Final Results - Part 2 of 3

Condensed Consolidated Statement of Comprehensive Income

1 In 2011, research and development includes a total of $553 million of intangible asset impairments relating to olaparib, TC-5214 and other projects in development. In 2010, research and development includes a $445 million impairment of intangible assets related specifically to motavizumab.

2 In 2010, selling, general and administrative costs includes a provision of $592 million with respect to Seroquel legal matters and gains of $791 million arising from changes made to benefits under certain of the Group's post-retirement benefit plans, chiefly the Group's UK pension plan.

Condensed Consolidated Statement of Comprehensive Income

1 In 2011, research and development includes a total of $471 million of intangible asset impairments relating to olaparib, TC-5214 and other projects in development. In 2010, research and development includes a $445 million impairment of intangible assets related specifically to motavizumab.

2 In 2010, selling, general and administrative costs includes gains of $791 million arising from changes made to benefits under certain of the Group's post-retirement benefit plans, chiefly the Group's UK pension plan.

Condensed Consolidated Statement of Financial Position

Condensed Consolidated Statement of Cash Flows

1 2010 restated to reclassify $114m cash paid in hedge contracts relating to dividend payments to cash flows from financing activities.

Condensed Consolidated Statement of Changes in Equity

* Other reserves includes the capital redemption reserve and the merger reserve.

Notes to the Interim Financial Statements

The preliminary announcement for the year ended 31 December 2011 has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and as issued by the International Accounting Standards Board. There have been no significant changes in accounting policies from those set out in AstraZeneca PLC's Annual Report and Form 20-F Information 2010.

The information contained in Note 5 updates the disclosures concerning legal proceedings and contingent liabilities in the Group's Annual Report and Form 20-F Information 2010 and the Third Quarter and Nine Months Results 2011.

The Group has considerable financial resources available. The Group's revenues are largely derived from sales of products which are covered by patents and for which, historically at least, demand has been relatively unaffected by changes in the general economy. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook and as such, the preliminary announcement has been prepared on a Going Concern basis.

The financial information included in the preliminary announcement does not constitute statutory accounts of the Group for the years ended 31 December 2011 and 2010 but is derived from those accounts. Statutory accounts for 2010 have been delivered to the registrar of companies and those for 2011 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

The table below provides an analysis of net funds and a reconciliation of net cash flow to the movement in net funds.

Non-cash movements in the period include fair value adjustments under IAS 39.

Profit before tax for the year ended 31 December 2011 is stated after charging restructuring costs of $1,161 million ($1,202million in 2010). These have been charged to profit as follows:

In August 2011, the Group announced the sale of the Astra Tech business to Dentsply International for approximately $1.8 billion in cash. At 31 December 2011, the Group has reported a profit on disposal of $1,483 million and a total cash inflow of $1,772 million as a result of this transaction.

AstraZeneca is involved in various legal proceedings considered typical to its business, including litigation and investigations relating to product liability, commercial disputes, infringement of intellectual property rights, the validity of certain patents, anti-trust law and sales and marketing practices. The matters discussed below constitute the more significant developments since publication of the disclosures concerning legal proceedings in the Company's Annual Report and Form 20-F Information 2010 and the Interim Management Statement 2011 as part of the Company's Half-Yearly Financial Report for the six-month period to 30 June 2011 and the Third Quarter and Nine Month results 2011 (together "2011 Disclosures"). Unless noted otherwise below or in the 2011 Disclosures, no provisions have been established in respect of the claims discussed below.

As discussed in the Company's Annual Report and Form 20-F Information 2010, for the majority of claims in which AstraZeneca is involved it is not possible to make a reasonable estimate of the expected financial effect, if any, that will result from ultimate resolution of the proceedings. In these cases, AstraZeneca discloses information with respect only to the nature and facts of the cases but no provision is made.

In cases that have been settled or adjudicated, or where quantifiable fines and penalties have been assessed and which are not subject to appeal, or where a loss is probable and we are able to make a reasonable estimate of the loss, we record the loss absorbed or make a provision for our best estimate of the expected loss.

The position could change over time and the estimates that we have made and upon which we have relied in calculating these provisions are inherently imprecise. There can, therefore, be no assurance that any losses that result from the outcome of any legal proceedings will not exceed the amount of the provisions that have been booked in the accounts. The major factors causing this uncertainty are described more fully in the Annual Report and Form 20-F Information 2010 and herein.

AstraZeneca has full confidence in, and will vigorously defend and enforce, its intellectual property.

Matters disclosed in respect of the fourth quarter of 2011 and January 2012

Crestor (rosuvastatin calcium)

Patent litigation - US

Teva Pharmaceutical Industries LTD. (Teva LTD) Infringement suit in the Eastern District of Pennsylvania

In December 2011, the US Court of Appeals for the Federal Circuit affirmed the decision by the US District Court for the Eastern District of Pennsylvania granting AstraZeneca's motion for summary judgment and invalidating Teva LTD's formulation patent.

Regulatory Related Matters - US 

In November 2011, AstraZeneca filed a Citizen Petition with the FDA for Crestor asking the FDA to withhold approval of any generic rosuvastatin drug product which omits from its labelling the diabetes-related warning and adverse reaction information which AstraZeneca was required to include in Crestor's labelling when the FDA approved Crestor's primary prevention of cardiovascular disease indication. The FDA is required to issue a decision on this petition by 12 May 2012. 

Regulatory litigation - Brazil

The court denied AstraZeneca's request for data exclusivity for Crestor. AstraZeneca requested an interlocutory appeal of the decision, which was denied. AstraZeneca filed a motion for reconsideration in September 2011, which was denied in November 2011.

Patent litigation - Australia 

Apotex Pty Ltd. (Apotex) challenged the validity of AstraZeneca's Australian patent no. 769897 regarding the use of starting dosages of 5mg and 10mg dose of rosuvastatin (dosage patent) in May 2011. In November 2011, AstraZeneca was informed that Apotex was intending to start commercialising its generic rosuvastatin product. AstraZeneca sought a preliminary injunction based on the dosage patent, a formulation patent and the patent claiming the use of Crestor for heterozygous familial hypercholesterolemia (HeFH). In December 2011, the Court granted the preliminary injunction until further order. Apotex's motion to vacate the injunction was heard on 31 January 2012. A decision is pending.

In January 2012, AstraZeneca instituted proceedings against Watson Pharm Pty Ltd. (Watson) and Actavis Australia Pty Ltd. (Actavis) asserting infringement of the dosage patent, formulation patent and HeFH patent for Crestor. AstraZeneca has applied for interlocutory relief against both Watson and Actavis, pending resolution of the infringement actions. Sandoz has agreed to an undertaking to refrain from launching a product pending decisions on the Apotex, Watson and Actavis injunctions.

Patent litigation - Mexico 

In November 2011, AstraZeneca filed a lawsuit against the Mexican Health Authority, contesting the Sandoz rosuvastatin health registration claiming that it is in violation of the linkage regulation. As part of the lawsuit, AstraZeneca also requested a preliminary injunction to stay the Sandoz health registration. The preliminary injunction was first granted and then lifted by the court in December 2011. AstraZeneca has appealed the decision to lift the preliminary injunction. Sandoz' product is on the market.

Patent litigation - Canada

In Canada, in January 2012, the Federal Court of Canada held a hearing in the patent proceeding involving Pharmascience Inc. The parties await the Court's decision. In 2011, AstraZeneca reached settlements with, Mylan Pharmaceuticals Inc., (Mylan) and Ranbaxy Pharmaceuticals Canada Inc. resolving the litigation regarding AstraZeneca's Crestor substance patent, and, as part of the agreements, those companies may enter the Canadian market on 2 April 2012, or earlier, in certain circumstances.

Iressa (gefitinib)

Product liability - Japan

AstraZeneca and the Japanese Ministry of Health, Labour and Welfare (MHLW) appealed the decision of the Tokyo District Court ordering AstraZeneca and the MHLW to pay approximately $192,000, plus interest. In November 2011, the Tokyo High Court reversed the Tokyo District Court decision and ruled that neither AstraZeneca, nor the MHLW, had any liability for any of the claims. The plaintiffs have appealed the Tokyo High Court decision to the Japanese Supreme Court.

Losec/Prilosec (omeprazole)

European Commission omeprazole case

AstraZeneca is awaiting a ruling on the cross-appeals from the General Court of the European Union's judgment regarding the European Commission's 2005 decision fining AstraZeneca €60 million (reduced to €52.5 million by the General Court) for abuse of a dominant position regarding omeprazole. An oral hearing took place on 12 January 2012.

Nexium (esomeprazole magnesium)

Patent litigation - US

In January 2012, AstraZeneca entered into a settlement agreement with Lupin Ltd. (Lupin) to settle AstraZeneca's previously disclosed patent infringement suit against Lupin in the US District Court for the District of New Jersey in respect of Lupin's ANDA for esomeprazole magnesium delayed-release capsules. As part of the settlement agreement, AstraZeneca has granted Lupin a licence to enter the US market with its generic esomeprazole magnesium product on 27 May 2014, subject to regulatory approval, or earlier in certain circumstances. 

In January 2012, AstraZeneca commenced a patent infringement action against Torrent Pharmaceuticals Ltd. (Torrent) in the US District Court for the District of New Jersey based on Torrent's December 2011 Paragraph IV notice letter stating that it had submitted an ANDA for approval to market esomeprazole magnesium capsules. Torrent alleges non-infringement and/or invalidity of 11 patents listed in the Orange Book in reference to Nexium.

In January 2012, AstraZeneca received a Paragraph IV Certification notice letter from Mylan Laboratories Limited (Mylan) stating that it had submitted an ANDA for approval to market esomeprazole magnesium capsules. Mylan alleges non-infringement and/or invalidity of three patents listed in the Orange Book in reference to Nexium. AstraZeneca is evaluating Mylan's notice.

Patent litigation - EU: 10-year countries

In July 2010, Consilient Health Limited (Consilient) was granted marketing approval in the UK for a generic esomeprazole product manufactured by Krka, d.d., Novo Mesto (Krka). AstraZeneca initiated infringement proceedings against Consilient and Krka in September 2010. In December 2011, the parties agreed to settle these cases.

In October 2011, the Court stayed the infringement case against Krka in Sweden pending the outcome of the proceedings at the European Patent Office (EPO) regarding EP 1020461 (the '461 patent). In January 2011, AstraZeneca was served with a lawsuit filed by ratiopharm GmbH and ratiopharm AB (both ratiopharm) claiming that the Nexium esomeprazole magnesium patent (the '461 patent) is invalid in Sweden. In November 2011, the Court stayed the invalidity case initiated by ratiopharm pending the outcome of the proceedings at the EPO regarding the '461 patent.

Patent litigation - Finland

In July 2008, AstraZeneca initiated a declaratory action against Sandoz AS and Sandoz A/S and in September 2008 Hexal AG, Sandoz Oy Ab and Sandoz A/S initiated an invalidity case regarding the esomeprazole enantiomer patent. On 22 December 2011, the Helsinki District Court found the patent invalid and also dismissed AstraZeneca's claims in the declaratory action. AstraZeneca has the opportunity to appeal.

Patent litigation - Turkey

In July 2011, AstraZeneca initiated patent infringement proceedings against Logus Ilac, Integri Ilac, Vem Ilac, Biofarma Ilac and Sandoz Ilac San. ve Tic. AS based on esomeprazole related patents. In September 2011, the Court dismissed the case against Integri Ilac. In October 2011, the Court dismissed the case against Biofarma Ilac and Logus Ilac due to the fact that these companies had transferred their applications for marketing authorisations to third parties.

Government investigations/proceedings

The Dutch National Competition Authority (NMa) investigation into alleged practices regarding Nexium and alleged breaches of both Dutch and EU competition laws is ongoing. On 23 December 2011, the investigation team issued a report alleging foreclosure of generic versions of certain Proton Pump Inhibitors. The file has now been passed to the Legal Department of the NMa.

Seroquel (quetiapine fumarate)

Product liability

With regard to Seroquel product liability litigation in the US, which primarily relates to diabetes and/or other related injuries, as of 31 January 2012, AstraZeneca was aware of approximately 25 claims that have not been settled in principle. As of 31 January 2012, pursuant to court-ordered mediation, AstraZeneca has reached agreements in principle on monetary terms, subject to various subsequent conditions, approvals and agreement on non-monetary terms, with the attorneys representing 28,575 claimants. The mediation process is ongoing with regard to other currently unsettled claims.

With regard to insurance coverage for the substantial legal defence costs and settlements that have been incurred in connection with Seroquel-related product liability claims, disputes continue with insurers about the availability of coverage under insurance policies. These policies have aggregate coverage limits of $300 million. In September 2011, AstraZeneca Insurance Company Limited commenced formal legal proceedings in the High Court, in London, against two of these insurers for recovery of money which AstraZeneca believes is due under two of these policies. No insurance receivable can be recognised under applicable accounting standards at this time.

State Attorney General Matters

Various states have sued AstraZeneca generally alleging that AstraZeneca made false and/or misleading statements in marketing and promoting Seroquel. AstraZeneca reached settlement agreements in principle with the Attorneys General of Arkansas in November 2011 and Alaska in December 2011 and provisions have been taken.

Patent litigation - Portugal

In the cases against Generis Farmacêutica, S.A., KRKA - Farmacêutica, Sociedade Unipessoal, Lda., Mer Medicamentos, Lda. and Wynn Industrial Pharma, S.A. preliminary injunctions were granted by the Court of Appeal in November 2011.

In October 2011, the Court of Appeal granted preliminary injunctions against Cinfa Portugal, Lda. and Bluescience Lda., S.A. and ordered suspension of their retail price until 27 March 2012.

Seroquel XR (quetiapine fumarate)

Patent Litigation - Canada 

In November 2011, Sandoz Canada Inc. (Sandoz) filed a Statement of Claim against AstraZeneca in respect of the Canadian patent no. 2,251,944 (the '944 patent). Sandoz seeks a declaration that its generic copies of Seroquel XR do not infringe the '944 patent.

Patent Litigation - the Netherlands

In January 2012, the District Court in the Hague heard the revocation action filed by Sandoz BV, Hexal AG, Accord Healthcare Ltd and Accord Healthcare BV against AstraZeneca AB. A decision is expected in March 2012.

Synagis (palivizumab)

In September 2011, AstraZeneca's biologics unit, MedImmune, filed an action against Abbott International, LLC (Abbott) in the Circuit Court for Montgomery County, Maryland.  Abbott moved to dismiss the action and MedImmune filed its opposition. A hearing on the motions has been set for 9 February 2012.

In September 2011, Abbott filed a parallel action in the Illinois State Court. MedImmune filed a motion to dismiss the action and Abbott filed a motion seeking to deposit the 'disputed funds' in escrow. Both MedImmune's motion to dismiss and Abbott's motion for escrow were heard on 19 January 2012. A ruling on those motions is expected by mid-February.

Symbicort (budesonide/formoterol)

Patent litigation - US 

In December 2011, Accuhale LLC (Accuhale) filed a patent infringement action against AstraZeneca in the US District Court for the Eastern District of Texas. Accuhale alleges sales of Symbicort infringe its US Patent No. 5,718,355.

Vimovo(fixed-dose combination of naproxen and esomeprazole)

Patent litigation - US

In October 2011, AstraZeneca and Pozen Inc. sued Anchen Pharmaceuticals, Inc. (Anchen) in the US District Court for the District of New Jersey for patent infringement based on Anchen's September 2011 Paragraph IV notice letter to AstraZeneca stating that Anchen had submitted an ANDA for approval to market generic versions of Vimovo tablets before expiration of patents listed in the Orange Book referencing Vimovo.

Other Commercial Litigation

Toprol XL (metoprolol succinate)

AstraZeneca is defending anti-trust claims regarding the listing and enforcement of patents protecting Toprol XL, brought by both direct purchasers and end-payers. In December 2011, AstraZeneca paid $15 million to settle the claims of those plaintiffs who have opted-out of the putative class of direct purchasers and took a corresponding provision. AstraZeneca continues to defend against the remaining claims alleged by end-payers.

Other Government Investigations

Serbia

In August 2011, AstraZeneca UK Limited's Representative Office in Belgrade, Serbia was served with a criminal indictment alleging that local employees of AstraZeneca, and several other pharmaceutical companies who are also named defendants in the indictment, made allegedly improper payments to physicians at the Institute of Oncology and Radiology of Serbia. AstraZeneca filed a number of preliminary procedural objections asking the Serbian criminal court to dismiss the indictment against the Representative Office and those objections were granted in November 2011. The Serbian prosecutor then amended and re-served the indictment, and in December 2011 AstraZeneca asked the Court again to dismiss the indictment.

Advance PCS

In November 2006, AstraZeneca was notified of an inquiry by the US Attorney's Office for the Eastern District of Pennsylvania regarding whether a payment made by AstraZeneca to Advance PCS was taken into account when calculating best price. In December 2011, the matter was resolved in principle with Centers for Medicare and Medicaid Services and the Department of Justice.

Korea - KFTC Investigation

In September 2011, the Korean Fair Trade Commission (KFTC) announced administrative fines against AstraZeneca and five other pharmaceutical companies as a result of the third and final wave of its investigation into alleged unfair trade practices related to interactions between the local pharmaceutical industry and Korean healthcare providers. AstraZeneca was fined KRW 1,512 million (approximately US$ 1.24 million), but was not referred to the public prosecutor for criminal proceedings. The KFTC's final investigation report was provided to AstraZeneca in November and alleges that AstraZeneca Korea induced prescriptions through improper marketing to physicians in 2006 and 2007, but recognises that such alleged unfair conduct stopped in 2007 after AstraZeneca voluntarily implemented an improved and effective compliance programme across its business in Korea.

1 Western Europe comprises France, Germany, Italy, Sweden, UK and others.

2Established ROW comprises Australia, Canada, Japan and New Zealand.

3 Emerging ROW comprises Brazil, China, India, Mexico, Russia, Turkey and all other ROW countries.

1 Western Europe comprises France, Germany, Italy, Sweden, UK and others.

2Established ROW comprises Australia, Canada, Japan and New Zealand.

3 Emerging ROW comprises Brazil, China, India, Mexico, Russia, Turkey and all other ROW countries.