AstraZeneca Annual Report and Form 20-F Information 2008

Notes to the Financial Statements (Group)

22 Acquisitions of business operations

There were no new acquisitions made during the year ended 31 December 2008.

Details with regard to acquisitions made during the year ended 31 December 2007 are set out below:

MedImmune, Inc.

On 1 June 2007, AstraZeneca announced the successful tender offer for all the outstanding shares of common stock of MedImmune, Inc., a world-leading biotechnology company with proven biologics discovery and development strength, pipeline and leading biomanufacturing capability. At that date, approximately 96.0% of the outstanding shares were successfully tendered; the remaining shares were acquired by 18 June 2007. The financial results of MedImmune, Inc. have been consolidated into the Group’s results from 1 June 2007.

Cash consideration of $13.9bn was paid for the outstanding shares. After taking account of the cash and investments acquired, together with the settlement of MedImmune’s convertible debt and outstanding share options, the total cash paid to acquire MedImmune was $15.6bn.

In most business acquisitions, there is a part of the cost that is not capable of being attributed in accounting terms to identifiable assets and liabilities acquired and is therefore recognised as goodwill. In the case of the acquisition of MedImmune, this goodwill is underpinned by a number of elements, which individually cannot be quantified. Most significant amongst these is the premium attributable to a pre-existing, well positioned business in the innovation intensive, high growth biologics market with a highly skilled workforce and established reputation. Other important elements include buyer specific synergies, potential additional indications for identified products and the core technological capabilities and knowledge base of the company.

MedImmune, Inc. contributed $714m of turnover in the year of acquisition. After amortisation, net investments/interest costs (including interest costs of external financing of $446m) and tax, the loss attributable to MedImmune in the year of acquisition was $410m. If the acquisition had taken effect at the beginning of the reporting period (1 January 2007), on a proforma basis the revenue, profit before tax and profit after tax of the combined Group for 2007 would have been $30,127m, $7,576m and $5,351m, respectively. Basic and diluted Earnings per Share for the combined Group in 2007 would have been $3.56 and $3.55, respectively. This proforma information has been prepared taking into account amortisation, interest costs and related tax effects but does not purport to represent the results of the combined Group that actually would have occurred had the acquisition taken place on 1 January 2007 and should not be taken to be representative of future results.

	Book value $m	Fair value adjustment $m	Fair value $m
Non-current assets Intangible assets	193	7,882	8,075
Property, plant and equipment	523	70	593
Other	550	(17)	533
	1,266	7,935	9,201
Current assets	1,439	115	1,554
Current liabilities	(326)	39	(287)
Additional obligations related to convertible debt and share options	–	(1,724)	(1,724)
Non-current liabilities
Interest bearing loans and borrowings	(1,165)	–	(1,165)
Other payables	(73)	–	(73)
Deferred tax assets/(liabilities)	314	(2,694)	(2,380)
	(924)	(2,694)	(3,618)
Total assets acquired	1,455	3,671	5,126
Goodwill			8,757
Total consideration for outstanding shares			13,883
Additional payments related to convertible debt, share options and other acquisition obligations			1,770
Total consideration			15,653

The total consideration for outstanding shares includes $29m of directly attributable costs.

The intangible assets acquired included: (a) product, marketing and distribution rights relating to currently marketed products or franchises (principally in respect of the Synagis and motavizumab RSV franchise, FluMist and Ethyol); (b) product marketing and distribution rights relating to products in development (principally motavizumab); and distribution rights relating to out-licensed product (principally the HPV cervical cancer vaccine). The combined acquisitions fair value of $8,075m comprised $6,570m relating to the Infection Therapy Area, $1,425m relating to the Oncology Therapy Area and $80m relating to the R&I Therapy Area. The carrying value of these assets is summarised in Note 9.

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Other acquisitions

	Book value $m	Fair value adjustment $m	Fair value $m
Non-current assets Intangible assets	–	347	347
Property, plant and equipment	7	–	7
	7	347	354
Current assets	12	–	12
Current liabilities	(19)	–	(19)
Non-current liabilities Other payables	(9)	–	(9)
Deferred tax liabilities	–	(118)	(118)
	(9)	(118)	(127)
Total assets acquired	(9)	229	220
Goodwill			–
Total consideration			220

The total consideration includes $3m of directly attributable costs.

Arrow Therapeutics Limited

On 28 February 2007, the Company acquired 100% of the issued share capital of Arrow Therapeutics Limited for cash consideration of $147m. Arrow Therapeutics Limited is a UK biotechnology company, focused on the discovery and development of anti-viral therapies. The acquisition provides a widely recognised expert group and technology platform in an area of research that complements internal capabilities in the therapy area of infection and anti-bacterials.

Arrow Therapeutics Limited had revenue of $nil and a loss of $26m for 2007 of which $nil of revenue and $17m of loss related to the period between acquisition and 31 December 2007.

Atlantis Components Inc.

On 10 October 2007, a Company subsidiary, Astra Tech, acquired 100% of the issued share capital of Atlantis Components Inc. for cash consideration of $71m.

Atlantis Components Inc. is a US dental business whose principal activity is the design and manufacture of bespoke dental implant abutments. The intangible asset acquired is the specialist CAD/CAM technology used to design and manufacture customised dental implant abutments. The acquisition further strengthens Astra Tech’s product portfolio in the field of dental implants.

The revenue and loss in 2007, for both the period since acquisition and full year, are immaterial.

Cash flows

	MedImmune, Inc. $m	Other $m	Total $m
Total consideration	15,653	220	15,873
Cash and cash equivalents included in undertaking acquired	(979)	(3)	(982)
Net cash consideration	14,674	217	14,891

Details with regard to acquisitions made during the year ended 31 December 2006 are set out below:

Cambridge Antibody Technology Group plc

On 22 August 2006, AstraZeneca completed the acquisition of 100% of the issued share capital of Cambridge Antibody Technology Group plc, a biopharmaceutical company with a leading position in the discovery and development of human therapeutic antibodies. On 22 June 2006, the offer to acquire the entire share capital of Cambridge Antibody Technology Group plc was declared unconditional and the financial results of Cambridge Antibody Technology Group plc were consolidated into the Company’s results from this date. Cash consideration of $1,074m was paid during 2006. Prior to the acquisition, AstraZeneca had been engaged in a collaboration and licensing agreement with Cambridge Antibody Technology Group plc. At 31 December 2005, AstraZeneca held a 19.2% interest in the issued share capital of Cambridge Antibody Technology Group plc, which was recorded on the balance sheet within non-current asset investments as ‘Equity securities available for sale’.

The goodwill arising on the acquisition results from assets which cannot be recognised separately and measured reliably including early stage pipeline products and a highly skilled workforce.

Cambridge Antibody Technology Group plc had revenue of $nil and a loss of $58m for 2006, of which $nil of revenue and $38m of loss related to the period between acquisition and 31 December 2006. Subsequent to the acquisition of Cambridge Antibody Technology Group plc, the Humira^™ royalty stream acquired with the company was sold for $661m.

	Book value $m	Fair value adjustment $m	Fair value $m
Non-current assets Intangible assets – Humira^™ royalty stream	–	675	675
Intangible assets – other	21	560	581
Property, plant and equipment	24	–	24
Other	20	–	20
	65	1,235	1,300
Current assets	336	–	336
Current liabilities	(72)	–	(72)
Non-current liabilities
Deferred taxation	(5)	(364)	(369)
Other	–	(20)	(20)
	(5)	(384)	(389)
Total assets acquired	324	851	1,175
Goodwill	–	104	104
Less: Existing non-current asset investment	–	(163)	(163)
Total consideration	324	792	1,116
Exchange	–	(24)	(24)
Settled in loan notes	–	(18)	(18)
Cash paid	324	750	1,074

The total consideration includes $15m of directly attributable costs.

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KuDOS Pharmaceuticals Limited

On 31 January 2006, the Company acquired 100% of the issued share capital of KuDOS Pharmaceuticals Limited for a cash consideration of $206m. KuDOS Pharmaceuticals Limited is a UK biotechnology company focused on the discovery and development of oncology therapies based on inhibition of DNA repair. The acquisition provides the Company with a widely recognised expert group and technology platform that complements the existing capabilities of the oncology franchise, one of the Company’s key therapy areas. The goodwill arising on the acquisition results from assets which cannot be recognised separately and measured reliably and includes early stage pipeline products.

KuDOS Pharmaceuticals Limited had revenue of $nil and a loss of $15m for 2006 of which $nil of revenue and $14m of loss related to the period between acquisition and 31 December 2006.

	Book value $m	Fair value adjustment $m	Fair value $m
Non-current assets Intangible assets – other	–	285	285
Property, plant and equipment	2	–	2
	2	285	287
Current assets	3	–	3
Current liabilities	(11)	–	(11)
Non-current liabilities
Deferred taxation	–	(85)	(85)
Total assets acquired	(6)	200	194
Goodwill	–	12	12
Total consideration	(6)	212	206