AstraZeneca PLC (AZN) 2012 Q4 法說會逐字稿

Good afternoon.

Welcome, ladies and gentlemen, to AstraZeneca's Full Year Results analyst conference.

Before I hand over to James Ward-Lilley in the auditorium, I'd like to read the safe harbor statement.

The Company intends to utilize the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995.

Participants on this call may make forward-looking statements with respect to the operations and financial performance of AstraZeneca.

By their very nature, forward-looking statements involve risk and uncertainty, and results may differ materially from those expressed or implied by these forward-looking statements.

The Company undertakes no obligation to update forward-looking statements.

There will be an opportunity to ask questions after today's presentations.

(Operator Instructions).

We will now hand you over to James Ward-Lilley at AstraZeneca where the meeting is about to start.

Good afternoon, everybody.

Welcome to AstraZeneca's Q4 and Full Year 2012 Results.

Happy to take questions and support whatever questions we have through the day.

And without further ado, I'll hand over to Pascal Soriot.

Thank you, James, and good afternoon, everyone.

It's really a pleasure to see you all again.

Welcome to our 2012 Full Year Results presentation.

First, let me set the stage for today's agenda.

I will make some opening remarks, summarizing the key events for 2012, the headline numbers for the full year.

I'll also review our commercial performance, looking at our revenue trends in our key regions and for our key brands.

Then Briggs Morrison, who is our EVP for Global Medicines Development, will review our pipeline progress in 2012.

Simon, you all know Simon very well, our CFO, will present our 2012 financial performance and provide you with our thinking for guidance for 2013.

And then I'll conclude with some observations from my first 90 days at AstraZeneca ahead of our Capital Market Days that we are planning for March.

I'm also pleased today to say that we have in the room Ruud Dobber.

Ruud is our Commercial Head for the European region, and he's also our interim leader for the Global Product Strategy function.

So we'll all share your questions, and Simon has committed he will actually take all your very hard questions and leave me with the easy ones.

So if I start with our performance in 2012, our results really reflect a period of significant patent expirations, as you all know, and overall challenging market conditions throughout the entire world.

Our revenue was down by 15% in constant currency terms, and reflects the loss of approximately $4.5 billion in revenue from the loss of exclusivity on several products, with Seroquel IR being the biggest driver.

Core EPS was down 9% for the year to $6.41.

That is above the latest guidance we provided.

We have to say core EPS benefited from favorable impact of two tax-related matters, and also from the sale of the Nexium OTC rights.

The second tax-related matter took place in the last quarter.

Reported EPS was $4.99, which is down 29% compared with last year, but as a reminder, last year included large gains from the sale of the Astra Tech assets.

The full year dividend was maintained at $2.80 per share.

We successfully drove the performance of many of our brands that [retained] market exclusivity.

The six brands together accounted for $600 million in incremental revenue on a constant currency basis.

We also made real progress on the pipeline this year, which is three important regulatory approvals for new medicines in Europe.

First Forxiga, which is a new first-in-class treatment for diabetes, an SGLT2 inhibitor, and so far, the feedback from our customers is very good; very early days but good feedback; Zinforo, a new cephalosporin antibiotic; and Caprelsa, a smaller new orphan treatment for advanced medullary cancer of the thyroid.

In the US also I want to point out that FluMist Quadrivalent was the first four-strain influenza vaccine to be approved by the FDA.

Our portfolio in Japan was strengthened by three approvals; for Symbicort, the SMART dosing regimen, and the approval of the COPD indication; but also the approval for Nexium for use in combination with low-dose Aspirin.

You will hear all the details on the pipeline from Briggs in a few minutes.

Finally, among the many transactions and alliances we forged in 2012, the big three, so to speak, are, firstly, the collaboration with Amgen on five clinical projects in the field of inflammation, one of which is in late stage development.

Second is the acquisition of Ardea Biosciences, which brought a Phase III molecule for the treatment of gout.

And finally, our diabetes alliance, which was expanded with Bristol-Myers Squibb's acquisition of Amylin, and as you know, our subsequent buy-in of our share of that exciting portfolio.

So we now have a full portfolio of products in diabetes.

Moving to the next slide.

The full-year revenue performance, when I refer to growth rates, would be on a constant currency basis.

So if you look at it by region, the US declined by 21%, driven by the loss of exclusivity for Seroquel IR, revenue in Western Europe was down 19%.

The loss of patent protection on four products, Seroquel IR, Atacand, Nexium, but also Merrem, accounted for more than 60% of the revenue decline, in addition to continued headwinds from Government interventions, which the whole industry is dealing with, as you know, in Europe.

Revenue in established Rest of the World was down 14%, largely due to a 31% decline in Canada as a result of generic competition for Crestor and Atacand.

Revenue in Japan was down 5%.

The biennial price reductions are a key factor, of course.

The underlying strengths of our in-market performance for Nexium, Symbicort and Seroquel IR were not reflected in our reported sales simply due to ordering patterns from our marketing partners in Japan.

Revenue in Other Established was negatively impacted by the loss of exclusivity for Seroquel IR and Merrem, as well as the challenging pricing environment for Crestor in Australia.

We experienced a substantial price reduction there.

So in total, Crestor sales were down 8% in Australia to around $350 million.

Revenue in the emerging markets was up 6% in the fourth quarter, which allowed us to bring the full-year growth rate to 4%.

As you will remember, the first half of 2012 was impacted by the supply chain issues, and we've been recovering progressively since then.

We had good growth in China, where revenue was up 17% for the year.

Amongst our other larger markets, we had good performance in Russia, in Rumania, Saudi Arabia.

Overall, our growth rate was really affected by weak performances in four markets.

Turkey, which was impacted by Government pricing interventions; Mexico, where we had generic competition, and clearly a tough market environment; Brazil, with the loss of exclusivity for Crestor and Seroquel IR; and also India, where revenue has been impacted by local supply issues.

Together, those four markets accounted for more than $160 million.

In constant currency, revenue declined for the full year.

If we look at it from a brand perspective now, this slide provides you with a snapshot of revenue for our key brands.

And there are really some real bright spots amongst those products in our portfolio that are not impacted by loss of a patent protection.

Crestor, of course, experienced loss of exclusivity in Canada, but excluding Canada, sales were up 2% for the year.

Symbicort had a good year with sales reaching over $1 billion in the US for the first time; a very strong result for Symbicort.

Despite the loss of exclusivity for Seroquel IR, we achieved 4% growth for Seroquel XR.

And we also had a strong year, another strong year for our oncology products, Iressa and Faslodex in particular.

A good performance for the Onglyza family, which is developing very nicely, and the inclusion of Byetta and Bydureon from Amylin added about $111 million in revenue since the addition of these products to our portfolio from the third quarter.

We achieved slow but steady progress on Brilinta, and we'll come back to this, but as you can see on the bottom of the slide, loss of exclusivity took a large toll.

We have substantial headwinds from those patent expiries, on Seroquel IR, globally and regional losses on Nexium, Atacand and Merrem.

Detailed commentaries on our brand performance are in the press release.

I just want to provide some additional color on five products in the portfolio.

Crestor, an update on our Brilinta launch, the performance of the Onglyza franchise, also some color on Symbicort, and finally a brief look at Nexium and its performance in Japan.

So let me start with Crestor.

The sales in the US were up 3%.

Total prescriptions were down just 1.4% for the year, which truly is a very resilient performance in the face of multiple atorvastatin in generics starting May 30 last year.

If you look at the next slide, that shows you -- the red area maps the number of patients who are newly starting their statin therapy with Crestor.

The blue represents the patients who have switched to Crestor from another statin.

And the gray line below the axis is the number of patients who are switching from Crestor to another statin.

And finally, the important line is the yellow line, which is the net result of all those additions and losses.

And as you can see, this yellow line on the chart, you can see the increase in net dynamic volume that occurred in the last six months of 2011.

This was following the label changes for Simvastatin and the removal of the 80 milligram dose from the market.

The Crestor volume was already on the downward trend from this spike around the time of the limited launch of generic atorvastatin in November 2011.

And we did lose a bit more ground following that launch.

But overall I think it is fair to say that the data on the right-hand side of the graph tends to demonstrate that Crestor dynamic volumes have held up very well and are stabilizing, even with the influx of multiple atorvastatins in May.

And that is confirmed by this chart that shows you the total prescriptions for Crestor in the United States.

And of course, it goes up and down, as I described a minute ago, but importantly, you can see that in the last couple of quarters we see signs of stabilization.

Total prescriptions in the fourth quarter of 2012 are about 6% lower than last year, some of which is a function of the prior period ramp up.

We also had a small decline in the second half of 2012 related to volume losses in the low margin medical business.

But overall, as I said, a very resilient performance in total prescriptions.

In the Rest of the World, sales were down 9%, but if you exclude Canada, they were unchanged.

We continue to do well in Japan where Crestor is the actually the number one statin by volume share of the market.

As you can see here on the next slide, we continued to grow our share of new patients in Japan, even after the launch of generic atorvastatin, and certainly Crestor is the largest statin there.

In the emerging markets, sales were up 4%, 14% if you adjust for the loss of exclusivity for -- in Brazil and in Mexico.

Now let me turn to Brilinta.

We have actually now launched in 82 countries.

Sales are still modest at about $89 million for the year.

But if you look at the next slide, in the US, we see steady progress in the goals in total prescriptions.

In the fourth quarter, scripts were 46% higher than in the third quarter.

As we start the New Year, we have seen a real boost to our market access.

We now have unrestricted preferred access to more than 50% of [covered labs] in the Commercial plans, but also in Medicare Part D. And we see a steady improvement in access in both Part D and Commercial plans.

That is up more than 20 percent points in Commercial and 30 points in Part D compared to the third quarter.

We know that physicians' concerns are about plan reimbursement and affordability for patients, and that has clearly hindered the product trial.

This improved access should really help us move forward into the year, and we are doing a number of other things which we could talk about later if you wanted to.

Outside of the United States, our good performance in Germany continues.

If you look at the data from our survey panel, we've leveraged our strong protocol adoption to maintain our number one share of this year's initiation in the hospitals, and this graph actually shows you the total IMS audit data, where our share of the total prescriptions in the OAP market in the hospital is measured.

And you see a clearly improving trend and a very encouraging development of our prescriptions here.

This is -- at 13%, this is a lower number than our ACS panel, but the panel measures new initiations, and this number also includes other indications, not on the ACS use, but using of antiplatelet products and other indications.

But overall, a very nice progression.

And our retail volume market share again, all usage, is also rising very quickly.

A second important country in Europe, and it's a very important one for Brilinta because it's the largest OAP market in Europe, and the latest market for which we have some early launch tracking to report.

Again, it's still very early days, but we've had a faster protocol uptake and share of ACS initiations than when we launched in Germany.

And even on just six months of data, our penetration of the hospital and retail volume for all OAP usage is on par with the Prasugrel launch that's taken its first six months, despite our being third to market.

So again, here in France pretty encouraging market development.

And if we move to the next slide, a final word on Brilinta.

We received approval in China in the fourth quarter.

Of course, this is only a first step.

We now must achieve a listing on the [RBL] before we can really drive revenue there.

So let me now move on to the Onglyza franchise.

Our share of the Alliance revenue for the Onglyza franchise was $323 million for the year, which is up just 53%.

Much of this is still in the US where the Alliance revenue was about $237 million.

If you look at the [sales] now for the Onglyza franchise in the US, they were up 45% for the year, which is well ahead of the DPP4 market growth of about 22%, and our share is steadily improving.

Our total franchise share was up 1.3 percentage points during the year, with the growth coming from Kombiglyze XR on the background of a stable Onglyza market share.

The sales in the rest of the world for Onglyza were up 56% to $86 million.

We've now launched Kombiglyze XR in Brazil and in Mexico.

And in Europe, the first launches of Komboglyze took place in the fourth quarter of 2012, which should really help the performance in Europe, where the combination products are very important.

Symbicort had another good year; a very important product for us in the next few years.

Sales in the US reached the $1 billion milestone for the first time.

We've achieved steady growth in total prescriptions, and the market share is up 2 percentage points over the last 12 months.

We are now at 22%.

Importantly, our share of new patient starts is 28%, which gives you an idea of the upside that is still ahead of -- is still there for Symbicort in the United States in terms of our total prescription share.

The sales in the Rest of the World were unchanged for the year at about $2.2 billion.

And importantly, we continue to do very well in Japan, helped by the approvals of the SMART regimen, but also the COPD indication.

The last product I would like to talk about is Nexium.

We've achieved a steady financial performance in the US in the highly generic PPI market.

And a slowly declining volume is actually partially offset by higher realized selling prices; a mix effect, which is due to the loss of low margin business in Medicaid.

But really what I wanted to talk about is Japan.

And as you will remember, Nexium sales in Japan were treading water for most of the year, essentially due to the provisions under the Ryotanki that limited prescriptions for new products in their first year on the market to just about two weeks' supplies; so that's unlimited next year.

And the two-week limit was lifted in October, and the performance has really accelerated.

And if you look at the next slide, it really shows the tremendous success we've experienced with Nexium, which is now the most successful launch ever in Japan; a great performance by our commercial team in Japan, which is really an outstanding team.

I'd like to stop here and turn the presentation over to Briggs, who will review our 2012 pipeline progress.

Thank you.

Thank you very much, Pascal.

My name is Briggs Morrison.

I'm the Executive Vice President of Global Medicines Development.

I've been with AZ about a year, and held a similar position at Pfizer before that in multiple development positions, and at Merck before that.

I'm a medical oncologist by training.

Today, I want to give a brief update on the priorities for R&D at AstraZeneca on our portfolio, including the pipeline movement, some highlights from 2012; and the late stage update and the anticipated news flow for 2013.

So we've set some clear and focused priorities to achieve scientific leadership; progress the pipeline and rebuild the Phase III portfolio, enhance R&D productivity, strengthen our capabilities in translational science and personalized medicine, and foster a culture of high quality and innovative science.

As you'll see, our Phase I and II pipeline is shaping up and our investments, and large molecules are particularly taking effect.

We've built good momentum in the portfolio, and it's important we now pull these through to patients.

So let's look at our pipeline movement since 2011.

The pipeline now includes 84 projects, of which 71 are in the clinical phase of development, and 13 are either launched, approved or filed.

There are 11 NME projects currently in late stage development, either in Phase III or undergoing regulatory review.

And during 2012 across the portfolio, 39 projects have progressed to the next phase, 12 molecules entered human testing, and 19 projects were discontinued.

This slide shows a detailed view across our Phase I, II and III, both small and large molecule.

There's a lot on it; it's hard to read, but you should have a copy.

You can see that we now have a good balance of small and large molecules today, with the large molecules making up about 45% of our portfolio.

The work we've done in the last few years has injected real quality into our pipeline.

This is reflected particularly in the Phase I and II portfolio.

I think this bodes quite well for what we can expect to enter into Phase III in the coming years, and I'll touch more on that later in the presentation.

So last year, there was a lot of good activity in the pipeline, as Pascal mentioned.

We saw, for example, the launches of Zinforo, Forxiga and Komboglyze in Europe, Oxis, Symbicort SMART and Symbicort COPD in Japan, and Phase III starts for brodalumab and CAZ AVI.

In the fourth quarter, we also had the approval for Brilinta in China, and I'm going to start with Brilinta and I'm going to talk a little bit more about some of our late stage assets.

So Brilinta continues to make great progress in terms of its availability around the world, now with approvals in 88 countries.

It's under review in a further 18.

PARTHENON is our life cycle management program for Brilinta, which we have continued to invest, and now has over 50,000 patients involved in a number of large outcomes trials.

We've completed Philo, our acute coronary syndrome trial in Asia, in anticipation of submitting for approval in Japan in the second quarter.

Our PEGASUS TMI-54 study in patients who've had a previous myocardial infarction is also progressing well, and is on track for filing in 2015.

We recruited our first patient for the EUCLID trial for patients with peripheral artery disease in December of last year.

Peripheral artery disease, or PAD, affects about 27 million people in Europe and North America, and there's currently insufficient evidence on how best to medically manage these patients, resulting in substantial healthcare costs.

We anticipate filing the EUCLID trial in 2016.

We're also investing significantly in investigator sponsor trials.

In the fourth quarter, Brilinta was added to the ACCF/AHA guidelines for the management of patients with ST elevation myocardial infarction, so called STEMI patients.

This brings to 11 the number of global guidelines in which Brilinta is considered standard of care.

In November, the European Commission approved Forxiga for the treatment of type 2 diabetes in the European Union, and the first SGLT2 inhibitor to be approved, gain regulatory approval anywhere in the world, and it provides physicians with a clearly new option to improve glycemic control with the additional benefits of weight loss and blood pressure reduction.

We've now launched Forxiga in the UK, Germany and Denmark, and received approval in Australia.

We've had constructive discussions with the FDA about the Forxiga NDA in the United States.

We will be providing additional data from ongoing studies, and expect to re-submit in the middle of this year.

Assuming a standard six-month review, we think we'll hear back from the FDA by the end of this calendar year.

We're excited about the future of the Dapagliflozin franchise and have submitted a marketing authorization for a Dapagliflozin Metformin immediate release fixed dose combination; did that in the fourth quarter of last year.

And we expect to begin enrolment in DECLARE, large cardiovascular outcomes trial, by the end of this year.

For Onglyza, the SAVOR-TIMI 53 study trial is fully recruited and the follow-up is ongoing.

This study complies with the new FDA requirements for assessing cardiovascular risk for patients with type 2 diabetes.

As the trial progressed, we recruited more patients, recruited more quickly than anticipated; we increased or enrolment number from 12,000 to 16,500.

This increase in sample size allowed us to accrue the events more quickly than we had planned.

We and our partner BMS expect to submit the data from SAVOR to regulatory authorities around the world in the second half of this year, which is two years ahead of our initially planned timeline.

For Symbicort, in June, Symbicort SMART was approved and launched in Japan.

The COPD indication was approved in August and launched in September.

PATHOS is a real world evidence study on the impact of different COPD management strategies and outcomes for patients.

That was shared at [ERA].

19,000 patient years of data; this is the largest and longest real-world study to compare the effectiveness and safety of Symbicort compared to fluticasone and salmeterol in patients with moderate to severe COPD.

Specific to the US, the next step for Symbicort is the submission of the breast activated inhaler which is on track for a 2014 filing.

It's also -- talk about the molecules that are in Phase III.

For Naloxegol, the Phase III Kodiac studies are progressing well.

Kodiac is designed to investigate the safety and efficacy of Naloxegol as a medicine to relieve constipation, which is a side effect of the prescription use of opioids for the chronic pain management.

We announced the top line results from Kodiac-04 and 05 and Kodiac-07 in patients with non-cancer related pain who have opioid-induced constipation.

We released those results in November last year.

More Phase III data from both of those trials will be presented at DDW in May.

Enrolment in Kodiac-08, which is a long-term safety trial, is complete, and those results are expected this quarter.

We remain on track for regulatory submissions in the US, Europe and Canada in the mid part of this year, of course, pending our full analysis of all the trials from all the data for all four trials, and a pre-MDA meeting we have with the FDA.

CAZ AVI is an innovative combination of an established antibiotic, ceftazidime, with a novel inhibitor of bacterial resistance called heavy bactrim.

CAZ AVI aims to treat hospitalized patients with complicated inter-abdominal infections, complicated urinary tract infections and hospital-acquired pneumonias including ventilator-assisted pneumonia.

We enrolled our first patient in the Phase III study in 2012.

Brodalumab is the anti-IL17 receptor monoclonal antibody that we are developing in collaboration with Amgen.

This is being studied for the treatment of psoriasis, and Phase III was initiated in the third quarter of last year.

Psoriatic arthritis Phase II trial was also completed, and we are in the middle of analyzing that data.

Fostamatinib is the first oral kinase inhibitor with selectivity for the spleen; tyrosine kinase, so-called [thick] kinase, and developed for rheumatoid arthritis.

Our Phase III OSKIRA program is on track to report in the second quarter of this year, with anticipated filings in the US and Europe at the end of this year in the fourth quarter.

Our acquisition of Ardea last year brought in the Phase III asset Lesinurad.

Lesinurad is the selective uric acid reabsorption inhibitor that primarily targets URAT1 and [04] in the proximal renal tubular cells that regulate the excretion of uric acid from the body.

It's being developed as an oral once-a-day chronic treatment for gout, and it's being studied in an ongoing Phase III program including, as an add-on to [Allopurinol] in patients do not reach their targets in uric acid concentrations with Allopurinol alone.

We think due to its complementary mechanism of action and its tolerability profile, it has the potential to fundamentally change the way that gout is treated by helping the majority of patients actually get to their goal of 6 milligrams per decimeter [interior] uric acid.

We're targeting regulatory submissions in 2014.

Now in 2013, there are five programs that could potentially progress to and start Phase III.

In 2014, there are an additional 11 programs.

Now not all of these will make it, but this figure clearly reflects the progress we've made in our Phase I and II pipelines that I mentioned earlier, and our consistent focus on quality, I think, increases the chances that these molecules will progress and start Phase III.

This year, as well as the upcoming Phase III starts, there are many milestones anticipated.

Further Phase III results for Fostamatinib and Naloxegol; several submissions, including Brilinta in Japan, and Forxiga in Japan and China; and the launch of FluMist Quadrivalent flu vaccine in the US, to just name a few.

So I think as you can see, our focus on quality, the innovative science in our lab, and the enhancements to our approaches are beginning to play out.

Continuing this momentum over the next few years will, I believe, result in a significant increase in our Phase III new molecular entity programs as we progress the pipeline.

I'll speak more about additional opportunities we are creating with our pipeline at the Capital Markets Day in New York in March.

I'd now like to turn the microphone over to the man who answers all the hard questions, Simon Lowth.

Thank you, Briggs.

I'm going to cover six topics.

I'll recap the headline numbers for the full year and the fourth quarter.

I'll cover our core operating profit performance, and I'll emphasize the key drivers of operating profit and margin.

I'll update you on the progress of Phase III of our restructuring program.

I'll describe our cash performance and our decisions on shareholder distributions.

I will make the bridge from our core P&L on the old basis to our new definition of core financial measures, and then using this new core as the baseline, I will close with our thoughts on guidance for 2013.

Pascal covered the overview of the full-year performance in his opening remarks.

To complete the picture, we bridge from core earnings per share of $6.41 to a reported earnings per share of $4.99, with the usual adjusting items for restructuring, amortization, impairments and legal provisions.

While core earnings per share declined by 9%, reported earnings per share fell by 29%.

The faster decline in reported EPS is due to higher restructuring and amortization costs in 2012, and of course, the $1.08 benefit in 2011 from the sale of Astra Tech.

I don't intend to go into any detail on the fourth quarter accounts.

The revenue picture is similar to the full year.

Core EPS, however, benefited from the favorable adjustments to deferred tax balances related to the reduction in the Swedish corporation tax rate.

So I'll now turn to the P&L for the full year, and I'll focus here on core margins and profit.

The press release does, of course, contain the statutory numbers and a detailed reconciliation to the core measures.

When I refer to growth rates, they will all be on a constant currency basis.

Core gross margin was 81.2% of revenue.

Now that is down 90 basis points compared with last year which had benefited from the settlement with PDL Biopharma in the first quarter.

For 2012, there were benefits from the absence of Astra Tech and Aptium, and there was also a small uplift in the second half from the accounting treatment of the Merck second option.

But countering those upsides, there was an unfavorable impact from product mix.

Core SG&A expense was down 12% compared with last year.

Restructuring benefits and spending discipline were partially offset by increased investment, particularly in emerging markets, and the inclusion of the amortization expense related to the Amylin intangible assets acquired in the expansion of the diabetes alliance.

The excise fee imposed by the enactment of US healthcare reform measures amounted to 2.8% of core SG&A expense for the year.

Core other income for the year was up 24%, reflecting the $250 million from the sale of Nexium OTC rights.

Core pre-R&D operating margin was 53.2% of revenue.

That is 90 basis points lower than last year, but the benefit from higher core other income was more than offset by higher core cost of sales and core SG&A expense as a percent of revenue.

Core R&D expenditures were down 11% to nearly $4.5 billion.

And we did absorb significant new spending in-licensed, acquired or partner projects during the year.

However, these are more than offset by restricting benefits and by significantly lower intangible impairments in 2012 compared with last year.

The volatility related to impairments is one of the reasons we moved to our new definition of core measures.

Core operating profit was $10.4 billion at 18% lower than last year.

Core operating margin was 37.3% of revenue, 160 basis points lower than last year.

We turn to our productivity program.

For the full year, we've incurred $1.6 billion of costs associated with the third phase of restructuring that we announced back in February 2012.

If you add in the $261 million that you recall was charged in the fourth quarter of 2011, that means we've around $300 million left to go against the total program estimate of $2.1 billion, and most of this will be taken in 2013.

Actions involving around 6,300 of the estimated 7,300 physicians that will ultimately be impacted have been completed.

Total annual benefits of $1.6 billion by the end of 2014 are targeted from this phase, and we estimate that around $350 million were retrieved by the end of 2012.

Now bringing together all three phases of restructuring, we have reduced gross headcount by around 27,000 physicians.

After reinvestments, we've achieved a net reduction of over 15,000 physicians.

Cash generated from operating activities was $6.9 billion for the year compared with $7.8 billion in 2011.

Lower tax payments only partially offset the low EBITDA for the year.

Cash outflows on externalization activities were $5.1 billion, chiefly related to the purchase of the Amylin intangibles and the $1.1 billion acquisition of Ardea.

We ended the year with a net debt position of $1.4 billion.

Now turning to cash distributions to shareholders.

The second interim dividend is $1.90, which brings the dividend for the full year to $2.80, maintaining the same dividend as last year.

This is consistent with our progressive dividend policy by which we aim to maintain or grow the dividend each year.

It's a policy that we're committed to going forward.

We've revised the basis by which we assess dividend cover.

Previously, you may recall that dividend cover target was 2 times based on reported earnings before restructuring costs.

Now with the adoption of our new definition of core financial measures, the dividend cover target is now 2 times based on core earnings on the new definition.

We believe that this new core earnings measure is a better indicator of the cash cover for the dividends.

Now when the Board adopted the progressive dividend policy, it recognized that some earnings fluctuations are to be expected as the Company transitions through this period of exclusivity losses and new product launches.

The Board's view is that the annual dividend will not just reflect the financial performance of a single year taken in isolation, but it will reflect its view of the earnings prospects for the Group over the entirety of the investment cycle.

And likewise, it recognizes the dividend cover in any given year is likely to vary from the 2 times cover target.

Prior to suspending the 2012 share repurchase program, we executed net share repurchases of $2.2 billion.

The Board will continue to keep under review the opportunity to return excess cash to shareholders through periodic share repurchases.

However, the Board has decided that no share repurchases will take place in 2013 in order to maintain flexibility to invest our business.

As we announced last quarter, beginning with the first quarter of 2013, we'll be updating our definition of core financial measures.

The principal change is to exclude all intangible asset amortization and impairments, with the exception of information systems-related intangibles.

Now we've provided the reconciliations for the four quarters of 2011 and the nine months of 2012 back in November.

And in today's press release, we've included the reconciliations for the fourth quarter and the full year 2012.

Now I know that many of you have already adjusted your 2013 models, but others may yet to do so.

And just to be absolutely clear, here is the core P&L for 2012 reconciled to the new basis.

I'll not take the time to go all the way down all the accounts here, and I'd just point out the core gross margin.

Against this new basis, I might expect to see some decline in 2013.

And the other item I'll call out is, of course, that the new core EPS figure is $6.87 for 2012 versus $6.41 on the old basis.

I'll now turn to our guidance for 2013, and it's in the context of this new core baseline.

Now the financial performance for the full year of 2012 was defined by the significant revenue decline associated with the loss of exclusivity for several products.

Seroquel IR alone declined by $3 billion.

Regional losses of exclusivity for Atacand, Nexium and Crestor combined for a further negative impact of more than $1 billion.

Against this revenue profile, spending discipline and restructuring benefits can only be expected to partially mitigate the impact on core profits and margins, particularly as investments to drive future growth and value are to be made.

A larger decline in core EPS for 2012 was averted by the favorable impact of two tax-related items; $0.19 from the tax provision release in the second quarter, and then $0.18 from the adjustment to deferred tax balances in the fourth quarter.

2012 also benefited from $0.16 from the sale of OTC rights to Nexium in the third quarter.

So together, those three items amount to $0.53 per share headwind as we move into 2013

So for 2013, we expect challenging market conditions will persist, including continued government interventions in price.

The revenue impact from the loss of exclusivity will continue to affect the revenue performance, with the first quarter particularly challenging, since Seroquel IR and Crestor in Canada have not yet reached the 12-month anniversary since generics entered the market.

For the full year 2013, the Company anticipates a mid to high single-digit decline in revenue on a constant currency basis.

Productivity and efficiency programs will continue to deliver their target level of savings.

These will provide the necessary headroom to invest behind key growth platforms and in progressing the pipeline, with the aim to hold core operating costs, combined core R&D and SG&A expense, the whole core operating costs in 2013 to a slight increase compared 2012 on a constant currency basis.

Core other income is expected to be under $600 million for the year.

The reported tax rate for 2013 is anticipated to be around 23%.

And with a revenue and operating cost profile in line with our guidance, core EPS will decline significantly more than revenue in 2013.

Now in January 2010, the Company outlined planning assumptions for revenue and margin evolution for the period 2010 to 2014.

With 2013 guidance now in place, and in the context of an updated corporate strategy, these planning assumptions for the remainder of the period have been withdrawn.

Financial guidance for 2013 has been based on January 2013 average exchange rates for our principal currencies, and takes no account of the likelihood that average exchange rates for the remainder of 2013 may differ materially from these rates.

I'll hand back to Pascal.

Pascal?

Thank you, Simon.

I just wanted to close this session with a few thoughts on my first three months at AstraZeneca.

It's too early for us to share any views as to what our strategy will look like.

We wanted to do this at the end of March, as we had communicated to you earlier.

We really want to do a thorough job of analyzing our options and looking at our business and developing priorities and strategies in detail.

And also, my priority for the first three months was really to get to know the people, understand the organization, understand the culture, understand how this Company works, what it is we do very well and what we could do better.

And as you can imagine, an organization of that size is not something you get to know very quickly, and fundamentally, the most critical piece is to understand the people, and in particular the critical leaders that are making this Company work.

So I have gone around the world; I've visited about 15 sites in many countries.

I've visited every single research and development site.

I've gone to many of our commercial organizations.

I've had many town halls; I must have interacted with more than 8,000 people.

I've met many, many of our leaders.

I have had many roundtables of eight to 10 people, cross-functional roundtables in the various sites; must have run 35 or 40 of those, which enabled me to hear from 350 to 400 people.

And I think I have now a good sense for the organization and what it is we do well and what we need to improve.

And as I have shared with some of you in the last few weeks, one of the things that really struck me the most at AstraZeneca is that despite two or three years of waves of restructuring, the people are still very, very motivated.

Sometimes a little bit disoriented, of course, as you can imagine, because you saw the headcount reduction that the Company's experienced in the last few years and you can't do this without impacting people.

But incredibly engaged and committed, passionate group of people, and very committed to doing the right thing and committed to the success of the Company.

Second thing is the collaborative spirit is quite unique actually.

I have worked for many companies; I've been in many different places, and the level of collaboration in the organization is quite remarkable.

I also believe we have tremendous science; got great scientists around the world.

And it's not only me saying this.

I have talked to, as you can imagine, many European leaders, many people I know from my past lives at the previous company, or other companies, in oncology and diabetes, cardiovascular medicine.

We've also run a series of meetings, advisory boards, probably spent in total close to two weeks doing this, with some of the top leaders in the world; top scientists in oncology, in metabolism, cardiovascular medicine etc.

And typically what I heard was that AstraZeneca and its science ranks in the top three companies in the industry, three/four companies in the industry.

So fundamentally -- good fundamental science and fundamental scientist.

So you might ask me what it is that you need to do then to leverage this, and why is the pipeline not what you would -- what you could expect it to be.

And I think really over the last few years, we have, as a Company become a little bit complicated, and in many ways out of this complication a bit conservative; and complicated with quite a number of management layers.

A great collaborative culture, but also as a result very consensus-driven, with sometimes lack of clarity over decision making that leads to many committees and not necessarily rapid decision making.

So one of the things we need to do, it was a clear resounding message from many of those scientists, is select the assets that can do well and commit to those and prioritize them.

And we haven't been able to do this very well, I must say, in the past, and that is certainly something we will do better in the future.

But fundamentally many strengths, and strong biology, strong understanding of biology, strong biologics unit, strong small molecule.

And if I could have my first slide maybe, I wanted to share with you a few reasons why I believe this Company can do well.

And if you look at it, AstraZeneca has strengths in biologics.

It has strengths in small molecules, of course, and that's the heritage of AstraZeneca.

It has strengths in immunotherapeutics, and also, it has quite unique antibody engineering technologies.

And these biologics, immunotherapeutics and antibody technologies, they are part of the [minimum] organization today, but a part of it is the [Cam] heritage, the Cambridge antibody technology here in Cambridge UK.

We have quite a unique combination of capabilities.

We're not the only ones having some of those, but to the extent we have them, I think we have a very special place.

And if you look at the pipeline itself, if you look at the next slide, this is a complicated chart like many of those pipeline charts are, I just want to leave you with two messages here.

One is if you look at Phase I, Phase II and Phase III, you have two columns.

The left one is the small molecules; the right one is the biologics, the large molecules.

And what this tells you is our pipeline is about 50/50 small and large molecules.

It doesn't -- it's not reflected in the Phase III, late stage development portfolio, of course; it's too early for this.

But many of those products are progressing now through the development program.

And so 50/50 is the first message I want to leave you with.

The second is if you look at the colors and if you look at the top color, the red color, you will see a lot of oncology programs there.

And I guess the message to you is we are going to be rebuilding oncology.

Cardiovascular medicine, diabetes is close to my heart.

Oncology is also close to my heart.

And I am very happy to have Briggs leading our development function because Briggs is an oncologist by training, and oncology, of course, is very close to his heart.

So this is clearly what -- one of the things we're going to do is rebuild the oncology pipeline.

And finally, as you can see here, I know it's written in small letters and I have to read, but we have a very rich program of lifecycle management extensions around Brilinta, around our diabetes franchise, so a very full program.

The key for us is to pick the winners out of this pipeline and move them forward and commit and invest in those.

So clearly, this is what we're going to do; we're going to invest in this pipeline and build it organically.

And finally, it is sometimes hard to see, because when you are faced with headwinds like we are faced, losing patent protections for Nexium, Seroquel, etc., the top line of costs is very substantial and negatively impacted by all of that.

So it's hard to see that there are underlying growth opportunities, but there are.

And I've talked about those before.

If I get the last slide, beyond the pipeline which will drive our future growth, Brilinta is still, I believe, a growth driver.

$89 million last year doesn't feel like it is a massive growth driver, but I believe we can through hard work and clever work, we certainly can turn this product into a true growth driver.

It will be a slow, steady path towards progress.

I'm hoping -- I believe that by the second half of 2013 you will see a different trajectory for this product, and we have signs that we actually can do it.

The second is diabetes and our alliance with BMS.

Diabetes is a disease that is a progressive disease, as you know.

Patients tend to progress.

They receive one, two, three treatments and receive combinations; and there is room for a variety of products.

We have, of course, [EGLIP 1]; we have a DPP4 with Onglyza; we have combinations.

And we have now Forxiga SGLT2 inhibitor which was just launched in Germany, and so far, and this is very early days of course, but so far it's getting pretty good reception.

The emerging markets have always been important to AstraZeneca, which is a company that was one of the first ones to identify the potential of those countries.

We have tremendous presence in many of those markets, in particular in China, because when you talk about emerging markets, typically you really mean China.

It's the biggest potential out there.

We have 5,000 people.

About -- that's about the size of our presence in China.

We have a very large sales force.

We have a tremendous leadership team.

And I believe that, moving forward, we can drive growth, faster growth in China than we have in the recent past.

The fourth one is our respiratory franchise.

Symbicort certainly will face challenges in Europe.

Even though the analogs are not generics, or the market dynamics are different, certainly they will impact us negatively.

But in the US, we have tremendous potential.

You heard what I said a bit earlier.

$1 billion is what we achieved.

We have 22% share, 28% new patients initiation, so a lot of potential.

I'd like to remind you that Advair was a $5 billion product, so there's a lot of room for growth in the US and the emerging markets, and China in particular.

In Japan we have growth potential from Symbicort.

And we will build our respiratory franchise with our own portfolio.

There's quite a number of products that address the respiratory field in our portfolio, but also, we'll be looking at licensing and partnering, of course.

And the last one is Japan.

Japan is a market that has been stable for the last few years.

It's starting to grow steadily, 3%/5% a year.

Again in Japan, we have a tremendous leadership team and a tremendous organization.

We have a lot of products that still have growth potential; Symbicort for sure, Nexium, Crestor, many others.

So Japan will be one of our growth platforms.

So clearly, beyond these patent expiries, we have potential for growth.

So my conclusion is that there is a way forward for us organically through these patent expiries by delivering better on what we have in our hands; the portfolio of course, but also the pipeline, but also what we have in the marketplace.

Complement this with a string of pearls business development strategy; finding the right opportunities out there and doing the right thing, developing and commercializing them.

There is opportunities for us to partner further, just like we've done with Amgen, or we've done with BMS, and bring our capabilities to bear to better market, or develop products where we have expertise.

And finally, we -- as I said before, we'd certainly be open to initiatives that are more transformative deals, but I also wanted to tell you that the probability, the likelihood of this is lower, because they're not so many.

They have to make strategic sense.

We have to be able to operationally deliver on something like this.

Many of those large acquisitions are difficult to execute, and so they have to be operationally feasible.

And finally, and importantly, they have to create value, of course.

But we're going to be open to all of this.

And I really believe that our base plan, which is execute on what we have and complement it with business development, can actually take us through the patent of expiries, the cliff we are facing, and then start growing again at some point in time in the not too distant future.

So that's really what I wanted to share today.

The message is, we are committed to science, we're committed to innovation.

We're committed to our pipeline.

We'll invest in growing our pipeline.

We'll invest for long-term growth.

We will return to growth one way or another.

And we will share with you more of our plans, not only our strategies and our plans, but also our pipeline.

And share all of this with you in March; invite you all to join us, March 21, so you can get a sense for why we are so excited, and why we believe we can actually turn this Company back to growth.

Thank you so much and I'll open the floor for questions now.

Amit Roy, Nomura.

Just a couple of questions around Crestor.

Do you have any plans to have any dose discrimination on pricing?

When Simvastatin went against generic against Lipitor, they ended up dropping the lower dose by about 30%, I believe.

Now if you look at the prescriptions, you can see the two lower doses, and now even the 20 milligram is going negative in the US.

The two lower doses make sense because they're similar to Lipitor.

So would you be able to give some price away on the lower dose and keep the price higher on the higher doses which are quite unique?

And secondly, in terms of pricing Crestor overall for next year, you've managed to in the US keep pricing quite high and realize some of that despite loss of volume.

Will you be able to keep pricing high for next year in Crestor in general?

Many thanks.

Amit, I'm not sure I got the first question.

Let me just try, and if I don't -- if I didn't get it, you can always ask again.

In the United States, in 2012, our price didn't decline much.

In fact, what happened is that we lost the Medicaid business, so we lost volume out of the Medicaid business.

And that price was more or less stable, and because of the effect of the Medicaid, losing the Medicaid business, which is at a lower price, for 2013 the price will show some decline.

The good thing is we know what it is going to be and we know that we have good coverage and good reinvestments for 2013, because we have completed our run of negotiations with [Managed Care].

And so there will be some pressure on price in the United States in 2013.

I won't tell you how much, but there will be some price pressure.

Thank you.

That was the answer to my second question.

So the first question was around Crestor pricing by its different doses, the four different doses of Crestor.

When one looks at the prescriptions, you can see that the two lower doses, the 5 milligram and the 10 milligram, are the ones that are suffering the most; 20 milligram a little bit, which is to be expected considering -- as a physician myself, we tend to think that the 5 milligram and 10 milligram are similar to the 20 milligram and 40 milligram Lipitor.

When Pfizer faced the same issue with generic Simvastatin, we saw them drop the price of lower dose Lipitor down to be able to compete with the generic Simvastatin in that case.

So do you have any plans on changing the price of Crestor by dose, so essentially keep the higher doses at a high price, but keep -- but drop the price of the low dose to try to maintain some share in the face of generic atorvastatin, 20 milligram and 40 milligrams?

Our focus is really to -- our focus is on the patients who need high dose, because that's really where you can see the best clinical benefit.

So our focus for Crestor is the [post DS ACS] patients in particular, and those patients who need higher dose, where clearly we deliver better benefit than atorvastatin.

And in that setting, we've been able to defend the use of Crestor quite well without having to adjust our price too dramatically.

Well, we certainly are adjusting the price of the small dose.

I can't tell you precisely whether we have specific plans for the low dose.

We can get back to you on this one, unless, Simon, you know the answer.

No.

One thing I can tell you is that the absolute commercial focus is the higher dose where really the benefit is.

Sachin Jain, Bank of America.

Three questions, please, firstly on cost growth.

You've alluded to some growth in '13.

I wonder if you could give us any color '14 and '15?

Is it fair to assume continued growth?

And I guess that comment in the context of the savings program, I see you've got roughly $1.3 billion left.

How does that phase '13/'14, and is there potential for greater cost growth once the saving program begins to slow or even come to an end?

Second question, just within your sales guidance, if you can give some color as to what emerging market growth is assumed, and given that your growth rate for the fourth quarter is still running at around 6%, I think.

And then the third question on R&D, just really a top down question.

On the slide you put up on Phase II to III progression decisions this year and next year, I just wondered if you can give us any color on the average time those compounds have been in Phase II.

I guess an external perception is a lot of those compounds have been sitting there for a while.

Is that perception correct or not?

Thank you.

Thanks, Sachin.

So maybe, Simon, you could take the first two, and Briggs will take the R&D question.

Certainly.

So if we start with -- let me just start with your second one first, which was on emerging markets.

So the -- I think Pascal described some of the pressures, Sachin, we faced in 2012 in the emerging markets.

We had good underlying growth in markets like China and Russia, but some specific issues, as he described, in Turkey, India, Brazil and Mexico.

In addition, of course, we had the drain in the first half really from the supply chain issues which impacted emerging markets.

As we move into 2013, we do expect the growth to recover in some of those drains on 2012 that are annualizing out.

So we'd expect to see some stronger growth going into 2013 and continuing good fundamentals in a number of those core markets, and we're investing behind those; so some acceleration.

The first of your questions on the costs, we do see costs -- as we said, productivity improvement programs restructuring continue to deliver benefit.

The Phase III program, the remaining benefit, when we described [Azenovich], you're probably familiar with this, we described it as the annual rate at the end of that year.

I would expect the remaining benefits, those to be reasonably evenly phased between '13 and '14; most of the cost coming in '13, but the benefits flowing out in '14.

If you then come and look at the cost run rate in '13, that's a combination of the restructuring, the productivity delivering.

But as you saw actually from my headcount, that bridge, we're reinvesting where we can see growth potential.

You saw that in the movement of headcount.

And that's certainly a feature as we go into 2013.

We're investing behind our growth platforms in sales and marketing; in emerging markets but elsewhere.

We're investing to progress the pipeline.

And that certainly is leading to the guidance we've provided for '13 which is to hold the increase to a slight increase.

'14 and '15, we'll update you when we get to those years.

It's going to be shaped by the nature of the investment opportunities that we face.

I hope that helps you on that.

I'll maybe just add on the -- as far as the emerging markets, Sachin, if you look at China, we grew by 17% last year.

I think we can grow faster than that in China.

We have many products that really have pretty good potential there.

Crestor is only $100 million in China.

It's growing fast, but it's only starting.

The potential is still enormous.

Nexium is growing and can do very well.

Iressa has tremendous potential in China.

Seroquel is growing.

We can certainly do better than 17%.

So the growth in those countries should overall accelerate, as Simon as saying.

Briggs, do you want to --?

Yes.

So the pipeline tells you when each of those molecules started the phase they're in, so you can go down and take a look.

And I think it is fair to say that some of the ones that are in the potential may have been there longer than one would have liked.

I think the sense of urgency that we as a leadership team are bringing to the portfolio is exactly that; to look at what we have and ask what are those molecules, as Pascal said, that we need to accelerate, get them into Phase III and get them out to patients.

So what happened in the past is what happened in the past.

What we're focused on is what do we have for substrate today and when can we move it quickly forward.

Sorry, just a follow-on.

So for those ones that have been sitting there for a while, do you have additional data, or just greater conviction that's driving the decision?

Just to clarify that.

Yes.

So I can give you an example.

So olaparib was one that we do have additional data.

We've done additional studies and we had longer-term follow-up on patients that were in trials that we've done.

And from that data, which I think most of it was presented at ASCO in May or June, you'll see that there's new information that gives us greater confidence about the molecule.

This is typically an example where I think one of the things as a company we need to do better is identify biomarker and have a better personal healthcare approach, because olaparib was developed in all-comers, and in fact, we find now that (inaudible) are really the population that is the most likely to respond to this drug.

But we are like two years behind the [ball] a little bit and so we have new data, as Briggs was saying, that is very encouraging actually.

So now what we need to do is move forward in late stage development.

Alexandra Hauber, JPMorgan.

Four questions, please.

Firstly, on the top line, you gave quite a range.

Can you just roughly tell us where the key uncertainties are in your forecast?

Secondly, on the gross margin, you -- I think you said that may decline a little bit year on year, and I was surprised about that given that you're going to have a full year benefit of the Option 2 accounting, plus also, a large proportion of Alliance revenue which I think comes to you at 100% gross margin.

Can you just explain where the negative mix effect is coming from and why so strong?

Third question.

Symbicort obviously has been a great success story in the US, and market shares have been going up in a straight line.

But at $1 billion and 23% market share, you're no longer the little guy who's playing catch-up.

So what is driving --?

How certain are you that you can continue to drive further market share gains?

Is it as simple as that as long as that new patient market share is staying significantly above the overall market share?

Are you confident that you can get that additional 4% share at the very least?

And the last question is on moxetumomab, which you said you -- which -- I'm not -- actually, I can't remember which -- whether decisions --.

The decision's actually taken, I think, whether it needs to be taken forward.

Let's assume it is going to be taken forward.

This is an anti-CD22, so how widely applicable is that in hematological toxicities?

And how aggressively would you bring this forward?

Would it be very step by step, going to various factory populations first?

So, Simon, do you want to take the first couple of questions from Alexandra?

And maybe, Ruud, you would take the Symbicort one?

So, Alexandra, on the gross margin, I indicated that we felt we'd see some downward pressure on gross margin into '13.

That's comparing on a new core versus new core.

So we're looking through the Merck effect.

So that isn't a driver of it.

You are right.

As the alliance grows, particularly from [Glizor], you'd think that would have a bit of a benefit.

That is being offset though.

As the proportion of our sales in emerging markets grows, that tends to put a bit of pressure on the relative mix or the geographic mix.

And you've also got the unwind of the full-year effect from Seroquel flowing through.

So it's really a function of geographic and product mix; nothing very significant.

I would also say, Alexandra, we're continuing to work very hard from the supply chain efficiency standpoint to mitigate that mix effect and, of course, the wider pricing environment we face.

In terms of the revenue, you asked I think what some of the uncertainties are.

I think that they're familiar to all of us.

There's government price interventions.

I think I've shared this with you before.

Up until really the last 12 months/18 months, we've been able to forecast, really very accurately as it turned out, the annual price effect, particularly in Europe and some of our key markets.

What we've found in the last 12 months/18 months is we're getting less predicted price interventions of various forms, and in some markets coming back several times with different types of programs.

So I would say first uncertainty is price interventions, particularly in Europe but in some other markets.

The second is that what has characterized our revenues in the last 12 months/18 months has been some loss of exclusivity and some well followed, well appreciated markets where the patent has expired.

We do also have a number of patents, particularly formulation patents, where we continue to defend our intellectual property, but we've had generic companies launching at risk.

You may have followed, for example, Seroquel XR in Germany would be a good example of that.

And if you also look at the notes to the accounts today, you will see where we've tabled out the various patent proceeding matters we're involved in and, clearly, some of those have some binary outcomes around them.

So I would say government price intervention, loss of exclusivity, but actually in some of the markets that may not be tracked as closely as in the past in the European markets, Australia, those are the two main uncertainties.

And in providing you with a range in terms of our revenue decline, that builds in the range of outcomes that we could envisage.

I hope that helps.

Yes, if I get your question right about the Symbicort performance in the US, let me first echo some of the words Pascal was using that we are very pleased that the growth is there.

We believe we have a very strong team in place locally in order to further boost the performance moving forward.

We are very strong in [asthma] historically.

We feel that we are gaining market share in the COPD segment.

So that all in all together, it gives us the confidence moving forward that Symbicort can gain substantial market share moving forward in the US marketplace.

So in answer to your question about marketing, I think was your last one, yes.

So I think what you'll see, as you know quite well in oncology, it's not uncommon that a molecule can work for multiple indications.

You'll see that with olaparib; you'll see that with selumetinib; you'll see that with [moxi].

So if the lead indication is actually a small orphan indication, hairy cell leukemia, the data is quite compelling and quite impressive, and so we feel compelled obviously to get that done and get that out.

But as you correctly note, there is a broader envelope of opportunities there that we'll continue to explore.

Does that answer your question, Alexandra?

Well, basically, it seems that you have seen the hairy cell data already, so the question is does that make you confident enough that you can go for a really broad rollout, or will this more stay in -- is there anything why the molecule is always in an [ET] -- the ET applications of hematology?

Yes, so I think if you're asking about the larger lymphoma indications, I don't think we have enough hard data yet.

Theoretically it makes sense, but I think getting the dosage schedule right in some of those other indications we're still working on.

And then maybe after that question we'll ask Tim or Jo who on the phone to ask their questions.

(Inaudible - microphone inaccessible) that you can, and I realize we'll get a greater update in March, just give us some sense of how we are thinking between midterm and the long term, whether -- how you are thinking about returning Astra to growth between those two different timeframes.

Secondly, Simon, from a dividend cover perspective, you mentioned you're looking at a [2X], the core EPS, or whether an investment cycle.

If you can just give us a sense for how long that investment cycle is.

Is it three years?

Is it five years?

How long should we think about that?

And thirdly, just for housekeeping purposes, what are you assuming for the outstanding patent litigation for Crestor in Australia in your guidance for '13?

In term of the first question, yes, we'll have to wait until March, I guess.

I see our story in three phases really; the short term, the midterm and the long term.

And the long term is clearly about rebuilding R&D and improving productivity in R&D, and we certainly have started working on developing plans and metrics for this.

The short term is clearly accelerating the walls of the growth -- the platforms I talked about earlier, because we have to unlock the potential of products like Brilinta, like diabetes, etc.

So it's clearly a short-term priority.

And the midterm is navigating through this patent expiry phase and returning to growth.

And I know you'd like to know where we will bottom out and when we will start growing again, and you know we've removed our 2014 guidance and the intent is not to introduce a new one.

That's very clear, so I don't have a specific number I would give you.

But the only thing I can tell you is that we're certainly working as hard as we can to return to growth as early as possible.

Now I hope it's very helpful but that's all I can say at this stage.

I'm sorry.

Simon?

Yes.

So two questions.

The first was about our assumptions I think on the proceedings on Crestor in Australia.

You asked what we'd assumed in our outlook.

And the answer to that is that we provide a range, as you're familiar with in terms of in this case the revenue decline, and the range is there to cover a variety of outcomes on that matter, success or not, and [to meet] a range of other matters.

So it's within that range.

That was your question on Crestor.

In terms of the dividend cover, yes, we are targeting 2 times on a core earnings per share basis.

We said that we look at that over an investment cycle.

Our industry has long investment cycles, so we're looking at five/10 years because it's driven by pipeline renewal.

We've obviously been running higher than that for recent years, but that's the target we have through that time period.

I hope that helps you.

Yes.

Let me just -- to repeat that, something Simon said before, and it's really our commitment to our dividend policy.

This we wanted to reaffirm and make sure there is no question around it.

Maybe what I could do is ask Tim, Tim Anderson who is on the phone, to ask his question, because I know he and Jo have been waiting for question time actually.

So, Tim, do you want to go ahead.

A few generic questions, if I can.

On Symbicort, in what future year should we realistically expect to see generics or quasi generics start to come to the market in Europe and US?

Or are you confident that this will not happen for at least the next three years?

And then you have two products where there could be different fault formulations introduced in the US by generic companies in the not so distant future.

So with Crestor and Nexium, if those clear the necessary legal hurdles, like they may, how do you view the potential share losses with those compounds in the US?

Then extending that question further, is there any chance of seeing different fault formulations, again something like Crestor, launch in Europe, like we saw happen with Plavix a number of years ago, where even though it was a different fault it actually took quite a bit of share?

Then last question is on your anti-PDL1.

When will we see data on that compound, and is there any possibility of leapfrogging that from Phase I to Phase III?

So, thank you so much, Tim.

Ruud, I'll ask you to cover Tim, because if you want maybe just quickly, let me make just one comment on Crestor, and that is I can't offer much comment because we don't really comment on IP-related matters.

We will defend our patents, as you can imagine.

The only comment maybe I would make is that just to remind you that a different [salt] is actually not substitutable.

So if any of those were to reach the market, which we'll certainly, as you can imagine, we'll do our best to avoid, and we believe we have a strong case.

But if it happened and those products are not substitutable, and therefore their impact is not the same as you would imagine from a pure generic product.

A couple of comments, Tim, about the Symbicort situation.

Let's not forget that the device market is a very special market.

We still have full patent protection of the device of the turbuhaler up to 2019.

So even if generic analogs were to enter the market, it will certainly not be in our device.

It can have price implications, of course, if products are clustered in one [jumbled] cluster.

But so far, we haven't seen any indication that generic analogs are entering the market.

We are following it, and if they are entering, we will take the adequate action we can take from a commercial perspective if there is an infringement from a legal perspective.

But so far, we feel relatively okay with that.

Regarding the US, more or less the same situation.

We have a patent protection of the device which is still for a long period of time.

So I cannot say that we are fully protected but we feel that this device is clearly good enough in order to protect our business for a considerable period of time.

When I commented a bit earlier that we expected Symbicort to face more challenges in Europe than elsewhere, I had in mind, of course, the impact of analogs which, again, is not the impact you would expect from a pure generic, but certainly will distort the pricing.

But that's the European situation.

In the US, we don't expect anything like this to happen in the near term.

And in the Rest of the World, in Japan, it's not that full event; and in China, we are doing very well.

We also believe we can sustain the growth of Symbicort.

What would be the other one?

Pascal described the two biotech units in late development.

So PD-L1 is still in our biotech unit, Tim.

It's in Phase I now.

I think Pascal has pushed all of us, particularly in oncology, to think about ways we can go from Phase I to Phase III.

So as that data reads out, that's certainly a candidate to get that kind of acceleration.

But it's a little further back than being able to do that immediately.

One of the things maybe to attract your attention to is the fact that we have PD-L1; we also have CTLA4.

And so we have the potential for combination of those two agents, which it's quite an intriguing sort of a possibility for us.

But of course, we have to see more data before we can formulate any combination strategy.

Thank you.

Savvas Neophytou, Panmure Gordon.

Just to press on a little bit on the respiratory portfolio on what Tim Anderson has just asked.

It's evident from your answer that you're making the fairly reasonable assumption that Symbicort generics in the US are unlikely.

Nonetheless, if we exclude some of the pipeline assets which have been in Phase II since 2008, or certainly for more than three years, then your pipeline in respiratory looks relatively light.

And 16% of your revenues, in 2012 came from respiratory growing as a proportion going forward.

Quite a significant concentration of risk there, and yet you have respiratory as one of your key engines there.

So what is the plan there?

Are you looking to broaden that pipeline there?

Is that something that is a focus area?

So that's one question on respiratory.

This is a tough question, but since you joined on October 1, Pascal, you have often said in public forums that the launch of [olaparib] was not optimal.

And perhaps I haven't heard that from you in person, and perhaps you can take this forum to just explain to us what the steps, remedial steps that you have taken to rectify that and what we can look forward to with regards -- because that was number one on your growth engine.

So that's obviously something that we need to understand, and I don't understand it probably through lack of understanding of that specific area.

And a third question, and that's more strategic, I guess.

You've come from an organization which had a diagnostics platform, and obviously companion diagnostics is a significant part of drug development going forward, and that may impact R&D product activity going forward.

And obviously, this organization that you've joined has suffered in the past five to six years from lack of companion diagnostics.

(Inaudible) is an example of those.

If a right market was available, I'm sure we'd have had higher revenues.

Do you see that as a weakness?

And can you address that organically not having a diagnostics platform specifically looking at markets for companion diagnostics?

Thanks so much.

Three questions.

Let me start maybe with respiratory, and then Briggs can also come back.

Symbicort we've talked about.

The measurement of respiratory would be [70] business development initiatives, but also our portfolio.

And I'm not sure what you've exactly in mind when you said we have assets there that have been there for a long time.

On the biologic side, we have assets that haven't been there for a long time.

They've been there a long time because they're in research and then in early development.

But products like tralokinumab, benralizumab, those are products that are progressing nicely through the development pipeline.

And they're new, and they will move into late stage development over the next couple of years.

And maybe certainly Briggs can tell you more about this.

But it is a priority for us because I think we have strength there, both in development and commercial, and also in research.

And we can leverage this and build that on the back of our Symbicort presence.

Brilinta.

Some of the things we are doing are things that AstraZeneca had started doing, but suddenly, we are expanding and doing more of since splitting up, and some of the things we are doing are new, additional, I would say.

So what we are doing is making sure that we address the [cas lab] as a priority and in a specific way, because the prescription starts there, the physicians, they are different; the patient flow is different.

So you have to have a sales force that is dedicated and understands that environment.

We are working on hospital protocols, formulary release things, because, essentially, physicians follow protocols in that setting, and you have to be on a protocol otherwise you don't get used.

And we've made good progress in terms of protocols inclusions in France, Germany, etc.

We are at 60% and above of inclusion on hospital protocols, at least for the key hospitals we are targeting.

We are working on discharge, making sure we don't lose patients from the discharge to the primary care or physician or cardiologist.

We have increased our commercial investment, certainly increased the sales force effort, increased the number of commercial programs.

We have increased substantially the investment in clinical programs.

We have started -- we are about to start a program in stroke.

We have other indications we are looking at.

We have unlocked substantial budgets for granting aids, specific studies that physicians are interested in addressing.

We also are looking at large Phase IV studies.

We have answered a number of good questions that are now on the label, or issues, clinical issues that are now addressed on our label, but physicians have lots and lots of questions that are not necessarily the regulatory questions but they are clinical; daily, practical, clinical questions that they need (technical difficulty).

We are certainly lifting our effort there.

So these are a wide series of things we are doing to accelerate the roles of Brilinta.

But for sure, we have increased our investment in a number of areas.

And finally, companion diagnostics, personal healthcare, I do believe that certainly we suffered a little bit from a primary care mindset where every drug as to be given to as many patients as possible.

As we all know, the world has moved, and certainly many of our R&D colleagues at AstraZeneca knew that.

But the question is sometimes in an organization, some people know something; the organization doesn't know it, or hasn't integrated it in the way it goes about developing and commercializing medicines.

And so the capabilities were not always there to do this and to understanding identification of biomarkers, diagnostic tests, etc.

But also the mindset was not necessarily there.

And, quite frankly, olaparib is probably a good example of that.

So that's one of the things we're doing now.

The biotech unit have responsibility from research to proof of concept, so the idea is to go from the bench to the bedside and back as quickly as possible and build early development teams that will capitalize on biomarker, personal healthcare and early and fast, speedy, early development work.

So we can, indeed, identify products that have potential to move from Phase I to Phase II/III, or Phase III quickly.

And all that work needs to be done.

And a lot of work had been done already.

We started doing it in the last couple of years.

We need to do more of this, change the mindset of the organization, and have the appropriate organizational model in place as well, which is really what we have done in this latest realignment.

Briggs, do you want to talk about --?

The only thing I can say about the respiratory franchise is, again, I think if you think about respiratory, there is asthma, there is COPD, there is interstitial lung disease, there's a variety of things.

Asthma, if you think about it today, we as an industry and we as a company have done pretty well to address a lot of the medical need of asthma, but there is a unique population that I think biologically we understand better.

And so the molecules that Pascal talked about that are coming through from the medi biotech unit, they're focused on the mechanisms that matter for the unmet need, and I think that's the right way to go after that part of that population.

COPD, we're still using some of the same mechanisms that have been around for a while, and I think we're still looking for those key biologic insights so that you can start to segment COPD the way we segment asthma.

That's really I think where the respiratory franchise is going to head.

Peter Verdult, Morgan Stanley.

Just two high level questions, Pascal, just firstly on the CNS division.

You've made some comments about how you're thinking about respiratory.

With the ongoing loss of Seroquel, how should we be thinking about this?

Just a dismantling of the infrastructure as CNS declines, relying on your virtual R&D business model, or BD in partnerships to complement the infrastructure you've got?

And then just on the pipeline, you're a fresh pair of eyes at Astra.

I'm sure you're going to tell us that you're excited by the whole pipeline, but if there are just a couple of assets that really excite you in the early stage, I'll be interested to hear what they are.

Yes.

And maybe I'll ask also Briggs because he's another pair of fresh eyes.

Briggs joined the Company, well, maybe a year ago now.

That much?

Okay.

I thought it was only nine months ago.

So you have a pair of fresh eyes too.

CNS, I think you have to see it as we are testing a new model, and essentially from a commercial viewpoint our presence is shrinking, there's no question about it, and we'll have to rebuild it.

So we have to start from the early pipeline and over time we'll build it.

Our priority is clearly going to be cardio-metabolism, oncology and respiratory inflammation, and to a lesser degree, anti-infectives.

So CNS is clearly one franchise where we start.

We're going to have to start from the beginning again and rebuild over the next few years.

Do you want to say which products you are the most impressed with, just to see whether we have the same -- (laughter)?

I think we've talked about -- tralokinumab, for instance in asthma, I think is a compound that we can move into late stage development, hopefully.

We need more data, but that's a very intriguing one.

I think olaparib, even though I know some of you will be a little bit skeptical, even cynical about it, we have a chance to reposition it for the right patient population across a variety of tumor types and move it forward.

I think that I'm intrigued personally by the possibilities we have to combine immunotherapies, for instance, CTLA4, PDL1, or combine some of our large molecules with small molecules or immunotherapies.

So this probably would be some of the most intriguing products.

Selumetinib, I have my doubts I must say, but we have good data that are shaping up.

And in a portfolio like this, it's always good to have internal debate.

So we have the internal debate, and I'm also open-minded.

So certainly we will progress this product and try, because there is a good opportunity for this product.

If what we believe is right, it could actually be quite a very interesting product in combination with chemotherapy.

That might be the only MEK inhibitor that can be combined with chemotherapy without incredible side effects because of its short acting profile.

So we'll have to see, of course, but those that are probably the most intriguing would be tralokinumab, benralizumab, I guess, a combination of the immunotherapies.

(Inaudible - microphone inaccessible) just because I think if you look at the data that was [in at ASCO] last year, when you combine it with Taxotere, response rate goes from zero to almost 40%; you get progression through survival, overall survival.

I think there is - we have to figure out exactly how to combine it with chemo, and that has not been the trend in oncology these days.

People try to move away from chemo.

But if a drug works well in that combination and works in combination with a number of different chemotherapies, it could actually be quite significant.

And we have a few tremendous people that I would trust personally who are really convinced or will give it a good shot.

Maybe what I could do -- I'm sorry.

I know that there are more questions.

I'll do one last question if [James] will allow me to do that.

And I'll hand the microphone to Jo who's been on the phone waiting for a long time.

You promise me you don't ask a question about non-core items, Jo; otherwise, I don't give you the microphone.

But go ahead.

Hello, can you hear me?

Go ahead with your question.

Hello, can you hear me?

Yes, go ahead.

I have two quick questions.

Firstly, just looking at the marketing cost, it's about $2.2 billion in the fourth quarter, your SG&A on your new core basis.

And of course, we haven't seen your Company in the same structure as it is, but that includes some spending on the Amylin products.

Is that a reasonable guide of the quarterly run rate or is there a heavy seasonal bias there?

And how much more in terms of marketing support can we expect that you will need as you take on board the European business, which I understand hasn't yet transitioned to you?

And secondly, on the price of assets, Chief Executive of Roche, a company you know well, said yesterday at the analyst meeting that it was very difficult to get assets in.

The prices were just astronomically high for late stage assets.

You had to do deals really early on to show where you could add value.

Otherwise, it was just a basic bidding war.

I wondered if you felt that there were any reasons why you might be able to show something other than just sheer money in bidding for late stage assets, because I think we all understand you're going to do exciting things with your R&D, but they don't probably really bite until 2015/'16 and beyond, and investors might want to see something a bit sooner.

Thanks, Jo.

Simon, do you want to address the first question?

Jo, on the quarterly run rate, I think the guidance that we provided for our cost base, which is continued efforts to efficiency and the benefits of our [efficiency] program [spreading] headroom that we're going to redeploy that headroom, and that holding our core cost to a slight increase as we go into '13, and that applies really across the SG&A and R&D line.

So I think you'll see some increased investments showing through in your quarterly run rates on SG&A, albeit at a slight increase.

And the quarterly patterns, or another piece of that, I'd encourage you to look at our quarterly patterns over the last couple of years.

You generally do see a pattern of some high spend in the fourth quarter, and not a typically constant rate.

But I would say that our '10/'11/'12 quarterly rates probably are reasonably reflective of what we'd see going forward.

And any extra costs?

Anything we haven't seen for the European bit of the Bydureon/Byetta, or is that insignificant?

Sorry, Jo.

I beg your pardon.

I was including -- I do beg your pardon.

I was including that actually as one of the drivers of the investment that we're putting back in.

So Ruud here has been working extraordinarily hard in Europe over the past couple of years and has adjusted his cost base to reflect loss of exclusivity in a number of markets, and actually done a great job of maintaining our margins for that period.

Ruud, I think you'll be putting investment behind our diabetes franchise reflective of the opportunity that we see.

Absolutely.

And to answer quickly on that, we are in the transition phase, as you probably know, with Lilly to (inaudible) marketing authorization [hold-up], and we hope to finalize that at the end of the first quarter so we can start promoting the Byetta/Bydureon portfolio in the European environment from quarter 2 onwards together with Bristol-Myers.

Thank you.

Licensing opportunities, Jo, I would not dispute the fact that -- first of all, there are not so many very late stage opportunities; and secondly, certainly they are more expensive than early opportunities.

So the point is that we need to license earlier for sure.

You need to license as early as possible so you can add as much value as possible.

I don't think, though, that it is totally impossible to find assets where you can add value if you have specific skills in an area on a global scale.

But in terms of late stage, buying products is not the only way you can do it.

The BMS alliance that we entered into is a good example of another way to do it where we certainly are getting together and sharing expertise to develop and commercialize a portfolio of products.

And so far, we've done it quite well, and I really hope that Forxiga is actually going to be a nice product.

The feedback so far is very encouraging.

So that is an example.

The Amgen one is another example.

You don't necessarily need to buy products.

You can enter into alliances and share risk and value doing it.

So there's a variety of options that are open to us out there, not necessarily buying at full price, and that's certainly not something we will do.

We'll not buy products if we don't believe we can add value and make it a financially attractive option.

I don't think my CFO would allow me to do that anyway.

That's probably not possible.

Thank you so much for your great questions, and see you next time.

Thank you.

Bye-bye.