
have out-of-pocket expenses relating to their
medicines. Pharmaceutical companies are now
expending significant resources to demonstrate
the economic as well as the therapeutic value of
their medicines.
The need and desire for payers to manage
healthcare expenditure has been heightened by
the shift over the last decade from a primary care
to a specialty care focus. Specialty medicines are
used for the treatment of complex, chronic or rare
conditions, such as cancers, and pricing for these
products reflects the higher value they bring to
patients and payers, as well as the smaller patient
numbers as a result of targeted treatment options.
Pricing controls and transparency measures remain
a priority in key markets such as China, where the
National Reimbursement Drug List was updated
in December. According to the Chinese National
Healthcare Security Administration, 119 medicines
will be added to the NRDL from March 2021 with
an average price reduction of 50%.
Loss of exclusivity and genericisation
Also in China, value-based procurement (VBP),
was expanded in 2019, placing downward pressure
on the pricing of medicines and products that have
lost exclusivity in the VBP.
In Europe, governments continue to implement
and expand price control measures for medicines,
and the EU has committed to introducing a
harmonised health technology assessment (HTA)
review. In other markets, there has been a trend
towards rigorous and consistent application of
pricing regulations, including reference pricing
and group/alliance purchasing.
There is also pressure on pricing in the US. For
example, federal and state policymakers are
considering legislative and regulatory efforts to
lower drug prices and to implement transparency
measures. President Biden has conceptually
supported proposals aimed at prescription drug
pricing that include allowing the government’s
Medicare programme to negotiate costs, limiting
launch prices through the use of international
reference pricing and other tools, encouraging
importation and limiting price increases beyond
inflation. The Democrat majority in Congress
increases the potential for drug pricing legislation
and executive authorities could also become a
vehicle for policies. This environment could create
further downward pressure on pricing.
Patent protection for pharmaceutical products
is finite and after protection expires, payers,
physicians and patients gain greater access to
generic alternatives (both substitutable and
analogue) in many important drug classes. These
generic alternatives are primarily lower priced
because generic manufacturers are largely spared
the costs of R&D and market development. As a
result, demand for generics is high. For prescriptions
dispensed in the US in 2020, generics constituted
85.3% of the market by volume (2019: 84.8%).
Generic competition can also result from patent
disputes or challenges before patent expiry.
Increasingly, generics companies are launching
products ‘at risk’, for example, before resolution
of the relevant patent litigation. This trend, which
is likely to continue, creates significant market
presence for the generic version while the litigation
remains unresolved. Given the unpredictable nature
of patent litigation, some companies have settled
such challenges on terms acceptable to the
innovator and generic manufacturer.
Biologics typically retain exclusivity for longer than
traditional small molecule pharmaceuticals, with less
generic competition.
“ Pharmaceutical
companies are now
expending significant
resources to
demonstrate the
economic as well as
the therapeutic value
of their medicines.”
Link to strategy
Deliver Growth and Therapy
Area Leadership
For more information, see Risk from
page 254.
85.3%
For prescriptions dispensed in the
US in 2020, generics constituted
85.3% of the market by volume
(2019: 84.8%)
Link to strategy
Deliver Growth and Therapy
Area Leadership
For more information, see Intellectual
property from page 65.
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There is also increasing recognition and concern
about healthcare disparities by race, region, and
socioeconomic status, in particular, the growing
prevalence of NCDs and the human symptoms
of climate change. An emphasis on public health,
screening and early intervention that is designed
with the engagement of civil society, patient
organisations and government is critical.
“ Organisations are no
longer valued or
trusted solely on the
quality of products and
services, and financial
performance.”
Additionally, it is important to recognise that by
exacerbating social, economic and demographic
inequalities, climate change is further undermining
progress on public health.
To address these challenges, companies are
seeking to operate in a way that meets stakeholders’
expectations by, for example:
> embedding a culture of ethics and integrity
> adopting higher governance standards
> setting ambitious sustainability targets
> partnering across sectors
> improving relationships with employees,
shareholders and other stakeholders.
Trust
Organisations are no longer valued or trusted solely
on the quality of products and services, and financial
performance. It also depends on their engagement
with employees, customers, communities and
society as a whole, as well as the way in which
they address sustainability issues, such as the
environment or human rights. Therefore, to be
trusted, companies need to address both how their
operations are impacted by these issues and how
their operations impact stakeholders. For example,
the shift in focus of healthcare systems to prevention
and early intervention, as well as treatment, presents
an opportunity for the sector to enter into health
management. But if it is to do so successfully,
healthcare professionals and patients need to trust
that the industry has their best interests at heart.
Historically, the pharmaceutical industry has faced
challenges in building and maintaining its reputation
and the trust of its stakeholders. This was as a result
of improper sales and marketing practices by some
companies and related inquiries and investigations
carried out by government and regulatory authorities
in connection with, for example, the selling of opioid
pain relievers and improper pricing practices,
including price gouging.
The industry’s response to the COVID-19 pandemic
and the quick mobilisation of resources to develop
a vaccine appears to have contributed to a slight
increase in public trust. To build on this, the sector
will need to commit to affordable access, be
transparent, and measure outcomes in trials that
have real-world implications.
Reshaping of the sector
The pharmaceutical market is highly competitive
and, while our peers face similar challenges and
opportunities, they approach them in different ways.
Some companies have pursued a strategy focused
on branded prescription pharmaceuticals. Others
have diversified by acquiring or building branded
generics businesses or consumer portfolios, or
have looked to geographic expansion, especially
in Emerging Markets. Companies are also focused
on improving R&D productivity and operational
efficiency. Across the industry, mergers and
acquisitions, business development deals (including
licensing and collaborations) and competition for
business development opportunities have continued.
Companies are also adopting more ‘patient-centric’
approaches that encompass all aspects of disease
management – prevention, screening, diagnosis,
treatment and rehabilitation. In particular, the speed
of technological change is rapidly transforming
current business models. Existing and new entrants
to the industry, for example from the technology
sector, are focusing on patient outcomes rather than
just products and services, and prediction and
prevention rather than just diagnosis and treatment.
They are driving innovative thinking around how to
improve health through technology and how to
improve patient satisfaction through a heightened
focus on user experience. Patients are becoming
more engaged and willing to take greater control of
their own health. These non-traditional companies are
applying their years of experience in environments
where products change all the time to the healthcare
industry. New entrants have a great opportunity to
improve healthcare and partner with researchers
and manufacturers to more effectively develop and
commercialise treatments. This may also entail new
ways of competing.
If new approaches such as outcomes-based pricing
are to be successful, companies will need to
develop systems that capture outcomes data linked
to the use of their medicines. The sustainability and
growth of a more patient-centric pharmaceutical
industry is predicated on organisations being able to
take full advantage of these breakthroughs in digital
and other technologies.
More generally, to be successful, companies will
need to be able to respond to the pressures and
demands made on them by patients and caregivers,
health authorities, payers, policymakers and others.
Link to strategy
Be a Great Place to Work
For more information, see Ethics and
transparency from page 73.
“ ...the speed of
technological
change is rapidly
transforming current
business models.”
Link to strategy
Global, science-led, patient-focused
pharmaceutical company
For more information, see Risk from
page 254.
AstraZeneca Annual Report & Form 20-F Information 2020 / Healthcare in a Changing World
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Our Strategy and
Key Performance
Indicators
We are always seeking new ways in which
to accelerate delivery of our growth through
innovation strategy.
As outlined in Business Model and Life-cycle
of a Medicine from page 8, the fundamentals
of our science-led, patient-focused value
proposition endure. In furtherance of this,
our strategic priorities support delivery of
our growth through innovation strategy.
They include a focus on embedding a
patient-centric business model and culture
to incorporate patient insights, doing more
with technology, digital and data, and
advancing more cutting-edge science.
They are accompanied by our unwavering
commitment to being a trusted partner for
all our stakeholders, having a positive impact
on society, and being an indispensable ally
in the quest to meet rising global demand for
effective healthcare. Those priorities are:
1. Accelerate
Innovative Science
2. Deliver Growth
and Therapy
Area Leadership
3. Be a Great
Place to Work
Achieve Group Financial Targets
Effective delivery of our strategic pillars will help us achieve our financial targets. We aim to
deliver great medicines to patients while maintaining cost discipline and a flexible cost base,
driving operating leverage and increased cash generation.
We wish to maintain a progressive dividend policy and a strong balance sheet.
Accelerating in the ‘next normal’
The world around us continues to change,
including, in 2020, the biggest health crisis
in a generation. Recognising this, and in line
with our Values, we invited employees to
participate in a crowdsourcing event
– COVID-19: Now & Next. This provided an
opportunity to share perspectives, thoughts
and ideas to support the delivery of our
strategy and enable us to emerge stronger
from the pandemic. Almost half our employees
participated and more than 12,000 people
from across 47 countries contributed ideas,
reactions and comments.
Our KPIs and remuneration
Our KPIs are aligned to our strategic priorities
and are the indicators against which we
measure our productivity and success.
A number of the KPIs used in this section are
used to measure the remuneration of Executive
Directors and allow us to disclose aggregated
targets without disclosing sensitive commercial
information at the individual KPI level. Any
variances between the KPI and values used in
determining remuneration are explained in the
Directors’ Remuneration Report from page 140.
Other indicators used are now included in
Performance in 2020 from page 24.
Following the event, suggestions were
reviewed and prioritised, contributing to
recommendations covering the following areas:
> healthcare delivery
> future of R&D
> digital foundations
> organisation of the future
> supply chain.
These recommendations were considered by
the Senior Executive Team and Board, and are
reflected further on the following pages.
From 2021, a metric focusing on the delivery
of our Ambition Zero Carbon commitments
will be included in our executive incentive
arrangements, to underline the importance we
place on eliminating our Scope 1 and Scope 2
greenhouse gas emissions by 2025.
KPI key
New in 2020
Used for remuneration
of Executive Directors
Denotes a scale break.
For more information,
see the Directors’
Remuneration Report
from page 140.
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Accelerate Innovative Science
What this means
Delivering the next wave of our innovative
pipeline and ensuring the sustainable delivery
of new products.
Pursuing the next wave of disruptive R&D
platforms with new scientific modalities,
such as ProTACs and cell therapies; new
technologies, such as OMICs; and new
biology, such as epigenetics, oligonucleotides
and antibody drug conjugates.
Driving R&D productivity through clinical trial
excellence and the use of artificial intelligence
(AI), data science and digital technology, that
enable new insights, accelerated processes and
an improved patient experience and adherence.
How our strategy responds to
market trends
Aiming to lead in new science platforms,
leveraging technology to transform R&D
productivity and the patient’s experience:
> Developing an R&D culture of inspiring
people with curious minds, harnessing
data and technology, working seamlessly
and inclusively, and always learning
from patients.
> Focusing on innovative science in three
main therapy areas, a range of drug
modalities, emerging drug platforms
and new technologies.
> Driving R&D productivity by focusing on
quality rather than quantity at all stages
of drug discovery and development, and
strengthening our ability to match targeted
medicines to patients who need them most.
> Transforming our science and leveraging
technology, including the provision of
enhanced data and clinical insights,
as well as digital and AI approaches.
> Working in collaboration with academia,
governments, industry, and scientific
and patient organisations to access the
best science.
> Attracting the brightest minds and creating
an environment where science can thrive.
How we progressed in the year
> During 2020, we secured 29 approvals for
new medicines and made 24 NME or major
LCM regulatory submissions in the US, EU,
China and Japan.
> Our pipeline includes 171 projects, of which
145 are in the clinical phase of development.
> At the end of the year, we had 10 NME
projects in pivotal trials or under regulatory
review covering 16 indications (2019: 8).
> 22 projects were discontinued.
“ Developing an R&D
culture of inspiring
people with curious
minds, harnessing
data and technology,
working seamlessly
and inclusively, and
always learning
from patients.”
For more information, see Performance
in 2020 from page 24, Therapy Area
Review from page 30 and Research &
Development from page 53.
Key Performance Indicators
Our science measures incentivise the
development of new molecular entities
(NMEs) and the maximisation of the potential
of existing medicines. Pipeline progression events
(Phase II NME starts/progressions and Phase III
investment decisions) measure innovation and
sustainability. Regulatory events (regulatory
submissions and approvals) demonstrate the
advancement of this innovation to patients and
the value to the Group.
For more information on performance against
the Group scorecard, see page 140.
Pipeline progression events
Regulatory events
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2019
2018
53
36¹
22²
28³
2020
2019
2018
53¹
63²
51³
1 25 against our Group scorecard for
1 43 against our Group scorecard for
determining annual bonus.
determining annual bonus.
2 17 against our Group scorecard for
2 37 against our Group scorecard for
determining annual bonus.
determining annual bonus.
3 28 against our Group scorecard for
3 47 against our Group scorecard for
determining annual bonus.
determining annual bonus.
AstraZeneca Annual Report & Form 20-F Information 2020 / Our Strategy and Key Performance Indicators
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Our Strategy and
Key Performance
Indicators
continued
Deliver Growth and Therapy Area Leadership
What this means
Meeting our growth and profitability goals by
driving growth through successful innovation
and commercial excellence, and creating
sustainable profitability.
Transforming healthcare delivery through
a focus on:
> Patients, impacting and improving the
whole patient experience, from disease
prevention and awareness, diagnosis,
treatment, post-treatment to wellness.
> Data analytics, omnichannel and go-to-
market models.
> Innovative value strategies for pricing that
focus on the outcomes our medicines
deliver to patients and healthcare systems.
Implementing our plans for ‘smart factories’
and next-generation manufacturing
technologies.
How our strategy responds to
market trends
Aiming to shift from a focus on treatment to
improving the whole patient experience and
developing new payer models that improve
access to our medicines:
1
Tagrisso, Imfinzi, Lynparza, Calquence, Enhertu, Koselugo,
Farxiga, Brilinta, Lokelma, roxadustat, Fasenra, Bevespi
and Breztri.
Key Performance Indicator
Our Total Revenue measure reflects the
importance of incentivising sustainable
growth in both the short and longer term.
For details of how Total Revenue is
considered when calculating the annual
bonus, see from page 140.
> Fostering a patient-focused approach and
embedding patient insights across our
organisation, building fully-integrated
therapy area ecosystem models and
establishing ‘health innovation hubs’.
> Engaging with policymakers to support
improvements in access, coverage, care
delivery, quality of care and patient care
outcomes.
> Leveraging technology across prevention
and awareness, diagnosis, treatment and
post-treatment to wellness to deliver better
patient outcomes more efficiently.
> Enabling our Emerging Markets to deliver
better and broader patient access through
faster submissions, innovative and targeted
equitable pricing strategies and practices.
> Partnering with industry, governments and
academia to find ways to bring new
medicines to market more quickly and
efficiently.
> Collaborating with the funders of healthcare
to increase the use of value-based pricing
solutions.
> Basing pricing policy on four principles:
value, sustainability, access and flexibility;
and developing novel and flexible ways to
access and pay for medicines.
> Pursuing a strong patent strategy – building
robust patent estates that protect our
pipeline and products to defending and
enforcing patent rights.
How we progressed in the year:
> Total Revenue, comprising Product Sales
and Collaboration Revenue, increased
by 9% (10% at CER) to $26,617 million.
> Product Sales grew by 10% (11% at CER)
to $25,890 million; Collaboration Revenue
fell by 11% (11% at CER) to $727 million.
> Total Revenue from New Medicines1
increased by 33% (33% at CER) to
$13,950 million, representing 52% of
total Product Sales (2019: 43%).
> Oncology Product Sales grew by 25%
(26% at CER) to $10,850 million, while
CVRM increased by 3% (5% at CER)
to $7,096 million. R&I declined by 1%
(stable at CER) to $5,357 million, reflecting
the impact in China of COVID-19.
> Total Revenue grew in Emerging Markets
by 7% (10% at CER) to $8,711 million.
In the US it grew by 13% to $8,833 million
and in Europe by 10% (9% at CER) to
$5,540 million.
> COVID-19: Now & Next – Healthcare
Delivery: thinking differently about how we
deliver healthcare to patients, for example,
mixing remote and in-person approaches.
> COVID-19: Now & Next – Digital
Foundations: developing new approaches
and advancing behaviours and skills
required to speed digital transformation.
> COVID-19: Now & Next – Supply Chain:
better connecting our people, processes
and platforms to enhance our performance.
For more information, see Performance
in 2020 from page 24, Therapy Area
Review from page 30 and Commercial
from page 57.
Total Revenue
$26,617m
2020
2019
2018
$26,617m
$24,384m
$22,090m
Actual growth
2020 +9%
2019 +10%
2018 -2%
CER growth
2020 +10%
2019 +13%
2018 -2%
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AstraZeneca Annual Report & Form 20-F Information 2020 / Strategic Report
Be a Great Place to Work
What this means:
> Contributing to the enterprise, with a focus
on inclusion and diversity, as well as lifelong
learning and development.
> Contributing to society by improving
access to healthcare, environmental
protection, and ethics and transparency,
as well as delivering our Ambition Zero
Carbon programme.
> Living our Values and behaviours.
How our strategy responds to
market trends
Aiming to be a great and sustainable
organisation, trusted by all our stakeholders:
> Empowering employees through our Code
of Ethics to make decisions in the best
interests of the Group and society.
> Contributing to society in support of the
United Nations Sustainable Development
Goals.
> Broadening access to healthcare solutions
for life-changing treatment and prevention.
> Addressing the environment’s impact on
human health.
How we progressed in the year
> We continue to invest in our people to
ensure we recruit, retain and develop a
talented workforce.
> In 2020, we delivered a strong performance
across the key priorities of our People and
Sustainability strategies.
> We continue to score highly in our Pulse
surveys for questions relating to our
Purpose, direction, patient centricity and
employee commitment to our success.
> Refusing to tolerate bribery or any other
> We achieved a ‘Green’ rating for performance
form of corruption.
> Recruiting the best talent which underpins
our innovation and growth.
> Living our Values and engendering a
high-performing team and lifelong learning.
> Harnessing different perspectives, talents
and ideas to be inclusive, as well as
ensuring that employees reflect the diversity
of the communities in which we operate.
across our three sustainability pillars
> COVID-19: Now & Next – Future of R&D:
how we use our office and lab spaces; what
flexibility and working practices look like
and how we can keep ahead of technology
advancements; assessing whether we
could bring more flexibility to how we work
as well as advancing other ways to continue
to evolve our organisation.
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built around two
priorities: contribution
to the enterprise
and contribution
to society.”
For more information, see Performance
in 2020 from page 24 and People and
Sustainability from pages 68 and 72.
Key Performance Indicators
Our Great Place to Work strategy is built around
two priorities: Contribution to the enterprise and
Contribution to society.
Our Contribution to the enterprise KPI is based
on our Pulse survey measure of those employees
who believe that AstraZeneca is a great place
to work.
Our new Contribution to society KPI is based
on our Sustainability scorecard. It measures
progress on annual and long-term targets across
our three pillars of sustainability: Access to
healthcare, Environmental protection, and Ethics
and transparency.
Employee belief that AstraZeneca
is a great place to work¹
Sustainability
scorecard performance²
89%
2020
2019
2018
93%
89%
86%
83%
2020 93%
2019 86%
2018 83%
Blue
Green
Amber
Red
1 Source: December Pulse survey for each
year. 2020 and 2019 were a full census
survey, 2018 surveyed a 50% sample of
the organisation.
2 A Green rating = more than 70% of our
categories are rated green. Each category
consists of several key performance
indicators.
AstraZeneca Annual Report & Form 20-F Information 2020 / Our Strategy and Key Performance Indicators
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Our Strategy and
Key Performance
Indicators
continued
Achieve Group Financial Targets
What this means
Effective delivery of our three strategic pillars
will help us achieve our financial targets.
We aim to deliver great medicines to patients
while maintaining cost discipline and a flexible
cost base, driving operating leverage and
increased cash generation.
We wish to maintain a progressive dividend
policy and a strong balance sheet.
For more information, see
Financial Review from page 82.
Key Performance Indicators
Cash generation is a key driver of long-term
shareholder returns and facilitates reinvestment
in our pipeline, which is critical for delivering
new medicines and future value.
Net cash flow from operating activities
$4,799m
Earning per share (EPS) is an important
profitability metric and a key driver of
shareholder value. For more information on
our Core measures, see from page 82 in the
Financial Review.
For details of how Achieve Group Financial
Targets are considered when calculating the
annual bonus, see page 141.
Denotes a scale break.
$4,799m
$2,969m
$2,618m
$2.44
$1.03
$1.70
$4.02
$3.50
$3.46
2020
2019
2018
Actual growth
2020 +62%
2019 +13%
2018 -27%
Reported EPS
$2.44
2020
2019
2018
Actual growth
2020 +137%
2019 -40%
2018 -28%
CER growth
2020 +142%
2019 -33%
2018 -29%
Core EPS
$4.02
2020
2019
2018
Actual growth
2020 +15%
2019 +1%
2018 -19%
CER growth
2020 +18%
2019 0%
2018 -19%
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AstraZeneca Annual Report & Form 20-F Information 2020 / Strategic Report Better prediction
of clinical success
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Bridging the gap between
animals and humans
In our efforts to improve our ability to
predict the clinical success of our candidate
drug molecules, we are adopting a range
of cutting‑edge technologies.
> Humanised models bridge the gap
between animals and humans and
are a big step forward compared
to the conventional human cell
cultures which have been in use
for many years. These models
provide an environment in which
human cells behave more like they
would in the body, generating data
about toxicity, efficacy and other
key effects that are more relevant
to patients than previous methods.
> ‘Organ-Chips’ are helping
us recreate what happens in
full-size tissues and organs.
Recently published research, in
collaboration with the Emulate,
Inc. and the Wyss Institute at
Harvard University, respectively,
demonstrates the ability of the
Liver-Chip to model the liver
toxicity of eight previously-studied
compounds, and the bone marrow
chip to effectively replicate
>3D
drug-induced toxicity responses
observed in human patients at
clinically relevant doses.
> 3D bioprinting and organoid
models are helping us create
complex structures for research
into kidney and other diseases
where preclinical to clinical
translation is a challenge.
Our collaboration with Harvard
University created human
vascularised renal proximal
tubules to study cellular crosstalk
and the behaviour of our
compounds in the kidney.
> In the development of ‘miniature
organs’ to recreate the mechanical
and electrical properties in a
beating heart, we are working with
Novoheart, using its 3D human
ventricular cardiac organoid
chamber. This ‘heart-in-a-jar’
technology is designed to
reproduce key characteristics
of heart failure with preserved
ejection fractions.
Organ-Chips: enhancing
our ability to translate science
into medicines.
3D bioprinting and organoid models
help create complex structures for
research into diseases
For more information, see Research
& Development from page 53.
AstraZeneca Annual Report & Form 20-F Information 2020 / Our Strategy and Key Performance Indicators
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Performance
in 2020
How we delivered against our three
strategic pillars.
In this section, we report
in detail on how we have
delivered against our strategic
priorities, which are to:
1. Accelerate
Innovative Science
2. Deliver Growth
and Therapy
Area Leadership
3. Be a Great
Place to Work
1. Accelerate
Innovative Science
1a. Advancing our scientific knowledge
to extend the possible
2020 was another exceptional year for our
science, with our pipeline producing
overwhelmingly positive news for patients.
This included 53 regulatory events, either
submissions or approvals for our medicines
in major markets. That performance is backed
by a healthy pipeline of high potential
medicines, with a record number of 36
pipeline progression events, either NME
Phase II starts or Phase III investment
decisions, indicating our ability to deliver
longer-term sustainable growth.
Development pipeline
During 2020, we delivered clinical trial data
and submissions that resulted in 29 approvals
for new medicines in the US, EU, China and
Japan. As shown in the table opposite, our
pipeline includes 171 projects, of which 145
are in the clinical phase of development. We
are making significant progress in advancing
our late-stage programmes through regulatory
approval with 24 NME or major life-cycle
management (LCM) regulatory submissions
in the US, EU, China and Japan during 2020.
At the end of the year, we had 10 NME projects
in pivotal trials or under regulatory review
(covering 16 indications), compared with
eight at the end of 2019.
Also in 2020, 18 NMEs progressed to their
next phase of development and 22 projects
were discontinued: 12 for poorer than
anticipated safety and efficacy results and
10 as a result of a strategic shift in the
environment or portfolio prioritisation.
Accelerating our pipeline
We are prioritising our investment in specific
programmes, focusing on scientific
innovation. As a result, we had numerous
positive trial readouts in 2020 including
the presentation of scientific rationale that
resulted in 14 Regulatory Designations for
Breakthrough Therapy, Priority Review or
Fast Track for new medicines which offer the
potential to address unmet medical need in
certain diseases. We also secured Orphan
Drug Designation for the development of six
medicines to treat very rare diseases.
For more information, see Therapy Area Review from
page 30 and Research & Development from page 53.
1b. Harnessing data and technology to
accelerate change
As outlined in Information technology and
information services resources on page 66,
a programme of digital transformation is
helping deliver our strategic priorities. During
2020, we leveraged our capabilities and
technologies to respond to the challenges
posed by COVID-19 and maintain care for
patients. This included building integrated,
remote care solutions that helped release
capacity in hospitals by providing services
such as home delivery of medicines,
self-administration and telemedicine
consultation. Internally, we deployed MS
Teams to more than 77,000 employees and
contract workers within eight days.
For healthcare practitioners (HCPs), we
ensured continued day-to-day engagement
by rolling out a number of technologies to
more than 15,000 employees across 71
countries in less than two weeks. We did
not fully replace our traditional face-to-face
interactions, but identified what approach
added most value. We also arranged
webcasts for HCPs to share knowledge
and clinical insights from experts in treating
COVID-19.
Many of our commercial launches and
congresses moved to digital. For example,
Imfinzi in China was the first medicine ever
to be launched virtually, engaging nearly
6,000 HCPs.
24
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Performance indicators
By measuring both Phase II and
Phase III pipeline progressions,
we are focused on both near-term and
longer-term delivery. Phase II NME
starts ensure the ongoing robustness
and future stability of the pipeline (and
reflect the outcome of nearer-term
strategic investment decisions). Phase
III investments measure assets that will
deliver nearer-term value (and reflect
the outcome of longer-term strategic
investment decisions).
Submissions and approvals metrics
demonstrate the advancement of this
innovation through filing and approval
in our four major markets (US, EU,
China and Japan).
Denotes a scale break.
NME Phase II starts/progressions
NME and major LCM submissions
8
2020
2019
2018
NME and major LCM Phase III
investment decisions
28
2020
2019
2018
24
2020
2019
2018
NME and major LCM approvals
29
2020
2019
2018
8
8
9
28
14
19
24
35
28
29
28
23
Development pipeline overview (as at 11 February 2021)
171 projects
Projects are counted here until they have launched in all applicable major regions.
Phase I
35 Phase II
42 Late-stage
development*
25 Life-cycle
management
projects*
69
> 35 projects in Phase 1
including:
– 27 NMEs
– 8 novel combinations
> 42 projects in Phase II,
> 25 projects in late-stage
> 69 LCM projects
including:
– 36 NMEs or novel
combinations
– 6 significant additional
indications for projects that
have reached Phase III
development, either in Phase
III/pivotal Phase II trials or
under regulatory review:
– 10 NMEs or novel
combinations not yet
approved in any market
– 6 projects exploring
additional indications for
these NMEs
– 9 NMEs already approved
or launched in the US, EU,
China and/or Japan
– 52 LCMs not yet approved
in any market
– 17 LCMs already approved
or launched in the US, EU,
China and/or Japan
* NMEs or novel combinations and
significant additional indications.
* Only includes material projects where
first indication is already launched.
35
42
25
69
Oncology
CVRM
Respiratory & Immunology
Other
AstraZeneca Annual Report & Form 20-F Information 2020 / Performance in 2020
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Performance
in 2020
continued
2. Deliver Growth and
Therapy Area Leadership
2a. Leading in science and healthcare
to create value and growth
Product Sales grew by 10% (11% at CER) to
$25,890 million. This total included $2 million
of COVID-19 Vaccine AstraZeneca Product
Sales. Growth was driven primarily by the
performance of new medicines across
Oncology and BioPharmaceuticals, including
Tagrisso and Farxiga.
The impact of COVID-19 included reduced
sales of Pulmicort in China on lower
nebulisation-centre visits and reduced
elective surgery, and less use globally of
infused and injectable medicines, such as
Imfinzi and Fasenra. A decline in the number
of hospitalisations for the treatment of heart
attacks adversely impacted sales of Brilinta.
Some medicines, however, may benefit from
shifts in patient care and behaviours, including
oral medicines such as Calquence.
Additional investment in new medicines
continued to fuel our growing Oncology and
BioPharmaceuticals therapy areas. Tagrisso’s
future was enhanced with its first regulatory
approval in early, potentially-curative lung
cancer and further national reimbursement
in China in advanced disease. Farxiga
expanded its potential beyond diabetes,
while tezepelumab has potential for
patients suffering from severe asthma.
Performance indicators
Global Product Sales by geography
Oncology
Oncology Product Sales grew by 25%
(26% at CER). Annual sales of Tagrisso,
Lynparza and Imfinzi each exceeded
$1 billion. AstraZeneca’s share of Enhertu
profits are included in Collaboration Revenue.
Cardiovascular, Renal & Metabolism
Cardiovascular, Renal & Metabolism (CVRM)
Product Sales grew by 3% (5% at CER).
Annual sales of Farxiga, Brilinta and Crestor
each exceeded $1 billion.
Respiratory & Immunology
Product Sales from Respiratory & Immunology
(R&I) medicines declined by 1% (stable at CER)
which included a decline in Pulmicort sales of
32% (32% at CER). Annual sales of Symbicort
exceeded $1 billion.
Performance by geography
Product Sales in Emerging Markets increased
by 6% (10% at CER). In the US, Product Sales
increased by 12% and in Europe by 16%
(15% at CER). Japan sales increased 2%
(1% at CER).
A strong performance in China was limited by
the adverse impacts of COVID-19 on sales of
Pulmicort and the pricing effect of the China
volume-based procurement programme on
Brilinta, Losec and Arimidex.
For more information, see Financial Review from
page 82.
2b. Recognising patients as people
first and putting them at the heart of
what we do
The healthcare landscape is evolving rapidly
and we are working to make an impact
across the entire healthcare system and better
address current and future patient needs.
We understand that putting patients first, or
patient centricity, makes a real difference to
the lives of people living with various diseases.
In committing to patient centricity, we listen
to their experiences and embed their insights
to innovate and strengthen the way we work.
By working across AstraZeneca, from R&D
to commercial development, and with
external partners in the broader healthcare
environment, we believe we can deliver the
healthcare experience and outcomes that
people care about most so that they can
enjoy fulfilling lives.
Our work with and for patients recognises
the entire patient network – caregiver, family,
friends, co-workers, HCPs and others – as
partners. We use their diverse experiences,
values and expertise to better understand
needs at all points during the patient journey
– from prevention and awareness, diagnosis,
treatment and post- treatment to wellness.
We swiftly adapted the way we work to
address the challenges caused or exacerbated
by COVID-19 in order to meet the needs of
diverse patients and patient communities.
For more information on how our patient-centric
approach drove our response to the pandemic,
see COVID-19 pandemic on page 28.
Product
Sales
$m
8,679
8,638
5,059
3,514
25,890
Actual
growth
%
2020
CER
growth
%
6
12
16
6
10
10
12
15
6
11
Product
Sales
$m
8,165
7,747
4,350
3,303
23,565
Actual
growth
%
18
13
(2)
17
12
2019
CER
growth
%
24
13
2
18
15
Product
Sales
$m
6,891
6,876
4,459
2,823
21,049
Actual
growth
%
12
11
(6)
(8)
4
2018
CER
growth
%
13
11
(10)
(9)
4
Emerging
Markets
US
Europe
Established
Rest of World
Total
Oncology
$10,850m
Product Sales
Cardiovascular, Renal & Metabolism
Respiratory & Immunology
$7,096m
Product Sales
$5,357m
Product Sales
2020
2019
2018
$10,850m
$8,667m
$6,028m
2020
2019
2018
$7,096m
$6,906m
$6,710m
2020
2019
2018
$5,357m
$5,391m
$4,911m
Actual growth
2020 + 25%
2019 +44%
2018 +50%
CER growth
2020 + 26%
2019 +47%
2018 +49%
Actual growth
2020 + 3%
2019 +3%
2018 -8%
CER growth
2020 + 5%
2019 +6%
2018 -8%
Actual growth
2020 -1%
2019 +10%
2018 +4%
CER growth
2020 0%
2019 +13%
2018 +3%
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3. Be a Great Place
to Work
3a. Enabling our people to
make a difference
In 2020 we made progress across the three
pillars of our People Strategy. To ensure we
continue to perform as an enterprise team,
we removed performance ratings and shifted
our focus to coaching, development and
contribution. We saw a four percentage point
increase in our employee survey question
addressing effective collaboration between
teams. To support our employees’ lifelong
learning, we made a substantial investment
in a global online learning platform providing
on-demand access to a comprehensive
library of educational resources.
We have updated our Values to clearly reflect
our commitment to inclusion and diversity,
developed a comprehensive plan to ensure
that the actions we take to address racial
equity are meaningful and sustainable, with
long-term impact, and saw significant
progress in the representation of women in
senior roles.
community with Non-Executive Chairman
of the Board, Leif Johansson and Executive
Vice-President, Sustainability and Chief
Compliance Officer; President AstraZeneca
AB, Sweden, Katarina Ageborg. We also
presented at the United Nations General
Assembly on health system resiliency, in
support of broadening access to healthcare.
We are committed to supporting our
employees through the personal challenges
presented by the impact of the COVID-19
pandemic, and were encouraged that 91% of
employees stated they are getting the support
they need during this time.
3b. Contributing sustainably to society
and the planet
In 2020, we continued toward our ambition to
be Leading in sustainability. We hosted our
first ESG-specific webcast for the investor
We progressed on our Ambition Zero Carbon
commitment, announced in January 2020
and, during the year, sourced 99.9% of our
imported electricity globally from renewable
sources. To further our efforts in ethics and
transparency, we deepened our commitment
to inclusion and diversity with a commitment
to ensure racial equity in our workplace and
access to our medicines, in our clinical trials
and beyond.
Performance indicators BV
Contribution to the enterprise
This priority is built on three pillars:
performing as an enterprise team,
commitment to lifelong learning and
development, and championing of
inclusion and diversity.
For more information, see People from
page 68.
Contribution to society – Leading in
sustainability
The Leading in sustainability performance
indicators measure the progress of our
environmental, social and governance
practices. They are representative indicators
of each of the three priorities for our
sustainability approach – to broaden access
to healthcare, to protect the environment,
and to foster ethics and transparency.
For more information, see Sustainability
from page 72.
Performing as an enterprise team1,2
Building a culture of lifelong learning
and development3,4
Inclusion and diversity5
81%
2020
2019
2018
84%
46.9%
81%
77%
74%
2020
2019
2018
84%
83%
80%
2020
2019
2018
46.9%
45.4%
44.6%
1 Source: December Pulse survey for each
3 Source: December Pulse survey for each
year, based on the percentage of favourable
responses to the question ‘effective
collaboration between teams’.
year, based on the percentage of favourable
responses to the question ‘opportunity for
personal development and growth’.
2 Source: December Pulse survey for each
year. 2020 and 2019 were a full census
survey, 2018 surveyed a 50% sample of
the organisation.
4 Source: December Pulse survey for each
year. 2020 and 2019 were a full census
survey, 2018 surveyed a 50% sample of
the organisation.
5 Female representation at career level F+
(the most senior 13% of the employee
population).
Access to healthcare: through our
access to healthcare programmes1,2
25.0m
people
2020
2019
2018
Environmental protection:
Scope 1 and 2 greenhouse gas
(GHG) footprint1
248 kt CO2e
Ethics and transparency:
non-compliance with our
Code of Ethics¹
49.1
per 1,000 employees in
Commercial Business Units
25.0m
20.5m
15.0m
2020
2019
2018
248 kt CO2e
385 kt CO2e
413 kt CO2e
2020
2019
2018
49.1
63.3
56.6
1 This indicator is consistent with a new
1 There were 2,113 instances, most of
2025 target included in our Ambition Zero
Carbon commitment. Previously reported
operational GHG footprint emissions
included select Scope 3 sources. See
page 75 for more information.
them minor, of non-compliance with our
Code of Ethics or supporting requirements
in our Commercial Business Units by
employees and third parties. See page 61
for more information.
1 Our access to healthcare programmes,
including Healthy Heart Africa, Healthy
Lung, Phakamisa, and Young Health
Programme (YHP), have reached
25.0 million people through education,
screenings, diagnosis and treatment
cumulatively since the start of each
programme. See from page 74 for more
information.
2 We expanded this measure to include
the YHP for all years. Totals for each
programme individually are reported in
the Sustainability Data Summary at
www.astrazeneca.com/sustainability.
AstraZeneca Annual Report & Form 20-F Information 2020 / Performance in 2020
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Performance
in 2020
continued
COVID-19 pandemic
AstraZeneca’s response to the
COVID-19 pandemic was consistent
with our Values of following the
science, putting patients first and
doing the right thing.
Our priorities
Our priorities were driven by the needs
of patients, caregivers and communities.
To respond effectively, we partnered with
governments, international organisations,
HCPs, industry and non-profit organisations.
Our response had the following objectives:
> Help ensure the safety of patients and their
continued access to care and medicines.
> Protect critical operations to ensure the
continued supply of our medicines to
patients who need them.
> Ensure the safety and wellbeing of our
employees.
> Contribute to the process of scientific
innovation to combat the virus.
> Contribute more broadly to society,
including emergency relief.
Patient safety and continuity of care
In addition to healthcare systems, significant
support for patients, their caregivers and
communities comes from the charitable and
non-profit sector. Yet more than 90% of these
organisations were negatively impacted in
2020 and one quarter expected to close down
within the next 12 months if the situation did
not change. Therefore, in addition to our
longstanding support, in 2020 we pledged
to maintain our support to these groups,
including additional financial commitments
to dozens of patient advocacy groups and
professional societies across the globe to
prioritise continuity of care during the
pandemic.
In addition, we helped medical professionals,
which included being lead donor of the COVID
Impacts Cancer Initiative – an emergency
initiative that was launched by the American
Society of Clinical Oncology to establish a
registry for its members to share data on how
the pandemic impacted cancer care and
patient outcomes. It also provided patients
and providers with information and resources
on cancer and its relationship with COVID-19.
The pandemic will have longer-lasting
implications for healthcare systems. Hence,
in November, we launched our Partnership for
Health System Sustainability and Resilience
with the World Economic Forum and the
London School of Economics. Working with
academia, local governments and other
institutions around the world, the partnership
will work to identify practical solutions to
strengthen the resilience and sustainability
of healthcare systems.
Throughout the pandemic, we continued to
progress our pipeline and, fuelled by digital
technologies, we closely monitored our
clinical trials, adapting and responding on a
study-by-study basis to maintain continuity
wherever possible. We redesigned trials to
protect patients and avoid disruption by
increasing the use of initiatives like home-
based treatments and remote monitoring.
Continued supply of medicines
The pandemic placed challenges on global
supply chains, in particular for the highly
integrated pharmaceutical sector. We
monitored the situation closely, working with
national authorities and agencies, activating
business continuity plans and managing
inventory to ensure manufacturing and supply
continuity. We also monitored logistics
channels to safeguard the efficient flow of
medicines and maintained our quality
standards. This enabled us to continue to
deliver our medicines during the pandemic
and respond effectively to the growth in global
demand for some medicines. There were no
meaningful disruptions to the supply of our
medicines during the pandemic.
For more information, see Operations from page 62.
Safety and wellbeing of employees
We are committed to providing safe working
environments for our employees and
suppliers. Throughout the pandemic, our
employees adapted to new ways of working
and a secure digital platform was rolled out to
more than 77,000 employees and contract
workers in eight days so that most, including
some laboratory staff, could work from home.
In locations where employees were able to
return to offices, and at our sites where
manufacturing staff and critical frontline
workers remained in our workplaces,
additional health and safety measures
were put in place, including temperature
screenings, physical distancing and
mandatory mask-wearing.
At key sites, we launched internal PCR and
antibody assessments and we carried out
more than 50,000. We provided support and
guidance to employees with suspected or
confirmed COVID-19 and performed contact
tracings among our site-based employees
whenever a colleague tested positive. We also
launched toolkits for employees and leaders,
including advice on working effectively from
home while maintaining wellbeing.
To ease the challenges for employees of
having their children at home, in May we
launched ‘MyClassroom’ in the UK, a
programme of virtual classroom sessions.
In addition, we assisted our key workers,
who work at manufacturing sites, laboratories,
and distribution centres, or who directly
support our sites, in finding places at
nurseries and with registered childminders.
For more information, see People from page 68.
Research and development
In 2020, our R&D teams focused on
researching new ways to tackle the virus.
This included initiating new clinical trials to
investigate our new and existing medicines
to see how they might protect organs from
damage or suppress the body’s overactive
immune response and turn off the cytokine
storm in severely ill patients. We used our
scientific expertise in infectious disease and
proprietary antibody discovery technology to
identify novel coronavirus-neutralising antibodies
as a potential preventative or treatment
approach to COVID-19 disease. A clinical
candidate, AZD7442, was selected in just
99 days. It is now in Phase III clinical trials.
As a longer-term preventative approach,
in April 2020, we concluded an agreement
with the University of Oxford for the global
development, production and supply of their
potential vaccine for COVID-19, now known
as COVID-19 Vaccine AstraZeneca. We
committed to doing this at no profit during
the pandemic and to providing the broad
and equitable supply of billions of doses.
To date, up to 60,000 participants have been
recruited into clinical trials and, following
publication of high-level results in The Lancet,
COVID-19 Vaccine AstraZeneca received its
first approval for emergency use in the UK
on 30 December 2020. It now has conditional
marketing authorisation or emergency use
approval in more than 50 countries. We are
working with our supply partners to optimise
the manufacturing process and ensure that
the vaccine is produced at the scale and pace
required while retaining the highest quality
standards.
For more information, see R&D and Other Medicines and
COVID-19 from pages 53 and 47.
Contribution to society
As mentioned above, charities struggled to keep
their programmes going in 2020. In March, we
therefore reaffirmed our commitment to the
non-profit organisations we support around
the world, allowing them to divert grants
towards pandemic-related activities, delay
projects and defer reporting. In all, we
provided more than $15 million in COVID-19
donations to patient advocacy groups, health
charities and relief agencies, supporting 340
non-profit organisations in 78 countries.
At the start of the pandemic, and faced with
a critical shortage of protective medical
equipment, we donated emergency supplies
and resources to support health systems
around the world. We donated nine million
face masks to 49 countries, collaborating with
the World Economic Forum’s COVID Action
Platform, created with the support of the
WHO, to identify countries in greatest need and
with Direct Relief to distribute across the US,
with a focus on medically unserved communities.
We also donated surgical gloves, monitors,
medicines and other medical supplies.
28
AstraZeneca Annual Report & Form 20-F Information 2020 / Strategic Report
In line with our global focus on adolescent
health, we provided additional support to our
Young Health Programme collaborators to
adapt programming and address issues
specific to this demographic. We also provided
disaster relief funds to Direct Relief, Americares
and Project Hope and pre-positioned medicines
with Direct Relief to expedite relief work.
More broadly, we shared our employee
toolkits externally for other organisations to
use and repurpose. By January 2021, they
had been downloaded more than 6,000 times.
We updated our Global Volunteering Policy,
extending the amount of leave for medically
trained employees, and encouraged
volunteering more generally to relieve
exhausted health systems and support
communities. In 2020, 894 employees
volunteered 17,397 hours.
For more information, see Community investment
from page 78.
Impact on the business
AstraZeneca faced a number of challenges
arising from the pandemic. These included:
> Reduced levels of patient screenings,
diagnoses, testing and elective procedures.
> Less face-to-face engagement with HCPs
for commercial field sales teams.
> Additional costs and procedures related to
COVID-19, such as facilities cleaning, face
masks and COVID-19 assessments.
> An increase in Distribution Expense.
> An impact on initiation, ongoing recruitment
and follow-up in some clinical trials,
primarily in the early stage.
COVID-19 has had a direct impact on some
of our medicines, including reduced sales
of Pulmicort in China on fewer nebulisation-
centre visits and reduced elective surgery,
and less use globally of infused and injectable
medicines, such as Imfinzi and Fasenra. Other
medicines, however, may benefit from shifts
in patient care and behaviours, including oral
medicines such as Calquence.
Other impacts include savings on expenses
and travel with, for example, a one-third
reduction in business miles driven and a
reduction in greenhouse gases from flying
of more than 80%.
We believe it remains prudent to assume that
additional delays will arise as a consequence
of the pandemic. However, despite a delayed
global recovery, we believe AstraZeneca is
well-placed to manage these challenges.
The unprecedented environment has also
provided multiple opportunities to explore
more efficient ways of working, which have
the potential to provide long-term benefits
to patients and to the Group.
For more information, see Financial Review, Principal
Risks and Risk from pages 82, 80 and 254.
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Supporting the
UK response
to COVID-19
In April 2020, we
collaborated with GSK and
the University of Cambridge
to create the UK’s fourth
COVID-19 testing centre.
The project drew on AstraZeneca
and GSK’s drug discovery and
technology expertise, as well as
the University’s interdisciplinary
research capabilities. Volunteers
from all three organisations
and our technical partners
set up the facility in record
time at the University’s Anne
McLaren building.
They installed innovative robotics
and automation, implemented an
entire supply chain and ensured that
the testing facility was both resilient
and efficient.
We also improved the testing
process by combining molecular
biology expertise with automation,
building capacity to process
thousands of samples per day.
AstraZeneca Annual Report & Form 20-F Information 2020 / Performance in 2020
29
Therapy Area Review
Oncology
Leading a revolution in oncology to redefine
cancer care. Our ambition is to provide cures for
cancer in every form. We are following the science
to understand cancer and all its complexities to
discover, develop and deliver life-changing
treatments and increase the potential for cure.
Unmet medical need and world market
> Cancer is the second leading cause of death globally
> Lung cancer claims a life every 18 seconds; it has the
highest cancer mortality rate, followed by colorectal,
stomach, liver and breast cancer
> With over two million new cases worldwide for each in
2019, lung cancer and breast cancer are the two most
common types of cancer
> Other common cancers include prostate
and ovarian cancer
Minute pieces of tumour DNA
circulating in the bloodstream.
1.8m
Lung cancer was
responsible for the deaths of
1.8 million people in 2018.
2.1m
Breast cancer is the most
frequent cancer among
women, impacting 2.1
million women each year.
Cancer worldwide burden
New cases
Deaths
2018
18.1m
2030
26.4m
2018
9.6m
2030
17m
Living with cancer
2018
43m
2030
82m
Therapy area world market
(MAT/Q3/20)
$140.2bn
Annual worldwide market value
Small molecule targeted agents $40.3bn
Monoclonal antibodies (mAbs) $30.3bn
Chemotherapy $27.4bn
Immune checkpoint inhibitors $25.9bn
Hormonal therapies $14.1bn
PARP Inhibitors $1.9bn
Source: International Agency for Research on Cancer.
Other oncology therapies $0.2bn
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Source: IQVIA.
AstraZeneca focuses on
specific segments within
this overall therapy area
market.
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Approved in the US for the adjuvant treatment of patients with
early-stage EGFR mutated (EGFRm) non-small cell lung cancer
(NSCLC). Approved in 85 countries, including the US, Japan,
China and the EU, for 1st-line EGFRm advanced NSCLC, and
in 89 countries, including the US, Japan, China and the EU, for
2nd-line use in patients with EGFRm T790M mutation-positive
advanced NSCLC.
Approved in 78 countries for the treatment of ovarian cancer;
it has also been approved in 76 countries for the treatment of
metastatic breast cancer, and in 55 countries, including the US,
for the treatment of pancreatic cancer. It is also approved in the
US for the 2nd-line treatment of homologous recombination
repair gene mutated (HRRm) metastatic castration-resistant
prostate cancer (mCRPC) and in the EU and Japan for breast
cancer susceptibility gene mutated (BRCAm) mCRPC.
Approved in the curative-intent setting of unresectable,
Stage III NSCLC after chemoradiotherapy in 67 countries,
including the US, Japan, China and the EU. Also approved
in extensive-stage small cell lung cancer (ES-SCLC) in 51
countries including the US, Japan and the EU. Also approved
for previously treated patients with advanced bladder cancer
in 18 countries.
Approved for the treatment of CLL and small lymphocytic
lymphoma in the US and approved for CLL in the EU and
several other countries worldwide. Also approved for the
treatment of adult patients with MCL who have received at least
one prior therapy in the US and several other countries.
Approved in the US and Japan for human epidermal growth
factor receptor 2 (HER2)-positive unresectable or metastatic
breast cancer following two or more prior anti-HER2 based
regimens. Approved in Japan for patients with HER2-positive
metastatic gastric cancer. Regulatory reviews in other
countries are also under way in breast and gastric cancers.
Approved in the US for the treatment of paediatric patients
two years of age and older with neurofibromatosis type 1 (NF1)
who have symptomatic, inoperable PN. Regulatory review is
also under way in the EU for this indication.
Approved in the US for adult patients with relapsed or
refractory HCL who have received at least two prior systemic
therapies, including treatment with a purine nucleoside
analogue. Regulatory review is under way in the EU.
Approved in the EU for metastatic colorectal cancer, metastatic
breast cancer, advanced NSCLC, advanced renal cell cancer,
epithelial ovarian, fallopian tube or primary peritoneal cancer,
and advanced cervical cancer. Regulatory review is also under
way in the US.
Product
Disease area
Revenue
Commentary
Tagrisso
(osimertinib)
Lung cancer
$4,328m,
up 36%
(36% at CER)
Lynparza
(olaparib)
Ovarian cancer
Breast cancer
Pancreatic cancer
Prostate cancer
$2,236m,
up 24%
(24% at CER)
Imfinzi
(durvalumab)
Lung cancer
Bladder cancer
$2,042m,
up 39%
(39% at CER)
Calquence
(acalabrutinib)
Enhertu
(trastuzumab
deruxtecan)
Mantle cell
lymphoma (MCL)
Chronic
lymphocytic
leukaemia (CLL)
Breast cancer
Gastric cancer
$522m,
up 219%
(219% at CER)
$94m share
in profits
Koselugo
(selumetinib)
Neurofibromatosis
type 1 plexiform
neurofibromas (PN)
$38m
Lumoxiti
(moxetumomab
pasudotox-tdfk)
Hairy cell
leukaemia (HCL)
Equidacent
(bevacizumab
biosimilar)
Colon, breast,
lung, kidney,
ovarian and
cervical cancers
Legacy
Zoladex
(goserelin
acetate implant)
Faslodex
(fulvestrant)
Prostate cancer
Breast cancer
Breast cancer
Iressa
(gefitinib)
Lung cancer
Full product information from page 25.
$938m,
up 13%
(17% at CER)
$580m,
down 35%
(34% at CER)
$268m,
down 37%
(36% at CER)
Arimidex
(anastrozole)
Breast cancer
Casodex/Cosudex
(bicalutamide)
Prostate cancer
Others
$185m,
down 18%
(16% at CER)
$172m,
down 14%
(14% at CER)
$51m,
down 47%
(46% at CER)
Key marketed products and
revenues 2020
Our Oncology performance in 2020
was driven by the rapid and broad
market penetration of our new
medicines, with several launches
and 18 approvals.
Oncology Product Sales
$10,850m
42% of total
2019: $8,667m
2018: $6,028m
Our strategy in Oncology
Our Oncology strategy is built with one goal
in mind – to push the boundaries of science
to change the practice of medicine and
transform the lives of patients living with
cancer. Our broad pipeline of next-generation
medicines, together with our focus on
excellence in execution, are aimed at
expanding treatment options and improving
outcomes for patients with solid tumours and
haematological cancers. With this vision in
mind, we focus on four strategic priorities:
1. Pioneering research across six scientific
platforms: we are exploring several
monotherapy and combination approaches
across our six scientific platforms:
a. Tumour drivers and resistance (TDR)
– targeting the genetic mutations and
resistance mechanisms that enable
cancer cells to evade treatment, survive
and proliferate.
b. Immuno-oncology (IO) – activating the
body’s own immune system to help
fight cancer.
c. DNA damage response – targeting the
DNA repair process to block cancer cells’
ability to reproduce.
d. Antibody drug conjugates (ADC) –
delivering highly-potent cancer-killing
agents directly to cancer cells via a linker
attached to a targeted antibody.
e. Epigenetics – identifying epigenetic
changes (how the genome is expressed)
and deploying inhibitors targeting key
processes in cancer cells.
f. Cell Therapies – harnessing living cells to
target cancer.
2. Advancing innovative clinical strategies to
treat early stages of disease and relapsed
or refractory patients: to redefine the
current cancer treatment paradigm,
we recognise that we must both identify
and treat patients earlier in their disease
progression when there is a possibility
of cure, and also improve the treatment
of relapsed or refractory patients to
extend survival and deliver the most
transformative outcomes.
3. Building expertise and leadership in the
most prevalent and highest mortality rate
tumour types: on our path to eliminating
cancer as a cause of death, we have set
ourselves the goal of improving five-year
survival across key tumour types including
lung, breast, ovarian and haematologic
malignancies. We also continue to
concentrate on biomarker-driven
indications where the benefits to patient
populations are tangible and significant.
AstraZeneca Annual Report & Form 20-F Information 2020 / Therapy Area Review
31
Therapy Area Review
Oncology
continued
4. Delivering across our global footprint – to
deliver cancer therapies to every eligible
and appropriate patient, we are building
oncology-specific expertise and capability
across all geographies. We are deploying
innovative access solutions to ensure
that patients that need our medicines can
get them and leveraging digital and data
to optimise our commercial efforts. In
addition, through our Oncology Business
Unit, we are increasing focus and
improving response time in key markets
such as the US, UK, Italy, France, Germany,
Spain, Japan and China.
2020 pipeline highlights
Life-cycle phases – R&D
NME Phase II a/b starts/progressions
NME and major life-cycle
management (LCM) positive Phase III
investment decisions
NME and major LCM regional
submissions
Life-cycle phases – approvals
NME and major LCM regional
approvals
Discontinued projects
Product
AZD4573
MEDI2228
Cancer type
Haematological malignancies
Multiple myeloma
Enhertu + Imfinzi (platform)
Post IO NSCLC (HUDSON)
Product
Cancer type
Imfinzi + chemoradiation therapy
Locally advanced, unresectable oesophageal squamous cell carcinoma
(KUNLUN)
Tagrisso
Neoadjuvant EGFRm NSCLC (NeoADAURA)
Imfinzi + chemotherapy
Neoadjuvant/adjuvant gastric cancer (MATTERHORN)
Enhertu
HER2-positive post-neoadjuvant high-risk breast cancer (DESTINY-Breast05)
Datopotamab deruxtecan (DS-1062)
2nd-line+ NSCLC without activating mutations (U301, TROPION-Lung01)
Investment decisions have been made for 16 projects; five clinical trials have started and 11 have yet to start.
Product
Imfinzi
Calquence
Enhertu
Enhertu
Imfinzi + SoC
Koselugo
Lynparza
Lynparza + Avastin
Tagrisso
Product
Calquence
Calquence
Enhertu
Equidacent (bevacizumab biosimilar)
Imfinzi + SoC
Koselugo
Lynparza
Lynparza
Lynparza + Avastin
Tagrisso
Imfinzi
Product
Cancer type
New, once every four weeks (Q4W) dosing
Relapsed/refractory CLL (ASCEND)
HER2-positive metastatic breast cancer
(DESTINY-Breast01)
HER2-positive metastatic gastric cancer
(DESTINY-Gastric01)
Region
US, EU
Japan
EU
US
1st-line extensive-stage SCLC (CASPIAN)
China
Neurofibromatosis type 1 (SPRINT)
EU
Prostate cancer (PROfound)
Ovarian cancer (PAOLA-1)
China, Japan
Japan
Adjuvant EGFRm NSCLC (ADAURA)
US, EU, China
Cancer type
Relapsed/refractory CLL (ASCEND)
1st-line CLL (ELEVATE-TN)
HER2-positive metastatic breast cancer
(DESTINY-Breast01)
Vascular endothelial growth factor cancer
treatment
Region
EU
EU
Japan
EU
1st-line extensive-stage SCLC (CASPIAN)
US, EU, Japan
Neurofibromatosis type 1 (SPRINT)
US
1st-line pancreatic cancer (POLO)
Prostate cancer (PROfound)
Ovarian cancer (PAOLA-1)
EU, Japan
EU, US, Japan
EU, US, Japan
Adjuvant EGFRm NSCLC (ADAURA)
New, once every four weeks (Q4W) dosing
US
US
Cancer type
Reason
Imfinzi + tremelimumab
1st-line bladder cancer (DANUBE)
Safety/efficacy
Imfinzi + AZD5069 or Imfinzi + danvatirsen
Head and neck squamous cell carcinoma,
bladder and NSCLC
Lynparza + adavosertib
Solid tumours
Lynparza + cediranib
Recurrent platinum-resistant ovarian cancer
(CONCERTO)
Safety/efficacy
Strategic
Safety/efficacy
Safety/efficacy
Safety/efficacy
Solid tumours
Prostate cancer
Oestrogen receptor positive breast cancer
Safety/efficacy
COVID-19 (CALAVI)
Safety/efficacy
Solid tumours, haematological malignancies
Safety/efficacy
MEDI5083
AZD4635
AZD9496
Calquence
AZD5153
For more information on the life-cycle
of a medicine, see page 9.
Imfinzi + tremilimumab
1st-line head and neck squamous cell carcinoma Safety/efficacy
oleclumab + imaradenant (AZD4635)
Prostate cancer
Safety/efficacy
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Along with the entire healthcare community,
we faced extremely challenging circumstances,
but also unique opportunities to evolve in ways
that will have a positive, lasting impact. We
moved quickly to launch a range of strategies
to mitigate the impact of COVID-19, embracing
our responsibility to ensure continuity of care
for our current patients, while maintaining our
momentum around screening and early diagnosis.
For example:
> 80% of late-stage Oncology clinical trials
continued with minimal delays or disruptions.
> We partnered with global patient coalitions to
launch New Normal, Same Cancer, a programme
to raise awareness regarding the impact of
COVID-19 and call for patients to contact their
doctor and return to cancer care services.
> In Brazil, we worked with our collaborator to
introduce at-home testing for cancers with
EGFR mutations, which has been replicated
in other countries.
> In Russia, retrospective lung cancer screening
allowed COVID-19 scans to be analysed using AI
to determine if signs of lung cancer were present.
80%
of late-stage Oncology
clinical trials continued
For more information on our response to COVID-19,
see COVID-19 pandemic from page 28.
Our response
to COVID-19
In Oncology, we pivoted and
adapted our approach in the
face of the global pandemic
across drug discovery, delivery
and care.
2020 pipeline highlights continued
Our late-stage pipeline delivered a strong
flow of new clinical data across our portfolio
and we continued to present our scientific
progress at major medical congresses. We
also continued to invest in new medicines
through collaborations and acquisitions.
Full details are given in the Development
Pipeline from page 245, and for highlights
from the progress our Oncology pipeline
made in 2020 against our KPIs, see opposite.
2020 review – strategy in action
We are striving to make cure a reality for
the millions of people across the world living
with cancer every day. Our focus is on some
of the most hostile and hard-to-treat cancers
including breast, lung, ovarian, prostate,
certain blood cancers and gastrointestinal
cancers. By understanding the complexities
of these cancer types, we can truly achieve
life-changing benefits for patients.
2020 saw strong continued growth,
underpinned by the performance of our new
oncology medicines and our established
products while our pioneering late-stage
pipeline dominated news flow in each of
our four strategic tumour types.
Lung cancer
AstraZeneca is committed to transforming the
treatment of lung cancer with a comprehensive
portfolio of approved and potential new
medicines in late-stage development spanning
different histologies, several stages of disease,
lines of therapy and modes of action.
Our strategy in lung cancer focuses on
detecting and treating patients as early as
possible, revolutionising care to give patients
the best chance of cure. We also continue
to advance research in metastatic disease,
bringing new solutions to patients that
meaningfully extend survival in advanced
lung cancer settings using precision medicine
and combination approaches.
In 2020, Tagrisso remained our top-selling
medicine, as we continued its global rollout
for 1st-line advanced EGFRm NSCLC and
secured the first global approval in the
adjuvant setting in the US in December 2020,
based on the unprecedented disease-free
survival benefit demonstrated in the ADAURA
Phase III trial.
Tagrisso also continues to be investigated
in the Stage III, unresectable setting (LAURA),
in the neoadjuvant resectable setting
(NeoADAURA), in combination with
chemotherapy in the metastatic setting
(FLAURA2), and in combination with potential
new medicines to address resistance to
EGFR-tyrosine kinase inhibitors (TKIs)
(SAVANNAH, ORCHARD).
Imfinzi continued its strong commercial
performance in 2020, supported by new
approvals in 51 countries in the extensive-
stage small cell lung cancer (ES-SCLC) setting
including the US, Japan and the EU, and
accelerating growth in the Stage III NSCLC
setting in markets outside the US. Imfinzi is
also being tested in the limited-stage SCLC
setting following concurrent chemoradiation
therapy (CRT) (ADRIATIC).
AstraZeneca Annual Report & Form 20-F Information 2020 / Therapy Area Review
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Therapy Area Review
Oncology
continued
Imfinzi is the current global standard of care
for the treatment of unresectable, Stage III
NSCLC based on the PACIFIC trial, and we
remain focused on bringing Imfinzi to other
early lung cancer settings where cure is
possible. In 2020, Imfinzi continued to
demonstrate unprecedented overall survival
in Stage III NSCLC with an estimated 50%
of patients surviving four years compared to
36% for placebo after CRT in updated data
from the PACIFIC trial.
We recognise that, for some, cancer has
become a secondary priority to the COVID-19
pandemic. Imfinzi was approved for a new
four-week, fixed-dose regimen in Stage III
NSCLC and advanced bladder cancer in the
US, and was approved in January 2021 in this
dosing for Stage III NSCLC patients in the EU.
The new dosing regimen helps simplify and
improve treatment by enabling continuity of
care while minimising the risk of exposure to
infection in the healthcare setting.
In May 2020, we received US Breakthrough
Therapy Designation for Enhertu in HER2-
mutant metastatic NSCLC. In the interim
results of the DESTINY-Lung01 Phase II trial,
Enhertu demonstrated meaningful clinical
activity for patients with HER2-mutant
NSCLC, with a confirmed objective response
rate of 61.9%. Additionally, an interim analysis
presented in January 2021 at the World
Conference on Lung Cancer showed preliminary
evidence of anti-tumour activity for Enhertu in
patients with HER2-overexpressing metastatic
NSCLC as well.
In July 2020, we entered a new global
development and commercialisation
agreement with Daiichi Sankyo for
datopotamab deruxtecan, Daiichi Sankyo’s
TROP2-directed ADC for the potential
treatment of multiple tumour types, including
lung cancer. In December 2020, we announced
two new trials exploring the potential of this
ADC: the pivotal Phase III TROPION-Lung01
trial versus docetaxel in previously treated
patients with advanced or metastatic NSCLC
without actionable genomic alterations, and
the Phase II TROPION-Lung05 trial in patients
with advanced or metastatic NSCLC with
actionable genomic alterations previously
treated with a kinase inhibitor and platinum
chemotherapy.
Savolitinib, a selective inhibitor of
mesenchymal epithelial transition factor
(c-MET) receptor tyrosine kinase, is being
investigated with Hutchison China MediTech
Limited (Chi-Med), both as a monotherapy
and in combination, and is showing promising
signs of clinical efficacy in patients with MET
gene alterations in lung cancer and gastric
cancer. It also showed promise in the TATTON
Phase Ib expansion cohort when combined with
Tagrisso in patients with EGFRm MET-amplified
NSCLC; this combination has been taken
into a large Phase II trial, SAVANNAH, which
is ongoing.
Breast cancer
By continuing to understand the complexities
of breast cancer and directly addressing
patients’ greatest unmet medical needs, we
hope to redefine breast cancer care.
Following approval of Enhertu in the US in
December 2019, we are continuing to work
with regulators in other markets to expand its
availability for patients with HER2-positive
metastatic breast cancer. In March 2020,
Enhertu was approved in Japan. We have also
submitted an application for approval in the
EU, for which we received a positive opinion
from the Committee for Medicinal Products
for Human Use in December 2020. We also
continue to expand the access to Lynparza
for patients with triple-negative breast cancer
(TNBC) in more than 67 countries.
Other agents in development for breast
cancer include: camizestrant (AZ9833), a
next-generation oral selective oestrogen
receptor degrader (SERD), which recently
entered into Phase III development for the
treatment of ER-positive breast cancer, and
capivasertib (AZD5363), an AKT (also known
as Protein kinase B) inhibitor, in Phase III
development for advanced or metastatic
TNBC or hormone receptor-positive (HR+)
breast cancer. Datopotamab deruxtecan is
also in development for TNBC in collaboration
with Daiichi Sankyo.
Ovarian cancer
We are committed to changing the way
advanced ovarian cancer is treated in the
1st-line setting. Our focus in ovarian cancer
is centred on Lynparza, which is our first
and best-in-class oral poly ADP-ribose
polymerase (PARP) inhibitor. We have a global
collaboration with MSD to co-develop and
co-commercialise Lynparza.
The positive results from the Phase III
PAOLA-1 trial showed Lynparza as 1st-line
maintenance treatment with bevacizumab
demonstrated a substantial progression
free survival (PFS) benefit for patients with
homologous recombination deficiency
(HRD)-positive advanced ovarian cancer. One
in two women with advanced ovarian cancer
has an HRD-positive tumour and represents a
broader patient group than in the SOLO-1 trial,
which had already demonstrated the significant
benefit of extending PFS much earlier. The
goal of 1st-line treatment is to delay progression
of the disease for as long as possible, with the
intent of achieving complete remission or
cure, and these data have the potential to
change clinical practice in how women with
advanced ovarian cancer are treated.
Lynparza is being evaluated in combination
with adavosertib (AZD1775), our WEE1
inhibitor, in recurrent ovarian, primary
peritoneal or fallopian tube cancers.
Adavosertib is also being evaluated as
monotherapy in the Phase II ADAGIO trial
in uterine serous carcinoma.
34
AstraZeneca Annual Report & Form 20-F Information 2020 / Strategic Report
Blood cancers
Leveraging our strength in solid tumours,
we have established haematology as one of
four key oncology disease areas of focus.
Our approach to tackling the diversity and
complexity of blood cancers is to identify
highly promising mechanisms in our pipeline
and align them with the greatest unmet
medical need.
Calquence is our irreversible oral Bruton’s
tyrosine kinase (BTK) inhibitor, now approved
in over 50 markets. In November 2020, the
European Commission approved Calquence
for adult patients with CLL. The approval was
based on positive results from the interim
analyses of two Phase III clinical trials. The
ASCEND trial compared Calquence with
rituximab combined with idelalisib or
bendamustine in patients with relapsed or
refractory CLL. The ELEVATE-TN trial
evaluated the safety and efficacy of
Calquence, alone or in combination with
obinutuzumab, compared with chlorambucil
in combination with obinutuzumab in patients
with previously untreated CLL. Together, the
trials showed that Calquence, in combination
with obinutuzumab, or as a monotherapy,
significantly reduced the relative risk of
disease progression or death versus the
comparator arms in both 1st-line and relapsed
or refractory CLL.
Positive data from the ACE-CL-003 trial
demonstrated that Calquence, in combination
with venetoclax and either obinutuzumab or
rituximab, in CLL patients resulted in high
complete response and undetectable minimal
residual disease after a median follow-up of
23.2 months with a tolerable safety profile.
We also made progress in our haematology
early-phase clinical programme, with
MEDI2228, an investigational B-cell
maturation antigen (BCMA)-targeted ADC
being explored for the treatment of relapsed
or refractory multiple myeloma.
The blood cancer pipeline also includes
ceralasertib (AZD6738), an ataxia telangiectasia
and Rad3-related (ATR) serine/threonine
protein kinase inhibitor being investigated in
combination with Calquence in CLL, and in
combination with radiation therapy and
chemotherapy. AZD2811 an aurora kinase B
inhibitor is in development as monotherapy
in Phase II in acute myeloid leukaemia.
Prostate cancer
We are pushing the boundaries of science,
aiming to provide precision medicines
matched to the patients who can benefit
most from them.
In 2020, Lynparza became the first and only
PARP inhibitor to improve overall survival in
patients with advanced prostate cancer.
Based on final results from the PROfound
Phase III trial of Lynparza in men with
metastatic castration-resistant prostate
cancer (mCRPC), it has been approved in the
US for men with homologous recombination
repair (HRR) gene-mutated mCRPC and in
the EU and Japan for patients with BRCAm
mCRPC.
The potential benefits of Lynparza in mCRPC
will continue to be tested in the Phase III
PROpel trial that will assess the combination of
Lynparza with abiraterone in 1st-line mCRPC.
Capivasertib (AKT inhibitor) is being evaluated
in combination with abiraterone in the Phase III
CAPItello-281 trial for metastatic hormone-
sensitive prostate cancer and PTEN deficiency.
Gastrointestinal/Genitourinary cancers
We have a number of ongoing trials testing
our medicines in gastrointestinal cancers,
notably in gastric and bladder cancers –
rare but life-threatening diseases. In 2020,
we announced results from two key trials
– DESTINY-Gastric01 and DANUBE.
The positive results from the DESTINY-
Gastric01 Phase II trial of Enhertu versus
chemotherapy was the first time that a
HER2-directed medicine showed an
improvement in survival for previously treated
HER2-positive metastatic gastric cancer
patients. Based on these results and the
significant unmet clinical needs of these
patients, we achieved several regulatory
milestones, including US BTD, US Orphan
Drug Designation (ODD), US Priority Review
and approval in Japan. Additional trials are
ongoing and planned for Enhertu in gastric
cancer as well as colorectal cancer.
Results from the Phase III DANUBE trial
showed Imfinzi, alone and in combination
with tremelimumab, versus standard of care
platinum-based chemotherapy in the 1st-line
treatment of patients with unresectable, Stage
IV bladder cancer, failed to meet either of
its primary endpoints of overall survival.
Secondary analyses suggested that this
combination has clinical activity, which is
enhanced in patients with tumours that have
high PD-L1 expression.
We continue to test Imfinzi extensively in
bladder cancer and in other gastrointestinal
(GI) cancer settings. Data from the Study 22
Phase II trial presented in May, showed Imfinzi
plus tremelimumab demonstrated promising
clinical activity and tolerability in patients with
advanced hepatocellular carcinoma (HCC).
This combination was granted ODD in the US
for HCC. In addition, tremelimumab was
granted orphan designation for HCC in the
EU, and Imfinzi was granted ODD in the US
for biliary tract cancer.
Head and neck cancer
In February 2021, the KESTREL Phase III
trial did not meet the primary endpoint of
improving overall survival for patients treated
with Imfinzi versus the EXTREME treatment
regimen, a standard of care, in the 1st-line
treatment of recurrent or metastatic head
and neck squamous cell carcinoma (HNSCC)
whose tumours expressed high levels of
PD-L1. Also, the combination of Imfinzi plus
tremelimumab did not indicate an overall
survival benefit in ‘all-comer’ patients, a
secondary endpoint.
Paediatric cancers
Historically, attention and research are not
directed to paediatric cancers, even though
they may be fatal and there is significant
unmet medical need. In 2020, Koselugo
became the first and only medicine approved
in the US for the treatment of paediatric
patients two years of age and older with
neurofibromatosis type 1 (NF1) who have
symptomatic, inoperable PN. NF1 is a rare
and debilitating genetic condition. Some
30-50% of patients with NF1 experience PN
– tumours growing inside their nerve sheaths.
The approval was based on results from the
Phase II SPRINT Stratum 1 trial coordinated
by the National Cancer Institute Centre for
Cancer Research, Paediatric Oncology
Branch.
Koselugo, which is part of a collaboration with
MSD, is also being investigated in a Phase III
trial for the treatment of adult patients with
NF1 symptomatic and/or progressive,
inoperable PN.
Our robust pipeline across cancers
We follow the science, without fear of failure,
wherever it takes us, in pursuit of the best
medicines. It is through this relentless quest
for innovation that we have created one of the
most diverse portfolios and pipelines in the
industry; encompassing molecules and
modalities designed to kill cancer cells
preferentially, at every stage of the disease.
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Our pipeline continues to expand and
progress across cancers, including:
> AZD7648, a potent and selective DNA-PK
inhibitor which could be an innovative new
way to target alternative DDR dependencies.
> Ceralasertib (AZD6738), an ATR serine/
threonine protein kinase inhibitor is being
evaluated in Phase I/II trials in solid tumours
and haematological malignancies as
monotherapy and in combination with
other targeted therapies, including Lynparza
in TNBC.
> AZD1390, a blood-brain barrier penetrant
inhibitor of ataxia-telangiectasia, mutated
(ATM) is in Phase I for brain tumours.
> AZD2811, an aurora kinase B inhibitor in
development as monotherapy in Phase II
for SCLC.
> MEDI2228, a BCMA-directed ADC being
investigated in relapsed/refractory multiple
myeloma.
> MEDI5752, a novel bispecific antibody
designed to target PD-1 and CTLA-4
checkpoints on immune cells, is being
studied in a range of solid tumours.
> MEDI0457, a human papilloma virus (HPV)
vaccine, currently being tested in combination
with Imfinzi in HPV-positive HNSCC.
> Monalizumab, our first-in-class humanised
anti-NKG2A antibody, is being investigated
in HNSCC, colorectal cancer and
haematological malignancies. Monalizumab
is being tested in the INTERLINK-1 Phase III
trial in HSNCC in combination with
cetuximab.
> AZD5153, a bromodomain-4 inhibitor
in Phase I for solid tumours.
> In our cell death portfolio, AZD5991
(MCL1 inhibitor) and AZD4573 (CDK9
inhibitor), are being investigated
in haematological malignancies.
Established portfolio
In 2020, our established Oncology brands –
Faslodex, Zoladex and Iressa – performed
well, with growth in Zoladex and moderate
sales decreases of Faslodex and Iressa.
Faslodex showed a slower decline than
expected, largely led by growth in
combination use with CDK4/6 inhibitors and
slower generic competition in the EU. Decline
in the second half of the year was primarily
driven by generic competition in the US.
Iressa sales continued to decline due to
generic entries in select markets, the uptake
of Tagrisso in 1st-line EGFRm advanced
NSCLC, and the pricing impact on Iressa
from centralised procurement in China.
Zoladex double-digit growth was based
on increased access to medical castration
and ovarian suppression, as well as earlier
detection and diagnosis in prostate and
breast cancers, predominantly in China
and Emerging Markets.
AstraZeneca Annual Report & Form 20-F Information 2020 / Therapy Area Review
35
Therapy Area Review
continued
Cardiovascular,
Renal & Metabolism
Our mission is to protect the lives of people from
the often devastating consequences of heart failure,
cardiovascular, metabolic and renal diseases, so they
can enjoy long and fulfilling lives. We are committed
to the seamless management of diseases, improving
patient outcomes and decreasing the mortality rate.
Unmet medical need and world market
Cardiovascular, Renal & Metabolism (CVRM) diseases
are the leading causes of death across the globe, killing
more than 20 million people each year.
mRNA is a compelling therapeutic
modality to repair and modify
disease using a cell’s blueprint for
building proteins.
463m
Number of people living
with diabetes.
17.9m
Number of people that die each
year from heart failure (HF) and
cardiovascular disease.
Nearly 700m
Number of people living with
chronic kidney disease (CKD).
Therapy area world market
(MAT/Q3/20)
$204.3bn
Annual worldwide market value
Diabetes $99.6bn
High blood pressure $35.3bn
Abnormal levels of blood cholesterol $16.7bn
Thrombosis $7.2bn
CKD $10.0bn
CKD associated anaemia $6.7bn
Hyperkalaemia $0.5bn
Other CV $45.0bn
Source: IQVIA.
AstraZeneca focuses on
specific segments within
this overall therapy area
market. Sales for CKD
($10.0bn) and CKD-
associated anaemia ($6.7bn)
fall outside the CVRM total
market. All sales for CKD
associated anaemia ($6.7bn)
fall within the CKD market
and should not be double
counted.
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Product
Disease area
Revenue
Commentary
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$1,959m, up 27%
(30% at CER)
$1,593m, up 1%
(2% at CER)
Approved in 100 countries to improve glycaemic control
in adult patients with type-2 diabetes; included in major
guidelines. Farxiga delivered consistent, solid growth
quarter-over-quarter in 2020. Type-1 diabetes sNDA
withdrawn in the US. First-in-class approval for HFrEF
in patients with and without type-2 diabetes in the US,
EU, Japan, China and several other countries worldwide.
Approved in more than 110 countries for ACS and more than
70 countries for high-risk patients with history of heart attack;
included in major guidelines. Approved in the US to reduce
the risk of a first heart attack or stroke in high-risk patients
with CAD, and to reduce the risk of stroke in patients with
acute ischaemic stroke (NIH Stroke Scale score ≤5) or
high-risk transient ischaemic attack (TIA).
Type-2 diabetes,
Type-1 diabetes;
heart failure with
reduced ejection
fraction (HFrEF)
Acute coronary
syndromes
(ACS), high-risk
patients with
history of
myocardial
infarction (MI),
high-risk patients
with coronary
artery disease
(CAD), stroke
Type-2 diabetes
Type-2 diabetes
Farxiga/
Forxiga
(dapagliflozin)
Brilinta/Brilique
(ticagrelor)
Onglyza
(saxagliptin)
Bydureon
(exenatide XR
injectable
suspension)
$470m,
down 11%
(10% at CER)
$448m,
down 18%
(18% at CER)
Approved in more than 85 countries for the treatment of adults
with type-2 diabetes; included in guidelines.
Approved in 58 countries to improve glycaemic control in
adults with type-2 diabetes; included in major guidelines.
Bydureon continues launch progress with BCise in a highly
dynamic GLP-1 class.
Approved for the treatment of hyperkalaemia. Label extensions
secured in the EU, US and China to include patients with
hyperkalaemia on haemodialysis. Launched in China and
Japan with further launches under way in key markets.
Our combination therapy of dapagliflozin, saxagliptin
and metformin hydrochloride was withdrawn in the US
(Qternmet XR) and in the EU (Qtrilmet).
Lokelma (sodium
zirconium
cyclosilicate (SZC))
Hyperkalaemia
$76m, movement
n/m
Byetta (exenatide
injection)
Qtern (saxagliptin
and dapagliflozin)
Type-2 diabetes
Type-2 diabetes
$68m, down 37%
(36% at CER)
$27m, up 50%
(50% at CER)
Symlin
(pramlintide
acetate)
Legacy
Crestor
(rosuvastatin
calcium)
Type-2 diabetes
$20m, down 41%
(41% at CER)
Dyslipidaemia
Hyper-
cholesterolaemia
$1,182m,
down 10%
(9% at CER)
Divested rights in over 30 countries in Europe (except the UK
and Spain) to Grünenthal in December 2020. Divested rights
in Australia and New Zealand to Menarini in December 2020.
Licensed from Shionogi.
Key marketed products and
revenues 2020
Brilinta and Farxiga continued to
provide a foundation for growth
and our renal franchise made
progress, with Lokelma launching
in China and Japan. Overall CVRM
Product Sales were up 3% on 2019
(5% at CER).
Seloken/Toprol-XL
(metoprolol
succinate)
Hypertension
Heart failure
Angina
$821m, up 8%
(12% at CER)
Divested rights in Europe to Recordati in May 2017.
Divested US rights to Aralez effective October 2016.
CVRM Product Sales
$7,096m
27% of total
2019: $6,906m
2018: $6,710m
Atacand/Atacand
HCT/Atacand Plus
(candesartan
cilexitil)
Others
Hypertension
Heart failure
$243m, up 10%
(15% at CER)
Divested rights to Cheplapharm in 28 European markets in
July 2018 and approximately 70 mainly International markets in
October 2020. Licensed from Takeda Chemicals Industries Ltd.
$144m,
down 35%
(34% at CER)
Our strategy for CVRM
We are committed to advancing the science
and treatment of four interrelated conditions
– cardiovascular disease, heart failure,
metabolic and renal diseases. Science
continues to identify the underlying links
between the heart, kidney and pancreas, and
how the interconnectivity of these organs is
reflected in the relationship of the diseases
that can occur. Damage to any one of these
organs can cause the other organs to fail.
Unfortunately, in many instances, these
conditions are either under-diagnosed or
not addressed early enough to avoid
life-threatening complications. We are
focused on delivering targeted treatment
options that address the root cause of these
diseases and help to manage complications.
Our ambition in CVRM
Our aim is to grow our already robust
portfolio of medicines that address the
multiple risk factors and co-morbidities
across the spectrum of CVRM diseases.
Our efforts are built on global randomised
clinical trials that are as close as possible
to clinical practice and real-world evidence
(RWE) research. These help us gather vital
insights into patient needs and clinical
practice, and develop treatments that meet
the requirements of both patients and HCPs.
Our ambition is as follows:
> Cardiovascular: to reverse atherosclerosis
to halt morbidity and prolong life.
> Heart failure (HF): to eliminate HF as the
first cause of hospitalisations, and cure
HF with reduced ejection fraction (HFrEF).
> Renal: to eliminate dialysis.
> Metabolism: to eliminate non-alcoholic
steatohepatitis (NASH) as a cause of liver
failure and cure diabetes.
With our existing medicines and those in
late-stage development, we are already
delivering life-changing results in the four
CVRM disease areas and their complications:
> Cardiovascular: Brilinta
> Heart failure: Farxiga, Lokelma
> Renal: Lokelma, Evrenzo (roxadustat),
Farxiga
> Metabolism: Brilinta, Farxiga, Bydureon.
We additionally have a pipeline of more than
25 therapies and therapy combinations and
believe we have a comprehensive portfolio of
potential medicines that might combat these
life-threatening conditions.
Beyond our research, we also invest in
strategic partnerships to better educate
stakeholders about these diseases and
improve patient access to healthcare
worldwide.
AstraZeneca Annual Report & Form 20-F Information 2020 / Therapy Area Review
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Therapy Area Review
Cardiovascular, Renal
& Metabolism continued
2020 pipeline highlights
Our pipeline includes biologics, small
molecules, antisense oligonucleotides,
mRNA, ProTACs and cell therapy. We are
researching pioneering approaches in the field
of disease regression and organ regeneration
for conditions such as CKD, CAD, chronic HF,
diabetes and NASH.
Life-cycle phases – R&D
New molecular entity (NME) Phase II a/b
starts/progressions
We are constantly building and investing in
cutting-edge technologies to fast-forward
the pace of our science, and by investing in
a cell therapy department, we aim to develop
the next wave of medicines that can halt or
reverse the damage caused by some of the
most complex diseases. We are also
leveraging the power of precision medicine
to target specific patient populations using
genetic signatures or biomarkers to address
patients with high unmet medical need
and where there remains very few
treatment options.
Full details are given in the Development
Pipeline, see from page 245, and highlights
from the progress of our CVRM pipeline made
in 2020 against our KPIs are shown below.
Product
AZD5718
AZD8233
MEDI6570
Disease
CKD
Dyslipidaemia
CAD
NME and major life-cycle management
(LCM) positive Phase III investment
decisions
Product
Farxiga/Forxiga
Farxiga/Forxiga
Disease
COVID-19 respiratory failure (DARE-19)
Prevention of heart failure and CV death following a myocardial infarction
in patients without type-2 diabetes (DAPA-MI)
Investment decisions have been made for three projects. Two clinical trails have started and one is yet to start.
NME and major LCM regional
submissions
Product
Brilinta
Farxiga/Forxiga
Farxiga/Forxiga
Disease
Acute ischaemic stroke or transient ischaemic
attack (THALES)
Renal outcomes and cardiovascular mortality in
patients with chronic kidney disease
(DAPA-CKD)
Worsening heart failure or cardiovascular death
in patients with HFrEF (DAPA-HF)
Region
EU, US, China
EU, US, Japan
Japan, China
Life-cycle phases – approvals
NME and major LCM regional approvals
Product
Disease
Brilinta/Brilique
Brilinta/Brilique
Farxiga/Forxiga
Farxiga/Forxiga
Lokelma
CV outcomes trial (CVOT) in patients with CAD
and type-2 diabetes without a previous history of
MI or stroke (THEMIS)
Acute ischaemic stroke or transient ischaemic
attack (THALES)
Worsening heart failure or cardiovascular death
in patients with HFrHF (DAPA-HF)
Type-2 diabetes CVOT (DECLARE)
Hyperkalaemia
Region
US
US
EU, US, Japan
China
Japan
Discontinued projects
Product
Brilinta/Brilique
MEDI7219
Qternmet XR/Qtrilmet (saxagliptin/
dapagliflozin metformin)
AZD6615
Farxiga/Forxiga
Farxiga/Forxiga
Disease
Prevention of vaso-occlusive crises in paediatric
patients with sickle cell disease (HESTIA)
Type-2 diabetes
Type-2 diabetes
CV disease
Heart failure with preserved ejection fraction
(HFpEF) (DETERMINE-Preserved)
Heart failure with reduced ejection fraction
(HFrEF) (DETERMINE-Reduced)
Reason
Strategic
Strategic
Strategic
Strategic
Strategic
Strategic
For more information on the life-cycle of a medicine,
see page 9.
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Working to
improve patient
outcomes
Our bold ambition can only
be achieved by working with
those who share our vision for
a better future for those with
CVRM diseases.
> By combining our expertise we
look to transform the lives of
patients and protect millions of
people from the devastating
consequences of CVRM diseases.
> In 2020, we entered into multiple
strategic collaborations with
healthcare innovators who share
this vision to both further our
understanding of CVRM diseases
and look for ways to improve
patient care. By working together
to harness the power of digital and
data science, we hope to enhance
the delivery of medicines to patients,
reduce inefficiencies throughout
the patient journey and support
patients in engaging with their
own health, while building trusted
data frameworks to connect health
data to health research.
>5
strategic collaborations
aim to address continued
unmet patient need across
CVRM diseases
20m
Up to 20 million people
die from CVRM diseases
each year
AstraZeneca Annual Report & Form 20-F Information 2020 / Therapy Area Review
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Therapy Area Review
Cardiovascular, Renal
& Metabolism continued
2020 review – strategy in action
2020 saw label extensions across our
current brand portfolio, supporting stable
performances from our Farxiga franchise
across type-2 diabetes and HF, and strong
launches with roxadustat and Lokelma. Our
pipeline remains strong, well balanced and
grows with existing products, LCMs and
multiple NMEs. We continue to drive
best-in-class clinical programmes aimed
at elucidating the commonalities and
interconnectedness between these diseases
and their complications.
Metabolism
Data from the landmark Phase III DECLARE-
TIMI 58 trial for Farxiga, part of the DapaCare
clinical programme which demonstrated the
effective reduction in HF risk in a broad range
of people with type-2 diabetes, provided the
basis for the label update in China. The
National Medical Products Administration
(NMPA) in China has updated the Forxiga
label to include data that demonstrate a
statistically significant reduction in the
composite endpoint of hospitalisation for
heart failure (hHF) or cardiovascular (CV)
death, versus placebo, in adults with type-2
diabetes and established CV disease or
multiple CV risk factors.
NASH prevalence is growing and is a major
public health burden. We are looking at how
we can accelerate and broaden our portfolio
in NASH. Our GLP-1 glucagon dual peptide,
cotadutide, was granted Fast Track
designation by the FDA for NASH and we
continue to progress our novel precision
medicine programme with AZD2693, an
antisense oligonucleotide.
Heart failure
As part of our efforts to prevent, treat and
cure HF as a leading cause of death, we are
developing treatments that include earlier
intervention across interconnected conditions
such as type-2 diabetes. As indicated above,
the DECLARE-TIMI 58 trial provided evidence
of Farxiga’s effectiveness in the prevention of
HF, and in cardio-renal protection. Meanwhile
the landmark Phase III DAPA-HF trial, showed
that Farxiga reduced the risk of CV death and
the rate of hospitalisation from HF in patients
with HFrEF with and without type-2 diabetes.
The FDA, EMA, Ministry of Health, Labour and
Welfare of Japan, and China’s National
Medical Products Administration (NMPA)
approved Farxiga for the treatment of HFrEF
patients with and without type-2 diabetes and
it is under review in several other regions.
Cardiovascular disease
In working towards our objective of eliminating
CV residual risk and stopping disease
progression, we believe we are already
making a difference in patients with CAD,
including those who are at high risk of
experiencing a first heart attack or stroke,
with the approval of the expanded indication
in the US, based on the THEMIS trial.
Strokes remain a significant cause of mortality
and disability, and a transient ischaemic attack
(TIA) can be a warning of a future stroke – these
individuals are at a high risk of a subsequent
CV event. Detailed results from the Phase III
THALES trial, as published in The New England
Journal of Medicine, showed Brilinta, taken
with aspirin for 30 days, reduced the rate of
the primary composite endpoint of stroke and
death by 17% (ARR, 1.1%; HR 0.83 95% CI
0.71, 0.96, p=0.02), compared to aspirin alone
in patients who had an acute ischaemic stroke
or TIA. The FDA approved Brilinta for the
reduction of subsequent stroke in patients who
experienced an acute ischaemic stroke or
high-risk TIA.
Our development strategy is focused on
targeting the drivers of inflammation and
dyslipidaemia in order to improve blood flow
to vital organs. AZD8233, our PCSK9 inhibitor,
focuses on preventing long- and short-term
tissue damage by tackling LDL cholesterol.
Raised LDL cholesterol is a key risk factor for
cardiovascular disease and is estimated to
cause 2.6 million deaths worldwide each year.
Whilst PCSK9 is a well-validated target for
lowering LDL cholesterol it has been a hugely
challenging target to inhibit with small
molecules. We entered into an agreement
with Dogma Therapeutics to develop the first
potential small molecule, orally bioavailable
PCSK9 inhibitor, for patients at risk of
cardiovascular disease.
We are also exploring MEDI6570 (LOX1),
that prevents tissue damage following
a cardiovascular event, and addressing
macro- and microvascular dysfunction
resulting from the widespread systemic
inflammation of major and minor blood
vessels.
During the period, the Group obtained
results from the DETERMINE-preserved and
DETERMINE-reduced function and symptom
trials, evaluating Farxiga as a treatment for
HFpEF and HFrEF, respectively. These trials
had the same primary endpoints. In the
DETERMINE-reduced trial, Farxiga
demonstrated a statistically significant
reduction in HF symptoms, as measured by
the Kansas City Cardiomyopathy Questionnaire
(KCCQ)-Total Symptom Score, versus placebo.
This trial did not, however, show a change from
baseline in the distance walked in six minutes,
and the KCCQ-Physical Limitation Score. The
DETERMINE HFpEF trial did not meet any of
the three aforementioned endpoints. No new
safety concerns were identified.
Our extensive clinical programme includes
several more Phase III trials for the potential
cardio-renal benefits of Farxiga, DAPA-CKD,
and DELIVER. These will explore its
effectiveness in addressing areas of high
unmet medical need in HF and CKD. The large
randomised DELIVER Phase III trial, evaluating
Farxiga in HFpEF, is expected to read out in
the second half of 2021.
HF patients are often prescribed life-saving
renin-angiotensin-aldosterone system
inhibitors (RAASi), which lead to elevated
potassium levels. These patients have an
increased risk of developing hyperkalaemia,
which can be life threatening if left untreated.
Lokelma is a treatment for hyperkalaemia
which was launched in the US and EU in 2019.
Data from the Phase II PRIORITIZE-HF trial,
designed to evaluate the benefits and risks of
using Lokelma to initiate and intensify RAASi
therapy in HF patients, is anticipated in 2021.
We continue to explore opportunities in
HFpEF, including investigation of AZD4831
(MPO), and initiation of a Phase II trial with
verinurad (currently also being investigated for
CKD). We also have a Farxiga combination
with AZD9977, a mineralocorticoid receptor
modulator, moving into Phase II in heart
failure. This is one of the first of several
Farxiga combinations moving into mid-stage
development across CVRM indications with
the aim of extending the life cycle of Farxiga.
We are also rapidly progressing our research
efforts in the fields of stem cell and cellular
regeneration of tissues with the potential to
treat life-threatening cardiovascular diseases
such as heart failure.
40
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Renal diseases
CKD is a progressive disease that can
eventually lead to end-stage kidney disease
(ESKD), with the potential for dialysis and
serious life-threatening complications. To help
transform the lives of more patients, we are
investigating the potential of roxadustat,
Lokelma and Farxiga to manage these
complications and reduce disease progression.
In August 2020, we presented detailed results
from the ground-breaking DAPA-CKD Phase
III trial showing that Farxiga on top of standard
of care reduced the composite measure of
worsening of renal function or risk of CV or
renal death compared to placebo in patients
with CKD Stages 2-4 and elevated urinary
albumin excretion. The results were consistent
in patients both with and without type-2
diabetes. The trial also met all secondary
endpoints, including significantly reducing
death from any cause compared to placebo.
Roxadustat is an oral hypoxia inducible factor
prolyl hydroxylase (HIF-PH) inhibitor that has
the potential to transform the lives of people
living with anaemia of CKD, both on dialysis
and not on dialysis.
Roxadustat is currently approved in China
and Japan under the name Evrenzo for the
treatment of anaemia in CKD in non-dialysis
dependent (NDD) and dialysis-dependent
adult patients.
People living with CKD are at an increased
risk of developing hyperkalaemia. Lokelma,
a highly selective, oral potassium-removing
agent, was approved for the treatment of
hyperkalaemia in Japan in March 2020, and
received label updates in the US, EU and
China to include patients with hyperkalaemia
on chronic and stable haemodialysis in April,
May and November 2020, respectively.
In order to help address the unmet medical
need in CKD, we are exploring the clinical
science behind our medicines with DELIGHT,
an exploratory Phase II/III trial, also part of the
DapaCare programme. The trial evaluates the
potential albuminuria-lowering effect of Farxiga
in the treatment of CKD and type-2 diabetes.
Our vision for the future is to stop progression
of ESKD. We accelerated MEDI3506 into
Phase II for diabetic kidney disease and
AZD5718 (FLAP) for CKD, and continue to
investigate new molecules such as MEDI8367
and AZD2373. AZD2373 targets the mRNA for
APOL1 and has shown encouraging results in
preclinical models. Several variants of the
APOL1 gene evolved in sub-Saharan West
Africa providing protection from Trypanosoma
infections, but people carrying two copies of
these variants have an increased risk for
developing CKD. APOL1 knockdown through
ASOs is being explored with the aim of being a
precision medicine in CKD and, if successful,
would provide a novel treatment option for
patients with APOL1-mediated CKD.
Our GLP-1 glucagon dual peptide, cotadutide,
has started Phase II trials, also in diabetic
kidney disease. We have a Farxiga
combination moving into Phase II for CKD
indications with a selective endothelin A
antagonist, zibotentan, otherwise known
as AZD4054.
We are now using AI and large data sets to
identify novel targets, and as part of our
collaboration with BenevolentAI, we identified
our first novel AI-generated CKD target.
We have also entered into strategic
collaborations with healthcare innovators
to further explore our understanding of
CVRM diseases, with the aim of harnessing
data, new technologies and digital health
to transform the lives of patients and
clinical practice.
In March, we entered into a multi-target
collaboration with Silence Therapeutics to
discover, develop and commercialise small
interfering RNA (siRNA) therapeutics for the
treatment of cardiovascular, renal, metabolic
and respiratory diseases. The collaboration
will harness Silence’s established mRNAi
GOLD™ (GalNAc Oligonucleotide Discovery)
Platform, bringing an exciting new modality
into our drug discovery toolbox.
In August 2020, we announced our
collaboration with two distinct digital health
innovators, Eko Health and Us2.ai, in order
to leverage the use of digital health solutions
to facilitate the management of HF to more
patients. The collaborations aim to drive
practice-changing solutions for HF screening,
diagnosis and management through the use
of artificial intelligence (AI) and technology to
enable earlier and more accurate prediction
of HF risk and CV complications.
In the same month, we entered into a
collaboration with RenalytixAI to develop
and launch precision medicine strategies for
CVRM diseases. Together, we will use an
AI-enabled in vitro diagnostic platform to help
identify previously hidden high-risk patient
groups and accelerate patient identification
and recruitment for clinical trials. The first
stage of the collaboration is now under way.
We are continuing our collaboration with the
NHS through Imperial College Health Partners
(London, UK) who are leading Discover-NOW,
the Health Data Research Hub for real world
evidence (RWE). Together, we are exploring
the potential of RWE, with new tools and
technologies to transform clinical care
pathways, resulting in better management and
prevention of various long-term conditions
such as type-2 diabetes and HF. This
programme has huge potential to revolutionise
how we are partnering with health systems
and academic bodies to deliver the right care
to the right patients at the right time.
Beyond research
We have made a long-term investment
to improve CVRM patient care through
a multi-disciplinary programme called
Accelerate Change Together (ACT).
ACT on HF aims to improve the lives of HF
patients by reducing HF hospitalisations by
half and improving five-year survival rates by
20% by 2024. The initiative seeks to elevate
HF as a healthcare priority, increase diagnosis
rates and improve management of patients.
In partnership with the World Heart Federation
(WHF), we are raising awareness of HF and
the need to improve prevention, diagnosis
and treatment of HF. Through our support for
WHF’s flagship global public health platform,
World Heart Day, we are also raising
awareness of all causes of cardiovascular
disease and championing heart health
for everyone.
ACT on CKD seeks to transform kidney health
and reduce the number of patients developing
kidney failure by 20% by 2025. We aim to
achieve this by raising awareness of kidney
disease, expand early diagnosis and
transform management of CKD. In partnership
with the International Society of Nephrology
(ISN) we intend to raise awareness of CKD
and enhance education on the importance
of early diagnosis among the general public,
patients, healthcare professionals and
policymakers worldwide.
The ACT programmes are already running
in over 40 countries.
We also invest in programmes to improve
patient access to healthcare. Some of our
most notable programmes include Healthy
Heart, which addresses hypertension and the
increasing burden of CV disease (see page 74
for more information); and One Brave Idea,
which aims to understand the molecular
events surrounding the earliest transition from
wellness to disease in coronary heart disease.
AstraZeneca Annual Report & Form 20-F Information 2020 / Therapy Area Review
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Therapy Area Review
continued
Respiratory &
Immunology
We aim to fundamentally transform the treatment
of respiratory and immune-mediated diseases,
with the bold ambition to eliminate preventable
attacks and achieve durable remission or even
cure for millions of people with these potentially
devastating conditions.
The epithelium is the first line of defence in the
human body; interaction between the airway
epithelium and bacteria, viruses, allergens or
pollution can result in the release of epithelial
cytokines, driving inflammation.
339m
339 million individuals
worldwide have asthma and
more than 60% of patients
have uncontrolled disease.
Prevalence is expected to rise.
10%
Severe asthma accounts for
about 10% of asthma patients
but 50% of the physical and
socio-economic burden of
asthma.
384m
Globally, 384 million people
have COPD, and it is the
third leading cause of death
worldwide. COPD
exacerbations represent a
significant burden for patients,
carers and society. COPD
costs are estimated to exceed
$100 billion per year globally.
Therapy area world market
(MAT/Q3/20)
$71.8bn
Annual worldwide market value
42
AstraZeneca Annual Report & Form 20-F Information 2020 / Strategic Report
Asthma $21.6bn
COPD $17.3bn
Other $33.0bn
Source: IQVIA.
AstraZeneca focuses on
specific segments within
this overall therapy area
market.
Unmet medical need and world marketMore than 700 million people have asthma or COPD. Despite currently available medicines, therapeutic advances are needed to reduce morbidity and mortality. Lupus is a debilitating autoimmune condition affecting up to five million people. No new medicines have been approved in nearly a decade. Key marketed products and
revenues 2020
Despite significant challenges
created by the COVID-19 pandemic,
our medicines achieved sales of
$5.4 billion, representing a decline
of 1% (0% at CER). Key growth
drivers for Respiratory &
Immunology were Fasenra and
Symbicort and, in the late stages of
2020, Breztri Aerosphere (Breztri).
Fasenra was the leading novel
biologic in new-to-brand
prescriptions in key markets around
the world. Symbicort strengthened
its class leadership in 2020, driven
by strong performances in the US,
Europe and Emerging Markets,
the anti-inflammatory reliever
indication in 35 countries, launch
of our authorised generic in the
US and COVID-19-driven repeat
prescribing in the first quarter.
Breztri, our triple therapy, was
launched in COPD in China and
the US, achieving $28m in sales.
Respiratory & Immunology
Product Sales
$5,357m
21% of total
2019: $5,391m
2018: $4,911m
Our strategy for Respiratory &
Immunology
Our aim is to lead the science of
respiratory medicine to transform
the treatment of asthma and COPD
by eliminating preventable asthma
attacks across disease severities
and removing COPD as a leading
cause of death through earlier,
biology-led treatment. In
immunology, we are following the
science and our expertise in key
inflammatory pathways that are
relevant in other immune-mediated
conditions, with the ambition of
achieving disease control and
durable remission in areas of high
unmet medical need.
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Revenue
Commentary
Symbicort
(budesonide/
formoterol)
Asthma
COPD
$2,721m, up 9%
(10% at CER)
Continued volume and value leadership of the inhaled
corticosteroid/long-acting beta2-agonist (ICS/LABA) class;
growth driven by US, Europe and Emerging Markets. Pricing
pressure is expected to continue in major territories such as
the US and EU.
Pulmicort
(budesonide)
Asthma
$996m, down
32% (32% at CER)
Pulmicort sales were significantly affected by COVID-19.
In-hospital paediatric use of nebulised Pulmicort reduced
significantly at the start of the pandemic.
Fasenra
(benralizumab)
Severe asthma
$949m, up
35% (34% at CER)
Fasenra was the leading biologic in new-to-brand
prescriptions in key markets around the world.
Daliresp/Daxas
(roflumilast)
COPD
$217m, up
1% (1% at CER)
Growth driven by favourable affordability-programme
changes and inventory movements in the US.
Duaklir
(aclidinium/
formoterol)
COPD
$75m, down 10%
(10% at CER)
Growth in Europe is in line with expectations. AstraZeneca
and Circassia terminated their collaboration for commercial
rights to Duaklir in the US in May 2020 and agreed a transition
period during which Circassia is continuing to commercialise
the medicine to ensure ongoing patient access.
Tudorza/Eklira
(aclidinium)
COPD
$68m, down 14%
(15% at CER)
Reflects the flat long-acting muscarinic antagonist (LAMA)
market. AstraZeneca and Circassia terminated their
collaboration for commercial rights to Tudorza in the US in
May 2020 and agreed a transition period during which
Circassia is continuing to commercialise the medicine to
ensure ongoing patient access.
COPD
COPD
Bevespi
(glycopyrrolate/
formoterol)
Breztri
(budesonide/
glycopyrrolate/
formoterol)
$48m, up 16%
(15% at CER)
In 2020, we launched Bevespi in China and Germany.
$28m, movement
n/m
Breztri launched in China and the US. In China, performance
outpaced Trelegy, despite order of entry. The lifting of Japan’s
Ryotanki restriction accelerated uptake in Japan in the fourth
quarter of 2020.
Others
Asthma
COPD
$273m, down 15%
(15% at CER)
Asthma
In asthma, we have a leading portfolio of
inhaled and biologic medicines today and
a pipeline for the future designed to address
the challenges of this highly heterogeneous
disease and reduce the vast unmet medical
need for the majority of patients whose
disease remains uncontrolled.
> The foundation of our strategy is to treat the
underlying inflammation of the disease and
eliminate patients’ over-reliance on reliever
medications such as short-acting beta2-
agonist (SABA) across disease severities.
Our inhaled anti-inflammatory reliever
portfolio includes the leading ICS/LABA
combination Symbicort and PT027, an ICS/
SABA combination, currently in Phase III
development.
> In severe disease, we are establishing
ourselves as the leader in biologic medicines
which aim to eliminate both asthma attacks
and chronic use of oral corticosteroids, which
is associated with debilitating side effects.
Our portfolio addresses the different drivers
of this complex, heterogeneous disease.
Fasenra is a mAb approved in 59 countries
indicated in patients with severe,
eosinophilic disease. It binds directly to
IL-5 receptor alpha on eosinophils and
attracts natural killer cells to induce rapid
and near-complete depletion of eosinophils
via apoptosis (programmed cell death).
Tezepelumab is a potential first-in-class
mAb that inhibits the action of thymic
stromal lymphopoietin (TSLP) – a key
epithelial cytokine that works at the top
of the inflammatory cascade. In its pivotal
Phase III trial, tezepelumab, compared
to placebo, significantly reduced the
exacerbation rate in a broad population
of severe asthma patients who are
underserved by currently available
biologic treatments.
> Our early portfolio is positioned to help
more patients with uncontrolled disease
by tackling alternative pathways not
covered by current therapies and
developing small molecules and new
inhaled modalities with greater ease of use
with the potential to enable greater access
for patients. MEDI3506 (anti-IL-33 mAb)
and AZD0449 (inhaled-JAK inhibitor) are
two highly differentiated and promising
early-stage medicines.
AstraZeneca Annual Report & Form 20-F Information 2020 / Therapy Area Review
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Therapy Area Review
Respiratory & Immunology
continued
COPD
In COPD, our ambition is to eliminate COPD
as a leading cause of death through early,
biology-led intervention. Our strategy is to
treat the underlying inflammation of the
disease, intervene earlier in the treatment
paradigm to halt disease progression and
move beyond inflammation to address a
broader set of disease drivers, including small
airways remodelling, lung tissue destruction,
mucous production and neuronal dysfunction.
> Breztri is indicated as a maintenance
treatment for moderate to severe COPD,
and is now approved in the US, China,
Japan and the EU where it is marketed as
Trixeo Aerosphere. Based on the growing
body of evidence supporting triple
therapies, we expect this class of medicines
to become the largest in COPD.
> Biologic medicines, Fasenra and
tezepelumab, which are in Phase III and
Phase II trials respectively in COPD, target
a range of disease processes, including
eosinophilic and epithelial-driven
inflammation. Our early COPD research
looks beyond inflammation with assets
such as MEDI3506.
2020 pipeline highlights
Life-cycle phases – R&D
New molecular entity (NME)
Phase II starts/progressions
NME and major life-cycle
management (LCM) positive
Phase III investment decisions
Immunology
In 2020, we expanded the name of the
respiratory therapy area to become ‘Respiratory
& Immunology’, reflecting our growing presence
in immune-mediated diseases. In immunology,
our understanding of the imbalanced immune
system in chronic lung diseases is being
applied to immune-mediated inflammatory
diseases that share key common pathways.
Our ambition in immunology is to achieve
disease control and ultimately clinical remission
in targeted disease areas where the unmet
medical need remains high.
In our mid- to late-stage portfolio, we are
advancing five franchises with multi-disease
potential across three key main pathways in
epithelial damage, eosinophilia and type 1
interferon. Our potential multi-disease
franchises in immunology include Fasenra,
which is targeting seven diseases beyond
respiratory disease, tezepelumab, MEDI3506,
anifrolumab and brazikumab (an anti-IL-23),
recently brought back to AstraZeneca and
currently being developed for Crohn’s disease
(CD) and ulcerative colitis (UC).
The progress we are making in immunology
complements our announcement to acquire
Alexion (subject to regulatory clearances and
approval by shareholders of both companies)
and accelerate our ambition to become a
leader in immunology in areas with high unmet
medical need.
Respiratory infectious diseases
We have significant heritage in respiratory
syncytial virus (RSV), having developed and
launched Synagis, used for the prevention of
serious lower respiratory tract infection (LRTI)
caused by RSV in high-risk infants. See
Infection on page 49 for more information.
Synagis is the current standard of care for
high-risk infants and we are building on its
efficacy by advancing nirsevimab, an
extended half-life RSV mAb. It is being
developed as a passive immunisation with the
potential to provide immunity directly and
offer immediate protection against RSV for a
broader group of infants. Nirsevimab is being
developed in conjunction with our collaborator
Sanofi. See below for more information.
Product
None
Product
Anifrolumab
Breztri
Fasenra
Fasenra
Disease
–
Disease
Systemic lupus erythematosus (subcutaneous)
Asthma
Bullous pemphigoid (FJORD)
Eosinophilic gastritis/eosinophilic gastroenteritis (HUDSON)
Plus three projects where an investment decision was made, but the clinical trial is yet to start.
NME and major LCM regional
submissions
Product
Anifrolumab
Disease
Systemic lupus erythematosus
Region
EU, US, Japan
Life-cycle phases – approvals
NME and major LCM regional approvals
Product
Bevespi
Breztri Trixeo 1
Symbicort pressurised metered-dose
inhaler (pMDI)
Symbicort 2
Disease
COPD
COPD
Asthma
Asthma
Discontinued projects
1 Trixeo in the EU, Breztri in the US, Japan and China.
2 In January 2021, Symbicort received regulatory approval in China for use in mild asthma.
For more information on the life-cycle of a medicine,
see page 9.
Product
MEDI5117 China
Abediterol
AZD5634
Velsecorat
Disease
Rheumatoid arthritis
Asthma/COPD
Cystic fibrosis
Asthma/COPD
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Region
China
US, EU
EU
China
Reason
Strategic
Strategic
Safety/efficacy
Strategic
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New frontiers
in asthma
Completion of Phase III
trial advances the science
of severe asthma.
>60%
More than 60% of patients have
uncontrolled asthma
Severe asthma patients are at
an increased risk of mortality
and experience twice as many
asthma-related hospitalisations
The epithelium is the first line of
defence for our body; interactions
between the airway epithelium and
viruses, allergy or pollution can
result in the release of epithelial
cytokines, driving inflammation.
We are pioneering research on the
role of three epithelial cytokines:
thymic stromal lymphopoietin
(TSLP), interleukin IL-33, and IL-25.
These key cytokines activate multiple
downstream innate and adaptive
immune responses involved in
asthma, COPD, atopic dermatitis and
chronic kidney disease. AstraZeneca
is bringing forward tezepelumab, a
potential first-in-class human mAb
that inhibits the action of TSLP, and
which has completed its Phase III
pivotal trial in severe asthma and
MEDI3506, a mAb that inhibits IL-33
and which is in Phase I in COPD,
Phase II in asthma, Phase II in atopic
dermatitis and COVID-19.
2020 pipeline highlights continued
In 2020, highlights included positive results for
the NAVIGATOR Phase III trial of tezepelumab
in severe asthma, positive results in the
OSTRO Phase III trial in chronic rhinosinusitis
with nasal polyps (CRSwNP) for Fasenra and
positive results in the ETHOS Phase III trial
for Breztri leading to approvals for Breztri for
maintenance treatment of COPD in the US
and moderate to severe COPD in the EU (where
it is marketed as Trixeo). Our early research in
respiratory includes opportunities in idiopathic
pulmonary fibrosis (IPF) and chronic cough.
Regulatory submissions were also made in
the US, EU and Japan for anifrolumab in
systemic lupus erythematosus (SLE).
Full details of our pipeline are given in the
Development Pipeline from page 245 and
highlights from the progress of our Respiratory
& Immunology pipeline made in 2020 against
our KPIs are shown on previous page.
2020 review – strategy in action
Asthma
In 2020, we continued our leadership in
transforming care across disease severities
to address the significant unmet medical
needs of this disease. The majority of patients
are uncontrolled and there are 176 million
asthma attacks each year.
At the foundation of asthma care, Symbicort
continued its volume and value market
leadership as the number one ICS/LABA
combination globally 20 years after launch.
The main drivers of growth were in Emerging
Markets, particularly in China, launch of an
authorised generic in the US, repeat
prescribing in the first quarter due to
COVID-19 and approvals of the anti-
inflammatory reliever indication, which
has now been achieved in 35 countries.
Our second anti-inflammatory reliever, which
we are developing for US patients is PT027,
a fixed-dose combination of budesonide
(an ICS) and albuterol, a short-acting beta2-
agonist (SABA). Results from two Phase III trials
in patients with mild-to-moderate asthma,
conducted by our co-development collaborator,
Avillion, are expected to read out in 2021.
Breztri, our triple therapy, is also being
studied in asthma and the Phase III pivotal
trials, KALOS was initiated in January 2021.
In severe asthma, where our aim is to
eliminate both asthma attacks and chronic
use of oral corticosteroids, we are on track
to be the leader in biologic medicines and
address the different drivers of this complex,
heterogeneous disease. Our first respiratory
biologic, Fasenra, reached more than 70,000
patients with severe eosinophilic asthma,
retaining its position as the leading novel
biologic in new-to-brand prescriptions in key
markets around the world. The rapid adoption
of the Fasenra Pen in several markets was in
part driven by the COVID-19 pandemic, keeping
patients out of hospital and able to manage
their treatment at home. Approximately 40%
of patients now self-administer Fasenra. A
significant increase in enrolment in our patient
support programme, Connect 360, was seen in
2020 further supporting self-care in response
to COVID-19. More than 30,000 patients across
29 countries have enrolled in this programme.
In October 2020, we announced high-level
results from the PONENTE Phase IIIb
open-label trial, which showed OCS-
dependent asthma patients across baseline
blood eosinophil counts receiving Fasenra
were able to eliminate the use of maintenance
OCS. On the first primary endpoint, 62% (95%
CI: 58.2-66.1) of patients achieved complete
elimination of daily OCS use. On the second
primary endpoint, 81% (95% CI: 77.2-83.7) of
patients achieved complete elimination or
were able to reduce their daily OCS dose to
5mg or less when further reduction was not
possible due to adrenal insufficiency. Both
primary endpoints were sustained for at least
four weeks while maintaining asthma control.
In November 2020, we announced with our
collaborator Amgen the positive high-level
results from the NAVIGATOR Phase III
registrational trial which met the primary
endpoint with tezepelumab added to standard
of care (SoC) demonstrating a statistically
significant and clinically meaningful reduction
in the annualised asthma exacerbation rate
(AAER) over 52 weeks in the overall patient
population, compared to placebo when added
to SoC. SoC was medium- or high-dose ICS
plus at least one additional controller
medication with or without OCS.
In the subgroup of patients with baseline
eosinophil counts less than 300 cells per
microlitre, the trial also met the primary
endpoint, with tezepelumab demonstrating
a statistically significant and clinically
meaningful reduction in AAER. Similar
reductions in AAER were observed in the
subgroup of patients with baseline eosinophil
counts less than 150 cells per microlitre.
In December 2020, we announced that the
SOURCE Phase III trial of 150 patients did not
meet the primary endpoint of a statistically
significant reduction in the daily OCS dose,
without loss of asthma control, with
tezepelumab compared to placebo in patients
with severe, OCS-dependent asthma.
Tezepelumab’s effect on other efficacy
AstraZeneca Annual Report & Form 20-F Information 2020 / Therapy Area Review
45
Therapy Area Review
Respiratory & Immunology
continued
parameters was similar to those observed in
previous trials, including the NAVIGATOR
Phase III registrational trials. Full results from
the NAVIGATOR and SOURCE trials will be
presented at a forthcoming medical meeting.
Chronic rhinosinusitis with nasal polyps
Fasenra is also in development for other
respiratory diseases driven by eosinophils.
Chronic rhinosinusitis with nasal polyps
(CRSwNP) is characterised by persistent
inflammation of the nasal passages and
sinuses accompanied by benign growths
called nasal polyps, which can block nasal
passages and lead to breathing problems,
reduction in the sense of smell, nasal
discharge, sleep disturbance and other
adverse effects on quality of life. High-level
results from the OSTRO Phase III trial showed
that Fasenra compared with placebo met both
co-primary endpoints by demonstrating a
statistically significant improvement in the
size of nasal polyps and in nasal blockage
in patients with CRSwNP.
COPD
The focus with our triple combination
therapy, Breztri, is on treating the underlying
inflammation of the disease and reducing
COPD exacerbations, which are often
under-reported and undertreated, despite
causing irreversible lung damage and disease
progression. Evidence supporting the benefits
of triple therapy is driving the growth of its
class, and we expect it to be the largest class
of medicines in COPD in the future.
In 2020, we achieved approval for Breztri
in the US and EU and launched Breztri in
China and the US. We have delivered strong
launches, specifically in China with Breztri,
significantly outperforming competition and
capturing the majority of market share. In the
US, Breztri has performed better than the
competitor’s launch. In December 2020,
Breztri was included in China’s NRDL which
will further support growth.
In June 2020, The New England Journal of
Medicine published results from the Phase III
ETHOS trial which demonstrated a statistically
significant reduction in the rate of moderate or
severe exacerbations compared with two
different types of dual-combination therapies
(Bevespi and PT009 – an ICS/LABA
combination). As an additional analysis in a
key secondary endpoint, Breztri showed a
49% reduction in the risk of all-cause mortality
compared with Bevespi (unadjusted p=0.0035*).
The trial also demonstrated benefit in a
second dose of our fixed triple-combination
therapy: at half of the budesonide dose,
(budesonide/glycopyrronium/formoterol
fumarate 160/14.4/9.6mcg), a dose that is
not licensed for use.
In May 2020, it was announced that Circassia
would hand back marketing rights for
dual-combination therapy Duaklir and
monotherapy Tudorza to AstraZeneca.
*
Re: unadjusted p-value: The p-value is considered
unadjusted, due to an endpoint in the Type I error control
testing hierarchy not reaching significance.
Immunology
We made significant advances in immune-
driven diseases.
SLE is the most common type of lupus and
a debilitating, chronic immune-driven disease.
Only one new medicine has been approved
for SLE in the last 60 years, and there is an
urgent medical need to bring new medicines
to patients. Patients often rely on prolonged
use of OCS, which can increase the risk of
permanent organ damage and other poor
health outcomes. Anifrolumab is a
developmental mAb that inhibits the activity
of type I interferons and suppresses the
activation of B and T cells that contribute
to the cycle of tissue destruction and
inflammation seen in SLE.
In the second half of 2020, we received
regulatory submission acceptances for
anifrolumab from the FDA, EMA and PDMA
Japan for the treatment of adult patients with
moderate-to-severe SLE. Our submissions
were based on results from the two TULIP
Phase III trials and the MUSE Phase II trial, in
which a reduction in disease activity and OCS
use, and improvement in lupus skin activity
were observed with anifrolumab added to
standard therapy compared to placebo and
standard therapy. Anifrolumab has a well-
characterised safety profile, based on the safety
and tolerability findings across all three trials.
At the European League Against Rheumatism
annual conference, we presented pooled
analysis from the TULIP trials showing the
consistent clinical benefits of anifrolumab
across multiple measured patient subgroups,
including age, sex, age at onset and race,
compared to placebo. At the American
College of Rheumatology Annual Meeting, we
presented pooled analysis that showed 40%
of patients treated with anifrolumab plus
standard therapy had a sustained reduction
in OCS use without experiencing a disease
flare through 52 weeks versus placebo plus
standard therapy (17.3%).
Eosinophils are white blood cells and part
of the immune system that, when working
normally, help fight disease and infection.
Having too many activated eosinophils may
contribute to disease pathology and the
self-perpetuating cycle of inflammation
and damage across a range of debilitating
diseases. Fasenra is being investigated in
seven Phase II and Phase III trials in
eosinophil-driven diseases beyond the
three respiratory diseases of severe asthma,
COPD and CRSwNP. First subjects have
been dosed in trials for atopic dermatitis,
chronic spontaneous urticaria, eosinophilic
esophagitis, eosinophilic granulomatosis with
polyangiitis and hypereosinophilic syndrome.
We have also initiated Phase III trials in bullous
pemphigoid and eosinophilic gastritis/
eosinophilic gastroenteritis.
We recovered the global rights to brazikumab
(formerly MEDI2070), mAb targeting IL-23,
from Allergan. Brazikumab is a mAb that
binds to the p19 subunit of IL-23 and is in
development for CD and UC alongside
development of a companion diagnostic.
Brazikumab selectively blocks the IL-23
immune signal, reducing intestinal
inflammation. With current biologic medicines,
40% to 55% of patients have no response to
therapy, and 65% to 80% of patients do not
experience a full remission. Brazikumab is
currently in a Phase IIb/III programme in CD
and a Phase II trial in UC, and we will work to
bring this potential new treatment option to
patients as quickly as possible.
Respiratory infectious diseases
In July, The New England Journal of Medicine
published the Phase IIb trial in which
nirsevimab showed a significant reduction in
medically-attended LRTI and hospitalisations
caused by RSV in healthy preterm infants
compared with placebo. Nirsevimab has a
more efficient dosing regimen than Synagis
(which requires monthly injections for five
months to cover a typical RSV season) and
demonstrated for the first time that a
single-dose mAb can significantly reduce
medically-attended RSV LRTI, including
bronchiolitis and pneumonia, in infants
throughout the full RSV season, compared
with placebo.
Early science
Compounds in early-stage development
include: MEDI3506 (Phase I in COPD and
Phase II in asthma; Phase II in atopic
dermatitis and COVID-19), a mAb that inhibits
IL-33, a key upstream epithelial cytokine that
is functionally distinct from TSLP; AZD0449
(Phase I), a potential first-in-class inhaled
JAK-inhibitor being developed for a broad
population of asthma patients, intended as
a step-through therapy between ICS therapy
and biologics.
In our early research and development, we are
also advancing the science of other chronic
respiratory diseases with great unmet medical
need, including IPF and chronic cough. In
August 2020, we announced a licensing
agreement with Redx Pharma for RXC006 –
an oral small molecule, preclinical porcupine
inhibitor. We will move RXC006 into clinical
development targeting fibrotic diseases
including IPF, a chronic, progressive,
irreversible and usually fatal interstitial lung
disease for which there are limited treatment
options available. The porcupine inhibitor
targets multiple disease drivers which may
offer a competitive advantage over other
investigative treatments for IPF.
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Other Medicines
and COVID-19
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We have medicines and vaccines in other
disease areas that have an important
impact for patients. As such, we are
selectively active in the areas of infection,
neuroscience and gastroenterology,
where we follow an opportunity-driven
approach and often work through
collaborations.
We are working to defeat the COVID-19
pandemic by advancing and accelerating
the development of potential medicines
that prevent or treat the virus.
Cross section of nanoparticles
circulating in the blood stream.
AstraZeneca Annual Report & Form 20-F Information 2020 / Therapy Area Review
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Unmet medical need and world marketThe WHO estimates that seasonal influenza may result in nearly one billion cases of influenza and 290,000 to 650,000 deaths each year due to influenza-related respiratory diseases.By the end of January 2021, the Johns Hopkins Disease Tracker had recorded more than 100 million confirmed cases of COVID-19 and more than two million deaths. Almost 60 million people had recovered.
Therapy Area Review
Other Medicines and COVID-19
continued
Key marketed products and
revenues 2020
Nexium is continuing to perform
in line with expectations in all
AstraZeneca retained markets
including China, given pressures
from generic competition. Fluenz
Tetra/FluMist Quadrivalent
performed strongly driven primarily
by heightened focus on increased
vaccination coverage as a means
to further limit healthcare burden
given the ongoing COVID-19
pandemic. Fluenz Tetra/FluMist
Quadrivalent continues to be
licensed in multiple markets,
including the US, Canada, EU,
Israel and Hong Kong, and it
remains a central part of the UK
and Finnish paediatric national
influenza vaccination programmes.
For the 2020-21 flu season, we have
increased production of vaccine
doses by more than 150% over the
previous season and delivered our
highest volume of flu vaccine.
Total Revenue included $2 million
of COVID-19 Vaccine AstraZeneca
Product Sales.
Other Medicines and COVID-19
Product Sales
$2,587m
10% of total
2019: $2,601m
2018: $3,400m
Product
Disease area
Revenue
Commentary
Other medicines
Infection
Synagis
(palivizumab)
RSV
$372m, up 4%
(4% at CER)
Divested US rights to Sobi. AbbVie holds rights to Synagis
outside the US until 30 June 2021, after which AstraZeneca
will, in general, solely distribute and promote the medicine
outside the US.
Fluenz Tetra/
FluMist
Quadrivalent
(live attenuated
influenza vaccine)
Neuroscience
Seroquel IR/
Seroquel XR
(quetiapine
fumarate)
Vimovo
(naproxen and
esomeprazole)
Movantik/
Moventig
(naloxegol)
Gastroenterology
Nexium
(esomeprazole)
Losec/
Prilosec
(omeprazole)
COVID-19
COVID-19 Vaccine
AstraZeneca
Influenza
$295m, up 161%
(153% at CER)
Approved in the US, EU, Canada, Israel and Hong Kong.
Daiichi Sankyo holds rights to FluMist Quadrivalent in Japan.
Schizophrenia
Bipolar disease
$117m, down
39% (37%
at CER)
Divested rights in Europe and Russia in October 2019 and in
US and Canada in December 2019 to Cheplapharm. Luye
Pharma holds rights to Seroquel and Seroquel XR in the UK,
China and other international markets. The rights to Seroquel
and Seroquel XR in Japan are partnered with Astellas.
Osteoarthritic
pain
$37m, up 1%
(down 1%
at CER)
Licensed from Pozen and divested worldwide rights (ex-US) to
Grünenthal in October 2018. Divested US rights to Horizon
Pharma Inc. since November 2013.
Opioid-induced
constipation
$33m, down 68%
(68% at CER)
Proton pump
inhibitor to treat
acid-related
diseases
Proton pump
inhibitor to treat
acid-related
diseases
$1,492m,
up 1%
(2% at CER)
$183m, down
30% (30%
at CER)
Licensed from Nektar Therapeutics. Kyowa Kirin has held
rights in the EU since March 2016. Knight Therapeutics Inc.
has held rights in Canada and Israel since December 2016.
Co-commercialisation in the US with Daiichi Sankyo. In April
2020, AstraZeneca signed an agreement to sublicense its
global rights to Movantik (naloxegol), excluding Europe,
Canada and Israel, to RedHill Biopharma (RedHill).
Divested European rights to Grünenthal in October 2018.
In October 2019, divested global commercial rights, excluding
China, Japan, the US and Mexico to Cheplapharm.
COVID-19
$2m
From the first quarter of 2021, AstraZeneca intends to report
the COVID-19 Vaccine AstraZeneca sales performance
separately.
2020 pipeline highlights
Full details of our pipeline are given in the
Development Pipeline from page 245 and
highlights from the progress of our Other
Medicines and COVID-19 pipeline made in
2020 against our KPIs are shown below.
Life-cycle phases – R&D
New molecular entity (NME) Phase II
starts/progressions
Product
AZD7442
Disease
Prevention and treatment of COVID-19
COVID-19 Vaccine AstraZeneca
COVID-19
NME and major life-cycle management
(LCM) positive Phase III investment
decisions
Product
AZD7442
Disease
Prevention and treatment of COVID-19
COVID-19 Vaccine AstraZeneca
COVID-19
Discontinued projects
For more information on the life-cycle of
a medicine, see page 9.
Product
MEDI3902
Disease
Prevention of nosocomial Pseudomonas
aeruginosa pneumonia
Reason
Safety/efficacy
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In June 2020, Public Health England published
provisional end of season vaccine effectiveness
(VE) data for the 2019–20 season in the UK.
In children two to 17 years old, adjusted VE
with Fluenz was 45.4% against all circulating
strains and 30.5% against circulating A/H3N2
strains. VE data against the A/H1N1pdm09
strain was not available due to low strain
circulation during the season. These latest
data support the real-world effectiveness
demonstrated by Fluenz Tetra and reinforce
the public health importance of influenza
vaccination as the most effective way to
prevent influenza disease.
Neuroscience
We are progressing MEDI7352, a bispecific
molecule which targets both nerve growth
factor and tumour necrosis factor alpha, in
both painful diabetic neuropathy in Phase II
and osteoarthritis pain in Phase IIb. Also in
Phase I is MEDI0618, an anti-PAR2 (protease-
activated receptor 2) antibody which we are
also developing for osteoarthritis pain and
migraine and AZD4041, a selective orexin 1
receptor antagonist, which is being developed
for substance use disorder in a collaborative
effort between AstraZeneca, Eolas
Therapeutics and NIH.
We continue our collaboration with Takeda
on MEDI1341 for Parkinson’s disease, which
is in Phase I.
We have a collaboration with Lilly on
MEDI1814, an antibody selective for amyloid-
beta 1-42 that is currently in Phase I as a
potential disease-modifying treatment for
Alzheimer’s disease.
Respiratory syncytial virus (RSV) is a
common seasonal virus and the most
prevalent cause of LRTI among infants and
young children. Since its initial approval in
1998, Synagis has become the global
standard of care for RSV prevention and helps
protect at-risk babies against RSV. Measures
to combat COVID-19, including national and
local lockdowns and stay at home orders,
have likely led to significantly lower rates of
RSV transmission, creating decreased
demand and impacting sales for preventative
options like Synagis. These COVID-19 impacts
varied across markets.
The commercial rights to the sale and
distribution of Synagis in more than 80
countries outside the US, held by AbbVie
since 1997, will revert to AstraZeneca upon
the expiry of the current agreement on 30
June 2021. In general, the Group will solely
distribute and promote the medicine outside
the US from 1 July 2021. The agreement
with Swedish Orphan Biovitrum AB, for the
rights to Synagis in the US, was unaffected
by this decision.
Our strategy for Other Medicines
Our approach to other disease areas looks
to maximise revenue of on market medicines,
divest medicines, where this enhances
shareholder value, and advance the novel
medicine pipeline with collaborations where
appropriate, whilst preserving a financial
stake in the most promising assets.
2020 review – strategy in action
Infection
Seasonal influenza is a serious public health
problem that causes severe illness and death
in high-risk populations. FluMist Quadrivalent/
Fluenz Tetra continues to be licensed in
multiple markets, including the US, Canada,
EU, Israel and Hong Kong, and it remains a
central part of the UK and Finnish paediatric
national influenza vaccination programmes.
For the 2020-21 flu season, AstraZeneca will
deliver its highest volume of flu vaccine supply
to date, reflecting our ongoing, longstanding
commitment to global public health and flu
prevention. Specifically, we have increased
the volume of available vaccine doses globally
by more than 150 percent over the previous
year due to higher demand and statements
from global health authorities urging increased
flu vaccination for the 2020-21 season due to
the ongoing COVID-19 pandemic. This includes
more than eight million doses delivered to
support the childhood vaccinations through
the UK’s national immunisation programme
during the 2019–20 season. In addition, we
participate in both the US Centers for Disease
Control and Prevention Vaccine for Children
programme and Vaccine for Adult programme,
which are federally funded programmes that
ensure under or uninsured children and adults
have access to vaccines at little or no cost.
We also have an ongoing agreement with the
WHO to donate and supply stock at reduced
prices in the event of an influenza pandemic.
AstraZeneca Annual Report & Form 20-F Information 2020 / Therapy Area Review
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Therapy Area Review
Other Medicines and COVID-19
continued
50
COVID-19 Vaccine AstraZeneca has
been granted a conditional marketing
authorisation or emergency use
approval in more than 50 countries
180
Built supply capacity for billions of
doses with agreements spanning more
than 180 countries
170m
Advance Purchase Agreement with
Gavi, the Vaccines Alliance, to supply
170 million doses of COVID-19 Vaccine
AstraZeneca to the COVAX Facility for
countries around the world.
The primary analysis for efficacy was based
on 17,177 participants. Results demonstrated
vaccine efficacy of 76% three weeks after the
first dose, with protection maintained to the
second dose. With an inter-dose interval of
12 weeks or more, vaccine efficacy increased
to 82%.
Data continues to accumulate, including
the upcoming final analysis and further
follow-up, refining the efficacy reading and
characterising vaccine efficacy over a longer
period of time.
Authorisation and supply
The first authorisation for the vaccine
occurred on 30 December 2020, when the
UK Medicines and Healthcare products
Regulatory Agency (MHRA) authorised
COVID-19 Vaccine AstraZeneca for
emergency supply in the UK for the active
immunisation of individuals 18 years or older.
The vaccine received conditional marketing
authorisation (CMA) in the European Union
on 29 January, 2021. By February 2021,
the vaccine had been granted a CMA or
emergency use approval in more than 50
countries spanning four continents, including
Brazil, India, and South Africa, for the active
immunisation of adults.
We are continuing to work with governments
and regulatory bodies to bring the vaccine
to more people across the world as quickly
as possible.
In February 2021, WHO’s Strategic Advisory
Group of Experts on Immunization (SAGE)
recommended COVID-19 Vaccine AstraZeneca
for use in individuals 18 years of age and
older, with a preferred dosing interval of eight
to 12 weeks.
We are committed to supplying the vaccine
at no profit during the pandemic and we will
make it available to low-income countries at
no profit in perpetuity. So far, we have built
supply capacity for billions doses with
agreements spanning more than 180
countries and multiple parallel supply chains
across the world. Global manufacturing
capacity is in place to begin mass supply
on regulatory approval.
The pace and complexity of development
has brought some challenges, including
initially lower-than-expected yields at some
manufacturing sites. We continue to work
urgently with our supply partners to optimise
this process to ensure the vaccine is produced
at the scale and pace required while retaining
the highest quality standards.
COVID-19
We are working to defeat the pandemic by
advancing and accelerating the development
of potential medicines to prevent or treat
COVID-19.
COVID-19 Vaccine AstraZeneca
In April, we announced an agreement with the
University of Oxford to develop, manufacture
and supply a potential vaccine to prevent
COVID-19. Both parties shared a commitment
to delivering it in a broad, equitable and timely
way, and at no profit during the pandemic.
Technology
The vaccine was co-invented by the University
of Oxford and its spin-out company, Vaccitech,
and is a nonreplicating, recombinant adenoviral
vector vaccine containing the genetic material
of the SARS-CoV-2 virus spike protein. After
vaccination, the surface spike protein is
produced, priming the immune system to
attack the virus if it later infects the body. The
adenoviral vector vaccine is infected into
‘producer’ cells derived from a human cell line
created more than 50 years ago, which rapidly
divides, making copies of the potential
vaccine and producing large amounts of the
viral vector vaccine. After cell manufacture,
the vaccine product is filtered and purified and
undergoes a number of quality checks before
the ‘fill and finish’ stage where the vaccine is
packaged into multi-dose vials.
Clinical development programme
The programme of global clinical development
for COVID-19 Vaccine AstraZeneca (AZD1222)
is under way to measure efficacy, safety and
immune response in up to 60,000 participants
across a broad age range and diverse racial,
ethnic and geographic groups.
Phase II/III trials are ongoing in the UK, US
and Brazil, and Phase I/II trials are underway
in South Africa, Japan and Kenya.
Regulators have clear and stringent efficacy
and safety standards for the approval of any
new medicine, including any potential
COVID-19 vaccine. To progress the
assessment of promising vaccines such as
AZD1222 more flexibly, rolling reviews of
data were implemented by many regulatory
authorities such the European Medicines
Agency, Health Canada, and Anvisa in Brazil.
We are also seeking Emergency Use Listing
from the World Health Organization (WHO) for
an accelerated pathway to vaccine availability
in low-income countries.
Published clinical data
The primary analysis of the Phase III clinical
trials led by the University of Oxford with
AZD1222 in the UK, Brazil and South Africa
was announced on 3 February 2021. It
confirmed that COVID-19 Vaccine AstraZeneca
is safe and effective at preventing COVID-19
and that it protects against severe disease,
hospitalisation and death.
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Our products
While this Therapy Area Review
concentrates on our key marketed
products, many of our other products
are crucial to our business in certain
countries in Emerging Markets.
For more information on our potential
new products and product life-cycle
developments, see the Therapy Area
pipeline tables on pages 32, 38, 44 and 48
and the Development Pipeline table from
page 245. For information on Patent
Expiries of our Key Marketed Products,
see from page 251.
Indications for each product described in
this Therapy Area Review may vary among
countries. See local prescribing information
for country-specific indications for any
particular product.
For those of our products subject to litigation,
information about material legal proceedings
can be found in Note 29 to the Financial
Statements from page 228.
Details of relevant risks are set out in Risk
from page 254.
We have received support of around
$486 million from the US Government for
the development and supply of AZD7442
under an agreement with the Biomedical
Advanced Research and Development
Authority (BARDA).
Other new and existing medicines
As well as developing preventative
approaches against the SARS-CoV-2 virus,
in 2020 we initiated clinical trials to investigate
AstraZeneca’s new and existing medicines to
treat the infection by suppressing the body’s
overactive immune response or protecting from
serious complications, such as organ failure.
For example, we assessed Calquence
(acalabrutinib), approved in a number of
countries for the treatment of chronic
lymphocytic leukaemia, in the suppression
of the cytokine storm that inflames the lungs
and other organs of some COVID-19 patients.
The CALAVI Phase II trials for Calquence
in patients hospitalised with respiratory
symptoms of COVID-19 did not meet the
primary efficacy endpoint of increasing the
proportion of patients who remained alive
and free of respiratory failure.
In the DARE-19 Phase III trial, we are
assessing whether Farxiga could potentially
reduce organ failure. Farxiga is being
evaluated in combination with ambrisentan
in the Cambridge University Hospitals NHS
Trust’s TACTIC-E Phase II trial.
We also joined the UK Government’s
ACCORD proof-of-concept clinical-trial
platform, to speed the development of
medicines for patients with COVID-19,
evaluating the use of IL-33 mAb MEDI3506 in
suppressing the overactive immune response
that can characterise COVID-19. We are also
supplying Pulmicort and Symbicort to
externally sponsored research programmes.
In the longer term
From the first quarter 2021, AstraZeneca
intends to report the performance of
COVID-19 Vaccine AstraZeneca separately.
As part of our equitable access strategy,
AstraZeneca concluded an Advance Purchase
Agreement with Gavi, the Vaccines Alliance,
to supply 170 million doses of COVID-19
Vaccine AstraZeneca to the COVAX Facility
for countries around the world. Combined
with committed supply of the vaccine from
our licensing partner, the Serum Institute of
India, this represents hundreds of millions
of doses to COVAX.
Supply of the vaccine is facilitated by the
fact that it can be stored at 2-8ºC, enabling
easy use within existing healthcare settings
such as care homes and pharmacies, and
in low-income countries.
AZD7442 (potential LAAB combination)
In addition to our work on a potential vaccine,
we are researching potential preventative
and treatment options. This includes the
development of a combination of two novel
coronavirus-neutralising long-acting
antibodies (LAABs), AZD7442, which is being
studied as a potential preventative option for
people exposed to SARS-CoV-2, as well as
to treat and prevent disease progression in
patients already infected with the virus.
The two LAABs in AZD7442 were derived
from convalescent patients after SARS-CoV-2
infection. Discovered by Vanderbilt University
Medical Center and licensed to AstraZeneca
in June 2020, AstraZeneca optimised the
antibodies with half-life extension and
reduced Fc receptor binding. The half-life
extended LAABs should afford six to 12
months of protection from COVID-19 and the
reduced Fc receptor binding aims to minimise
the risk of antibody-dependent enhancement
of disease – a phenomenon in which
virus-specific antibodies promote, rather
than inhibit, infection and/or disease.
In a Nature publication, the LAABs were
shown in pre-clinical experiments to block
the binding of the SARS-CoV-2 virus to host
cells and protect against infection in cell
and animal models of disease.
Several Phase III clinical trials of AZD7442 in
more than 6,000 participants at sites in and
outside the US are under way and additional
trials are planned. PROVENT began in
November and is evaluating the safety and
efficacy of AZD7442 to prevent infection for
up to six months in approximately 5,000
participants. STORM CHASER started in
December to evaluate postexposure
prophylaxis in approximately 1,100
participants. We are also evaluating AZD7442
in a late-stage trials for the treatment of
COVID-19, including the Phase III TACKLE
trial in non-hospitalised patients with mild
to moderate COVID-19 and the National
Institutes of Health-sponsored ACTIV-3 trial
in hospitalised patients.
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Business
Review
Our business is organised to deliver our strategic
priorities sustainably, supporting continued
scientific innovation and commercial success.
Pancreatic beta cells at different
stages of regeneration.
Our way of working in 2020 benefited from
the organisational changes we implemented
in 2019 that were designed to support
continued scientific innovation and
commercial success. They did so by
integrating R&D, and accelerating decision
making and the launches of new medicines.
We also enhanced our commercial functions
to increase collaboration with our R&D
organisation, enabling greater commitment
to our main therapy areas.
We are committed to operating in a way that
recognises the interconnection between
business growth, the needs of society and
the limitations of our planet.
Since 2007, we have made significant efforts
to restructure and reshape our business to
control costs and improve long-term
competitiveness.
Full details are provided in the Financial Review
from page 82.
Research & Development (R&D)
We have therapy area-focused R&D organisations that are responsible for discovery
through to late-stage development – one for Oncology and one for BioPharmaceuticals
(CVRM and Respiratory & Immunology). These are designed to enable us to follow
the science by accelerating promising early-stage assets and life-cycle management
programmes, as well as providing new opportunities for combinations.
Our R&D activities focus on three strategic R&D centres: Gaithersburg, MD, US;
Gothenburg, Sweden; and Cambridge, UK.
Commercial
Our sales and marketing functions are grouped into regions. Two commercial units,
one for Oncology and one for BioPharmaceuticals, align product strategy and
commercial delivery across our US and Europe-Canada regions and focus on our
main therapy areas. In addition, our International region comprises Emerging
Markets, including China, Australia and New Zealand. Japan reports separately.
Our Operations function plays a key role in development, manufacturing, testing
and delivery of our medicines to our customers. We also have Business development,
Intellectual Property as well as Information technology and information
services resources.
People
We aim to recruit, retain and develop talented people which we do by being a great
place to work.
Sustainability
We want to be valued and trusted by our stakeholders as a sustainable source of
great medicines over the long term. We deliver our business strategy sustainably
and in a way that broadens access to our medicines, minimises the environmental
footprint of our products and processes, and ensures that ethics and transparency
underpin everything we do.
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Research & Development
We are using our distinctive scientific
capabilities to deliver a pipeline of
life-changing medicines.
Overview
> Accelerated innovation in response to
pandemic to ensure more than 80% of our
clinical trials continued.
> Published 123 manuscripts in ‘high-impact’
journals.
> Using genomics to better predict the right
target for our therapy areas.
> At the end of 2020, 30% of our early pipeline
comprised new drug modalities.
> Trialling identification of patients at high
risk of recurrence of lung cancer.
> Digital transformation helping quicker
launch of clinical trials, such as CALAVI.
> Bioethics Advisory Group met eight times
in 2020 and extended scope to include,
for example, guidance on employee testing
for COVID-19.
Transforming our science
Throughout 2020 we responded to the
challenges posed by the COVID-19 pandemic
by working to ensure the continuity of our
research projects. By accelerating key
elements of our clinical and digital innovation
programmes, more than 80% of our clinical
trials continued. Maintaining and improving the
experience of patients was a particular priority.
Our unified approach across our R&D
organisations in 2020 was guided by our 5R
(right target, right patient, right tissue, right
safety, right commercial potential) framework
which champions quality over quantity. This
focus on quality is exemplified by our research
publications in ‘high-quality’ and ‘high-impact’
journals, a critical aspect for accelerating
innovative science, and recruiting and
retaining the best people. In 2020, our
scientists published 123 manuscripts in
‘high-impact’ peer-reviewed journals, each
with an impact factor exceeding 15 (Thomson
Reuters 5yr IF score). The increase from the
(revised) number of 111 in 2019, continues to
reflect the drive to share our science, which
also resulted in 890 publications in total,
increasing from 870 in 2019.
In order to advance our scientific knowledge
we are committed to investing in and
embedding four key areas, which will help us
in our aspiration to create the greatest and
swiftest impact on disease. More information
on these areas is provided below and in the
case studies in this Annual Report, see pages
11, 23, 56 and 67.
Enhancing our understanding of disease
We are determined to advance our
understanding of disease biology to uncover
novel drivers for the diseases we aim to treat,
prevent and, in the future, even cure. Selecting
the right target remains the most important
decision we make in the drug discovery
process and we are investing in multiple
approaches to improve this.
Our Centre for Genomics Research (CGR)
is aligning genetic variants with clinical,
biomarker and other disease-associated
characteristics or phenotypes to provide new
disease insights. One recent study using a
cloud-based platform analysed more than
three billion datasets within 24 hours and
identified more than 8,700 disease associations
within 330 distinct genes. This type of analysis
has provided new disease understanding and
resulted in the selection of new targets into
our Respiratory & Immunology (R&I) discovery
portfolio for idiopathic pulmonary fibrosis (IPF).
To support the validation of novel targets, we
continue to build complex models of disease.
For example, we are working to improve
CRISPR gene editing accuracy and specificity,
and develop an inducible CRISPR system for
rapid and sustainable creation of cellular and
animal disease models. We are pairing these
approaches with bioinformatics and artificial
intelligence to analyse the data generated from
screening to help improve target identification.
We are also progressing our understanding of
epigenomics and the potential of modulating
epigenetic processes to deliver the next
generation of cancer therapies. Many
haematological and paediatric cancers are
driven through epigenetic aberrations and we
are focused on a next generation of epigenetic
cancer therapeutics.
Designing the next generation of therapeutics
In our quest to transform disease, we are
continuing to design new ways to target the
drivers of disease and create the next
generation of therapeutics. At the end of 2020,
30% of our early pipeline consisted of new
drug modalities including oligonucleotide,
antibody drug conjugate (ADC), and cell
therapy approaches.
Following our 2019 collaboration with Daiichi
Sankyo to develop and commercialise the
ADC, now known as Enhertu, our commitment
to these next-generation therapeutics
continued with our 2020 collaboration with
Daiichi Sankyo to develop and commercialise
DS-1062, a potential best-in-class, second
generation TROP2-targeted ADC. For more
information, see Business development on
page 63.
Our growing oligonucleotide platforms offer
a range of new opportunities through the
specific inhibition of protein expression.
Antisense oligonucleotide approaches include
AZD2373, developed in collaboration with
Ionis Pharmaceuticals, which aims to reduce
podocyte injury, decrease proteinuria and
slow renal function decline in patients with
APOL1 nephropathy. The oligonucleotide
platform was supplemented in 2020 with a
collaboration with Silence Therapeutics, which
aims to discover, develop and commercialise
small interfering RNA (siRNA) therapeutics.
We formed cross-functional Cell Therapy
departments in 2020 to harness and maximise
the therapeutic potential of existing and
emerging technology platforms, including
stem cell technologies and new modalities.
In Oncology R&D, we are rapidly building a
new CAR-T portfolio, focused on the potential
of lymphocytes as powerful, living drugs.
The most advanced of our BioPharmaceuticals
R&D stem cell programmes is in collaboration
with Procella Therapeutics AB and aims to
treat heart failure patients using human
ventricular progenitor (HVP) cells which have
demonstrated therapeutic potential by forming
heart muscle de novo in preclinical models.
Better predicting clinical success
In our efforts to improve our ability to predict
the clinical success of our candidate drug
molecules, we are adopting a range of
cutting-edge technologies. We are developing
advanced cellular models of disease, such as
a bone marrow ‘organ-chip’ that replicates
clinically-observed toxicities, as well as a
renal micro-organoid model which allows
high-throughput drug screening and,
potentially, regenerative medicine.
Mass spectrometry imaging (MSI) is now
embedded as an advanced imaging
technology to help interrogate complex
disease profiles, such as the first mechanistic
description of how metabolites generated by
the gut microbiome can play a role in
neurological conditions like Parkinson’s or
new insights into the mechanism of nutrient
sensing and utilisation in lung metastasis and
colorectal cancer.
Breaking new ground in circulating tumour
DNA (ctDNA) monitoring, in 2020 we initiated
a trial to evaluate treatment outcomes in
patients with lung cancer through detection
of minimal residual disease (MRD) following
surgery. The trial, in collaboration with
ArcherDX, Inc., is designed to identify patients
with high risk of recurrence and enable early
interventions to improve long-term survival/
curative intent. It is anticipated that two-year
DNA (ctDNA) monitoring will identify nearly
80% of patients prior to clinical relapse.
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Research & Development
continued
Pioneering new approaches to engagement
in the clinic
We continue to design and conduct our
clinical trials to support better experiences for
patients and increase efficiencies in clinical
practice. Our digital transformations include
new tools to improve the way we work, such
as Control Tower which provides real-time
access to trial information at a site level,
Merlin to enable rapid and effective decisions
for clinical trial recruitment, and Clinical
Supply Chain to monitor global stocks of
clinical-grade material. The expedited launch
of eConsent in 2020 enabled remote sharing
and review capabilities of informed consent
with patients and is further helping to get new
trials under way safely and quickly. We have
also ensured continuity for clinical trial
patients by facilitating the shipments of study
drugs direct to patient homes, replacing some
site visits with home visits to maintain patient
safety, and accelerating remote data
collection and home-based measurements
wherever possible during the pandemic.
These advances have led to the launch of
some of the fastest clinical trials in our history.
For example, first patients in the Phase II
CALAVI trial to assess the potential of the
BTK inhibitor, acalabrutinib, in COVID-19
disease were dosed in under three months,
representing a new standard for engagement
in the clinic.
During the year, we also initiated our first fully
virtual trial in patients with mild-to-moderate
asthma, decentralising both study recruitment
and support. Working closely with regulatory
authorities, we designed and initiated a trial
that integrated high-quality patient data from
routine clinical care and registries, with the
requirements of a rigorous clinical trial. This
approach has the potential to deliver robust
safety and efficacy data, while reducing
patient burden and streamlining trial delivery.
For more information, see Therapy Area Review from
page 30.
Bioethics BV
‘Bioethics’ refers to the range of ethical
issues that arise from the study and practice
of biological and medical science. We are
committed to working in a transparent and
ethical manner across all our bioethics subject
matter areas. Our Global Standard on Bioethics
sets out our principles which apply to all our
scientific activities, whether conducted by
us or by third parties acting on our behalf.
The following sections summarise our activities
in the main areas, and our Global Standard
on Bioethics is available on our website,
www.astrazeneca.com/sustainability.
Our Bioethics Advisory Group (BAG) is
sponsored by the Chief Medical Officer and
oversees the operation of the Global Standard
on Bioethics. BAG met eight times in 2020.
BAG continued to be involved with ethical
discussions on traditional topics, for example,
animal research and human biological
samples as well as emerging topics, for
example, Artificial Intelligence. In 2020, BAG
expanded its scope to include guidance on
employee testing for SARS-CoV-2, potential
employee screening for early cancer
detection, employee participation in
AstraZeneca clinical trials and governance
decisions in the exception process for
payments to participants for involvement
in AstraZeneca research.
Clinical trials
We believe that transparency enhances the
understanding of how our medicines work and
benefit patients. We publish information about
our clinical research, as well as the registration
and results of our clinical trials – regardless of
whether or not they are favourable – for all
products and all phases, including marketed
medicines, drugs in development and drugs
where development has been discontinued. In
February 2020, AstraZeneca was recognised
as a leader by The Lancet as having 100%
compliance to registration and results, posting
laws on clinicaltrials.gov for a cohort of studies
analysed (March 2018 to September 2019).
In 2020, we conducted a range of clinical trials
across regions as shown in the charts on the
right. This broad span helps to ensure that
study participants reflect the diversity of
patients for whom our medicines are intended
and identifies the patients for whom the
medicine may be most beneficial. Our global
governance process provides the framework for
ensuring a consistent, high-quality approach
worldwide. Protecting participants throughout
the trial process is a priority and we have strict
procedures to help ensure that participants
are not exposed to unnecessary risks.
All our clinical trials are designed and finally
interpreted in-house. Some are conducted by
contract research organisations (CROs) on our
behalf and we require these organisations to
comply with our global standards.
As of 31 December 2020, we shared
anonymised individual patient-level data from
160 studies with 59 unique research teams
and responded to 199 requests from external
researchers using our portal, www.vivli.org
to request our clinical data and reports to
support additional research. We publish
Anonymized Clinical Data Packages for
products in compliance with regulations in
Canada and the EU, as well as share them
with approved qualified researchers where
they contribute to successful data-sharing
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Clinical trial active sites by region*
BioPharmaceuticals
Oncology
Europe 37%
US/Canada 28%
Asia Pacific 9%
Japan 7%
Latin America 10%
Middle East and Africa 3%
China 6%
Europe 37%
US/Canada 24%
Asia Pacific 17%
Japan 9%
Latin America 6%
Middle East and Africa 2%
China 5%
* Percentages have been rounded to the nearest whole number.
needs. In 2020, we continued to
participate in the industry-wide portal,
www.trialsummaries.com where we publish
Trial Result Summaries in easy-to-understand
language and translate these to the local
language for all sites where a study is
conducted. As of 31 December 2020, we
published Trial Result Summaries for 173
AstraZeneca trials.
For more information, see our website,
www.astrazeneca.com, or our clinical trials website,
www.astrazenecaclinicaltrials.com.
Clinical trial diversity
Our belief is that increasing the diversity of
principal investigators and site staff will foster
trust between healthcare providers and their
communities, and that this will help to
increase patient diversity within our clinical
trials. In support of this belief, in 2020 we
launched an educational programme globally
to train staff at clinical research sites with
limited experience of clinical trials.
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independently assured by Bureau Veritas
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The cost projection for the R&D Centre
remains in the region of $1.3 billion
(c.£1.0 billion); the programme is well
advanced, although the full and potential
impact of COVID-19 is yet to be determined.
The project continues to be funded out of
operational cash flows.
Investment
In 2020, R&D expenditure was $5,991 million
(2019: $6,059 million; 2018: $5,932 million),
including Core R&D costs of $5,872 million
(2019: $5,320 million; 2018: $5,266 million). In
addition, we spent $1,454 million on acquiring
product rights (such as in-licensing) (2019:
$1,835 million; 2018: $476 million). We also
invested $35 million on the implementation
of our R&D restructuring strategy (2019:
$10 million; 2018: $94 million). The allocations
of spend by early-stage and late-stage
development are presented in the R&D spend
analysis table below.
R&D spend analysis
Discovery and
early-stage
development
Late-stage
development
2020
2019
2018
36%
36%
37%
64%
64%
63%
Research use of human biological samples
The use of human biological samples, such
as solid tissue, biofluids and their derivatives,
plays a vital role in developing a deeper
understanding of human diseases.
We are committed to minimising the use
of fetal tissue by exploring technological
alternatives. Fetal tissue is used to provide
invaluable data to advance novel treatments
for serious diseases of unmet medical need
and only when no other scientifically
reasonable alternative is available. In 2020,
two additional new research proposals that
include use of human fetal tissue (hFT), or
cells derived from hFT, were approved; one
was required to meet regulatory requirements.
Four projects using hFT had progressed as at
31 December 2020 and three projects are
ongoing. An additional three projects using
human embryonic stem cells (hESC) were
approved in 2020, resulting in 13 projects
using 24 different hESC lines or derived cells
having been approved as at 31 December
2020. Seven projects are ongoing.
Animal research
Technology has not yet advanced to the stage
where all animal use can be eliminated from
research and development. In addition, some
animal studies are required by international
regulators before medicines progress to
human trials. Animal studies therefore remain
a small, but necessary, part of the process of
developing new drugs.
Animal research use varies depending on many
interrelated factors, including our amount of
pre-clinical research, the nature and complexity
of the diseases under investigation and
regulatory requirements. We believe that
without our active and ongoing commitment
to the 3Rs (Replacement, Reduction and
Refinement of animals in research), our animal
use would be much greater. In 2020, animals
were used for in-house studies 74,684 times
(2019: 108,674). In addition, animals were used
on our behalf for CRO studies 51,625 times
(2019: 35,210). In total, over 94% were rodents
or fish.
For more information, see our Sustainability
Report available on our website,
www.astrazeneca.com/sustainability.
R&D resources
We have approximately 10,500 employees
in our R&D organisation, working in various
sites around the world. We currently have
three strategic R&D centres: Cambridge, UK;
Gaithersburg, MD, US; and Gothenburg,
Sweden. Other R&D centres are located in the
UK (Alderley Park and Macclesfield), the US
(Waltham, MA and South San Francisco, CA),
Japan (Osaka) and China (Shanghai). We also
have a site in Poland (Warsaw) that focuses
on late-stage development.
During 2020, we opened a new office in New
York, NY, US with a specific focus on delivery
of our Oncology pipeline, particularly in the
clinical and medical space. The addition of
this new Manhattan-based site ensures that
we have an R&D footprint in all four of the
nationally recognised top areas for
biopharmaceutical innovation in the US.
Cambridge
Cambridge, UK is one of the most exciting
bioscience hotspots in the world and it is
where we are creating an open and vibrant
R&D Centre on the Cambridge Biomedical
Campus.
We believe that the best way to meet today’s
science challenges is to work openly and
collaboratively with the world’s best scientists.
Being in Cambridge enables us to continue
building on the great tradition of innovative
thinking to contribute to the advancement of
a world-class ecosystem of great science and
delivering our Company’s science-led strategy.
The vision for the R&D Centre has been an
incredible catalyst for delivering our strategy.
It has brought more than 3,500 of our people
together in one geographical location and the
opening of our R&D Centre this year will
enable us to take the next step towards
fulfilling our Cambridge vision – to bring our
research together under one roof.
As part of our commitment to encourage
innovation and entrepreneurship in life
sciences, we support a number of initiatives
that help biotech entrepreneurs advance their
business ideas. Our support is wide-ranging,
from connecting entrepreneurs with dedicated
business mentors and organising guest
lectures to offering internships. We have more
than 60 business mentors in Cambridge. To
date around 75 start-ups have benefited from
their experience so far.
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Enhancing our
understanding
of disease
biology
Investing in multiple
approaches
We are determined to advance our
understanding of disease biology to uncover
novel drivers for the diseases we aim to treat,
prevent and, in the future, cure.
Selecting the right target remains
the most important decision we
make in the drug discovery process.
We are investing in multiple
approaches to improve this:
> Through our Genomics Initiative,
we aim to analyse two million
genomes by 2026 to identify rare
genetic variants to uncover new
targets and disease insights.
> We are investing in broader
multi-omic technologies, such as
transcriptomics, proteomics and
metabolomics, to probe the more
complex and transient molecular
changes that underpin the course
of disease and responses to
drug treatment.
> Our use of precise gene and base
editing technologies continues to
help us create more relevant cell
lines and animal models in a
matter of weeks, as opposed
to months or longer still.
> At our AstraZeneca-Cancer
Research UK Functional Genomics
Centre at the Milner Therapeutics
Institute in Cambridge, UK, we
aim to discover new targets by
using CRISPR libraries to delete
or upregulate every gene in the
cell to understand the role of
that gene in disease biology.
> We are combining these rich
datasets with external data
sources and applying AI and
machine learning, to develop
biomedical knowledge graphs to
contextualise scientific data and
the relationships between them,
in collaboration with companies
such as BenevolentAI.
For more information,
see Research & Development
from page 53.
>2m
We aim to analyse two
million genomes by 2026
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Our growing experience
with CRISPR-based tools has
allowed us to expand its use
across R&D, helping us create
new gene-edited disease models
to advance drug discovery.
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Commercial
We plan to meet our growth and
profitability goals by driving growth
through successful innovation and
commercial excellence, and creating
sustainable profitability. We are doing
so with a shift from a focus on
treatment to improving the whole
patient experience and developing
new payer models that improve
access to our medicines.
Overview
> Total Revenue, comprising Product Sales
and Collaboration Revenue, increased
by 9% (10% at CER) to $26,617 million.
> Total Revenue from New Medicines
improved by 33% (33% at CER) in the
year to $13,950 million.
> In the US, Total Revenue increased by
13% to $8,833 million and in Europe by
10% (9% at CER) to $5,540 million.
> Total Revenue in Emerging Markets
increased by 7% (10% at CER) to
$8,711 million, with China growth of
10% (11% at CER) to $5,375 million.
> Continuing to make our medicines
affordable to more people on a commercially
and socially sustainable basis.
> Entered into more than 100 innovative
value-based agreements across our three
main therapy areas.
> Committed to high ethical standards: 108
people removed from roles for breaches of
external sales and marketing regulations
or codes.
> 91 on-time launches during the year and
14 external inspections of our operations
facilities with zero critical observations.
> More than 800 collaborations around
the world.
> Embarking on digital transformation to
develop solutions to enhance the delivery
of our medicines, reduce inefficiencies
and support patients.
Sales and marketing
Our Commercial teams, which comprised
around 43,400 employees at the end of
2020, are active in more than 100 countries.
In most countries, we sell our medicines
through wholly owned local marketing
companies. We also sell through distributors
and local representative offices. We market
our products largely to primary care and
specialty care physicians.
Total Revenue, comprising Product Sales
and Collaboration Revenue, increased by
9% in 2020 (10% at CER) to $26,617 million.
Product Sales grew by 10% (11% at CER)
to $25,890 million, driven primarily by the
performances of the new medicines across
Oncology and BioPharmaceuticals, including
Tagrisso and Farxiga.
Total Revenue included $2m of COVID-19
Vaccine AstraZeneca Product Sales within
Other Medicines; from the first quarter of 2021
AstraZeneca intends to report the COVID-19
Vaccine AstraZeneca performance separately.
The ongoing COVID-19 pandemic had a
significant impact on every aspect of life in
2020, AstraZeneca. The largest direct impacts
of COVID-19 on the our portfolio of medicines
included reduced sales of Pulmicort in
China on fewer nebulisation-centre visits
and reduced elective surgery, and less use
globally of infused and injectable medicines,
such as Imfinzi and Fasenra.
There was also a decline in the number of
hospital admissions around the world for the
treatment of heart attacks and lower levels of
elective percutaneous coronary intervention,
adversely impacting sales of Brilinta.
Some medicines, however, may benefit
from shifts in patient care and behaviours,
including oral medicines such as Calquence,
which saw an element of benefit from the
substitution from infused-chemotherapy
regimens.
Additional investment in new medicines
continued to fuel our growing Oncology and
BioPharmaceuticals therapy areas. Tagrisso’s
future was enhanced with its first regulatory
approval in early, potentially-curable lung
cancer and further national reimbursement in
China in advanced disease. Farxiga expanded
its potential beyond diabetes, while
tezepelumab promised hope for patients
suffering from severe asthma.
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Regional Product Sales
1. Emerging Markets
3. Europe
6%
6% growth in the year
(10% at CER) to
$8,679m
16%
16% growth in the year
(15% growth at CER) to
$5,059m
2. US
12%
12% growth in the year
to $8,638m
4. Established
Rest of World
6%
6% growth in the year
(6% at CER) to
$3,514m
All numbers as at 31 December 2020.
Pricing and delivering value
Our medicines help address unmet medical
need, improve health and create economic
benefits. Treatments that are targeted
and effective as well as innovative and
personalised, can lower healthcare costs
by reducing the need for more expensive
care, preventing more serious and costly
diseases and increasing productivity. We
are committed to a pricing policy for our
medicines based on four principles:
> We determine the price of our medicines
while considering their full value for
patients, payers and society. The agreement
on price involves many national, regional
and local stakeholders, reflecting factors
such as clinical benefit, cost-effectiveness,
improvement to life expectancy and
quality of life.
> We aim to ensure the sustainability
of both the healthcare system and our
research-led business model. We believe
we share a collective responsibility with
healthcare providers and other
stakeholders to work together to enable
an efficient healthcare system for patients
today and support a pipeline of new
medicines for patients tomorrow.
> We seek to ensure appropriate patient
access to our medicines. We work closely
with payers and providers to understand
their priorities and requirements, and play
a leading role in projects to better align
the specifications of regulatory and health
technology assessment (HTA) agencies
or other organisations that provide value
assessment of medicines.
4
2
3
1
4
> We pursue a flexible pricing approach
that reflects the wide variation in global
healthcare systems. We have developed
patient access programmes that are
aligned with a patient’s ability to pay and
a healthcare system’s ability to respond.
We are committed to the appropriate
use of managed entry schemes and the
development of real-world evidence and we
are investigating innovative approaches to
the pricing of medicines, such as payment
for outcomes received by the patient and
healthcare system.
We have outlined our commitment to optimising
affordability and accessibility in our Affordability
Statement that can be found on our website,
www.astrazeneca.com/sustainability.
By way of example of our approach, we apply
Tiered Pricing Principles globally. This defines
price levels commensurate with affordability
based on a country’s ability to pay. We believe
that this approach to pricing is sustainable
and fair, and that it will increase access and
improve patient outcomes in Emerging Markets.
More generally, we remain committed to
working with payers to explore novel and
flexible ways to assess and pay for medicines
towards our shared goal of delivering the
outcomes that matter for patients through
innovative and personalised treatments. We
are collaborating with payers to conclude
outcomes- and value-based reimbursement
that improves patient outcomes. By the end of
2020, we had entered into more than 100 such
innovative value-based agreements across
our three main therapy areas.
We understand that our medicines will not
benefit patients if they are unable to afford
them which is why we offer a number of
patient assistance programmes that can help
increase patients’ access to medicines and
reduce their out-of-pocket costs. Through
these programmes, we support qualifying
patients in a variety of ways, including
through discounts and/or product donations.
Outside the US, we generally provide these
programmes in markets with limited or no
public reimbursement system, no coverage
beyond the most basic therapies, or where the
possibility of public reimbursement is unlikely,
or only after an extended period.
US
As the sixteenth largest prescription-based
pharmaceutical company in the US, we have
a 2.7% market share of US pharmaceuticals
by sales value. In 2020, Product Sales in
the US increased by 12% to $8,638 million
(2019: $7,747 million).
The US healthcare system is complex with
multiple payers and intermediaries exerting
pressure on patient access to branded
medicines through regulatory rebates in
government programmes and voluntary
rebates paid to managed care organisations
and pharmacy benefit managers for
commercially insured patients, including
Medicare Part D patients. In the Medicare
Part D programme, branded pharmaceutical
manufacturers are also statutorily required
to pay a percentage of the patient’s out-of-
pocket costs during the ‘coverage gap’
portion of their benefit design.
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In 2020, the overall measurable reduction
in our profit before tax for the year due to
discounts on branded pharmaceuticals
in the Medicare Part D Coverage Gap and
an industry-wide HealthCare Reform Fee
was $590 million (2019: $547 million;
2018: $432 million; 2017: $119 million).
In the US, there is significant pricing pressure
driven by payer consolidation, restrictive
reimbursement policies and cost control
tools, such as exclusionary formularies and
price protection clauses. Many formularies,
employ ‘generic first’ strategies and/or require
physicians to obtain prior approval for the
use of a branded medicine where a generic
alternative exists. These mechanisms can
be used to limit use of branded products and
pressure manufacturers to reduce net prices.
In 2020, 85.3% of prescriptions dispensed
in the US were generic (2019: 84.8%). In
addition, patients continue to see changes
in the design of their health plan benefits and
may experience increases, in both premiums
and out-of-pocket payments for branded
medications. There is a growing trend towards
high-deductible health plans which may
require patients to pay the full list price until
they meet certain out-of-pocket thresholds.
Ongoing scrutiny of the US pharmaceutical
industry, focused largely on affordability, has
been the basis of multiple policy proposals
in the US. Over the course of 2020, Congress
and the Trump Administration issued several
proposals designed to increase generic
competition, reform coverage and
reimbursement of drug therapies, reduce
list prices and out-of-pocket costs, limit
price increases, and increase regulatory
rebate liability, among other topics. While
the attention of Congress necessarily shifted
in order to respond to the COVID-19 public
health emergency, we expect a focus on
drug pricing proposals to continue into 2021.
AstraZeneca is actively supporting solutions
that provide access and affordability while
continuing to support scientific innovation.
In addition, lawmakers at both the federal
and state levels have sought increased drug
pricing transparency and have proposed and
implemented policies that include measures
relating to the submission of proprietary
manufacturer data, establishment of price
parameters that are indexed to certain federal
programmes, and reporting of changes in
pricing beyond certain thresholds.
Though widespread adoption of a broad
national price control scheme in the near
future is unlikely, we continue to comply with
new state-level regulations in this area. We
recognise the sustained potential for substantial
changes to laws and regulations regarding
drug pricing that could have a significant
impact on the pharmaceutical industry.
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We offer a number of resources and
programmes in the US that can help increase
patients’ access to medication and reduce
their out-of-pocket costs.
Results have been driven by strong
performance from Oncology brands Tagrisso,
Imfinzi and Lynparza as well as Fasenra, Breztri
and Forxiga.
We successfully launched Lokelma in May
and Imfinzi for SCLC in August. Forxiga
was approved for heart failure treatment in
November and Lynparza was approved in
three new indications in December (advanced
ovarian, prostate and pancreatic cancers).
Canada
Product Sales in Canada increased by 29% at
actual rate of exchange (31% at CER) in 2020.
This was primarily driven by strong sustained
growth of our New Medicines, particularly
Imfinzi, Tagrisso, Lynparza and Fasenra
coupled with Symbicort sales benefiting from
the regulatory approval to use the product as
an anti-inflammatory reliever as-needed in
mild asthma coupled with improved
adherence related to COVID-19.
Decline of Onglyza was accompanied by the
impact of divestments, particularly Losec.
There continues to be pricing pressure from
both public and private payers. We remain
committed to exploring innovative value-based
pricing solutions that benefit patient outcomes.
Australia and New Zealand
Our sales in Australia and New Zealand
increased by 8% at actual rate of exchange
(10% at CER) in 2020. This was primarily due
to growth in key brands such as Symbicort
(which benefited from a strong LABA/ICS
class growth from the impact of the bushfires
earlier in the year and then COVID-19),
Tagrisso, Lynparza and Forxiga. These were
supplemented by strong growth in Fasenra in
its first full year after reimbursement and an
earlier than expected Pharmaceutical Benefits
Scheme (PBS) listing of Imfinzi. The decline in
older, non-patent protected brands such as
Crestor and Nexium continued but were more
than offset by the growth brands. Australia
remains a predominantly HTA-reimbursed
market with products aiming to be reimbursed
needing to show a clear level of cost
effectiveness and benefit to patients versus
existing standard of care. Within this context,
the Group’s pipeline of new assets and
indications provide good opportunities for
continued future growth.
* Established ROW comprises Australia and New Zealand,
Canada and Japan.
For more information, see Community investment
on page 76.
Europe
The total European pharmaceutical market
was worth $211 billion in 2020. We are
the thirteenth largest prescription-based
pharmaceutical company in Europe
(see Market definitions on page 280) with
a 2.0% market share of pharmaceutical
sales by value.
In 2020, Product Sales in Europe increased by
16% at actual rate of exchange (15% at CER)
to $5,059 million (2019: $4,350 million). We
continued to launch and saw sustained
performance of innovative medicines, in
particular with Tagrisso, Imfinzi, Lynparza,
Forxiga and Fasenra. Oncology sales in
Europe grew by 36% (35% at CER), driven
by increased use of Tagrisso for the treatment
of patients in the 1st-line EGFR7-mutated
(EGFRm) non-small cell lung cancer (NSCLC)
setting, as well as continued strong levels of
demand in the 2nd-line setting. Imfinzi sales
reflect a growing number of reimbursements.
Lynparza sales benefited from the increasing
levels of reimbursement and BRCA-testing
rates. Forxiga sales growth of 36% (35% at
CER) was accompanied by Fasenra sales
increase of 72% (70% at CER). With
the increased focus on flu vaccination
programmes, FluMist sales saw a significant
increase of 135% (126% at CER).
Despite the overall growth, we experienced
a decline in Iressa sales due to the uptake of
Tagrisso, coupled with the ongoing impact of
divestments, mainly Losec and Seroquel XR.
Established Rest of World (ROW)*
Japan
Japan remains an attractive market for
innovative pharmaceutical companies,
positioned as the third largest pharmaceutical
market for R&D-driven companies. In 2020,
there was continued pressure on healthcare
spend and, being an even year, the biennial
government-induced price control
measurements were in place.
Total Revenue in Japan was $2,620 million,
positioning AstraZeneca as the sixth
largest prescription-based pharmaceutical
company with a 3.5% value market share
of pharmaceutical sales by value.
Revenue has been kept flat versus 2019
($2,591 million) outperforming the negative
market growth despite challenges linked to
COVID-19, regular biennial price cut in April,
repricing for Imfinzi and Faslodex, and generic
entry for Symbicort (December 2019) and
Pulmicort (January 2020).
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12%
12% increase in Product Sales in
the US in 2020 to $8,638 million
10%
10% increase in Product Sales in
China in 2020 (10% at CER) to
$5,345 million
“ AstraZeneca was the
second fastest-growing
top 10 multinational
pharmaceutical
company in Emerging
Markets in 2020.”
Emerging Markets
Emerging Markets, as defined in Market
definitions on page 280, comprise various
countries with dynamic, growing economies.
As outlined in Healthcare in a changing
world from page 12, these countries
represent a major growth opportunity for
the pharmaceutical industry due to high
unmet medical need and sound economic
fundamentals. Emerging Markets are not
immune, however, to economic downturn.
Market volatility is higher than in Established
Markets, and various political and economic
challenges exist. These include regulatory
and government interventions. In selected
markets, governments are encouraging local
manufacturing and investment by offering
more favourable market access conditions
and pricing is increasingly controlled by
payers through price referencing regulations
in addition to cost effectiveness and cost
minimisation approaches.
Growth drivers for Emerging Markets include
new medicines across our Oncology, CVRM
and Respiratory & Immunology portfolios.
To educate physicians about our broad
portfolio, we are selectively investing in sales
capabilities where opportunities from unmet
medical need exist. We are also expanding
our reach through multi-channel marketing
and external partnerships.
With revenues of $8,711 million (2019:
$8,171 million), AstraZeneca was the fourth
largest multinational pharmaceutical company,
as measured by prescription sales, and the
second fastest-growing top 10 multinational
pharmaceutical company in Emerging
Markets in 2020. Despite the impact of
COVID-19 across all geographies we saw
growth across all major areas including Latin
America at 0% (18% at CER), Russia &
Eurasia at 26% (39% at CER), Middle East
& Africa down 4% (up 1% at CER) and Asia
Area at 5% (7% at CER).
China
In China, AstraZeneca is the largest
pharmaceutical company by value in the
hospital sector, as measured by sales. Sales in
China in 2020 increased by 10% at actual rate
of exchange (11% at CER) to $5,345 million
(2019: $4,880 million). Despite the significant
impact of COVID-19 in the first half of the year
especially, we delivered sales growth above
the growth rate of the hospital market sector
through strategic brand investment, systematic
organisational capability improvements and
long-term channel expansion programmes
in our main therapy areas.
Tagrisso, Breztri, Bevespi, Lynparza, Zoladex
and Linzess were listed or renewed in the
National Reimbursement Drug List (NRDL).
Pricing practices remain a priority for
regulators, and new national regulations,
in addition to provincial and hospital tenders,
continue to put increasing pricing pressures
on pharmaceutical companies in China.
The introduction of the Generics Quality
Consistency Evaluation (GQCE) in 2018 has
had an impact on pharmaceutical company
budgets and pricing through setting new
standards for bioequivalence that generic
products must adhere to as part of participation
in a process called value-based procurement
(VBP) that covers up to 70% of anticipated
hospital volumes in all areas. This evaluation
is being applied retrospectively, so several
existing generic products may fail and be
withdrawn which could lead to a consolidation
in the sector. This would leave fewer,
higher-quality generics in the market thereby
putting pressure on any originator brand price
premiums and driving a reduction in overall
medical costs.
In 2018, the first round of VBP, which involved
Crestor and Iressa, was announced with
implementation from early 2019. In 2020,
Losec, Brilinta and Arimidex were included
within the latest VBP cycle with none of the
AstraZeneca brands successfully winning
any of the tendered volumes. Consequently
the growth of these brands was significantly
impacted in the latter part of the year. As
the implementation of VBP accelerates it
is expected that more AstraZeneca brands
will be impacted in 2021.
COVID-19 has had a major effect on growth
rates in all channels across China and for
AstraZeneca in the Respiratory & Immunology
therapy area. In particular, the nebulised
brands such as Pulmicort, Fluimucil and
Bricanyl were most heavily impacted as
nebulisation centres were initially closed;
when opened, demand was slow to return
to pre-pandemic levels.
The industry-wide growth rate is expected
to be 4.4% over the next five years, following
the updates of the NRDL and expanding
health insurance coverage. Nevertheless,
the healthcare environment in China remains
dynamic. Opportunities are arising from
incremental healthcare investment, in-licensing,
strong underlying demand for our more
established medicines and the emergence
of innovative medicines such as Lynparza,
Breztri and roxadustat.
Several initiatives announced in the latter part
of 2019 to support transformation of healthcare
in China were further progressed in 2020.
These included the creation of a global R&D
centre in Shanghai. A new AI Innovation
Centre, also in Shanghai, will be established
to capitalise on the latest digital technology
in R&D, manufacturing, operations and
commercialisation to help accelerate the
delivery of medicines to patients in China and
globally. A healthcare investment fund jointly
set up with CICC, one of China’s leading
investment banks, has executed funding
agreements with other investors and the initial
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Code of Ethics
We are committed to employing high ethical
standards when carrying out all aspects of
our business globally. Our Code of Ethics
(the Code) is based on our Values, expected
behaviours and key policy principles. It applies
to all Executive and Non-Executive Directors,
officers, employees and temporary staff, in
all companies within our Group worldwide.
It empowers employees to make decisions in
the best interests of the Group and the people
we serve, now and in the long term, by
outlining our commitments in simple terms
and focusing on why these commitments
matter. The Code is at the core of our
compliance programme. It has been translated
into approximately 40 languages and guides
employees on how to make the best day-to-day
choices and how to act in a consistent,
responsible way, worldwide. There are two
mandatory training courses dedicated to the
Code: one is for new starters; the second is the
annual training for all employees, reminding
them of the key commitments. In 2020, 100%
of all active employees completed the annual
training on the Code of Ethics.
The Code includes four high-level Global
Policies covering Science, Interactions,
Workplace and Sustainability. These Global
Policies continue to be complemented by
underlying Global Standards, which define
the global requirements we follow to deliver
our business consistent with the Values,
behaviours, commitments and principles
embodied in our Code and Global Policies.
Our Code and Global Policies, together with
relevant Global Standards and Position
Statements, are published on our website,
www.astrazeneca.com. Our policy framework
also includes additional requirements at the
global, local and business unit level to support
employees in their daily work.
A Finance Code complements the Code and
applies to the Chief Financial Officer, the
Group’s principal accounting officers (including
key Finance staff in all overseas subsidiaries)
and all managers in the Finance function. This
reinforces the importance of the integrity of the
Group’s Financial Statements, the reliability
of the accounting records on which they are
based and the robustness of the relevant
controls and processes.
In 2020, we identified 14 confirmed breaches
of external sales and marketing regulations or
codes (2019: eight). There were 2,113 instances,
most of them minor, of non-compliance with
our policy framework in our Commercial
Business Units, including instances by
employees and third parties (2019: 2,597).
We removed a total of 108 employees and
third parties from their roles as a result of
these breaches (a single breach may involve
more than one person). We also formally
warned 861 others and provided further
guidance or coaching on our policies to 2,099
more. The Audit Committee is provided with
the breach statistics on a quarterly basis.
Further commentary on the more serious
breaches and corresponding remediation
is also provided to the Audit Committee.
The total number of incidents has increased
since last year, driven by increasing numbers
of low impact incidents. This may be
attributable to many factors, including the
growth in AstraZeneca’s employee base,
stronger first-line oversight, more targeted
monitoring with data analytics, the
strengthening of ‘Speak Up’ culture and
evolving external regulations and enforcement
priorities (e.g. data privacy globally and human
genetic resources in China). Regardless of
cause(s), we see increased reporting of low
impact incidents (as opposed to medium or
high impact), a positive trend that enables the
enterprise to learn and intervene early before
non-compliance escalates or leads to
systemic issues.
Anti-bribery and anti-corruption BV
We do not tolerate bribery or any other form
of corruption. We conveyed our commitment
to ethical behaviour in the 2020 annual Code
training, reinforced through anti-bribery/
anti-corruption training materials delivered
and made available to relevant employees and
third parties, including mandatory, periodic
training for selected business units and roles.
Bribery and corruption remains a business
risk as we launch new medicines in markets
across the globe and enter into collaborations,
and the risk is a focus of our third-party risk
management process, as well as our Business
Development due diligence procedures. It
is also a focus of our monitoring and audit
programmes. The majority of marketing
company audits include anti-bribery/
anti-corruption work programmes.
deployment of capital is expected to be made
in the early part of 2021 following regulatory
approval of the fund. An internet hospital
venture with Hillhouse Capital which also
includes an in-house pharmacy distribution
was executed in 2020 and expected to close
in early 2021.
Emerging market healthcare BV
We continue to make our medicines
affordable to more people on a commercially
and socially sustainable basis. As, on average,
almost half of healthcare expenditure in
emerging markets is paid for by the patient
or their families, we base our approach in
these markets on an understanding of their
economic circumstances and the burden
placed on them by healthcare costs.
We enable our Emerging Markets to deliver
better and broader patient access through
innovative and targeted equitable pricing
strategies and practices which include
patient assistance programmes, such as
FazBem in Brazil which offer products at
a discounted cost.
For information on our access to healthcare
programmes in Emerging Markets and as
one of our sustainability priorities, see our
Sustainability Report available on our website,
www.astrazeneca.com/sustainability.
Responsible sales and marketing BV
We are committed to employing high ethical
standards of sales and marketing practice
worldwide, in line with our Code of Ethics and
supporting requirements (our policy framework).
We maintain a robust compliance programme
in our efforts to ensure compliance with all
applicable laws, regulations and adopted
industry codes. As outlined in Global
Compliance and Internal Audit Services
on page 118, our compliance programme
is delivered by dedicated compliance
professionals who advise on and monitor
adherence to our policy framework.
These professionals also support our line
managers locally in ensuring that their
staff meet our ethical standards. A network
of nominated signatories reviews our
promotional materials and activities against
applicable requirements to ensure we abide
by the applicable regulations and codes of
practice and share accurate, balanced and
non-misleading information about our
products. Our Internal Audit Services
department, in partnership with external
audit experts, also conducts compliance
audits on selected marketing companies.
For more information about the assurance provided
by Bureau Veritas, see page 72.
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Transparency reporting BV
AstraZeneca is committed to the highest
standards of conduct in all our operations,
including the disclosure of payments
to healthcare practitioners (HCPs),
healthcare organisations (HCOs) and patient
organisations, with full transparency where
recipients have provided consent and in
accordance with all current local, state and
global-level obligations covering the 46
markets with existing reporting requirements.
For the 2020 disclosure period (of 2019 data),
AstraZeneca disclosed 974,000 payments
totalling $899 million in payments or transfers
of value to 174,000 unique covered recipients.
We continue to monitor the external
landscape to ensure that the Company is
prepared to meet new obligations and are
progressively heading towards increased
disclosure in additional markets globally and,
in all locations, we are committed to ensuring
that payments are justified and reasonable.
For more information, see our transparency page,
www.astrazeneca.com/sustainability/ethics-and-
transparency.html.
Operations
Our manufacturing and supply
function has continued to support
our growth by delivering every
new launch on time and in full, and
sustaining strong customer service
and product lead-time reductions.
2020 marks the completion of the delivery
of our Operations 2020 plan designed to
enhance supply capabilities to respond better
to the expanding patient and market needs.
In 2020, we delivered 91 successful market
launches and 3 pre-registration launches. We
will further evolve our manufacturing and
supply capabilities through the launch of our
new Operations 2025 plan, aligned to our
Company strategy. Our Operations 2025
plan will focus on scaling our capabilities
to support the continued growth of our
portfolio, combined with leveraging the
benefits of new manufacturing technology
and digital innovation across our end-to-end
supply chains.
Quality, regulation and compliance
We are committed to high product quality,
which underpins the safety and efficacy of
our medicines. We maintain a comprehensive
quality management system to assure
compliance and quality. Similarly, we set strict
standards for safety, health and environment
at each of our sites. During 2020, our site
safety protocols were updated in response to
the global outbreak of COVID-19 to reduce the
risk of workplace transmission. Manufacturing
facilities and processes are subject to rigorous
and continuously evolving regulatory standards.
They are subject to inspections by regulatory
authorities, which are authorised to mandate
improvements to facilities and processes,
halt production and impose conditions for
production to resume.
To ensure compliance with global Good
Manufacturing Practice (GMP) regulations,
the Operations Quality team continuously
reviews and strengthens the Quality Systems
at our manufacturing sites through internal
audit programmes, external intelligence and
sharing learnings between sites. In 2020,
these measures helped us successfully achieve
zero critical observations from 14 independent
inspections. We review observations from
these inspections together with the outcomes
of internal audits and, where necessary,
implement improvement actions.
We are committed to maintaining the
highest ethical standards and compliance
with internal policies, laws and regulations.
We review and comment upon evolving
national and international compliance
regulations through our membership of
industry associations, including IFPMA,
EFPIA and PhRMA.
Supply chain management
We need an uninterrupted supply of high-quality
materials along our end-to-end supply chains.
This includes our active pharmaceutical
ingredients (APIs) and, with most of our API
manufacturing outsourced, we place great
importance on our global external sourcing
and procurement organisations and policies,
as well as our integrated risk management
processes. We purchase materials from a
wide range of suppliers and work to mitigate
supply risks, such as natural or man-made
disasters that disrupt supply chains or the
unavailability of raw materials. Contingency
plans include using dual or multiple suppliers
where appropriate, maintaining adequate
stock levels and working to mitigate the effect
of pricing fluctuations in raw materials. During
2020, we activated our business continuity
plans to maintain supply of medicines to
patients and mitigate against any risk of
disruption caused by COVID-19.
As a consequence of the UK leaving the EU on
31 January 2020, we continued to work both
internally and externally with our suppliers on
our readiness for the impact of the transition
period ending on 31 December 2020, with a
view to mitigating the effect on our business.
We continue to maintain a range of mitigations,
including revised logistics channels, additional
warehousing, the potential to move clinical
trial-related activities, stock building of final
product and manufacturing-related goods,
movement of stock locations, and assessment
of the opportunity for supplier substitution.
While we have continued to make progress
in our preparations, it is possible that adverse
events, such as border delays, will impact
supplier activities. Issue management may
therefore play a key element in our ability to
maintain safe supply of our medicines and
ongoing business operations more generally
in 2021. In addition, we have continued to
engage with regulators and governments
to ensure that they have a clear view on
the potential impact on pharmaceutical
supply chains.
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Supply chain finance
AstraZeneca has a supply chain finance
programme to support the cash flow of
its external supply base. This programme,
supported by Taulia Inc. and Greensill Capital,
provides suppliers with visibility of invoices
and payment dates via a dedicated platform.
Suppliers can access this platform free of
charge and have flexibility to select individual
invoices for early payment. On election of an
early payment, a charge is incurred by the
supplier based on the period of acceleration,
central bank interest rate and the rate agreed
between Taulia Inc. and each supplier. All
early payments are processed by Greensill
Capital and AstraZeneca settles the original
invoice amount with Greensill Capital at
maturity of the original invoice due date.
The programme is live in the US, UK, Sweden,
Germany and Australia, with expansion into
other countries under review. As of December
2020, the programme had 3,396 suppliers
enrolled and a potential early payment
balance of $248 million.
For more information on supply chain financing,
see Note 20 on page 207.
Responsible supply chain BV
Every employee and contractor who sources
goods and services on behalf of AstraZeneca
is expected to follow responsible business
processes, which are embedded into our
Global Standard for the Procurement of
Goods and Services. All our procurement
professionals receive training on our Code
of Ethics which contains our expectations
on responsible procurement.
We monitor compliance through assessments
and improvement programmes and we will
not use suppliers who are unable to meet our
standards. Our Global Standard Expectation
of Third Parties is published on our website,
www.astrazeneca.com/sustainability. We
conducted a total of 16,197 assessments
in 2020 (2019: 15,519).
In 2020, we conducted 48 audits on high-risk
suppliers (external manufacturing partners),
seeking to ensure that they employ appropriate
practices and controls. 6% of these suppliers
fully met our expectations, with a further 94%
implementing improvement plans to address
minor instances of non compliance. Through
our due diligence process, no high-risk
engagements were rejected.
For more information on our Responsible supply chain,
see, www.astrazeneca.com/sustainability.
Manufacturing capabilities
Our principal tablet and capsule formulation
sites are in the UK, Sweden, China, Puerto
Rico and the US, with local/regional supply
sites in Russia, Japan, Indonesia, Egypt, India,
Germany, Mexico and Brazil. We also have
major formulation sites for the global supply
of parenteral and/or inhalation products in the
US, Sweden, France, Australia and the UK.
Most of the manufacture of APIs is delivered
through the efficient use of external sourcing
that is complemented by internal capability
in Sweden.
In January 2020, AstraZeneca re-acquired
the Reims packing and distribution centre
from Avara Reims Pharmaceutical Services.
This transaction saw the site and former
Avara Reims employees transfer to
AstraZeneca. The transition of the Reims
site into the AstraZeneca network, including
full IT systems integration, remains on
schedule for completion in early 2021.
In September 2019, we announced our
intention to exit our manufacturing facility
at Wedel in Germany by late 2021, and we
remain on track to exit the facility to plan.
For biologics, our principal commercial
manufacturing facilities are in the US
(Frederick, MD; Greater Philadelphia, PA), the
UK (Speke) and the Netherlands (Nijmegen),
with capabilities in process development,
manufacturing and distribution of biologics,
including global supply of mAbs and influenza
vaccines. In Sweden, we have continued to
complete extensive qualification of our new
biologics drug product manufacturing facility.
We have commenced GMP manufacturing
activity ahead of seeking regulatory approval
in 2021 in order to begin commercial supply.
In 2020, we announced a long-term supply
agreement with Samsung Biologics to provide
large-scale commercial manufacturing for
drug substance and drug product. This new
collaboration enables us to expand our global
biologics manufacturing capability into
Asia Pacific.
At the end of 2020, approximately 14,300
people were employed at 26 Operations sites
in 16 countries.
Business development
Business development, specifically
partnering, is an important element
of our business. It supplements and
strengthens our pipeline and our
efforts to achieve scientific leadership.
We work with others around the world,
including academia, governments, industry,
scientific organisations and patient groups,
as well as other pharmaceutical companies,
to access the best science to stimulate
innovation and accelerate the delivery of new
medicines to target unmet medical need. We
currently have more than 8001 collaborations
around the world.
Our business development activity takes
many forms and can be broadly grouped into:
> alliances, collaborations and acquisitions
to enhance our portfolio and pipeline in our
main therapy areas
> divestments of non-priority medicines.
Alliances, collaborations and
acquisitions
We continue to assess opportunities to make
strategic, value-enhancing additions to our
portfolio and pipeline in our main therapy
areas, including through in-licensing and
acquisitions. No company acquisitions were
completed in 2020, however, we acquired a
preclinical oral PCSK9 inhibitor programme
from Dogma Therapeutics. We aim to take
the programme forward into clinical
development for dyslipidaemia, or abnormal
amount of lipids in the blood, and familial
hypercholesterolemia, a common genetic
condition that causes high cholesterol.
PCSK9 is a protein that regulates the level
of low-density lipoprotein (LDL), or ‘bad’
cholesterol in the blood. Increased activity
of PCSK9 is associated with high LDL
cholesterol. The acquired PCSK9 inhibitors
are small molecules that bind directly to
a novel part of PCSK9 and have shown to
block its activity and lower LDL cholesterol
in preclinical models. There are currently
no oral PCSK9 inhibitors available to
patients or in clinical development. We also
acquired MSC-1, an anti-LIF antibody, from
Northern Biologics. MSC-1 has completed
Phase Ia clinical studies for the treatment
of solid tumours.
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In addition, we completed the divestment of
commercial rights to Atacand (candesartan
cilexetil) and Atacand Plus (a fixed-dose
combination of candesartan cilexetil and
hydrochlorothiazide) in around 70 countries
globally to Cheplapharm. Atacand is a
prescription medicine approved for the
treatment of heart failure (HF) and
hypertension. Atacand Plus is approved for
the treatment of hypertension. Cheplapharm
will pay AstraZeneca a total of $400 million in
non-contingent consideration, $250 million of
which was received in 2020 and the remainder
is due in the first half of 2021.
Proceeds
The resulting revenue from these activities
supports our R&D investments in our main
therapy areas. Ten new transactions that
contribute to Collaboration Revenue or
generate income through divestment or
out-licensing were completed in 2020.
More information on our partnering activity in 2020 can
be found in the Financial Review from page 82 and
Notes 1 and 2 to the Financial Statements from page 187.
Business Review
Commercial
continued
Over the past three years, we have completed
more than 123 major or strategically important
business development transactions, including
some 27 in 2020. Of these transactions, six
were completed on behalf of Oncology R&D
and six on behalf of BioPharmaceuticals
R&D. Five related to preclinical assets or
programmes and 12 to precision medicine,
genomics or access to genetic data2.
In addition, we recovered the global rights
to brazikumab (formerly MEDI2070), a mAb
targeting IL23, from Allergan. Brazikumab
is currently in a Phase IIb/III programme in
Crohn’s disease (CD) and a Phase IIb trial
in ulcerative colitis (UC). AstraZeneca and
Allergan terminated the existing license
agreement and all rights to brazikumab
reverted to AstraZeneca.
Collaboration activities that focus on the
development and/or commercialisation of
specific medicines are a component of our
strategy. This activity can create additional
value from our existing and potential medicines
and falls broadly into two categories:
> collaborations that help us access therapy
area expertise through AstraZeneca and
non-AstraZeneca medicines
> collaborations that help us increase the
number of patients and the reach of
medicines in which we maintain an ongoing
interest, but which typically sit outside our
main therapy areas.
Of particular note, we announced a global
development and commercialisation
collaboration agreement with Daiichi Sankyo
for DS-1062, Daiichi Sankyo’s proprietary
trophoblast cell-surface antigen 2 (TROP2)-
directed ADC and potential new medicine for
the treatment of multiple tumour types.
DS-1062 is currently in development for the
treatment of multiple tumours that commonly
express the cell-surface glycoprotein TROP2.
Among them, TROP2 is overexpressed in the
majority of NSCLC and breast cancers tumour
types that have long been a strategic focus
for AstraZeneca. This collaboration reflects
AstraZeneca’s strategy to invest in ADCs as a
class, the innovative nature of the technology
and the successful existing collaboration with
Daiichi Sankyo. AstraZeneca will pay Daiichi
Sankyo an upfront payment of $1 billion in
staged payments: $350 million was paid upon
completion, with $325 million to be paid after
12 months and $325 million after 24 months
from the effective date of the agreement.
AstraZeneca will pay additional conditional
amounts of up to $1 billion for the successful
achievement of regulatory approvals and up
to $4 billion for sales-related milestones.
We also entered a strategic collaboration
agreement with OM Pharma SA, through
which the Company was granted the exclusive
right to import, distribute and promote the
immunological therapy Broncho-Vaxom
(Bacterial Lysates/OM-85) in China (excluding
Hong Kong, Macau and Taiwan). Broncho-
Vaxom can prevent and treat recurrent or
acute respiratory infections in patients by
boosting host immunity. In China, recurrent
respiratory tract infection is a particularly
common disease in children, with an
incidence rate of c.20%.
Divestments
We divest medicines that typically sit outside
our main therapy areas and that can be
deployed better by other companies, in order
to redirect investment and resources in our
main areas of focus, while ensuring continued
or expanded patient access. For example, in
2020, we divested global commercial rights
to Inderal (propranolol), Tenormin (atenolol),
Tenoretic (atenolol, chlorthalidone fixed-dose
combination), Zestril (lisinopril) and Zestoretic
(lisinopril, hydrochlorothiazide fixed-dose
combination) to Atnahs Pharma (Atnahs). The
agreement excluded the rights in the US and
India, which were previously divested, and in
Japan, which were retained by AstraZeneca.
The medicines, used primarily to treat
hypertension, have lost their patent protection
globally. Atnahs made an upfront payment of
$350 million to AstraZeneca and AstraZeneca
may also receive future sales-contingent
payments of up to $40 million between
2020 and 2022. Japan rights to Inderal and
Tenormin were subsequently divested to
Taiyo Pharma Co. Ltd along with Japan
rights to Omepral.
In 2020, we also sublicensed global rights
to Movantik (naloxegol), excluding Europe,
Canada and Israel, to RedHill Biopharma
(RedHill). Movantik is a peripherally acting
mu-opioid receptor antagonist (PAMORA)
indicated for the treatment of opioid-induced
constipation (OIC). RedHill made an upfront
payment of $52.5 million to AstraZeneca on
closing and will make a further non-contingent
payment of $15 million in 2021.
1
2
Following the full integration of MedImmune into
AstraZeneca, the basis for this metric has changed and
is not comparable to prior years.
Following the restructuring of R&D and the associated
realignment of Business Development teams across
AstraZeneca, the basis for reporting transaction activity
has changed. As a result, metrics for 2019 and 2020 are not
directly comparable to those reported in previous years.
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Compulsory licensing and access
Compulsory licensing (where a patent
authority imposes a licence on the patentee)
is on the increase in certain markets in
which we operate. We recognise the right of
developing countries to use the flexibilities in
the World Trade Organization’s Agreement on
Trade-Related Aspects of Intellectual Property
Rights (including the Doha amendment) in
certain circumstances, such as a public health
emergency. We believe this should apply only
when all other ways of meeting the emergency
needs have been considered and where
healthcare frameworks and safeguards exist
to ensure the medicines reach those who
need them.
More generally, we are committed to
expanding access to healthcare through
intellectual property and to providing
transparency about where our patents
are filed and enforced. See our Intellectual
Property statement on our website,
www.astrazeneca.com to learn more about
our approach, and to view patent rights for
medicines used to treat Index diseases.
Intellectual property
Our industry’s principal economic
safeguard is a well-functioning
system of patent and related
protection that recognises our
efforts and rewards innovation with
appropriate protection – and allows
time to generate the revenue we
need to reinvest in pharmaceutical
innovation. Patent rights are limited
by territory and duration.
A significant portion of a patent’s term can
be spent during R&D, before it is possible to
launch the protected medicine. Therefore, we
commit significant resources to establishing
and defending our patent and related IP
protection for inventions.
Patent process
We file patent protection applications for
our inventions through government patent
offices around the world to safeguard the
large investment required to obtain marketing
approvals for potential new drugs. As we
further develop a product and its uses, these
new developments may necessitate new
patent filings. Our competitors can challenge
our patents in patent offices and/or courts,
and we may face challenges early in the
patent application process and throughout a
patent’s life – the grounds for these challenges
could be the validity of a patent and/or its
effective scope and are based on ever-evolving
legal precedents. We are experiencing
increased challenges around the world and
there can be no guarantee of success for
either party in patent proceedings.
For information about third-party challenges to patents
protecting our products, see Note 29 to the Financial
Statements from page 228. For more information on the
risks relating to patent litigation and early loss and expiry
of patents, see Risk from page 254.
The basic term of a patent is typically 20 years
from the filing of the patent application with
the relevant patent office. However, a product
protected by a pharmaceutical patent may not
be marketed for several years after filing due
to the duration of clinical trials and regulatory
approval processes. Patent Term Extensions
(PTEs) are available in certain major markets,
including the EU and the US, to compensate
for these delays. The term of the PTE can vary
from zero to five years, depending on the time
taken to obtain any marketing approval. The
maximum patent term, when including PTE,
cannot exceed 15 years (EU) or 14 years (US)
from the first marketing authorisation.
Patent expiries
The table on pages 251 to 253 sets out certain
patent expiry dates and sales for our key
marketed products.
Other exclusivities
Regulatory data protection (RDP or ‘data
exclusivity’) is an important additional form
of exclusivity which is separate from, but runs
in parallel with, patent exclusivity. RDP arises
in respect of data which is required to be
submitted to regulatory authorities to obtain
marketing approvals for our medicines.
Significant investment is required to generate
such data (for example, through conducting
global clinical trials) and these proprietary
data are protected from use by third parties
(such as generic manufacturers) for a number
of years in a limited number of countries. The
period of such protection, and the extent to
which it is respected, differs significantly
among countries and varies depending on
whether an approved drug is a small molecule
or biologic compound. RDP is an important
protection for our products and we strive to
enforce our rights to it, particularly as patent
rights are increasingly being challenged.
The RDP period starts from the date of the
first marketing approval from the relevant
regulatory authority and runs parallel to any
patent protection.
If a product takes an unusually long time
to secure marketing approval, or if patent
protection has not been secured, has expired
or has been lost, then RDP may be the sole
right protecting a product from being copied.
Generic manufacturers, we believe, should not
be allowed to rely on AstraZeneca’s data to
support the generic product’s approval or
marketing until the RDP right has expired.
In the US, new chemical entities (NCEs) are
entitled to a period of five years of RDP under
the Federal Food, Drug and Cosmetic Act.
This period of RDP runs parallel to any
pending or granted patent protection and
starts at the approval of the new application.
Further, under the Biologics License
Application process, the FDA will grant 12
years’ data RDP for a new biologic to an
innovator manufacturer. In the EU, the RDP
period is eight years followed by two years’
market exclusivity.
Under Orphan Drug laws in the EU and US,
market exclusivity is granted to an innovator
who gains approval for a pharmaceutical
product developed to treat a rare disease.
What qualifies as a rare disease differs
between the EU and US. Qualifying Orphan
Drugs are granted 10 years’ market exclusivity
in the EU and seven years’ market exclusivity
in the US.
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Business Review
Commercial
continued
Information technology and
information services resources
We believe the future of healthcare
is one of individualised healthcare
solutions focused on improved patient
outcomes, driven by science and data.
We are therefore embarking on a digital
transformation, developing digital solutions to
enhance the delivery of our medicines; reduce
inefficiencies and support patients in
engaging with their own health; redefine the
clinical trial experience through the use of
digital tools and technologies to improve
patient safety and outcomes; harness data
science and AI to transform the way we
discover and develop new medicines; and
transform our Group operations using digital
technologies. Our drive towards integrated
care is dependent on building interoperable
and trusted health data frameworks to be able
to unlock the full potential of scientific data for
patients and healthcare systems.
With our IT foundation now firmly in place and
operating at high levels of efficiency, we have
a growing programme portfolio to support
this business transformation and which takes
advantage of data and analytics, artificial
intelligence, digital and the Internet of Things.
In order to deliver on these commitments,
IT has actively been strengthening its
capabilities through recruiting key external
talent into the organisation, as the expertise
to succeed in some of these technologies
was not internally present at the levels
needed. In addition to recruiting leaders
in new technologies, the IT organisation
continues to harness internal capabilities,
enabling us to accelerate drug development,
revenue growth and profitability.
During 2020, we leveraged our capabilities
and technologies to ensure that a significant
proportion of our workforce were able to
work remotely in an effective way during the
COVID-19 pandemic. For more information,
see Harnessing data and technology to
accelerate change on page 24.
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Pioneering new
approaches to
engagement in the
clinic and beyond
Focusing on better patient
experiences and outcomes
Digital technologies are creating never-
seen-before opportunities to improve clinical
practice and engagement both in the clinic
and beyond, helping to increase efficiencies
and effectiveness for clinicians and support
better experiences for patients.
In a typical year, we conduct over 240
global clinical trials, involving more
than 123,000 patients, in around
60 countries. Digital is enabling us
to improve their design and reduce
set-up time. Electronic health records
will help improve delivery, and more
accurately forecasting drug supplies
will avoid waste and delays. Trials
will be more patient-centric, the
patient burden will be lightened,
and the value of the information
that trials give us will be increased,
helping us to make faster and more
effective decisions.
>240
More than 240 global clinical trials
in around 60 countries annually
>123,000
More than 123,000 patients involved
in clinical trials
For more information, see Research &
Development from page 53.
Digital is helping patients optimise
medication use, connect with
medical staff and manage or
prevent adverse events during
trials. Invasive monitoring is being
replaced with digital – finger-prick
glucose monitoring, for example,
is being replaced with patches
giving continuous readings. It is
also helping us improve disease
understanding and patient outcomes.
As our digital capabilities grow, we
are able to explore how we can help
patients prevent, manage or treat
their condition with evidence-based,
digital therapeutic solutions. For
instance, with Voluntis and the
National Cancer Institute, we are
developing a digital therapeutic for
women being treated for recurrent
platinum-sensitive high-grade
ovarian cancer. Currently in clinical
trials, this aims to support patients
through tolerability and management
of adverse effects – recently winning
the Prix Galien award for best patient
engagement technology.
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Digital technologies are creating
opportunities to improve patient
experience and outcomes.
Business Review
People
People
We grow and prosper by recruiting,
retaining and developing talented
people. We do that by being a
great place to work, encouraging
and rewarding innovation,
entrepreneurship and high
performance.
Overview
In 2020, we made progress across the three
pillars of our People Strategy. To ensure we
continue to perform as an enterprise team:
> We removed performance ratings and
shifted our focus to coaching, development
and contribution.
> We saw a four percentage point increase in
our employee survey question addressing
effective collaboration between teams.
> We made a substantial investment in a
global online learning platform providing
on-demand access to a comprehensive
library of educational resources.
> We have updated our Values to clearly
reflect our commitment to Inclusion
and Diversity.
A global business
> We have developed a comprehensive plan
to ensure that the actions we take to address
racial equity are meaningful, sustainable
and impactful.
activity. We have also developed a Digital &
Data Hub to build capability and to support
our ambition to accelerate the use of digital
technology across our value chain.
> We saw significant progress in the
representation of women in senior roles.
> We were encouraged that, through the
COVID-19 pandemic, 91% of employees
stated that they were getting the support
that they needed during this time.
Our People Strategy supports our strategic
priorities and is built on three pillars:
performing as an enterprise team; being
committed to lifelong learning; and being
champions of inclusion and diversity.
Performing as an enterprise team
We ensure that all our business areas have
robust workforce plans to ensure that we can
attract and develop the critical capabilities
required to deliver our strategic priorities.
These plans are underpinned by predictive
analytics, meaning workforce decisions are
data-driven. We also use workforce analytics
to ensure that we manage our global workforce
in an optimum way and continue to implement
a significant number of automation and digital
initiatives, to allow our workforce to spend a
higher proportion of their time on higher-value
Attracting key talent and critical capabilities
Our graduate and apprentice programmes are
critical to attract early-career talent, and to
ensure that we build the capabilities we will
need in the future, as well as investing in
internships and recruitment opportunities
globally. We also offer an MBA Development
programme in our US Commercial Business,
providing business rotations to give our future
leaders breadth of experience, as well as a
12-week internship opportunity for business
school students to contribute to key initiatives
in our Oncology therapy area.
The talent scout model continues to be
successful in enhancing our ability to attract
key talent and critical capabilities into senior
roles. This has been supported by an enhanced
employee referral scheme, which has become
an increasingly important source of hiring.
During 2020, we hired 15,500 permanent
employees, indicating that we are still able to
attract key capabilities and talent throughout
the COVID-19 pandemic. Hiring over recent
Employees by reporting region
By geographical area
Emerging Markets 44%
Europe 31%
US 18%
Established Rest
of World 7%
76,100
employees
Co-located around three
strategic R&D centres
1. Gaithersburg, MD, US
3,500
2. Cambridge, UK
3,300
3. Gothenburg, Sweden
2,400
1. US
13,400
18%
2. UK
8,000
11%
3. Sweden
6,800
9%
All numbers as at 31 December 2020.
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3
7
6
4
1
5
4. Canada
1,000
1%
5. Central and
South America
3,200
4%
6. Middle East
and Africa
1,700
2%
7. Other Europe
9,100
12%
8. Russia
1,400
2%
9. Other Asia
Pacific
7,300
10%
11
10
9
12
10. China
20,000
26%
11. Japan
3,100
4%
12. Australia and
New Zealand
1,100
1%
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years means that employees with less than
two years’ service now represent 35% of
our global workforce (up from 20% in 2012).
This provides a greater balance in terms of
refreshing talent and retaining organisational
experience. Most of this hiring has been
focused in our Emerging Markets, in particular
China, as we continue to reshape our
workforce footprint to support our strategic
objectives and to position us well for the
future. Our data indicates that these recent
recruits are performing strongly although, in
some areas of the business, retention of this
population is challenging.
Voluntary employee turnover decreased to
9.7% (2019: 10.5%). The voluntary employee
turnover rate among our high performers
increased in 2020 to 7.2% (2019: 7.0%), while
the voluntary employee turnover of recent hires
increased to 14.7% (2019: 14.4%). We seek
to reduce regretted turnover through more
effective hiring and onboarding, exit interviews,
risk assessments and retention plans.
The uncertainty faced by individuals and their
families following the UK’s departure from
the EU could have an impact on hiring and
retaining staff in some business-critical areas.
Consequently, we continue to provide extensive
support and information to employees
who might be impacted, monitor trends in
recruitment and resignation closely, and guide
new hires through our recruitment process.
A culture of high performance
A high-performing workforce underpins our
success and, in 2020, our high performers
were promoted at twice the rate of the wider
employee population. We require every
employee to have high-quality objectives,
aligned to our strategy, which we monitor
closely. To advance our high-performing
organisation, in 2020 we took the decision
to remove performance ratings and shift
our focus to coaching, development and
contribution to the organisation.
Approximately 7,000 line managers have
participated in development workshops to
support this. Managers are accountable for
working with their teams to develop individual
and team performance targets, and for
ensuring employees understand how they
contribute to our overall business objectives.
To support our ambition to be a Great Place
to Work, in May 2020 we introduced a global
recognition platform, aligned to our Values,
to drive engagement, collaboration and to
ensure we celebrate our successes and
achievements. The initiative has been
successful, with 55,000 employees being
recognised in 2020.
described in the Directors’ Remuneration
Report from page 131 and in Note 28 to
the Financial Statements from page 225.
Listening to our workforce
Employee opinion surveys help us measure
employee sentiment and engagement, and
progress in our aim of being a great place
to work. Comparing our most recent survey
(November 2020) to the previous year
(November 2019), of the 20 questions
common to both surveys, we improved in
18 questions and saw minor decreases for
two, although the scores for these two
questions were still above 90% favourable.
We continue to score highly for questions
related to our Purpose and company
direction, patient centricity, and employee
commitment to AstraZeneca’s success. We
saw significant increases in questions around
senior leader communication, prioritisation,
and being able to challenge decisions and
actions not aligned to our Values. We also
exceeded our scorecard target for ‘I would
recommend AstraZeneca as a great place to
work’. Importantly, we continue to see positive
scores for the proportion of employees who
felt ‘comfortable to speak up and express
their opinion’.
We also track a set of questions related to
the impact of the COVID-19 pandemic, to
understand how well we are supporting our
employees through this challenging time.
The responses were positive and
encouraging, with 91% of employees replying
favourably that they are getting the support
they need during this time. Our employees
were also invited to participate in a
crowdsourcing event – COVID-19: Now &
Next. Almost half our employees participated
and more than 12,000 people from across 47
countries contributed ideas, reactions and
comments. For more detail, see from page 18.
Developing a culture of lifelong learning
We encourage employees to take ownership
of their own development and expect leaders
to spend time supporting their employees’
development.
In early 2019, we took a decision to review
how we support the learning and development
of our people and this continued through
2020. This work involved a substantial
investment to develop a culture of lifelong
learning and support the up-skilling and
re-skilling of our people. This included a new
operating model and global team, and the
implementation of a global online learning
platform providing on-demand access to
a comprehensive library of educational
resources. Over 600,000 resources have
been accessed since launch.
Our salary and bonus budgets are distributed
in line with our principles, allowing us to
differentiate reward according to performance
clearly. We encourage participation in various
employee share plans, some of which are
Developing our people
Through our ‘Leading Enterprise’ programme,
we have invested heavily in supporting our top
150 senior leaders to develop their resilience,
agility and adaptive leadership skills to be
able to lead with purpose through increasingly
ambiguous times. Our other differentiated
development programmes, such as ‘Leading
Self’, ‘Leading People’, and ‘Leading Business’
programmes, continue to impact engagement
and retention measures positively. These are
supported by ‘Employee Essentials’ and
‘Manager Essentials’, which provide a curated
set of digital resources to support foundational
business skills and manager capability.
Our ‘Women as Leaders’ programme aims
to encourage more women into senior roles.
Approximately 800 women had completed
the programme by the end of 2020, with
continuing feedback that it is providing
positive career outcomes for the participants.
In addition, we have developed women’s
networks in most countries, continued to hold
empowerment summits in various locations
around the world and to support mentoring
relationships, for example, introducing
mentoring by senior women for emerging
talent in Operations.
We continue to offer our ‘Rising Leaders
Experience’, a development programme
aimed at emerging talent who demonstrate
the potential to reach senior leadership
roles, and in 2020 supplemented this with our
‘Accelerate’ programme, designed to develop
our talent from Emerging Markets.
We continue to provide a global mentoring
programme, with the aim of pairing
mentors and mentees in order to encourage
personal development and to support the
implementation of a culture of lifelong
learning. This has been successful, with over
1,700 mentors registered and almost 11,000
mentor-mentee relationships established.
In 2020, 60% of vacancies across the top
three levels of our organisation were filled
internally, reflecting our long-term commitment
to develop high-quality leaders and the rigour
of our leadership succession planning.
Champions of inclusion and diversity
To foster innovation, we seek to harness
different perspectives, talents and ideas, as
well as ensuring that our employees reflect
the diversity of the communities in which we
operate. We focus on inclusive leadership at
all levels, creating a culture where people feel
able to speak their mind, as well as building
a diverse leadership and talent pipeline. Our
Values are supported by a clear set of
behavioural statements. In 2020, we updated
these statements to reflect more clearly our
commitment to inclusion and diversity.
We have implemented numerous initiatives
across our global population, such as
unconscious bias training, and have
encouraged and supported the formation
of various employee resource groups (such
as a neurodiversity network) and updated
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Gender diversity
Board of Directors of the Company
Men 9 (64%)
Women 5 (36%)
Men 8 (67%)
Women 4 (33%)
Men 49.5%
Women 50.5%
Senior Executive Team
AstraZeneca employees
All numbers as at 31 December 2020.
Business Review
People
continued
recruitment standards to ensure diverse
candidate lists and selection panels. To
help ensure that our people feel safe and
empowered to speak their mind, we introduced
‘Meeting of Minds’, a framework for conducting
meetings that enables constructive challenge
and active listening.
Our Inclusion and Diversity (I&D) Council,
chaired by the CEO, continues to inform our
strategy. In 2020, we held our first global
‘Power of Diversity’ week, a series of events
aimed at emphasising and celebrating the
importance of inclusion, diversity and creating
an environment where our differences are
recognised and our uniqueness is valued,
across our entire workforce.
Gender diversity
Our commitments include a goal to increase
the number of women on our leadership
teams. As shown in the gender diversity figure
on this page, women comprise 50.5% of
our global workforce. With the appointment
of Diana Layfield in November 2020 there
were five women on our Board (36% of the
total) at the end of 2020. Below Board level,
the representation of women in senior roles
(i.e. roles at Career Level F or above which
constitute the six highest bands of our
employee population) increased to 46.9%
in 2020 (2019: 45.4%), which exceeded our
scorecard target of 46.2% for this measure
and compares favourably to external
benchmarks. Women are also currently
promoted at a higher rate than men across
all levels of seniority, positively impacting
the gender balance.
Our improved representation of women on
the Board (36%) and women on the SET and
direct reports (43%) exceeds the Hampton-
Alexander review target of 33% by 2020. The
2020 Hampton-Alexander review rankings
will be published in February 2021. We also
retained our position in the Bloomberg
Gender Equality Index in 2020.
Racial and ethnic diversity
Diversity is integrated into our Code of Ethics
and its associated Workforce Global Policy as
described on page 61. In addition to the two
diversity metrics tracked in the AstraZeneca
scorecard (representation of women in senior
roles and senior leadership country of origin
that is an Emerging Market or Japan), on a
bi-annual basis, the Senior Executive Team
(SET) and Board are provided with a
comprehensive overview of the AstraZeneca
workforce, covering a wide range of metrics
and measures (including trends around
gender diversity, leadership ethnic diversity
and age profile). The SET is also provided with
a quarterly summary of key workforce metrics,
including gender diversity and leadership
ethnic diversity. Within the US, we track overall
ethnic minority representation, ethnic minority
representation in senior roles and ethnic
minority representation in succession plans.
In support of our commitment to racial
equity, our I&D Council has developed a
comprehensive plan to ensure that the actions
we take are meaningful and sustainable with
long-term impact. Our commitments are
aligned to our I&D strategy, and see us
making contributions both to our company
and society more broadly. They include
ensuring that our workforce is representative
of the communities in which we operate, taking
action at each stage of our talent pipeline to
increase representation, and driving change
beyond our company by ensuring that we
reflect the diversity of the communities we
serve. Within the UK, AstraZeneca has signed
up to the Race at Work Charter (working with
the Business in the Community organisation)
to address the recommendations of the
McGregor-Smith Review and the UK
Government’s response to the review.
To ensure that our senior leadership reflects
our diverse geographic footprint, we track the
country of origin of senior leaders and reflect
this in our diversity targets. In 2020, 18.4% of
employees who are either members of the
SET, or their direct reports, have a country
of origin that is an Emerging Market or Japan
(an increase from 5% in 2012, although slightly
below our 2020 scorecard ambition of 20%).
The Parker Review (which was set up by the
UK Government in 2017 to focus on the ethnic
diversity of FTSE 100 Boards) set a target to
have at least one Board member from an ethnic
minority background by 2021. AstraZeneca
currently has two Board members who
identify as belonging to an ethnic minority.
We are committed to hiring and promoting
talent ethically and in compliance with
applicable laws. Our Code of Ethics and its
supporting Standards are designed to help
protect against discrimination on any grounds
(including disability) and cover recruitment
and selection, performance management,
career development and promotion, transfer,
training, retraining (including retraining,
if needed, for people who have become
disabled), and reward. Our Global Standard
for Inclusion and Diversity sets out how we
foster an inclusive and diverse workforce
where everyone feels valued and respected
because of their individual ability and
perspective. More information on our
Standards and Global Policy framework
can be found on our website,
www.astrazeneca.com/sustainability.
In addition to our Global Standard on
Inclusion and Diversity, we recently launched
two further Global Standards on sexual
harassment, and harassment and bullying.
Drawing on our commitment to respect each
other and uphold equal opportunity, we aim
to build a culture where everyone feels safe to
speak up. These Standards are reinforced by
training and education on the importance of
speaking up (which includes challenging
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behaviours that are inconsistent with our
Values and Code of Ethics), demonstrating
inclusive leadership and responding to
allegations of misconduct. We have multiple
channels available for reporting. Allegations
are taken seriously and handled in a manner
that is sensitive to the confidentiality and
security of those making a report and is
subject to global oversight.
AstraZeneca has been an ongoing contributor
to the investor-led Workforce Disclosure
Initiative (WDI) since its inception in 2017.
Human rights BV
Our Code of Ethics and Human Rights
Statement commit us to respecting and
promoting international human rights – not only
in our own operations, but also in our wider
spheres of influence, such as our third-party
providers. To that end, we integrate human
rights considerations into our processes and
practices. We are also committed to ensuring
that there is no modern slavery or human
trafficking in our supply chains or any part of
our business. We provide assurance annually
to the Audit Committee and our full statement
required under section 54 of the UK Modern
Slavery Act 2015 and Section II (14) of the
Australian Modern Slavery Act 2018 is available
on our website, www.astrazeneca.com.
We support the principles set out in the United
Nations Universal Declaration of Human Rights
and the International Labour Organization’s
(ILO) standards on child labour and minimum
wages. We have been members of the United
Nations Global Compact on Human Rights
since 2010.
We measure human rights by means of a
labour review survey every two years in all
countries where we have a presence. Where
local gaps to ILO minimum standards are
identified, we put in place local plans to close
those gaps where allowed by relevant national
legislation. Based on the last report, we have
improved our practices to meet a number
of standards, including the length of breaks
during the working day in Hungary, which
means 100% of countries now meet this
minimum standard. 100% of countries also
now meet the minimum standard for paid
holiday. We have increased maternity paid
leave up to the minimum standard of 14 paid
weeks in Mexico, Malaysia, Thailand, Saudi
Arabia and Egypt. In addition to these
achievements, all countries now have
a grievance policy in place and have
implemented measures to prevent and deal
with any kind of harassment or discrimination
in the workplace. Our reporting in this area
is assured by Bureau Veritas.
In 2017, we signed up to the ‘Fair Wage’
database. These independently produced data
were used in our end of 2018 and 2020 surveys
to measure against the real earnings of all our
employees, and we performed well.
For more information about the assurance provided by
Bureau Veritas, see page 275. For more information on
our restructuring programme, see the Financial Review
from page 82.
Managing change BV
In December 2020, we took the decision to
transform our customer engagement model in
our US business, in order to adapt to changing
customer needs, and to deliver against our
evolving portfolio of medicines. As a result of
these changes, we will remove approximately
500 positions. We are committed to making
outplacement services available to support
our impacted employees through this period.
For more information on our restructuring programme,
see the Financial Review from page 82.
Safety, health and wellbeing BV
We work to promote a safe, healthy and
energising work environment for our workforce
and partners. Our standards apply globally
and are stated in our Code of Ethics as
described on page 61 and are available on
www.astrazeneca.com/sustainability. We
have established and monitor a set of safety,
health and wellbeing targets aimed at
supporting our workforce and keeping
AstraZeneca among the sector leaders
in performance. Our performance in this
area is in the Sustainability Report and
Sustainability Data Summary available on
www.astrazeneca.com/sustainability and
is assured by Bureau Veritas.
For more information about the assurance provided by
Bureau Veritas, see page 275.
Safety
Vehicle collisions
Employee relations BV
We seek to follow a global approach to
employee relations guided by global
employment principles and standards,
local laws and good practice. In July 2019,
we established a new Global Function for
Employee Relations.
Year
2020
2019
2018
2017
2016
2015 baseline
Collisions
per million km1
Target not
to exceed
2.21
2.84
3.69
4.05
4.66
4.13
3.20
3.39
3.58
3.76
4.00
The purpose of this function is to build and
maintain a positive work environment where
every employee can feel safe, with the right
terms and conditions, productive, motivated
and able to speak up. The Board of Directors,
in collaboration with our Global Compliance
and Employee Relations functions, supports
our efforts to create a ‘Speak Up’ culture
to encourage employees to express their
opinions and prevent and detect any
behaviour not in line with our Values, Code
of Ethics and Global Standards. The Audit
Committee also checks the sexual
harassment and harassment and bullying
process activities and cases periodically.
To achieve this objective, we also work to
develop and maintain good relations with
local workforces and work closely with our
recognised national trade unions. We also
regularly consult with employee representatives
or, where applicable, trade unions, who share
our aim of retaining key skills and mitigating
job losses. According to our internal Human
Rights survey carried out in 2020, 75% of our
employees recognise and have a relationship
with trade unions. Where trade unions do not
exist in an area of operation, 100% of
countries have established arrangements
to engage similarly with their workforce.
1
AZ overall collisions per million km for 2018 has been
revised after amendments from the US Commercial Group.
Work-related injuries
Year
2020
2019
2018
2017
2016
2015 baseline
Reportable injury rate
per million hours
worked²
Target not
to exceed
0.63
1.11
1.32
1.48
1.57
1.78
1.25
1.37
1.50
1.60
1.69
2
Reportable injury rate for 2019 revised due to late
confirmation of injuries.
As shown above, we made further progress
against our strategic targets in 2020, achieving
a 46% reduction in vehicle collision rate and
a 64% reduction in the work-related injury rate
from the 2015 baseline. In addition, there were
no work-related fatalities during 2020. Building
on our previous success in establishing a
culture of health and wellbeing, we continued
to focus on active health promotion. We have
programmes to address all four essential
health activities – healthy eating and drinking,
physical activity, tobacco cessation, and
mental wellbeing – at 86%³ of our sites.
3
For sites that did not respond to the 2020 Healthy You
Survey, the responses from earlier year(s) were used.
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Business Review
Sustainability
Sustainability BV
We are committed to operating
in a way that recognises the
interconnection between business
growth, the needs of society and
the limitations of our planet.
Overview
> Seventy Healthy Lung partnerships.
> Sixth anniversary of Healthy Heart Africa
and country expansion to Uganda.
> The Young Health Programme partnership
with UNICEF announced six accelerator
countries to lead joint effort for youth health.
Benchmarking and assurance
Recognition of our work in sustainability
DJSI
FTSE4Good
> Named in the Dow Jones Sustainability World and Europe Indices.
> Attained industry-best scores for: Environmental Reporting, Social Reporting,
and Strategy to Improve Access to Drugs or Products.
> Named as a FTSE4Good Index Series constituent, which is designed to measure
the performance of companies demonstrating strong Environmental, Social and
Governance (ESG) practices.
> Switched to 99.9% renewable imported
CDP
electricity in 2020.
> Gave more than $76 million through our
community investment activities.
> Employees volunteered more than 28,000
hours on community projects globally.
> Sustainability strategy focused on access
to healthcare, environmental protection,
and ethics and transparency.
> Water Security A List – in recognition of our commitment to transparency around
environmental risks and demonstration of sustainable water management.
> Climate Change A List and Supplier Engagement Leader Board – in recognition of our
strategy and actions to reduce emissions and manage the risks associated with climate
change, in our direct operations and our wider value chain.
ATMI
> Retained a place among the top ten companies of the Index.
> Recognised for strong performance in governance and compliance, and health system
strengthening.
> Ranked 3rd in Governance of Access, 6th in Research and Development, and 6th in
Product Delivery.
ISAE3000 Assured
> Bureau Veritas has provided independent external assurance to a limited level in
accordance with the International Standard on Assurance Engagements 3000
(ISAE3000), and in accordance with ISAE3410 Assurance Engagements on
Greenhouse Gas Statements for the sustainability information contained within
this Annual Report and Form 20-F
For more information, see Sustainability: Supplementary Information on page 275
and the letter of assurance available on www.astrazeneca.com/sustainability.
Our approach
We want to be valued and trusted by our
stakeholders as a source of great medicines
over the long term. We operate in a way that
broadens access to healthcare and addresses
health disparity, minimises the environmental
footprint of our products and processes, and
ensures that ethics and transparency
underpin everything we do.
Our approach to sustainability is aligned
with our Purpose, business strategy and
stakeholder engagement, allowing us to
maximise the benefit for our patients, our
business, broader society and the planet. As
outlined below, we have a global sustainability
strategy that integrates sustainability practices
throughout our operations and is based on
a structured materiality assessment that
engages external and internal stakeholders.
We measure our progress through annual and
long-term targets, and share periodic updates
with analysts, institutional investors, and
credit and sustainability rating agencies.
We recognise the connection between
enterprise risk management and sustainability
management. Enterprise risk management
helps inform the sustainability materiality
assessment and we have better aligned
our risk and sustainability classifications.
Sustainability is considered throughout
our quarterly risk reviews.
We show performance in our Sustainability
Data Summary. Expanded discussion about
our sustainability journey is in our 2020
Sustainability Report.
Sustainability governance
Sustainability governance frames how we
operate. During 2020, Geneviève Berger,
Non-Executive Director, oversaw sustainability
matters on behalf of the Board. Nazneen
Rahman, Non-Executive Director, assumed
these responsibilities from January 2021. Our
ambition is to be a leader in sustainability by
delivering the strategy from the materiality
assessment carried out in 2018 and as
outlined in our Sustainability Report.
Katarina Ageborg, Executive Vice-President,
Sustainability and Chief Compliance Officer,
and President AstraZeneca AB, Sweden,
is responsible for the global strategy, and
performance measures are tracked by the
SET on the quarterly Company Scorecard.
Our Sustainability Advisory Board comprises
five SET members and four external
sustainability experts. In 2020, it provided
guidance on strategic direction,
recommendations for opportunities, and
insights and feedback. Throughout the year,
we engaged with employees and external
stakeholders, including investors, Ministries
of Health, NGOs, patients and suppliers.
Learn more on our website,
www.astrazeneca.com/sustainability.
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Our sustainability strategy
At AstraZeneca, health is our business and our contribution to society. How we operate supports sustainable ecosystems for healthcare
that benefit people and our planet through science-based innovation.
Our aspiration is for a sustainable, healthy future where we continue to be an active participant for a healthy society, planet and business.
Our pioneering medicines touch the lives of millions of people so it is a business imperative that we are partners and activists for solutions
to global health. At the heart of our sustainability approach is access to healthcare and its connection to environmental protection, and
ethics and transparency.
Our pillars
1. Access to healthcare
Health is key for thriving people,
planet and business
2. Environmental protection
The health of the planet
impacts all life
3. Ethics and transparency
Equality and prosperity for all
fosters healthy societies
Our ambitions
to 2025
Work towards a future where all people have
access to sustainable healthcare solutions for
life-changing treatment and disease prevention.
Demonstrate global leadership to proactively
manage our environmental impact across all
our activities and products.
Create positive societal impact and promote
ethical behaviour in all markets across our
value chain.
The
connection to
human health
Our material
issues
Why it
matters
Innovative healthcare solutions are essential
to improving global health outcomes.
Supporting a healthy environment helps prevent
the onset of certain diseases and improves
health outcomes.
Fostering a culture of doing the right thing across
our value chain promotes health and wellbeing.
Disease prevention and treatment,
Responsible R&D, Investments in health
systems, Environment’s impact on health,
and Affordability.
Product environmental stewardship, Greenhouse
gas reduction, Pharmaceuticals in the
environment, Water stewardship, and Waste
management.
Ethical business culture, Inclusion and diversity,
Talent and workforce evolution, Workforce
wellbeing and safety, Responsible supply chain,
and Human rights.
Access to healthcare at AstraZeneca goes
beyond our medicines. We are working
towards a future where all people have
access to sustainable healthcare solutions.
We are working towards transforming the
future of healthcare along the continuum from
prevention and awareness to diagnosis and
treatment. We innovate across our therapy
areas to address the challenges of diseases
for patients, and their unmet medical need.
We recognise that healthcare delivery
systems may be complex and multi-layered
and we collaborate with experts to foster
patient-centred quality healthcare designed
to improve the health outcomes of patients.
Our internal initiatives place a strong
emphasis on the role of health in workforce
wellbeing and safety, our supply chain and
environmental stewardship.
Information in respect of our focus areas
in broadening access to healthcare can be
found in this Annual Report as follows:
> Investments in health systems, see
Access to healthcare on page 73.
> Disease prevention and treatment, see
Access to healthcare on page 73.
> Affordability, see Pricing and delivering
value on page 58.
> The environment’s impact on health,
see our Sustainability Report available
on our website.
> Responsible R&D, see our Sustainability
Report available on our website.
We are taking climate action now because we
recognise the strong connection between a
healthy planet and healthy people. With health
at the heart of our business, we work to foster
environments in which all life can thrive – seeking
opportunities for environmental stewardship and
mitigating climate impacts by managing natural
resources and ensuring environmental safety
of our products across our operations and
value chain.
Information in respect of our focus areas in
protecting the environment can be found in
this Annual Report as follows:
> Greenhouse gas emissions reduction,
see page 75 and page 275.
> Waste management, see page 75.
> Water stewardship, see page 75.
> Product environmental stewardship,
see page 75.
> Pharmaceuticals in the environment,
see page 76.
We want to be valued not only for our medicines,
but also for the way we work. We believe integrity,
respect and transparency comprise the
foundation of a healthy business culture. We build
trust by demonstrating ethical business practices
and fair treatment in everything we do across our
value chain and in society.
Information in respect of our focus areas in ethics
and transparency can be found in this Annual
Report as follows:
> Ethical business culture: our Values and
norms, practices, standards and principles
that guide the actions and behaviour of
employees, including our Code of Ethics
(see page 61), and acting in an ethical
manner that goes beyond compliance with
policies, laws and regulations. This applies
across all our operations and our entire value
chain and includes:
– Bioethics (including animal welfare),
see page 54.
– Anti-bribery and anti-corruption, see
page 61.
– Intellectual property, see page 65.
– Responsible sales and marketing, see
page 61.
– Transparency reporting, see page 62.
> Inclusion and diversity, see page 69 and
page 120.
> Employee relations, see page 71.
> Safety, health and wellbeing, see page 71.
> Responsible supply chain, see page 63.
> Human rights, see page 71.
Our global
development
impact
For more information on our targets and performance, and contribution to the UN Sustainable Development Goals,
see our 2020 Sustainability Report available on our website, www.astrazeneca.com/sustainability.
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The COVID-19 pandemic had a significant
impact on young people around the world.
We adapted our health education programming
to reach more than 2 million young people
digitally and, where appropriate, included
COVID-19 information. We provided grants to
support hygiene and education programmes
to UNICEF, Plan International and Project
Hope to support their humanitarian relief
efforts. We also provided Johns Hopkins
Bloomberg School of Public Health with a
grant to support a new 18-month research
project to understand the challenges and
implications of the pandemic on young
people living in urban poor communities
in 11 cities around the world.
Further information on YHP can be found on its website,
www.younghealthprogrammeyhp.com.
Environmental protection BV
We follow the science to protect the planet
by managing our impact on the environment
across our value chain, from R&D activities,
our own operations, into our supply chain and
customer use of products. Our 2020 targets
(against a 2015 baseline) included:
> Reducing our Scope 1 and 2 greenhouse
gas (GHG) footprint by 50% to 314 ktCO2e.
> Limiting the increase in our energy
consumption to no more than 6%
to 1,938 GWh.
> Limiting the increase in our waste
generation to less than 24% to
38,173 tonnes.
> Reducing water use by 10% to
3.89 million m3.
In 2020, $19 million (2019: $15 million) was
invested in natural resource efficiency projects
at our manufacturing and R&D sites, and
a further $28 million has been committed
for 2021.
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Access to healthcare BV
We are working towards our 2025 ambition by:
Since launching in Kenya six years ago and
subsequently expanding to Ethiopia, Tanzania,
Ghana and Uganda. HHA has:
> Innovating – to deliver life-changing
medicine.
> Partnering – to improve access and
affordability.
> Transforming – for the future of healthcare.
In working to achieve this:
> Conducted 16.7 million blood pressure
screenings in the community and in
healthcare facilities.
> Trained more than 7,360 healthcare
workers, including doctors, nurses,
pharmacists and community health
volunteers.
> We invest in health systems around the
> Activated more than 820 healthcare
world to ensure that patients have access
to healthcare.
facilities in Africa to provide hypertension
services.
> We make changes to address affordability,
ensuring our medicines are accessible.
> We support disease prevention and
treatment whenever possible, through
screenings, awareness programmes and
training healthcare professionals.
Below, we highlight some of our key access
to healthcare programmes and initiatives.
Further examples in this Annual Report
include the Young Health Programme (see
this page) and Emerging market healthcare
(see page 61). More detail on our access
programmes can be found in our 2020
Sustainability Report, available on our
website, www.astrazeneca.com/sustainability.
Healthy Lung
The Healthy Lung initiative aims to support
increased awareness and prevention; earlier
diagnosis; improved treatment and disease
management; and establishing standards of
care in line with international best practice
for asthma and COPD.
Since inception, Healthy Lung has:
> Supported the training of more than
103,000 healthcare professionals.
> Enabled diagnosis of more than 1.56 million
cases of asthma and/or COPD.
> Activated more than 2,530 Respiratory
Centres.
> Aligned 131 national care guidelines
and care pathways to international
best practice.
The programme is present in Asia, Latin
America, and the Middle East and Africa.
Healthy Heart Africa (HHA) is AstraZeneca’s
innovative programme committed to tackling
hypertension (high blood pressure) and the
increasing burden of cardiovascular disease
(CVD) in Africa. To achieve this, HHA supports
local health systems by increasing awareness
of the symptoms and risks of hypertension
and by offering education, screening, treatment
where appropriate, and control. The programme
is currently active in both East and West Africa.
> Identified more than three million elevated
blood pressure readings.
Young Health Programme
The Young Health Programme (YHP) is a
non-communicable disease (NCD) prevention
programme focused on young people aged
10 to 24 and delivered in partnership with Plan
International UK, Project Hope and more than
30 other not-for-profit organisations around
the world. In 2020, UNICEF joined YHP as its
newest partner, expanding advocacy activities
in Angola, Belize, Brazil, Indonesia, Jamaica
and South Africa. Together with UNICEF, YHP
aims to reach five million young people, train
1,000 youth advocates and positively shape
public policy around the world through 2025.
In 2020, we directly reached more than one
million young people with health information
on NCDs and risk behaviours and trained
more than 54,000 peer educators and
healthcare workers. We launched new
programmes in Bulgaria, Colombia, Egypt,
France, Slovenia and the UK and, in line
with our goal to support the development of
young leaders, we offered 20 scholarships
in partnership with One Young World.
A number of YHP countries completed
multi-year programme evaluations in 2020
to measure changes in young people’s
knowledge, attitude and behaviours towards
NCDs and NCD risk behaviours. In Kenya,
preliminary findings show substantive
changes between baseline (n=470) and final
evaluation (n=424), for example: current
smokers decreased from 47.2% at baseline
to 5.9% at final evaluation; young people not
meeting the WHO recommendation of fruit
and vegetable intake declined from 93.1%
at baseline to 37.8 % at final evaluation;
and young people not meeting the WHO
recommendation for physical activity declined
fivefold from 71.7% at baseline to 16.3% at
final evaluation. It is our hope that this
behaviour change will continue, positively
influencing the future health outcomes of
these young people.
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Scope 1 and 2 greenhouse gas
footprint emissions (tonnes CO2e)¹,²
2020
2019
2018
248,006
385,487
413,087
248,006 tonnes CO2e
2015 Baseline
Energy consumption (MWh)¹,²
2020
2019
2018
1,595,330
1,741,955
1,850,984
1,595,330 MWh
% total site energy (heat and power) from renewables¹
2020: 44%
2019: 31%
2018: 30%
2015 Baseline
Waste production (tonnes)²,³,⁴
30,262
34,173
31,059
2020
2019
2018
30,262 tonnes
2015 Baseline
Water use (million m³)²,⁴
2020
2019
2018
3.44 million m³
2015 Baseline
1
2
3
4
Regular review of the data is carried out to ensure accuracy
and consistency. This has led to changes in the data from
previous years. Our primary GHG footprint KPI is
emissions from all Scope 1 and 2 categories. Previously we
included select Scope 3 sources, which are now calculated
in our Scope 3 reporting. Numbers have been updated for
all three years. The majority of adjustments made are not
material individually, except for Scope 1 road fleet (Scope 1
reporting boundary adjusted to leased vehicles only, with
personal vehicles accounted in Scope 3). The data quoted
in this Annual Report are generated from the revised data.
The data coverage includes 100% of sites that are both
owned and controlled globally.
Construction and Demolition data is excluded from
waste data.
Regular review of the data is carried out to ensure accuracy
and consistency. This has led to changes in the data from
previous years. Adjustments have also been made due to
change in site ownership.
Greenhouse gas emissions reduction
We launched our Ambition Zero Carbon
strategy in January 2020 to accelerate all
of our decarbonisation plans. This strategy
supersedes our previous Operational GHG
footprint target that was a combination of
Scope 1, 2 and selected Scope 3 sources. We
are taking actions to eliminate Scope 1 and 2
GHG emissions from our sites and fleet by
2025, without carbon credits, and to become
carbon negative across our entire Scope 3
value chain by 2030. To support achievement
of these goals we joined The Climate Group’s
energy productivity campaign ‘EP100’ in 2020
and accelerated our existing commitments to
renewable energy, RE100, and having a zero
emission marketing fleet, EV100.
Our new GHG targets exceed the Science
Based Targets initiative (SBTi) reductions
required to keep warming to 1.5 degrees
celsius, the most ambitious goal of the Paris
Agreement. Our total Scope 1 and Scope 2
emissions have been reduced by 60% from
our 2015 baseline. Although our Scope 3
emissions sources continue to fluctuate,
we have made progress towards our 2025
science-based targets for these emission
sources through strategic developments,
including committing to changing the
propellants used in our inhalers, improving
our switching of freighting of goods from air
to sea and rail, and engaging our key suppliers
to set science-based targets and renewable
energy goals.
3.44
3.51
3.98
For more information on our pressurised metered-dose
inhaler (pMDI) therapies, see the Product environmental
stewardship section below.
Energy use
We recognise that energy efficiency is the
key to a sustainable and cost-effective GHG
reduction plan. By 2025, we aim to reduce
total energy consumption by 10% from our
2015 baseline, double our energy productivity
relative to revenue, and substitute 100% of
our energy demand with certified renewable
sources for power and heat. Our resource
efficiency capital fund invested $19 million
in resource efficiency projects in 2020, such
as LED lighting and utility efficiency at our
Macclesfield, UK site. In 2020, our energy use
was 1,595 GWh, a decrease of 13% from our
2015 baseline and we achieved 99.9% supply
of certified renewable imported power across
all our sites worldwide.
For more information on GHG emissions reporting, see
Sustainability: Supplementary Information on page 275.
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Waste management
Due to anticipated activity growth across
our site network in 2020, we aimed to limit
increases in our waste volumes to a 24%
increase from our 2015 baseline. In 2020,
our total waste was 30,262 metric tonnes,
a 2% decrease on 2015. As waste generation
is linked to production volumes, our waste
reduction ambitions are going to be challenged
as our business grows. However, we are
focusing on processes to boost our
operational efficiency and investing in waste
reduction projects to help us reach our target
to reduce waste generation by 10% by 2025.
While waste prevention is an essential goal,
we seek to maximise treatment by material
recycling and avoiding landfill disposal when
prevention is impractical.
Water stewardship
We recognise the need to use water
responsibly and, where possible, to minimise
water use in our facilities. In 2020, we targeted
a 10% reduction from our 2015 water use.
In 2020, our water footprint was 3.44 million m3,
a 20% reduction from our 2015 baseline.
Water reduction and reuse projects throughout
our site network have improved the efficiency
of water use across our operations. In 2020, we
collaborated with WWF to analyse the physical,
reputational and regulatory water risks across
our global operations to establish how we can
strengthen our water stewardship programme.
Product environmental stewardship
We are committed to ensuring effective
environmental management of our products
from pre-launch through to product end-of-life.
We work at all stages of a medicine’s life-cycle
from the design of API production and
formulation processes, devices and packaging
through to distribution, patient use and final
disposal. We prioritise our efforts guided by
our life-cycle assessment (LCA) programme
that identifies where, in the product value
chain, the most significant environmental
impacts occur.
During 2020, we finalised a Product
Sustainability Index scoring methodology
covering significant categories of
environmental impact. As we roll out this
framework across the business, it will ensure
that environmental impacts are understood
and minimised throughout the development
and commercialisation of a product. A key
product-related element of our Ambition Zero
Carbon strategy, which launched in January
2020, is our commitment to become carbon
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25m
Our access to healthcare
programmes, including
Healthy Heart Africa, Healthy
Lung, Phakamisa, and Young
Health Programme (YHP),
have reached 25 million people
(2019: 20.5 million).
>$76m
In 2020, we gave more than
$76 million (2019: $72 million)
through our community
investment activities to more
than 1,300 non-profit
organisations in 88 countries
Business Review
Sustainability
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negative across our entire value chain by 2030
and to develop the next-generation respiratory
inhalers with near-zero Global Warming
Potential (GWP) propellants. We expect the
propellant used in our next-generation pMDI
to have an environmental footprint, measured
as GWP, that is 90-99% lower than
propellants used in existing pMDIs. During
2020, we progressed a project spanning all
key functions in the business to investigate
alternative low-GWP propellant options from an
environmental, technical, regulatory, medical,
non-clinical and commercial viewpoint.
Pharmaceuticals in the environment
We aim to lead our industry in understanding
and mitigating the effects of pharmaceuticals
in the environment (PIE). An estimated 98% of
pharmaceuticals get into the environment as
a result of patient use (excretion or improper
disposal). While API discharge from
production is only a small proportion of the
environmental burden, it is the part we as an
industry can deal with directly. We manage
the manufacturing discharge of our APIs in
a responsible manner to ensure that we do
not exceed the safe discharge standards
from all of our own manufacturing sites and
from at least 90% of key suppliers. We review
compliance with these safe discharge
standards annually.
As part of our progress towards our 2025
environmental targets, our 2020 targets
included:
> Safe API discharges for AstraZeneca
sites (100%) and globally managed
first-tier suppliers (>90%). Target met.
> Management of PIE through our
ecopharmacovigilance programme.
Target met.
A thorough assessment of the environmental
risks resulting from the patient use of all our
APIs has indicated that all our medicines
currently pose low or insignificant
environmental risk and our ongoing
ecopharmacovigilance of published data on
our APIs has not highlighted any additional
risks or changed our safe discharge
concentrations.
Further information on our efforts in these areas, including
environmental risk assessment data for our medicines,
is available on our website, www.astrazeneca.com/
sustainability/environmental-sustainability.
Contributing to society
We aim to make a significant financial and
non-financial contribution to the communities
in which we operate. This comprises our
medicines for patients and our focus on
sustainability for people and the environment.
As a science-led, patient-focused
pharmaceutical company, our innovative
medicines impact millions of lives annually.
But our contribution to society extends
beyond this to include our wider efforts to
benefit people and the planet. Additionally,
wherever we work in the world, we aim to
make a positive impact on our communities,
making financial contributions, supporting
healthcare and STEM education programmes,
volunteering, and through product donations.
As a major investor, employer and taxpayer,
we also make a significant contribution to the
economies of all the countries in which we
operate. We pay corporate income taxes,
customs duties, excise taxes, stamp duties,
employment and many other business taxes
where applicable in the jurisdictions in which
we operate. In addition, we collect and pay
employee taxes and indirect taxes such as
value-added tax.
Community investment BV
Our Global Standard on External Funding
encompasses community investment and
provides guidance to ensure a consistent,
transparent and ethical approach around the
world, based on local need. Our activities are
focused on healthcare in the community and
supporting science education. They include
financial and non-financial contributions.
In 2020, we gave more than $76 million
(2019: $72 million) through our community
investment activities to more than 1,300
non-profit organisations in 88 countries.
The amount includes more than $20 million
(2019: $27.4 million) for product donations that
were given in support of public health needs
and disaster relief. In addition to these
community investments, we also donated
more than $1.6 billion (2019: $801 million)
of medicines in connection with patient
assistance programmes around the world,
the largest of which is our AZ&Me programme
in the US. The increase reflects a larger
number of patients enrolled in our programme
and the mix of products donated.
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Non-Financial Information Statement
Under sections 414CA and 414CB of the
Companies Act 2006, as introduced by the
Companies, Partnerships and Groups (Accounts
and Non-Financial Reporting) Regulations 2016,
AstraZeneca is required to include, in
its Strategic Report, a non-financial statement
containing certain information. As required by
the Regulations, the Strategic Report contains
information on the following matters, which
include references to our relevant policies, due
diligence processes and information on how we
are performing against various measures in
these areas:
> Code of Ethics, see page 61.
> Environmental protection, see pages 73 to 76.
> People, see pages 68 to 71.
> Contributing to society, see pages 76 to 77.
> Respect for human rights, see page 71.
> Anti-bribery and anti-corruption, see page 61.
Information on the Group’s Principal Risks is
included in Risk Overview (see from page 78)
and information on the non-financial key
performance indicators relevant to our business
is included in Key Performance Indicators (see
from page 18). A description of our business
model is contained in Business Model and
Life-cycle of a Medicine (see from page 8).
In 2020, our Step Up! Young Health Global
Grants Programme provided a total of
$198,000 to help 20 small, youth-focused
non-profit organisations deliver innovative
health promotion programmes in 15 countries
around the world. In 2020, we reached over
1.25 million students and educators with
engaging and accessible STEM education,
including our Ask a Scientist video series
which generated more than 375,000 views,
and our virtual STEM festivals achieved
registration of over 150,000 STEM enthusiasts
around the world. Our signature initiative
Generation Health: How Science Powers Us
reached more than one million students and
has become a steadfast resource for teachers
and parents in the US and around the world,
as they look for resources to support
at-home learning.
Product donation programmes BV
Our global product donation partners are
Americares, Direct Relief and Health Partners
International of Canada. In 2020, we continued
to support humanitarian efforts to provide
healthcare to people with urgent medical needs
in countries around the world, including Haiti,
El Salvador and Myanmar.
As noted above, in some countries, our
patient assistance programmes offer
medicine for free to patients who cannot
afford to pay. These programmes vary by
country with the largest being AZ&Me in
the US. AZ&Me is governed as a 501(c) (4)
organisation, which categorises the activity for
the purpose of social welfare and establishes
specific governance requirements, which keeps
it separate from our commercial business.
In 2020, we celebrated the twelfth year of
our collaboration with Americares and the
Sihanouk Hospital Center of Hope (SHCH)
for the Cambodia Breast Cancer Initiative.
During the year, the programme administered
more than 18,500 units of free AstraZeneca
medicines to post-menopausal breast cancer
patients in the SHCH’s treatment cohort.
For more information, see our Sustainability
Report available on our website,
www.astrazeneca.com/sustainability.
We continue to support Connections for
Cardiovascular HealthSM (CCH), a programme
of the AstraZeneca HealthCare Foundation
launched in 2010 to address heart health in
the US. In 2020, CCH marked its tenth
anniversary and launched CCH Next
Generation by providing $1.02 million in
grants to nine non-profit organisations for
programmes that aim to help prevent, better
manage and reduce cardiovascular disease.
Making a positive impact on our communities
is also about volunteering. We encourage our
employees to volunteer and support their
efforts with one day’s leave for community
service. In 2020, our employees volunteered
more than 28,000 hours on community
projects in countries around the world.
For more information on the Step Up!
Young Health Global Grants Programme,
visit www.younghealthprogrammeyhp.com.
For more information on Generation Health,
visit www.howsciencepowersus.com.
For more information on the AstraZeneca HealthCare
Foundation’s Connections for Cardiovascular HealthSM
programme, visit www.astrazeneca-us.com/foundation.
For more information on the AstraZeneca HealthCare
Foundation, see the Glossary from page 280.
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Risk Overview
We face a diverse range of risks and uncertainties. Those risks
that have the potential to have a material impact on our business
or results of operations are our Principal Risks.
The Board has carried out a robust
assessment of the Principal and Emerging
risks facing the Group. The table overleaf
provides insight into the ongoing Principal
Risks, outlining why effective management
of these risks is important and relevant to
the business, how we are managing them
and which risks are rising, falling or have
remained static during the past 12 months.
The procedures in place to identify
emerging risks are explained below.
Managing risk
Our approach to risk management is designed
to encourage clear decision making on which
risks we take and how we manage these risks.
Fundamental to this process is a sound
understanding of every risk’s potential
strategic, commercial, financial, compliance,
legal and reputational implications.
We work to ensure that we have effective risk
management processes in place to support
the delivery of our strategic priorities. This
enables us to meet the expectations of our
stakeholders and upholds our Values. The
Board believes that existing processes provide
it with adequate information on the risks and
uncertainties we face. Further information
can be found in Risk from page 254, which
includes a description of circumstances
under which Principal and other risks and
uncertainties might arise in the course of
our business and their potential impact.
Emerging risks
Emerging risks are ‘new’ risks which may
challenge us in the future. They have the
potential to crystallise at some point in the
future but are unlikely to impact the business
during the next year. The outcome of such
risks is often more uncertain. They may begin
to evolve rapidly or simply not materialise.
We monitor our business activities and
external and internal environments for new,
emerging and changing risks to ensure that
these are managed appropriately. Annually,
we combine input from each SET function
and external insight to scan the horizon for
emerging risks. A summary of emerging
risks is presented for assessment to the Audit
Committee and the Board. Emerging risks
continue to be monitored as part of our
ongoing risk management processes.
Climate risk
The identification and assessment of climate
risk form part of our existing risk management
processes as described below. ‘Failure to
meet regulatory and ethical expectations
on environmental impact, including climate
change’ has been added to the Group’s risk
landscape as a standalone enduring risk
during 2020, having been included as a
sub-risk within the broader Health,
Safety and Environment risk previously.
The Taskforce on Climate-related Financial
Disclosures (TCFD) section, (see from
page 276), summarises work undertaken to
date to understand the potential impact of
climate change on our business and outlines
future areas of management focus.
Risk management embedded in
business processes
We strive to embed sound risk management
in our strategy, planning, budgeting and
performance management processes.
The Board defines the Group’s risk appetite,
enabling the Group, in both quantitative and
qualitative terms, to judge the level of risk it
is prepared to take in achieving its overall
objectives. The Board expresses the
acceptable levels of risk for the Group using
three key dimensions. These are: (i) earnings
and cash flow; (ii) return on investment; and
(iii) ethics and reputation. Annually, the Group
develops a detailed three-year bottom-up
business plan and 10-year long-range
projection to support the delivery of its
strategy. The Board considers these in
the context of the Group’s risk appetite.
Adjustments are made to the plan or risk
appetite to ensure that they remain aligned.
Our risk management approach is aligned
to our strategy and business planning
processes. We cross-check financial risks
and opportunities identified through the
business planning process and integrate
our findings into the overall risk management
reporting. Line managers are accountable
for identifying and managing risks and for
delivering business objectives in accordance
with the Group’s risk appetite.
The SET is required by the Board to oversee
and monitor the effectiveness of the risk
management processes implemented by
management. Within each SET function,
leadership teams discuss the risks the
business faces. This process provides a
Group-wide assessment for the Board, Audit
Committee and SET. Quarterly, each SET
function assesses changes to these risks,
new and emerging risks, and mitigation plans.
These are assimilated into a Group Risk
Report for the Board, Audit Committee and
SET. Supporting tools are in place to assist
risk leaders and managers in managing,
monitoring and planning for risk. We continue
to work on developing our risk management
standards and guidelines. Global Compliance,
Finance and Internal Audit Services support
SET by advising on policy and standard
setting, monitoring and auditing, and
communication and training, as well as
reporting on the adequacy of line management
processes as they apply to risk management.
We have a business resilience framework
which governs our ability to prevent or
quickly adapt to situations while maintaining
continuous business operations and
safeguarding our people, processes and
reputation. Within this we have business
continuity plans to address situations in which
specific risks have the potential to severely
impact our business. These plans include
training and crisis simulation activities for
business managers.
More information about our Global Compliance function
and the Code of Ethics can be found in the Corporate
Governance Report, see page 118, and the Business
Review, see page 61.
Viability statement
In accordance with provision 31 of the 2018
UK Corporate Governance Code, the Board
has determined that a three-year period to
31 December 2023 constitutes an appropriate
period over which to provide its viability
statement.
The Board considers annually and on a rolling
basis, a three-year bottom-up detailed business
plan. The Board also assesses the company’s
prospects using a 10-year long-range
projection but, given the inherent uncertainty
involved, believes that the three-year
statement presents readers of this Annual
Report with a reasonable degree of assurance
while still providing a longer-term perspective.
The three-year detailed business plan
captures risks to the sales and cost forecasts
at a market and SET function level. The plan
is used to perform central net debt and
headroom profile analysis. The following
scenarios have been applied to this analysis
to create a severe but plausible downside
combining some of the Principal Risks,
see from page 80:
> Scenario 1 Principal Risks: pricing,
affordability, access and competitive
pressures; failures or delays in the quality
or execution of the Group’s commercial
strategies. Government action on pricing
and the impact of the COVID-19 pandemic
results in higher than expected pressure on
pricing and lower than anticipated growth
rates for our medicines.
> Scenario 2 Principal Risk: failure or delay
in the delivery of our pipeline or launch of
new medicines. Assumes no launches of
new products.
> Scenario 3 Principal Risk: failure to maintain
supply of compliant, quality medicines.
Major equipment failure or significant
regulatory observation at one of our major
manufacturing sites results in a 12-month
supply interruption for one of our key
oncology products.
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The Board reviews the potential impact
of Brexit regularly as an integral part of its
Principal Risks (as outlined overleaf) rather
than as a standalone risk. The Board most
recently reviewed an update on the Group’s
Brexit readiness plans at its meeting in
December 2020 and continues to assess
its impact.
COVID-19 pandemic
The risk ‘failure of critical processes’ (see
page 262) incorporates the risk of disruption
as a result of a pandemic. The Board does not
consider this to be a Principal Risk in its own
right. However, the impact of the COVID-19
pandemic on the Group operations is highly
uncertain and cannot be predicted with
confidence and the extent of any adverse
impact on Group operations will depend on
the global duration, extent and severity of the
pandemic. To the extent that the pandemic
adversely impacts Group operations and/or
performance, the Company expects it to have
the effect of heightening certain risks, including
Principal Risks, such as those relating to the
delivery of the pipeline or launch of new
medicines, the execution of the Group’s
commercial strategy, the manufacturing
and supply of new medicines, and reliance
on third-party goods and services.
On 4 May 2020, the Group announced a
collaboration with the University of Oxford
for the development and distribution of the
University’s potential recombinant adenovirus
vaccine aimed at preventing COVID-19
infection from the SARS-CoV-2 virus. Though
there are significant funding flows associated
with this collaboration, financial risks for the
Group are balanced by matching cash
outflows incurred during the development
and manufacture of this vaccine with funding
to secure supply received from government
agencies and other international organisations.
Any potential financial exposure for the Group
is limited. The Group has built capacity (which
includes both internal and third-party capacity)
for the manufacture of approximately 3 billion
vaccine doses as a result of this collaboration
and has entered into a number of supply
agreements around the world. ‘Failure to
maintain supply of compliant, quality
medicines’ is one of the Group’s Principal
Risks disclosed on page 80. A failure to
supply the vaccine as expected may lead to
a negative reputational impact for the Group.
> Scenario 4 Principal Risks: pricing,
affordability, access and competitive
pressures; failures or delays in the quality
or execution of the Group’s commercial
strategies. A significant incident leads to
reputational damage in a key market resulting
in an ongoing reduction in market share.
> Scenario 5 Principal Risks: failure in
information technology or cybersecurity;
failure to meet regulatory and ethical
expectations on commercial practices,
including anti-bribery and corruption, and
scientific exchanges. Legal or regulatory
non-compliance results in the levy of a
significant fine.
In addition, the Board has considered more
stressed scenarios including restrictions on
debt factoring. In each scenario or combination
of scenarios above, the Group is able to rely
on its existing cash, cash equivalents and
short-term fixed income investments,
committed credit facilities, leverage its cost
base, reduce capital expenditure and take
other cash management measures to mitigate
the impacts and still have residual capacity
to absorb further shocks.
Based on the results of this analysis, the
Directors have a reasonable expectation
that the Company will be able to continue
in operation and meet its liabilities as they
fall due over the three-year period of
their assessment.
On 12 December 2020, the Group signed
a definitive agreement to acquire Alexion
subject to regulatory clearance and approval
by shareholders of both companies. The deal
is anticipated to close in the third quarter of
2021. The Directors have considered the
funding requirements together with the
forecast proforma financial performance
of the combined entity and have concluded
that this transaction does not change the
assessment of Viability as outlined above.
Brexit
On 23 June 2016, the UK held a referendum
on the UK’s continuing membership of the EU,
the outcome of which was a decision for the
UK to leave the EU (Brexit). Following Royal
Assent of the European Union (Withdrawal
Agreement) Act on 23 January 2020 and
ratification of the Withdrawal Agreement by
the European Parliament on 24 January 2020,
the UK left the EU on 31 January 2020 and
became a third country with a transition
period which ran to 31 December 2020.
On 24 December 2020, the UK Government
and European Commission agreed the terms
of a Trade and Cooperation Agreement which
sets out the relationship between the UK
and the EU following the end of the transition
period. Entering into this agreement was
provisionally approved by the European
Council on 29 December 2020 and the
associated UK legislation received Royal
Assent on 30 December 2020. The European
Parliament is due to scrutinise the agreement
formally in the coming months prior to
providing its consent to it. The agreement
comprises a Free Trade Agreement, rules
on governance and dispute resolution and,
security cooperation. The Free Trade
Agreement provides for zero tariffs and zero
quotas on all goods that comply with the
appropriate rules of origin; maintains a level
playing field in areas such as environmental
protection, social and labour rights, tax
transparency and state aid, with enforcement
and a binding dispute settlement mechanism;
and maintains air, road, rail and maritime
connectivity but with new customs and
passport checks and limitations on
haulage operations.
Until the European Parliament has consented
to the European Commission entering into
the agreement, there is no clarity on how the
new agreement will operate in practice. It is
therefore difficult to anticipate the potential
impact on AstraZeneca’s market share, sales,
profitability and results of operations.
The Group operates from a global footprint
and retains flexibility to adapt to changing
circumstances. The continuing uncertainty
on the impact of the practical implementation
of the Trade and Cooperation agreement is
expected to increase volatility and may have
an economic impact, particularly in the UK
and Eurozone.
Since the time of the referendum in 2016,
the Group has responded to the evolving
situation by engaging proactively with key
external stakeholders and establishing
a cross-functional internal steering and
implementation committee to understand,
assess, plan and implement operational
actions that may be required to mitigate
risks associated with a no deal Brexit.
These actions have already been implemented
based on an assumption that the UK would
have left the EU without a deal or extension
to the transition period under the Withdrawal
Agreement on 31 December 2020 such that
the Group has been able to mitigate the risks
arising from variable external outcomes to the
negotiation. Actions undertaken in this regard
include, but are not limited to: engagement
with governments and regulators; duplication
of release testing and procedures for products
for the EU27 in the EU; transfer of regulatory
licences; redesign of packaging and labelling;
additional inventory builds; changes to
logistics plans and shipping routes; customs
and duties set up for introduction of or
amendment to tariffs or processes;
associated IT systems reconfigurations;
and banking arrangement changes.
AstraZeneca Annual Report & Form 20-F Information 2020 / Risk Overview
79
Risk Overview
continued
Principal Risks
Strategy key
Trend key
Deliver Growth and
Therapy Area Leadership
Accelerate Innovative Science
Be a Great Place to Work
Achieve Group Financial Targets
Increasing risk
Decreasing risk
Unchanged
Risk category and Principal Risks
Context/potential impact
Management actions
Trend versus prior year
Product pipeline and intellectual property
Failure or
delay in the
delivery of our
pipeline or
launch of new
medicines
Failure to
meet
regulatory
or ethical
requirements
for medicine
development
or approval
Failure to
obtain, defend
and enforce
effective IP
protection or
IP challenges
by third
parties
Commercialisation
Pricing,
affordability,
access and
competitive
pressures
Failure or
delays in the
quality or
execution of
the Group’s
commercial
strategies
> Prioritise and accelerate our pipeline.
Strengthen pipeline through acquisitions,
licensing and collaborations.
> Focus on innovative science in three main
therapy areas.
Changing patient
behaviour as a result of
the ongoing COVID-19
pandemic may result in
unexpected delays to
clinical programmes.
> Quality management systems
incorporating monitoring, training and
assurance activities.
> Collaborating with regulatory bodies and
advocacy groups to monitor and respond
to changes in the regulatory environment,
including revised process, timelines
and guidance.
> Active management of IP rights and
IP litigation.
The development of any pharmaceutical product
candidate is a complex, risky and lengthy process
involving significant financial, R&D and other
resources. A project may fail or be delayed at any
stage of the process due to a number of factors,
which could reduce our long-term growth, revenue
and profit.
Our pharmaceutical products and commercialisation
processes are subject to extensive regulation.
Delays in regulatory reviews and approvals impact
patients and market access, and can materially
affect our business or financial results.
Discovering and developing medicines requires
a significant investment of resources. For this to
be a viable investment, new medicines must be
safeguarded from being copied for a reasonable
amount of time. If we are not successful in obtaining,
maintaining, defending or enforcing our IP rights,
and face competition from generic or biosimilar
products, our revenues could be materially
adversely affected.
Third parties may allege infringement of their IP,
and may seek injunctions and/or damages, which,
if ultimately awarded, could adversely impact our
commercial and financial performance.
Operating in more than 100 countries, we are subject
to political, socioeconomic and financial factors,
both globally and in individual countries. There can
be additional pressure from governments and other
healthcare payers on medicine prices and sales in
response to recessionary pressures, which may lead
to a reduction in our revenue, profits and cash flow.
> Focus on sales platforms.
> Demonstrating value of medicines/
health economics.
> Global footprint.
> Diversified portfolio.
If commercialisation of a product does not succeed
as anticipated, or its rate of sales growth is slower
than anticipated, there is a risk that we may not be
able to fully recoup related launch costs.
> Focus on sales platforms.
> Accelerate execution of plans and risk
share through business development and
strategic collaborations and alliances.
Supply chain and business execution
Failure to
maintain
supply of
compliant,
quality
medicines
Delays or interruptions in supply can lead to recalls,
product shortages, regulatory action, reputational
harm and lost sales revenue.
> Establishment of new manufacturing
facilities, creating capacity and technical
capability to support new product launches.
> Contingency plans including dual sourcing,
multiple suppliers, and close monitoring
and maintenance of stock levels.
> Business continuity and resilience
initiatives, disaster and data recovery
and emergency response plans.
> Quality management systems.
80
AstraZeneca Annual Report & Form 20-F Information 2020 / Strategic Report
Global economic and
political conditions
placing downward
pressure on healthcare
pricing and spending,
and therefore on
revenue.
Maximising the
commercial potential
of our new products
underpins the success
of our strategy and the
delivery of our short and
medium-term targets.
External factors such as
the COVID-19 pandemic
and Brexit place
increased pressure
on supply chains and
distribution networks.
S
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Risk category and Principal Risks
Context/potential impact
Management actions
Trend versus prior year
Supply chain and business execution continued
Failure in
information
technology or
cybersecurity
Failure to
attract, develop,
engage and
retain a diverse,
talented and
capable
workforce
Significant disruption to our IT systems or
cybersecurity incidents, including breaches of
data security, could harm our reputation and
materially affect our financial condition or
results of operations. This could lead to
regulatory penalties or non-compliance with
laws and regulations.
Failure to attract and retain highly-skilled
personnel may weaken our succession plans for
critical positions in the medium term. Employee
uncertainty as a result of, for example, Brexit or
organisational change may result in a lower level
of employee engagement which could impact
productivity and turnover. Both could adversely
affect the achievement of our strategic objectives.
> Cybersecurity framework and dashboard.
> Disaster and data recovery plans.
> Strategies to secure critical systems
and processes.
> Regular cybersecurity and privacy training
for employees.
> Targeted recruitment and retention
strategies deployed.
> Identification and active support of staff
potentially impacted by Brexit.
> Development of our employees.
> Evolve our culture.
Growing multi-faceted
cyber threat.
Legal, regulatory and compliance
Safety and
efficacy of
marketed
medicines is
questioned
Patient safety is very important to us and we strive to
minimise the risks and maximise the benefits of our
medicines. Failure to do this could adversely impact
our reputation, our business and the results of
operations, and could lead to product liability claims.
> Robust processes and systems in place
to manage patient safety and efficacy
trends as well as externally reported risks
through regulatory agencies and other
parties. This includes a comprehensive
pharmacovigilance programme
supplemented by close monitoring
and review of adverse events.
> Combined internal and external counsel
management.
The number of new
products in our portfolio
continues to grow. Our
ability to assess the
safety and efficacy of new
medicines accurately is
inherently limited due to
relatively short periods
of testing and relatively
small clinical study
patient samples.
Investigations or legal proceedings could be
costly, divert management attention and/or
damage our reputation and demand for our
products. Unfavourable resolutions could subject us
to criminal liability, fines, penalties or other monetary
or non-monetary remedies, adversely affecting our
financial results.
Any failure to comply with applicable laws, rules and
regulations, including anti-bribery and anti-corruption
legislation, may result in civil and/or criminal legal
proceedings and/or regulatory sanctions, fines or
penalties, impacting financial results.
> Strong ethical and compliance culture.
> Established compliance framework
including annual Code of Ethics training
for all employees.
> Focus on due diligence and oversight of
third-party engagements.
Increasing government
and regulatory scrutiny
and evolving compliance
challenges as complexity
of business relationships
increases.
Adverse
outcome
of litigation
and/or
governmental
investigations
Failure to meet
regulatory
and ethical
expectations
on commercial
practices,
including
anti-bribery and
anti-corruption,
and scientific
exchanges
Economic and financial
Failure to
achieve
strategic
plans or meet
targets or
expectations
Failure to implement successfully our business
strategy may frustrate the achievement of our
financial or other targets or expectations. This failure
could, in turn, damage our reputation and materially
affect our business, financial position or results
of operations.
> Focus on sales platforms and innovative
science in three main therapy areas.
> Strengthen pipeline through acquisitions,
licensing and collaborations.
> Appropriate capital structure and
balance sheet.
> Portfolio-driven decision making process
governed by senior executive-led
committees.
Global economic and
political conditions
placing downward
pressure on healthcare
pricing and spending,
and therefore
on revenue.
AstraZeneca Annual Report & Form 20-F Information 2020 / Risk Overview
81
Financial Review
2020 delivered sustained, double-digit Total Revenue
growth, steered by sales of New Medicines, driving
increased profitability.
“ 2020 generated Total
Revenue growth of
9% (CER: 10%) to
$27 billion, including
eight blockbusters
and another
outstanding
performance
by New Medicines
with growth
of 35% (CER: 36%)
to $13 billion.”
Sustained Total Revenue growth
Despite the COVID-19 pandemic, AstraZeneca
achieved Total Revenue of $26.6 billion with
growth of 9% (CER: 10%) in 2020.
Product Sales grew by 10% (CER: 11%) to
$25.9 billion, including eight blockbuster
medicines. Our continued investment in New
Medicines was evidenced by the rapid growth
of Product Sales in the Oncology and New
CVRM therapy areas, which grew by 25%
(CER: 26%) and 7% (CER: 8%) respectively.
Globally, New Medicines sales, led by
Tagrisso and Lynparza in Oncology and
Brilinta and Farxiga in New CVRM delivered
continued growth of 35% (CER: 36%) and
represented 52% of total Product Sales.
Within our sales platforms, we continue to see
sales growth in Emerging Markets with sales
increasing by 6% (CER: 10%), primarily driven
by China, which comprised 62% of Product
Sales within that region and generated growth
of 10% (CER: 10%).
Collaboration Revenue declined by 11%
(CER: 11%) to $727 million and included
$460 million of milestone payments from
the ongoing MSD arrangement on Lynparza
and selumetinib and a $94 million share
of gross profits arising from our alliance
with Daiichi Sankyo for the development
of Enhertu.
Investing in future growth
We continue to make focussed investments
in the business to support our key objectives.
Reported R&D expenses decreased by
1% (CER: 1%) to $5,991 million. Core R&D
expenses increased by 10% (CER: 10%)
to $5,872 million, reflecting our continued
investment in the Oncology pipeline. Reported
Selling, general and administrative (SG&A)
expenses decreased by 3% (CER: 3%) with
Core SG&A expenses increasing by 3%
(CER: 4%). Within Core SG&A expenses, we
saw investment in New Medicine launches
and China expansion partially offset by
COVID-19 pandemic-related savings.
Divestment activity
2020 Reported and Core Other operating
income was $1.5 billion and included income
from various disposal transactions, including
the sale of the international and Canadian
rights for Atacand to Cheplapharm and the
sale of the global rights excluding US, India
and Japan for Zestril, Inderal and Tenormin
to Atnahs.
Increased profitability
We are making good progress on delivering
our operating leverage. In 2020, Reported
Operating profit grew by 77% (CER: 81%) to
$5.2 billion and Core Operating profit grew
by 14% (CER: 17%) to $7.3 billion in the year,
primarily driven by Product Sales growth.
Reported Basic earnings per share (EPS)
was $2.44 and Core EPS was $4.02.
Acquisition of Alexion
In December 2020, we were excited to
announce that we had reached agreement
with the board of Alexion to acquire 100%
of the company. We are looking forward
to building on our combined expertise, to
enhance our presence in Immunology and
drive the Group’s strategic and financial
development. To support the financing of
the acquisition, AstraZeneca entered into
committed bank facilities of $17.5 billion
during December 2020.
COVID-19
The COVID-19 pandemic presented new
challenges for the business with reduced
elective surgery and hospitalisations for
non-COVID-19-related illnesses impacting
sales of our medicines. Notably, we mobilised
our research efforts to target the SARS-CoV-2
virus, and developed the COVID-19 Vaccine
AstraZeneca in collaboration with the
University of Oxford, as well as initiating
clinical trials for AZD7442. We are delighted
that the COVID-19 Vaccine AstraZeneca has
been approved in the UK, Europe and other
countries.
Marc Dunoyer
Chief Financial Officer
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Highlights
Financial performance
S
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g
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R
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p
o
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t
E P S
t
fi
o
r
p
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n
i
t
a
r
e
p
O
Pro
d
u
c
t
S
a
l
e
s
C
ollaboration R
e
v
enue
Product
Sales
Collaboration
Revenue
Operating
profit
EPS
$25.9bn
Reported and Core
(2019: $23.6bn)
$0.7bn
Reported and Core
(2019: $0.8bn)
$5.2bn
$2.44
77% growth – Reported
(CER: 81%)
137% growth – Reported
(CER: 142%)
$7.3bn
14% growth – Core
(CER: 17%)
$4.02
15% growth – Core
(CER: 18%)
Sales platforms
Oncology
Emerging Markets
25%
growth
(CER: 26%)
6%
growth
(CER: 10%)
Respiratory &
Immunology
(1)%
decline
(CER: stable)
New CVRM
Japan
7%
growth
(CER: 8%)
2%
growth
(CER: 1%)
Summary performance in 2020
Product Sales
Collaboration Revenue
Total Revenue
Cost of sales
Gross profit
Operating expenses
Other operating income and expense
Operating profit
Net finance expense
Share of after tax losses of joint ventures and associates
Profit before tax
Taxation
Profit after tax
Basic earnings per share ($)
Reported
CER
Core
2020
$m
2019
$m % change
25,890
23,565
727
819
26,617
24,384
(5,299)
(4,921)
21,318
19,463
(17,684)
(18,080)
1,528
5,162
1,541
2,924
(1,219)
(1,260)
(27)
3,916
(772)
3,144
2.44
(116)
1,548
(321)
1,227
1.03
10
(11)
9
8
10
(2)
(1)
77
(3)
(77)
153
140
156
137
CER
growth1
$m
2,550
(91)
2,459
(391)
2,068
360
(12)
2,416
46
88
2,550
(486)
2,064
1.52
Growth
due to
exchange
effects
$m % change
2020
$m
2019
$m % change
(225)
(1)
(226)
13
(213)
36
(1)
(178)
(5)
1
(182)
35
(147)
(0.11)
11
(11)
10
8
11
(2)
(1)
81
(4)
(76)
157
145
160
142
25,890
23,565
727
819
26,617
24,384
(5,175)
(4,761)
21,442
19,623
(15,633)
(14,748)
1,531
7,340
(782)
(27)
6,531
(1,312)
5,219
4.02
1,561
6,436
(765)
(116)
5,555
(1,109)
4,446
3.50
10
(11)
9
9
9
6
(2)
14
2
(77)
18
18
17
15
1 As detailed on page 85, CER growth is calculated using prior year actual results adjusted for certain exchange rate effects including hedging.
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Review
83
Financial Review
continued
Business background and results
overview
The business background is covered in the
Healthcare in a changing world section from
page 12, the Therapy Area Review from page
30 and the Performance in 2020 section from
page 24, which describe in detail the business
developments of our products.
As described earlier in this Annual Report,
sales of our products are directly influenced
by medical need and are generally paid for
by health insurance schemes or national
healthcare budgets. Our operating results can
be affected by a number of factors other than
the delivery of operating plans and normal
competition, such as:
> The risk of competition from generics
following loss of patent protection or patent
expiry of one of our products, or an ‘at risk’
launch by a competitor, or the launch of a
competitive product in the same class as
one of our products, with potential adverse
effects on sales volumes and prices. Details
of patent expiries for our key marketed
products are included in Patent Expiries
of Key Marketed Products from page 249.
> The adverse impact on pharmaceutical
prices as a result of the macroeconomic
and regulatory environment. For instance,
in the US, political leadership has continued
to consider drug pricing controls and
transparency measures at national and
local levels. In other parts of the world,
governments have continued to implement
and expand price control measures,
including reference pricing.
> The timings of new product launches, which
can be influenced by national regulators,
the speed to market relative to competitor
products and the risk that such new
products do not succeed as anticipated,
together with the rate of sales growth and
costs following new product launches.
> Currency fluctuations. Our functional and
reporting currency is the US dollar, but
we have substantial exposures to other
currencies, in particular the Chinese
renminbi, euro, Japanese yen, pound
sterling and Swedish krona.
> Macro factors such as greater demand
from an ageing population and increasing
requirements of Emerging Markets.
> Supply chain risks including the failure
of third parties to supply timely, quality
products, such as raw materials, and the
risk of catastrophic failure of critical internal
processes leading to an inability to
research, manufacture or supply products
to patients.
Further details of the risks faced by the business are
given in Risk Overview from page 78 and Risk
from page 254.
Over the longer term, the success of our R&D
is crucial and we devote substantial resources
to this area. The benefits of this investment
are expected to emerge over the long term
and there is considerable inherent uncertainty
as to the scale and timing of outcomes and
their transition to saleable products.
Measuring performance
The following measures are referred to in
this Financial Review when reporting on our
performance in absolute terms, but more
often in comparison to earlier years:
> Reported performance: Reported
performance takes into account all the
factors (including those which we cannot
influence, such as currency exchange
rates) that have affected the results of our
business, as reflected in our Group Financial
Statements prepared in accordance with
international accounting standards in
conformity with the requirements of the
Companies Act 2006 and International
Financial Reporting Standards (IFRSs)
adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the EU. The
Consolidated Financial Statements also
comply fully with IFRSs as issued by the
International Accounting Standards Board
(IASB). On 31 December 2020, EU-adopted
IFRS was brought into UK law and became
UK-adopted international accounting
standards, with future changes to IFRS
being subject to endorsement by the UK
Endorsement Board.
> Core performance: Core performance
measures are adjusted to exclude certain
significant items, using a set of established
principles.
Readers should refer to our explanation of Core measures
on page 85 for a detailed definition of this measure.
Use of non-GAAP performance measures
Non-GAAP performance measures: Core
performance measures, EBITDA, Net debt,
Ongoing Collaboration Revenue and Initial
Collaboration Revenue are non-GAAP
financial measures because they cannot be
derived directly from the Financial Statements.
Management believes that these non-GAAP
performance measures, when provided in
combination with Reported results, will
provide investors with helpful supplementary
information to understand the financial
performance and position of the Group better
on a comparable basis from period to period.
These non-GAAP performance measures are
not a substitute for, or superior to, financial
measures prepared in accordance with GAAP.
By disclosing non-GAAP performance and
growth measures, in addition to our Reported
financial information, we are enhancing
investors’ ability to evaluate and analyse
the financial performance and trends of
our ongoing business and the related key
business drivers. The adjustments are made
to our Reported financial information in order
to show non-GAAP performance measures
that illustrate clearly, on a year-on-year or
period-by-period basis, the impact on our
performance caused by factors such as
changes in revenues and expenses driven by
volume, prices and cost levels relative to such
prior years or periods.
As shown in the 2020 Reconciliation of
Reported results to Core results table on
page 86, our reconciliation of Reported
financial information to Core performance
measures includes a breakdown of the items
for which our Reported financial information is
adjusted, and a further breakdown by specific
line item as such items are reflected in our
Reported income statement. This illustrates
the significant items that are excluded from
Core performance measures and their impact
on our Reported financial information, both as
a whole and in respect of specific line items.
Management presents these results externally
to meet investors’ requirements for
transparency and clarity. Core financial
measures are also used internally in the
management of our business performance,
in our budgeting process and when
determining compensation. As a result, Core
performance measures merely allow investors
to differentiate between different kinds of
costs and they should not be used in isolation.
Readers should also refer to our Reported financial
information in the Summary performance in 2020 table
on page 83, our reconciliation of Core performance
measures to Reported financial information in the 2020
Reconciliation of Reported results to Core results table
and the Excluded from Core results table on page 86 for
our discussion of comparative Actual growth measures
that reflect all factors that affect our business.
Our determination of non-GAAP measures,
and our presentation of them within this
financial information, may differ from similarly
titled non-GAAP measures of other companies.
The SET retains strategic management of
the costs excluded from Reported financial
information in arriving at Core financial
measures, tracking their impact on Reported
Operating profit and EPS, with operational
management being delegated on a case-by-
case basis to ensure clear accountability and
consistency for each cost category.
We strongly encourage readers of the Annual
Report not to rely on any single financial
measure but to review our Financial
Statements, including the Notes thereto, and
our other publicly filed reports, carefully and
in their entirety.
84
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S
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Non-GAAP measures: definitions
Revenue
Constant
exchange rate
(CER) growth
rates
Reconciliation,
see page 86.
Definition: Retranslation of the current year’s performance at the
previous year’s average exchange rates, adjusted for other exchange
effects, including hedging.
Ongoing
Collaboration
Revenue
Reconciliation,
see page 88.
Definition: Ongoing Collaboration Revenue is defined as Collaboration
Revenue excluding Initial Collaboration Revenue (which is defined as
Collaboration Revenue that is recognised at the point in time control is
transferred). Ongoing Collaboration Revenue comprises, among other
items, milestone payments, profit sharing and royalties. The updated
category of Collaboration Revenue includes all income previously
included within Externalisation Revenue.
For more information, see Group Accounting Policies from page 180.
Profitability
Core
performance
measures
Reconciliation,
see page 86.
Core performance measures are adjusted to exclude certain significant
items. In determining the adjustments to arrive at the Core result, we use
a set of established principles relating to the nature and materiality of
individual items or groups of items, excluding, for example, events which
are (i) outside the normal course of business, (ii) incurred in a pattern that
is unrelated to the trends in the underlying financial performance of our
ongoing business, or (iii) related to major acquisitions, to ensure that
investors’ ability to evaluate and analyse the underlying financial
performance of our ongoing business is enhanced.
See the 2020 Reconciliation of Reported results to Core results table on page 86
for a reconciliation of Reported to Core performance, as well as further details
of the adjustments.
Core performance measures merely allow investors to differentiate
between different kinds of cost and they should not be used in isolation.
Restructuring costs, include charges that relate to the impact of our global
restructuring programmes on our capitalised manufacturing facilities and
IT assets. These can take place over a significant period of time, given the
long life-cycle of our business. We adjust for these charges and provisions
because they primarily reflect the financial impact of change to legacy
arrangements, rather than the underlying performance of our ongoing
business. However, our Core results do reflect the benefits of such
restructuring initiatives.
Why we use them: CER measures allow us to focus on the changes in
revenues and expenses driven by volume, prices and cost levels relative
to the prior period. Revenues and cost growth expressed in CER allow
management to understand the true local movement in revenues and
costs, in order to compare recent trends and relative return on investment.
CER growth rates can be used to analyse revenues in a number of ways
but, most often, we consider CER growth by products and groups of
products, and by countries and regions. CER revenue growth can be
further analysed by revenue volumes and selling price. Similarly, CER cost
growth helps us to focus on the real local change in costs so that we can
manage the cost base effectively.
Why we use it: This measure provides us with an understanding of the
ongoing value derived from our collaboration arrangements, removing any
distortion driven by the upfront income.
Intangible amortisation and impairments, include impairment reversals
but excluding any charges relating to IT assets. These generally arise from
business combinations and individual licence acquisitions. We adjust for
these charges because their pattern of recognition is largely uncorrelated
with the underlying performance of the business. However, a significant
part of our revenues could not be generated without owning the
associated acquired intangible assets.
Other items, principally comprise acquisition-related costs and credits,
which include fair value adjustments and the imputed finance charge
relating to contingent consideration on business combinations and legal
settlements. It should be noted that other costs excluded from our Core
results, such as finance charges related to contingent consideration, will
recur in future years, and other excluded items such as impairments and
legal settlements costs, along with other acquisition-related costs, may
recur in the future.
Gross margin
percentage
Reconciliation,
see page 86.
Definition: Gross Profit margin, as a percentage, by which Product Sales
exceeds the Cost of sales, calculated by dividing the difference between
the two by the sales figure. The calculation of Reported and Core Gross
Profit margin excludes the impact of Collaboration Revenue and any
associated costs, thereby reflecting the underlying performance of
Product Sales.
Why we use it: This measure sets out the progression of key performance
margins and illustrates the overall quality of the business.
EBITDA
Reconciliation,
see page 89.
Definition: Reported Profit before tax plus Net finance expense, Share
of after-tax losses of joint ventures and associates, and charges for
depreciation, amortisation and impairment.
Why we use it: EBITDA allows us to understand our baseline profitability,
removing any ‘non-operational’ expenses that are not considered by
management to be reflective of the underlying performance of the Group.
Cash flow and liquidity
Net debt
Definition: Interest-bearing loans and borrowings net of Cash and cash
equivalents, Other investments and Net derivative financial instruments.
Reconciliation,
see page 92.
Why we use it: Net debt is a measure that provides valuable additional
information regarding the Group’s net financial liabilities and is a measure
commonly used by investors and rating agencies. It facilitates the tracking
of one of our key financial priorities: deleveraging.
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Review
85
Financial Review
continued
Summary statement of consolidated income
2020 Reconciliation of Reported results to Core results
Gross profit
Product Sales gross margin %4
Distribution expenses
Research and development expenses
Selling, general and administrative expenses
Other operating income and expense
Operating profit
Operating margin as a % of Total Revenue
Net finance expense
Taxation
Basic earnings per share ($)
2020
Reported
$m
Restructuring
costs
$m
Intangible
amortisation
and
impairments
$m
Diabetes
Alliance1
$m
21,318
79.5
(399)
(5,991)
(11,294)
1,528
5,162
19.4
(1,219)
(772)
2.44
53
–
35
162
1
251
–
(50)
0.15
66
–
84
1,657
2
1,809
–
(376)
1.10
–
–
–
310
–
310
228
(127)
0.31
2019 Reconciliation of Reported results to Core results
Gross profit
Product Sales gross margin %4
Distribution expenses
Research and development expenses
Selling, general and administrative expenses
Other operating income and expense
Operating profit
Operating margin as a % of Total Revenue
Net finance expense
Taxation
Basic earnings per share ($)
Restructuring
costs
$m
Intangible
amortisation
and
impairments
$m
Diabetes
Alliance1
$m
73
–
101
173
–
347
–
(66)
0.22
87
–
638
1,771
1
2,497
–
(519)
1.52
–
–
–
(126)
–
(126)
287
(54)
0.08
2019
Reported
$m
19,463
79.1
(339)
(6,059)
(11,682)
1,541
2,924
12.0
(1,260)
(321)
1.03
1 Relating to the 2014 acquisition of BMS’s share of Global Diabetes Alliance.
2 See table below for further details of other adjustments.
3 Each of the measures in the Core column is a non-GAAP measure.
4 Gross margin as a percentage of Product Sales reflects Gross profit derived from Product Sales, divided by Product Sales.
Excluded from Core results
Core 2020 compared with
Core 20193
Actual
growth
%
CER
growth
%
9
18
10
3
(2)
14
10
19
10
4
(2)
17
15
18
Core 2019 compared with
Core 2018 3
Actual
growth
%
10
CER
growth
%
13
2
1
5
(27)
13
7
4
8
(26)
13
1
–
2020
Core3
$m
21,442
80.0
(399)
(5,872)
(9,362)
1,531
7,340
27.6
(782)
(1,312)
4.02
2019
Core3
$m
19,623
79.8
(339)
(5,320)
(9,089)
1,561
6,436
26.4
(765)
(1,109)
3.50
Other2
$m
5
–
–
(197)
–
(192)
209
13
0.02
Other 2
$m
–
–
–
775
19
794
208
(149)
0.65
Restructuring costs
> Restructuring costs totalling $251 million (2019: $347 million) include those incurred on finance transformation ($73 million) and the
Global Post Pandemic New Ways of Working Programme ($72 million).
Intangible amortisation
and impairments
> Amortisation totalling $1,511 million (2019: $1,466 million) relating to intangible assets, except those related to IT, and to our
acquisition of BMS’s share of our Global Diabetes Alliance (which are separately detailed below). Further information on our
intangible assets is contained in Note 10 to the Financial Statements from page 198.
> Intangible impairment charges of $240 million (2019: $1,031 million) excluding those related to IT, include the impact of the
$147 million impairment reversal on FluMist. 2019 charges included $533 million relating to the write-down of the Epanova intangible
asset. Further details relating to intangible asset impairments are included in Note 10 to the Financial Statements from page 198.
Diabetes Alliance
> Costs associated with our acquisition of BMS’s share of our Global Diabetes Alliance in February 2014 amounting to $538 million
(2019: $161 million), including a fair value credit of $51 million, amortisation charges of $361 million and discount unwind of
$228 million.
Other
> Other adjustments amounted to $17 million (2019: $1,002 million charge).
> Other adjustments to Reported SG&A expenses include net legal provisions of $197 million (2019: $775 million charge). Further details
of legal proceedings in which we are currently involved are contained within Note 29 to the Financial Statements from page 228.
> Also included in other adjustments are $209 million discount unwind charges (2019: $208 million) and $221 million (2019: $69 million
charge) for net fair value adjustments relating to contingent consideration arising from business combinations as detailed in Note 20
to the Financial Statements from page 207.
86
AstraZeneca Annual Report & Form 20-F Information 2020 / Strategic Report
Revenue
Total Revenue for the year was up 9% (CER:
10%) to $26,617 million, comprising Product
Sales of $25,890 million up 10% (CER: 11%)
and Collaboration Revenue of $727 million;
a decrease of 11% (CER: 11%).
Product Sales
By Geography
Product Sales in Emerging Markets continued
to increase with growth of 6% (CER: 10%) to
$8,679 million in 2020. China Product Sales
comprised 62% of Emerging Markets in the
year, increasing by 10% (CER: 10%) to
$5,345 million. New Medicines sales, primarily
driven by Tagrisso and Lynparza in Oncology
and Brilinta and Farxiga in New CVRM,
delivered encouraging growth and
represented 30% of China Product Sales. US
Product Sales were up 12% to $8,638 million,
reflecting the success of the Oncology
medicines. In Europe, Product Sales grew by
16% (CER: 15%) to $5,059 million, reflecting
a strong performance in Oncology, which
increased by 36% (CER: 35%) in the year.
Established Rest of World Product Sales
increased by 6% (CER: 6%) to $3,514 million
with sales in Japan up 2% (CER: 1%) to
$2,600 million.
By Product
2020 succeeded in delivering eight
blockbuster drugs, of which our largest selling
products were Tagrisso ($4,328 million),
Symbicort ($2,721 million), Imfinzi
($2,042 million), Farxiga ($1,959 million)
and Lynparza ($1,776 million). Tagrisso sales
grew by 36% (CER: 36%) reflecting a strong
performance across all markets, with notable
growth of 59% in Emerging Markets. Global
sales of Symbicort grew by 9% (CER: 10%)
with a return to growth in the US of 23%.
Imfinzi Product Sales grew by 39% (CER:
39%), with recent regulatory approvals and
launches in China and continued growth in
other markets. Farxiga sales increased by
27% (CER: 30%), with growth across all
markets including an increase of 46% in
Emerging Markets (CER: 55%). Lynparza
Product Sales delivered a strong performance
in all markets, with launches continuing
globally and generated total growth of
48% (CER: 49%) in the year.
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
Sales platforms
Total sales platform Product Sales
2020
Product
Sales
$m
24,288
2019
Product
Sales
$m
21,894
Actual
growth
%
11
CER
growth
%
12
Individual sales platform Product Sales (certain Product Sales are included in more than one sales platform)
Oncology (total Oncology Product Sales)
Emerging Markets
Respiratory & Immunology
New CVRM (incorporating Brilinta and Diabetes)
Japan
10,850
8,679
5,357
4,662
2,600
8,667
8,165
5,391
4,376
2,548
25
6
(1)
7
2
26
10
–
8
1
Reconciliation to Note 1 Revenue (page 187) as follows:
Sum of individual sales platforms
Add: Product Sales not included in sales platforms
Less: Product Sales double-counted for Emerging Markets
Oncology
Respiratory & Immunology
New CVRM
Less: Product Sales double-counted for Japan
Oncology
Respiratory & Immunology
New CVRM
Total Product Sales
32,148
1,602
29,147
1,672
(2,906)
(1,599)
(1,372)
(2,211)
(1,987)
(1,133)
(1,514)
(1,436)
(328)
(141)
(377)
(110)
25,890
23,565
New CVRM
New CVRM grew by 7% (CER: 8%) with
revenue of $4,662 million, mainly reflecting
the strong performance of Farxiga with global
sales of $1,959 million, representing growth
of 27% (CER: 30%) as it continued to be
our largest-selling CVRM medicine. Within
New CVRM, sales of Brilinta in the year were
$1,593 million, an increase of 1% (CER: 2%).
Brilinta sales in the US were up 3% to
$732 million, where an increase in the
average duration of treatment was offset
by an adverse COVID-19 impact, reflecting
fewer procedures.
Japan
Japan Product Sales grew by 2% (CER: 1%)
to $2,600 million with Tagrisso growing by
16% (CER: 14%) to $731 million being offset
by declines in legacy products.
Sales platforms
Our sales platforms include products in our
three main therapy areas, and a focus on
Emerging Markets and Japan. Sales platforms
grew by 11% (CER: 12%), representing
91% of Total Revenue after removing the
effect of certain Product Sales which are
included in more than one sales platform.
Oncology
Product Sales of Oncology medicines grew
by 25% (CER: 26%) to $10,850 million in 2020,
$4,328 million of which came from Tagrisso
(2019: $3,189 million), which continues to be
our leading medicine for the treatment of lung
cancer and had received regulatory approval
in more than 87 countries by the end of 2020.
Emerging Markets
Product Sales in Emerging Markets grew
by 6% (CER: 10%) to $8,679 million mainly
driven by strong performances from New
Medicines. Product Sales in China increased
by 10% in 2020 (CER: 10%), representing 62%
of Emerging Markets Product Sales in the year.
Respiratory & Immunology
Product Sales of Respiratory & Immunology
medicines declined by 1% (CER: stable) to
$5,357 million, with growth in Fasenra and
Symbicort being more than offset by a
significant decline in sales of Pulmicort,
which decreased by 32% (CER: 32%) in the
year to $996 million, mainly in China, as the
effect of COVID-19 impacted the treatment
of respiratory patients.
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Review
87
Financial Review
continued
Collaboration Revenue
Details of our significant business
development transactions which give rise
to Collaboration Revenue are given below:
Daiichi Sankyo
> In March 2019, AstraZeneca announced
it had entered into an alliance with Daiichi
Sankyo to develop and commercialise
Enhertu for multiple cancer types.
In markets where Daiichi Sankyo is selling
the product, AstraZeneca is entitled to
receive a royalty (in Japan) or a profit share
(in other territories). Royalty income and
the AstraZeneca share of gross margin
from sales made by Daiichi Sankyo are
recognised as Collaboration Revenue.
Enhertu launched in the US on
31 December 2019.
> Collaboration Revenue of $94 million
was recognised in 2020, in relation to
AstraZeneca’s share of gross profits arising
from sales made by Daiichi Sankyo.
FibroGen
> In July 2013, AstraZeneca entered into
a strategic collaboration with FibroGen to
develop and commercialise roxadustat, a
first-in-class oral compound in late-stage
development for the treatment of anaemia
from chronic kidney disease and end-stage
renal disease (ESRD). This broad
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. Under the
arrangement, AstraZeneca agreed to pay
FibroGen upfront and subsequent non-
contingent payments totalling $350 million,
as well as potential development-related
milestone payments of up to $465 million,
and potential future sales-related milestone
payments, in addition to tiered royalty
payments on future sales of roxadustat in
the low 20% range. Additional development
milestones will be payable for any
subsequent indications which the
companies choose to pursue. AstraZeneca
is responsible for the US commercialisation
of roxadustat, with FibroGen undertaking
specified promotional activities in the ESRD
segment in this market. The companies
are also co-commercialising roxadustat
in China where FibroGen is responsible
for clinical trials, regulatory matters,
manufacturing and medical affairs,
and AstraZeneca oversee promotional
activities and commercial distribution.
> Collaboration Revenue of $30 million
was recognised in 2020, in relation to
AstraZeneca’s share of gross profits
arising from sales made by FibroGen.
Collaboration Revenue1
Initial Collaboration Revenue
Total Initial Collaboration Revenue
Ongoing Collaboration Revenue
Lynparza/selumetinib (MSD) – option exercised
Lynparza/selumetinib (MSD) – milestone
Zoladex (TerSera) – milestone
Crestor (Almirall) – milestone
MEDI8897 (Sanofi) – milestone
Enhertu (Daiichi Sankyo) – share of gross profit margin
Roxadustat (FibroGen) – share of gross profit margin
Royalty income
Other
Total Ongoing Collaboration Revenue
Total Collaboration Revenue
2020
$m
–
–
–
460
35
–
–
94
30
62
46
727
727
2019
$m
–
–
100
510
–
39
34
–
–
62
74
819
819
1
The updated category of Collaboration Revenue includes all income previously included within Externalisation Revenue.
For more information, see Group Accounting Policies from page 181.
MEDI8897 (Sanofi)
> In March 2017, AstraZeneca announced an
agreement to develop and commercialise
MEDI8897 with Sanofi. Under the terms
of the global agreement, Sanofi made an
upfront payment of €120 million and will
pay up to €495 million upon achievement
of certain development and sales-related
milestones. All costs and profits are shared
equally. The US element of this collaboration
is subject to a participation agreement
with Sobi, effective January 2019.
> In July 2019, AstraZeneca received
notification that the Phase III clinical
milestone had been triggered, resulting
in Collaboration Revenue of $34 million
being recognised in 2019.
Zoladex (TerSera)
> In March 2017, AstraZeneca entered into an
agreement with TerSera for the commercial
rights to Zoladex in the US and Canada.
TerSera paid $250 million upon completion
of the transaction. The Group will also
receive sales-related income through
milestones totalling up to $70 million, as
well as recurring quarterly sales-based
payments at a mid-teen percent of Product
Sales. AstraZeneca will also manufacture
and supply Zoladex to TerSera, providing
a further source of ongoing income from
Zoladex in the US and Canada.
> In December 2018, TerSera paid a
sales-related milestone of $35 million
to AstraZeneca.
> In April 2020, TerSera paid a sales-related
milestone of $35 million to AstraZeneca.
Lynparza/selumetinib (MSD)
> In July 2017, the Group announced a global
strategic oncology collaboration with
MSD to co-develop and co-commercialise
AstraZeneca’s Lynparza for multiple cancer
types. Under the collaboration, the
companies will develop and commercialise
Lynparza jointly, both as monotherapy and in
combination with other potential medicines.
AstraZeneca and MSD will also jointly
develop and commercialise AstraZeneca’s
selumetinib, currently being developed for
multiple indications including thyroid cancer.
Independently, AstraZeneca and MSD will
develop and commercialise Lynparza in
combination with their respective PD-L1
and PD-1 medicines, Imfinzi and Keytruda.
Under the terms of the agreement, the two
companies will share the development and
commercialisation costs for Lynparza and
selumetinib monotherapy and non-PD-L1/
PD-1 combination therapy opportunities.
Gross profits from Lynparza and selumetinib
Product Sales generated through
monotherapies or combination therapies
will be shared equally. MSD will fund all
development and commercialisation costs
of Keytruda in combination with Lynparza
or selumetinib. AstraZeneca will fund all
development and commercialisation costs
of Imfinzi in combination with Lynparza or
selumetinib. AstraZeneca will continue to
manufacture Lynparza and selumetinib.
As part of the agreement, MSD will pay
AstraZeneca up to $8.5 billion in total
consideration, including $1.6 billion upfront,
$750 million for certain licence options
and up to $6.2 billion contingent upon
successful achievement of future regulatory
and sales milestones. Of the upfront
payment of $1.6 billion, $1.0 billion was
recognised as Collaboration Revenue on
deal completion in 2017, with the remaining
$0.6 billion deferred to the balance sheet.
88
AstraZeneca Annual Report & Form 20-F Information 2020 / Strategic Report
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
> AstraZeneca books all Collaboration
Reconciliation of Reported Profit before tax to EBITDA
Revenue of Lynparza and selumetinib; gross
profits due to MSD under the collaboration
will be recorded under Cost of sales.
> In November 2017, MSD exercised the first
licence option resulting in Collaboration
Revenue of $250 million.
> In January 2018, the FDA expanded the
approved use of Lynparza to include the
treatment of patients with certain types of
breast cancer. The approval triggered a
$70 million milestone payment from MSD
to AstraZeneca, which was recognised
as Collaboration Revenue for 2018.
> In June 2018, net sales of Lynparza reached
a $250 million cumulative sales threshold,
triggering a sales-related milestone,
resulting in Collaboration Revenue of
$100 million for AstraZeneca in 2018.
> In November 2018, MSD exercised the
second licence option resulting in
Collaboration Revenue of $400 million.
In addition to the exercise of this option, net
sales of Lynparza reached the $500 million
cumulative sales threshold, triggering a
sales-related milestone, resulting in
Collaboration Revenue of $150 million
due to AstraZeneca.
> In December 2018, AstraZeneca was
notified of an FDA approval of Lynparza,
which triggered the SOLO-1 $70 million
milestone payment, recognised as
Collaboration Revenue in 2018 for
AstraZeneca.
> In April 2019, AstraZeneca was notified
that the Committee for Medicinal Products
for Human Use (CHMP) of the European
Medicines Agency had adopted a positive
opinion recommending Lynparza as a
1st-line maintenance treatment of BRCA-
mutated advanced ovarian cancer, which
triggered an approval milestone, resulting
in Collaboration Revenue of $30 million.
> In June 2019, AstraZeneca was notified
that Lynparza had been approved in the
EU as a maintenance treatment after
1st-line chemotherapy in patients with
BRCA-mutated advanced ovarian cancer.
This triggered an approval milestone,
resulting in Collaboration Revenue of
$30 million for AstraZeneca in 2019.
> In September 2019, AstraZeneca was
notified that net sales of Lynparza had
reached the $750 million cumulative
sales threshold, triggering a sales-related
milestone, resulting in Collaboration
Revenue of $200 million for 2019.
> In October 2019, MSD notified AstraZeneca
of its intention to exercise the third and
final licence option of the agreement.
The payment of $100 million was received
in November 2019 and was recognised
as Collaboration Revenue for 2019.
> In November 2019, AstraZeneca received
notification that net sales of Lynparza had
reached the $1 billion cumulative sales
threshold triggering a sales-related payment
of $250 million, which was recognised as
Collaboration Revenue for 2019.
Reported Profit before tax
Net finance expense
Share of after tax losses of joint ventures
and associates
Depreciation, amortisation and impairment
EBITDA
> In May 2020, the FDA approved Lynparza
as a 1st-line maintenance treatment for
certain types of ovarian cancer, triggering a
$100 million regulatory milestone payment
from MSD, which was recognised as
Collaboration Revenue for 2020.
> In May 2020, AstraZeneca received
approval for Lynparza following the
PROfound result, triggering a $35 million
regulatory milestone from MSD, which has
been recognised as Collaboration Revenue
for 2020.
> In November 2020, AstraZeneca was
notified that net sales of Lynparza had
reached the $1.5 billion cumulative sales
threshold, triggering a $300 million
sales-related milestone, which has been
recognised as Collaboration Revenue
for 2020.
> In November 2020, AstraZeneca received
EU approval for Lynparza following the
PAOLA result, triggering a $25 million
regulatory milestone from MSD, which has
been recognised as Collaboration Revenue
for 2020.
Gross profit
Reported Gross profit increased by 10%
(CER: 11%) to $21,318 million. Core Gross
profit increased by 9% (CER: 10%) to
$21,442 million. These increases reflected
the growth of Product Sales.
Operating expenses
Reported Total Operating expense declined
by 2% (CER: 2%) in the year to $17,684 million
and represented 66% of Total Revenue
(2019: 74%). Core Total Operating expense
increased by 6% (CER: 6%) to $15,633 million.
Included in Operating expenses were
additional costs and procedures related
to COVID-19, such as personal protective
equipment and employee testing.
Reported R&D expenses decreased by 1%
(CER: 1%) to $5,991 million and Core R&D
expenses increased by 10% (CER: 10%) to
$5,872 million. The decline in Reported R&D
expense was partly driven by the comparative
effect of the $533 million impairment of
Epanova in 2019. The growth in Core R&D
expense included investment in the Oncology
pipeline, such as the development of
datopotomab deruxtecan and the ending
in 2019 of the release of the upfront funding
of the Lynparza development, as part of the
aforementioned collaboration with MSD.
2020
$m
3,916
1,219
27
3,149
8,311
2019
$m
1,548
1,260
116
3,762
6,686
Actual
growth
%
CER
growth
%
153
(3)
(77)
(16)
24
157
(4)
(76)
(16)
27
Reported SG&A expenses decreased by
3% (CER: 3%) to $11,294 million and Core
SG&A expenses increased by 3% (CER: 4%)
to $9,362 million. The difference in the
movements of Reported and Core SG&A
expenses partly reflected fair value
adjustments arising on acquisition-related
liabilities, as well as a decrease in legal
provisions recognised in comparison to 2019.
Within Reported and Core SG&A expenses,
pandemic-related savings partly compensated
for investment in the launches of new
medicines and expansion in China.
Other operating income and expense
Reported Other operating income and
expense in the year was down 1% (CER: 1%)
to $1,528 million and included $400 million
from the sale of the international and
Canadian rights for Atacand to Cheplapharm,
$350 million on the sales of the global rights
excluding the US, India and Japan for Zestril,
Inderal and Tenormin to Atnahs, $120 million
on the sale of an FDA Priority Review Voucher
and $107 million of payments from Allergan
in respect of the development of brazikumab.
In accordance with our Collaboration Revenue
definition in the Group Accounting Policies
from page 181 and the requirements of IFRS
15 ‘Revenue from Contracts with Customers’,
proceeds from these divestments are
recorded as Other operating income and
expense and comprise the majority of Other
operating income and expense for the year.
Operating profit
Reported Operating profit grew by 77%
(CER: 81%) to $5,162 million in the year.
The Reported Operating margin increased
by seven percentage points (CER: eight
percentage points) to 19% of Total Revenue.
Core Operating profit grew 14% (CER: 17%) in
the year to $7,340 million. The Core Operating
profit margin increased by one percentage
point (CER: two percentage points) to 28% of
Total Revenue, as a result of revenue growth.
Net finance expense
Reported Net finance expense decreased
by 3% (CER: 4%) in the year to $1,219 million
(2019: $1,260 million). Core Net finance
expense increased by 2% (CER: 2%) in the
year to $782 million. The increase to Core Net
finance expense partly reflected an adverse
movement in securities and short-term
deposits.
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Review
89
Financial Review
continued
Profit before tax
Reported Profit before tax increased by
153% (CER: 157%) in 2020 to $3,916 million
(2019: $1,548 million), reflecting the increase
in Total Revenue. Pre-tax adjustments to
arrive at Core Profit before tax amounted to
$2,615 million in 2020 (2019: $4,007 million),
comprising $2,178 million adjustments to
Operating profit (2019: $3,512 million) and
$437 million to Net finance expense
(2019: $495 million). EBITDA increased
by 24% (CER: 27%) to $8,311 million.
Taxation
Both the Reported and Core tax rates in the
year were 20%. The income tax paid for the
year was $1,562 million (40% of Reported
Profit before tax). This was $790 million higher
than the Reported tax charge for the year,
which benefited from a net deferred tax credit
of $199 million (2019: $988 million), relating
to the elimination of unrealised profit on
inventory, intangible amortisation and other
deferred tax items, partially offset by a net
$133 million deferred tax charge reflecting
the change in Dutch and UK income tax
rates, cash liabilities arising on gains in
equity investments recorded through Other
comprehensive income and other cash tax
timing differences. Additional information on
these items is contained in Note 4 from page
190 to the Financial Statements.
We pay corporate income taxes, customs
duties, excise taxes, stamp duties,
employment and many other business
taxes in all jurisdictions where applicable. In
addition, we collect and pay employee taxes
and indirect taxes such as value added tax.
Total comprehensive income
Total comprehensive income increased
by $4,136 million to $4,752 million in 2020.
Other comprehensive income for the period,
net of tax was $1,608 million, an increase of
$2,219 million. The increase was primarily
driven by the Net gains/(losses) on equity
investments measured at fair value through
Other comprehensive income of $938 million
(2019: $28 million loss) and Foreign exchange
arising on designated borrowings in net
investment hedges gains of $573 million
(2019: loss of $252 million). A significant
proportion of the Net gains/(losses) on equity
investments measured at fair value through
Other comprehensive income relates to gains
recognised during the year from the sale of
part of AstraZeneca’s equity portfolio in the
year, a large proportion of which related to
the disposal of its full holding in Moderna
as detailed in Note 12 from page 202 of the
Financial Statements.
EPS
Reported EPS of $2.44 in the year was an
increase of 137% (CER: 142%), driven by
Revenue growth. Core EPS increased by
15% (CER: 18%) to $4.02. Reported growth
in 2020 was impacted by the absence of the
2019 increase in legal provisions and higher
intangible impairment charges.
Restructuring
In 2016, we announced plans to advance
the strategy through sharper focus by
streamlining operations, primarily in
Commercial and Manufacturing, to redeploy
investment to key therapy areas, particularly
Oncology. Restructuring costs associated
with this programme were initially forecast to
be $1.5 billion by the end of 2017 and generate
net annualised benefits of $1.1 billion by 2018.
The total cost estimate is now $1.3 billion to
be incurred by the end of 2021, with benefits
expected to be $1.1 billion in 2021. In addition
to the 2016 plan, there are two further active
programmes. The first is the continuation of
the phase 3 restructuring that was announced
in 2012, superseded by phase 4 in 2013 and
subsequently expanded in 2014. This initiative
consists of centralisation of our global R&D
footprint into three strategic centres,
transformation of the IT organisation, closure
of a number of manufacturing facilities and
other activities to simplify and streamline the
organisation. At the time of the announcement,
the phase 4 programme was estimated to
incur $3.2 billion of costs and deliver
$1.1 billion of annualised benefits by 2016.
By the end of 2020, the phase 4 programme
had incurred costs of $3.6 billion, creating
headroom for investment in our pipeline and
launch capability. The 2021 opening of our
Cambridge R&D facility will enable us to
successfully deliver on the vision of
centralising AstraZeneca’s leading research
in strategic locations, while building upon the
numerous pioneering projects and scientific
collaborations already underway in
Cambridge. The phase 4 programme is
now expected to conclude in 2023, upon
completion of the ongoing consolidation of
our sites and occupation of the Cambridge
R&D facility. Total phase 4 programme
costs are estimated to be $3.8 billion with
annualised benefits of $1.2 billion. Out of that
total, an estimated $716 million of costs are
associated with the R&D transition to the new
Cambridge footprint.
The second step was initiated in 2016
and relates to multi-year transformation
programmes within our SG&A functions
(principally Finance and HR) with anticipated
costs by the end of 2018 of $270 million.
By the end of 2020, these programmes
had incurred costs of $471 million with total
expected costs rising to $551 million. An
estimated $116 million of annualised benefits
are expected to be delivered in 2021.
In 2020, we initiated the Global Post-
Pandemic New Ways of Working programme
in response to the changing business
environment, accelerated by the current
COVID-19 pandemic. This programme is
expected to run until the end of 2022 and
incorporates the increasing utilisation of
digitisation and technology, as well as the new
ways of working that reflect in the size, nature
and footprint of commercial teams, enabling
functions, R&D and operations. This
programme is already underway in various
regions including North America and Japan,
with $72 million of costs incurred in 2020.
The aggregate restructuring charge incurred
in 2020 across all our restructuring programmes
was $251 million (2019: $347 million). Final
estimates for programme costs, benefits and
headcount impact in all functions are subject
to completion of the requisite consultation
in the various areas.
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.
Brexit readiness preparations and planning
Following the UK referendum outcome in June
2016, the UK Government and European
Commission negotiated the terms on which
the UK would leave the EU and the framework
for the future relationship. The UK left the EU
on 31 January 2020 with a transition period
running to 31 December 2020.
On 24 December 2020, the UK Government
and European Commission agreed the terms
of a Trade and Cooperation Agreement which
sets out the relationship between the UK
and the EU following the end of the transition
period. The agreement comprises a Free
Trade Agreement, rules on governance and
dispute resolution, and security cooperation.
The Free Trade Agreement: provides for zero
tariffs and quotas on all goods that comply
with the appropriate rules of origin; maintains
a level playing field in areas such as
environmental protection, social and labour
rights, tax transparency and state aid, with
enforcement and a binding dispute settlement
mechanism; and maintains air, road, rail and
maritime connectivity but with new customs
and passport checks and limitations on
haulage operations. It is still too early to judge
the full impact of the Trade and Cooperation
Agreement between the UK and EU on our
market share, sales, profitability, cash flows
and results of operations.
90
AstraZeneca Annual Report & Form 20-F Information 2020 / Strategic Report
Summary cash flows
Net debt brought forward at 1 January
Profit before tax
Sum of changes in interest, depreciation, amortisation, impairment
and share of after tax losses on joint ventures and associates
Movement in working capital and short-term provisions
Tax paid
Interest paid
Gains on disposal of intangible assets
Fair value movements on contingent consideration arising from
business combinations
Non-cash and other movements
Net cash available from operating activities
Disposal of intangibles (net of purchases)
Payment of contingent consideration from business combinations
Other capital expenditure (net)
Investments
Dividends
Share proceeds
Distributions
Lease liabilities: IFRS 16
Other movements
2020
$m
2019
$m
2018
$m
(11,904)
(13,003)
(12,679)
3,916
1,548
1,993
4,395
361
(1,562)
(733)
(1,030)
(272)
(276)
4,799
(694)
(822)
399
(1,117)
(3,572)
30
(3,542)
(207)
(139)
5,138
(346)
(1,118)
(774)
(1,243)
(614)
378
2,969
595
(709)
(1,016)
(1,130)
(3,592)
3,525
(67)
(675)
2
5,147
(639)
(537)
(676)
(1,885)
(495)
(290)
2,618
2,010
(349)
(1,218)
443
(3,484)
34
(3,450)
–
65
Net debt carried forward at 31 December
(12,110)
(11,904)
(13,003)
Bonds issued in 2020 and 2019
Bonds issued in 2020:
0.7% USD bond
1.375% USD bond
2.125% USD bond
Total 2020
Bonds issued in 2019:
Total 2019
Repayment
dates
Face value
of bond
$m
Net book
value of
bond at
31 December
2020
$m
2026
2030
2050
1,200
1,300
500
3,000
–
–
1,192
1,291
486
2,969
–
–
In response to the UK referendum outcome,
the Group decided to implement appropriate
actions to mitigate where possible the
potential risk of disruption to the supply of
medicines (including potential new medicines
currently undergoing clinical trials), including
duplication of release testing and procedures
for products based in the EU27, transfer of
regulatory licences, new freight routes
between the UK and European mainland
avoiding the short straits, customs and duties
set up for the introduction or amendment of
existing tariffs or processes, and associated
IT systems reconfiguration. In addition, the
Group engaged with its major suppliers to
assess their readiness and continues to work
with them to mitigate the risk of disruption to
supply chains due to new border processes
and potential port congestion. The costs
associated with this and other actions directly
related to Brexit are charged as restructuring,
with the majority of such costs being cash
costs. The costs incurred since the
referendum are approximately $47 million
of which $7 million was incurred in the year
(2019: $28 million).
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
Cash flow and liquidity – for the year
ended 31 December 2020
Net cash generated from operating
activities was $4,799 million for 2020
(2019: $2,969 million), reflecting an underlying
improvement to business performance.
Net investment cash outflows were
$1,117 million (2019: $1,130 million).
Investment cash outflows for 2020 include
$822 million (2019: $709 million) of Payments
of contingent consideration arising on
business combinations and $1,645 million
(2019: $1,481 million) for the purchase of other
intangible assets, including $675 million to
Daiichi Sankyo in respect of the second of
two upfront payments made as part of the
strategic collaboration on Enhertu and an
upfront payment of $350 million to Daiichi
Sankyo for the development and
commercialisation of DS-1062.
Investment cash inflows include $951 million
(2019: $2,076 million) from the sale of
intangible assets, including $350 million on
the sales of the global rights excluding US,
India and Japan for Zestril, Inderal and
Tenormin to Atnahs, $250 million from the sale
of the international and Canadian rights for
Atacand to Cheplapharm, and $120 million
on the sale of an FDA Priority Review Voucher
to Incyte Corporation and also include
amounts recognised from the sale of part
of AstraZeneca’s equity portfolio in the year,
a large proportion of which related to the
disposal of its full holding in Moderna.
The comparative period in 2019 included
$821 million on the sale of the US rights to
Synagis to Sobi, $243 million from the sale
of the global rights to Losec excluding the
US, Japan, China and Mexico to
Cheplapharm, $181 million on the sale of the
rights to Arimidex and Casodex to Juvisé and
$178 million from the sale of the rights to
Seroquel and Seroquel XR in Europe and
Russia to Cheplapharm.
Net cash distributions to shareholders were
$3,542 million (2019: $67 million), including the
proceeds from the exercise of share options of
$30 million (2019: $32 million) less dividends
paid of $3,572 million (2019: $3,592 million).
2019 Share proceeds also included net
proceeds from the issue of Share capital
of $3,493 million.
Bonds
In August 2020, AstraZeneca issued
$3.0 billion of bonds in the US dollar debt
capital markets with maturities of five, 10 and
30 years. There were no bonds issued in 2019.
In 2020, AstraZeneca repaid a $1.6 billion
2.375% bond, which matured in November
2020. In 2019, AstraZeneca repaid a
$1.0 billion 1.95% bond, which matured
in September 2019.
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Review
91
Financial Review
continued
Net debt
At 31 December 2020, outstanding gross debt
(interest-bearing loans and borrowings) was
$20,380 million (2019: $18,227 million). Of the
gross debt outstanding $2,386 million is due
within one year (2019: $2,010 million). On
1 January 2019, the Group adopted IFRS 16,
which eliminates the classification of leases
as either operating or finance leases. The
adoption of the new standard resulted in
the initial recognition of Lease liabilities of
$720 million at the start of 2020. Net debt
at 31 December 2020 was $12,110 million,
compared with $11,904 million at the
beginning of the year, as a result of the net
cash flows, foreign exchange movement
and other non-cash movements.
At 31 December 2020, Cash and cash
equivalents and liquid investments totalled
$7,992 million (2019: $6,280 million) and
undrawn committed bank facilities totalled
$21,625 million (2019 $4,125 million). Of the
committed facilities, $4,125 million is intended
to manage liquidity. In preparation for the
acquisition of Alexion, the Company entered
into committed bank facilities totalling $17,500
million during December 2020. The facilities
contain no financial covenants and were
undrawn at 31 December 2020.
Property, plant and equipment
In 2020, Property, plant and equipment
increased by $563 million to $8,251 million with
additions of $926 million (2019: $996 million),
impairment charges of $13 million (2019:
$53 million net reversal) and exchange
adjustments of $360 million (2019: credit
of $3 million) offset by depreciation of
$689 million (2019: $647 million) and disposals
and other movements of $21 million
(2019: $138 million).
Right-of-use assets
Following the adoption of IFRS 16 on
1 January 2019, the Group recognised Lease
liabilities and corresponding Right-of-use
assets for arrangements that were previously
classified as operating leases. Right-of-
use assets at 31 December 2020 were
$666 million (2019: $647 million).
Business combinations
No business acquisitions were made in 2020,
2019 or 2018.
On 12 December 2020, AstraZeneca
announced that it had reached an agreement
with the board of Alexion to acquire 100%
of the company. Under the terms of the
agreement, Alexion shareholders will receive
$60 in cash and 2.1243 AstraZeneca American
Depositary Shares per Alexion share. The
transaction is subject to regulatory clearances
and approval by the shareholders of both
companies, and is expected to close in the
third quarter of 2021.
Net debt reconciliation
Cash and cash equivalents
Other investments1,2
Cash and investments
Overdraft and short-term borrowings
Lease liabilities
Current instalments of loans
Loans due after one year
Loans and borrowings
Net derivative financial instruments
Net debt³
2020
$m
7,832
160
7,992
(658)
(681)4
2019
$m
5,369
911
6,280
(225)
(675)
(1,536)
(1,597)
(17,505)
(15,730)
(20,380)
(18,227)
278
43
2018
$m
4,831
895
5,726
(755)
–
(999)
(17,359)
(19,113)
384
(12,110)
(11,904)
(13,003)
1
2
Other investments in 2020 included $nil (2019: $62 million) of non-current Treasury investments.
Other investments include non-current investments, which are included within the balance of $1,108 million (2019: $1,401
million) in the Statement of Financial Position on page 177.
3 The equivalent GAAP measure to Net debt is ‘liabilities arising from financing activities’, which excludes the amounts for
cash and overdrafts, other investments and non-financing derivatives shown above and includes the Acerta Pharma put
option of $2,297 million (2019: $2,146 million) shown in non-current other payables.
4
Included in the Net debt reconciliation for 2020 are Lease liabilities of $681 million (2019: $675 million), which arose on
the adoption of IFRS 16 on 1 January 2019. See Group Accounting Policies from page 183 and Note 8 from page 196 for
more information.
Summary statement of financial position – 31 December
All data in this section are on a Reported basis
Trade and other payables
(21,869)
(1,591)
(20,278)
Property, plant and equipment
Right-of-use assets
Goodwill and intangible assets
Trade and other receivables
Net deferred tax assets/(liabilities)
Provisions
Net income tax payable
Retirement benefit obligations
Non-current other investments
(excluding Treasury investments of
$nil in 2020 (2019: $62 million))
Investments in associates and joint
ventures
Net debt
Net assets
2020
$m
8,251
666
32,792
–
4,024
7,742
520
Movement
$m
563
19
291
(70)
831
1,241
292
2019
$m
7,688
647
Movement
$m
267
647
2018
$m
7,421
–
32,501
(1,165)
33,666
70
3,193
6,501
228
(912)
303
412
1,135
(667)
(673)
(119)
(296)
982
2,890
6,089
(907)
(19,611)
(891)
(957)
(2,511)
787
89
(13,003)
14,044
(1,560)
(763)
(3,202)
4
313
(395)
(1,564)
(1,076)
(2,807)
1,108
(231)
1,339
552
39
(12,110)
15,638
(19)
(206)
1,042
58
(11,904)
14,596
(31)
1,099
552
Goodwill and intangible assets
Our goodwill of $11,845 million
(2019: $11,668 million) principally arose
on the acquisition of MedImmune in 2007,
the restructuring of our US joint venture with
MSD in 1998 and the acquisition of BMS’s
share of the Global Diabetes Alliance.
Intangible assets amounted to $20,947 million
at 31 December 2020 (2019: $20,833 million)
and included amortisation in the year of
$1,992 million (2019: $1,928 million). Intangible
asset additions were $1,592 million in 2020
(2019: $2,001 million), $996 million, of which
arose from the collaborations with Daiichi
Sankyo. Net impairment charges were
$240 million (2019: $1,033 million) including
impairments on Duaklir ($200 million) and
Bydureon ($102 million), offset by an
impairment reversal of $147 million on FluMist.
Disposals of intangible assets totalled
$71 million in the year (2019: $10 million).
Further details of additions to Intangible assets, and
impairments recorded, are included in Note 10 to the
Financial Statements from page 198.
Assets held for sale
In 2019, Assets held for sale of $70 million
comprised tangible assets relating to the
Boulder, Colorado manufacturing site.
There were no Assets held for sale in 2020.
Receivables, payables and provisions
Total current and non-current Trade and other
receivables increased by $1,241 million to
$7,742 million in the year, driven by activities
related to the COVID-19 Vaccine AstraZeneca
and a reduction in debt factoring in the US.
Total current and non-current Trade and other
payables increased by $1,591 million in 2020 to
$21,869 million. The increase was driven by the
recognition of vaccine-related deferred income.
Financial position – 31 December 2020
All data in this section are on a Reported basis.
Assets held for sale
Inventories
92
AstraZeneca Annual Report & Form 20-F Information 2020 / Strategic Report
Contingent consideration arising on business combinations
Acquisition of
BMS’s share
of Diabetes
Alliance
$m
Other
business
combinations
$m
3,300
(546)
(51)
229
2,932
839
(276)
(221)
49
391
At 1 January
Settlements
Fair value adjustments
Discount unwind
At 31 December
Payments due by period
2020
Total
2020
$m
4,139
(822)
(272)
278
Acquisition of
BMS’s share
of Diabetes
Alliance
$m
Other
business
combinations
$m
3,983
(454)
(516)
287
1,123
(255)
(98)
69
839
3,323
3,300
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
2019
Total
2019
$m
5,106
(709)
(614)
356
4,139
Provisions decreased by $4 million to
$1,560 million in 2020. The Group revised its
presentation of certain provisions ($258 million)
in 2020, which cover Third party Liability and
other risks (including incurred but not yet
reported claims) to present this within current
Other provisions. This balance has historically
been presented within current Other payables.
This is offset by legal payments as described
in Note 21 from page 208.
Further details of the charges made against provisions
are contained in Notes 21 and 29 to the Financial
Statements from pages 208 and 228 respectively.
Bank loans and
other borrowings1
Lease liabilities2
Contracted capital
expenditure
Total
Less than
1 year
$m
1-3 years
$m
3-5 years
$m
Over
5 years
$m
Total
2020
$m
Total
2019
$m
2,803
207
3,940
288
4,119
135
–
–
–
16,921
27,783
25,688
108
689
738
689
737
396
3,010
4,228
4,254
17,718
29,210
26,821
1
Bank loans and other borrowings include interest charges payable in the period, as detailed in Note 27 to the Financial
Statements from page 219.
2 Lease liabilities arose on the adoption of IFRS 16 on 1 January 2019. See Note 8 from page 196 for more information.
Dividends for 2020
First interim dividend
Second interim dividend
Total
$
0.90
1.90
2.80
Pence
69.6
137.4
207.0
SEK
7.87
15.76
23.63
Payment date
14 September 2020
29 March 2021
The divestment of the US rights to Synagis,
which completed in 2019, included $150 million
held as a financial liability. AstraZeneca will
also receive $175 million following the
submission of the Biologics Licence
Application for MEDI8897, potential net
payments of $110 million for other MEDI8897
profit-related milestone payments and
$60 million in non-contingent payments for
MEDI8897 during the period from 2019 to 2021.
Contingent consideration
The majority of our business acquisitions have
included elements of consideration that are
contingent on future development and/or
sales milestones, with both the Diabetes and
Respiratory acquisitions in 2014 also including
royalty payments linked to future revenues.
The acquisitions of ZS Pharma in 2015 and
Acerta Pharma in 2016 had no contingent
consideration element and there were no
relevant acquisitions in 2020, 2019 and 2018.
Our agreement with BMS provides for various
sales-related royalty payments up until 2025.
Our transaction with Almirall includes further
payments of up to $0.4 billion for future
development, launch, and various other
sales-related milestone payments, and
sales-related royalty payments as detailed
in Note 20 to the Financial Statements
from page 207.
All these future payments are treated as
contingent consideration liabilities, and are
fair valued using decision-tree analyses, with
key assumptions, including the probability
of success, the potential for delays and the
expected levels of future revenues. The fair
value is updated at each reporting date to
reflect our latest estimate of the probabilities
of these key assumptions. Given the long-
term nature of the liabilities, the fair value
calculation includes the discounting of future
potential payments to their present value
using discount rates appropriate to the
period over which payments are likely to
be made. Over time, as the target date of
a consideration payment approaches, the
discount in absolute terms of such future
potential payment to its present value
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Review
93
Financial Review
continued
decreases. Therefore, in each period we
take a corresponding charge reflecting the
passage of time. We refer to this charge as
‘discount unwind’. The calculation of the fair
value is considered to be a key estimate.
Both the discount unwind and any movements
on the fair value of the underlying future
payments can result in significant income
statement movements. As detailed in the
Excluded from Core results section on page
86, these movements are treated as non-Core
items in our Reconciliation of Reported results
to Core results. In 2020, we recorded an
interest charge of $278 million on the discount
unwind on contingent consideration arising on
our business combinations, and a net fair
value decrease on contingent consideration of
$272 million (which resulted in a credit to
our income statement for the same amount)
driven principally by revised forecasts for
revenues and lower probabilities of achieving
certain sales milestones. At 31 December
2020, our contingent consideration liability
was $3,323 million (2019: $4,139 million) with
the movements of the balance detailed in the
table on page 93.
Tax payable and receivable
Net income tax payable has decreased by
$313 million (2019: increased by $119 million)
to $763 million, principally due to cash tax
timing differences and the impact of foreign
exchange movements. The tax receivable
balance of $364 million (2019: $285 million)
principally relates to cash tax timing
differences.
Net deferred tax assets increased by
$292 million (2019: $1,135 million) in the
year, resulting in a Net deferred tax asset of
$520 million, due to movements in deferred
tax arising on the elimination of unrealised
profit on inventory and associated with
intangible amortisation, offset by a net
$133 million deferred tax charge reflecting the
change in Dutch and UK income tax rates.
Additional information on the movement in deferred
tax balances is contained in Note 4 to the Financial
Statements from page 190.
Commitments and contingencies
We have commitments and contingencies
which are accounted for in accordance with
the accounting policies described in the
Financial Statements in the Group Accounting
Policies section from page 180.
We also have taxation contingencies. These
are described in the Taxation section in the
Critical accounting policies and estimates
section from page 97 and in Note 29 to the
Financial Statements from page 228.
Off-balance sheet transactions
and commitments
We have no off-balance sheet arrangements
and our derivative activities are non-speculative.
The table on page 93 sets out our minimum
contractual obligations at the year end.
Research and development
collaboration payments
Details of future potential R&D collaboration
payments are also included in Note 29 to the
Financial Statements on page 228. As detailed
in Note 29, payments to our collaboration
partners may not become payable due to
the inherent uncertainty in achieving the
development and revenue milestones linked
to the future payments. We may enter into
further collaboration projects in the future
that may include milestone payments and
as certain milestone payments fail to
crystallise due to, for example, development
not proceeding, they may be replaced by
potential payments under new collaborations.
Investments, divestments and capital
expenditure
We have completed over 123 major or
strategically important business development
transactions over the past three years.
In addition to the business development
transactions detailed under Collaboration
Revenue from page 88 of this Financial
Review, the following significant collaborations
remain in the development phase:
Defined benefit plan obligations
In terms of the Group’s major defined benefit
plans, approximately 90% of total defined
benefit obligations (or around 77% of net
obligations) are concentrated in the UK, the
US and Sweden. The UK and US plans are
largely legacy arrangements, as they have
been closed to new entrants since 2000. In
line with local regulations, the collectively
bargained Swedish pension plan remains
open to employees born before 1979.
Net defined benefit obligations increased by
$395 million in 2020 (2019: increase of $296
million) to $3,202 million. The increase was
driven by actuarial remeasurements of $168
million from lower discount rate assumptions
in the UK, US and Sweden which increased
liability valuations, partially offset by higher
than expected investment performance. A
further $278 million remeasurement was due
to exchange rate movements, caused by a
weakening USD against GBP, SEK and euro.
These remeasurements were partially offset
by Group contributions totalling $172 million
and an actuarial gain relating to amendments
to the US Post-Retirement Welfare Plans, as
detailed below.
In the UK, an actuarial valuation of the
AstraZeneca Pension Fund was carried out
by a qualified actuary as at 31 March 2019.
Following agreement between the Group
and Trustee, an updated actuarial valuation,
recovery plan and schedule of contributions
was submitted to the Pensions Regulator in
June 2020, ahead of the statutory deadline.
Over the past few years, the Group has
undertaken several initiatives to reduce net
defined benefit obligations and manage
associated long-term financial risks. As a
reminder, in the UK, a freeze on pensionable
pay has been in effect from 30 June 2010 and
in the US, both the qualified and non-qualified
US pension plans were closed to future
accruals in December 2017. Moreover, liability
management exercises have also been carried
out in the UK, including a Pension Increase
Exchange exercise in 2016/2017. There has
been further such activity in the US and
Netherlands during 2020.
In the US, there was a change within the
Group’s Post Retirement Healthcare plans
to the level of medical coverage provided
for members aged 65 and over, effective
from 1 January 2021. The changes resulted
in a past service credit of approximately
$64 million. In the Netherlands, a past service
credit of approximately $7 million resulted
from the freeze of the defined benefit
pension plan from 1 January 2021. Both
past service credits were recognised in
the income statement for the year ended
31 December 2020.
Further details of our accounting for post-retirement
benefit plans are included in Note 22 to the Financial
Statements from page 209.
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Daiichi Sankyo
> AstraZeneca has entered into a new
global development and commercialisation
agreement with Daiichi Sankyo for DS-1062,
their proprietary trophoblast cell-surface
antigen 2 (TROP2)-directed antibody drug
conjugate and potential new medicine for
the treatment of multiple tumour types.
AstraZeneca will pay Daiichi Sankyo an
upfront payment of $1 billion in staged
payments: $350 million is due upon
completion, with $325 million after 12 months
and $325 million after 24 months from the
effective date of the agreement. AstraZeneca
will pay additional conditional amounts
of up to $1 billion for the successful
achievement of regulatory approvals and
up to $4 billion for sales-related milestones.
The transaction was accounted for as an
intangible asset acquisition, recognised
initially at the present value of non-
contingent consideration, with any potential
future milestone payments capitalised into
the intangible asset as they are recognised.
The companies will jointly develop and
commercialise DS-1062 worldwide, except
in Japan where Daiichi Sankyo will maintain
exclusive rights. AstraZeneca and Daiichi
Sankyo will share equally development and
commercialisation expenses as well as
profits relating to DS-1062 worldwide,
except for Japan where Daiichi Sankyo will
be responsible for such costs and will pay
AstraZeneca mid-single-digit royalties.
Daiichi Sankyo will record sales in the US,
certain countries in Europe and certain
other countries where Daiichi Sankyo has
affiliates. Profits shared with AstraZeneca
from those countries will be recorded as
Collaboration Revenue by AstraZeneca.
AstraZeneca will record Product Sales in
other countries worldwide, for which profits
shared with Daiichi Sankyo will be recorded
within Cost of sales. Daiichi Sankyo will
manufacture and supply DS-1062. The
collaboration agreement became effective
on 27 July 2020.
Innate Pharma
> In April 2015, we entered into two oncology
agreements with Innate Pharma: first, a
licence which provides us with exclusive
global rights to co-develop and
commercialise IPH2201 in combination with
Imfinzi; and, second, an option to license
exclusive global rights to co-develop and
commercialise IPH2201 in monotherapy
and other combinations in certain treatment
areas. Under the terms of the combination
licence, we assumed exclusive global rights
to research, develop and commercialise
IPH2201 in combination with Imfinzi. We
jointly fund Phase II studies with Innate
Pharma and we lead the execution of these
studies. Under the terms of the agreements,
we made an initial payment to Innate
Pharma of $250 million, which included the
consideration for exclusive global rights to
co-develop and commercialise IPH2201 in
combination with Imfinzi, as well as access
to IPH2201 in monotherapy and other
combinations in certain treatment areas.
The agreement includes a Phase III initiation
milestone of $100 million, as well as
additional regulatory and sales-related
milestones. We record all sales and will pay
Innate Pharma double-digit royalties on net
sales. The arrangement includes the right
for Innate Pharma to co-promote in Europe
for a 50% profit share in the territory.
> In October 2018, we exercised our option
over IPH2201 and simultaneously entered
into a further multi-element transaction
with Innate Pharma. Under the agreement,
we paid $50 million to collaborate on, and
acquire an option to license, IPH5201, a
first-in-class anti-CD39 mAb. Additionally,
we paid $20 million to acquire options over
four future programmes currently being
developed by Innate Pharma, and paid
€62.6 million to acquire a 9.8% stake in
Innate Pharma. The $100 million option fee
and $50 million premium paid over market
price for the investment in Innate Pharma
have been capitalised as intangible assets.
The payment for future programmes will be
expensed as research and development
expenditure over four years. At the same
time, we licensed the EU and US rights to
Lumoxiti to Innate Pharma for $50 million
upfront plus future milestone payments of
up to $25 million.
> In December 2020, Innate Pharma
announced its intention to transfer the
rights of Lumoxiti back to AstraZeneca.
AstraZeneca will not be required to refund
the upfront payment but will no longer
be entitled to receive milestones from
Innate Pharma.
Moderna
> In March 2013, we signed an exclusive
agreement with Moderna to discover,
develop and commercialise pioneering
medicines based on messenger RNA
Therapeutics for the treatment of serious
cardiovascular, metabolic and renal
diseases, as well as cancer. Under the
terms of the agreement, we made an
upfront payment of $240 million. We will
have exclusive access to select any target
of our choice in cardiometabolic and renal
diseases, as well as selected targets in
oncology, over a period of up to five years
for subsequent development of messenger
RNA Therapeutics. In addition, Moderna is
entitled to an additional $180 million for the
achievement of three technical milestones.
Through this agreement, we have the option
to select up to 40 drug products for clinical
development and Moderna will be entitled
to development and commercial milestone
payments as well as royalties on drug sales.
AstraZeneca will lead the pre-clinical,
clinical development and commercialisation
of therapies resulting from the agreement
and Moderna will be responsible for
designing and manufacturing the
messenger RNA Therapeutics against
selected targets. We are currently
progressing 19 projects across CVRM and
Oncology. Utilising both companies’
expertise, significant progress has also
been made with the technology platform,
with the focus on formulation, safety, and
drug metabolism and pharmacokinetics.
We determine the above business
development transactions to be significant
using a range of factors. We look at the
specific circumstances of the individual
arrangement and apply several quantitative
and qualitative criteria. Because we consider
business development transactions to be an
extension of our R&D strategy, the expected
total value of development payments under
the transaction and its proportion of our
annual R&D spend, both of which are proxies
for overall R&D effort and cost, are important
elements of the determination of the
significance. Other quantitative criteria we
apply include, without limitation, expected
levels of future sales, the possible value of
milestone payments and the resources used
for commercialisation activities (for example,
the number of staff). Qualitative factors we
consider include, without limitation, new
market developments, new territories, new
areas of research and strategic implications.
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Review
95
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continued
Capitalisation and shareholder return
Capitalisation
The total number of shares in issue at
31 December 2020 was 1,313 million (2019:
1,312 million). In April 2019, AstraZeneca
completed an issuance of 44,386,214 new
Ordinary Shares of $0.25 each at a price of
£60.50 per share, resulting in an increase in share
capital of $11 million and an increase in share
premium of $3,479 million, net of transaction
costs of $22 million. In addition, 0.5 million
Ordinary Shares (2019: 0.7 million) were issued
upon share option exercises for total proceeds
of $30 million (2019: $32 million).
Shareholders’ equity increased by
$2,495 million to $15,622 million at the year end.
Non-controlling interests were $16 million
(2019: $1,469 million), with the decrease in
the year as a result of the reclassification of
the $1,401 million Non-controlling interests
reserve into Retained earnings relating to the
minority shareholders of Acerta Pharma.
Following the approval of Calquence in the EU
in November 2020, the minority shareholders
are now considered to have no further
substantive variability in risk and reward
related to their shares as it is considered
highly likely that one of the options will be
exercised, and the price of the options is now
fixed. Therefore, no further amounts of the
consolidated AstraZeneca results have been
attributed to the minority shareholders of
Acerta Pharma and the Non-controlling
interests reserve relating to the minority
shareholders of Acerta Pharma, totalling
$1,401 million, has been reclassified into
Retained earnings as detailed in Note 26
to the Financial Statements on page 218.
Dividend and share repurchases
The Board has recommended a second
interim dividend of $1.90 (137.4 pence, 15.76
SEK) to be paid on 29 March 2021. This brings
the full-year dividend to $2.80 (207.0 pence,
23.63 SEK). Against Reported Earnings per
share, the Group had a dividend cover ratio
of 0.9:1 in 2020 (2019: 0.4:1). Against Core
Earnings per share, the Group had a dividend
cover ratio of 1.44:1 in 2020 (2019: 1.25:1). This
dividend is consistent with the progressive
dividend policy, by which the Board intends
to maintain or grow the dividend each year.
The Board regularly reviews its distribution
policy and its 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, the Board currently
believes it is appropriate to continue the
suspension of the share repurchase
programme which was announced in 2012.
The Board reviews the level of distributable
reserves of the Parent Company annually
and aims to maintain distributable reserves
that provide adequate cover for dividend
payments. At 31 December 2020, the Profit
and loss account reserve of $10,304 million
(2019: $11,998 million) was available for
distribution, subject to filing these Financial
Statements with Companies House. When
making a distribution to shareholders, the
Directors determine profits available for
distribution by reference to guidance on
realised and distributable profits under the
Companies Act 2006 issued by the Institute of
Chartered Accountants in England and Wales
and the Institute of Chartered Accountants
of Scotland in April 2017.
The profits of the company have been
received in the form of receivables due from
subsidiaries. The availability of distributable
reserves in the Company is dependent on
those receivables meeting the definition of
qualifying consideration within the guidance,
and in particular on the ability of subsidiaries
to settle those receivables within a reasonable
period of time. The Directors consider that,
based on the nature of these receivables
and the available cash resources of the
Group and other accessible sources of
funds, at 31 December 2020 all (2019: the
overwhelming majority; 2018: all) of the
Company’s profit and loss reserves were
available for distribution.
Future prospects
As outlined earlier in this Annual Report, our
strategic priorities support delivery of growth
through innovation and our Purpose: to push
the boundaries of science to deliver life-
changing medicines.
In support of this, we made certain choices
around our three strategic priorities:
> Deliver Growth and Therapy Area Leadership
> Accelerate Innovative Science
> Be a Great Place to Work.
For more information, see Our Strategy and Key
Performance Indicators from page 18.
Full year 2021: additional commentary
Total Revenue is expected to increase by
a low-teens percentage, accompanied by a
faster growth in Core EPS to $4.75 to $5.00.
AstraZeneca continues its focus on improving
operating leverage, while addressing its
most important capital-allocation priority
of reinvestment in the business; namely
continued investment in R&D and the support
of medicines and patient access in key markets
A Core Tax Rate of 18-22% is expected.
This commentary represents management’s
current estimates and is subject to change.
See the Cautionary statement regarding
forward-looking statements on page 284.
Financial risk management
Financial risk management policies
Insurance
Our risk management processes are
described in Risk Overview from page 78.
These processes enable us to identify risks
that can be partly or entirely mitigated through
the use of insurance. We negotiate the best
available premium rates with insurance
providers on the basis of our extensive risk
management procedures. We focus our
insurance resources on the most critical
areas, or where there is a legal requirement,
and where we can get the best value for
money. We purchase an external multi-line
insurance programme to mitigate against
significant financial loss arising from business
risks, including liability, business interruption,
property damage, and Directors’ and officers’
liability. In order to contain insurance costs,
as of February 2006, we adjusted our product
liability coverage profile, accepting uninsured
exposure above $100 million.
Taxation
Our approach to managing tax risk is
integrated with our broader business risk
management and compliance framework.
Our approach is to manage tax risks and tax
costs in a manner consistent with applicable
regulatory requirements and with shareholders’
best long-term interests, taking into account
operational, economic and reputational
factors. We manage tax risks in the context
of substantive business transactions.
Treasury
The principal financial risks to which we are
exposed are those arising from liquidity,
interest rates, foreign currency and credit.
We have a centralised treasury function to
manage these risks in accordance with
Board-approved policies. Specifically, liquidity
risk is managed through maintaining access
to a number of sources of funding to meet
anticipated funding requirements, including
committed bank facilities, cash resources
and use of debt factoring. We also use supply
chain financing.
For further information on our supply chain financing
arrangements, refer to the Business Review on page 52.
Interest rate risk is managed through
maintaining a debt portfolio that is weighted
towards fixed rates of interest. In 2020, our
net interest charge was adversely affected by
movements in floating rates of interest on the
floating rate assets AstraZeneca held, offset
by lower interest on floating rate debt. We
monitor the impact of currency on a portfolio
basis (to recognise correlation effect), and
may hedge to protect against significant
adverse impacts on cash flow over the short
to medium term. We aim to hedge the
currency exposure that arises between the
booking and settlement dates on material
non-local currency purchases and sales
by subsidiaries and the external dividend.
Significant intra-Group loans that give rise to
foreign exchange movements are also hedged.
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AstraZeneca Annual Report & Form 20-F Information 2020 / Strategic Report
Credit risk is managed through setting and
monitoring credit limits appropriate for the
assessed risk of the counterparty. The Group
utilises factoring arrangements for selected
trade receivables. These factoring
arrangements qualify for full derecognition
of the associated trade receivables under
IFRS 9 ‘Financial Instruments’.
Our capital and risk management objectives
and policies are described in further detail
in Note 27 to the Financial Statements from
page 219 and in Risk Overview from page 78.
Sensitivity analysis of the Group’s exposure
to exchange rate and interest rate movements
is also detailed in Note 27 to the Financial
Statements from page 219.
Critical accounting policies and estimates
Our Financial Statements are prepared in
accordance with international accounting
standards in conformity with the requirements
of the Companies Act 2006 and International
Financial Reporting Standards (IFRSs)
adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the EU. The
Consolidated Financial Statements also
comply fully with IFRS as issued by the IASB.
The accounting policies employed are set out
in the Group Accounting Policies section in
the Financial Statements from page 180. In
applying these policies, we make estimates
and assumptions that affect the Reported
amounts of assets and liabilities and
disclosure of contingent assets and liabilities.
The actual outcome could differ from those
estimates. Some of these policies require a
high level of judgement because the areas are
especially subjective or complex. We believe
that the most critical accounting policies and
significant areas of judgement and estimation
are in the following areas and align with the
accounting policies containing our key
accounting judgements and significant
accounting estimates as disclosed in the
Financial Statements from page 180:
> revenue recognition – see Revenue
Accounting Policy from page 181 KJ and
Note 1 on page 187 SE
> expensing of internal development
expenses – see Research and Development
Policy from page 182 KJ
> impairment review of Intangible assets –
see Note 10 from page 198 SE
> useful economic life of Intangible assets –
see Research and Development Policy from
page 182 KJ and Note 10 from page 198 SE
> business combinations and Goodwill
(and Contingent consideration arising from
business combinations) – see Business
Combinations and Goodwill Policy on page
184 KJ , Note 10 from page 198 KJ and
Note 20 from page 207 SE
> litigation liabilities – see Litigation and
Environmental liabilities within Note 29 from
page 228 KJ
Key
KJ Key Judgement
SE Significant Estimate
S
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2020
$m
19,255
(2,464)
(1,088)
(5,690)
(281)
(198)
(47)
(849)
8,638
2019
$m
18,354
(2,429)
(1,380)
(5,467)
(303)
(44)
(105)
(879)
7,747
2018
$m
16,538
(2,224)
(1,304)
(4,600)
(286)
(119)
(140)
(989)
6,876
Gross to Net Product Sales
US pharmaceuticals
Gross Product Sales
Chargebacks
Regulatory – Medicaid and state programmes
Contractual – Managed care and Medicare
Cash and other discounts
Customer returns
US Branded Pharmaceutical Fee
Other
Net Product Sales
Movements in accruals
US pharmaceuticals
Brought forward
at
1 January 2020
$m
Provision for
current year
$m
Adjustment in
respect of
prior years
$m
Returns and
payments
$m
Carried forward at
31 December 2020
$m
245
731
2,572
1,269
(28)
(93)
(2,611)
(1,412)
178
495
1,939
5,796
(127)
(5,671)
1,937
19
180
126
145
289
225
92
851
–
–
(51)
(2)
(288)
(152)
(52)
(866)
20
253
115
128
3,385
11,094
(301)
(11,052)
3,126
Chargebacks
Regulatory – Medicaid
and state programmes
Contractual – Managed
care and Medicare
Cash and other discounts
Customer returns
US Branded
Pharmaceutical Fee
Other
Total
Brought forward
at
1 January 2019
$m
271
892
1,542
4
361
52
144
Provision for
current year
$m
2,458
1,477
5,613
303
44
111
879
Adjustment in
respect of
prior years
$m
Returns and
payments
$m
Carried forward at
31 December 2019
$m
(29)
(2,455)
(97)
(1,541)
245
731
(146)
(5,070)
1,939
–
–
(6)
–
(288)
(225)
(31)
(878)
19
180
126
145
3,266
10,885
(278)
(10,488)
3,385
Chargebacks
Regulatory – Medicaid
and state programmes
Contractual – Managed
care and Medicare
Cash and other discounts
Customer returns
US Branded
Pharmaceutical Fee
Other
Total
Chargebacks
Regulatory – Medicaid
and state programmes
Contractual – Managed
care and Medicare
Cash and other discounts
Customer returns
US Branded
Pharmaceutical Fee
Other
Total
Brought forward
at
1 January 2018
$m
206
749
1,267
4
386
63
151
Provision for
current year
$m
2,220
Adjustment in
respect of
prior years
$m
Returns and
payments
$m
Carried forward at
31 December 2018
$m
4
(2,159)
271
892
1,482
(178)
(1,161)
4,685
(85)
(4,325)
1,542
286
119
99
989
–
–
41
–
(286)
(144)
(151)
(996)
4
361
52
144
2,826
9,880
(218)
(9,222)
3,266
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Review
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continued
> operating segments – see Note 6 from
page 193 KJ
> employee benefits – see Note 22 from
page 209 SE
> taxation – see Taxation Accounting Policies
on page 183 and Note 29 on page 232 KJ SE .
Revenue recognition
Product Sales are recorded at the invoiced
amount (excluding inter-company sales and
value added taxes), less movements in
estimated accruals for rebates and chargebacks
given to managed care and other customers,
which are a particular feature in the US and
are considered to be key estimates. It is the
Group’s policy to offer a credit note for all
returns and to destroy all returned stock in all
markets. Cash discounts for prompt payments
are also discounted from sales. Sales are
recognised when the control of the goods has
been transferred to a third party, which is usually
when title passes to the customer, either on
shipment or on the receipt of goods by the
customer, depending on local trading terms.
Rebates, chargebacks and returns in the US
When invoicing Product Sales in the US, we
estimate the rebates and chargebacks that
we expect to pay, which are considered to be
estimates. These rebates typically arise from
sales contracts with third-party managed
care organisations, hospitals, long-term care
facilities, group purchasing organisations and
various federal or state programmes (Medicaid
contracts, supplemental rebates, etc.). They
can be classified as follows:
> Chargebacks, where we enter into
arrangements under which certain parties,
typically hospitals, long-term care facilities,
group purchasing organisations, the
Department of Veterans Affairs, Public
Health Service Covered Entities and the
Department of Defense, are able to buy
products from wholesalers at the lower
prices we have contracted with them. The
chargeback is the difference between the
price we invoice to the wholesaler and the
contracted price charged by the wholesaler
to the other party. Chargebacks are
credited directly to the wholesalers.
> Regulatory, including Medicaid and other
federal and state programmes, where we
pay rebates based on the specific terms
of agreements with the US Department
of Health and Human Services and with
individual states, which include product
usage and information on best prices and
average market prices benchmarks.
> Contractual, under which entities such as
third-party managed care organisations are
entitled to rebates depending on specified
performance provisions, which vary from
contract to contract.
The effects of these deductions on our US
pharmaceuticals revenue and the movements
on US pharmaceuticals revenue provisions
are set out on page 97.
Accrual assumptions are built up on a
product-by-product and customer-by-
customer basis, taking into account specific
contract provisions coupled with expected
performance, and are then aggregated into a
weighted average rebate accrual rate for each
of our products. Accrual rates are reviewed
and adjusted on an as needed basis. There
may be further adjustments when actual
rebates are invoiced based on utilisation
information submitted to us (in the case of
contractual rebates) and claims/invoices are
received (in the case of regulatory rebates and
chargebacks). We believe that we have made
reasonable estimates for future rebates using
a similar methodology to that of previous
years. Inevitably, however, these estimates
involve assumptions in respect of aggregate
future sales levels, segment mix and
customers’ contractual performance.
Overall adjustments between gross and net
US Product Sales amounted to $10,617 million
in 2020 (2019: $10,607 million) with the
increase driven by an overall increase in our
US Product Sales and changes in product mix.
Cash discounts are offered to customers to
encourage prompt payment. Accruals are
calculated based on historical experience and
are adjusted to reflect actual experience. Our
revenue recognition policy is described within
Group Accounting Policies from page 181.
Industry practice in the US allows wholesalers
and pharmacies to return unused stocks
within six months of, and up to 12 months
after, shelf-life expiry. The customer is
credited for the returned product by the
issuance of a credit note. Returned products
are not exchanged for products from inventory
and once a return claim has been determined
to be valid and a credit note has been issued
to the customer, the returned products are
destroyed. At the point of sale in the US, we
estimate the quantity and value of products
which may ultimately be returned. Our returns
accruals in the US are based on actual
experience. Our estimate is based on the
historical sales and returns information for
established products together with market-
related information, such as estimated shelf
life, product recall, and estimated stock
levels at wholesalers, which we receive via
third-party information services. For newly
launched products, we use rates based
on our experience with similar products or
a pre-determined percentage.
Business combinations and goodwill
(and contingent consideration arising
from business combinations)
Our business model includes investment
in targeted business developments to
strengthen our portfolio, pipeline and
capabilities. These business development
transactions include collaborations, asset
in-licences and business acquisitions.
Each transaction is considered to establish
whether it qualifies as a business combination
by applying the criteria assessment detailed
in IFRS 3 ‘Business Combinations’, after
applying the optional concentration test on
an elective basis. The determination of a
transaction being a business combination
or asset acquisition is considered to be a
key judgement as detailed in the accounting
policy on page 184.
On the acquisition of a business, fair values
are attributed to the identifiable assets and
liabilities and contingent liabilities unless the
fair value cannot be measured reliably, in which
case the value is subsumed into goodwill.
Attributing fair values is a key judgement.
Goodwill is the difference between the fair
value of the consideration and the fair value
of net assets acquired. Fair value is the price
that would be received to sell an asset or pay
for a liability in an orderly transaction at the
date of acquisition. The price may be directly
observable but, in most cases, is estimated
using valuation techniques which normally
involve predicting future cash flows and
applying a market participant discount rate.
No business combinations were made in
2020, 2019 and 2018.
Future contingent elements of consideration,
which may include development and launch
milestones, revenue threshold milestones and
revenue-based royalties, are fair valued at
the date of acquisition using decision-tree
analysis with key inputs including probability
of success, consideration of potential delays
and revenue projections based on the Group’s
internal forecasts. Unsettled amounts of
consideration are held at fair value within
payables with changes in fair value recognised
immediately in the Consolidated Statement
of Comprehensive Income. Several of our
business combinations have included
significant amounts of contingent consideration.
Details of the movements in the fair value of
the contingent consideration in the year and
the range of possible contingent consideration
amounts that may eventually become payable,
are contained in Note 10 to the Financial
Statements from page 198.
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S
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Sarbanes-Oxley Act section 404
As a consequence of our Nasdaq listing, we
are required to comply with those provisions
of the Sarbanes-Oxley Act applicable to
foreign issuers. Section 404 of the Sarbanes-
Oxley Act requires companies annually to
assess and make public statements about
the quality and effectiveness of their internal
control over financial reporting. As regards
Sarbanes-Oxley Act section 404, our approach
is based on the Committee of Sponsoring
Organizations (COSO) 2013 framework.
Our approach to the assessment has been
to select key transaction and financial
reporting processes in our largest operating
units and a number of specialist areas
(e.g. financial consolidation and reporting,
treasury operations and taxation etc.), so that,
in aggregate, we have covered a significant
proportion of the key lines in our Financial
Statements. Each of these operating units
and specialist areas has ensured that its
relevant processes and controls are
documented to appropriate standards, taking
into account, in particular, the guidance
provided by the SEC. We have also reviewed
the structure and operation of our ‘entity level’
control environment. This refers to the
overarching control environment, including
structure of reviews, checks and balances
that are essential to the management of
a well-controlled business.
Where not all the equity of a subsidiary is
acquired, the non-controlling interest is
recognised either at fair value or at the
non-controlling interest’s proportionate
share of the net assets of the subsidiary,
on a case-by-case basis. Put options over
non-controlling interests are recognised as a
financial liability measured at amortised cost,
with a corresponding entry in either retained
earnings or against non-controlling interest
reserves on a case-by-case basis.
As detailed on page 98, we have significant
investments in goodwill and intangible assets
as a result of acquisitions of businesses and
purchases of assets, such as product
development and marketing rights.
Details of the estimates and assumptions
we make in our annual impairment testing
of goodwill are included in Note 9 to the
Financial Statements on page 197. The Group,
including acquisitions, is considered a single
operating segment for impairment purposes.
No impairment of goodwill was identified.
A significant portion of our investments in
intangible assets and goodwill arose from the
restructuring of the joint venture with MSD
which commenced in 1998, the acquisition of
MedImmune in 2007 and our 2014 acquisition
of BMS’s interest in the Group’s Diabetes
Alliance. We are satisfied that the carrying
values of our intangible assets as at
31 December 2020 are fully justified by
estimated future cash flows. The accounting
for our Intangible assets is fully explained in
Note 10 to the Financial Statements from page
198, including details of the estimates and
assumptions we make in impairment testing
of intangible assets.
Litigation and environmental liabilities
In the normal course of business, contingent
liabilities may arise from product-specific and
general legal proceedings, from guarantees or
from environmental liabilities connected with
our current or former sites. Where we believe
that potential liabilities have a less than 50%
probability of crystallising, or where we are
unable to make a reasonable estimate of the
liability, we treat them as contingent liabilities.
These are not provided for, but are disclosed
in Note 29 to the Financial Statements from
page 228.
In cases that have been settled or
adjudicated, or where quantifiable fines and
penalties have been assessed and which are
not subject to appeal (or other similar forms of
relief), or where a loss is probable and we are
able to make a reasonable estimate of the
loss, we generally indicate the loss absorbed
or make a provision for our best estimate of
the expected loss.
Where it is considered that the Group is
more likely than not to prevail, or in the rare
circumstances where the amount of the legal
liability cannot be estimated reliably, legal
costs involved in defending the claim are
charged to profit as they are incurred. Where
it is considered that we have a valid contract
which provides the right to reimbursement
(from insurance or otherwise) of legal costs
and/or all or part of any loss incurred or for
which a provision has been established and
we consider recovery to be virtually certain,
then the best estimate of the amount
expected to be received is recognised
as an asset.
Assessments as to whether or not to
recognise provisions or assets and of the
amounts concerned usually involve a series
of complex judgements about future events
and can rely heavily on estimates and
assumptions. We believe that the provisions
recorded are adequate based on currently
available information and that any insurance
recoveries recorded will be received.
However, given the inherent uncertainties
involved in assessing the outcomes of these
cases and in estimating the amount of the
potential losses and the associated insurance
recoveries, we could in future periods incur
judgments or insurance settlements that
could have a material adverse effect on our
results in any particular period.
The position could change over time and
there can, therefore, be no assurance that any
losses that result from the outcome of any
legal proceedings will not exceed the amount
of the provisions that have been booked in
the accounts.
Although there can be no assurance regarding
the outcome of legal proceedings, we do not
currently expect them to have a material
adverse effect on our financial position, but
they could significantly affect our financial
results in any particular period.
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Review
99
We are committed to employing high ethical
standards when carrying out all aspects of
our business globally. Our Code of Ethics
(the Code) is based on our Values, expected
behaviours and key policy principles. More
information on the Code can be found in the
Business Review on page 61 and page 118
of the Corporate Governance Report.
AstraZeneca recognises patients as people
first and puts them at the heart of what we do.
Information on the importance of Patients to
the business can be found on pages 26 and
112, with further information throughout the
Business Review.
Information on interactions with suppliers
are set on pages 62 and 63, and on page 110.
The consideration and impact of the Group’s
operations on the environment can be found
on pages 72 to 77 and Ambition Zero Carbon
on page 27. Information on how the Group has
considered other factors, such as communities,
is also set out in Contributing to society, from
page 76 and Connecting with our stakeholders
on page 110.
Details of how the Board operates and matters
considered by the Board are set out in the
Corporate Governance Report from page 108.
Examples of how Directors discharged their
section 172(1) duties when making Principal
Decisions during 2020 are set out on page
112. Principal Decisions are decisions and
discussions which are material or strategic to
the Group, but also those that are significant
to any of our stakeholder groups.
Strategic Report
The following sections make up the Strategic
Report, which has been prepared in
accordance with the requirements of the
Companies Act 2006:
> AstraZeneca at a Glance
> Chairman’s Statement
> Chief Executive Officer’s Review
> Business Model and Life-cycle of
a Medicine
> Healthcare in a Changing World
> Our Strategy and Key Performance
Indicators
> Case study: Creating the next generation
of therapeutics
> Performance in 2020
> Therapy Area Review
> Business Review
> Risk Overview
> Financial Review
and has been approved and signed
on behalf of the Board.
A C N Kemp
Company Secretary
11 February 2021
Financial Review
continued
Section 172(1) statement
When making decisions, the Directors of
AstraZeneca PLC must act in the way they
consider, in good faith, is most likely to
promote the success of the Company for the
benefit of its members as a whole, while also
considering the broad range of stakeholders
who interact with and are impacted by our
business. Throughout the year, while
discharging their duties, section 172(1)
requires a director to have regard, amongst
other matters, to the:
> likely consequences of any decisions
in the long term
> interests of the company’s employees
> need to foster the company’s business
relationships with suppliers, customers
and others
> impact of the company’s operations on
the community and environment
> desirability of the company maintaining
a reputation for high standards of
business conduct and
> need to act fairly as between members
of the company.
In discharging their section 172(1) duties the
Directors have had regard to the factors set
out above, as well as other factors relevant
to the decision being made. The Board
acknowledges that every decision made will
not necessarily result in a positive outcome for
all stakeholders. By considering our Purpose
and Values, together with our strategic
priorities, the Board aims to ensure that the
decisions made are consistent and intended
to promote the Company’s long-term success.
The Group engaged with key stakeholders
throughout the year to understand the issues
and factors that are significant for these
stakeholders, and a number of actions were
taken as a result of this engagement. The
interaction with stakeholders, and the impact
of these interactions, is set out in the
Connecting with our stakeholders section
on pages 110 - 112 and throughout the
Strategic Report. We are committed to being
a great place to work for the global workforce,
encouraging and rewarding innovation,
entrepreneurship and high performance.
Details on engagement with employees can
be found on pages 68-71 of the Business
Review, page 123 of the Audit Committee
Report and page 151 of the Remuneration
Committee Report.
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AstraZeneca Annual Report & Form 20-F Information 2020 / Strategic Report
Corporate
Governance
Chairman’s Introduction 102
Corporate Governance Overview 103
Board of Directors 104
Senior Executive Team (SET) 106
Corporate Governance Report 108
Science Committee Report 119
Nomination and Governance
Committee Report 120
Audit Committee Report 122
Directors’ Remuneration Report 131
Remuneration Policy 156
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AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance
101
Chairman’s
Introduction
Good corporate governance is a prerequisite for a well-run company
and this Corporate Governance Report reflects the new regulations
which encourage transparency in governance reporting and enhance
understanding of how AstraZeneca is managed.
“ It became apparent
early in the year that
we could work well
together in a virtual
way, maintaining
continuity of
governance.”
2020 proved to be a test of AstraZeneca’s
solid governance foundations
2020 proved to be a test of AstraZeneca’s
solid governance foundations as the Board,
SET and colleagues around the world had to
adapt quickly to new ways of working due to
the COVID-19 pandemic. It became apparent
early in the year that we could work well
together in a virtual way, with good IT support,
continuing to collaborate and maintain the
continuity of the various governance
processes and activities, including our usual
financial and other controls, and quarterly
results announcements.
However, the pandemic has hindered the
Board’s ability to engage as fully as usual
with some stakeholders this year and we
had to curtail our travel plans, including a
planned visit to AstraZeneca Japan, and
some employee engagement activities.
Having published our Notice of AGM at
about the time the UK started its first
lockdown, we had to hold a closed AGM in
2020. We encouraged shareholders to vote
by proxy in advance and invited them to
submit questions to the Board by post or
e-mail. These questions and our responses
were made available on our website. The
Board is looking forward to returning to a
more normal level of engagement with
shareholders, employees and other
stakeholders as soon as it is safe to do
so in 2021.
With Directors based in different time zones
across the world – from the west coast of
the US to Asia – it has occasionally proved
difficult to schedule Board meetings at times
convenient for all. However, we believe this
challenge is outweighed by the benefits of
having a diverse Board that reflects the global
nature of our business, made up of Directors
who have the skills and experience that align
with the Company’s and the Board’s needs.
Despite having to operate virtually, we
successfully recruited two new Non-Executive
Directors during 2020, in October and
November – Euan Ashley and Diana Layfield.
We are delighted to have the benefit of Euan’s
scientific achievements and interests, and his
entrepreneurial experience on the US west
coast, and of Diana’s broad international
business experience, expertise in delivering
innovation at scale and her passion for
life sciences.
As always, discussion of strategy was a key
part of the good governance process in 2020
and you can read elsewhere in this report
about our agreement to acquire Alexion.
As part of its oversight of management, the
Board will continue to monitor the work to close
this proposed transaction and assure itself
that there is good planning for a successful
integration, subject, of course, to regulatory
clearances and shareholders’ approval.
Leif Johansson
Chairman
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AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance
Corporate
Governance
Overview
Delivery
Governance structure
How our governance supports the delivery of our strategy
All Directors are collectively responsible for the success of the Group. The Non-Executive Directors
exercise independent, objective judgement in respect of Board decisions, and scrutinise and challenge
management. They also have various responsibilities concerning the integrity of financial information,
internal controls and risk management.
The Board is responsible for setting our strategy
and policies, overseeing risk and corporate
governance, and monitoring progress towards
meeting our objectives and annual plans. It is
accountable to our shareholders for the proper
conduct of the business and our long-term success,
and seeks to represent the interests of all
stakeholders. The Board conducts an annual
review of the Group’s overall strategy. The CEO,
CFO and Senior Executive Team (SET) take the
lead in developing our strategy, which is then
reviewed, constructively challenged and approved
by the Board.
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The Board has delegated some of its powers to the CEO and operates with the assistance of four Committees:
Board
Corporate Governance Report from page 108
Audit
Committee
Report from page 122
Remuneration
Committee
Report from page 131
Nomination and
Governance Committee
Report from page 120
Science
Committee
Report from page 119
Senior Executive Team (SET)
Details of our SET on pages 106 and 107
In addition to the SET, we have two senior-level governance bodies:
Early Stage Portfolio Committee
Page 106
Late Stage Portfolio Committee
Page 106
Attendance in 2020
Board or Committee Chairman
Board Committee membership and meeting attendance in 2020
The Board held 15 meetings in 2020,
including its usual annual strategy
review. Eight of these were convened
at short notice and related to the
proposed acquisition of Alexion.
Other than its meeting in January
2020, which took place in London, UK,
all Board meetings in 2020 were held
virtually by video conference due to
the COVID-19 pandemic.
1
Dr Euan Ashley missed three ad hoc
meetings. Two absences were due to
long-standing medical training and
student teaching commitments, and the
third resulted from a time zone conflict.
For full details, see page 115.
Name
Euan Ashley – appointed 1 October 2020
Geneviève Berger
Philip Broadley
Graham Chipchase
Michel Demaré
Deborah DiSanzo
Marc Dunoyer
Leif Johansson
Diana Layfield – appointed 1 November 2020
Sheri McCoy
Tony Mok
Nazneen Rahman
Pascal Soriot
Marcus Wallenberg
Board
4(7)1
14(15)
13(15)
12(15)
15(15)
12(15)
15(15)
15(15)
5(5)
14(15)
15(15)
15(15)
15(15)
13(15)
Audit Remuneration
Nomination and
Governance
7(7)
7(7)
7(7)
7(7)
6(6)
4(4)
2/(2)
6(6)
6(6)
5(5)
4(5)
5(5)
5(5)
Science
1(1)
4(5)
5(5)
5(5)
4(5)
Note: number in brackets denotes number of meetings during the year that Board members were entitled to attend.
For more information, see Changes to the composition of the Board and its Committees for the year ended 31 December 2020 on page 104.
For more information on attendance at Board and Committee meetings, see Role of Non-Executive Directors on page 115.
AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance Overview
103
Board of Directors
as at 31 December 2020
Committee membership key
Committee
Chairman
NG Nomination and
Governance
A Audit
S Science
R Remuneration
*
Date of first appointment
or election to the Board.
Changes to the composition of the Board
and its Committees for the year ended
31 December 2020
Euan Ashley
Appointed as a
Non-Executive
Director and became
a member of the
Science Committee
on 1 October 2020.
Graham Chipchase
Stepped down as
Chairman of the
Remuneration
Committee on
1 August 2020.
Michel Demaré
Appointed as a
member and
Chairman of the
Remuneration
Committee on
1 August 2020.
Diana Layfield
Appointed as a
Non-Executive
Director on
1 November 2020.
For full biographical details of our Board
members see, www.astrazeneca.com/
our-company/leadership
Board composition
as at 31 December 2020
Gender split of Directors
Men 9
Women 5
Leif Johansson NG R
Non-Executive Chairman of the Board
(April 2012*)
Pascal Soriot
Executive Director and CEO
(October 2012*)
Marc Dunoyer
Executive Director and CFO
(November 2013*)
Skills and experience: From 1997-2011,
Leif was Chief Executive Officer of
AB Volvo. Leif served at AB Electrolux
as Chief Executive Officer from
1994-1997. He was a Non-Executive
Director of BMS from 1998-September
2011, serving on the Audit Committee
and Compensation and Management
Development Committee. Leif was
Chairman of LM Ericsson from
2011-2018. He holds an MSc in
engineering from Chalmers University
of Technology, Gothenburg.
Other appointments: Leif holds board
positions at Autoliv, Inc. and Ecolean
AB. Leif has been a member of the
Royal Swedish Academy of
Engineering Sciences since 1994
(Chairman 2012-2017), is a member
of the European Round Table of
Industrialists (Chairman 2009-2014)
and also of the Council of Advisors,
Boao Forum for Asia.
Skills and experience: Pascal has a
passion for science and medicine, and
significant experience in established
and emerging markets, together with
a strength of strategic thinking and
execution, a successful track record
of managing change and executing
strategy, and the ability to lead a diverse
organisation. He served as COO of
Roche’s pharmaceuticals division from
2010-2012 and previously as CEO of
Genentech in San Francisco, where he
led its successful merger with Roche.
Pascal joined the pharmaceutical
industry in 1986 and has worked in
senior roles in major companies around
the world. He is a doctor of veterinary
medicine (École Nationale Vétérinaire
d’Alfort, Maisons-Alfort) and holds an
MBA from HEC Paris.
Skills and experience: Marc’s
pharmaceutical career includes
periods with Roussel Uclaf, Hoechst
Marion Roussel and GSK, which
has given him extensive industry
experience in: finance and accounting;
corporate strategy and planning;
research and development; sales and
marketing; business reorganisation;
and business development. Marc is
a qualified accountant and joined
AstraZeneca in 2013 serving as
Executive Vice-President, Global
Product and Portfolio Strategy (GPPS)
from June-October 2013. Previously,
he served as Global Head of Rare
Diseases at GSK and (concurrently)
Chairman, GSK Japan. He holds an
MBA from HEC Paris and a Bachelor
of Law degree from Paris University.
Other appointments: Marc is a Director
of Orchard Therapeutics Plc.
Directors’ nationalities
British 5
French 3
American 2
Swedish 2
Canadian 1
Belgian 1
Length of tenure of
Non-Executive Directors
<3 years
6-9 years
4
Euan Ashley
Michel Demaré
Diana Layfield
Tony Mok
3
Leif Johansson
Geneviève Berger
Graham Chipchase
3-6 years
>9 years
1
Marcus Wallenberg
4
Deborah DiSanzo
Sheri McCoy
Nazneen Rahman
Philip Broadley
Graham Chipchase NG
Senior independent Non-Executive Director
(April 2012*)
Euan Ashley S
Non-Executive Director
(October 2020*)
Geneviève Berger S
Non-Executive Director
(April 2012*)
Skills and experience: Graham is Chief
Executive Officer of Brambles Limited,
a global supply chain logistics
company listed on the Australian
Securities Exchange that operates
primarily through the CHEP brand.
Graham was Chief Executive Officer
of Rexam PLC from 2010-2016 after
serving as Group Director, Plastic
Packaging and Group Finance Director.
Previously, he was Finance Director of
Aerospace Services at GKN PLC from
2001-2003. After starting his career
with Coopers & Lybrand Deloitte, he
held various finance roles in The BOC
Group PLC (now part of The Linde
Group). 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.
Other appointments: Chief Executive
Officer of Brambles Limited.
Skills and experience: Euan studied
physiology and medicine at Glasgow
University, trained as a junior doctor at
Oxford University Hospitals NHS Trust,
and gained a DPhil in cardiovascular
cellular biology and molecular genetics
at the University of Oxford. In 2002,
Euan moved to Stanford University,
California where his research focuses on
genetic mechanisms of cardiovascular
health and disease. His laboratory
leverages AI and digital health tools,
alongside biotechnology and
technology partners in Silicon Valley,
to advance translational and clinical
research. Euan’s awards include
recognition from the Obama White
House for contributions to
personalised medicine and the
American Heart Association’s Medal
of Honor for precision medicine.
Other appointments: Associate
Dean and Professor of Biomedical
Data Science and Professor of
Cardiovascular Medicine and Genetics
at Stanford University in California.
Skills and experience: Geneviève was
Chief Science Officer at Unilever PLC
& NV, and a member of the Unilever
Leadership Executive from 2008-2014.
She holds doctorates in physics,
human biology and medicine, and was
appointed Professor of Medicine at
Université Pierre & Marie Curie, Paris
in 1995. Previous positions include
Professor and Hospital Practitioner at:
Hôpital de la Pitié-Salpêtrière, Paris;
Director General, Centre National de la
Recherche Scientifique; Chairman,
Health Advisory Board of the EU
Commission; and Non-Executive
Director of Smith & Nephew plc. During
2020, Geneviève oversaw sustainability
matters on behalf of the Board.
Other appointments: Chief Research
Officer at Firmenich SA and Director
of Air Liquide SA.
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AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance
Philip Broadley A R NG
Non-Executive Director
(April 2017*)
Michel Demaré R A
Non-Executive Director
(September 2019*)
Deborah DiSanzo A
Non-Executive Director
(December 2017*)
Diana Layfield
Non-Executive Director
(November 2020*)
Skills and experience: Philip has
significant financial and international
business experience. He was
previously Group Finance Director
of Prudential plc for eight years and
Old Mutual plc for six years. He has
served as Chairman of the 100 Group
of Finance Directors in the UK and
as a board member of Stallergenes
Greer plc. He graduated in Philosophy,
Politics and Economics from
St Edmund Hall, Oxford, where he is
now a St Edmund Fellow, and holds
an MSc in Behavioural Science from
London School of Economics.
Other appointments: Philip is a
Non-Executive Director of Legal &
General Group plc, where he chairs
the Audit Committee. He is Treasurer
of the London Library and Chairman
of the Board of Governors of
Eastbourne College.
Skills and experience: Michel was
previously Vice-Chairman of UBS
Group AG (2010-2019), Chairman of
Syngenta and Syngenta Foundation
for Sustainable Agriculture (2013-2017)
and Chairman of SwissHoldings
(2013-2015). Between 2005 and 2013,
Michel was CFO of ABB Ltd and
interim CEO during 2008. He joined
ABB from Baxter International Inc.,
where he was CFO Europe from
2002-2005. Prior to that, he spent 18
years at The Dow Chemical Company,
including as CFO of Dow’s Global
Polyolefins and Elastomers division
between 1997-2002.
Other appointments: Michel is
Non-Executive Director of Vodafone
Group Plc, Chairman of IMD Business
School in Lausanne, Deputy Chairman
of Louis Dreyfus Company Holdings
BV and Chairman of Nomoko AG.
Skills and experience: Deborah is
president of Best Buy Health for Best
Buy Co. Inc., where she is responsible
for the company’s health strategy. Her
oversight includes GreatCall, a provider
of connected health and personal
emergency response services to the
ageing population. Most recently,
Deborah served as an instructor at the
Harvard T.H. Chan School of Public
Health. Deborah’s previous roles have
included General Manager for IBM
Watson Health and CEO of Philips
Healthcare.
Other appointments: Deborah is
president of Best Buy Health for Best
Buy Co. Inc, continues to teach at the
Harvard T.H. Chan School of Public
Health, is a Director of Novanta, Inc.
and also serves on the board of Project
Hope, a global health and humanitarian
relief organisation.
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Skills and experience: Diana has
broad global business experience
which began in the pharmaceutical
and biotech sector. She has held senior
leadership roles in the technology
sector and international banking,
including senior positions at Standard
Chartered Bank, as the CEO of a
start-up technology company, and
in Healthcare and Life Sciences at
McKinsey & Co. Until December 2020,
Diana was a Non-Executive Director of
Aggreko plc. She has a BA from Oxford
University and an MA in Public
Administration and International
Economics from Harvard University.
Other appointments: Diana is
President, EMEA Partnerships at
Google, driving technology
transformation and is also Vice-
President, ‘Next Billion Users’ &
Product Management, leading the
development of products and services
for future Google users, and is also a
Council Member of the London School
of Hygiene & Tropical Medicine.
Sheri McCoy A R
Non-Executive Director
(October 2017*)
Tony Mok S
Non-Executive Director
(January 2019*)
Nazneen Rahman S NG
Non-Executive Director
(June 2017*)
Marcus Wallenberg S
Non-Executive Director
(April 1999*)
Skills and experience: Sheri had a
distinguished 30-year career at
Johnson & Johnson, latterly as Vice
Chairman of the Executive Committee,
responsible for the Pharmaceuticals
and Consumer business segments.
She joined Johnson & Johnson as an
R&D scientist and subsequently
managed businesses in every major
product sector, holding positions
including Worldwide Chairman,
Surgical Care Group and Division
President, Consumer. In 2012, Sheri
was recruited by Avon Products, Inc.
and served as Chief Executive Officer
and a Director until February 2018.
Other appointments: Sheri serves on
the boards of Stryker, Kimberly-Clark,
and Novocure and is an industrial
adviser for EQT, in connection with
which she chairs Certara and Aldevron,
and serves on the board of Galderma.
Skills and experience: Tony is the Li
Shu Fan Medical Foundation endowed
Professor and Chairman of the
Department of Clinical Oncology at the
Chinese University of Hong Kong. His
work includes multiple aspects of lung
cancer research, including biomarker
and molecular targeted therapy in lung
cancer. Tony is a former President of
the International Association for the
Study of Lung Cancer and is on the
Board of Directors of the American
Society of Clinical Oncology. His work
has achieved numerous awards
including the ESMO Lifetime
Achievement Award in 2018 and
Giant of Cancer Care in 2020.
Other appointments: Tony is a
Non-Executive Director of Hutchison
China MediTech Limited and
co-founder and the Chairman of
Sanomics Limited.
Skills and experience: Nazneen has
significant scientific, medical and
data analysis experience. She was
Head of the Division of Genetics and
Epidemiology at the Institute of Cancer
Research (ICR), London, and Head of
Cancer Genetics at the Royal Marsden
NHS Foundation Trust for 10 years to
2018. Nazneen was also founder and
Director of the TGLclinical Genetic
Testing Laboratory. She is now working
on making healthcare more sustainable.
Nazneen qualified in medicine from
Oxford University in 1991, gained her
Certificate of Completion of Specialist
Training in medical genetics in 2001 and
completed a PhD in molecular genetics
in 1999. She has garnered numerous
awards, including a CBE recognising
her contribution to medical sciences.
Nazneen has overseen sustainability
matters on behalf of the Board from
January 2021.
Other appointments: Nazneen is the
founder of sustainable healthcare
company, YewMaker.
Skills and experience: Marcus has
international business experience
across various industry sectors,
including the pharmaceutical industry
from his directorship with Astra prior
to 1999.
Other appointments: Marcus is
Chairman of Skandinaviska Enskilda
Banken AB, Saab AB and FAM AB. He
is a member of the boards of Investor
AB and the Knut and Alice Wallenberg
Foundation.
AstraZeneca Annual Report & Form 20-F Information 2020 / Board of Directors
105
Senior Executive Team (SET)
as at 31 December 2020
In addition to the SET, we have two
senior-level governance bodies
accountable for making key decisions
regarding our portfolio and pipeline.
Early Stage Portfolio Committee (ESPC)
The ESPC is a senior-level,
cross-functional governance body
with accountability for oversight of
our early-stage small molecule and
biologics portfolio across all therapy
areas, from candidate drug investment
decisions to Phase IIb. It is co-chaired
by the EVP, Oncology R&D and the
EVP, BioPharmaceuticals R&D.
The ESPC seeks to deliver a flow of
products for Phase III development
through to launch. The ESPC also
seeks to maximise the value of our
internal and external R&D investments
through robust, transparent and
well-informed decision making that
drives business performance and
accountability. This decision making
is based on data generated by teams
of scientists involved in the discovery
and development process up to
Phase IIb and who follow well
established business processes.
Specifically, the ESPC has
responsibility for the following:
> approving early-stage investment
decisions
> prioritising the early-stage portfolio
> licensing activity for products in
Phase I and earlier
> delivering internal and external
opportunities
> reviewing allocation of R&D
resources.
Late Stage Portfolio Committee (LSPC)
The LSPC is also a senior-level
governance body, accountable for the
quality of the portfolio post-Phase III
investment decision. It is chaired by
the CEO and co-chaired by the EVP,
Oncology R&D and the EVP, Oncology
Business Unit, and by the EVP,
BioPharmaceuticals R&D and the EVP,
BioPharmaceuticals Business Unit.
The LSPC seeks to maximise the value
of our investments in the late-stage
portfolio, also ensuring well-informed
and robust decision making based on
data that demonstrates the clinical
efficacy and safety of the medicine.
Specific accountabilities include:
> approval of the criteria supporting
Proof of Concept
> decisions to invest in Phase III
development based on the scientific
data, commercial opportunity and
our plans to develop the medicine
> evaluations of the outcomes
of development programmes
and decisions to proceed to
regulatory filing
> decisions to invest in life-cycle
management activities for the
late-stage assets
> decisions to invest in late-stage
business development
opportunities.
Pascal Soriot
CEO
Marc Dunoyer
CFO
See page 104.
See page 104.
Katarina Ageborg
Executive Vice-President, Sustainability
and Chief Compliance Officer
Katarina has overall responsibility
for the delivery, design and
implementation of the Company’s
sustainability programme, covering
three priority areas: access to
healthcare; environmental protection;
and ethics and transparency. She leads
the Global Sustainability function,
focusing on Compliance, and Safety,
Health and Environment. Katarina was
appointed President of AstraZeneca
AB (Sweden) in 2018. Prior to these
roles, Katarina led the Global
Intellectual Property function from
2008-2011, before taking the role as
Chief Compliance Officer. Katarina
holds a Master of Law Degree from
Uppsala University School of Law in
Sweden and ran her own law firm
before joining AstraZeneca in 1998.
José Baselga
Executive Vice-President,
Oncology R&D
Pam Cheng
Executive Vice-President,
Operations & Information Technology
Ruud Dobber
Executive Vice-President,
BioPharmaceuticals Business Unit
José has responsibility for our
Oncology portfolio from discovery
through to late-stage development.
He was formerly Physician-in-Chief
at Memorial Sloan Kettering Cancer
Center, Professor of Medicine at
Weill Cornell Medical College, led
the Division of Oncology at the
Massachusetts General Hospital and
was Professor of Medicine at Harvard
Medical School. José was also
founding Director of the Vall d’Hebron
Institute of Oncology and is an
international thought leader in
innovation in cancer care and research.
He is a past President of ESMO and
AACR, a member of the National
Academy of Medicine, the American
Society of Clinical Investigation, the
Association of American Physicians,
and a Fellow of the AACR Academy.
Pam joined AstraZeneca in June 2015,
after 18 years with Merck/MSD in
Global Manufacturing, Supply Chain
and Commercial roles. She was the
Head of Global Supply Chain
Management & Logistics for Merck and
led the transformation of Merck supply
chains across the global supply
network. Pam also held the role of
President of MSD China. Prior to joining
Merck, Pam held various engineering
and project management positions at
Universal Oil Products, Union Carbide
Corporation and GAF Chemicals. She
holds Bachelor’s and Master’s degrees
in chemical engineering from Stevens
Institute of Technology, New Jersey and
an MBA from Pace University in New
York. Pam serves as a Non-Executive
Director of the Smiths Group plc board.
Ruud has responsibility for product
strategy and commercial delivery for
CVRM, Respiratory & Immunology,
neuroscience and infection. Ruud joined
Astra in 1997 and has held the roles
of Executive Vice-President, North
America; Executive Vice-President,
Europe; Regional Vice-President,
Europe, Middle East and Africa; and
Regional Vice-President, Asia Pacific.
Ruud was a member of the board and
executive committee of the European
Federation of Pharmaceutical
Industries and Associations and was
previously Chairman of the Asia
division of Pharmaceutical Research
and Manufacturers of America. Ruud
holds a doctorate in immunology from
the University of Leiden, Netherlands,
beginning his career as a research
scientist in immunology and ageing.
106
AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance
David Fredrickson
Executive Vice-President,
Oncology Business Unit
Menelas Pangalos
Executive Vice-President,
BioPharmaceuticals R&D
Dave is responsible for driving growth
and maximising the commercial
performance of the AstraZeneca global
Oncology portfolio. He has global
accountability for marketing, sales,
medical affairs and market access in
Oncology and plays a critical leadership
role in setting the Oncology portfolio
and product strategy. Previously, Dave
served as President of AstraZeneca
K.K. in Japan, and Vice-President,
Specialty Care in the US. Before joining
AstraZeneca, Dave worked at Roche/
Genentech, where he served in several
functions and leadership positions,
including Oncology Business Unit
Manager in Spain, and strategy,
marketing and sales roles in the US.
Dave is a graduate of Georgetown
University in Washington DC.
Mene is responsible for
BioPharmaceuticals R&D from
discovery through to late-stage
development across CVRM,
Respiratory & Immunology,
neuroscience and infection. He
previously held senior R&D roles at
Pfizer, Wyeth and GSK. Mene is a
Fellow of the Academy of Medical
Sciences, the Royal Society of Biology
and Clare Hall, University of
Cambridge. He sits on the Medical
Research Council, co-chairs the Life
Sciences Council Expert Group on
Innovation, Clinical Research and Data.
He is on the boards of The Francis
Crick Institute, The Judge Business
School and Dizal Pharma. In 2019,
Mene was awarded a knighthood from
The Queen and the Prix Galien Medal,
Greece. He oversees the creation of
AstraZeneca’s new Global R&D Centre
in Cambridge.
Jeff Pott
General Counsel and, effective January
2021, Chief Human Resources Officer
Jeff was appointed General Counsel
in January 2009 and has overall
responsibility for all aspects of
AstraZeneca’s Legal and IP function.
In addition to his role as General
Counsel, he was appointed Chief
Human Resources Officer in January
2021 assuming additional
responsibilities for the AstraZeneca
Human Resources function. Jeff 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.
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Iskra Reic
Executive Vice-President,
Europe and Canada
Leon Wang
Executive Vice-President,
International and China President
Fiona Cicconi
Executive Vice-President,
Human Resources
Throughout 2020, Fiona was Executive
Vice-President, Human Resources with
responsibility for design and delivery
of AstraZeneca’s people strategy and
ambition to Be a Great Place to Work.
She held that role until 31 December
2020, when she resigned to take up
a similar role at a global company
outside the pharmaceutical industry.
Iskra has responsibility for
BioPharmaceuticals sales, marketing
and commercial operations across our
businesses in 30 European countries
and Canada. She trained as a doctor
of dental surgery at the Medical
University of Zagreb, Croatia. She
joined AstraZeneca in 2001 and has
held a variety of in-market, regional
sales and marketing, and general
management roles, including: Head of
Commercial Operations for Croatia;
Head of Specialty Care Central &
Eastern Europe; and General Manager,
Russia and the Eurasia Area. She was
appointed EVP, Europe in April 2017.
Iskra has an International Executive
MBA from the IEDC-Bled School of
Management, Slovenia.
Leon Wang is responsible for overall
strategy driving sustainable growth
across the International region, which
includes China. Leon joined AstraZeneca
China in March 2013 and was promoted
to become President, AstraZeneca
China in 2014. Under Leon’s leadership,
China has become AstraZeneca’s
second-largest market worldwide and
AstraZeneca has become the largest
pharmaceutical company in China.
Prior to joining AstraZeneca, Leon held
positions of increasing responsibility in
marketing and business leadership at
Roche, where he was a Business Unit
Vice-President. In addition, Leon
holds several positions in local trade
associations and other prominent
organisations in China. Leon holds an
EMBA from China Europe International
Business School, and a Bachelor of
Arts from Shanghai International
Studies University.
AstraZeneca Annual Report & Form 20-F Information 2020 / Senior Executive Team
107
Corporate
Governance Report
Activities of the Board
All Directors are collectively responsible
for the success of the Company.
Principal matters considered by the Board in 2020
Reserved powers
The Board maintains and periodically reviews
a list of matters that are reserved to, and can
only be approved by, the Board.
These include: the appointment, termination
and remuneration of any Director; approval
of the annual budget; approval of any item of
fixed capital expenditure or any proposal for
the acquisition or disposal of an investment
or business which exceeds $150 million; the
raising of capital or loans by the Company
(subject to certain exceptions); the giving of
any guarantee in respect of any borrowing
of the Company; and allotting shares of the
Company. The matters that have not been
expressly reserved to the Board are delegated
by the Board to its four principle Committees
or the CEO.
Principal matters
The principal matters considered by the
Board during 2020 and the link to the Group’s
strategic priorities are set out in the table. As
part of the business of each Board meeting,
the CEO typically submits a progress report,
giving details of business performance and
progress against the goals the Board has
approved. To ensure that the Board has good
visibility of the key operating decisions of the
business, members of the SET attend Board
meetings regularly and Board members meet
other senior executives throughout the year.
The Board also receives accounting and other
management information about our resources,
and presentations from internal and external
speakers on legal, governance and regulatory
developments.
Adapting to virtual ways of working
From the end of the first quarter of 2020, all
Board and Board Committee meetings were
held virtually by videoconference due to the
global COVID-19 pandemic. Directors adapted
quickly to this new way of working, although
scheduling virtual meetings at times
convenient to all Board members was made
more difficult by Directors being based in
multiple time zones, including the US west
and east coasts and Asia. In addition, as
described later in this report, the pandemic
significantly curtailed the Board’s usual annual
programme of site visits and face-to-face
engagement with employees and other
stakeholders.
Area of focus
Strategic priority
Strategic matters
> The Group’s strategy, including its long-range plan, annual budget, strategic
options and the overall state of the pharmaceuticals industry
> The Group’s capital structure, including financing needs, credit rating and
capital strategy
> The proposed acquisition of Alexion
> Requests for approval of business development transactions of a size
requiring Board approval, including the co-development and
co-commercialisation agreement with Daiichi Sankyo for DS-1062
> Dividend decisions
Operational
matters
> Executive management reports, including business performance reports,
R&D pipeline updates and the results of key clinical trials
> Quarterly results announcements
> Reviews of the development of COVID-19 Vaccine AstraZeneca, cybersecurity
and IT more generally, Operations, plans relating to climate change and the
Company’s carbon footprint, doing business in China and the switch of US
share and bond listings to Nasdaq
> Business continuity during the global COVID-19 pandemic, including
safeguarding employees’ health and safety, and doing the right thing
for patients.
Stakeholders
> Investor perceptions
> Employee gender data
> Sustainability and philanthropic matters
> Review of the Board’s Inclusion and Diversity Policy
Governance,
assurance and
risk management
> Reports from Board Committees
> Routine succession planning for SET and Board-level roles
> Review of the workforce culture and employee engagement reports
> Year-end governance and assurance reports
> The Group’s viability, risk appetite and Modern Slavery Act statements
> The annual review of the performance of the Board, its Committees and
individual Directors
> Private discussions between Non-Executive Directors only
Key
Deliver Growth and Therapy Area Leadership
Be a Great Place to Work
Accelerate Innovative Science
Achieve Group Financial Targets
108
AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance
Board performance evaluation
2020 Overview
During the year, the Board conducted the annual
evaluation of its own performance and that of
its Committees and individual Directors. The
2020 evaluation was externally facilitated by
Lintstock Ltd (Lintstock), a London-based
corporate advisory firm that provides objective
and independent counsel to leading European
companies. Lintstock supplies software and
services to the Company Secretary’s team
for Board evaluation questionnaires but has
no other commercial relationship with the
Company or any individual Directors. Based
on Board members’ responses to the
web-based questionnaire covering a wide
range of topics and on interviews carried
out by Lintstock with each Board member,
2020 Outcomes
Lintstock prepared a report which was
discussed by the Board at its meeting in
December 2020 and was also used by the
Chairman as the basis for individual
conversations with each Board member
prior to the full Board discussion.
As part of each Director’s individual discussion
with the Chairman during the Board evaluation,
his or her contribution to the work of the
Board and personal development needs were
considered. Directors’ training needs are met
by a combination of: internal presentations and
updates and external speaker presentations as
part of Board and Board Committee meetings;
specific training sessions on particular topics,
where required; and the opportunity for
Directors to attend external courses at the
Company’s expense, should they wish to do so.
The Board intends to continue to comply with
the UK Corporate Governance Code guidance
that the evaluation should be externally
facilitated at least every three years and
expects to commission the next externally-
facilitated review in 2023.
As part of the Board performance evaluation,
Directors are asked to consider the composition
and diversity of the Board, as well as how
effectively members are working together.
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Main areas covered
Main conclusions and recommendations
> Board composition and dynamics
> Stakeholder oversight
> Board meeting management and support
> Board Committees
> Board oversight
> Risk management and internal control
> External Audit function
> Succession planning and human resource management
> Priorities for change
> COVID-19
> The Board operates effectively and in a manner that encourages open and frank discussion where all Board members feel
free to express their views.
> The way in which the Board actively discussed its composition and the varied skills and experience of Directors was
commended.
> The Board’s relationship with management was highly rated.
> The reviews of the performance of the Board’s Committees did not raise any significant issues and the evaluation
concluded that the Committees are operating effectively and are highly rated overall.
> The performance of the External Auditor was rated positively overall, and the scope and quality of work and reporting was
highly rated. Further detail on the review of the External Audit function is set out on page 130 of the Audit Committee Report.
> An appropriate focus on structured succession planning for the most senior Board roles was being maintained.
> Areas for improvement identified included: how the full Board reviews key risks faced by the Company; finding more
opportunities for the Board to hear about or interact with a broad selection of stakeholders; and re-assessing the format
and cadence of the annual schedule of Board meetings.
> The Board adjusted its focus and priorities well in response to the COVID-19 pandemic and engaged quickly and effectively.
> In respect of the 2020 annual performance evaluation, it was concluded that each Director continues to perform effectively
and to demonstrate commitment to his or her role and the performance of the Board since the last Board evaluation was
rated highly.
Chairman evaluation
Process
Overall conclusion
The 2020 evaluation also included a review of the
performance of the Chairman by the other Directors, led by
the senior independent Non-Executive Director and absent
the Chairman
The Chairman is highly engaged and continues to perform very well across the broad spectrum of internal and external
stakeholders. The Company’s reputation and how it is viewed by external stakeholders was suggested as an additional area for
the Board’s focus in 2021. The Chairman was encouraged to continue to keep the Board regularly informed about succession
planning for the most senior Board roles, as he had done throughout 2020, and to consider ways to mitigate the effects of
remote meetings and working. Minor improvements relating to management of virtual Board meetings by videoconference
were suggested.
Actions against prior year recommendations
2019 evaluation
2020 actions taken
Consider ways to reduce the length of Board meeting papers,
such as making more use of executive summaries, while
ensuring the Board receives all the information it needs
Further focus in 2020 on sustainability
Further focus in 2020 on aspects of digital technology,
such as AI
The Board continues to seek the right balance between discouraging lengthy Board meeting papers and making sure it receives
all the information it needs, and to encourage management to make greater use of executive summaries, where appropriate.
The Company’s Ambition Zero Carbon strategy to eliminate emissions by 2025 and be carbon negative by 2030 was launched
during the year. As part of the Board’s 2020 review of the Company’s strategy, the Board received a presentation from the EVP,
Sustainability and Chief Compliance Officer about Ambition Zero Carbon and related sustainability matters, which enabled
Directors to discuss the programme and the Company’s overall approach to sustainability, including its carbon footprint and
exposure to climate change risk.
As part of the Board’s 2020 review of the Company’s strategy, the Board received presentations from various members of the
SET and the Chief Digital Officer and Chief Information Officer that demonstrated how the Company is embracing digital
technology in R&D, Operations, commercial teams and enabling units. Additionally, in recruiting new Directors, the Board has
increasingly focused on candidates with the right skills and experience for a digital world, as evidenced by the appointments in
2020 of Euan Ashley and Diana Layfield.
AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance Report
109
Corporate
Governance Report
Connecting with
our Stakeholders
When making decisions, the Directors of AstraZeneca
PLC act in the way they consider is most likely to promote
the success of the Company, for the benefit of its
members as a whole, while also considering the broad
range of stakeholders who interact with the business.
Shareholders,
investors and analysts
Patients
Healthcare practitioners
(HCPs)
Suppliers
Government and payers
Communities
How we engage as a Company
In striving to achieve our Purpose to
push the boundaries of science and
deliver life-saving medicines, our
business touches the lives of many
people. We exist in a complex and
evolving regulatory and scientific
environment and as a result we have
a number of key stakeholder groups.
Considering the interests of our
stakeholders is fundamental to the way
in which the Group operates. Our Values
and Code of Ethics empower employees
to make the best decisions in the interests
of the Group and our stakeholders, and
help to ensure that these considerations
are made not only at Board level, but
throughout our organisation.
The following table identifies our key
stakeholders, as well as summarising the
engagement that has been undertaken
across the business during 2020. In
addition, the Board’s engagement with
our workforce is set out on page 113.
How the Board understands the interests
of stakeholders, and how the Board
considers stakeholders’ interests in
decision making, including examples
of principal decisions made in 2020
are summarised on page 112.
The s.172(1) statement is set out on page 100.
For more information about our Code of Ethics,
see page 61
A full list of our stakeholders can be found
in our 2020 Sustainability Report on the website,
www.astrazeneca.com/sustainability.
Overview
Significance of
the stakeholder
to the business
Interests
Issues and factors
which are most
important to the
stakeholder group
The Board and management
maintain a regular, fair and
balanced dialogue with
investors to secure a group of
supporters and believers in the
Company’s strategy, provide
objective information about
performance, enabling
investors to put a fair value
on the Company and ensure
continued access to capital
if needed
> Exposure to Geopolitical
and macro-economic risk
> Strategy, resource
allocation and R&D
productivity
> Pipeline, business and
financial performance
> Culture, values and
behaviours
> Environmental, social and
governance (ESG) matters
We see every patient as a person first
and put them at the heart of what we do.
We do this by listening to their experiences,
co-creating solutions and embedding their
insights into our daily work. By truly
understanding the needs of the people we
serve we can ensure the life-changing
medicines, products and services we
develop have the greatest impact on
their lives.
> Customising support and including
their insights throughout the entire
patient experience
> Designing clinical trials that reflect
real-world clinical practice, are
minimally burdensome to patients, and
measure outcomes they care about
> Providing information that is easy to
understand, accessible, reliable and
transparent
> Ensuring the safety, efficacy and
affordable accessibility of our medicines
Engagement
Examples of
engagement
in 2020
> Chairman met analysts and
Remuneration Committee
Chairman met shareholders
> Quarterly results conference
call and webcast
> Engaged patients at every stage in
our development and clinical trial
programmes
> Grew our Patient Partnership
Programme across 12 diseases
> Management meetings with
investors and analysts
> ‘Meet AZN management’
> Gathered diverse insights from patients
and patient stakeholders to co-create
programmes across business units
events at medical meetings
> Established patient support and
affordability programmes
> Q&A facilities with
operational management
at key news events
> Extensive outreach
programme including
regular roadshows,
incoming visits and
attending investor
conferences; over 1,000
meetings in 2020 with
more than 5,200 people
Outcomes
Any actions
which resulted
> More time allocated to Q&A
with senior and next-level/
operational management
> Increased focus on ESG
matters within quarterly
results announcements
> Initial disclosures made in
the 2020 Annual Report
against the TCFD
framework
> Introduction of an ESG
metric within PSP
measures
> Continued to evolve, enhance and
embed insights from patients and
patient stakeholders into our work
> Increased number of programmes
to support patients throughout
their experience
> Evolved Health Innovation Hub
archetypes
> Scaled patient-centric ecosystem
solutions
> Updated corporate materials to
reflect patient-centric practices
and narrative
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AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance
Overview
HCPs positively influence our
In 2020, we spent approximately
Government policy can impact the
We aim to make a positive
business to enhance the lives
$14 billion with suppliers on goods
business operating environment.
impact on the communities in
of patients. HCPs are essential
or services critical to the effective
Health technology assessment
which we operate, as well as
partners in clinical research, as
operation of our entire value chain
agencies, national and regional
those which our medicines
advisers and study investigators.
– from discovery to development,
healthcare insurance funds and
reach. Communities expect
We provide HCPs with
manufacturing and supply of our
government bodies appraise the
companies to give back and
information about our medicines
medicines to patients. Our
clinical and economic value of our
support the issues that affect
to support rational prescribing,
business-critical operations are
medicines following successful
them. Communities have a direct
and they provide insights that
delivered and managed with the
regulatory approval.
improve our medicines for
support of our suppliers.
influence on the health of
patients, caregivers and families.
patients.
Interests
> Development of medicines
> Understanding of AstraZeneca’s
> Attracting business investment
> How our activities and plans
for unmet clinical needs
strategy and how the supplier
> Investment in research and
impact local communities
> Education and information on
can best create value through
scientific collaborations
> Support for programmes,
advances in medical science
innovative and new opportunities
> Access to innovative
> Accurate and balanced
> Creating a collaborative and
medicines
platforms and policies that
make healthcare more
information on licenced
medicines, including
up-to-date safety data
trusting environment between
> Pricing of medicines, including
accessible, build health equity
the supplier and AstraZeneca
breakthrough therapies and
and reduce health disparity
> That AstraZeneca acts ethically,
the impact on public budgets
> Identification of areas of
> Uninterrupted supply of
lawfully, protects the
> Containment of reimbursement
unmet need and collaborating
quality medicines
> Ethical and transparent
interactions with industry
environment and benefits society
expenditure
to address them
and its partners
> The safety and efficacy of
> Promotion of science-based
drugs
education and careers
Engagement
> Provided and supported HCP
> Engaged with suppliers to find
> Discussions with governments
> Young Health Programme
educational events, including
creative solutions to address the
and policy makers to increase
delivered NCD prevention
early platforms for physicians
impact of COVID-19
understanding of supporting
information to over one
to share their experience of
> Enabled 1st- and 2nd-tier small
investment in life sciences,
million young people
treating patients with
and diverse suppliers access to
regulation of the pharmaceutical
> AstraZeneca HealthCare
COVID-19
business opportunities through
industry and improve access
> Established HCP advisory
our participation in outreach
to new medicines
> Engaged HCPs in clinical
boards
trials
events, collaborations, and
memberships with various
> Engaged in discussions on
evolving the current
CV disease
industry groups and diversity
reimbursement system for
> More than $1.4 billion of
> Responded to more than
councils
medicines in the US
medicines donated for
118,000 HCP enquiries and
> Partnered with suppliers to
> Hosted site visits and tours at
disaster relief and patient
scale our impact in sustainability
our manufacturing and R&D
assistance programmes
Foundation provided $1.02
million in grants to prevent,
better manage and reduce
processed over 21,000
adverse event reports
from HCPs
through joint workshops,
collaborative projects and
initiatives
facilities for international and
> AstraZeneca Generation
local politicians
Health STEM Program
reached over one million
students and educators
> More than $15 million granted
to non-profit organisations
for COVID-19 relief
Outcomes
> Advisory boards informed
> Securing contract manufacturing
> Established working
> New five-year collaboration
our clinical research and
facilities and critical supply
relationships with key
contracts for on-time vaccine
government stakeholders
with UNICEF to reach five
million youths, train 1,000
product strategy.
> Collaboration in clinical
studies has led to new
products. Our use of ‘virtual’
> Enabled innovative solutions
clinical and testing strategies
and events have been
organised to increase
12 policies by 2025
> Expansion of disease
study monitoring has taught
through extending the supplier
understanding about how
prevention programming
delivery, supply of PPE, robust
> Regular meetings, roundtables
young leaders and change
governments can support life
collaborations in Colombia,
HCPs this system for their
own studies
diversity programme to South
Africa and the UK, in addition
> Exchange of information with
to the US and Brazil, to enrich
HCPs supports clinical
decision making
> We enabled early shared
learning between HCPs on
our supply base. In the US we
received five external industry
recognitions and awards for
supporting diverse suppliers
management of patients with
> Achieved our 2020 commitment
COVID-19
to remove single use plastics
from facilities’ key areas
sciences investment and
improve patient access to
new medicines
Egypt, the Caribbean,
Angola and South Africa
> External evaluation of
programming shows
evidence of risk behaviour
reduction in youth
Overview
Significance of
the stakeholder
to the business
Interests
Issues and factors
which are most
important to the
stakeholder group
Engagement
Examples of
engagement
in 2020
Shareholders,
investors and analysts
Patients
The Board and management
We see every patient as a person first
maintain a regular, fair and
and put them at the heart of what we do.
balanced dialogue with
We do this by listening to their experiences,
investors to secure a group of
co-creating solutions and embedding their
supporters and believers in the
insights into our daily work. By truly
Company’s strategy, provide
understanding the needs of the people we
objective information about
serve we can ensure the life-changing
performance, enabling
medicines, products and services we
investors to put a fair value
develop have the greatest impact on
on the Company and ensure
their lives.
continued access to capital
if needed
> Exposure to Geopolitical
> Customising support and including
and macro-economic risk
their insights throughout the entire
> Strategy, resource
allocation and R&D
productivity
> Pipeline, business and
financial performance
> Culture, values and
behaviours
patient experience
> Designing clinical trials that reflect
real-world clinical practice, are
minimally burdensome to patients, and
measure outcomes they care about
> Providing information that is easy to
understand, accessible, reliable and
> Environmental, social and
transparent
governance (ESG) matters
> Ensuring the safety, efficacy and
affordable accessibility of our medicines
> Chairman met analysts and
> Engaged patients at every stage in
Remuneration Committee
our development and clinical trial
Chairman met shareholders
programmes
> Quarterly results conference
> Grew our Patient Partnership
call and webcast
Programme across 12 diseases
> Management meetings with
> Gathered diverse insights from patients
investors and analysts
and patient stakeholders to co-create
> ‘Meet AZN management’
programmes across business units
events at medical meetings
> Established patient support and
> Q&A facilities with
affordability programmes
operational management
at key news events
> Extensive outreach
programme including
regular roadshows,
incoming visits and
attending investor
conferences; over 1,000
meetings in 2020 with
more than 5,200 people
Outcomes
Any actions
which resulted
> More time allocated to Q&A
> Continued to evolve, enhance and
with senior and next-level/
embed insights from patients and
operational management
patient stakeholders into our work
> Increased focus on ESG
> Increased number of programmes
matters within quarterly
results announcements
to support patients throughout
their experience
> Initial disclosures made in
> Evolved Health Innovation Hub
the 2020 Annual Report
archetypes
> Introduction of an ESG
> Updated corporate materials to
against the TCFD
framework
metric within PSP
measures
> Scaled patient-centric ecosystem
solutions
reflect patient-centric practices
and narrative
Overview
Healthcare practitioners
(HCPs)
HCPs positively influence our
business to enhance the lives
of patients. HCPs are essential
partners in clinical research, as
advisers and study investigators.
We provide HCPs with
information about our medicines
to support rational prescribing,
and they provide insights that
improve our medicines for
patients.
Suppliers
Government and payers
Communities
In 2020, we spent approximately
$14 billion with suppliers on goods
or services critical to the effective
operation of our entire value chain
– from discovery to development,
manufacturing and supply of our
medicines to patients. Our
business-critical operations are
delivered and managed with the
support of our suppliers.
Government policy can impact the
business operating environment.
Health technology assessment
agencies, national and regional
healthcare insurance funds and
government bodies appraise the
clinical and economic value of our
medicines following successful
regulatory approval.
We aim to make a positive
impact on the communities in
which we operate, as well as
those which our medicines
reach. Communities expect
companies to give back and
support the issues that affect
them. Communities have a direct
influence on the health of
patients, caregivers and families.
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Interests
> Development of medicines
for unmet clinical needs
> Education and information on
advances in medical science
> Understanding of AstraZeneca’s
strategy and how the supplier
can best create value through
innovative and new opportunities
> Attracting business investment
> Investment in research and
scientific collaborations
> Access to innovative
> Accurate and balanced
information on licenced
medicines, including
up-to-date safety data
> Uninterrupted supply of
quality medicines
> Ethical and transparent
interactions with industry
> Creating a collaborative and
medicines
trusting environment between
the supplier and AstraZeneca
> That AstraZeneca acts ethically,
lawfully, protects the
environment and benefits society
and its partners
> Pricing of medicines, including
breakthrough therapies and
the impact on public budgets
> Containment of reimbursement
expenditure
> The safety and efficacy of
> Promotion of science-based
drugs
education and careers
> How our activities and plans
impact local communities
> Support for programmes,
platforms and policies that
make healthcare more
accessible, build health equity
and reduce health disparity
> Identification of areas of
unmet need and collaborating
to address them
Engagement
> Provided and supported HCP
educational events, including
early platforms for physicians
to share their experience of
treating patients with
COVID-19
> Established HCP advisory
boards
> Engaged HCPs in clinical
trials
> Responded to more than
118,000 HCP enquiries and
processed over 21,000
adverse event reports
from HCPs
> Engaged with suppliers to find
creative solutions to address the
impact of COVID-19
> Enabled 1st- and 2nd-tier small
and diverse suppliers access to
business opportunities through
our participation in outreach
events, collaborations, and
memberships with various
industry groups and diversity
councils
> Partnered with suppliers to
scale our impact in sustainability
through joint workshops,
collaborative projects and
initiatives
> Discussions with governments
and policy makers to increase
understanding of supporting
investment in life sciences,
regulation of the pharmaceutical
industry and improve access
to new medicines
> Engaged in discussions on
evolving the current
reimbursement system for
medicines in the US
> Hosted site visits and tours at
our manufacturing and R&D
facilities for international and
local politicians
Outcomes
> Advisory boards informed
our clinical research and
product strategy.
> Collaboration in clinical
studies has led to new
products. Our use of ‘virtual’
study monitoring has taught
HCPs this system for their
own studies
> Exchange of information with
HCPs supports clinical
decision making
> We enabled early shared
learning between HCPs on
management of patients with
COVID-19
> Securing contract manufacturing
> Established working
relationships with key
government stakeholders
> Regular meetings, roundtables
and events have been
organised to increase
understanding about how
governments can support life
sciences investment and
improve patient access to
new medicines
facilities and critical supply
contracts for on-time vaccine
delivery, supply of PPE, robust
clinical and testing strategies
> Enabled innovative solutions
through extending the supplier
diversity programme to South
Africa and the UK, in addition
to the US and Brazil, to enrich
our supply base. In the US we
received five external industry
recognitions and awards for
supporting diverse suppliers
> Achieved our 2020 commitment
to remove single use plastics
from facilities’ key areas
> Young Health Programme
delivered NCD prevention
information to over one
million young people
> AstraZeneca HealthCare
Foundation provided $1.02
million in grants to prevent,
better manage and reduce
CV disease
> More than $1.4 billion of
medicines donated for
disaster relief and patient
assistance programmes
> AstraZeneca Generation
Health STEM Program
reached over one million
students and educators
> More than $15 million granted
to non-profit organisations
for COVID-19 relief
> New five-year collaboration
with UNICEF to reach five
million youths, train 1,000
young leaders and change
12 policies by 2025
> Expansion of disease
prevention programming
collaborations in Colombia,
Egypt, the Caribbean,
Angola and South Africa
> External evaluation of
programming shows
evidence of risk behaviour
reduction in youth
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Corporate Governance Report
Connecting with our Stakeholders
continued
How our Board understands the interests
of our stakeholders
To promote and facilitate Directors’
understanding of the interests of our
stakeholders, the Board is able to review
the stakeholder matrix, which sets out
management’s engagement with stakeholders
and highlights the most significant issues to
each group. This provides assurance to the
Board that management has engaged with
stakeholders and allows the Board to consider
stakeholder impact, as well as other factors,
when making decisions. The stakeholder
matrix is refreshed annually to ensure that
stakeholders and methods of engagement
remain relevant to the business.
Understanding in action
In 2020, all employees were invited to
participate in a crowdsourcing event –
COVID-19: Now & Next. This provided an
opportunity for the workforce to share
perspectives, thoughts and ideas to support
the delivery of our strategy and enable us to
emerge stronger from the pandemic. Almost
half of our employees participated and more
than 12,000 people from across 47 countries
contributed ideas, reactions and comments.
These employee ideas and comments helped
inform recommendations that were made to
the AstraZeneca Board as part of the Group’s
annual strategy review process.
For more information on COVID-19: Now & Next,
see from page 18.
How our Board considers stakeholders’
interests in decision making
Throughout the year, Directors recognised
their responsibility to act in good faith to
promote the success of the Company for the
benefit of shareholders, while also considering
the impact of their decisions on wider
stakeholders and other factors relevant to the
decision being made. Clear communication
and proactive engagement to understand the
issues and factors which are most important
to stakeholders is fundamental to this.
The Board acknowledges that every decision
made will not necessarily result in a positive
outcome for all stakeholders. By considering
our Purpose and Values, together with our
strategic priorities, the Board aims to ensure
that the decisions made are consistent
and intended to promote the Company’s
long-term success.
In addition to the stakeholder considerations
set out on pages 110 to 111, the Board has
also had regard to other factors such as
environmental factors and community interests.
For more information on the environmental
and community factors considered by the
business, see the Sustainability section set
out from page 72.
The table to the right provides examples of how
key stakeholders were considered in Principal
Decisions made by the Board during 2020.
For the s.172(1) statement, see page 100.
Principal Decisions in 2020
Overview
We define ‘Principal Decisions’ as decisions and discussions, which are material or strategic to
the Group, and also those that are significant to any of our stakeholder groups. We consider
the following items to be examples of Principal Decisions made by the Board during 2020.
Principal Decisions
Throughout 2020, the Board considered management’s response to the COVID-19 pandemic to ensure that it was consistent with
the Group’s Values of following the science, putting patients first and doing the right thing. The Board considered the Group’s
work in communities to ensure that efforts such as global donations of PPE reached those most in need and that the business
supported the communities in which we operate, such as through the establishment of a COVID-19 testing facility in Cambridge
and providing additional support to our Young Health Programme partners. Employees also remained at the forefront of Board
discussions to ensure the creation of safe working environments and the establishment of measures to support employees’
physical and mental wellbeing. Ensuring the safety of patients and the continued supply of all of AstraZeneca’s medicines
remained a priority, and the Board sought regular operational updates from management.
In April 2020, the Group entered into a landmark agreement with the University of Oxford for the global development, production
and supply of their potential vaccine for COVID-19. AstraZeneca committed to doing this at no profit during the pandemic and
to providing broad and equitable supply of billions of doses of the potential vaccine. The Board acknowledged that although
vaccine-related activities were not a core therapy area, the need for a vaccine was urgent and AstraZeneca had expertise and
resources that could assist in its development. If successful, the vaccine would significantly impact all stakeholders and have a
wide-reaching societal benefit.
For more information on the Group’s response to the COVID-19,Pandemic see page 28 and Other medicines and COVID-19
from page 47
During 2020, the Group entered an agreement with Daiichi Sankyo for the co-development and co-commercialisation of DS-1062,
a clinical-stage, proprietary, TROP2-targeting ADC. The Board discussed the opportunity DS-1062 presented and the potential
the medicine had to reshape the current standard of care for the treatment of lung cancer, while also considering patient safety.
The Board considered how DS-1062 would fit into the Group’s portfolio and noted that DS-1062 was at a relatively early stage of
development, and therefore carried a degree of risk, but was being investigated in tumour types that would provide a good
strategic fit for AstraZeneca and early data indicated it had the potential to be a best-in-class treatment. The Board also
considered the Group’s capital allocation priorities and level of investment required alongside the potential future market for
ADCs and the potential returns the investment could generate for the Company’s shareholders. It was concluded that entering
into the agreement would promote the long-term success of the Company and, if successful, could help transform the treatment
of patients and deliver value for shareholders.
For more information, see Business development from page 63, and the Oncology Therapy Area Review from page 30.
In December 2020, the Group signed an agreement to acquire Alexion subject to regulatory clearances and approval by the
shareholders of both companies. When discussing this opportunity, the Board considered how Alexion’s pipeline, expertise in
immunology and strong research platforms could accelerate the combined company’s strategic ambitions. The potential
combination would drive innovation and speed of delivery of the next wave of science, accelerating the development of potential
medicines to help more patients around the world. The Board also considered the Company’s shareholders and the strong
financial benefits of the proposed acquisition, which would include improved profitability and strengthened cash flow.
For more information, see the CEO Review on page 5.
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Engaging with our workforce
AstraZeneca is committed to being a great
place to work. Engagement with employees
is an important element in fostering this
and ensuring an environment in which all
employees are respected, and where
openness is valued, diversity celebrated and
every voice heard. We rely on our global
workforce and their commitment to uphold
our Values, deliver our strategic priorities and
make the changes necessary to sustain and
improve short- and long-term performance.
For AstraZeneca, ‘global workforce’ includes
all AstraZeneca’s full-time and part-time
employees, fixed-term workers and external
contractors working full- or part-time,
regardless of their geographical location.
The Directors believe that the Board as a
whole should continue to take responsibility
for gathering the views of the workforce.
Consequently, the Board chose not to
implement any of the three methods set out
in the 2018 Code. Instead, the multiple,
long-standing channels of engagement
which already exist in the organisation were
developed and enhanced to ensure that the
Board continues to understand the global
workforce’s views on a wide variety of topics.
The Board believes that this alternative
approach is the best model of engagement
for the Group and ensures that the Board
has access to the views of the workforce,
regardless of their location, and provides
meaningful information and data that the
Board can use when considering the impact
of the strategic decisions on employees.
Additionally, the chosen mechanisms allow
all Directors to engage directly with a wider
cross-section of the global workforce and
provide opportunity for meaningful dialogue.
The Board considers these views and the
potential impacts on the workforce when it
makes key decisions.
Workforce trends report and Annual
Global Remuneration Overview
The Board was provided with information
outlining progress against a range of metrics
related to workforce culture and engagement.
This information is provided biannually to
enable Directors to monitor trends and, if
required, take action. The Remuneration
Overview provides evidence of how the
workforce is rewarded in line with our
principles.
92%
of employees stated they believe
strongly in AstraZeneca’s future
direction and key priorities in the
November 2020 Pulse survey
Due to the global COVID-19 pandemic,
the Board’s usual annual programme of site
visits and face-to-face engagement with
the workforce was significantly curtailed
during 2020. Instead, a number of virtual
engagements took place. Directors attended
virtual townhalls which were broadcast to the
global workforce on matters including the
Group’s performance and the response to the
COVID-19 pandemic. The CFO also took part
in a Q&A session via Workplace, the Group’s
social media platform, responding to
questions on the intended Alexion acquisition.
The Audit Committee undertook a number
of virtual site visits which facilitated
understanding of business operations and
allowed engagement between the Directors
and employees. Further information about this
can be found from page 123. The Science
Committee also hosted a number of virtual
coffees with individuals within the R&D units
to provide exposure to talent and leadership,
and provide opportunity for dialogue.
In addition, the Board received a number
of reports containing various metrics on
workforce engagement and culture.
For more information, see People, from page 68.
Investing in and rewarding our workforce
The Remuneration Committee considers
remuneration arrangements for our global
workforce, aiming to ensure the global total
reward offering is competitive, compelling and
aligned to our business performance, while
supporting a culture where everyone feels
valued and included.
For more information, see the Directors’ Remuneration
Report from page 131.
Workforce culture
During 2020, the Board reviewed the
workforce culture report, which demonstrates
how our Values and behaviours are embedded
throughout all levels of the workforce. Within
the report, there is a summary metrics
dashboard, which is divided into five
categories reflecting various key aspects of
AstraZeneca’s culture (Performance and
Development, Integrity, Engagement,
Reputation and Sustainability). The dashboard
is compiled from data across the global
workforce including scores from the Pulse
surveys and promotion and resignation rates.
Additionally, Directors receive information
on compliance issues and grievance cases,
and a workforce trends report which covers
broader metrics around workforce structure,
composition, hiring and retention. The Board
monitors the data for trends and to ensure
that a culture consistent with our Values is
being fostered. The report also contains a
list of approximately 10 further analyses
that reference culture and workforce
engagement and help the Board to judge
our culture and whether it reflects our Values.
This information is made available to Directors
via the Board portal.
The workforce culture report is reviewed by
the Board twice per annum. Where the Board
has concerns that the culture does not reflect
our Values, the Board seeks assurances from
management that remedial action has been
taken, and where necessary, requests senior
management’s attendance at Board meetings
to discuss corrective actions.
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Employee opinion surveys (Pulse)
Twice a year the workforce are invited to take
part in an employee opinion survey, which
seeks employees’ views of the business.
The results are reviewed by management
and trends are monitored. The results are
shared with the Board, which enables it
to understand the views and sentiments
of the workforce.
91%
of employees took part in the
November 2020 Pulse survey
Actions and outcomes
The Board considered the workforce
throughout its Principal Decisions in 2020.
Directors ensured that, where required, queries
raised during engagements were fed back to
management or discussed by the wider Board.
In 2020, the Board discussed the impact of
the COVID-19 pandemic on employees. The
Board received regular updates on the steps
taken by management to create safe working
environments, support the mental and
physical wellbeing of the workforce and access
to testing for employees. The Remuneration
Committee also discussed and reported back
to the full Board the Group’s decision to
remove performance ratings and the shift our
focus to coaching, development and
contribution to the organisation.
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Corporate Governance Report
Compliance with the UK
Corporate Governance Code
How we have complied with the UK
Corporate Governance Code
We have prepared this Annual Report with
reference to the UK Corporate Governance
Code published by the UK Financial Reporting
Council (FRC) in July 2018.
Our statement of compliance (together with
the wider Corporate Governance Report and
other sections of this Annual Report)
describes how we apply the principles set out
in the UK Corporate Governance Code.
We have complied throughout the accounting
period with the provisions of the UK Corporate
Governance Code, which is available on the
FRC’s website, www.frc.org.uk.
Board Leadership and Company Purpose
A. Board’s role
B. Our Purpose, Values
and culture
The Board is comprised of skilled individuals from a diverse
range of nationalities and professional backgrounds, as set out
in their biographies on pages 104 and 105, and the skills matrix
on page 121. The Directors’ diversity of experience and ability to
exercise independent and objective judgement help the Board
to operate effectively, through an established governance
framework, to assist the Group in delivering its strategy,
thereby promoting the long-term sustainable success of the
Group, generating value for shareholders and contributing to
wider society.
The Board believes that our Purpose, to push the boundaries
of science to deliver life-changing medicines, positions
AstraZeneca for long-term, sustainable success. Our strategy,
which was refreshed in 2019, remains relevant for the current
status of our business and the evolving external environment.
Our Values, and the behaviours that align with these Values,
support a culture in which our people are empowered and
inspired to make a difference to patients, society and our
Company, and makes AstraZeneca a great place to work.
The Board discharges its responsibilities as set out in the
Corporate Governance Overview on page 103 through a
programme of meetings that includes regular reviews of financial
performance, the Group’s R&D pipeline and critical business
issues, review and approval of the Group’s strategy and
long-range plan, and oversight of their execution and delivery.
For information on how the Board considers stakeholders’ interests
in decision making and the principal matters considered in 2020,
see page 112.
The Board reviews a workforce culture and employee
engagement report twice per year. For more information, see
People from page 68. As part of its work, the Remuneration
Committee also reviewed the Company’s approach to rewarding
the workforce. For more information, see page 113.
Individual Committees also monitor culture throughout the year.
C. Resources and
controls
The Board ensures that the necessary resources are in place
to help the Company to meet its objectives and measure its
performance against them.
The Board has a formal system in place for Directors to declare
a conflict, or potential conflict of interest.
For more information, see Conflicts of interest on page 268.
The Audit Committee received quarterly updates from the
Internal Audit Services (IA) and Compliance functions.
For more information, see pages 125 and 126 of the
Audit Committee Report.
D. Engagement
The Board aims to ensure that a good dialogue with our
shareholders is maintained and that their issues and concerns
are understood and considered.
The Company’s 2020 AGM was held on 29 April 2020 as a
closed meeting due to the COVID-19 pandemic. Engagement
with shareholders remains of the utmost importance to the
Board and all shareholders were encouraged to vote by proxy
in advance and invited to submit questions to the Board by
post or email. These questions and the responses, as well
as the communications to shareholders regarding the AGM
arrangements, are available on our website, see
www.astrazeneca.com.
E. Our workforce policies Our Code of Ethics (the Code) is based on our Values, expected
behaviours and key policy principles. The Code empowers our
workforce to make decisions that are in the best interests of the
Group and society and intended to promote the Company’s
long-term sustainable success. It applies to the Board and
all officers, employees and temporary staff within the Group
worldwide. More information on the Code is set out on
pages 61 and 118.
In our reporting to shareholders and other interested parties,
we aim to present a balanced and understandable assessment
of our strategy, financial position and prospects. Our corporate
website, www.astrazeneca.com, contains a wide range of data
of interest to institutional and private investors.
Details of how the Board considers shareholders and wider
stakeholders when making decisions is set out in the Connecting
with our stakeholders section from page 110 and throughout the
Strategic Report. Our section 172(1) statement is set out on
page 100.
How the Board engages with the global workforce is set out on page 113.
Details of further engagement with the global workforce is set out
on page 113.
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Division of responsibilities
F. The role of the
Chairman
Leif Johansson, our Non-Executive Chairman, is responsible for
leadership of the Board and promoting a culture of openness
and constructive debate.
He was considered to be independent upon his appointment
as Chairman.
G. Composition
of the Board
The Board comprises 12 Non-Executive Directors, including the
Chairman, and two Executive Directors – the CEO, Pascal
Soriot, and the CFO, Marc Dunoyer.
H. Role of the
Non-Executive Directors
The roles of the Board, Board Committees, Chairman and CEO
are documented, as are the Board’s reserved powers and
delegated authorities. The Board’s responsibilities and the
governance structure by which it delegates authority is set out
in the Corporate Governance Overview from page 103.
During 2020, the Board considered the independence of each
Non-Executive Director for the purposes of the UK Corporate
Governance Code and the Nasdaq Listing Rules. Except for
Marcus Wallenberg, the Board considers that all the Non-
Executive Directors are independent.
The role of the Non-Executive Directors is to provide
constructive challenge, strategic guidance, offer specialist
advice and hold management to account. At the end of Board
meetings, the Non-Executive Directors meet without the
Executive Directors present to review and discuss any matters
that have arisen during the meeting and/or such other matters
as may appear to the Non-Executive Directors to be relevant
in properly discharging their duty to act independently.
Time commitment
Our expectation is that Non-Executive Directors should be
prepared to commit 15 days a year, as an absolute minimum,
to the Group’s business. In practice, Board members’ time
commitment exceeds this minimum expectation when all the work
that they undertake for the Group is considered, particularly in
the case of the Chairman of the Board and the Chairmen of the
Board Committees. As well as their work in relation to formal
Board and Board Committee meetings, the Non-Executive
Directors also commit time throughout the year to meetings and
telephone calls with various levels of executive management,
visits to AstraZeneca’s sites throughout the world and, for new
Non-Executive Directors, induction sessions and site visits.
On occasions when a Director is unavoidably absent from a Board
or Board Committee meeting, they still receive and review the
papers for the meeting and typically provide verbal or written
input ahead of the meeting, usually through the Chairman of the
Board or the Chairman of the relevant Board Committee, so that
their views are made known and considered at the meeting.
Given the nature of the business to be conducted, some Board
meetings are convened at short notice, which can make it
difficult for some Directors to attend due to prior commitments.
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The 2020 Evaluation of the Board, including details of the Chairman’s
evaluation, is set out on page 109.
Marcus Wallenberg was appointed as a Director of Astra in May 1989
and subsequently became a Director of the Company in 1999. He is
a Non-Executive Director of Investor AB, which has a 3.93% interest
in the issued share capital of the Company as at 11 February 2021.
For these reasons – his overall length of tenure and relationship with
a significant shareholder – the Board does not believe that he can
be determined independent under the UK Corporate Governance
Code. However, the Board believes that he has brought, and
continues to bring, considerable business experience and makes
a valuable contribution to the work of the Board. In April 2010, he
was appointed as a member of the Science Committee, reflecting
his interest in innovation and R&D, knowledge of the history of the
Company and its scientific heritage and culture, and his broad
experience of other industries and businesses in which innovation
and R&D are important determinants of success.
The membership of the Board as at 31 December 2020 and information
about individual Directors is contained in Board of Directors on pages 104
and 105.
Euan Ashley attended all scheduled Board meetings following
his appointment as a Director on 1 October 2020. He missed
three ad hoc meetings relating to the proposed acquisition of
Alexion that were arranged at short notice. Two clashed with
long-standing, pre-arranged commitments of Dr Ashley attending
on a cardiac care unit and in respect of a PhD student exam. The
other was unavoidably arranged at a time in the middle of the night
in Dr Ashley’s time zone in California. The Board recognises the
challenges of having Directors based in multiple time zones,
including the US west and east coasts and Asia, particularly when
arranging ad hoc, virtual or telephone meetings at short notice,
but is committed to having a diverse Board that reflects the global
nature of the Company’s business and is made up of Directors
with skills and experience that align with the Company’s and the
Board’s needs.
Subject to specific Board approval, Directors and SET members
may accept external appointments as non-executive directors of
other companies, and retain any related fees paid to them,
provided that such appointments are not considered by the Board
to prevent or reduce the ability of the executive to perform his or
her role within the Group to the required standard.
Senior independent Non-Executive Director
Graham Chipchase was appointed senior independent
Non-Executive Director with effect from 1 January 2019. The role
of the senior independent Non-Executive Director is to serve as
a sounding board for the Chairman and as an intermediary for
the other Directors when necessary. The senior independent
Non-Executive Director is also available to shareholders if they
have concerns that contact through the normal channels of
Chairman or Executive Directors has failed to resolve, or for
which such contact is inappropriate.
For more information, see Board Committee membership and meeting
attendance in 2020 on page 103.
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Corporate Governance Report
Compliance with the UK
Corporate Governance Code continued
I. The Company Secretary The Company Secretary is responsible to the Chairman for
ensuring that all Board and Board Committee meetings are
properly conducted, that the Directors receive appropriate
information prior to meetings to enable them to make an
effective contribution, and that governance requirements
are considered and implemented.
Composition, succession and evaluation
The 2020 Board Evaluation set out on page 109 provides details of the
effective operation of the Board.
J. Appointments to the
Board and succession
planning
The Nomination and Governance Committee and, where
appropriate, the full Board, regularly review the composition of
the Board and the status of succession to both senior executive
management and Board-level positions. Directors have regular
contact with and access to succession candidates for senior
executive management positions.
Re-election of Directors
In accordance with Article 66 of the Articles, all Directors
retire at each AGM and may offer themselves for re-election by
shareholders. Accordingly, all the Directors will retire at the AGM
in April 2021. The Notice of AGM will give details of those Directors
seeking election or re-election.
During 2020, the Board appointed two new Non-Executive
Directors, Euan Ashley and Diana Layfield. During 2020, the
Committee engaged search firms Korn Ferry, MWM Consulting
and Spencer Stuart.
For information on the Nomination and Governance Committee,
including appointments and Director inductions, see the
Nomination and Governance Committee Report from page 120.
K. Skills, experience and
knowledge of the Board
As part of its role, the Nomination and Governance Committee
is responsible for reviewing the composition of the Board, to
ensure that it has the appropriate expertise while also
recognising the importance of diversity.
L. Board evaluation
In 2020, the Board undertook an externally-facilitated evaluation
in line with the UK Corporate Governance Code guidance that
the evaluation should be externally facilitated at least every
three years.
For more information, see the Nomination and Governance Committee
Report from page 120.
The Committee reviews the composition of the Board using a
matrix that records the skills and experience of current Board
members, comparing this with the skills and experience it believes
are appropriate to the Company’s overall business and strategic
needs, both now and in the future. The composition of the Board
is set out on page 104.
For more information, see the Nomination and Governance Committee
Report from page 120.
For further information, including results of the 2020 evaluation and
actions taken, see page 109 of the Corporate Governance Report.
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AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance
Audit, risk and internal control
M. Internal and external
audit
N. Fair, balanced and
understandable
assessment
O. Risk management and
internal controls
Remuneration
P. Policies and practices
Q. Procedure for
developing remuneration
policy
R. Exercising
independent judgement
The role of the Audit Committee is set out from page 122. The
Audit Committee is responsible for reviewing the Company’s
relationship with its external auditors, PricewaterhouseCoopers
LLP (PwC), including the independence of the external auditors.
The Committee maintains a policy (the Audit and Non-Audit
Services Policy) for the pre-approval of all audit services and
audit related services undertaken by the external auditor. The
principal purpose is to ensure that the independence of the
auditor is not impaired. For more information on fees paid to
the auditors for audit and audit related services and the
Audit and Non-Audit Services Policy, see Note 30 to the
Financial Statements.
The Board as a whole takes a keen interest in the Company’s
financial and business reporting including, in particular,
reviewing the Company’s quarterly financial results
announcements and through its oversight of the Company’s
Disclosure Committee.
For more information about the Disclosure Committee, see page 118.
The Board has overall responsibility for our system of internal
controls and risk management policies and has an ongoing
responsibility for reviewing their effectiveness. During 2020,
the Directors continued to review the effectiveness of our
system of controls, risk management (including a robust
assessment of the emerging and Principal Risks) and high-level
internal control processes.
The Remuneration Committee is responsible for determining,
approving and reviewing the Company’s global remuneration
principles and frameworks, to ensure that they support the
strategy of the Company and are designed to promote
long-term sustainable success.
During 2020, the Remuneration Committee reviewed the
Directors’ Remuneration Policy to ensure it continues to align
with corporate governance best practice; support the Company’s
ability to recruit and retain executive talent to deliver against its
strategy; and promote the delivery of the long-term strategy.
The Remuneration Committee also considers executive pay in
the context of the wider workforce, details of which can be
found from page 151. As part of the process for developing the
Directors’ Remuneration Policy, the Chairman of the
Remuneration Committee consulted with major institutional
shareholders on the Committee’s proposals and Willis Towers
Watson as independent adviser to the Remuneration Committee.
The Remuneration Committee exercises independent
judgement when determining remuneration outcomes. The
Committee takes into account factors such as wider business
and individual performance during the year, including
achievements across the enterprise, such as advancing our
Great Place to Work priorities and environmental, social and
governance (ESG) goals.
For more information on fees paid to the auditors for audit-related
and other assurance fees and the Audit and Non-Audit Services
Policy, see Note 30 to the Financial Statements on page 233 and
page 130 of the Audit Committee Report.
The Audit Committee also reviews the independence and
effectiveness of Internal Audit Services.
For more information, see Risk management and controls on page 118.
The Board considers this Annual Report, taken as a whole, to be
fair, balanced and understandable, and provides the information
necessary for shareholders to assess AstraZeneca’s position and
performance, business model and strategy.
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The Directors believe that the Group maintains an effective,
embedded system of internal controls and complies with the
FRC’s guidance entitled ‘Guidance on Risk Management, Internal
Control and Related Financial and Business Reporting’.
For more information about the ways in which we manage our business
risks, our procedures for identifying our emerging risks, how we describe
our Principal Risks and uncertainties, and our Viability statement, see
Risk management and controls on page 118, the Risk Overview from page
52 and Risk from page 254.
For more information on the Remuneration Committee’s work during 2020,
see the Directors’ Remuneration Report from page 131.
Details of these engagements are set out in the Directors’
Remuneration Report from page 131.
The Directors’ Remuneration Policy, which is to be put to shareholders for
approval at the 2021 AGM, can be found from page 156.
For more information on 2020 Remuneration Outcomes, see the Directors’
Remuneration Report from page 131.
AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance Report
AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance Report
117
The helpline is available to both employees and to
external parties to report any concerns or make
enquiries. Reports can be made anonymously where
desired and where permitted by local law. Anyone
who raises a potential breach in good faith is fully
supported by management.
The majority of cases come to our attention through
management and employee self-reporting, which
can be seen as an indication that employees are
comfortable in raising their concerns with line
managers or local Human Resources, Legal or
Compliance, as recommended in the Code and
reinforced in the 2020 Code training. In addition, in
2020, 385 reports of alleged compliance breaches
or other ethical concerns were made through the
helpline, including reports made by any anonymous
route that could be considered whistleblowing:
in 2019 there were 556 reports.
External auditor
A resolution will be proposed at the AGM on
30 April 2021 for the reappointment of
PricewaterhouseCoopers LLP (PwC) as auditor of
the Company. During 2020, PwC undertook various
audit and audit related services. More information
about this work and the audit and audit related fees
that we have paid are set out in Note 30 to the
Financial Statements on page 233. The external
auditor is not engaged by AstraZeneca to carry out
any audit related services in respect of which it might,
in the future, be required to express an audit opinion.
As explained more fully in the Audit Committee
Report from page 122, the Audit Committee has
established pre-approval policies and procedures
for audit and audit related services permitted to be
carried out by the external auditor and has carefully
monitored the objectivity and independence of the
external auditor throughout 2020.
Electronic communications
with shareholders
The Company has been authorised by shareholders
to place shareholder communications (such as the
Notice of AGM and this Annual Report) on the
corporate website in lieu of sending paper copies to
shareholders (unless specifically requested). While
recognising and respecting that some shareholders
may have different preferences about how they
receive information from us, we will continue to
promote the benefits of electronic communication
given the advantages that this has over traditional
paper-based communications, both in terms of the
configurability and accessibility of the information
provided and the consequent cost savings and
reduction in environmental impact.
Corporate Governance Report
Other Governance Information
Risk management and controls
Disclosure Committee
Our disclosure policy provides a framework for the
handling and disclosure of inside information and
other information of interest to shareholders and
the investment community. It also defines the role
of the Disclosure Committee. The core members of
the Disclosure Committee in 2020 were the CFO,
who chaired the Disclosure Committee; the General
Counsel; the Vice-President, Global Corporate
Affairs; the Head of Investor Relations; and the
Senior Vice-President Finance, Group Controller.
The EVP, BioPharmaceuticals R&D and the
EVP, BioPharmaceuticals Business Unit were
members of the Disclosure Committee for
BioPharmaceuticals-related matters. The EVP,
Oncology R&D and the EVP, Oncology Business
Unit were members of the Disclosure Committee
for Oncology-related matters. Other personnel
attend its meetings on an agenda-driven basis.
The Deputy Company Secretary acted as
secretary to the Disclosure Committee.
The Disclosure Committee meets regularly to assist
and inform the decisions of the CEO concerning
inside information and its disclosure. Periodically,
it reviews our disclosure controls and procedures
and its own operation as part of work carried out
to enable management and the Board to assure
themselves that appropriate processes are operating
for both our planned disclosures, such as our quarterly
results announcements and scheduled investor
relations events, and our unplanned disclosures in
response to unforeseen events or circumstances.
Global Compliance and Internal Audit Services (IA)
The role of the Global Compliance function is to help
the Group achieve its strategic priorities by doing
business the right way – with integrity and high
ethical standards. Global Compliance continues to
focus on ensuring the delivery of a globally aligned
approach to compliance that addresses key risk
areas across the business, including risks relating
to third parties and anti-bribery/anti-corruption.
Our priorities include: reinforcing and strengthening
compliant behaviours through effective policies,
training, advice and communications; monitoring
adherence to our Code of Ethics and supporting
requirements; providing assurance that we are
conducting appropriate risk assessments and due
diligence on third parties whom we engage for
services; and ensuring that employees and external
parties can raise any concerns.
We take all alleged compliance breaches and
concerns extremely seriously, including appropriate
investigation, as well as disciplinary action, and
other remediation to address misconduct and
prevent reoccurrence. Internal investigations are
undertaken by staff from our Global Compliance,
Human Resources and/or Legal functions. When
necessary, external advisers are engaged to conduct
and/or advise on investigations. Where a significant
breach has occurred, management, in consultation
with our Legal function, will consider whether the
Group needs to disclose and/or report the findings
to a regulatory or governmental authority.
Global Compliance provides direct assurance to the
Audit Committee on compliance matters, including
an analysis of compliance breaches and associated
disciplinary actions, as well as commentary on
the more serious breaches and corresponding
remediation. Complementing this, IA carries out
a range of audits that include compliance-related
audits and periodically reviews the assurance
activities of other Group assurance functions.
The results from these activities are reported to the
Audit Committee. Global Compliance and IA work
with specialist compliance functions throughout our
organisation to share outcomes and to coordinate
reporting on compliance matters.
IA is established by the Audit Committee on behalf
of the Board and acts as an independent and
objective assurance function guided by a philosophy
of adding value to improve the operations of the
Group. The scope of IA’s responsibilities
encompasses, but is not limited to, the examination
and evaluation of the adequacy and effectiveness
of the Group’s governance, risk management, and
internal control processes in relation to the Group’s
defined goals and objectives.
Among others, internal control objectives
considered by IA include:
> compliance with significant policies, plans,
procedures, laws and regulations
> consistency of operations or programmes with
established objectives and goals and effective
performance
> safeguarding of assets.
Based on its activity, IA is responsible for reporting
significant risk exposures and control issues
identified to the Board and to senior management,
including fraud risks, governance issues, and other
matters needed or requested by the Audit
Committee. It may also evaluate specific operations
at the request of the Audit Committee or
management, as appropriate.
Code of Ethics
Our Code of Ethics (the Code) is based on our
Values, expected behaviours and key policy
principles. The Code recommends that employees
report possible violations to their line managers or to
their local Human Resources, Legal or Compliance
partners. The Code also contains information on
how to report possible violations through our
helpline, which includes the AZ Ethics telephone
lines, the AZ Ethics website, and the Global
Compliance email and postal addresses. The
externally-operated website is available in
approximately 58 languages to facilitate reporting,
and telephone lines are included for 151 countries.
AstraZeneca’s new case management platform
launched in the third quarter of 2020 continues to
incorporate the AZ Ethics helpline for reporting
compliance concerns and raising inquiries. The
new platform is more user-friendly for reporters
by expanding access to reporting channels,
streamlining intake of reports and prompting regular
communication touchpoints with AstraZeneca
investigators. AZ Ethics continues to be managed
by an independent third party on the Group’s behalf
and remains available to both employees and
external parties via website or telephone, and now
SMS in North America.
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Science
Committee Report
“ The Science
Committee’s core
role is to provide
assurance to the
Board regarding
the quality,
competitiveness
and integrity of
the Group’s R&D
activities.”
Our focus during 2020
> COVID-19 pandemic
impact and response
> R&D strategic science
capabilities
> Corporate scorecard
achievements and targets
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Role of the Committee
The Science Committee’s core role is to provide
assurance to the Board regarding the quality,
competitiveness and integrity of the Group’s
R&D activities. This is done by way of meetings
and dialogue with our R&D leaders and other
scientist employees, when circumstances
allow visits to our R&D sites throughout the
world, and review and assessment of:
> the approaches we adopt in respect
of our chosen therapy areas
> the scientific technology and R&D
capabilities we deploy
> the scientific strategy for maintaining
our pipeline and competitiveness
> the decision-making processes for R&D
projects and programmes
as co-opted members in 2020. The
Vice-President, Chief Operating Officer acts
as secretary to the Science Committee.
Activities during 2020
The Science Committee held five meetings
in 2020, virtually, as a result of the global
COVID-19 pandemic.
Key areas of focus for the Science Committee
in 2020 included:
> COVID-19: how the pandemic is impacting
AstraZeneca clinical trials, the progress
of AstraZeneca’s vaccine and monoclonal
antibody programmes and clinical trials
of existing AstraZeneca drugs such as
Calquence and Farxiga.
> the quality of our scientists and their career
> R&D strategic science capabilities:
opportunities and talent development
> benchmarking against industry and
scientific best practice, where appropriate.
The Science Committee periodically reviews
important bioethical issues that we face and
assists in the formulation of, and agrees on
behalf of the Board, appropriate policies in
relation to such issues. It also considers future
trends in medical science and technology. The
Science Committee does not review individual
R&D projects but does review, on behalf of the
Board, the R&D aspects of specific business
development or acquisition proposals and
advises the Board on its conclusions.
Membership of the Committee
During 2020, the members of the Science
Committee, all of whom have a knowledge
of, or an interest in, life sciences, were
Nazneen Rahman (Chair), Geneviève Berger,
Marcus Wallenberg, Tony Mok and the
newest member, Euan Ashley. As usual,
the EVP, Oncology R&D and the EVP,
BioPharmaceuticals R&D participated
in meetings of the Science Committee
including functional genomics, Diagnostics/
precision medicine, cfDNA- based
registrational studies, cell therapy,
epigenetics and oligonucleotides.
> Corporate scorecard outturn and goal
setting: providing insight and feedback to
the Remuneration Committee in support of
2020 achievements and 2021 goal setting.
> Daiichi Sankyo collaboration: providing
a review to the Board of the scientific case
supporting the joint development and
commercialisation agreement with Daiichi
Sankyo for DS-1062.
> Alexion: providing scientific review in
AstraZeneca Board meetings prior to
proposed commercial agreement.
Nazneen Rahman
Chairman of the Science Committee
The Science Committee’s terms of reference are available
on our website, www.astrazeneca.com.
AstraZeneca Annual Report & Form 20-F Information 2020 / Science Committee Report
119
Nomination and
Governance
Committee Report
“ The Nomination
and Governance
Committee
recommends to the
Board new Board
appointments and
considers, more
broadly, succession
plans at Board level.”
Our focus during 2020
> Composition of the Board
> Succession planning for
the Board
> Inclusion and diversity
> Inductions and training
Composition of the Board
As part of its role, the Nomination and
Governance Committee is responsible for
reviewing the composition of the Board, to
ensure that it has the appropriate expertise
while also recognising the importance of
diversity. The Committee reviews the
composition of the Board using a matrix that
records the skills and experience of current
Board members, comparing this with the skills
and experience it believes are appropriate to
the Company’s overall business and strategic
needs, both now and in the future. The matrix is
set out opposite. Any decisions relating to the
appointment of Directors are made by the entire
Board based on the merits of the candidates
and the relevance of their background and
experience, measured against objective criteria,
with care taken to ensure that appointees
have enough time to devote to our business.
Inclusion and diversity
Diversity is integrated across our Code of
Ethics and associated workforce policy, and we
promote a culture of diversity, respect and equal
opportunity, where individual success depends
only on personal ability and contribution. We
strive to treat our employees with fairness,
integrity, honesty, courtesy, consideration,
respect, and dignity, regardless of gender,
race, nationality, age, sexual orientation or
other forms of diversity. The Board is provided
each year with a comprehensive overview of
the AstraZeneca workforce, covering a wide
range of metrics and measures (including
trends around gender diversity, leadership,
ethnic diversity and age profile). The latest
Hampton-Alexander Report published in
2020 named AstraZeneca PLC as one of the
top 10 best performers in the FTSE 100 for
representation of women on the combined
executive committee and their direct reports.
For the year ended 31 December 2020,
women represented 42.5% of senior
management and their direct reports.
The Board views gender, nationality, cultural
and ethnic diversity among Board members
as important considerations when reviewing
its composition and has met the
recommendations of the Hampton-Alexander
and Parker Reviews. Considering diversity in
a wider sense, the Board aims to maintain a
balance in terms of the range of experience
and skills of individual Board members, which
includes relevant international business,
pharmaceutical industry and financial
experience, as well as appropriate scientific
and regulatory knowledge. The biographies of
Board members set out on pages 104 and 105
give more information about current Directors
in this respect.
The Board has adopted an Inclusion and
Diversity Policy (the Policy), which is
applicable to the Board and its Committees.
The Policy reinforces the Board’s ongoing
commitment to all aspects of diversity and to
fostering an inclusive environment in which
each Director feels valued and respected.
While the Board appoints candidates based
on merit and assesses Directors against
measurable, objective criteria, the Board
recognises that an effective Board with a
broad strategic perspective requires diversity.
The Policy sets out the Board’s aim to
maintain a composition of at least 33% female
Directors and at least one Director from an
ethnic minority background. The Policy
provides a commitment to use at least one
professional search firm which has signed
up to the ‘Voluntary Code of Conduct for
Executive Search Firms’, to help recruit
Directors from a broad, qualified group of
candidates to increase diversity of thinking
and perspective. The Board’s approach to
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Non-Executive Directors’ experience, as at 31 December 2020
Business
Geographic
Name
Commercial
Financial Managerial
Sales &
Marketing
Tech &
Digital
US
Europe
Asia
Science Regulatory
Industry-specific
Medical
Doctor/
Physician
Biologics
Pre-AZ
Pharma
Leif Johansson
Euan Ashley
Geneviève Berger
Philip Broadley
Graham Chipchase
Michel Demaré
Deborah DiSanzo
Diana Layfield
Sheri McCoy
Tony Mok
Nazneen Rahman
Marcus Wallenberg
inclusion and diversity continues to yield
successful results. Currently, 42% of the
Company’s Non-Executive Directors are
women, and women make up 36% of the
full Board.
> when possible after the pandemic, visits
to various sites including R&D centres,
commercial sites and operations facilities
in China, Sweden, the UK and the US
> access to a reading room which provides
This meets the Policy’s aim of 33% female
representation on the Board, the same target
as set out in the report from Lord Davies
published in October 2015. The Board also
met the recommendations of the Hampton-
Alexander and Parker Reviews.
The Board’s Inclusion and Diversity Policy can be found
on our website, www.astrazeneca.com.
Information about our approach to diversity
in the organisation below Board level can be
found in the People section from page 68.
Inductions and training
Newly appointed Directors are provided with
comprehensive information about the Group
and their role as Non-Executive Directors.
They also typically participate in tailored
induction programmes that take account of
their individual skills and experience. During
2020, two independent Non-Executive
Directors, Euan Ashley and Diana Layfield,
were appointed and commenced ongoing
induction programmes intended to provide an
understanding of the Group, as well as their
duties as a Director of a listed company. Due
to the global COVID-19 pandemic, these
induction programmes are taking place
virtually, typically by videoconference, until
it is possible to recommence face-to-face
meetings and site visits. Although elements
of their inductions will be adjusted for their
existing expertise and Committee membership,
key areas covered during 2020 and continuing
into 2021 include:
> meetings with members of the Board,
SET and other senior management
> meeting with external legal advisers
> meeting with the external auditors
information on the Group, including
financial performance, pipeline information,
policies including the AstraZeneca
Securities Dealing Code and rules relating
to inside information, investor and analyst
reports, and media updates. In addition, the
reading room contains guidance on directors’
duties and listed company requirements.
Ongoing training and development
AstraZeneca is committed to developing a
culture of lifelong learning, including for
Directors. As part of each Director’s individual
discussion with the Chairman, his or her
contribution to the work of the Board and
personal development needs were
considered. Directors’ training needs are met
by: a combination of internal presentations
and updates and external speaker
presentations as part of Board and Board
Committee meetings; specific training
sessions on particular topics, where required;
and the opportunity for Directors to attend
external courses at the Company’s expense,
should they wish to do so. In addition,
Directors are encouraged to attend site visits
during the year. During these visits, Directors
meet with local management and have tours
of both AstraZeneca sites and facilities, as
well as those of our strategic partners. These
site visits further Directors’ understanding of
the Group’s business and operations, as well
as providing an insight into the particular
challenges faced in those regions.
Additionally, such visits provide Directors
with an opportunity to engage with key
stakeholders. As mentioned elsewhere in this
report, the COVID-19 pandemic significantly
curtailed Board members’ ability to travel for
site visits during 2020 but such visits will
recommence when possible.
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Succession planning
The Nomination and Governance Committee
considers both planned and unplanned
(unanticipated) succession scenarios and met
five times in 2020. The Committee split the
majority of its time between succession
planning for Non-Executive Directors and
continued routine succession planning for
the roles of Chairman, CEO and CFO. The
search firms Korn Ferry, MWM Consulting
and Spencer Stuart were engaged to assist
the Committee with its work. Korn Ferry
and Spencer Stuart periodically undertake
executive search assignments for the Company.
Corporate governance
The Nomination and Governance Committee
also advises the Board periodically on
significant developments in corporate
governance and the Company’s compliance
with the UK Corporate Governance Code.
See from page 114 for the Company’s
statement of compliance with the UK
Corporate Governance Code during 2020.
Leif Johansson
Chairman
The Nomination and Governance Committee’s
terms of reference are available on our website,
www.astrazeneca.com.
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Audit Committee
Report
“ Effective internal
controls, appropriate
accounting practices
and policies, and
the exercise of
experienced
judgement by the
Committee and the
Board underpin
AstraZeneca’s
financial reporting
integrity.”
Our focus during 2020
This Report describes the work
of the Audit Committee (the
Committee) and the significant
issues it considered in 2020.
Our priorities were to receive
assurance over the integrity of:
> Financial reporting, internal
controls, and the quality
and effectiveness of the
external audit
> Risk management, including
the identification, mitigation,
monitoring and reporting
of risks, and lines of
management accountability
> Compliance matters,
including continued work on
fostering a ‘Speak Up’ culture,
and on anti-bullying and
anti-harassment
> Cybersecurity and information
governance
> Business continuity planning
and resilience
Financial reporting
Effective internal controls, appropriate
accounting practices and policies, and the
exercise of experienced judgement by the
Committee and the Board underpin
AstraZeneca’s financial reporting integrity.
At least once per quarter, the Committee
reviewed the Group’s significant accounting
matters, including contingent liabilities and
provisions, revenue recognition and
impairment triggers for intangible assets.
Where appropriate, the Committee challenged
management’s decisions before approving
the proposed accounting treatment. The
Committee dedicated significant time to
considering the effects of COVID-19 on the
Company’s business, internal controls and
financial reporting. This included: (i) the
additional accounting and reporting
considerations given the increased risk posed
by the economic consequences of COVID-19
(including specific, topical guidance from
regulators such as the Financial Reporting
Council, the Financial Conduct Authority,
the Securities Exchange Commission and
the European Securities and Markets
Association); (ii) ensuring that Company
management and internal audit personnel
involved in managing and reviewing, and
PwC audit teams involved in auditing, the
Company’s accounting, reporting and control
activities were able to carry out their work
adequately using remote and technology-
enabled working practices; and (iii) accounting
considerations, governance, risk management
and controls framework relating to the
development, manufacture and supply of the
vaccine, COVID-19 Vaccine AstraZeneca and
the development of other AstraZeneca
medicines to treat COVID-19.
PwC was reappointed as the Company’s
external auditor by its shareholders at the
Company’s AGM held in April 2020, serving
for the fourth successive year. The Committee
continued to oversee the conduct, performance
and quality of the external audit, in particular
through its review and challenge of the
coverage of the external auditor’s audit plan
and subsequent monitoring of their progress
against it. The Committee maintained regular
contact with PwC through formal and informal
reporting and discussion throughout the year,
with a particular focus on maintaining audit
efficiency and quality during a prolonged
period of remote working.
Risk identification and management
During the year, the Committee continued its
regular reviews of the Group’s approach to
risk management, the operation of its risk
reporting framework and risk mitigation.
The Committee has continued its interaction
with the Company’s Science Committee to
assist both Committees in deepening their
understanding of the clinical compliance risk
facing the Group, with Nazneen Rahman
(Science Committee Chair) attending the
Committee session on R&D activities in China.
When identifying risks, the Committee
considers the total landscape of risks.
The most significant of these, as measured
through potential impact and probability,
are our Principal Risks. We then consider
those specific risks which are challenging
our business presently, our key active risks.
Finally, we scan the horizon and identify risks
which may challenge us in the future, our
emerging risks. This framework provided
the context for the Committee’s consideration
of the Directors’ Viability statement. The
Directors’ Viability statement is underpinned
by the assurance provided through a ‘stress
test’ analysis under which key profitability,
liquidity and funding metrics are tested
against severe downside scenarios.
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Each of these scenarios assumes that
the associated risks crystallise and that
management will take mitigating actions
against those risks. The Committee
considered in detail the validity of each
scenario. This included obtaining additional
analysis from management as to the indirect
or unintended consequences of its proposed
mitigating actions including, for example,
assessing the likely response of a broader
range of stakeholders. The Committee also
assessed whether the proposed mitigations
were viable.
For more information on the Viability statement,
see Risk Overview from page 78.
The Committee’s consideration of risk
management was supported by ‘deep dive’
reviews of key activities, including:
> a detailed review with PwC of the audit
process, the current and future regulatory
environment for auditors and the use of
technology in auditing
> regular information security and information
technology updates
> R&D activities in China and the impact of
the Human Genetic Resource regulation
> a review of compliance-related activities
in the Central America & Caribbean
(CAMCAR) region
> the implementation of the Global Standards
on sexual harassment, and bullying and
harassment
> tax charges and liabilities
> defined benefit pensions scheme liabilities
and disclosures
> manufacturing and supply activities,
including inventory management and
C19VAZ vaccine production
> specific risks posed by COVID-19 aligned
with respective mitigation actions.
Further information on the deep dive reviews can be
found in the Business updates section on page 126.
As discussed below, members of the
Committee engaged with Group personnel
through virtual meetings to enhance their
understanding of risks arising across the
organisation.
For more information on the Group’s Principal Risks,
see Risk Overview from page 78.
Cybersecurity and information
governance
The Committee receives bi-annual
presentations from the Chief Digital Officer
and Chief Information Officer (CIO) and her
team. During 2020, the Committee continued
to monitor and review the effectiveness of our
procedures to defend our IT systems against
increased levels and new forms of attack from
external agents. The Committee also reviewed
data governance standards across the Group.
Business continuity planning
The Committee receives quarterly risk
management reports from the CFO on the
key active and emerging risks facing the
Company. During the year, the Committee
considered the particular risks associated
with operating during the pandemic, including
maintaining manufacture and supply of the
Company’s products in all markets.
Compliance with the Code of Ethics
The Committee’s priorities continue to include
overseeing compliance with AstraZeneca’s
Code of Ethics, and ensuring high ethical
standards, and that we operate within the law
in all countries where we operate. The Code
of Ethics is written in simple and accessible
language to empower decision making that
reflects AstraZeneca’s Values, expected
behaviours and key policy principles. During
the year, the Committee continued to monitor
and review the effectiveness of our anti-bribery
and anti-corruption controls across the Group,
prioritising its focus on countries/regions
where we have significant operations and
countries in which doing business is generally
considered to pose higher compliance risks.
The Committee also monitored and reviewed
the impact of the implementation of our new
Global Standards of behaviour on bullying
and harassment. AstraZeneca is committed
to ensuring that its people feel respected
through promoting a culture of inclusion and
diversity, and fostering a working environment
in which its employees feel able and safe to
speak up.
For more information on our Code of Ethics, see the
Business Review on page 61 and the Corporate
Governance Report on page 118.
Engagement with employees and other
stakeholders
The Committee regularly interacts with
members of management below the SET and
seeks wider engagement with the Group’s
employees and other stakeholders. In a
normal year, this would have involved members
of the Committee visiting a wide range of the
Group’s sites. As this was not possible in 2020
due to travel restrictions and social distancing
measures, the Committee undertook a series
of virtual interactions with a wider range of
teams from across the organisation. While
these virtual interactions were typically shorter
than in-person site visits, meeting virtually
enabled the Committee to arrange for a
greater number of meetings across many
geographies. The Committee met with
representatives from the following teams:
> the Japanese marketing company
> Business Development Operations
and Oncology Business Development
> the German marketing company
> the Australian marketing company
> Treasury
> the UK marketing company
> the Middle East and Africa marketing
organisation
> the French marketing company.
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These interactions provided the Committee
with valuable insights from these teams about
the key issues and challenges relating to, and
current and emerging risks associated with,
our activities in these areas. They also
enabled AstraZeneca personnel from these
parts of the business to meet Committee
members and share their perspectives on the
Group and the work they do. The Committee
welcomes the opportunity to engage with
employees in these meetings and uses them
to communicate the importance it attaches to
compliance and our ‘Speak Up’ culture. The
Committee looks forward to being able to
make in-person visits again in the future and
to meet an even wider range of personnel.
During 2020, the Committee monitored
the Group’s engagements with external
stakeholders relevant to the Committee’s
areas of oversight, including the Financial
Reporting Council (FRC) and Securities and
Exchange Commission. In particular, during
the year the FRC’s Audit Quality Review (AQR)
team reviewed PwC’s audit of the Group’s
2019 Financial Statements as part of its
annual inspection of audit firms. The Audit
Committee received and reviewed the final
report from the AQR team which identified no
key findings, assessed the audit as requiring
limited improvement, and noted some areas
of good practice.
We hope that you find this information helpful
in understanding the work of the Committee.
Our dialogue with our shareholders and other
stakeholders is valued greatly and we
welcome your feedback on this Report.
Philip Broadley
Chairman of the Audit Committee
AstraZeneca Annual Report & Form 20-F Information 2020 / Audit Committee Report
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Audit Committee
Report
continued
The role of the Committee and how we
have complied
Committee membership and attendance
All Committee members are Non-Executive
Directors and considered by the Board to be
independent under the UK Corporate
Governance Code. The Committee’s
members are Philip Broadley (Committee
Chairman), Michel Demaré, Deborah DiSanzo
and Sheri McCoy.
In December 2020, the Board determined
that, for the purposes of the UK Corporate
Governance Code, at least one member of the
Committee had recent and relevant financial
experience, and Philip Broadley and Michel
Demaré were determined to be financial
experts for the purposes of the Sarbanes-
Oxley Act. The Board also determined that the
members of the Committee as a whole had
competence relevant to the sector in which
the Company operates, as Philip Broadley has
served as a Non-Executive Director of the
Company since April 2017, Michel Demaré has
experience of working in an innovation and
science-driven environment from his role as
Chairman of Syngenta, Deborah DiSanzo has
healthcare sector experience from her roles
previously at IBM Watson Health and now at
Best Buy Health, and Sheri McCoy has had a
30-year career in the pharmaceutical industry.
The Board of Directors’ biographies on pages
104 and 105 contain details of each
Committee member’s skills and experience.
The Committee held seven meetings in 2020
and the Committee members’ attendance is
set out in the table on page 103.
Following each Committee meeting, the
Committee Chairman informs the Board of the
principal matters the Committee considered
and of any significant concerns it has or that
have been reported by the external auditor,
the IA function or the Group Compliance
function. The Committee identifies matters
that require action or improvement and makes
recommendations on the steps to be taken.
The Committee’s meeting minutes are
circulated to the Board.
The Committee’s work is supported by
valuable insight gained from its interactions
with other Board Committees, senior
executives, managers and external experts.
The Committee meetings are routinely
attended by: the CFO; the General Counsel;
the Executive Vice-President Sustainability
and Chief Compliance Officer; the VP Ethics
& Transparency and Deputy Chief Compliance
Officer; the Vice-President, IA; the Senior
Vice-President Finance, Group Controller; and
the Company’s external auditor. The CEO and
other members of the Senior Executive Team
attend when required by the Committee.
In addition, to ensure the effective flow of
material information between the Committee
and management, the Committee, and
separately the Committee Chair, meet
privately and on an individual basis with:
the CFO; the Executive Vice-President
Sustainability and Chief Compliance Officer;
the VP Ethics & Transparency and Deputy
Chief Compliance Officer; the General
Counsel; the Vice-President, IA; and the
Company’s external auditor.
Regulation
The Committee considers that the Company
has complied with the Competition and
Markets Authority’s Statutory Audit Services
for Large Companies Market Investigation
(Mandatory Use of Competitive Tender
Processes and Audit Committee
Responsibilities) Order 2014 in respect of its
financial year commencing 1 January 2020.
Role and operation of the Committee
The Committee’s terms of reference are
available on our website, www.astrazeneca.com.
The Committee regularly reports to the Board
on how it discharges its main responsibilities,
which include the following standing items:
> Monitoring the integrity of the Company’s
financial reporting and formal
announcements relating to its financial
performance, and reviewing significant
financial reporting judgements and
estimates contained within them.
> Monitoring the work of the Disclosure
Committee which manages the Company’s
other public disclosures.
> Ensuring the Company’s Annual Report
and financial statements presents a fair,
balanced and understandable assessment
of the Company’s position and prospects
by carrying out a formal review of the
documentation and receiving a year-end
report from management on the internal
controls, governance, compliance,
assurance and risk management activities
that support the assessment.
> Reviewing the effectiveness of the
Company’s internal financial controls,
internal non-financial controls, risk
management systems (including
whistleblowing procedures) and
compliance with laws and the
AstraZeneca Code of Ethics.
> Monitoring and reviewing the role,
resources and effectiveness of the Group’s
IA function and its Compliance function.
> Reviewing the effectiveness of the external
audit process and overseeing the Group’s
relationship with its external auditor.
> Monitoring and reviewing the external
auditor’s independence and objectivity.
> Ensuring that the provision of non-audit
services by the external auditor are
appropriate and in accordance with the
policy approved by the Committee.
> Making recommendations to the Board for
seeking shareholder approval relating to
the appointment, reappointment and
removal of the external auditor, and to
approve the remuneration and terms of
engagement of the external auditor.
> Monitoring the Company’s response to
any external enquiries and investigations
regarding matters within the Committee’s
area of responsibility.
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AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance
Principal activities focused on by the Committee in 2020
During 2020 and in January 2021, the Committee considered and discussed the following items:
Financial
reporting
> Key elements of the Financial Statements and the
estimates and judgements contained in the Group’s
financial disclosures. Accounting matters considered
included the areas described in the Financial Review
under Critical accounting policies, judgements and
estimates (with a focus on accounting issues relevant
to revenue recognition, litigation and taxation matters,
and intangible asset impairment) from page 97.
> The preparation of the Directors’ Viability statement and the
adequacy of the analysis supporting the assurance provided
by that statement.
> The external auditor’s reports on its audit of the Group
Financial Statements, and reports from management, IA,
Global Compliance and the external auditor on the effectiveness
of our system of internal controls and, in particular, our internal
control over financial reporting.
> The appropriateness of management’s and the external
> Compliance with applicable provisions of the Sarbanes-Oxley
auditor’s analysis and conclusions on judgemental
accounting matters.
> The completeness and accuracy of the Group’s financial
Act. In particular, the status of compliance with the programme
of internal controls over financial reporting implemented
pursuant to section 404 of that Act.
performance against its internal and external key
performance indicators.
> The going concern assessment and adoption of the going
concern basis in preparing this Annual Report and the
Financial Statements. More information on the basis of
preparation of Financial Statements on a going concern
basis is set out in the Financial Statements on page 180.
For more information, see Sarbanes-Oxley Act section 404 in the Financial Review
on page 99.
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Risk and
compliance
> The Group’s Principal, enduring and emerging risks,
> Quarterly reports from Global Compliance regarding key
including the Group’s risk management approach, risk
reporting framework and risk mitigation. The Committee
also considered how the risk management process
was embedded in the Group and assured itself that
management’s accountability for risks was clear and
functioning.
> Quarterly reports from the General Counsel on the
status of significant litigation matters and governmental
investigations.
> Quarterly reports of work carried out by IA and Finance,
including the status of follow-up actions with management.
> The geographic presence, reach and capabilities of the
IA and Compliance functions and the appropriateness
of the Group’s resource allocation for these vital
assurance functions.
External
audit
> Monitoring the effectiveness and quality of the external
audit process through: examination and review of the
coverage provided by the external auditor’s audit plan,
and their performance against it; management’s feedback
on the conduct of the audit; and considering the level of
and extent to which the auditors challenged management’s
assumptions. External audits typically involve a significant
amount of in-person meetings and other interactions.
The Committee therefore paid particular attention to the
delivery of the audit plan in a predominantly remote working
environment. The Committee was satisfied that the external
auditor would be able to deliver the plan in these conditions.
compliance incidents (both substantiated and unsubstantiated),
trends arising and the dispersion of incidents across the
Group’s business functions and management hierarchy,
including any corrective actions taken so that the Committee
could assess the effectiveness of controls, and monitor and
ensure the timeliness of remediation.
> Data from reports made by employees via the AZethics helpline,
online facilities and other routes regarding potential breaches
of the Code of Ethics, together with the results of enquiries into
those matters.
> The monitoring, review, education and improvements made to
support assurance that the risk of modern slavery and human
trafficking is eliminated, to the fullest extent practicable, from
AstraZeneca’s supply chain.
Further information about the Principal Risks faced by the Group is set out in the
Risk Overview section from page 78.
> Reviewing quarterly reports from the external auditor over key
audit and accounting matters, and business processes, internal
controls and IT systems.
> Audit and non-audit fees of the external auditor during the year,
including the objectivity and independence of the external
auditor through the application of the Audit and Non-Audit
Services Pre-Approval Policy as described further on page 130.
Further information about the audit and non-audit fees for 2020 is disclosed in
Note 30 to the Financial Statements on page 233.
AstraZeneca Annual Report & Form 20-F Information 2020 / Audit Committee Report
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Audit Committee
Report
continued
Principal activities focused on by the Committee in 2020 continued
Performance
assessment
> An effectiveness review of IA by considering its
performance against the internal audit plan and key
activities. IA provided assurance over compliance with
significant policies, plans, procedures, laws and
regulations, as well as risk-based audits across a broad
range of key business activities, further strengthened its
thematic reporting to the business, and adapted the audit
plan to respond to new or arising risks and COVID-19
disruption. The Committee noted IA’s continued
contributions in supporting and delivering value to the
business and the Committee during the year. The
Committee supports IA’s continued efforts to deploy its
resources in line with the shape and size of the overall
organisation and was satisfied with the quality, experience
and expertise of the IA function.
> The Committee conducted the annual evaluation of its own
performance, with each Committee member and other
attendees responding to a questionnaire prepared by a third
party. The results were reported to and discussed with the
Committee and the Board. The Committee was deemed highly
diligent and its oversight was rated positively. There continued
to be a strong focus on risk, risk governance and targeted deep
dives with appropriate lines of questioning and challenges to
management’s logic and thinking regarding financial reporting
and strategies. It was thought that there were opportunities to
refine the approach to deep dives, enhance analysis of key
accounting judgements, and enhance discussion and focus
on potential new disclosures containing greater degrees of
sensitivity and judgement.
Business
updates
> A review of compliance-related activities in the
Central America & Caribbean (CAMCAR) region.
> A detailed review with PwC of the audit process, the
current and future regulatory environment for auditors
and the use of technology in auditing.
> An overview of R&D activities in China and the impact
of the Human Genetic Resource regulation.
> A review of the implementation of the Global Standards
on sexual harassment, and bullying and harassment.
> An overview of the global corporate income tax
environment including transfer pricing, disputes and
dispute resolution, fiscal incentives, controlled foreign
company regimes, country-by-country reporting, and
recent developments at the OECD including the Pillar 1
and Pillar 2 blueprints.
> An overview of the Group’s pensions arrangements, in particular
the valuation and management of pension assets and liabilities.
> An overview of the Group’s manufacturing and supply activities,
including inventory management and technology trends.
> Regular updates from the IS/IT team on matters including:
the Group’s cyber defence capability; the activities of the
team responding to COVID-19 and supporting remote and
technology-enabled working practices; and the use of artificial
intelligence in the business.
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AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance
Significant financial reporting issues considered by the Committee in 2020
Reporting issue
Rationale
Committee response
Committee conclusion/actions taken
The Committee is aware of the
significance and complexity of the
new arrangements and focused
considerable attention on ensuring
a clear understanding of the impact
on the Group’s financial position
and performance.
The Committee was presented
with a detailed assessment of areas
of increased risk conducted by
management and has been provided
with updates throughout the year.
A detailed report on the status (and
any financial reporting implications)
of each new arrangement related
to the vaccine is provided on a
quarterly basis.
The Committee has discussed and
challenged the applicable accounting
principles applied, which were
assessed to be appropriate. Given the
material value of the government grants
included in the new arrangements,
a new accounting policy has been
included as part of the Group’s
Accounting Policies from page 180.
The Committee recognised
management’s proactive assessment
and continual close monitoring of the
COVID-19 pandemic on the areas of
increased risk, as noted in the Group’s
Accounting Policies from page 180.
The Committee has also reviewed the
additional disclosures that have been
included in the Annual Report relating
to the vaccine arrangements and
concluded these to be appropriate.
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Vaccine and other
COVID-19 activities’
accounting
Group Accounting
Policies from page 180.
AstraZeneca entered into a large
number of new arrangements with
government bodies, certain vaccine
alliances, and external contract
manufacturers as part of the Group’s
response to develop and supply
COVID-19 Vaccine AstraZeneca, a
vaccine against COVID-19.
Some of these government
arrangements included grants or
advanced funding to support both
research and development costs and
the establishment of supply chains.
Each government and alliance
arrangement required a thorough
and considered assessment to
determine different performance
obligations and ensure appropriate
accounting treatment.
Furthermore the impact of the
COVID-19 pandemic has given rise
to topical regulatory guidance
being issued by the UK FRC, The
Department for Business, Energy &
Industrial Strategy (BEIS) and the
European Securities and Markets
Authority (ESMA), coupled with an
increased focus on impairment risks,
going concern and viability,
presentation of non-GAAP measures
along with the impact on key
judgements and significant estimates.
Revenue
recognition
Financial Review
from page 82 and
Note 1 to the
Financial Statements
from page 187.
The US is our largest single market
and sales accounted for 33% of our
Product Sales in 2020. Revenue
recognition, particularly in the US,
is affected by rebates, chargebacks,
returns, other revenue accruals and
cash discounts.
The Committee pays attention to
management’s estimates of these
items, its analysis of any unusual
movements and their impact on
revenue recognition, informed by
commentary from the external
auditor.
The Committee receives regular
reports from management and the
external auditor on this complex area.
The US market remains highly
competitive with diverse marketing
and pricing strategies adopted by the
Group and its peers.
The Committee recognised the close
monitoring and control by management
and the continuous drive to improve
the accuracy in forecasting for managed
market rebates and excise fees, which
has supported a stabilisation of the
overall gross-to-net deductions.
AstraZeneca Annual Report & Form 20-F Information 2020 / Audit Committee Report
127
Audit Committee
Report
continued
Significant financial reporting issues considered by the Committee in 2020 continued
Reporting issue
Rationale
Committee response
Committee conclusion/actions taken
The Committee considered the
impairment reviews of the Group’s
intangible assets. Significant reviews
included the partial impairments of
Bydureon, Eklira/Duaklir and FluMist.
Valuation of
intangible assets
Financial Review
from page 82 and
Note 10 to the
Financial Statements
from page 198.
The Group carries significant intangible
assets on its balance sheet arising from
the acquisition of businesses and IP
rights to medicines in development and
on the market. Each quarter, the CFO
reports on the carrying value of the
Group’s intangible assets and, in respect
of those intangible assets that are
identified as at risk of impairment, the
difference between the carrying value
and management’s current estimate of
discounted future cash flows for ‘at risk’
products (the headroom). Products will
be identified as ‘at risk’ because the
headroom is small or, for example, in the
case of a medicine in development, there
is a significant development milestone
such as the publication of clinical trial
results which could significantly alter
management’s forecasts for the product.
The reviews also cover the impact on
any related contingent consideration.
Litigation and
contingent
liabilities
Note 29 to the
Financial Statements
from page 228.
AstraZeneca is involved in various
legal proceedings considered typical
to its business and the pharmaceutical
industry as a whole, including litigation
and investigations relating to product
liability, commercial disputes,
infringement of IP rights, the validity
of certain patents, anti-trust law, and
sales and marketing practices.
The Committee was regularly informed
by the General Counsel of, and
considered management and the
external auditor’s assessments about,
IP litigation, actions, governmental
investigations, and claims that might
result in fines or damages against the
Group, to assess whether provisions
should be taken and, if so, when and
in what amount.
The Committee assured itself of the
integrity of the Group’s accounting
policy and models for its assessment
and valuation of its intangible assets,
and related headroom, including
understanding the key assumptions
and sensitivities within those models,
along with the internal and external
estimates and forecasts for the Group’s
cost of capital relative to the broader
industry. The Committee was satisfied
that the Group had appropriately
accounted for the identified
impairments.
The Committee was assisted by the
provision of external benchmark
market data to enhance its
understanding of key assumptions.
Of the matters the Committee
considered in 2020, the more significant
included: the continued defence of the
Nexium and Prilosec product liability
litigation in the US, the Seroquel
Antitrust, Iraq DOJ, Array, and
Amplimmune litigations; and patent
challenges relating to Symbicort,
Tagrisso, Enhertu and Farxiga in the US.
The Committee was satisfied that the
Group was effectively managing its
litigation risks including seeking
appropriate remedies and continuing
to defend its IP rights vigorously.
Tax charges and
liabilities
AstraZeneca’s
Approach to Taxation,
which was published
in December 2020 and
covers its approach to
governance, risk
management and
compliance, tax
planning, dealing with
tax authorities and the
level of tax risk the
Company is prepared
to accept, can be
found on our website,
www.astrazeneca.com.
Note 4 to the
Financial Statements
from page 190.
The Group has business activities
around the world and incurs a
substantial amount and variety of
business taxes. AstraZeneca pays
corporate income taxes, customs
duties, excise taxes, stamp duties,
employment and many other business
taxes in all jurisdictions where due.
In addition, we collect and pay
employee taxes and indirect taxes
such as value-added tax. The taxes
the Group pays and collects represent
a significant contribution to the
countries and societies in which we
operate. Tax risk can arise from
unclear laws and regulations as well
as differences in their interpretation.
The Committee reviews the Group’s
approach to tax, including
governance, risk management and
compliance, tax planning, dealings
with tax authorities and the level of tax
risk the Group is prepared to accept.
The Committee was satisfied with
the Group’s practices regarding tax
liabilities, including, most notably,
its response to developments in the
corporate income tax environment.
During 2020, the Committee undertook
a deep dive into tax matters which
covered developments in the global
corporate income tax environment,
including transfer pricing, disputes and
dispute resolution, fiscal incentives,
controlled foreign company regimes,
country-by-country reporting and recent
developments at the OECD including
the Pillar 1 and Pillar 2 blueprints.
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Significant financial reporting issues considered by the Committee in 2020 continued
Reporting issue
Rationale
Committee response
Committee conclusion/actions taken
Retirement benefits
Financial Review
from page 82 and
Note 22 to the
Financial Statements
from page 209.
Accounting for defined benefit pension
and other retirement benefits is an
important area of focus. The Group
recognises that the present value of
these liabilities is sensitive to changes
in long-term interest rates, future
inflation and mortality expectations.
As a result, the assumptions used to
value the liabilities for the Group’s
main retirement benefit obligations
are updated every quarter. Similarly,
‘mark-to-market’ asset valuations
are also procured. This enables an
updated funding level to be calculated
each quarter. The Group is cognisant
of the wider regulatory environment
and local requirements around funding
levels and contributions.
The Committee monitors the Group’s
funding level on a quarterly basis for
its principal defined benefit pension
obligations in the Tier 1 countries
(Sweden, UK and US) and the funding
requirements in each case, alongside
key developments.
The Committee reviews annually the
Group’s global funding objective and
key activities, the engagement with
local fiduciary bodies, and
comparisons of funding solvency
relative to the wider market. In
addition, the Committee reviews the
reasonableness of the key actuarial
assumptions used to determine the
value of the Group’s liabilities.
In 2020, the Committee undertook a
further, detailed assessment of how
the Group’s defined benefit pension
assets and liabilities are measured and
managed. The Committee considered
the investment strategy deployed by
local fiduciary bodies and the resulting
investment performance and the
liability management exercises
undertaken by the Group.
The Committee noted the Group’s
review of the IAS 19 reporting
framework for the various small benefit
obligations around the world.
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The Committee was reassured by
the Group’s engaged and balanced
approach to managing the risks
associated with the funding of its
defined benefit obligations.
The Committee was satisfied that
the Group’s contribution policy and
actuarial assumptions used were
appropriate during the year.
The Committee was also satisfied
that the actuarial valuation for the UK
Pension Fund had been agreed with
the Trustee and submitted to the
Pensions Regulator ahead of the
regulatory deadline.
The Committee is cognisant of the
need to adhere to local funding
regulations and best practice and to
the security provided by the Group
which underwrites obligations to
members.
The Committee was reassured by the
review which took place to ensure that
all benefits which fall under IAS 19
rules were correctly reported.
Fair, balanced and understandable
assessment
As in previous years, at the instruction of
the Board, the Committee undertook an
assessment of this Annual Report to ensure
that, taken as a whole, it is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the
Company’s position and performance,
business model and strategy. The Committee
reviewed the Company’s governance
structure and assurance mechanisms for the
preparation of the Annual Report and, in
particular, the contributor and SET member
verification process. The Committee received
an early draft of the Annual Report to review
its proposed content and the structural
changes from the prior year and to undertake
a review of the reporting for the year, following
which the Committee members provided their
individual and collective feedback. In addition,
in accordance with its terms of reference,
the Committee (alongside the Board) took
an active part in reviewing the Company’s
quarterly announcements and considered the
Company’s other public disclosures which are
managed through its Disclosure Committee.
To aid its review further, the Committee also
received a summary of the final Annual
Report’s content, including the Company’s
successes and setbacks during the year and
an indication of where they were disclosed
within the document.
The processes described above allowed the
Committee to provide assurance to the Board
to assist it in making the statement required of
it under the UK Corporate Governance Code,
which is set out from page 114.
AstraZeneca Annual Report & Form 20-F Information 2020 / Audit Committee Report
129
Audit Committee
Report
continued
Internal controls
The Committee receives a report of the
matters considered by the Disclosure
Committee during each quarter. At the
February 2021 meeting, the CFO presented
to the Committee the conclusions of the CEO
and the CFO following the evaluation of the
effectiveness of our disclosure controls and
procedures required by Item 15(a) of Form
20-F at 31 December 2020. Based on their
evaluation, the CEO and the CFO concluded
that, as at that date, the Company maintained
an effective system of disclosure controls
and procedures.
There was no change in our internal control
over financial reporting that occurred during
the period covered by this Annual Report that
has materially affected, or is reasonably likely
to materially affect, our internal control over
financial reporting.
For further information on the Company’s
internal controls, refer to the Audit, Risk and
Internal Control section in the Corporate
Governance Report on page 117.
External auditor
Following a competitive tender carried out in
2015, PwC was appointed as the Company’s
external auditor for the financial year ending
31 December 2017. In April 2020, PwC was
reappointed as the Company’s auditor for
the financial year ending 31 December 2020.
Richard Hughes continues to be the lead audit
partner at PwC.
Non-audit services and safeguards
The Committee maintains a policy (the Audit
and Non-Audit Services Pre-Approval Policy)
for the pre-approval of all audit services,
audit-related services and other services
undertaken by the external auditor. The
principal purpose of this policy is to ensure
that the independence of the external auditor
is not impaired. The Audit and Non-Audit
Services Pre-Approval Policy was revised
during the year to incorporate the requirement
of the FRC Ethical Standard and it includes a
‘whitelist’ of permitted audit and audit-related
services along with a listing of prohibited
services aligned with the rules of the FRC,
SEC and other relevant UK and US
professional and regulatory requirements.
The pre-approval procedures permit certain
audit and audit-related services to be
performed by the external auditor during the
year, subject to annual fee limits agreed with
the Committee in advance. Pre-approved
audit and audit-related services below the
clearly trivial threshold (within the overall
annual fee limit) are subject to case-by-case
approval by the Senior Vice-President
Finance, Group Controller.
Pre-approved audit services included services
in respect of the annual financial statement
audit (including quarterly and half-year
reviews), attestation opinions under section
404 of the Sarbanes-Oxley Act, statutory
audits for subsidiary entities, and other
procedures to be performed by the
independent auditor to be able to form an
opinion on the Group’s consolidated Financial
Statements. The pre-approved audit-related
services, which the Committee believes are
services reasonably related to the performance
of the audit or review of the Company’s
Financial Statements, included certain
services required by law or regulation, such
as financial statements audits of employee
benefit plans and transactions. The Audit and
Non-Audit Services Pre-Approval Policy
prohibits any tax services. Audit-related
services included the assurance in relation
to tax regulatory certificates required to be
issued by the external auditor.
The CFO (supported by the Senior Vice-
President Finance, Group Controller),
monitors the status of all services being
provided by the external auditor. Authority
to approve work exceeding the pre-agreed
annual fee limits and for any individual service
above the clearly trivial threshold is delegated
to the Chairman of the Committee together
with one other Committee member in the
first instance. A standing agenda item at
Committee meetings covers the operation
of the pre-approval procedures and regular
reports are provided to the full Committee.
All services other than the pre-approved audit
and audit-related services, require approval
by the Committee on a case-by-case basis. In
2020, PwC provided audit services including
an interim review of the results of the Group
for the six months ended 30 June 2020, and
audit-related assurance services in respect of
the Group’s debt issuance activities, including
its US shelf registration prospectus renewal.
Audit/non-audit services
2020
2019
$20.3m
$14.9m
Statutory audit fee
Audit-related and other assurance services
Fees for audit-related and other assurance
services amounted to 6% of the fees payable
to PwC for audit services in 2020 (2019: 5%).
The Committee is mindful of the 70% non-audit
services fee cap under EU regulation, together
with the overall proportion of fees for audit
and audit-related services in determining
whether to pre-approve such services. Fees
for audit-related and other assurance services
payable to PwC in 2020 were 9% of average
audit fees over 2017 to 2019.
PwC were considered better-placed than any
alternative provider to provide these services
in terms of their familiarity with the Company’s
business, skills, capability and efficiency. All
such services were either within the scope of
the pre-approved services set out in the Audit
and Non-Audit Services Pre-Approval Policy
or were presented to Committee members
for pre-approval and all such services were
permitted by the FRC Ethical Standard.
Further information on the fees paid to PwC
for audit, audit-related and other services
is provided in Note 30 to the Financial
Statements on page 233.
Assessing external audit effectiveness
In accordance with its normal practice,
the Committee considered the performance
of PwC and its compliance with the
independence criteria under the relevant
statutory, regulatory and ethical standards
applicable to auditors.
The Committee assessed PwC’s effectiveness
principally against four key factors, namely:
judgement; mindset and culture; skills,
character and knowledge; and quality control.
As part of that assessment, it also took
account of the views of senior management
within the Finance function and regular
Committee attendees.
The Committee concluded that the PwC audit
was effective for the financial year ended
31 December 2020.
In February 2021, the Committee recommended
to the Board the reappointment of PwC as
the Company’s auditor for the financial year
ending 31 December 2021. Accordingly, a
resolution to reappoint PwC as auditor will be
put to shareholders at the Company’s AGM
in April 2021.
130
AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance
Directors’
Remuneration
Report
We have sought to be clear and transparent in how
we link remuneration of our executives to successful
delivery of our strategy and shareholder returns.
“ Stretching targets
have once again
incentivised strong
performance, as
evidenced by a
three year total
shareholder return
of 77%.”
The Directors’ Remuneration
Report contains the following
sections:
> Chairman’s letter, page 131
> Remuneration at a glance,
page 135
> How our performance measures
for 2021 support the delivery
of our strategy, page 136
> How the Remuneration
Committee ensures targets are
stretching, page 137
> Annual Report on
Remuneration, page 138
> Directors’ Remuneration
Policy, page 156
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On behalf of the Board, I am pleased to
present AstraZeneca’s Directors’ Remuneration
Report. This is my first report as Chairman of
the Remuneration Committee, since stepping
into the role in August 2020. On behalf of the
Committee I would like to thank Graham
Chipchase for his valuable contribution as
Chairman over the past five years and express
my gratitude to him for the great support he
provided me as I took over the role.
2020 has been a very challenging and difficult
year for everyone around the globe. In this
demanding environment, our Chief Executive
Officer, Mr Soriot, Chief Finance Officer,
Mr Dunoyer, and the Senior Executive Team
have delivered an outstanding performance,
exceeding targets set in many areas, including
strengthening our scientific leadership. They
also positioned AstraZeneca as a globally
recognised leader in developing solutions in
response to the global pandemic.
COVID-19
As outlined earlier in this Annual Report, 2020
has been an impactful year for AstraZeneca,
which has taken a world-leading role in
responding to the COVID-19 pandemic.
The development of testing, treatment and
vaccination in response to COVID-19 is an
entirely new field of activity for AstraZeneca.
This includes ongoing clinical trials in relation
to potential neutralising mAbs for the virus
and trials to explore the potential benefits of
approved medicines in COVID-19 patients. In
addition to providing humanitarian aid, such
as the development of extremely high efficacy
PCR, saliva and antibody tests for the virus
and the establishment of national testing
facilities, the most significant development
has been our agreement with the University
of Oxford to develop, produce and supply
a vaccine at a record pace. We have also
decided to make an unparalleled move
to make these vaccines available and
affordable around the world. Our leadership
team has secured agreements spanning
some 180 countries to deliver billions of doses
of a COVID-19 vaccine worldwide, on a
not-for-profit and equitable basis throughout
the pandemic.
AstraZeneca has also not applied for any
Government funded wage subsidies or
furlough arrangements, around the world.
For more information on the impact of
COVID-19 on our employees, see the Great
Place to Work paragraph on page 132.
2020 Performance
AstraZeneca has continued to deliver
against its strategic priorities throughout
this unprecedented period. In December
2020, the Group announced the proposed
acquisition of Alexion, which is anticipated
to close in Q3 2021 subject to regulatory
clearance and approval by shareholders of
both companies. The proposed acquisition
is intended to accelerate AstraZeneca’s
commercial and scientific evolution even
further, allowing AstraZeneca to enhance its
presence in immunology. For more information
on the acquisition, see page 79.
Growth and Therapy Area Leadership
Revenue growth is strong, and has continued
throughout 2020, with new medicines driving
growth – more than $2 billion of incremental
total revenue compared with 2019. This has
been accomplished in an environment where
the pandemic has adversely impacted
healthcare for non-COVID patients. Our
success has been made possible through
an acceleration of our digital transformation
and the dedication of our workforce, who
have ensured both continuity of the supply of
medicines to patients and of engagement with
healthcare professionals around the world.
Accelerate Innovative Science
Science productivity has also continued to
grow markedly, with return on investment in
our pipeline continuing to outperform our
peers. We secured a record number of 36
pipeline progression events, either NME
Phase II starts or Phase III investment
decisions in 2020. Our clinical trial success
rate (from pre-clinical through to registrational
studies) stands at 24%. This is three times
higher than the industry median1, exemplified
in 2020 with two studies unblinded and
submitted early for overwhelming efficacy
(Tagrisso ADAURA and Forxiga CKD),
emergency supply approval of the COVID-19
vaccine in the UK, and positive readout for
tezepelumab NAVIGATOR. We have also
secured a range of opportunities to
collaborate with partners, bringing our clinical
development expertise to bear in relation to
NMEs discovered by the global scientific
community. An example of this is our trusted
partnership with Daiichi Sankyo, which has
materialised into a further collaboration for
the development of datopotamab deruxtecan
(DS-1062), building on our successful 2019
collaboration in relation to Enhertu. These
assets continue to show enormous promise in
the clinic across multiple tumour types, and
the recent successful US and Japan launches
of Enhertu highlight the importance of such
partnerships for future growth.
1
Benchmarking group consists of Amgen, Astellas, Biogen,
Boehringer, BMS, Roche, GSK, Janssen, Merck KGaA,
Merck, Novo Nordisk, Novartis, Pfizer, Sanofi.
AstraZeneca Annual Report & Form 20-F Information 2020 / Directors’ Remuneration Report
131
Directors’ Remuneration
Report
continued
Great Place to Work
Our focus on ensuring that AstraZeneca
continues to be a great place to work
increased during the pandemic. AstraZeneca
helped employees to work from home
whenever necessary, and increased emphasis
on the health and safety of our global
workforce. We implemented new COVID-19
safe protocols and working arrangements for
those that continued to attend the workplace.
This ensured continuity of clinical trials and
the supply of medicines to patients. We have
taken steps to ensure that our workforce, who
have continued to deliver, are appropriately
recognised and rewarded. Payments to
employees and contractors were increased
in some areas to address the additional
requirements of COVID-19. Of our total
workforce, 96% report that they are proud of
AstraZeneca’s contribution to society through
the pandemic. Employee engagement is at an
all-time high and we continue to improve our
diversity at senior levels. An example of this
is the increase in women in senior roles, now
at 47% with our ambition to achieve 50% by
2025. This is underscored by the CEO’s
personal commitment to oversee the delivery
of our Inclusion & Diversity strategy as Chair
of our Global Inclusion and Diversity Council.
Total shareholder return
This success is reflected in the share price
and TSR growth.
2020 remuneration outcomes
The Committee always seeks to ensure that
the remuneration of our Executive Directors
and our wider workforce reflects the
underlying performance of the business. When
approving outcomes, we therefore considered
the Group scorecard along with wider business
and individual performance over 2020, including
other achievements across the enterprise,
such as our COVID-19 response summarised
earlier in this letter, advancing our Great Place
to Work priorities and environmental, social
and governance (ESG) goals. In that context,
we believe that the payments outlined below
fairly reflect performance.
Annual bonus – 90% of maximum
When determining bonus outturns, the
Committee considered the formulaic outcome
from the Group scorecard along with wider
business and individual impact and
performance in 2020, including ESG
achievements. The Committee determined to
award annual bonuses equivalent to 90% of
maximum (180% of base pay) and 90% of
maximum (162% of base pay) to Mr Soriot and
Mr Dunoyer respectively. Details of the factors
considered to determine the bonuses are
provided from pages 139 to 143.
One half of each Executive Director’s bonus
for 2020 will be deferred into AstraZeneca
shares for three years to ensure further
alignment with shareholder interests.
How we have performed in 2020
Total shareholder return (TSR)
450
400
350
300
250
200
150
100
2018-201
+77%
AstraZeneca
Global pharma peers average
European pharma peers average
FTSE 100
Dec
10
Dec
11
Dec
12
Dec
13
Dec
14
Dec
15
Dec
16
Dec
17
Dec
18
Dec
19
Dec
20
AstraZeneca
Global pharmaceutical peers average
European pharmaceutical peers
FTSE 100
1
Calculated using a three-month calendar average, from 1 October to 31 December, prior to the start and at the end of the
relevant period.
More information on the European and global pharmaceutical peer groups can be found on page 134.
Delivery against strategy – 2020 Group scorecard performance3
Deliver Growth and Therapy Area Leadership
Total Revenue
Accelerate Innovative Science
Pipeline progression events
Regulatory events
Achieve Group Financial Targets
Cash flow
Core EPS
Target
2020
outcome
$26.8bn
$26.5bn
19
33
$4.4bn
$4.14
25
43
$4.6bn
$4.17
3
For details of the Remuneration Committee’s consideration of Group scorecard outcomes and a description of performance
measures, see from page 140.
Further detail of 2020 commercial and scientific performance can be found in the Strategic Report from page 18.
Long-term incentives (LTI)
2018 PSP – 99% of maximum
Our approach aims to reward sustainable
out-performance and hence our 2018 award
will vest at the upper end of the possible
range. The three-year performance period
for Performance Share Plan (PSP) awards
granted to Executive Directors in 2018
ended on 31 December 2020. Awards will
vest at 99% of maximum, as shown on page
144 and reflect overachievement in each and
every three year target, as well as delivering
a three year TSR of 77%.
Policy review and remuneration in 2021
At last year’s AGM, our shareholders
approved our new Remuneration Policy,
which is usually intended to stay in place
for three years. We need, however, to
acknowledge that the world has drastically
changed in the last 12 months, and so did
AstraZeneca. Our Executive Directors,
Mr Soriot and Mr Dunoyer, have demonstrated
solid and visionary leadership to steer the
Company towards delivering another
outstanding performance. They have
delivered on financial targets, actively
managing the pipeline to accelerate innovation
and negotiated new partnerships with great
potential, including the proposed acquisition
of Alexion. Notably they have also initiated an
impactful societal, not-for-profit initiative – in
partnership with University of Oxford – as a
response to the global pandemic. During
2020, they have led AstraZeneca in
developing new or deeper relationships
with governments and non-governmental
organisations in the developed and
developing worlds, to deliver globally an
affordable vaccine and help mitigate the
impact of the COVID-19 crisis.
Since their appointment, our Executive
Directors have driven a remarkable turnaround
in the Company’s performance. This has
resulted in AstraZeneca delivering a Total
Shareholder Return of close to 300% over the
last eight years, significantly ahead of our
Global pharmaceutical and FTSE 100 peers
(at 183% and 44% TSR respectively)1. With
this impressive track record, the Board wants
to ensure that our Remuneration Policy keeps
driving a performance in line with the
ambitious expectations of our shareholders
and other stakeholders.
1
From 2013-2020. TSR calculated using a three-month
calendar average. AstraZeneca return of 284%.
132
AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance
Markets have changed and became even
more differentiated in 2020. Strong leadership
performance can more than ever drive
exceptional success. In the last year, it
became apparent that the current Remuneration
Policy did not provide the Committee with
sufficient flexibility to appropriately reward
the exceptional performance and growth
we expect the Executive team to deliver.
We have therefore decided to propose some
adjustments to our Policy, further increasing
the focus on pay for performance for our
Executive Directors, while immediately
aligning pension contributions to the level of
the wider workforce. We have also taken this
opportunity to introduce an ESG measure to
the performance criteria of our PSP.
At the 2021 AGM, we will therefore be seeking
shareholder approval for a renewed Directors’
Remuneration Policy (the Policy). The Policy
is set out from pages 156 to 167 and is
intended to remain in effect for three years
from the date of the AGM. Changes to the
Policy and how it will be implemented are
summarised on the following page and in
more detail on page 156.
Our proposal is to increase the maximum PSP
award under the Policy to 650% base pay
from the current 550%. At the same time, the
pension contributions of our current Executive
Directors will be reduced to the level of the
wider workforce (11% of base pay) under the
new Policy. The combination of these two
proposed changes drives further a reduction
of the fixed remuneration component, while
offering more potential when exceptional
performance has been delivered.
In shaping the new Policy, we have taken into
account the perspectives of shareholders,
gathered from consultation undertaken during
2020. I met 21 of AstraZeneca’s largest
shareholders and proxy advisors to discuss
our proposals, and was pleased with the level
of engagement, feedback and support
received. The importance of being able to
offer our impactful CEO a remuneration
package competitive with our European
peers, has been a key theme in consultation
discussions with our shareholders. The
Committee took shareholders’ feedback into
account on the proposed changes to the
Policy, and we would like to take this
opportunity to thank all those who took part
for their constructive engagement and
support for our proposals.
There will be a 3% base pay increase for the
two Executive Directors, effective 1 January
2021, in line with the UK all-employee base pay
increase budget for 2021. Target annual bonus
opportunity for Mr Soriot and Mr Dunoyer in
2021 will be 125% and 100% of base pay
respectively, with the maximum bonus
opportunity 250% of base pay for Mr Soriot
and 200% of base pay for Mr Dunoyer. One
half of any earned bonus will be deferred into
2020 Annual bonus scorecard performance1
Accelerate Innovative Science
Deliver Growth and Therapy Area Leadership
Achieve Group Financial Targets
2018 PSP performance
TSR
EBITDA
Achieve Scientific Leadership
Return to Growth
Achieve Group Financial Targets – Cash flow
EBITDA
Relative TSR
Achieved
90%
32%
66%
Achieved
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Achieved
96%
100%
100%
100%
100%
Achieved
1
When determining bonus outturns, the Committee considered the formulaic outcome from the Group scorecard
along with wider business and individual impact and performance in 2020, including ESG achievements.
shares for three years. Awards under the PSP
will be increased for Mr Soriot and Mr Dunoyer
to 650% and 450% of base pay respectively
(from 550% and 400%). Shareholding
guidelines will mirror the size of PSP awards
and a two-year post-cessation shareholding
requirement will continue to apply.
These proposals represent a reduction in our
Executive Directors’ fixed pay, whilst seeking
to increase the competitiveness of their
performance-related pay opportunity. This is
illustrated in the charts on the following page,
showing our Executive Directors’ on-target
opportunity relative to comparator groups.
However, our proposed changes will only
bring Mr Soriot and Mr Dunoyer into the lower
quartile of our global peer group, but will
better reflect AstraZeneca’s relative position
within the European peer group. Global
competition for talent in the biopharmaceutical
industry has increased as the world focuses
on healthcare. The Board considers that the
proposed changes will enable our
remuneration framework to be more
competitive as we focus on balancing the
delivery of long-term sustainable success for
our patients and shareholders with the need
to attract and retain outstanding talent. And
our emphasis on performance related pay is
further strengthened, ensuring that outcomes
are fully aligned with shareholder interests.
Incentivising environmental, social
and governance delivery
As reflected in our 2019 Directors’
Remuneration Report, AstraZeneca
recognises the importance of ESG factors
in operating a sustainable business and has
made a number of clear commitments in this
area. I am delighted to confirm that, from
2021, a metric focusing on the delivery of
our Ambition Zero Carbon commitments
will be included in our executive incentive
arrangements for the PSP, to underline the
importance we place on eliminating our
Scope 1 and Scope 2 greenhouse gas
emissions by 2025. Targets and assessment
of performance against this metric will be
determined in line with the World Resources
Institute/World Business Council for
Sustainable Development GHG Protocol
methodology for accounting and reporting
of our emissions footprint. In selecting this
metric, the Committee considered a range
of alternatives, covering Environmental
Protection, Access to Healthcare, and Ethics
and Transparency, the three pillars of
AstraZeneca’s sustainability strategy. As set
out on pages 141 and 142, the full breadth of
achievements in relation to ESG performance
is taken into account when considering the
individual performance of Executive Directors
for bonus purposes.
In determining this ESG goal, the Committee is
also conscious of the significant contribution
to society that is reflected in AstraZeneca’s
commitment to support the global response
to the COVID-19 pandemic on a not-for-profit
basis during the pandemic. With those plans
already well under way, the Committee
concluded that it would be appropriate to
instead focus on an environmental measure
that is designed to incentivise the delivery of
our Ambition Zero Carbon commitments,
which will require the complete long-term
transition to 100% renewable sources of
onsite and imported energy, having an entirely
electric vehicle fleet, and the introduction of
a programme to eliminate F-gas propellant
emissions from our inhaler production –
AstraZeneca Annual Report & Form 20-F Information 2020 / Directors’ Remuneration Report
133
Directors’ Remuneration
Report
continued
a significant investment in line with our
commitment in this area. As an organisation
committed to health equity, climate action is
central to our sustainability strategy because
climate change amplifies and accelerates
existing social inequities, including physical
and mental health issues, the prevalence of
communicable and non-communicable
diseases, poverty, forced migration, and
disparities in education, housing, wealth, etc.
Over the next decade or two, we believe
environmental issues will become much more
material and a differentiator in the marketplace
as the wider healthcare value chain embraces
net-zero. This will result in physical and
transitional risks to proactively manage and
mitigate, and new opportunities as we
transition to a low carbon market where
healthcare can be delivered to patients and
society with a lower environmental burden
and improved clinical outcomes. From page
276, our first statement that follows the
Taskforce on Climate-related Financial
Disclosures (TCFD)-recognised framework
describes how Ambition Zero Carbon
addresses these risks and opportunities.
Next steps
I hope that you find this Remuneration Report
clear in explaining the implementation of our
Remuneration Policy during 2020. We trust
that we have provided the information you
need to be able to support the resolution to be
put to shareholders on the new Policy and this
Remuneration Report at the Company’s AGM
in April 2021.
Our ongoing dialogue with shareholders and
other stakeholders is valued greatly and, as
always, we welcome your feedback on this
Directors’ Remuneration Report.
2021 Remuneration Policy
Pension alignment with wider
workforce
Improving the competitiveness of
Executive Directors’ compensation
opportunity, reflecting the increase
in the scope of their roles
Shareholder alignment
Pension contributions for CEO and CFO will reduce from a fixed
pension allowance of £257,706 and £183,760 respectively to 11%
of base pay
We recognise that our Executive Directors’ total compensation
opportunity is well behind that of their peers in the global and
European pharmaceutical talent market, not withstanding the
significant breadth of their roles. The renewed Policy and its
implementation for 2021 will align pay to performance and
investor expectation, as follows:
> No change to annual bonus Policy maximum. For 2021, the
CEO’s maximum bonus opportunity will be aligned to the Policy
maximum at 250% of base pay. The maximum bonus opportunity
for the CFO will be increased to 200% of base pay
> Increased maximum limit under PSP from 550% to 650% of base
pay. For 2021, the CEO’s PSP award will be aligned to the new
Policy maximum at 650% of base pay. The CFO’s PSP award will
be increased to 450% of base pay.
Mandatory 50% bonus deferral into shares for three years
Increased shareholding guidelines to align with the respective
Executive Director’s annual PSP opportunity, that continue to apply
for two years post-employment.
Market positioning of CEO on-target remuneration for 2020
CEO
Global pharma peers¹
European pharma peers²
Lower quartile to median
Median to upper quartile
Current position
£8.0m
£6.6m
£7.9m
£12.5m
Market positioning of CFO on-target remuneration for 2020
CFO
Global pharma peers¹
European pharma peers²
£3.7m
£3.8m
£4.6m
£4.0m
Michel Demaré
Chairman of the Remuneration Committee
Lower quartile to median
Median to upper quartile
Current position
1
2
Global pharma peer group consist of: AbbVie, Allergan, Amgen, BMS, Eli Lilly, Gilead, GSK, J&J, Merck, Novartis,
Novo Nordisk, Pfizer, Roche, and Sanofi.
European pharma peer group consists of: Bayer, GSK, Merck KGaA, Novartis, Novo Nordisk, Roche, and Sanofi.
Remuneration includes base salary, target annual bonus and the expected value of Long-term Incentives (LTI) awards.
Benchmarking data has been provided by the Committee’s independent adviser.
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AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance
Remuneration
at a glance
What our Executive Directors earned
Executive Directors’ realised pay 2020 outcomes
Annual bonus and PSP outcome
£0
£4,000
£8,000
£12,000
£16,000
£’000
CEO
CFO
£15,447
£7,703
Fixed Pay
Other
Annual bonus
PSP
Share price appreciation on
Long-term incentive awards
Achieved 63%
Lapsed 37%
Achieved 99%
Lapsed 1%
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Fixed pay consists of base pay, benefits fund and pension. Further information
on Executive Directors’ realised pay for 2020 is on page 138.
See from page 138 for further information on the annual bonus
and PSP outcome.
When determining bonus outturns, the Committee considered
the formulaic outcome from the Group scorecard along with
wider business and individual impact and performance in
2020, including ESG achievements.
Looking ahead
Executive Directors’ remuneration for 2021
Pascal
Soriot
(CEO)
Marc
Dunoyer
(CFO)
Fixed remuneration
Annual bonus
Long-term incentives
Base pay:
£1,327,186
Benefits fund
Pension: £145,990
(equivalent to 11% of
base pay)
Max: 250%
base pay
Target: 125%
base pay
Deferred: 50% for
three years
Max: 650% base pay
Performance period:
three years
Holding period:
two years
Base pay: £788,249
Benefits fund
Pension: £86,707
(equivalent to 11% of
base pay)
Max: 200%
base pay
Target: 100%
base pay
Deferred: 50% for
three years
Max: 450%
base pay
Performance period:
three years
Holding period:
two years
Shareholding
guideline
Post-cessation
guideline
Holding
requirement:
650% base pay
Holding
requirement:
450% base pay
Holding
requirement:
shares up to 650%
base pay for two
years post-
cessation
Holding
requirement:
shares up
to 450%
base pay
for two years
post-cessation
CEO fixed vs performance-linked (%)
Fixed
12%
Performance-linked
88%
36%
Short-term
64%
Long-term
Base salary
Benefits fund
Pension
Annual bonus – cash
Annual bonus – shares
PSP
Executive Directors’ pay at risk
’21
’22
’23
’24
’25
Based on maximum payout scenarios for the CEO assuming maximum
of 250% and 650% of base salary for annual bonus and PSP respectively.
CFO fixed vs performance-linked (%)
Fixed
16%
Performance-linked
84%
Annual
Bonus
PSP
Performance period
Deferral period
Holding period
42%
Short-term
58%
Long-term
See from page 138 for further details on plan design.
Base salary
Benefits fund
Pension
Annual bonus – cash
Annual bonus – shares
PSP
Based on maximum payout scenarios for the CFO assuming maximum
of 200% and 450% for annual bonus and PSP respectively.
AstraZeneca Annual Report & Form 20-F Information 2020 / Directors’ Remuneration Report
135
How our performance measures for
2021 support the delivery of our strategy
AstraZeneca aims to continue to deliver great
medicines to patients while maintaining cost
discipline and a flexible cost base, driving
operating leverage and increased cash
generation. To incentivise and reward delivery
of great performance over the short and
longer term, the Committee carefully
considered the balance of science and
financial measures between the annual
bonus and PSP.
Our focus on incentivising innovative science
aligns with our patient centric culture, as we
strive to push the boundaries of science to
deliver life-changing medicines to patients.
The 2021 performance measures are closely
aligned with our strategic priorities, as
shown below.
For more information about our strategic priorities,
see page 18. For more information about the 2021
performance measures, see pages 143 to 147.
Key
Annual bonus
PSP
KPI
Strategic pillar
Strategic pillar
Financial targets
Accelerate
Innovative Science
Deliver Growth and
Therapy Area Leadership
Achieve Group
Financial Targets
Remuneration performance measures
Remuneration performance measure
Remuneration performance measures
Science indices
Our science measures incentivise the
development of new molecular entities
(NMEs) and the maximisation of the potential
of existing medicines.
Total Revenue
Our Total Revenue measure is included in the
bonus and the PSP, reflecting the importance
of incentivising sustainable growth in both
the short and longer term.
Cash flow
Ensures that we can sustain investment in
our pipeline and therapy areas while at the
same time meeting our capital allocation
priorities. Cash flow is included in both the
bonus and the PSP, so as to motivate a focus
on the importance of both short and longer
term cash flow generation and balance
sheet strength.
Core EPS
Incentivises operational efficiency and
cost discipline, remains a key measure
of our profitability and is a key focus for
our investors.
Total shareholder return (TSR)
Assessed relative to our peer group of
companies, the measure rewards positive
performance that our shareholders also
directly benefit from. This measure
incentivises outperformance versus our peer
group, and promotes the delivery of long-term
sustainable returns for our shareholders.
Bonus performance is assessed on pipeline
progressions through Phase II and Phase III
clinical trials. These reflect the outcome of
nearer-term strategic investment decisions,
whereas in contrast PSP performance is
assessed on the volume of NMEs in Phase III
and the registration stage which reflects the
outcome of longer term strategic investment
decisions.
Additionally, we measure regulatory
submissions and approvals for bonus, and
regulatory approvals for PSP to drive the
conversion of scientific progress into
commercial revenue over the short term
(bonus) and the longer term (PSP).
Together, these science measures incentivise
innovation and sustainable success along the
length and breadth of the pipeline, leading to
commercial growth.
Strategic pillar
Be a Great Place to Work
Being a Great Place to Work is critical to
delivering our ambition. Assessment of
performance against this pillar is captured
through a holistic review of each Executive
Director’s individual performance as part of
the final determination of annual bonus,
including consideration of our progress
against our ESG aspirations through:
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AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance
> Contribution to the enterprise – their
achievement of embedding a culture of
life-long learning and development, and
performing as an enterprise team, as well
as advancement of our inclusion and
diversity strategy; and
> Contribution to society – their delivery
across access to healthcare, environmental
protection, ethics and transparency to lead
in sustainability.
Ambition Zero Carbon
This measure incentivises the
elimination of our Scope 1 and Scope 2
greenhouse gas (GHG) emissions by 2025
with targets verified in line with the
science of climate change, where we will
innovate to avoid, reduce and substitute
to become zero carbon.
How the Remuneration Committee
ensures targets are stretching
We set stretching targets which incentivise our leaders to deliver exceptional performance, to drive sustainable results for our patients,
our employees and our shareholders. We take the following robust process to setting annual bonus and PSP targets:
Stage 1 –
Target setting
Science targets are based on a cohort of scientific opportunities
specified at the start of the performance period. Opportunities
represent potential achievements through the pipeline, from an
early stage where our scientists work to discover new molecules,
through to ultimately obtaining approvals and getting new
medicines to patients. Rewarding success at each stage
recognises the importance of creating and maintaining a
long-term sustainable pipeline. Stretch of proposed targets is
reviewed by the Science Committee taking into account factors
such as past performance, the external regulatory environment
and internal resourcing and efficiencies. Targets for realisation
of these opportunities are ambitious.
Stage 2 –
Committee review
and approval of
targets
The Committee thoroughly reviews and challenges initial targets
proposed by management, before final targets are agreed and
approved. Draft targets are reviewed in December, with final
target setting and approval in January, once the prior year’s
final results are available to inform decisions.
The Committee is provided with considerable supporting
material for each metric. For science measures, the Committee
reviews and approves the full cohort of opportunities and
receives briefings from senior science leaders within the
business. These targets are set with oversight of the Science
Committee. The target in relation to our ESG metric in the PSP
is determined with the input of our Non-Executive Director with
accountability for the oversight of sustainability matters on
behalf of the Board.
Stage 3 –
Performance
assessment
At the end of the period, final performance against each metric
is assessed. Outcomes are calculated based on performance
against each weighted metric. Each performance measure is
assessed on a standalone basis, so that underperformance
against one measure cannot be compensated for by
overperformance against another.
Stage 4 –
Determination of
Executive Directors’
bonuses
For annual bonus, the fairness of the formulaic Group scorecard
outcome is considered in the context of overall business
performance and the experience of shareholders. Such
considerations include TSR performance and each Executive
Director’s personal impact on the delivery of the strategy, ESG
performance and other organisational achievements, such as
inclusion and diversity targets and the realisation of technology-
based milestones. Each year there are important individual
deliverables beyond the scorecard metrics which are taken
into account when determining individual bonuses.
Deliver Growth and Therapy Area Leadership and Achieve
Group Financial Targets metrics align with the business’
Long Range Plan (LRP), which sets out the financial framework
for delivering our ambitious strategy over the short, medium
and long-term. The LRP process includes detailed business
reviews during which plans and efficiencies of each unit are
challenged, leading to a proposed LRP for the Board to review
and challenge. The Committee sets targets based on the
Board-approved LRP, considering consensus expectations,
independent analytics and anticipated challenges and
opportunities. This range of data is used by the Committee to
ensure the stretching nature of performance targets is robustly
tested. Additionally, the PSP TSR measure is designed to
reward strong performance relative to our peers.
Committee members participate in the full Board discussions
on the strategy, LRP and budget which form the basis for the
targets. The Committee considers how proposed financial
targets align with the LRP and budget; prior years’ outcomes
(in absolute terms and against target); how the ambition has
changed from the prior LRP and budget; external guidance
the business has provided or plans to give; consensus from
external financial analysts and factors it may be impacted by;
and the underlying assumptions. Statistical analysis conducted
by the Committee’s independent adviser is also used to assess
the proposals. This includes an assessment of historic levels
of performance volatility.
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The Science Committee independently considers and informs
the Committee whether science achievements represent a fair
and balanced outcome, reflecting genuine achievements and
pipeline progression. Apart from Cash flow, which is set at
actual rates of exchange, financial metrics are set at budget
rates of exchange and evaluated at those rates at year end,
which means they are not directly comparable year-on-year.
The Committee is, however, provided with data to allow it to
conduct year-on-year analyses.
Having considered the Group scorecard outcome, overall
business performance, the experience of shareholders
and individual performance, the Committee carefully
determines a final bonus outcome for each Executive Director
which is considered fair and appropriate for the year’s
performance and is in the best interests of shareholders.
“ We set stretching targets which
incentivise our leaders to deliver
exceptional performance, to drive
sustainable results for our patients,
our employees and our shareholders.”
2021 targets
> Financial performance goals under the 2021 Group
scorecard and PSP would require growth in excess
of the average expected of the industry, and above
prior year outturns.
> The Committee has reviewed the proposed targets
against internal and external forecasts including
market consensus and is comfortable that the level
of stretch promotes exceptional performance.
AstraZeneca Annual Report & Form 20-F Information 2020 / Directors’ Remuneration Report
137
Annual Report
on Remuneration
Key:
Audited information
Content contained within the Audited panel
indicates that all the information within has
been subject to audit.
Audited
Planned implementation for 2021
Content contained within a grey box indicates
planned implementation for 2021.
The elements within the Executive Directors’ realised pay is colour coded:
> Fixed Remuneration has a light blue border and is found on pages 138 to 139
> Other items in the nature of remuneration has a purple border and can be found on page 139
> Annual bonus has a yellow border and can be found on pages 139 to 143
> Long-term incentives has a magenta border and can be found on pages 144 to 147
Executive Directors’ remuneration
This section of the Remuneration Report sets out the Executive Directors’ remuneration for the year ended 31 December 2020 alongside the
remuneration that will be paid to Executive Directors during 2021.
Executive Directors’ realised pay for 2020 (single total figure of remuneration)
The table below sets out all elements of take-home pay receivable by the Executive Directors in respect of the year ended 31 December 2020,
alongside comparator figures for 2019. This includes the vesting of PSP awards from 2018 following the three-year performance period. These
shares are subject to a further two-year holding period. The significant increase in AstraZeneca’s share price over the period of grant to vest has
provided the Executive Directors with a significant increase in value of the equity components of their reward. £4,050,722 of Mr Soriot’s and
£1,924,633 of Mr Dunoyer’s 2020 realised pay is attributable to share price increases. The benefit of the increased share price has also been
experienced by shareholders. The Committee did not exercise any discretion in relation to the Long-term incentive outcomes.
Audited
£’000
Pascal Soriot
Marc Dunoyer
Base
pay
Taxable
benefits
Pension
Total fixed
Annual
bonus
Long-term
incentives1
Total
variable
Other
Single total
figure
2020
2019
2020
2019
1,289
1,289
765
765
121
124
79
63
258
387
184
184
1,668
1,800
1,028
1,012
2,319
1,933
1,240
957
11,060
11,464
5,255
5,395
13,380
13,396
6,495
6,351
400
110
180
56
15,447
15,307
7,703
7,420
1 Long-term incentive values disclosed in 2019 have been recalculated using the average closing share price for the three months ended 31 December 2020, see page 144.
Share price
appreciation
as % of
single figure
total
26%
25%
25%
24%
The following sections provide further detail on the figures in the above table, including the underlying calculations and assumptions and
the Committee’s performance assessments for variable remuneration. The Annual bonus section is set out from page 139 and the Long-term
incentives section from page 144. Information about the Executive Directors’ remuneration arrangements for the coming year, ending
31 December 2021, is highlighted in grey boxes.
Fixed remuneration
Base pay
When awarding base pay increases, the
Committee considers, among other factors,
base pay increases applied across the UK
employee population. The Executive Directors’
base pay for 2021 will increase in line with
the UK all-employee base pay increase
budget at 3%.
£’000
Pascal Soriot
Marc Dunoyer
Taxable benefits
The Executive Directors may select benefits
within AstraZeneca’s UK Flexible Benefits
Programme and may choose to take their
allowance, or any proportion remaining after
the selection of benefits, in cash.
£’000
Pascal Soriot
Marc Dunoyer
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AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance
Audited
2020
Base
pay
1,289
765
Change
from 2019
0%
0%
Change
from 2020
3%
3%
2021
Base
pay
1,327
788
Audited
2020
Total taxable
benefits
121
79
2021
Taxable
benefits
In line with
2020
In line with
2020
£’000
Pascal Soriot
Marc Dunoyer
Audited
2020
Fixed pension
allowance
258
184
1 2021 pension allowance to be reduced to 11% of base pay to be in line with the wider workforce.
2021
Pension
allowance1
146
87
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£’000
Pascal Soriot
Marc Dunoyer
Dividend equivalents
received on
DBP awards
Dividend equivalents
received on PSP
awards released from
holding period
Total Other items
in the nature of
remuneration
50
27
350
153
400
180
Fixed remuneration continued
Pension
The Executive Directors receive a fixed
pension allowance. During 2020, both
Executive Directors took their pension
allowance as a cash alternative to
participation in a defined contribution pension
scheme. Neither Executive Director has a
prospective entitlement to a defined benefit
pension by reason of qualifying service.
Pension arrangements for 2021 are described
on page 156.
Other remuneration
Other items in the nature of remuneration
Deferred shares granted to the Executive
Directors under the Deferred Bonus Plan (DBP)
(in respect of the withheld proportion of their
annual bonuses awarded for performance
during the year ended 31 December 2016)
were released during 2020 on completion of
the three-year deferral period. Shares granted
to the Executive Directors under the 2015 PSP
award were released during 2020 following
completion of the three-year performance
period and further two-year holding period.
The dividend equivalents accrued on the DBP
shares during the deferral period and the 2015
PSP award during the holding period and paid
to the Executive Directors at the time of
release are included in the Other column.
Annual bonus
2020 Annual bonus
Annual bonuses earned in respect of
performance during 2020 are included in the
realised pay table. Detailed information on the
Committee’s approach to target setting and
assessment of performance is set out on
page 137.
£’000
Pascal Soriot
Marc Dunoyer
Under the DBP a proportion of each Executive
Director’s pre-tax bonus is compulsorily
deferred into Ordinary Shares which are
released three years from the date of deferral,
ordinarily subject to continued employment.
The proportion of the 2020 bonus deferred is
one half. Bonuses are not pensionable.
1 Numbers have been rounded.
Audited
Annual bonus in respect of performance during 2020
Bonus potential
as % of base pay
Target
Maximum
Bonus
payable in
cash
Bonus
deferred into
shares
100%
200%
1,160
1,160
90%
180%
620
620
Total bonus
awarded
2,3191
90% max
1,240
90% max
AstraZeneca Annual Report & Form 20-F Information 2020 / Annual Report on Remuneration
139
Annual Report
on Remuneration
continued
Annual bonus continued
2020 Group scorecard assessment
Performance against the 2020 Group scorecard is set out below.
Audited
The Group scorecard is used in the determination of bonus payouts for all AstraZeneca employees. Each metric within the scorecard is assessed
on a standalone basis and has a defined payout range. Performance below the specified threshold level for a metric will result in 0% payout for
that metric. 100% of target bonus will pay out for on-target performance. For employees, 200% of target bonus will pay out for the maximum level
of performance. Maximum bonus payouts for the CEO and CFO for 2020 were capped at 200% and 180% of base pay respectively. The payout
range for each metric is capped in line with each Executive Director’s maximum bonus opportunity to ensure underperformance against one
metric cannot be compensated for by overachievement against another. The table below shows the scorecard formulaic outcomes for the CEO
and CFO as a percentage of target bonus, taking into account their respective target and maximum profiles.
Science measures
2020 Group scorecard performance measures and metrics
Weighting
Threshold
for payout
Target
Maximum
Outcome
Formulaic outcome
(% of target bonus)
Accelerate Innovative Science
Pipeline progression events
Regulatory events
Subtotal – Science measures
Financial measures
Deliver Growth and Therapy Area Leadership
10
23
19
33
29
43
25
43
15%
15%
30%
24%
30%
54%
Total Revenue ($bn)
30%
25.991
26.795
27.598
26.499
19%
Achieve Group Financial Targets
Cash flow ($bn)
Core EPS ($)
Subtotal – Financial measures
Total1
20%
4.1
4.4
4.9
4.6
4.02
4.14
4.27
4.17
20%
70%
100%
28%
25%
73%
126%
Bar charts are indicative of 2020 performance; scales do not start from zero.
Key:
1 Due to rounding, the total formulaic outcome differs from the arithmetic total of the individual metric outcomes disclosed above.
Pipeline progression events include Phase II starts and progressions, and NME and life-cycle management positive Phase III investment
decisions. Regulatory events include NME and major life-cycle management regional submissions and approvals. Further detail on our Accelerate
Innovative Science performance and these events is included from page 18 of this Annual Report.
A number of further scientific achievements during 2020 have not been taken into account in the formulaic Group scorecard outcome, as they
were additional to the cohort set at the start of the year. These have instead been considered and reflected in the Committee’s final bonus
determination.
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Annual bonus continued
In 2020, Deliver Growth and Therapy Area Leadership measured Total Revenue. This target was set and evaluated at budget exchange rates at
the beginning of the year and evaluated at those rates at the end of the performance period, so that any beneficial or adverse movements in
currency, which are outside the Company’s control, do not impact reward outcomes. The Cash flow measure is set and evaluated at the actual
exchange rate and is evaluated by reference to net cash flow from operating activities less capital expenditure adding back proceeds from
disposal of intangible assets, to be fully transparent with all elements easily derived from the Group IFRS cash flow statement. The Core EPS and
Total Revenue measures are evaluated by reference to budget exchange rates, so that any beneficial or adverse movements in currency, which
are outside the Company’s control, do not impact reward outcomes. The Cash flow and EPS outcomes for 2020 were influenced by a number of
significant one-off events, both positive and negative, which were unforeseeable at the start of the year when targets were set. Two material
examples of this were the impact of unanticipated changes in corporate income tax rates and the impact of advances received from governments
and supranational organisations in relation to the COVID-19 vaccine. The Committee agreed to eliminate these impacts when deciding the final
bonus achievement as best reflecting the underlying operational Cash flow and EPS of the business.
Overall assessment
During 2020, the Executive Directors’ individual performance was assessed in the following key areas which align with the Company’s objectives.
Pascal Soriot
2020 was a truly remarkable year for AstraZeneca under Mr Soriot’s leadership. In addition to delivery of the financial and scientific performance in extremely
challenging circumstances as described from page 19, the Committee considered Mr Soriot’s strong performance against his personal objectives as well as his
inspiring leadership in response to the COVID-19 pandemic.
COVID-19 response
In 2020, Mr Soriot worked tirelessly to steer AstraZeneca into a world-leading role in response to the COVID-19 pandemic.
Achievements of particular importance include: humanitarian aid, through the development of extremely high efficacy PCR, saliva and
antibody tests for the virus, the establishment of national testing facilities and the donation of nine million items of personal protective
equipment for the benefit of millions of people around the world; ongoing clinical trials in relation to potential neutralising monoclonal
antibodies for the virus and trials to explore the potential benefits of approved medicines in COVID-19 patients; the delivery of an
effective vaccine through our agreement with the University of Oxford, which is on track to deliver up to 3 billion doses of the vaccine
worldwide, on a not-for-profit and equitable basis throughout the pandemic.
Demonstrating
leadership to support
developments in global
life sciences
Throughout 2020, Mr Soriot continued to extend his influence with senior external stakeholders on key issues in healthcare with a
particular focus on the world’s response to COVID-19. Mr Soriot attended more than 50 meetings and engagements with senior level
Government officials around the world including in China, Russia, Australia, the EU, Brazil, France, Japan, the UK, France, the
Netherlands, Italy, Germany and the US. These interactions continue to shape the external environment and materially contribute to
AstraZeneca’s success around the world. They were also instrumental in securing agreements for the development, production and
delivery of the vaccine.
Leading in
Environmental, Social &
Governance (ESG)
performance
Under Mr Soriot’s leadership we made significant progress against key environmental initiatives during 2020. At the World Economic
Forum in January, Mr Soriot announced our Ambition Zero Carbon programme: our commitment to have zero carbon emissions from
operations across the world by 2025 and ensure our entire value chain is carbon negative by 2030, bringing forward decarbonisation
plans by more than a decade. 2020 saw significant progress against this ambition, with accelerated delivery of our renewable power
sourcing targets, achieving 100% supply of certified renewable imported power across all our sites worldwide, five years ahead of our
original RE100 (renewable energy) commitments. Ambition Zero Carbon targets will also feature as a performance measure under the
Performance Share Plan from 2021 further demonstrating our commitment to strong environmental performance.
Making AstraZeneca a
Great Place to Work –
achieve demonstrable
advances in inclusion,
diversity and employee
engagement
Throughout 2020 AstraZeneca received external recognition as one of the leading companies demonstrating ESG practice. We were
ranked 5th in the Dow Jones Sustainability Index for our industry globally and achieved the industry highest score in three areas –
Environmental Reporting, Social Reporting, and Strategy to Improve Access to Drugs or Products. We were again named as a member
of the FTSE4Good Index Series, an index designed to measure the performance of companies demonstrating strong ESG practices;
and ranked 56th in the Corporate Knights Global 100 (an overview of global 100 most sustainable corporations in the world).
As Chair of the AstraZeneca Global Inclusion and Diversity (I&D) Council, Mr Soriot has continued to oversee and drive accountability
for our I&D strategy throughout the organisation. In 2020, we held our first ever Global Power of Diversity Week to celebrate our
diversity and build understanding of the link between inclusion, innovation, performance and creativity. This event was hugely
successful with 71,000 employees around the globe participating in global and local events. The Council also oversaw the development
and launch of comprehensive racial equity plans to benefit both our workforce and under-served patient populations.
By the end of 2020, our internal KPIs were exceeded again with 46.9% of our senior leadership positions being held by women. We
were pleased that AstraZeneca has again been included in the Bloomberg Gender-Equality Index, which distinguishes companies
committed to transparency in gender reporting and advancing women’s equality. Internal engagement remains high with internal
surveys showing 96% of the 70,000 employee respondents stating they were proud of AstraZeneca’s contribution to society through
the pandemic. 91% said they felt AstraZeneca is truly patient-oriented and 89% would recommend AstraZeneca as a great place to
work. 84% said they felt comfortable to speak up and express their opinion at work.
AstraZeneca Annual Report & Form 20-F Information 2020 / Annual Report on Remuneration
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Annual Report
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continued
Annual bonus continued
Marc Dunoyer
COVID-19 response
Mr Dunoyer has played a critical role in realising the COVID-19 vaccine opportunity. He has been instrumental in ensuring vaccine
availability around the world and putting together arrangements with governments to enable the development of a vaccine on a no
profit/no loss basis.
COVID-19 had a profound impact on the financial markets. Under Mr Dunoyer’s leadership, the company’s robust balance sheet on
entering the pandemic was further strengthened during the course of 2020 to reduce liquidity risk, including a $3bn bond issuance at
all time low financing costs.
Recent technology investments within the Finance function enabled the group to quickly operationalise the challenges arising from the
vaccines programme with regard to contract financial management, cash flow management, profitability, and foreign exchange exposure.
Mr Dunoyer has also overseen delivery of revenue targets and has played a key role in ensuring our relationships with suppliers and
customers have been managed effectively and fairly in these precarious times.
Acquisition of Alexion
In December 2020, we announced the intended acquisition of Alexion, the largest US takeover announced in 2020, which promises to
open up many scientific and innovative opportunities, in particular expanding our presence in immunology. Mr Dunoyer led the deal on
behalf of AstraZeneca, this included due diligence, the successful deal negotiations and oversight of the financing construct of the
deal.
Japan
Mr Dunoyer’s additional responsibilities continue to include leading AstraZeneca Japan, which had another year of strong performance
in 2020, despite the broader economic and COVID challenges, achieving its business targets. Mr Dunoyer continued to play a critical
leadership role in Japan, playing an active role despite the travel challenges in 2020. Throughout the year Mr Dunoyer had numerous
meetings with senior government officials, as well as other senior pharmaceutical leaders, all of which were critical in enabling
AZ Japan to sign a COVID-19 vaccine (AZD1222) contract of 120 million doses and contracts with local companies to manufacture
the vaccine locally. Significant approvals obtained during the year included Lokelma, Imfinzi (Caspian), Forxiga and Lynparza (Paola,
Polo, Profound).
Creating an enterprise-
wide impact through
Global Business
Services (GBS)
GBS contributes to our Growth Through Innovation strategy by connecting business needs with innovative solutions that add value
by freeing up time and money while protecting the Company’s value and reputation. Under Mr Dunoyer’s leadership, in 2020, GBS’s
automation programmes helped AstraZeneca to free-up more than hundred thousand hours across the enterprise while improving
process accuracy and effectiveness. GBS enabled AstraZeneca to continue to effectively engage externally during the pandemic with
innovative virtual meeting capabilities with over 230,000 people attending key events. GBS also ensured services resilience during
COVID-19 and realised $200m working capital benefits and $100m cost savings.
Final determination of Executive Directors’ bonuses
In determining the annual bonus outturn for executive directors, the Remuneration Committee considers the formulaic Group scorecard outcome,
as well as the overall business performance, shareholder experience and the personal contribution of the individual Executive. A description of
the Executive Directors’ personal achievements is detailed above. In consideration of their exceptional leadership and personal contribution –
particularly in relation to the response to COVID-19 as well as the successful announcement of the Alexion acquisition – the Committee
determined the bonus outturn for both Executive Directors should be 180% of target (or 90% of maximum). This is in line with the approach
to differentiate bonus awards for individuals in the wider workforce that have made an exceptional contribution in 2020.
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Annual bonus continued
Deferred Bonus Plan
A proportion of each Executive Director’s pre-tax annual bonus is compulsorily deferred under the Deferred Bonus Plan (DBP). In respect of the
bonus deferred, the Executive Director is granted a conditional award over shares. No further performance conditions apply to DBP shares, but
release at the end of the three-year deferral period is ordinarily subject to continued employment. One third of the bonus earned in respect of
performance during 2019 was deferred and details of the consequent DBP awards granted in 2020 are shown below. One half of the bonus
earned in respect of performance during 2020 has been deferred and the consequent DBP awards are expected to be granted in March 2021.
Pascal Soriot
Marc Dunoyer
Ordinary Shares
granted
8,734
4,323
Grant date
6 March 2020
6 March 2020
Grant price
(pence per share)1
7376
7376
Audited
2020 Grant
Face value
£’000
644
319
2021 Grant
2020 Bonus deferred
£’000
1,160
620
1 The grant price is the average closing share price over the three dealing days preceding grant.
Accelerate Innovative Science
Deliver Growth and Therapy Area Leadership
Achieve Group Financial Targets
Measure weighting
Underlying metrics (if applicable)
Metric weighting
2021 target
2021 Group scorecard performance measures and metrics
30% Pipeline progression events
Regulatory events
30% Total Revenue
40% Cash flow
Core EPS
15%
15%
30%
20%
20%
C
C
C
C
C
Key
Target increased vs 2020 target
Target decreased vs 2020 target
Target constant
N New measure
C Commercially sensitive
We intend to disclose the 2021 Group scorecard outcome, and details of the performance hurdles and targets, in the 2021 Directors’
Remuneration Report following the end of the performance period. The performance targets are currently considered to be commercially
sensitive as prospective disclosure may prejudice the Company’s commercial interests. Executive Directors’ individual contribution will be
assessed by reference to individual goals in line with the Company’s objectives for the year.
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AstraZeneca Annual Report & Form 20-F Information 2020 / Annual Report on Remuneration
143
Annual Report
on Remuneration
continued
Long-term incentives
Long-term incentives included in the Executive Directors’ realised pay for 2020 figure: 2018 PSP
The Executive Directors’ realised pay for 2020 includes the value of Performance Share Plan (PSP) awards with performance period ended
31 December 2020. These shares and dividend equivalents will not be released to the Directors until the awards vest at the end of their respective
holding periods.
The values of the shares due to vest have been calculated using the average closing share price over the three-month period ended 31 December
2020 (8,027.55 pence). The table below provides a breakdown showing the face value of these shares at the time they were granted, the value that
is attributable to share price appreciation since grant and the value of dividend equivalents accrued on these shares over the relevant performance
period. Further information about the individual awards and performance assessments follows the table.
Pascal Soriot
Marc Dunoyer
Ordinary Shares
granted
Performance
outcome
2018 PSP
2018 PSP
128,889
61,240
99%
99%
Audited
Long-term incentive awards with performance periods ended 31 December 2020
Value of shares due to vest
Face value
at time
of grant1
£’000
6,192
2,942
Value due to
share price
appreciation2
£’000
Dividend equivalent
accrued over
performance period
£’000
4,051
1,925
817
388
Long-term
incentives total
£’000
11,060
5,255
1 Calculated using the grant price of 4853 pence for 2018 PSP awards.
2 Calculated using the difference between the grant price and the average closing share price over the three-month period ended 31 December 2020.
The 2018 PSP awards granted on 23 March 2018 are due to vest and be released on 23 March 2023 on completion of a further two-year holding
period. Performance over the period from 1 January 2018 to 31 December 2020 will result in 99% of the award vesting, based on the following
assessment of performance.
The Return to Growth target (measuring
aggregate Product Sales of the Oncology,
New CVRM, Respiratory, Japan and Emerging
Markets sales platforms, previously referred
to as growth platforms) and EBITDA target are
set at budget exchange rates at the beginning
of the performance period and evaluated at
those rates at the end of the performance
period, so that any beneficial or adverse
movements in currency, which are outside the
Company’s control, do not impact reward
outcomes.
The EBITDA measure is assessed using
cumulative Reported EBITDA, excluding
non-cash movements on fair value of
contingent consideration on business
combinations and gains on disposals of
intangible assets.
The Cash flow measure is assessed using
cumulative net cash flow from operating
activities less capital expenditure adding back
proceeds from disposal of intangible assets
and movement in profit participation liability.
AstraZeneca ranked third within the TSR peer
group, in the upper quartile.
For more information about the TSR performance of the
Company and the TSR comparator group, see page 153.
2018 PSP performance measures and metrics
Weighting
Threshold
(20%
vesting)
Maximum
(100%
vesting)
Outcome
Payout
Achieve Scientific Leadership
NME approvals
Major life-cycle management approvals
NME Phase III/registrational volume
Subtotal – Achieve Scientific Leadership1
Return to Growth (aggregate revenue of
growth platforms) ($bn)
6.7%
6.7%
6.7%
20%
20%
1
3
3
4
13
13
7
100%
23
100%
11
87%
96%
20.0
23.5
24.5
100%
Cash flow ($bn)
20%
8.0
12.0
13.0
100%
EBITDA ($bn)
20%
13.0
18.5
19.0
100%
Total shareholder return
20%
Median
UQ2
3rd
100%
Total1
100%
99%
Bar charts are indicative of 2018 PSP performance; scales do not start from zero.
Key:
1 The subtotal and total reflect the weightings of the individual metrics.
2 UQ = Upper Quartile.
144
AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance
Long-term incentives continued
PSP awards granted during 2020
During 2020 conditional awards of shares were granted to Mr Soriot and Mr Dunoyer with face values equivalent to 550% of base pay and 400%
of base pay respectively under the PSP. Face value is calculated using the grant price, being the average closing share price over the three
dealing days preceding grant. The 21 May 2020 grant, following the approval of the policy at the 2020 AGM, was made at the same share price
as the 6 March grant.
Audited
Performance will be assessed over the period from 1 January 2020 to 31 December 2022 against the measures outlined below, to determine the
proportion of the award that vests. A further two-year holding period will then apply before vesting, which is scheduled to occur on the fifth
anniversary of grant.
Pascal Soriot
Pascal Soriot1
Marc Dunoyer
Ordinary
Shares
granted
87,346
8,734
41,501
Grant
date
Grant price
(pence per
share)
Face value
£’000
End of
performance period
End of
holding period
6 March 2020
21 May 2020
6 March 2020
7376
7376
7376
6,443
31 December 2022
6 March 2025
644
31 December 2022
21 May 2025
3,061
31 December 2022
6 March 2025
1
This award forms part of the PSP award granted to Mr Soriot on 6 March 2020, and was made to take account of the revised limits for the PSP approved by shareholders at the Company’s
2020 AGM.
The 2020 PSP performance measures focus on scientific, commercial and financial performance over the three-year performance period. The
five performance metrics attached to the 2020 PSP awards are detailed below. Twenty percent of the award will vest if the threshold level of
performance is achieved; the maximum level of performance must be achieved under each measure for 100% of the award to vest.
Relative total shareholder return (TSR) (20% of award)
TSR performance is assessed against a predetermined peer group of global pharmaceutical companies and consists of AbbVie, Amgen, Astellas,
BMS, Daiichi Sankyo, Gilead, GSK, Johnson & Johnson, Lilly, MSD, Novartis, Novo Nordisk, Pfizer, Roche, Sanofi and Takeda. The rank which the
Company’s TSR achieves over the performance period will determine how many shares will vest under this measure.
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TSR ranking of the Company
Median
Between median and upper quartile
Upper quartile
% of award that vests
20% (threshold for payout)
Pro rata
100%
AstraZeneca Annual Report & Form 20-F Information 2020 / Annual Report on Remuneration
145
Annual Report
on Remuneration
continued
Long-term incentives continued
Net Cash flow (25% of award)
The Cash flow measure is assessed using cumulative net cash flow from operating activities less capital expenditure adding back proceeds
from disposal of intangible assets. The level of vesting under this measure is based on a scale between a threshold target and an upper target.
Audited
Cash flow
$12.5bn
Between $12.5bn and $15.0bn
$15.0bn
Between $15.0bn and $17.5bn
$17.5bn and above
% of award that vests
20% (threshold for payout)
Pro rata
75%
Pro rata
100%
Deliver Growth and Therapy Area Leadership (25% of award)
For PSP awards granted in 2020 Deliver Growth and Therapy Area Leadership measure Total Revenue. Disclosing the threshold and maximum
hurdles for this measure could be construed to constitute financial guidance, which is not the Company’s intention. The Deliver Growth and
Therapy Area Leadership (Total Revenue) measure is thus considered to be commercially sensitive and will be disclosed following the end of the
performance period. This measure is evaluated by reference to budget exchange rates.
Accelerate Innovative Science (30% of award)
Performance is assessed using dual indices which measure regulatory and pipeline progression events, allowing disclosure of targets at the
beginning of the performance period.
NME PhIII/Registrational Volume
(12% of award)
8
Between 8 and 11
11
Between 11 and 15
15
% of award that vests
Regulatory events (18% of award)
% of award that vests
20% (threshold for payout)
11
20% (threshold for payout)
Pro rata
75%
Pro rata
100%
Between 12 and 17
17
Between 17 and 22
22
Pro rata
75%
Pro rata
100%
146
AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance
Long-term incentives continued
PSP performance measures for 2021 grant
The 2021 PSP measures differ from the 2020 PSP measures as follows:
> An ESG measure, Ambition Zero Carbon, has been introduced with a weighting of 10%. This measure has been introduced to reflect the
importance of eliminating greenhouse gas emissions from our Scope 1 and 2 operations by 2025.
> To accommodate the introduction of an ESG measure, the weighting of the Deliver Growth and Therapy Area Leadership (Total Revenue)
and Cash Flow measures have both been reduced from 25% to 20%.
> The Relative TSR and Accelerate Innovative Science measures remain unchanged.
PSP performance measure
Accelerate Innovative Science
Measure weighting Underlying metrics (if applicable)
Metric weighting
Threshold
(20%
vesting)
Maximum
(100%
vesting)
30% NME Phase III/registrational volume
Regulatory events
12%
18%
8
11
15
23
Deliver Growth and Therapy Area
Leadership
20% Total Revenue
Cash flow
Relative TSR
Ambition Zero Carbon
20%
20%
10%
Commercially sensitive
until end of
performance period
$16.0bn
$22.5bn
Median
Upper
quartile
60%
reduction
68%
reduction
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Regulatory events measure NME and major life-cycle management approvals (taking into account the first approval over the performance
period). NME Phase III/registrational volume measures the total NME pipeline volume at the end of the performance period. These two items
ensure that management are assessed on both R&D late-stage delivery (approvals) and also future pipeline sustainability (volume).
Disclosing the threshold and maximum hurdles for the Deliver Growth and Therapy Area Leadership (Total Revenue) measure could be
construed to constitute financial guidance, which is not the Company’s intention. The Total Revenue measure is thus considered to be
commercially sensitive and will be disclosed following the end of the performance period.
The Total Revenue measure is evaluated by reference to budget exchange rates such that beneficial or adverse movements in currency, which
are outside the Company’s control, do not impact reward outcomes. The Cash flow measure is evaluated using net cumulative cash flow from
operating activities less capital expenditure adding back proceeds from disposal of intangible assets. The companies in the TSR comparator
group are shown on page 153.
Our Ambition Zero Carbon measure is based on our Scope 1 and Scope 2 emissions reductions, as measured against our 2015 baseline.
Further detail on our commitment can be found on page 75.
As described on page 137, the Committee takes into account a wide range of data to ensure that the stretching nature of PSP hurdles is
robustly tested and that financial targets are aligned with the business’s Long Range Plan. The Committee will take consensus into account
when determining the appropriate level of stretch.
PSP awards are expected to be granted to the Executive Directors in March 2021. The PSP award to be granted to Mr Dunoyer will be
equivalent to 450% of base pay. The PSP award to be granted to Mr Soriot will be equivalent to 550% of base pay. Subject to the approval
of the Directors’ Remuneration Policy and amended rules of the PSP at the Company’s AGM on 30 April 2021, a further PSP award will be
granted to Mr Soriot equivalent to 100% of base pay, bringing Mr Soriot’s total PSP award for 2021 in line with the maximum opportunity
under the Policy.
AstraZeneca Annual Report & Form 20-F Information 2020 / Annual Report on Remuneration
147
Annual Report
on Remuneration
continued
Non-Executive Directors’ remuneration
Non-Executive Directors’ realised pay for 2020 (total single figure of remuneration)
The table sets out all elements of remuneration receivable by the Non-Executive Directors in respect of the year ended 31 December 2020,
alongside comparative figures for the prior year.
Audited
Leif Johansson
Euan Ashley – appointed 1 October 2020
Geneviève Berger
Philip Broadley
Graham Chipchase
Michel Demaré – appointed 1 September 2019
Deborah DiSanzo
Diana Layfield – appointed 1 November 2020
Sheri McCoy
Tony Mok
Nazneen Rahman
Marcus Wallenberg
Former Non-Executive Directors
Rudy Markham – retired 26 April 2019
Total
2020
Fees
£’000
625
26
110
148
141
125
108
15
123
103
118
103
2019
Fees
£’000
625
–
110
144
158
36
108
–
123
103
118
103
–
1,745
44
1,672
2020
Other
£’000
73
2019
Other
£’000
72
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2020
Total
£’000
698
26
110
148
141
125
108
15
123
103
118
103
–
73
72
1,818
2019
Total
£’000
697
–
110
144
158
36
108
–
123
103
118
103
44
1,744
The Chairman’s single total figure includes office costs (invoiced in Swedish krona) of £73,000 for 2020 and £72,000 for 2019.
Payments to former Directors
During 2020, no payments were made to former Directors.
Payments for loss of office
During 2020, no payments were made to Directors for loss of office.
Non-Executive Directors’ fee structure
The Non-Executive Directors’ fee structure that applied during 2020 is set out below, alongside the structure that will be in place during 2021.
No changes have been made to fees for 2021. Further information on the Non-Executive Directors’ fee structure can be found within the
Remuneration Policy on page 166.
Non-Executive Director fees
Chairman1
Basic Non-Executive Director
Senior independent Non-Executive Director
Member of the Audit Committee
Member of the Remuneration Committee
Chairman of the Audit Committee or the Remuneration Committee2
Member of the Science Committee
Chairman of the Science Committee2
Non-Executive Director responsible for overseeing sustainability matters on behalf of the Board
1 The Chairman does not receive any additional fees for chairing, or being a member of, a committee.
2 This fee is in addition to the fee for membership of the relevant committee.
2021
£’000
625
2020
£’000
625
88
30
20
15
25
15
15
7.5
88
30
20
15
25
15
15
7.5
Fees in respect of Executive Directors’ external appointments
Marc Dunoyer is a non-executive director of Orchard Therapeutics. During 2020, Mr Dunoyer received a gross fee of £46,000 from Orchard
Therapeutics, which he retained in full.
Pascal Soriot was appointed a non-executive director of CSL Limited in July 2020. During 2020, Mr Soriot received a gross fee of £46,000 from
CSL Limited, which he retained in full.
148
AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance
Directors’ shareholdings
Minimum shareholding requirements
The CEO and CFO are each required to build a shareholding to satisfy their respective minimum shareholding requirements, each within five
years of their dates of appointment. During 2020, the minimum shareholding requirements for the CEO and CFO were set at 550% and 400%
of base pay respectively. Shares that count towards these minimum shareholding requirements are shares beneficially held by the Executive
Director and their connected persons and share awards that are not subject to further performance conditions. Share awards included are DBP
shares in deferral periods and PSP and AZIP shares in holding periods, on a net of tax basis. On this basis, as at 31 December 2020, Mr Soriot
and Mr Dunoyer held shares worth 1,108% and 2,290% of base pay respectively and had fulfilled their minimum shareholding requirements.
Audited
A further post-employment shareholding requirement applies to Executive Directors. For two years following cessation of employment,
Executive Directors are required to hold shares to the value of the shareholding guideline that applied at the cessation of their employment;
or, in cases where the individual has not had sufficient time to build up shares to meet their guideline, the actual level of shareholding at cessation.
The post-cessation requirement will be maintained through self-certification, with the Committee keeping this approach under review.
Position against minimum shareholding requirement (MSR) as a percentage of base pay
Pascal Soriot
Marc Dunoyer
Beneficially owned
shares and shares in
a holding period1
358,272
294,875
Shares in
deferral period
31,740
16,234
Shares subject
to performance
conditions
327,444
151,431
Value of shares
counted towards
MSR as a % of
base pay2
1,108%
2,290%
CEO
CFO
550%
400%
1 Holding period shares included are those which are not subject to continued employment.
2
Holding as at 31 December 2020. Shares subject to deferral and holding periods calculated net of a theoretical 50% tax rate.
Shares subject to performance conditions are not included in the value of shares counted towards MSR.
Key:
2020 MSR
Shares counted towards MSR
1,108%
2,290%
It is proposed that the minimum shareholding requirements for the CEO and CFO be increased to 650% and 450% of base salary respectively
on approval of the proposed Directors’ Remuneration Policy at the 2021 AGM.
Non-Executive Directors are encouraged to build up, over a period of three years, a shareholding in the Company with a value approximately
equivalent to the basic annual fee for a Non-Executive Director (£88,000 during 2020) or, in the case of the Chairman, approximately equivalent to
his basic annual fee (£625,000 during 2020). All Non-Executive Directors who had served for a period of three years or more as at 31 December
2020 held sufficient shares to fulfil this expectation.
Directors’ interests as at 31 December 2020
The following table shows the beneficial interests of the Directors (including the interests of their connected persons) in Ordinary Shares as at
31 December 2020.
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Executive Directors
Pascal Soriot
Marc Dunoyer
Non-Executive Directors
Leif Johansson
Euan Ashley2
Geneviève Berger
Philip Broadley
Graham Chipchase
Michel Demaré3
Deborah DiSanzo
Diana Layfield4
Sheri McCoy
Tony Mok5
Nazneen Rahman
Marcus Wallenberg
Beneficial interest in
Ordinary Shares at
31 December 20201
Beneficial interest in
Ordinary Shares at
31 December 20191
358,272
294,875
39,009
1,150
2,090
7,045
3,000
2,000
1,000
1,400
1,736
1,000
1,017
352,226
246,266
39,009
–
2,090
5,735
3,000
–
1,000
–
1,736
–
500
60,028
60,028
For the Executive Directors, beneficial interests include shares in holding periods which are not subject to performance measures or continued employment.
1
2 Euan Ashley was appointed on 1 October 2020.
3 Michel Demaré was appointed on 1 September 2019.
4 Diana Layfield was appointed on 1 November 2020.
5 Tony Mok was appointed on 1 January 2019.
AstraZeneca Annual Report & Form 20-F Information 2020 / Annual Report on Remuneration
149
Annual Report
on Remuneration
continued
Directors’ shareholdings continued
Executive Directors’ share plan interests
The following tables set out the Executive Directors’ interests in Ordinary Shares under the Company’s share plans.
Audited
Pascal Soriot
Share scheme interests
Grant date
Shares
outstanding at
1 January 2020
Grant
price
(pence)
Shares
granted
in year
24/03/2017
23/03/2018
08/03/2019
06/03/2020
27/03/2015
24/03/2016
24/03/2017
23/03/2018
08/03/2019
06/03/2020
21/05/2020
11/06/2013
28/03/2014
27/03/2015
24/03/2016
7,968
13,157
9,849
–
80,668
102,473
125,009
128,889
102,475
–
–
89,960
20,677
13,095
21,618
715,838
DBP
PSP
AZIP
Total
Marc Dunoyer
4880
4853
6287
7376
4762
3923
4880
4853
6287
7376
7376
3297
3904
4762
3923
–
–
–
8,734
–
–
–
–
–
87,346
8,734
–
–
–
–
104,814
88,636
DBP
PSP
AZIP
Total
24/03/2017
23/03/2018
08/03/2019
06/03/2020
27/03/2015
24/03/2016
24/03/2017
23/03/2018
08/03/2019
06/03/2020
01/08/2013
28/03/2014
27/03/2015
24/03/2016
4,262
7,037
4,874
–
35,327
42,739
59,439
61,240
48,690
–
8,176
8,709
5,734
9,016
4880
4853
6287
7376
4762
3923
4880
4853
6287
7376
3302
3904
4762
3923
–
–
–
4,323
–
–
–
–
–
41,501
–
–
–
–
Shares outstanding at
31 December 2020
Shares
lapsed
in year
Shares
subject to
performance
Shares
in deferral/
holding
period
Performance
period end
Vesting and
release date
–
–
–
–
–
–
3,751
n/a
n/a
n/a
n/a
–
–
–
–
n/a 24/03/20201
13,157
n/a 23/03/2021
9,849
8,734
n/a
n/a
08/03/2022
06/03/20232
– 31/12/2017
27/03/20203
102,473
31/12/2018
24/03/2021
121,258 31/12/2019
24/03/20224
–
128,889
– 31/12/2020
23/03/2023
–
–
–
–
–
–
10,809
14,560
102,475
87,346
8,734
–
31/12/2021
08/03/2024
– 31/12/2022
06/03/20255
– 31/12/2022
21/05/20255
–
–
–
–
89,960 31/12/2016
01/01/2021
20,677 31/12/2017
01/01/2022
13,095
31/12/2018
01/01/2023
10,809 31/12/2019
01/01/20246
327,444
390,012
Shares outstanding at
31 December 2020
Shares
in deferral/
holding
period
–
7,037
4,874
4,323
Performance
period end
Vesting and
release date
n/a 24/03/20201
n/a 23/03/2021
n/a
n/a
08/03/2022
06/03/20232
–
31/12/2017
27/03/20203
42,739
31/12/2018
24/03/2021
57,655 31/12/2019
24/03/20224
– 31/12/2020
23/03/2023
–
31/12/2021
08/03/2024
– 31/12/2022
06/03/20255
n/a
n/a
n/a
n/a
–
–
–
61,240
48,690
41,501
–
–
–
–
8,176 31/12/2016
01/01/2021
8,709 31/12/2017
01/01/2022
5,734
31/12/2018
01/01/2023
4,508 31/12/2019
01/01/20246
–
–
–
–
–
–
1,784
–
–
–
–
–
–
4,508
Shares
released
in year
7,968
–
–
–
80,668
–
–
–
–
–
–
–
–
–
–
Shares
released
in year
4,262
–
–
–
35,327
–
–
–
–
–
–
–
–
–
Share scheme interests
Grant date
Shares
outstanding at
1 January 2020
Grant
price
(pence)
Shares
granted
in year
Shares
lapsed
in year
Shares
subject to
performance
295,243
45,824
39,589
6,292
151,431
143,755
1 Market price on 24 March 2020, the actual date of release, was 6831 pence.
2 Award granted following deferral of one third of the annual bonus earned in respect of performance during 2019, further detail on page 143.
3 Market price on 27 March 2020, the actual date of release, was 6882 pence.
4 97% of the shares entered the holding period, following assessment of performance over the period to 31 December 2019. The remaining shares lapsed.
5 Details of PSP awards granted during 2020 are shown from page 145.
6 50% of the shares entered the holding period, following assessment of performance over the period to 31 December 2019.
No Director or senior executive beneficially owns, or has options over, 1% or more of the issued share capital of the Company, nor do they have different
voting rights from other shareholders. None of the Directors has a beneficial interest in the shares of any of the Company’s subsidiaries. Between
31 December 2020 and 11 February 2021, there was no change in the interests in Ordinary Shares shown in the tables on pages 149 and 150.
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AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance
Remuneration in the wider context
In our Corporate Governance Report on page 113, we explain in detail how the Board has chosen to engage with AstraZeneca’s workforce, and
how important engagement with our employees is if we are to be a great place to work and continue to deliver outstanding performance. The
Directors believe that the Board as a whole should continue to take responsibility for gathering the views of the workforce. Consequently, instead
of implementing one of the three methods for workforce engagement prescribed in the 2018 UK Corporate Governance Code, the Board has
chosen to further enhance and develop the long-standing channels of engagement which already exist in the organisation to ensure that the
Board continues to understand the global workforce’s views on a wide variety of topics, including matters relating to remuneration.
In light of the challenging conditions in a COVID-19 year, Directors’ (including members of the Remuneration Committee) in person engagement
was replaced with virtual interactions. Remuneration Committee members review wide-ranging data on employee reward, as well as broader
information on workforce trends and culture, which is provided to the full Board. Decisions of the Remuneration Committee affecting employees,
such as the annual Group scorecard outcomes, are communicated to employees through internal communications as well as through the
Remuneration Report. In the event that more significant changes to workforce remuneration are proposed, active engagement with employee
representative groups provides feedback to help the Committee understand the impact upon the broader workforce.
When considering executive remuneration and setting the Directors’ Remuneration Policy, the Committee takes into consideration our global
workforce, looking to ensure the global total reward offering is competitive, compelling and aligned to our business performance, while
supporting a culture where everyone feels valued and included, as outlined in the table below. Being a great place to work is one of our three
strategic priorities. We explain in our Business Review from page 64 the role that reward plays in developing a diverse culture that encourages
and rewards innovation, entrepreneurship and high performance.
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Summary of remuneration structure for employees below the Board
Element
Policy features for the wider workforce
Comparison with Executive Director
and Senior Executive Team (SET) remuneration
Base pay
Our base pay is the basis for a competitive total reward package
for all employees, and we review base pay annually. This review
takes account of country budget, relevant market comparators,
the skills, capabilities, knowledge and experience of each
individual, relativity to peers within the Company and individual
contribution.
The base pay of our Executive Directors and SET form the basis
of their total remuneration, and we review their base pay annually.
The primary purpose of the review is to ensure base pay remains
competitive and reflects the value of the individual to the
organisation.
In setting the budget each year, we consider affordability as well
as assessing how employee base pay is currently positioned
relative to market rates, forecasts of any further market increases
and turnover.
Pensions and benefits
We offer market-aligned wellbeing benefit packages reflecting
market practice in each country in which we operate.
Where appropriate, we offer elements of personal benefit choice
to our employees.
The benefit packages of our Executive Directors and SET are
broadly aligned with the wider workforce of the country in which
they are employed. Pension contributions for our UK Executive
Directors will be reduced to be in line with the UK workforce
under our new Directors’ Remuneration Policy, see page 156.
Annual bonus
With the exception of our sales representatives receiving sales
related incentives, our global workforce participates in the same
annual cash bonus plan as the Executive Directors and SET,
with the same Group scorecard performance measures outlined
on pages 140 and 143. Achievement against the scorecard
creates a bonus pool from which all awards are made.
The bonus ranges for our Executive Directors are described on
page 139. The ranges for the SET align with the wider workforce at
0-200% of target. Half of any award to an Executive Director under
the plan is subject to deferral into shares subject to a three-year
holding period. One sixth of any award to SET under the plan is
deferred into shares subject to a three-year holding period.
For employees within our commercial organisation, the
country-level share of the global bonus pool also takes into
account country performance against KPIs.
Individual outcomes are based on manager assessment of
contribution against individual objectives and peers. Awards are
based on a 0-200% target range.
Long-term
incentives
The PSP is operated with a three-year performance period for
employees at Vice-President and Senior Vice-President level,
with the same performance measures that apply to Executive
Director and SET PSP awards (outlined on pages 145 and 146.
PSP awards to Executive Directors and SET are granted under
the same plan as PSP awards granted to Vice-Presidents. PSP
awards to Executive Directors and SET are subject to a two-year
holding period following the three-year performance period.
A proportion of our workforce below Vice-President level is
eligible to be considered for other long-term incentive awards,
such as restricted stock awards.
AstraZeneca Annual Report & Form 20-F Information 2020 / Annual Report on Remuneration
151
Annual Report
on Remuneration
continued
Remuneration in the wider context continued
Change in Director remuneration compared to other employees
In the table below, as per the requirements of the Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations
2019, changes to the base pay (or fees), taxable benefits and annual bonus of Directors are compared to employees over the same period
(2019 to 2020). The regulations require comparison between the remuneration of each Director and that of all employees of the parent company
on a full-time equivalent basis. As AstraZeneca PLC has no direct employees, and in line with our disclosure approach in prior years to changes
in employee remuneration, the selected comparator group is comprised of employees in the UK, US and Sweden who represent approximately
30% of our total employee population. We consider that this group is representative of the Group’s major science, business and enabling units.
These employee populations are also well balanced in terms of seniority and demographics.
Executive Directors
Pascal Soriot
Marc Dunoyer1
Non-Executive Directors
Leif Johansson2
Euan Ashley3
Geneviève Berger
Philip Broadley
Graham Chipchase
Michel Demaré4
Deborah DiSanzo
Diana Layfield5
Sheri McCoy
Tony Mok
Nazneen Rahman
Marcus Wallenberg
Employees
Salary/fees
Benefits
Annual Bonus
Change in 2020 against 2019 (%)
0.0%
0.0%
0.0%
–
0.0%
2.8%
-10.8%
15.7%
0.0%
–
0.0%
0.0%
0.0%
0.0%
4.1%
-2.7%
25.0%
1.4%
–
–
–
–
–
–
–
–
–
–
–
20.0%
29.6%
–
–
–
–
–
–
–
–
–
–
–
–
4.1%
-11.6%
1
Changes to the value of benefits provided to Marc Dunoyer were due to increased costs to the Company for the provision of external financial planning advice during 2020 (£18,218 in 2020,
compared to £2,444 in 2019). Other benefit values remained consistent with 2019.
2 Benefits for Leif Johansson are office costs.
3 Euan Ashley was appointed on 1 October 2020.
4 Michel Demaré was appointed on 1 September 2019. 2019 fees have been annualised to enable like for like comparison. Mr Demaré became Chairman of the Remuneration Committee in August 2020.
5 Diana Layfield was appointed on 1 November 2020.
CEO and employee pay ratios
The table below sets out the ratios of the CEO’s realised pay to the equivalent pay for the lower quartile, median and upper quartile UK employees
(calculated on a full -time equivalent basis). The ratios have been calculated in accordance with the Companies (Miscellaneous Reporting)
Requirements 2018 (the Regulations).
Year1
2020
2019
2018
Method
25th percentile pay ratio
50th percentile pay ratio
75th percentile pay ratio
Option A
Option A
Option A
284:1
280:1
230:1
197:1
190:1
160:1
130:1
123:1
103:1
1 Prior year’s figures have not been restated for subsequent share price changes (as shown in the CEO realised pay for 2020 table on page 138).
The comparison with UK employees is specified by the Regulations. This group represents approximately 10% of our total employee population.
The Regulations provide flexibility to adopt one of three methods of calculation; we have chosen Option A which is a calculation based on all UK
employees on a full-time equivalent basis as we consider this to be the most appropriate method of comparison and in line with the calculation
of CEO’s realised pay. The ratios are based on total pay, which includes base pay, benefits, bonus and long-term incentives (LTI). The CEO pay is
as shown in the realised pay for 2020 table, on page 138. For UK employees, quartile data has been determined as at 31 December 2020, with
calculations based on actual pay data for January to November 2020. Estimates have been used for December 2020 pay, annual bonus outcomes
and LTI dividend equivalent payments. These estimates are based on forecast December 2020 pay, the 2020 bonus budget and projected payout,
and anticipated dividend equivalent payments on LTI awards, respectively. No elements of pay have been excluded from the calculation, which
has been determined following the approach of previous years.
CEO
25th percentile
50th percentile
UK employees
75th percentile
Pay data1 (£’000)
Base pay
Total pay
Base pay
Total pay
Base pay
Total pay
Base pay
Total pay
2020
2019
2018
1,289
1,289
1,251
15,447
14,330
11,356
41
38
36
54
51
49
60
53
50
78
75
71
82
71
70
119
117
110
1 Prior year’s figures have not been restated for subsequent share price changes (as shown in the CEO realised pay for 2020 table on page 138).
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Although higher slightly at each quartile, the 2020 CEO pay ratio is broadly consistent when compared to 2019, which also saw strong bonus
and PSP outcomes, and share price appreciation driving the CEO’s realised pay. The Committee is mindful that ratios may vary significantly
year-on-year given varied annual bonus and PSP outcomes and share price movements, and therefore also considers the CEO pay ratio when
excluding LTI. The median pay ratio of the CEO compared to the median UK employee when excluding LTI is 53:1, compared to 51:1 in 2018 and
2019. The stability of the ratio at the 50th percentile between 2018, 2019 and 2020, when calculated to exclude the variability of LTIs, is consistent
with the pay and progression policies for UK employees. The Committee remains mindful of the debate on executive pay and seeks to ensure that
when determining the remuneration of the CEO it finds the right balance between rewarding performance in a highly competitive global executive
talent market, as shown by the pay across the Group.
Relative importance of spend on pay
The table below shows the remuneration paid to all employees in the Group, including the Executive Directors, and expenditure on shareholder
distributions through dividends. The figures have been calculated in accordance with the Group Accounting Policies and drawn from either the
Company’s Consolidated Statement of Comprehensive Income on page 176, or its Consolidated Statement of Cash Flows on page 179. Further
information on the Group’s Accounting Policies can be found from page 180.
Total employee remuneration
Distributions to shareholders: dividends paid
2020
$m
8,247
3,572
2019
$m
7,568
3,592
Difference
in spend
between
years
$m
679
-20
Difference
in spend
between
years
%
8.97
-0.56
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Total shareholder return (TSR)
The graph below compares the TSR performance of the Company over the past ten years with the TSR of the FTSE 100 Index. This graph is
re-based to 100 at the start of the relevant period. As a constituent of the FTSE 100, this index represents an appropriate reference point for the
Company. To provide shareholders with additional context we have also included a ‘Pharmaceutical peers average’, reflecting the TSR of the
comparator group adopted in 2017 which is used to assess relative TSR performance for PSP awards granted in 2018. It consists of AbbVie,
Amgen, Astellas, BMS, Celgene, Daiichi Sankyo, Gilead, GSK, Johnson & Johnson, Lilly, MSD, Novartis, Novo Nordisk, Pfizer, Roche, Sanofi,
Shire and Takeda. Where a comparator company delisted during the 2018 PSP performance period, as the result of an acquisition, TSR
performance has been assessed up unto the point of de-listing. The TSR comparator group for PSP awards to be granted in 2021 consists of
AbbVie, Amgen, Astellas, BMS, Daiichi Sankyo, Gilead, GSK, Johnson & Johnson, Lilly, MSD, Novartis, Novo Nordisk, Pfizer, Roche, Sanofi
and Takeda. CEO remuneration over the same ten-year period is shown after the TSR graph.
TSR over a ten-year period
450
400
350
300
250
200
150
100
Dec
10
Dec
11
Dec
12
Dec
13
Dec
14
Dec
15
Dec
16
Dec
17
Dec
18
Dec
19
Dec
20
AstraZeneca
Pharmaceutical peers average
FTSE 100
AstraZeneca Annual Report & Form 20-F Information 2020 / Annual Report on Remuneration
153
Annual Report
on Remuneration
continued
CEO total remuneration table
Year
2020
2019
2018
2017
2016
2015
2014
2013
2012
2012
2012
2011
CEO
Pascal Soriot
Pascal Soriot
Pascal Soriot
Pascal Soriot
Pascal Soriot
Pascal Soriot
Pascal Soriot
Pascal Soriot
Pascal Soriot – appointed with effect from 1 October 2012
Simon Lowth – acted as interim CEO from June to September 2012 inclusive
David Brennan – ceased to be a Director on 1 June 2012
David Brennan
CEO
realised pay
£’000
Annual bonus
payout against
maximum
opportunity
%
LTI vesting
rates against
maximum
opportunity
%
15,4471
15,3072
12,868
10,429
14,3423
7,963
3,507
3,344
3,6934
3,289
4,1476
7,863
90
83
83
87
54
97
94
94
68
86
–7
74
99
90
79
81
95
78
–
–
–
385
38
62
1 The 2020 realised pay is shown on page 138.
2 This figure has been revised using the average closing share price over the three-month period to 31 December 2020, as explained on page 144.
3 This figure includes shares awarded to Mr Soriot in 2013 under the AZIP to compensate him for LTIs from previous employment forfeited on his recruitment as the Company’s CEO.
4
This figure includes £991,000 paid to compensate Mr Soriot in respect of his forfeited bonus opportunity for 2012 and an award of £2,000,000 to compensate him for his loss of LTI awards,
both in respect of his previous employment.
5 Mr Lowth’s LTI awards which vested during 2012 were not awarded or received in respect of his performance as Interim CEO.
6 This figure includes Mr Brennan’s pay in lieu of notice of £914,000.
7
Mr Brennan informed the Committee that he did not wish to be considered for a bonus in respect of that part of 2012 in which he was CEO. The Committee determined that no such bonus
would be awarded and also that there should be no bonus award relating to his contractual notice period.
Governance
Committee membership
During 2020, the Committee members were Michel Demaré (Chairman of the Committee), Leif Johansson, Sheri McCoy and Philip Broadley.
Graham Chipchase stepped down as Chairman and a member of the Committee on 1 August 2020. The Deputy Company Secretary acts as
secretary to the Committee. The Committee met six times in 2020 and members’ attendance records are set out on page 103. During the year,
the Committee was materially assisted, except in relation to their own remuneration, by the CEO; the CFO; the VP Finance Group Controller;
the EVP, GMD; the EVP, Human Resources; the SVP, Reward and Inclusion; the Senior Director Executive Reward; the Company Secretary;
the Deputy Company Secretary; EVP, Sustainability and Chief Compliance Officer; the Non-Executive Director responsible for overseeing
Sustainability matters on behalf of the Board; and, the Non-Executive Directors forming the Science Committee. The Committee’s independent
adviser attended all Committee meetings.
Terms of reference
A copy of the Committee’s terms of reference is available on our website, www.astrazeneca.com. The Committee reviewed its terms of
reference during 2020 and did not recommend any changes. The terms of reference were subsequently approved by the Board.
Independent adviser to the Committee
The Committee reappointed Willis Towers Watson (WTW) as its independent adviser following a tender process undertaken in 2018. The 2018
tender process involved submission of written proposals, followed by shortlisted candidates being interviewed by both Committee members and
members of the Company’s management. The Committee selected and appointed WTW with effect from September 2018. WTW’s service to the
Committee during 2020 was provided on a time spent basis at a cost to the Company of £183,540, excluding VAT. During 2020, WTW also provided
pensions advice and administration, and advice and support to management including market data to assist in the annual employee pay review
and global pay survey data. WTW have no other connection with the Company or individual Directors. The Committee reviewed the potential for
conflicts of interest and judged that there were no conflicts. WTW is a member of the Remuneration Consultants’ Group, which is responsible for
the stewardship and development of the voluntary code of conduct in relation to executive remuneration consulting in the UK. The principles on
which the code is based are transparency, integrity, objectivity, competence, due care and confidentiality. WTW adheres to the code.
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Shareholder voting at the AGM
At the Company’s AGM on 29 April 2020, shareholders voted in favour of a resolution to approve the Directors’ Remuneration Policy and Annual
Report on Remuneration for the year ended 31 December 2019.
Resolution
Votes for
% for
Votes against
% against
Total votes cast
% of Issued
Share
Capital voted
Withheld
votes
Ordinary Resolution to approve the Directors’
Remuneration Policy (2020 AGM)
Ordinary Resolution to approve the Annual Report on
Remuneration for the year ended 31 December 2019 (2020 AGM)
972,774,742
94.71
54,292,376
5.29
1,027,067,118
78.27
42,106,679
1,032,308,145
96.65
35,747,783
3.35 1,068,055,928
81.39
1,118,038
Directors’ service contracts and letters of appointment
The notice periods and unexpired terms of Executive Directors’ service contracts at 31 December 2020 are shown in the table below.
AstraZeneca or the Executive Director may terminate the service contract on 12 months’ notice.
Executive Director
Pascal Soriot
Marc Dunoyer
Date of service contract
15 December 2016
6 December 2016
Unexpired term at 31 December 2020
Notice period
12 months
12 months
12 months
12 months
None of the Non-Executive Directors has a service contract but each has a letter of appointment. In accordance with the Company’s Articles,
following their appointment, all Directors must retire at each AGM and may present themselves for re-election. The Company is mindful of the
director independence provisions of the 2018 UK Corporate Governance Code and, in this regard, a Non-Executive Director’s overall tenure will
not normally exceed nine years. The Chairman of the Company may terminate his appointment at any time, on three months’ notice. None of the
other Non-Executive Directors has a notice period or any provision in their letters of appointment giving them a right to compensation upon early
termination of appointment.
Basis of preparation of this Directors’ Remuneration Report
This Directors’ Remuneration Report has been prepared in accordance with the Large and Medium-sized Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013 (as amended) (the 2013 Regulations). As required by the 2013 Regulations, a resolution to approve the
Annual Report on Remuneration will be proposed at the AGM on 30 April 2021.
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On behalf of the Board
A C N Kemp
Company Secretary
11 February 2021
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155
Remuneration Policy
Changes to Remuneration Policy and its implementation
The table below summarises the main proposed changes to the Directors’ Remuneration Policy (the Policy), the intended changes to
implementation of the Policy in 2021 and the rationale for each change.
The full Policy that shareholders will be asked to approve is set out from page 157.
2021 Remuneration Policy Summary
Element
Base pay
Pension
Proposed change to Policy
Implementation in 2021
Rationale for change
No change
Increase for CEO or CFO in line with
the workforce
The maximum pension allowance for
UK-based Executive Directors capped in
line with the pension arrangements of
other UK employees
CEO and CFO pension reduced to 11% of
base pay in line with the wider workforce
Aligns Executive Director pension
contributions with those of wider
workforce
Annual bonus
No change
Bonus for 2021 will be as follows:
No change in policy maximum
CEO bonus:
> Target: 125% of base pay (2020: 100%)
> Max: 250% of base pay (2020: 200%)
CFO bonus:
> Target: 100% of base pay (2020: 90%)
> Max: 200% of base pay (2020: 180%)
Performance Share
Plan (PSP)
Increase maximum opportunity from
550% to 650% of base pay
Increase CEO PSP award from 550%
to 650% of base pay
Increase CFO PSP award from 400%
to 450% of base pay
Recognition of CEO’s and CFO’s criticality
to future business success and increased
scope of roles in light of significant
activities arising from the COVID-19
vaccine development
Continuing to close the gap to market pay
levels within the competitive global and
European pharmaceutical talent pool
Increased weighting on long-term
performance
Shareholding
requirements
Increase shareholding requirements
to mirror annual PSP opportunity:
Ensures further alignment with
shareholders during and post-employment
> Shareholding requirement for CEO
increases from 550% to 650% of
base pay
> Shareholding requirement for CFO
increases from 400% to 450% of
base pay
Executive Directors required to hold up to
100% of their shareholding requirement for
two years after leaving office
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Remuneration Policy
This section sets out the Directors’ Remuneration Policy (the Policy) proposed for approval by shareholders at the Company’s AGM on 30 April
2021. Subject to shareholder approval, the Policy is intended to remain in effect for three years from the 2021 AGM. The previous page
summarises how the Policy differs from the policy which was approved by shareholders at the 2020 AGM. Whilst the policy at the 2020 AGM
received strong support from our shareholders, the Committee reviewed the policy in light of AstraZeneca’s continuous growth, the increase to
both the CEO’s and CFO’s role scope following AstraZeneca’s COVID-19 response, as well as competitive pay levels in comparison to global
and European pharmaceutical peers.
Setting the Policy
The Remuneration Committee (the Committee) is responsible for setting overall remuneration policy and makes decisions about specific
remuneration arrangements in the broader context of employee remuneration throughout the Group. The Committee reviews Group remuneration
data annually, including ratios of average employee pay to senior executive pay; bonus data; as well as gender and geographical data in relation
to base pay and variable compensation. This includes a workforce remuneration review to understand the ways in which reward is differentiated
by contribution across the population.
Remuneration for all roles within the organisation is benchmarked against that for comparable roles in similar organisations and in the employee’s
local market. Executive Directors’ remuneration is benchmarked against global and European pharmaceutical peer groups and the FTSE 30. In
reviewing the base pay of Executive Directors, the Committee considers the overall level of any base pay increases being awarded to employees
in the Executive Director’s local market in the relevant year. In setting, reviewing and implementing the Policy, the Committee seeks independent
advice and ensures that no Director makes decisions relating to their own remuneration. The Committee connects with the Audit Committee to
ensure that the Group’s remuneration policies and practices achieve the right balance between appropriate incentives to reward good
performance, management of risk, and the pursuit of the Company’s strategic objectives.
The Board as a whole takes responsibility for gathering the views of AstraZeneca’s workforce, and does so through multiple channels of
engagement. While the Committee does not consult employees specifically when setting the Executive Directors’ remuneration policy, the
Company engages with employees, either on a Group-wide basis or in the context of smaller focus groups, to solicit feedback generally on a wide
range of matters, including pay. Many employees are also shareholders in the Company and therefore have the opportunity to vote on the Policy
at the 2021 AGM.
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In all aspects of its work, the Committee considers both the external environment in which the Company operates and the guidance issued by
organisations representing institutional shareholders. It consults the Company’s major investors on general and specific remuneration matters
and provides opportunities for representatives of those investors to meet the Chairman of the Committee and other Committee and Board
members. It is the Company’s policy to seek input from major shareholders on an ad hoc basis when significant changes to remuneration
arrangements are proposed. A thorough consultation process was undertaken as this Policy was developed, with investors’ feedback on the
Committee’s proposals influencing the final Policy. The Company’s shareholders are encouraged to attend the AGM and any views expressed
will be considered by Committee members.
Legacy arrangements
The Committee may approve remuneration payments and payments for loss of office on terms that differ to the terms in the Policy where the
terms of the payment were agreed before the Policy came into effect or were agreed at a time when the relevant individual was not a Director of
the Company (provided that, in the opinion of the Committee, the agreement was not entered into in consideration for the individual becoming
a Director of the Company). This includes the exercise of any discretion available to the Committee in connection with such payments. For these
purposes, payments include the Committee satisfying awards of variable remuneration, including share awards, in line with the terms agreed at
the time the award was granted.
Minor amendments
The Committee may make minor amendments to the arrangements for Directors described in the Policy without shareholder approval for
regulatory, exchange control, tax or administrative purposes or to take account of a change in legislation.
AstraZeneca Annual Report & Form 20-F Information 2020 / Remuneration Policy
157
Remuneration Policy
continued
Remuneration Policy for Executive Directors
Fixed elements of remuneration: base pay, benefits and pension
Base pay
Purpose and link to strategy
Operation
Maximum opportunity
Intended to be sufficient to
attract, retain and develop
high-calibre individuals
When setting base pay, the Committee gives consideration
to a number of factors, including (but not limited to):
> recognition of the value of an individual’s personal
performance and contribution
> the individual’s skills and experience
> internal relativities
> conditions in the relevant external market
While there is no formal maximum, any increases in base
pay will normally be in line with the percentage increases
awarded to the employee population within the individual’s
country location.
Higher increases may be made if the Committee
considers it appropriate, for example to reflect:
> an increase in the scope and/or responsibility of the
Base pay is normally reviewed annually with any change
usually taking effect from 1 January.
individual’s role; or
> development of the individual within the role.
Benefits
Purpose and link to strategy
Operation
Maximum opportunity
Intended to provide a market-
competitive benefits package
sufficient to attract, retain and
develop high-calibre individuals
The maximum value of the benefits available will be
equivalent to the cost to the Company of the suite of
benefits available in the local market at the time.
The value of the support towards the costs of relocation,
professional fees and other costs will be the reasonable
costs associated with the Executive Director’s particular
circumstances.
The maximum value of the directors’ and officers’ liability
insurance and third-party indemnity insurance is the cost
at the relevant time.
While the Committee has not set an overall level of benefit
provision, the Committee keeps the benefit policy and
benefit levels under review.
UK Executive Directors are provided with a fund, the value
of which is based on a range of benefits, including private
medical provision for themselves, partner and children; life
assurance; company car; additional holidays and other
additional benefits made available by the Company from time
to time that the Committee considers appropriate based on
the Executive Director’s circumstances.
A Director may choose to take a proportion of, or the entire,
fund as cash.
Non UK-based Executive Directors will receive a range of
benefits (or a fund of equivalent value) comparable to those
typically offered in their local market. Depending on local
market practices, they may be able to elect to take the fund
as cash or elect to take one or more of these benefits and
take the balance as cash.
At its discretion, the Committee may consider support towards
reasonable costs associated with relocation and/or provide an
allowance towards reasonable fees for professional services
such as legal, tax, property and financial advice. The Company
may also fund the cost of a driver and car for Executive
Directors and any expenses deemed to be taxable which are
reasonably incurred in the course of the Company’s business,
together with any taxes thereon.
The Company provides directors’ and officers’ liability
insurance and an indemnity to the fullest extent permitted by
law and the Company’s Articles.
Pension
Purpose and link to strategy
Operation
Maximum opportunity
Provision of retirement benefits
to attract, retain and develop
high-calibre individuals
UK-based Executive Directors receive a pension allowance
based on a percentage of base pay, which the Director may
elect to pay into a pension scheme (or an equivalent
arrangement) or take as cash.
The maximum pension allowance that may be provided to
UK-based Executive Directors shall be capped at a level in
line with the pension arrangements of other UK employees.
Non UK-based Executive Directors will receive an allowance
for the purpose of providing retirement benefits in line with
local market practice. A non UK-based Executive Director may
be offered the opportunity to elect to take some or all of the
allowance as cash.
The maximum value that may be provided to non
UK-based Executive Directors will be aligned with
employees in the relevant local market.
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Variable elements of remuneration: annual bonus and long-term incentive
Annual bonus and Deferred Bonus Plan (DBP)
Purpose and link to strategy
Operation
Maximum opportunity
The maximum annual bonus amount that can be awarded
is equivalent to 250% of base pay.
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The annual bonus incentivises
and rewards short-term
performance against Group
targets and individual objectives
that are closely aligned to the
Company’s strategy
The deferred share element
of the annual bonus is designed
to align Executive Directors’
interests with those of
shareholders
Annual bonus awards are conditional on performance.
Performance is measured over one year and the bonus, if
awarded, is paid after the year end. Normally half of the bonus
is delivered in cash and half is delivered in shares, which are
deferred for three years under the DBP. DBP awards may
consist of Ordinary Shares or American Depositary Shares
(ADSs) depending on the country in which the Director is
based. In line with the approach for other employees, a
Director may be offered the opportunity to elect to defer part
of their cash bonus into pension.
Stretching Group targets are set annually by the Committee
based on the key strategic priorities for the year. The
performance targets form a Group scorecard, which is closely
aligned to the Company’s strategy, and are designed to reward
scientific, commercial and financial success. Performance is
assessed in relation to each performance target on a
standalone basis. A threshold level of performance is
specified; if performance falls below this level, there will be
no payout for that proportion of the award.
Payout levels are determined by the Committee after the year
end, based on performance against the Group scorecard
targets as well as each Executive Director’s individual
performance. The Committee may use its discretion to ensure
that a fair and balanced outcome is achieved, taking into
account the overall performance of the Company and the
experience of shareholders.
On vesting of the deferred shares, shares equivalent in value
to the dividends that would have been paid during the deferral
period will be awarded to the Director.
The Committee has discretion to claw-back from individuals
some or all of the cash bonus award in certain circumstances
including (i) serious misconduct by the individual (for up to six
years from the payment date); (ii) material misstatement or
restatement of the results of the Group (for up to two years
from the payment date); or (iii) significant reputational damage
to the Group (for up to two years from the payment date).
For shares under the DBP, the Committee has discretion to
reduce or cancel any portion of an unvested deferred bonus
share award in certain circumstances (malus) including (i)
serious misconduct by the individual; (ii) material misstatement
or restatement of the results of the Group; or (iii) significant
reputational damage to the Group. The Committee also has
discretion to claw-back from individuals some or all of the
deferred bonus share award in certain circumstances,
including (i) serious misconduct by the individual (for up to six
years from the vesting date); (ii) material misstatement or
restatement of the results of the Group (for up to two years
from the vesting date); or (iii) significant reputational damage
to the Group (for up to two years from the vesting date).
AstraZeneca Annual Report & Form 20-F Information 2020 / Remuneration Policy
159
Remuneration Policy
continued
Remuneration Policy for Executive Directors continued
Long-term incentive (LTI): Performance Share Plan (PSP)
Purpose and link to strategy
Operation
Maximum opportunity
The maximum market value of shares that may be
awarded under the PSP in any year is equivalent to 650%
of the participant’s annual base pay at the date of grant.
The PSP is designed to align
the variable pay of Executive
Directors with the successful
execution of the Company’s
strategy
PSP awards are conditional awards and may be granted over
Ordinary Shares or American Depositary Shares (ADSs)
depending on the country in which the Director is based.
Vesting is dependent on the achievement of stretching
performance targets and continued employment, as further
described in the Treatment of LTI and Deferred Bonus Plan
awards on cessation of employment section on page 165.
Stretching performance targets are set by the Committee at
the beginning of the relevant performance period. Performance
measures are closely aligned to the Company’s strategy and
are designed to reward scientific, commercial and financial
success. The Committee will consult with major shareholders
in advance if it proposes any material changes to the PSP
performance measures.
When selecting the performance measures for each award, the
Committee weights the performance measures as it considers
appropriate, taking into account strategic priorities. The
Committee’s intention is to exercise appropriate judgement
both when setting performance targets and assessing
outcomes, in particular so that the experience of shareholders
over time is taken into account.
Performance is normally assessed over a three-year period
commencing on 1 January in the year of grant. Shares are
subject to a two-year holding period following the
performance period, so vesting takes place on the fifth
anniversary of grant. During the holding period, no further
performance measures apply.
Typically, 20% of the proportion of a PSP award linked to
a performance measure will vest on achievement of the
threshold level of performance and 100% will vest if the
maximum level of performance is achieved in full. For relative
measures (such as relative total shareholder return (TSR)) the
threshold performance will be performance at or above
median, and maximum performance will usually be set as
achievement of performance at the upper quartile level of the
peer group. Where a performance measure permits, there will
be further vesting points between threshold and maximum
vesting levels.
The Committee may (acting fairly and reasonably) adjust or
waive a performance target if an event occurs that causes it to
believe that the performance target is no longer appropriate.
Shares equivalent in value to the dividends that would have
been paid on the vesting shares during the performance and
holding periods will be awarded to the Director.
The Committee has discretion to reduce or cancel any portion
of an unvested award in certain circumstances (malus),
including (i) serious misconduct by the individual; (ii) material
misstatement or restatement of the results of the Group; or (iii)
significant reputational damage to the Group. The Committee
also has discretion to claw-back from individuals some or all
of the award in certain circumstances, including (i) serious
misconduct by the individual (for up to six years from the third
anniversary of the date of grant); (ii) material misstatement or
restatement of the results of the Group (for up to two years
from the third anniversary of the date of grant); and (iii)
significant reputational damage to the Group (for up to two
years from the third anniversary of the date of grant).
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AstraZeneca Annual Report & Form 20-F Information 2020 / Corporate Governance
UK Employee Share Plans
Share Incentive Plan (SIP)
Purpose and link to strategy
Operation
Maximum opportunity
Encouraging employee share
ownership
The Company operates an HM Revenue & Customs (HMRC)-
approved SIP whereby UK employees, including Executive
Directors, may elect to save a regular amount to be used to
purchase shares. The Company currently grants one matching
share in respect of every four shares purchased by the
participant.
Participants may contribute up to £150 per month
from pre-tax pay or such other maximum amount as
determined by the Company within the parameters
of applicable legislation.
Save As You Earn Share Option Scheme (SAYE)
Purpose and link to strategy
Operation
Maximum opportunity
Encouraging employee share
ownership
The Company operates an HMRC-approved SAYE whereby
UK employees, including Executive Directors, may save a
regular amount over three or five years and are granted options
to purchase shares at the end of the saving period. A maximum
discount of 20% to the market price prevailing at the date of
the commencement of the scheme applies to the option price.
Participants may save up to £500 per month from post-tax
pay or such other maximum amount as determined by the
Company within the parameters of applicable legislation.
The maximum opportunity available to participants in
a non UK-based all-employee share scheme will be
determined by the Company within the parameters of
applicable legislation.
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Historical LTI: AstraZeneca Investment Plan (AZIP)
The final grant under the AZIP took place in 2016. All extant AZIP awards have completed the relevant four year performance period and are now
subject to a holding period before vesting. The AZIP holding period lasts for four years following the performance period, so that vesting takes
place on the eighth anniversary of the start of the performance period. The holding period attached to the 2016 AZIP award will end on 1 January
2024. During the holding period, no further performance measures apply. Payout of an award is subject to continued employment as further
described in the Treatment of LTI and Deferred Bonus Plan awards on cessation of employment section on page 165. The shares equivalent in
value to the dividends that would have been paid on the vesting shares during the performance and holding periods will be awarded to the
Director.
The Committee has discretion to reduce or cancel any portion of an unvested award in certain circumstances (malus), including (i) serious
misconduct by the individual; (ii) material misstatement or restatement of the results of the Group; or (iii) significant reputational damage to the
Group. The Committee has discretion to claw-back from individuals some or all of the award in certain circumstances, including (i) serious
misconduct by the individual (for up to six years from the end of the performance period); (ii) material misstatement or restatement of the results
of the Group (for up to two years from the end of the performance period); or (iii) significant reputational damage to the Group (for up to two
years from the end of the performance period).
Differences in remuneration policy for other employees
The Company’s approach to determining and reviewing the base pay of the Executive Directors and the employee population as a whole is the
same. On an annual basis the base pay for individual roles are reviewed in the context of the external market. AstraZeneca participates in annual
global compensation surveys, which provide benchmarking data for all roles within the organisation, ensuring a robust base pay review process
for all roles. Employee base pay is reviewed through our annual review process. The Company seeks to provide an appropriate range of
competitive benefits, including healthcare and pension, to all employees (including Executive Directors) in the context of their local market.
Employees globally may be eligible for LTI awards in the form of the PSP and/or restricted stock units depending on their level and market. The
occupants of senior roles in the Company are currently eligible for PSP awards – these are the leaders who have the ability to directly influence
the execution of the Company’s strategic goals. A proportion of each Senior Executive Team (SET) member’s annual bonus is deferred into shares
under the DBP. An LTI award may be used for the same purpose as described above on the recruitment of employees, or, for employees other
than Directors, for retention.
AstraZeneca Annual Report & Form 20-F Information 2020 / Remuneration Policy
161
Remuneration Policy
continued
Remuneration Policy for Executive Directors continued
Remuneration scenarios for Executive Directors
The charts below illustrate how much the current Executive Directors could receive under different performance scenarios in 2021. Dividend
equivalents payable in respect of PSP awards are not included in the scenarios. To compile the charts, the following assumptions have been made:
Minimum remuneration
> base pay is that applicable in 2021
> taxable benefits are those included in the Executive Directors’ realised pay table for 2020, as set out in the table on page 138
> pension value is 11% of base pay
Pascal Soriot (CEO)
Marc Dunoyer (CFO)
Base pay
£’000
1,327
788
Taxable benefits
£’000
121
79
Pension
£’000
146
87
Total
£’000
1,594
954
Remuneration for performance
in line with the Company’s
expectations
Maximum remuneration
> annual bonus payout is equivalent to 125% of 2021 base pay for Pascal Soriot and 100% of 2021 base pay for Marc Dunoyer
> PSP share award vesting at 325% of 2021 base pay for Pascal Soriot and 225% of 2021 base pay for Marc Dunoyer
(representing 50% of the face value of the PSP award)
> annual bonus payout equivalent to 250% of 2021 base pay for Pascal Soriot and 200% of 2021 base pay for Marc Dunoyer
> PSP share award vesting at 650% of 2021 base pay for Pascal Soriot and 450% of 2021 base pay for Marc Dunoyer
(representing 100% of the face value of the PSP award)
Share price appreciation
> the potential impact of share price appreciation on PSP award values in the maximum remuneration scenario is illustrated,
assuming a 50% increase on the share price at grant
Pascal Soriot (%)
Marc Dunoyer (%)
Minimum
In line
Maximum
Share price appreciation
100
21
12
9
22
57
25
19
63
48
24
£1.6m
£7.6m
£13.5m
£17.8m
Minimum
In line
Maximum
Share price appreciation
100
27 22 51
16
12
26
20
58
45
23
£1.0m
£3.5m
£6.1m
£7.9m
Fixed remuneration
Annual bonus
Long-term incentive
Share price appreciation
Fixed remuneration
Annual bonus
Long-term incentive
Share price appreciation
Approach to recruitment remuneration for Executive Directors
On the recruitment of a new Executive Director, the Committee seeks to pay no more than is necessary to attract and retain the best candidate
available, within the limits of our approved Remuneration Policy. The Committee will offer a remuneration package that it considers appropriate in
the particular circumstances of the recruitment, giving due regard to the interests of the Company’s shareholders and taking into account factors
such as typical market practice, existing arrangements for the other Executive Directors, internal relativities and market positioning.
The pharmaceutical industry is global, and future Executive Directors might be recruited from organisations with pay structures and practices that
differ from AstraZeneca’s usual Remuneration Policy. The Committee believes that it is in the interests of shareholders for it to retain an element
of flexibility in its approach to recruitment to enable it to attract the best candidates; however, this flexibility is limited.
The Committee may find it necessary to compensate a new recruit for forfeiture of entitlements as a consequence of the recruit leaving his or her
previous employment to join AstraZeneca. There is no limit to the value of such buy-out award, however the Committee will rigorously consider
the appropriate value so as not to pay more than the compensation being forfeited. The Committee will seek to offer a package weighted towards
equity in the Company, and will usually seek to use the PSP as the primary vehicle for buy-out awards where possible; however, the precise
nature of the compensation arrangement will depend on the type of entitlement being forfeited. The arrangement might therefore comprise a
combination of cash, share awards granted under the PSP (subject to the Policy maximum), and other restricted shares. The Committee may
introduce a one-off arrangement as permitted under Listing Rule 9.4.2 in order to deliver a restricted share award. Malus and claw-back
provisions would normally apply to buy-out awards, for the same reasons as detailed under the DBP and PSP.
Restricted share awards will only be granted as part of recruitment arrangements to compensate for loss of remuneration opportunities suffered
on leaving previous employment.
The Committee considers whether the lost incentives were subject to performance targets and their probability of vesting. The normal approach
is to seek broadly to mirror the timing of vesting and application of performance targets of the compensation being forfeited. For example, a
buy-out award may be granted without performance conditions where the foregone compensation was not subject to performance testing,
however the Committee may apply appropriate performance measures if it considers it appropriate.
The Committee may allow a restricted share award to vest in tranches at different points. If no performance targets are attached to a
compensatory award, it will vest in full if the individual remains in employment on the vesting date. On vesting, shares equivalent in value to the
dividends that would have been paid during the vesting period will be awarded to the Director.
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All other aspects of a new recruit’s compensation opportunity will be subject to the maxima stated in the Policy. In the case of Group employees
who are promoted internally to the position of Executive Director, the Committee intends to honour all remuneration arrangements entered into
before the promotion.
The Company may reimburse the costs of financial planning, legal and tax advice and reasonable costs incurred on recruitment, including
relocation support.
Service contracts for Executive Directors
Save as noted below, it is not intended that service contracts for new Executive Directors will contain terms that are materially different from those
summarised below or contained in the Policy as set out in this Remuneration Policy Report. The contractual obligations below are applicable to
each of the current Executive Directors unless stated otherwise. Copies of the Executive Directors’ service contracts can be inspected at the
Company’s Registered Office.
Notice period
Payments in
lieu of notice
The service contracts of Executive Directors do not have a fixed term but the Company may terminate employment by giving
not less than 12 months’ written notice. The Company may agree on appointment that any notice given by the Company will
not expire prior to the second anniversary of the commencement date of the Executive Director’s appointment. Executive
Directors may terminate their employment on 12 months’ written notice.
The Company may terminate an Executive Director’s contract at any time with immediate effect and pay a sum in lieu of
notice. This sum will consist of (i) the base pay that they would have been entitled to receive during the notice period and (ii)
the cost to the Company of funding the benefit arrangements for this period, including the Company’s contribution in
respect of pension.
Garden leave
The Company has the right to place the Executive Director on ‘garden leave’.
Summary termination
The Company may terminate employment summarily in particular defined circumstances such as gross misconduct, with no
further payment.
Payments in
lieu of holiday
If, on termination, the Executive Director has exceeded their accrued holiday entitlement, the value of this excess may be
deducted by the Company from any sums payable. If the Executive Director has unused holiday entitlement, the Committee
has discretion to require the Executive Director to take such unused holiday during any notice period or make a payment in
lieu of it calculated in the same way as the value of any excess holiday.
Directors’ and officers’
liability insurance
Directors’ and officers’ liability insurance and an indemnity to the fullest extent permitted by law and the Company’s Articles
is provided for the duration of an Executive Director’s employment and for a minimum of five years following termination.
Principles of payment for loss of office for Executive Directors
The Company does not make additional payments for loss of office, other than, as appropriate, payments in lieu of notice as described above or
payments in respect of damages if the Company terminates an Executive Director’s service contract in breach of contract (taking into account, as
appropriate, the Director’s responsibility to mitigate any losses). The Committee has discretion to award payments in certain circumstances, as
set out on the following page, depending on the nature of the termination and the Executive Director’s performance. The LTI plans are governed
by plan rules, which define how individual awards under those plans should be treated upon termination of employment and corporate activity,
including sale of a business outside the Group. The treatment of awards in these circumstances will be determined according to the rules and
subject to Committee discretion. Aside from the reasons relating to corporate activity, generally, awards under LTI plans will only be allowed to
vest for those Executive Directors who leave the Company in circumstances such as ill-health, injury, disability, redundancy or retirement, or any
other reason the Committee considers appropriate, or where employment terminates by reason of the Executive Director’s death (see the table
on page 165 for further information). Awards that are allowed to vest will typically be pro-rated for time, subject to the Committee’s discretion. In
addition to any payment in lieu of notice, the individual components of remuneration and other payments which may be payable on loss of office
are set out on the following pages, subject to the terms of any applicable bonus rules or share plan rules. No awards will vest where an individual
has been dismissed for cause.
AstraZeneca Annual Report & Form 20-F Information 2020 / Remuneration Policy
163
Remuneration Policy
continued
Remuneration Policy for Executive Directors continued
Annual bonus
At the discretion of the Committee, an Executive Director may receive a bonus for the performance year in which they leave the Company.
Typically, this sum will reflect a bonus pro-rated for the part of the year in which they worked. This will depend on the circumstances, including
an assessment of performance against the scorecard and the Executive Director’s performance in the relevant period and the circumstances of
their departure, and may be in such proportion of cash and/or shares as the Committee will determine. The deferred share element of previous
bonuses granted, and any deferred share element of the bonus awarded in respect of the departing year, may still vest for the benefit of the
departing Executive Director at the end of the period of deferral. The Committee has the discretion to accelerate and/or retain the deferral period
and allow shares to vest for the benefit of the Executive Director on their departure and/or in accordance with the vesting schedule as the case
may be.
LTI plans
The LTI plan rules envisage circumstances under which some, all or none of the shares held under LTI plans will vest in connection with departure.
The exact timing and number of shares vesting will depend on the circumstances, including the reason for leaving (as set out in the table on
page 165) and may be subject to Committee discretion, depending on what it considers to be fair and reasonable in the circumstances.
Restricted share awards
The treatment on termination will depend upon the terms of the individual Executive Director’s awards on recruitment. The Committee has
discretion to determine the treatment at the time of departure based on what it considers to be fair and reasonable in the circumstances.
Non-statutory redundancy payment
Executive Directors are not entitled to non-statutory redundancy payments.
Pension contributions and other benefits
Pension contributions and other benefits for Executive Directors will be payable up to the termination date or as part of a payment in lieu of notice
as described on page 163.
Payments in relation to statutory rights
The amount considered reasonable to pay by the Committee in respect of statutory rights may be included in the overall termination payment.
Payments required by law
The Committee reserves the right to make any other payments in connection with an Executive Director’s cessation of office or employment
where the payments are made in good faith in discharge of an existing legal obligation (or by way of damages for breach of such an obligation)
or by way of settlement of any claim arising in connection with the cessation of an Executive Director’s office or employment.
Mitigation
The departing Executive Director will be required to mitigate their loss by using reasonable efforts to secure new employment.
Professional fees
The Company may pay an amount considered reasonable by the Committee in respect of fees for legal and tax advice, and outplacement
support for the departing Executive Director.
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Treatment of LTI and Deferred Bonus Plan awards on cessation of employment
Plan
Termination by mutual agreement (broadly in
circumstances of ill-health, injury, disability,
redundancy or retirement and in the case of death
and certain corporate events e.g. sale of a business
outside the Group)
Other leaver scenarios
Deferred Bonus Plan
(Annual bonus)
Awards will vest at the end of the relevant deferral period,
unless the Committee decides otherwise.
Ordinarily awards will lapse unless the Committee exercises
its discretion to apply the treatment for leavers by mutual
agreement.
PSP
Where cessation of employment occurs within three years
of the date of grant, awards will vest, pro rata, to the time
elapsed between the date of grant of the award and the date
of cessation of employment, after the end of the performance
period, to the extent that the performance target(s)
measured over the performance period has been met.
Other than during a holding period, ordinarily awards will
lapse unless the Committee exercises its discretion to
preserve all or part of an award and apply the default
treatment for leavers by mutual agreement as described
in this table.
This discretion will not be exercised in the case of dismissal
for gross misconduct.
However, the Committee has discretion to permit the award
to vest immediately on cessation of employment to the
extent that the performance target(s) has, in the opinion of
the Committee, been satisfied from the date of grant to the
date of cessation of employment.
However, if the Committee believes that exceptional
circumstances warrant this, it may exercise its discretion to
vest the award on another basis.
Where cessation of employment occurs during any holding
period, the award will vest in respect of all the shares that
continue to be subject to the award as soon as practicable
following the cessation of employment. However, the
Committee has discretion to require the award to vest only
at the end of the holding period.
AZIP
The final grant under the AZIP took place in 2016. All extant
AZIP awards have completed the relevant performance
period and are now subject to a holding period before vesting.
Ordinarily awards will lapse unless the Committee exercises
its discretion to apply the default treatment for leavers by
reason of redundancy or retirement described in this table.
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Death, ill-health, injury or disability:
> in the holding period: the award will vest in respect of all
the shares that continue to be subject to the award as soon
as practicable following the cessation of employment.
Redundancy, retirement or certain corporate events (e.g. sale
of a business outside the Group):
> in the holding period: the award will vest in respect of all
shares that continue to be subject to the award at the
earlier of the end of the holding period or the end of the
period of 24 months from the date of cessation of
employment. Where the Committee terminates an
Executive Director’s employment (other than for gross
misconduct) during the holding period, the awards will vest
on the same basis.
In each case described above, the Committee has discretion
to vest the award or part of the award on a different basis.
In relation to awards granted at the time of the Executive
Director’s recruitment to the Company in compensation for
any awards or bonuses forfeited at his or her previous
employer, the award will vest on the date his or her
employment ceases. The Committee will, in its discretion,
determine the proportion of shares which vests, and (unless
exceptional circumstances apply) take into account the
period elapsed between the date of grant and the date of
cessation of employment.
Restricted shares
Ordinarily awards will lapse unless the Committee exercises
its discretion to preserve all or part of an award.
AstraZeneca Annual Report & Form 20-F Information 2020 / Remuneration Policy
165
Remuneration Policy
continued
Remuneration Policy for Non-Executive Directors
Non-Executive Directors, including the Chairman, receive annual Board fees. With the exception of the Chairman, Non-Executive Directors
receive additional fees for membership and chairmanship of Board Committees and for holding the position of senior independent Non-Executive
Director. Non-Executive Directors are not eligible for performance-related bonuses or to participate in any of the Company’s share-based
incentive plans. No pension contributions are made on their behalf. The annual Board fees applicable to Non-Executive Directors are set out in
the Annual Report on Remuneration. Changes to these fees in future years will be set out in the corresponding year’s Annual Report on
Remuneration. The remuneration of Non-Executive Directors (excluding the Chairman) is determined by the Chairman and the Executive Directors.
The remuneration of the Chairman is determined by the other members of the Committee and the senior independent Non-Executive Director.
Annual Board fees
Purpose and link to strategy
Operation
Maximum opportunity
Intended to attract, retain and
develop high-calibre individuals
Board fees for Non-Executive Directors are subject to
periodic review and may be increased in the future to
ensure that they remain sufficient to attract high-calibre
individuals while remaining fair and proportionate. Although
Non-Executive Directors currently receive their fees in cash,
the Company may pay part or all of their fees in the form
of shares.
Non-Executive Directors are eligible to receive a base fee
and additional fees where appropriate to reflect any
additional time commitment or duties (e.g. being the
Chairman of a Committee). The fee structure is set out in
the Annual Report on Remuneration.
The aggregate ordinary remuneration of the Non-Executive
Directors shall not exceed the maximum specified in Articles
88 and 89 of the Company’s Articles, as approved by the
Company’s shareholders.
As at the date of this Policy, the maximum aggregate
remuneration is £2,250,000 per annum and any Non-
Executive Director who serves on any Board Committee
may be paid such extra remuneration as the Board
may determine.
Benefits
Purpose and link to strategy
Operation
Maximum opportunity
Intended to attract and retain
high-calibre individuals
The Company also provides directors’ and officers’ liability
insurance and an indemnity to the fullest extent permitted by
law and the Company’s Articles and may also reimburse the
costs of financial planning and tax advice.
The maximum amount payable in respect of these costs
and cost of insurance will be the reimbursement of the
Non-Executive Directors’ benefits grossed up for any tax
payable by the individual.
Other costs and expenses
Purpose and link to strategy
Operation
Maximum opportunity
The maximum amounts payable in respect of these costs and
expenses will be the reimbursement of the Non-Executive
Directors’ costs and expenses grossed up for any tax
payable by the individual.
Intended to reimburse
individuals for legitimately
incurred costs and expenses
In addition to the Chairman’s fee, the office costs of the
Chairman may be reimbursed. In 2021, this amounted to
£73,000. The amount of office costs to be reimbursed each
year will be determined at the discretion of the Committee,
based on an assessment of the reasonable requirements of
the Chairman. The Committee has the discretion to approve
contributions by the Company to office costs of other
Non-Executive Directors in circumstances where such
payments are deemed proportionate and reasonable.
The Company will pay for all travel (including travel to the
Company’s offices), hotel and other expenses reasonably
incurred by Non-Executive Directors (and any associated
tax thereon) in the course of the Company’s business, for
example, professional fees such as secretarial support,
and reimbursement for domestic security arrangements
such as lights and alarms following a security assessment.
There are no contractual provisions for claw-back or malus
of other costs and expenses.
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Letters of appointment
None of the Non-Executive Directors has a service contract but each has a letter of appointment. The terms and conditions of appointment of
Non-Executive Directors may be viewed on the Governance page of the AstraZeneca website, at www.astrazeneca.com. In accordance with the
Company’s Articles, following their appointment, all Directors must retire at each AGM and may present themselves for re-election. The Company
is mindful of the director independence provisions of the 2018 UK Corporate Governance Code and, in this regard, a Non-Executive Director’s
overall tenure will not normally exceed nine years. The Chairman may terminate his appointment at any time, on three months’ notice. None of the
other Non-Executive Directors has a notice period or any provision in their letter of appointment giving them a right to compensation upon early
termination of appointment.
On behalf of the Board
A C N Kemp
Company Secretary
11 February 2021
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167
Financial
Statements
Auditors’ Report 170
Consolidated Statements 176
Group Accounting Policies 180
Notes to the Group
Financial Statements 187
Group Subsidiaries and Holdings 234
Company Statements 238
Company Accounting Policies 240
Notes to the Company
Financial Statements 241
Group Financial Record 243
Key
KJ Key Judgement
SE Significant Estimates
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AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Statements
Preparation of the Financial Statements
and Directors’ Responsibilities
The Directors are responsible for preparing this Annual
Report and Form 20-F Information and the Group and
Parent Company Financial Statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare
Financial Statements for each financial year. Under
that law the Directors have prepared the Group
Financial Statements in accordance with international
accounting standards in conformity with the
requirements of the Companies Act 2006 and Parent
Company Financial Statements in accordance with
United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards,
comprising FRS 101 “Reduced Disclosure Framework”,
and applicable law). Additionally, the Financial Conduct
Authority’s Disclosure Guidance and Transparency
Rules require the Directors to prepare the Group
Financial Statements in accordance with international
financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the
European Union. In preparing the Group Financial
Statements, the Directors have also elected to
comply with international financial reporting
standards issued by the International Accounting
Standards Board (IASB).
Under company law, the Directors must not approve
the Financial Statements unless they are satisfied that
they give a true and fair view of the state of affairs of
the Group and Parent Company and of their profit or
loss for that period. In preparing each of the Group and
Parent Company Financial Statements, the Directors
are required to:
> select suitable accounting policies and
then apply them consistently
> make judgements and estimates that are
reasonable and prudent
> for the Group Financial Statements,
state whether they have been prepared in
accordance with IFRSs as adopted by the EU
> for the Parent Company Financial Statements,
state whether FRS 101 has been followed, subject
to any material departures disclosed and explained
in the Parent Company Financial Statements
> prepare the Financial Statements on the going
concern basis unless it is inappropriate to presume
that the Group and the Parent Company will
continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Parent Company’s transactions and
disclose with reasonable accuracy at any time the
financial position of the Parent Company and enable
them to ensure that its Financial Statements comply
with the Companies Act 2006. They have general
responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Group and
to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors
are also responsible for preparing a Directors’ Report,
Strategic Report, Directors’ Remuneration Report,
Corporate Governance Report and Audit Committee
Report that comply with that law and those regulations.
The Directors are responsible for the maintenance
and integrity of the corporate and financial information
included on our website. Legislation in the UK
governing the preparation and dissemination of
Financial Statements may differ from legislation in
other jurisdictions.
Directors’ responsibility statement
pursuant to DTR 4
The Directors confirm that to the best
of our knowledge:
> the Financial Statements, prepared in accordance
with the applicable set of accounting standards,
give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company
and the undertakings included in the consolidation
taken as a whole
> the Directors’ Report includes a fair review of the
development and performance of the business
and the position of the issuer and the undertakings
included in the consolidation taken as a whole,
together with a description of the principal risks
and uncertainties that they face.
On behalf of the Board of Directors on 11 February 2021
Pascal Soriot
Director
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Directors’ Annual Report on Internal Controls
over Financial Reporting
The Directors are responsible for establishing and
maintaining adequate internal control over financial
reporting. AstraZeneca’s internal control over financial
reporting is designed to provide reasonable assurance
over the reliability of financial reporting and the
preparation of consolidated Financial Statements in
accordance with generally accepted accounting
principles.
Due to its inherent limitations, internal control over
financial reporting may not prevent or detect
misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risks
that controls may become inadequate because of
changes in conditions or that the degree of compliance
with the policies or procedures may deteriorate.
The Directors assessed the effectiveness of
AstraZeneca’s internal control over financial reporting
as at 31 December 2020 based on the criteria set forth
by the Committee of Sponsoring Organizations of the
Treadway Commission in Internal Control-Integrated
Framework (2013). Based on this assessment, the
Directors believe that, as at 31 December 2020, the
internal control over financial reporting is effective
based on those criteria.
PricewaterhouseCoopers LLP, an independent
registered public accounting firm, has audited the
effectiveness of internal control over financial reporting
as at 31 December 2020 and has issued an unqualified
report thereon.
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Statements
169
Independent auditors’ report to
the members of AstraZeneca PLC
Report on the audit of the
financial statements
Opinion
In our opinion:
> AstraZeneca PLC’s Group Financial Statements
and Parent Company Financial Statements (the
‘financial statements’) give a true and fair view of the
state of the Group’s and of the Parent Company’s
affairs as at 31 December 2020 and of the Group’s
profit and the Group’s cash flows for the year
then ended;
> the Group Financial Statements have been properly
prepared in accordance with International
Accounting Standards in conformity with the
requirements of the Companies Act 2006;
> the Parent Company Financial Statements have
been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards,
comprising FRS 101 “Reduced Disclosure
Framework’, and applicable law); and
> the financial statements have been prepared in
accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements, included
within the Annual Report and Form 20-F Information
2020 (the ’Annual Report’), which comprise: the
Consolidated Statement of Financial Position as at
31 December 2020; the Consolidated Statement of
Comprehensive Income, the Consolidated Statement
of Changes in Equity, and the Consolidated Statement
of Cash Flows for the year then ended; the Group
Accounting Policies; the Notes to the Group Financial
Statements; the Company Balance Sheet as at
31 December 2020; the Company Statement of
Changes in Equity for the year then ended; the
Company Accounting Policies; and the Notes to
the Company Financial Statements.
Our opinion is consistent with our reporting to the
Audit Committee.
Separate opinion in relation to International
Financial Reporting Standards adopted
pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union
As explained in the Group Accounting Policies to the
Group Financial Statements, the Group, in addition
to applying International Accounting Standards in
conformity with the requirements of the Companies
Act 2006, has also applied International Financial
Reporting Standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union.
In our opinion, the Group Financial Statements have
been properly prepared in accordance with
International Financial Reporting Standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies
in the European Union.
Separate opinion in relation to International
Financial Reporting Standards as issued by
the International Accounting Standards
Board
As also explained in the Group Accounting Policies
to the Group Financial Statements, the Group has
applied International Financial Reporting Standards
as issued by the International Accounting Standards
Board.
In our opinion, the Group Financial Statements
have been properly prepared in accordance with
International Financial Reporting Standards as issued
by the International Accounting Standards Board.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (‘ISAs (UK)’)
and applicable law. Our responsibilities under ISAs
(UK) are further described in the Auditors’
responsibilities for the audit of the financial statements
section of our report. We believe that the audit
evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance
with the ethical requirements that are relevant to our
audit of the financial statements in the UK, which
includes the FRC’s Ethical Standard, as applicable to
listed public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these
requirements.
To the best of our knowledge and belief, we declare
that non-audit services prohibited by the FRC’s Ethical
Standard were not provided to the Group.
Other than those disclosed in Note 30 to the financial
statements, we have provided no non-audit services
to the Group in the period under audit.
Our audit approach
Overview
Audit scope
> We identified 12 reporting components which
required a full scope audit of their complete financial
information, either due to their size or risk
characteristics. These components are the principal
operating units in the US, UK (two components),
Sweden, China (two components), Japan, France,
Germany and Brazil as well as the Parent Company
and AstraZeneca Treasury.
> We also identified a further 15 reporting
components which had one or more individual
balances that were considered significant to the
Group’s Financial Statements. For these
components our work was solely focussed on the
audit of one or more of the following financial
statement line items: revenue, accounts receivable,
inventory, research and development expense,
taxation and/or property, plant and equipment.
> We also identified four shared service centres
where audit procedures were performed over
certain shared service functions for transaction
processing. Audit procedures were performed
centrally in relation to various Group functions,
including pensions, goodwill, intangible assets
(excluding software), other investments and
litigation matters, as well as the consolidation.
> The above procedures accounted for 87% of the
Group’s revenue and over 76% of the Group’s
absolute profit before tax.
Key audit matters
> Recognition and measurement of accruals
for certain rebates in the US (Group)
> Assessment of the recoverability of the carrying
value of intangible assets (product, marketing
and distribution rights and other intangible
assets) (Group)
> Recognition and measurement of litigation
provisions and contingent liabilities in both the
Group and the Parent Company (Group and
Parent Company)
> Recognition and measurement of uncertain
tax positions (Group)
> Valuation of the Group’s defined benefit
obligations (Group)
> Impact of COVID-19 (Group)
Materiality
> Overall Group materiality: $200m (2019: $140m)
based on approximately 5% of profit before tax
after adding back intangible asset impairment
charges (Note 10), fair value movements and
discount unwind on contingent consideration
(Note 20) and the discount unwind on the Acerta
Pharma put option liability (Note 3) and material
legal settlements (Note 21).
> Overall Parent Company materiality: $100m
(2019: $50m) based on approximately 0.5% of net
assets as constrained by the allocation of overall
Group materiality.
> Performance materiality: $150m (Group) and $75m
(Parent Company).
The scope of our audit
As part of designing our audit, we determined
materiality and assessed the risks of material
misstatement in the financial statements.
Capability of the audit in detecting
irregularities, including fraud
Irregularities, including fraud, are instances of
non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined
in the Auditors’ responsibilities for the audit of the
financial statements section, to detect material
misstatements in respect of irregularities, including
fraud. The extent to which our procedures are
capable of detecting irregularities, including fraud,
is detailed below.
Based on our understanding of the Group and the
industry in which it operates, we identified that the
principal risks of non-compliance with laws and
regulations related to patent protection, product safety
(including but not limited to the US Food and Drug
Administration regulation), competition law (including
but not limited to the Foreign Corrupt Practices Act)
and tax legislation, and we considered the extent to
which non-compliance might have a material effect on
the financial statements. We also considered those
laws and regulations that have a direct impact on the
preparation of the financial statements such as the
Companies Act 2006. We evaluated management’s
incentives and opportunities for fraudulent
manipulation of the financial statements (including the
risk of override of controls), and determined that the
principal risks were related to posting inappropriate
journal entries to manipulate financial results and
potential management bias in accounting estimates.
The Group engagement team shared this risk
assessment with the component auditors so that they
could include appropriate audit procedures in
response to such risks in their work. Audit procedures
performed by the Group engagement team and/or
component auditors included:
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> Evaluation and testing of the operating effectiveness
of management’s controls designed to prevent and
detect irregularities;
> Discussions with VP Group Internal Audit, the
Deputy Chief Compliance Officer and the Group’s
General Counsel and Deputy General Counsels,
including consideration of known or suspected
instances of non-compliance with laws and
regulations and fraud;
> Assessment of matters reported on the Group’s
whistleblowing helpline and the results of
management’s investigation of such matters;
> Challenging assumptions made by management in
its significant accounting estimates, in particular in
relation to the recognition and measurement of
certain rebate accruals in the US, the impairment of
intangible assets (excluding goodwill and software
assets), the recognition and measurement of legal
provisions and contingent liabilities, the recognition
and measurement of uncertain tax positions, and
the valuation of the defined benefit obligations (see
related key audit matters below); and
> Identifying and testing the validity of journal entries,
in particular any journal entries posted with unusual
account combinations, journals posted by senior
management and consolidation journals.
There are inherent limitations in the audit procedures
described above. We are less likely to become aware
of instances of non-compliance with laws and
regulations that are not closely related to events and
transactions reflected in the financial statements.
Also, the risk of not detecting a material misstatement
due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate
concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements of the current period and
include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on:
the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the
results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Impact of COVID-19 is a new key audit matter this year. The recognition and measurement of accruals for certain rebates in the US key audit matter also included the US returns
accrual last year; in 2020 we determined that this does not involve significant management estimation. Otherwise, the key audit matters below are consistent with last year.
Key audit matter
How our audit addressed the key audit matter
Recognition and measurement of accruals for certain rebates in the US (Group)
Refer to Audit Committee Report, Group Accounting Policies and Notes 1 and
20 in the Group Financial Statements
In the US the Group sells to customers under various commercial and
government mandated contracts and reimbursement arrangements that
include rebates of which the most significant are Medicare Part D, Managed
Care and Medicaid.
Rebates provided to customers under these arrangements are accounted for
as variable consideration, and recognised as a reduction in revenue, for which
unsettled amounts are accrued. Management has determined an accrual of
$3,126m to be necessary at 31 December 2020 (2019: $3,385m).
There is significant measurement uncertainty involved in developing these
accruals, as the reserves are based on assumptions developed using
contractual and mandated terms with customers, historical experience, and
market related information in the US. Changes in these estimates (individually
or in combination) can have a significant financial impact.
We evaluated the design and tested the operating effectiveness of controls
relating to the assumptions used to estimate the accruals for the Medicare
Part D, Managed Care and Medicaid rebate arrangements. We determined
that we could rely on these controls for the purposes of our audit.
We obtained management’s calculations for the accruals for the Medicare
Part D, Managed Care and Medicaid rebate arrangements and assessed
management’s calculations.
We:
> developed an independent expectation of these accruals using the terms of
the specific rebate programmes, third party information on prices and market
conditions in the US and the historical trend of actual rebate claims paid;
> compared the independent estimate to management’s estimates recorded by
the Group;
> considered the historical accuracy of the Group’s estimates in previous years
and the effect of any adjustments to prior years’ accruals in the current year’s
results; and
> tested rebate claims processed by the Group, including evaluating those
claims for consistency with the contractual and mandated terms of the
Group’s arrangements.
Based on the procedures performed, we did not identify any material
misstatements in the accrual.
We also evaluated the disclosures in Note 1 and Note 20, which we considered
appropriate.
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continued
Key audit matter
How our audit addressed the key audit matter
Assessment of the recoverability of the carrying value of intangible assets
(product, marketing and distribution rights and other intangible assets) (Group)
Refer to Audit Committee Report, Group Accounting Policies and Note 10 in the
Group Financial Statements
The Group has product, marketing and distribution rights and other intangible
assets (hereafter the intangible assets) totalling $20,627m at 31 December 2020
(2019: $20,601m). Those intangible assets under development and not available
for use are tested annually for impairment and other intangible assets are tested
when there is an indication of impairment.
The recoverability of the carrying values of intangible assets is contingent on
future cash flows and/or the outcome of research and development (R&D)
activities. The determination of the recoverable amounts include significant
estimates, which are highly sensitive and depend upon key assumptions
including the probability of technical and regulatory success and amount and
timing of projected future cash flows (in particular peak year sales and sales
erosion curves). Future cash flows include the impact of COVID-19 if relevant.
Changes in these assumptions could have an impact on the recoverable amount
of intangible assets.
During 2020, $240m (2019: $1,031m) of impairment charges (net of impairment
reversals of $165m; 2019: $3m) were recorded (of which $55m (2019: $609m)
was recorded in Research and development expenses and $185m (2019: $425m)
within Selling, general and administrative costs) as a result of the impairment
review conducted by management. There is no headroom in the recoverable
amount calculation for those partially impaired assets and they are inherently
sensitive to any variations in assumptions, which could give rise to future
impairments.
We evaluated the design and tested the operating effectiveness of controls
over management’s assessment of the impairment of intangible assets. We
determined that we could rely on these controls for the purposes of our audit.
For those assets or cash generating units which we selected based on our risk
assessment to be in scope for our audit we:
> tested management’s process for determining the recoverable amount;
> evaluated the appropriateness of the methodology used in the impairment models;
> tested the completeness and accuracy of the models as well as the underlying
data used in the models, including reconciling the cash flows to the Board
approved Long Range Plan (which includes the impact of COVID-19); and
> evaluated the significant assumptions used by management in determining
future cash flows, including the probability of technical and regulatory
success, peak year sales and sales erosion curves, and considering the
potential future impact of COVID-19 in the future cash flows.
In evaluating the reasonableness of management’s assumptions we:
> compared significant assumptions (including management’s probability of
technical and regulatory success, peak year sales assumptions and sales
erosion curves) to external data and benchmarks; and
> performed a retrospective comparison of forecasted revenues and costs to
actual past performance.
We utilised our in-house valuation experts to assess the valuation techniques
used and to assist with the evaluation of certain key assumptions for higher risk
assets (primarily the probability of technical and regulatory success).
As a result of our work, we determined that the net impairment charge of $240m
recorded for intangible assets was reasonable.
We considered the disclosures in Note 10 of the Group Financial Statements,
including sensitivity analysis based on reasonably possible downsides. We are
satisfied that these disclosures are appropriate.
Recognition and measurement of legal provisions and contingent liabilities
in both the Group and the Parent Company (Group and Parent Company)
Refer to Audit Committee Report, Group Accounting Policies, Notes 21 and 29
in the Group Financial Statements
We evaluated the design and tested the operating effectiveness of controls
in respect of the recognition and measurement of legal matters and related
disclosures. We determined that we could rely on these controls for the
purposes of our audit.
Refer to Company Accounting Policies and Note 5 in the Parent Company
Financial Statements
We obtained and evaluated letters of audit inquiry with the Group’s internal
and external legal counsel.
The Group is engaged in a number of legal proceedings, including patent
litigation, product liability, commercial litigation, and government investigations/
proceedings. At 31 December 2020 the Group held provisions of $348m (2019:
$642m) in respect of legal claims and settlements (together, legal provisions) and
disclosed the more significant legal proceedings as contingent liabilities in Note
29 of the Group Financial Statements. The Parent Company is also named in two
of these legal proceedings, as disclosed in Note 5 in the Parent Company
Financial Statements.
There is significant judgement by management when assessing the likelihood of
a loss being incurred and in determining whether a reasonable estimate can be
made for the loss or range of loss for each legal claim.
We tested the completeness of management’s assessment of both the
identification of legal claims and possible outcomes of each legal claim. This
included assessment of whether the Parent Company was named as a party
to these legal claims.
We evaluated management’s judgement that each of the claims set out in Note 29
represents a contingent liability and that for one matter management is unable to
estimate the possible loss or range of possible losses at this stage.
For the provisions recorded we consider them to be appropriate.
We evaluated the disclosures in Notes 21 and 29 of the Group Financial
Statements and Note 5 in the Parent Company Financial Statements and
considered them to be appropriate.
Recognition and measurement of uncertain tax positions (Group)
Refer to Audit Committee Report, Group Accounting Policies and Note 29 in the
Group Financial Statements
We evaluated the design and tested the operating effectiveness of controls in respect
of the identification, recognition and measurement of uncertain tax positions. We
determined that we could rely on these controls for the purposes of our audit.
The Group operates in a complex multinational tax environment and is subject to
a range of tax risks, leading to uncertain tax positions which arise in the normal
course of business, including transaction related tax matters, transfer pricing
arrangements and a number of audits and reviews with tax authorities, and in
some cases is in dispute with tax authorities.
At 31 December 2020 the Group recorded provisions of $1,014m (2019: $1,027m)
in respect of these uncertain tax positions. As disclosed in Note 29, accruals can
be built up over a long period of time but the ultimate resolution of tax exposures
usually occurs at a point in time. Given the inherent uncertainties in
management’s assessments of the outcomes of these exposures, there could,
in future periods, be adjustments to these accruals that have a material positive
or negative effect on the results in any particular period.
We tested the completeness of management’s assessment of both the
identification of tax contingencies and the possible outcomes of each tax
contingency. We also evaluated the status and results of tax audits and enquiries
with the relevant tax authorities.
With the assistance of our local and international tax specialists, we tested the
information used in the calculation of the probability of different outcomes for tax
contingencies and the determination of the liability for those tax contingencies
by jurisdiction, including management’s assessment of the technical merits of
tax positions (including where relevant evaluating any advice received from the
Group’s external advisors) and estimates of the amount of tax benefit expected
to be sustained.
We noted that the assumptions and judgements that are required to determine
the accruals mean that there is a range of possible outcomes. However, from the
evidence obtained, we considered the level of provisioning to be acceptable in
the context of the Group Financial Statements taken as a whole.
We considered the disclosures in Note 29 of the Group Financial Statements.
We are satisfied that these disclosures are appropriate.
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Key audit matter
How our audit addressed the key audit matter
Valuation of the Group’s defined benefit obligations (Group)
Refer to Audit Committee Report, Group Accounting Policies and Note 22 in the
Group Financial Statements
The Group has defined benefit obligations of $13,870m at 31 December 2020
(2019: $12,412m), which is significant in the context of the overall balance sheet.
The Group’s most significant schemes are in the UK, the US and Sweden, which
comprise 90% of the Group’s defined benefit obligations.
The valuation of pension plan obligations requires estimation in determining
appropriate assumptions such as salary increases, mortality, discount rates and
inflation levels. Movements in these assumptions can have a material impact on
the determination of the defined benefit obligations. Management uses external
actuaries to assist in determining these material assumptions.
We evaluated the design and tested the operating effectiveness of controls in
respect of the determination of the Group’s most significant defined benefit
obligations. We determined that we could rely on these controls for the purposes
of our audit.
We used our actuarial experts to assess whether the assumptions used in
calculating the defined benefit obligations for the UK, the US and Sweden were
reasonable.
We assessed whether salary increases (for the Sweden scheme) and mortality
assumptions were consistent with the specifics of each plan and, where applicable,
with relevant independently developed ranges considering national information.
Additionally our actuarial experts evaluated whether the discount rates (for each
scheme) and inflation rates (for the UK and Sweden schemes) used were consistent
with independently developed ranges and in line with other companies’ recent
external reporting. We also assessed management’s methodology used to
determine the discount rate (for each scheme) and inflation assumptions
(relevant to the UK and Sweden schemes) to ensure that this is in line with the
requirements of IAS 19 and that any changes in methodologies were appropriate.
We evaluated the calculations prepared by management’s external actuaries to
assess the impact of the assumptions used on the Group Financial Statements.
Based on our procedures, we noted no exceptions and considered
management’s key assumptions to be within reasonable ranges.
We assessed the appropriateness of the related disclosures in Note 22 of the
Group Financial Statements and considered them to be reasonable.
Impact of COVID-19 (Group)
Refer to Audit Committee Report, Group Accounting Policies and Notes 2
and 20 in the Group Financial Statements
The directors have considered the impact of COVID-19 on the Group’s
operations (including the effects of any governmental or regulatory response to
the pandemic), and mitigations to the risks identified.
As regards the financial statements, we consider the key estimate impacted by
COVID-19 to be the Group’s intangible asset impairment assessment, as
discussed in the key audit matter entitled ‘Assessment of the recoverability of
the carrying value of intangible assets’.
The Group has entered into an arrangement with the University of Oxford for the
global development, production and supply of the COVID-19 Vaccine AstraZeneca
(‘C19VAZ’) vaccine. The Group has entered into a number of advanced sales
agreements, grants and licensing arrangements in relation to the development,
production and sale of C19VAZ for which the Group has recognised vaccine
contract liabilities of $1,616m, deferred government grant income of $253m and
government grant income of $161m. The Group has also entered into an
agreement for the development of AZD7442 for which the Group has recognised
grant income of $61m.
In addition, management’s way of working, including the operation of controls, has
been impacted by COVID-19 as a result of a large number of employees working
remotely and using technology enabled working practices. For example, this has
meant virtual review meetings, electronic review processes (in place of hardcopy
reviews) and some stock counts being performed using virtual technology tools.
We reviewed management’s assessment of the impact of the uncertainty
presented by the COVID-19 pandemic and considered its completeness.
The key audit matter entitled “Assessment of the recoverability of the carrying
value of intangible assets” sets out how our audit considered the impact of
COVID-19 on the Group’s annual impairment assessment.
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Based on our work undertaken across the Group and after considering the other
areas identified in management’s assessment, we did not identify any other material
impacts of COVID-19 on the Group’s key judgements and/or significant estimates.
As regards the arrangements for the global development, production and supply
of C19VAZ, we:
> evaluated the design and tested the operating effectiveness of controls in place;
> read the underlying contracts and management’s accounting analysis;
> vouched upfront payments received to bank statements and verified
underlying transactions on a sample basis to supporting evidence; and
> considered the appropriateness of the disclosures in the Annual Report.
Based on the procedures performed we consider the accounting treatment and
disclosures for C19VAZ and AZD7442 to be appropriate.
We performed procedures to assess any control implications arising from the
change in management’s ways of working. We determined that we could rely
on the controls for the purposes of our audit.
We also increased the oversight of our component teams, using video
conferencing and remote workpaper reviews to satisfy ourselves as to the
sufficiency of audit work performed at the significant and material components.
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How we tailored the audit scope
We tailored the scope of our audit to ensure that we
performed enough work to be able to give an opinion
on the financial statements as a whole, taking into
account the structure of the Group and the Parent
Company, the accounting processes and controls,
and the industry in which they operate.
In establishing the overall approach to the Group audit,
we determined the type of work that needed to be
performed by us, as the Group engagement team, or
component auditors within PwC UK and other PwC
network firms operating under our instruction. Where
the work was performed by component auditors, we
determined the level of involvement we needed to have
in the audit work in these territories to be able to
conclude whether sufficient appropriate audit
evidence had been obtained as a basis for our opinion
on the Group Financial Statements as a whole.
The Group operates in over 100 countries and the size
of operations within each territory varies. We identified
12 reporting components which, in our view, required a
full scope audit of their complete financial information,
due to their size or risk characteristics. These are
the principal operating units in the US, UK (two
components), Sweden, China (two components),
Japan, France, Germany and Brazil as well as the
Parent Company and AstraZeneca Treasury.
We also identified a further 15 reporting components
which had one or more individual balances that were
considered significant to the Group’s Financial
Statements. For these components our work was
solely focussed on the audit of one or more of the
following financial statement line items: revenue,
accounts receivable, inventory, research and
development expense, taxation and/or property, plant
and equipment. We also identified four shared service
centres where audit procedures were performed over
certain shared service functions for transaction
processing. Audit procedures were performed
centrally in relation to various Group functions,
including pensions, goodwill, intangible assets
(excluding software), other investments and litigation
matters, as well as the consolidation. Our Group
engagement team’s involvement in the audits of the
reporting components was performed virtually and
included regular meetings with component auditors,
reviews of the component auditors’ planned response
to significant risks and the review of auditor working
paper reviews for material reporting components. We
attended meetings with local management alongside
the component auditors for all full scope and other
material components.
Materiality
The scope of our audit was influenced by our
application of materiality. We set certain quantitative
thresholds for materiality. These, together with
qualitative considerations, helped us to determine the
scope of our audit and the nature, timing and extent
of our audit procedures on the individual financial
statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in
aggregate on the financial statements as a whole.
Based on our professional judgement, we determined
materiality for the financial statements as a whole as
follows:
Financial statements – Group
Financial statements – Parent Company
Overall materiality
$200m (2019: $140m).
$100m (2019: $50m).
How we determined it
Approximately 5% of profit before tax after adding back intangible asset
impairment charges (Note 10), fair value movements and discount unwind on
contingent consideration (Note 20) and the discount unwind on the Acerta Pharma
put option liability (Note 3) and material legal settlements (Note 21).
Approximately 0.5% of net assets as constrained
by the allocation of overall Group materiality
Rationale for
benchmark applied
The reported profit of the Group can fluctuate due to intangible asset impairment
charges, fair value and discount unwind movements on contingent consideration
and the Acerta Pharma put option liability, and material legal settlements. These
amounts are prone to year on year volatility and are not necessarily reflective of
the operating performance of the Group and as such they have been excluded
from the benchmark amount.
We have considered the nature of the business
of AstraZeneca PLC (being holding company
investment activities) and have determined that net
assets is an appropriate basis for the calculation of
the overall materiality level.
For each component in the scope of our Group audit,
we allocated a materiality that is less than our overall
Group materiality. The range of materiality allocated
across components was between $20m and $130m.
Certain components were audited to a local statutory
audit materiality that was also less than our overall
Group materiality. We use performance materiality to
reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically,
we use performance materiality in determining the
scope of our audit and the nature and extent of our
testing of account balances, classes of transactions
and disclosures, for example in determining sample
sizes. Our performance materiality was 75% of overall
materiality, amounting to US$150m for the Group
Financial Statements and US$75m for the Parent
Company Financial Statements.
In determining the performance materiality, we
considered a number of factors – the history of
misstatements, risk assessment and aggregation risk,
and the effectiveness of controls – and concluded that
an amount at the upper end of our normal range was
appropriate.
We agreed with the Audit Committee that we would
report to them misstatements identified during our
audit above $10m (Group audit) (2019: $7m) and $10m
(Parent Company audit) (2019: $7m) as well as
misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the
Group’s and the Parent Company’s ability to continue
to adopt the going concern basis of accounting
included:
> agreeing the underlying cash flow projections to
management approved forecasts, assessing how
these forecasts are compiled, and assessing the
accuracy of management’s forecasts;
> evaluating the key assumptions within
management’s forecasts;
> considering liquidity and available financial
resources;
> assessing whether the stress testing performed by
management appropriately considered the principal
risks facing the business; and
> evaluating the feasibility of management’s mitigating
actions in the stress testing scenarios.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the Group’s and the Parent
Company’s ability to continue as a going concern for
a period of at least twelve months from when the
financial statements are authorised for issue.
In auditing the financial statements, we have
concluded that the directors’ use of the going concern
basis of accounting in the preparation of the financial
statements is appropriate.
However, because not all future events or conditions
can be predicted, this conclusion is not a guarantee as
to the Group’s and the Parent Company’s ability to
continue as a going concern.
In relation to the Group’s and the Parent Company’s
reporting on how they have applied the UK Corporate
Governance Code, we have nothing material to add or
draw attention to in relation to the directors’ statement
in the financial statements about whether the directors
considered it appropriate to adopt the going concern
basis of accounting.
Our responsibilities and the responsibilities of the
directors with respect to going concern are described
in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information
in the Annual Report other than the financial
statements and our auditors’ report thereon. The
directors are responsible for the other information. Our
opinion on the financial statements does not cover the
other information and, accordingly, we do not express
an audit opinion or, except to the extent otherwise
explicitly stated in this report, any form of assurance
thereon.
In connection with our audit of the financial
statements, our responsibility is to read the other
information and, in doing so, consider whether the
other information is materially inconsistent with the
financial statements or our knowledge obtained in the
174
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Statements
audit, or otherwise appears to be materially misstated.
If we identify an apparent material inconsistency or
material misstatement, we are required to perform
procedures to conclude whether there is a material
misstatement of the financial statements or a material
misstatement of the other information. If, based on the
work we have performed, we conclude that there is a
material misstatement of this other information, we are
required to report that fact. We have nothing to report
based on these responsibilities.
With respect to the Strategic Report and Directors’
Report, we also considered whether the disclosures
required by the UK Companies Act 2006 have been
included.
Based on our work undertaken in the course of the
audit, the Companies Act 2006 requires us also to
report certain opinions and matters as described
below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the
course of the audit, the information given in the
Strategic Report and Directors’ Report for the year
ended 31 December 2020 is consistent with the
financial statements and has been prepared in
accordance with applicable legal requirements.
In light of the knowledge and understanding of the
Group and Parent Company and their environment
obtained in the course of the audit, we did not identify
any material misstatements in the Strategic Report
and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’
statements in relation to going concern, longer-term
viability and that part of the corporate governance
statement relating to the Parent Company’s
compliance with the provisions of the UK Corporate
Governance Code specified for our review.
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements of
the corporate governance statement, included within the
Corporate Governance Report, is materially consistent
with the financial statements and our knowledge
obtained during the audit, and we have nothing
material to add or draw attention to in relation to:
> The directors’ confirmation that they have carried
out a robust assessment of the emerging and
principal risks;
> The disclosures in the Annual Report and Form
20-F Information 2020 that describe those principal
risks, what procedures are in place to identify
emerging risks and an explanation of how these are
being managed or mitigated;
> The directors’ statement in the financial statements
about whether they considered it appropriate to
adopt the going concern basis of accounting in
preparing them, and their identification of any
material uncertainties to the Group’s and Parent
Company’s ability to continue to do so over a period
of at least twelve months from the date of approval
of the financial statements;
> The directors’ explanation as to their assessment of
the Group’s and Parent Company’s prospects, the
period this assessment covers and why the period
is appropriate; and
> The directors’ statement as to whether they have
a reasonable expectation that the Parent Company
will be able to continue in operation and meet its
liabilities as they fall due over the period of its
assessment, including any related disclosures
drawing attention to any necessary qualifications
or assumptions.
Our review of the directors’ statement regarding the
longer-term viability of the Group was substantially
less in scope than an audit and only consisted of
making inquiries and considering the directors’
process supporting their statement; checking that the
statement is in alignment with the relevant provisions
of the UK Corporate Governance Code; and
considering whether the statement is consistent with
the financial statements and our knowledge and
understanding of the Group and Parent Company and
their environment obtained in the course of the audit.
our opinion. Reasonable assurance is a high level
of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate,
they could reasonably be expected to influence the
economic decisions of users taken on the basis of
these financial statements.
Our audit testing might include testing complete
populations of certain transactions and balances,
possibly using data auditing techniques. However, it
typically involves selecting a limited number of items
for testing, rather than testing complete populations.
We will often seek to target particular items for testing
based on their size or risk characteristics. In other
cases, we will use audit sampling to enable us to draw
a conclusion about the population from which the
sample is selected.
In addition, based on the work undertaken as part of
our audit, we have concluded that each of the following
elements of the corporate governance statement is
materially consistent with the financial statements and
our knowledge obtained during the audit:
A further description of our responsibilities for the audit
of the financial statements is located on the FRC’s
website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditors’ report.
> The directors’ statement that they consider the
Annual Report, taken as a whole, is fair, balanced
and understandable, and provides the information
necessary for the members to assess the Group’s
and Parent Company’s position, performance,
business model and strategy;
> The section of the Annual Report and Form 20-F
Information 2020 that describes the review of
effectiveness of risk management and internal
control systems; and
> The section describing the work of the Audit
Committee.
We have nothing to report in respect of our
responsibility to report when the directors’ statement
relating to the Parent Company’s compliance with the
Code does not properly disclose a departure from a
relevant provision of the Code specified under the
Listing Rules for review by the auditors.
Responsibilities for the financial
statements and the audit
Responsibilities of the directors for the
financial statements
As explained more fully in the Preparation of the
Financial Statements and Directors’ Responsibilities,
the directors are responsible for the preparation of the
financial statements in accordance with the applicable
framework and for being satisfied that they give a true
and fair view. The directors are also responsible for
such internal control as they determine is necessary to
enable the preparation of financial statements that are
free from material misstatement, whether due to fraud
or error.
In preparing the financial statements the directors are
responsible for assessing the Group’s and the Parent
Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going
concern and using the going concern basis of
accounting unless the directors either intend to
liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole are
free from material misstatement, whether due to fraud
or error, and to issue an auditors’ report that includes
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
Use of this report
This report, including the opinions, has been prepared
for and only for the Parent Company’s members as a
body in accordance with Chapter 3 of Part 16 of the
Companies Act 2006 and for no other purpose. We
do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other
person to whom this report is shown or into whose
hands it may come save where expressly agreed by
our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to
report to you if, in our opinion:
> we have not obtained all the information and
explanations we require for our audit; or
> adequate accounting records have not been kept
by the Parent Company, or returns adequate for our
audit have not been received from branches not
visited by us; or
> certain disclosures of directors’ remuneration
specified by law are not made; or
> the financial statements and the part of the
Directors’ Remuneration Report to be audited are
not in agreement with the accounting records and
returns; or
> a corporate governance statement has not been
prepared by the Parent Company.
We have no exceptions to report arising from this
responsibility.
Appointment
Following the recommendation of the Audit
Committee, we were appointed by the members on
27 April 2017 to audit the financial statements for the
year ended 31 December 2017 and subsequent
financial periods. The period of total uninterrupted
engagement is four years, covering the years ended
31 December 2017 to 31 December 2020.
Richard Hughes (Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
11 February 2021
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Statements
175
Consolidated Statement of Comprehensive Income
for the year ended 31 December
Product Sales
Collaboration Revenue
Total Revenue
Cost of sales
Gross profit
Distribution costs
Research and development expense
Selling, general and administrative costs
Other operating income and expense
Operating profit
Finance income
Finance expense
Share of after tax losses in associates and joint ventures
Profit before tax
Taxation
Profit for the period
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Remeasurement of the defined benefit pension liability
Net gains/(losses) on equity investments measured at fair value through other comprehensive income
Fair value movements related to own credit risk on bonds designated as fair value through profit and loss
Tax on items that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit or loss:
Foreign exchange arising on consolidation
Foreign exchange arising on designated borrowings in net investment hedges
Fair value movements on cash flow hedges
Fair value movements on cash flow hedges transferred to profit and loss
Fair value movements on derivatives designated in net investment hedges
Gains/(costs) of hedging
Amortisation of loss on cash flow hedge
Tax on items that may be reclassified subsequently to profit or loss
Other comprehensive income/(loss) for the period, net of tax
Total comprehensive income for the period
Profit attributable to:
Owners of the Parent
Non-controlling interests
Total comprehensive income attributable to:
Owners of the Parent
Non-controlling interests
Basic earnings per $0.25 Ordinary Share
Diluted earnings per $0.25 Ordinary Share
Weighted average number of Ordinary Shares in issue (millions)
Diluted weighted average number of Ordinary Shares in issue (millions)
Notes
1
1
2
2
2
3
3
11
4
22
4
23
23
23
4
26
26
5
5
5
5
2020
$m
25,890
727
26,617
(5,299)
21,318
(399)
(5,991)
(11,294)
1,528
5,162
87
(1,306)
(27)
3,916
(772)
3,144
(168)
938
(1)
(81)
688
443
573
180
(254)
8
9
–
(39)
920
1,608
4,752
3,196
(52)
4,804
(52)
$2.44
$2.44
1,312
1,313
2019
$m
23,565
819
24,384
(4,921)
19,463
(339)
(6,059)
(11,682)
1,541
2,924
172
(1,432)
(116)
1,548
(321)
1,227
(364)
(28)
(5)
21
(376)
40
(252)
(101)
52
35
(47)
–
38
(235)
(611)
616
1,335
(108)
723
(107)
$1.03
$1.03
1,301
1,301
2018
$m
21,049
1,041
22,090
(4,936)
17,154
(331)
(5,932)
(10,031)
2,527
3,387
138
(1,419)
(113)
1,993
57
2,050
(46)
(171)
8
56
(153)
(450)
(520)
(37)
111
(8)
(54)
1
51
(906)
(1,059)
991
2,155
(105)
1,097
(106)
$1.70
$1.70
1,267
1,267
Dividends declared and paid in the period
25
3,668
3,579
3,539
All activities were in respect of continuing operations.
$m means millions of US dollars.
176
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Statements Consolidated Statement of Financial Position
at 31 December
Assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Goodwill
Intangible assets
Investments in associates and joint ventures
Other investments
Derivative financial instruments
Other receivables
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Other investments
Derivative financial instruments
Income tax receivable
Cash and cash equivalents
Assets held for sale
Total assets
Liabilities
Current liabilities
Interest-bearing loans and borrowings
Lease liabilities
Trade and other payables
Derivative financial instruments
Provisions
Income tax payable
Non-current liabilities
Interest-bearing loans and borrowings
Lease liabilities
Derivative financial instruments
Deferred tax liabilities
Retirement benefit obligations
Provisions
Other payables
Total liabilities
Net assets
Equity
Capital and reserves attributable to equity holders of the Company
Share capital
Share premium account
Capital redemption reserve
Merger reserve
Other reserves
Retained earnings
Non-controlling interests
Total equity
Notes
2020
$m
2019
$m
2018
$m
7
8
9
10
11
12
13
14
4
15
16
12
13
17
18
19
8
20
13
21
19
8
13
4
22
21
20
24
23
23
26
8,251
666
11,845
20,947
39
1,108
171
720
3,438
47,185
4,024
7,022
160
142
364
7,832
–
19,544
66,729
(2,194)
(192)
(15,785)
(33)
(976)
(1,127)
(20,307)
7,688
647
11,668
20,833
58
1,401
61
740
2,718
45,814
3,193
5,761
849
36
285
5,369
70
15,563
61,377
(1,822)
(188)
(13,987)
(36)
(723)
(1,361)
(18,117)
7,421
–
11,707
21,959
89
833
157
515
2,379
45,060
2,890
5,574
849
258
207
4,831
982
15,591
60,651
(1,754)
–
(12,841)
(27)
(506)
(1,164)
(16,292)
(17,505)
(15,730)
(17,359)
(489)
(2)
(2,918)
(3,202)
(584)
(6,084)
(30,784)
(51,091)
15,638
328
7,971
153
448
1,423
5,299
15,622
16
15,638
(487)
(18)
(2,490)
(2,807)
(841)
(6,291)
(28,664)
(46,781)
14,596
328
7,941
153
448
1,445
2,812
13,127
1,469
14,596
–
(4)
(3,286)
(2,511)
(385)
(6,770)
(30,315)
(46,607)
14,044
317
4,427
153
448
1,440
5,683
12,468
1,576
14,044
The Financial Statements from pages 176 to 237 were approved by the Board and were signed on its behalf by
Pascal Soriot
Director
11 February 2021
Marc Dunoyer
Director
AstraZeneca Annual Report & Form 20-F Information 2020 / Consolidated Statements
177
Financial Statements Consolidated Statement of Changes in Equity
for the year ended 31 December
At 1 January 2018
Adoption of new accounting standards1
Profit for the period
Other comprehensive loss2
Transfer to other reserves3
Transactions with owners
Dividends
Issue of Ordinary Shares
Share-based payments charge for the period (Note 28)
Settlement of share plan awards
Net movement
At 31 December 2018
Adoption of new accounting standards4
Profit for the period
Other comprehensive loss2
Transfer to other reserves3
Transactions with owners
Dividends
Issue of Ordinary Shares
Share-based payments charge for the period (Note 28)
Settlement of share plan awards
Net movement
At 31 December 2019
Profit for the period
Other comprehensive income2
Transfer to other reserves3, 5
Transactions with owners
Dividends
Issue of Ordinary Shares
Share-based payments charge for the period (Note 28)
Settlement of share plan awards
Net movement
At 31 December 2020
Share
capital
$m
Share
premium
account
$m
Capital
redemption
reserve
$m
Merger
reserve
$m
Other
reserves
$m
317
4,393
153
448
1,428
–
–
–
–
–
–
–
–
–
–
–
–
–
–
34
–
–
34
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
12
–
–
–
–
12
317
4,427
153
448
1,440
–
–
–
–
–
–
–
–
–
–
11
3,514
–
–
11
328
–
–
3,514
7,941
–
–
–
–
–
–
–
–
–
–
–
–
30
–
–
30
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5
–
–
–
–
5
153
448
1,445
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(22)
–
–
–
–
(22)
328
7,971
153
448
1,423
Total
attributable
to owners
$m
Non-
controlling
interests
$m
Total
equity
$m
14,960
1,682
16,642
Retained
earnings
$m
8,221
(91)
2,155
(1,058)
(12)
(91)
2,155
(1,058)
–
(3,539)
(3,539)
–
219
(212)
(2,538)
5,683
54
1,335
(612)
(5)
(3,579)
–
259
(323)
(2,871)
2,812
3,196
1,608
1,423
34
219
(212)
(2,492)
12,468
54
1,335
(612)
–
(3,579)
3,525
259
(323)
659
13,127
3,196
1,608
1,401
(3,668)
(3,668)
–
277
(349)
2,487
5,299
30
277
(349)
2,495
15,622
–
(105)
(1)
–
–
–
–
–
(106)
1,576
–
(108)
1
–
–
–
–
–
(107)
1,469
(52)
–
(1,401)
–
–
–
–
(1,453)
16
(91)
2,050
(1,059)
–
(3,539)
34
219
(212)
(2,598)
14,044
54
1,227
(611)
–
(3,579)
3,525
259
(323)
552
14,596
3,144
1,608
–
(3,668)
30
277
(349)
1,042
15,638
1 The Group adopted IFRS 15 ‘Revenue from Customers’ from 1 January 2018.
2
Included within Other comprehensive income of $1,608m (2019: loss of $611m, 2018: loss of $1,059m) is a gain of $9m (2019: charge of $47m, 2018: charge of $54m), relating to Costs of hedging.
3 Amounts charged or credited to other reserves relate to exchange adjustments arising on goodwill.
4 The Group adopted IFRIC 23 ‘Uncertainty over Income Tax Treatments’ from 1 January 2019. The cumulative effect of initially applying the interpretation was recognised as a decrease to
income tax payable of $51m and to trade and other payables of $3m, and a corresponding adjustment to the opening balance of Retained earnings of $54m.
5 The non-controlling interests reserve relating to the minority shareholders of Acerta Pharma, totalling $1,401m, has been reclassified into Retained earnings in 2020 (see Note 26).
178
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Statements Consolidated Statement of Cash Flows
for the year ended 31 December
Cash flows from operating activities
Profit before tax
Finance income and expense
Share of after tax losses of associates and joint ventures
Depreciation, amortisation and impairment
Increase in trade and other receivables
Increase in inventories
Increase/(decrease) in trade and other payables and provisions
Gains on disposal of intangible assets
Fair value movements on contingent consideration arising from business combinations
Non-cash and other movements
Cash generated from operations
Interest paid
Tax paid
Net cash inflow from operating activities1
Cash flows from investing activities
Payment of contingent consideration from business combinations
Purchase of property, plant and equipment
Disposal of property, plant and equipment
Purchase of intangible assets
Disposal of intangible assets
Movement in profit-participation liability
Purchase of non-current asset investments
Disposal of non-current asset investments
Movement in short-term investments, fixed deposits and other investing instruments
Payments to associates and joint ventures
Interest received
Net cash (outflow)/inflow from investing activities
Net cash inflow before financing activities
Cash flows from financing activities
Proceeds from issue of share capital
Issue of loans
Repayment of loans
Dividends paid
Hedge contracts relating to dividend payments
Repayment of obligations under leases
Movement in short-term borrowings
Net cash outflow from financing activities
Net increase in Cash and cash equivalents in the period
Cash and cash equivalents at the beginning of the period
Exchange rate effects
Notes
3
11
2
20
17
20
2
11
Cash and cash equivalents at the end of the period
17
1
In 2020, $1,062m of Net cash inflow from operating activities related to COVID-19 Vaccine AstraZeneca-related activities (see Note 17).
2020
$m
3,916
1,219
27
3,149
(739)
(621)
1,721
(1,030)
(272)
(276)
7,094
(733)
(1,562)
4,799
(822)
(961)
106
(1,645)
951
40
(119)
1,381
745
(8)
47
(285)
4,514
30
2,968
(1,609)
(3,572)
(101)
(207)
288
(2,203)
2,311
5,223
12
7,546
2019
$m
1,548
1,260
116
3,762
(898)
(316)
868
(1,243)
(614)
378
4,861
(774)
(1,118)
2,969
(709)
(979)
37
(1,481)
2,076
150
(13)
18
194
(74)
124
(657)
2,312
3,525
500
(1,500)
(3,592)
4
(186)
(516)
(1,765)
547
4,671
5
5,223
2018
$m
1,993
1,281
113
3,753
(523)
(13)
(103)
(1,885)
(495)
(290)
3,831
(676)
(537)
2,618
(349)
(1,043)
12
(328)
2,338
–
(102)
24
405
(187)
193
963
3,581
34
2,971
(1,400)
(3,484)
(67)
–
(98)
(2,044)
1,537
3,172
(38)
4,671
AstraZeneca Annual Report & Form 20-F Information 2020 / Consolidated Statements
179
Financial Statements Group Accounting Policies
Basis of accounting and preparation
of financial information
The Consolidated Financial Statements
have been prepared under the historical cost
convention, modified to include revaluation
to fair value of certain financial instruments
as described below, in accordance with
international accounting standards in conformity
with the requirements of the Companies Act
2006 and International Financial Reporting
Standards (IFRSs) adopted pursuant to
Regulation (EC) No 1606/2002 as it applies
in the EU. The Consolidated Financial
Statements also comply fully with IFRSs
as issued by the International Accounting
Standards Board (IASB).
The Consolidated Financial Statements are
presented in US dollars, which is the Company’s
functional currency.
In preparing their individual financial statements,
the accounting policies of some overseas
subsidiaries do not conform with IASB
issued IFRSs. Therefore, where appropriate,
adjustments are made in order to present
the Consolidated Financial Statements on
a consistent basis.
UK-adopted international
accounting standards
On 31 December 2020 EU-adopted IFRS was
brought into UK law and became UK-adopted
international accounting standards, with
future changes to IFRS being subject to
endorsement by the UK Endorsement Board.
The Consolidated Financial Statements will
transition to UK-adopted international
accounting standards for financial periods
beginning 1 January 2021.
IFRS 3
An amendment to IFRS 3 ‘Business
Combinations’ relating to the definition of
a business was endorsed by the EU in April
2020 with an effective date of 1 January 2020,
which the Group has adopted from the
effective date.
The change in definition of a business within
IFRS 3 introduces an optional concentration
test to perform a simplified assessment of
whether an acquired set of activities and assets
is or is not a business on a transaction by
transaction basis. This change is expected to
result in more consistency in accounting in the
pharmaceutical industry for substantially similar
transactions that, under the previous definition,
may have been accounted for in different
ways despite limited differences in substance.
The change would not have resulted in
a different accounting treatment for any
transactions undertaken during the prior
year when compared with the previous
version of IFRS 3.
180
IFRS 9, IFRS 7
The replacement of benchmark interest rates
such as LIBOR and other interbank offered
rates (IBORs) is a priority for global regulators
and is expected to be largely completed in 2021.
To prepare for this, the Group early adopted
the Phase 1 amendments to IFRS 9 ‘Financial
Instruments’ and IFRS 7 ‘Financial Instruments:
Disclosures’ in 2019. These amendments
provide relief from applying specific hedge
accounting requirements to hedge relationships
directly affected by IBOR reform and have the
effect that the reform should generally not
cause hedge accounting to terminate. There
was no financial impact from the early adoption
of these amendments. Further amendments
(Phase 2) were issued on 27 August 2020 and
the Group will apply these in 2021.
The Group has one IFRS 9 designated hedge
relationship that is impacted by IBOR reform:
our euro 300m cross currency interest rate
swap in a fair value hedge relationship with
euro 300m of our euro 750m 0.875% 2021
non-callable bond. This swap references three
month USD LIBOR and uncertainty arising
from the Group’s exposure to IBOR reform
will cease when the swap matures in 2021.
The implications on the wider business of
IBOR reform have been assessed and the
Group is currently preparing to move to the
new benchmark rates in 2021.
Basis for preparation of Financial
Statements on a going concern basis
The Group has considerable financial
resources available. As at 31 December 2020,
the Group has $12.1bn in financial resources
(cash and cash equivalent balances of $7.8bn,
$0.2bn of liquid fixed income securities and
undrawn committed bank facilities of $4.1bn,
of which $3.4bn is available until April 2024,
$0.7bn is available until November 2021 (with
a one-year extension option, exercisable by
the Group), with only $2.4bn of borrowings
due within one year). In addition, to support
the financing of the acquisition of Alexion
Pharmaceuticals, Inc., the Group entered
into committed bank facilities totalling $17.5bn
during December 2020. The facilities are
intended to cover the financing of the cash
portion of the acquisition consideration and
associated acquisition costs and to refinance
the existing term loan and revolving credit
facilities of Alexion. All the facilities contain
no financial covenants and were undrawn
at 31 December 2020.
The Directors have considered the impact
of COVID-19 on AstraZeneca’s operations
(including the effects of any governmental or
regulatory response to the pandemic), and
mitigations to these risks. Overall, the impact
of these items would heighten certain risks,
such as those relating to the delivery of the
pipeline or launch of new medicines, the
execution of AstraZeneca’s commercial
strategy, the manufacturing and supply of
medicines and reliance on third-party goods
and services. The Company is continuously
monitoring, and mitigating where possible,
impacts of these risks.
The Group’s revenues are largely derived from
sales of medicines covered by patents, which
provide a relatively high level of resilience
and predictability to cash inflows, although
government price interventions in response
to budgetary constraints are expected to
continue to adversely affect revenues in many
of the mature markets. The Group, however,
anticipates new revenue streams from both
recently launched medicines and products in
development, and the Group has a wide
diversity of customers and suppliers across
different geographic areas.
Consequently, the Directors believe that, overall,
the Group is well placed to manage its business
risks successfully. Accordingly, they continue
to adopt the going concern basis in preparing
the Annual Report and Financial Statements.
Estimates and judgements
The preparation of the Financial Statements in
conformity with generally accepted accounting
principles requires management to make
estimates and judgements that affect the
reported amounts of assets and liabilities at
the date of the Financial Statements and the
reported amounts of revenues and expenses
during the reporting period. Actual results
could differ from those estimates.
The accounting policy descriptions set out the
areas where judgements and estimates need
exercising, the most significant of which
include the following Key Judgements KJ and
Significant Estimates SE :
> revenue recognition – see Revenue
Accounting Policy on page 181 KJ and
Note 1 on page 187 SE
> expensing of internal development expenses
– see Research and Development Policy
on page 182 KJ
> impairment reviews of Intangible assets
– see Note 10 on page 199 SE
> useful economic life of Intangible assets –
see Research and Development Policy on
page 182 KJ and Note 10 on page 200 SE
> business combinations and Goodwill
(and Contingent consideration arising from
business combinations) – see Business
Combinations and Goodwill Policy on
page 184 KJ , Note 10 on page 200 KJ ,
and Note 20 on page 208 SE
> litigation liabilities – see Litigation and
Environmental Liabilities within Note 29
on page 229 KJ
> operating segments – see Note 6 on
page 193 KJ
> employee benefits – see Note 22 on
page 216 SE
> taxation – see Taxation Policy on page 183
KJ and Note 29 on page 232. KJ SE
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Statements AstraZeneca has assessed the impact of
the uncertainty presented by the COVID-19
pandemic on the Financial Statements,
specifically considering the impact on key
judgements and significant estimates along
with several other areas of increased risk.
A detailed assessment has been performed,
focusing on the following areas:
> recoverable value of goodwill, intangible
assets and property, plant and equipment
> impact on key assumptions used to
estimate contingent consideration liabilities
> key assumptions used in estimating the
Group’s defined benefit pension obligations
> basis for estimating clinical trial accruals
> key assumptions used in estimating rebates
and chargebacks for US Product Sales
> valuations of unlisted equity investments
> expected credit losses associated with
changes in credit risk relating to trade and
other receivables
> net realisable value of inventories
> fair value of certain financial instruments
> recoverability of deferred tax assets
> effectiveness of hedge relationships.
No material accounting impacts relating to
the areas assessed above were recognised
in the year.
The Group will continue to monitor these areas
of increased judgement, estimation and risk
for material changes.
Financial risk management policies are detailed
in Note 27 to the Financial Statements from
page 219.
AstraZeneca’s management considers the
following to be the most important accounting
policies in the context of the Group’s operations.
Revenue
Revenue comprises Product Sales and
Collaboration Revenue.
Product Sales are revenues arising from
contracts with customers. Collaboration
Revenue arises from other contracts, however,
the recognition and measurement principles
of IFRS 15 ‘Revenue from Contracts with
Customers’ are applied as set out below.
Revenue excludes inter-company revenues
and value-added taxes.
Product Sales
Product Sales represent net invoice value less
estimated rebates, returns and chargebacks,
which are considered to be variable
consideration and include significant estimates.
Sales are recognised when the control of the
goods has been transferred to a third party.
This is usually when title passes to the customer,
either on shipment or on receipt of goods by
the customer, depending on local trading terms.
In markets where returns are significant,
estimates of returns are accounted for at the
point revenue is recognised. Revenue is not
recognised in full until it is highly probable that
a significant reversal in the amount of cumulative
revenue recognised will not occur.
Rebates are amounts payable or credited to
a customer, usually based on the quantity or
value of Product Sales to the customer for
specific products in a certain period. Product
sales rebates, which relate to Product Sales
that occur over a period of time, are normally
issued retrospectively.
At the time Product Sales are invoiced,
rebates and deductions that the Group
expects to pay, are estimated. These rebates
typically arise from sales contracts with
government payers, third-party managed care
organisations, hospitals, long-term care
facilities, group purchasing organisations
and various state programmes.
For the markets where returns are significant,
we estimate the quantity and value of goods
which may ultimately be returned at the point of
sale. Our returns accruals are based on actual
experience over the preceding 12 months for
established products together with market-
related information such as estimated stock
levels at wholesalers and competitor activity
which we receive via third-party information
services. For newly launched products, we
use rates based on our experience with similar
products or a predetermined percentage.
When a product faces generic competition,
particular attention is given to the possible
levels of returns and, in cases where the
circumstances are such that the level of
Product Sales are considered highly probable
to reverse, revenues are only recognised when
the right of return expires, which is generally on
ultimate prescription of the product to patients.
The methodology and assumptions used to
estimate rebates and returns are monitored and
adjusted regularly in the light of contractual
and legal obligations, historical trends, past
experience and projected market conditions.
Once the uncertainty associated with returns
is resolved, revenue is adjusted accordingly.
Under certain collaboration agreements
which include a profit sharing mechanism,
our recognition of Product Sales depends on
which party acts as principal in sales to the end
customer. In the cases where AstraZeneca
acts as principal, we record 100% of sales to
the end customer.
Contracts relating to the supply of COVID-19
Vaccine AstraZeneca during the COVID-19
pandemic include conditions whereby
payments are receivable from customers in
advance of the delivery of product. Such
amounts are held on the balance sheet as
contract liabilities until the related revenue is
recognised, generally upon product delivery.
Certain of these contracts contain further
provisions that restrict the use of inventory
manufactured in specified supply chains to
specified customers, resulting in an enforceable
right to payment as the activities are performed.
Under IFRS 15, such contracts require revenue
to be recognised over time using an appropriate
and reasonably measurable method to
measure progress. Revenue is recognised
on these contracts based on the proportion
of product delivered compared to the total
contracted volumes.
Collaboration Revenue
Collaboration Revenue includes income from
collaborative arrangements where either the
Group has sold certain rights associated with
those products, but retains a significant ongoing
economic interest or has acquired a significant
interest from a third party. Significant interest
can include ongoing supply of finished goods,
participation in profit share arrangements or
direct interest from sales of medicines.
These arrangements may include development
arrangements, commercialisation arrangements
and collaborations. Income may take the form
of upfront fees, milestones, profit sharing and
royalties and includes profit share income
arising from sales made as principal by a
collaboration partner.
KJ Timing of recognition of clinical and
regulatory milestones is considered to be
a key judgement. There can be significant
uncertainty over whether it is highly probable
that there would not be a significant reversal
of revenue in respect of specific milestones if
these are recognised before they are triggered
due to them being subject to the actions of
third parties. In general, where the triggering
of a milestone is subject to the decisions of
third parties (e.g. the acceptance or approval
of a filing by a regulatory authority), the Group
does not consider that the threshold for
recognition is met until that decision is made.
Where Collaboration Revenue arises from
the licensing of the Group’s own intellectual
property, the licences we grant are typically
rights to use intellectual property which do
not change during the period of the licence
and therefore related non-conditional revenue
is recognised at the point the license is
granted and variable consideration as soon as
recognition criteria are met. Those licences are
generally unique and therefore when there are
other performance obligations in the contract,
the basis of allocation of the consideration
makes use of the residual approach as
permitted by IFRS 15.
These arrangements typically involve the receipt
of an upfront payment, which the contract
attributes to the license of the intangible assets,
and ongoing receipts, which the contract
attributes to the sale of the product we
manufacture. In cases where the transaction
has two or more components, we account for
AstraZeneca Annual Report & Form 20-F Information 2020 / Group Accounting Policies
181
Financial Statements Group Accounting Policies
continued
the delivered item (for example, the transfer of
title to the intangible asset) as a separate unit
of accounting and record revenue on delivery
of that component, provided that we can make
a reasonable estimate of the fair value of the
undelivered component.
Where non-contingent amounts are payable
over one year from the effective date of a
contract, an assessment is made as to whether
a significant financing component exists, and
if so, the fair value of this component is
deferred and recognised over the period to
the expected date of receipt.
Where control of a right to use an intangible
asset passes at the outset of an arrangement,
revenue is recognised at the point in time
control is transferred. Where the substance
of an arrangement is that of a right to access
rights attributable to an intangible asset,
revenue is recognised over time, normally on a
straight-line basis over the life of the contract.
Where the fair market value of the undelivered
component (for example, a manufacturing
agreement) exceeds the contracted price
for that component, we defer an appropriate
element of the upfront consideration and
amortise this over the performance period.
However, where the fair market value of the
undelivered component is equal to or lower than
the contracted price for that component, we
treat the whole of the upfront amount as being
attributable to the delivered intangible assets
and recognise that part of the revenue upon
delivery. No element of the contracted revenue
related to the undelivered component is
ordinarily allocated to the sale of the intangible
asset. This is because the contracted revenue
relating to the undelivered component is
contingent on future events (such as sales)
and cannot be recognised until either receipt
of the amount is highly probable or where
the consideration is received for a licence of
intellectual property, on the occurrence of the
related sales.
Where the Group provides ongoing services,
revenue in respect of this element is recognised
over the duration of those services. Where the
arrangement meets the definition of a licence
agreement, sales milestones and sales royalties
are recognised when achieved by applying the
royalty exemption under IFRS 15. All other
milestones and sales royalties are recognised
when considered it is highly probable there
will not be a significant reversal of income.
The determination requires estimates to be
made in relation to future Product Sales.
Where Collaboration Revenue is recorded and
there is a related Intangible asset that is licensed
as part of the arrangement, an appropriate
amount of that Intangible asset is charged to
Cost of sales based on an allocation of cost or
value to the rights that have been licenced.
Cost of sales
Cost of sales are recognised as the associated
revenue is recognised. Cost of sales include
manufacturing costs, royalties payable on
revenues recognised, movements in provisions
for inventories, inventory write-offs and
impairment charges in relation to manufacturing
assets. Cost of sales also includes co-
collaborator profit shares arising from
collaborations, and foreign exchange gains and
losses arising from business trading activities.
Research and development
Research expenditure is charged to profit and
loss in the year in which it is incurred.
KJ Internal development expenditure is
capitalised only if it meets the recognition
criteria of IAS 38 ‘Intangible Assets’. This is
considered a key judgement. Where regulatory
and other uncertainties are such that the
criteria are not met, the expenditure is charged
to profit and loss and this is almost invariably
the case prior to approval of the drug by the
relevant regulatory authority. Where, however,
recognition criteria are met, Intangible assets
are capitalised and amortised on a straight-
line basis over their useful economic lives
from product launch. At 31 December 2020,
no amounts have met the recognition criteria.
Payments to in-license products and
compounds from third parties for new research
and development projects (in process research
and development) generally take the form of
upfront payments, milestones and royalty
payments. Where payments made to third
parties represent consideration for future
research and development activities, an
evaluation is made as to the nature of the
payments. Such payments are expensed if they
represent compensation for sub-contracted
research and development services not
resulting in a transfer of intellectual property.
By contrast, payments are capitalised if they
represent compensation for the transfer of
identifiable intellectual property developed
at the risk of the third party. Development
milestone payments relating to identifiable
intellectual property are capitalised as the
milestone is triggered. Any upfront or
milestone payments for research activities
where there is no associated identifiable
intellectual property are expensed. Assets
capitalised are amortised, on a straight-line
basis, over their useful economic lives from
product launch.
KJ The determination of useful economic
life is considered to be a key judgement.
On product launch, the Group makes a
judgement as to the expected useful economic
life with reference to the expiry of associated
patents for the product, expectation around
the competitive environment specific to the
product and our detailed long-term risk-
adjusted sales projections compiled annually
across the Group and approved by the Board.
The useful economic life can extend beyond
patent expiry dependent upon the nature
of the product and the complexity of the
development and manufacturing process.
Significant sales can often be achieved post
patent expiration.
Intangible assets
Intangible assets are stated at cost less
amortisation and impairments. Intangible
assets relating to products in development
are subject to impairment testing annually. All
Intangible assets are tested for impairment when
there are indications that the carrying value
may not be recoverable. The determination of
the recoverable amounts include key estimates
which are highly sensitive to, and depend
upon, key assumptions as detailed in Note 10
to the Financial Statements from page 198.
Impairment reviews have been carried out on
all Intangible assets that are in development
(and not being amortised), all major intangible
assets acquired during the year and all other
intangible assets that have had indications
of impairment during the year. Recoverable
amount is determined as the higher of value
in use or fair value less costs to sell using a
discounted cash flow calculation, where the
products’ expected cash flows are risk-adjusted
over their estimated remaining useful economic
life. The determination of the recoverable
amounts include significant estimates which
are highly sensitive and depend upon key
assumptions as detailed in Note 10 to the
Financial Statements from page 198. Sales
forecasts and specific allocated costs (which
have both been subject to appropriate senior
management review and approval) are
risk-adjusted and discounted using appropriate
rates based on our post-tax weighted average
cost of capital or for fair value less costs to sell,
a required rate of return for a market participant.
Our weighted average cost of capital reflects
factors such as our capital structure and our
costs of debt and equity.
Any impairment losses are recognised
immediately in profit. Intangible assets relating
to products which fail during development (or
for which development ceases for other
reasons) are also tested for impairment and
are written down to their recoverable amount
(which is usually nil).
If, subsequent to an impairment loss being
recognised, development restarts or other
facts and circumstances change indicating
that the impairment is less or no longer exists,
the value of the asset is re-estimated and its
carrying value is increased to the recoverable
amount, but not exceeding the original value,
by recognising an impairment reversal in
operating profit.
182
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Statements Government grants
Government grants are recognised in the
Consolidated Statement of Comprehensive
Income so as to match with the related
expenses that they are intended to compensate.
Where grants are received in advance of the
related expenses, they are initially recognised
in the Consolidated Statement of Financial
Position under Trade and other payables as
deferred income and released to net off
against the related expenditure when incurred.
Each contract is assessed to determine whether
there are both grant elements and supply of
product which need to be separated. In each
case, the contracts set out the specified terms
for the supply of the product and the provisions
for funding for certain costs, primarily research
and development associated with the IP. It is
considered whether there are any conditions for
the funding to be refunded. The consideration
in the contract is allocated between the grant
and supply elements. The standalone selling
price for the supply of products is determined
by reference to observed prices with other
customers. The amount allocated as a
government grant is determined by reference to
the specific agreed costs and activities identified
in the contract as not directly attributable to
the supply of product. Government grants are
recorded as an offset to the relevant expense
in the Income Statement and are capped to
match the relevant costs incurred.
Joint arrangements and associates
The Group has arrangements over which it
has joint control and which qualify as joint
operations or joint ventures under IFRS 11
‘Joint Arrangements’. For joint operations, the
Group recognises its share of revenue that it
earns from the joint operations and its share of
expenses incurred. The Group also recognises
the assets associated with the joint operations
that it controls and the liabilities it incurs under
the joint arrangement. For joint ventures and
associates, the Group recognises its interest in
the joint venture or associate as an investment
and uses the equity method of accounting.
Employee benefits
The Group accounts for pensions and other
employee benefits (principally healthcare) under
IAS 19 ‘Employee Benefits’ and recognises all
actuarial gains and losses immediately through
Other comprehensive income. In respect of
defined benefit plans, obligations are measured
at discounted present value while plan assets
are measured at fair value. Given the extent
of the assumptions used to determine these
values, these are considered to be significant
estimates. The operating and financing costs of
such plans are recognised separately in profit,
current service costs are spread systematically
over the lives of employees and financing costs
are recognised in full in the periods in which
they arise. Remeasurements of the net defined
benefit pension liability, including actuarial
gains and losses, are recognised immediately
in Other comprehensive income.
Where the calculation results in a surplus to
the Group, the recognised asset is limited
to the present value of any available future
refunds from the plan or reductions in future
contributions to the plan. Payments to defined
contribution plans are recognised in profit as
they fall due.
Taxation
The current tax payable is based on taxable
profit for the year. Taxable profit differs from
reported profit because taxable profit excludes
items that are either never taxable or tax
deductible or items that are taxable or tax
deductible in a different period. The Group’s
current tax assets and liabilities are calculated
using tax rates that have been enacted or
substantively enacted by the reporting date.
KJ Deferred tax is provided using the balance
sheet liability method, providing for temporary
differences between the carrying amounts of
assets and liabilities for financial reporting
purposes and the amounts used for taxation
purposes. Deferred tax assets are recognised
to the extent that it is probable that future
taxable profit will be available against which
the asset can be utilised. This requires
judgements to be made in respect of the
availability of future taxable income.
No deferred tax asset or liability is recognised
in respect of temporary differences associated
with investments in subsidiaries and branches
where the Group is able to control the timing
of reversal of the temporary differences and it
is probable that the temporary differences will
not reverse in the foreseeable future.
The Group’s Deferred tax assets and liabilities
are calculated using tax rates that are expected
to apply in the period when the liability is settled
or the asset realised based on tax rates that
have been enacted or substantively enacted
by the reporting date.
Accruals for tax contingencies require
management to make judgements of potential
exposures in relation to tax audit issues. Tax
benefits are not recognised unless the tax
positions will probably be accepted by the tax
authorities. This is based upon management’s
interpretation of applicable laws and regulations
and the expectation of how the tax authority
will resolve the matter. Once considered
probable of not being accepted, management
reviews each material tax benefit and reflects
the effect of the uncertainty in determining the
related taxable result.
Accruals for tax contingencies are measured
using either the most likely amount or the
expected value amount depending on which
method the entity expects to better predict
the resolution of the uncertainty.
Further details of the estimates and assumptions
made in determining our recorded liability for
transfer pricing contingencies and other tax
contingencies are included in Note 29 to the
Financial Statements from page 232.
Share-based payments
All plans have been classified as equity settled
after assessment. The grant date fair value
of employee share plan awards is calculated
using a Monte Carlo model. In accordance with
IFRS 2 ‘Share-based Payment’, the resulting
cost is recognised in profit over the vesting
period of the awards, being the period in which
the services are received. The value of the
charge is adjusted to reflect expected and
actual levels of awards vesting, except where
the failure to vest is as a result of not meeting
a market condition. Cancellations of equity
instruments are treated as an acceleration of
the vesting period and any outstanding charge
is recognised in profit immediately.
Property, plant and equipment
The Group’s policy is to write off the difference
between the cost of each item of Property,
plant and equipment and its residual value over
its estimated useful life on a straight-line basis.
Assets under construction are not depreciated.
Reviews are made annually of the estimated
remaining lives and residual values of individual
productive assets, taking account of
commercial and technological obsolescence as
well as normal wear and tear. It is impractical to
calculate average asset lives exactly. However,
the total lives range from approximately 10 to
50 years for buildings, and three to 15 years for
plant and equipment. All items of Property, plant
and equipment are tested for impairment when
there are indications that the carrying value may
not be recoverable. Any impairment losses are
recognised immediately in operating profit.
Borrowing costs
The Group has no borrowing costs with respect
to the acquisition or construction of qualifying
assets. All other borrowing costs are recognised
in profit as incurred and in accordance with the
effective interest rate method.
Leases
Accounting policy applied from
1 January 2019 (IFRS 16)
The Group’s lease arrangements are principally
for property, most notably a portfolio of office
premises and employee accommodation, and
for a global car fleet, utilised primarily by our
sales and marketing teams.
The lease liability and corresponding right-of-
use asset arising from a lease are initially
measured on a present value basis. Lease
liabilities include the net present value of the
following lease payments:
> fixed payments, less any lease
incentives receivable
> variable lease payments that depend on an
index or a rate, initially measured using the
index or rate as at the commencement date
AstraZeneca Annual Report & Form 20-F Information 2020 / Group Accounting Policies
183
Financial Statements Group Accounting Policies
continued
> the exercise price of a purchase option if
the Group is reasonably certain to exercise
that option
> payments of penalties for terminating the
lease, if the lease term reflects the Group
exercising that option, and
> amounts expected to be payable by the
Group under residual value guarantees.
Right-of-use assets are measured at cost
comprising the following:
> the amount of the initial measurement
of lease liability
> any lease payments made at or before
the commencement date less any lease
incentives received
> any initial direct costs, and
> restoration costs.
Judgements made in calculating the lease
liability include assessing whether arrangements
contain a lease and determining the lease term.
Lease terms are negotiated on an individual
basis and contain a wide range of different
terms and conditions. Property leases will often
include an early termination or extension option
to the lease term. Fleet management policies
vary by jurisdiction and may include renewal
of a lease until a measurement threshold,
such as mileage, is reached. Extension and
termination options have been considered
when determining the lease term, along with
all facts and circumstances that may create
an economic incentive to exercise an extension
option, or not exercise a termination option.
Extension periods (or periods after termination
options) are only included in the lease term if
the lease is reasonably certain to be extended
(or not terminated).
The lease payments are discounted using
incremental borrowing rates, as in the majority
of leases held by the Group the interest rate
implicit in the lease is not readily identifiable.
Calculating the discount rate is an estimate
made in calculating the lease liability. This rate
is the rate that the Group would have to pay to
borrow the funds necessary to obtain an asset
of similar value to the right-of-use asset in a
similar economic environment with similar
terms, security and conditions. To determine
the incremental borrowing rate, the Group
uses a risk-free interest rate adjusted for
credit risk, adjusting for terms specific to the
lease including term, country and currency.
The Group is exposed to potential future
increases in variable lease payments that are
based on an index or rate, which are initially
measured as at the commencement date,
with any future changes in the index or rate
excluded from the lease liability until they take
effect. When adjustments to lease payments
based on an index or rate take effect, the lease
liability is reassessed and adjusted against the
right-of-use asset.
Lease payments are allocated between principal
and finance cost. The finance cost is charged to
the Consolidated Statement of Comprehensive
Income over the lease period so as to produce
a constant periodic rate of interest on the
remaining balance of the liability for each period.
Payments associated with short-term leases
of Property, plant and equipment and all
leases of low-value assets are recognised
on a straight-line basis as an expense in the
Consolidated Statement of Comprehensive
Income. Short-term leases are leases with
a lease term of 12 months or less. Low-value
leases are those where the underlying asset
value, when new, is $5,000 or less and
includes IT equipment and small items of
office furniture.
Contracts may contain both lease and
non-lease components. The Group allocates
the consideration in the contract to the lease
and non-lease components based on their
relative stand-alone prices.
Right-of-use assets are generally depreciated
over the shorter of the asset’s useful life and
the lease term on a straight-line basis. If the
Group is reasonably certain to exercise a
purchase option, the right-of-use asset is
depreciated over the underlying asset’s useful
life. It is impractical to calculate average asset
lives exactly. However, the total lives range from
approximately 10 to 50 years for buildings,
and three to 15 years for motor vehicles and
other assets.
There are no material lease agreements under
which the Group is a lessor.
Accounting policy applied until
1 January 2019 (IAS 17)
Leases are classified as finance leases if they
transfer substantively all the risks and rewards
incidental to ownership, otherwise they are
classified as operating leases. Assets and
liabilities arising on finance leases are initially
recognised at fair value or, if lower, the present
value of the minimum lease payments. The
discount rate used in calculating the present
value of the minimum lease payments is the
interest rate implicit in the lease. Finance
charges under finance leases are allocated
to each reporting period so as to produce
a constant periodic rate of interest on the
remaining balance of the finance liability.
Rentals under operating leases are charged
to profit and loss on a straight-line basis.
Business combinations and goodwill
In assessing whether an acquired set of
assets and activities is a business or an asset,
management will first elect whether to apply
an optional concentration test to simplify the
assessment. Where the concentration test is
applied, the acquisition will be treated as the
acquisition of an asset if substantially all of
the fair value of the gross assets acquired
(excluding cash and cash equivalents,
deferred tax assets, and related goodwill)
is concentrated in a single asset or group
of similar identifiable assets.
Where the concentration test is not applied,
or is not met, a further assessment of whether
the acquired set of assets and activities is a
business will be performed.
KJ The determination of whether an acquired
set of assets and activities is a business or an
asset can be judgemental, particularly if the
target is not producing outputs. Management
uses a number of factors to make this
determination, which are primarily focused
on whether the acquired set of assets and
activities include substantive processes that
mean the set is capable of being managed
for the purpose of providing a return. Key
determining factors include the stage of
development of any assets acquired, the
readiness and ability of the acquired set to
produce outputs and the presence of key
experienced employees capable of conducting
activities required to develop or manufacture
the assets. Typically, the specialised nature of
many pharmaceutical assets and processes
is such that until assets are substantively
ready for production and promotion, there
are not the required processes for a set of
assets and activities to meet the definition
of a business in IFRS 3.
On the acquisition of a business, fair values
are attributed to the identifiable assets and
liabilities. Attributing fair values is a judgement.
Contingent liabilities are also recorded at fair
value unless the fair value cannot be measured
reliably, in which case the value is subsumed
into goodwill. Where the Group fully acquires,
through a business combination, assets that
were previously held in joint operations, the
Group has elected not to uplift the book value
of the existing interest in the asset held in
the joint operation to fair value at the date full
control is taken. Where fair values of acquired
contingent liabilities cannot be measured
reliably, the assumed contingent liability is
not recognised but is disclosed in the same
manner as other contingent liabilities.
Where not all of the equity of a subsidiary
is acquired, the non-controlling interest is
recognised either at fair value or at the
non-controlling interest’s proportionate share
of the net assets of the subsidiary, on a case-by-
case basis. Put options over non-controlling
interests are recognised as a financial liability,
with a corresponding entry in either Retained
earnings or against non-controlling interest
reserves on a case-by-case basis.
The timing and amount of future contingent
elements of consideration is considered a
significant estimate. Contingent consideration,
which may include development and launch
milestones, revenue threshold milestones and
184
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Statements revenue-based royalties, is fair valued at the
date of acquisition using decision-tree analysis
with key inputs including probability of success,
consideration of potential delays and revenue
projections based on the Group’s internal
forecasts. Unsettled amounts of consideration
are held at fair value within payables with
changes in fair value recognised immediately
in profit.
Assets held for sale are stated at the lower of
carrying amount and fair value less costs to sell.
Where there is a partial transfer of a non-current
asset to held for sale, an allocation of value is
made between the current and non-current
portions of the asset based on the relative
value of the two portions, unless there is a
methodology that better reflects the asset to
be disposed of.
Goodwill is the difference between the fair
value of the consideration and the fair value
of net assets acquired.
Assets held for sale are not depreciated
or amortised.
Goodwill arising on acquisitions is capitalised
and subject to an impairment review, both
annually and when there is an indication that
the carrying value may not be recoverable.
The Group’s policy up to and including
1997 was to eliminate Goodwill arising upon
acquisitions against reserves. Under IFRS 1
‘First-time Adoption of International Financial
Reporting Standards’ and IFRS 3 ‘Business
Combinations’, such Goodwill will remain
eliminated against reserves.
Subsidiaries
A subsidiary is an entity controlled, directly
or indirectly, by AstraZeneca PLC. Control
is regarded as the exposure or rights to the
variable returns of the entity when combined
with the power to affect those returns.
The financial results of subsidiaries are
consolidated from the date control is obtained
until the date that control ceases.
Inventories
Inventories are stated at the lower of cost
and net realisable value. The first in, first out
or an average method of valuation is used.
For finished goods and work in progress, cost
includes directly attributable costs and certain
overhead expenses (including depreciation).
Selling expenses and certain other overhead
expenses (principally central administration
costs) are excluded. Net realisable value is
determined as estimated selling price less all
estimated costs of completion and costs to
be incurred in selling and distribution.
Write-downs of inventory occur in the general
course of business and are recognised in
Cost of sales for launched or approved
products and in Research and development
expense for products in development.
Assets held for sale
Non-current assets are classified as assets
held for sale when their carrying amount is
to be recovered principally through a sale
transaction and a sale is considered highly
probable. A sale is usually considered highly
probable only when the appropriate level of
management has committed to the sale.
Trade and other receivables
Financial assets included in Trade and other
receivables are recognised initially at fair value.
The Group holds the Trade receivables with the
objective to collect the contractual cash flows
and therefore measures them subsequently at
amortised cost using the effective interest rate
method, less any impairment losses.
Trade receivables that are subject to debt
factoring arrangements are derecognised if
they meet the conditions for derecognition
detailed in IFRS 9 ‘Financial Instruments’.
Trade and other payables
Financial liabilities included in Trade and other
payables are recognised initially at fair value.
Subsequent to initial recognition they are
measured at amortised cost using the effective
interest rate method. Contingent consideration
payables are held at fair value within Level 3 of
the fair value hierarchy as defined in Note 12.
Financial instruments
The Group’s financial instruments include
Lease liabilities, Trade and other receivables
and payables, liabilities for Contingent
consideration and put options under business
combinations, and rights and obligations
under employee benefit plans which are dealt
with in specific accounting policies.
The Group’s other financial instruments include:
> Cash and cash equivalents
> Fixed deposits
> Other investments
> Bank and other borrowings
> Derivatives
Cash and cash equivalents
Cash and cash equivalents comprise cash in
hand, current balances with banks and similar
institutions, and highly liquid investments
with maturities of three months or less when
acquired. They are readily convertible into
known amounts of cash and are held at
amortised cost under the hold to collect
classification, where they meet the hold to
collect ‘solely payments of principal and interest’
test criteria under IFRS 9. Those not meeting
these criteria are held at fair value through
profit and loss. Cash and cash equivalents
in the Statement of Cash Flows include
unsecured bank overdrafts at the balance
sheet date where balances often fluctuate
between a cash and overdraft position.
Fixed deposits
Fixed deposits, principally comprising
funds held with banks and other financial
institutions, are initially measured at fair
value, plus direct transaction costs, and are
subsequently measured at amortised cost
using the effective interest rate method at
each reporting date. Changes in carrying
value are recognised in the Consolidated
Statement of Comprehensive Income.
Other investments
Investments are classified as fair value through
profit or loss (FVPL), unless the Group makes
an irrevocable election at initial recognition
for certain non-current equity investments
to present changes in Other comprehensive
income (FVOCI). If this election is made, there
is no subsequent reclassification of fair value
gains and losses to profit and loss following
the derecognition of the investment.
Bank and other borrowings
The Group uses derivatives, principally interest
rate swaps, to hedge the interest rate exposure
inherent in a portion of its fixed interest rate
debt. In such cases the Group will either
designate the debt as fair value through profit
and loss when certain criteria are met or as
the hedged item under a fair value hedge.
If the debt instrument is designated as fair
value through profit or loss, the debt is initially
measured at fair value (with direct transaction
costs being included in profit as an expense)
and is remeasured to fair value at each reporting
date with changes in carrying value being
recognised in profit (along with changes in
the fair value of the related derivative), with the
exception of changes in the fair value of the
debt instrument relating to own credit risk which
are recorded in Other comprehensive income in
accordance with IFRS 9. Such a designation has
been made where this significantly reduces an
accounting mismatch which would result from
recognising gains and losses on different bases.
If the debt is designated as the hedged item
under a fair value hedge, the debt is initially
measured at fair value (with direct transaction
costs being amortised over the life of the debt)
and is remeasured for fair value changes in
respect of the hedged risk at each reporting
date with changes in carrying value being
recognised in profit (along with changes in
the fair value of the related derivative).
If the debt is designated in a cash flow hedge,
the debt is measured at amortised cost
(with gains or losses taken to profit and direct
transaction costs being amortised over the life
of the debt). The related derivative is remeasured
for fair value changes at each reporting date
with the portion of the gain or loss on the
derivative that is determined to be an effective
hedge recognised in Other comprehensive
income. The amounts that have been
recognised in Other comprehensive income
AstraZeneca Annual Report & Form 20-F Information 2020 / Group Accounting Policies
185
Financial Statements that generates cash inflows from continuing
use that are largely independent of the cash
flows of other assets. Impairment losses are
recognised immediately in the Consolidated
Statement of Comprehensive Income.
International accounting transition
On transition to using adopted IFRSs in the
year ended 31 December 2005, the Group
took advantage of several optional exemptions
available in IFRS 1 ‘First-time Adoption of
International Financial Reporting Standards’.
The major impacts which are of continuing
importance are detailed below:
> Business combinations – IFRS 3 ‘Business
Combinations’ has been applied from
1 January 2003, the date of transition,
rather than being applied fully retrospectively.
As a result, the combination of Astra and
Zeneca is still accounted for as a merger,
rather than through purchase accounting.
If purchase accounting had been adopted,
Zeneca would have been deemed to have
acquired Astra.
> Cumulative exchange differences – the
Group chose to set the cumulative exchange
difference reserve at 1 January 2003 to nil.
Applicable accounting standards and
interpretations issued but not yet adopted
At the date of authorisation of these financial
statements, the following amendments were
in issue but not yet adopted by the Group:
> amendments to IAS 1 ‘Presentation of
Financial Instruments’, effective for periods
beginning on or after 1 January 2021 −
not endorsed by the UK Endorsement
Board (UKEB).
> amendments to IFRS 9, IAS 39, IFRS 7,
IFRS 4, IFRS 16 in relation to Interest rate
benchmark reform − phase 2, effective for
periods beginning on or after 1 January 2021
− endorsed by the UKEB on 5 January 2021.
The above amendments and interpretations
are not expected to have a significant impact
on the Group’s net results.
Group Accounting Policies
continued
are reclassified to profit in the same period
that the hedged forecast cash flows affect
profit. The reclassification adjustment is
included in Finance expense in the Consolidated
Statement of Comprehensive Income.
Other interest-bearing loans are initially
measured at fair value (with direct transaction
costs being amortised over the life of the loan)
and are subsequently measured at amortised
cost using the effective interest rate method at
each reporting date. Changes in carrying
value are recognised in the Consolidated
Statement of Comprehensive Income.
Derivatives
Derivatives are initially measured at fair value
(with direct transaction costs being included
in profit as an expense) and are subsequently
remeasured to fair value at each reporting
date. Changes in carrying value are
recognised in the Consolidated Statement
of Comprehensive Income.
Foreign currencies
Foreign currency transactions, being
transactions denominated in a currency other
than an individual Group entity’s functional
currency, are translated into the relevant
functional currencies of individual Group
entities at average rates for the relevant monthly
accounting periods, which approximate to
actual rates.
Monetary assets and liabilities arising from
foreign currency transactions are retranslated
at exchange rates prevailing at the reporting
date. Exchange gains and losses on loans and
on short-term foreign currency borrowings
and deposits are included within Finance
expense. Exchange differences on all other
foreign currency transactions are recognised
in Operating profit in the individual Group
entity’s accounting records.
Non-monetary items arising from foreign
currency transactions are not retranslated in the
individual Group entity’s accounting records.
In the Consolidated Financial Statements,
income and expense items for Group entities
with a functional currency other than US dollars
are translated into US dollars at average
exchange rates, which approximate to actual
rates, for the relevant accounting periods.
Assets and liabilities are translated at the
US dollar exchange rates prevailing at the
reporting date. Exchange differences arising
on consolidation are recognised in Other
comprehensive income.
If certain criteria are met, non-US dollar
denominated loans or derivatives are designated
as net investment hedges of foreign operations.
Exchange differences arising on retranslation
of net investments, and of foreign currency
loans which are designated in an effective net
investment hedge relationship, are recognised
in Other comprehensive income in the
Consolidated Financial Statements. Foreign
186
exchange derivatives hedging net investments
in foreign operations are carried at fair value.
Effective fair value movements are recognised
in Other comprehensive income, with any
ineffectiveness taken to profit. Gains and losses
accumulated in the translation reserve will be
recycled to profit and loss when the foreign
operation is sold.
Litigation and environmental liabilities
AstraZeneca is involved in legal disputes, the
settlement of which may involve cost to the
Group. Provision is made where an adverse
outcome is probable and associated costs,
including related legal costs, can be estimated
reliably. In other cases, appropriate disclosures
are included. Determining the timing of
recognition of when an adverse outcome is
probable is considered a key judgement, refer
to Note 29 to the Financial Statements on
page 229.
Where it is considered that the Group is
more likely than not to prevail, or in the rare
circumstances where the amount of the legal
liability cannot be estimated reliably, legal
costs involved in defending the claim are
charged to the Consolidated Statement of
Comprehensive Income as they are incurred.
Where it is considered that the Group has
a valid contract which provides the right to
reimbursement (from insurance or otherwise)
of legal costs and/or all or part of any loss
incurred or for which a provision has been
established, the best estimate of the amount
expected to be received is recognised as an
asset only when it is virtually certain.
AstraZeneca is exposed to environmental
liabilities relating to its past operations,
principally in respect of soil and groundwater
remediation costs. Provisions for these costs
are made when there is a present obligation
and where it is probable that expenditure on
remedial work will be required and a reliable
estimate can be made of the cost. Provisions
are discounted at the relevant risk free rate
where the effect is material.
Impairment
The carrying values of non-financial assets,
other than Inventories and Deferred tax assets,
are reviewed at least annually to determine
whether there is any indication of impairment.
For Goodwill, Intangible assets under
development and for any other assets where
such indication exists, the asset’s recoverable
amount is estimated based on the greater of its
value in use and its fair value less cost to sell.
In assessing the recoverable amount, the
estimated future cash flows, adjusted for the
risks specific to each asset, are discounted
to their present value using a discount rate
that reflects current market assessments of the
time value of money, the general risks affecting
the pharmaceutical industry and other risks
specific to each asset. For the purpose of
impairment testing, assets are grouped
together into the smallest group of assets
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Statements Notes to the Group Financial Statements
1 Revenue
Product Sales
Oncology:
Tagrisso
Imfinzi
Lynparza
Calquence
Koselugo
Zoladex
Faslodex
Iressa
Arimidex
Casodex
Others
Emerging
Markets
$m
US Europe
$m
$m
Rest of
World
$m
2020
Total
$m
Emerging
Markets
$m
US
$m
Europe
$m
Rest of
World
$m
1,208
1,566
158
264
6
–
561
180
221
147
133
28
1,185
876
511
38
5
55
14
–
–
–
748
370
435
2
–
140
221
12
3
3
4
806
4,328
329
201
2,042
1,776
3
–
182
124
21
35
36
19
522
38
888
580
268
185
172
51
762
1,268
30
1,041
133
2
–
492
198
286
152
127
29
626
162
–
7
328
17
–
–
–
474
179
287
–
–
135
229
70
28
16
5
685
219
152
–
–
179
137
50
45
57
60
2019
Total
$m
3,189
1,469
1,198
164
–
813
892
423
225
200
94
Emerging
Markets
$m
US
$m
Europe
$m
Rest of
World
$m
2018
Total
$m
347
6
51
–
–
409
154
286
132
113
30
869
564
345
62
–
8
537
26
–
1
–
314
27
190
–
–
133
221
109
31
20
8
330
1,860
36
61
–
–
633
647
62
–
202
116
752
1,028
97
49
67
77
518
212
201
115
2,906
4,250
1,938
1,756 10,850
2,211
3,449
1,423
1,584
8,667
1,528
2,412
1,053
1,035
6,028
Cardiovascular, Renal and Metabolism:
Farxiga
Brilinta
Onglyza
Bydureon
Byetta
Other Diabetes
Lokelma
Crestor
Seloken/Toprol-XL
Atacand
Others
686
461
201
4
8
7
5
748
782
175
126
569
732
166
382
37
25
57
92
13
10
–
507
342
58
53
14
13
4
197
1,959
58
45
9
9
2
10
1,593
470
448
68
47
76
129
211
1,180
16
35
57
10
23
8
821
243
191
471
462
176
11
12
1
–
806
686
160
193
537
710
230
459
68
40
13
373
351
70
66
19
9
1
162
1,543
58
51
13
11
2
–
1,581
527
549
110
52
14
104
148
220
1,278
37
12
(1)
25
30
59
12
19
20
760
221
271
336
326
172
8
8
(1)
–
841
641
157
207
591
588
223
475
74
34
–
315
348
89
81
29
5
–
149
1,391
59
59
20
15
1
–
1,321
543
584
126
39
–
170
203
219
1,433
39
13
(1)
19
70
71
13
20
24
712
260
301
3,203
2,083
1,228
582
7,096
2,978
2,209
1,151
568
6,906
2,695
2,206
1,230
579
6,710
Respiratory & Immunology:
Symbicort
Pulmicort
Fasenra
Daliresp/Daxas
Bevespi
Breztri
Others
Other:
Nexium
Synagis
FluMist
Losec/Prilosec
Seroquel XR/IR
Others
567
798
12
4
1
14
203
1,022
71
603
190
44
5
6
694
73
203
22
3
–
438
2,721
54
131
1
–
9
996
949
217
48
28
547
1,190
5
4
–
–
176
13
398
241
829
110
482
184
42
–
6
678
81
118
26
–
–
441
2,495
85
99
1
–
2
1,466
704
215
42
2
495
995
1
5
–
–
204
16
467
148
862
116
218
155
33
–
32
773
431
2,561
90
32
28
–
–
85
46
1
–
–
1,286
297
189
33
–
306
59
545
1,599
1,941
1,171
646
5,357
1,987
1,653
1,107
644
5,391
1,644
1,416
1,229
622
4,911
495
1,492
748
218
757
169
–
1
152
55
6
47
70
6
17
55
71
325
219
20
29
58
–
5
5
16
9
372
295
183
117
128
971
364
722
530
2,587
–
–
179
50
12
989
46
20
10
34
108
436
63
312
93
49
88
64
454
1,483
–
–
25
19
9
358
113
263
191
193
690
1
1
161
118
53
669
507
2,601
1,024
306
287
15
7
108
119
842
235
377
91
70
107
67
947
471
1,702
–
3
34
28
51
665
110
272
361
290
587
3,400
Product Sales
8,679
8,638
5,059
3,514 25,890
8,165
7,747
4,350
3,303 23,565
6,891
6,876
4,459
2,823 21,049
SE Rebates and chargebacks in the US
The major market where estimates are seen as significant is the US. When invoicing Product Sales in the US, we estimate the rebates and chargebacks
we expect to pay. The adjustment in respect of prior year net US Product Sales revenue in 2020 was 3.5% (2019: 3.6%; 2018: 3.2%). The most
significant of these relate to the Medicaid and state programmes with an adjustment in respect of prior year net US Product Sales revenue in 2020
of 1.1% (2019: 1.3%; 2018: 2.6%) and Managed Care and Medicare of 1.5% (2019: 1.9%; 2018: 1.2%).
These values demonstrate the level of sensitivity; further meaningful sensitivity is not able to be provided due to the large volume of variables that
contribute to the overall rebates, chargebacks, returns and other revenue accruals.
AstraZeneca Annual Report & Form 20-F Information 2020 / Group Accounting Policies
187
Financial Statements
1 Revenue continued
Collaboration Revenue
Royalty income
Global co-development and commercialisation of Lynparza and Koselugo with MSD
Transfer of rights to Zoladex in the US and Canada to TerSera
Enhertu: share of gross profits
Roxadustat: share of gross profits
Licence agreement for Crestor in Spain with Almirall
Co-development and commercialisation of MEDI8897 with Sanofi
Grant of authorised generic rights to various medicines in Japan
Other collaboration revenue
2020
$m
62
460
35
94
30
–
–
–
46
727
2019
$m
62
610
–
–
–
39
34
19
55
2018
$m
49
790
35
–
–
61
–
41
65
819
1,041
Substantially all Collaboration Revenue relates to performance obligations satisfied in prior periods.
2 Operating profit
Operating profit includes the following significant items:
Selling, general and administrative costs
In 2020, Selling, general and administrative costs includes a credit of $51m (2019: credit of $516m; 2018: credit of $482m) resulting from changes in the
fair value of contingent consideration arising from the acquisition of the diabetes alliance from BMS. These adjustments reflect revised estimates
for future sales performance for the products acquired and, as a result, revised estimates for future royalties payable.
In 2020, Selling, general and administrative costs also includes a credit of $143m (2019: credit of $58m; 2018: credit of $32m) resulting from changes
in the fair value of contingent consideration arising from the acquisition of Almirall’s respiratory business. These adjustments reflect revised estimates
for future sales performance for the products acquired and, as a result, revised estimates for future milestones payable.
In 2020, Selling, general and administrative costs also includes a credit of $9m (2019: charge of $610m; 2018: credit of $219m) relating to a number
of legal proceedings including settlements in various jurisdictions in relation to several marketed products.
In 2020, there were no changes in estimates of cash flows arising from the put option over the non-controlling interest in Acerta Pharma, and therefore
no charge or credit to Selling, general and administrative costs (2019: charge of $172m; 2018: credit of $113m).
Research and development expense: Government grants
During the year $222m of government grants were recognised within Operating profit. Substantially all of the grants recognised relate to funding for
research and development and related expenses for COVID-19 Vaccine AstraZeneca ($161m) and AZD7442 ($61m). Historically, AstraZeneca did not
receive any substantial government grants prior to the commencement of these programmes.
Other operating income and expense
Royalties
Income
Amortisation
Gains on disposal of intangible assets
Net gains/(losses) on disposal of other non-current assets
Impairment of property, plant and equipment
Legal settlements1
Other income2
Other expense
Other operating income and expense
2020
$m
149
(2)
1,030
25
(12)
–
406
(68)
1,528
2019
$m
146
(4)
1,243
(21)
–
–
285
(108)
1,541
2018
$m
96
(4)
1,885
(8)
–
374
277
(93)
2,527
1 Primarily driven by a $352m settlement of legal action in Canada in relation to a patent infringement of Losec/Prilosec.
2 Other income in 2020 includes $107m of payments from Allergan in respect of the development of brazikumab (2019: $nil; 2018: $nil).
Royalty amortisation relates to intangible assets recorded in respect of income streams acquired with MedImmune.
Gains on disposal of intangible assets in 2020 includes $350m on disposal of global rights excluding US, India and Japan to established hypertension
medicines to Atnahs Pharma, $400m on disposal of rights in over 70 countries to Atacand to Cheplapharm and $120m on the sale of an FDA Priority
Review Voucher.
Gains on disposal of intangible assets in 2019 includes $515m on disposal of US rights to Synagis to Sobi, $243m on disposal of rights to Losec
globally excluding China, Japan, the US and Mexico to Cheplapharm, $181m on disposal of rights to Arimidex and Casodex in Europe and certain
additional countries to Juvisé Pharmaceuticals and $213m on disposal of commercialisation rights to Seroquel and Seroquel XR in Europe, Russia,
US and Canada to Cheplapharm.
188
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued
As part of the total consideration received in respect of the agreement to sell US rights to Synagis in 2019, $150m related to the rights to participate
in the future cash flows from the US profits or losses for nirsevimab. A further $40m has been received in 2020. The total amount has been recognised
as a financial liability as the Group has not fully transferred the risks and rewards of the underlying cash flows arising from nirsevimab to Sobi. This
liability is presented in Other payables within Non-current liabilities. The associated cash flow is presented within Investing Activities as the Group has
received the cash in exchange for agreeing to transfer future cash flows relating to an intangible asset.
Gains on disposal of intangible assets in 2018 includes $695m on the disposal of Europe rights to Nexium, $527m on the disposal of rights to Seroquel
in the UK, China and other international markets, $210m from the sale of rights to Atacand in Europe to Cheplapharm, milestone receipts of $172m
from the disposal of the anaesthetics portfolio outside the US to Aspen and $139m from the sale of the global rights to Alvesco, Omnaris and Zetonna
to Covis.
Restructuring costs
The tables below show the costs that have been charged in respect of restructuring programmes by cost category and type. Severance provisions
are detailed in Note 21.
Cost of sales
Research and development expense
Selling, general and administrative costs
Other operating income and expense
Total charge
Severance costs
Accelerated depreciation and impairment1
Other
Total charge
2020
$m
53
35
162
1
251
2020
$m
26
17
208
251
2019
$m
73
101
173
–
347
2019
$m
137
(67)
277
347
2018
$m
432
94
181
(10)
697
2018
$m
41
259
397
697
1
Included within accelerated depreciation and impairment in 2019 is a credit relating to the impairment reversal of two manufacturing sites in Colorado, US. Refer to Note 7 for further details.
Other costs are those incurred in designing and implementing the Group’s various restructuring initiatives, including costs of decommissioning sites
impacted by changes to our global footprint, temporary lease costs during relocation, internal project costs and external consultancy fees.
Financial instruments
Included within Operating profit are the following net gains and losses on financial instruments:
Losses on forward foreign exchange contracts
Gains on receivables and payables
Total
Impairment charges
Details of impairment charges for 2020, 2019 and 2018 are included in Notes 7 and 10.
3 Finance income and expense
Finance income
Returns on fixed deposits and equity securities
Returns on short-term deposits
Fair value gains on debt and interest rate swaps
Discount unwind on other long-term assets
Interest income on income tax balances
Total
Finance expense
Interest on debt and commercial paper
Interest on overdrafts, lease liabilities and other financing costs1
Net interest on post-employment defined benefit plan net liabilities (Note 22)
Net exchange losses
Discount unwind on contingent consideration arising from business combinations (Note 20)
Discount unwind on other long-term liabilities2
Fair value losses on debt and interest rate swaps
Interest expense on income tax balances
Total
Net finance expense
2020
$m
(86)
89
3
2020
$m
1
40
4
6
36
87
(669)
(67)
(37)
(34)
(278)
(219)
–
(2)
2019
$m
(112)
66
(46)
2019
$m
1
122
7
20
22
172
(698)
(74)
(53)
(30)
(356)
(213)
–
(8)
(1,306)
(1,219)
(1,432)
(1,260)
1 Comparative figures in 2018 included finance leases recognised under IAS 17.
2
Included within Discount unwind on other long-term liabilities is $151m relating to the Acerta Pharma put option liability (2019: $136m; 2018: $133m), see Note 20 for further details.
2018
$m
(100)
43
(57)
2018
$m
10
86
–
6
36
138
(673)
(68)
(52)
(51)
(416)
(154)
(2)
(3)
(1,419)
(1,281)
189
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements
3 Finance income and expense continued
Financial instruments
Included within finance income and expense are the following net gains and losses on financial instruments:
Interest and fair value adjustments in respect of debt designated at fair value through profit or loss, net of derivatives
Interest and changes in carrying values of debt designated as hedged items in fair value hedges, net of derivatives
Interest and fair value changes on fixed and short-term deposits, equity securities, other derivatives and tax balances
Interest on debt, overdrafts, lease liabilities and commercial paper held at amortised cost
2020
$m
(8)
(6)
42
(660)
2019
$m
(12)
(10)
110
(662)
2018
$m
(11)
(28)
96
(619)
Fair value gain of $33m (2019: loss of $5m; 2018: loss of $13m) on interest rate fair value hedging instruments and $32m fair value loss (2019: gain
of $8m; 2018: gain of $10m) on the related hedged items have been included within Interest and changes in carrying values of debt designated as
hedged items, net of derivatives. All fair value hedge relationships were effective during the year.
Fair value gain of $2m (2019: gain of $4m; 2018: loss of $13m) on derivatives related to debt instruments designated at fair value through profit or
loss and $3m fair value loss (2019: loss of $4m; 2018: gain of $13m) on debt instruments designated at fair value through profit or loss have been
included within Interest and fair value adjustments in respect of debt designated at fair value through profit or loss, net of derivatives.
4 Taxation
Taxation recognised in the Consolidated Statement of Comprehensive Income is as follows:
Current tax expense
Current year
Adjustment to prior years
Total
Deferred tax expense
Origination and reversal of temporary differences
Adjustment to prior years
Total
Taxation recognised in the profit for the period
Taxation relating to components of Other comprehensive income is as follows:
Current and deferred tax
Items that will not be reclassified to profit or loss:
Remeasurement of the defined benefit liability
Net (gains)/losses on equity investments measured at fair value through other comprehensive income
Deferred tax charge/(credit) relating to change of tax rates
Total
Items that may be reclassified subsequently to profit or loss:
Foreign exchange arising on consolidation
Foreign exchange arising on designated borrowings in net investment hedges
Deferred tax credit relating to change of tax rates
Total
Taxation relating to components of other comprehensive income
The reported tax rate in the year was 20%.
2020
$m
981
(10)
971
(178)
(21)
(199)
772
2020
$m
36
(180)
63
(81)
(61)
22
–
(39)
(120)
2019
$m
1,243
66
1,309
(875)
(113)
(988)
321
2019
$m
81
(60)
–
21
34
4
–
38
59
2018
$m
711
38
749
(644)
(162)
(806)
(57)
2018
$m
37
30
(11)
56
69
–
(18)
51
107
The income tax paid for the year was $1,562m which was 40% of Profit before Tax.
Taxation has been provided at current rates on the profits earned for the periods covered by the Group Financial Statements. The 2020 prior period
current tax adjustment relates mainly to net reductions in provisions for tax contingencies and tax accrual to tax return adjustments. The 2019 prior
period current tax adjustment relates mainly to net increases in provisions for tax contingencies and tax accrual to tax return adjustments. The 2018
prior period current tax adjustments relate mainly to net reductions in provisions for tax contingencies and tax accrual to tax return adjustments.
The 2020 prior period deferred tax adjustments relate mainly to tax accrual to return adjustments offset by net increases in provisions for tax
contingencies. The 2019 and 2018 prior period deferred tax adjustments relate mainly to tax accrual to return adjustments.
To the extent that dividends remitted from overseas subsidiaries, joint ventures and associates are expected to result in additional taxes, appropriate
amounts have been provided for. No deferred tax has been provided for unremitted earnings of Group companies overseas as these are considered
permanently employed in the business of these companies. Unremitted earnings may be liable to overseas taxes and/or UK taxation (after allowing for
double tax relief) if distributed as dividends. The aggregate amount of temporary differences associated with investments in subsidiaries and branches
for which Deferred tax liabilities have not been recognised totalled approximately $5,742m at 31 December 2020 (2019: $4,902m; 2018: $8,144m).
190
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued
Factors affecting future tax charges
As a group with worldwide operations, AstraZeneca is subject to several factors that may affect future tax charges, principally the levels and mix
of profitability in different jurisdictions, transfer pricing regulations, tax rates imposed and tax regime reforms.
Details of the material tax exposures and items currently under audit, negotiation and review are set out in Note 29.
Tax reconciliation to UK statutory rate
The table below reconciles the UK statutory tax charge to the Group’s total tax charge/(credit):
Profit before tax
Notional taxation charge at UK corporation tax rate of 19%
Differences in effective overseas tax rates
Deferred tax charge/(credit) relating to change in tax rates1
Unrecognised deferred tax asset2
Items not deductible for tax purposes
Items not chargeable for tax purposes
Other items3
Adjustments in respect of prior periods4
Total tax charge/(credit) for the year
2020
$m
3,916
744
(49)
138
3
36
(4)
(65)
(31)
772
2019
$m
1,548
294
(49)
39
(16)
92
(13)
21
(47)
321
2018
$m
1,993
379
18
(334)
7
167
(6)
(164)
(124)
(57)
1 The 2020 item relates to the increase in the 2020 substantively enacted Dutch Corporate Income Tax rate (debit of $151m) and other (debit of $5m). In 2020, it was substantively enacted that
the planned reduction in the Dutch Corporate Income Tax rate to 21.7% from 25% effective 1 January 2021 would not take place. In addition, the planned reduction in the UK corporation tax
rate to 17% was not enacted with the corporation tax rate remaining at 19% (credit of $18m). The 2019 item relates to the increase in the 2019 substantively enacted Dutch Corporate Income
Tax rate (debit of $66m) and other (credit of $27m). In 2019, it was substantively enacted that the Dutch Corporate Income Tax rate for the year ended 31 December 2020 would increase from 22.55%
to 25% and effective 1 January 2021 would increase from 20.5% to 21.7%. The 2018 item relates to the 2018 reduction in the Dutch and Swedish Corporate Income Tax rates (credit of $297m)
and other (credit of $37m).
2 The 2020 item includes a $22m credit arising on recognition of previously unrecognised deferred tax assets. The 2019 item includes a $27m credit arising on recognition of previously unrecognised
deferred tax assets.
3 Other items in 2020 relate to a net credit of $65m relating to the release of tax contingencies following the expiry of the relevant statute of limitations partially offset by a provision for transfer
pricing and other contingencies. Other items in 2019 relate to a charge of $309m relating to collaboration and divestment activity, a credit of $70m relating to internal transfers of intellectual
property and a net credit of $218m relating to the release of tax contingencies following the expiry of the relevant statute of limitations and on the conclusion of tax authority review partially
offset by a provision for transfer pricing and other contingencies. Other items in 2018 relate to a credit of $188m relating to the release of tax contingencies following the expiry of the relevant
statute of limitations and on the conclusion of tax authority review partially offset by a provision for transfer pricing and other contingencies (charge $24m).
4 Further details explaining the adjustments in respect of prior periods is set out on page 190.
AstraZeneca is domiciled in the UK but operates in other countries where the tax rates and laws are different to those in the UK. The impact on
differences in effective overseas tax rates on the Group’s overall tax charge is noted above. Profits arising from our manufacturing operation in
Puerto Rico are granted special status and are taxed at a reduced rate compared with the normal rate of tax in that territory under a tax incentive
grant continuing until 2031.
Deferred tax
The total movement in the net deferred tax balance in the year was $292m. The movements are as follows:
Intangibles,
Elimination of
Pension and
property, plant post-retirement unrealised profit
on inventory
$m
& equipment1
$m
benefits
$m
Net deferred tax balance at 1 January 2018
(3,852)
Net adjustment to the opening balance of Retained earnings
Income statement
Other comprehensive income
Equity
Exchange
Net deferred tax balance at 31 December 2018
Income statement
Other comprehensive income
Equity
Exchange
Net deferred tax balance at 31 December 2019
Income statement
Other comprehensive income
Equity
Exchange
Net deferred tax balance at 31 December 20203
–
401
56
–
27
(3,368)
1,055
34
–
14
(2,265)
(226)
(78)
–
(58)
(2,627)
509
–
(15)
26
–
(25)
495
(9)
79
–
(4)
561
(64)
101
–
58
656
831
–
179
–
–
(30)
980
312
–
–
1
1,293
444
–
–
70
1,807
Untaxed
reserves2
$m
(600)
–
(4)
–
–
47
(557)
(63)
–
–
22
(598)
(92)
(1)
–
(110)
(801)
Losses and
tax credits
carried forward
$m
Accrued
expenses
and other
$m
906
–
129
–
–
(27)
1,008
(480)
–
–
18
546
136
–
–
32
714
400
12
116
31
12
(36)
535
173
(30)
12
1
691
1
72
(16)
23
771
Total
$m
(1,806)
12
806
113
12
(44)
(907)
988
83
12
52
228
199
94
(16)
15
520
1
Includes deferred tax on contingent consideration liabilities in respect of intangibles.
2 Untaxed reserves relate to taxable profits where the tax liability is deferred to later periods.
3 The US includes a net deferred tax asset of $201m as at 31 December 2020, which has been recognised on the basis of sufficient forecast future taxable profits against which the deductible
temporary differences can be utilised.
191
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements 4 Taxation continued
The net deferred tax balance, before the offset of balances within countries, consists of:
Intangibles,
property, plant
& equipment
$m
Pension and
post-retirement
benefits
$m
Elimination of
unrealised profit
on inventory
$m
Untaxed
reserves
$m
Losses and
tax credits
carried forward
$m
Accrued
expenses
and other
$m
Deferred tax assets at 31 December 2018
Deferred tax liabilities at 31 December 2018
Net deferred tax balance at 31 December 2018
Deferred tax assets at 31 December 2019
Deferred tax liabilities at 31 December 2019
Net deferred tax balance at 31 December 2019
Deferred tax assets at 31 December 2020
Deferred tax liabilities at 31 December 2020
Net deferred tax balance at 31 December 2020
1,071
(4,439)
(3,368)
1,091
(3,356)
(2,265)
1,061
(3,688)
(2,627)
521
(26)
495
591
(30)
561
690
(34)
656
1,287
(307)
980
1,543
(250)
1,293
2,286
(479)
1,807
–
(557)
(557)
–
(598)
(598)
–
(801)
(801)
Analysed in the Consolidated Statement of Financial Position, after offset of balances within countries, as:
Deferred tax assets
Deferred tax liabilities
Net deferred tax balance
1,103
(95)
1,008
608
(62)
546
852
(138)
714
2020
$m
3,438
(2,918)
520
913
(378)
535
959
(268)
691
1,130
(359)
771
2019
$m
2,718
(2,490)
228
Total
$m
4,895
(5,802)
(907)
4,792
(4,564)
228
6,019
(5,499)
520
2018
$m
2,379
(3,286)
(907)
Unrecognised deferred tax assets
Deferred tax assets (DTA) of $428m (2019: $441m; 2018: $444m) have not been recognised in respect of deductible temporary differences because
it is not probable that future taxable profit will be available against which the Group can utilise the benefits therefrom.
2020
Temporary
differences
$m
2020
Unrecognised
DTA
$m
2019
Temporary
differences
$m
2019
Unrecognised
DTA
$m
2018
Temporary
differences
$m
2018
Unrecognised
DTA
$m
Trading and capital losses expiring:
Within 10 years
More than 10 years
Indefinite
Tax credits and State tax losses expiring:
Within 10 years
More than 10 years
Indefinite
Total
33
1
218
252
2
–
234
236
–
–
63
63
36
255
74
365
428
5 Earnings per $0.25 Ordinary Share
Profit for the year attributable to equity holders ($m)
Basic earnings per Ordinary Share
Diluted earnings per Ordinary Share
Weighted average number of Ordinary Shares in issue for basic earnings (millions)
Dilutive impact of share options outstanding (millions)
Diluted weighted average number of Ordinary Shares in issue (millions)
The earnings figures used in the calculations above are post-tax.
9
–
62
71
44
259
67
370
441
2020
3,196
$2.44
$2.44
1,312
1
1,313
4
4
175
183
2019
1,335
$1.03
$1.03
1,301
–
1,301
1
1
51
53
40
281
70
391
444
2018
2,155
$1.70
$1.70
1,267
–
1,267
192
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued 6 Segment information
The Group has reviewed its assessment of reportable segments under IFRS 8 ‘Operating Segments’ and concluded that the Group continues to
have one reportable segment.
KJ This determination is considered to be a Key Judgment and this judgement has been taken with reference to the following factors:
1 The level of integration across the different functions of the Group’s pharmaceutical business:
AstraZeneca is engaged in a single business activity of pharmaceuticals and the Group does not have multiple operating segments. AstraZeneca’s
pharmaceuticals business consists of the discovery and development of new products, which are then manufactured, marketed and sold. All of these
functional activities take place (and are managed) globally on a highly integrated basis. These individual functional areas are not managed separately.
2 The identification of the Chief Operating Decision Maker (CODM) and the nature and extent of the financial information reviewed by the CODM:
The SET, established and chaired by the CEO, is the vehicle through which he exercises the authority delegated to him from the Board for the
management, development and performance of our business. It is considered that the SET is AstraZeneca’s chief operating decision making body
(as defined by IFRS 8). The operation of the SET is principally driven by the management of the Commercial operations, R&D, manufacturing and
supply. All significant operating decisions are taken by the SET. While members of the SET have responsibility for implementation of decisions in
their respective areas, operating decision making is at SET level as a whole. Where necessary, these are implemented through cross-functional
sub-committees that consider the Group-wide impact of a new decision. For example, product launch decisions would be initially considered by
the SET and, on approval, passed to an appropriate sub team for implementation. The impacts of being able to develop, produce, deliver and
commercialise a wide range of pharmaceutical products drive the SET decision making process.
In assessing performance, the SET reviews financial information on an integrated basis for the Group as a whole, substantially in the form of, and
on the same basis as, the Group’s IFRS Financial Statements. The high upfront cost of discovering and developing new products, coupled with
the relatively insignificant and stable unit cost of production, means that there is not the clear link that exists in many manufacturing businesses
between the revenue generated on an individual product sale and the associated cost and hence margin generated on a product. Consequently,
the profitability of individual drugs or classes of drugs is not considered a key measure of performance for the business and is not monitored by
the SET. The focus of additional financial information reviewed is at brand sales level within specific geographies. Expenditure analysis is completed
for the science units, operations and enabling functions; there is no allocation of these centrally managed group costs to the individual product
brands. SET members’ bonus continues to be derived from the Group scorecard outcome as discussed in our Directors Remuneration Report.
3 How resources are allocated:
Resources are allocated on a Group-wide basis according to need. In particular, capital expenditure, in-licensing, and R&D resources are allocated
between activities on merit, based on overall therapeutic considerations and strategy under the aegis of the Group’s Early Stage Product Committees
and a single Late Stage Product Committee.
Geographic areas
The following table shows information for Total Revenue by geographic area and material countries. The additional tables show the Operating profit
and Profit before tax made by companies located in that area, together with Non-current assets, Total assets, assets acquired, net operating assets,
and Property, plant and equipment owned by the same companies. Product Sales by geographic market are included in the area/country where the
legal entity resides and from which those sales were made.
UK
Continental Europe
France
Germany
Italy
Spain
Sweden
Others
The Americas
Canada
US
Others
Asia, Africa & Australasia
Australia
China
Japan
Others
Total Revenue
2020
$m
1,741
653
937
431
398
1,026
1,391
4,836
596
8,955
761
10,312
282
5,345
2,567
1,534
9,728
2019
$m
1,822
578
704
396
359
834
1,291
4,162
466
8,047
814
9,327
266
4,867
2,522
1,418
9,073
Total Revenue
2018
$m
2,390
617
592
426
396
477
1,312
3,820
483
7,240
806
8,529
313
3,778
1,952
1,308
7,351
26,617
24,384
22,090
Total Revenue outside of the UK totalled $24,876m for the year ended 31 December 2020 (2019: $22,562m; 2018: $19,700m).
193
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements 6 Segment information continued
UK
Continental Europe
The Americas
Asia, Africa & Australasia
Continuing operations
UK
Continental Europe
The Americas
Asia, Africa & Australasia
Continuing operations
UK
Continental Europe
The Americas
Asia, Africa & Australasia
Continuing operations
Operating profit/(loss)
Profit/(loss) before tax
2020
$m
824
2,838
758
742
5,162
2020
$m
7,900
15,821
18,501
1,354
43,576
2020
$m
1,611
505
286
116
2,518
2019
$m
466
1,502
(8)
964
2,924
2018
$m
(66)
3,671
(757)
539
3,387
Non-current assets1, 2
2019
$m
6,874
15,245
19,663
1,253
43,035
2019
$m
2,255
386
236
120
2,997
2018
$m
4,828
14,529
22,191
976
42,524
Assets acquired3
2018
$m
556
530
356
105
1,547
2020
$m
518
2,356
297
745
3,916
2020
$m
17,851
19,738
23,640
5,500
66,729
2020
$m
5,244
10,242
15,697
607
31,790
2019
$m
93
1,006
(474)
923
1,548
2019
$m
15,302
18,182
23,380
4,513
61,377
2018
$m
(514)
3,179
(1,171)
499
1,993
Total assets
2018
$m
13,573
17,119
26,381
3,578
60,651
Net operating assets4
2019
$m
4,206
9,201
15,929
1,432
30,768
2018
$m
3,471
8,913
18,598
1,037
32,019
1 Non-current assets exclude Deferred tax assets and Derivative financial instruments.
2 The Group has revised the presentation of Non-current assets in 2019 previously disclosed as $42,746m to $43,035m. This is due to omission of $289m of these assets from the prior
year disclosure.
Included in Assets acquired are those assets that are expected to be used during more than one period (Property, plant and equipment, Goodwill and Intangible assets).
3
4 Net operating assets exclude short-term investments, cash, short-term borrowings, loans, Derivative financial instruments, retirement benefit obligations and non-operating receivables
and payables.
UK
Sweden
US
Rest of the world
Continuing operations
Geographic markets
The table below shows Product Sales in each geographic market in which customers are located.
UK
Continental Europe
The Americas
Asia, Africa & Australasia
Continuing operations
2020
$m
2,227
1,755
2,662
1,607
8,251
2020
$m
611
4,446
10,004
10,829
25,890
Property, plant and equipment
2019
$m
1,920
1,488
2,758
1,522
7,688
2019
$m
458
3,891
9,032
10,184
23,565
2018
$m
1,605
1,456
2,844
1,516
7,421
2018
$m
469
4,388
8,177
8,015
21,049
Product Sales are recognised when control of the goods has been transferred to a third party. In general, this is upon delivery of the products to
wholesalers. One wholesaler (2019: one; 2018: one) individually represented greater than 10% of Product Sales. The value of Product Sales to this
wholesaler was $3,321m (2019: $3,078m; 2018: $2,704m).
194
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued 7 Property, plant and equipment
Land and
buildings
$m
Plant and
equipment
$m
Assets in
course of
construction
$m
Total property,
plant and
equipment
$m
Cost
At 1 January 2018
Capital expenditure
Transfer of assets into use
Disposals and other movements
Exchange adjustments
At 31 December 2018
Capital expenditure
Transfer of assets into use
Disposals and other movements
Exchange adjustments
At 31 December 2019
Capital expenditure
Transfer of assets into use
Disposals and other movements
Exchange adjustments
At 31 December 2020
Depreciation and impairment
At 1 January 2018
Depreciation charge for the year
Impairment charge
Disposals and other movements
Exchange adjustments
At 31 December 2018
Depreciation charge for the year
Impairment (reversal)/charge
Disposals and other movements
Exchange adjustments
At 31 December 2019
Depreciation charge for the year
Impairment (reversal)/charge
Disposals and other movements
Exchange adjustments
At 31 December 2020
Net book value
At 31 December 2018
At 31 December 2019
At 31 December 2020
5,023
25
429
50
(161)
5,366
8
403
(236)
(9)
5,532
10
137
(48)
220
5,851
2,231
202
150
10
(89)
2,504
209
(67)
(120)
(21)
7,183
99
594
(427)
(353)
7,096
48
620
(324)
(57)
7,383
42
462
(615)
466
7,738
4,793
412
98
(336)
(253)
4,714
438
14
(313)
(45)
2,505
4,808
227
(1)
(42)
137
462
2
(606)
324
2,826
4,990
2,433
910
(1,023)
(14)
(129)
2,177
940
(1,023)
(11)
3
14,639
1,034
–
(391)
(643)
14,639
996
–
(571)
(63)
2,086
15,001
874
(599)
(18)
135
926
–
(681)
821
2,478
16,067
–
–
43
(43)
–
–
–
–
–
–
–
–
12
(12)
–
–
7,024
614
291
(369)
(342)
7,218
647
(53)
(433)
(66)
7,313
689
13
(660)
461
7,816
7,421
7,688
8,251
2,862
3,027
3,025
2,382
2,575
2,748
2,177
2,086
2,478
Impairment charges in 2019 were recognised for Land and buildings and Plant and equipment as a result of the announcement of the closure of the
Wedel manufacturing site and the cessation of specific operations in Algeria. These charges were recognised in Cost of sales in 2019. Impairment
reversals were recognised in 2019 of $23m in relation to the Longmont, Colorado manufacturing site (sold in March 2019) and the Boulder, Colorado
manufacturing site of $70m (sold in May 2020). These assets had been fully impaired during 2018.
Included within other movements in 2019 is a transfer of $70m from Land and buildings to Assets held for sale in relation to the Boulder
manufacturing site.
The net book value of land and buildings comprised:
Freeholds
Leaseholds
2020
$m
2,583
442
2019
$m
2,657
370
2018
$m
2,567
295
195
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements 8 Leases
Right-of-use assets
Cost
At 1 January 2019
Opening balance
Additions
Disposals and other movements
Exchange adjustments
At 31 December 2019
Additions
Disposals and other movements
Exchange adjustments
At 31 December 2020
Depreciation and impairment
At 1 January 2019
Depreciation charge for the year
Impairment charge
Disposals and other movements
Exchange adjustments
At 31 December 2019
Depreciation charge for the year
Disposals and other movements
Exchange adjustments
At 31 December 2020
Net book value
At 31 December 2019
At 31 December 2020
Lease Liability
The present value of lease liabilities is as follows:
Within one year
Later than one year and not later than five years
Later than five years
Total lease liabilities
Land and
buildings
$m
Motor
vehicles
$m
Other
$m
Total right-
of-use
assets
$m
–
580
85
(44)
6
627
87
–
21
735
–
130
4
(3)
1
132
131
(24)
8
247
495
488
–
124
85
(7)
–
202
89
(27)
8
272
–
70
–
(6)
–
64
75
(26)
4
117
138
155
2020
$m
(192)
(389)
(100)
(681)
–
18
3
1
–
22
15
(2)
1
36
–
7
–
1
–
8
9
(4)
–
13
14
23
2019
$m
(188)
(368)
(119)
(675)
–
722
173
(50)
6
851
191
(29)
30
1,043
–
207
4
(8)
1
204
215
(54)
12
377
647
666
2018
$m
–
–
–
–
Prior to 2019, the Group only recognised lease assets and lease liabilities in relation to leases that were classified as ‘finance leases’ under IAS 17
‘Leases’. The assets were presented within Property, plant and equipment and the liabilities within Interest-bearing loans and borrowings. Initial
adoption of IFRS 16 on 1 January 2019 resulted in the recognition of Right-of-use assets of $722m and Lease liabilities of $720m. The weighted
average incremental borrowing rate applied to the Lease liabilities on 1 January 2019 was 3%.
The interest expense on lease liabilities included within finance costs was $21m (2019: $22m). The expense relating to short-term leases was $2m
(2019: $1m). The expense relating to leases of Low-value assets that are not shown above as short-term leases was $1m (2019: $1m). The income
relating to variable lease payments not included in lease liabilities was $1m (2019: $nil). Income recognised from subleasing was $7m (2019: $4m).
The total cash outflow for leases in 2020 was $228m (2019: $208m).
196
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued
Prior to adoption of IFRS 16 on 1 January 2019, total rentals under operating leases charged to profit were as follows:
Operating leases
2018
$m
188
Prior to adoption of IFRS 16 on 1 January 2019, the future minimum lease payments under operating leases that had an initial or remaining term in
excess of one year at 31 December 2019 were as follows:
Not later than one year
Later than one year and not later than five years
Later than five years
Total future minimum lease payments
9 Goodwill
Cost
At 1 January
Exchange and other adjustments
At 31 December
Amortisation and impairment losses
At 1 January
Exchange and other adjustments
At 31 December
Net book value
At 31 December
2018
$m
188
360
136
684
2018
$m
12,143
(121)
12,022
318
(3)
315
2020
$m
11,982
182
12,164
314
5
319
2019
$m
12,022
(40)
11,982
315
(1)
314
11,845
11,668
11,707
Goodwill is tested for impairment at the operating segment level, this being the level at which goodwill is monitored for internal management purposes.
As detailed in Note 6, the Group does not have multiple operating segments and is engaged in a single business activity of pharmaceuticals.
Recoverable amount is determined on a fair value less costs to sell basis using the market value of the Company’s outstanding Ordinary Shares.
Our market capitalisation is compared to the book value of the Group’s net assets and this indicates a significant surplus at 31 December 2020
(and 31 December 2019 and 31 December 2018). No goodwill impairment was identified.
197
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements
10 Intangible assets
Cost
At 1 January 2018
Additions – separately acquired
Transferred to assets held for sale (Note 18)
Disposals
Exchange and other adjustments
At 31 December 2018
Additions – separately acquired
Disposals
Exchange and other adjustments
At 31 December 2019
Additions – separately acquired
Disposals
Exchange and other adjustments
At 31 December 2020
Amortisation and impairment losses
At 1 January 2018
Amortisation for year
Impairment charges
Impairment reversals
Transferred to assets held for sale (Note 18)
Disposals
Exchange and other adjustments
At 31 December 2018
Amortisation for year
Impairment charges
Impairment reversals
Disposals
Exchange and other adjustments
At 31 December 2019
Amortisation for year
Impairment charges
Impairment reversals
Disposals
Exchange and other adjustments
At 31 December 2020
Net book value
At 31 December 2018
At 31 December 2019
At 31 December 2020
Product,
marketing and
distribution rights
$m
Other
intangibles
$m
Software
development
costs
$m
2,636
1,911
42,913
476
(2,486)
(630)
(1,137)
39,136
1,835
(35)
(282)
40,654
1,454
(970)
1,539
42,677
17,658
2,016
711
(28)
(1,504)
(294)
(652)
17,907
1,808
1,034
(3)
(29)
(112)
20,605
1,872
405
(165)
(899)
746
–
–
–
(110)
2,526
99
–
24
2,649
2
(66)
57
2,642
2,004
69
–
–
–
–
(38)
2,035
52
–
–
–
10
2,097
59
–
–
(66)
38
22,564
2,128
21,229
20,049
20,113
491
552
514
Total
$m
47,460
513
(2,486)
(646)
(1,340)
43,501
2,001
(186)
(232)
45,084
1,592
(1,672)
1,603
46,607
21,272
2,165
711
(28)
(1,504)
(307)
(767)
21,542
1,928
1,036
(3)
(176)
(76)
24,251
1,992
405
(165)
(1,601)
778
25,660
21,959
20,833
20,947
37
–
(16)
(93)
1,839
67
(151)
26
1,781
136
(636)
7
1,288
1,610
80
–
–
–
(13)
(77)
1,600
68
2
–
(147)
26
1,549
61
–
–
(636)
(6)
968
239
232
320
Other intangibles consist mainly of research and device technologies.
Included within Additions − separately acquired are amounts of $835m (2019: $1,093m; 2018: $211m), relating to deferred payments and other non-cash
consideration for the acquisition of Product, marketing and distribution rights, which are not reflected in the current year Consolidated Statement of Cash
Flows. Disposals include amounts related to fully depreciated assets that are no longer in use by the Group.
198
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued
Amortisation charges are recognised in profit as follows:
Year ended 31 December 2018
Cost of sales
Research and development expense
Selling, general and administrative costs
Other operating income and expense
Total
Year ended 31 December 2019
Cost of sales
Research and development expense
Selling, general and administrative costs
Other operating income and expense
Total
Year ended 31 December 2020
Cost of sales
Research and development expense
Selling, general and administrative costs
Other operating income and expense
Total
Net impairment charges/(reversals) are recognised in profit as follows:
Year ended 31 December 2018
Research and development expense
Selling, general and administrative costs
Total
Year ended 31 December 2019
Research and development expense
Selling, general and administrative costs
Other operating income and expense
Total
Year ended 31 December 2020
Research and development expense
Selling, general and administrative costs
Total
Product,
marketing and
distribution rights
$m
Other
intangibles
$m
Software
development
costs
$m
187
–
1,829
–
2,016
87
–
1,721
–
1,808
66
–
1,806
–
1,872
–
33
32
4
69
–
29
19
4
52
–
29
28
2
59
–
–
80
–
80
–
–
68
–
68
–
–
61
–
61
Product,
marketing and
distribution rights
$m
Other
intangibles
$m
Software
development
costs
$m
539
144
683
609
425
(3)
1,031
55
185
240
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2
–
2
–
–
–
Total
$m
187
33
1,941
4
2,165
87
29
1,808
4
1,928
66
29
1,895
2
1,992
Total
$m
539
144
683
609
427
(3)
1,033
55
185
240
Impairment charges and reversals
Intangible assets under development and not available for use are tested annually for impairment and other intangible assets are tested when there
is an indication of impairment loss or reversal. Where testing is required, the recoverable amount of the assets is estimated in order to determine the
extent of the impairment loss or reversal. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the
recoverable amount of the Cash Generating Unit (CGU) to which it belongs. The Group considers that as the intangible assets are linked to individual
products and that product cash flows are considered to be largely independent of other product cash flows, the CGU for intangibles is at the product
level. Group level budgets and forecasts include forecast capital investment and operational impacts related to sustainability projects, and form the
basis for the value in use models used for impairment testing.
An asset’s recoverable amount is determined as the higher of an asset’s or CGU’s fair value less costs to sell or value in use, in both cases using
discounted cash flow calculations where the assets’ expected post-tax cash flows are risk-adjusted over their estimated remaining period of expected
economic benefit. Where the value in use approach is used, the risk-adjusted cash flows are discounted using AstraZeneca’s post-tax weighted
average cost of capital (7% for 2020, 2019 and 2018), with reference to comparable companies. There is no material difference in the approach taken
to using pre-tax cash flows and a pre-tax rate compared to post-tax cash flows and a post-tax rate, as required by IAS 36. Where fair value less costs
to sell is used to determine recoverable value, the discount rate is assessed with reference to a market participant; this is not usually materially different
to the AstraZeneca post-tax weighted average cost of capital rate of 7%.
SE The estimates used in calculating the recoverable amount are considered significant estimates, highly sensitive and depend on assumptions specific
to the nature of the Group’s activities including:
> outcome of R&D activities
> probability of technical and regulatory success
> market volume, share and pricing (to derive peak year sales)
> amount and timing of projected future cash flows
> sales erosion curves following patent expiry.
199
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements
10 Intangible assets continued
For assets held at fair value less costs to sell, we make appropriate adjustments to reflect market participant assessments.
In 2020, the Group recorded impairment charges of $350m in respect of launched products, including Duaklir ($200m, revised carrying amount of
$210m) under fair value less costs to sell, Bydureon ($102m, revised carrying amount of $581m) under value in use model, and other launched products
totalling $48m. The fair value less costs to sell valuation model for Duaklir is based on discounted cash flows, and is categorised at Level 3 in the fair
value hierarchy. Key assumptions in this model are forecast future revenue and costs of production. As these assets have been impaired in the current
year, there is limited headroom in the recoverable amount calculation and they are inherently sensitive to any changes in assumptions, which could
give rise to future impairments.
Impairment charges recorded against products in development totalled $55m.
In 2019, the Group recorded impairment charges of $425m in respect of launched products Bydureon ($154m, revised carrying amount of $747m)
under value in use model, Qtern ($89m, revised carrying amount of $233m) under value in use model, Eklira/Tudorza ($84m, revised carrying amount
of $192m) under value in use model, FluMist ($52m, revised carrying amount of $172m) under fair value less costs to sell and $46m relating to other
launched products. Impairment charges recorded against products in development related to Epanova ($533m) and other intangible assets ($76m).
In 2018, the Group recorded impairment charges of $144m in respect of launched products Eklira/Tudorza ($114m, revised carrying value of $396m)
and Movantik ($30m, revised carrying value of $59m). Impairment charges recorded against products in development related to MEDI0680 ($470m)
and other intangible assets ($95m).
The impairments recorded on launched products were a consequence of revised market volume, share and price assumptions. Impairments recorded
on products in development were a consequence of failed or poor performing trials, with the individual assets being fully impaired.
The Group has performed an assessment on assets which have had impairments recorded in previous periods to determine if any reversals of
impairments were required. Impairment reversals of $165m were recorded in 2020 in respect of launched products, including FluMist ($147m,
revised carrying amount of $300m, driven by expanded vaccination efforts increasing global demand), and other launched products of $18m.
No impairment reversals were recorded against products in development in 2020 (2019: $3m; 2018: $28m).
Sensitivities
When launched products, such as the ones detailed above, are partially impaired, the carrying values of these assets in future periods are particularly
sensitive to changes in forecast assumptions, including those assumptions set out above, as the asset is impaired down to its recoverable amount.
Assets that are particularly sensitive to variations in valuation assumptions include Ardea (carrying value of $1,172m) and Bydureon (carrying value of
$581m). The Ardea valuation is particularly sensitive to variations in the probability of technical and regulatory success (PTRS) assumptions. Sensitivities
performed at the year end on the Ardea asset included reducing the PTRS by five percentage points. Applying this sensitivity would result in an
impairment charge against the Ardea intangible asset of approximately $140m. If revenue projections for Bydureon were to fall by 15% over the forecast
period, this would result in a further impairment charge of approximately $110m.
SE Were the useful economic lives to be adjusted to reduce them all by one year, the net book value would be reduced by $526m. If the useful
economic lives were to be extended by one year, the net book value would increase by $275m.
Significant assets
Intangible assets arising from the acquisition of Acerta Pharma
Intangible assets arising from the acquisition of ZS Pharma
Enhertu intangible assets acquired from Daiichi Sankyo
Intangible assets arising from the acquisition of Ardea1
Other intangible assets acquired from Daiichi Sankyo1
Farxiga/Forxiga intangible assets acquired from BMS
Intangible assets arising from the restructuring of a historical joint venture with MSD
Intangible assets arising from the acquisition of Pearl Therapeutics
RSV franchise assets arising from the acquisition of MedImmune
Bydureon intangible assets acquired from BMS
Respiratory intangible assets acquired from Almirall and Actavis
Onglyza intangible assets acquired from BMS
Roxadustat intangible assets acquired from FibroGen
Other diabetes intangible assets acquired from BMS
Monalizumab intangible assets acquired from Innate Pharma1
1 Assets in development are not amortised but are tested annually for impairment.
Carrying value
$m
Remaining amortisation
period
5,781
2,746
1,651
1,172
1,060
952
797
765
764
581
527
462
444
391
344
12 years
11 years
13 years
Not amortised
Not amortised
6 years
1 to 9 years
8 to 9 years
5 years
10 years
4 to 18 years
3 years
9 years
2 to 5 years
Not amortised
The acquisition of intangible assets relating to DS-1062 in 2020 was assessed under the optional concentration test in IFRS 3 and was determined
to be an asset acquisition, as substantially all of the value of the gross assets acquired was concentrated in a single asset.
KJ In assessing whether the intangible assets and associated processes acquired from Daiichi Sankyo in 2019 were a business, we determined
that they were not at a stage of readiness to be able to obtain regulatory approval and manufacture and commercialise at scale. The transaction was
treated as an asset acquisition.
200
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued 11 Investments in associates and joint ventures
At 1 January
Additions
Share of after tax losses
Unrecognised profit on transactions with joint ventures
Exchange and other adjustments
At 31 December
2020
$m
58
8
(27)
–
–
39
2019
$m
89
74
(116)
–
11
58
2018
$m
103
187
(113)
(64)
(24)
89
On 23 February 2018, AstraZeneca entered into an agreement with a consortium of investors to form a new, US domiciled standalone company called
Viela Bio. This agreement was to divest a number of assets in MedImmune’s non-core inflammation and autoimmunity portfolio to Viela Bio, including
MEDI-551, which is an advanced Phase IIb/III asset, and a number of other clinical and pre-clinical assets. AstraZeneca contributed $142m in initial
funds and held an initial 45% interest in the joint venture. Consideration was $142m and a restricted disposal gain of $63m was recognised in Other
operating income in 2018. Viela Bio completed an IPO on 7 October 2019 with AstraZeneca investing $8m. After the IPO, AstraZeneca’s holding was
reduced to 29%. In May 2020, Viela Bio completed a follow-on financing reducing AstraZeneca’s holding to 26.7% with one member on a board size of
seven. Given the shareholding and board representation, the investment continues to be treated as an associate. During the year the Group provided
transitional research and development services to Viela Bio, comprising $3m (2019: $13m) of services provided directly by the Group and $15m
(2019: $24m) of passed-through third-party costs incurred by the Group on behalf of Viela Bio. At the end of the year, the Group had an outstanding
unsecured receivable of $2m (2019: $6m) settleable in cases on customary terms against which no credit loss provision has been made.
On 27 November 2017, AstraZeneca entered into a joint venture agreement with Chinese Future Industry Investment Fund (FIIF), to discover, develop and
commercialise potential new medicines to help meet unmet medical needs globally, and to bring innovative new medicines to patients in China more
quickly. The agreement resulted in the formation of a joint venture entity based in China, Dizal (Jiangsu) Pharmaceutical Co., Limited (Dizal). AstraZeneca
contributed $55m in initial funds and held an initial 48% interest in the joint venture. The joint venture entity purchased exclusive rights from
AstraZeneca in 2017 to develop and commercialise three potential medicines currently in pre-clinical development in the areas of oncology,
cardiovascular and metabolic diseases, and respiratory, resulting in a disposal gain of $28m for AstraZeneca recognised in Other operating income.
An additional contribution of $25m was made in 2019. In July 2020, Dizal completed a follow-on financing reducing AstraZeneca’s holding to 30.3%
with two members on a board size of seven. Given the shareholding and board representation, the investment continues to be treated as an associate.
On 1 December 2015, AstraZeneca entered into a joint venture agreement with Fujifilm Kyowa Kirin Biologics Co., Ltd. to develop a biosimilar using
the combined capabilities of the two parties. The agreement resulted in the formation of a joint venture entity based in the UK, Centus Biotherapeutics
Limited. AstraZeneca contributed $45m in cash to the joint venture entity and has a 50% interest in the joint venture. Additional contributions were
made of $10m in 2016, $20m in 2017, $27m in 2018, $20m in 2019 and $7.5m in 2020.
On 30 April 2014, AstraZeneca entered into a joint venture agreement with Samsung Biologics Co., Ltd. to develop a biosimilar using the combined
capabilities of the two parties. The agreement resulted in the formation of a joint venture entity based in the UK, Archigen Biotech Limited. Since its
establishment, AstraZeneca has contributed $131m in cash to the joint venture entity and has a 50% interest in the joint venture. At the end of the
year Archigen had net assets of $1m, of which AstraZeneca’s share is $0.4m, and the investment is held at $nil value.
All investments are accounted for using the equity method. At 31 December 2020, unrecognised losses in associates and joint ventures totalled $56m
(2019: $3m; 2018: $nil) which have not been recognised due to the investment carrying value reaching $nil value.
Aggregated summarised financial information for the associate and joint venture entities is set out below:
Non-current assets
Current assets
Total liabilities
Net assets
Amount attributable to AstraZeneca
Exchange adjustments
Carrying value of investments in associates and joint ventures
2020
$m
324
552
(105)
771
38
1
39
2019
$m
298
447
(89)
656
64
(6)
58
2018
$m
260
233
(71)
422
104
(15)
89
201
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements 12 Other investments
Non-current investments
Equity securities at fair value through Other comprehensive income
Fixed income securities at fair value through profit and loss
Total
Current investments
Fixed income securities at fair value through profit and loss
Fixed deposits
Total
2020
$m
1,108
–
1,108
118
42
160
2019
$m
1,339
62
1,401
811
38
849
2018
$m
833
–
833
809
40
849
Other investments held at fair value through Other comprehensive income include equity securities which are not held for trading and which the Group
has irrevocably elected at initial recognition to recognise in this category. Other investments held at fair value through profit and loss comprise fixed
income securities that the Group holds to sell.
The fair value of listed investments is based on year end quoted market prices. Fixed deposits are held at amortised cost with carrying value being
a reasonable approximation of fair value given their short-term nature.
Fair value hierarchy
The table below analyses equity securities and bonds, contained within Other investments and carried at fair value, by valuation method. The different
levels have been defined as follows:
> Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
> Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices)
> Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Level 1
Level 2
Level 3
Total
2020
FVPL
$m
118
–
–
118
2020
FVOCI
$m
891
–
217
1,108
2019
FVPL
$m
873
–
–
873
2019
FVOCI
$m
1,112
–
227
1,339
2018
FVPL
$m
809
–
–
809
2018
FVOCI
$m
667
–
166
833
During 2020, AstraZeneca sold a proportion of its equity portfolio receiving consideration of $1,381m, a large proportion of which related to the
disposal of its full holding in Moderna. All related gains were accounted through Other comprehensive income.
Equity securities that are analysed at Level 3 include investments in private biotech companies. In the absence of specific market data, these unlisted
investments are held at fair value based on the cost of investment and adjusting as necessary for impairments and revaluations on new funding rounds,
which approximates to fair value. Movements in Level 3 investments are detailed below:
At 1 January
Additions
Revaluations
Transfers out
Disposals
Impairments and exchange adjustments
At 31 December
2020
FVOCI
$m
227
96
63
(103)
(86)
20
217
2019
FVOCI
$m
166
5
56
2
(5)
3
227
2018
FVOCI
$m
675
79
(147)
(434)
(6)
(1)
166
Assets are transferred in or out of Level 3 on the date of the event or change in circumstances that caused the transfer.
202
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued
13 Derivative financial instruments
Interest rate swaps related to instruments designated at fair value through profit and loss
Cross currency swaps designated in a net investment hedge
Cross currency swaps designated in a cash flow hedge
Cross currency swaps designated in a fair value hedge1
Other derivatives
31 December 2018
Interest rate swaps related to instruments designated at fair value through profit and loss
Cross currency swaps designated in a net investment hedge
Cross currency swaps designated in a cash flow hedge
Cross currency swaps designated in a fair value hedge1
Other derivatives
31 December 2019
Interest rate swaps related to instruments designated at fair value through profit and loss
Cross currency swaps designated in a net investment hedge
Cross currency swaps designated in a cash flow hedge
Cross currency swaps designated in a fair value hedge1
Forward FX designated in a cash flow hedge2
Other derivatives
31 December 2020
Non-current
assets
$m
Current
assets
$m
Current
liabilities
$m
Non-current
liabilities
$m
40
–
101
16
–
157
–
213
–
–
45
258
–
–
–
–
(27)
(27)
–
(4)
–
–
–
(4)
Non-current
assets
$m
Current
assets
$m
Current
liabilities
$m
Non-current
liabilities
$m
43
4
4
10
–
61
–
–
–
–
36
36
–
–
–
–
(36)
(36)
–
(1)
(17)
–
–
(18)
Non-current
assets
$m
Current
assets
$m
Current
liabilities
$m
Non-current
liabilities
$m
45
19
107
–
–
–
–
–
43
43
8
48
171
142
–
–
–
–
(3)
(30)
(33)
–
(2)
–
–
–
–
(2)
Total
$m
40
209
101
16
18
384
Total
$m
43
3
(13)
10
–
43
Total
$m
45
17
150
43
5
18
278
1 Cross currency swaps designated in a fair value hedge refers to a cross currency interest rate swap that hedges a designated euro 300m portion of our euro 750m 0.875% 2021 non-callable
bond against exposure to movements in the euro:US dollar exchange rate.
2 Forward FX designated in a cash flow hedge relates to contracts hedging anticipated CNY, EUR, JPY and SEK transactions occurring in Q1 2021.
All derivatives are held at fair value and fall within Level 2 of the fair value hierarchy as defined in Note 12. None of the derivatives have been reclassified
in the year.
The fair value of interest rate swaps and cross currency swaps is estimated using appropriate zero coupon curve valuation techniques to discount
future contractual cash flows based on rates at the current year end.
The fair value of forward foreign exchange contracts and currency options are estimated by cash flow accounting models using appropriate yield
curves based on market forward foreign exchange rates at the year end. The majority of forward foreign exchange contracts for existing transactions
had maturities of less than one month from year end.
The interest rates used to discount future cash flows for fair value adjustments, where applicable, are based on market swap curves at the reporting
date, and were as follows:
Derivatives
14 Non-current other receivables
Prepayments
Accrued income
Other receivables
Non-current other receivables
2020
2019
2018
(0.5)% to 2.4% (0.5)% to 2.7% (0.4)% to 3.2%
2020
$m
395
56
269
720
2019
$m
392
10
338
740
2018
$m
461
–
54
515
Prepayments include $121m (2019: $125m; 2018: $146m) in relation to our research collaboration with Moderna. Other receivables include $nil
(2019: $118m; 2018: $nil) of outstanding payments relating to the out-licence of Duaklir and Tudorza to Circassia in 2017 and $56m (2019: $53m;
2018: $nil) owed by FibroGen for promotional activity in China pursuant to the roxadustat collaboration.
The 2018 balance included a prepayment of $114m which represented the long-term element of minimum contractual royalties payable to Shionogi
under the global licence agreement for Crestor, which was renegotiated in December 2013. The resulting modified royalty structure, which included
fixed minimum and maximum payments in years until 2020, resulted in the Group recognising liabilities, and corresponding prepayments, for the
discounted value of total minimum payments. At 31 December 2019 the prepayment was reported in amounts due within one year (see Note 16).
203
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements 15 Inventories
Raw materials and consumables
Inventories in process
Finished goods and goods for resale
Inventories
2020
$m
1,262
1,331
1,431
4,024
2019
$m
830
1,272
1,091
3,193
The Group recognised $3,110m (2019: $2,708m; 2018: $2,659m) of inventories as an expense within Cost of sales during the year.
Inventory write-offs in the year amounted to $149m (2019: $231m; 2018: $208m).
16 Current trade and other receivables
Amounts due within one year
Trade receivables
Less: Amounts provided for doubtful debts (Note 27)
Other receivables
Prepayments
Government grants receivable
Accrued income
Amounts due after more than one year
Prepayments
2020
$m
3,829
(23)
3,806
1,278
1,735
53
150
7,022
–
–
2019
$m
3,606
(21)
3,585
1,083
865
–
228
5,761
–
–
Trade and other receivables
7,022
5,761
2018
$m
794
1,450
646
2,890
2018
$m
3,033
(38)
2,995
1,143
871
–
492
5,501
73
73
5,574
Trade receivables includes $1,250m (2019: $892m; 2018: $724m) measured at FVOCI classified ‘hold to collect and sell’ as they are due from customers
that the Group has the option to factor.
All other financial assets included within current Trade and other receivables are held at amortised cost with carrying value being a reasonable
approximation of fair value.
17 Cash and cash equivalents
Cash at bank and in hand
Short-term deposits
Cash and cash equivalents
Unsecured bank overdrafts
Cash and cash equivalents in the cash flow statement
2020
$m
1,182
6,650
7,832
(286)
7,546
2019
$m
755
4,614
5,369
(146)
5,223
2018
$m
893
3,938
4,831
(160)
4,671
The Group holds $nil (2019: $1m; 2018: $86m) of Cash and cash equivalents which is required to meet insurance solvency, capital and
security requirements.
AstraZeneca invests in constant net asset value funds and low volatility net asset value funds with same day access for subscription and redemption.
These investments fail the ‘solely payments of principal and interest’ test criteria under IFRS 9. They are therefore measured at fair value through
profit and loss, although the fair value will be materially the same as amortised cost.
Non-cash and other movements, within operating activities in the Consolidated Statement of Cash Flows, includes:
Net (gains)/losses on disposal of non-current assets
Changes in fair value of put option (Acerta Pharma)
Share-based payments charge for the period
Settlement of share plan awards
Pension contributions
Pension charges recorded in operating profit
Long-term provision charges recorded in operating profit
Non-cash intangible additions
Foreign exchange and other
Total operating activities non-cash and other movements
2020
$m
(25)
–
277
(349)
(172)
84
66
(120)
(37)
(276)
2019
$m
21
172
259
(323)
(175)
59
506
–
(141)
378
2018
$m
8
(113)
219
(212)
(174)
128
63
–
(209)
(290)
Activities related to COVID-19 Vaccine AstraZeneca increased Net cash inflow from operating activities by $1,062m in the year. The movement primarily
related to changes in working capital balances including Vaccine contract liabilities, Deferred government grant income, Trade payables, Prepayments,
Government grants receivables and Inventory.
204
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued
18 Assets held for sale
There were no assets held for sale at year end (2019: $70m; 2018: $982m). In 2019, Assets held for sale comprised tangible assets relating to the
Boulder Manufacturing Centre, which was subsequently sold in May 2020. In 2018, Assets held for sale comprised intangible assets relating to the
US rights to RSV franchise assets (specifically Synagis) arising from the acquisition of MedImmune and to US rights to certain respiratory assets
acquired from Almirall and Actavis (including Tudorza), which were subsequently sold in January 2019.
19 Interest-bearing loans and borrowings
Current liabilities
Bank overdrafts
Other short-term borrowings excluding overdrafts
Bank collateral
Lease liabilities
1.95% Callable bond
2.375% Callable bond
0.25% Callable bond
0.875% Non-callable bond
Other loans (including commercial paper)
Total
Non-current liabilities
Lease liabilities
2.375% Callable bond
0.25% Callable bond
0.875% Non-callable bond
Floating rate notes
2.375% Callable bond
7% Guaranteed debentures
Floating rate notes
3.5% Callable bond
0.75% Callable bond
3.375% Callable bond
0.7% Callable bond
3.125% Callable bond
1.25% Callable bond
4% Callable bond
1.375% Callable bond
5.75% Non-callable bond
6.45% Callable bond
4% Callable bond
4.375% Callable bond
4.375% Callable bond
2.125% Callable bond
Other loans
Total
Total interest-bearing loans and borrowings1, 2
1 All loans and borrowings above are unsecured.
2 The floating rate notes which will be repaid beyond 2021 are expected to be impacted by the change in LIBOR reference rates.
At 1 January
Adoption of new accounting standards – Lease liabilities
Changes from financing cash flows
Issue of loans
Repayment of loans
Movement in short-term borrowings
Repayment of obligations under leases
Total changes in cash flows arising on financing activities
Movement in overdrafts
New lease liabilities
Exchange
Other movements
At 31 December
Repayment
dates
On demand
US dollars
US dollars
euros
euros
2019
2020
2021
2021
Within one year
2020
$m
286
84
288
192
–
–
614
919
3
2019
$m
146
8
71
188
–
1,597
–
–
–
2,386
2,010
US dollars
euros
euros
US dollars
US dollars
US dollars
US dollars
US dollars
euros
US dollars
US dollars
US dollars
euros
US dollars
US dollars
pounds sterling
US dollars
US dollars
US dollars
US dollars
US dollars
US dollars
2020
2021
2021
2022
2022
2023
2023
2023
2024
2025
2026
2027
2028
2029
2030
2031
2037
2042
2045
2048
2050
2018
$m
160
–
384
–
999
–
–
–
211
1,754
–
1,594
570
854
250
994
325
400
845
1,022
1,980
–
743
903
992
–
443
2,721
987
979
736
–
21
17,359
19,113
Total
loans and
borrowings
2018
$m
17,807
–
2,971
(1,400)
(98)
–
1,473
8
–
(177)
2
489
–
–
–
250
996
339
400
847
1,102
1,985
1,192
744
973
993
1,291
475
2,722
988
980
737
486
5
17,994
20,380
Total
loans and
borrowings
2020
$m
18,227
–
2,968
(1,609)
288
(207)
1,440
138
174
363
38
487
–
559
837
250
996
335
400
846
1,003
1,983
–
743
885
992
–
457
2,721
987
980
737
–
19
16,217
18,227
Total
loans and
borrowings
2019
$m
19,113
720
500
(1,500)
(516)
(186)
(1,702)
(13)
173
(62)
(2)
20,380
18,227
19,113
205
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements
19 Interest-bearing loans and borrowings continued
Set out below is a comparison by category of carrying values and fair values of all the Group’s interest-bearing loans and borrowings:
2018
Overdrafts
Loans due within one year
Loans due after more than one year
Total at 31 December 2018
2019
Overdrafts
Lease liabilities due within one year
Lease liabilities due after more than one year
Loans due within one year
Loans due after more than one year
Total at 31 December 2019
2020
Overdrafts
Lease liabilities due within one year
Lease liabilities due after more than one year
Loans due within one year
Loans due after more than one year
Total at 31 December 2020
Instruments in a
fair value hedge
relationship1
$m
Instruments
Instruments
designated
designated in
at fair value2 cash flow hedge
$m
$m
Amortised
cost
$m
–
–
346
346
–
–
–
–
339
339
–
–
–
371
–
371
–
–
325
325
–
–
–
–
335
335
–
–
–
–
339
339
–
–
2,495
2,495
–
–
–
–
2,447
2,447
–
–
–
614
2,075
2,689
160
1,594
14,193
15,947
146
188
487
1,676
12,609
15,106
286
192
489
923
15,091
16,981
Total
carrying
value
$m
160
1,594
17,359
19,113
146
188
487
1,676
15,730
18,227
286
192
489
1,908
17,505
20,380
Fair
value
$m
160
1,587
17,841
19,588
146
188
487
1,684
18,044
20,549
286
192
489
1,922
20,936
23,825
1
2
Instruments designated as hedged items in a fair value hedge relationship relate to a designated euro 300m portion of our euro 750m 0.875% 2021 non-callable bond. The accumulated amount
of fair value hedge adjustments to the bond is a loss of $44m.
Instruments designated at fair value through profit or loss include the US dollar 7% guaranteed debentures repayable in 2023.
The fair value of fixed-rate publicly traded debt is based on year end quoted market prices; the fair value of floating rate debt is nominal value, as
mark to market differences would be minimal given the frequency of resets. The carrying value of loans designated at fair value through profit or loss
is the fair value; this falls within the Level 1 valuation method as defined in Note 12. For loans designated in a fair value hedge relationship, carrying
value is initially measured at fair value and remeasured for fair value changes in respect of the hedged risk at each reporting date. All other loans
are held at amortised cost. Fair values, as disclosed in the table above, are all determined using the Level 1 valuation method as defined in Note 12,
with the exception of overdrafts and lease liabilities, where fair value approximates to carrying values.
A loss of $1m was made during the year on the fair value of bonds designated at fair value through profit or loss, due to decreased credit risk. A gain
of $29m has been made on these bonds since designation due to increased credit risk. Under IFRS 9, the Group records the component of fair value
changes relating to the component of own credit risk through Other comprehensive income. Changes in credit risk had no material effect on any
other financial assets and liabilities recognised at fair value in the Group Financial Statements. The change in fair value attributable to changes in
credit risk is calculated as the change in fair value not attributable to market risk. The amount payable at maturity on bonds designated at fair value
through profit or loss is $287m.
The interest rates used to discount future cash flows for fair value adjustments, where applicable, are based on market swap curves at the reporting
date, and were as follows:
Loans and borrowings
2020
2019
2018
(0.5)% to 0.1% (0.5)% to 1.6% (0.4)% to 2.4%
206
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued
20 Trade and other payables
Current liabilities
Trade payables
Value-added and payroll taxes and social security
Rebates, chargebacks, returns and other revenue accruals
Clinical trial accruals
Other accruals
Collaboration Revenue contract liabilities
Vaccine contract liabilities
Deferred government grant income
Contingent consideration
Other payables
Total
Non-current liabilities
Accruals
Collaboration Revenue contract liabilities
Contingent consideration
Acerta Pharma put option liability (Note 26)
Other payables
Total
2020
$m
2,350
390
4,772
699
3,905
12
1,616
253
647
1,141
15,785
56
38
2,676
2,297
1,017
6,084
2019
$m
1,774
323
4,410
736
4,026
28
–
–
897
1,793
13,987
34
50
3,242
2,146
819
6,291
2018
$m
1,720
204
4,043
993
3,951
92
–
–
867
971
12,841
7
78
4,239
1,838
608
6,770
Included within Rebates, chargebacks, returns and other revenue accruals are contract liabilities of $77m (2019: $97m; 2018: $126m). The revenue
recognised in the year for contract liabilities is $101m, comprising $73m relating to other revenue accruals and $28m Collaboration Revenue contract
liabilities. The most significant market where Rebates, chargebacks, returns and other revenue accruals are seen relates to the US where the liability
at 31 December 2020 amounted to $3,126m (2019: $3,385m; 2018: $3,266m).
Trade payables includes $248m (2019: $492m; 2018: $166m) due to suppliers that have signed up to a supply chain financing programme, under
which the suppliers can elect on an invoice-by-invoice basis to receive a discounted early payment from the partner bank rather than being paid
in line with the agreed payment terms. If the option is taken, the Group’s liability is assigned by the supplier to be due to the partner bank rather
than the supplier. The value of the liability payable by the Group remains unchanged. The Group assesses the arrangement against indicators to
assess if debts which vendors have sold to the funder under the supplier financing scheme continue to meet the definition of trade payables or
should be classified as borrowings. At 31 December 2020, the payables met the criteria of Trade payables.
Vaccine contract liabilities relate to amounts received from customers, primarily government bodies, in advance of supply of product. Substantially
all of the vaccine contract liabilities are expected to be recognised as revenue during the next financial year.
Deferred government grant income relates to government grants received or receivable but for which the related expenses have not been incurred.
Included within current Other payables are liabilities to Daiichi Sankyo totalling $146m (2019: $795m; 2018: $nil) resulting from the collaboration
agreement in relation to Enhertu entered into in March 2019 and $324m (2019: $nil; 2018: $nil) in relation to DS-1062 entered into in July 2020.
Additionally, included within non-current Other payables are liabilities totalling $100m (2019: $241m; 2018: $nil) as a result of the Enhertu collaboration
agreement and $323m (2019: $nil; 2018: $nil) as a result of the DS-1062 collaboration agreement.
On 5 November 2020, Calquence received marketing approval in the EU, which removed all remaining conditionality in respect of the Acerta Pharma
put and call options regarding the non-controlling interest (see Note 26). Based on the latest assessment of the expected timing and amount of the
Acerta Pharma put option redemption, no remeasurement was required in 2020. In 2019, remeasurement of the liability resulted in an increase
(2018: decrease) in the liability for the year before the effect of interest costs, with the remeasurement taken to Selling, general and administrative
costs (see Note 2). In October 2019, an amendment to the share purchase and option agreement (SPOA) with the sellers of Acerta Pharma (originally
entered into in December 2015) came into effect, changing certain terms of the SPOA on both the timing and also reducing the maximum consideration
that would be required to be made to acquire the remaining outstanding shares of Acerta Pharma if the options are exercised. The payments would
be made in similar annual instalments commencing at the earliest from 2022 through to 2024, subject to the options being exercised. The changes
to the terms have been reflected in the assumptions used to calculate the amortised cost of the option liability as at 31 December 2020 of $2,297m
(2019: $2,146m; 2018: $1,838m). Interest arising from amortising the liability is included within Finance Expense (see Note 3). Upon exercise of the
option, the associated cash flows will be disclosed as financing activities within the Consolidated Statement of Cash Flows.
With the exception of Contingent consideration payables of $3,323m (2019: $4,139m; 2018: $5,106m) which are held at fair value within Level 3 of the
fair value hierarchy as defined in Note 12, all other financial liabilities are held at amortised cost with carrying value being a reasonable approximation
of fair value.
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AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements
20 Trade and other payables continued
Contingent consideration
At 1 January
Settlements
Revaluations
Discount unwind (Note 3)
At 31 December
2020
$m
4,139
(822)
(272)
278
3,323
2019
$m
5,106
(709)
(614)
356
4,139
2018
$m
5,534
(349)
(495)
416
5,106
Contingent consideration arising from business combinations is fair valued using decision-tree analysis, with key inputs including the probability of
success, consideration of potential delays and the expected levels of future revenues.
Revaluations of Contingent consideration are recognised in Selling, general and administrative costs and include a decrease of $51m in 2020
(2019: $516m; 2018: $482m) based on revised milestone probabilities, and revenue and royalty forecasts, relating to the acquisition of BMS’s share
of the Global Diabetes Alliance. Discount unwind on the liability is included within Finance expense (see Note 3).
The discount rate used for the Contingent consideration balances range from 7% to 9%. The most significant Contingent consideration balance is
the Global Diabetes Alliance and this is discounted at 8%.
Management has identified that reasonably possible changes in certain key assumptions, including the likelihood of achieving successful trial results,
obtaining regulatory approval, the projected market share of the therapy area and expected pricing for launched products, may cause the calculated
fair value of the above Contingent consideration to vary materially in future years.
SE The Contingent consideration balance relating to BMS’s share of Global Diabetes Alliance of $2,932m (2019: $3,300m; 2018: $3,983m) would
increase/decrease by $293m with an increase/decrease in sales of 10% as compared with the current estimates.
The maximum development and sales milestones payable under outstanding Contingent consideration arrangements arising on business combinations
are as follows:
Acquisitions
Spirogen
Amplimmune
Pearl Therapeutics
Almirall1
Year
2013
2013
2013
2014
Nature of
contingent consideration
Maximum future milestones
$m
Milestones
Milestones
Milestones
Milestones and royalties
180
150
140
420
1 These contingent consideration liabilities have been designated as the hedge instrument in a net investment hedge of foreign currency risk arising on the Group’s underlying US dollar net
investments held in non-US dollar denominated subsidiaries. Exchange differences on the retranslation of the contingent consideration liability are recognised in Other comprehensive
income to the extent that the hedge is effective. Any ineffectiveness is taken to profit.
The amount of royalties payable under the arrangements is inherently uncertain and difficult to predict, given the direct link to future sales and the
range of outcomes. The maximum amount of royalties payable in each year is with reference to net sales.
21 Provisions
At 1 January 2018
Charge for year
Cash paid
Reversals
Exchange and other movements
At 31 December 2018
Charge for year
Cash paid
Reversals
Exchange and other movements
At 31 December 2019
Transfers in1
Charge for year
Cash paid
Reversals
Exchange and other movements
At 31 December 2020
Severance
$m
Environmental
$m
358
94
(152)
(58)
(16)
226
158
(115)
(30)
2
241
–
116
(62)
(89)
8
214
59
65
(24)
–
(3)
97
31
(39)
(1)
8
96
–
34
(30)
–
–
100
Employee
benefits
$m
126
1
(9)
–
1
119
18
(13)
–
6
130
–
15
(48)
(2)
33
128
Legal
$m
654
11
(232)
(230)
(5)
198
618
(147)
(28)
1
642
–
16
(295)
(14)
(1)
348
Other
provisions
$m
271
30
(28)
(28)
6
251
236
(24)
(17)
9
455
258
95
(56)
(27)
45
770
Total
$m
1,468
201
(445)
(316)
(17)
891
1,061
(338)
(76)
26
1,564
258
276
(491)
(132)
85
1,560
1 The Group revised its presentation of certain provisions ($258m) in 2020, which cover third-party liability and other risks (including incurred but not yet reported claims) to present this within
current Other provisions. This balance has historically been presented within current Other payables. Upon review of the balances, the claims are considered to be uncertain as to timing and
amount and therefore treatment as a provision is deemed more appropriate. The prior year comparatives have not been restated as the change in presentation on the financial statement line
items impacted is not considered to be material.
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AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued Due within one year
Due after more than one year
Total
2020
$m
976
584
2019
$m
723
841
1,560
1,564
2018
$m
506
385
891
Severance provisions arise from global restructuring initiatives which involve rationalisation of the global supply chain, the sales and marketing
organisation, IT and business support infrastructure, and R&D. Employee costs in connection with the initiatives are recognised in severance provisions.
Final severance costs are often subject to the completion of the requisite consultations on the areas impacted. AstraZeneca endeavours to support
employees affected by restructuring initiatives to seek alternative roles within the organisation. Where the employee is successful, any severance
provisions will be released.
Details of the environmental and legal provisions totalling $100m (2019: $96m; 2018: $97m) and $348m (2019: $642m; 2018: $198m), respectively, and
ongoing matters are provided in Note 29. The legal issues are often subject to substantial uncertainties with regard to the timing and final amounts of
any payments. As such, once established these provisions remain in Provisions until settlement is reached and uncertainty resolved, with no transfer
to Trade and other payables prior to payment. A significant proportion of the total legal provision relates to matters settled in previous periods. These
uncertainties can also cause reversal in previously established provisions once final settlement is reached.
Employee benefit provisions include the Deferred Bonus Plan. Further details are included in Note 28.
Other provisions comprise amounts relating to specific contractual or constructive obligations and disputes. The majority of other provisions relates
to amounts associated with long-standing product liability settlements that arose prior to the merger of Astra and Zeneca. Given the nature of the
provision the amounts are expected to be settled over many years.
No provision has been released or applied for any purpose other than that for which it was established.
22 Post-retirement and other defined benefit schemes
Background
This section predominantly covers defined benefit arrangements like post retirement pension and medical plans which make up the vast bulk of the
Group’s liabilities. However, it also incorporates other benefits which fall under IAS 19 rules and which require an actuarial valuation, including but
not limited to: Lump Sum plans, Long Service Awards and defined contribution pension plans which have some defined benefit characteristics
(e.g. a minimum guaranteed level of benefit).
The Group and most of its subsidiaries offer retirement plans which cover the majority of employees in the Group. The Group’s policy is to provide
defined contribution (DC) orientated pension provision to its employees unless otherwise compelled by local regulation. As a result, many of these
retirement plans are DC, where the Group contribution and resulting charge is fixed at a set level or is a set percentage of employees’ pay.
However, several plans, mainly in the UK, the US and Sweden, are defined benefit (DB), where benefits are based on employees’ length of service
and linked to their salary. The major defined benefit plans are largely legacy arrangements as they have been closed to new entrants since 2000,
apart from the collectively bargained Swedish plan (which is still open to employees born before 1979). During 2010, following consultation with its
UK employees’ representatives, the Group introduced a freeze on pensionable pay at 30 June 2010 levels for defined benefit members of the UK
Pension Fund. The number of active members in the Fund continues to decline and is now 579 employees. In November 2017, the Group closed
the qualified and non-qualified US defined benefit pension plans to future accrual (and removed any salary link) from 31 December 2017.
The major defined benefit plans are funded through separate, fiduciary-administered assets. The cash funding of the plans, which may from time
to time involve special Group payments, is designed, in consultation with independent qualified actuaries, to ensure that the assets are sufficient
to meet future obligations as and when they fall due. The funding level is monitored rigorously by the Group and by local fiduciaries, who take into
account the strength of the Group’s covenant, local regulation, cash flows, and the solvency and maturity of the relevant pension scheme.
Financing principles
Ninety per cent of the Group’s total defined benefit obligations (or 77% of net obligations) at 31 December 2020 are in schemes within the UK, the US
and Sweden. In these countries, the pension obligations are funded in line with the Group’s financing principles. There were no fundamental changes
to these principles during 2020. The Group believes:
> in funding the benefits it promises to employees (when compatible with local regulation and best practice) and in meeting its obligations
> that the pension arrangements should be considered in the context of its broader capital structure. In general, it does not believe in committing
excessive capital for funding when the Group might use the capital elsewhere to reinvest in the wider business, nor does it wish to generate surpluses
> in taking some measured and rewarded risks with the investments underlying the funding, subject to a long-term plan to reduce those risks when
opportunities arise
> that holding certain investments may cause volatility in the funding position. However, the Group would not wish to amend its contribution level
for relatively small deviations in funding level, because it is expected that there will be short-term volatility, but it is prepared to react appropriately
to more significant deviations
> that proactive engagement with local Fiduciary Bodies is necessary and helpful to provide robust oversight and input in relation to funding and
investment strategy and to facilitate liability management exercises appropriate to each pension plan
> in considering the use of alternative methods of providing security that do not require immediate cash funding but help mitigate exposure of the
pension arrangement to the credit risk of the Group.
These principles are appropriate at the present date but they are kept under ongoing review and, should circumstances change, these principles
may be subject to change.
209
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements 22 Post-retirement and other defined benefit schemes continued
The Group has developed a long-term funding framework to implement these principles. This framework targets either full funding on a low-risk funding
measure or buy-out with an external insurer as the pension funds mature, with affordable long-term de-risking of investment strategy along the way.
Unless local regulation dictates otherwise, this framework determines the cash contributions payable to the pension funds. A key element of this
funding framework is the investment strategy used to grow existing assets and hedge against changes in liability values. The Group provides regular
input to local fiduciary boards with the aim of ensuring that an appropriate investment return is targeted over the long term in a risk-controlled manner.
UK
The UK defined benefit pension fund represents approximately 61% of the Group’s defined benefit obligations at 31 December 2020. The financing
principles are modified in light of the UK regulatory requirements (summarised below) and resulting discussions with the Pension Fund Trustee.
Role of Trustees and Regulation
The UK Pension Fund is governed and administered by a corporate Trustee which is legally separate from the Group. The Trustee Directors are
comprised of representatives appointed by both the employer and employees and include an independent professional Trustee Director. The Trustee
Directors are required by law to act in the interest of all relevant beneficiaries and are responsible in particular for investment strategy and the
day-to-day administration of the benefits. They are also responsible for jointly agreeing with the employer the level of contributions due to the UK
Pension Fund (see below).
The UK pensions market is regulated by The Pensions Regulator whose statutory objectives and regulatory powers are described on its website,
www.thepensionsregulator.gov.uk.
Funding requirements
UK legislation requires that pension schemes are funded prudently. On a triennial basis, the Trustee and the Group must agree on a set of assumptions
used to value the liabilities as a part of an actuarial valuation. Together with the asset valuation, this facilitates the calculation of a funding level and
of the contributions required (if any) to ensure the UK Pension Fund is fully funded over an appropriate time-period and on a suitably prudent measure.
The technical provisions assumptions used to value the liabilities for the triennial actuarial valuation are usually set more prudently than the assumptions
used to prepare an accounting valuation of the liabilities, which are set under IAS 19 rules to be a ‘best estimate’.
The last full actuarial valuation of the AstraZeneca Pension Fund was carried out by a qualified actuary as at 31 March 2019. Following discussions
between the Group and Trustee, it was finalised and submitted to the Pensions Regulator in June 2020, ahead of the statutory deadline. The next
actuarial valuation is due to take place as at 31 March 2022, with a likely timescale for completion in early to mid-2023.
Certain aspects of the triennial actuarial valuation are governed by a long-term funding agreement, effective since October 2016 and which sets out
a path to full funding on a low-risk measure. Under this agreement, if a deficit exists, the Group will grant a charge in favour of the Trustee over certain
land and buildings on the Cambridge Biomedical Campus, effective upon practical completion of the site, or from 2022 (whichever is earlier). This
charge is not currently in force. When effective, the charge would only crystallise in the event of the Group’s insolvency. This charge will provide
long-term security in respect of future UK Pension Fund contributions and will be worth up to £350m.
In relation to deficit recovery contributions, a lump sum contribution of £51m ($65m) was made in March 2020, with a further £39m contribution due
before 31 March 2021. In addition, a contribution of £28m ($36m) was also made in March 2020, with a further contribution of £29m due before
31 March 2021, in relation to part payment of the deferred contribution explained below.
During 2017, the Group provided a letter of credit to the Trustee, to underwrite the deferral of an additional deficit recovery contribution of approximately
£126m which was due in 2017. This contribution will be paid in five instalments (with interest added each year) from March 2018 to March 2022 and
to date, three instalments have been paid. The letter of credit underwriting these payments will reduce in value as each annual payment is made.
Under the funding assumptions used to set the statutory funding target, the key assumptions from the actuarial valuation as at 31 March 2019
(shown as a single-equivalent rate) were as follows: salary increases at 0% per annum (as a result of pensionable pay levels being frozen in 2010);
pension increases at 3.07% per annum; and discount rate at 2.98% per annum. The resulting valuation of the Fund’s liabilities on that basis was
£5,991m ($8,012m) compared to a market value of assets at 31 March 2019 of £5,403m ($7,225m).
Under the governing documentation of the UK Pension Fund, any future surplus in the Fund would be returnable to the Group by refund assuming
gradual settlement of the liabilities over the lifetime of the Fund. In particular, the Trustee has no unilateral right to wind-up the Fund without Company
consent nor does it have the power to unilaterally use surplus to augment benefits prior to wind-up. As such, there are no adjustments required in
respect of IFRIC 14 ‘IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction’.
High Court Ruling on GMP
A second UK High Court Ruling in the Lloyds Guaranteed Minimum Pensions (GMP) equalisation case was published on Friday 20 November 2020.
The first ruling in 2018 instructed Trustees of UK Pension Funds to equalise GMP benefits across genders for members and resulted in a past service
cost of £17m ($23m) being recognised in the year ended 31 December 2018. The second ruling instructed Trustees to equalise for historical benefits
paid via past transfers out, going back to 1990. The impact of this second ruling is estimated to be minimal, adding approximately $1m to liabilities.
210
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued United States and Sweden
The US plan and the Sweden plan account for 12% and 18%, respectively, of the Group’s defined benefit obligations. The US and Sweden pension
funds are governed by Fiduciary Bodies with responsibility for the investment policies of the assets. These plans are funded in line with the Group’s
financing principles and local regulations.
The US defined benefit pension plans were actuarially revalued at 31 December 2020, when plan obligations were $1,428m and plan assets were
$1,335m. This includes obligations in respect of the non-qualified plan which is unfunded. The qualified US pension plan remains approximately
fully funded on an IAS 19 basis and has a positive funding balance on the local statutory measure. As such, no contributions are required, and the
investment strategy is largely de-risked.
The Swedish defined benefit pension plans were actuarially valued at 31 December 2020, when plan obligations were estimated to amount to $2,525m
and plan assets were $1,338m. It should be noted that the Swedish plans have a funding surplus on the local GAAP accounting basis and this influences
contribution policy.
On current bases, it is expected that ongoing contributions (excluding those in respect of past service deficit contributions) during the year ending
31 December 2021 for the three main countries will be approximately $33m.
Other defined benefit plans
The Group provides benefit plans other than pensions which have to be reported under IAS 19. These include Lump Sum plans, Long Service Awards
and defined contribution pension plans which have a guaranteed minimum benefit. However, the largest category of these ‘other’ non-pension plans
are healthcare benefits.
In the US, and to a lesser extent in certain other countries, the Group’s employment practices include the provision of healthcare and life assurance
benefits for eligible retired employees. As at 31 December 2020, some 2,953 retired employees and covered dependants currently benefit from these
provisions and some 1,879 current employees will be eligible on their retirement. The Group accrues for the present value of such retiree obligations
over the working life of the employee. In practice, these benefits will be funded with reference to the financing principles.
In the US, there was a change to the level of benefit provision for members aged 65 and over within the Group’s healthcare plans, effective from
1 January 2021. The changes were communicated to the membership in September 2020 and resulted in an estimated liability reduction of $64m
which has been recognised as a past service credit for the year ending 31 December 2020. Following these changes, the plans became fully funded
on an IAS 19 basis and are projected to have a small surplus. As a result, the investment strategy has been fully de-risked.
The cost of post-retirement benefits other than pensions for the Group in 2020 was $1m (2019: $3m). Plan assets were $235m and plan obligations
were $209m at 31 December 2020. These benefit plans have been included in the disclosure of post-retirement benefits under IAS 19.
Financial assumptions
Qualified independent actuaries have updated the actuarial valuations under IAS 19 for the major defined benefit schemes operated by the Group to
31 December 2020. The assumptions used may not necessarily be borne out in practice, due to the inherent financial and demographic uncertainty
associated with making long-term projections. These assumptions reflect the changes which have the most material impact on the results of the
Group and were as follows:
Inflation assumption
Rate of increase in salaries
Rate of increase in pensions in payment
Discount rate – defined benefit obligation
Discount rate – interest cost
Discount rate – service cost
Inflation assumption
Rate of increase in salaries
Rate of increase in pensions in payment
Discount rate – defined benefit obligation2
Discount rate – interest cost3
Discount rate – service cost3
UK
3.0%
–1
2.8%
2.0%
2.7%
2.8%
UK
2.9%
–1
2.8%
1.4%
1.1%
1.4%
US
–
–
–
3.2%
3.9%
4.0%
US
–
–
–
2.5%
1.8%
1.7%
Sweden
Rest of Group4
2019
1.8%
3.3%
1.8%
1.5%
2.0%
2.5%
1.5%
2.3%
1.5%
1.3%
1.6%
1.9%
2020
Sweden
Rest of Group4
1.5%
3.0%
1.5%
1.2%
1.0%
1.2%
1.6%
3.1%
1.6%
0.7%
0.5%
0.8%
1 Pensionable pay frozen at 30 June 2010 levels following UK fund changes.
2 Group defined benefit obligation as at 31 December 2020 calculated using discount rates based on market conditions as at 31 December 2020.
3 2020 interest costs and service costs calculated using discount rates based on market conditions as at 31 December 2019.
4 Rest of Group reflects the assumptions in Germany as these have the most material impact on the Group.
The weighted average duration of the post-retirement scheme obligations is 16 years in the UK, 12 years in the US, 20 years in Sweden and 10 years
for the Rest of the Group.
211
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements 22 Post-retirement and other defined benefit schemes continued
Demographic assumptions
The mortality assumptions are based on country-specific mortality tables. These are compared to actual experience and adjusted where sufficient
data are available. Additional allowance for future improvements in life expectancy is included for all major schemes where there is credible data to
support a continuing trend.
The table below illustrates life expectancy assumptions at age 65 for male and female members retiring in 2020 and male and female members
expected to retire in 2040 (2019: 2019 and 2039 respectively).
Country
UK
US
Sweden
Life expectancy assumption for a male member retiring at age 65
Life expectancy assumption for a female member retiring at age 65
2020
22.4
21.8
21.9
2040
23.7
24.5
23.6
2019
22.4
22.0
21.9
2039
23.7
24.9
23.6
2020
23.9
23.2
24.5
2040
25.1
26.1
25.6
2019
23.7
23.4
24.5
2039
25.0
26.6
25.6
In the UK, the Group adopted the CMI 2019 Mortality Projections Model with a 1% long-term improvement rate. No other demographic assumptions
have changed since they were updated in 2019 following the actuarial valuation. The Group has continued to assume that 30% of members (2019: 30%)
will transfer out of the defined benefit section of the AstraZeneca Pension Fund at the point of retirement.
The assumption used for the US plans was updated in 2020 to use the mortality tables (Pri-2012 and MP-2020) that were published during the year.
Risks associated with the Group’s defined benefit pension schemes
The UK defined benefit plan accounts for 61% of the Group’s defined benefit obligations and exposes the Group to a number of risks, the most
significant of which are:
Risk
Description
Mitigation
Volatile asset
returns
The Defined Benefit Obligation (DBO) is calculated using a discount rate
set with reference to AA-rated corporate bond yields; asset returns that
differ from the discount rate will create an element of volatility in the
solvency ratio. The UK Pension Fund holds a significant proportion of
assets (around 72.5%) in a growth portfolio. Although these growth assets
are expected to outperform AA-rated corporate bonds in the long term,
they can lead to volatility and mismatching risk in the short term. The
allocation to growth assets is monitored to ensure it remains appropriate
given the UK Pension Fund’s long-term objectives.
Changes in
bond yields
A decrease in corporate bond yields will increase the present value placed
on the DBO for accounting purposes.
Inflation risk
The majority of the DBO is indexed in line with price inflation (mainly
inflation as measured by the UK Retail Price Index (RPI) but also for some
members a component of pensions is indexed by the UK Consumer Price
Index (CPI)) and higher inflation will lead to higher liabilities (although, in
most cases, this is capped at an annual increase of 5%). It was confirmed
in November 2020, the intention to align RPI with Consumer Price Index
including Housing (CPIH) from 2030, which is expected to be a lower
measure of inflation on average. Other things being equal, this will lead
to lower liability valuations, offset by lower asset valuations of RPI linked
assets (and index-linked gilts in particular).
Life
expectancy
The majority of the UK Pension Fund’s obligations are to provide benefits
for the life of the member, so increases in life expectancy will result in an
increase in the liabilities.
In order to mitigate investment risk, the Trustee invests in a suitably
diversified range of asset classes, return drivers and investment managers.
The investment strategy will evolve to further improve the expected risk/
return profile as opportunities arise.
The Trustee has hedged approximately 75% of unintended non-sterling,
overseas currency risk within the UK Pension Fund assets.
The interest rate hedge of the UK Pension Fund is implemented via holding
gilts and swaps of appropriate duration and set at approximately 91% of
total assets and protects to some degree against falls in long-term interest
rates (approximately 85% hedged at the end of 2019). There is a framework
in place to gradually increase the level of interest rate hedging to 100%
of assets.
There are some differences in the bonds and instruments held by the UK
Pension Fund to hedge interest rate risk on the statutory and long-term
funding basis (gilts and swaps) and the bonds analysed to set the DBO
discount rate on an accounting basis (AA corporate bonds). As such, there
remains some mismatching risk on an accounting basis should yields on
gilts and swaps diverge compared to AA corporate bonds.
The UK Pension Fund holds RPI index-linked gilts and derivative
instruments such as swaps. The inflation hedge of the UK Pension
Fund is set at approximately 83% of total assets and protects to some
degree against higher-than-expected inflation increases on the DBO
(approximately 85% hedged at the end of 2019). There is a framework
in place to gradually increase the level of inflation hedging to 100% of
assets over time, via a combination of liability management exercises
and additional market-based hedging.
The UK Pension Fund entered into a longevity swap during 2013 which
provides hedging against the longevity risk of increasing life expectancy
over the next 75 years for around 10,000 of the UK Pension Fund’s current
pensioners and covers $2.5bn of the UK Pension Fund’s liabilities.
A one-year increase in life expectancy would result in a $396m increase
in pension fund obligations, which would be partially offset by a $205m
increase in the value of the longevity swap and hence the pension fund
assets. A one-year decrease in life expectancy would result in a $395m
decrease in pension fund obligations, which would be partially offset by a
$205m decrease in the value of the longevity swap and hence the pension
fund assets.
212
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued Other risks
There are a number of other risks of administering the UK Pension Fund including counterparty risks from using derivatives (mitigated by using a
diversified range of counterparties of high standing and ensuring positions are collateralised daily). Furthermore, there are operational risks (such
as paying out the wrong benefits) and legislative risks (such as the government increasing the burden on companies through new legislation). These
are mitigated so far as possible via the governance structure in place which oversees and administers the pension funds.
The Group’s pension plans in the US and Sweden also manage these key risks, where they are relevant, in a similar manner, with the local fiduciary
bodies investing in a diversified growth portfolio and employing a framework to hedge interest rate risk.
Local fiduciary boards are aware of Environmental, Social and Governance (ESG) risks as they pertain to investment policy, and where local regulation
allows, have policies in place to monitor and manage such risks.
Assets and obligations of defined benefit schemes
The assets and obligations of the defined benefit schemes operated by the Group at 31 December 2020, as calculated in accordance with IAS 19,
are shown below. The fair values of the schemes’ assets are not intended to be realised in the short term and may be subject to significant change
before they are realised. The present value of the schemes’ obligations is derived from cash flow projections over long periods and is therefore
inherently uncertain.
Scheme assets
Government bonds1
Corporate bonds2
Derivatives3
Investment funds: Listed Equities4
Investment funds:
Absolute Return/Multi Strategy4
Investment funds: Corporate Bonds/Credit4
Cash and cash equivalents
Other
UK
US
Sweden
Rest of Group
Total
Quoted Unquoted
$m
$m
Quoted Unquoted
$m
$m
Quoted Unquoted
$m
$m
Quoted
$m
Unquoted
$m
Quoted Unquoted
$m
$m
1,749
–
–
–
–
–
55
–
–
–
(354)
1,474
2,688
683
169
–
274
727
3
164
–
–
40
–
–
–
–
64
145
39
44
6
–
–
–
–
–
–
–
–
–
–
–
244
122
592
162
3
–
74
55
(1)
61
10
–
–
(1)
1,123
198
–
–
–
–
–
–
5
309
314
2,097
782
2
–
–
(110)
225
1,660
1,885
10
–
95
(1)
3,425
3,435
884
221
315
884
316
314
3,210
6,395
9,605
Total fair value of scheme assets5
1,804
4,660
1,208
298
UK
US
Sweden
Rest of Group
Total
Quoted Unquoted
$m
$m
Quoted Unquoted
$m
$m
Quoted Unquoted
$m
$m
Quoted
$m
Unquoted
$m
Quoted Unquoted
$m
$m
Government bonds1
Corporate bonds2
Derivatives3
Investment funds: Listed Equities4
Investment funds:
Absolute Return/Multi Strategy4
Investment funds: Corporate Bonds/Credit4
Cash and cash equivalents
Other
1,929
–
–
–
–
64
–
–
–
(170)
1,771
2,463
969
153
–
321
878
–
93
–
–
31
–
–
–
–
90
72
80
–
5
Total fair value of scheme assets5
1,993
5,186
1,323
247
–
–
–
–
–
–
–
–
–
–
–
333
119
668
211
7
–
52
30
1
72
12
39
–
(1)
1,338
205
–
–
–
5
–
12
4
355
376
2,302
908
1
–
–
163
165
1,985
2,150
12
39
95
(1)
3,203
1,272
164
360
3,215
1,311
259
359
3,521
7,147
10,668
1 Predominantly developed markets in nature.
2 Predominantly developed markets in nature and investment grade (AAA-BBB).
3
Includes interest rate swaps, inflation swaps, longevity swap, equity total return swaps and other contracts. More detail is given in the section Risks associated with the Group’s defined benefit
pensions on page 212. Valuations are determined by independent third parties.
Investment Funds are pooled, commingled vehicles, whereby the pension scheme owns units in the fund, alongside other investors. The pension schemes invest in a number of Investment
Funds, including Listed Equities (primarily developed markets with some emerging markets), Corporate Bonds/Credit (a range of investment grade and non-investment grade credit) and
Absolute Return/Multi Strategy (multi-asset exposure both across and within traditional and alternative asset classes). The price of the funds is set by independent administrators/custodians
employed by the investment managers and based on the value of the underlying assets held in the fund. Details of pricing methodology is set out within internal control reports provided for
each fund. Prices are updated daily, weekly or monthly depending upon the frequency of the fund’s dealing.
Included in scheme assets is $nil (2019: $nil) of the Group’s own assets.
4
5
213
2019
Total
$m
2,097
782
(108)
2020
Total
$m
2,302
908
164
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements 22 Post-retirement and other defined benefit schemes continued
Scheme obligations
Present value of scheme obligations in respect of:
Active membership
Deferred membership
Pensioners
Total value of scheme obligations
Present value of scheme obligations in respect of:
Active membership
Deferred membership
Pensioners
Total value of scheme obligations
Net deficit in the scheme
Total fair value of scheme assets
Total value of scheme obligations
Deficit in the scheme as recognised in the
Consolidated Statement of Financial Position
Total fair value of scheme assets
Total value of scheme obligations
Deficit in the scheme as recognised in the
Consolidated Statement of Financial Position
Fair value of scheme assets
At beginning of year
Interest income on scheme assets
Expenses
Actuarial gains
Exchange and other adjustments
Employer contributions
Participant contributions
Benefits paid
2019
Total
$m
(1,792)
(3,560)
(7,060)
(12,412)
2020
Total
$m
(2,118)
(3,961)
(7,791)
UK
$m
(502)
(1,760)
(5,318)
(7,580)
US
$m
(114)
(715)
(763)
Sweden
$m
Rest of Group
$m
(770)
(704)
(686)
(406)
(381)
(293)
(1,592)
(2,160)
(1,080)
UK
$m
US
$m
Sweden
$m
Rest of Group
$m
(598)
(1,887)
(5,940)
(8,425)
UK
$m
6,464
(7,580)
(99)
(787)
(715)
(953)
(783)
(789)
(468)
(504)
(347)
(1,601)
(2,525)
(1,319)
(13,870)
US
$m
1,506
(1,592)
Sweden
$m
1,123
(2,160)
Rest of Group
$m
512
(1,080)
2019
Total
$m
9,605
(12,412)
(1,116)
(86)
(1,037)
(568)
(2,807)
UK
$m
7,179
(8,425)
US
$m
1,570
(1,601)
Sweden
$m
1,338
(2,525)
Rest of Group
$m
581
(1,319)
2020
Total
$m
10,668
(13,870)
(1,246)
(31)
(1,187)
(738)
(3,202)
UK
$m
US
$m
Sweden Rest of Group
$m
$m
2020
Total
$m
UK
$m
US
$m
Sweden Rest of Group
$m
$m
2019
Total
$m
6,464
1,506
1,123
512
9,605
5,989
1,379
1,017
469
8,854
111
(6)
501
299
131
2
39
(2)
148
–
14
–
14
–
84
162
2
–
5
(1)
27
38
25
2
169
(9)
760
499
172
4
159
(5)
294
207
133
2
51
–
183
–
14
–
19
–
172
(43)
5
–
(323)
(135)
(47)
(27)
(532)
(315)
(121)
(47)
7
(1)
47
(4)
23
–
236
(6)
696
160
175
2
(29)
512
(512)
9,605
Scheme assets’ fair value at end of year
7,179
1,570
1,338
581
10,668
6,464
1,506
1,123
The actual return on the plan assets was a gain of $929m (2019: gain of $932m).
214
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued Movement in post-retirement scheme obligations
UK
$m
US Sweden Rest of Group
$m
$m
$m
2020
Total
$m
UK
$m
US Sweden Rest of Group
$m
$m
$m
2019
Total
$m
Present value of obligations in scheme at beginning of year
(7,580)
(1,592)
(2,160)
(1,080) (12,412)
(7,052)
(1,463)
(1,872)
(978) (11,365)
Current service cost
Past service (cost)/credit
Participant contributions
Benefits paid
Interest expense on post-retirement scheme obligations
Actuarial losses
(18)
(9)
(2)
323
(130)
(1)
64
–
135
(40)
(637)
(167)
(59)
(2)
–
47
(26)
(28)
(26)
(24)
(2)
27
(10)
(96)
(104)
29
(4)
532
(206)
(928)
Exchange and other adjustments
(372)
–
(297)
(108)
(777)
(18)
34
(2)
315
(186)
(435)
(236)
(4)
–
–
121
(55)
(44)
(3)
–
47
(33)
(21)
3
–
29
(15)
(87)
34
(2)
512
(289)
(191)
(328)
(106)
(1,060)
–
73
8
(155)
Present value of obligations in scheme at end of year
(8,425)
(1,601) (2,525)
(1,319) (13,870)
(7,580)
(1,592)
(2,160)
(1,080) (12,412)
The obligations arise from the following plans:
Funded – pension schemes
Funded – post-retirement healthcare
Unfunded – pension schemes
Unfunded – post-retirement healthcare
Total
UK
$m
US Sweden Rest of Group
$m
$m
$m
2020
Total
$m
UK
$m
US Sweden Rest of Group
$m
$m
$m
2019
Total
$m
(8,405)
(1,335) (2,525)
(603) (12,868)
(7,561)
(1,280)
(2,160)
(531) (11,532)
–
–
(169)
(97)
(20)
–
–
–
–
–
(169)
(696)
(793)
–
–
(20)
(40)
(19)
(216)
(96)
–
–
–
–
–
(532)
(17)
(216)
(628)
(36)
(8,425)
(1,601) (2,525)
(1,319) (13,870)
(7,580)
(1,592)
(2,160)
(1,080) (12,412)
Consolidated Statement of Comprehensive Income disclosures
The amounts that have been charged to the Consolidated Statement of Comprehensive Income, in respect of defined benefit schemes for the
year ended 31 December 2020, are set out below.
Operating profit
Current service cost
Past service (cost)/credit
Expenses
Total (charge)/credit to Operating profit
Finance expense
Interest income on scheme assets
Interest expense on post-retirement scheme obligations
Net interest on post-employment
defined benefit plan liabilities
(Charge)/credit before taxation
Other comprehensive income
Difference between the actual return and the expected return
on the post-retirement scheme assets
Experience gains/(losses) arising on the
post-retirement scheme obligations
Changes in financial assumptions underlying the present value
of the post-retirement scheme obligations
Changes in demographic assumptions
Remeasurement of the defined benefit liability
UK
$m
US Sweden Rest of Group
$m
$m
$m
US Sweden Rest of Group
$m
$m
$m
2020
Total
$m
(104)
29
(9)
(84)
(26)
(24)
(1)
(51)
5
169
(10)
(206)
(5)
(37)
(56)
(121)
UK
$m
(18)
34
(5)
11
159
(186)
(27)
(16)
(4)
–
–
(4)
51
(55)
(4)
(8)
(44)
(3)
–
(47)
19
(33)
(14)
(61)
2019
Total
$m
(87)
34
(6)
(59)
(21)
3
(1)
(19)
7
236
(15)
(289)
(8)
(27)
(53)
(112)
(18)
(9)
(6)
(33)
111
(130)
(19)
(52)
(1)
64
(2)
61
39
(40)
(1)
60
(59)
(2)
–
(61)
14
(26)
(12)
(73)
501
148
84
27
760
294
183
172
47
696
43
(19)
(24)
(17)
(17)
39
(30)
(10)
(5)
(6)
(649)
(160)
(31)
(136)
12
(19)
(4)
–
56
(79)
(892)
(771)
(182)
(318)
(104)
(1,375)
–
(19)
(69)
(168)
297
(141)
21
(8)
–
(156)
3
321
(59)
(364)
Past service cost in 2020 includes the aforementioned credit of $64m relating to the change in coverage of the US healthcare plans. In addition, the
freeze of the Netherlands pension plan effective from 1 January 2021 yielded a past service credit of $7m. The past service cost in 2020 also includes
costs predominantly related to enhanced pensions in early retirement in the UK and Sweden. Past service cost in 2019 includes a credit of $49m
arising from changes to the payment of GMP benefits from the UK Pension Fund.
Total Group pension costs in respect of defined contribution and defined benefit schemes during the year are set out below (see Note 28).
Defined contribution schemes
Defined benefit schemes − current service costs and expenses
Defined benefit schemes − past service credit
Pension costs
2020
$m
351
113
(29)
435
2019
$m
432
93
(34)
491
215
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements
22 Post-retirement and other defined benefit schemes continued
SE Rate sensitivities
The following table shows the US dollar effect of a change in the significant actuarial assumptions used to determine the retirement benefits obligations
in our three main defined benefit pension obligation countries.
Discount rate
UK ($m)
US ($m)
Sweden ($m)
Total ($m)
Inflation rate1
UK ($m)
US ($m)
Sweden ($m)
Total ($m)
Rate of increase in salaries
UK ($m)
US ($m)
Sweden ($m)
Total ($m)
Mortality rate
UK ($m)
US ($m)
Sweden ($m)
Total ($m)
+0.5%
610
93
214
917
+0.5%
(396)
n/a
(245)
(641)
+0.5%
n/a
n/a
(62)
(62)
+1 year
(396)2
(32)
(106)
(534)
2020
−0.5%
(687)
(99)
(246)
(1,032)
2020
−0.5%
378
n/a
216
594
2020
−0.5%
n/a
n/a
70
70
2020
−1 year
3953
32
96
523
+0.5%
559
91
183
833
+0.5%
(374)
n/a
(203)
(577)
+0.5%
n/a
n/a
(68)
(68)
+1 year
(328)
(30)
(85)
(443)
2019
−0.5%
(628)
(97)
(211)
(936)
2019
−0.5%
349
n/a
176
525
2019
−0.5%
n/a
n/a
63
63
2019
−1 year
326
30
84
440
1 Rate of increase in pensions in payment follows inflation.
2 Of the $396m increase, $205m is covered by the longevity swap.
3 Of the $395m decrease, $205m is covered by the longevity swap.
The sensitivity to the financial assumptions shown above has been estimated taking into account the approximate duration of the liabilities and the
overall profile of the plan membership.
The inflation sensitivity allows for the impact of a change in inflation on salary increases and pension increases (where these assumptions are
inflation-linked).
The salary increase sensitivity reflects the impact of an increase of only salary relative to inflation.
The sensitivity to the life expectancy assumption is estimated based on a revised mortality assumption that extends/reduces the current life expectancy
by one year for a particular age.
216
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued
23 Reserves
Retained earnings
The cumulative amount of goodwill written off directly to reserves resulting from acquisitions, net of disposals, amounted to $636m (2019: $614m;
2018: $619m) using year-end rates of exchange.
At 31 December 2020, 556,108 shares, at a cost of $51m, have been deducted from Retained earnings (2019: 907,239 shares, at a cost of $37m;
2018: 456,792 shares, at a cost of $22m) to satisfy future vesting of employee share plans.
There are no significant statutory or contractual restrictions on the distribution of current profits of subsidiaries; undistributed profits of prior years
are, in the main, permanently employed in the businesses of these companies. The undistributed income of AstraZeneca companies overseas might
be liable to overseas taxes and/or UK taxation (after allowing for double taxation relief) if they were to be distributed as dividends (see Note 4).
Cumulative translation differences included within Retained earnings
At 1 January
Foreign exchange arising on consolidation
Exchange adjustments on goodwill (recorded against other reserves)
Foreign exchange arising on designated borrowings in net investment hedges1
Fair value movement on derivatives designated in net investment hedges
Net exchange movement in Retained earnings
At 31 December
2020
$m
2019
$m
2018
$m
(2,189)
(2,007)
(1,017)
443
22
573
8
1,046
(1,143)
40
(5)
(252)
35
(182)
(450)
(12)
(520)
(8)
(990)
(2,189)
(2,007)
1 Foreign exchange arising on designated borrowings in net investment hedges includes $(69)m in respect of designated bonds and $642m in respect of designated contingent consideration
and other liabilities. The change in value of designated contingent consideration liabilities relates to $346m in respect of BMS’ share of Global Diabetes Alliance, $10m in respect of Almirall,
$1m in respect of Definiens and $285m in relation to the put option liability in Acerta Pharma.
The cumulative gain with respect to costs of hedging is $9m (2019: $nil; 2018: $47m) and the gain during the year was $9m (2019: loss of $47m;
2018: loss of $54m).
The balance remaining in the foreign currency translation reserve from net investment hedging relationships for which hedge accounting no longer
applied is a gain of $565m.
Other reserves
The other reserves arose from the cancellation of £1,255m of share premium account by the Company in 1993 and the redenomination of share capital
of $157m in 1999. The reserves are available for writing off goodwill arising on consolidation and, subject to guarantees given to preserve creditors
at the date of the court order, are available for distribution.
24 Share capital
Issued Ordinary Shares ($0.25 each)
Redeemable Preference Shares (£1 each – £50,000)
At 31 December
Allotted, called-up and fully paid
2020
$m
328
–
328
2019
$m
328
–
328
2018
$m
317
–
317
The Redeemable Preference Shares carry limited class voting rights and no dividend rights. This class of shares is capable of redemption at par at
the option of the Company on the giving of seven days’ written notice to the registered holder of the shares.
The Company does not have a limited amount of authorised share capital.
The movements in the number of Ordinary Shares during the year can be summarised as follows:
At 1 January
Issue of shares (share placing)
Issue of shares (share schemes)
At 31 December
Share repurchases
No Ordinary Shares were repurchased by the Company in 2020 (2019: nil; 2018: nil).
Shares held by subsidiaries
No shares in the Company were held by subsidiaries in any year.
No. of shares
2020
2019
2018
1,312,137,976 1,267,039,436 1,266,221,605
–
44,386,214
–
530,748
712,326
817,831
1,312,668,724
1,312,137,976 1,267,039,436
217
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements
25 Dividends to shareholders
Second interim (March 2020)
First interim (September 2020)
Total
2020
Per share
2019
Per share
2018
Per share
$1.90
$0.90
$2.80
$1.90
$0.90
$2.80
$1.90
$0.90
$2.80
2020
$m
2,489
1,180
3,669
2019
$m
2,403
1,180
3,583
2018
$m
2,402
1,139
3,541
The Company has exercised its authority in accordance with the provisions set out in the Company’s Articles of Association that the balance of
unclaimed dividends outstanding past 12 years be forfeited. $1m (2019: $4m; 2018: $2m) of unclaimed dividends have been adjusted for in Retained
earnings in 2020.
The 2019 second interim dividend of $1.90 per share was paid on 30 March 2020.
Reconciliation of dividends charged to equity to cash flow statement:
Dividends charged to equity
Exchange losses on payment of dividend
Hedge contracts relating to payment of dividends (cash flow statement)
Dividends paid (cash flow statement)
2020
$m
3,669
4
(101)
3,572
2019
$m
3,583
5
4
2018
$m
3,541
10
(67)
3,592
3,484
26 Non-controlling interests
In February 2016, AstraZeneca acquired a 55% controlling stake in Acerta Pharma where the non-controlling interest is subject to put and call options.
The put option gives rise to a liability (see Note 20). The ability of the parties to exercise their respective put and call options, as well as the timing
and amount of exercise, was dependent on certain conditions, the last of which was based on regulatory outcomes of Calquence (acalabrutinib) in
the EU. On 5 November 2020, Calquence received marketing approval in the EU, which removed all remaining conditionality in respect of the options.
The minority shareholders are now considered to have no further substantive variability in risk and reward related to their shares as it is considered
highly likely that one of the options will be exercised, and the price of the options is now fixed. Therefore, from 5 November 2020, no further amounts
of the consolidated AstraZeneca result have been attributed to the minority shareholders of Acerta Pharma. In addition, the Non-controlling interests
reserve relating to the minority shareholders of Acerta Pharma, totalling $1,401m, has been reclassified into Retained earnings (see Consolidated
Statement of Changes in Equity).
The Group Financial Statements at 31 December 2020 reflect equity of nil (2019: $1,456m; 2018: $1,567m) and total comprehensive losses of $55m
(2019: losses of $111m; 2018: losses of $109m) attributable to the non-controlling interest in Acerta Pharma. The following summarised financial
information, for Acerta Pharma and its subsidiaries, is presented on a standalone basis since the acquisition date, and before the impact of
Group-related adjustments, some of which are incorporated into this calculation of the loss attributable to the non-controlling interests:
Total Revenue
Loss after tax
Other comprehensive income
Total comprehensive loss
Non-current assets
Current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Net cash (outflow)/inflow from operating activities
Net cash inflow/(outflow) from investing activities
Net cash inflow from financing activities
Increase in cash and cash equivalents in the year
2019
$m
–
(422)
–
(422)
2019
$m
157
475
632
(310)
(267)
(577)
55
2019
$m
(13)
7
7
1
2018
$m
–
(9)
–
(9)
2018
$m
16
526
542
(63)
–
(63)
479
2018
$m
7
(4)
–
3
In addition to the non-controlling interests in Acerta Pharma, the Group Financial Statements at 31 December 2020 also reflect equity of $16m
(2019: $13m; 2018: $9m) and total comprehensive income of $3m (2019: $4m; 2018: $3m) attributable to the non-controlling interests in AstraZeneca
Pharma India Limited and P.T. AstraZeneca Indonesia, resulting in reported total comprehensive losses of $52m (2019: $107m; 2018: $106m).
218
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued 27 Financial risk management objectives and policies
The Group’s principal financial instruments, other than derivatives, comprise bank overdrafts, lease liabilities, loans, current and non-current investments,
cash and short-term deposits. The main purpose of these financial instruments is to manage the Group’s funding and liquidity requirements. The Group
has other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.
The principal financial risks to which the Group is exposed are those of liquidity, interest rate, foreign currency and credit. Each of these is managed
in accordance with Board-approved policies. These policies are set out below.
Hedge accounting
The Group uses foreign currency borrowings, foreign currency forwards and swaps, currency options, interest rate swaps and cross-currency interest
rate swaps for the purpose of hedging its foreign currency and interest rate risks. The Group may designate certain financial instruments as fair value
hedges, cash flow hedges or net investment hedges in accordance with IFRS 9. Hedge effectiveness is determined at the inception of the hedge
relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item
and hedging instrument. Sources of hedge effectiveness will depend on the hedge relationship designation but may include:
> a significant change in the credit risk of either party to the hedging relationship
> a timing mismatch between the hedging instrument and the hedged item
> movements in foreign currency basis spread for derivatives in a fair value hedge
> a significant change in the value of the foreign currency denominated net assets of the Group in a net investment hedge.
The hedge ratio for each designation will be established by comparing the quantity of the hedging instrument and the quantity of the hedged item to
determine their relative weighting; for all of the Group’s existing hedge relationships the hedge ratio has been determined as 1:1. Designated hedges
are expected to be effective and therefore the impact of ineffectiveness on profit is not expected to be material. The accounting treatment for fair value
hedges and debt designated as fair value through profit or loss is disclosed in the Group Accounting Policies section from page 180.
The following table represents the Group’s continuing designated hedge relationships under IFRS 9.
2018
Other comprehensive income
Nominal
amounts
in local
currency
Opening
balance
Carrying 1 January
2018
$m
value
$m
Fair value
loss/(gain)
deferred
to OCI statement
$m
income 31 December Average Average
2018 maturity USD FX
rate
year
$m
$m
Fair value
loss
recycled
to the
Closing
balance
Average
pay
interest
rate
Fair value hedge – foreign currency and interest rate risk
Cross currency interest rate swap – Euro bond
EUR 300m
16
–
–
–
–
2021
1.09 USD LIBOR + 1.27%
Cash flow hedges – foreign currency and interest rate risk
Cross currency interest rate swaps – Euro bonds
EUR 2,200m
101
(76)
95
(111)
(92)
2025
1.14
USD 2.69%
Net investment hedge – foreign exchange risk4
Transactions matured pre 2018
Cross currency interest rate swap – JPY investment
Cross currency interest rate swap – CNY investment
Cross currency interest rate swap – CNY investment
Foreign currency borrowing – GBP investment
Foreign currency borrowing – EUR investment
Contingent consideration liabilities and Acerta Pharma
put option liability – AZUK and AZAB USD investments
2019
JPY 58.5bn
CNY 458m
CNY 919m
GBP 350m
EUR 450m
–
213
(4)
–
(443)
(508)
(338)
(223)
4
(12)
(240)
65
–
10
–
(6)
(25)
(21)
USD 6,015m (6,015)
1,239
566
–
–
–
–
–
–
–
(338)
(213)
4
(18)
(265)
44
–
–
2019 78.01
2026
2018
2031
2021
6.68
6.09
n/a
n/a
–
JPY 0.35%
CNY 4.80%
CNY 3.12%
GBP 5.75%
EUR 0.88%
1,805
–
–
–
Other comprehensive income
Nominal
amounts
in local
currency
Opening
balance
Carrying 1 January
2019
$m
value
$m
Fair value
loss/(gain)
deferred
to OCI statement
$m
income 31 December Average Average
2019 maturity USD FX
rate
year
$m
$m
Fair value
loss
recycled
to the
Closing
balance
Average
pay
interest
rate
Fair value hedge – foreign currency and interest rate risk1
Cross currency interest rate swap – Euro bond
EUR 300m
10
–
–
–
–
2021
1.09 USD LIBOR + 1.27%
Cash flow hedges – foreign currency and interest rate risk2, 4
Cross currency interest rate swaps – Euro bonds
EUR 2,200m
(13)
(92)
114
(52)
(30)
2025
1.14
USD 2.69%
Net investment hedge – foreign exchange risk3, 4
Transactions matured pre 2019
Cross currency interest rate swap – JPY investment5
Cross currency interest rate swap – JPY investment
Cross currency interest rate swap – CNY investment
Foreign currency borrowing – GBP investment
Foreign currency borrowing – EUR investment
Contingent consideration liabilities and Acerta Pharma
put option liability – AZUK and AZAB USD investments
JPY 58.5bn
JPY 58.3bn
CNY 458m
GBP 350m
EUR 450m
–
–
4
(1)
(356)
(213)
–
4
(457)
(498)
(265)
44
–
4
(4)
(3)
14
(10)
USD 5,583m (5,583)
1,805
248
–
–
–
–
–
–
–
(356)
(209)
(4)
1
(251)
34
–
–
2019 78.01
2029 108.03
2026
2031
2021
6.68
n/a
n/a
2,053
–
–
–
JPY 0.35%
JPY 1.53%
CNY 4.80%
GBP 5.75%
EUR 0.88%
–
219
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements 27 Financial risk management objectives and policies continued
2020
Other comprehensive income
Opening Fair value
balance (gain)/loss
deferred
Fair value
gain
recycled
to the
Closing
balance
Carrying 1 January
2020
$m
value
$m
to OCI statement
$m
income 31 December Average Average
2020 maturity USD FX
rate
year
$m
$m
Nominal
amounts
in local
currency
Average
pay
interest
rate
Fair value hedge – foreign currency and interest rate risk1
Cross currency interest rate swap – Euro bond
EUR 300m
43
–
–
–
–
2021
1.09 USD LIBOR + 1.27%
EUR 2,200m 150
USD 618m
5
(30)
–
(163)
(20)
239
15
46
(5)
2025
2021
Cash flow hedges – foreign currency and interest rate risk2, 4, 6
Cross currency interest rate swaps – Euro bonds
FX Forwards − short term FX risk
Net investment hedge – foreign exchange risk3, 4
Transactions matured pre 2020
Cross currency interest rate swap – JPY investment
Cross currency interest rate swap – CNY investment
Foreign currency borrowing – GBP investment
Foreign currency borrowing – EUR investment
Contingent consideration liabilities and Acerta Pharma
put option liability – AZUK and AZAB USD investments
JPY 58.5bn
CNY 458m
GBP 350m
EUR 450m
–
19
(2)
(475)
(548)
(565)
(4)
1
(251)
34
–
(15)
1
18
51
USD 5,252m (5,252)
2,053
(642)
–
–
–
–
–
–
1.14
USD 2.69%
–
–
–
–
(565)
–
(19)
2029 108.03
2
(233)
85
2026
2031
2021
6.68
n/a
n/a
JPY 1.53%
CNY 4.80%
GBP 5.75%
EUR 0.88%
1,411
–
–
–
1 Hedge ineffectiveness recognised on swaps designated in a fair value hedge during the period was a gain of $1m (2019: gain of $3m).
2 Hedge ineffectiveness recognised on swaps designated in a cash flow hedge during the period was $nil (2019: $nil).
3 Hedge ineffectiveness recognised on swaps designated in a net investment hedge during the period was $nil (2019: $nil).
4 Fair value movements on cross currency interest rate swaps in cash flow hedge and net investment hedge relationships are shown inclusive of the impact of costs of hedging.
5
In September 2019, the maturity of our JPY 58.5bn cross currency interest rate swap resulted in a net cash inflow of $209m. The cash flow associated with the settlement has been reflected
in cash flows from investing activities within the Consolidated Statement of Cash Flows on page 179, as its primary purpose was to hedge the translation foreign exchange risk arising on
the consolidation of the Group’s net investment in Japan.
6 Nominal amount of FX forwards in a cash flow hedge of USD 618m represents the USD equivalent notional of the FX forwards. By currency, the nominal amounts were SEK 3,310m at FX
rate 8.35373, RMB 366m at 6.5561, JPY 4,690m at 103.5085 and EUR 99m at 1.21918. All FX forwards in a cash flow hedge mature on 25 January 2021.
Key controls applied to transactions in derivative financial instruments are to use only instruments where good market liquidity exists, to revalue all
financial instruments regularly using current market rates and to sell options only to offset previously purchased options or as part of a risk management
strategy. The Group is not a net seller of options, and does not use derivative financial instruments for speculative purposes. The Group held no
options during the reporting period.
Capital management
The capital structure of the Group consists of Shareholders’ equity (Note 24), Debt (Note 19), Other current investments (Note 12) and Cash (Note 17).
For the foreseeable future, the Board will maintain a capital structure that supports the Group’s strategic objectives through:
> managing funding and liquidity risk
> optimising shareholder return
> maintaining a strong, investment-grade credit rating.
The Group utilises factoring arrangements for selected trade receivables. These factoring arrangements qualify for full derecognition of the associated
trade receivables under IFRS 9. Amounts due, on invoices that have not been factored at year end, from customers that are subject to factoring
arrangements are disclosed in Note 16.
Funding and liquidity risk are reviewed regularly by the Board and managed in accordance with policies described below.
The Board’s distribution policy comprises a regular cash dividend and, subject to business needs, a share repurchase component. The Board regularly
reviews its shareholders’ return strategy, and, in 2012, decided to suspend share repurchases in order to retain strategic flexibility.
The Group’s net debt position (loans and borrowings net of Cash and cash equivalents, Other investments and Derivative financial instruments) has
increased from a net debt position of $11,904m at the beginning of the year to a net debt position of $12,110m at 31 December 2020.
Liquidity risk
The Board reviews the Group’s ongoing liquidity risks annually as part of the planning process and on an ad hoc basis. The Board considers short-term
requirements against available sources of funding, taking into account forecast cash flows. The Group manages liquidity risk by maintaining access to a
number of sources of funding which are sufficient to meet anticipated funding requirements. Specifically, the Group uses US and European commercial
paper, bank loans, committed bank facilities and cash resources to manage short-term liquidity and manages long-term liquidity by raising funds
through the capital markets. The Group is assigned short-term credit ratings of P-2 by Moody’s and A-2 by Standard and Poor’s. The Group’s
long-term credit rating is A3 Negative outlook by Moody’s and BBB+ CreditWatch Positive outlook by Standard and Poor’s.
In addition to Cash and cash equivalents of $7,832m, short-term fixed income investments of $118m, fixed deposits of $42m, less overdrafts of $286m
at 31 December 2020, the Group has committed bank facilities of $21,625m. Of the committed facilities, $4,125m is intended to manage liquidity.
Of these, $3,375m mature in April 2024 and $750m is available until November 2021 with a one-year extension option, exercisable by the Group.
In conjunction with the acquisition of Alexion Pharmaceuticals, Inc., the Company entered into committed bank facilities totalling $17,500m during
December 2020. None of the above facilities contain any financial covenants and all were undrawn at 31 December 2020. The Group regularly monitors
220
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued the credit standing of the banking group and currently does not anticipate any issue with drawing on the committed facilities should this be necessary.
Advances under these facilities currently bear an interest rate per annum based on the LIBOR (or other relevant benchmark rate) plus a margin.
The facilities contain arrangements to switch to alternative risk free rate benchmarks during 2021.
At 31 December 2020, the Group has $4,083m outstanding from debt issued under a Euro Medium Term Note programme and $14,950m under a
SEC-registered programme. The funds made available under these facility agreements may be used for the general corporate purposes of the Group.
The maturity profile of the anticipated future contractual cash flows including interest in relation to the Group’s financial liabilities, on an undiscounted
basis and which, therefore, differs from both the carrying value and fair value, is as follows:
47
24
28
28
70
–
(258)
(126)
(384)
Total
derivative
financial
instruments
$m
29
21
13
13
28
6
110
(79)
(74)
(43)
3,952
2,873
5,181
2,873
19,559
49,673
(8,929)
(2,404)
38,340
Total
$m
16,729
3,932
3,751
3,752
3,209
17,092
48,465
(8,118)
(1,852)
38,495
Total
$m
Total
Trade non-derivative
financial
instruments
$m
and other
payables
$m
Finance
leases1
$m
Derivative
financial
instruments
receivable2
$m
Derivative
financial
instruments
payable2
$m
Total
derivative
financial
instruments2
$m
Total
$m
13,029
15,432
(10,368)
10,171
(197)
15,235
Within one year
In one to two years
In two to three years
In three to four years
In four to five years
In more than five years
Effect of interest
Bank
overdrafts
and other
loans
$m
774
7
14
–
–
–
Bonds
$m
1,629
2,210
2,002
1,813
2,069
17,405
795
27,128
(2)
(8,669)
Effect of discounting, fair values and issue costs
(17)
(122)
31 December 2018
776
18,337
Bank
overdrafts
and other
loans
$m
234
14
–
–
–
–
Bonds
$m
2,207
1,970
1,810
2,068
1,479
15,906
248
25,440
Within one year
In one to two years
In two to three years
In three to four years
In four to five years
In more than five years
Effect of interest
Effect of discounting, fair values and issue costs
–
–
–
–
–
–
–
–
–
–
Lease
liability
$m
205
158
117
79
50
128
737
–
1,688
833
3,340
776
2,084
21,750
–
(2,139)
19,611
Trade
and other
payables
$m
14,054
1,769
1,811
1,592
1,652
1,052
21,930
–
3,905
2,849
5,153
2,845
19,489
49,673
(8,671)
(2,278)
38,724
(35)
(950)
(30)
(30)
(2,084)
(13,497)
251
(9)
82
974
58
58
2,154
13,497
(509)
(117)
(13,255)
12,871
Total
non-derivative
financial
instruments
$m
Derivative
financial
instruments
receivable2
$m
Derivative
financial
instruments
payable
$m
16,700
(11,956)
11,985
3,911
3,738
3,739
3,181
17,086
48,355
(8,039)
(1,778)
(955)
(54)
(54)
(1,051)
(1,648)
976
67
67
1,079
1,654
(15,718)
15,828
409
(20)
(488)
(54)
(8,038)
(1)
(3)
(94)
(62)
(1,619)
31 December 2019
244
17,308
675
20,311
38,538
(15,329)
15,286
Within one year
In one to two years
In two to three years
In three to four years
In four to five years
In more than five years
Effect of interest
Effect of discounting, fair values and issue costs
Bank
overdrafts
and other
loans
$m
667
–
–
–
–
–
Bonds
$m
2,136
1,839
2,101
1,617
2,502
16,921
667
27,116
–
(1)
(7,974)
(109)
Trade
Lease and other
payables
$m
liability
$m
Total
non-derivative
financial
instruments
$m
Derivative
financial
instruments
receivable
$m
Derivative
financial
instruments
payable
$m
Total
derivative
financial
instruments
$m
15,812
18,822
(9,719)
9,620
(99)
18,723
207
168
120
82
53
108
738
–
2,584
1,658
1,728
722
1,435
23,939
–
(57)
(2,070)
4,591
3,879
3,427
3,277
18,464
52,460
(7,974)
(2,237)
(60)
(59)
(1,151)
(36)
(1,707)
67
67
1,080
40
1,652
(12,732)
12,526
379
(70)
(405)
24
7
8
(71)
4
(55)
(206)
(26)
(46)
(278)
4,598
3,887
3,356
3,281
18,409
52,254
(8,000)
(2,283)
41,971
31 December 2020
666
19,033
681
21,869
42,249
(12,423)
12,145
1 Comparative figures relate to Finance leases recognised under IAS 17.
2 The maturity profile table has been amended in 2019 to show gross derivative flows and to include all derivatives shown in Note 13 on page 203. In previous periods the table separately
disclosed the net cash flows on interest rate swaps and cross-currency swaps. Other derivative instruments amounting to $18m in 2018 were not included in the table.
Where interest payments are on a floating rate basis, it is assumed that rates will remain unchanged from the last business day of each year ended
31 December.
It is not expected that the cash flows in the maturity profile could occur significantly earlier or at significantly different amounts, with the exception
of $3,323m of contingent consideration held within Trade and other payables (see Note 20).
Market risk
Interest rate risk
The Group maintains a mix of fixed and floating rate debt. The portion of fixed rate debt was approved by the Board and any variation requires
Board approval.
221
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements 27 Financial risk management objectives and policies continued
A significant portion of the long-term debt is held at fixed rates of interest. The Group uses interest rate swaps and forward rate agreements to manage
this mix.
At 31 December 2020, the Group held interest rate swaps with a notional value of $288m, converting the 7% guaranteed debentures payable in 2023
to floating rates. No new interest rate swaps were entered into during 2020. At 31 December 2020, swaps with a notional value of $288m related to
debt designated as fair value through profit or loss.
The majority of surplus cash is currently invested in US dollar liquidity funds and investment-grade fixed income securities.
The interest rate profile of the Group’s interest-bearing financial instruments are set out below. In the case of current and non-current financial
liabilities, the classification includes the impact of interest rate swaps which convert the debt to floating rate.
Financial liabilities
Interest-bearing loans and borrowings
Current
Non-current
Total
Financial assets
Fixed deposits
Cash and cash equivalents
Total
Fixed rate Floating rate
$m
$m
1,357
17,005
18,362
42
–
42
1,029
989
2,018
–
7,832
7,832
2020
Total
$m
2,386
17,994
20,380
42
7,832
7,874
Fixed rate
$m
Floating rate
$m
1,785
14,893
16,678
38
–
38
225
1,324
1,549
–
5,369
5,369
2019
Total
$m
2,010
16,217
18,227
38
5,369
5,407
Fixed rate
$m
Floating rate
$m
999
16,038
17,037
40
–
40
755
1,321
2,076
–
4,831
4,831
2018
Total
$m
1,754
17,359
19,113
40
4,831
4,871
In addition to the financial assets above, there are $6,328m (2019: $6,765m; 2018: $6,195m) of other current and non-current asset investments and
other financial assets. Of these, $nil receive floating rate interest (2019: $111m; 2018: $nil).
The Group is also exposed to market risk on equity securities, which represent non-controlling interests in third-party biotech companies.
Equity securities at fair value through Other comprehensive income (Note 12)
Total
2020
$m
1,108
1,108
2019
$m
1,339
1,339
2018
$m
833
833
Foreign currency risk
The US dollar is the Group’s most significant currency. As a consequence, the Group results are presented in US dollars and exposures are managed
against US dollars accordingly.
Translational
Approximately 66% of Group external sales in 2020 were denominated in currencies other than the US dollar, while a significant proportion of
manufacturing, and research and development costs were denominated in pounds sterling and Swedish krona. Surplus cash generated by business
units is substantially converted to, and held centrally in, US dollars. As a result, operating profit and total cash flow in US dollars will be affected by
movements in exchange rates.
This currency exposure is managed centrally, based on forecast cash flows. The impact of movements in exchange rates is mitigated significantly
by the correlations which exist between the major currencies to which the Group is exposed and the US dollar. Monitoring of currency exposures
and correlations is undertaken on a regular basis and hedging is subject to pre-execution approval.
As at 31 December 2020, before the impact of derivatives, 3% of interest-bearing loans and borrowings were denominated in pounds sterling and 18%
were denominated in euros. Where there is non-US dollar debt and an underlying net investment of that amount in the same currency, the Group
applies net investment hedging. Exchange differences on the retranslation of debt designated as net investment hedges are recognised in Other
comprehensive income to the extent that the hedge is effective. Any ineffectiveness is taken to profit.
The Group holds cross-currency swaps to hedge against the impact of fluctuations in foreign exchange rates. Fair value movements on the revaluation
of the cross-currency swaps are recognised in Other comprehensive income to the extent that the hedge is effective, with any ineffectiveness taken
to profit.
Foreign currency risk arises when the Group has inter-company funding and investments in certain subsidiaries operating in countries with exchange
controls or where there is risk of significant future currency devaluation. One indicator of potential foreign currency risk is where a country is officially
designated as hyperinflationary. As at 31 December 2020, the Group operates in two countries designated as hyperinflationary, being Argentina
and Venezuela.
The foreign exchange risk to the Group from Argentina and Venezuela has been assessed and deemed to be immaterial.
Transactional
The Group aims to hedge all its forecast major transactional currency exposures on working capital balances, which typically extend for up to three
months. Where practicable, these are hedged using forward foreign exchange. In addition, the Group’s external dividend, which is paid principally
in pounds sterling and Swedish krona, is fully hedged from announcement to payment date. Foreign exchange gains and losses on forward contracts
transacted for transactional hedging are taken to profit.
222
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued
Sensitivity analysis
The sensitivity analysis set out overleaf summarises the sensitivity of the market value of our financial instruments to hypothetical changes in market
rates and prices. The range of variables chosen for the sensitivity analysis reflects our view of changes which are reasonably possible over a one-year
period. Market values are the present value of future cash flows based on market rates and prices at the valuation date. For long-term debt, an increase
in interest rates results in a decline in the fair value of debt.
The sensitivity analysis assumes an instantaneous 100 basis point change in interest rates in all currencies from their levels at 31 December 2020, with all
other variables held constant. Based on the composition of our long-term debt portfolio as at 31 December 2020, a 1% increase in interest rates would
result in an additional $20m in interest expense being incurred per year. The exchange rate sensitivity analysis assumes an instantaneous 10% change
in foreign currency exchange rates from their levels at 31 December 2020, with all other variables held constant. The +10% case assumes a 10%
strengthening of the US dollar against all other currencies and the -10% case assumes a 10% weakening of the US dollar.
Each incremental 10% movement in foreign currency exchange rates would have approximately the same effect as the initial 10% detailed in the
table below and each incremental 1% change in interest rates would have approximately the same effect as the 1% detailed in the table below.
31 December 2018
Increase/(decrease) in fair value of financial instruments ($m)
Impact on profit: (loss)/gain ($m)
Impact on equity: gain/(loss) ($m)
31 December 2019
Increase/(decrease) in fair value of financial instruments ($m)
Impact on profit: (loss)/gain ($m)
Impact on equity: gain/(loss) ($m)
31 December 2020
Increase/(decrease) in fair value of financial instruments ($m)
Impact on profit: (loss)/gain ($m)
Impact on equity: gain/(loss) ($m)
+1%
1,130
–
–
+1%
1,417
–
–
+1%
1,696
–
–
Interest rates
Exchange rates
−1%
(1,267)
–
–
Interest rates
−1%
(1,521)
–
–
+10%
(146)
(299)
153
+10%
(4)
(174)
170
−10%
161
348
(187)
Exchange rates
−10%
(36)
172
(208)
Interest rates
Exchange rates
−1%
(1,758)
–
–
+10%
114
(57)
171
−10%
(132)
74
(206)
Credit risk
The Group is exposed to credit risk on financial assets, such as cash investments, derivative instruments, and Trade and other receivables. The Group
is also exposed in its Net asset position to its own credit risk in respect of the 2023 debentures which are accounted for at fair value through profit
or loss. Under IFRS 9, the effect of the losses and gains arising from own credit risk on the fair value of bonds designated at fair value through profit
or loss are recorded in Other comprehensive income.
Financial counterparty credit risk
The majority of the AstraZeneca Group’s cash is centralised within the Group treasury entity and is subject to counterparty risk on the principal invested.
The level of the Group’s cash investments and hence credit risk will depend on the cash flow generated by the Group and the timing of the use of
that cash. The credit risk is mitigated through a policy of prioritising security and liquidity over return and, as such, cash is only invested in high
credit-quality investments. Counterparty limits are set according to the assessed risk of each counterparty and exposures are monitored against
these limits on a regular basis.
The Group’s principal financial counterparty credit risks at 31 December 2020 were as follows:
Current assets
Cash at bank and in hand
Money market liquidity funds
Collateralised repurchase agreement
Other short-term cash equivalents
Total Cash and cash equivalents (Note 17)
Fixed income securities at fair value through profit and loss (Note 12)
Fixed deposits (Note 12)
Total derivative financial instruments (Note 13)
Current assets subject to credit risk
Non-current assets
Fixed income securities at fair value through profit and loss (Note 12)
Derivative financial instruments (Note 13)
Non-current assets subject to credit risk
2020
$m
1,182
6,602
–
48
7,832
118
42
142
2019
$m
755
4,110
400
104
5,369
811
38
36
2018
$m
893
3,435
400
103
4,831
809
40
258
8,134
6,254
5,938
2020
$m
–
171
171
2019
$m
62
61
123
2018
$m
–
157
157
The Group may hold significant cash balances as part of its normal operations, with the amount of cash held at any point reflecting the level of cash
flow generated by the business and the timing of the use of that cash. The majority of the Group’s cash is invested in US dollar AAA rated money
market liquidity funds.
223
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements 27 Financial risk management objectives and policies continued
The money market liquidity fund portfolios are managed by five external third-party fund managers to maintain an AAA rating. The Group’s investments
represent no more than 10% of each overall fund value. There were no other significant concentrations of financial credit risk at the reporting date.
The short-term repurchase agreements were fully collateralised investments. The Group closed out its repurchase agreements during 2020. The value
of the cash deposited in repurchase agreements at 31 December 2020 was $nil (2019: $401m; 2018: $403m).
The fixed income securities are managed by four external third-party fund managers. During 2020, a significant amount of the securities were sold and
reinvested in money market liquidity funds. The long-term rating of these securities was BBB- or better.
All financial derivatives are transacted with commercial banks, in line with standard market practice. The Group has agreements with some bank
counterparties whereby the parties agree to post cash collateral, for the benefit of the other, equivalent to the market valuation of the derivative positions
above a predetermined threshold. The carrying value of such cash collateral held by the Group at 31 December 2020 was $288m (2019: $71m;
2018: $384m) and the carrying value of such cash collateral posted by the Group at 31 December 2020 was $11m (2019: $10m; 2018: $14m).
The impairment provision for other financial assets at 31 December 2020 was immaterial.
Trade receivables
Trade receivable exposures are managed locally in the operating units where they arise and credit limits are set as deemed appropriate for the customer.
The Group is exposed to customers ranging from government-backed agencies and large private wholesalers to privately owned pharmacies, and
the underlying local economic and sovereign risks vary throughout the world. Where appropriate, the Group endeavours to minimise risks by the use
of trade finance instruments such as letters of credit and insurance. The Group applies the expected credit loss approach to establish an allowance
for impairment that represents its estimate of expected losses in respect of Trade receivables.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all Trade
receivables. To measure expected credit losses, Trade receivables have been grouped based on shared credit characteristics and the days past due.
The expected loss rates are based on payment profiles over a period of 36 months before 31 December 2020, 31 December 2019 or 31 December
2018 respectively and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current
and forward-looking information on macroeconomic factors affecting the ability of the customer to settle the receivables.
On that basis, the loss allowance was determined as follows:
31 December 2018
Expected loss rate
Gross carrying amount ($m)
Loss allowance ($m)
31 December 2019
Expected loss rate
Gross carrying amount ($m)
Loss allowance ($m)
31 December 2020
Expected loss rate
Gross carrying amount ($m)
Loss allowance ($m)
Current
0.05%
2,854
1
Current
0.05%
3,178
2
Current
0.05%
3,659
2
0-90 days
past due
0.75%
82
1
0-90 days
past due
0.75%
312
2
0-90 days
past due
2.00%
124
2
90-180 days
past due
Over 180 days
past due
10%
27
3
47%
70
33
90-180 days
past due
Over 180 days
past due
2%
82
2
44%
34
15
90-180 days
past due
Over 180 days
past due
19%
21
4
61%
25
15
Total
3,033
38
Total
3,606
21
Total
3,829
23
Trade receivables are written off where there is no reasonable expectation of recovery.
Impairment losses on Trade receivables are presented as net impairment losses within Operating profit, any subsequent recoveries are credited
against the same line.
In the US, sales to three wholesalers accounted for approximately 95% of US sales (2019: three wholesalers accounted for approximately 94%;
2018: three wholesalers accounted for approximately 88%).
The movements of the Group expected credit losses provision are follows:
At 1 January
Net movement recognised in income statement
Amounts utilised, exchange and other movements
At 31 December
2020
$m
21
3
(1)
23
2019
$m
38
(13)
(4)
21
2018
$m
16
22
–
38
Given the profile of our customers, including large wholesalers and government-backed agencies, no further credit risk has been identified with the
Trade receivables not past due other than those balances for which an allowance has been made. The income statement credit or charge is recorded
in Operating profit.
224
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued
28 Employee costs and share plans for employees
Employee costs
The monthly average number of people, to the nearest hundred, employed by the Group is set out in the table below. In accordance with the
Companies Act 2006, this includes part-time employees.
Employees
UK
Continental Europe
The Americas
Asia, Africa & Australasia
Continuing operations
2020
2019
2018
7,900
16,600
17,300
33,000
74,800
7,400
15,500
16,600
27,800
67,300
7,200
14,800
16,700
24,500
63,200
Geographical distribution described in the table above is by location of legal entity employing staff. Certain staff will undertake some or all of their
activity in a different location.
The number of people employed by the Group at the end of 2020 was 76,100 (2019: 70,600; 2018: 64,600).
The costs incurred during the year in respect of these employees were:
Wages and salaries
Social security costs
Pension costs
Other employment costs
Total
2020
$m
6,273
726
435
813
8,247
2019
$m
5,648
658
491
771
7,568
2018
$m
5,370
626
469
505
6,970
Severance costs of $116m are not included above (2019: $158m; 2018: $94m).
The Directors believe that, together with the basic salary system, the Group’s employee incentive schemes provide competitive and market-related
packages to motivate employees. They should also align the interests of employees with those of shareholders, as a whole, through long-term share
ownership in the Company. The Group’s current UK, Swedish and US schemes are described below; other arrangements apply elsewhere.
Bonus plans
The AstraZeneca UK Performance Bonus Plan
Employees of participating AstraZeneca UK companies are invited to participate in this bonus plan, which rewards strong individual performance.
Bonuses are paid in cash.
The AstraZeneca Executive Annual Bonus Scheme
This scheme is a performance bonus scheme for Directors and senior employees who do not participate in the AstraZeneca UK Performance
Bonus Plan. Annual bonuses are paid in cash and reflect both corporate and individual performance measures. The Remuneration Committee
has discretion to reduce or withhold bonuses if business performance falls sufficiently short of expectations in any year such as to make the
payment of bonuses inappropriate.
The AstraZeneca Deferred Bonus Plan
This plan was introduced in 2006 and is used to defer a portion of the bonus earned under the AstraZeneca Executive Annual Bonus Scheme into
Ordinary Shares in the Company for a period of three years. The plan currently operates only in respect of Executive Directors and members of the
SET. Awards of shares under this plan are typically made in March each year, the first award having been made in February 2006.
Sweden
In Sweden, an all-employee performance bonus plan is in operation, which rewards strong individual performance. Bonuses are paid 50% into a fund
investing in AstraZeneca equities and 50% in cash. The AstraZeneca Executive Annual Bonus Scheme, the AstraZeneca Performance Share Plan
and the AstraZeneca Global Restricted Stock Plan all operate in respect of relevant AstraZeneca employees in Sweden.
US
In the US, there are two all-employee short-term or annual performance bonus plans in operation to differentiate and reward strong individual
performance. Annual bonuses are paid in cash. There is also one senior staff long-term incentive scheme, under which 120 participants may be
eligible for awards granted as AstraZeneca ADSs. AstraZeneca ADSs necessary to satisfy the awards are purchased in the market or funded via a
share trust. The AstraZeneca Performance Share Plan and the AstraZeneca Global Restricted Stock Plan operate in respect of relevant employees
in the US.
225
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements
28 Employee costs and share plans for employees continued
Share plans
The charge for share-based payments in respect of share plans is $277m (2019: $259m; 2018: $219m). The plans are equity settled.
The AstraZeneca UK All-Employee Share Plan
The Company offers UK employees the opportunity to buy Partnership Shares (Ordinary Shares). Employees may invest up to £150 a month to purchase
Partnership Shares in the Company at the current market value. In 2010, the Company introduced a Matching Share element, the first award of which
was made in 2011. Currently one Matching Share is awarded for every four Partnership Shares purchased. Partnership Shares and Matching Shares
are held in the HM Revenue & Customs (HMRC)-approved All-Employee Share Plan. At the Company’s AGM in 2002, shareholders approved the
issue of new shares for the purposes of the All-Employee Share Plan.
The AstraZeneca 2014 Performance Share Plan
This plan was approved by shareholders in 2014 for a period of 10 years and replaces the AstraZeneca Performance Share Plan. Generally, awards
can be granted at any time, but not during a closed period of the Company. The first grant of awards was made in May 2014. Awards granted under
the plan vest after three years, or in the case of Executive Directors and members of the SET, after an additional two-year holding period, and can be
subject to the achievement of performance conditions. For awards granted to all participants in 2020, vesting is subject to a combination of measures
focused on scientific leadership, revenue growth and financial performance. The Remuneration Committee has responsibility for agreeing any awards
under the plan and for setting the policy for the way in which the plan should be operated, including agreeing performance targets and which employees
should be invited to participate.
Outstanding at 1 January 2018
Granted
Forfeited
Cancelled
Exercised
Outstanding at 31 December 2018
Granted
Forfeited
Exercised
Outstanding at 31 December 2019
Granted
Forfeited
Cancelled
Exercised
Outstanding at 31 December 2020
1 Weighted average fair value.
Ordinary Shares
’000
WAFV1
pence
ADR Shares
’000
2,415
981
(309)
(10)
(395)
2,682
1,018
(350)
(491)
2,859
932
(191)
(3)
(552)
3,045
2251
2434
2311
2427
2357
2295
3147
2317
1983
2649
3702
3088
2234
2426
2985
7,388
2,529
(1,356)
–
(1,598)
6,963
1,978
(1,900)
(1,835)
5,206
1,767
(478)
–
(1,704)
4,791
WAFV1
$
15.58
17.38
16.27
–
17.52
15.65
21.06
16.80
14.17
17.80
24.02
19.57
–
15.43
20.76
The AstraZeneca Investment Plan
This plan was introduced in 2010 and approved by shareholders at the 2010 AGM. The final grant of awards under this plan took place in March 2016.
Awards granted under the plan vest after eight years and are subject to performance conditions measured over a period of four years.
The AstraZeneca Global Restricted Stock Plan
This plan was introduced in 2010. This plan provides for the grant of restricted stock unit (RSU) awards to selected below SET-level employees and
is used in conjunction with the AstraZeneca Performance Share Plan to provide a mix of RSUs and performance shares. Awards typically vest on the
third anniversary of the date of grant and are contingent on continued employment with the Company. The Remuneration Committee has responsibility
for agreeing any awards under the plan and for setting the policy for the way in which the plan should be operated.
Outstanding at 1 January 2018
Granted
Forfeited
Cancelled
Exercised
Outstanding at 31 December 2018
Granted
Forfeited
Cancelled
Exercised
Outstanding at 31 December 2019
Granted
Forfeited
Cancelled
Exercised
Outstanding at 31 December 2020
226
Ordinary Shares
’000
865
436
(82)
–
(218)
1,001
759
(115)
–
(317)
1,328
689
(113)
–
(278)
1,626
WAFV
pence
4491
4867
4583
–
4720
4598
6313
5438
–
4028
5640
7408
6204
7280
4929
6471
ADR Shares
’000
9,945
4,081
(1,094)
(2)
(2,437)
10,493
3,885
(1,199)
(1)
(3,408)
9,770
3,671
(1,077)
(9)
(3,180)
9,175
WAFV
$
31.03
34.66
31.60
32.52
34.52
31.57
42.06
35.44
32.39
28.82
36.22
47.71
41.08
36.93
31.47
41.89
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued The AstraZeneca Restricted Share Plan
This plan was introduced in 2008 and provides for the grant of restricted share awards to key employees, excluding Executive Directors. Awards are
made on an ad hoc basis with variable vesting dates. The plan has been used four times in 2020 to make awards to 113 employees. The Remuneration
Committee has responsibility for agreeing any awards under the plan and for setting the policy for the way in which the plan should be operated.
Outstanding at 1 January 2018
Granted
Forfeited
Cancelled
Exercised
Outstanding at 31 December 2018
Granted
Forfeited
Cancelled
Exercised
Outstanding at 31 December 2019
Granted
Forfeited
Exercised
Outstanding at 31 December 2020
Ordinary Shares
’000
95
19
(3)
–
(19)
92
105
(7)
–
(14)
176
80
(6)
(89)
161
WAFV
pence
4714
5808
4293
–
4698
4952
6894
5907
–
5244
6051
7931
7168
5166
7434
ADR Shares
’000
1,740
249
(253)
(177)
(497)
1,062
176
(141)
(2)
(446)
649
295
(79)
(359)
506
WAFV
$
29.13
36.24
29.11
28.29
29.46
30.79
43.91
31.17
28.19
30.12
34.70
52.92
39.26
31.05
47.20
The AstraZeneca Extended Incentive Plan
This plan was introduced in 2018 and provides for the grant of awards to key employees, excluding Executive Directors. Awards are made on an
ad hoc basis and 50% of the award will normally vest on the fifth anniversary of grant, with the balance vesting on the tenth anniversary of grant.
The award can be subject to the achievement of performance conditions. The Remuneration Committee has responsibility for agreeing any awards
under the plan and for setting the policy for the way in which the plan should be operated, including agreeing performance targets (if any) and which
employees should be invited to participate.
Outstanding at 1 January 2018
Granted
Outstanding at 31 December 2018
Granted
Outstanding at 31 December 2019
Granted
Outstanding at 31 December 2020
Ordinary Shares
’000
–
238
238
44
282
18
300
WAFV
pence
–
5239
5239
7301
5563
8386
5730
ADR Shares
’000
–
65
65
–
65
–
65
WAFV
$
–
38.46
38.46
–
38.46
–
38.46
The fair values were determined using a modified version of the Monte Carlo model. This method incorporated expected dividends but no other
features into the measurements of fair value. The grant date fair values of share awards disclosed in this section do not take account of service
and non-market related performance conditions.
227
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements 29 Commitments and contingent liabilities
Commitments
Contracts placed for future capital expenditure on Property, plant and equipment and
software development costs not provided for in these financial statements
2020
$m
689
2019
$m
396
2018
$m
586
Guarantees and contingencies arising in the ordinary course of business, for which no security has been given, are not expected to result in any
material financial loss.
Research and development collaboration payments
The Group has various ongoing collaborations, including in-licensing and similar arrangements with development partners. Such collaborations may
require the Group to make payments on achievement of stages of development, launch or revenue milestones, although the Group generally has
the right to terminate these agreements at no cost. The Group recognises research and development milestones as an intangible asset once it is
committed to payment, which is generally when the Group reaches set trigger points in the development cycle. Revenue-related milestones are
recognised as intangible assets on product launch at a value based on the Group’s long-term revenue forecasts for the related product. The table
below indicates potential development and revenue-related payments that the Group may be required to make under such collaborations.
Future potential research and development milestone payments
Future potential revenue milestone payments
Total
$m
Under 1 year
$m
Years 1 and 2
$m
Years 3 and 4
$m
11,067
12,263
549
48
2,372
178
1,954
1,247
Years 5
and greater
$m
6,192
10,790
The table includes all potential payments for achievement of milestones under ongoing research and development arrangements. Revenue-related
milestone payments represent the maximum possible amount payable on achievement of specified levels of revenue as set out in individual contract
agreements, but exclude variable payments that are based on unit sales (e.g. royalty-type payments) which are expensed as the associated sale is
recognised. The table excludes any payments already capitalised in the Financial Statements for the year ended 31 December 2020.
The future payments we disclose represent contracted payments and, as such, are not discounted and are not risk-adjusted. As detailed in the Risk
section from page 254, the development of any pharmaceutical product candidate is a complex and risky process that may fail at any stage in the
development process due to a number of factors (including items such as failure to obtain regulatory approval, unfavourable data from key studies,
adverse reactions to the product candidate or indications of other safety concerns). The timing of the payments is based on the Group’s current best
estimate of achievement of the relevant milestone.
Environmental costs and liabilities
The Group’s expenditure on environmental protection, including both capital and revenue items, relates to costs that are necessary for implementing
internal systems and programmes, and meeting legal and regulatory requirements for processes and products. This includes investment to conserve
natural resources and otherwise minimise the impact of our activities on the environment.
They are an integral part of normal ongoing expenditure for carrying out the Group’s research, manufacturing and commercial operations and are
not separated from overall operating and development costs. There are no known changes in legal, regulatory or other requirements resulting in
material changes to the levels of expenditure for 2018, 2019 or 2020.
In addition to expenditure for meeting current and foreseen environmental protection requirements, the Group incurs costs in investigating and
cleaning up land and groundwater contamination. In particular, AstraZeneca has environmental liabilities at some currently or formerly owned,
leased and third-party sites.
In the US, Zeneca Inc., and/or its indemnitees, have been named as potentially responsible parties (PRPs) or defendants at a number of sites where
Zeneca Inc. is likely to incur future environmental investigation, remediation, operation and maintenance costs under federal, state, statutory or
common law environmental liability allocation schemes (together, US Environmental Consequences). Similarly, Stauffer Management Company LLC
(SMC), which was established in 1987 to own and manage certain assets of Stauffer Chemical Company acquired that year, and/or its indemnitees,
have been named as PRPs or defendants at a number of sites where SMC is likely to incur US Environmental Consequences.
AstraZeneca has also given indemnities to third parties for a number of sites outside the US. These environmental liabilities arise from legacy operations
that are not currently part of the Group’s business and, at most of these sites, remediation, where required, is either completed or in progress.
AstraZeneca has made provisions for the estimated costs of future environmental investigation, remediation, operation and maintenance activity
beyond normal ongoing expenditure for maintaining the Group’s R&D and manufacturing capacity and product ranges; where a present obligation
exists, it is probable that such costs will be incurred and they can be estimated reliably. With respect to such estimated future costs, there were
provisions at 31 December 2020 in the aggregate of $100m (2019: $96m; 2018: $97m), mainly relating to the US. Where we are jointly liable or
otherwise have cost-sharing agreements with third parties, we reflect only our share of the obligation. Where the liability is insured in part or in
whole by insurance or other arrangements for reimbursement, an asset is recognised to the extent that this recovery is virtually certain.
It is possible that AstraZeneca could incur future environmental costs beyond the extent of our current provisions. The extent of such possible
additional costs is inherently difficult to estimate due to a number of factors, including: (i) the nature and extent of claims that may be asserted in
the future; (ii) whether AstraZeneca has or will have any legal obligation with respect to asserted or unasserted claims; (iii) the type of remedial
action, if any, that may be selected at sites where the remedy is presently not known; (iv) the potential for recoveries from or allocation of liability
to third parties; and (v) the length of time that the environmental investigation, remediation and liability allocation process can take. As per our
accounting policy on page 186, provisions for these costs are made when there is a present obligation and where it is probable that expenditure
on remedial work will be required and a reliable estimate can be made of the cost. Notwithstanding and subject to the foregoing, we estimate the
potential additional loss for future environmental investigation, remediation, remedial operation and maintenance activity above and beyond our
provisions to be, in aggregate, between $95m and $158m (2019: $86m and $143m; 2018: $71m and $118m), which relates mainly to the US.
228
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued Legal proceedings
AstraZeneca is involved in various legal
proceedings considered typical to its business,
including actual or threatened litigation and
actual or potential government investigations
relating to employment matters, product
liability, commercial disputes, pricing, sales
and marketing practices, infringement of IP
rights, and the validity of certain patents and
competition laws. The more significant matters
are discussed below.
Most of the claims involve highly complex
issues. Often these issues are subject to
substantial uncertainties and, therefore, the
probability of a loss, if any, being sustained
and/or an estimate of the amount of any loss
is difficult to ascertain.
Unless specifically identified below that
a provision has been taken, AstraZeneca
considers each of the claims to represent a
contingent liability and discloses information
with respect to the nature and facts of the
cases in accordance with IAS 37.
There is one matter, which is considered
probable that an outflow will be required, but
for which we are unable to make an estimate
of the possible loss or range of possible losses
at this stage.
We do not believe that disclosure of the
amounts sought by plaintiffs, if known, would
be meaningful with respect to these legal
proceedings. This is due to a number of factors,
including (i) the stage of the proceedings
(in many cases trial dates have not been set)
and the overall length and extent of pre-trial
discovery; (ii) the entitlement of the parties to
an action to appeal a decision; (iii) clarity as to
theories of liability, damages and governing
law; (iv) uncertainties in timing of litigation;
and (v) the possible need for further legal
proceedings to establish the appropriate
amount of damages, if any.
While there can be no assurance regarding the
outcome of any of the legal proceedings referred
to in this Note 29, based on management’s
current and considered view of each situation,
we do not currently expect them to have a
material adverse effect on our financial position
including within the next financial year. This
position could of course change over time, not
least because of the factors referred to above.
In cases that have been settled or adjudicated,
or where quantifiable fines and penalties have
been assessed and which are not subject to
appeal (or other similar forms of relief), or where
a loss is probable and we are able to make a
reasonable estimate of the loss, we generally
indicate the loss absorbed or make a provision
for our best estimate of the expected loss.
Where it is considered that the Group is more
likely than not to prevail, legal costs involved
in defending the claim are charged to profit as
they are incurred.
Where it is considered that the Group has
a valid contract which provides the right to
reimbursement (from insurance or otherwise)
of legal costs and/or all or part of any loss
incurred or for which a provision has been
established, and we consider recovery to
be virtually certain, the best estimate of the
amount expected to be received is recognised
as an asset.
KJ Assessments as to whether or not to
recognise provisions or assets, and of the
amounts concerned, usually involve a series of
complex judgements about future events and
can rely heavily on estimates and assumptions.
AstraZeneca believes that the provisions
recorded are adequate based on currently
available information and that the insurance
recoveries recorded will be received. However,
given the inherent uncertainties involved in
assessing the outcomes of these cases, and
in estimating the amount of the potential losses
and the associated insurance recoveries,
we could in the future incur judgments or
insurance settlements that could have a
material adverse effect on our results in any
particular period.
IP claims include challenges to the Group’s
patents on various products or processes
and assertions of non-infringement of patents.
A loss in any of these cases could result in loss
of patent protection on the related product.
The consequences of any such loss could be
a significant decrease in Product Sales, which
could have a material adverse effect on our
results. The lawsuits filed by AstraZeneca for
patent infringement against companies that
have filed ANDAs in the US, seeking to market
generic forms of products sold by the Group
prior to the expiry of the applicable patents
covering these products, typically also involve
allegations of non-infringement, invalidity and
unenforceability of these patents by the ANDA
filers. In the event that the Group is unsuccessful
in these actions or the statutory 30-month stay
expires before a ruling is obtained, the ANDA
filers involved will also have the ability, subject
to FDA approval, to introduce generic versions
of the product concerned.
AstraZeneca has full confidence in, and will
vigorously defend and enforce, its IP.
Over the course of the past several years,
including in 2020, a significant number of
commercial litigation claims in which
AstraZeneca is involved have been resolved,
particularly in the US, thereby reducing potential
contingent liability exposure arising from such
litigation. Similarly, in part due to patent litigation
and settlement developments, greater certainty
has been achieved regarding possible generic
entry dates with respect to some of our
patented products. At the same time, like other
companies in the pharmaceutical sector and
other industries, AstraZeneca continues to be
subject to government investigations around
the world.
Patent litigation
Tagrisso
US patent proceedings
In February 2020, in response to Paragraph IV
notices from multiple abbreviated new drug
application (ANDA) filers, AstraZeneca filed
patent infringement lawsuits in the US District
Court for the District of Delaware. In its
complaint, AstraZeneca alleged that a generic
version of Tagrisso, if approved and marketed,
would infringe a US Orange Book-listed Tagrisso
patent. The trial is scheduled for May 2022.
Faslodex
US patent proceedings
AstraZeneca filed patent infringement lawsuits
in the US District Court for the District of New
Jersey (the District Court) relating to four patents
listed in the FDA Orange Book with reference
to Faslodex after receiving a number of
Paragraph IV notices relating to multiple ANDAs
or NDAs submitted pursuant to 21 U.S.C. §
355(b)(2) seeking FDA approval to market
generic versions of Faslodex prior to the
expiration of AstraZeneca’s patents. In July
2016, AstraZeneca settled one of these, the
lawsuit brought against Sandoz, Inc. (Sandoz),
and the District Court entered a consent
judgment, which included an injunction
preventing Sandoz from launching a generic
fulvestrant product until March 2019, or earlier
in certain circumstances. Between 2016 and
2020, AstraZeneca resolved all of the remaining
lawsuits, and the District Court also entered
consent judgments ending those lawsuits.
Farxiga
US patent proceedings
In 2018, in response to Paragraph IV notices,
AstraZeneca initiated ANDA litigation against
Zydus Pharmaceuticals (USA) Inc. (Zydus) in
the US District Court for the District of Delaware.
In its complaint, AstraZeneca alleged that
Zydus’ generic version of Farxiga, if approved
and marketed, would infringe patents listed
in the FDA Orange Book with reference to
Farxiga. Proceedings are ongoing and trial
is scheduled for May 2021.
Patent proceedings outside the US
In Canada, in January 2021, Sandoz Canada
Inc. served three Notices of Allegation on
AstraZeneca alleging invalidity and/or
non-infringement of all three patents listed
on the Canadian Patent Register in relation
to Forxiga. AstraZeneca is considering
its response.
Brilinta
US patent proceedings
In 2015 and subsequently, in response to
Paragraph IV notices from ANDA filers,
AstraZeneca filed patent infringement
lawsuits in the US District Court for the District
of Delaware (the District Court) relating to
patents listed in the FDA Orange Book with
reference to Brilinta. In 2020, AstraZeneca
entered into three separate settlements and
the District Court entered consent judgments to
229
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements 29 Commitments and contingent liabilities continued
dismiss each of the corresponding litigations.
Additional proceedings are ongoing in the
District Court. No trial date has been set.
AstraZeneca, Nektar Therapeutics and Daiichi
Sankyo, Inc., relating to Movantik. A trial has
been set for March 2023.
Roxadustat
Patent proceedings outside the US
In Canada, in May 2018, Akebia Therapeutics,
Inc. filed an impeachment action in the Federal
Court of Canada alleging invalidity of several of
FibroGen, Inc.’s (FibroGen) method of use
patents (Canadian Patent Nos. 2467689;
2468083; and 2526496) related to HIF
prolylhydroxylase inhibitors. AstraZeneca is
the exclusive licensee of FibroGen in Canada.
AstraZeneca and FibroGen are defending
the action. A trial is scheduled to begin on
15 February 2021.
Symbicort
US patent proceedings
In October 2018, AstraZeneca initiated ANDA
litigation against Mylan Pharmaceuticals Inc.
(Mylan) and subsequently against 3M Company
(3M) in the US District Court for the Northern
District of West Virginia. In the action,
AstraZeneca alleges that the defendants’
generic versions of Symbicort, if approved and
marketed, would infringe various AstraZeneca
patents. Mylan and 3M alleged that their
proposed generic medicines do not infringe
the asserted patents and/or that the asserted
patents are invalid and/or unenforceable. In
July 2020, AstraZeneca added Kindeva Drug
Delivery L.P. (Kindeva) as a defendant in the
case. In September 2020, Mylan, 3M and
Kindeva stipulated to patent infringement
to the extent that the asserted patent claims
are found to be valid and enforceable, but
reserved the right to seek a vacatur of the
stipulation if the U.S. Court of Appeals for
the Federal Circuit reverses or modifies the
District Court’s claim construction. In October
2020, following a stipulation by AstraZeneca,
3M and Kindeva, 3M was dismissed from
the action. The trial of the matter was held in
October 2020 and closing argument was held
in January 2021. A decision is awaited.
Daliresp
US patent proceedings
In 2015 and subsequently, in response to
Paragraph IV notices from ANDA filers,
AstraZeneca filed patent infringement lawsuits
in the US District Court for the District of New
Jersey (the District Court) relating to patents
listed in the FDA Orange Book with reference
to Daliresp. In 2020, AstraZeneca entered into
a settlement and the District Court entered a
consent judgment to dismiss the corresponding
litigation. Additional proceedings are ongoing
in the District Court. No trial date has been set.
Movantik
US patent proceedings
In March 2020, Aether Therapeutics, Inc. filed
a patent infringement lawsuit in the US District
Court for the District of Delaware against
230
Onglyza
Patent proceedings outside the US
In Canada, in November 2019, Sandoz Canada
Inc. sent a Notice of Allegation to AstraZeneca
challenging the validity of Canadian substance
Patent No. 2402894 (expiry March 2021)
(the ‘894 patent) and formulation Patent No.
2568391 (expiry May 2025) related to Onglyza.
AstraZeneca commenced an action in response
related to the ‘894 patent in January 2020.
A trial date has been set for October 2021.
Enhertu
US patent proceedings
In October 2020, Seagen Inc. (Seagen) filed
a complaint against Daiichi Sankyo Company,
Limited in the US District Court for the
Eastern District of Texas alleging that Enhertu
infringes US Patent No. 10,808,039 (the ‘039
patent). AstraZeneca Pharmaceuticals LP
co-commercialises Enhertu with Daiichi
Sankyo, Inc. in the US. A claim construction
hearing has been scheduled for August 2021
and a trial has been scheduled for April 2022.
In November 2020, AstraZeneca, Daiichi
Sankyo Company, Limited and Daiichi Sankyo,
Inc. filed a complaint against Seagen in the
US District Court for the District of Delaware
seeking a declaratory judgment that plaintiffs do
not infringe the ‘039 patent. On 18 December
2020, Seagen filed a motion seeking to stay or
dismiss this action.
On 23 December 2020, AstraZeneca and
Daiichi Sankyo, Inc. filed a post grant review
petition with the US Patent and Trademark
Office alleging, inter alia, that the ‘039 patent
is invalid for lack of written description and
enablement. In January 2021, AstraZeneca
and Daiichi Sankyo, Inc filed a second post
grant review petition with the US Patent and
Trademark Office extending its challenge to
additional claims in the ‘039 patent. A decision
on institution of these petitions is expected in
July 2021.
Product liability litigation
Farxiga (dapagliflozin) and Xigduo XR
(dapagliflozin/metformin HCl)
In several jurisdictions in the US, AstraZeneca
has been named as a defendant in lawsuits
involving plaintiffs claiming physical injury,
including diabetic ketoacidosis and kidney
failure, from treatment with Farxiga and/or
Xigduo XR. In April 2017, the Judicial Panel on
Multidistrict Litigation ordered transfer of any
currently pending cases as well as of any similar,
subsequently filed cases to a co-ordinated and
consolidated pre-trial multidistrict litigation
proceeding in the US District Court for the
Southern District of New York. All of these
claims have been resolved or dismissed, and
the MDL has been administratively closed.
In addition, in several jurisdictions in the US,
AstraZeneca has been named as a defendant
in lawsuits involving plaintiffs claiming physical
injury, including Fournier’s Gangrene and
necrotising fasciitis, from treatment with
Farxiga and/or Xigduo XR. A majority of these
claims are filed in Delaware state court and
remain pending.
Byetta/Bydureon
In the US, Amylin Pharmaceuticals, LLC, a
wholly owned subsidiary of AstraZeneca, and/
or AstraZeneca are among multiple defendants
in various lawsuits filed in federal and state
courts involving claims of physical injury from
treatment with Byetta and/or Bydureon. The
lawsuits allege several types of injuries including
pancreatitis, pancreatic cancer, thyroid cancer,
and kidney cancer. A multidistrict litigation was
established in the US District Court for the
Southern District of California (the District Court)
in regard to the alleged pancreatic cancer cases
in federal courts. Further, a coordinated
proceeding has been established in Los Angeles
(the California Court), California in regard to
the various lawsuits in California state courts.
In November 2015, the District Court granted
the defendants’ motion for summary judgment
and dismissed all claims alleging pancreatic
cancer that accrued prior to 11 September 2015.
In November 2017, the US Court of Appeals for
the Ninth Circuit vacated the District Court’s
order and remanded for further discovery.
In November 2018, the Court of Appeals for
the State of California annulled the judgment
from the California state coordinated proceeding
and remanded for further discovery. In October
and December 2020, the District Court and the
California Court jointly heard oral argument on
a renewed motion filed by Defendants seeking
summary judgment and dismissal of all
claims. That motion remains pending.
Onglyza and Kombiglyze
In the US, AstraZeneca is defending various
lawsuits alleging heart failure, cardiac injuries,
and/or death from treatment with Onglyza or
Kombiglyze. In February 2018, the Judicial
Panel on Multidistrict Litigation ordered the
transfer of various pending federal actions to
the US District Court for the Eastern District
of Kentucky (District Court) for consolidated
pre-trial proceedings with the federal actions
pending in the District Court. The previously
disclosed California State Court coordinated
proceeding remains pending in California.
Nexium and Losec/Prilosec
U.S. proceedings
In the US, AstraZeneca is defending various
lawsuits brought in federal and state courts
involving multiple plaintiffs claiming that they
have been diagnosed with various injuries
following treatment with proton pump inhibitors
(PPIs), including Nexium and Prilosec. The vast
majority of those lawsuits relate to allegations
of kidney injuries. In particular, in May 2017,
counsel for a group of such plaintiffs claiming
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued that they have been diagnosed with kidney
injuries filed a motion with the Judicial Panel
on Multidistrict Litigation (JPML) seeking the
transfer of any currently pending federal court
cases as well as any similar, subsequently filed
cases to a coordinated and consolidated
pre-trial multidistrict litigation (MDL) proceeding.
In August 2017, the JPML granted the motion
and consolidated the pending federal court
cases in an MDL proceeding in federal court
in New Jersey for pre-trial purposes. A trial in
the MDL has been scheduled for November
2021. In addition to the MDL cases, there are
cases filed in several state courts around the
US; a trial in Delaware state court has been
scheduled for February 2022.
In addition, AstraZeneca has been defending
lawsuits involving allegations of gastric cancer
following treatment with PPIs. All but one of
these claims is filed in the MDL. One claim
is filed in the US District Court for the Middle
District of Louisiana, where the court has
scheduled a trial for March 2022.
Canada proceedings
In Canada, in July and August 2017, AstraZeneca
was served with three putative class action
lawsuits. Two of the lawsuits seek authorisation
to represent individual residents in Canada
who allegedly suffered kidney injuries from
the use of proton pump inhibitors, including
Nexium and Losec. In August 2019, the third
lawsuit, filed in Quebec, was dismissed.
Commercial litigation
Amplimmune
In the US, in June 2017, AstraZeneca was
served with a lawsuit filed by the stockholders’
agents for Amplimmune, Inc. (Amplimmune)
in Delaware State Court that alleged, among
other things, breaches of contractual obligations
relating to a 2013 merger agreement between
AstraZeneca and Amplimmune. A trial of the
matter was held in February and post-trial
oral argument was heard in August 2020.
In November 2020, the Court decided in
AstraZeneca’s favour and subsequently entered
a Final Judgment as to all pending claims in
favour of AstraZeneca. In December 2020,
the plaintiffs filed an appeal to the Delaware
Supreme Court.
Array BioPharma
In the US, in December 2017, AstraZeneca
was served with a complaint filed in New York
State court by Array BioPharma, Inc. (Array)
alleging breaches of contractual obligations
relating to a 2003 collaboration agreement
between AstraZeneca and Array. In June
2020, an appeal court denied AstraZeneca’s
motion for an early dismissal of the case,
allowing the case to continue towards trial.
No trial date has been set.
Ocimum lawsuit
In the US, in December 2017, AstraZeneca
was served with a complaint filed by Ocimum
Biosciences, Ltd. (Ocimum) in the Superior
Court for the State of Delaware that alleges,
among other things, breaches of contractual
obligations and misappropriation of trade
secrets, relating to a now terminated 2001
licensing agreement between AstraZeneca
and Gene Logic, Inc. (Gene Logic), the rights
to which Ocimum purports to have acquired
from Gene Logic. In December 2019, the court
granted AstraZeneca’s motion for summary
judgment and dismissed the case. Ocimum
has appealed to the Delaware Supreme Court.
Seroquel XR (Antitrust Litigation)
In the US in 2019, AstraZeneca was named in
several related complaints brought in the US
District Court for the Southern District of New
York, including several putative class action
lawsuits that were purportedly brought on
behalf of classes of direct purchasers or end
payors of Seroquel XR, that allege AstraZeneca
and generic drug manufacturers violated
antitrust laws when settling patent litigation
related to Seroquel XR. In August 2020, the
Court granted AstraZeneca’s motions to
transfer all such lawsuits to the US District
Court for the District of Delaware.
Anti-Terrorism Act Civil Lawsuit
In the US, in July 2020, the US District Court for
the District of Columbia granted AstraZeneca’s
and certain other pharmaceutical and/or medical
device companies’ motion and dismissed a
lawsuit filed by US nationals (or their estates,
survivors, or heirs) who were killed or wounded
in Iraq between 2005 and 2011, which had
alleged that the defendants violated the US
Anti-Terrorism Act and various state laws by
selling pharmaceuticals and medical supplies
to the Iraqi Ministry of Health. The plaintiffs are
appealing the District Court’s order dismissing
the litigation.
AZD1222 Securities Litigation
In January 2021, putative securities class
action lawsuits were filed in the US District
Court for the Southern District of New York
against AstraZeneca PLC and certain officers,
on behalf of purchasers of AstraZeneca
publicly traded securities during the period
21 May 2020 through 20 November 2020.
The complaints allege that defendants made
materially false and misleading statements in
connection with the development of AZD1222
(otherwise known as COVID-19 Vaccine
AstraZeneca), a potential recombinant
adenovirus vaccine for the prevention of
COVID-19, and assert claims under sections
10(b) and 20(a) of the Securities Exchange Act
of 1934 and SEC Rule 10b-5.
Government investigations/proceedings
Crestor
Qui tam litigation
In the US, in January and February 2014,
AstraZeneca was served with lawsuits filed
in the US District Court for the District of
Delaware under the qui tam provisions of the
federal False Claims Act and related state
statutes, alleging that AstraZeneca directed
certain employees to promote Crestor off-label
and provided unlawful remuneration to
physicians in connection with the promotion
of Crestor. The Department of Justice and all
US states declined to intervene in the lawsuits.
In March 2019, AstraZeneca filed a motion to
dismiss the complaint. In February 2020, the
District Court partially granted AstraZeneca’s
motion to dismiss. This matter has resolved
and is now concluded.
Synagis
Investigations and Litigations
In the US, in June 2011, MedImmune received
a demand from the US Attorney’s Office for
the Southern District of New York requesting
certain documents related to the sales and
marketing activities of Synagis. In July 2011,
MedImmune received a similar court order
to produce documents from the Office of the
Attorney General for the State of New York
Medicaid and Fraud Control Unit pursuant to
what the government attorneys advised was
a joint investigation. In May 2012, MedImmune
received a subpoena duces tecum from the
Office of Attorney General for the State of
Florida Medicaid and Fraud Control Unit
requesting certain documents related to
the sales and marketing activities of Synagis.
MedImmune accepted receipt of these requests
and coordinated with these agencies to provide
the appropriate responses and cooperate with
any related investigation.
In March 2017, the Attorney General for the State
of New York filed a complaint in intervention in
the US District Court for the Southern District
of New York alleging that MedImmune
inappropriately provided assistance to a single
specialty care pharmacy. Neither the US
Attorney’s Office for the Southern District of
New York nor the Office of the Attorney General
for the State of Florida sought to intervene or
pursue litigation. In September 2018, the US
District Court in New York denied MedImmune’s
motion to dismiss the lawsuit brought by the
Attorney General for the State of New York.
In July 2020, this matter was resolved. This
matter is now concluded.
Definiens
In Germany, in July 2020, AstraZeneca received
a notice of arbitration filed with the German
Institution of Arbitration from the sellers of
Definiens AG (Sellers) regarding the 2014
Share Purchase Agreement (SPA) between
AstraZeneca and the Sellers. The Sellers
claim they are owed approximately $140m
in earn-outs under the SPA. AstraZeneca
disputes the claims of the Sellers. An oral
hearing is scheduled for July 2022.
In November 2017, MedImmune was served with
an amended complaint in the US District Court
for the Southern District of New York by a relator
under the qui tam (whistle-blower) provisions
of the federal and certain state False Claims
Acts. The lawsuit was originally filed under seal
in April 2009 and alleged that MedImmune made
false claims about Synagis. In September 2018,
the US District Court for the Southern District
of New York dismissed the relator’s lawsuit. In
January 2019, the relator appealed the decision
231
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements 29 Commitments and contingent liabilities continued
of the US District Court. In March 2020, the
United States Court of Appeals for the Second
Circuit affirmed the US District Court’s decision
dismissing the relator’s lawsuit with prejudice.
This matter is now concluded.
in the program to offer their drugs for purchase
at statutorily capped rates by an unlimited
number of contract pharmacies. AstraZeneca
has sought to intervene in the lawsuits.
Administrative Dispute Resolution (ADR)
proceedings have also been initiated against
AstraZeneca before the US Health Resources
and Services Administration.
In addition, in January 2021, AstraZeneca filed
a separate lawsuit in federal court in Delaware
alleging that a recent Advisory Opinion issued by
the Department of Health and Human Services
violates the Administrative Procedure Act.
US Congressional
In January 2019, AstraZeneca received a
letter from the US House of Representatives
Committee on Oversight and Reform seeking
information related to pricing practices for
Crestor. Similar letters were sent to 11 other
pharmaceutical manufacturers. We continue to
cooperate with the inquiry and have produced
certain responsive information.
Additional government inquiries
As is true for most, if not all, major prescription
pharmaceutical companies, AstraZeneca is
currently involved in multiple inquiries into drug
marketing and pricing practices. In addition to
the investigations described above, various
law enforcement offices have, from time to
time, requested information from the Group.
There have been no material developments
in those matters.
Tax
SE AstraZeneca considers whether it is
probable that a taxation authority will accept an
uncertain tax treatment. If it is concluded that
it is not probable that the taxation authority
will accept an uncertain tax treatment, where
tax exposures can be quantified, an accrual is
made based on either the most likely amount
method or the expected value method
depending on which method management
expects to better predict the resolution of the
uncertainty. Accruals can be built up over a
long period of time but the ultimate resolution
of tax exposures usually occurs at a point in
time, and given the inherent uncertainties in
assessing the outcomes of these exposures
(which sometimes can be binary in nature), we
could, in future periods, experience adjustments
to these accruals that have a material positive
or negative effect on our results in any particular
period. Details of the movements in relation to
material tax exposures are discussed below.
KJ AstraZeneca faces a number of audits
and reviews in jurisdictions around the world
and, in some cases, is in dispute with the tax
authorities. The issues under discussion are
often complex and can require many years
to resolve. Accruals for tax contingencies
require management to make key judgements
with respect to the ultimate outcome of
current and potential future tax audits, and
actual results could vary from these estimates.
Transfer pricing and other international
tax contingencies
The total net accrual included in the Group
Financial Statements to cover the worldwide
exposure to transfer pricing audits is $287m
(2019: $140m; 2018: $212m), an increase of
$147m compared with 2019 mainly as a result
of additional provisions for tax contingencies
partially offset by reductions following the
conclusion of tax authority review. These
positions can be complex and judgemental.
Therefore in determining the accrual,
management has assessed their expectation
of the ultimate resolution of the uncertainty,
including settlement or litigation.
Management continues to believe that
AstraZeneca’s positions on all its transfer
pricing and other international tax audits and
disputes are robust, and that AstraZeneca is
appropriately provided, including consideration
of whether corresponding relief will be
available under Mutual Agreement procedures
or unilaterally.
The European Commission (EC) issued its
decision on the state aid review of UK
Controlled Foreign Company Group Financing
Exemption. The EC concluded that part of the
UK measures was unlawful and have instructed
recovery of the state aid. The UK Government
and the Group have appealed the decision.
Despite the nature of the complexities of the
ruling in relation to the Group’s position, the
complex tax legislation and taking into account
the ongoing appeal, the Group does not expect
any additional liability would be material.
For transfer pricing and other international
tax matters where AstraZeneca and the tax
authorities are in dispute, and the state aid
matter, AstraZeneca estimates the potential
for reasonably possible additional liabilities
above and beyond the amount provided to
be up to $251m (2019: $76m; 2018: $357m)
including associated interest. Management
believes that it is unlikely that these additional
liabilities will arise. It is possible that some of
these contingencies may change in the future
to reflect progress in tax authority reviews, to
the extent that any tax authority challenge is
concluded, or matters lapse including following
expiry of the relevant statutes of limitation
resulting in a reduction in the tax charge in
future periods.
Other tax contingencies
Included in the tax accrual is $727m (2019:
$887m; 2018: $730m) relating to a number of
other tax contingencies, a decrease of $160m
mainly due to releases of tax contingencies
following the expiry of the relevant statute of
limitations and on the conclusion of tax authority
review, partially offset by the impact of an
additional year of transactions relating to
contingencies for which accruals had already
been established and exchange rate effects.
The majority of the accrual relates to tax
contingencies which are estimated using
Toprol-XL Louisiana Attorney General Litigation
In July 2020, the Louisiana First Circuit Court
of Appeals (the Appellate Court) reversed and
remanded a Louisiana state trial court (the Trial
Court) ruling that had granted AstraZeneca’s
motion for summary judgment and dismissed a
state court complaint, brought by the Attorney
General for the State of Louisiana, alleging
that AstraZeneca engaged in unlawful
monopolisation and unfair trade practices
in connection with the enforcement of its
Toprol-XL patents. In August 2020, AstraZeneca
petitioned the Louisiana Supreme Court (the
Supreme Court) to review the decision of the
Appellate Court and reinstate the Trial Court’s
summary judgment ruling. In December 2020,
the Supreme Court granted AstraZeneca’s
petition and agreed to review the Appellate
Court’s decision. AstraZeneca filed its opening
appellate brief with the Supreme Court in
January 2021, and a decision on the merits
of the appeal remains pending.
Iraqi Ministry of Health Anti-Corruption Probe
In the US, in July 2018, AstraZeneca, along with
other companies, received an inquiry from the
US Department of Justice (DOJ) pursuant to
the Foreign Corrupt Practices Act in connection
with an anticorruption investigation relating to
activities in Iraq, including interactions with
the Iraqi government. In August 2020, the DOJ
notified AstraZeneca that it does not intend to
institute an enforcement action and is closing
the inquiry.
Vermont US Attorney Investigation
In the US, in April 2020, AstraZeneca received
a Civil Investigative Demand from the US
Attorney’s Office in Vermont and the Department
of Justice, Civil Division, seeking documents
and information relating to AstraZeneca’s
relationships with electronic health-record
vendors. AstraZeneca is co-operating with
this enquiry.
US 340B Litigations and Proceedings
AstraZeneca is involved in several matters
relating to its policy with regard to contract
pharmacy recognition under the 340B Drug
Pricing Program in the US. In October and
November 2020, two lawsuits, one in the US
District Court for the District of Columbia and
one in the US District Court for the Northern
District of California, were filed by covered
entities and advocacy groups against the US
Department of Health and Human Services,
the US Health Resources and Services
Administration as well as other US government
agencies and their officials. The complaints
allege, among other things, that these agencies
should enforce an interpretation of the governing
statute for the 340B Drug Pricing Program that
would require drug manufacturers participating
232
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial StatementsNotes to the Group Financial Statements continued the expected value method and depend on
AstraZeneca’s assessment of the likelihood of
the approach taken by the tax authorities and
could change in the future to reflect progress
in tax authority reviews, the extent that any tax
authority challenge is concluded, or matters
lapse including following expiry of the relevant
statutes of limitation resulting in a reduction in
the tax charge in future periods.
For these other tax contingencies, AstraZeneca
estimates the potential for reasonably possible
additional losses above and beyond the amount
provided to be up to $517m (2019: $327m;
2018: $253m) including associated interest.
It is possible that some of these contingencies
may reduce in the future if any tax authority
challenge is concluded or matters lapse
following expiry of the relevant statutes of
limitation, resulting in a reduction in the tax
charge in future periods.
Timing of cash flows and interest
It is not possible to estimate the timing of tax
cash flows in relation to each outcome. It is
anticipated that tax payments may be required
in relation to a number of significant disputes
which may be resolved over the next one to
30 Statutory and other information
two years. AstraZeneca considers the accruals
set out above to appropriately reflect the
expected value of any final settlement. Some
of the items discussed above are not currently
within the scope of tax authority audits and
may take longer to resolve.
Included within other receivables and
payables is a net amount of interest arising
on tax contingencies of $82m (2019: $90m;
2018: $116m).
Fees payable to PricewaterhouseCoopers LLP and its associates:
Group audit fee
Fees payable to PricewaterhouseCoopers LLP and its associates for other services:
The audit of subsidiaries pursuant to legislation
Attestation under s404 of Sarbanes-Oxley Act 2002
Audit-related assurance services
Tax compliance services
Other assurance services
Fees payable to PricewaterhouseCoopers Associates in respect of the Group’s pension schemes:
The audit of subsidiaries’ pension schemes
2020
$m
6.3
10.8
2.0
0.7
–
0.2
0.3
20.3
2019
$m
3.9
8.3
2.0
0.3
–
0.1
0.3
14.9
2018
$m
3.8
9.4
2.0
0.8
0.1
0.9
0.4
17.4
$0.8m of fees payable in 2020 are in respect of the 2019 Group audit and audit of subsidiaries (2019: $0.7m in respect of the 2018 audit).
Related party transactions
The Group had no material related party transactions which might reasonably be expected to influence decisions made by the users of these
Financial Statements.
Key management personnel compensation
Key management personnel are defined for the purpose of disclosure under IAS 24 ‘Related Party Disclosures’ as the members of the Board and
the members of the SET.
Short-term employee benefits
Post-employment benefits
Share-based payments
2020
$’000
29,126
1,602
27,666
58,394
2019
$’000
31,329
1,766
19,210
52,305
2018
$’000
32,523
2,387
23,605
58,515
Total remuneration is included within employee costs (see Note 28).
31 Subsequent events
On 12 December 2020, AstraZeneca and Alexion Pharmaceuticals, Inc. (Alexion) announced that they had entered into a definitive agreement for
AstraZeneca to acquire Alexion for a total consideration of $39bn, partly funded in cash and partly in AstraZeneca American Depository Shares.
The boards of directors of both companies have unanimously approved the acquisition. Subject to receipt of regulatory clearances and approval
by shareholders of both companies, the acquisition is expected to close in the third quarter of 2021, and upon completion, Alexion shareholders
will own approximately 15% of the combined company. In conjunction with the acquisition, AstraZeneca has entered into committed bank facilities
of $17.5bn as discussed in Note 27.
On 1 February 2021, AstraZeneca announced that it had agreed, subject to certain limited exceptions, to divest its 26.7% ownership of Viela Bio,
as part of the proposed acquisition of Viela Bio by Horizon Therapeutics plc. AstraZeneca is anticipating to receive cash proceeds and profit of
approximately $760-$780m upon closing for the sale of the holding, which will be recorded in Other operating income and expense. The divestment
is expected to complete by the end of the first quarter of 2021.
On 9 February 2021, AstraZeneca completed its sale of rights to Crestor and associated medicines in certain European countries to Grünenthal for
an upfront payment of $320m, which will be recorded within Other operating income and expense. At 31 December 2020 there were no intangible
or other assets on the balance sheet relating to the disposal.
233
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Group Financial StatementsFinancial Statements
Group Subsidiaries and Holdings
In accordance with section 409 of the Companies Act 2006 a full list of subsidiaries, partnerships, associates, joint ventures and joint arrangements,
the country of incorporation, registered office address, and the effective percentage of equity owned as at 31 December 2020 are disclosed below.
Unless otherwise stated the share capital disclosed comprises ordinary shares which are indirectly held by AstraZeneca PLC.
Unless otherwise stated the accounting year ends of subsidiaries are 31 December. The Group Financial Statements consolidate the Financial
Statements of the Company and its subsidiaries at 31 December 2020.
At 31 December 2020
Group Interest
At 31 December 2020
Group Interest
At 31 December 2020
Wholly owned subsidiaries
China
Group Interest
100%
AstraZeneca Pharmaceuticals Co., Limited 100%
100%
No. 2, Huangshan Road,
Wuxi New District, China
Drimex LLC
Villa 47, Road 270, New Maadi,
Cairo 11435, Egypt
Estonia
AstraZeneca (Wuxi) Trading Co., Ltd
100%
AstraZeneca Eesti OÜ
100%
Algeria
AAPM Sarl
20 Zone Macro-Economique, Hydra,
Dar El Medina, Algiers, Algeria
Argentina
AstraZeneca S.A.
Nicolas de Vedia 3616, Piso 8, Ciudad
Autónoma de Buenos Aires, Argentina
Australia
AstraZeneca Holdings Pty Limited
AstraZeneca PTY Limited
Pharmaceutical Manufacturing
Company Pty Limited
Pharmaceutical Manufacturing
Division Pty Limited
66 Talavera Road, Macquarie Park,
NSW 2113, Australia
Austria
AstraZeneca Österreich GmbH
100%
A-1030 Wien, Landstraßer Hauptstraße 1A,
Austria
Building E (Building No. 5), Huirong
Commercial Plaza, East Jinghui Road,
Xinwu District, Wuxi, China
100%
AstraZeneca Investment (China) Co., Ltd
100%
No. 199 Liangjing Road, China (Shanghai)
Pilot Free Trade Zone, Shanghai, China
Valukoja 8, Ülemiste City,
Tallinn 11415, Estonia
Finland
AstraZeneca OY.
Itsehallintokuja 4, Espoo, 02600, Finland
AstraZeneca Pharmaceutical (China) Co., Ltd 100%
France
100%
100%
100%
100%
No. 88 Yaocheng Avenue, Taizhou,
Jiangsu Province, China
AstraZeneca Pharmaceuticals
Technologies (Beijing) Co., Ltd
Unit 2203, 22F, No 8, Jianguomenwai
Avenue, Chaoyang District, Beijing, China
Guangzhou AstraZeneca
Pharmaceutical Co., Ltd.
Room 406-178, No. 1, Yichuang Street,
(China-Singapore Guangzhou
Knowledge City) Huangpu District,
Guangzhou City, China
AstraZeneca S.A.S.
AstraZeneca Finance S.A.S.
100%
AstraZeneca Holding France S.A.S.
Tour Carpe Diem-31, Place des Corolles,
92400 Courbevoie, France
AstraZeneca Dunkerque Production SCS
100%
100%
224 Avenue de la Dordogne, 59640
Dunkerque, France
AstraZeneca Reims Production
100%
Chemin de Vrilly Parc, Industriel de la
Pompelle, 51100, Reims, France
100%
100%
100%
100%
Belgium
Colombia
Germany
AstraZeneca S.A. / N.V.
100%
AstraZeneca Colombia S.A.S.
100%
AstraZeneca Holding GmbH
Alfons Gossetlaan 40 bus 201 at 1702
Groot-Bijgaarden, Belgium
Carrera 7 No. 71-21, Torre A, Piso 19,
Bogota, D.C., Colombia
Brazil
Costa Rica
AstraZeneca GmbH
Tinsdaler Weg 183, Wedel,
D-22880, Germany
AstraZeneca do Brasil Limitada
100%
AstraZeneca CAMCAR Costa Rica, S.A.
100%
Sofotec GmbH
Rod. Raposo Tavares, KM 26, 9, Cotia, Brazil
Bulgaria
Escazu, Guachipelin, Centro Corporativo
Plaza Roble, Edificio Los Balcones,
Segundo Nivel, San Jose, Costa Rica
AstraZeneca Bulgaria EOOD
100%
36 Dragan Tzankov Blvd., District Izgrev,
Sofia, 1057, Bulgaria
Croatia
AstraZeneca d.o.o.
Benzstrasse 1-3, 61352, Bad Homburg v.d.
Hohe, Germany
AstraZeneca Computational
Pathology GmbH2
100%
Bernhard-Wicki-Straße 5, 80636,
Munich, Germany
Canada
Radnicka cesta 80, 10000 Zagreb, Croatia
AstraZeneca Canada Inc.1
100%
Czech Republic
Greece
AstraZeneca S.A.
100%
100%
100%
100%
100%
Suite 5000, 1004 Middlegate Road,
Ontario, L4Y 1M4, Canada
Cayman Islands
AZ Reinsurance Limited
18 Forum Lane, 2nd Floor, Camana Bay,
Grand Cayman, P.O. BOX 69, Cayman Islands
Chile
AstraZeneca S.A.
AstraZeneca Farmaceutica Chile Limitada
100%
Av. Isidora Goyenechea 3477, 2nd Floor,
Las Condes, Santiago, Chile
234
AstraZeneca Czech Republic, s.r.o.
100%
Agisilaou 6-8 Marousi, Athens, Greece
U Trezorky 921/2, 158 00 Prague 5, Czech
Republic
Hong Kong
100%
Denmark
AstraZeneca A/S
World Trade Center Ballerup, Borupvang 3,
DK- 2750 Ballerup, Denmark
100%
Egypt
AstraZeneca Egypt for Pharmaceutical
Industries JSC
AstraZeneca Hong Kong Limited
100%
100%
Unit 1 – 3, 11/F., 18 King Wah Road,
North Point, Hong Kong
Hungary
AstraZeneca Kft
100%
100%
1st Floor, 4 Building B, Alíz Str., Budapest,
1117, Hungary
Villa 133, Road 90 North, New Cairo, Egypt
India
AstraZeneca Egypt for Trading LLC
100%
AstraZeneca India Private Limited3
100%
14C Ahmed Kamel Street, New Maadi,
Cairo, Egypt
Block A, Neville Tower, 11th Floor,
Ramanujan IT SEZ, Taramani, Chennai,
Tamil Nadu, PIN 600113, India
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Statements
At 31 December 2020
Group Interest
At 31 December 2020
Group Interest
At 31 December 2020
Group Interest
Iran
Morocco
Portugal
AstraZeneca Pars Company
100%
AstraZeneca Maroc SARLAU
100%
Astra Alpha Produtos Farmaceuticos Lda
100%
Suite 1, 1st Floor No. 39, Alvand Ave.,
Argantin Sq., Tehran 1516673114, Iran
92 Boulevard Anfa ETG 2, Casablanca
20000, Morocco
Ireland
AstraZeneca Pharmaceuticals (Ireland)
Designated Activity Company
4th Floor, South Bank House, Barrow Street,
Dublin, 4, Republic of Ireland
Israel
The Netherlands
100%
AstraZeneca B.V.
AstraZeneca Continent B.V.
AstraZeneca Gamma B.V.
AstraZeneca Holdings B.V.
AstraZeneca Jota B.V.
AstraZeneca (Israel) Ltd
100%
AstraZeneca Rho B.V.
AstraZeneca Sigma B.V.
AstraZeneca Treasury B.V.
AstraZeneca Zeta B.V.
100%
100%
Prinses Beatrixlaan 582, 2595BM,
The Hague, The Netherlands
MedImmune Pharma B.V.
Lagelandseweg 78, 6545 CG
Nijmegen, The Netherlands
100%
New Zealand
AstraZeneca Limited
100%
Pharmacy Retailing (NZ) Limited
t/a Healthcare Logistics, 58 Richard Pearse
Drive, Mangere, Auckland, 1142, New Zealand
Nigeria
6 Hacharash St., Hod Hasharon,
4524075, Israel
Italy
Simesa SpA
AstraZeneca SpA
Palazzo Ferraris, via Ludovico il Moro 6/c
20080, Basiglio (Milan), Italy
Japan
AstraZeneca K.K.
3-1, Ofuka-cho, Kita-ku, Osaka,
530-0011, Japan
Kenya
AstraZeneca Pharmaceuticals Limited
100%
L.R. No.1/1327, Avenue 5, 1st Floor,
Rose Avenue, Nairobi, Kenya
Latvia
AstraZeneca Latvija SIA
100%
Skanstes iela 50, Riga, LV-1013, Latvia
AstraZeneca Produtos Farmaceuticos Lda
100%
Novastra Promoção e Comércio
Farmacêutico Lda
100%
Novastuart Produtos Farmaceuticos Lda
100%
Stuart-Produtos Farmacêuticos Lda
Zeneca Epsilon – Produtos
Farmacêuticos Lda
Zenecapharma Produtos Farmaceuticos,
Unipessoal Lda
Rua Humberto Madeira, No 7, Queluz de
Baixo, 2730-097, Barcarena, Portugal
100%
100%
100%
Puerto Rico
IPR Pharmaceuticals, Inc.
100%
Road 188, San Isidro Industrial Park,
Canóvanas, Puerto Rico 00729
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Romania
AstraZeneca Pharma S.R.L.
100%
12 Menuetului Street, Bucharest Business
Park, Building D, West Wing, 1st Floor,
Sector 1, Bucharest, 013713, Romania
Russia
AstraZeneca Industries, LLC
100%
249006, 1st Vostochny passage, 8, Dobrino
village, Borovskiy, Russian Federation
AstraZeneca Nigeria Limited
100%
AstraZeneca Pharmaceuticals, LLC
100%
11A, Alfred Olaiya Street, Awuse Estate, Off
Salvation Street, Opebi, Ikeja, Lagos, Nigeria
Norway
AstraZeneca AS
Building 1, 21 First Krasnogvardeyskiy lane,
Floor 30, Rooms 13 and 14, 123100, Moscow,
Russian Federation
100%
Singapore
Lithuania
Fredrik Selmers vei 6 NO-0663 Oslo, Norway
AstraZeneca Singapore Pte Limited
100%
AstraZeneca Lietuva UAB
100%
Spaudos g., Vilnius, LT-05132, Lithuania
Pakistan
10 Kallang Avenue #12-10, Aperia Tower 2,
339510, Singapore
Luxembourg
AstraZeneca Pharmaceuticals Pakistan
(Private) Limited4
100%
South Africa
AstraZeneca Luxembourg S.A.
100%
Rue Nicolas Bové 2A, L-1253, Luxembourg
Office No 1, 2nd Floor, Sasi Arcade, Block 7,
Main Clifton Road, Karachi, Pakistan
AstraZeneca Pharmaceuticals (Pty)
Limited
100%
Panama
17 Georgian Crescent West, Northdowns
Office Park, Bryanston, 2191, South Africa
100%
AstraZeneca CAMCAR, S.A.
100%
Bodega #1, Parque Logistico MIT, Carretera
Hacia Coco Solo, Colon, Panama
South Korea
AstraZeneca Korea Co. Ltd
100%
Malaysia
AstraZeneca Asia-Pacific
Business Services Sdn Bhd
12th Floor, Menara Symphony, No 5 Jalan
Prof, Khoo Kay Kim, Seksyen 13, 46200
Petaling Jaya, Selangor Darul Ehsan, Malaysia
AstraZeneca Sdn Bhd
100%
Nucleus Tower, Level 11 & 12, No. 10 Jalan
PJU 7/6, Mutiara Damansara, 47800 Petaling
Jaya, Selangor Darul Ehsan, Malaysia
Peru
AstraZeneca Peru S.A.
100%
21st Floor, Asem Tower, 517,
Yeongdong-daero, Gangnam-gu,
Seoul, 06164, Republic of Korea
Calle Las Orquídeas N° 675, Int. 802,
Edificio Pacific Tower, San Isidro, Lima, Peru
Spain
Philippines
AstraZeneca Farmaceutica Holding
Spain, S.A.
AstraZeneca Pharmaceuticals (Phils.) Inc.
100%
AstraZeneca Farmaceutica Spain S.A.
Mexico
AstraZeneca Health Care Division,
S.A. de C.V.
100%
16th Floor, Inoza Tower, 40th Street, Bonifacio
Global City, Taguig 1634, Philippines
AstraZeneca, S.A. de C.V.
100%
Poland
Laboratorio Beta, S.A.
Laboratorio Lailan, S.A.
Laboratorio Odin, S.A.
Av. Periferico Sur 4305 interior 5, Colonia
Jardines en la Montaña, Mexico City,
Tlalpan Distrito Federal, CP 14210, Mexico
AstraZeneca Pharma Poland Sp.z.o.o.
100%
Laboratorio Tau S.A.
Postepu 14, 02-676, Warszawa, Poland
Parque Norte, Edificio Álamo, C/Serrano
Galvache no 56., 28033 Madrid, Spain
100%
100%
100%
100%
100%
100%
AstraZeneca Annual Report & Form 20-F Information 2020 / Group Subsidiaries and Holdings
235
Financial Statements
Group Subsidiaries and Holdings
continued
At 31 December 2020
Group Interest
At 31 December 2020
Group Interest
At 31 December 2020
Group Interest
Sweden
Ukraine
United States
Astra Export & Trading Aktiebolag
100%
AstraZeneca Ukraina LLC
100%
Amylin Ohio LLC7
AstraZeneca Employee Share Trust Limited 100%
Astra Lakemedel Aktiebolag
AstraZeneca AB
AstraZeneca Biotech AB
AstraZeneca BioVentureHub AB
AstraZeneca Holding Aktiebolag5
AstraZeneca International
Holdings Aktiebolag6
AstraZeneca Nordic AB
100%
100%
100%
100%
100%
100%
100%
AstraZeneca Pharmaceuticals Aktiebolag
100%
AstraZeneca Södertälje 2 AB
Stuart Pharma Aktiebolag
Tika Lakemedel Aktiebolag
SE-151 85 Södertälje, Sweden
Aktiebolaget Hassle
Symbicom Aktiebolag6
431 83 MoIndal, Sweden
100%
100%
100%
100%
100%
Astra Tech International Aktiebolag
100%
Box 14, 431 21 MoIndal, Sweden
54 Simi Prakhovykh street, Kiev,
01033, Ukraine
United Arab Emirates
AstraZeneca FZ-LLC
P.O. Box 505070, Block D, Dubai
Healthcare City, Oud Mehta Road,
Dubai, United Arab Emirates
United Kingdom
Ardea Biosciences Limited
Arrow Therapeutics Limited
Astra Pharmaceuticals Limited
AstraPharm6
AstraZeneca China UK Limited
AstraZeneca Death In Service
Trustee Limited
AstraZeneca Finance Limited
AstraZeneca Intermediate
Holdings Limited5
AstraZeneca Investments Limited
Switzerland
AstraZeneca AG
Neuhofstrasse 34, 6340 Baar, Switzerland
AstraZeneca Nominees Limited
Spirogen Sarl6
100%
AstraZeneca Quest Limited
100%
AstraZeneca Japan Limited
Rue du Grand-Chêne 5, CH-1003
Lausanne, Switzerland
Taiwan
AstraZeneca Taiwan Limited
100%
21st Floor, Taipei Metro Building 207,
Tun Hwa South Road, SEC 2 Taipei,
Taiwan, Republic of China
Thailand
AstraZeneca (Thailand) Limited
100%
Asia Centre 19th floor, 173/20, South
Sathorn Rd, Khwaeng Thungmahamek,
Khet Sathorn, Bangkok, 10120, Thailand
Tunisia
AstraZeneca Tunisie SaRL
100%
Lot n°1.5.5 les jardins du lac,
bloc B les berges du lac Tunis, Tunisia
AstraZeneca Share Trust Limited
AstraZeneca Treasury Limited6
AstraZeneca UK Limited
AstraZeneca US Investments Limited5
AZENCO2 Limited
AZENCO4 Limited
Cambridge Antibody Technology
Group Limited
KuDOS Horsham Limited
KuDOS Pharmaceuticals Limited
Zenco (No. 8) Limited
Zeneca Finance (Netherlands) Company
1 Francis Crick Avenue, Cambridge
Biomedical Campus, Cambridge, CB2 0AA,
United Kingdom
MedImmune Limited
Milstein Building, Granta Park, Cambridge,
CB21 6GH, United Kingdom
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Amylin Pharmaceuticals, LLC7
AstraZeneca Collaboration Ventures, LLC7
100%
AstraZeneca Pharmaceuticals LP8
100%
Atkemix Nine Inc.
Atkemix Ten Inc.
BMS Holdco, Inc.
Corpus Christi Holdings Inc.
Omthera Pharmaceuticals, Inc.
Optein, Inc.
Stauffer Management Company LLC7
Zeneca Holdings Inc.
Zeneca Inc.
Zeneca Wilmington Inc.5
Delta Omega Sub Holdings Inc.5
Delta Omega Sub Holdings Inc. 1
Delta Omega Sub Holdings LLC 27
1800 Concord Pike, Wilmington,
DE 19803, United States
ZS Pharma Inc.
1100 Park Place, Suite 300, San Mateo,
CA 94403, United States
AlphaCore Pharma, LLC7
100%
333 Parkland Plaza, Suite 5, Ann Arbor,
MI 48103, United States
100%
100%
100%
100%
100%
76 St Paul Street, Suite 500, Burlington,
VT 05401, United States
Definiens Inc.
1808 Aston Avenue, Suite 190, Carlsbad,
CA 92008, United States
100%
MedImmune, LLC7
MedImmune Ventures, Inc.
One MedImmune Way, Gaithersburg,
MD 20878, United States
Pearl Therapeutics, Inc.
100%
200 Cardinal Way, Redwood City,
CA 94063, United States
Uruguay
100%
AstraZeneca S.A.
Yaguarón 1407 of 1205, 11.100,
Montevideo, Uruguay
AstraZeneca Sweden Investments Limited
100%
AZ-Mont Insurance Company
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
MedImmune U.K. Limited
100%
Venezuela
Plot 6, Renaissance Way, Boulevard Industry
Park, Liverpool, L24 9JW, United Kingdom
AstraZeneca Venezuela S.A.
Gotland Pharma S.A.
100%
Av. La Castellana, Torre La Castellana,
Piso 5, Oficina 5-G, 5-H, 5-I, Urbanización
La Castellana, Municipio Chacao, Estado
Bolivariano de Miranda, Venezuela
Vietnam
AstraZeneca Vietnam Company Limited
100%
18th Floor, A&B Tower, 76 Le Lai, Ben Thanh
Ward, District 1, Ho Chi Minh City, Vietnam
Turkey
AstraZeneca Ilac Sanayi ve
Ticaret Limited Sirketi
YKB Plaza, B Blok, Kat:3-4,
Levent/Bes˛ iktas˛ , Istanbul, Turkey
Zeneca Ilac Sanayi Ve Ticaret
Anonim Sirketi
Büyükdere Cad., Y.K.B. Plaza, B Blok, Kat:4,
Levent/Bes˛ iktas˛ , Istanbul, Turkey
236
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Statements
At 31 December 2020
Group Interest
At 31 December 2020
Group Interest
At 31 December 2020
Group Interest
Significant Holdings
Australia
Armaron Bio Ltd10
Other Holdings
Sweden
22.07%
Swedish Orphan Biovitrum AB
7.96%
MPR Group, HWT Tower, Level 19, 40 City Rd,
Southbank, VIC 3006, Australia
Tomtebodavägen 23A, Stockholm, Sweden
Ondosis9
19.90%
Subsidiaries where the effective interest
is less than 100%
Algeria
SPA AstraZeneca Al Djazair9
65.77%
No 20 Zone Macro Economique,
dar El Medina-Hydra, Alger, Algeria
India
AstraZeneca Pharma India Limited3
75%
Block N1, 12th Floor, Manyata Embassy
Business Park, Rachenahalli, Outer Ring
Road, Bangalore-560 045, India
Indonesia
P.T. AstraZeneca Indonesia
95%
Perkantoran Hijau Arkadia Tower F,
3rd Floor, JI. T.B. Simatupang Kav. 88,
Jakarta, 12520, Indonesia
China
Dizal (Jiangsu) Pharmaceutical Co., Ltd.11
30.25%
Suite 4105, Building E (Building No.5) of
Huirong Plaza, East Jinghui Road, Xinwu
District, Wuxi, Jiangsu Province, China
United Kingdom
Apollo Therapeutics LLP7
25%
Stevenage Biosciences Catalyst,
Gunnels Wood Road, Stevenage,
Hertfordshire, SG1 2FX, United Kingdom
The Netherlands
Acerta Pharma B.V.
Aspire Therapeutics B.V.
Kloosterstraat 9, 5349 AB,
Oss, The Netherlands
United States
Acerta Pharma LLC7
United States
C.C. Global Chemicals Company8
37.5%
55%
55%
PO Box 7, MS2901, Texas, TX76101-0007,
United States
Viela Bio, Inc.
26.72%
One MedImmune Way, First Floor, Area Two,
Gaithersburg, MD 20878, United States
55%
121 Oyster Point Boulevard, South
San Francisco, CA 94080, United States
Joint Ventures
Hong Kong
WuXi MedImmune Biopharmaceutical
Co., Limited
50%
Room 1902, 19/F, Lee Garden One,
33 Hysan Avenue, Causeway Bay, Hong Kong
United Kingdom
Archigen Biotech Limited9
Centus Biotherapeutics Limited9
1 Francis Crick Avenue, Cambridge
Biomedical Campus, Cambridge, CB2 0AA,
United Kingdom
United States
Montrose Chemical Corporation
of California
Suite 380, 600 Ericksen Ave N/E,
Bainbridge Island, United States
50%
50%
50%
BioVentureHub, Pepparedsleden 1,
431 83 Mölndal, Sweden
Switzerland
ADC Therapeutics Sàrl12
5.23%
Biopôle, Route de la Corniche 3B,
1066 Epalinges, Switzerland
United Kingdom
Circassia Group PLC
Northbrook House, Robert Robinson Avenue,
Oxford Science Park, Oxford, OX4 4GA
United States
AbMed Corporation13
68 Cummings Park Drive, Woburn,
MA 01801, United States
17.88%
18%
Aristea Therapeutics, Inc.14
13.42%
122770 High Bluff Drive, #380, San Diego,
CA 92130, United States
Baergic Bio, Inc.
19.95%
2 Gansevoort Street, 9th Floor, New York,
NY 10014, United States
PhaseBio Pharmaceuticals, Inc.
10.23%
One Great Valley, Parkway, Suite 30,
Malvern, PA 19355, United States
Employee Benefit Trust
The AstraZeneca Employee Benefit Trust
1 Ownership held in ordinary and class B special shares.
2 Ownership held in common shares, preferred shares 2003, preferred shares 2003 ex (A), preferred shares 2003 ex (B),
preferred shares Series D, preferred shares Series E and preferred shares Series F.
3 Accounting year end is 31 March.
4 Accounting year end is 30 June.
5 Directly held by AstraZeneca PLC.
6 Ownership held in Ordinary A shares and Ordinary B shares.
7 Ownership held as membership interest.
8 Ownership held as partnership interest.
9 Ownership held in class A shares.
10 Ownership held in class B preference shares.
11 Voting rights and percentages vary depending on the subject matter and business to be voted on.
12 Ownership held in class B preference shares, class C preference shares, class D preference shares and class E preference shares.
13 Ownership held in common shares and series A preferred shares.
14 Ownership held in series A-1 preferred stock and series B preferred stock.
AstraZeneca Annual Report & Form 20-F Information 2020 / Group Subsidiaries and Holdings
237
Financial Statements
Company Balance Sheet
at 31 December
AstraZeneca PLC
Fixed assets
Fixed asset investments
Other receivables
Current assets
Debtors – other
Debtors – amounts owed by Group undertakings
Creditors: Amounts falling due within one year
Non-trade creditors
Interest-bearing loans and borrowings
Net current assets
Total assets less current liabilities
Creditors: Amounts falling due after more than one year
Amounts owed to Group undertakings
Interest-bearing loans and borrowings
Net assets
Capital and reserves
Called-up share capital
Share premium account
Capital redemption reserve
Other reserves
Profit and loss account
Shareholders’ funds
Notes
2020
$m
1
33,268
2019
$m
31,525
–
31,525
1
8,755
8,756
(164)
(1,597)
(1,761)
6,995
4
33,272
26
7,011
7,037
(192)
(1,535)
(1,727)
5,310
38,582
38,520
(283)
(17,161)
(17,444)
21,138
328
7,971
153
2,382
10,304
21,138
(283)
(15,376)
(15,659)
22,861
328
7,941
153
2,441
11,998
22,861
2
3
3
3
4
$m means millions of US dollars.
The Company’s profit for the year was $1,974m (2019: $3,975m).
The Company Financial Statements from page 238 to 242 were approved by the Board and were signed on its behalf by
Pascal Soriot
Director
11 February 2021
Marc Dunoyer
Director
Company’s registered number 02723534
238
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Statements
Company Statement of Changes in Equity
for the year ended 31 December
At 1 January 2019
Total comprehensive income for the period
Profit for the period
Total comprehensive income for the period
Transactions with owners, recorded directly in equity
Dividends
Capital contributions for share-based payments
Issue of Ordinary Shares
Total contributions by and distributions to owners
At 31 December 2019
Total comprehensive income for the period
Profit for the period
Total comprehensive income for the period
Transactions with owners, recorded directly in equity
Dividends
Capital contributions for share-based payments
Issue of Ordinary Shares
Total contributions by and distributions to owners
Share
capital
$m
317
–
–
–
–
11
11
328
–
–
–
–
–
–
Share
premium
account
$m
4,427
Capital
redemption
reserve
$m
153
Other
reserves1
$m
2,533
Profit and
loss account2
$m
Total
equity
$m
11,602
19,032
–
–
–
–
3,514
3,514
7,941
–
–
–
–
30
30
–
–
–
–
–
–
–
–
–
(92)
–
(92)
153
2,441
–
–
–
–
–
–
–
–
–
(59)
–
(59)
3,975
3,975
(3,579)
–
–
(3,579)
11,998
1,974
1,974
3,975
3,975
(3,579)
(92)
3,525
(146)
22,861
1,974
1,974
(3,668)
(3,668)
–
–
(3,668)
10,304
(59)
30
(3,697)
21,138
At 31 December 2020
328
7,971
153
2,382
1 The Other reserves arose from the cancellation of £1,255m share premium by the Company in 1993 and the redenomination of share capital of $157m in 1999. Also included within Other reserves
at 31 December 2020 is $541m (31 December 2019: $600m) in respect of cumulative share-based payment awards. These amounts are not available for distribution.
2 At 31 December 2020, the Profit and loss account reserve of $10,304m (2019: $11,998m) was available for distribution, subject to filing these Financial Statements with Companies House. When
making a distribution to shareholders, the Directors determine profits available for distribution by reference to guidance on realised and distributable profits under the Companies Act 2006
issued by the Institute of Chartered Accountants in England and Wales and the Institute of Chartered Accountants of Scotland in April 2017. The profits of the Company have been received in
the form of receivables due from subsidiaries. The availability of distributable reserves in the Company is dependent on those receivables meeting the definition of qualifying consideration
within the guidance, and in particular on the ability of subsidiaries to settle those receivables within a reasonable period of time. The Directors consider that, based on the nature of these
receivables and the available cash resources of the Group and other accessible sources of funds, at 31 December 2020, all (2019: overwhelming majority; 2018: all) of the Company’s profit
and loss reserves were available for distribution.
AstraZeneca Annual Report & Form 20-F Information 2020 / Company Statements
239
Financial Statements Company Accounting Policies
Basis of presentation of
financial information
These financial statements were prepared
in accordance with FRS 101 ‘Reduced
Disclosure Framework’.
In preparing these financial statements, the
Company applied the recognition, measurement
and disclosure requirements of International
Financial Reporting Standards as adopted by
the EU (adopted IFRSs), but makes amendments
where necessary in order to comply with the
Companies Act 2006 and has set out below
where advantage of the FRS 101 disclosure
exemptions has been taken.
In these financial statements, the Company
has applied the exemptions available under
FRS 101 in respect of the following disclosures:
> Statement of Cash Flows and related notes
> disclosures in respect of transactions
with wholly owned subsidiaries
> disclosures in respect of
capital management
> the effects of new but not yet effective IFRSs
> disclosures in respect of the compensation
of Key Management Personnel.
As the Group Financial Statements (presented
on pages 176 to 237) include the equivalent
disclosures, the Company has also taken the
exemptions under FRS 101 available in respect
of the following disclosures:
>
IFRS 2 ‘Share-based Payment’ in respect of
Group settled share-based payments certain
disclosures required by IFRS 13 ‘Fair Value
Measurement’ and the disclosures required
by IFRS 7 ‘Financial Instrument Disclosures’.
> No individual profit and loss account is
prepared as provided by section 408 of
the Companies Act 2006.
UK-adopted international
accounting standards
On 31 December 2020, EU-adopted IFRS was
brought into UK law and became UK-adopted
international accounting standards, with future
changes to IFRS being subject to endorsement
by the UK Endorsement Board. The Company
Financial Statements will transition to
UK-adopted international accounting standards
for financial periods beginning 1 January 2021.
Basis of accounting
The Company Financial Statements are
prepared under the historical cost convention
and on a going concern basis, in accordance
with the Companies Act 2006.
The following paragraphs describe the
main accounting policies, which have been
applied consistently.
Estimates and judgements
The preparation of the Financial Statements in
conformity with generally accepted accounting
principles requires management to make
estimates and judgements that affect the
reported amounts of assets and liabilities at
the date of the Financial Statements and the
reported amounts of revenues and expenses
during the reporting period. Actual results
could differ from those estimates. There are
no significant judgements and estimates.
Foreign currencies
Profit and loss account items in foreign
currencies are translated into US dollars at
average rates for the relevant accounting
periods. Monetary assets and liabilities are
translated at exchange rates prevailing at the
date of the Company Balance Sheet. Exchange
gains and losses on loans and on short-term
foreign currency borrowings and deposits are
included within net Finance expense. Exchange
differences on all other foreign currency
transactions are recognised in Operating profit.
Taxation
The current tax payable is based on taxable
profit for the year. Taxable profit differs from
reported profit because taxable profit excludes
items that are either never taxable or tax
deductible or items that are taxable or tax
deductible in a different period. The Company’s
current tax assets and liabilities are calculated
using tax rates that have been enacted or
substantively enacted by the reporting date.
Deferred tax is provided using the balance
sheet liability method, providing for temporary
differences between the carrying amounts
of assets and liabilities for financial reporting
purposes and the amounts used for taxation
purposes. Deferred tax assets are recognised
to the extent that it is probable that taxable
profit will be available against which the asset
can be utilised. This requires judgements to
be made in respect of the availability of future
taxable income.
No deferred tax asset or liability is recognised in
respect of temporary differences associated
with investments in subsidiaries and branches
where the Company is able to control the timing
of reversal of the temporary differences and it
is probable that the temporary differences will
not reverse in the foreseeable future.
The Company’s deferred tax assets and
liabilities are calculated using tax rates that
are expected to apply in the period when the
liability is settled or the asset realised based
on tax rates that have been enacted or
substantively enacted by the reporting date.
Accruals for tax contingencies require
management to make judgements of potential
exposures in relation to tax audit issues. Tax
benefits are not recognised unless the tax
positions will probably be accepted by the
authorities. This is based upon management‘s
interpretation of applicable laws and regulations
and the expectation of how the tax authority
will resolve the matter. Once considered
probable of not being accepted, management
reviews each material tax benefit and reflects
the effect of the uncertainty in determining the
related taxable result.
Accruals for tax contingencies are measured
using either the most likely amount or the
expected value amount depending on which
method the Company expect to better predict
the resolution of the uncertainty.
Investments
Fixed asset investments, including investments
in subsidiaries, are stated at cost and reviewed
for impairment if there are indications that the
carrying value may not be recoverable.
Share-based payments
The issuance by the Company to employees
of its subsidiaries of a grant of awards over
the Company’s shares, represents additional
capital contributions by the Company to its
subsidiaries. An additional investment in
subsidiaries results in a corresponding increase
in shareholders’ equity. The additional capital
contribution is based on the fair value of the
grant issued, allocated over the underlying
grant’s vesting period, less the market cost
of shares charged to subsidiaries in settlement
of such share awards.
Financial instruments
Interest-bearing loans are initially measured
at fair value (with direct transaction costs
being amortised over the life of the loan)
and are subsequently measured at amortised
cost using the effective rate method at each
reporting date. Changes in carrying value
are recognised in profit.
Litigation
Through the normal course of business, the
AstraZeneca Group is involved in legal disputes,
the settlement of which may involve cost to
the Company. Provision is made where an
adverse outcome is probable and associated
costs can be estimated reliably. In other
cases, appropriate descriptions are included.
240
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Statements Notes to the Company Financial Statements
1 Fixed asset investments
At 1 January 2019
Transfer to Debtors – amounts owed by group undertakings
Capital reimbursement
Exchange
Amortisation
At 31 December 2019
Additions during the year
Transfer to Debtors – amounts owed by group undertakings
Capital reimbursement
Exchange
Amortisation
At 31 December 2020
Investments in subsidiaries
Shares
$m
15,942
–
(81)
–
–
15,861
–
–
(44)
–
–
Loans
$m
17,302
(1,595)
–
(55)
12
15,664
2,971
(1,451)
–
254
13
Total
$m
33,244
(1,595)
(81)
(55)
12
31,525
2,971
(1,451)
(44)
254
13
15,817
17,451
33,268
Loans to subsidiaries consists of bonds which are issued externally and are issued back to group undertakings with comparable terms on interest
rates and are repayable on maturity, details of which are disclosed in Note 3. The recoverability of these inter-company loans has been assessed in
accordance with IFRS 9 with no impairment identified. The inter-company balances are considered to have low credit risk due to timely payment of
interest and settlement of principal amount on agreed due dates, limiting the loss allowance to 12-month expected credit losses. In 2020, there have
been no credit losses (2019: $nil).
2 Non-trade creditors
Amounts due within one year
Other creditors
Amounts owed to Group undertakings
3 Loans
Amounts due within one year
Interest-bearing loans and borrowings (unsecured)
2.375% Callable bond
0.25% Callable bond
0.875% Non-callable bond
Amounts due after more than one year
Amounts owed to Group undertakings (unsecured)
7.2% Loan
Interest-bearing loans and borrowings (unsecured)
0.25% Callable bond
0.875% Non-callable bond
Floating rate notes
2.375% Callable bond
Floating rate notes
3.5% Callable bond
0.75% Callable bond
3.375% Callable bond
0.7% Callable bond
3.125% Callable bond
1.25% Callable bond
4% Callable bond
1.375% Callable bond
5.75% Non-callable bond
6.45% Callable bond
4% Callable bond
4.375% Callable bond
4.375% Callable bond
2.125% Callable bond
Total amounts due after more than one year
Total loans
2020
$m
185
7
192
2020
$m
–
614
921
2019
$m
157
7
164
2019
$m
1,597
–
–
1,535
1,597
283
–
–
250
996
400
847
1,102
1,985
1,192
744
973
993
1,291
475
2,722
988
980
737
486
17,444
18,979
283
559
837
250
996
400
846
1,003
1,983
–
743
885
992
–
457
2,721
987
980
737
–
15,659
17,256
Repayment
dates
2020
2021
2021
2023
2021
2021
2022
2022
2023
2023
2024
2025
2026
2027
2028
2029
2030
2031
2037
2042
2045
2048
2050
US dollars
euros
euros
US dollars
euros
euros
US dollars
US dollars
US dollars
US dollars
euros
US dollars
US dollars
US dollars
euros
US dollars
US dollars
pounds sterling
US dollars
US dollars
US dollars
US dollars
US dollars
AstraZeneca Annual Report & Form 20-F Information 2020 / Company Accounting Policies
241
Financial Statements
Notes to the Company Financial Statements
continued
Loans are repayable:
After five years from balance sheet date
From two to five years
From one to two years
Within one year
Total unsecured
2020
$m
11,580
4,617
1,247
1,535
18,979
2019
$m
10,485
3,778
1,396
1,597
17,256
All bonds are issued with fixed interest rates with an exception of two bonds, the 2022 and the 2023 floating rate notes. This might impact the fair
values of loans as they change according to changes in the market rate. As the loans are held at amortised cost, change in interest rates and the credit
rating of the Company do not have an effect on the Company’s net assets.
4 Called-up share capital
Details of share capital movements in the year are included in Note 24 to the Group Financial Statements.
5 Contingent liabilities
The Company has guaranteed the external borrowing of a subsidiary in the amount of $286m (2019: $286m), as well as guaranteed the undrawn
borrowing facility of a subsidiary totalling $17.5bn (2019: $nil) in relation to the acquisition of Alexion Pharmaceuticals, Inc. (Alexion) as further described
in Note 7.
Vermont US Attorney Investigation
In the US, in April 2020, AstraZeneca received a Civil Investigative Demand from the US Attorney’s Office in Vermont and the Department of Justice,
Civil Division, seeking documents and information relating to AstraZeneca’s relationships with electronic health-record vendors. AstraZeneca is
co-operating with this enquiry.
AZD1222 Securities Litigation
In January 2021, putative securities class action lawsuits were filed in the US District Court for the Southern District of New York against
AstraZeneca PLC and certain officers, on behalf of purchasers of AstraZeneca publicly traded securities during the period 21 May 2020 through
20 November 2020. The complaints allege that defendants made materially false and misleading statements in connection with the development
of AZD1222 (otherwise known as COVID-19 Vaccine AstraZeneca), a potential recombinant adenovirus vaccine for the prevention of COVID-19,
and assert claims under sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5.
6 Statutory and other information
The Directors of the Company were paid by another Group company in 2020 and 2019.
7 Subsequent events
On 12 December 2020, AstraZeneca and Alexion Pharmaceuticals, Inc. (Alexion) announced that they had entered into a definitive agreement for
AstraZeneca to acquire Alexion for a total consideration of $39bn, partly funded in cash and partly in AstraZeneca American Depository Shares.
The boards of directors of both companies have unanimously approved the acquisition. Subject to receipt of regulatory clearances and approval
by shareholders of both companies, the acquisition is expected to close in the third quarter of 2021, and upon completion, Alexion shareholders
will own approximately 15% of the combined company.
No other subsequent events having material impact on the financial statements were identified after the balance sheet date.
242
AstraZeneca Annual Report & Form 20-F Information 2020 / Financial Statements
Group Financial Record
For the year ended 31 December
Revenue and profits
Product Sales
Collaboration Revenue
Cost of sales
Distribution costs
Research and development expense
Selling, general and administrative costs
Other operating income and expense
Operating profit
Finance income
Finance expense
Share of after tax losses in associates and joint ventures
Profit before tax
Taxation
Profit for the period
Other comprehensive income for the period, net of tax
Total comprehensive income for the period
Profit attributable to:
Owners of the Parent
Non-controlling interests
Earnings per share
Basic earnings per $0.25 Ordinary Share
Diluted earnings per $0.25 Ordinary Share
Dividends
Return on revenues
Operating profit as a percentage of Total Revenue
Ratio of earnings to fixed charges
At 31 December
Statement of Financial Position
Property, plant and equipment, right-of-use assets, goodwill and intangible assets
Other non-current assets
Deferred tax assets
Current assets
Total assets
Current liabilities
Deferred tax liabilities
Other non-current liabilities
Net assets
Share capital
Reserves attributable to equity holders of the Company
Non-controlling interests
Total equity and reserves
For the year ended 31 December
Cash flows
Net cash inflow/(outflow) from:
Operating activities
Investing activities
Financing activities
2016
$m
2017
$m
2018
$m
2019
$m
2020
$m
21,319
1,683
(4,126)
(326)
(5,890)
(9,413)
1,655
4,902
67
(1,384)
(33)
3,552
(146)
3,406
(1,778)
1,628
3,499
(93)
$2.77
$2.76
$2.80
21.3%
8.9
2016
$m
46,092
2,070
1,102
13,262
62,526
(15,256)
(3,956)
(26,645)
16,669
316
14,538
1,815
16,669
2016
$m
4,145
(3,969)
(1,324)
(1,148)
20,152
2,313
(4,318)
(310)
(5,757)
(10,233)
1,830
3,677
113
(1,508)
(55)
2,227
641
2,868
639
3,507
3,001
(133)
$2.37
$2.37
$2.80
21,049
1,041
(4,936)
(331)
(5,932)
(10,031)
2,527
3,387
138
(1,419)
(113)
1,993
57
2,050
(1,059)
991
2,155
(105)
$1.70
$1.70
$2.80
23,565
819
(4,921)
(339)
(6,059)
(11,682)
1,541
2,924
172
(1,432)
(116)
1,548
(321)
1,227
(611)
616
1,335
(108)
$1.03
$1.03
$2.80
16.4%
15.3%
12.0%
4.4
2017
$m
45,628
2,387
2,189
13,150
63,354
(16,383)
(3,995)
(26,334)
16,642
317
14,643
1,682
16,642
2017
$m
3,578
(2,328)
(2,936)
(1,686)
3.7
2018
$m
41,087
1,594
2,379
15,591
60,651
(16,292)
(3,286)
(27,029)
14,044
317
12,151
1,576
14,044
2018
$m
2,618
963
(2,044)
1,537
3.0
2019
$m
40,836
2,260
2,718
15,563
61,377
(18,117)
(2,490)
(26,174)
14,596
328
12,799
1,469
14,596
2019
$m
2,969
(657)
(1,765)
547
25,890
727
(5,299)
(399)
(5,991)
(11,294)
1,528
5,162
87
(1,306)
(27)
3,916
(772)
3,144
1,608
4,752
3,196
(52)
$2.44
$2.44
$2.80
19.4%
5.9
2020
$m
41,709
2,038
3,438
19,544
66,729
(20,307)
(2,918)
(27,866)
15,638
328
15,294
16
15,638
2020
$m
4,799
(285)
(2,203)
2,311
For the purpose of computing the ratio of earnings to fixed charges, earnings consist of the income from continuing ordinary activities before taxation
of Group companies and income received from companies owned 50% or less, plus fixed charges. Fixed charges consist of interest on all indebtedness,
amortisation of debt discount and expense, and that portion of rental expense representative of the interest factor.
AstraZeneca Annual Report & Form 20-F Information 2020 / Notes to the Company Financial Statements
243
Financial Statements
Additional
Information
Development Pipeline 245
Patent Expiries of Key Marketed
Products 251
Risk 254
Shareholder Information 267
Directors’ Report 272
Sustainability: Supplementary
Information 275
Taskforce on Climate-related Financial
Disclosures Statement 276
Trade Marks 279
Glossary 280
Cautionary Statement Regarding
Forward-looking Statements 284
244
AstraZeneca Annual Report & Form 20-F Information 2020 / Additional Information
Development Pipeline
as at 11 February 2021
Key
PP Partnered product
AstraZeneca-sponsored or -directed trial
New Molecular Entities (NMEs) and significant indications
Regulatory submission dates shown for assets in Phase III and beyond. As disclosure of compound information is balanced by the business
need to maintain confidentiality, information in relation to some compounds listed here has not been disclosed at this time.
Phase I
Compound
Oncology
AZD0466
AZD1390
AZD4573
AZD5305
AZD5991
AZD7648
AZD8701
Calquence (platform)
PRISM
Calquence + ceralasertib
Mechanism
BCL2/xL
ATM inhibitor
CDK9 inhibitor
PARP1Sel
MCL1 inhibitor
DNAPK
FOXP3
Area Under Investigation
haematological and solid tumours
glioblastoma
haematalogical malignancies
solid tumours
haematalogical malignancies
PP haematological and solid tumours
solid tumours
BTK inhibitor + multiple novel oncology therapies
relapsed/refractory aggressive non-hodgkin’s lymphoma
BTK inhibitor + ATR inhibitor
haematological malignancies
Imfinzi + adavosertib
PD-L1 mAb + Wee1 inhibitor
PP solid tumours
Imfinzi + RT (platform)
CLOVER
PD-L1 mAb + RT
Imfinzi + selumetinib
PD-L1 + MEK inhibitor
Imfinzi + tremelimumab
PD-L1 mAb + CTLA-4 mAb
PP locally-advanced head and neck squamous cell carcinoma, non-small
cell lung cancer, small-cell lung cancer
PP solid tumours
PP solid tumours
Imfinzi + tremelimumab + CTx
PD-L1 mAb + CTLA-4 mAb + CTx
PP 1st-line pancreatic ductal adenocarcinoma, oesophageal and small
cell lung cancer
IPH5201
CD39
PP solid tumours
MEDI2228
MEDI5395
MEDI5752 + axitinib
MEDI9253
Tagrisso + (Koselugo or savolitinib)
TATTON
BCMA antibody drug conjugate
rNDV GMCSF
PD-1/CTLA-4 bispecific mAb + VEGF
rNDV IL12
multiple myeloma
solid tumours
advanced renal cell carcinoma
solid tumours
EGFR inhibitor + (MEK inhibitor or MET inhibitor)
PP advanced EGFRm non-small cell lung cancer
MEDI1191
IL-12 mRNA
PP solid tumours
CVRM
AZD2373
AZD2693
AZD3366
AZD3427
AZD99771
MEDI8367
Respiratory & Immunology
AZD0284
AZD0449
AZD1402
AZD8154
Other
AZD4041
MEDI0618
MEDI1341
MEDI1814
Phase II
Compound
Oncology
(oleclumab+CTx) or
(Imfinzi+oleclumab+CTx)
Podocyte health
NASH resolution
CD39L3
Relaxin ThP
MCR
avb8
RORg
Inhaled JAK inhibitor
inhaled IL-4Ra
Inhaled PI3Kgd
orexin 1 receptor antagonist
PAR2 antagonist mAb
alpha synuclein mAb
amyloid beta mAb
nephropathy
NASH
CV disease
CV disease
CV disease
chronic kidney disease
psoriasis/respiratory
asthma
PP asthma
asthma
PP opioid use disorder
osteoarthritis pain
PP parkinson's disease
PP alzheimer’s disease
Mechanism
Area Under Investigation
(CD73 mAb + CTx) or (PD-L1 mAb + CD73 mAb + CTx)
metastatic pancreatic cancer
adavosertib
Wee1 inhibitor
PP ovarian cancer, solid tumours, uterine serous cancer
AZD2811 nanoparticle
camizestrant (AZD9833)
Aurora B inhibitor
selective oestrogen receptor degrader
solid tumours, haematological malignancies
oestrogen receptor +ve breast cancer
capivasertib
Imfinzi (platform)
BALTIC
Imfinzi (platform)
COAST
AKT inhibitor
PP prostate cancer
PD-L1 mAb + CTLA-4, WEE1 inhibitor + Carboplatin,
ATR inhibitor+ PARP inhibitor
PP ES-SCLC refractory/resistant
PD-L1 mAb + multiple novel oncology therapies
PP non small cell lung cancer
1
Pending Phase II start in combination with dapagliflozin
AstraZeneca Annual Report & Form 20-F Information 2020 / Development Pipeline
245
A
d
d
i
t
i
o
n
a
l
I
n
f
o
r
m
a
t
i
o
n
Development Pipeline
continued
Phase II continued
Compound
Imfinzi (platform)
NeoCOAST
Imfinzi + imaradenant (AZD4635) +
cabazitaxel
Imfinzi + Lynparza
BAYOU
Imfinzi + Lynparza
ORION
Mechanism
Area Under Investigation
PD-L1 mAb + multiple novel oncology therapies
PP non-small cell lung cancer
PD-L1 mAb + A2aR inhibitor + chemotherapy
PP prostate cancer
PD-L1 mAb + PARP inhibitor
PP 1st-line unresectable stage IV bladder cancer
PD-L1 mAb + PARP inhibitor
PP 1st-line metastatic non-small cell lung cancer
Imfinzi + MEDI0457
PD-L1 mAb + DNA HPV vaccine
PP head and neck squamous cell carcinoma
Imfinzi + monalizumab
PD-L1 mAb + NKG2a mAb
PP solid tumours
Imfinzi + tremelimumab
PD-L1 mAb + CTLA-4 mAb
PP biliary tract, oesophageal
Imfinzi + tremelimumab
PD-L1 mAb + CTLA-4 mAb
PARP inhibitor + ATR inhibitor
PD-1/CTLA-4 bispecific mAb
PP gastric cancer
PP breast cancer
solid tumours
EGFR inhibitor + multiple novel oncology therapies
EGFRm non-small cell lung cancer
EGFR inhibitor + MET inhibitor
PP advanced EGFRm non-small cell lung cancer
PD-L1 mAb + multiple novel oncology therapies
post IO non-small cell lung cancer
PD-L1 mAb + CTx + VEGF
1st-line metastatic microsatellite-stable colorectal cancer
Lynparza + ceralasertib
VIOLETTE
MEDI5752
Post-1L Tagrisso ORCHARD
(platform)
Tagrisso + savolitinib
SAVANNAH
Imfinzi (platform)
HUDSON
Imfinzi + FOLFOX + bevacizumab
COLUMBIA 1
CVRM
AZD4831
AZD5718
AZD8233
AZD8601
cotadutide
MEDI3506
MEDI5884
MEDI6012
MEDI6570
verinurad
Respiratory & Immunology
LCAT
LOX-1 mAb
URAT1 inhibitor
myeloperoxidase
FLAP
hypercholesterolemia
VEGF-A
GLP-1/glucagon dual agonist
IL-33 mAb
cholesterol modulation
Type I IFN receptor mAb
Type I IFN receptor mAb
DPP1
oral SGRM
IL-23 mAb
IL-33 mAb
MABA
TSLP mAb
TSLP mAb
anifrolumab
anifrolumab
AZD7986
AZD9567
brazikumab
EXPEDITION
MEDI3506
navafenterol
tezepelumab
tezepelumab
Other
MEDI7352
suvratoxumab
heart failure with a preserved ejection fraction
coronary artery disease / chronic kidney disease
CV disease
PP cardiovascular disease
type-2 diabetes, obesity and NASH, diabetic kidney disease
diabetic kidney disease
PP cardiovascular disease
cardiovascular disease
cardiovascular disease
chronic kidney disease / HF with a preserved ejection fraction
PP lupus nephritis
PP systemic lupus erythematosus (subcutaneous)
PP chronic obstructive pulmonary disease
chronic inflammatory diseases
ulcerative colitis
COPD/atopic dermatitis/asthma/COVID-19
PP chronic obstructive pulmonary disease
PP atopic dermatitis
PP chronic obstructive pulmonary disease
NGF/TNF bispecific mAb
mAb binding to S. aureus toxin
osteoarthritis pain and painful diabetic neuropathy
prevention of nosocomial Staphylococcus aureus pneumonia
Phase III/Pivotal Phase II/Registration (listed until launched in all applicable major regions)
Compound
Oncology
capivasertib + CTx
CAPItello-290
capivasertib +
fulvestrant
CAPItello-291
capivasertib +
abiraterone
CAPItello-281
Enhertu
DESTINY-Breast01
Imfinzi +
tremelimumab + SoC
NILE
Mechanism
Area Under Investigation
Additional information
US
EU
Japan
China
Estimated Filing Acceptance
AKT inhibitor
+ CTx
1st-line metastatic triple negative breast
cancer
AKT inhibitor
+ fulvestrant
locally advanced (inoperable) or metastatic
breast cancer
AKT inhibitor
+ abiraterone
PTEN deficient metastatic hormone sensitive
prostate cancer
HER2
targeting
antibody drug
conjugate
PL-L1 mAb +
CTLA-4 mAb
+ SoC
HER2-positive, unresectable and/or
metastatic breast cancer subjects previously
treated with T-DM1
1st-line urothelial cancer
PP
PP
PP
PP
PP
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
Phase II
registrational
study
Launched
Accepted
(Accelerated
assessment)
2022+
2022+
2022+
2022+
246
AstraZeneca Annual Report & Form 20-F Information 2020 / Additional Information
Phase III/Pivotal Phase II/Registration (listed until launched in all applicable major regions) continued
Compound
Mechanism
Area Under Investigation
Additional information
1st-line hepatocellular carcinoma
PP
US
H2 2021
(Orphan
Drug
Designation)
Estimated Filing Acceptance
EU
Japan
China
2022
H2 2021
2022+
1st-line limited-stage small-cell lung cancer
PP
2022
2022
2022+
2022+
1st-line non-small cell lung cancer
MEK inhibitor
paediatric neurofibromatosis type-1
anti-CD22
recombinant
immunotoxin
PARP inhibitor
+ PD-L1 mAb
+ VEGF
inhibitor
PARP inhibitor
+ PD-L1 mAb
3rd-line hairy cell leukaemia
1st-line ovarian cancer
1st-line endometrial cancer
NKG2a mAb +
EGFR mAb
2L+ relapsed metastatic head and neck
squamous cell cancer
Koselugo in
the US.
Registrational
Phase IIb study.
PP
PP
PP
PP
PP
PP
H2 2021
H2 2021
H2 2021
Launched
(Orphan
Drug,
Breakthrough
Designation,
Priority
Review)
Launched
(Orphan
Drug, Priority
Review)
Accepted
(Orphan
Drug,
Breakthrough
Designation)
Accepted
(Orphan
Drug)
2022
(Orphan
Drug)
2022
N/A
N/A
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
severe hypertriglyceridaemia
Approved
anaemia in chronic kidney disease/end-stage
renal disease
PP
Respiratory & Immunology
anifrolumab
TULIP 1 & TULIP 2
Type I IFN
receptor mAb
systemic lupus erythematosus
PP
COVID-19
LAAB
combination
Prevention and treatment of COVID-19
US submissions
based on entire
Phase III
programme.
US timing
based on FDA
Emergency Use
Authorisation
Accepted
Launched
Accepted
(Fast Track
Designation)
Accepted
Accepted
H1 2021
2022
2022
TBC
LABA/LAMA
chronic obstructive pulmonary disease
Launched
Launched
Launched
Launched
IL-23 mAb
crohns disease
Phase II/III
2022+
2022+
2022+
2022+
PD-L1 mAb +
CTLA-4 mAb
PD-L1 mAb
+/- CTLA-4
mAb + CRT
PD-L1 mAb
+/- CTLA-4
mAb + CTx
omega-3
carboxylic
acids
hypoxia-
inducible
factor prolyl
hydroxylase
inhibitor
Imfinzi +
tremelimumab
HIMALAYA
Imfinzi +/-
tremelimumab +
CRT
ADRIATIC
Imfinzi +/-
tremelimumab +
CTx
POSEIDON
Koselugo/
selumetinib
SPRINT
Lumoxiti
Lynparza + Imfinzi +
bevacizumab
DUO-O
Lynparza + Imfinzi
DUO-E
monalizumab +
cetuximab
INTERLINK-1
CVRM
Epanova
roxadustat
OLYMPUS
ROCKIES
AZD7442
Bevespi Aerosphere
(PT003)
brazikumab
INTREPID
Breztri/Trixeo
Aerosphere
(formoterol
fumarate/
glycopyrronium
bromide/
budesonide)
COVID-19 Vaccine
AstraZeneca
(AZD1222)
Fasenra
CALIMA SIROCCO
ZONDA BISE BORA
GREGALE
MIRACLE
LABA/LAMA/
ICS
chronic obstructive pulmonary disease
SARS-CoV-2
COVID vaccine
IL-5R mAb
severe uncontrolled asthma
nirsevimab
RSV mAb-YTE passive RSV immunisation
PT027
tezepelumab
NAVIGATOR
SOURCE
ICS/SABA
asthma
TSLP mAb
severe uncontrolled asthma
Breztri
Aerosphere in
Japan, China
and the US.
Trixeo
Aerosphere
in the EU.
EMA Conditional
Marketing
Authorisation.
FDA Emergency
Use
Authorisation.
PP
PP
PP
PP
Launched
Approved
Launched
Launched
(Priority
Review)
H1 2021
Approved
H1 2021
A
d
d
i
t
i
o
n
a
l
I
n
f
o
r
m
a
t
i
o
n
Launched
Launched
Launched
2022+
2022+
(Fast Track
Designation,
Breakthrough
Therapy
Designation)
2022
2022+
(PRIME
eligibility)
2022+
H1 2021
H1 2021
H1 2021
AstraZeneca Annual Report & Form 20-F Information 2020 / Development Pipeline
247
Development Pipeline
continued
Significant Life-cycle Management
Compound
Oncology
Mechanism
Area Under Investigation
Additional information
US
EU
Japan
China
Estimated Filing Acceptance
Calquence
ASCEND
BTK inhibitor
relapsed/refractory chronic lymphocytic
leukaemia
Calquence
ELEVATE-RR
BTK inhibitor
relapsed/refractory chronic lymphocytic
leukaemia, high risk
Calquence
ELEVATE-TN
Calquence +
R-CHOP
ESCALADE
Calquence +
venetoclax +
obinutuzumab
AMPLIFY
Calquence
ECHO
Enhertu
DESTINY-Breast02
Enhertu
DESTINY-Breast04
Enhertu
DESTINY-Breast03
Enhertu
DESTINY-Breast05
Enhertu
DESTINY-Breast06
Enhertu
DESTINY-CRC01
BTK inhibitor
1st-line chronic lymphocytic leukaemia
BTK inhibitor
+ R-CHOP
BTK inhibitor
+ BCL-2
inhibitor +
anti-CD20
mAb
1st-line Diffuse Large B Cell Lymphoma
1st-line chronic lymphocytic leukaemia
BTK inhibitor
1st-line mantle cell lymphoma
HER2-positive, unresectable and/or
metastatic breast cancer pretreated with prior
standard of care HER2 therapies, including
T-DM1
HER2-low, unresectable and/or metastatic
breast cancer subjects
HER2-positive, unresectable and/or
metastatic breast cancer subjects previously
treated with trastuzumab and taxane
HER2-positive post-neoadjuvant high-risk
breast cancer
post-ET HER2low/HR+ breast cancer 2L
HER2
targeting
antibody drug
conjugate
HER2
targeting
antibody drug
conjugate
HER2
targeting
antibody drug
conjugate
HER2
targeting
antibody drug
conjugate
HER2
targeting
antibody drug
conjugate
HER2
targeting
antibody drug
conjugate
PP
PP
PP
PP
PP
PP
PP
PP
PP
PP
Launched
(Orphan
drug,
Breakthrough
Therapy
Designation)
H1 2021
(Orphan
drug)
Launched
(Orphan
drug,
Breakthrough
Therapy
Designation)
Approved
Approved
2022
H1 2021
Approved
2022+
2022
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
(Orphan
drug)
2022+
2022+
2022+
2022
2022
N/A
N/A
2022
2022
2022
2022
H2 2021
H2 2021
H2 2021
H2 2021
2022+
2022+
2022+
2022+
2022+
2022+
2022+
HER2-expressing advanced colorectal cancer
PP Phase II LCM
Enhertu
DESTINY-Gastric01
HER2
targeting
antibody drug
conjugate
HER2-overexpressing advanced gastric or
gastroesophageal junction adenocarcinoma
patients who have progressed on two prior
treatment regimens
PP
Phase II LCM
registrational
study
Approved
(Orphan
drug,
Breakthrough
Therapy,
Priority
Review)
H1 2021
Approved
2022+
Enhertu
DESTINY-Gastric02
Enhertu
DESTINY-Lung01
Enhertu
DESTINY-
PanTumour01
Enhertu
DESTINY-
PanTumour02
Imfinzi
PEARL
Imfinzi (platform)
BEGONIA
Imfinzi (platform)
MAGELLAN
HER2
targeting
antibody drug
conjugate
HER2
targeting
antibody drug
conjugate
HER2
targeting
antibody drug
conjugate
HER2 targeting
antibody drug
conjugate
HER2-positive gastric cancer that cannot be
surgically removed or has spread
PP Phase II LCM
HER2-over-expressing or -mutated,
unresectable and/or metastatic non-small cell
lung cancer
PP Phase II LCM
(Breakthrough
Therapy)
HER2-expressing solid tumours
PP Phase II LCM
HER2-expressing solid tumours
PP Phase II LCM
PD-L1 mAb
1st-line metastatic non-small cell lung cancer
PP
H2 2021
H2 2021
H2 2021
H2 2021
PD-L1 mAb
with paclitaxel
and mulitiple
novel
oncology
therapies
PD-L1 mAb +
multiple novel
oncology
therapies
+/- CTx
1st-line metastatic triple negative breast
cancer
PP Phase II LCM
1st-line metastatic non-small cell lung cancer
PP Phase II LCM
248
AstraZeneca Annual Report & Form 20-F Information 2020 / Additional Information
Significant Life-cycle Management continued
Imfinzi + SoC
CASPIAN
PD-L1 mAb +
SoC
1st-line extensive-stage small-cell lung cancer PP
Compound
Imfinzi + azacitidine
Imfinzi + CRT
KUNLUN
Imfinzi + CRT
PACIFIC-5 (China)
Imfinzi + CRT
PACIFIC-2
Imfinzi + CTx
neoadjuvant
AEGEAN
Imfinzi + CTx
MATTERHORN
Imfinzi + CTx
MERMAID-1
Imfinzi + CTx
NIAGARA
Imfinzi + CTx
TOPAZ-1
Imfinzi + VEGF +
TACE
EMERALD-1
Imfinzi + VEGF
EMERALD-2
Imfinzi post-SBRT
PACIFIC-4
Imfinzi
CALLA
Imfinzi
POTOMAC
Lynparza
OlympiA
Lynparza
OlympiAD
Lynparza
POLO
Lynparza
SOLO-3
Lynparza (basket)
MK-7339-002 /
LYNK002
Lynparza +
abiraterone
PROpel
Lynparza
LYNK-003
Lynparza
PROfound
Tagrisso
LAURA
Tagrisso + CTx
FLAURA2
Tagrisso +/- CTx
neoadjuvant
NeoADAURA
Tagrisso
ADAURA
Area Under Investigation
myelodysplastic syndrome
Additional information
PP Phase I LCM
Mechanism
PD-L1 mAb +
azacitidine
PD-L1 mAb +
CRT
PD-L1 mAb +
CRT
PD-L1 mAb +
CRT
Locally advanced esophageal squamous cell
carcinoma
locally-advanced (stage III) non-small cell lung
cancer
locally-advanced (stage III) non-small cell lung
cancer
PD-L1 mAb +
CTx
locally-advanced (stage II-III) non-small cell
lung cancer
PD-L1 mAb +
CTx
PD-L1 mAb +
CTx
PD-L1 mAb +
CTx
PD-L1 mAb +
CTx
Neo-adjuvant/adjuvant gastric cancer
stage II-III adjuvant NSCLC
muscle invasive bladder cancer
1st-line biliary tract cancer
PP
PP
PP
PP
PP
PP
PP
PD-L1 mAb +
VEGF + TACE
PD-L1 mAb +
VEGF
PD-L1 mAb
post-SBRT
locoregional hepatocellular carcinoma
adjuvant hepatocellular carcinoma
stage I/II non-small cell lung cancer
PD-L1 mAb
locally-advanced cervical cancer
PD-L1 mAb
non muscle invasive bladder cancer
PARP inhibitor gBRCA adjuvant breast cancer
PARP inhibitor gBRCA metastatic breast cancer
PARP inhibitor pancreatic cancer
PARP inhibitor gBRCA PSR ovarian cancer
PP
PP
PP
PP
PP
PP
PP
PP
PP
PARP inhibitor HRRm cancer
PP Phase II LCM
PARP inhibitor
+ NHA
prostate cancer
PARP inhibitor platinum sensitive 1st-line colorectal cancer
PARP inhibitor prostate cancer
PP
PP
PP
US
EU
Japan
China
Estimated Filing Acceptance
2022+
2022+
2022+
2022+
2022+
H1 2021
H2 2021
H2 2021
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022
(Orphan
Drug)
Launched
(Priority
Review,
Orphan
Drug)
2022
2022
2022
Launched
Launched
Accepted
2022
2022
2022
2022
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
2022+
N/A
2022
Accepted
2022+
2022+
2022+
H2 2021
H2 2021
H2 2021
Launched
Launched
Launched
(Orphan
Drug, Priority
Review)
Launched
(Orphan
Drug)
Launched
(Priority
review)
Launched
(Orphan
Drug, Priority
Review)
2022
H2 2021
H2 2021
2022
2022+
2022+
2022+
2022+
2022+
Launched
(Breakthrough
Designation,
Priority
Review)
Launched
Launched
Accepted
(Priority
Review)
EGFR inhibitor stage 3 EGFRm non-small cell lung cancer
2022+
2022+
2022+
2022+
EGFR inhibitor
+ CTx
1st-line advanced EGFRm non-small cell lung
cancer
EGFR inhibitor
+/- CTx
stage II/III resectable EGFRm NSCLC
2022+
2022+
N/A
2022+
2022+
2022+
2022+
2022+
EGFR inhibitor adjuvant EGFRm non-small cell lung cancer
Approved
(Breakthrough
Therapy
Designation,
Priority
Review)
Accepted
TBC
Accepted
A
d
d
i
t
i
o
n
a
l
I
n
f
o
r
m
a
t
i
o
n
AstraZeneca Annual Report & Form 20-F Information 2020 / Development Pipeline
249
Farxiga/Forxiga
DAPA-MI
Farxiga/Forxiga
DECLARE-
TIMI 58
Farxiga/Forxiga
DELIVER
roxadustat
roxadustat
Xigduo XR/Xigduo
SGLT-2
inhibitor
SGLT-2
inhibitor
SGLT-2
inhibitor
hypoxia-
inducible
factor prolyl
hydroxylase
inhibitor
hypoxia-
inducible
factor prolyl
hydroxylase
inhibitor
SGLT-2
inhibitor/
metformin
FDC
Development Pipeline
continued
Compound
CVRM
Brilinta/Brilique
THEMIS
Brilinta/Brilique
THALES
Bydureon BCise
(autoinjector)
Mechanism
Area Under Investigation
Additional information
US
EU
Japan
China
Estimated Filing Acceptance
P2Y12
receptor
antagonist
P2Y12
receptor
antagonist
GLP-1
receptor
agonist
cardiovascular outcomes trial in patients with
coronary artery disease and type-2 diabetes
without a previous history of myocardial
infarction or stroke
acute ischaemic stroke or transient ischaemic
attack
Brilinta in the US;
Brilique in rest of
world.
Brilinta in the US;
Brilique in rest of
world.
Launched
Accepted
Accepted
Accepted
Launched
Accepted
Accepted
type-2 diabetes
Launched
Approved
N/A
2022
Farxiga/Forxiga
DAPA-CKD
SGLT-2
inhibitor
renal outcomes and cardiovascular mortality in
patients with chronic kidney disease
Farxiga/Forxiga
DAPA-HF
SGLT-2
inhibitor
worsening heart failure or cardiovascular death
in patients with chronic heart failure (HFrEF)
Prevention of heart failure and CV death
following a myocardial infarction
cardiovascular outcomes trial in patients with
type-2 diabetes
worsening HF or CV death in patients with
chronic heart failure (HFpEF)
Farxiga in the US;
Forxiga in rest of
world.
Farxiga in the US;
Forxiga in rest of
world.
Farxiga in the US;
Forxiga in rest of
world.
Farxiga in the US;
Forxiga in rest of
world.
Farxiga in the US;
Forxiga in rest of
world.
Accepted
(Fast Track,
Breakthrough
Therapy
Designation)
Launched
(Fast Track,
Priority
Review)
Accepted
Accepted
(Priority
Review)
Accepted
Launched
Launched
Approved
2022+
2022+
N/A
N/A
Launched
Launched
Launched
2022
2022
2022
2022
anaemia in myelodysplastic syndrome
PP
2022
2022+
chemotherapy induced anaemia
PP Phase II LCM.
type-2 diabetes
Xigduo XR in the
US; Xigduo in the
EU.
Launched
Launched
2022
Respiratory & Immunology
Breztri (PT010)
LABA/LAMA/
ICS
asthma
Duaklir Genuair
LAMA/LABA
chronic obstructive pulmonary disease
IL-5R mAb
chronic obstructive pulmonary disease
PP
PP
2022+
2022+
2022+
2022+
Launched
Launched
2022
2022+
2022+
2022+
Fasenra
RESOLUTE
Fasenra
ARROYO
Fasenra
HILLIER
Fasenra
MANDARA
Fasenra
MESSINA
Fasenra
NATRON
Fasenra
OSTRO
ORCHID (Japan/
China)
Symbicort
SYGMA
Other
Nexium
IL-5R mAb
chronic spontaneous urticaria
IL-5R mAb
atopic dermatitis
Phase II LCM
Phase II LCM
IL-5R mAb
eosinophilic granulomatosis with polyangiitis
2022+
2022+
2022+
IL-5R mAb
eosinophilic esophagitis
2022+
2022+
2022+
IL-5R mAb
hypereosinophilic syndrome
2022+
2022+
2022+
2022+
IL-5R mAb
nasal polyps
PP
H1 2021
2022
2022+
2022+
ICS/LABA
as-needed use in mild asthma
N/A
Accepted
N/A
Approved
proton pump
inhibitor
stress ulcer prophylaxis
Approved
250
AstraZeneca Annual Report & Form 20-F Information 2020 / Additional Information
Patent Expiries of Key
Marketed Products
Patents covering our products are, or may be, challenged by third parties. Generic products may be launched ‘at risk’ and our patents may be
revoked, circumvented or found not to be infringed. For more information, please see Risk from page 254. Many of our products are subject to
challenges by third parties. Details of material challenges by third parties can be found in Note 29 to the Financial Statements from page 228.
The expiry dates shown below include granted SPC/PTE and/or Paediatric Exclusivity periods (as appropriate). In Europe, the exact SPC situation
may vary by country as different Patent Offices grant SPCs at different rates. Expiry dates in red relate to new molecular entity patents, the
remaining dates relate to other patents. The expiry dates of relevant regulatory data exclusivity periods are not represented in the table below.
A number of our products are subject to generic competition in one or more markets.
Key marketed
products
Oncology
Calquence
(acalabrutinib)
Enhertu 4
(trastuzumab
deruxtecan)
Faslodex
(fulvestrant)
Imfinzi
(durvalumab)
Iressa
(gefitinib)
Koselugo
(selumetinib)
Description
US
China
EU1
Japan
2020
2019
2018
2020
2019
2018
US
Product Sales ($m)
Aggregate Product
Sales for China,
Japan and Europe2
($m)
A selective inhibitor of Bruton’s tyrosine
kinase indicated for the treatment of chronic
lymphocytic leukaemia (CLL) and mantle cell
lymphoma (MCL) and in development for the
treatment of multiple B-cell malignancies.
A HER2-directed antibody drug conjugate
(ADC) indicated for the treatment of adult
patients with unresectable or metastatic
HER2-positive breast cancer who have received
two or more prior anti-HER2 based regimens in
the metastatic setting.
An injectable oestrogen receptor antagonist,
used for the treatment of hormone receptor
positive advanced breast cancer that has
progressed following treatment with prior
endocrine therapy.
A human monoclonal antibody that blocks
PD-L1 interaction with PD-1 and CD80 on
T-cells, countering the tumour’s immune-
evading tactics and inducing an immune
response. It is currently indicated for the
treatment of locally advanced or metastatic
urothelial carcinoma and unresectable Stage III
non-small cell lung cancer (NSCLC).
An epidermal growth factor receptor-tyrosine
kinase inhibitor (EGFR-TKI) that acts to block
signals for cancer cell growth and survival
in advanced NSCLC.
Koselugo (selumetinib) is an inhibitor of
mitogen-activated protein kinase kinases 1 and
2 (MEK1/2). MEK1/2 proteins are upstream
regulators of the extracellular signal-related
kinase (ERK) pathway. Both MEK and ERK are
critical components of the RAS-regulated
RAF-MEK-ERK pathway, which is often
activated in different types of cancers.
2026-2032,
2035-2036
2032
2032,
2036
2032
511
162
62
2
–
–
2033 2033-2035
2033-2035
3
–
–
–
–
–
–
20215
expired
2021
2025-2026
55
328
537
414
449
382
2031
2030
2030
2033 1,185 1,041
564
744
390
62
expired6
2023
2023
2023
14
17
26
178
302
376
2023,
2023-2026
2023,
2026-2029
2023,
2023,
2026-2029
2023,
2023,
2026-2029
38
–
–
–
–
–
Lumoxiti
(moxetumomab
pasudotox-tdfk)
A CD22-directed cytotoxin and a first-in-class
treatment in the US for adult patients with
relapsed or refractory hairy cell leukaemia (HCL).
2022-2024,
2031-2032
2031
2022,
2031
2031
1
–
–
–
–
–
Lynparza 7
(olaparib)
An oral poly ADP-ribose polymerase (PARP)
inhibitor that blocks DNA damage response
(DDR) in cells/tumours harbouring a deficiency
in homologous recombination repair, such as
mutations in BRCA1 and/or BRCA2. It is
indicated for platinum-sensitive relapsed
ovarian cancer, regardless of BRCA status,
1st-line maintenance treatment of BRCAm
advanced ovarian cancer, for gBRCAm
HER2-negative, metastatic breast cancer and
for gBRCAm metastatic pancreatic cancer.
2022-2024,
2028*,
2024-2031
2021-2024,
2024-2029
2021-2029,
2024-2029
2021-2029,
2024-2033
876
626
345
753
475
250
A
d
d
i
t
i
o
n
a
l
I
n
f
o
r
m
a
t
i
o
n
Tagrisso
(osimertinib)
An EGFR-TKI indicated for patients with
metastatic EGFR-mutated NSCLC.
Zoladex 8
(goserelin
acetate implant)
A luteinising hormone-releasing hormone
(LHRH) agonist used to treat prostate cancer,
breast cancer and certain benign
gynaecological disorders.
2032,
2035
2022
2032
2032
2034 1,566 1,268
869
2,319 1,588
808
2021
2021
2021
5
7
8
656
566
508
AstraZeneca Annual Report & Form 20-F Information 2020 / Patent Expiries of Key Marketed Products
251
Patent Expiries of Key
Marketed Products
continued
Key marketed
products
CVRM
Brilinta/
Brilique
(ticagrelor)
Bydureon/
Bydureon
BCise
(exenatide XR
injectable
suspension)
Byetta
(exenatide
injection)
Crestor
(rosuvastatin
calcium)
Farxiga/
Forxiga
(dapagliflozin)
Description
US
China
EU1
Japan
2020
2019
2018
2020
2019
2018
US
Product Sales ($m)
Aggregate Product
Sales for China,
Japan and Europe2
($m)
An oral P2Y12 platelet inhibitor for acute
coronary syndromes (ACS) (ticagrelor 90mg)
or continuation therapy in high-risk patients
(ticagrelor 60mg) with a history of myocardial
infarction (MI).
A once-weekly injectable glucagon-like
peptide-1 (GLP-1) receptor agonist available as
a single-dose tray, a single-dose pen or
autoinjector device indicated as monotherapy
and as part of combination therapy adjunct to
diet and exercise to improve glycaemic control
in adults with type-2 diabetes.
A twice-daily injectable GLP-1 receptor agonist
indicated to improve glycaemic control in adults
with type-2 diabetes.
A statin for dyslipidaemia and
hypercholesterolaemia.
A selective inhibitor of human sodium-glucose
cotransporter 2 (SGLT-2 inhibitor) indicated
as monotherapy, and as part of combination
therapy, adjunct to diet and exercise to
improve glycaemic control in adult patients
with type-2 diabetes.
20249,
2021-2036
202110
2024,
2021,
202111-202712
2023-2024,
2025-2030
732
710
588
630
652
532
2020-2028,
203013
2020-2028,
202913
2020-2028,
202913
2021-2028,
202913
382
459
475
55
69
85
202014
2020
2020-2021
2020
37
68
74
17
23
34
2021-202215 2020-2021
2020
2023
92
104
170
661
752
825
2020,
2025,
2020-2030
2020-2023,
2028
2020-2027 2024-2025,
2028
569
537
591
674
416
345
Komboglyze/
Kombiglyze XR16
(saxagliptin/
metformin)
Combines saxagliptin and metformin as either
Komboglyze – a twice-daily tablet for type-2
diabetes, or Kombiglyze XR – an extended
release once-daily tablet for type-2 diabetes.
2023,
2025
2021,
2025
2021-2026,
2025
3
55
–
–
–
31
19
–
1
–
–
An insoluble, non-absorbed sodium zirconium
silicate, formulated as a powder for oral
suspension, that acts as a highly selective
potassium-removing agent for the treatment
of hyperkalaemia.
2032-2035 2033-2034
203217 2032-2036
57
13
An oral dipeptidyl peptidase 4 (DPP-4) inhibitor
for type-2 diabetes.
2023,
2028
2021,
2025
2024,
2025
3
3
3
2024,
2024-2034
2024,
2024-2033
166
230
223
198
178
178
–
5
–
6
–
–
18
13
–
9
–
5
2020-2023
2020-2027
2024-2025
2020,
2025,
2020-2029
Lokelma
(sodium
zirconium
cyclosilicate)
Onglyza
(saxagliptin)
Roxadustat
Qtern
(dapagliflozin/
saxagliptin)
Xigduo/
Xigduo XR
(dapagliflozin/
metformin)
Respiratory &
Immunology
Bevespi
Aerosphere
(glycopyrrolate/
formoterol)
Breztri
Aerosphere
(PT010)
(budesonide/
glycopyrrolate/
formoterol)
First-in-class hypoxia-inducible factor
prolyl hydroxylase inhibitor (HIF-PHI) indicated
for the treatment of anaemia from chronic
kidney disease.
A once-daily oral treatment combination of
dapagliflozin (10mg) and saxagliptin (5mg)
indicated as an adjunct to diet and exercise to
improve glycaemic control in adults with type-2
diabetes who have inadequate control with
dapagliflozin or who are already treated with
dapagliflozin and saxagliptin.
Combines dapagliflozin and metformin as
either Xigduo – a twice-daily tablet to improve
glycaemic control in adult patients with type-2
diabetes who are inadequately controlled
on metformin alone or Xigduo XR – an
extended release once-daily tablet to improve
glycaemic control in adult patients with type-2
diabetes who are inadequately controlled
on metformin alone.
A combination of a long-acting muscarinic
antagonist (LAMA) and a long-acting
beta2-agonist (LABA) used for the long-term
maintenance treatment of airflow obstruction
in COPD.
A fixed-dose triple combination of an inhaled
corticosteroid (ICS), a LAMA and a LABA, used
for the maintenance treatment of COPD.
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AstraZeneca Annual Report & Form 20-F Information 2020 / Additional Information
2020,
2025,
2020-2030
2020-2023
2020-2028 2024-2025,
2030
113
103
114
163
115
83
2030-2031
2030
2030
2030
44
42
33
4
–
–
2030-2031
2030
2030
2030
5
–
–
22
2
–
Key marketed
products
Daliresp/
Daxas
(roflumilast)
Duaklir
(aclidinium/
formoterol)
Fasenra
(benralizumab)
Pulmicort
(budesonide)
Symbicort
(budesonide/
formoterol)
Tudorza/Eklira/
Genuair
(aclidinium)
Other
Fluenz Tetra/
FluMist
Quadrivalent
(live attenuated
influenza vaccine)
Linzess
(linaclotide)
Description
An oral phosphodiesterase-4 inhibitor for
adults with severe COPD to decrease their
number of exacerbations.
US
2020,
2023-2024
China
2023
US
Product Sales ($m)
Aggregate Product
Sales for China,
Japan and Europe2
($m)
EU1
Japan
2020
2019
2018
2020
2019
2018
202319
expired
190
184
155
22
26
28
A fixed-dose combination of a LAMA and a
LABA for the maintenance treatment of COPD.
2020-2025,
2022-2029
2020,
2022-2027
2025,
2022-202920
2025,
2021-2029
–
3
–
65
71
91
A monoclonal antibody for add-on maintenance
treatment of patients with severe asthma aged
12 years and older, and with an eosinophilic
phenotype, which directly targets and depletes
eosinophils by recruiting natural killer cells and
inducing apoptosis (programmed cell death).
An inhaled corticosteroid for maintenance
treatment of asthma.
A combination of an inhaled corticosteroid and
a fast-onset LABA for maintenance treatment
of asthma and COPD either as Symbicort
Turbuhaler or Symbicort pMDI (pressurised
metered-dose inhaler).
2024,
2028-2034
2021,
2028
2020,
2028-2034
2025,
2034
603
482
218
303
204
77
expired
expired
expired
expired
71
110
116
751 1,149
975
2022-202921
expired
expired
202022 1,022
829
862
1,184 1,174 1,220
A LAMA for the maintenance treatment
of COPD.
2020-2025,
2022-2029
2020,
2022-2027
2025,
2022-202920
2025,
2021-202923
6
2
25
45
63
75
A live attenuated vaccine indicated for active
immunisation for the prevention of influenza
disease caused by influenza A subtype viruses
and type B viruses contained in the vaccine.
2020-2026 2020-2025
2020-2025
2020-2025
70
20
15
219
93
91
A guanylate cyclase-C agonist for the treatment
of irritable bowel syndrome with constipation
(IBS-C) in adults.
3
2024,
2029
3
3
Nexium
(esomeprazole)
A proton pump inhibitor used to treat
acid-related diseases.
Synagis
(palivizumab)
A humanised mAb used to prevent serious
lower respiratory tract disease caused by
respiratory syncytial virus (RSV) in paediatric
patients at high risk of acquiring RSV disease.
202024
expired
expired
expired
169
218
306
885
847
955
202325
expired
2023
2023
47
46
287
325
312
377
* Date represents expiry of a pending SPC/PTE and/or Paediatric Exclusivity period.
1 Expiry in major EU markets, which includes the UK.
2 The Product Sales reflected are for Europe Region as defined in Market definitions on page 280.
3 AstraZeneca does not have commercialisation rights.
4 AZ has recorded $94m of Collaboration Revenue in relation to this Product in 2020 as per Note 1 on page 188.
5 Settled with various generic companies for licensed entry dates of 25 March 2019 or later.
6
In the US, Iressa has seven years’ Orphan Drug exclusivity to 13 July 2022.
In addition to any product sales, AZ has also recorded $460m of Collaboration Revenue in relation to this Product in 2020 as per Note 1 on page 188.
7
8 Rights licensed to TerSera. In addition to any product sales, AZ has also recorded $35m of Collaboration Revenue in relation to this Product in 2020 as per Note 1 on page 188.
9 Separate settlements with ANDA challengers for a licensed entry date corresponding to the expiry of US Patent No. RE46,276, subject to regulatory approval.
10 The patent was invalidated during invalidation proceedings at the CNIPA. The patentee has appealed that decision.
11
The patent was revoked during opposition proceedings at the European Patent Office (EPO). The patentee has appealed that decision and obtained a decision from the EPO Boards of Appeal
upholding the patent.
12 The patent is the subject of a pending opposition proceeding at the EPO. The patentee successfully defended the patent in that proceeding, but the opponents have appealed.
13 Patent expiry date relates to BCise.
14 Separate settlements with ANDA challengers for a licensed entry date of 15 October 2017, or later, subject to regulatory approval.
15
A settlement agreement in the US permitted Watson Laboratories, Inc. and Actavis, Inc. (together, Watson) to begin selling its generic version of Crestor and its rosuvastatin zinc product from
2 May 2016.
16 Komboglyze/Kombiglyze XR revenue is included in the Onglyza revenue figure.
17 The patent is the subject of a pending opposition proceeding at the EPO.
18 AZ has recorded $30m of Collaboration Revenue in relation to this Product in 2020 as per Note 1 on page 188.
19 There are eight years of data exclusivity and two years of market exclusivity for Daxas in the EU to 5 July 2020.
20 Partnered with Berlin-Chemie AG (Menarini group).
21 Patent expiry dates relate to the Symbicort pMDI product, including any granted Paediatric Exclusivity term.
22 Patent expiry dates relate to the Symbicort Turbuhaler product.
23 Rights licensed to Kyorin Pharmaceutical Co., Ltd.
24
Licence agreements have allowed generic companies to launch generic capsule versions in the US.
25 Rights sold to Sobi.
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253
Risk
Risks and uncertainties
Operating in the pharmaceutical sector carries various inherent risks and uncertainties that may affect our business. In this section, we describe
the risks and uncertainties that we consider material to our business in that they may have a significant effect on our financial condition, results of
operations, and/or reputation.
These risks are not listed in any particular order of priority and have been categorised consistently with the Principal Risks detailed from page 80,
which are included below along with the other risks that we face. We believe that the forward-looking statements about AstraZeneca in this
Annual Report, identified by words such as ‘anticipates’, ‘believes’, ‘expects’ and ‘intends’, and that include, among other things, future prospects
in the Financial Review from page 82, are based on reasonable assumptions. However, forward-looking statements involve inherent risks and
uncertainties such as those summarised below. They relate to events that may occur in the future, that may be influenced by factors beyond our
control and that may have actual outcomes materially different from our expectations. Therefore, other risks, unknown or not currently considered
material, could have a material adverse effect on our financial condition or results of operations.
Product pipeline and IP risks
Impact
Failure or delay in the delivery of our pipeline or launch of new medicines
Our continued success depends on the development and successful launch of
innovative new drugs.
The development of pharmaceutical product candidates is a complex, risky and
lengthy process involving significant financial, R&D and other resources. A project
may fail at any stage of the process due to various factors, including failure to obtain
the required regulatory or marketing approvals for the product candidate or for its
manufacturing facilities, unfavourable clinical efficacy data, safety concerns, failure to
demonstrate adequate cost-effective benefits to regulatory authorities and/or payers,
and the emergence of competing products. More details of projects that have suffered
setbacks or failures during 2020, including projects potentially delayed due to the
impact of the COVID-19 pandemic on the ability of Health Authorities to conduct
business as usual, can be found in the Therapy Area Review from page 30.
Launch decisions and dates are primarily driven by our development programmes.
Once a development programme is completed and the dossier submitted to Health
Authorities, investments made in the manufacture of pre-launch product stocks,
marketing materials and sales force training, may result in excess expenses if the
product is not approved.
Various factors, including adverse findings in pre-clinical or clinical studies, regulatory
demands, price negotiation, large-scale natural disasters or global pandemics,
competitor activity and technology transfer may significantly delay or prevent launch.
Differing complex and stringent regulations govern the manufacturing and supply of
biologics products, thus impacting the production and release schedules of such
products more significantly.
In addition to developing products in-house, we also expand our product portfolio and
geographical presence through licensing arrangements and strategic collaborations,
which are key to growing and strengthening our business. The success of such
arrangements is largely dependent on the technology and other IP rights we acquire or
license, and the resources, efforts and skills of our partners. Disputes or difficulties in
our relationship with our collaborators or partners may arise, for example, due to
conflicting priorities or conflicts of interest between parties.
In many cases we make milestone payments well in advance of the commercialisation
of the products, with no assurance that we will recoup these payments.
We often experience strong competition from other pharmaceutical companies in our
pursuit of licensing transactions, strategic collaborations and acquisition targets.
Since our business model and strategy rely on the success of relatively
few compounds, the failure of any compound in our late-stage pipeline
or in-line products may have a significant negative effect on our
business or results of operations.
Failure or delay in development of new product candidates could
frustrate the achievement of development targets, adversely affect the
reputation of our R&D capabilities, and is likely to materially adversely
affect our business and results of operations. See also Failure to
achieve strategic plans or meet targets or expectations on page 265.
Significant delays to anticipated launch dates of new products could
have a material adverse effect on our financial position and/or results
of operations. For example, for the launch of products that are
seasonal in nature, delays in regulatory approvals or manufacturing
difficulties may delay launch to the next season which, in turn, may
significantly reduce the return on costs incurred in preparing for the
launch for that season. Furthermore, in immuno-oncology for example,
speed to market is critical given the large number of clinical trials being
conducted by other companies.
In addition, a delayed launch may lead to increased costs if, for
example, marketing and sales efforts need to be rescheduled or
performed for longer than expected.
Failure to complete collaborative projects in a timely, cost-effective
manner may limit our ability to access a greater portfolio of products,
IP, technology and shared expertise. Disputes and difficulties with our
partners may erode or eliminate the benefits of our alliances and
collaborations. In addition, failure to perform on the part of parties to
externalisation transactions may diminish the future value of those
transactions or, in some cases, allow a competitor to beat us to market
with a similar or first-in-class product. Delay of launch can also erode
the term of patent exclusivity.
Competition from other pharmaceutical companies means that we may
be unsuccessful in implementing some of our intended projects or we
may have to pay a significant premium over book or market values for
our acquisitions.
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Product pipeline and IP risks
Impact
Failure to meet regulatory or ethical requirements for medicine development or approval
We are subject to strict controls on the commercialisation processes for our
pharmaceutical products, including their development, manufacture, distribution and
marketing. The criteria for establishing safety, efficacy and quality, which are essential
for securing marketing approvals, vary by country and by region. Regulators can refuse
to grant approval or may require additional data before approval is granted or as a
post-approval commitment, even though the medicine may already be approved or
launched in other countries.
Factors, including advances in science and technology, evolving regulatory science,
new laws and policies, and different approaches to benefit/risk tolerance by regulatory
authorities, the general public, and other third-party public interest groups are known
to influence the approvability of new drugs. While we seek to manage most of these
risks, unanticipated and unpredictable policymaking by governments and regulators,
limited regulatory authority resources or conflicting priorities often lead to delays in
regulatory approvals.
We may be required to generate additional data after a drug’s approval because a
regulatory authority may have concerns that impact the benefit/risk profile of the drug.
For our marketed drugs, new data or meta-analyses have the potential to drive changes
in the approval status or labelling. In addition, recent years have seen an increase in
post-marketing regulatory requirements and commitments, an increased call for
third-party access to regulatory and clinical trial data packages for independent
analysis and interpretation, and broader data transparency. Such transparency, while
important, could lead to inappropriate or incorrect data analyses which may damage
the integrity of our products and our Company’s reputation. In 2020, we have seen
additional transparency challenges with the COVID-19 vaccine trials, due to intense
media scrutiny driven by extremely high public interest, as well as information leaks.
Delays in regulatory reviews and approvals could delay our ability to
market our products and may adversely affect our revenue. In addition,
post-approval requirements, including additional clinical trials, could
result in increased costs.
In anticipation of the UK leaving the EU on 31 January 2020, with a
transition period running to 31 December 2020, intense work was
undertaken to manage Brexit-related changes, identify scenarios for
the many uncertainties still to be resolved, and determine the new UK
requirements moving forward. This included transferring licences and
authorisations for EU markets historically held in the UK to an EU
member state and building capability to test medicines in the EU where
such testing has in the past been undertaken in the UK for all EU
markets. UK licences also needed to be separated out from centrally
approved products in the EU. These actions were undertaken to ensure
appropriate regulatory requirements can be met both in the EU and UK
following the end of the transition period. Our corporate planning
assumption was initially for a ‘no deal’ Brexit and no transition period.
This was revised after the Withdrawal Agreement was ratified to no
extension of the transition period and no deal. In light of these
assumptions, the Company has taken steps to protect product supply
in both the UK and the EU.
On 24 December 2020 the European Commission and UK Government
entered into a Trade and Cooperation agreement which sets out the
basis of their relationship following the end of the transition period.
Changes in regulatory review and approval processes, and safety
surveillance in light of this agreement will certainly have implications on
resources, ways of working and costs, and could impact the availability
and timing of approvals.
Failure to obtain, defend and enforce effective IP protection and IP challenges by third parties
A pharmaceutical product may be protected from being copied for a limited period
of time under certain patent rights and/or related IP rights, such as Regulatory Data
Protection or Orphan Drug status. Typically, products protected by such rights
generate significantly higher revenues than those not protected. Our ability to obtain,
maintain, defend and enforce patents and other IP rights in relation to our products is
an important element in protecting and recouping our investment in R&D and creating
long-term value for the business. Some countries in which we operate do not offer
robust IP protection. This may be because IP laws are still developing, the scope of
those laws is limited or the political environment does not support such legislation.
We also recognise increasing use of compulsory licensing in some countries in which
we operate.
We may also face challenges early in the patent application process and throughout
a patent’s life. The grounds for these challenges could be the validity of a patent
and/or its effective scope and are based on ever-evolving legal precedents. We are
experiencing increased challenges in the US and elsewhere in the world and there
can be no guarantee of success for either party in patent proceedings and litigation.
Limitations on the availability of patent protection, the ability to obtain
related IP rights or the use of compulsory licensing in certain countries
in which we operate, as well as our ability to defend and enforce our
patents, could allow for earlier entry of generic or biosimilar competitor
products. This could have a material adverse effect on the pricing and
sales of our products and, consequently, could materially adversely
affect our revenues.
Third parties may be awarded remedies for alleged infringement of
their IP, for example injunctions and damages for alleged patent
infringement. In the US, courts may order enhanced (i.e. up to treble)
damages for alleged wilful infringement of patents. From time to time
we may seek to acquire licences, which may not be available on
commercially reasonable terms or at all, discontinue activities and/or
modify processes to avoid claims of patent infringement. These steps
could entail significant costs and our revenue and margins could be
materially adversely affected.
We also bear the risk that our products may be found to infringe patents owned or
licensed by third parties, including research-based and generic pharmaceutical
companies and individuals. These third parties may seek remedies for patent infringement,
including injunctions (for example, preventing the marketing of one of our products)
and damages.
More information about protecting our IP, the risk of patent litigation
and the early loss of IP rights is contained in the Intellectual Property
section from page 65, the competitive pressures including expiry or
loss of IP rights, and generic competition risk on page 256 and Note 29
to the Financial Statements from page 228.
Details of material patent proceedings and litigation matters can be found in Note 29
to the Financial Statements from page 228.
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255
Risk
continued
Commercialisation risks
Impact
Competitive pressures including expiry or loss of IP rights, and generic competition
If we are not successful in obtaining, maintaining, defending or
enforcing our exclusive rights to market our products, particularly
in the US where we achieve our highest Product Sales, our revenue
and margins could be materially adversely affected. In addition,
unsuccessful assertion of our IP rights may lead to damages or other
liabilities to third parties that could materially adversely affect our
financial performance.
Approval of competitive products for the same or similar indication as
one of our products may result in immediate and significant decreases
in our revenues.
Unfavourable resolution of current and potential future patent litigation
may require us to make significant provisions in our accounts relating
to legal proceedings and/or could materially adversely affect our
financial condition or results of operations.
A pharmaceutical product competes with other products marketed by research-based
pharmaceutical companies and with generic or biosimilar drugs marketed by generic
drug manufacturers.
Generic versions of products, including biosimilars, are often sold at lower prices than
branded products, as the manufacturer does not have to recoup the significant cost of
R&D investment and market development. Expiry or loss of IP rights can materially
adversely affect our revenues and financial condition due to the launch of cheaper
generic copies of the product in the country where the rights have expired or been lost
(see the table in the Patent Expiries of Key Marketed Products section from page 251).
Additionally, the expiry or loss of patents covering other innovator companies’ products
may also lead to increased competition and pricing pressure for our own, still-patented
products in the same product class due to the availability of lower-priced generic
products in that product class.
Generic manufacturers may also take advantage of the failure of certain countries to
properly enforce Regulatory Data Protection or other related IP rights and may launch
generics during this protected period. This is a particular risk in some Emerging
Markets where appropriate patent protection or other related IP rights may be difficult
to obtain or enforce.
The biosimilars market has experienced notable growth since 2017, with approval of
several monoclonal antibody biosimilars in the US and Europe. This trend is expected
to continue. Increased regulatory and legal activity related to the launch and approval
of these therapeutics is anticipated. Regulatory authorities in other territories continue
to implement or consider abbreviated approval processes for biosimilars, allowing
quicker entry to market for such products and earlier than anticipated competition for
patented biologics.
As well as facing generic competition upon expiry or loss of IP rights, we also face the
risk that generic drug manufacturers seek to market generic versions of our products
prior to expiries of our patents and/or the Regulatory Exclusivity periods. For example,
we are currently facing challenges from numerous generic drug manufacturers
regarding our patents relating to key products, including Symbicort, Brilinta, Tagrisso,
Faslodex and Farxiga.
IP rights protecting our products may be challenged by external parties. We expect
our most valuable products to receive the greatest number of challenges. Despite
our efforts to establish and defend robust patent protection for our products, we
bear the risk that courts may decide that our IP rights are limited in scope, invalid
or unenforceable and/or that third parties do not infringe our asserted IP rights.
Where we assert our IP rights but are ultimately unsuccessful, third parties may seek
damages, alleging, for example, that they have been inappropriately restrained from
entering the market. In such cases, we bear the risk that we incur liabilities to those
third parties.
Details of material patent litigation matters can be found in Note 29 to the Financial
Statements from page 228.
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AstraZeneca Annual Report & Form 20-F Information 2020 / Additional Information
Commercialisation risks
Price controls and reductions
Impact
Most of our key markets have experienced the implementation of various cost control
or reimbursement mechanisms for pharmaceutical products.
In the US, there is significant pricing pressure driven by payer consolidation, restrictive
reimbursement policies, and cost control tools, such as exclusionary formularies and
price protection clauses. Many formularies employ ‘generic first’ strategies and/or
require physicians to obtain prior approval for the use of a branded medicine where a
generic alternative exists. These mechanisms can be used by payers to limit the use of
branded products and put pressure on manufacturers to reduce net prices. In addition,
patients are seeing changes in the design of their health plan benefits and may
experience variation in how their plans cover their medications, including increases
in the out-of-pocket payments for their branded medications. Patient out-of-pocket
spending is generally in the form of a co-payment or co-insurance, but there is a growing
trend towards high deductible health plans that may require that patients pay the full list
price of their drugs and services until they meet certain out-of-pocket thresholds. In the
US, policymakers at the federal and state level continue to consider a range of legislative
and regulatory proposals to address the affordability of prescription drugs in addition to
reforms to the US healthcare system. Modifications to Medicare and other government
programmes, price transparency requirements, reference pricing proposals, policies to
permit importation of drugs into the US, and policies aimed at reducing drug list prices
and limiting pricing flexibility have also been included in proposed federal legislation
and federal agency proposals. For more information, see Pricing of medicines in the
Healthcare in a changing world section from page 16. It is difficult to predict what
specific proposals could be enacted and to determine the implications for the healthcare
system and pharmaceutical industry. However, lowering drug costs remains a key
bipartisan priority in Congress, the administration and state governments. Proposals
that would significantly modify existing laws and regulations, including coverage and
reimbursement of drugs in government programmes and policies relating to drug pricing,
as well as the economic impact of the COVID-19 public health emergency could affect
private health insurance, coverage and reimbursement in Medicare, Medicaid and the
health insurance exchange marketplaces, and other facets of the US healthcare market,
with potentially significant impacts on the pharmaceutical industry.
Ongoing scrutiny of the US pharmaceutical industry, focused largely on pricing, is
placing increased emphasis on the value of medications. This scrutiny will likely
continue across many stakeholders, including policymakers and legislators.
In the US, consolidation among distributors, retail pharmacy chains and other
purchasing organisations, including integration across the supply chain, creates
concentration of credit risk and increasing potential for large integrated entities to exert
more power in negotiations with AstraZeneca, which could result in margin erosion.
In Europe, the industry continues to be exposed to various ad hoc cost-containment
measures and reference pricing mechanisms which impact prices. There is a trend
towards increasing transparency and comparison of prices among EU Member States
which may eventually lead to a change in the overall pricing and reimbursement
landscape. There is also a continued push across the EU to harmonise the Health
Technology Assessment (HTA) review process. This could lead to an environment in
the EU where medicines undergo duplicate HTA evaluations, both at an EU level and
a country level, as it is unlikely organisations such as GBA in Germany or HAS in
France would make changes to their systems.
In Emerging Markets, governments are increasingly controlling pricing and favouring locally
manufactured drugs. In addition, the emergence of price referencing has been seen in some
markets combined with a call from authorities to provide greater global price transparency.
For example, in 2020, China expanded value-based procurement (VBP), placing downward
pressure on the pricing of products that lost exclusivity in the VBP. China also continues to
leverage its purchasing power through the NRDL which has seen difficult pricing negotiations.
Notably in the 2020 NRDL, the industry average price decrease was over 50%.
In Japan, the government has relied on drug budget reductions to restrict increasing
social security costs associated with the rapidly ageing society, expanding the scope
and degree of price discounts. In April 2018, many new rules were implemented as drug
pricing system reforms. Further to that a cost-effectiveness evaluation was introduced
for certain categories of drugs from April 2019. Discussions for further drug budget
restrictions are underway at the health ministry.
Concurrently, many markets are adopting the use of HTA to provide a rigorous evaluation
of the clinical efficacy of a product at, or post, launch. HTA evaluations are also
increasingly being used to assess the clinical effect, as well as cost-effectiveness, of
products in a particular health system. This comes as payers and policymakers attempt
to increase efficiencies in the use and choice of pharmaceutical products.
A summary of the principal aspects of price regulation and how pricing pressures are
affecting our business in our most important markets is set out in Pricing of medicines in
the Healthcare in a changing world section from page 16 and on the next page in the
following risk factor.
Due to these pricing pressures, there will continue to be downward
pressure on prices globally that will challenge the profitability levels
of products in particular markets.
Any future expansion or judicial invalidation of the Affordable Care Act
(ACA), or any significant spending reductions or cost controls affecting
Medicare, Medicaid or other publicly funded or subsidised health
programmes in the US, could adversely affect our business and
financial results. The future of the ACA, entitlement reform and
healthcare laws in general in the US could have a material adverse
effect on our results of operations, financial condition or business.
We expect that consolidation and integration of drug distributors, retail
pharmacy chains, private insurers, managed care organisations and
other purchasing organisations may continue to have an effect on
pharmaceutical manufacturers, including us.
The potential duplication of HTA evaluations could result in a delay
to times of reimbursement and patient access.
The continued disparities in EU and US pricing systems could lead
to marked price differentials between regions, which, by way of the
implementation of existing or new reference pricing mechanisms,
increases the pricing pressure affecting the industry. The importation
of pharmaceutical products from countries where prices are low due
to government price controls, or other market dynamics, to countries
where prices for those products are higher, is already prevalent and
may increase. Strengthened collaboration by governments may
accelerate the development of further cost-containment policies
(such as joint procurement). Increased and simplified access to
national and regional prices in markets and the publication of these
prices in centralised databases have facilitated the uptake and
efficiency of price referencing across the world.
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257
Risk
continued
Commercialisation risks
Impact
Economic, regulatory and political pressures
Deterioration of, or failure to improve, socio-economic conditions, and
situations and/or resulting events, depending on their severity, could
adversely affect our supply and/or distribution chain in the affected
countries and the ability of customers or ultimate payers to purchase
our medicines. This could adversely affect our business or results
of operations.
While we have adopted cash management and treasury policies to
manage the risk of not being able to access a sustainable flow of liquid
funds (see the Financial risk management policies section of the
Financial Review from page 96), we cannot be certain that these will be
as effective as they are intended to be, in particular in the event of
a global liquidity crisis. In addition, open positions where we are owed
money and investments we have made in financial and non-financial
institutions or money market funds cannot be guaranteed to be
recoverable. Additionally, if we need access to external sources of
financing to sustain and/or grow our business, such as the debt or
equity capital financial markets, this may not be available on
commercially acceptable terms, if at all, in the event of a severe and/or
sustained economic downturn. This may, for instance, be the case in
the event of any default by the Company on its debt obligations, which
may materially adversely affect our ability to secure debt funding in the
future or our financial condition in general. Further information on debt
funding arrangements is contained in the Financial risk management
policies section of the Financial Review from page 96.
In addition, as set out in the next section, the UK’s exit from the EU
followed by the end of the transition period which occurred on
31 December 2020 could adversely impact the operation of the
financial system and the ability of financial institutions to perform
certain activities and services upon which we rely if the arrangements,
agreed between the UK and EU in the upcoming future negotiations
relating to equivalence determinations, do not adequately address
such matters and those financial institutions have not implemented
plans to mitigate the impact of such an outcome.
Operating in more than 100 countries, we are subject to political, socio-economic
and financial factors (including foreign exchange movements) both globally and in
individual countries.
A sustained global economic downturn, such as that which we are experiencing as
a consequence of the COVID-19 pandemic, may further exacerbate pressure from
governments and other healthcare payers on medicine prices and volumes of sales in
response to pressures on budgets, and may cause a slowdown or a decline in growth
in some markets. Those most severely impacted by the economic downturn may seek
alternative ways to settle their debts through, for example, the issuance of government
bonds which might trade at a discount to the face value of the debt. Other customers
may cease to trade, which may result in losses from writing off debts, or a reduction
in demand for products.
In addition, escalation of the current trade disputes could lead to sanctions such as
the unilateral imposition of tariffs, duties, quotas or other non-tariff barriers. While the
introduction of such sanctions in relation to medicines is unlikely, it could occur if
matters escalate significantly and could therefore adversely impact medicine process
and volumes of sales in impacted markets.
We are highly dependent on being able to access a sustainable flow of liquid funds
due to the high fixed costs of operating our business and the long and uncertain
development cycles of our products. In a sustained economic downturn, financial
institutions with whom we deal may cease to trade and there can be no guarantee
that we will be able to access monies owed to us without a protracted, expensive
and uncertain process, if at all.
The majority of our cash investments are managed centrally and are invested in AAA
credit-rated institutional money market funds, collateralised bank deposits, fixed
income securities in government, and financial and non-financial securities. Money
market funds are backed by institutions in the US, EU or elsewhere, which, in turn,
invest in other funds, including sovereign funds. This means our credit exposure is
a mix of US, EU and rest of the world sovereign default risk, financial institution and
non-financial institution default risk.
A number of our existing or future commercial or other agreements, such as
borrowings, derivative financial instruments and commercial contracts, utilise or may
utilise various London Interbank Offered Rates, known as LIBOR, or other similar rates
as benchmark reference rates. LIBOR and other benchmark reference rates are the
subject of ongoing national and international regulatory reform, the result of which is
expected to see some or all of them partially or fully replaced by alternative reference
rates, or cause LIBOR’s regulator to determine that their quality has degraded to the
degree that it is no longer representative of its underlying market. This may result in
potential adjustments or renegotiations being necessary to our agreements in respect
of the commercial terms or mechanisms to set the reference rate in the future. While
different alternative reference rates are developing for different currencies, there is
a risk that we fail to renegotiate or adjust our agreements. Any combination of these
could have an adverse effect on the cost, cash flows, value, return on and trading
market of our borrowings, derivative financial instruments, commercial and other
agreements, and could increase our administrative burden if the transition to alternative
rates is required or necessary by regulation or market practice.
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Commercialisation risks
Impact
Uncertainty and volatility in relation to the UK’s planned exit from the EU
On 23 June 2016, the UK held a referendum on the UK’s continuing membership of the
EU, the outcome of which was a decision for the UK to leave the EU (Brexit). Following
Royal Assent of the European Union (Withdrawal Agreement) Act in the UK and
ratification of the Withdrawal Agreement by the European Parliament, the UK left the
EU on 31 January 2020 with a transition period running to 31 December 2020.
On 24 December 2020 the UK Government and European Commission agreed the
terms of a Trade and Cooperation Agreement which sets out the relationship between
the UK and the EU following the end of the transition period. Entering into this agreement
was provisionally approved by the European Council on 29 December 2020 and the
associated UK legislation received Royal Assent on 30 December 2020. The European
Parliament is due to formally scrutinise the agreement in the coming months prior to
providing its consent to it. The agreement comprises a Free Trade Agreement, rules on
governance and dispute resolution, and security cooperation. The Free Trade Agreement
provides for zero tariffs and zero quotas on all goods that comply with the appropriate
rules of origin; maintains a level playing field in areas such as environmental protection,
social and labour rights, tax transparency and State aid, with enforcement and a binding
dispute settlement mechanism; and maintains air, road, rail and maritime connectivity
but with new customs and passport checks and limitations on haulage operations.
It is still too early to judge the full impact of the new Trade and Cooperation Agreement
between the UK and EU. Brexit, implementation of the resulting changes from the new
agreement together with the outcome of future negotiations between the UK and EU on
matters not fully addressed in it, could materially and adversely affect the tax, tax treaty,
currency, operational, legal and regulatory regimes as well as the macro-economic
environment in which the Group operates. Since the referendum, global markets and
foreign exchange rates have experienced increased volatility, including a decline in the
value of the pound sterling as compared with the euro and US dollar. Following the end
of the transition period provided for in the Withdrawal Agreement, among other things,
the UK no longer benefits from membership of the single EU market. Travel between
the UK and EU countries now has some increased restrictions and border checks or other
regulatory and system constraints may impede the rapid free movement of goods.
Our workforce, and in turn our ability to recruit and retain talent, could
be impacted by the new restrictions on the movement of persons. We
could face new and greater costs and challenges if UK regulations and
policies that govern our business diverge from those of the EU, or if
there is any other new or increased friction in our trading environment.
It therefore remains difficult to anticipate the potential impact on our
market share, sales, profitability and results of operations as a result
of Brexit.
The longer-term effects of Brexit remain difficult to predict but could
include further financial instability and slower economic growth or
economic downturn in the UK in particular, but also in Europe and the
global economy. Restrictions on the movement of persons, deterioration
in market access or trading terms, delay or restrictions to the movement
of goods or increased cost and burdens in the form of new or diverging
rules and regulations may have a significant adverse impact on our
operations, profitability and business model. Further, uncertainty
around the form and timing of any future trading arrangements
between the UK and other countries now that benefits of the EU’s Free
Trade Agreement network are no longer available to the UK could
increase volatility and lead to adverse effects on the economy of the
UK, other parts of Europe and the rest of the world, which in turn could
have an adverse economic impact on our operations.
Failures or delays in the quality or execution of the Group’s commercial strategies
Commercial success of our products and markets, including the development of
growth markets, is a critical factor in sustaining or increasing global Product Sales and
replacing lost Product Sales due to patent expiry. The successful launch of a new
pharmaceutical product involves substantial investment in sales and marketing
activities, launch stocks and other items. We may ultimately be unable to achieve
commercial success for various reasons, including difficulties in manufacturing
sufficient quantities of the product candidate for development or commercialisation
in a timely manner, the impact of price control measures imposed by governments
and healthcare authorities, the outcome of negotiations with third-party payers, erosion
of IP rights (including infringement by third parties), failure to show a differentiated
product profile and changes in prescribing habits.
The commercialisation of biologics is often more complex than for small molecule
pharmaceutical products, primarily due to differences in the mode of administration,
technical aspects of the product, and rapidly changing distribution and
reimbursement environments.
We face particular challenges in Emerging Markets, including:
> More volatile economic conditions and/or political environments.
> Competition from multinational and local companies with existing market presence.
> Difficulties enforcing and protecting IP.
> Inadequate protection against crime (including counterfeiting, corruption and fraud).
> Unauthorised or unregulated parallel imports.
> The need to impose developed market compliance standards.
> The need to meet a more diverse range of national regulatory, clinical, manufacturing
and distribution requirements.
> Potential inadvertent breaches of local and international law and the need to manage
sanctions and other restrictions that may be imposed in each jurisdiction.
> Possible geopolitical risks impacting trade and tariffs across connected markets.
> Recruitment of appropriately skilled and experienced personnel.
> Difficulty in identifying the most effective sales and marketing channels and routes
to market.
> Intervention by local or national governments or regulators, restricting market access
and/or introducing adverse price controls and price referencing.
> Difficulty in managing local arrangements, such as co-promotion and co-marketing,
in terms of performance and adherence to AstraZeneca’s compliance standards,
which are often higher than the market norm.
> Difficulties in cash repatriation due to strict foreign currency controls, risk of material
currency devaluation and lack of hard currency reserves in some Emerging Markets.
> Complexity derived from direct exports to countries where we do not have a legal entity.
Failure to execute our commercial strategies could materially adversely
impact our business or results of operations.
If a new product does not succeed as anticipated or its rate of sales
growth is slower than anticipated, there is a risk that we may be unable
to fully recoup the costs incurred in launching it, which could materially
adversely affect our business or results of operations.
Due to the complexity of the commercialisation process for biologics,
the methods of distributing and marketing biologics could materially
adversely impact our revenues from the sales of biologic medicines,
such as Synagis and FluMist/Fluenz.
The failure to exploit potential opportunities appropriately in Emerging
Markets or materialisation of the risks and challenges of doing
business in such markets, including inadequate protection against
crime (including counterfeiting, corruption and fraud) or inadvertent
breaches of local and international law may materially adversely affect
our reputation, business or results of operations.
The inability to effectively integrate acquired businesses into our
operations may result in significant unexpected expenses or failure
to realise anticipated benefits which may materially impact the results
of operations.
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Risk
continued
Commercialisation risks
Impact
Failures or delays in the quality or execution of the Group’s commercial strategies continued
We may also seek to acquire complementary businesses or enter into other strategic
transactions. For example, on 12 December 2020 the Group signed a definitive
agreement to acquire Alexion, subject to regulatory clearances and the approval of
shareholders of both companies. The integration of an acquired business could involve
incurring significant debt and unknown or contingent liabilities, as well as having a
negative effect on our reported results of operations from acquisition-related charges,
amortisation of expenses related to intangibles and charges for the implementation
of long-term assets. The integration of new businesses with our own could result in
operational complexities.
We may also experience difficulties in integrating geographically separated
organisations, systems and facilities, and personnel with different organisational cultures.
Disputes or difficulties in our relationship with our collaborators or partners may also
arise, often due to conflicting priorities or conflicts of interest between parties.
Supply chain and business execution risks
Impact
Failure to maintain supply of compliant, quality medicines
We may experience difficulties, delays and interruptions in the manufacturing
and supply of our products for various reasons, including:
> Demand significantly in excess of forecast demand, which may lead to supply
shortages (this is particularly challenging before launch).
> Supply chain disruptions, including those due to natural or man-made disasters
at one of our facilities, at a critical supplier or vendor, or during transit.
> Delays in construction of new facilities or the expansion of existing facilities to
support future demand for our products, including new modalities of medicine.
> The inability to supply products due to a product quality failure or regulatory
compliance action such as licence withdrawal, product recall or product seizure.
> Other manufacturing or distribution problems, including changes in manufacturing
production sites, limits to manufacturing capacity due to regulatory requirements,
changes in the types of products produced, or physical limitations or other business
interruptions that could impact continuous and adequate supply.
As with the rest of the pharmaceutical industry, we work in a heavily regulated
environment, which is subject to continued evolution. It is necessary for us to meet all
regulations, including compliance with Good Manufacturing Practices (GMP) and Good
Distribution Practices and comparable regulatory dossier conditions of approval in
other countries in which our products are licensed, manufactured or sold. Regulatory
agencies periodically inspect our manufacturing facilities to evaluate compliance with
applicable requirements and may identify potential deficiencies.
We increasingly rely on third parties for the timely supply of goods, such as raw
materials (for example, the API in some of our medicines and drug substances and/or
finished drug products for some of our biologics medicines), equipment, formulated
drugs and packaging, critical product components and services, all of which are key
to our operations. Many of these goods are difficult to substitute in a timely manner or
at all. We expect that external capacity for biologics drug substance production will
continue to remain constrained for the next few years and, accordingly, may not be
readily available for supplementary production in the event that we experience an
unforeseen need for such capacity.
Illegal trade in the Group’s medicines
The illegal trade in pharmaceutical products is widely recognised by industry,
non-governmental organisations and governmental authorities to be increasing.
Illegal trade includes counterfeiting, theft and illegal diversion (that is, when our
products are found in a market where we did not send them and where they are not
approved to be sold). There is a risk to public health when illegally traded products
enter the supply chain, as well as associated financial risk. Authorities and the public
expect us to help reduce opportunities for illegal trade in our products through
securing our supply chains, surveillance, investigation and supporting legal action
against those found to be engaged in illegal trade.
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Difficulties with manufacturing and supply, forecasting, distribution or
third-party suppliers may result in product shortages, which may lead
to lost Product Sales and materially adversely affect our reputation
and revenues. Even slight variations in components or any part of the
manufacturing process may lead to a product that is non-compliant
and does not meet quality standards. This could lead to recalls,
spoilage, product shortage, regulatory action and/or reputational harm.
Failure to comply with all manufacturing regulations can result in
negative regulatory inspection findings leading to manufacturing
cessation, product seizure, debarment or recalls which could have a
material adverse effect on our business, financial condition and results
of operations.
Public loss of confidence in the integrity of pharmaceutical products as
a result of illegal trade could materially adversely affect our reputation
and financial performance. In addition, undue or misplaced concern
about this issue may cause some patients to stop taking their
medicines, with consequential risks to their health.
If we are found liable for breaches in our supply chains, authorities may
take action, financial or otherwise, that could adversely impact the
distribution of our products.
Counterfeit and/or illegally diverted products replacing sales of genuine
products in a market can have a direct financial impact on our global
markets as well as being a risk to patient safety.
Supply chain and business execution risks
Impact
Reliance on third-party goods and services
AstraZeneca spends approximately $13 billion each year with trade suppliers.
The spend supports the length of our value chain from discovery to manufacture
and commercialisation of our medicines.
Many of our business-critical operations, including certain R&D processes, IT systems,
HR, finance, tax and accounting services have been outsourced to third-party
providers. We are therefore heavily reliant on these third parties, not just to deliver
timely and high-quality services, but also to comply with applicable laws and
regulations and adhere to our ethical business expectations of third-party providers.
Failure in information technology or cybersecurity
We are dependent on effective IT systems. These systems support key business
functions such as our R&D, manufacturing, supply chain and sales capabilities. They
provide an important means of safeguarding and communicating data, including critical
or strictly confidential information, the confidentiality and integrity of which we rely on.
We also rely on the effectiveness of our internal policies, controls and procedures to
protect the confidentiality, integrity and availability of information held on our IT
systems, as well as the effectiveness of our due diligence and ongoing oversight of
third-party vendors who hold or have access to our data. In addition, we must ensure
that the personal data which we, or third-party vendors operating on our behalf, hold
and process is protected in a manner that complies with increasingly stringent global
privacy laws.
Examples of strictly confidential information that we aim to protect include clinical trial
records (patient characteristics and treatments), personal information (employee bank
details, salary, home address), IP related to manufacturing processes and compliance,
and key research science techniques.
The size and complexity of our IT systems and cloud utilisation, and those of our
third-party vendors (including outsource and Software as a Service (SaaS) providers)
with whom we contract, have significantly increased over the past decade. Such
systems are potentially vulnerable to service interruptions and security breaches
including interruptions or breaches from attacks by malicious third parties, or from
intentional or inadvertent actions by our employees or vendors.
Significant changes in the business footprint and the implementation of the IT strategy,
including the creation and use of captive offshore Global Technology Centres, could
lead to temporary loss of capability.
We increasingly use the internet, digital content, social media, mobile applications,
the Internet of Things (IoT), artificial intelligence, and other forms of new technology to
process our data and to communicate internally and externally. The accessibility and
instantaneous nature of interactions with such media may facilitate or exacerbate the
risk of unauthorised data loss or other security incidents or breaches from within
AstraZeneca. Globalisation also means that it becomes difficult to comply with all local
data protection obligations for our websites and mobile apps (e.g. enhanced cookie
banner rules in the EU or higher standards for obtaining valid consent for certain uses
of personal data). In addition, increasing regulatory and legal challenges to international
transfers of personal information, for example in relation to transfers of personal data
from the EU to the rest of the world as a result of a recent European Court of Justice
decision, may result in data no longer being available to locations we are present in,
with adverse operational impacts. The increased use of artificial intelligence, genomic
data and biometric data poses additional risks to the rights and freedoms of individuals
and consequently higher reputational and financial risks for AstraZeneca.
Privacy legislation in various jurisdictions includes obligations to report data breaches,
whether intentional or inadvertent, to regulators, local media and affected individuals
within expedited timeframes. Such expedited reporting, often before the nature and
impact of a data breach can be fully understood, could cause reputational damage
and a loss of public trust that may be disproportionate to the extent of the breach.
The failure of outsource providers to deliver timely services, and to
the required level of quality, or the failure of outsource providers to
cooperate with each other, could materially adversely affect our
financial condition or results of operations. Moreover, the failure of
these third parties to operate in an ethical manner could adversely
impact our reputation, both internally and externally, or even result
in non-compliance with applicable laws and regulations.
Our business and financial results could also be materially adversely
affected by disruptions caused by our failure to successfully manage
either the integration of outsourced services or the transition process
of insourcing services from third parties.
Any significant disruption to, or incidents involving, these IT systems
(including breaches of data security or cybersecurity or failure to
integrate new and existing IT systems) or failure to comply with
additional requirements under applicable laws or contractual
obligations, could harm our reputation, result in regulatory penalties
or sanctions, and materially adversely affect our financial condition
or results of operations.
While we invest heavily in the protection of our data and IT, we may
be unable to prevent breakdowns, breaches or other incidents
affecting our systems or failures of our cybersecurity policies, controls
or procedures. Any such breakdown, breach, incident or failure could
result in disclosure of confidential or sensitive information, damage to
our reputation, regulatory penalties or sanctions, financial losses and/
or other costs.
The inability to back-up and restore data effectively could lead to
permanent loss of data that could in turn result in non-compliance with
applicable laws and regulations, and otherwise harm our business.
We and our vendors could be susceptible to third-party or internal
attacks on our information security systems. Such attacks are of
ever-increasing levels of sophistication, difficult to detect and are made
by groups and individuals with a wide range of motives and expertise,
including organised criminal groups, ‘hacktivists’, nation states,
employees and others. Occasionally we experience intrusions,
including as a result of computer-related malware. We may be unable
to timely detect and defend against such attacks which could have an
adverse effect on our business and could result in significant legal
liability, regulatory penalties, including fines, or sanctions.
Although we maintain cybersecurity insurance, there can be no
assurance that our insurance coverage limits will protect against any
future claim, that such insurance proceeds will be paid to us in a timely
manner, or that such coverage will continue to be available to us on
commercially reasonable terms, if at all.
Inappropriate use of certain media vehicles could lead to the
unauthorised or unintentional public disclosure of confidential
information (such as personally identifiable information on employees,
healthcare professionals or patients), which may damage our
reputation, adversely affect our business or results of operations and
expose us to legal risks, regulatory penalties or sanctions and/or
additional legal obligations. Similarly, the involuntary public disclosure
of commercially sensitive information, or an information loss, could
adversely affect our business or results of operations and could result
in regulatory penalties or sanctions. In addition, negative posts or
comments about us (or, for example, the safety of our products) on
social media websites or other digital channels could harm our
reputation, brand image or goodwill.
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Risk
continued
Supply chain and business execution risks
Impact
Failure of critical processes
Unexpected events and/or events beyond our control could result in the failure
of critical processes within the Company or at third parties on whom we are reliant.
The business faces threats to business continuity from many directions. Examples
of material threats include:
> Disruption to our business or the global markets if there is instability in a particular
geographic region, including as a result of war, terrorism, pandemics, armed conflicts,
riots, unstable governments, civil insurrection or social unrest.
> Natural disasters in areas of the world prone to extreme weather events, which may
increase in frequency or severity as a result of climate change and earthquakes.
> Cyber threats similar to those detailed in the Failure in information technology and
cybersecurity section overleaf.
Failure of critical processes may result in an inability to research,
manufacture or supply products to patients. AstraZeneca has
developed a Business Resilience framework which is designed to
mitigate such risks. However, there is no guarantee that these
measures will be sufficient to prevent business interruption.
This may expose the Company to litigation and/or regulatory action
which may result in fines. In addition, failure of critical processes may
lead to loss of revenue and have an adverse impact on the Company’s
financial results.
The impact of COVID-19 on AstraZeneca’s operations is highly
uncertain and cannot be predicted with confidence. The extent of any
adverse impact on the Company’s operations (including the effects of
any governmental or regulatory response to the pandemic) will depend
on global duration, extent and severity of the pandemic. To the extent
that the pandemic adversely affects the Company’s operations and/or
performance, the Company expects it to have the effect of heightening
certain risks such as those relating to the delivery of the pipeline or
launch of new medicines, the execution of the Company’s commercial
strategy, the manufacturing and supply of medicines and reliance on
third-party goods and services.
Failure to collect and manage data in line with legal and regulatory requirements and strategic objectives
We are currently in a period of significant change in global privacy laws, with many
countries creating new, or strengthening existing, laws relating to how organisations
can collect, process, transmit, store, use and share data that relate to individuals
(personal data), including the EU General Data Protection Regulation (GDPR), the UK
Data Protection Act, the US California Consumer Privacy Act and California Privacy
Rights Act. Such laws require us, among other things, to maintain reasonable and
appropriate data security measures and to provide timely notice to individuals and/or
regulators in the event that personal data is compromised. Non-compliance with these
laws may attract significant and material regulatory sanctions and corresponding
reputational damage. For example, under the GDPR, fines of up to €20 million or 4%
of a company’s worldwide annual revenue of the previous fiscal years (whichever is
higher) can be imposed. Further, these laws are subject to differing interpretations, and
may be inconsistent from jurisdiction to jurisdiction. Many other countries where we
operate are also enforcing their own laws more aggressively and/or adopting tougher
new measures, aligning themselves to the updated EU privacy framework. The effects
of such laws and regulations are potentially significant and may require us to modify
our data processing practices and policies and to incur substantial compliance-related
costs and expenses.
AstraZeneca processes significant volumes of personal data, including sensitive data
relating to health and genomics, which is subject to heightened protections and may
attract increased attention under privacy laws. Personal data is used for drug
development, sales and marketing, and managing our employees and contractors. As
such, the ability to process personal data in a lawful and compliant manner is essential
to achieving our stated business aims.
Despite taking measures designed to ensure compliance with the
applicable privacy laws by our personnel and associated third parties,
non-compliance may still occur, potentially resulting in the imposition
of significant penalties, such as fines, orders to cease sharing or using
personal data, or legal action on behalf of impacted individuals. Any
of these impacts could materially adversely affect our reputation,
business or results of operations, which in turn would further impact
patient confidence in sharing further personal data with us. While the
management of company-sensitive data (such as intellectual property)
is subject to less regulation than personal data, failure to protect such
data could similarly lead to a competitive disadvantage and a loss of
trust from partners and other stakeholders, and ultimately prevent us
from delivering against our strategic objectives. We or our third-party
service providers could be adversely affected if legislation or
regulations are expanded to require changes in our or our third-party
service providers’ business practices, or if governing jurisdictions
interpret or implement their legislation or regulations in ways that
negatively affect our or our third-party service providers’ business,
financial condition and results of operations.
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Supply chain and business execution risks
Impact
Failure to attract, develop, engage and retain a diverse, talented and capable workforce
We rely heavily on recruiting and retaining talented employees with a diverse range of
skills and capabilities to meet our strategic objectives. We face intense competition for
well-qualified individuals, as the supply of people with specific skills and significant
leadership potential or in specific geographic regions may be limited, and in the UK
the added uncertainty created by Brexit could impact the hiring and retention of staff
in some business-critical areas.
The successful delivery of our business objectives, including in relation to the proposed
acquisition of Alexion, is dependent on high levels of engagement, commitment and
motivation of our workforce. With the move to remote working for a large number of our
employees in 2020, there is a risk of reduced levels of engagement and collaboration.
The inability to attract and retain highly skilled personnel may
weaken our succession plans for critical positions in the medium term,
may materially adversely affect the implementation of our strategic
objectives, and could ultimately impact our business or results
of operations.
Failure to engage effectively with our employees could lead to disruption
in our day-to-day operations, reduce levels of productivity and/or
increase levels of voluntary turnover, all of which could ultimately
materially adversely affect our business or results of operations.
Legal, regulatory and compliance risks
Impact
Failure to adhere to applicable laws, rules and regulations
Failure to comply with applicable laws, rules and regulations, to
manage our liabilities, or to adequately anticipate or proactively
manage emerging policy and legal developments could materially
adversely affect our licence to operate or results of operations,
adversely affect our reputation, cause harm to people or the
environment, and/or lead to fines or other penalties.
For example, once a product has been approved for marketing by the
regulatory authorities, it is subject to continuing control and regulation,
such as the manner of its manufacture, distribution, marketing and
safety surveillance. If regulatory issues concerning compliance with
environmental, current GMP or safety monitoring regulations for
pharmaceutical products (often referred to as pharmacovigilance)
arise, this could lead to product recalls, loss of product approvals and
seizures, and interruption of production, which could create product
shortages and delays in new product approvals, and negatively impact
patient access. As another example, violation of laws, rules, regulations
or policies in countries subject to trade and economic sanctions could
lead to loss of import or export privileges, civil or criminal penalties for
us or our employees, or potential reputational harm, which could have
a material adverse effect on our results of operations, financial
condition or business.
Our many business operations are subject to a wide range of laws, rules and
regulations from governmental and non-governmental bodies around the world.
Any failure to comply with these applicable laws, rules and regulations may result in
AstraZeneca being investigated by relevant agencies and authorities and/or in legal
proceedings being filed against us. Such investigations or proceedings could result in
us becoming subject to civil or criminal sanctions and/or being forced to pay fines or
damages. Relevant authorities have wide-ranging administrative powers to deal with
any failure to comply with continuing regulatory oversight and this could affect us,
whether such failure is our own or that of our contractors or external partners.
Moreover, such laws, rules and regulations are subject to change.
Material examples of statutes, rules and regulations impacting business
operations include:
> Compliance with GMP.
> Local, national and international environmental and occupational health and safety
laws and regulations.
> Trade control laws governing our imports and exports including nationally and
internationally recognised trade agreements, embargoes, trade and economic
sanctions and anti-boycott requirements.
> Competition and marketing laws.
> Rules and regulations established to promote ethical supply chain management.
> Financial regulations related to external financial reporting, taxation and
anti-money laundering.
> Employment practices.
> Disclosure of payments to healthcare professionals under the Sunshine Act, relevant
US State laws, and EFPIA legislation.
> Appropriate disclosure of community support, patient organisation support and
product donations.
> Compliance with human rights and appropriate environmental practices of third-party
contractors around the world including the conflict minerals rule in the US, and the UK
Modern Slavery Act.
We have environmental and/or occupational health and safety-related liabilities at some
current, formerly owned, leased and third-party sites. For more information on the most
significant of these and for details on other significant litigation matters, refer to Note
29 to the Financial Statements from page 228.
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Risk
continued
Legal, regulatory and compliance risks
Impact
Failure to meet regulatory or ethical expectations on environmental impact, including climate change
Delivering on our Ambition Zero Carbon strategy to reduce carbon emissions to zero in
all our global operations by 2025 is one way in which we will mitigate our impact on the
planet and the climate crisis. Another is ensuring that we adapt to the physical risks
that climate change may pose to the resilience of our business and supply chain.
The physical risks that climate change poses to our business have been screened and
we expect exposure to periods of extreme heat, floods and water scarcity to become
more frequent and severe in some regions where we operate, in the medium to longer
term. These will need to be managed if global temperatures continue to rise.
There is an increasing global focus from regulators, investors,
healthcare providers and broader society regarding measures needed
to transition to a low carbon economy and the impact that this will have
on business, i.e. transitional risks. In some markets, regulators or
healthcare providers may choose not to approve or reimburse our
products if other products with a better carbon footprint are available.
In addition, carbon taxes and fees may be imposed on us and our
suppliers as a way to reduce greenhouse gas emissions. AstraZeneca’s
Ambition Zero Carbon addresses these risks in a science-based way
and will also open up opportunities from increased efficiency of using
natural resources and market benefits from low carbon alternatives.
Safety and efficacy of marketed medicines is questioned
Our ability to accurately assess, prior to launch, the eventual safety or efficacy of a new
product once in broader clinical use, can only be based on data available at that time,
which is inherently limited due to relatively short periods of product testing and
relatively small clinical study patient samples.
Serious safety concerns or adverse events relating to our products
could lead to product recalls, seizures, loss of product approvals,
declining sales and interruption of supply and could materially
adversely impact patient access, our reputation and financial revenues.
Any unforeseen safety concerns or adverse events relating to our products or failure to
comply with laws, rules and regulations relating to provision of appropriate warnings
concerning the dangers and risks of our products that result in injuries, could expose
us to large product liability damages claims, settlements and awards, particularly in the
US. Adverse publicity relating to the safety of a product or of other competing products
may increase the risk of product liability claims.
Details of material product liability litigation matters can be found in Note 29 to the
Financial Statements from page 228.
Significant product liability claims could also arise, which could be
costly, divert management attention, or damage our reputation and
demand for our products.
Unfavourable resolution of such current and similar future product
liability claims could subject us to enhanced damages, consumer fraud
and/or other claims, including civil and criminal governmental actions,
requiring us to make significant provisions in our accounts relating to
legal proceedings, and could materially adversely affect our financial
condition or results of operations, particularly where such
circumstances are not covered by insurance. For more information,
see the limited third-party insurance coverage risk on page 266.
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AstraZeneca Annual Report & Form 20-F Information 2020 / Additional Information
Legal, regulatory and compliance risks
Impact
Adverse outcome of litigation and/or governmental investigations
We may be subject to various product liability, consumer, commercial, anti-trust,
environmental, employment or tax litigation or other legal proceedings and
governmental investigations, including in relation to the proposed acquisition of
Alexion. Litigation, particularly in the US, is inherently unpredictable and unexpectedly
high awards for damages can result from an adverse verdict. In many cases, plaintiffs
may claim enhanced damages in extremely high amounts. In particular, the marketing,
promotional, clinical and pricing practices of pharmaceutical manufacturers, as well as
the manner in which manufacturers interact with purchasers, prescribers and patients,
are subject to extensive regulation, litigation and governmental investigation. Many
companies, including AstraZeneca, have been subject to claims related to these
practices asserted by federal and state governmental authorities and private payers
and consumers, which have resulted in substantial expense and other significant
consequences. Note 29 to the Financial Statements from page 228 describes the
material legal proceedings in which we are currently involved.
Governmental investigations, for example under the US Foreign
Corrupt Practices Act or federal or state False Claims Acts or other
types of legal proceedings, regardless of their outcome, could be
costly, divert management attention, or damage our reputation and
demand for our products. Unfavourable resolution of current and
similar future proceedings against us could subject us to criminal
liability, fines, penalties or other monetary or non-monetary remedies,
including enhanced damages, require us to make significant provisions
in our accounts relating to legal proceedings and could materially
adversely affect our business or results of operations.
Failure to adhere to increasingly stringent anti-bribery and anti-corruption legislation
There remains an increased global focus on the implementation and enforcement
of anti-bribery and anti-corruption legislation.
Two relevant pieces of legislation include the UK Bribery Act and the US Foreign
Corrupt Practices Act, and many other countries where we operate are also enforcing
their own laws more aggressively and/or adopting tougher new measures. There has
also been an increase in cooperation and coordination between regulators across
countries with respect to investigation and enforcement.
Despite taking measures to prevent breaches of applicable anti-
bribery and anti-corruption laws by our personnel and associated
third parties, breaches may still occur, potentially resulting in the
imposition of significant penalties, such as fines, the requirement to
comply with monitoring or self-reporting obligations, or debarment
or exclusion from government sales or reimbursement programmes,
any of which could materially adversely affect our reputation,
business or results of operations.
We have been the subject of anti-corruption investigations and there can be no
assurance that we will not, from time to time, be subject to informal enquiries and
formal investigations from governmental agencies. In the context of our business,
governmental officials interact with us in various roles that are important to our
operations, such as in the capacity of a regulator, partner or healthcare payer,
reimburser or prescriber, among others. To the extent we are the subject of any
such pending and material matters, details are included in Note 29 to the
Financial Statements from page 228.
Economic and financial risks
Impact
Failure to achieve strategic plans or meet targets or expectations
From time to time, we communicate our business strategy or our targets or
expectations regarding our future financial or other performance (for example,
the expectations described in Future prospects in the Financial Review on page 96).
All such statements are of a forward-looking nature and are based on assumptions
and judgements we make, all of which are subject to significant inherent risks
and uncertainties, including those that we are unaware of and/or that are beyond
our control.
Failure in financial control or the occurrence of fraud
Effective internal controls are necessary to provide reliable financial reports and to
prevent and detect fraud. Lapses in controls could undermine our ability to prevent
fraud or provide accurate and timely disclosure of financial information. Testing of
our internal controls can provide only reasonable assurance with respect to the
preparation and fair presentation of Financial Statements and may not prevent
or detect misstatements or fraud.
There can be no guarantee that our financial targets or expectations will
materialise on the expected timeline or at all. Actual results may deviate
materially and adversely from any such target or expectation, including
if one or more of the assumptions or judgements underlying any such
target or expectation proves to be incorrect in whole or in part.
Any failure to successfully implement our business strategy, whether
determined by internal or external risk factors, may frustrate the
achievement of our financial or other targets or expectations and,
in turn, materially damage our brand and materially adversely affect
our business, financial position or results of operations.
Significant resources may be required to remediate any lapse or
deficiency in internal controls.
Any such deficiency may trigger related investigations (e.g. by the SEC
etc.) and may result in fines being levied against Group individual
directors or officers.
Serious fraud may lead to potential prosecution or even imprisonment
of senior management.
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Risk
continued
Economic and financial risks
Impact
Unexpected deterioration in the Group’s financial position
In addition to the economic, regulatory and political pressures which have increased
as a consequence of COVID-19 (see above), a wide range of financial risks could result
in a material deterioration in the Group’s financial position.
As a global business, currency fluctuations can significantly affect our results of
operations, which are reported in US dollars. Approximately 33% and 21% of our
global 2020 Product Sales were in the US and China respectively, which are expected
to remain our largest two markets for the foreseeable future. Product Sales in other
countries are predominantly in currencies other than the US dollar and the Chinese
renminbi, including the euro, Japanese yen and pound sterling.
Our Consolidated Statement of Financial Position contains significant investments in
intangible assets, including goodwill. The nature of the pharmaceutical business is high
risk and requires that we invest in a large number of projects in an effort to develop a
successful portfolio of approved products. Our ability to realise value on these
significant investments is often contingent upon, among other things, regulatory
approvals, market acceptance, competition and legal developments. As such, in the
course of our many acquisitions and R&D activities, we expect that some of our
intangible assets may become impaired and be written off.
Inherent variability of biologics manufacturing increases the risk of write-offs of product
batches. Due to the value of the materials used, the carrying amount of biologics
products is much higher than that of small molecule products. As we continue to grow
our biologics business, we also increase the risk of potential impairment charges.
The costs associated with product liability litigation have increased the cost of, and
narrowed the coverage afforded by, pharmaceutical companies’ product liability
insurance. To contain insurance costs, as of February 2006, we adjusted our product
liability coverage profile, accepting uninsured exposure above $100 million. In addition,
where claims are made under insurance policies, insurers may reserve the right to deny
coverage on various grounds. Furthermore, some product liability litigation cases, for
example those relating to Byetta and Bydureon, are not covered by traditional
third-party product liability insurance. See Note 29 to the Financial Statements
from page 228 for details.
The integrated nature of our worldwide operations can produce conflicting claims from
revenue authorities as to the profits to be taxed in individual countries. The majority of
the jurisdictions in which we operate have double tax treaties with other foreign
jurisdictions, which provide a framework for mitigating the incidence of double taxation
on our revenues and capital gains.
The Group’s worldwide operations are taxed under laws in the jurisdictions in which
they operate. International standards governing the global tax environment regularly
change. The Organisation for Economic Co-operation and Development (OECD) has
introduced a number of changes under the Base Erosion and Profit Shifting (BEPS)
Action Plans which are now being progressively implemented by tax authorities around
the world. During 2019 and 2020, it undertook a public consultation setting out
alternatives for further potential actions, which would potentially include allocating
taxing rights over a higher proportion of profits to end market jurisdictions and the
introduction of a global minimum tax and is now working to seek a consensus amongst
the Inclusive Framework members on those changes that should be implemented.
Our defined benefit pension obligations are largely backed by assets invested across
the broad investment market. Our most significant obligations relate to defined benefit
pension funds in the UK, Sweden and the US. The largest obligation is in the UK.
266
AstraZeneca Annual Report & Form 20-F Information 2020 / Additional Information
Movements in the exchange rates used to translate foreign currencies
into US dollars may materially adversely affect our financial condition
or results of operations. Some of our subsidiaries import and export
goods and services in currencies other than their own functional
currency, and so the financial results of such subsidiaries could be
affected by currency fluctuations arising between the transaction and
settlement dates. In addition, there are foreign exchange differences
arising on the translation of investments in subsidiaries.
We have significant investments in goodwill and intangible assets as
a result of our acquisitions of various businesses and our purchases
of certain assets, such as product development and marketing rights.
Impairment losses may materially adversely affect our financial
condition or results of operations. Details of the carrying values of
goodwill and intangible assets, and the estimates and assumptions
we make in our impairment testing, are included in Notes 8 and 9 to
the Financial Statements from page 196.
Financial liabilities arising due to product liability or other litigation, in
respect of which we do not have insurance coverage, or if an insurer’s
denial of coverage is ultimately upheld, could require us to make
significant provisions relating to legal proceedings and could materially
adversely affect our financial condition or results of operations.
For more information, see the Adverse outcome of litigation and/or
governmental investigations risk on page 265.
The resolution of tax disputes regarding the profits to be taxed in
individual territories can result in a reallocation of profits or losses
between jurisdictions and an increase or decrease in related tax costs,
and has the potential to affect our cash flows, EPS and post-tax
earnings. Claims, regardless of their merits or their outcome, are costly,
divert management attention and may adversely affect our reputation.
If any double tax treaties are withdrawn or amended, especially
in a territory where a member of the AstraZeneca Group is involved
in a taxation dispute with a tax authority in relation to cross-border
transactions, such withdrawal or amendment could materially
adversely affect our financial condition or results of operations, as
could a negative outcome of a tax dispute or a failure by tax authorities
to agree to eliminate double taxation through competent authority
proceedings. Changes to the application of double tax treaties, as a
result of the Parent Company of the Group no longer being an EU entity
following Brexit, could also result in adverse consequences such as
those described above. See the Financial risk management policies
section of the Financial Review on page 96 for tax risk management
policies and Note 29 to the Financial Statements from page 228 for
details of current tax disputes.
Changes in tax regimes, such as those relating to the US federal tax
regime which were effective from 1 January 2018, could result in a
material impact on the Group’s cash tax liabilities and tax charge,
resulting in either an increase or a reduction in financial results
depending upon the nature of the change. We represent views to the
OECD, governments and tax authorities through public consultations
to ensure international institutions and governments understand the
business implications of proposed law changes. Specific OECD BEPS
recommendations that we expect to impact the Group include changes
to patent box regimes, restrictions of interest deductibility and revised
transfer pricing guidelines.
Sustained falls in asset values could reduce pension fund solvency
levels, which may result in requirements for additional cash, restricting
the cash available for our business. Changes to funding regulations for
defined benefit pensions may also result in a requirement for additional
cash contributions by the Group. If the present value of the liabilities
increases due to a sustained low interest rate environment, an increase
in expectations of future inflation, or an improvement in member
longevity (above that already assumed), this could also reduce pension
fund solvency ratios. The likely increase in the IAS 19 ‘Employee
Benefits’ accounting deficit generated by any of these factors may
cause the credit rating agencies to review our credit rating, with the
potential to negatively affect our ability to raise debt and the price of
new debt issuances. See Note 22 to the Financial Statements from
page 209 for further details of the Group’s pension obligations.
Shareholder Information
The principal markets for trading in
AstraZeneca shares are the London Stock
Exchange, Nasdaq Stockholm and the
Nasdaq Global Select Market (Nasdaq).
AstraZeneca shares were listed on Nasdaq on
25 September 2020, prior to which they were
listed on the New York Stock Exchange.
Ordinary Shares of $0.25 each in AstraZeneca
PLC are listed on the London Stock Exchange
and the shareholder register is maintained by
Equiniti Limited, the Ordinary Share registrar.
Shares listed on Nasdaq Stockholm are
issued under the Euroclear Services
Agreement by Euroclear Sweden AB, the
Swedish Central Securities Depositary.
Shares listed on Nasdaq are in the form
of American Depositary Shares (ADSs),
evidenced by American Depositary Receipts
(ADRs) issued by the Company’s ADR
depositary, Deutsche Bank Trust Company
Americas (Deutsche Bank). Deutsche Bank
replaced Citibank, N.A. as the Company’s
ADR depositary on 6 February 2020. Two
ADSs are equivalent to one Ordinary Share.
Before 27 July 2015, the ratio was one ADS
per one Ordinary Share. Shares are listed on
all three markets under the stock symbol AZN.
Ordinary Share registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
UK
Tel (Freephone in UK): +44 (0)800 389 1580
Tel (outside UK): +44 (0)121 415 7033
Swedish Central Securities Depositary
Euroclear Sweden AB
PO Box 191
SE-101 23 Stockholm
Sweden
Tel: +46 (0)8 402 9000
ADR depositary
Deutsche Bank Trust Company Americas
c/o American Stock Transfer & Trust
Company, LLC
6201 15th Avenue
Brooklyn NY 11219
USA
Tel (toll free in the US): +1 (888) 697 8018
Tel (outside US): +1 (718) 921 8137
db@astfinancial.com
Annual General Meeting (AGM)
The 2021 AGM will be held on 30 April 2021
and further details will be set out in the Notice
of Meeting.
If you hold shares listed in Stockholm or hold
ADRs, information relating to voting and
attendance, will be included in the relevant
Notice of AGM.
If you hold your shares through a nominee,
your nominee provider will be able to advise
you of their arrangements in relation to voting
and attendance.
US corporate governance requirements
Our ADSs are traded on Nasdaq and,
accordingly, we are subject to the reporting
and other requirements of the SEC applicable
to foreign private issuers. Section 404 of the
Sarbanes-Oxley Act requires companies to
include in their annual report on Form 20-F
filed with the SEC, a report by management
stating its responsibility for establishing
internal control over financial reporting and
to assess annually the effectiveness of such
internal control. We have complied with
those provisions of the Sarbanes-Oxley Act
applicable to foreign private issuers.
The Board continues to believe that the
Group has a sound corporate governance
framework, good processes for the accurate
and timely reporting of its financial position
and results of operations, and an effective and
robust system of internal controls. We have
established a Disclosure Committee, further
details of which can be found in the Corporate
Governance Report on page 118.
The Directors’ assessment of the
effectiveness of internal control over financial
reporting is set out in the Directors’ Annual
Report on Internal Controls over Financial
Reporting on page 169.
We are required to disclose any significant
ways in which our corporate governance
practices differ from those followed by US
companies under the Nasdaq Corporate
Governance Requirements. In addition, we
must comply fully with the provisions of the
Nasdaq Corporate Governance Requirements
relating to the composition, responsibilities
and operation of audit committees, applicable
to foreign private issuers. These provisions
incorporate the rules concerning audit
committees implemented by the SEC under
the Sarbanes-Oxley Act. We have reviewed
the corporate governance practices required
to be followed by US companies under the
Nasdaq Corporate Governance Requirements
and our corporate governance practices are
generally consistent with those standards.
Dividends
Dividend dates for 2021 are shown in the
financial calendar on page 268. A first interim
dividend is normally announced in July/
August and paid in September and a second
interim dividend is normally announced in
January/February and paid in March.
Dividends are paid in GBP, SEK and USD,
depending on where the eligible shares are
listed. Further information on dividends
declared can be found in the Shareholder
Information section of the website,
www.astrazeneca.com.
Shareholders holding Ordinary Shares
directly may opt for dividends to be paid
straight to their bank or building society
account, rather than being paid by cheque.
To elect for this swift and secure method of
payment, contact the Ordinary Share registrar,
visit www.shareview.co.uk or fill in the
mandate form that will be sent to you with
your next dividend cheque. If you hold shares
listed in Stockholm, you should contact your
personal bank/broker or, if you hold a VP
account, contact the bank that services your
VP account. If you hold ADRs directly you
should contact American Stock Transfer &
Trust Company, LLC (the ADR transfer agent).
If you hold your shares through a nominee,
you should direct any queries relating to your
shareholding and dividend payments to the
nominee provider.
Shareholder communications
Copies of shareholder communications and
annual reports are available on our website,
www.astrazeneca.com. If you hold Ordinary
Shares directly, currently receive hard copies
of shareholder communications and/or the
annual report and would rather receive these
documents electronically, you can manage
your communication preferences at
www.shareview.co.uk or by contacting the
Ordinary Share registrar. If your record on the
Ordinary Share register has been duplicated
you may receive multiple copies of shareholder
communications. If this is the case, please
contact the Ordinary Share registrar so that
this can be rectified.
Holders of shares listed in Stockholm
should contact Computershare AB,
PO Box 5267, 102 46 Stockholm, Sweden
(Tel: +46 (0)771 24 64 00) and holders of
ADRs should contact the ADR depositary
or their personal broker with queries relating
to shareholder communications.
Shareview
Holders of Ordinary Shares may create
a portfolio at www.shareview.co.uk to view
and manage their AstraZeneca shareholding.
Shareview is a free and secure online service
provided by the Ordinary Share registrar that
allows users to, among other things, update
personal details, manage communication
preferences, view dividend information and
manage direct dividend payments.
ShareGift
Shareholders that hold only a small number
of shares, the value of which makes it
uneconomical to sell them, may wish to
consider donating them to charity through
ShareGift, an independent charity share
donation scheme (registered charity number
1052686). Further information about
ShareGift can be found on its website at
www.sharegift.org or by calling
+44 (0)20 7930 3737.
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267
Shareholder Information
continued
Shareholder fraud warning
Shareholders of AstraZeneca and many
other companies have reported receiving
unsolicited calls and correspondence relating
to their shareholdings and investment matters.
Shareholders are advised to be very cautious
of any unsolicited approaches and to note that
reputable firms authorised by the Financial
Conduct Authority (FCA) are very unlikely to
make such approaches. Such approaches
are likely to be part of a ‘boiler room scam’
attempting to defraud shareholders.
Shareholders are advised to familiarise
themselves with the information on scams
available on the FCA website, www.fca.org.uk/
consumers and within the FAQs in the
Investors section of our website,
www.astrazeneca.com.
Any suspected scams or fraudulent
approaches should be reported to the FCA
via its website and to AstraZeneca’s Ordinary
Share registrar, using the contact details on
page 267.
Related party transactions
During the period 1 January 2021 to
31 January 2021, there were no transactions,
loans, or proposed transactions between the
Company and any related parties which were
material to either the Company or the related
party, or which were unusual in their nature or
conditions (see also Note 30 to the Financial
Statements on page 233).
Documents on display
The Articles and other documents concerning
the Company which are referred to in this
Annual Report may be inspected at the
Company’s registered office at 1 Francis Crick
Avenue, Cambridge Biomedical Campus,
Cambridge CB2 0AA, UK.
Property
Substantially all of our properties are held
freehold, free of material encumbrances and
are fit for their purpose. For more information,
please refer to Note 7 to the Group Financial
Statements on page 195.
Investor Relations
www.astrazeneca.com/investors
irteam@astrazeneca.com
Tel (UK): +44 (0)20 3749 5824
Tel (toll free in the US): +1 (866) 381 7277
Financial calendar
Event
Second interim
dividend for 2020
Ex-dividend date
Record date
Payment date
Announcement of
first quarter results
for 2021
Annual General
Meeting (AGM)
Provisional date
25 February 2021
26 February 2021
29 March 2021
30 April 2021
30 April 2021
Announcement of
second quarter and half-year
results for 2021
29 July 2021
First interim
dividend for 2021
Ex-dividend date
Record date
Payment date
Announcement of
third quarter results
for 2021
12 August 2021
13 August 2021
13 September 2021
12 November 2021
Financial year end
31 December 2021
History and development of the Company
AstraZeneca PLC was incorporated in
England and Wales on 17 June 1992 under
the Companies Act 1985. It is a public limited
company domiciled in the UK. The Company’s
registered number is 2723534 and its
registered office is at 1 Francis Crick Avenue,
Cambridge Biomedical Campus, Cambridge
CB2 0AA, UK (Tel: +44 (0)20 3749 5000). From
February 1993 until April 1999, the Company
was called Zeneca Group PLC. On 6 April
1999, the Company changed its name to
AstraZeneca PLC.
The Company was formed when the
pharmaceutical, agrochemical and specialty
chemical businesses of Imperial Chemical
Industries PLC were demerged in 1993. In
1999, the Company sold the specialty
chemical business. Also in 1999, the
Company merged with Astra of Sweden. In
2000, it demerged the agrochemical business
and merged it with the similar business of
Novartis to form a new company called
Syngenta AG. In 2007, the Group acquired
MedImmune, a biologics and vaccines
business based in the US.
In 1999, in connection with the merger
between Astra and Zeneca, the Company’s
share capital was redenominated in US
dollars. On 6 April 1999, Zeneca shares were
cancelled and US dollar shares issued,
credited as fully paid on the basis of one
dollar share for each Zeneca share then held.
This was achieved by a reduction of capital
under section 135 of the Companies Act 1985.
Upon the reduction of capital becoming
effective, all issued and unissued Zeneca
shares were cancelled and the sum arising
as a result of the share cancellation credited
to a special reserve, which was converted into
US dollars at the rate of exchange prevailing
on the record date. This US dollar reserve
was then applied in paying up, at par, newly
created US dollar shares.
At the same time as the US dollar shares
were issued, the Company issued 50,000
Redeemable Preference Shares for cash, at
par. The Redeemable Preference Shares carry
limited class voting rights, no dividend rights
and are capable of redemption, at par, at the
option of the Company on the giving of seven
days’ written notice to the registered holder
of the Redeemable Preference Shares.
A total of 826 million Ordinary Shares were
issued to Astra shareholders who accepted
the merger offer before the final closing date,
21 May 1999. The Company received
acceptances from Astra shareholders
representing 99.6% of Astra’s shares and
the remaining 0.4% was acquired in 2000,
for cash.
Conflicts of interest
The Articles enable the Directors to authorise
any situation in which a Director has an
interest that conflicts or has the potential to
conflict with the Company’s interests and
which would otherwise be a breach of the
Director’s duty, under Section 175 of the
Companies Act 2006. The Board has a formal
system in place for Directors to declare such
situations to be considered for authorisation
by those Directors who have no interest in the
matter being considered.
In deciding whether to authorise a situation,
the non-conflicted Directors must act in the
way they consider, in good faith, would be
most likely to promote the success of the
Company, and they may impose limits or
conditions when giving the authorisation, or
subsequently, if they think this is appropriate.
Situations considered by the Board and
authorisations given are recorded in the
Board minutes and in a register of conflicts
maintained by the Company Secretary and
are reviewed annually by the Board. The
Board believes that this system operates
effectively.
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AstraZeneca Annual Report & Form 20-F Information 2020 / Additional Information
Issued share capital, shareholdings and share prices
At 31 December 2020, the Company had 76,919 registered holders of 1,312,668,724 Ordinary Shares. There were 173,021 holders of Ordinary
Shares held under the Euroclear Services Agreement, representing 11.4% of the issued share capital of the Company and 1,727 registered holders
of ADSs, representing 17.5% of the issued share capital of the Company. Information on the Company’s share price, including historical closing
prices and volumes, and an interactive share price graph can be found on the Investor Relations page on our website, www.astrazeneca.com.
Ordinary Shares in issue
Ordinary Shares in issue – millions
At year end
Weighted average for year
Stock market price per Ordinary Share (London Stock Exchange)
Highest (pence)
Lowest (pence)
At year end (pence)
Analysis of shareholdings as a percentage of issued share capital at 31 December
Number of Ordinary Shares1
1 – 250
251 – 500
501 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 50,000
50,001 – 1,000,000
Over 1,000,000
1
Includes Euroclear and ADR holdings.
2020
2019
2018
2017
2016
1,313
1,312
9320.0
6221.0
7324.0
1,312
1,301
7808.0
5325.0
7607.0
1,267
1,267
6317.0
4712.5
5873.0
1,266
1,266
5508.0
4194.0
5121.0
1,265
1,265
5220.0
3774.0
4437.5
2020
%
0.4
0.4
0.5
0.7
0.2
1.1
11.2
85.5
2019
%
0.4
0.5
0.5
0.7
0.2
1.0
11.2
85.5
2018
%
0.4
0.5
0.5
0.8
0.2
1.0
12.1
84.5
2017
%
0.5
0.5
0.6
0.8
0.2
1.0
11.9
84.5
2016
%
0.5
0.5
0.6
0.8
0.2
0.9
12.3
84.2
US holdings
At 31 January 2021, the proportion of Ordinary Shares represented by ADSs was 15.6% of the issued share capital of the Company. At 31 January
2021, there were 76,887 registered holders of Ordinary Shares, of which 638 were based in the US and there were 1,724 record holders of ADRs,
of which 1,705 were based in the US.
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269
Shareholder Information
continued
Tax information for shareholders
Taxation for US persons
The following summary of material UK and
US federal income tax consequences of
ownership of Ordinary Shares or ADRs held
as capital assets by the US holders described
below is based on current UK and US federal
income tax law, including the US/UK double
taxation convention relating to income and
capital gains, which entered into force on
31 March 2003 (the Convention). This
summary does not describe all of the tax
consequences that may be relevant in light of
the US holders’ particular circumstances and
tax consequences applicable to US holders
subject to special rules (such as certain
financial institutions, insurance companies,
entities treated as partnerships for US federal
income tax purposes, persons whose
functional currency for US federal income tax
purposes is not the US dollar, tax-exempt
entities, persons holding Ordinary Shares or
ADRs as part of a straddle, hedge or
integrated transaction, dealers or traders in
securities that use a mark-to-market method
of tax accounting, persons that own directly,
indirectly or constructively ADRs or Ordinary
Shares representing 10% or more of our
voting power or value, persons subject to
alternative minimum tax, persons subject to
the Medicare contribution tax on ‘net
investment income’, or persons holding
Ordinary Shares or ADRs in connection with
a trade or business conducted outside of the
US). US holders are urged to consult their tax
advisers regarding the UK and US federal
income tax consequences of the ownership
and disposition of Ordinary Shares or ADRs
in their particular circumstances.
This summary is based in part on
representations of the depositary for ADRs
and assumes that each obligation in the
deposit agreement among the Company and
the depositary and the holders from time to
time of ADRs and any related agreements will
be performed in accordance with its terms.
The US Treasury has expressed concerns that
parties to whom American depositary shares
are released before shares are delivered to the
depositary (pre-release), or intermediaries in
the chain of ownership between holders and
the issuer of the security underlying the
American depositary shares, may be taking
actions that are inconsistent with the claiming,
by US holders of American depositary shares,
of foreign tax credits for US federal income
tax purposes. Such actions would also be
inconsistent with the claiming of the reduced
tax rates, described below, applicable to
dividends received by certain non-corporate
US holders. Accordingly, the availability of the
reduced tax rates for dividends received by
certain non-corporate US holders could be
affected by actions that may be taken by
parties to whom ADRs are pre-released.
For the purposes of this summary, the term
‘US holder’ means a beneficial owner of
Ordinary Shares or ADRs that is, for US federal
income tax purposes, a citizen or resident of
the US, a corporation (or other entity taxable
as a corporation) created or organised in or
under the laws of the US, any state in the US or
the District of Columbia, or an estate or trust,
the income of which is subject to US federal
income taxation regardless of its source.
Subject to applicable limitations and the
discussion above regarding concerns
expressed by the US Treasury, dividends
received by certain non-corporate US holders
of Ordinary Shares or ADRs may be taxable at
favourable US federal income tax rates. US
holders should consult their own tax advisers
to determine whether they are subject to any
special rules which may limit their ability to be
taxed at these favourable rates.
Taxation on capital gains
Under present English law, individuals who are
neither resident nor ordinarily resident in the
UK, and companies which are not resident in
the UK, will not be liable for UK tax on capital
gains made on the disposal of their Ordinary
Shares or ADRs, unless such Ordinary Shares
or ADRs are held in connection with a trade,
profession or vocation carried on in the UK
through a branch or agency or other
permanent establishment.
A US holder will generally recognise US
source capital gains or losses for US federal
income tax purposes on the sale or exchange
of Ordinary Shares or ADRs in an amount
equal to the difference between the US dollar
amount realised and such holder’s US dollar
tax basis in the Ordinary Shares or ADRs. US
holders should consult their own tax advisers
about the treatment of capital gains, which
may be taxed at lower rates than ordinary
income for non-corporate US holders, and
capital losses, the deductibility of which may
be subject to limitations.
Passive Foreign Investment Company
(PFIC) rules
We believe that we were not a PFIC for US
federal income tax purposes for the year
ended 31 December 2020. However, since
PFIC status depends on the composition of
our income and assets, and the market value
of our assets (including, among others, less
than 25% owned equity investments), from
time to time, there can be no assurance that
we will not be considered a PFIC for any
taxable year. If we were treated as a PFIC for
any taxable year during which Ordinary
Shares or ADRs were held, certain adverse
tax consequences could apply to US holders.
This summary assumes that we are not, and
will not become, a passive foreign investment
company, as discussed below.
For US federal income tax purposes, a holder
of ADRs generally will be treated as the owner
of the underlying Ordinary Shares. Accordingly,
deposits or withdrawals of Ordinary Shares
for ADRs will not be subject to US federal
income tax.
UK and US income taxation of dividends
The UK does not currently impose a
withholding tax on dividends paid by a UK
company, such as the Company.
For US federal income tax purposes,
distributions paid by the Company to a US
holder are included in gross income as foreign
source ordinary dividend income to the extent
paid out of the Company’s current or
accumulated earnings and profits, calculated
in accordance with US federal income tax
principles. The Company does not maintain
calculations of its earnings and profits under
US federal income tax principles and so it is
expected that distributions generally will be
reported to US holders as dividends. For any
dividend paid in a foreign currency, the
amount of the dividend will, in the case of
ADRs, be the US dollar value of the foreign
currency payment received by the depositary
determined at the spot rate of the relevant
foreign currency on the date the dividend is
received by the depositary (or, in the case of
Ordinary Shares, the US dollar value of the
foreign currency payment received by the US
holders, determined at the spot rate of the
relevant foreign currency on the date the
dividend is received by the US holders,
regardless of whether the dividend is
converted into US dollars). Dividends will
not be eligible for the dividends received
deduction generally available to US
corporations.
If the dividend is converted into US dollars
on the date of receipt, US holders of Ordinary
Shares generally should not be required to
recognise foreign currency gains or losses
in respect of the dividend income. They may
have foreign currency gain or loss (which
would be US source and taxable at the rates
applicable to ordinary income) if the amount
of such dividend is converted into US dollars
after the date of its receipt.
270
AstraZeneca Annual Report & Form 20-F Information 2020 / Additional Information
UK stamp duty reserve tax and stamp duty
A charge to UK stamp duty or UK stamp duty
reserve tax (SDRT) may arise on the deposit
of Ordinary Shares in connection with the
creation of ADRs. The rate of stamp duty or
SDRT will generally be 1.5% of the value of
the consideration or, in some circumstances,
the value of the Ordinary Shares. HMRC
accept that this is a breach of EU law and
there is no 1.5% SDRT charge on the issue of
Ordinary Shares (or, where it is integral to the
raising of new capital, the transfer of Ordinary
Shares) into the ADR arrangement and it was
confirmed in the Autumn 2017 Budget that the
Government intend to continue this approach
following Brexit.
No UK stamp duty will be payable on the
acquisition or transfer of existing ADRs
provided that any instrument of transfer or
written agreement to transfer is executed
outside the UK and remains at all times outside
the UK. An agreement for the transfer of ADRs
will not give rise to a liability for SDRT.
A transfer of, or an agreement to transfer,
Ordinary Shares will generally be subject to
UK stamp duty or SDRT at 0.5% of the
amount or value of any consideration,
provided, in the case of stamp duty, it is
rounded up to the nearest £5.
Transfers of Ordinary Shares into CREST
will generally not be subject to stamp duty
or SDRT, unless such a transfer is made for
a consideration in money or money’s worth,
in which case a liability to SDRT will arise,
usually at the rate of 0.5% of the value of the
consideration. Paperless transfers of Ordinary
Shares within CREST are generally liable to
SDRT at the rate of 0.5% of the value of the
consideration. CREST is obliged to collect
SDRT from the purchaser on relevant
transactions settled within the system.
Exchange controls and other limitations
affecting security holders
There are no governmental laws, decrees
or regulations in the UK restricting the import
or export of capital or affecting the remittance
of dividends, interest or other payments to
non-resident holders of Ordinary Shares
or ADRs.
There are no limitations under English law
or the Articles on the right of non-resident or
foreign owners to be the registered holders
of, or to exercise voting rights in relation to,
Ordinary Shares or ADRs or to be registered
holders of notes or debentures of the
Company or its wholly owned subsidiary,
Zeneca Wilmington Inc.
Information reporting and backup
withholding
Payments of dividends and sales proceeds
that are made within the US or through certain
US-related financial intermediaries may be
subject to information reporting and backup
withholding, unless: (i) the US holder is a
corporation or other exempt recipient; or (ii) in
the case of backup withholding, the US holder
provides a correct taxpayer identification
number and certifies that it is not subject to
backup withholding. The amount of any
backup withholding from a payment to a US
holder will be allowed as a credit against the
holder’s US federal income tax liability and
may entitle the holder to a refund, provided
that the required information is timely supplied
to the US Internal Revenue Service (IRS).
Certain US holders who are individuals (or
certain specified entities) may be required
to report information relating to securities
issued by non-US persons (or foreign
accounts through which the securities are
held), generally on IRS Form 8938, subject
to certain exceptions (including an exception
for securities held in accounts maintained by
US financial institutions). US holders should
consult their tax advisers regarding their
reporting obligations with respect to the
Ordinary Shares or ADRs.
UK inheritance tax
Under the current Double Taxation (Estates)
Convention (the Estate Tax Convention)
between the US and the UK, Ordinary Shares
or ADRs held by an individual shareholder
who is domiciled for the purposes of the Estate
Tax Convention in the US, and is not for the
purposes of the Estate Tax Convention a
national of the UK, will generally not be subject
to UK inheritance tax on the individual’s death
or on a chargeable gift of the Ordinary Shares
or ADRs during the individual’s lifetime,
provided that any applicable US federal gift or
estate tax liability is paid, unless the Ordinary
Shares or ADRs are part of the business
property of a permanent establishment of
the individual in the UK or, in the case of a
shareholder who performs independent
personal services, pertain to a fixed base
situated in the UK. Where the Ordinary Shares
or ADRs have been placed in trust by a settlor
who, at the time of settlement, was a
US-domiciled shareholder, the Ordinary
Shares or ADRs will generally not be subject
to UK inheritance tax unless the settlor, at
the time of settlement, was a UK national,
or the Ordinary Shares or ADRs are part of
the business property of a permanent
establishment of the individual in the UK or,
in the case of a shareholder who performs
independent personal services, pertain to a
fixed base situated in the UK. In the exceptional
case where the Ordinary Shares or ADRs are
subject to both UK inheritance tax and US
federal gift or estate tax, the Estate Tax
Convention generally provides for double
taxation to be relieved by means of credit relief.
Exchange rates
The following information relating to average
and spot exchange rates used by
AstraZeneca is provided for convenience:
SEK/USD
USD/GBP
Average rates
(statement of comprehensive income,
statement of cash flows)
2020
2019
2018
End of year spot rates
(statement of financial position)
2020
2019
2018
9.3184
9.3980
8.6419
1.2763
1.2678
1.3405
8.1999
9.3550
8.9537
1.3650
1.3133
1.2743
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AstraZeneca Annual Report & Form 20-F Information 2020 / Shareholder Information
271
Directors’ Report
The Directors’ Report includes information
required to be given in accordance with the
Companies Act 2006.
Relevant information as set out below, which
is contained elsewhere in the Annual Report,
is incorporated by cross reference herein.
Subsidiaries and principal activities
The Company is the holding company for
a group of subsidiaries whose principal
activities are described in this Annual Report.
The Group’s subsidiaries and their locations
are set out in Group Subsidiaries and Holdings
in the Financial Statements from page 234.
Branches and countries in which the
Group conducts business
In accordance with the Companies Act 2006,
we disclose below our subsidiary companies
that have representative or scientific branches/
offices outside the UK:
> AstraZeneca UK Limited: Algeria (scientific
office), Angola, Chile, Costa Rica, Croatia,
Cuba, Dubai (branch office), Georgia,
Ghana (scientific office), Jordan,
Kazakhstan, Lebanon, Romania, Russia,
Saudi Arabia (scientific office), Serbia,
Slovenia (branch office), Syria, Ukraine
and Yemen (scientific office)
> AstraZeneca AB: Egypt (scientific office)
and Slovakia (branch office)
> AstraZeneca Singapore Pte Limited:
Vietnam
> Astra Export & Trading AB: United Arab
Emirates (branch office).
Disclosure of information to auditors
The Directors who held office at the date of
approval of this Annual Report confirm that,
so far as they are each aware, there is no
relevant audit information of which the
Company’s auditors are unaware; and each
Director has taken all the steps that he or she
ought to have taken as a Director to make
himself or herself aware of any relevant audit
information and to establish that the Company’s
auditors are aware of that information.
Going concern accounting basis
Information on the business environment in
which AstraZeneca operates, including the
factors underpinning the industry’s future
growth prospects, is included in the Strategic
Report. Details of the product portfolio of the
Group are contained in both the Strategic
Report (in the Therapy Area Review from page
30) and the Directors’ Report. Information on
patent expiry dates for key marketed products
is included in Patent Expiries of Key Marketed
Products from page 251. Our approach to
product development and our development
pipeline are also covered in detail with
additional information by therapy area in
the Strategic Report.
The financial position of the Group, its cash
flows, liquidity position and borrowing
facilities are described in the Financial Review
from page 82. In addition, Note 27 to the
Financial Statements from page 219 includes
the Group’s objectives, policies and
processes for managing capital; financial risk
management objectives; details of its financial
instruments and hedging activities; and its
exposures to credit, market and liquidity risk.
Further details of the Group’s cash balances
and borrowings are included in Notes 16 and
18 to the Financial Statements from page 204.
Having assessed the Principal Risks and other
matters considered in connection with the
Viability statement on page 78, the Board
considers it appropriate to adopt the going
concern basis of accounting in preparing the
Annual Report and Financial Statements.
> Subject to the provisions of the Companies
Act 2006, the Company has the right to
redeem the Redeemable Preference Shares
at any time on giving not less than seven
days’ written notice.
There are no specific restrictions on the transfer
of shares in the Company, which is governed
by the Articles and prevailing legislation.
The Company is not aware of any agreements
between holders of shares that may result in
restrictions on the transfer of shares or that
may result in restrictions on voting rights. The
Company is also not aware of any arrangements
under which financial rights are held by a
person other than the holder of the shares.
Shares
For more information, see Issued share capital,
shareholdings and share prices on page 269.
A shareholders’ resolution was passed at
the 2020 AGM authorising the Company to
purchase its own shares. The Company did
not purchase any of its own shares in 2020.
On 31 December 2020, the Company did
not hold any shares in treasury.
Rights, preferences and restrictions
attaching to shares
As at 31 December 2020, the Company had
1,312,668,724 Ordinary Shares and 50,000
Redeemable Preference Shares in issue. The
Ordinary Shares represent 99.98% and the
Redeemable Preference Shares represent
0.02% of the Company’s total share capital
(these percentages have been calculated by
reference to the 8am WM/Reuters USD/GBP
exchange rate on 31 December 2020).
As agreed by the shareholders at the
Company’s AGM held on 29 April 2010, the
Articles were amended with immediate effect
to remove the requirement for the Company to
have an authorised share capital, the concept
of which was abolished under the Companies
Act 2006. Each Ordinary Share carries the right
to vote at general meetings of the Company.
The rights and restrictions attaching to the
Redeemable Preference Shares differ from
those attaching to Ordinary Shares as follows:
> The Redeemable Preference Shares carry
no rights to receive dividends.
> The holders of Redeemable Preference
Shares have no rights to receive notices of,
attend or vote at general meetings except
in certain limited circumstances. They have
one vote for every 50,000 Redeemable
Preference Shares held.
> On a distribution of assets of the Company,
on a winding-up or other return of capital
(subject to certain exceptions), the holders of
Redeemable Preference Shares have priority
over the holders of Ordinary Shares to
receive the capital paid up on those shares.
Action necessary to change the rights
of shareholders
In order to vary the rights attached to any
class of shares, the consent in writing of the
holders of three quarters in nominal value of
the issued shares of that class or the sanction
of a special resolution passed at a general
meeting of such holders is required.
Changes in share capital
Changes in the Company’s Ordinary Share
capital during 2020, including details of the
allotment of new shares under the Company’s
share plans, are given in Note 24 to the
Financial Statements on page 217.
Directors’ and officers’ shareholdings
At 31 January 2021, the total amount of the
Company’s voting securities owned by
Directors and officers of the Company was:
Title of class
Amount
owned
Percentage
of class
Ordinary Shares
582,432
0.04
Options to purchase securities from
registrant or subsidiaries
(a) At 31 January 2021, options outstanding to
subscribe for Ordinary Shares were:
Number of shares
1,234,490
Subscription
price (pence)
Normal
expiry date
3307-6839
2020-2026
The weighted average subscription price of
options outstanding at 31 January 2021 was
5386 pence. All options were granted under
Company employee share schemes.
(b) Included in paragraph (a) are options
granted to officers of the Company as follows:
Number of shares
526
Subscription
price (pence)
Normal
expiry date
6839
2024
(c) During 2020, no options were held by
Directors.
During the period 1 January 2021 to
31 January 2021, no Director was granted
or exercised any options.
272
AstraZeneca Annual Report & Form 20-F Information 2020 / Additional Information
Major shareholdings
At 31 December 2020, the following persons had disclosed an interest in the issued Ordinary Share capital of the Company in accordance
with the requirements of rules 5.1.2 or 5.1.5 of the UK Listing Authority’s Disclosure Guidance and Transparency Rules:
Shareholder
BlackRock, Inc.
Investor AB
The Capital Group Companies, Inc.
Wellington Management Group LLP2
Wellington Management Company LLP2
Number of
Ordinary Shares
Date of
disclosure to
Company1
Number of Ordinary
Shares disclosed as a
percentage of issued
share capital at
31 December 2020
100,885,181
4 December 2009
51,587,810
63,802,495
65,120,892
65,118,411
3 April 2019
17 July 2018
21 July 2020
21 July 2020
7.69
3.93
4.86
4.96
4.96
1
2
Since the date of disclosure to the Company, the interest of any person listed above in Ordinary Shares may have increased or decreased. No requirement to notify the Company of any increase
or decrease arises unless the holding passes a notifiable threshold in accordance with rules 5.1.2 or 5.1.5 of the UK Listing Authority’s Disclosure Guidance and Transparency Rules.
The Company was notified at the time of the disclosure that Wellington Management Company LLP was a subsidiary of Wellington Management Group LLP and that the shareholding
percentage notified by Wellington Management Company LLP was included within the aggregate shareholding percentage notified by Wellington Management Group LLP.
So far as the Company is aware, no other person held a notifiable interest in the issued Ordinary Share capital of the Company. No changes to
major shareholdings were disclosed to the Company between 31 December 2020 and 31 January 2021.
Changes in the percentage ownerships disclosed by major shareholders during the past three years are set out below. Major shareholders do not
have different voting rights.
Shareholder
BlackRock, Inc.
Investor AB
The Capital Group Companies, Inc.
Wellington Management Group LLP
Wellington Management Company LLP
31 January
2021
31 January
2020
31 January
2019
31 January
2018
7.69
3.93
4.86
5.89
5.88
7.69
3.93
4.86
5.89
5.88
7.96
4.07
5.04
–
–
7.97
4.07
4.98
–
–
So far as the Company is aware, it is neither directly nor indirectly owned or controlled by one or more corporations or by any government.
The Company does not know of any arrangements, the operation of which might result in a change in the control of the Company.
Distributions to shareholders – dividends
for 2020
Details of our distribution policy are set out in
the Financial Review from page 82 and Notes
24 and 25 to the Financial Statements from
page 217.
The Company’s dividend for 2020 of $2.80
(207.0 pence, SEK 23.63) per Ordinary Share
amounts to, in aggregate, a total dividend
payment to shareholders of $3,669 million.
Two employee share trusts, AstraZeneca
Employee Benefit Trust and AstraZeneca
Share Retention Trust, waived their rights to
a dividend on the Ordinary Shares they hold
and instead received nominal dividends.
For more information, see Financial calendar on page 268.
Articles of Association
AstraZeneca PLC’s current Articles were
adopted by shareholders at the Company’s
AGM held on 18 May 2018. Any amendment
to the Articles requires the approval of
shareholders by a special resolution at a
general meeting of the Company.
Objects
The Company’s objects are unrestricted.
Directors
The Board has the authority to manage the
business of the Company, for example,
through powers to allot and repurchase its
shares, subject where required to shareholder
resolutions. Subject to certain exceptions,
Directors do not have power to vote at Board
meetings on matters in which they have
a material interest.
The quorum for meetings of the Board is a
majority of the full Board, of whom at least
four must be Non-Executive Directors. In the
absence of a quorum, the Directors do not
have power to determine compensation
arrangements for themselves or any member
of the Board.
The Board may exercise all the powers of the
Company to borrow money. Variation of these
borrowing powers would require the passing
of a special resolution of the Company’s
shareholders.
All Directors must retire from office at the
Company’s AGM each year and may present
themselves for election or re-election.
Directors are not prohibited, upon reaching
a particular age, from submitting themselves
for election or re-election.
For more information on the Directors, see Board
of Directors on pages 104 and 105.
General meetings
AGMs require 21 clear days’ notice to
shareholders. Subject to the Companies Act
2006, other general meetings require 14 clear
days’ notice.
For all general meetings, a quorum of two
shareholders present in person or by proxy,
and entitled to vote on the business
transacted, is required unless each of the two
persons present is a corporate representative
of the same corporation, or each of the two
persons present is a proxy of the same
shareholder.
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Shareholders and their duly appointed proxies
and corporate representatives are entitled to
be admitted to general meetings.
Limitations on the rights to own shares
There are no limitations on the rights to
own shares.
AstraZeneca Annual Report & Form 20-F Information 2020 / Directors’ Report
273
Directors’ Report
continued
Gender Diversity
Men
Women
Total
Men
Women
Total
Directors of the
Company’s subsidiaries*
209 (64%)
144 (36%)
353
Senior Executive Team*
8 (67%)
4 (33%)
12
All numbers as at 31 December 2020.
*
For the purposes of section 414C(8)(c)(ii) of the Companies
Act 2006, ‘Senior Managers’ are the Senior Executive
Team (SET), the directors of all of the subsidiaries of the
Company and other individuals holding named positions
within those subsidiaries.
Stakeholder engagement
The discussion on stakeholder engagement and
the impact of these interactions is contained
in Connecting with our Stakeholders from
page 110 and throughout the Strategic
Report. This includes engagement with our
employees, suppliers, and other stakeholders,
as well as the impact of our operations on the
community and environment.
Information on how we encourage employee
involvement in the Company’s performance
is set out in A culture of high performance
on page 69. Details of some of the employee
share plans are described in the Directors’
Remuneration Report from page 131, and in
Note 28 to the Financial Statements from
page 225. All employees are provided with
information on matters of concern to them
through regular meetings and updates on the
Group’s intranet and internal social media.
Townhall meetings and Q&A sessions hosted
by members of senior management, including
the SET, are broadcast on internal social
media. During 2020, these broadcasts
included business updates, as well as
information on the Group’s response to the
COVID-19 pandemic and working
arrangements. In addition, information on
the Group’s quarterly results are shared with
employees through the intranet and internal
social media. These updates inform employees
of the financial and economic factors which
affect the performance of the Company.
Political donations
Neither the Company nor its subsidiaries
made any EU political donations or incurred
any EU political expenditure in 2020 and they
do not intend to do so in the future in respect
of which shareholder authority is required,
or for which disclosure in this Annual Report
is required, under the Companies Act 2006.
However, to enable the Company and its
subsidiaries to continue to support interest
groups or lobbying organisations concerned
with the review of government policy or law
reform without inadvertently breaching the
Companies Act 2006, which defines political
donations and other political expenditure in
broad terms, a resolution will be put to
shareholders at the 2021 AGM, similar to that
passed at the 2020 AGM, to authorise the
Company and its subsidiaries to:
> make donations to political parties or
independent election candidates
> make donations to political organisations
other than political parties
> incur political expenditure, up to an
aggregate limit of $250,000.
Corporate political contributions in the US are
permitted in defined circumstances under the
First Amendment of the US Constitution and
are subject to both federal and state laws and
regulations. In 2020, the Group’s US legal
entities made contributions amounting in
aggregate to $1,016,550 (2019: $1,120,525) to
national political organisations, state-level
political party committees and to campaign
committees of various state candidates. No
corporate donations were made at the federal
level and all contributions were made only
where allowed by US federal and state law.
We publicly disclose details of our corporate
US political contributions, which can be found
on our website, www.astrazeneca-us.com/
sustainability/corporate-transparency.
The annual corporate contributions budget
is reviewed and approved by the US Vice-
President, Corporate Affairs and the President
of our US business to ensure robust
governance and oversight. US citizens or
individuals holding valid green cards
exercised decision making over the
contributions and the funds were not provided
or reimbursed by any non-US legal entity.
Such contributions do not constitute political
donations or political expenditure for the
purposes of the Companies Act 2006 and
were made without any involvement of
persons or entities outside the US.
Significant agreements
There are no significant agreements to which
the Company is a party that take effect, alter
or terminate on a change of control of the
Company following a takeover bid. There are
no persons with whom we have contractual or
other arrangements, who are deemed by the
Directors to be essential to our business.
Use of financial instruments
The Notes to the Financial Statements,
including Note 27 from page 219, include
further information on our use of financial
instruments.
Insurance and indemnities
The Company maintained Directors’ and
officers’ liability insurance cover throughout
2020. The Directors are also able to obtain
independent legal advice at the expense of
the Company, as necessary, in their capacity
as Directors.
The Company has entered into a deed of
indemnity in favour of each Board member
since 2006. These deeds of indemnity are still
in force and provide that the Company shall
indemnify the Directors to the fullest extent
permitted by law and the Articles, in respect
of all losses arising out of, or in connection
with, the execution of their powers, duties and
responsibilities as Directors of the Company
or any of its subsidiaries. This is in line with
current market practice and helps us attract
and retain high-quality, skilled Directors.
Compliance requirements under Listing
Rule 9.8.4
The only matter to report is the shareholder
waiver of dividends on page 273.
Directors’ Report
The Directors’ Report, which has been
prepared in accordance with the requirements
of the Companies Act 2006, comprises the
following sections:
> Chairman’s Statement
> Chief Executive Officer’s Review
> Business Review
> Therapy Area Review
> Risk Overview
> Financial Review: Financial risk
management
> Corporate Governance: including the
Corporate Governance Overview,
Corporate Governance Report, Science
Committee Report, Nomination and
Governance Committee Report, and Audit
Committee Report
> Directors’ Responsibility Statement
> Development Pipeline
> Sustainability: supplementary information
> Shareholder Information
and has been approved by the Board and
signed on its behalf.
On behalf of the Board
A C N Kemp
Company Secretary
11 February 2021
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Sustainability:
Supplementary Information
External assurance
Bureau Veritas has provided independent
external assurance to a limited level on the
following sustainability information
contained within this Annual Report:
> Key Performance Indicators – Be a Great
Place to Work, see page 21.
> Bioethics, including Clinical trials,
Research use of human biological
samples and Animal research, see pages
54 and 55.
> Emerging market healthcare,
see page 61.
> Responsible sales and marketing,
see page 61.
> Anti-bribery and anti-corruption,
see page 61.
> Transparency reporting, see page 62.
> Responsible supply chain, see page 63.
> Human rights, see page 71.
> Managing change, see page 71.
> Employee relations, see page 71.
> Safety, health and wellbeing,
see page 71.
> Sustainability, including Benchmarking
and assurance, Our approach,
Sustainability governance and Our
Sustainability strategy, see pages 72
and 73.
> Access to healthcare, including Healthy
Lung, Healthy Heart Africa and Young
Health Programme, see page 74.
> Environmental protection, including
Greenhouse gas emissions reduction,
Energy use, Waste management, Water
stewardship, Product environmental
stewardship and Pharmaceuticals in
the environment, see pages 74 and 75.
> Contributing to society, including
Community investment and Product
donation programmes, see pages 76
and 77.
> Taskforce on Climate-related Financial
Disclosures statement, see page 276.
BV Used throughout this Annual Report
to denote the sustainability information
listed above, which has been
independently assured by
Bureau Veritas.
Based on the evidence provided and subject
to the scope, objectives and limitations
defined in the full assurance statement,
nothing has come to the attention of Bureau
Veritas causing them to believe that the
sustainability information contained within
this Annual Report is materially misstated.
Bureau Veritas is a professional services
company that has a long history of providing
independent assurance services in
environmental, health, safety, social and
ethical management and disclosure.
The full assurance statement, which
includes Bureau Veritas’s scope of work,
methodology, overall opinion, and
limitations and exclusions, is available
on our website, www.astrazeneca.com.
Greenhouse gas (GHG) reporting BV
We have reported on all of the emission
sources required under the Quoted
Companies Greenhouse Gas Emissions
(Directors’ Reports) Regulations 2013. These
sources fall within our consolidated Financial
Statements. We do not have responsibility
for any emission sources that are not included
in our consolidated Financial Statements.
We have used the GHG Protocol Corporate
Accounting and Reporting Standard (revised
edition). Emission factors for electricity have
been derived from the International Energy
Agency (IEA), USEPA eGRID, US Green-e
and the Association of Issuing Bodies (AIB)
databases and for all other fuels and emission
sources from the 2006 IPCC Guidelines for
National Greenhouse Gas Inventories.
Global greenhouse gas emissions data for the period 1 January 2020 to 31 December 20201
Emissions from:
Scope 1: Combustion of fuel and operation of facilities2,5
Scope 2 (Market-based): Electricity (net of market instruments),
heat, steam and cooling purchased for own use3,5
Scope 2 (Location-based): Electricity, heat, steam and cooling
purchased for own use3,5
Tonnes CO2e
2020
2019
2018
224,771
254,402
272,737
23,235
131,085
140,350
212,003
233,951
248,984
Company’s chosen intensity measurement: Scope 1 + Scope 2 (Market-
based) emissions reported above normalised to million US dollar revenue
9.3
15.8
18.7
Scope 3 Total: Emissions from all 15 Greenhouse Gas Protocol
Scope 3 Categories
Scope 3 intensity measurement: Scope 3 emissions from all
15 Greenhouse Gas Protocol Scope 3 Categories normalised to
million US dollar revenue.
Total energy consumption4, 5
7,803,145
7,282,111 6,603,075
293
299
299
MegaWatt hours (MWh)
1,595,330
1,741,955 1,850,984
1
2
3
4
5
Regular review of the data is carried out to ensure accuracy and consistency. This has led to changes in the data from
previous years. The majority of adjustments made are not material individually, except for Scope 1 road fleet (Scope 1
reporting boundary adjusted to leased vehicles only, with personal vehicles accounted in Scope 3), business air travel
(updated methodology including well-to-tank emissions and more complete traveller data, leading to restated baseline),
and upstream logistics (updated methodology including well-to-tank emissions, leading to restated baseline). The data
quoted in this Annual Report are generated from the revised data.
Included in this section are GHGs from direct fuel combustion, process and engineering emissions at our sites and from fuel
use in our vehicle fleet.
GHGs from imported electricity are calculated using the GHG Protocol Scope 2 Guidance (January 2015) requiring dual
reporting using two emissions factors for each site – Market-based and Location-based. Our corporate emissions reporting
and targets follow the Market-based approach.
The aggregate of: (i) the annual quantity of energy consumed from activities for which the Company is responsible, including
the combustion of fuel at a facility or the operation of any facility; and (ii) the annual quantity of energy consumed resulting
from the purchase of electricity, heat, steam or cooling by the Company for its own use.
Under the new Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations
2018, the Company needs to disclose what proportion of this figure relates to energy use in the UK and offshore area. For 2020,
the proportion of total global energy and emissions originating from AstraZeneca’s UK and offshore area footprint were as
follows: energy use 346 GWh (22%); Scope 1 emissions 55 ktCO2e (25%); Scope 2 emissions using Market-based accounting
0 ktCO2e (0%); Scope 2 emissions using Location-based accounting 15 ktCO2e (7%)%.
For more information see ‘Energy Use’ on page 75.
Learn more in our 2020 Sustainability Report on our website, www.astrazeneca.com/sustainability.
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275
Taskforce on Climate-related
Financial Disclosures Statement BV
We support the Taskforce on Climate-related
Financial Disclosures (TCFD) and aim to
develop our disclosures in line with its
recommendations. This is AstraZeneca’s
first report that follows the TCFD-recognised
framework and it describes our process
and actions as of 31 December 2020. All
our business operations worldwide are in
scope regardless of their function, unless
otherwise stated. A full TCFD disclosure will
be provided according to the Listing Rule for
the 2021 reporting year onwards.
Our CDP response provides further disclosures
on our approach to climate change and is
available at https://www.cdp.net/en.
Governance
Non-Executive Director, Geneviève Berger,
oversees our sustainability strategy on behalf
of the Board, including delivery of our
Ambition Zero Carbon programme, and
evaluates our performance against our
targets and commitments.
As outlined on page 6, our CEO is responsible
to the Board for the management, development
and performance of our business, including
AstraZeneca’s Ambition Zero Carbon and
climate-related risks and opportunities.
Reporting to the CEO, the Executive Vice-
President (EVP), Sustainability and Chief
Compliance Officer (CCO) is responsible for
the delivery of the AstraZeneca sustainability
strategy, including our climate-related strategy
and leads a quarterly update with the Board.
A number of strategic groups have been
established to support delivery of our
sustainability and climate strategies:
> An external Sustainability Advisory Board
(SAB) advises on strategic direction,
recommends opportunities and provides
insight. Our SAB comprises five SET
members (EVP, Sustainability and CCO;
EVP, Operations and IT; EVP, Human
Resources; EVP & President,
BioPharmaceuticals R&D; and EVP &
President, International) and four external
sustainability experts (Pankaj Bhatia,
Deputy Director, Climate Program, World
Resources Institute; Dame Polly Courtice,
Director, Cambridge Institute for
Sustainability Leadership, University of
Cambridge; Louise Nicholls, Managing
Director of Suseco and Vice Chair of IEMA;
and Rain Henderson, Founder, Elementor
Advisors). The SAB met once in 2020
where an update was provided on our
climate strategy.
For more information, see our Sustainability
Report available on our website,
www.astrazeneca.com/sustainability.
> In 2020, we established an Ambition Zero
Carbon Governance Group with executive-
level ownership, accountable for the
delivery of our Ambition Zero Carbon
programme. The group meets monthly and
includes AstraZeneca’s CEO; CFO; the EVP,
Sustainability and CCO; and EVP,
Operations and IT.
> In 2020, a TCFD steering group was also
established with cross-functional
membership to identify and proactively
manage the physical and transitional risks
and opportunities posed to AstraZeneca by
climate change. The Board was updated on
progress in September 2020.
The outcomes from the specialist groups are
regularly reported to the AstraZeneca Board.
Identifying and managing climate risk
and opportunity
Our overall approach to risk management and
a summary of our Principal Risks can be
found from page 80. To inform the wider
enterprise risk management process of any
specific risks and opportunities posed by
climate change and/or the transition to a low
carbon economy, we have integrated climate
assessments into the overall risk management
process. In 2020, we conducted physical and
transitional risk assessments and the process
for these assessments is described below.
Physical assessment
In 2020, working with environmental resource
managements experts, ERM Group, Inc,
(ERM), we conducted a screening study of
two future climatic scenarios to explore our
physical climate-related risks (floods, water
scarcity, extreme heat, cyclones and wild
fires); Representative Concentration Pathways
(RCP) 4.5 (+2°C) and RCP 8.5 (+4°C) were
used for this study. These scenarios were
applied to 61 AstraZeneca sites with
predictions out from 2020 to 2030 and 2050.
The sites evaluated included all business-
critical operations sites, R&D Hubs, IT centres
and other strategic hubs; pure commercial
sites were out of scope as they posed a low
material risk. The outcome of these screening
studies across the 61 sites was combined
with a revenue-based assessment for each
site to identify medium- to long-term risks.
Transitional assessment
In 2020, working with ERM we defined the
risks and opportunities associated with the
transition to a low-carbon economy. To
measure these transitional risks, we adopted
two scenarios; a base case (~3.5°C) and low
carbon (~2°C) scenario with predictions out
to 2025, 2030, 2035 and 2040. Risks and
opportunities were assessed at an enterprise
level and product-specific level for the top ten
brands where life-cycle assessment (LCA)
data is available, representing approximately
50% of Total Revenue with examples from all
therapy areas.
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Outcome of the physical and transitional
assessments
As a result of this analysis, a new risk
‘Failure to meet regulatory expectations on
environmental impact, including climate
change’ has been added as a standalone
risk to the Group’s risk landscape. This risk
has been shared with the Board and Audit
Committee. The risk is not currently assessed
to be financially material and does not impact
our current business model. In many cases
mitigation measures are already in place to
address the risks and opportunities presented
by climate change, including the transition to
a low carbon economy. These risks and
opportunities are explained in more detail
in the table opposite/overleaf.
Climate change and our strategy
The nature of the risks and opportunities we
face depends not only on the physical aspects
of climate change, but also changes in the
regulations in the markets in which we
operate, pressures to reduce the carbon
footprints of specific medicinal products, and
our ability to understand and shape a culture
of climate action. Our response to the
identified climate risks and opportunities
requires enterprise-wide action, in addition
to further integration of environmental
considerations in drug development and
manufacture, and a greater focus on
responsible procurement and sourcing
across the entire value chain.
To mitigate the impact of AstraZeneca’s
business operations on the environment, the
Board of Directors approved a new climate
strategy in 2019. Our Ambition Zero Carbon
strategy was launched in January 2020 when
we disclosed new targets to be zero carbon
across our global operations by 2025 (Scopes
1 and 2) and be carbon negative across our
entire value chain by 2030 (Scopes 1, 2 and 3).
Ambition Zero Carbon goes beyond the
verified reduction goals of our existing Scope
1 and 2 Science Based Targets to limit global
warming to 1.5°C. To support achievement of
Ambition Zero Carbon we will double energy
productivity, use 100% renewable energy for
both power and heat, and switch to a 100%
electric vehicle fleet five years ahead of
schedule. Our actions to tackle climate change
include plans to launch next-generation
near-zero Global Warming Potential (GWP)
respiratory inhalers and plant 50 million trees
under the ‘AZ Forest’ programme. Overall, the
$1 billion Ambition Zero Carbon programme
brings forward our decarbonisation plans by
more than a decade.
For more information on our GHG footprint, see our
Sustainability Report available on our website,
www.astrazeneca.com/sustainability.
Risk or opportunity
Potential impact
How it is managed
Key
R Risk
O Opportunity
Physical risks
Increased frequency
of extreme weather
and climate-related
natural disasters.
In 2020, we conducted a screening study of two future climatic
scenarios to explore our physical climate related risks (floods,
water scarcity, extreme heat, cyclones and wildfires) across 61
business critical sites.
R
Eight sites were predicted to be exposed to increased risk of
severe or very severe climate-related hazards in the next 10
years based on the worst-case scenario.
Out of the eight ‘at-risk’ sites, a deep dive was conducted at the
manufacturing site in Wuxi, China to verify the global screening
results with help from local climate data and infrastructure. The
outcome indicated increased risk of (a) heavy rainfall causing
localised flooding, and (b) an extreme heat event in combination
with air pollution that could cause increased need of cooling
capacity, impact workers’ health and potentially impact our
licence to operate in the long term.
Transitional risks and opportunities
Some healthcare providers and professionals are actively looking
to substitute medicinal products based on their Greenhouse Gas
(GHG) footprint in order to reduce their own Scope 3 footprint, as
part of their net-zero targets (e.g. UK NHS). This could impact
market access and revenue in some countries for high GWP
products. Future revenue from our pMDI inhaled medicines
portfolio could be ‘at risk’ should substitution become widespread
before the transition to our next-generation low GWP pMDIs.
These risks are currently low and limited to a few countries.
Transitioning to low GWP respiratory products as part of
AstraZeneca Ambition Zero Carbon, and understanding the
positive impacts that early diagnosis and clinical intervention can
have on the carbon footprint of specific patient care pathways,
will provide business opportunities to improve the standard of
care and clinical outcomes with a lower environmental footprint.
Increased demand for
sustainable low
Global Warming
Potential (GWP)
products and services
from healthcare
providers in some
countries may result
in the potential for
green substitution of
medicinal products
with a high GWP
(e.g. anaesthetics and
respiratory products).
Business
opportunities will exist
with increased future
demand for low GWP
alternatives and
where earlier
diagnosis and clinical
intervention can
reduce the carbon
footprint of healthcare
pathways.
R O
In 2021, indicative findings of increased risks (extreme heat,
floods, drought and wild fires) will be verified by local assessments
(based on learnings from the Wuxi study) across other potentially
‘at risk’ strategic sites (Södertälje, Maihara, Chennai, West
Chester, Guadalajara, Gothenburg, Cairo, Canovanas, Mount
Vernon, Newark, Frederick, Bensalem, North Ryde and Taizhou).
Any climate risks identified will be integrated into our existing risk
management processes including local site and business
continuity plans to ensure they contain measures to proactively
manage any physical climate risks and embed climate resilience
in their short-, medium- and long-term planning.
Business resilience has also been increased as a result of exposure
to extreme weather events like hurricane Maria at Canovanas
(Puerto Rico, 2016), an extended period of heat in Södertälje
(Sweden, 2018) and water scarcity in Chennai (India, 2019).
Our site in Canovanas has taken proactive steps to increase its
resilience and mitigate the risks posed to our business
operations by installing its own heat and power plant to reduce
reliance on the local power network.
In 2019, we restored two lakes next to our site in Chennai,
together with the local community, to help protect against
extremes in water stress and availability.
In 2021, physical risk assessments will be conducted on the
broader value chain and our critical suppliers for (i) our top ten
products, and (ii) our long-term strategic suppliers responsible
for bulk drug production.
> AstraZeneca has life-cycle assessments (LCAs) in place for key
brands (respiratory and wider) that includes the GHG footprint
to help assess and manage risks and target interventions to
reduce the environmental footprint of our products.
For more information on product environmental stewardship,
see our Sustainability Report available on our website,
www.astrazeneca.com/sustainability.
> In 2020 we developed a Product Sustainability Index (PSI) as
part of our Product Environmental Stewardship strategy. The
PSI captures carbon and water intensity metrics per product,
per patient, per annum – as well as measures of % renewable
power and resource efficiency used to make that product.
> As part of our $1 billion AstraZeneca Ambition Zero Carbon
commitment, we will transition to low GWP propellants across
our asthma and COPD products between 2025 and 2030.
For more information on our GHG footprint, see our
Sustainability Report available on our website,
www.astrazeneca.com/sustainability.
> Patients whose treatment is optimised are more likely to have
a lower carbon impact overall, through reduced reliever pMDI
use and fewer unscheduled healthcare interventions.
> We are working with academics and healthcare agencies to
understand the environmental impact of respiratory care
pathways for patients with controlled and uncontrolled asthma
and the opportunities for improved clinical care with a lower
environmental footprint. The output of these environmental and
clinical studies will be communicated at scientific conferences
and via peer-reviewed literature in 2021.
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277
Taskforce on Climate-related
Financial Disclosures Statement
continued
Key
R Risk
O Opportunity
Risk or opportunity
Potential impact
How it is managed
Transitional risks and opportunities continued
Review of the US, EU,
UK and other national
F-Gas Regulations
and their impact on
respiratory medicines
used to treat asthma
and COPD.
R O
> The US and EU F-Gas review carries the potential risk that some
F-gases used in pMDI-based respiratory products could be
subject to emission restrictions from which they are currently
exempt. Loss of the medicinal exemption, or failure to have a
long-term phased transition, could prevent or limit availability of
products in our pMDI inhaled medicines portfolio, should these
restrictions become applicable before the transition to our
next-generation low GWP pMDIs.
> Inhaler device selection is a critical consideration as patient
need or preference for a specific device type will influence
adherence to treatment which in turn impacts clinical outcomes.
Ban and/or
restrictions on the
sale of petrol and
diesel vehicles in
some markets.
R O
AstraZeneca has approximately 16,900 leased vehicles as part
of its commercial fleet, of which 51% are internal combustion
engine (ICE), 39% are self-generating hybrids, 7% are plug-in
hybrid electric vehicles (PHEVs) and 0.3% are battery electric
vehicles (BEVs). With some countries banning or restricting sales
of ICE vehicles in the future, AstraZeneca will need to transition
to BEVs across its markets and there is an expectation that
duties on fossil fuels associated with our fleet will increase over
the next decade.
There is also an increase in the number of clean air zones
globally with cities or regions either restricting fossil fuel vehicles
or charging a daily premium for ICE vehicles to access those
regions. A proactive shift to BEVs opens up an opportunity to
decrease the future cost of ownership and maintain access to
these restricted clean air zones.
Carbon pricing and
future environmental
taxation.
R
There is uncertainty over the future environmental policy and
fiscal landscape in many countries where we operate. We
anticipate that carbon pricing and environmental taxation will
increase over the medium to long term.
Patient-centric advocacy assesses both clinical and
environmental outcomes.
> As part of the $1 billion AstraZeneca Ambition Zero Carbon
commitment, AstraZeneca will transition to low GWP
propellants in its asthma and COPD products between 2025
and 2030.
> We are advocating a phased transition to at least 2030 if the
medicinal exemption is lifted to ensure transition to alternative
low GWP propellants within the scope of the AstraZeneca
Ambition Zero Carbon programme.
> We are working with academics and healthcare agencies to
understand the environmental impact of respiratory care
pathways for patients with controlled and uncontrolled asthma,
and the opportunities for improved clinical care with a lower
environmental footprint.
> As part of AstraZeneca Ambition Zero Carbon we will transition
to 100% BEV by 2025 and we are signatories to the Climate
Group’s EV100 commitment.
> A market readiness study has been conducted for our top
markets and those countries that are BEV ready have been
identified. Transitioning to BEVs will start in 2021 as part of the
existing fleet renewal cycles in those market ready countries.
Incremental costs can be offset by relatively small reductions in
fleet number and kilometres driven or through adopting mobility
as a service and digitalisation as described in the two bullet
points below.
> We are also looking at mobility options as a holistic service,
where we will reduce our reliance on vehicles within urban
regions and make more use of low carbon integrated private
and public transport systems.
> An increase in digitalisation (e-detailing) and virtual selling
to reduce our reliance on a physical vehicle fleet is also
being adopted.
> Our AstraZeneca Ambition Zero Carbon commitment will help
to mitigate exposure to future carbon pricing and environmental
taxation for our operations and our wider value chain. Managed
correctly, this presents a commercial opportunity where peers
have yet to establish a path to net-zero or carbon zero. We are
being positive advocates for science-based targets to address
climate change across our industry and supply chain via trade
associations and networks.
Monitoring our progress
Since 2015, we have invested over
$100 million in a natural resource reduction
programme that has reduced our carbon
emissions from operations by almost one
third and our water consumption by almost
one fifth.
For more information, see our Sustainability
Report available on our website,
www.astrazeneca.com/sustainability.
In 2020, we sourced 99.9% of our imported
electricity globally from renewable sources
and generated over 5 GWh from solar PV
installations on our own sites from renewable
sources.
In 2019, the Science Based Targets Initiative
confirmed that our Scope 1 and Scope 2
emissions targets aligned with the more
progressive Paris Agreement target to limit
global warming to 1.5°C. In 2019, AstraZeneca
was also the first pharmaceutical company to
join the EV100 initiative for electric vehicles.
AstraZeneca is the first pharmaceutical
company worldwide to reinforce its
commitment to sustainability and climate
control by joining all three of the Climate
Group’s initiatives: RE100 (renewable energy),
EV100 (electric vehicles) and EP100 (energy
productivity).
We are one of only three companies
worldwide to have been CDP A rated for
Climate Change and Water Security for the
last five years.
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Trade Marks
AstraZeneca, the AstraZeneca logotype, and the AstraZeneca symbol are all trade marks of the Group.
The following medicine names which appear in italics in this Annual Report are trade marks of the Group:
Trade mark
Arimidex1
Atacand2
Atacand HCT
Atacand Plus2
BCise
Bevespi Aerosphere
Breztri
Breztri Aerosphere
Brilinta
Brilique
Bydureon
Byetta
Calquence
Casodex1
Cosudex
Crestor
Daliresp
Daxas
Epanova
Equidacent3
Farxiga
Fasenra
Fasenra Pen
Faslodex
Fluenz
FluMist
Forxiga
Genuair
Imfinzi
Iressa
Kombiglyze
Komboglyze
Koselugo
Losec4
Lokelma
Lynparza
Movantik
Moventig
Nexium
Omepral4
Onglyza
Prilosec
Provisacor
Pulmicort
Qtern
Qternmet
Qtrilmet
Seloken
Seroquel5
Seroquel XR5
Symbicort
Symbicort Turbuhaler
Symlin
Tagrisso
Toprol-XL
Trixeo Aerosphere
Turbuhaler
Vimovo6
Xigduo
Zoladex
1 AstraZeneca divested these trade marks in a number of European, African and other markets to Juvisé Pharmaceuticals effective 19 December 2019.
2 AstraZeneca divested these trade marks in Europe to Cheplapharm effective 28 September 2018, and in more than 70 other markets effective 31 December 2020.
3 Owned by Centus Biotherapeutics Limited, which is a joint venture between AstraZeneca and Fujifilm Kyowa Kirin Biologics Co., Ltd.
4 AstraZeneca divested the global rights (excluding China, Japan, US and Mexico) for these trade marks to Cheplapharm effective 30 September 2019.
5 AstraZeneca divested these trade marks in Europe and Russia to Cheplapharm effective 13 December 2019.
6 AstraZeneca divested the global rights (excluding the US and Japan) for this trade mark to Grünenthal, effective 3 December 2018.
The following medicine names, which appear in italics in this Annual Report, are trade marks licensed to the Group by the entities set out below:
Trade mark
Anticalin
Duaklir
Eklira
Enhertu
Linzess
Lumoxiti
Tudorza
Licensor or Owner
Pieris AG
Almirall, S.A.
Almirall, S.A.
Daiichi Sankyo Company, Limited
Ironwood
Innate Pharma
Almirall, S.A.
The following medicine names, which appear in italics throughout this Annual Report, are not owned by or licensed to the Group and are owned
by the entities set out below:
Trade mark
Keytruda
Owner
MSD
messenger RNA Therapeutics
Moderna
Synagis
Depending on geography, the trade mark is owned by Sobi or AbbVie
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279
Glossary
Market definitions
Region
US
Europe
Country
US
Albania*
Austria
Belgium
Czech Republic
Denmark
Estonia*
Bosnia and Herzegovina*
Finland
Bulgaria
Croatia
Cyprus*
Established ROW Australia
Emerging Markets Algeria
Argentina
Aruba*
Bahamas*
Bahrain*
Barbados*
Belarus*
Belize*
Bermuda*
Brazil
Chile
China
Colombia
Hungary
Iceland*
Ireland
Israel*
Italy
Latvia*
Lithuania*
Japan
Iraq*
Jamaica*
France
Germany
Greece
Canada
Costa Rica
Cuba*
Dominican Republic*
Jordan*
Ecuador*
Egypt
El Salvador
Georgia*
Guatemala
Honduras
Hong Kong
India
Indonesia
Iran*
Kazakhstan
Kuwait*
Lebanon*
Libya*
Malaysia
Mexico
Morocco*
Nicaragua
Oman*
Other Africa*
Luxembourg*
Malta*
Netherlands
Norway
Poland
Portugal*
Romania
New Zealand
Pakistan*
Palestine*
Panama
Peru
Philippines
Qatar*
Russia
Saudi Arabia
Singapore
South Africa
South Korea
Sri Lanka*
Sudan*
Serbia and Montenegro*
Slovakia*
Slovenia*
Spain
Sweden
Switzerland
UK
Syria*
Taiwan
Thailand
Trinidad and Tobago*
Tunisia*
Turkey
Ukraine*
United Arab Emirates
Uruguay*
Venezuela*
Vietnam
Yemen*
* Q3 2020 IQVIA, IQVIA Midas Quantum Q3 2020 data are not available or AstraZeneca does not subscribe for IQVIA quarterly data for these countries.
The above table is not an exhaustive list of all the countries in which AstraZeneca operates, and excludes countries with revenue in 2020 of less
than $1 million.
Established Markets means US, Europe and Established ROW.
North America means US.
Other Established ROW means Australia and New Zealand.
Other Emerging Markets means all Emerging Markets except China.
Other Africa includes Angola, Botswana, Ethiopia, Ghana, Kenya, Mauritius, Mozambique, Namibia, Nigeria, Swaziland, Tanzania, Uganda,
Zambia and Zimbabwe.
Asia Area comprises India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam.
US equivalents
Terms used in this Annual Report
Accruals
Called-up share capital
Creditors
Debtors
Earnings
Employee share schemes
Fixed asset investments
Freehold
Loans
Prepayments
Profit
Share premium account
Short-term investments
US equivalent or brief description
Accrued expenses
Issued share capital
Liabilities/payables
Receivables and prepaid expenses
Net income
Employee stock benefit plans
Non-current investments
Ownership with absolute rights in perpetuity
Long-term debt
Prepaid expenses
Income
Additional paid-in capital or paid-in surplus (not distributable)
Redeemable securities and short-term deposits
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The following abbreviations and expressions have the meanings
given below when used in this Annual Report:
AACR – The American Association for Cancer Research.
AbbVie – AbbVie Inc.
Acerta Pharma – Acerta Pharma B.V.
Actavis – Actavis plc.
ADC – antibody drug conjugate(s).
ADRs – American Depositary Receipts.
ADSs – American Depositary Shares.
AGM – an Annual General Meeting of the Company.
AI – artificial intelligence.
Alexion – Alexion Pharmaceuticals, Inc.
Almirall – Almirall, S.A.
Amgen – Amgen, Inc.
Amplimmune – Amplimmune, Inc.
ANDA – an abbreviated new drug application, which is a marketing
approval application for a generic drug submitted to the FDA.
Annual Report – this Annual Report and Form 20-F Information 2020.
API – active pharmaceutical ingredient.
Aralez – Aralez Pharmaceuticals Trading DAC.
Ardea – Ardea Biosciences, Inc.
Articles – the Articles of Association of the Company.
Aspen – Aspen Global Incorporated.
Astellas – Astellas Pharma Inc.
CEO – the Chief Executive Officer of the Company.
CER – constant exchange rates.
CFO – the Chief Financial Officer of the Company.
Cheplapharm – Cheplapharm Arzneimittel GmbH.
Circassia – Circassia Pharmaceuticals plc.
CIS – Commonwealth of Independent States.
CKD – chronic kidney disease.
CLL – chronic lymphocytic leukaemia.
Code of Ethics – the Group’s Code of Ethics, see pages 61 and 118.
Company or Parent Company – AstraZeneca PLC (formerly Zeneca
Group PLC (Zeneca)).
COPD – chronic obstructive pulmonary disease.
COVAX – the vaccines pillar of the Access to COVID-19 Tools (Act)
Accelerator. COVAX is co-led by CEPI, the Coalition for Epidemic
Preparedness Innovations; Gavi, the Vaccines Alliance, and the WHO,
working in partnership with developed and developing country vaccine
manufacturers, UNICEF, the World Bank and others.
COVID-19 – the official WHO name for the disease caused by the
2019 novel coronavirus.
Covis – Covis Pharma B.V.
CREST – UK-based securities settlement system.
CROs – contract research organisations.
CV – cardiovascular.
CVOT – cardiovascular outcomes trial.
CVRM – Cardiovascular, Renal & Metabolism.
Daiichi Sankyo – Daiichi Sankyo, Inc. or a company within the
Daiichi Sankyo group of companies.
Astra – Astra AB, being the company with whom the Company
merged in 1999.
AstraZeneca – the Company and its subsidiaries.
DDR – DNA damage response.
Definiens – Definiens AG.
AstraZeneca HealthCare Foundation – a Delaware, US not-for-profit
corporation and a 501(c)(3) entity, separate from AstraZeneca
Pharmaceuticals, organised for charitable purposes, including to
promote public awareness and education of healthcare issues and
support eligible non-profit organisations in alignment with its mission.
The Foundation has received $30 million in contributions to date from
AstraZeneca to support the Connections for Cardiovascular HealthSM
programme.
Atnahs – Atnahs Pharma UK Ltd.
Avillion – Avillion LLP.
Director – a director of the Company.
DOJ – the United States Department of Justice.
DTR – UK Disclosure Guidance and Transparency Rules.
earnings per share (EPS) – profit for the year after tax and non-
controlling interests, divided by the weighted average number of
Ordinary Shares in issue during the year.
EBITDA – Reported Profit before tax plus net finance expense, share
of after tax losses of joint ventures and associates and charges for
depreciation, amortisation and impairment.
biologic(s) or biologic medicine(s) – a class of drugs that are
produced in living cells.
biosimilars – a copy of a biologic that is sufficiently similar to meet
regulatory requirements.
EC – European Commission.
EFPIA – European Federation of Pharmaceutical Industries and
Associations.
EGFR – epidermal growth factor receptor.
BMS – Bristol-Myers Squibb Company.
EMA – European Medicines Agency.
Board – the Board of Directors of the Company.
ESG – environmental, social and governance.
Bureau Veritas – Bureau Veritas UK Limited.
ESMO – European Society for Medical Oncology.
C19VAZ – COVID-19 Vaccine AstraZeneca
EVP – Executive Vice-President.
CDP (formerly the Carbon Disclosure Project) – a not-for-profit
organisation that runs the global disclosure system for investors,
companies, cities, states and regions to manage their environmental
impacts.
EU – the European Union.
Fc receptor – Fragment crystallisable receptor.
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Glossary
continued
FDA – the US Food and Drug Administration, which is part of the
US Department of Health and Human Services Agency, which is the
regulatory authority for all pharmaceuticals (including biologics and
vaccines) and medical devices in the US.
FibroGen – FibroGen, Inc.
FRC – the UK Financial Reporting Council.
GAAP – Generally Accepted Accounting Principles.
GHG – greenhouse gas.
GLP1 – glucagon-like peptide-1.
gross margin – the margin, as a percentage, by which sales exceed
the cost of sales, calculated by dividing the difference between the
two by the sales figure.
Group – AstraZeneca PLC and its subsidiaries.
Grünenthal – Grünenthal Group.
GSK – GlaxoSmithKline plc.
GWP – global warming potential.
HCPs – healthcare practitioners.
HF – heart failure.
LCM projects – significant life-cycle management projects (as
determined by potential revenue generation), or line extensions.
Lilly – Eli Lilly and Company.
LRTI – lower respiratory tract infection.
Luye Pharma – Luye Pharma Group.
mAb – monoclonal antibody, a biologic that is specific, meaning
it binds to and attacks one particular antigen.
major market – US, Europe, Japan and China.
MAT – moving annual total.
MedImmune – MedImmune, LLC (formerly MedImmune, Inc.).
mRNA – Messenger RNA.
MHRA – Medicines and Healthcare products Regulatory Agency,
the UK’s regulator of medicines, medical devices and blood
components for transfusion.
MI – myocardial infarction.
Moderna – Moderna Therapeutics, Inc.
MSD – Merck & Co., Inc., which is known as Merck in the US and
Canada and MSD in other territories.
HHA – Healthy Heart Africa programme.
n/m – not meaningful.
HMRC – Her Majesty’s Revenue & Customs, the UK tax authority.
Nasdaq – Nasdaq Global Select Market.
HNSCC – head and neck squamous cell carcinoma.
Nasdaq Stockholm – previously the Stockholm Stock Exchange.
HR – human resources.
HTA – health technology assessment.
IA – the Group’s Internal Audit Services function.
IAS – International Accounting Standards.
IASB – International Accounting Standards Board.
ICS – inhaled oral corticosteroid.
IFPMA – International Federation of Pharmaceutical Manufacturers
and Associations.
New Medicines – Roxadustat, Koselugo, Enhertu, Tagrisso, Imfinzi,
Lynparza, Calquence, Farxiga, Brilinta, Lokelma, Fasenra, Bevespi and
Breztri.
New CVRM – New CVRM sales platform includes Brilinta, Onglyza
franchise (Onglyza and Kombiglyze), Farxiga franchise (Farxiga and
Xigduo), exenatide total (Byetta and Bydureon), Symlin, Qtern,
roxadustat and Lokelma.
NME – new molecular entity.
NMPA – National Medical Products Administration, formerly the
China Food and Drug Administration (CFDA).
IFRS – International Financial Reporting Standards or International
Financial Reporting Standard, as the context requires.
Novartis – Novartis Pharma AG.
IMF – International Monetary Fund.
Innate Pharma – Innate Pharma S.A.
IO – immuno-oncology.
IP – intellectual property.
IQVIA – IQVIA Solutions HQ Limited. For more information,
see page 284.
Ironwood – Ironwood Pharmaceuticals, Inc.
IS – information services.
ISAs – International Standards on Auditing.
IT – information technology.
Johnson & Johnson – Johnson & Johnson.
KPI – key performance indicator.
krona or SEK – references to the currency of Sweden.
Kyowa Kirin – Kyowa Kirin International plc, a subsidiary of Kyowa
Hakko Kirin Co., Ltd.
LABA – long-acting beta2-agonist.
LAMA – long-acting muscarinic antagonist.
NRDL – National Reimbursement Drug List, China.
NSCLC – non-small cell lung cancer.
NYSE – the New York Stock Exchange.
OECD – the Organisation for Economic Co-operation and
Development.
OMICs – refers to a field of study in biology ending in ‘omics’,
such as genomics, proteomics or metabolomics.
operating profit – sales, less cost of sales, less operating costs,
plus operating income.
Ordinary Share – an ordinary share of $0.25 each in the share capital
of the Company.
Orphan Drug – a drug that has been approved for use in a relatively
low-incidence indication (an orphan indication) and has been rewarded
with a period of market exclusivity; the period of exclusivity and the
available orphan indications vary between markets.
Paediatric Exclusivity – in the US, a six-month period of exclusivity
to market a drug which is awarded by the FDA in return for certain
paediatric clinical studies using that drug. This six-month period runs
from the date of relevant patent expiry. Analogous provisions are
available in certain other territories (such as European Supplementary
Protection Certificate (SPC) paediatric extensions).
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PARP – an oral poly ADP-ribose polymerase.
Roche – F. Hoffmann-La Roche AG.
PD-L1 – an anti-programmed death-ligand 1.
ROW – rest of world.
Pearl Therapeutics – Pearl Therapeutics, Inc.
RSV – respiratory syncytial virus.
Pfizer – Pfizer, Inc.
PFS – progression-free survival. The length of time during and after
the treatment of a disease, such as cancer, that a patient lives with the
disease without it getting worse.
PhRMA – Pharmaceutical Research and Manufacturers of America.
Phase I – the phase of clinical research where a new drug or treatment
is tested in small groups of people (20 to 80) to check that the drug can
achieve appropriate concentrations in the body, determine a safe
dosage range and identify side effects. This phase includes healthy
volunteer studies.
Phase II – the phase of clinical research which includes the controlled
clinical activities conducted to evaluate the effectiveness of the drug in
patients with the disease under study and to begin to determine the safety
profile of the drug. Phase II studies are typically conducted in small- or
medium-sized groups of patients and can be divided into Phase IIa
studies, which tend to be designed to assess dosing requirements,
and Phase IIb studies, which tend to assess safety and efficacy.
Phase III – the phase of clinical research which is performed to gather
additional information about effectiveness and safety of the drug, often
in a comparative setting, to evaluate the overall benefit/risk profile of
the drug. Phase III studies usually include between several hundred
and several thousand patients.
RWE – Real-World Evidence.
SABA – short-acting beta2-agonist.
Samsung Biologics – Samsung Biologics Co., Ltd.
sales platforms – previously referred to as Growth Platforms,
consisting of Emerging Markets, Respiratory & Immunology,
New CVRM, Japan and Oncology.
Sanofi – Sanofi S.A./Sanofi Pasteur, Inc.
Sarbanes-Oxley Act – the US Sarbanes-Oxley Act of 2002.
SEC – the US Securities and Exchange Commission, the governmental
agency that regulates the US securities industry and stock markets.
SEK – Swedish krona (or kronor).
SET – Senior Executive Team.
SG&A costs – selling, general and administrative costs.
Shionogi – Shionogi & Co., Ltd.
Silence Therapeutics – Silence Therapeutics Ltd.
sNDA – supplemental New Drug Application.
Sobi – Swedish Orphan Biovitrum AB.
SPC – supplementary protection certificate.
Pieris Pharmaceuticals – Pieris Pharmaceuticals, Inc.
pMDI – pressurised metered-dose inhaler.
specialty care – specific healthcare provided by medical specialists
who do not generally have first contact with patients.
pound sterling, £, GBP or pence – references to the currency of the UK.
Spirogen – Spirogen Sàrl.
Pozen – POZEN, Inc.
primary care – general healthcare provided by physicians who
ordinarily have first contact with patients and who may have continuing
care for them.
Proof of Concept – data demonstrating that a candidate drug results
in a clinical change on an acceptable endpoint or surrogate in patients
with the disease.
ProTACs – a proteolysis targeting chimera, which is a
heterobifunctional small molecule composed of two active domains
and a linker capable of removing specific unwanted proteins.
PTE – Patent Term Extension, an extension of up to five years in the
term of a US patent relating to a drug which compensates for delays
in marketing resulting from the need to obtain FDA approval. The
analogous right in the EU is an SPC.
SoC – standard of care. Treatment that is accepted by medical experts
as a proper treatment for a certain type of disease and that is widely
used by healthcare professionals.
Takeda – Takeda Pharmaceutical Company Limited.
TCFD – Task Force on Climate-related Financial Disclosures.
TerSera – TerSera Therapeutics LLC.
Total Revenue – the sum of Product Sales and Collaboration Revenue.
TSR – total shareholder return, being the total return on a share over
a period of time, including dividends reinvested.
UK – United Kingdom of Great Britain and Northern Ireland.
UK Corporate Governance Code – the UK Corporate Governance
Code published by the FRC in July 2018 that sets out standards of
good practice in corporate governance for the UK.
Pulse Survey – an AstraZeneca employee opinion survey, which seeks
employees’ views of the business.
US – United States of America.
PwC – PricewaterhouseCoopers LLP.
R&D – research and development.
Recordati – Recordati S.p.A.
Redeemable Preference Share – a redeemable preference share
of £1 each in the share capital of the Company.
RedHill – RedHill Biopharma.
Regulatory Exclusivity – any of the IP rights arising from generation
of clinical data and includes Regulatory Data Protection, Paediatric
Exclusivity and Orphan Drug status.
RNA – ribonucleic acid.
US dollar, US$, USD or $ – references to the currency of the US.
VBP – value-based procurement.
Viela Bio – Viela Bio, Inc.
WHO – World Health Organization, the United Nations’ specialised
agency for health.
ZS Pharma – ZS Pharma, Inc.
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283
Important information for
readers of this Annual Report
Cautionary statement regarding forward-
looking statements
The purpose of this Annual Report is to
provide information to the members of the
Company. The Company and its Directors,
employees, agents and advisers do not
accept or assume responsibility to any other
person to whom this Annual Report is shown
or into whose hands it may come and any
such responsibility or liability is expressly
disclaimed. In order, among other things, to
utilise the ‘safe harbour’ provisions of the US
Private Securities Litigation Reform Act of
1995 and the UK Companies Act 2006, we are
providing the following cautionary statement:
This Annual Report contains certain forward-
looking statements with respect to the
operations, performance and financial
condition of the Group, including, among
other things, statements about expected
revenues, margins, earnings per share or
other financial or other measures. Forward-
looking statements are statements relating to
the future which are based on information
available at the time such statements are
made, including information relating to risks
and uncertainties. Although we believe that
the forward-looking statements in this Annual
Report are based on reasonable assumptions,
the matters discussed in the forward-looking
statements may be influenced by factors that
could cause actual outcomes and results to
be materially different from those predicted.
The forward-looking statements reflect
knowledge and information available at the
date of the preparation of this Annual Report
and the Company undertakes no obligation to
update these forward-looking statements. We
identify the forward-looking statements by
using the words ‘anticipates’, ‘believes’,
‘expects’, ‘intends’ and similar expressions in
such statements. Important factors that could
cause actual results to differ materially
from those contained in forward-looking
statements, certain of which are beyond our
control, include, among other things:
> the risk of failure or delay in delivery of
pipeline or launch of new medicines
> the risk of failure to meet regulatory or
ethical requirements for medicine
development or approval
> the risk of failure to obtain, defend and
enforce effective intellectual property (IP)
protection and IP challenges by third
parties
> the impact of competitive pressures
including expiry or loss of IP rights, and
generic competition
> the impact of price controls and reductions
> the impact of economic, regulatory and
political pressures
> the impact of uncertainty and volatility
in relation to the UK’s exit from the EU
> the risk of failures or delays in the quality
or execution of our commercial strategies
> the risk of failure to maintain supply of
compliant, quality medicines
> the risk of illegal trade in our medicines
> the impact of reliance on third-party goods
Inclusion of Reported performance,
Core financial measures and constant
exchange rate growth rates
AstraZeneca’s determination of non-GAAP
measures together with our presentation of
them within our financial information may
differ from similarly titled non-GAAP
measures of other companies.
and services
> the risk of failure in information technology,
data protection or cybercrime
> the risk of failure of critical processes
> any expected gains from productivity
initiatives are uncertain
> the risk of failure to attract, develop, engage
and retain a diverse, talented and capable
workforce, including following the Alexion
transaction
> the risk of failure to adhere to applicable
laws, rules and regulations
> the risk of the safety and efficacy of
marketed medicines being questioned
> the risk of adverse outcome of litigation
and/or governmental investigations,
including relating to the Alexion transaction
> the risk of failure to adhere to increasingly
stringent anti-bribery and anti-corruption
legislation
> the risk of failure to achieve strategic plans
or meet targets or expectations
> the risk of failure in financial control or the
occurrence of fraud
> the risk of unexpected deterioration in our
financial position
> the impact that the COVID-19 global
pandemic may have or continue to have on
these risks, on our ability to continue to
mitigate these risks, and on our operations,
financial results or financial condition
> the risk that a condition to the closing of the
transaction with Alexion may not be
satisfied, or that a regulatory approval that
may be required for the transaction is
delayed or is obtained subject to conditions
that are not anticipated
> the risk that we are unable to achieve the
synergies and value creation contemplated
by the Alexion transaction, or that we are
unable to promptly and effectively integrate
Alexion’s businesses
> and the risk that management’s time and
attention are diverted on transaction-
related issues or that disruption from the
Alexion transaction makes it more difficult
to maintain business, contractual and
operational relationships.
Certain of these factors are discussed in more
detail elsewhere in this Annual Report
including, without limitation, in the Risk
section from page 254 of this Annual Report.
Nothing in this Annual Report should be
construed as a profit forecast.
Statements of competitive position,
growth rates and sales
In this Annual Report, except as otherwise
stated, market information regarding the
position of our business or products relative
to its or their competition is based upon
published statistical sales data for the 12
months ended 30 September 2020 obtained
from IQVIA, a leading supplier of statistical
data to the pharmaceutical industry. Unless
otherwise noted, for the US, dispensed new or
total prescription data and audited sales data
are taken, respectively, from IQVIA National
Prescription Audit and IQVIA National Sales
Perspectives for the 12 months ended
31 December 2020; such data are not
adjusted for Medicaid and similar rebates.
Except as otherwise stated, these market
share and industry data from IQVIA have been
derived by comparing our sales revenue with
competitors’ and total market sales revenues
for that period, and except as otherwise
stated, growth rates are given at CER. For
the purposes of this Annual Report, unless
otherwise stated, references to the world
pharmaceutical market or similar phrases are
to the 50 countries contained in the IQVIA
database, which amounted to approximately
94% (in value) of the countries audited by
IQVIA. Changes in data subscriptions, exchange
rates and subscription coverage, as well as
restated IQVIA data, have led to the restatement
of total market values for prior years.
AstraZeneca websites
Information on or accessible through our
websites, including www.astrazeneca.com,
and www.astrazenecaclinicaltrials.com and
on any websites referenced in this Annual
Report, does not form part of and is not
incorporated into this Annual Report.
External/third-party websites
Information on or accessible through any
third-party or external website does not form
part of and is not incorporated into this
Annual Report.
Figures
Figures in parentheses in tables and in the
Financial Statements are used to represent
negative numbers.
284
AstraZeneca Annual Report & Form 20-F Information 2020 / Additional Information
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SET photography
Scott Nibauer
Graham Carlow
Hannes Kirchhof
Image on page 33
©David Levene/Guardian/
eyevine
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Registered office and
corporate headquarters
AstraZeneca PLC
1 Francis Crick Avenue
Cambridge Biomedical Campus
Cambridge CB2 0AA
UK
Tel: +44 (0)20 3749 5000
This Annual Report is also available on our website,
www.astrazeneca.com/annualreport2020