AstraZeneca Annual Report and Form 20-F Information 2011

Using the full range of innovative technologies, the industry is focusedon two critical milestones: Proof of Concept, which delivers candidatedrugs with supporting data demonstrating that the drug results in aclinical change with an acceptable endpoint or surrogate in patientswith the disease, and, secondly, product approval.Organisationally, companies are addressing productivity challengesin a variety of ways. These include:> focusing on a defined set of therapeutic areas, and exiting thosewhere success has been poor> restructuring R&D organisations to create clearer accountabilitiesand smaller, more entrepreneurial units> revamping decision making and governance, so that unsuccessfulcompounds are identified early, before significant costs havebeen incurred> reducing costs and improving process efficiency, using Leanbusiness improvement tools such as Six Sigma and outsourcing> a collaboration-centric business model that includes academiccollaborations and co-development agreements that provide forthe sharing of development risks and costs with third parties> looking externally for high quality science, technologies, targets,drug candidates, and/or entire drug pipelines.Regulatory requirementsOur industry continues to be one of the most heavily regulated.This reflects public interest in ensuring access to safe, effective andhigh quality medicines that are responsibly promoted. Given thenature and geographic scope of our business, we maintain importantrelationships with health authorities worldwide, including the FDA inthe US, the EMA in the EU, the Japan Pharmaceuticals and MedicalDevice Agency and the SFDA in China.Efforts to harmonise regulations globally are ongoing, yet thenumber of regulations and their impact continue to multiply. This isparticularly evident in the conduct of clinical trials. In order to supportthe registration of our products in a given regulatory jurisdiction,programmes providing foreign clinical trial data must meet eachindividual health authority’s requirements to ensure relevance to theirpopulation. Regulators also continue to redefine their patient safetyassessment processes. This includes the management of knownand emerging risks, both before and after product approval. In certainmarkets, additional safety initiatives are developing locally whichoperate independently of already established international standards,further increasing the complexity and disharmony of drug safetymonitoring and reporting. In addition, the growing complexity andglobalisation, of both clinical studies and the manufacturing supplychain, has led to an increase in cross-regional health authoritycollaborations and inspections in these areas.Public demand for access to data, especially clinical data, tounderstand how health authorities arrive at their regulatory decisions,has resulted in numerous transparency proposals worldwide. In someinstances, policies have been implemented without guidelines thatdefine personal, private and proprietary information. Thus therecan be no assurance that the data will be safeguarded againstpublic disclosure.There is mounting pressure from both health technology assessorsand payers to assess not only the safety of our products but alsotheir relative effectiveness and value. Consequently there is aheightened interest by health authorities in both the comparativeclinical effectiveness and the ongoing benefit/risk assessmentof pharmaceuticals after approval. The regulatory landscape isevolving with an increased focus on incorporating validated healthoutcome quality measures into clinical trials and developing clinicalcomparative evidence.Strategy and PerformanceEstimated pharmaceutical market growth 2010-20155.3%12.2%1.5%2.2%7.4%15.3%15.3%3.3%7.9%12.2%3.9%KeyEstimated sales – 2015*Estimated growth – 2010-2015(compound annual growth rate)North America Sales $357.4bn Growth 1.5%Europe (EU countries) Sales $237.4bn Growth 2.2%South East & East Asia Sales $147.1bn Growth 15.3%Japan Sales $120.6bn Growth 3.3%Latin America Sales $100.9bn Growth 12.2%Source: IMS Health, IMS Market Prognosis 2011-2015.* Ex-manufacturer prices at CER.CIS Sales $33.5bn Growth 12.2%Indian Subcontinent Sales $32.1bn Growth 15.3%Europe (Non EU countries) Sales $27.6bn Growth 5.3%Africa Sales $25.0bn Growth 7.9%Oceania Sales $16.7bn Growth 3.9%Middle East Sales $15.4bn Growth 7.4%AstraZeneca Annual Report and Form 20-F Information 2011Strategy and Performance The pharmaceutical industry 17