AstraZeneca Annual Report and Form 20-F Information 2011

Financial Statements25 Commitments and contingent liabilities continued IP claims include challenges to the Group’s patents on various productsLegal proceedingsAstraZeneca is involved in various legal proceedings consideredtypical to its business, including actual or threatened litigation and/oractual or potential government investigations relating to employmentmatters, product liability, commercial disputes, pricing, sales andmarketing practices, infringement of IP rights, the validity of certainpatents and competition laws. The more significant matters arediscussed below.Most of the claims involve highly complex issues. Often these issuesare subject to substantial uncertainties and, therefore, the probabilityof a loss, if any, being sustained and an estimate of the amount of anyloss is difficult to ascertain. Consequently, for a majority of these claims,it is not possible to make a reasonable estimate of the expectedfinancial effect, if any, that will result from ultimate resolution of theproceedings. In these cases, AstraZeneca discloses information withrespect to the nature and facts of the cases.or processes and assertions of non-infringement of patents. A lossin any of these cases could result in loss of patent protection onthe related product. The consequences of any such loss could bea significant decrease in product sales, which could have a materialadverse effect on our results. The lawsuits filed by AstraZeneca forpatent infringement against companies that have filed ANDAs in theUS, seeking to market generic forms of products sold by the Groupprior to the expiry of the applicable patents covering these products,typically also involve allegations of non-infringement, invalidity andunenforceability of these patents by the ANDA filers. In the event thatthe Group is unsuccessful in these actions or the statutory 30-monthstay expires before a ruling is obtained, the ANDA filers involved willalso have the ability, subject to FDA approval, to introduce genericversions of the product concerned.AstraZeneca has full confidence in, and will vigorously defend andenforce, its IP.With respect to each of the legal proceedings described below, otherthan those for which provision has been made, we are unable to makeestimates of the possible loss or range of possible losses at this stage,other than as set forth in this section. We also do not believe thatdisclosure of the amount sought by plaintiffs, if known, would bemeaningful with respect to those legal proceedings. This is due toa number of factors, including (1) the stage of the proceedings (inmany cases trial dates have not been set) and the overall lengthand extent of pre-trial discovery; (2) the entitlement of the parties toan action to appeal a decision; (3) clarity as to theories of liability,damages and governing law; (4) uncertainties in timing of litigation;and (5) the possible need for further legal proceedings to establishthe appropriate amount of damages, if any.While there can be no assurance regarding the outcome of any of thelegal proceedings referred to in this Note 25, based on management’scurrent and considered view of each situation, we do not currentlyexpect them to have a material adverse effect on our financial position.This position could of course change over time, not least because ofthe factors referred to above.In cases that have been settled or adjudicated, or where quantifiablefines and penalties have been assessed and which are not subjectto appeal (or other similar forms of relief), or where a loss is probableand we are able to make a reasonable estimate of the loss, we indicatethe loss absorbed or the amount of the provision accrued.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 theyare incurred.Where it is considered that the Group has a valid contract whichprovides the right to reimbursement (from insurance or otherwise)of legal costs and/or all or part of any loss incurred or for whicha provision has been established, and we consider recovery to bevirtually certain, the best estimate of the amount expected to bereceived 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 complexjudgements about future events and can rely heavily on estimatesand assumptions. AstraZeneca believes that the provisions recordedare adequate based on currently available information and that theinsurance recoveries recorded will be received. However, given theinherent uncertainties involved in assessing the outcomes of thesecases, and in estimating the amount of the potential losses and theassociated insurance recoveries, we could in the future incur judgmentsor insurance settlements that could have a material adverse effect onour results in any particular period.Over the course of the past several years, including in 2011, a significantnumber of commercial litigation claims in which AstraZeneca is involvedhave been resolved, particularly in the US, thereby reducing potentialcontingent liability exposure arising from such litigation. Similarly,in part due to patent litigation and settlement developments, greatercertainty has been achieved regarding possible generic entry dateswith respect to some of our patented products. At the same time, likeother companies in the pharmaceutical sector and other industries,AstraZeneca continues to be subject to government investigationsaround the world.Patent LitigationArimidex (anastrozole)Patent/regulatory proceedings outside the USAstraZeneca is engaged in proceedings in Canada and Russiaregarding patent and/or regulatory exclusivity for Arimidex.Atacand (candesartan cilexetil)Patent/regulatory proceedings outside the USAstraZeneca is engaged in proceedings in Portugal and Canadaregarding patent and/or regulatory exclusivity for Atacand.Atacand Plus (candesartan cilexetil/hydrochlorothiazide)Patent/regulatory proceedings outside the USAstraZeneca is engaged in proceedings in Portugal and Canadaregarding patent and/or regulatory exclusivity for Atacand Plus.In July 2011, an Atacand Plus patent (European patent no. 753301)was revoked by a Technical Board of Appeal at the European PatentOffice (EPO).In Canada, in 2011, AstraZeneca settled notice of complianceproceedings with Pharmascience Inc., Teva Canada Limited andSandoz Canada, Inc., allowing those companies to enter the Canadianmarket on 23 September 2012, or earlier, in certain circumstances.Crestor (rosuvastatin calcium)US patent litigation/regulatory proceedingsSeveral defendants appealed the 2010 decision in the US DistrictCourt for the District of Delaware finding in favour of AstraZeneca thatthe substance patent covering the active ingredient in Crestor tabletsis valid, enforceable and infringed. The parties await the decision ofthe US Court of Appeals for the Federal Circuit (the Federal Circuit).AstraZeneca is also engaged in patent litigation in the US District Courtfor the District of Delaware in which it contends that a §505(b)(2) NDAfor rosuvastatin zinc tablets infringes the substance patent and otherpatents for Crestor tablets. The Court has scheduled a trial in thislitigation to begin on 24 September 2012.184 Financial StatementsAstraZeneca Annual Report and Form 20-F Information 2011