AstraZeneca Annual Report and Form 20-F Information 2011

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Financial Statements25 Commitments and contingent liabilities continuedIn July 2011, the UK High Court held that Ranbaxy (UK) Ltd’s genericesomeprazole product does not infringe the Nexium esomeprazolemagnesium patent (the ’461 patent).In the Netherlands, in July 2011, the District Court of the Hagueupheld the validity of the Nexium esomeprazole magnesium patent(the ’461 patent). This decision has been appealed.In Finland, the District Court of Helsinki found the Nexium esomeprazoleenantiomer patent (FI 117755) invalid in December 2011.In Norway, in March 2011, the Appeal Court upheld the validity ofthe Nexium-related substance patent (NO 307378) and invalidatedthe Nexium-related formulation patent (NO 314125).Nexium i.v. (esomeprazole sodium)US patent litigationIn October 2011, AstraZeneca entered into an agreement with SunPharma Global FZE and affiliates (together Sun) to settle the ongoingpatent infringement suit against Sun in the US District Court for theDistrict of New Jersey with respect to Sun’s ANDA for esomeprazolesodium intravenous formulation. As part of the settlement agreement,AstraZeneca granted Sun a licence to enter the US market with itsgeneric esomeprazole sodium intravenous formulation on 1 January2014, subject to regulatory approval, or earlier in certain circumstances.Pulmicort Respules (budesonide inhalation suspension)US patent litigationAstraZeneca’s consolidated patent infringement lawsuits againstvarious generic companies for infringement of US patents directed tomethods of use and the form of active ingredient for Pulmicort Respulesproceed in the US District Court for the District of New Jersey. The 2010preliminary injunction against generic defendants, Apotex Inc. andApotex Corp., remains in place. As previously disclosed, in 2008,AstraZeneca resolved patent litigation with Teva respecting its genericcopies of Pulmicort Respules, thereby allowing Teva to begin marketingits generic product in December 2009.In May 2011, AstraZeneca received a Paragraph IV Certification noticeletter from Watson Laboratories, Inc. (Watson) indicating that it wasseeking approval to market a generic version of the 1.0mg/2.0mldosage form of Pulmicort Respules before patent expiration. In June2011, AstraZeneca filed a patent infringement suit against Watson inthe US District Court for the District of New Jersey.Seroquel (quetiapine fumarate)US regulatory proceedingsIn September 2011, AstraZeneca filed a Citizen Petition with the FDAin respect of Seroquel requesting the FDA withhold approval of anygeneric quetiapine drug product which omits from its labelling certainhyperglycemia and suicidality warning language that the FDA requiredAstraZeneca to include in the Seroquel labelling. The FDA is requiredto issue a decision by 7 March 2012.Patent/regulatory proceedings outside the USAstraZeneca is engaged in proceedings in Portugal regarding Seroquelrelated patents and/or regulatory exclusivity for Seroquel.Seroquel XR (quetiapine fumarate)US patent litigation/regulatory proceedingsAstraZeneca’s several patent infringement actions proceeded in theUS District Court for the District of New Jersey against various genericdrug manufacturers who have filed ANDAs seeking approval to marketgeneric copies of Seroquel XR tablets prior to the expiration ofAstraZeneca’s product patent covering Seroquel XR.In May 2011, the US District Court for the District of New Jerseyentered a consent order dismissing the pending patent infringementcase against Biovail Laboratories International SRL.In September 2011, AstraZeneca settled its patent infringement actionagainst Handa Pharmaceuticals, LLC (Handa) by granting Handaa licence to the Seroquel XR product patent, effective 1 November 2016,or earlier under certain circumstances.Also, in September 2011, AstraZeneca filed a Citizen Petition withthe FDA in respect of Seroquel XR requesting the FDA to withholdapproval of any generic quetiapine drug product which omits from itslabelling certain hyperglycemia and suicidality warning language thatthe FDA required AstraZeneca to include in the Seroquel XR labelling.The FDA is required to issue a decision by 7 March 2012.In October 2011, AstraZeneca settled its patent infringement actionagainst Intas Pharmaceutical Ltd. and Accord Healthcare Inc.(collectively, Accord) by granting Accord a licence to the Seroquel XRproduct patent, effective 1 November 2016, or earlier under certaincircumstances.In October 2011, the US District Court for the District of New Jerseyconducted a trial in the patent infringement actions involving theproduct patent against four of the five remaining defendant genericdrug manufacturers. A decision on claims of infringement andinvalidity of AstraZeneca’s product patent is pending.Patent/regulatory proceedings outside the USAstraZeneca is engaged in proceedings in Canada, the Czech Republic,Germany, Hungary, the Netherlands, Portugal, Romania, Spain, Turkeyand the UK regarding Seroquel XR related patents and/or regulatoryexclusivity for Seroquel XR. Trials are scheduled in the first quarter of2012 in the Netherlands, Spain and the UK.Synagis (palivizumab)US patent litigationIn December 2008, MedImmune initiated patent litigation againstPDL BioPharma, Inc. (PDL) in the US District Court for the NorthernDistrict of California. MedImmune sought a declaratory judgment thatthe Queen patents owned by PDL are invalid and/or not infringedby Synagis and/or motavizumab, and that no further royalties areowed under a patent licence MedImmune and PDL signed in 1997.The matter was settled in February 2011. This resulted in the recognitionof $131m credit to operating profit in 2011.Symbicort (budesonide/formoterol)US patent litigationIn December 2011, a complaint alleging patent infringement was filedagainst AstraZeneca in the US District Court for the Eastern District ofTexas by Accuhale LLC (Accuhale). Accuhale is purportedly the ownerof US patent no. 5,718,355, which Accuhale alleges is infringed by salesof Symbicort. AstraZeneca is evaluating the complaint.Patent litigation outside the USAstraZeneca is engaged in proceedings related to the validity and/orinfringement of AstraZeneca’s patents covering Symbicort in Turkey.Vimovo (fixed dose combination of naproxenand esomeprazole)US patent litigationIn 2011, AstraZeneca and Pozen commenced patent infringementactions in the US District Court for the District of New Jersey againstthree ANDA challengers seeking approval to market generic copiesof Vimovo prior to expiry of seven patents listed in the Orange Bookincluding the patent in-licensed from Pozen.186 Financial StatementsAstraZeneca Annual Report and Form 20-F Information 2011
25 Commitments and contingent liabilities continuedZestril (lisinopril)Patent/regulatory proceedings outside the USAs previously disclosed, in 1996, two of AstraZeneca’s predecessorcompanies, Zeneca Limited and Zeneca Pharma Inc. (as licensees),Merck & Co., Inc. and Merck Frosst Canada Inc. (together MerckGroup) commenced a patent infringement action in Canada againstApotex, Inc. (Apotex), alleging infringement of Merck Group’s lisinoprilpatent. In 2010, after having established Apotex’s liability, AstraZenecaand the Merck Group initiated proceedings to recover damages. Thatdamages matter proceeded in 2011.Zomig (zolmitriptan)Patent/regulatory proceedings outside the USAstraZeneca is engaged in proceedings in Canada and Portugalregarding patent and/or regulatory exclusivity for Zomig.With regard to insurance coverage for the substantial legal defencecosts and settlements that have been incurred in connection with theSeroquel product liability claims (which now exceed the total amountof insurance coverage available), disputes continue with insurers aboutthe availability of coverage under insurance policies. These policies haveaggregate coverage limits of $300m. No insurance receivable can berecognised under applicable accounting standards at this time.Commercial LitigationNexium (esomeprazole magnesium)Of the various putative class actions in the US alleging thatAstraZeneca’s promotion, advertising and pricing of Nexium tophysicians, consumers and third party payers was unfair, unlawful anddeceptive, only two cases remain pending. In the Massachusetts StateCourt case, a bench trial has been set to commence on 9 October2012. The Delaware State Court case has been stayed since May 2005.Product Liability LitigationIressa (gefitinib)Between 2004 and 2008, seven claims were filed against AstraZenecain Japan, in the Osaka and Tokyo District Courts. In these claims, it isalleged that Iressa caused a fatal incidence of interstitial lung disease inJapanese patients. In November 2011, the Tokyo High Court reversedthe Tokyo District Court’s decision and ruled that neither AstraZeneca,nor the Japanese Ministry of Health, Labour and Welfare, had anyliability for the Iressa product liability claims filed in the Tokyo DistrictCourt. The plaintiffs have appealed the Tokyo High Court decision tothe Japanese Supreme Court.AstraZeneca is awaiting a ruling from the Osaka High Court onAstraZeneca’s appeal of the February 2011 Osaka District Courtdecision, which ordered AstraZeneca to pay approximately $670,000,plus interest.Nexium (esomeprazole magnesium)Since April 2011, AstraZeneca has been named as a defendant inproduct liability lawsuits brought by plaintiffs alleging bone deterioration,loss of bone density and/or bone fractures caused by Nexium and/or Prilosec in the US. Currently, there are five served cases involving101 plaintiffs.Seroquel (quetiapine fumarate)With regard to Seroquel product liability litigation in the US, whichprimarily relates to diabetes and/or other related injuries, as of31 January 2012, AstraZeneca was aware of approximately 25 claimsthat have not been settled in principle. As of 31 January 2012, pursuantto court-ordered mediation, AstraZeneca has reached agreements inprinciple on monetary terms, subject to various subsequent conditions,approvals and agreement on non-monetary terms, with the attorneysrepresenting 28,575 claimants. The mediation process is ongoing withregard to other currently unsettled claims.In Canada, four putative class actions remain pending in the provincesof British Columbia, Alberta, Ontario and Quebec, alleging thatAstraZeneca failed to provide adequate warnings in connection withan alleged association between Seroquel and the onset of diabetes.AstraZeneca is awaiting an appellate ruling on the dismissal of theQuebec action. A decision on class certification in the Ontario actionis pending.A provision has been established in respect of the Seroquel productliability claims regarding both current and anticipated future settlementcosts as well as anticipated future defence costs associated withresolving all or substantially all remaining claims.Seroquel (quetiapine fumarate)Of the various state laws actions generally alleging that AstraZenecamade false and/or misleading statements in marketing and promotingSeroquel, AstraZeneca remains in litigation with the Attorneys Generalof Montana, New Mexico, South Carolina, Utah and Mississippi. In 2011,AstraZeneca reached settlement agreements in principle with theAttorneys General of the states of Arkansas and Alaska, and provisionshave been taken.In March 2011, the Eleventh Circuit Court of Appeals affirmed theNovember 2008 dismissal of a putative nationwide third party payerclass action lawsuit which alleged that AstraZeneca promotedSeroquel for off-label uses and as superior to lower-cost alternativemedicines. No further appeals were taken.Synagis (palivizumab)In September 2011, AstraZeneca’s biologics unit, MedImmune, fileda declaratory judgment action against Abbott International, LLC(Abbott) in the Circuit Court for Montgomery County, Marylandseeking a declaratory judgment related to a contract dispute betweenthe parties as to when the transfer price of Synagis would revert toa lower amount (the Reversion Event). Abbott moved to dismiss theaction and MedImmune filed its opposition. A hearing on the motionshas been set for 9 February 2012.In September 2011, Abbott filed a parallel action in the Illinois StateCourt for breach of contract and for a declaratory judgment regardingthe Reversion Event. MedImmune filed a motion to dismiss the actionand Abbott filed a motion seeking to deposit the ‘disputed funds’ inescrow. Both MedImmune’s motion to dismiss and Abbott’s motionfor escrow were heard on 19 January 2012. A ruling on those motionsis expected by mid-February 2012.Toprol-XL (metoprolol succinate)AstraZeneca is defending against anti-trust claims in the US regardingthe listing and enforcement of patents protecting Toprol-XL, broughtby both direct purchasers and end-payers. In 2011, AstraZeneca paid$35.75m in aggregate in connection with agreements to settle theclaims of the putative class of direct purchasers and those plaintiffs whohave opted-out of that class. A provision has been taken. AstraZenecacontinues to defend against the remaining claims alleged by end-payers.Other Commercial LitigationVerus Pharmaceuticals litigationIn June 2011, the US Court of Appeals for the Second Circuit affirmedthe trial court’s dismissal of Verus Pharmaceuticals Inc.’s lawsuit, whichhad alleged breaches of several related collaboration agreements todevelop novel paediatric asthma treatments.Financial StatementsAstraZeneca Annual Report and Form 20-F Information 2011 Financial Statements 187
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healthAstraZeneca Annual Reportand
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Financial summary$33.6bnSales down
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China: We announcedour decision to
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OverviewOperational overview7979 pr
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Chairman’s StatementI would like
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Chief Executive Officer’s ReviewA
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The process of getting a drug to ma
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OverviewnovationInnovation drives p
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Our Strategy and PerformanceMore pe
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Using the full range of innovative
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Our strategyMissionto make the most
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Our strategic priorities to 2014Our
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Our performance in 2011Our performa
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Business shapePeopleResponsible bus
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Strategy and PerformanceaborationIm
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Delivering our strategyOur strategy
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Development projects20112010 129342
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Investing in capabilitiesA core com
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Patent expiries for our key markete
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our Established Markets footprint i
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Product qualityWe are committed to
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We have a global approach, supporte
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ComplianceWe ensure a culture of et
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tegrityBusiness ReviewWe are dedica
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Delivering our strategyResponsible
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India has the fastest growing numbe
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ProtestsAstraZeneca acknowledges th
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Also in 2011, the DIHR in collabora
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healthcollaborationRaising breast c
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Pipeline by Therapy Area at 31 Dece
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Therapy Area ReviewIn September, we
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Therapy Area ReviewGastrointestinal
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Therapy Area ReviewInfectionTherapy
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Therapy Area ReviewIn the pipelineI
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Therapy Area ReviewOur financial pe
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Therapy Area ReviewOncologyTherapy
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Therapy Area Reviewendpoints of pro
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Therapy Area ReviewOur financial pe
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healthinnovationReducing the number
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Geographical ReviewUSAstraZeneca is
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Geographical ReviewEmerging Markets
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Disciplined execution of our strate
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Financial ReviewMeasuring performan
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Financial ReviewResults of operatio
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Financial ReviewFinancial position
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Financial ReviewCapitalisation and
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Financial ReviewResults of operatio
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Financial ReviewSensitivity analysi
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Financial Reviewover the performanc
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healthcollaborationFighting the ris
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Board of Directors and Senior Execu
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Board of Directors and Senior Execu
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Corporate Governance ReportOperatio
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Corporate Governance ReportThe Boar
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Corporate Governance ReportDuring 2
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Corporate Governance ReportBusiness
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Corporate Governance ReportPolitica
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Directors’ Remuneration ReportDav
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Directors’ Remuneration ReportVar
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Directors’ Remuneration ReportAdd
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Directors’ Remuneration ReportSum
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Directors’ Remuneration ReportSum
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Directors’ Remuneration ReportIn
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Directors’ Remuneration ReportPer
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Directors’ Remuneration ReportGai
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RiskManagement reporting and assura
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RiskCommercialisation and business
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RiskCommercialisation and business
Page 138 and 139: RiskSupply chain and delivery risks
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Page 142 and 143: Financial StatementsPreparation of
Page 144 and 145: Financial StatementsConsolidated St
Page 146 and 147: Financial StatementsConsolidated St
Page 148 and 149: Financial StatementsGroup Accountin
Page 150 and 151: Financial StatementsProperty, plant
Page 152 and 153: Financial StatementsNotes to the Gr
Page 154 and 155: Financial Statements3 Finance incom
Page 156 and 157: Financial Statements4 Taxation cont
Page 158 and 159: Financial Statements6 Segment infor
Page 160 and 161: Financial Statements9 Intangible as
Page 162 and 163: Financial Statements10 Other invest
Page 164 and 165: Financial Statements15 Financial in
Page 166 and 167: Financial Statements15 Financial in
Page 168 and 169: Financial Statements18 Post-retirem
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Page 172 and 173: Financial Statements20 Share capita
Page 174 and 175: Financial Statements23 Financial ri
Page 176 and 177: Financial Statements23 Financial ri
Page 178 and 179: Financial Statements24 Employee cos
Page 184 and 185: Financial Statements25 Commitments
Page 192 and 193: Financial Statements26 LeasesTotal
Page 194 and 195: Financial StatementsIndependent Aud
Page 196 and 197: Financial StatementsCompany Account
Page 198 and 199: Financial Statements4 ReservesShare
Page 200 and 201: Financial StatementsGroup Financial
Page 202 and 203: Development PipelineNCEsPhase III/R
Page 204 and 205: Development PipelineNCEsPhases I an
Page 206 and 207: Shareholder Information> For shares
Page 208 and 209: Shareholder InformationDocuments on
Page 210 and 211: Corporate InformationHistory and de
Page 212 and 213: GlossaryThe following abbreviations
Page 214 and 215: Index2011 performance summary 23Acc
Page 216: Contact informationRegistered offic
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