Astrazeneca Regulatory News (AZN)

4 February 2016

Full-Year and Q4 2015 Results

Financial Summary

· Core EPS in the year up by 7% and by 22% in Q4 2015

· Total Revenue growth of 1% in the year, with the gross margin on Product Sales up by 1% point

· Top-line and gross-margin growth underpinned continued investment in R&D. Core R&D costs up by 21% in the year, reflecting the investment in the pipeline

· Core SG&A costs down by 2% in the year (Q4 2015: down by 11%), in line with commitments

· Reported EPS in the year up by 137%, at $0.63 in Q4 2015 (Q4 2014: loss per share of $0.25)

· A second interim dividend of $1.90 per share, bringing the dividend for the full year to $2.80; the Board reaffirms its commitment to the progressive dividend policy

· FY 2016 CER guidance - a low to mid single-digit percentage decline in Total Revenue and a low to mid single-digit percentage decline in Core EPS; includes dilutive effects from recent transactions

FY 2015 Commercial Highlights

The Growth Platforms grew by 11% in the year, representing 57% of Total Revenue. 'New Oncology' is included for the first time, reflecting its long-term importance for the Company's future growth:

1. Respiratory: +7%, before completion of the acquisition of Takeda's Respiratory business

2. Brilinta/Brilique: +44%, underpinned by a recently-extended US label and positive CHMP opinion

3. Diabetes: +26%, including +76% in Emerging Markets. Global Farxiga/Forxiga growth of 137%

4. Emerging Markets: +12%, including China and Latin America each growing by 15%

5. Japan: +4%, including +8% in Q4 2015

6. New Oncology: Contributed $119m, comprising Lynparza, Iressa (US) and Tagrisso

Achieving Scientific Leadership: Progress since the last results announcement

Pascal Soriot, Chief Executive Officer, commenting on the results said:

"We delivered a strong pipeline and financial performance in 2015 as we begin the next phase in our strategic journey. The Growth Platforms delivered an 11% rise in Product Sales that, along with the 7% increase in Core EPS, demonstrated the underlying strength of our business. Our culture of innovation continued to drive R&D productivity, with six regulatory approvals in the year. This momentum will continue in 2016 as we anticipate six regulatory submissions and around ten major data readouts. We strengthened the strategic importance of Oncology, bringing to patients next-generation therapies such as Tagrisso in lung cancer and Lynparza in ovarian cancer, as well as a promising immuno-oncology pipeline. Alongside this organic progress, we also continued to invest in our main therapy areas through key agreements with Acerta Pharma, ZS Pharma, and Takeda.

As we face the transitional period of patent expiry for Crestor in the US, we're confident that our strong execution on strategy, combined with the benefits of focused investments and new launches, keeps us on track to return to sustainable growth in line with our targets."

FY 2016 Guidance

All guidance is shown at CER1.

The above guidance incorporates the dilutive effects arising from the Acerta Pharma and ZS Pharma transactions announced in 2015.

The guidance also assumes the loss of exclusivity for Crestor in the US from May 2016. Externalisation Revenue is expected to be ahead of that in FY 2015, including an increasing element of recurring income arising from prior agreements. This is in line with the Company's long-term business model.

Core R&D costs are expected to be at a similar level to FY 2015. The Company is also committed to materially reducing Core SG&A costs in FY 2016. These measures are based on constant exchange rates.

Currency Impact

The weakness of key trading currencies against the US dollar has continued. Based on average exchange rates in January 2016 and the Company's published currency sensitivities, an adverse impact of around 3% from currency movements on Total Revenue and Core EPS in FY 2016 would be anticipated. Further details on currency sensitivities are contained within the Operating and Financial Review.

Pipeline: Forthcoming Major Newsflow

Innovation is critical to addressing unmet medical need and is at the heart of the Company's growth strategy. The focus on research and development at AstraZeneca is anticipated to yield a productive year for the pipeline, particularly in Oncology:

Notes

1. All growth rates and guidance are shown at constant exchange rates (CER) unless specified otherwise.

2. Total Revenue defined as Product Sales and Externalisation Revenue.

3. See the Operating and Financial Review for a definition of Core financial measures and a reconciliation of Core to Reported financial measures.

4. Q4 2014 results reflected a Reported Operating Loss of $349m and a Reported Loss Per Share of $0.25; a percentage comparison to the Reported results in Q4 2015 is not meaningful.

The performance shown in this announcement covers the twelve and three month periods to 31 December 2015 (the year and the quarter respectively) compared to the twelve and three month periods to 31 December 2014 (the prior year and the prior quarter respectively).

Results Presentation

A presentation and accompanying live webcast for investors and analysts, hosted by management, will begin at midday GMT today. Details can be accessed via www.astrazeneca.com/investors.

Reporting Calendar

The Company intends to publish its first-quarter financial results on 29 April 2016.

About AstraZeneca

AstraZeneca is a global, innovation-driven biopharmaceutical business that focuses on the discovery, development and commercialisation of prescription medicines, primarily for the treatment of diseases in three main therapy areas - Respiratory, Inflammation and Autoimmunity (RIA), Cardiovascular and Metabolic Disease (CVMD) and Oncology - as well as in Infection and Neuroscience. AstraZeneca operates in over 100 countries and its innovative medicines are used by millions of patients worldwide. For more information, please visit: www.astrazeneca.com.

Contacts at AstraZeneca

Key: RIA - Respiratory, Inflammation & Autoimmunity, CVMD - Cardiovascular & Metabolic Disease,

ING - Infection, Neuroscience & Gastrointestinal

Operating and Financial Review

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All narrative on growth and results in this section relates to Core performance, based on constant exchange rates (CER) unless stated otherwise. Financial figures are in $ millions ($m). The performance shown in this announcement covers the twelve and three-month periods to 31 December 2015 (the year and the fourth quarter respectively) compared to the twelve and three months to 31 December 2014. Core measures, which are presented in addition to Reported financial information, are non-GAAP measures provided to enhance understanding of the Company's underlying financial performance. Core financial measures are adjusted to exclude certain significant items, such as:

− amortisation and impairment of intangibles, including impairment reversals but excluding any charges relating to IT assets

− charges and provisions related to our global restructuring programmes (this will include such charges that relate to the impact of our global restructuring programmes on our capitalised IT assets)

− other specified items, principally comprising legal settlements and acquisition-related costs, which include fair value adjustments and the imputed finance charge relating to contingent consideration on business combinations

More detail on the nature of these measures is given on page 72 of the 2014 Annual Report and Form 20-F Information.

Total Revenue

Total Revenue increased by 1% to $24,708m in the year, comprising Product Sales of $23,641m (down by 1%) and Externalisation Revenue of $1,067m (up by 140%). Based on actual exchange rates, Total Revenue declined by 7% in the year, reflecting the particular weakness of key trading currencies against the US dollar.

Product Sales

The decline in Product Sales was primarily driven by the US market entry of Nexium generic products from February 2015, as well as full-year adverse impacts from Synagis guideline changes in 2014 and the change in accounting for the US Branded Pharmaceutical Fee, following issuance of final regulations in 2014.

Within Product Sales, the Growth Platforms grew by 11% in the year, representing 57% of Total Revenue. 'New Oncology' is included for the first time, given its long-term importance for the Company's future growth:

Externalisation Revenue

Externalisation Revenue of $1,067m for the year (Q4 2015: $192m) primarily reflected income generated from a strategic collaboration in haematology with Celgene Corporation (upfront receipt of $450m) and a co-development and co-commercialisation arrangement with Daiichi Sankyo Co., Ltd. (Daiichi Sankyo) for Movantik in the US (upfront receipt of $200m). Other Externalisation Revenue reflected a number of collaboration agreements, including the acceleration of the development of brodalumab with Valeant Pharmaceuticals International, Inc. (upfront receipt of $100m) and the co-commercialisation of Nexium in Japan (milestone income of $123m) with Daiichi Sankyo.

Product Sales

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The performance of a selection of key medicines is shown below. A geographical split of the performance is shown in Notes 8 and 9.

FY 2015 Product Sales Summary

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During 2014, final regulations relating to the US Branded Pharmaceutical Fee were issued, affecting how the fee is recognised. AstraZeneca accrues for the obligation as each sale occurs, and, as under the final guidelines the fee is based on actual Product Sales in the current year, the fee is recognised as a deduction from Product Sales rather than a charge to SG&A, impacting individual medicine sales in the US by an average of 2%.

Respiratory, Inflammation & Autoimmunity

Symbicort

FY 2015 sales declined by 3% to $3,394m.

In the US, sales of $1,520m represented growth of 1%, with lower net prices reflecting additional access and co-pay assistance. Strong volume growth was driven by higher market share within a growing market.

In Europe, sales declined by 14% to $1,076m with a modest volume decline and a significant price decline reflecting increased competition from recently-launched analogue medicines. In contrast, Emerging Markets sales grew by 22% to $394m with China sales growing by 38% to $124m, primarily reflecting volume growth.

Pulmicort

Pulmicort sales in the year were $1,014m, an increase of 15%. Growth was driven primarily by the performance of Pulmicort Respules in Emerging Markets, where Pulmicort sales grew by 35% to $609m. China sales increased by 43% to $485m, reflecting sustained investment in supporting asthma and chronic obstructive pulmonary disease (COPD) patients, both in hospitals and at home.

Tudorza/Eklira

Sales in the year were $190m; over half of the medicine's sales were in the US, where the brand name is Tudorza. In March 2015, the Company completed the acquisition of the Actavis plc (Actavis) rights to the product.

Daliresp

Rights were acquired in March 2015 from Actavis for Daliresp in the US and Canada. Sales were $104m in the year.

Duaklir

Duaklir was successfully launched in the year, principally in Europe. Sales of $27m reflected good progress of this leading LAMA/LABA medicine, with an encouraging formulary uptake in the UK and a strong market-share performance in Germany.

The encouraging performances of Tudorza/Eklira, Daliresp and Duaklir under the Company's ownership were in line with expectations.

Cardiovascular & Metabolic Disease

Brilinta/Brilique

Sales in the year were $619m, an increase of 44%. AstraZeneca announced in H2 2015 that the US Food and Drug Administration (FDA) had approved Brilinta tablets at a new 60mg dose to be used in patients with a history of heart attack beyond the first year of treatment.

FY 2015 sales in the US increased by 64% to $240m. The expanded indication launched in the second half of the year, underpinned ongoing new-to-brand prescription share growth, with share standing at 12% at the end of the year; this represented a four percentage point increase in the twelve-month period.

In Europe, Brilique continued to perform strongly, with an increase in full-year sales of 18% to $230m, reflecting indication leadership across a number of markets. Emerging Markets sales grew by 91% to $112m, with China representing the largest single market for the medicine, where sales were up by 160% to $38m.

Onglyza

Sales were up 2% in the year to $786m, with sales in Q4 2015 increasing by 3%.

US sales in the year declined by 13% to $420m as a consequence of a greater emphasis on the promotion of Farxiga. Competitive pressures in the DPP-4 class drove lower volumes and a decline in the net price.

Sales in Europe grew by 8% to $141m, while Emerging Markets sales increased by 41% to $159m.

Farxiga/Forxiga

Sales of Farxiga/Forxiga were up 137% in the year to $492m.

In the US, sales of $261m represented growth of 114%. Promotional activity underpinned increasing total-prescription market-share growth in the year; this was accompanied by overall growth in the market.

Sales in Europe reached $126m in the year, up by 126%. Launches of Forxiga in the year in a number of international markets, such as Australia, have been successful.

Bydureon/Byetta

Combined sales were $896m in the year, representing growth of 21%; Bydureon represented approximately 65% of total Bydureon/Byetta sales.

In the US, sales were $691m, up by 21%, with higher volumes driven by market growth and higher net prices. The majority of the remaining sales of Bydureon/Byetta were in Europe, totalling $143m; Bydureon sales in Europe grew by 65% to $81m, reflecting the Company's ongoing effort to expand its Diabetes presence.

Legacy: Crestor

Sales of Crestor declined in the year by 3% to $5,017m; pricing was stable. The volume performance primarily reflected ongoing competition from generic statins.

In the US, Crestor sales declined by 3% to $2,844m, driven by lower market share and destocking, partially offset by favourable price movements.

In Europe, sales declined by 9% to $916m, reflecting prevailing competitive trends. Crestor consolidated its position as the leading statin in Japan, with sales growth in the year of 8% to $468m. Sales in China grew by 13% to $258m.

Oncology

Iressa

Sales of Iressa in the year declined by 2% to $543m, driven by the competitive environment in Europe where sales were down by 8% to $128m; Japan sales declined by 13% to $121m. Following the US launch in July 2015, Iressa saw an encouraging number of new-patient starts.

Emerging Markets sales grew by 4% to $272m, with China sales increasing by 5% to $146m and Latin America sales increasing by 17% to $11m.

Lynparza

Sales of Lynparza reached $94m in 2015. US sales of $70m followed the launch of the medicine in December 2014. Growth was driven by addressing the accumulated needs of eligible patients awaiting treatment, as well as patients newly tested for BRCA mutation. By the end of 2015, the medicine had been launched in 15 countries, including France and Germany.

Tagrisso

Sales of Tagrisso were $19m in 2015; the medicine was launched in November 2015 in the US with a strong performance in the number of new-patient starts.

Legacy: Zoladex

Sales increased by 7% to $816m, with a notable performance in China where sales reached $121m, reflecting growth of 29%.

Legacy: Faslodex

Sales were up 9% to $704m in 2015. US sales grew by 5% to $356m, accompanied by Europe sales of $207m, up by 2% in the year. The notable performance was in the Emerging Markets, where sales of $87m represented growth of 49%. Supported by the launch of 500mg Faslodex, China sales accelerated in the year to $11m (Q4 2015: growth of 100%, Q3 2015: growth of 50%). AstraZeneca Russia also achieved federal reimbursement for the medicine in the year.

Infection, Neuroscience & Gastrointestinal

Nexium

Sales of Nexium declined by 26% in the year to $2,496m.

US sales declined by 52% to $902m following the loss of exclusivity at the start of the year, directly impacting both pricing and volumes. Sales in Europe declined by 7% to $284m.

Nexium sales in Emerging Markets were up by 3% to $761m, with growth in Latin America of 18% to $127m. Japan sales increased by 30% in the year to $405m.

Seroquel XR

Sales declined by 12% in the year to $1,025m.

In the US, sales were down 3% at $716m. Sales in Europe declined by 30% to $202m, a function of generic-product competition.

Synagis

FY 2015 sales of Synagis declined by 26% to $662m.

A 43% decline in US sales in the year to $285m reflected the reduction in demand as a result of the American Academy of Pediatrics Committee on Infectious Disease guidelines issued in 2014. These guidelines were more restrictive than the approved label, which further reduced patients eligible for preventative therapy with Synagis.

FluMist/Fluenz

Sales in the year were stable at $288m. US sales declined by 6% to $206m, reflecting supply issues. In contrast, Europe sales increased by 16% to $76m.

Movantik/Moventig

Sales in the year totalled $29m (Q4 2015: $15m); the medicine was launched in March 2015. The majority of sales were in the US, where the Company announced a co-commercialisation agreement in 2015 with Daiichi Sankyo for Movantik.

Regional Product Sales

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US

US sales declined in the year by 6% to $9,474m. The US Branded Pharmaceutical Fee was recognised as a deduction from Product Sales in the year rather than as a charge to SG&A, impacting individual medicine sales by an average of around 2%.

The decline in sales in the US also reflected the entry of Nexium generic products from February 2015; Nexium sales in the US declined by 52% to $902m in the year. Adverse Synagis guideline changes were reflected in a 43% decline in US Synagis sales to $285m in the year.

Favourable performances were delivered by Brilinta, Farxiga, Bydureon and Lynparza as well as the acquired Respiratory medicines Tudorza and Daliresp. Tagrisso, launched earlier than originally anticipated in the fourth quarter, delivered an encouraging number of new-patient starts.

Continued growth in demand for Farxiga was supported by a strong promotional programme. Bydureon benefitted from the launch of the Bydureon Pen as well as growth in demand in the overall GLP-1 class.

Europe

Sales in Europe declined by 6% to $5,323m in the year. Strong growth from the Diabetes portfolio was more than offset by continued generic competition facing Crestor and Seroquel XR. A 14% decline in Symbicort sales to $1,076m reflected adverse pricing movements driven by competition from analogues in key markets. Duaklir more than doubled its first-half sales in the final quarter, bringing the full-year total to $26m. Lynparza was launched in Europe in 2015, contributing sales of $23m in the year.

Established ROW

Sales in the Established Rest Of World (ROW) were stable in the year at $3,022m.

Japan sales in the year increased by 4% to $2,020m. Sales of Crestor continued to grow strongly in the full year, up 8% to $468m. This reflected a continued increase in the usage of the 5mg dosage. Nexium sales rose by 30% to $405m, flattered by the impact of a product recall in FY 2014. Symbicort sales in the year fell by 2% to $176m in Japan, with a Q4 2015 sales decline of 16%. The strong performance in Q4 2014 reflected restocking. Underlying Symbicort sales growth in the year was estimated at around 5%. The Established ROW market share of Symbicort was broadly stable in the fourth quarter and over the full year.

Canada sales grew by 4% to $533m in the year, driven by the performances of Onglyza with sales up 27% to $53m and Symbicort sales increasing by 8% to $149m.

Emerging Markets

The Company continues to focus on delivering innovative medicines by accelerating investment in its Emerging Markets capabilities, with a focus on China and other leading markets, such as Russia and Brazil.

Emerging Markets sales in the year increased by 12% to $5,822m, with contributions to growth generated from across the region. Around 60% of Emerging Markets sales were derived outside of China in the year. Emerging Markets sales in the final quarter increased by 10% to $1,428m, ahead of the Company's long-term forecast of mid to high single-digit percentage growth in the region's Product Sales.

China sales in the year increased by 15% to $2,530m, while Brazil sales grew by 16% to $381m and Russia sales grew by 21% to $231m.

Financial Performance

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Profit and Loss

Gross Profit

Core Gross Profit increased by 2% in the year to $20,589m. Excluding the impact of externalisation, the Core Gross-Profit margin increased by one percentage point. Drivers of the margin increase included the mix of Product Sales and manufacturing efficiencies.

Operating Expenses

Core R&D costs were up 21% in the year to $5,603m as the Company continued to focus on its pipeline. Oncology attracted over 40% of total Core R&D investment in the year, reflecting a number of active trials.

In line with commitments made in early 2015 to reduce Core SG&A costs for the full year, Core SG&A costs declined by 2% to $9,265m. Core SG&A costs also declined in the year by one percentage point as a proportion of Total Revenue. A number of ongoing programmes designed to address Core SG&A costs are progressing. These initiatives are focused on:

- Sales, marketing and medical-cost effectiveness

- Centralisation of selected functions and process improvements

- Reduced third-party spend

- Additional efficiencies gained across support functions and IT

- Continued footprint optimisation, including presence in the UK and US

Resources will continue to be deployed selectively to meet changing customer needs and the evolving portfolio, while driving top-line growth.

Other Operating Income

Core Other Operating Income of $1,520m in the year increased by 104% and included:

· $380m of income related to the disposal of the US rights to Entocort

· $322m of royalty income arising from a number of agreements

· $215m of income related to the disposal of the rest-of-world rights to Entocort

· $193m of income related to the disposal of Myalept

· $165m of income related to the disposal of Caprelsa

Operating Profit

Core Operating Profit increased by 6% to $6,902m in the year. The Core Operating Margin increased by one percentage point to 28% of Total Revenue. The increase reflected the decline in Core SG&A costs and the increase in Externalisation Revenue and Core Other Operating Income, while the Company continued to invest in the pipeline and the Growth Platforms.

Reported Operating Profit of $4,114m was $1,977m higher than FY 2014 principally due to the difference in Core adjustments between FY 2015 and FY 2014. Most significantly, fair value adjustments to contingent consideration relating to the Bristol-Myers Squibb Company (BMS) share of the global Diabetes alliance increased Reported Operating Profit by $378m in FY 2015, whereas fair value adjustments to contingent consideration reduced Reported Operating Profit by $529m in FY 2014. These fair value movements reflect estimates for future liabilities that can change materially over time. In addition, restructuring costs of $1,034m in FY 2015 were significantly lower than restructuring costs of $1,558m in FY 2014.

Finance Expense

The Core Net Finance Expense was $505m in the year, compared with $493m in FY 2014. The Reported Net Finance Expense of $1,029m included a charge of $524m relating to the discount unwind on contingent consideration liabilities recognised on business combinations, principally relating to the acquisition of the BMS share of the global Diabetes alliance.

Taxation

Excluding the previously disclosed one-off tax benefit of $186m following agreement of US federal tax liabilities of open years up to 2008, other net reductions in provisions for tax contingencies and non-Core revaluations of contingent consideration arising on business combinations, partially offset by the impact of internal transfers of intellectual property, the Core and Reported tax rates for the year ended 31 December 2015 were 21% and 22% respectively. Including the impact of these items, the Core and Reported tax rates for the year were 16% and 8% respectively. The cash tax paid for the year was $1,354m, which was 44% of Reported Profit Before Tax and 21% of Core Profit Before Tax. 

Both the underlying Reported and underlying Core tax rates for the year ended 31 December 2014 were around 18%. Taking into account the one-off benefits totalling $309m in respect of a transfer pricing matter, non-Core revaluations of contingent consideration arising on business combinations, and the benefit of the UK Patent Box, the Reported and Core tax rates fell to 1% and 16% respectively.

Earnings Per Share (EPS)

Core EPS in the year increased by 7% to $4.26.

Reported EPS was up by 137% at $2.23. Core profit adjustments were lower in the year and represented 40% of Core Operating Profit compared to 69% in 2014, mainly as a result of the fair value movements described above.

Dividends

The Board has declared a second interim dividend of $1.90 per share (131.0 pence, 16.26 SEK) bringing the dividend per share for the full year to $2.80 (188.5 pence, 23.97 SEK). The Board reaffirms its commitment to the Company's progressive dividend policy.

For holders of the Company's American Depositary Shares (ADSs), the $1.90 per Ordinary Share equates to $0.95 per ADS. Following the ratio change to the Company's NYSE-listed sponsored Level 2 American Depositary Receipt programme on 27 July 2015, two ADSs equal one Ordinary Share.

Productivity

Restructuring charges of $372m were recognised in the fourth quarter, bringing the full-year total to $1,034m, as the Company continued to make good progress in implementing its restructuring plans.

These charges included $683m related to the Phase 4 programme, initially announced in March 2013 and subsequently expanded. A $233m charge was associated with previously-announced site exits (including Avlon in the UK) and the integration of the Diabetes and Respiratory businesses acquired from BMS and Almirall respectively. A charge of $102m was associated with targeted restructuring of the Company's commercial business, implemented in late 2015, principally in Venezuela, in response to challenging economic conditions, and Europe.

Furthermore, as part of the ongoing commitment to improve productivity, the Company is initiating multi-year transformation programmes within back-office functions (principally finance and human resources) with anticipated costs by the end of 2018 of $270m. Once complete, these should deliver annualised benefits of approximately $100m by the end of 2018.

Final estimates for programme costs, benefits and headcount impacts in all functions will be subject to completion of the requisite consultation in the various areas. The Company's priority in undertaking these restructuring initiatives is to work with affected employees on the proposed changes, acting in accordance with relevant local consultation requirements and employment law.

Cash Flow and Balance Sheet

Cash Flow

The Company generated a cash inflow from operating activities of $3,324m in the year compared with $7,058m in the comparative period. Cash generated from operating activities reflects a modest increase in investment in working capital of $49m compared to a decline of $2,508m in 2014. Working capital improvements made in 2014 have been sustained, minimising the impact of increased acquired diabetes and launch product inventory balances.

Net cash outflows from investing activities were $4,239m compared with $7,032m in the prior year. This reflects cash payments relating to business acquisitions in FY 2014 of $4,461m, which primarily related to the BMS Diabetes alliance and Almirall acquisitions, being higher than those in FY 2015 of $3,025m, which primarily related to the ZS Pharma acquisition. In addition, there was a cash inflow from the disposal of intangible assets of $1,130m in FY 2015, principally related to the disposals of Entocort, Myalept and Caprelsa.

Debt and Capital Structure

At 31 December 2015, outstanding gross debt (interest-bearing loans and borrowings) was $15,053m (31 December 2014: $10,843m). In November 2015, the Company issued a total of $6bn of notes, with the proceeds of the issue to be used to fund corporate and business development activity, repay certain outstanding commercial paper obligations and for general corporate purposes. Of the gross debt outstanding at 31 December 2015, $916m was due within one year (31 December 2014: $2,446m). The Company's net debt position at 31 December 2015 was $7,762m (31 December 2014: $3,223m).

Shares in Issue

During the year, one million shares were issued in respect of share option exercises for a consideration of $43m. The total number of shares in issue as at 31 December 2015 was 1,264 million.

Capital Allocation

The Board's aim is to continue to strike a balance between the interests of the business, financial creditors and the Company's shareholders. After providing for investment in the business, supporting the progressive dividend policy and maintaining a strong, investment-grade credit rating, the Board will keep under review investment in earnings-accretive opportunities.

Sensitivity: Foreign-Exchange Rates

The Company provides the following currency sensitivity information:

Currency Hedging

AstraZeneca monitors the impact of adverse currency movements on a portfolio basis, recognising correlation effects. The Company may hedge to protect against adverse impacts on cash flow over the short to medium term. As at 31 December 2015, AstraZeneca had hedged around 85% of forecast short-term currency exposure that arises between the booking and settlement dates on non-local currency purchases and Product Sales.

Corporate and Business Development Update

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The highlights of the Company's corporate and business development activities since the prior results announcement on 5 November 2015 are shown below.

a) Investment in Acerta Pharma

On 17 December 2015, AstraZeneca announced that it had entered into an agreement to invest in a majority equity stake in Acerta Pharma B.V. (Acerta), a privately-owned biopharmaceutical company based in the Netherlands and the US. The transaction will provide AstraZeneca with a potentially best-in-class irreversible oral Bruton's tyrosine kinase (BTK) inhibitor, acalabrutinib (ACP-196), currently in Phase II/III development for B-cell blood cancers and in Phase I/II clinical trials in multiple solid tumours.

On 2 February 2016, on completion of the agreement, AstraZeneca acquired 55% of the entire issued share capital of Acerta for an upfront payment of $2.5bn. A further payment of $1.5bn will be paid either on receipt of the first regulatory approval for acalabrutinib in the US, or the end of 2018, whichever is sooner. The agreement also includes options, which if exercised, provide the opportunity for Acerta shareholders to sell, and AstraZeneca to buy, the remaining 45% of shares in Acerta (see Note 5).

b) Acquisition of ZS Pharma

On 6 November 2015, AstraZeneca announced that it had entered into an agreement to acquire ZS Pharma Inc. (ZS Pharma), a biopharmaceutical company based in San Mateo, California. The transaction, completed in Q4 2015, gives AstraZeneca access to the potassium-binding compound ZS-9. This is a potential best-in-class treatment for hyperkalaemia, a condition associated with increased mortality in chronic kidney disease (CKD) and chronic heart failure (CHF). Under the terms of the agreement, AstraZeneca acquired ZS Pharma for $90 per share (see Note 4).

c) Respiratory portfolio acquisition

On 16 December 2015, AstraZeneca announced that it had entered into a definitive agreement to acquire the core Respiratory business of Takeda Pharmaceutical Company Limited (Takeda). The transaction, once completed, will include the expansion of rights to roflumilast (marketed as Daliresp in the US and Daxas in other countries), the only approved oral PDE4 inhibitor for the treatment of COPD.

Under the terms of the agreement, AstraZeneca will make a payment of $575m. Upon completion approximately 200 staff will transfer to AstraZeneca.

d) Allergan - ATM-AVI

On 29 January 2016, it was announced that AstraZeneca had entered into a global agreement with Allergan plc (Allergan) to develop and commercialise ATM-AVI, an investigational, fixed-dose antibiotic, combining aztreonam and avibactam. Together, the two companies will evaluate the combination to treat serious infections caused by metallo β‐lactamase MBL-producing Gram-negative pathogens, a difficult-to-treat sub-type of carbapenem-resistant Enterobacteriaceae, for which there are currently very limited treatments. ATM-AVI may present a new treatment option for patients with MBL-producing pathogens.

Under the terms of the agreement, Allergan will maintain commercialisation rights in the US and Canada and AstraZeneca will retain commercialisation rights in all other countries. AstraZeneca initiated a Phase I trial for ATM-AVI in 2012.

e) Agreement on rights to Entocort in the US

On 15 December 2015, AstraZeneca completed an agreement with Perrigo Company plc (Perrigo) for the divestment of US rights to Entocort (budesonide), a gastroenterology medicine for patients with mild to moderate Crohn's disease. Under the terms of the agreement, Perrigo paid AstraZeneca $380m to acquire the rights to sell Entocort capsules and the authorised generic Entocort capsules marketed by Par Pharmaceuticals Companies, Inc.

The transaction did not include the transfer of any AstraZeneca employees or facilities. As a divestment, the income was recorded within Other Operating Income.

f) Strategic investments in China

On 16 December 2015, AstraZeneca announced a range of strategic initiatives to accelerate the delivery of innovative biologics and targeted medicines to patients in China. The initiatives and investments include a strategic alliance with WuXi AppTec, a leading Chinese biologics manufacturer and contract research organisation, to produce innovative biologics locally in China. Under the agreement, AstraZeneca has the option to acquire WuXi AppTec's biologics manufacturing capacity in Wuxi City in the next few years through an overall investment approximating $100m. Prior to that, WuXi AppTec remains the Company's exclusive partner for R&D manufacturing for innovative biologics in China.

Research and Development Update

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A comprehensive table with AstraZeneca's pipeline of medicines in human trials can be found later in this document.

Since the prior results announcement on 5 November 2015:

Key: RIA - Respiratory, Inflammation & Autoimmunity, CVMD - Cardiovascular & Metabolic Disease, ING - Infection, Neuroscience & Gastrointestinal

1. Respiratory, Inflammation & Autoimmunity (RIA)

Steady progress continues to be made in the RIA pipeline, which now includes six programmes in pivotal trials or under registration. AstraZeneca's Respiratory portfolio includes a range of differentiated potential medicines such as novel combinations, biologics and devices for the treatment of asthma and COPD. The pipeline also includes a number of assets in inflammatory and autoimmune diseases within areas such as psoriasis, systemic lupus and rheumatoid arthritis.

a) Symbicort (asthma)

Symbicort comprises budesonide (a corticosteroid, ICS) and formoterol (a long-acting beta agonist, LABA). The FDA required all manufacturers of medicines indicated for the treatment of asthma, containing LABA-based medicines, to conduct identical trials evaluating the safety when used in combination with an inhaled corticosteroid compared to the ICS alone.

The Symbicort LABA safety trial met its primary endpoint in the period, based on top-line results, demonstrating that the risk of serious asthma-related events for Symbicort is no different to that of budesonide alone. The trial was a randomised, double-blind, 26-week, active-controlled trial in 11,700 patients, aged at least 12 years of age and suffering from asthma.

b) Zurampic (gout)

On 22 December 2015, AstraZeneca announced that the FDA had approved Zurampic (lesinurad) 200mg tablets in combination with a xanthine oxidase inhibitor (XOI) for the treatment of hyperuricemia associated with gout in patients who have not achieved target serum uric-acid levels with an XOI alone. The approval was based on data from three pivotal Phase III trials, CLEAR1, CLEAR2 and CRYSTAL. These represent the largest clinical trial data set of gout patients (n=1,537) treated with combination urate-lowering therapy.

On 18 December 2015, AstraZeneca announced that the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) adopted a positive opinion recommending the marketing authorisation of Zurampic 200mg tablets. Zurampic is recommended for the adjunctive treatment of hyperuricaemia in adult gout. Zurampic will now be reviewed by the European Commission (EC). AstraZeneca anticipates a final decision in the first half of 2016.

c) Brodalumab (psoriasis)

During the period, regulatory submissions for brodalumab for the treatment of moderate-to-severe psoriasis were accepted in the US and EU. The submissions were supported by data from the three AMAGINE Phase III pivotal trials. The results indicated that brodalumab has an effective mechanism of action that delivers clinical benefit and could help a significant number of moderate-to-severe plaque psoriasis patients achieve total clearance of skin disease.

Under a collaboration agreement, Valeant Pharmaceuticals International Inc. (Valeant) has an exclusive license to develop and commercialise brodalumab globally, except in Japan and certain other Asian countries. Valeant assumes decisions on future development and development costs associated with the regulatory approval of brodalumab, as well as decisions on future development.

d) Tralokinumab (IPF)

A Phase II trial for tralokinumab in idiopathic pulmonary fibrosis (IPF), a potential exploratory indication for the medicine, was terminated in the period due to lack of efficacy on endpoints of IPF progression. No safety issues were detected. The Phase III programme for severe asthma, the lead indication for tralokinumab, is ongoing, with top-line results expected in 2017. Tralokinumab is anticipated to become AstraZeneca's second biologic medicine in Respiratory diseases after benralizumab.

e) Anifrolumab (lupus)

Positive new data on anifrolumab in systemic lupus erythematosus (SLE) were presented at the American College of Rheumatology's annual scientific meeting in San Francisco. The trial met primary and secondary endpoints in Phase II, with anifrolumab significantly reducing lupus disease activity compared with placebo across multiple endpoints.

In line with the Company's dedication to personalised medicines, anifrolumab is being developed with an interferon-gene signature test designed to identify patients who may be more likely to benefit from treatment. The anifrolumab Phase III programme in SLE was initiated in July 2015 and is expected to read out with top-line results in 2018. Additional ongoing trials include a Phase II lupus nephritis trial and a Phase I trial with a subcutaneous route of administration.

2. Cardiovascular & Metabolic Disease (CVMD)

AstraZeneca's strategy in CVMD focuses on ways to reduce morbidity, mortality and organ damage by addressing multiple risk factors across CV disease, Diabetes and CKD indications. The patient-centric approach is reinforced by science-led life-cycle management programmes and technologies, including early research into regenerative methods.

a) Brilinta/Brilique (CV disease)

On 18 December 2015, AstraZeneca announced that the CHMP adopted a positive opinion, recommending approval of the 60mg dose of Brilique for the treatment of patients with a history of heart attack and at high risk of having a further coronary event. The opinion stated that treatment may be started as continuation therapy after an initial one-year treatment with dual anti-platelet therapy. The 90mg dose of Brilique is currently indicated in the EU to reduce the rate of cardiovascular death, myocardial infarction (MI, also known as heart attack) and stroke in patients with acute coronary syndrome.

b) Saxagliptin/dapagliflozin (type-2 diabetes)

AstraZeneca has continued to work closely with the FDA following the receipt of a Complete Response Letter in October 2015. The Company plans to submit additional clinical data for saxagliptin/dapagliflozin from a trial that is now completed and anticipates a new regulatory submission in the first half of 2016.

c) ZS-9 (hyperkalaemia)

The acquisition of ZS Pharma was completed on 17 December 2015 and ZS-9 (sodium zirconium cyclosilicate), a potential best-in-class treatment for hyperkaelemia, was accepted in the period by CHMP for regulatory review, in line with the Company's expectations.

3. Oncology

AstraZeneca has a deep-rooted heritage in Oncology with a rejuvenating portfolio of medicines that has the potential to transform patients' lives and the Company's future. With at least six new medicines molecular entities to be launched between 2014 and 2020 and a broad pipeline of small molecules and biologics in development, the Company is committed to advance Oncology as one of AstraZeneca's six Growth Platforms, focusing on lung, ovarian, breast and blood cancers. By exploiting the power of four scientific platforms -- immuno-oncology (IO), the genetic drivers of cancer and resistance, DNA damage repair and antibody drug conjugates -- and by championing the development of personalised medicines combinations, AstraZeneca has the vision to redefine cancer treatment and, one day, eliminate cancer as a cause of death.

a) Faslodex (breast cancer)

On 29 January 2016, the Company received notification that the FDA had accepted for regulatory submission a supplemental new drug application (sNDA) for Faslodex. The aim of the sNDA is to supplement the currently-approved indication for Faslodex to encompass the positive results of the Phase III PALOMA-3 trial. This trial tested adding Ibrance (palbociclib) to Faslodex versus Faslodex alone in women with HR-positive, HER2-negative metastatic breast cancer. The trial was conducted by Pfizer Inc., in collaboration with AstraZeneca.

b) Lynparza (ovarian and other cancers)

In January 2016 Breakthrough Therapy designation was granted by the FDA for Lynparza for prostate cancer patients with BRCA1/2 or ATM gene-mutated metastatic castrate-resistant prostate cancer (mCRPC) who have received previous taxane-based chemotherapy and one newer hormonal agent (abiraterone or enzalutamide). Accompanying this designation, Lynparza received a positive Phase III investment decision in the period from the Company for development in mCRPC.

These developments highlighted Lynparza's significant future potential, in addition to the approved use in treating patients with a particular form of ovarian cancer.

c) Tagrisso (lung cancer)

On 13 November 2015, Tagrisso was approved by the FDA for patients with epidermal growth factor receptor (EGFR) T790M mutation-positive metastatic non-small cell lung cancer (NSCLC) who have progressed on an EGFR tyrosine kinase inhibitor (TKI). This followed one of the fastest medicine-development programmes in history, from the start of clinical trials to approval in two years and eight months. Tagrisso provides an important new option for patients, with an objective response rate of 59% and a median duration of response of over one year.

On 3 February 2016, Tagrisso received conditional approval in the EU for the treatment of adult patients with locally-advanced or metastatic EGFR T790M mutation-positive NSCLC. Tagrisso is the first T790M-directed inhibitor to receive marketing authorisation by the EU. Tagrisso's indication includes patients with T790M NSCLC regardless of previous treatment with an EGFR TKI, underlining the unmet medical need in the small number of EGFR-mutated NSCLC patients who are initially (de novo) diagnosed with the T790M mutation. The approval follows the positive opinion received on 18 December 2015.

Interactions with regulatory authorities in the rest of the world, including the accelerated review process in Japan, are ongoing.

The ADAURA Phase III trial in adjuvant EGFRm NSCLC began enrollment in the quarter and will measure disease-free survival.

d) Durvalumab (multiple cancers)

MonotherapyAs announced on 18 December 2015, the preliminary findings of the ATLANTIC trial supported the clinical activity of durvalumab. In the trial of 3rd-line or later-stage NSCLC patients, durvalumab demonstrated expected clinical activity and durable response in heavily pre-treated patients. The treatment and regulatory landscape in lung cancer is evolving however, and the Company does not anticipate any regulatory submission as a monotherapy for 3rd-line PD-L1-positive NSCLC patients. Durvalumab is a cornerstone of the IO portfolio, with a fast-advancing development programme focused primarily on novel combinations.

Combination therapy

New data from the Phase Ib durvalumab + tremelimumab (durva + treme) combination trial in NSCLC were presented at the Society for Immunotherapy of Cancer meeting in November 2015. The trial investigators presented updated safety and efficacy results for 102 patients. In 84 of the patients evaluable for efficacy, results showed an overall response rate of 25% (21/84, 95% CI of 16-36%), consistent with data presented at the American Society of Clinical Oncology's meeting in 2015. Response rates did not appear dependent on PD-L1 status: 35% (PD-L1-positive), 22% (PD-L1-negative,

The CAURAL trial, combining Tagrisso and durvalumab, remains on clinical hold, based on an increase in the incidence of interstitial lung disease, compared to what has been previously reported with each medicine used on its own. Investigation of the safety signal is ongoing.

During the period, first patients were dosed in a number of durva + treme combination trials, including NEPTUNE, EAGLE, KESTREL, DANUBE and ALPS as well as in the safety lead-in of the triple combination trial in NSCLC with chemotherapy. AstraZeneca is planning a Phase III trial with durvalumab in small cell lung cancer that will include the first IO-IO-chemotherapy triple-combination arm. A second, earlier-stage trial will also pair durvalumab with other portfolio medicines such as Lynparza and AZD1775 (WEE-1).

The MYSTIC trial saw its primary endpoint updated to a co-primary endpoint of progression-free survival (PFS) and overall survival. The trial is recruiting ahead of expectations and is expected to be the first IO-IO combination 1st-line NSCLC trial to provide PFS data, in the first half of 2017.

An update on ongoing trials with durvalumab is provided over the page:

e) Early-stage Oncology

New Oncology programmes that progressed into human trials during the period included MEDI9197, a TLR 7/8 agonist, in solid tumours and a GITR fusion protein, MEDI1873. Furthermore, two small-molecule programmes developed in collaboration with BIND Therapeutics moved into clinical trials: AZD0156, a first-in-class ATM kinase inhibitor which further strengthens the Company's leading position in DNA damage response and AZD2811, a nanoparticle formulation of a novel, selective inhibitor of Aurora B kinase that has been shown to be active in both solid and haematological tumours.

Additionally the Company now has a HER2-targeted, bi-specific antibody drug conjugate, MEDI4276, in a Phase I trial in solid tumours. HER2 (receptor tyrosine-protein kinase) is over-expressed in several cancers, including breast and gastric cancers. AZD3759, an EGFR inhibitor designed to cross the blood brain barrier, progressed into Phase II expansion cohorts in leptomeningeal disease, a form of brain cancer, and in patients with brain metastases.

ASTRAZENECA DEVELOPMENT PIPELINE 31 DECEMBER 2015

Includes AstraZeneca-sponsored or directed studies only

Phase III / Pivotal Phase II / Registration

NMEs and significant additional indications

Regulatory submission dates shown for assets in Phase III and beyond. As disclosure of compound information is balanced by the business need to maintain confidentiality, information in relation to some compounds listed here has not been disclosed at this time.

† US and EU dates correspond to anticipated acceptance of the regulatory submission.

# Partnered and/or in collaboration.