ASTRA 98 A N N U A L R E P O R T CONTENTS LIST OF DIAGRAMS 1 Astra highlights 1998 GROUP REVIEW 2 AstraZeneca—a winning combination 8 Sales 3 The year in figures 10 Astra’s pharmaceutical sales in various countries 12 Pretax earnings 4 Chairman of the Board 12 Profitability and profit margin 6 The President and CEO 15 Capital expenditures 8 Group review TREASURY OPERATIONS 17 Treasury operations 17 Liquid assets and loans per currency 20 Astra shares 17 Development of important currencies in relation to SEK 22 Astra’s research and development—an overview 17 Currency flow 24 Gastrointestinal 18 Balance sheet net monetary assets 27 Cardiovascular 18 Investments per counterparty, December 31 19 Liquid assets 31 Respiratory 19 Liabilities and stockholders’ equity 35 Pain control ASTRA SHARES 38 Central nervous system 20 Dividend and earnings per share 40 Astra Tech 20 Price trend of Astra shares 42 Astra’s environmental work 21 Trading volume of Astra shares 1998 44 Astra’s employees 21 Astra shares around the world, December 31, 1998 45 Special article: USA – the world’s largest GASTROINTESTINAL pharmaceutical market 24 World market 1998 49 Consolidated financial statements 26 Sales 53 Parent company financial statements CARDIOVASCULAR 56 Notes to the financial statements 27 World market 1998 68 Auditors’ report 28 Sales 69 Year 2000 RESPIRATORY 70 Board of Directors and auditors 31 World market 1998 32 Sales 72 Astra’s organization, February 1999 74 Astra worldwide PAIN CONTROL 35 World market 1998 76 Overview, 1988–98 36 Sales 78 Registered trademarks CENTRAL NERVOUS SYSTEM 38 World market 1998 Definitions of key ratios are provided on p. 77. ASTRA TECH 40 Sales ASTRA’S EMPLOYEES 44 Number of employees (yearly average) 44 Number of employees by area of operation (yearly average) PHOTO THEME: THE RESEARCHER AT WORK Pharmaceutical research is about the search for new knowledge. Astra’s researchers have made numerous discoveries that have led to medical breakthroughs. The life of a researcher, however, consists in large part of the time-consuming and patient work on repeated studies and experiments, many of which never show the desired result. The pictures in this annual report illustrate various settings from the everyday work at Astra’s research laboratories. ANNUAL MEETING OTHER The Annual Meeting of Stockholders will be held on Financial information and press releases from Astra AB Tuesday, April 6, 1999, at 2 p.m. at the City Conference are available on Astra’s website: www.astra.com Centre, Folkets Hus, Barnhusgatan 12–14, Stockholm. Astra’s financial performance is stated in Swedish For further details, please refer to the notice to attend kronor (SEK). The value of SEK on December 31, 1998, the Annual Meeting, which will be published in daily was USD 1 = SEK 8.10. newspapers on Friday, March 19, 1999. Astra complies in all essential respects with the OECD NOTIFICATION: Stockholders who wish to participate guidelines on the provision of information by inter- in the Meeting must be recorded as stockholders in the nationally operating companies. register of shareholders maintained by the Swedish In its marketing, Astra complies with the IFPMA Code Securities Register Center (Värdepapperscentralen VPC of Pharmaceutical Marketing Practices, issued by the AB) not later than Friday, March 26, 1999; they must International Federation of Pharmaceutical Manufac- also notify the Company by mail, addressed to Astra turers Associations (IFPMA). AB, Legal Affairs, S-151 85 Södertälje, Sweden, or by calling +46 8-553 260 00, not later than 3 p.m. on Thurs- day, April 1, 1999. To be entitled to participate in the Meeting, stockhold- ers whose shares are registered under the name of a trustee must have their shares entered temporarily un- der their own names in the register of shareholders kept by the Swedish Securities Register Center. Stock- holders must instruct their trustees accordingly in good time before March 26, 1999. Stockholders may attend and vote at the Meeting in person or by proxy but, in accordance with Swedish practice, the Company does not send forms of proxy to its stockholders. Stockholders wishing to vote by proxy should submit their own forms of proxy to the Com- pany. DIVIDEND: The Board of Directors proposes Friday, April 9, 1999, as the record date. Provided that the Annual Meeting votes in favor of the proposal, divi- dend payments are expected to be sent from the Swed- ish Securities Register Center on Friday, April 16, 1999. Design: Karlerik Lindgren AB Photography: Stig-Göran Nilsson, J B Nordin, Elisabeth Ohlson, Pelle Stackman and others. Printed in Sweden by Stellan Ståls Grafiska AB, Stockholm, 1999 ISSN 1101-7813 Astra was founded in 1913. The Company’s research program, started in the early 1930s, has led over time to a number of important pharmaceuticals. These include Xylocaine (local anesthetic), Seloken and Plendil (cardiovascular agents), Bricanyl and Pulmicort (antiasthma agents), the Turbuhaler inhaler for asthma products, among others, and Losec (gastrointestinal agent). Astra built up a worldwide network of subsidiaries, agents and licensees during the 1950s and ’60s. Since the end of the 1970s the Company’s operations have been concentrated mainly on pharmaceuticals. At the end of the 1980s Astra implemented a new marketing strategy. The international marketing organization was strengthened considerably, and control over marketing in major markets was gradually transferred from various licensees to Astra. ASTRA TODAY Astra is an international pharmaceutical company in a phase of strong expansion. The Company focuses on areas of disease in which its proficiency in research can fulfill important medical needs. Research and development activities are conducted primarily by five research units in Sweden and the U.K. Marketing is conducted through Astra subsidiaries in about 40 countries and through agents and licensees in a large number of additional countries. In many countries Astra now ranks among the largest pharmaceutical companies in the market. Astra has approximately 25,000 employees, 68 percent of whom are outside Sweden. Astra’s shares have been listed on the Stockholm Stock Exchange since 1955, on the London Stock Exchange since 1985, and on the New York Stock Exchange since 1996. Astra has approximately 256,400 stockholders. ASTRA AB, S–151 85 SÖDERTÄLJE, SWEDEN TELEPHONE: +46 8–553 260 00. FAX: +46 8–553 290 00. www.astra.com PUBLIC COMPANY (publ) REG. NO. 556011-7482 ASTRA 98 A N N U A L R E P O R T ASTRA HIGHLIGHTS 1998 The boards of Astra and the British company Zeneca propose a merger of equals to form one of the world’s largest pharmaceutical companies New agreement with Merck & Co., Inc., gives Astra management control, strategic freedom, and the right to buy out Merck’s interests in the U.S. market Astra Pharmaceuticals, L.P., USA, which includes the operations of the former companies Astra Merck and Astra USA, was established on July 1, 1998 In December Astra reacquired the rights from Schering-Plough to market Losec in Italy and Spain Astra’s new proton pump inhibitor shows promising preliminary clinical results 1 AstraZeneca — a winning combination In December 1998, Astra’s board of directors approved AN ATTRACTIVE COLLABORATION PARTNER an agreement to merge with the British company Through its size and strong presence in key markets, Zeneca. Together the companies would form one of AstraZeneca will also be an attractive partner for aca- the world’s largest pharmaceutical companies—Astra demic institutions, biotechnology companies and other Zeneca. parties seeking to outlicense new substances. This cre- Astra’s and Zeneca’s operations complement each ates even better opportunities to complement the com- other well, and the new, combined company will have pany’s own research and meet the market’s needs. a world-leading product and research program. AstraZeneca will gain the financial, scientific and With SEK 17 bn. (pro forma 1998) in combined R&D marketing resources needed to be a leading pharma- expenditures, AstraZeneca would have been one of the ceutical company worldwide. The new company is ex- largest research and development organizations in the pected to be able to achieve even faster and more prof- pharmaceutical industry. AstraZeneca’s strong market- itable growth than what Astra would be able to achieve ing organization and extensive geographic coverage alone. This development will benefit patients, share- will give it a presence in all major markets. holders and employees alike. Zeneca and Astra have found in each other the per- fect partner with which to build up a global pharma- AstraZeneca Pro Forma 1998 ceutical company with strong commercial and scientific Change % future opportunities. FINANCIAL HIGHLIGHTS* (constant (USD bn.) 1998 1997 currency) Group sales 17.2 15.8 + 13 SIMILAR CULTURES—COMPLEMENTARY ................................................................................................................. PRODUCTS AstraZeneca will have leading positions Operating profit before exceptional items 3.5 3.5 + 10 in five therapeutic areas: gastrointestinal, cardiovascu- ................................................................................................................. 2 Profit before lar and respiratory diseases, oncology, and anesthesia/ tax and exceptional items 3.5 3.4 + 10 analgesia. In the areas of cardiovascular diseases, respi- ................................................................................................................