Arrow Learning Review

1. Arrow Learning Review

2. Feedback from Arrow to deal team • Feedback from deal team • Outputs from deal team working session Contents:

3. Arrow Learning Review Process: Interviews with key deal team members and Arrow staff Consolidation of key themes Play back key themes to group and discuss Agree next steps for sharing learning and key actions During Learning Review meeting Pre Learning Review meeting

4. Laura Earnshaw: Jo – can we add everyone's role here – think its useful for others ? Elaine Rodgers Myra Uttley Chris Hunt Andy Staples Karl Jonsson Kris Matykiewicz Ray Gairns Robert Sherville-Payne Nell McAndrew Jo Kelley Ian Garland Ken Powell Sue Grieves Barbara Domayne-Hayman Additional Sources of information: For Due Diligence the feedback that was sent from Arrow to the Due Diligence team has been incorporated into this document Deal team input was received from: The following Arrow team were also interviewed:

5. Placeholder – insert scene setting slide to provide high level details on the deal

6. 5 Dec 2006: Non-binding, indicative offer accepted by Arrow 18 Oct 2006: First meeting in London 25 Sept 2006: Arrow approaches AZ (non-confidential information exchanged) 31 Jan 2007: Acquisition agreement signed 6/8 Dec 2006: Due Diligence carried out 30 Nov 2006: Non-binding indicative offer made by AZ 28 Feb 2007: Acquisition completed 13 Oct 2006: CDA signed Sep 2006 Oct 2006 Nov 2006 Dec 2006 Jan 2007 Feb 2007 Arrow Acquisition: Timeline

7. Team Working • Decision Making • Resourcing • Communication • Due Diligence • SET Role and Involvement • Post Deal Management The Arrow team were asked to comment on what worked well and what could have been improved for the following areas:

8. Key Learning from Arrow’s Perspective

9. What worked well: What could have been improved: • Jo was clearly the point person throughout the deal – having this single point of contact was really helpful for us • In other large pharma, the ‘finders’ and ‘negotiation’ roles are more clearly defined. This leads to repetitious interactions from the 3rd parties perspective • The structure of the AZ team worked really well for us • The DD team seemed to operate separately to the core deal team. This often led to us repeating the same information to different people in AZ. This process could have been slicker Team Working:

10. What could have been improved: What worked well: • Overall it was good, we’d give you a 7 out of 10 • There could have been more transparency on decision making processes – it wasn’t always clear what decisions needed to be made by who and by when • In negotiations, it wasn’t always clear to us what was really important to AZ or what the key risks were from AZ’s perspective • The speed of decision making was OK for us. However, if another big pharma had shown interest in the process earlier they may well have beaten AZ on timelines • It wasn’t clear what was driving AZ’s drive on dates towards the end - this was confusing to us Decision Making:

11. What worked well: What could have been improved: • The AZ team seemed appropriately resourced to us - we didn’t feel that we were being short changed from a resourcing perspective and certainly didn’t feel like you were juggling anything else with this deal • It was great to see that you had external advisors for e.g. IP – these relationships seemed to work very smoothly • Linklaters worked well with the AZ and Arrow team • No comments Resourcing:

12. What worked well: What could have been improved: • Overall the communication was very good • Regular contact throughout the process ensured that everyone was appropriately communicated to throughout the deal • At the 28th December meeting - we were surprised at how much more alignment was needed from senior managers etc at this point in the process. This could have been more clearly communicated to us Communication:

13. What worked well: What could have been improved: • You met your promises of getting everything done within the timeframes, this was great • Your DD team were not aggressive and were very courteous, this sold a good image of AZ to Arrow • The process was rigorous and clearly communicated • Discussions throughout the DD process were positive and constructive • The DD team arriving in London was the first main indication that AZ were very serious – the deployment of a large amount of resource in short timeframes was impressive • Arrow have been involved with a lot of DD with other organisations. AZ were amongst the most pleasant to deal with • We thought that having 2 internal coordinators - Steve and Kirstin was slight overkill • AZ could have pushed harder during DD and obtained more detail from Arrow • Co-ordination between AZ and external parties supporting DD wasn’t great and there was duplication. We would have liked AZ to take more control in coordinating the process • Asking us to book hotels and restaurant for the DD team was difficult for us given our resource levels, this should have been done by AZ • External lawyers were very demanding and some requests were inappropriate e.g. asking us to photocopy documents for them Due Diligence (1 of 2):

14. What worked well: What could have been improved: • We spent a lot of time preparing electronic files for you and couriered these to AZ offices. It was very frustrating when this package was rejected by AZ due to it being a Saturday! And we incurred the cost • A complete list of the DD team, with names, contact details and roles would have been really useful. Not everyone had business cards to leave with us • It was difficult for us to feed and water that many people – we had to buy extra cutlery! Due Diligence (2 of 2):

15. What worked well: What could have been improved: • John and Jan coming for dinner was very important to the team (not so much to Ken personally). This demonstrated the significance of the transaction for AZ • No comments made SET Role and Involvement:

16. What is working well: What needs to be improved: • John Rex and team coming to Arrow on the day of the announcement etc. was great • We are still settling in and trying to figure out how we fit into the organisation • We have been very impressed with Nell and the development side of the organisation. Nell has been great at ensuring we don’t get absorbed into AZ processes • As soon as we signed the deal we quickly felt like we belong to AZ - that has been great • We still don’t have clarity on whether we are trying to become a mini AZ or remain independent - this leads to a slight feeling of discomfort from our perspective • We still don’t feel like we know how independent we will be from Alderley Park moving forward • We would like clarity on how Arrow resources will be used on future deals. We need to know what this model looks like so that we can resource our teams appropriately Post Deal Management:

17. Perceptions of AZ before the deal: • AZ is drivenby excellence in medicinal chemistry • AZ Culture is British with a Scandinavian influence – AZ is clearly trying to change its culture and externalisation is a key enablers of that • Boston has a very different culture to AP. It is smaller, more nimble and therefore has great momentum, this is more like Arrow’s culture • A lot of big pharma companies are perceived to go on fishing trips and waste a lot of third parties time, AZ are not perceived in this way. This really impacts the reputation of big pharma and so was a positive characteristic for AZ Perceptions of AZ after the deal: • Arrow’s perception remains unchanged We asked Arrow ‘What were your perceptions of AZ before the deal and did these change after the deal? Other comments made by Arrow: • Dealing with AZ was very pleasant, so much so that when another big pharma organisation initiated interest in Arrow we were not inclined to entertain this due to the relationship we had built up with AZ • You set deadlines and delivered to them and so managed our expectations very well • Engaging IP resource from Freshfields was one of the first indicators to us that AZ was very serious

18. Key LearningDeal Team’s Perspective

19. Team Working • Strategic Clarity • Project Management • Roles and Responsibilities • Decision Making • Resourcing • Communication • Due Diligence • SET Role and Involvement • Third Party Management • Post Deal Management • Other notable learning’s Deal team interviewees were asked to comment on what worked well and what could have been improved for the following areas:

20. What worked well: What could have been improved: • Continuing the engagement of the right people throughout the process I.e. due diligence to ensure the deal knowledge stays in the team • Having discovery resource on the team earlier in the deal would have been helpful • At the start of the deal we could have taken some ‘time out’ to understand key skills and experiences early (especially for the less experienced members of the team) • Behaviours • Inclusive and motivational Leadership from Jo Kelley • Clear sense of purpose • Camaraderie between deal team • ‘Can do’ attitude from all deal team • Flexibility of all team members • Lack of hierarchy within the deal team • ‘Fit for purpose’ mentality • Trust in each other to get the job done • Great team working between Linklaters, AZ Legal and the core deal team • Actions: • Co-location of core team enabled great team working • Team size – keeping it small = efficiency • Rolling action lists and weekly telecons Team Working:

21. What worked well: What could have been improved: • Strategy was crystal clear within the deal team, but we could have been better at ensuring our stakeholders really ‘got-it’ by asking them to play back their understanding of the strategy. This would have enabled us to better gauge their level of understanding • The long term operating model could have been articulated to a greater level of detail and within the context of the wider AZ • We could have made sure that the DD team had real clarity on the deal strategy before going into Arrow - this would have made more efficient use of everyone’s time • Jon Symonds wanted a detailed anti-viral strategy from the deal team, this was undeliverable for many reasons. We could have managed his expectations more effectively • Obtaining clarity on the strategy required a concerted effort given the nature of the deal. However, the team created this clarity for itself and for AZ in a proactive and positive way and sought external and internal support as appropriate • The strategy within the deal team was crystal clear this was largely due to John Rex and Jo Kelley – this was really motivating and gave the team a clear sense of purpose • The deal team were incredibly commercial and convincing when talking about the strategy with stakeholders Strategic Clarity:

22. What worked well: What could have been improved: • Jo Kelley did a great job at owning this throughout the deal with support from others on the team • It was clear what needed to be done and as a team, we just got on with it • There were several experienced project managers on the team – this really helped to keep momentum going throughout the deal • Jo Kelley had a massive workload and was constantly multi-tasking. This worked well and didn’t slow anything down but someone else could have taken the project management burden • The critical path (with dependencies and key milestones) could have been articulated in more detail within the deal team. This would have been especially useful for those less experienced in deal making • Some momentum was lost when Jo Kelley was absent, perhaps we could have more formally designated a senior leader to act as deputy for her Project Management:

23. What worked well: What could have been improved: • Everyone’s core role and responsibilities were made very clear by Jo Kelley and re-enforced by all team members throughout the deal process in a supportive way • Despite everyone's clear roles, there was a great degree of flexibility within the team. This meant that people often picked up activities that weren’t part of their role. This was key to the teams successful delivery • Having leads for each key team, e.g. operating model, HR etc. worked really well • No comments made Roles and Responsibilities:

24. What worked well: What could have been improved: • Deal team decision making was really transparent and efficient, the size of the team really helped this • Senior stakeholder decision making and questioning was sometimes unexpected. The team dealt with this really well and maintained a flexible approach throughout • Decisions were made quickly and efficiently - Jo Kelley was able to quickly synthesise the realistic options, critically analyse the best one and make the decision • When decisions needed to be made by SET members they made themselves available very quickly • Stakeholder decision making processes were not always clear and we didn’t always understand ‘where they were coming from’. How can we better anticipate and handle this in the future? • Enhanced/more detailed briefing of key stakeholders may have enabled their decision making processes Decision Making:

25. What worked well: What could have been improved: • Keeping the team small and expert was great • When there were resource issues the team took an inventive approach to get the job done • We were very fortunate to have experienced deal making team members from Finance (Andy Staples) and Legal (Robert Sherville-Payne) on our deal team as they were able to quickly and effectively deliver • The IP team appointed Ray very quickly and John Mack made himself available for ‘back-up’ as needed • The HR organisation took a long time to provide an HR lead for the deal team • Discovery resource had to be found by the team rather than provided by the organisation – this was time consuming • Having a project manager from the start would have been helpful Resourcing:

26. What worked well: What could have been improved: • Communication within the deal team was really effective. Daily telecons enabled this • The level of openness ensured everyone was on the same page • Having Jo Kelley lead deal communications internally and externally was very successful • Jo’s relationships with and understanding of stakeholders really helped tailor communications in the right way – this was essential for our success • Getting AZ scientists talking to Arrow scientists early engendered a great relationship early on • The co-location of the deal team and Arrow being in London enabled timely communications between all parties • Kris Matykiewicz was very flexible and took on the role of overall communications lead, this was extremely helpful and effective • The meeting between Les and Arrow after DD could have been better managed. We could have briefed Arrow as to Les’s role etc. and perhaps provided Les with an AZ companion to help him navigate the relationships and personalities at Arrow Communication:

27. What worked well: What could have been improved: • The lack of flexibility to share initial DD findings with the deal team once DD was completed was frustrating • The full DD report took a long time to be delivered to the deal team – some still haven’t seen it, this process could have been quicker • Corporate DD was sub-optimal. Could we have explored other ways of getting this done? Could Legal and Finance have handled the Corporate DD and left the DD team to do the technical DD (where they have deep expertise)? • Health of DD team! They were absolutely exhausted/bordering on ill and did a great job despite this. We need to address resourcing issues • We could have asked TAPT to nominate DD team members to ensure that they had credibility, this would have aided buy in and the speed of the process • The DD team delivered to its commitments and timelines despite resource issues/illness within the team • The team did a fantastic job on the science, the analysis was incredibly rigorous • Feedback to TAPT on DD was strong • The DD team interviewing key Arrow personnel gave the team a lot of rich information, this really helped to understand the key drivers for Arrow • Arrow set out the data room really well and handled the process with real professionalism Due Diligence:

28. What worked well: What could have been improved: • SET were supportive and flexible with their commitments to get the job done • Jan and John taking the Arrow CEO for dinner early on was extremely useful and really sped up relationship building • SET stakeholder management was continuous and planned throughout the deal process • The right people were engaged at the right time on the right things • Jon Symonds was generally accessible • Jan taking time out to be part of the final stages of the deal • Knowing what was going on in stakeholders minds would have been helpful as we responded to issues and challenges • Given that there is often push back from stakeholders on deals, how can we ensure that deal teams are best prepared for this? SET Role and Involvement:

29. What worked well: What could have been improved: • Interactions were open, polite, transparent and professional on both sides • The level of senior engagement helped to build trusting relationship early and gave both sides the ability to just ‘pick up the phone’ when they had questions • Understanding the owners and managers wants and needs enabled us to structure the deal in a really favourable way • The retention work that was done in collaboration with Arrow’s CEO meant that the retention terms were credible and had a lot of buy in • The team planned for tough questions in advance of the ‘welcome to AZ’ meeting and were well prepared when these came • We could have shared our critical path and decision points more clearly with Arrow. This would have ensured that they were really clear on what was happening inside AZ and when? Third Party Management: (1 of 2)

30. What worked well: What could have been improved: • We obtained some really good intelligence from JP Morgan in terms of thinking the deal though in the early stages – this was valuable • We decided not to open a contract that Arrow had with Novartis, this was a risk but one that paid off. Arrow were impressed that we didn’t insist on seeing the contract Third Party Management: (2 of 2)

31. What is working well: What could have been improved: • The communications with Arrow since deal signing have been open, quick and honest • Senior executive welcomes have been very visible and positive • From an alliance management perspective, interactions with the deal team have been very positive • Lots of learning from the Kudos and CAT deal has been applied to Arrow both from a deal and post deal perspective • Arrow had a really positive experience with the deal team. This has meant that they are very flexible and accommodating and have been willing to support/be involved in AZ governance processes • Greater clarity on the vision for the deal and the ownership of this vision would have been helpful. This would make it really clear what success for the deal looks like • Having greater clarity on ownership post signing of the deal and a transition plan within O&I e.g. definition of a 100 day integration plan jointly owned by Arrow and AZ • Greater clarity and detail around the operating model and ways of working would have been helpful, this is being developed now • Involvement of the O&I team earlier on in the deal process would have made the transition/handover process more effective • Identification of Alliance Management resource/process earlier on in the deal process • We recently had to go to John Patterson to get investment for some of the compounds to take them forward, it would have saved a lot of time had this been built into the deal Post Deal Management:

32. HR Solutions • HR has a limited number of HR solutions for M&A activity, this needs to be looked at and expanded • Acquisition vs Licensing – a different beast! • Until you have done an acquisition you don’t know how different it is to a licensing deal. Seek input and lessons from other acquisitions • Ensure at least a couple of people on the acquisition deal team have done an acquisition before. We need to develop a log of people that have been involved in acquisitions and use them for future acquisitions and/or as coaches to people on future acquisitions • Handover of deals from NO to TA • We need a best practice approach on Handing deals over from NO to the TA’s, e.g. when to engage the TA, what are the key questions to ask, who owns this and when etc. We were lucky to have John Rex as point of continuity on this occasion but it may not be so simple in the future • Kudos and CAT – lessons learnt • The deal team took a lot of the lessons learnt from the Kudos and CAT deals and applied these to this deal – this was really useful Other learning:

33. Working group sessions to explore learning

34. What are the key learnings on deals for AZ?: • The strategic context for the deal needs to be in place early • To continually improve our ways of working we need to pay specific attention to the following: • Timing – we need to continue to decrease our timelines • Risk management – we need to get better at articulating and mitigating risk as an organisation • New ways of working What are the key learning’s on acquisition deals specifically? • For licensing AZ always has good integration models but for acquisitions we need to look at this more closely bearing in mind: • There is always more risk up front with acquisitions • Is AZ flexible enough as an organisation to provide the required flexibility to really exploit acquisitions? • We have clear access to SET and key decision makers during the deal but we need to be able to provide SET with feedback and obtain their feedback • Acquisition post deal management resource needs to be accountable, skilled, senior enough to influence and be authoritative to ensure acquisition benefits are realised Group 1

35. What are the key learnings that we, as a team will take from this deal? • We were a flexible and diverse team, small is good and co-location is great • Strong leadership empowered the team and enabled good decision making • Understanding what makes key stakeholders tick is a really important skill to have and share amongst the team. We had this and it really helped • We need to look at the model for providing corporate DD to deals • The importance of having experienced Finance and Legal support cannot be underestimated • Its time consuming for the experienced team members to bring the less experienced team members up to speed but its also absolutely necessary • The team was really creative and came up with great solutions as a result • The group provided supportive challenge to each other, this enabled even more rigorous decisions to be made What organisational/individual development needs do we have? • As an organisation we need to develop more HR M&A models to ensure we attract and retain the best • As an organisation we need to get better at • Managing post deal relationships • Handing over from deal teal to post deal team • Monitoring deals once they are brought into the organisation • The systematic transfer of deal knowledge within the organisation • As individuals we need to continue to develop and encourage courageous transaction leadership • We need to continue to develop our understanding of which battles to fight by instilling co-coaching as part of the culture of SPBD Group 2 Outputs