AstraZeneca Annual Report and Form 20-F Information 2011

RiskSupply chain and delivery risksManufacturing biologicsManufacturing biologics, especially in large quantities, is complex and may require the use ofinnovative technologies to handle living micro-organisms and facilities specifically designed andvalidated for this purpose, with sophisticated quality assurance and control procedures.Reliance on third parties for goodsWe increasingly rely on third parties for the timely supply of goods, such as specified rawmaterials (for example, the active pharmaceutical ingredient in some of our medicines),equipment, formulated drugs and packaging, all of which are key to our operations.Unexpected events and/or events beyond our control could result in the failure of the supplyof goods. For example, suppliers of key goods we rely on may cease to trade. In addition, wemay have limited supply of biological materials, such as cells, animal products or by-products.Furthermore, government regulations in multiple jurisdictions could result in restricted accessto, use or transport of, such materials.ImpactSlight deviations in any part of the manufacturingprocess may result in lot failure, product recalls orspoilage, for example due to contamination.ImpactThird party supply failure could materially adverselyaffect our financial condition and results ofoperations. This may lead to significant delays and/or difficulties in obtaining goods and services oncommercially acceptable terms.Loss of access to sufficient sources of suchmaterials may interrupt or prevent our researchactivities as planned and/or increase our costs.Further information is contained in the Managingsourcing risk section on page 39.Legal, regulatory and compliance risksAdverse outcome of litigation and/or governmental investigationsWe may be subject to legal proceedings and governmental investigations. Litigation, particularlyin the US, is inherently unpredictable and unexpectedly high awards for damages can resultfrom an adverse verdict. In many cases, plaintiffs may claim compensatory, punitive andstatutory damages in extremely high amounts. In particular, the marketing, promotional, clinicaland pricing practices of pharmaceutical manufacturers, as well as the manner in whichmanufacturers interact with purchasers, prescribers, and patients, are subject to extensiveregulation, litigation and governmental investigation. Many companies, including AstraZeneca,have been subject to claims related to these practices asserted by federal and stategovernmental authorities and private payers and consumers which have resulted in substantialexpense and other significant consequences. Note 25 to the Financial Statements from page181 describes the material legal proceedings in which we are currently involved.Substantial product liability claimsPharmaceutical companies have, historically, been subject to large product liability damagesclaims, settlements and awards for injuries allegedly caused by the use of their products.Adverse publicity relating to the safety of a product or of other competing products mayincrease the risk of product liability claims.Failure to adhere to applicable laws, rules and regulationsAny failure to comply with applicable laws, rules and regulations may result in civil and/orcriminal legal proceedings being filed against us, or in us becoming subject to regulatorysanctions. Regulatory authorities have wide-ranging administrative powers to deal with anyfailure to comply with continuing regulatory oversight (and this could affect us, whether suchfailure is our own or that of our third party contractors).ImpactInvestigations or legal proceedings, regardless oftheir outcome, could be costly, divert managementattention, or damage our reputation and demand forour products. Unfavourable resolution of current andsimilar future proceedings against us could subjectus to criminal liability, fines, penalties or othermonetary or non-monetary remedies; require us tomake significant provisions in our accounts relatingto legal proceedings; and could materially adverselyaffect our financial condition and results ofoperations.ImpactSubstantial product liability claims that result incourt decisions against us or in the settlement ofproceedings could materially adversely affect ourfinancial condition and results of operations,particularly where such circumstances are notcovered by insurance. Further details of ourSeroquel product liability litigation are set out inNote 25 to the Financial Statements from page 181.ImpactThis could materially adversely affect the conduct ofour business.For example, once a product has been approvedfor marketing by regulatory authorities, it is subjectto continuing control and regulation, such as themanner of its manufacture, distribution, marketingand safety surveillance. In addition, any amendmentsthat are made to the manufacturing, distribution,marketing and safety surveillance processes ofour products may require additional regulatoryapprovals, which could result in significant additionalcosts and/or disruption to these processes. Suchamendments may be imposed on us as a result ofthe continuing inspections to which we are subjector may be made at our discretion. It is possible,for example, that regulatory issues concerningcompliance with current Good ManufacturingPractice or safety monitoring regulations forpharmaceutical products (often referred to aspharmacovigilance) could arise and lead to lossof product licences, product recalls and seizures,interruption of production leading to productshortages and delays in new product approvalspending resolution of the issues.136 RiskAstraZeneca Annual Report and Form 20-F Information 2011