Strategy, goals & performance measurement - Strategy, goals & performance measurement - Directors' Report

Strategy, goals and performance measurement

AstraZeneca is an innovation-driven, integrated, global pharmaceutical company. Our mission is to make the most meaningful difference to patient health through great medicines, and to create enduring value for our shareholders and society through industry-leading R&D productivity, commercial excellence and operational efficiency.

Our strategy centres on four main priorities: strengthen the pipeline, grow the business, re-shape the business and promote a culture of responsibility and accountability. These priorities are described in this table, together with details of our objectives; the measures we use to assess our progress; the initiatives in place to drive achievement of our objectives; and a summary of our 2008 performance.

STRENGTHEN THE PIPELINE

To be one of the fastest and most productive companies in the industry through continuous improvement in our research and development (R&D), coupled with externalisation to broaden our research base and further strengthen our pipeline of new products.

OBJECTIVES	Achieve a median composite eight-year product development cycle by 2010. Deliver two new molecular entity (NME) launches on average per year from 2010. In order to achieve the above objective, ensure that we have 10 or more NMEs in Phase III development by 2010.
MEASURES	Development cycle times and quality for small molecules and biologics. Number of NME launches per year. Attrition rates. Number of development projects by phase. Number of in-licensing deals, alliances and acquisitions. R&D investment levels.
INITIATIVES	Improving R&D quality and speed through leading-edge science, effective risk management and decision-making, and overall business efficiency. Maximising the value of our biologics business and continuing to build a major presence in this fast-growing sector. Investing in external opportunities to enhance our internal innovation through in-licensing, alliances and acquisitions.
2008 PERFORMANCE SUMMARY	2008 target exceeded for small molecule development cycle times. See the Development Projects table. NME and life-cycle management progressions delivered. See the Development Projects table Industry top quartile for speed and cost efficiencies achieved in Discovery. See Discovery Research. Eight significant regulatory packages delivered, broadening the use of Seroquel, Iressa, Symbicort and FluMist across several jurisdictions. Two new product submissions delivered. Overall pipeline volume increased by 5% and in-phase distribution of our projects has improved: FGLP (32); Phase I (34); Phase II (31); Phase III (10); Life-cycle management (23). See Development Pipeline. Over 300 Discovery collaborations/partnerships to access new science and technology platforms. 21 in-licensing deals, alliances and collaborations successfully concluded. See Externalisation. R&D investment $5.2 billion.

GROW THE BUSINESS

To maintain our position among the industry world leaders through a continued focus on driving commercial excellence.

OBJECTIVES	Deliver overall sales growth in line with market growth. Deliver target sales growth in key markets. Ensure profitable launch of our own and our in‑licensed products.
MEASURES	Sales value growth at CER. Global sales and prescription share trends for key products and key markets. Number of life-cycle projects delivered. Number of successful launches of new products. Number of commercial collaborations secured.
INITIATIVES	Active and rigorous development of our brands to maximise patient benefit and commercial potential. Driving high standards of sales force effectiveness, marketing excellence and customer support. Building on our leadership positions in existing markets and expanding our presence in important emerging ones. Securing new external commercial collaborations that further strengthen our platform for future business growth.
2008 PERFORMANCE SUMMARY	Global sales +3% at CER. Sales by region at CER: North America +2%; US +1%; Established ROW +2%; Emerging ROW +16%. See the Geographical Review. Sales by key product at CER: Arimidex +4%; Crestor +26%; Nexium -2%; Seroquel +9%; Symbicort +22%. See Financial Highlights. Two US co-promotion agreements secured and 12 disposal transactions to extract value from deprioritised and non-core assets. See Externalisation.

RE-SHAPE THE BUSINESS

To create an organisation with the flexibility and financial strength to adapt quickly and effectively within a challenging and rapidly changing business environment.

OBJECTIVES	Maintain gross profit margin. Efficiently deliver on R&D investment. Achieve upper quartile industry performance in relation to selling, general and administrative (SG&A) costs. Deliver procurement savings targets.
MEASURES	Gross margin and operating margin. R&D unit cost reduction. SG&A cost growth rates. Progress of productivity initiatives. Procurement savings.
INITIATIVES	Continued implementation and expansion of our restructuring programme, including: Reviewing supply and manufacturing assets. Driving R&D efficiency. Driving sales and marketing resource optimisation and customer focus. Implementing restructuring and efficiency programmes in corporate functions.
2008 PERFORMANCE SUMMARY	Core gross margin: 80.4% Core operating margin: 34.7% On track to deliver R&D unit cost reduction target of 15% over three years. Core SG&A cost growth rate: 3% Restructuring programme continues with benefits now estimated to reach $2.5 billion per annum (up from $1.4 billion); with $2.1 billion in savings expected before 2010, and the balance to be realised by 2013. Procurement savings on track to achieve target.

PROMOTE A CULTURE OF RESPONSIBILITY AND ACCOUNTABILITY

To create an organisation that is recognised not only for the skills, experience and quality of its people, but also for the integrity with which it conducts its business.

OBJECTIVES	Achieve upper quartile industry ranking for employee engagement. Ensure that a culture of responsible business, including compliance, is embedded across all of our activities. Ensure that our reputation is favourable and supports our continued success.
MEASURES	Employee engagement levels. Number of confirmed breaches of external sales and marketing regulations or codes. Ranking in Dow Jones World and STOXX (European) Sustainability Indexes. Number of animals used in research. Greenhouse gas and Ozone Depletion Potential (ODP) emissions. Accidents with serious injury and cases of occupational illness.
INITIATIVES	Strengthening the effectiveness of leaders and our performance management. Maintaining/improving levels of employee engagement. Investing in leadership development to improve accountability and collaboration. Integrating responsible business considerations into everyday business thinking and decision-making.
2008 PERFORMANCE SUMMARY	Global employee survey shows employee engagement is strong, outperforming many other pharmaceutical companies. See Communication and Dialogue. 15 confirmed breaches of external sales and marketing regulations or codes. See Sales and Marketing Ethics. Positioned amongst the top 6% of companies in the sector in the Dow Jones World and STOXX (European) Sustainability Indexes. 376,000 animals used in research (preliminary figures). See R&D Ethics. 1.22 million tonnes CO2 equivalents (39 tonnes/$million sales). See Environmental Sustainability. 22 tonnes ODP emissions (0.71kg/$million sales). See Environmental Sustainability. 2.28 accidents with serious injury per million hours worked. See Safety, Health and Wellbeing. 1.04 cases of occupational illness per million hours worked. See Safety, Health and Wellbeing.