ANNUAL FINANCIAL REPORT
AstraZeneca PLC (the Company) announced today the publication of its Annual
Report and Form 20-F Information 2015 (Annual Report).
A copy of the Annual Report will be submitted to the National Storage Mechanism
and will shortly be available for inspection at www.morningstar.co.uk/uk/nsm.
The Annual Report is also available on the Company's website at
http://www.astrazeneca-annualreports.com/2015/.
The Annual Report, together with the Notice of Annual General Meeting 2016 and
Shareholders' Circular, 'AstraZeneca 2015 In Brief' and a covering letter from
the Chairman will be despatched to shareholders on or about 18 March 2016.
The meeting place for the Annual General Meeting (AGM) will be the Lancaster
London Hotel, Lancaster Terrace, London, W2 2TY and the AGM will commence at
2.30 pm (BST) on 29 April 2016.
EXPLANATORY NOTE AND WARNING
Solely for the purposes of complying with Disclosure Rules and Transparency
Rules (DTR) 6.3.5R and the requirements it imposes on issuers as to how to make
public annual financial reports, we set out below:
- in Appendix A, the principal risks and uncertainties facing the Company;
- in Appendix B, the Directors' responsibility statement made in respect of
the Financial Statements and Directors' Report contained in the Annual Report;
and
- in Appendix C, a statement regarding related party transactions.
The appendices have been extracted from the Annual Report in unedited full text.
This information should be read in conjunction with the Company's fourth quarter
and full year results 2015 announcement, issued on 4 February 2016, which
contained a condensed set of financial statements and which can be found at
www.astrazeneca.com/Investors/financial-information/Financial-results. Together,
these constitute the material required by DTR 6.3.5R to be communicated to the
media in unedited full text through a Regulatory Information Service.
Page numbers and section cross-references in the appendices refer to pages and
sections in the Annual Report. Defined terms used in the appendices refer to
terms as defined in the Annual Report.
This material is not a substitute for reading the full Annual Report.
A C N Kemp
Company Secretary
8 March 2016
APPENDIX A
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 21. Other
risks, unknown or not currently considered material, could have a similar
effect. We believe that the forward-looking statements about AstraZeneca in this
Annual Report, identified by words such as 'anticipates', 'believes', 'expects'
and 'intends', and that include, among other things, Future prospects in the
Financial Review on page 76, 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.
Product pipeline and IP risks
Failure to meet Impact
development targets
The development of any A succession of
pharmaceutical product negative drug project
candidate is a complex, results and a failure
risky and lengthy process to reduce development
involving significant timelines
financial, R&D and other effectively, or produce
resources, which may fail new products that
at any stage of the achieve the expected
process due to various commercial success,
factors. These include could frustrate the
failure to obtain the achievement of
required regulatory or development targets,
marketing approvals for adversely affect the
the product candidate or reputation of our R&D
its manufacturing capabilities, and is
facilities; unfavourable likely to materially
clinical efficacy data; adversely affect our
safety concerns; failure business and results of
of R&D to develop new operations. See also
product candidates; Failure to achieve
failure to demonstrate strategic priorities or
adequate cost-effective to meet targets or
benefits to regulatory expectations on page
authorities and/or 225.
payers; and the emergence
of competing products.
Because our business model
and strategy rely on the
success of relatively few
compounds, the failure of
any in line production
may have a significant
negative effect on our
business or results of
operations.Production and
release schedules for
biologics may be more
significantly impacted by
regulatory processes than
other products. This is
due to more complex and
stringent regulation on
the manufacturing of
biologics and their supply
chain.
Delay to new product Impact
launches
Our continued success Significant delays to
depends on the development anticipated launch
and successful launch of dates of new products
innovative new drugs. could have a material
The anticipated launch adverse effect on our
dates of major new financial condition
products significantly and/or results of
affect our business, operations. For
including investment in example, for the launch
large clinical studies; of products that are
the manufacture of pre seasonal in nature,
-launch product stocks; delays in regulatory
investment in marketing approvals or
materials pre-launch; manufacturing
sales force training; and difficulties may delay
the timing of anticipated launch to the next
future revenue streams season which, in turn,
from new Product Sales. may significantly
Launch dates are primarily reduce the return on
driven by our costs incurred in
development programmes and preparing for the
the demands from various launch for that
factors, including season. In addition, a
adverse findings in pre delayed launch may lead
-clinical or clinical to increased costs if,
studies, regulatory for example,
demands, price marketing and sales
negotiation, competitor efforts need to be
activity and technology rescheduled or
transfer. performed for longer
than expected.
Acquisitions and Impact
strategic alliances,
including licensing and
collaborations, may be
unsuccessful
We seek licensing If we fail to complete
arrangements and strategic these types of
collaborations to expand collaborative projects
our product portfolio and in a timely manner, on
geographical presence as a cost-effective basis,
part of our business or at all, this may
strategy. Such licensing limit our ability to
arrangements and strategic access a greater
collaborations are key, portfolio of products,
enabling us to grow and IP technology and
strengthen the business. shared
The success of such expertise.Additionally,
arrangements is largely disputes or
dependent on the difficulties in our
technology and other IP relationship with our
rights we acquire, and the collaborators or
resources, efforts and partners may arise,
skills of our often due to
partners.Also, under many conflicting priorities
of our licensing or conflicts of
arrangements and interest between
strategic collaborations, parties, which may
we make milestone payments erode or eliminate the
well in advance of the benefits of these
commercialisation of the alliances.The
products, with no incurrence of
assurance that we will significant debt or
recoup these payments.We liabilities due to
may also seek to acquire the integration of an
complementary businesses acquired business could
or enter into other cause deterioration in
strategic transactions. our credit rating and
The integration of an result in increased
acquired business could borrowing costs and
involve incurring interest expense. We
significant debt and may issue additional
unknown or contingent shares to pay for
liabilities, as well as acquired businesses,
having a negative effect which would result in
on our reported results the dilution of our
of operations from then existing
acquisition-related shareholders.Further,
charges, amortisation of if liabilities are
expenses related to uncovered in an
intangibles and charges acquired business, an
for the implementation of acquired business fails
long-term assets. We may to perform in line with
also experience expectations, or a
difficulties in strategic transaction
integrating does not deliver the
geographically separated results we intended,
organisations, systems and then the Group or our
facilities, and personnel shareholders may suffer
with different losses and may not
organisational have adequate remedies
cultures.Furthermore, we against the seller or
experience strong third parties.
competition from other Integration processes
pharmaceutical companies may also result in
in respect of licensing business disruption,
arrangements, strategic diversion of management
collaborations, and resources, the loss
acquisition targets, and of key employees and
therefore, we may be other issues, such as a
unsuccessful in failure to integrate
implementing some of our IT and other systems.
intended projects or we
may have to pay a
significant premium over
book or market values
for our acquisitions.
Difficulties obtaining and Impact
maintaining regulatory
approvals for new products
We are subject to strict Delays in regulatory
controls on the reviews and approvals
commercialisation impact patient and
processes for our market access. In
pharmaceutical products, addition, post-approval
including their requirements result in
development, manufacture, increased costs and
distribution and may impact the
marketing. Safety, labelling and approval
efficacy and quality status of currently
must be established before marketed products.
a drug can be marketed for
a given indication. The
criteria for establishing
safety, efficacy and
quality may vary by
country or region and the
submission of an
application to regulatory
authorities may or may
not lead to the grant of
marketing approval.
Regulators can refuse to
grant approval or may
require additional data
before approval is
given, even though the
medicine may already be
launched in other
countries. Approved
products are also subject
to regulations, and a
failure to comply can
potentially result in
losing regulatory approval
to market our products.
Regulations may require a
company to conduct
additional clinical
trials after a drug's
approval, which can result
in increased costs,
labelling challenges or
loss of regulatory
approval.Factors,
including advances in
science and technology,
evolving regulatory
science, and different
approaches to
benefit/risk tolerance by
regulatory authorities,
the general public, and
other third party public
interest groups influence
the initial approvability
of new drugs. Existing
marketed products are also
subject to these same
forces, and new data and
meta-analyses have the
potential to drive changes
in the approval status
or labelling. Recent years
have seen an increase in
post-marketing regulatory
requirements and
commitments, and an
increased call for third
party access to regulatory
and clinical trial data
packages for independent
analysis and
interpretation, and
broader data
transparency.Unanticipated
and unpredictable policy
making by governments and
regulators can adversely
influence regulatory
decision making, often
leading to severe delays
in regulatory approval.
The predictability of the
outcome and timing of
review processes remains
challenging due to
evolving regulatory
science, competing
regulatory priorities,
unpredictable policy
making and limits placed
on regulatory authority
resources.
Failure to obtain and Impact
enforce effective IP
protection
Our ability to obtain and Limitations on the
enforce patents and availability of patent
other IP rights in protection or the use
relation to our products of compulsory licensing
is an important element in in certain countries in
protecting our which we operate
investment in R&D and could have a material
creating long-term value adverse effect on the
for the business. Some pricing and sales of
countries in which we our products and,
operate are still consequently, could
developing their IP materially adversely
laws, others are limiting affect our revenues
the applicability of their from those products.
IP laws to certain More information about
pharmaceutical inventions. protecting our IP, the
Certain countries may seek risk of patent
to limit or deny litigation and the
effective IP protection early loss of IP rights
for pharmaceuticals is contained in the
because of adverse Intellectual Property
political perspectives section on page 60, the
around the desirability of Effects of patent
appropriate IP protection litigation in respect
for pharmaceuticals. of IP rights risk on
page 218 and the Expiry
or loss of, or
limitations to, IP
rights and
consequential pressure
from generic
competition risk on
page 215.
Commercialisation risks
Expiry or loss of, or limitations to, IP Impact
rights and consequential pressure from
generic competition
A pharmaceutical product is protected from If challenges to our
being copied for the limited period of IP by generic drug
protection under patent rights and/or manufacturers
related IP rights such as Regulatory Data succeed and generic
Protection or Orphan Drug status. This products are
period of protection helps us recoup our launched, or generic
overall R&D investment. Early loss of IP products are
rights may threaten our ability to recoup launched 'at risk'
our investment in a patent product. Expiry on the expectation
or loss of these rights can materially that challenges to
adversely affect our revenues and our IP will be
financial condition due to the launch of successful, this may
generic copies of the product in the materially adversely
country where the rights have expired or affect our revenues
been lost (see the Patent Expiries section and financial
on pages 210 and 211, which contains a condition.
table of certain patent expiry dates for our Furthermore, if
key marketed products). Products protected limitations on the
by our IP account for a significant availability, scope
proportion of our revenues. For example, or enforceability
in 2015, US Product Sales for Crestor and of patent protection
Seroquel XR were $2,844 million (2014: are implemented in
$2,918 million) and $716 million (2014: $738 jurisdictions in
million), respectively. Additionally, the which we operate,
expiry or loss of patents covering other generic
innovator companies' products may also lead manufacturers in
to increased competition and pricing these countries may
pressure for our own, still-patented, be increasingly able
products in the same product class due to to introduce
the availability of lower priced generic competing products
products in that product class. Typically, to the market
products under patent protection or within earlier than they
the period of Regulatory Data Protection would have been
generate significantly higher revenues able to, had more
than those not protected by such rights.A robust patent
pharmaceutical product competes with other protection or
products marketed by research-based Regulatory Data
pharmaceutical companies and approved for Protection been
the same condition, as well as with generic available.
drugs for that condition marketed by
generic drug manufacturers. Generic versions
of products 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. The majority of our patented
products, including Nexium, Crestor and
Seroquel XR, are subject to pricing
pressures due to competition from generic
copies of these products and from generic
forms of other drugs in the same product
class (for example, generic forms of
Losec/Prilosec, Lipitor and Seroquel IR).
Additionally, generic manufacturers are
often able to invest more resources in the
marketing of their products than we do,
due to their lack of R&D expenses.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, as detailed in Note 27 to the
Financial Statements from page 186, we are
currently facing challenges from numerous
generic drug manufacturers regarding our
patents relating to key products,
including Brilinta, Faslodex, Seroquel XR,
Byetta, Daliresp, Onglyza and Crestor (which
goes off-patent in the US in May 2016).
Patent challenges are also discussed in
the Effects of patent litigation in respect
of IP rights risk on page 218. Generic
manufacturers may also take advantage of the
failure of certain countries to properly
enforce Regulatory DataProtection and may
launch generics during this protected
period. This is a particular risk in some
Emerging Markets where appropriate patent
protection may be difficult to obtain or
enforce.
Abbreviated approval processes for Impact
biosimilars
While no application for a biosimilar has The extent to which
been made in relation to an AstraZeneca biosimilars would
biologic, various regulatory authorities differ from
are implementing or considering abbreviated patented biologics
approval processes for biosimilars that on price is unclear.
would compete with patented biologics.For However, due to
example, in 2010, the US enacted the their complex
Biologics Price Competition and Innovation nature, it is
Act within the ACA, which contains general uncertain whether
directives for biosimilar applications. The biosimilars would
FDA issued final guidance in April 2015 on have the same impact
implementing an abbreviated biosimilar on patented
approval pathway. In March 2015, the FDA biologics that
approved the first biosimilar product generic products
submitted under the abbreviated biosimilar have had on patented
pathway. However, significant questions small molecule
remain, including standards for products. In
designation of interchangeability and data addition, it is
collection requirements to support uncertain when any
extrapolation of indications. In addition, such abbreviated
due to the recent submissions and approval processes
approvals of abbreviated biosimilar may be fully
applications, a number of legal challenges realised,
construing the requirements of the particularly for
abbreviated biosimilar pathway are under more complex protein
review. For example, in July 2015, the US molecules such as
Court of Appeals for the Federal Circuit MAbs. Such processes
held that biosimilar applicants were not may materially and
required to provide copies of the biosimilar adversely affect the
application or manufacturing information future commercial
but needed to provide 180-day commercial prospects for
marketing notice to the reference sponsor. patented biologics,
Although this decision and other ongoing such as the ones
legal challenges do not directly impact an that we produce.
AstraZeneca biologic, uncertainty regarding
the abbreviated biosimilar approval
pathway may remain until these initial legal
challenges reach final conclusion.In
Europe, the EMA published final guidelines
on similar biologics containing MAbs and
in May 2012, the first MAb biosimilar
application was submitted with
recommendation for approval made by the EMA.
Notably, various jurisdictions have
adopted either the EMA guidelines or those
set forth by WHO to enable biosimilars to
enter the market after discrete periods of
data exclusivity.
Political and socio-economic conditions Impact
We operate in over 100 countries around the Deterioration of, or
world, some of which may be subject to failure to improve,
political and social instability. There may socio-economic
be disruption to our business if there is conditions, and
instability in a particular geographic situations and/or
region, including as a result of war, resulting events,
terrorism, riot, unstable governments, depending on their
civil insurrection or social unrest. For severity, could
instance, our operational risks in Ukraine adversely affect our
have increased due to growing political and supply and/or
economic uncertainty in the region. 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. Broader
economic
developments, such
as potential
international
sanctions and global
oil price
developments, could
exacerbate this
effect in the
Ukrainian and
Russian markets.
Developing our business in Emerging Markets Impact
The development of our business in Emerging The failure to
Markets is a critical factor in exploit potential
determining our future ability to sustain or opportunities
increase our global Product Sales. This appropriately in
poses various challenges including: more Emerging Markets or
volatile economic conditions and/or materialisation of
political environments; competition from the risks and
multinational and local companies with challenges of doing
existing market presence; the need to business in such
identify and to leverage appropriate markets, including
opportunities for sales and marketing; inadequate protection
poor IP protection; inadequate protection against crime
against crime (including counterfeiting, (including
corruption and fraud); inadequate counterfeiting,
infrastructure to address disease corruption and fraud)
outbreaks (such as the Ebola virus); the or inadvertent
need to impose developed market compliance breaches of local and
standards; the need to meet a more diverse international law may
range of national regulatory, clinical and materially adversely
manufacturing requirements; inadvertent affect our
breaches of local and international law; not reputation, business
being able to recruit appropriately or results of
skilled and experienced personnel; operations.
identification of the most effective sales
and marketing channels and route to market;
and interventions by national governments
or regulators restricting market access
and/or introducing adverse price controls.
Challenges to achieving commercial success Impact
of new products
The successful launch of a new If a new product does
pharmaceutical product involves not succeed as
substantial investment in sales and anticipated or its
marketing activities, launch stocks and rate of sales growth
other items. The commercial success of our is slower than
new medicines is particularly important to anticipated, there is
replace lost Product Sales following patent a risk that we may
expiry. We may ultimately be unable to be unable to fully
achieve commercial success for any number of recoup the costs
reasons. These include difficulties in incurred in launching
manufacturing sufficient quantities of the it, which could
product candidate for development or materially adversely
commercialisation in a timely manner, the affect our business
impact of price control measures imposed by or results of
governments and healthcare authorities, operations.Due to the
the outcome of negotiations with third party complexity of the
payers, erosion of IP rights, including commercialisation
infringement by third parties, failure to process for
show a differentiated product profile and biologics, the
changes in prescribing habits.As a result, methods of
we cannot be certain that compounds distributing and
currently under development will achieve marketing biologics
success, and our ability to accurately could materially
assess, prior to launch, the eventual adversely impact our
efficacy or safety of a new product once revenues from the
in broader clinical use can only be based on sales of biologics
data available at that time, which is medicines, such as
inherently limited due to relatively short Synagis and
periods of product testing and relatively FluMist/Fluenz.
small clinical study patient samples. 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.Our products are
subject to competition by other products
approved for the same or similar indication,
and the approval of a competitive product
that is considered superior, or equivalent
to, one of our products may result in
immediate and significant decreases in our
revenues.
Effects of patent litigation in respect of Impact
IP rights
Any of the IP rights protecting our products Managing or
may be asserted or challenged in IP litigating
litigation and/or patent office proceedings infringement disputes
initiated against or by external parties. over so-called
We expect our most valuable products to 'freedom to operate'
receive the greatest number of challenges. can be costly. We may
Despite our efforts to establish and be subject to
defend robust patent protection for our injunctions against
products, we may not succeed in protecting our products or
or enforcing our patents in such litigation processes and be
or other challenges.We bear the risk that liable for damages or
courts may decide that third parties do royalties. We may
not infringe our asserted IP rights. This need to obtain costly
may result in AstraZeneca losing licences. These risks
exclusivity and/or erosion of revenues.Where may be greater in
we assert our IP rights but are ultimately relation to biologics
unsuccessful, third parties may seek and vaccines, where
damages, alleging, for example, that they patent infringement
have been inappropriately restrained from claims may relate
entering the market. In such cases, we to discovery or
bear the risk that we incur liabilities to research tools, and
those third parties.We also bear the risk manufacturing methods
that we may be found to infringe patents and/or biological
owned or licensed exclusively by third materials. While we
parties, including research-based and seek to manage such
generic pharmaceutical companies and risks by, for
individuals. Third parties may seek example, acquiring
damages for alleged patent infringement. In licences, forgoing
the US, they may also seek enhanced (ie up certain activities or
to treble) damages for alleged wilful uses, or modifying
infringement of their patents.Details of processes to avoid
material patent litigation matters can be infringement claims
found in Note 27 to the Financial Statements and permit
from page 186. commercialisation of
our products, such
steps can entail
significant cost and
there is no guarantee
that they will be
successful.If we are
not successful in
maintaining exclusive
rights to market
one or more of our
major products,
particularly in the
US where we achieve
our highest Product
Sales, our revenue
and margins could be
materially
adversely
affected.Unfavourable
resolution of such
current and similar
future patent
litigation matters
could subject us to
damages (including
enhanced damages),
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.
Price controls and reductions Impact
Most of our key markets have experienced the Due to these pricing
implementation of various cost control or pressures, there can
reimbursement mechanisms for be no certainty
pharmaceutical products.For example, in the that we will be able
US, prices are being depressed through to charge prices for
restrictive reimbursement policies and cost a product that, in a
control tools such as restricted lists and particular country
formularies, which employ 'generic first' or in the aggregate,
strategies and/or require physicians to enable us to earn an
obtain prior approval for the use of a adequate return on
branded medicine where a generic our product
alternative exists. These mechanisms can be investment. These
used by payers to limit the use of branded pressures, including
products and put pressure on manufacturers the increasingly
to reduce net prices. In addition, payers restrictive
are shifting a greater proportion of the reimbursement
cost of branded medicines to the patient via policies to which we
out-of-pocket payments at the pharmacy are subject, as well
counter. The patient out-of-pocket spend is as potential
generally in the form of a co-payment or, legislation that
in some cases, a co-insurance, which is expands the
designed, principally, to encourage commercial
patients to use generic medicines.In importation of
Emerging Markets, governments are medicines into the
increasingly controlling pricing in the US, could materially
self-pay sector and favouring locally adversely affect our
manufactured drugs.A summary of the business or results
principal aspects of price regulation and of operations.We
how pricing pressures are affecting our expect these pricing
business in our most important markets is pressures will
set out in Pricing of medicines in the continue, and may
Marketplace section on page 14 and increase.ImpactWhile
overleaf in the following risk new patients entering
factor.Economic, regulatory and political the US healthcare
pressuresWe face continued economic, system due to the ACA
regulatory and political pressures to may lead to a slight
limit or reduce the cost of our products. In increase in
2010, the US enacted the ACA, a prescription drug
comprehensive health reform law that utilisation, we
expands insurance coverage, implements expect that our
delivery system reforms and places a financial and other
renewed focus on cost and quality. In terms costs resulting from
of specific provisions impacting our the ACA, many of
industry, the law mandates higher rebates which we are unable
and discounts on branded drugs for certain to accurately
Medicare and Medicaid patients as well as estimate, will far
an industry-wide excise fee. Implementation outweigh any
of several health system delivery reforms increase in Product
included in the ACA has commenced and will Sales.The continued
continue through 2018. The ACA expands the disparities in EU and
patient population eligible for Medicaid and US pricing systems
provides new insurance coverage for could lead to marked
individuals through state and federally price differentials
operated health insurance exchanges. In between markets,
general, patients enrolled in the which, by way of
exchanges are subject to higher cost sharing the implementation of
obligations and may not have as robust existing or new
access to prescription drugs as compared to reference pricing
patients enrolled in Medicare Part D or mechanisms,
commercial plans. Based, in part, on the increases the pricing
impact of ACA to other healthcare sectors, pressure affecting
there is ongoing scrutiny of the US the industry. The
pharmaceutical industry that could result importation of
in further government intervention and pharmaceutical
financial constraint. Many stakeholders, products from
including some in Congress and others in the countries where
broader healthcare system, such as health prices are low due to
plans, have dramatically increased their government price
criticism over the value of medicines in the controls, or other
US and have placed a stronger emphasis on market dynamics, to
innovative therapies. Such criticism and countries where
focus on the value of medicines has prices for those
resulted in proposed policy and legislative products are higher,
changes at the state and federal levels is already prevalent
aimed at imposing price controls on and may increase.
medicines and increasing price Increased
transparency. For more information, please transparency of net
see Regulatory requirements and Pricing of prices and
medicines in the Marketplace section from strengthened
page 13 and page 14, respectively.In the EU, collaboration by
efforts by the EC to reduce governments may
inconsistencies and improve standards in the accelerate the
disparate national pricing and development of
reimbursement systems met with little further cost
immediate success as Member States guard containment policies
their right to make healthcare budget (such as
decisions. The industry continues to be procurement or the
exposed in Europe to various ad hoc cost comparison of net
-containment measures and reference prices etc).
pricing mechanisms, which impact prices.
There is a trend towards increasing
transparency and comparison of prices among
EU Member States. Recent controversy
regarding the high price of a drug marketed
by one of our competitors for chronic
hepatitis C may provoke further EU
collaboration and may eventually lead to a
change in the overall pricing and
reimbursement landscape.Concurrently, many
markets are adopting the use of Health
Technology Assessment (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.Further information
regarding these pressures is contained in
Regulatory requirements and Pricing of
medicines in the Marketplace section from
page 13 and page 14, respectively.
Illegal trade in our productsThe illegal ImpactPublic loss of
trade in pharmaceutical products is widely confidence in the
recognised by industry, non-governmental integrity of
organisations and governmental authorities pharmaceutical
to be increasing. Illegal trade includes products as a result
counterfeiting, theft and illegal diversion of illegal trade
(that is, when our products are found in a could materially
market where we did not send them and where adversely affect our
they are not approved or not reputation and
permitted/allowed to be sold). There is a financial
risk to public health when illegally performance. In
traded products enter the supply chain, as addition, undue or
well as associated financial risk. misplaced concern
Authorities and the public expect us to help about this issue may
reduce opportunities for illegal trade in cause some patients
our products through securing the integrity to stop taking their
of our supply chain, surveillance, medicines, with
investigation and supporting legal action consequential risks
against those found to be engaged in to their health.
illegal trade. Authorities may take
action, financial
or otherwise, if
they believe we are
liable for breaches
in our own supply
chains.There is also
a direct financial
loss when
counterfeit and/or
illegally diverted
products replace
sales of genuine
products; or genuine
products are
recalled following
discovery of
counterfeit
products; or
products which have
been the subject of
theft or illegal
diversion are
recalled; or
illegally diverted
products replace
sales of products
which are
approved/allowed for
sale in a market.
Increasing implementation and enforcement of Impact
more stringent anti-bribery and anti
-corruption legislation
There is an increasing global focus on the Despite taking
implementation and enforcement of anti measures to prevent
-bribery and anti-corruption breaches of
legislation.For example, in the UK, the applicable anti
Bribery Act 2010 has extensive extra -bribery and anti
-territorial application, and imposes -corruption laws by
organisational liability for any bribe our personnel and
paid by persons or entities associated with associated third
an organisation where the organisation parties, breaches
failed to have adequate preventative may still occur,
controls in place at the time of the potentially
offence. In the US, there has been resulting in the
significant enforcement activity in imposition of
respect of the Foreign Corrupt Practices Act significant
by the SEC and DOJ against US companies penalties, such as
and non-US companies listed in the US. China fines, the
and other countries are also enforcing requirement to
their own anti-bribery laws more comply with
aggressively and/or adopting tougher new monitoring or self
measures.We are the subject of current -reporting
anti-corruption investigations and there can obligations, or
be no assurance that we will not, from debarment or
time to time, continue to be subject to exclusion from
informal inquiries and formal investigations government sales or
from governmental agencies. In the context reimbursement
of our business, governmental officials programmes, any of
interact with us in various roles that are which could
important to our operations, such as in the materially adversely
capacity of a regulator, partner or affect our
healthcare payer, reimburser or prescriber, reputation, business
among others. Details of these matters are or results of
included in Note 27 to the Financial operations.
Statements from page 186.
Failure to adhere to applicable laws, Impact
rules and regulations
Any failure to comply with applicable laws, Failure to comply
rules and regulations may result in civil with applicable
and/or criminal legal proceedings being laws, including
filed against us, or in us becoming subject ongoing control and
to regulatory sanctions. Regulatory regulation, could
authorities have wide-ranging administrative materially adversely
powers to deal with any failure to comply affect our business
with continuing regulatory oversight and or results of
this could affect us, whether such failure operations. For
is our own or that of our contractors or example, once a
external partners. 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. For
example, if
regulatory issues
concerning
compliance with
current Good
Manufacturing
Practice or safety
monitoring
regulations for
pharmaceutical
products (often
referred to as
pharmacovigilance)
arise, this could
lead to loss of
product approvals,
product recalls and
seizures, and
interruption of
production, which
could create product
shortages and delays
in new product
approvals, and
negatively impact
patient access and
our reputation.
Failure of information technology and Impact
cybercrime
We are dependent on effective IT systems. Any significant
These systems support key business disruption to these
functions such as our R&D, manufacturing, IT systems,
supply chain and sales capabilities and are including breaches
an important means of safeguarding and of data security or
communicating data, including critical or cybersecurity, or
sensitive information, the confidentiality failure to integrate
and integrity of which we rely on.Examples new and existing
of sensitive information that we protect IT systems, could
include loss of clinical trial records harm our reputation
(patient names and treatments), personal and materially
information (employee bank details, home adversely affect our
address), intellectual property of financial condition
manufacturing process and compliance, key or results of
research science techniques, AstraZeneca operations.While we
property (theft) and privileged access have invested
(rights to perform IT tasks).The size and heavily in the
complexity of our IT systems, and those of protection of our
our third party vendors (including outsource data and IT, we may
providers) with whom we contract, have be unable to prevent
significantly increased over the past decade breakdowns or
and makes such systems potentially breaches in our
vulnerable to service interruptions and systems that could
security breaches from attacks by result in disclosure
malicious third parties, or from intentional of confidential
or inadvertent actions by our employees or information, damage
vendors. to our reputation,
regulatory
penalties, financial
losses and/or other
costs.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.The
inability to
effectively backup
and restore data
could lead to
permanent loss of
data that could
result in non
-compliance with
applicable laws and
regulations.We and
our vendors could be
susceptible to third
party attacks on
our information
security systems.
Such attacks are of
ever-increasing
levels of
sophistication and
are made by groups
and individuals
with a wide range of
motives and
expertise, including
criminal groups,
'hacktivists' and
others. From time to
time we experience
intrusions,
including as a
result of computer
-related malware.
Any expected gains from productivity
initiatives are uncertain We
continue to implement various productivity
initiatives and restructuring programmes
with the aim of enhancing the long-term
efficiency of the business. However,
anticipated cost savings and other
benefits from these programmes are based on
estimates and the actual savings may
vary significantly. In particular, these
cost-reduction measures are often based
on current conditions and cannot always take
into account any future changes to the
pharmaceutical industry or our
operations, including new business
developments or wage or price
increases. Impact If
inappropriately managed, the expected value
of these initiatives could be lost
through low employee engagement and
hence productivity, increased absence and
attrition levels, and industrial
action. Our failure to successfully
implement these planned cost-reduction
measures, either through the successful
conclusion of employee relations
processes (including consultation,
engagement, talent management,
recruitment and retention), or the
possibility that these efforts do not
generate the level of cost savings we
anticipate, could materially adversely
affect our business or results of
operations.
Failure of outsourcing Impact
We have outsourced various business-critical The failure of
operations to third party providers. This outsource providers
includes certain R&D processes, IT to deliver timely
systems, HR and finance, tax and accounting services, and to the
services. required level of
quality, and the
failure of
outsource providers
to co-operate with
each other, could
materially adversely
affect our
financial condition
or results of
operations. In
addition, such
failures could
adversely impact our
ability to meet
business targets,
maintain a good
reputation within
the industry and
with stakeholders,
and result in non
-compliance with
applicable laws and
regulations.A
failure to
successfully manage
and implement the
integration of IT
infrastructure
services provided by
our outsource
providers could
create disruption,
which could
materially adversely
affect our business
or results of
operations.In
addition, failure to
manage outsourcing
or insourcing
transition processes
may disrupt our
business. For
instance, as we
transition services
that previously were
outsourced to our
service centre in
Chennai (India),
incumbent outsource
providers may cease
to continue to
provide the same
level of resources
and quality of
service.
Failure to attract and retain key Impact
personnel and failure to successfully engage
with our employees
We rely heavily on recruiting and retaining The inability to
talented employees with a diverse range of attract and retain
skills and capabilities to meet our highly skilled
strategic objectives. For example, the personnel, in
success of our science activities depends particular those in
largely on our ability to attract and retain key scientific and
sufficient numbers of high-quality leadership positions
researchers and development specialists. We and those in our
face intense competition for well talent pools, may
-qualified individuals, as the supply of weaken our
people with specific skills and succession plans for
significant leadership potential or in critical positions
specific geographic regions may be in the medium term,
limited.Our ability to achieve high levels may materially
of employee engagement in the workforce, adversely affect the
and hence benefit from strong commitment and implementation of
motivation, is key to the successful our strategic
delivery of our business objectives. objectives and could
ultimately impact
our business or
results of
operations.Failure
to engage
effectively with our
employees could
lead to business
disruption in our
day-to-day
operations, reduce
levels of
productivity and/or
increase levels of
voluntary turnover,
all of which could
ultimately adversely
impact our business
or results of
operations.While we
are committed to
working on improving
drivers of
engagement, such as
increasing our
employees'
understanding of our
strategy and our
ongoing efforts to
reduce
organisational
complexity, our
efforts may be
unsuccessful.
Supply chain and business execution ImpactManufacturing,
risksDifficulties and delays in the forecasting,
manufacturing, distribution and sale of distribution and
our productsWe may experience difficulties sales difficulties
and delays in manufacturing our products, may result in
such as:> Supply shortages associated with product shortages
gaps between forecasted and actual demand and significant
for products.> Supply chain disruptions, delays, which may
including those due to natural or man-made lead to lost
disasters at one of our facilities or at a Product Sales and
critical supplier or vendor.> Delays materially adversely
related to the construction of new affect our business,
facilities or the expansion of existing financial
facilities, including those intended to condition or results
support future demand for our products.> of
Inability to supply products due to a operations. Impact
product quality failure or regulatory
agency 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 supply.Reliance on third
party goods and services
We increasingly rely on third parties for Third party supply
the timely supply of goods, such as raw failure could lead
materials (for example, the API in some of to significant
our medicines), equipment, formulated drugs delays and/or
and packaging, and services, all of which difficulties in
are key to our operations. Many of these obtaining goods and
goods are difficult to substitute in a services on
timely manner or at all.Unexpected events commercially
and/or events beyond our control could acceptable terms
result in the failure of the supply of goods and/or adversely
and services. For example, suppliers of affect AstraZeneca's
key goods may cease to trade or experience reputation. This
supply chain failures such as those may materially
described under the risk above. In addition, adversely affect our
we may experience limited supply of business, financial
biological materials, such as cells, animal condition or
products or by-products. Furthermore, results of
government regulations could result in operations.Loss of
restricted access to, use or transport of access to sufficient
such materials.Manufacturing sources of key goods
biologicsManufacturing biologics, especially and biological
in large quantities, is complex and may materials or
require the use of innovative technologies services may
to handle living micro-organisms and interrupt or prevent
facilities specifically designed and planned research
validated for this purpose, with activities and/or
sophisticated quality assurance and control increase our costs.
procedures.Final market release of a Further information
biologic depends on a number of in-process is contained in
manufacturing and supply chain parameters to Working with
ensure the product conforms with its suppliers in
safety, identity and strength requirements Manufacturing and
and meets its quality and purity Supply on page
characteristics.Biologics production 47.ImpactSlight
facilities, especially for drug substance variations in any
manufacture, are very specialised and can part of the
take years to develop and bring on line as manufacturing
licensed facilities. Predicting demand for process or
certain classes of biologics, especially components may lead
prior to launch, can be challenging. We to a product that
expect that external capacity for biologics does not meet its
drug substance production will remain stringent design
constrained for the next several years and, specifications.
accordingly, may not be readily available Failure to meet
for supplementary production in the event these specifications
that we experience unforeseen need for may lead to
such capacity. recalls, spoilage,
drug product
shortages,
regulatory action
and/or
reputational harm.
Legal; regulatory and compliance Impact
risksAdverse outcome of litigation and/or
governmental investigations
We may be subject to various product Governmental
liability, consumer commercial, anti-trust, investigations for
environmental, employment or tax example, under the
litigation or other legal proceedings and Foreign Corrupt Practices
governmental investigations. Litigation, Act or federal or state
particularly in the US, is inherently False Claims Acts or legal
unpredictable and unexpectedly high awards proceedings, regardless
for damages can result from an adverse of their outcome, could be
verdict. In many cases, plaintiffs may claim costly, divert management
enhanced damages in extremely high attention, or damage our
amounts. In particular, the marketing, reputation and demand for
promotional, clinical and pricing our products. Unfavourable
practices of pharmaceutical manufacturers, resolution of current
as well as the manner in which and similar future
manufacturers interact with purchasers, proceedings against us
prescribers and patients, are subject to could subject us to
extensive regulation, litigation and criminal liability, fines,
governmental investigation. Many penalties or other
companies, including AstraZeneca, have been monetary or non-monetary
subject to claims related to these remedies, including
practices asserted by federal and state enhanced damages, require
governmental authorities and private us to make significant
payers and consumers, which have resulted in provisions in our accounts
substantial expense and other significant relating to legal
consequences. Note 27 to the Financial proceedings and could
Statements from page 186 describes the materially adversely
material legal proceedings in which we are affect our business or
currently involved. results of operations.
Failure to adhere to applicable laws, rules ImpactWhere a government
and regulations relating to anti authority investigates our
-competitive behaviourAny failure to comply adherence to competition
with laws, rules and regulations relating laws, or we become subject
to anti-competitive behaviour may expose us to private party
to regulatory sanctions and/or lawsuits lawsuits, this may result
from governmental authorities and private, in inspections of our
nongovernmental entities.Certain of our sites or requests for
commercial arrangements with generics documents and other
companies, which have sought to settle information. Competition
patent challenges on terms acceptable to investigations or legal
both innovator and generics manufacturer, proceedings could be
costly, divert management
attention or damage our
reputation and demand for
our products.Unfavourable
resolution of such
current and similar future
proceedings against us
could subject us to
fines and penalties,
may be subject to challenge by competition including enhanced (ie up
authorities.Details of material litigation to treble) damages,
matters which raise allegations of require us to make
anticompetitive behaviour can be found in significant provisions in
Note 27 to the Financial Statements from our accounts relating to
page 186.Substantial product liability legal proceedings and
claims could materially adversely
affect our business
results of operations,
including, by requiring us
to change our commercial
practice.Impact
Any failure to comply with laws, rules and Significant product
regulations relating to the manufacturing, liability claims can
design, and provision of appropriate result in requests for
warnings concerning the dangers and risks of documents and other
our medicines that result in injuries information. These legal
allegedly caused by the use of our medicines proceedings could be
could expose us to large product liability costly, divert management
damages claims, settlements and awards, attention or damage our
particularly in the US. Adverse publicity reputation and demand
relating to the safety of a product or of for our
other competing products may increase the products.Unfavourable
risk of product liability claims.Details resolution of such current
of material product liability litigation and similar future
matters can be found in Note 27 to the product liability claims
Financial Statements from page 186. could subject us to
enhanced damages,
require 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 226.
Failure to adhere to applicable laws, rules ImpactWhile we carefully
and regulations relating to environment, manage compliance and any
health and safety; environmental and known liabilities, and
occupational health and safety work to stay ahead of
liabilitiesAny failure to comply with laws, policy and legislative
rules and regulations relating to the developments, if a
environment or occupational health or safety significant compliance
may expose us to regulatory sanctions issue, environmental,
and/or lawsuits from governmental occupational health or
authorities and private, non-governmental safety incident or legal
entities. Additionally, the failure to requirement for which we
adequately anticipate and proactively manage are responsible were to
emerging policy and legal developments arise, this could result
associated with the environment, health and in us being responsible
safety could adversely affect our licence for fines and penalties,
to operate and/or reputation.We have damages, and other costs.
environmental and/or occupational health and In some circumstances,
safety-related liabilities at some such liability could
currently and formerly owned, leased and materially adversely
third party sites, the most significant of affect our business or
which are detailed in Note 27 to the results of operations. In
Financial Statements from page 186. addition, our financial
provisions for any
obligations that we may
have relating to
environmental or
occupational health and
safety liabilities may be
insufficient if the
assumptions underlying the
provisions, including
for example our
assumptions regarding the
portion of waste at a
site for which we are
responsible, prove
incorrect or if we are
held responsible for
additional contamination
or occupational health and
safety-related claims.
Misuse of social media platforms and new Impact
technology
We increasingly use the internet, digital Inappropriate use of
content, social media, mobile applications certain media vehicles
and other forms of new technology to could lead to the
communicate internally and externally. The unauthorised or
accessibility and instantaneous nature of unintentional public
interactions with such media may facilitate disclosure of sensitive
or exacerbate the risk of data leakages information (such as
from within AstraZeneca or false or personally identifiable
misleading statements being made about information on employees,
AstraZeneca, which may damage our healthcare professionals
reputation. As existing social media or patients, for example,
platforms expand and evolve, and new social those enrolled in our
media platforms emerge, it becomes clinical trials), which
increasingly challenging to identify new may damage our reputation,
points of entry and to put structures in adversely affect our
place to secure and protect information. business or results of
operations and expose us
to legal risks, as well as
additional legal
obligations. Similarly,
the involuntary public
disclosure of
commercially sensitive
information, such as trade
secrets through external
media channels, or an
information loss could
adversely affect our
business or results of
operations. In addition,
negative posts or comments
on social media websites
or other digital channels
or new forms of technology
about us or, for
example, the safety of our
products, could harm our
reputation.
Economic and financial risksFailure to ImpactThere can be no
achieve strategic priorities or to meet guarantee that our
targets or expectationsWe may from time to financial targets or
time communicate our business strategy or expectations will
our targets or expectations regarding our materialise on the
future financial or other performance (for expected timeline or at
example, the expectations described in all. Actual results may
Future prospects in the Financial Review deviate materially and
on page 76). All such statements are of a adversely from any such
forward-looking nature and are based on target or expectation,
assumptions and judgements we make, all of including if one or more
which are subject to significant inherent of the assumptions or
risks and uncertainties, including risks judgements underlying
and uncertainties that we are unaware of any such target or
and/or that are beyond our control.Any expectation proves to be
failure to successfully implement our incorrect in whole or in
business strategy may frustrate the part.ImpactWhile we have
achievement of our financial or other adopted cash management
targets or expectations and, in turn, and treasury policies to
materially damage our brand and materially manage this risk (see the
adversely affect our business, financial Financial risk management
position or results of operations.Adverse policies section of the
impact of a sustained economic downturnA Financial Review on page
variety of significant risks may arise from 76), we cannot be certain
a sustained global economic downturn that these will be as
including for example the economic effective as they are
slowdown in China, our second largest intended to be, in
market. Additional pressure from particular in the event of
governments and other healthcare payers on a global liquidity
medicine prices and volumes of sales in crisis. In addition, open
response to recessionary pressures on positions where we are
budgets may cause a slowdown or a decline owed money and we have
in growth in some markets. In some cases, made in financial
those governments most severely impacted institutions or money
by the economic downturn may seek market funds cannot be
alternative ways to settle their debts guaranteed to be
through, for example, the issuance of recoverable. Additionally,
government bonds which might trade at a if we need access to
discount to the face value of the debt.In external sources of
addition, our customers may cease to trade, financing to sustain
which may result in losses from writing and/or grow our business,
off debts, or the sustained economic such as the debt or
downturn may unfavourably affect the equity capital financial
spending patterns of the consumers of our markets, this may not be
products.We are highly dependent on being available on commercially
able to access a sustainable flow of acceptable terms, if at
liquid funds due to the high fixed costs of all, in the event of a
operating our business and the long and severe and/or sustained
uncertain development cycles of our economic downturn. This
products. In a sustained economic may, for instance, be the
downturn, financial institutions with whom case in the event of any
we deal may cease to trade and there can default by the Group on
be no guarantee that we will be able to its debt obligations,
access monies owed to us without a which may materially
protracted, expensive and uncertain process, adversely affect our
if at all.More than 95% of our cash ability to secure debt
investments are managed centrally and are funding in the future or
invested in collateralised bank deposits or our financial condition
AAA credit rated institutional money in general. Further
market funds. Money market funds are backed information on debt
by institutions in the US and the EU, funding arrangements is
which, in turn, invest in other funds, contained in the Financial
including sovereign funds. This means our risk management policies
credit exposure is a mix of US and EU section of the Financial
sovereign default risk and financial Review on page
institution default risk.Fluctuations in 76.ImpactMovements in the
exchange ratesAs a global business, currency exchange rates used to
fluctuations can significantly affect our translate foreign
results of operations, which are reported in currencies into US dollars
US dollars. Approximately 40% of our may materially adversely
global 2015 Product Sales were in the US, affect our financial
which is expected to remain our largest condition or results of
single market for the foreseeable future. operations. Additionally,
Product Sales in other countries are some of our subsidiaries
predominantly in currencies other than the import and export goods
US dollar, including the euro, Japanese yen, and services in currencies
Chinese renminbi, Australian dollar and other than their own
Canadian dollar. We have a growing exposure functional currency, and
to Emerging Market currencies, some of so the financial results
which are subject to exchange controls, and of such subsidiaries
these currencies, such as that of could be affected by
Venezuela, may be subject to material currency fluctuations
devaluations against the US dollar. Major arising between the
components of our cost base are located in transaction dates and the
the UK and Sweden, where an aggregate of settlement dates for these
approximately 20% of our employees are transactions. In
based.Limited third party insurance addition, there are
coverageIn recent years, the costs foreign exchange
associated with product liability differences arising on the
litigation have increased the cost of, and translation of equity
narrowed the coverage afforded by, investments in
pharmaceutical companies' product liability subsidiaries. ImpactIf we
insurance. To contain insurance costs in are found to have a
recent years, we have continued to adjust financial liability due to
our coverage profile, accepting a greater product liability or
degree of uninsured exposure. The Group other litigation, in
has not held any material product liability respect of which we do not
insurance since February 2006. In have insurance coverage,
addition, where claims are made under or if an insurer's denial
insurance policies, insurers may reserve of coverage is ultimately
the right to deny coverage on various upheld, this could
grounds. For example, product liability require us to make
litigation cases relating to Crestor and significant provisions in
Nexium in the US are not covered by third our accounts relating to
party product liability insurance. See Note legal proceedings and
27 to the Financial Statements from page could materially adversely
186 for details.TaxationThe integrated affect our business or
nature of our worldwide operations can results of operations.For
produce conflicting claims from revenue more information, please
authorities as to the profits to be taxed see the Substantial
in individual countries. The majority of the product liability claims
jurisdictions in which we operate have risk on page 223.ImpactThe
double tax treaties with other foreign resolution of these
jurisdictions, which provide a framework disputes can result in a
for mitigating the incidence of double reallocation of profits
taxation on our revenues and capital between jurisdictions and
gains.AstraZeneca's worldwide operations are an increase or decrease in
taxed under laws in the jurisdictions in related tax costs, and
which they operate. International standards has the potential to
governing the global tax environment affect our cash flows and
regularly change. The Organisation for EPS. Claims, regardless
Economic Co-operation and Development (OECD) of their merits or their
has proposed a number of changes under the outcome, are costly,
Base Erosion and Profit Shifting (BEPS) divert management
Action Plans.PensionsOur pension obligations attention and may
are largely backed by assets invested adversely affect our
across the broad investment market. Our most reputation.If any of these
significant obligations relate to the UK double tax treaties should
pension fund. be withdrawn or amended,
especially in a territory
where a member of the
Group is involved in a
taxation dispute with a
tax authority in relation
to cross-border
transactions, such
withdrawal or amendment
could materially
adversely affect our
business or results of
operations, as could a
negative outcome of a
tax dispute or a failure
by the tax authorities to
agree through competent
authority proceedings. See
the Financial risk
management policies
section of the Financial
Review on page 76 for tax
risk management policies
and Note 27 to the
Financial Statements on
page 186 for details of
current tax
disputes.Changes in tax
regimes 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 OECD,
governments and tax
authorities through public
consultations to ensure
international institutions
and governments
understand the business
implications of 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.ImpactSustained
falls in these asset
values could reduce
pension fund solvency
levels, which may result
in requirements for
additional cash,
restricting the cash
available for business
growth. Similarly, if the
present value of the
liabilities increase 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
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. See
Note 20 to the Financial
Statements from page 166
for further details of the
Group's pension
obligations.
APPENDIX B
This statement relates to and is extracted from the Annual Report. It is
repeated here solely for the purpose of complying with DTR 6.3.5. It is not
connected to the information presented in this announcement or in the Company's
fourth quarter and full year results 2015 announcement that was published on 4
February 2016.
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 4 February 2016
Pascal Soriot
Director
APPENDIX C
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.
Annual Financial Report
| Source: AstraZeneca PLC
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