AstraZeneca PLC (AZN) 0 Q0 法說會逐字稿

Hello, everybody; it's Pascal Soriot here from AstraZeneca.

It's really a pleasure to welcome you to our Q2 and half-year conference.

It is my pleasure to introduce some of our team members here, Simon Lowth, of course, our CFO; but also Briggs Morrison, our EVP for Global Medical Development; and Marc Dunoyer, who is our EVP for Product Strategy, M&A and Business Development.

We're also here in the room together with some of our finance and investor relations team members.

So I would like to start by first giving you a high level summary of the highlights for the quarter as I see them.

Second quarter revenue was down by 4% on a CER basis, a $500 million decline coming from loss of exclusivity, which is very much in line with our expectations.

Despite this, we saw good a double-digit increase from our four key growth platforms -- our five growth platforms, sorry, which provided in aggregate more than $400 million of incremental revenue in CER terms.

I would also highlight our growing late-stage pipeline with two NDA submissions, one Phase III start and more to come later this year, and importantly, three late-stage projects that have been added to our pipeline via business development.

The headlines, from a sales and profit viewpoint, as you can see here our revenue was down for the quarter by 4% in constant currency terms to $6.2 billion.

Our core operating profit was down 10% as we continue to invest behind our growth platforms and our pipeline.

Our core EPS was down 21% at CER, with the main driver beyond the operating profit line, a higher tax rate in the quarter compared to last year where we had a $0.19 per share benefit from tax settlements.

And after the usual core adjusting items, reported EPS was $0.66 per share.

Importantly, we see that if we look at the evolution of our revenue profile, we have a steady moderation in the rate of revenue lost from products, recently experiencing loss of exclusivity from nearly $1.4 billion in the fourth quarter of 2012 to now just under $500 million this quarter.

The rest of the portfolio has been showing some growth but, obviously, it has been swallowed up by the generic erosion.

Still overall, we grew the rest of the portfolio by $232 million, or around 4%.

And as I mentioned in my introduction, this has been fueled by a double-digit increase for our five growth platforms, which combined for more than $400 million in incremental revenue in the quarter.

Next slide, if I look at the five growth platforms in turn, Brilinta, Diabetes, the emerging markets, respiratory and Japan, and if I start first of all with the revenue performance by region.

The US was down 4%, essentially on Seroquel IR and also further erosion of our Toprol-XL franchise.

If you exclude these, the rest of the portfolio was up 4%.

Revenue in Europe was down 13% as the exclusivity losses continue to take their toll.

In the established rest of the world, in particular Japan, which is one of our five growth platforms, we had a revenue increase of 10%, so a very nice result in Japan.

Now of course, some of this increase is the result of a very soft comparator for Nexium, where the second quarter last year only had $1 million in sales and we were still working [our large] stock.

Japan is a market where we have a number of partner products, so there is some revenue volatility based on ordering patterns by our partners.

But we're also seeing strong underlying in-market demand for next year for Crestor and for Symbicort.

If we look at the emerging markets on this graph, you see that they were up 12% in the quarter.

And, very importantly, we saw China grow by 21%, which is very nice to see, because we're now back in solid growth in China and actually growing faster than the market.

For the rest of the emerging markets, as you can see here, we have a pretty healthy 9% growth rate.

So we are certainly on track with our expectations for the year, which is a high single-digit growth rate.

Now if you look at this on a quarterly basis, you can see here that China again grew by 21% and represents almost half of the additional growth that was generated by the emerging markets.

Of course, we are a little bit advantaged here by the comparison to Q2, 2012, where we had some supply chain issues, and that certainly has an impact the quarter-to-quarter comparison in the second quarter.

But as I said, we are overall on track with our goal to keep growing the emerging markets by a high single-digit growth rate.

If I now turn to Brilinta, the revenue in the quarter was $65 million, up from $18 million last year.

We're executing a lot of the new programs and increased investment according to the plans we let out in March, including a July start for the Transition of Care nurses.

It's important to note, because a number of the parts of the plans we outlined in March have been put in place over the last few months, some of them earlier this year, some of them more recently.

And it's only the combination of all the elements of this plan that will, we believe, drive acceleration towards the end of this year, as we communicated earlier.

We've seen some nice progression, and that's progress in terms of our access.

As you can see on this chart, we gained 9 points of preferred reimbursement and good access in Medicare Part D. Now we are above 70%.

The sales in the rest of the world were $49 million for the quarter.

In Europe, we are now closing in on the number 2 position in volume share of the total OAP market, in Germany and in the UK but also in Italy, and we continue to make steady progress in France.

If we look at the US more specifically, the chart here shows you the steady progress we're making in growing our New to Brand share the US market, which is closing in on 6%.

That is of all OAP usage, not just the ACS indication.

And this is accompanied by a steadily increasing total prescription trend, which is here on the right-hand side of this chart, where total prescriptions in the second quarter are up 33% versus the first quarter of this year.

Now, I think what is important to keep in mind as far as Brilinta is that we grow this product through new prescriptions and the number of opportunities for new prescriptions is, of course, limited in relation to the total pool of prescriptions.

Therefore, the impact that we can make on the total pool of prescriptions is only progressive and it takes time.

This is why, once again, we've said a few times we need to be patient and wait until the second part of this year to see a fuller impact on our total sales.

If I look at the rest of the world, you can see here that we have good progress across a variety of markets in Europe.

A steady increase in our market share across several markets in Europe, and more to come throughout the year as we implement our additional plans in those various countries.

If I move to Diabetes, revenue from our share of the Diabetes Alliance reached $200 million in the quarter.

Of course, the growth rate compared to last year is flattered by the absence of Byetta, Bydureon and Symlin revenues in the prior year.

Onglyza revenues were up 29% in the US, although some of this was due to an adjustment related to return reserves.

The market itself looks to settling into a high single-digit growth trend in prescription terms as the [fear] of switches from the TDD products has run its course.

Our Onglyza franchise market share has stabilized following the formulary changes that affected our first quarter performance.

Outside the US, Onglyza revenue increased by 23%.

Of course, the Onglyza news in the quarter was the announcement of the headline results for the SAVOR trial where we met the primary endpoint and satisfied the FDA requirement to show no harm but, unfortunately, we didn't meet the secondary endpoint of showing superiority.

For the GLP-1 franchise, US revenue for both Byetta and Bydureon were $63 million in the quarter, and we recorded $22 million in the rest of the world following the assumption of this product family in April of 2013.

So the market share for Bydureon prescriptions in the US market continues to grow, although with the declines in Byetta, total market share for the franchise is actually down, as I will show you in a few minutes.

And as far as Forxiga, we recorded a good start in Europe, as I will show you in a few minutes, with revenue being $4 million for the first half.

We are facing a challenging reimbursement environment.

We filed or refiled in the US our NDA, and the PDUFA date now is January 11, 2014 for this submission.

So if I look at Onglyza, as I told you a minute ago, we have stabilized the market share.

We're not satisfied with this market share and we want to see it grow but, certainly, it is reassuring to see we've been able to stabilize it after the loss of the [Cama] account, of course, earlier this year.

If we look at Bydureon, as I told you a minute ago, the market share of Bydureon is still growing, but it is not growing sufficiently to compensate for the decline in the Byetta market share.

So the total extent in market share -- family share is actually declining, and certainly we are intending to address this and looking forward to the launch of the new device next year to reenergize this family.

And, finally, looking at Forxiga, as you can see on this graph, a very good launch in Germany and the UK, in Germany in particular a very successful launch.

Of course, we are now going to have to address the reimbursement challenges that we are facing in particular in Germany.

If I move on to Symbicort, the critical product in our Respiratory franchise, sales in the second quarter were up 8% to $842 million.

This performance is actually fuelled by the 16% revenue increase in the US market where Symbicort prescriptions were also up 16%, compared to just 2% for the fixed combination market, so really an outstanding result for Symbicort and the US marketplace.

In the rest of the world our sales were up 4%.

They were up 2% in Europe.

We continue to drive a good in-market performance in Japan on the back of the approvals for SMART and COPD, although this is not reflected in reported sales in the quarter due to partner ordering patterns.

If we look at the US market share trend, as I told you a few minutes ago, very nice progress.

You can see here that our share of total prescriptions has grown to 24.1%, and we've reached an all time high of 30.7% in share of patients new to combination therapy, so it's really an excellent performance.

Now, if I move to our second critical priority, which is to achieve significant leadership, I'll spend the next few minutes outlining the progress we're making on this critical priority.

As a reminder, to achieve this, we decided to focus on distinctive science in three core therapy areas; cardiovascular metabolic disease, oncology, and respiratory autoimmune diseases.

We are prioritizing and we are accelerating our pipeline, both in our internally sourced projects, but also with business development.

And we are driving to transform our innovation culture, and our model.

And so we have accelerated the projects, which translates into movements in Phase III, which we are announcing for the first half, but there is more to come in the second half.

So if I look at the recent pipeline news; first of all, as I mentioned earlier, we've resubmitted the NDA for Forxiga in the US.

Just before the ASCO, we announced the first patient has been involved in the Phase III clinical trial for Moxetumomab, in the treatment of adult patients with hairy cell leukemia, who have not responded to, or relapsed after stem therapy.

In June, together with our alliance partner, BMS, we announced the top line results for the SAVOR trial.

As you know, and I just said a minute ago, we met the primary safety objective, which is really critical because this was an FDA requirement, and, therefore, we showed no harm.

But we didn't meet the efficacy objective of superiority, which was a lower probability.

We always mention that, but of course, it certainly was disappointing to not be able to show superiority in that instance, and the results will be presented at the ESC in September.

The Metreleptin NDA has been accepted in the US.

This drug is a treatment for metabolic disorders, associated with inherited or acquired lipodystrophy, a rare disease estimated to affect a few thousand people around the world.

The disappointment in the quarter was actually the completion of the Fostamatinib [Oskira] program.

And at the end of the day, based on the totality of the results we saw, we made the decision not to proceed with regulatory filings, and we returned the asset to our partner, Rigel.

Finally, I'd like to make a note of our growing portfolio of late-stage assets, with the acquisitions of Omthera and Pearl, but also the collaboration we just announced yesterday, with FibroGen.

So if I look at our total pipeline, as I said, we have a growing late-stage pipeline.

We have now 81 projects in clinical development.

As you can see on the right-hand side of the chart, we now have eight new molecular entities in Phase III or in a registration.

This is the result of Moxetumomab Phase III start, combined with the additions of Eponova for high triglycerides, and the Pearl Laba/Lama combination for COPD.

There are five others that still await regulatory approval in one or some other major markets, and those are documented on the bottom right of this chart.

During the period, there were five additions to the clinical development pipeline, from discovery research.

Six projects successfully progressed to the next phase of development, alongside the two external additions, and 10 projects were discontinued.

Let me now turn to business development, and what I'd like to say here is that we've made good progress on the business front.

These are some of the key transactions we've completed in the last few months, mapped across all three core therapy areas.

And it's really key message is, all these activities have been focused on the core therapy areas that we announced in March.

The other message to you is that there is a good spread between investments in discovery research, just like Moderna or NGM and others, but also investment in later stage, or closer to market assets, which came by the way of the acquisition of Omthera, Pearl, (inaudible) and again yesterday, the announcement that we will collaborate with FibroGen for the development of FG-4592, for anemia, associated with chronic kidney disease, and end stage renal disease.

We made some progress with our Cambridge site.

You know that the biggest piece of news in the quarter for us was, in term of long-term applications for transforming our innovation culture, is our decision to locate our new UK base to Global R&D Headquarter center, on the Cambridge biomedical campus.

This is really a very exciting development for us all at AstraZeneca.

It's a very vibrant health -- biomedical innovation, sorry.

It's home to some of the leading institutions, academic institution research units in the world.

And you can see here on this map, the University of Cambridge of course, with the School of Clinical Medicine, but also the Addenbrooke Hospitals; the future Papworth Hospital that will be built just next door to where we will build our head office; the MRC Laboratory of Molecular Biology; the LMB; the MRC Institute of Metabolic Science; and also the Cancer Research UK Cambridge Institute.

So we are really very excited to be at the heart of science and be close to such a number of prestigious institutions.

In July, we announced a two year collaboration on three preclinical and clinical oncology projects with the University of Cambridge and Cancer Research UK.

This is the first of what we envision will be numerous opportunities for collaborations with all of these world-class centers that will be our new neighbors.

So I'm going to stop here, and I'm going to turn over to Simon, who will take you through the second quarter financial performance.

After which we will hold a Q&A session, and certainly Briggs and Marc will join us to address your questions.

Thank you.

Well, thank you, Pascal, and good afternoon or good morning to everyone on the call.

So I'm going to cover the second quarter P&L; I'll briefly touch on our restructuring program.

I'll then cover the cash performance and the first interim dividend, and then finally, I'm going to close with our thoughts on guidance for the full year.

So let me now turn to the second quarter P&L.

I'm going to focus here on core margins and profit; the press release does, of course, contain all the statutory numbers, and a detailed reconciliation to our core measures.

And then as with sales, when I refer to growth rates, they will all be in a constant currency basis.

Now Pascal has already covered the revenue performance, which as you saw, was down 4%, to $6.2 billion.

Core gross margin in the quarter was 83.2% of sales; that's up 110 basis points, compared with the second quarter last year.

Core gross margin benefited from lower core Merck expense, related to the second option amendments that we implemented in the middle of last year.

At the full year results, I mentioned that we would expect core gross margin this year to be below the level achieved in 2012, and that, as you'll recall, was 82.4%, and that remains our view, going forward.

Core SG&A expense was up 6%, in the quarter.

It was down 2% in the first quarter, which I flagged then as largely due to phasing.

Core SG&A expense for the first half is up 2%.

Now investments.

In support of our growth platforms, particularly in emerging markets, Brilinta and the Diabetes franchise, were only partially offset by benefits from restructuring and tight spending discipline in support of mature brands and in developed markets.

Core other income, of $218 million, was 19% higher than last year, and that included an increase in our Pulmicort Respules royalty income.

So that leads to a core pre R&D operating margin of 49.7% of revenue, 160 basis points lower than last year, as the benefit from the higher core gross margin and core other income was offset by the higher core SG&A expense as a percentage of revenue.

Core R&D investment in the quarter was $1.040 billion.

That's 1% higher than last year, and also a step up from the first quarter 2013.

The second quarter was impacted by incurring some closedown costs related to the Fostamatinib program.

We continue to realize savings from our restructuring programs, but the step up in business development activity is starting exert an upward tension on core R&D expenses as we look into the second half.

You'll recall that we've previously guided to core operating costs, that's combined SG&A and core R&D costs, being held to a slight increase in 2013, in constant currency terms.

With the investments that we're making behind our growth platforms, and the larger project volume that we now have in research and development, we anticipate, for the full year, a low to mid single-digit increase in core operating costs, compared with 2012, on a constant currency basis.

Core operating profit was just under $2.1 billion in the quarter, 10% lower than last year.

Core operating margin was 33% of revenue, 2.3 percentage points lower than last year.

Now just a brief word on restructuring.

On this slide, you can see the scope of what we're now referring to as Phase 4 of our restructuring program.

And this combines the initiatives newly announced in March of this year, together with the actions that remained to be implemented from the Phase 3 program that we announced back in February of 2012.

The total program costs are estimated to be $2.3 billion, and as you can see here, we have charged $308 million to the P&L in the second quarter.

Turning to cash; cash generated from operating activities was $3.8 billion for the first half, compared with $2.8 billion last year.

Lower tax and lower interest payments partially offset the lower operating profit in the first half of 2013, which included some higher non-cash costs, whilst a lump sum pension contribution drove higher cash outflows in the prior year.

Cash outlay on acquisitions and business operations was $565 million, with other net investments of $762 million, and that includes investment in IT and in the Merck arrangements.

Now the Board has recommended a first interim dividend of $0.90.

This amount is a reflection of the Board's aim of setting the first interim dividend at around one-third of the prior-year full dividend, which last year was $2.80.

We remain committed to our progressive dividend policy, by which we aim to maintain or grow the dividend each year.

Our target for dividend cover is 2 times core earnings over the entirety of the investment cycle.

And 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 reflect its view of the earnings prospect for the Group over the entirety of the investment cycle.

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

Moving to guidance.

As we expected, the impact from the loss of exclusivity for several brands affected performance in the first quarter.

And while this impact will be felt throughout the year, comparison with prior-year periods did moderate in the second quarter, a reflection that the 12-month anniversaries for generic competition for Seroquel IR in many markets, and for Crestor in Canada, have been reached.

While the revenue increase seen in Japan and in emerging markets in the quarter is a reflection of good growth in underlying demand, it is also somewhat flattered by soft comparisons with the second quarter last year, in particular, the destocking of Nexium in Japan and the impact of supply chain constraints in emerging markets.

So our revenue outlook for the full year is unchanged.

We continue to anticipate 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, providing us with the headroom to invest behind our key growth platforms and progress the pipeline.

Core operating costs, combining core R&D and SG&A expense in the first quarter, you'll recall were 4% lower than last year.

But as I said at the time, this was largely a matter of phasing.

Core operating costs were up 5% in the second quarter, resulting in core operating costs broadly flat for the half year.

As I mentioned earlier, we continue to drive investments behind our growth platforms.

And the influx of projects acquired through business development is exerting an upward tension on core R&D expenses in the second half.

So for the full year, we now anticipate a low to mid single-digit increase in core operating costs, compared with 2012, on a constant currency basis.

And with a revenue and cost profile in line with this guidance, the Company continues to expect core EPS to decline at a rate that is significantly higher than the revenue decline in 2013.

Now financial guidance for 2013 has been based on January 2013 average exchange rates for our principal currencies.

While our first quarter results were broadly in line with this currency assumption, movements versus guidance rates lowered core earnings per share in the second quarter by around 2%, and may continue to impact core EPS for the second half of the year, if rates remain where they are.

So with that, let me now hand back to Pascal who will chair the Q&A session.

Thank you very much, Simon.

So I now invite you to ask your questions.

Tim Anderson, Sanford Bernstein.

I have a few questions; a modeling question to start with.

In our forecasts at least, as your Company moves into 2014, we have SG&A and R&D declining year on year, but your new guidance for 2013 raises the possibility that operational spending could actually increase in 2014.

And I know you probably won't want to comment on 2014, but directionally, maybe you can say whether this line of thinking is correct.

Second question is on M&A.

I know you talked about this subject back in March, but can you refresh us on the upper limit of deal sizes you're considering?

I've been under the impression that they're mostly bolt-on types of arrangements.

Is that still the plan, going forward?

And then last question is, I'm wondering if you would be willing to say what the trough year for earnings for AstraZeneca is likely to be.

Some analyst's models show it happening in 2017; some show it happening in 2019.

I'm wondering if it could really be that far away.

Okay, Tim.

Thank you for those three questions.

I'll ask Simon to address the first one, and maybe you could also address the trough year question, Simon, if you don't mind?

No, certainly.

Tim, thanks very much for the question.

And I think firstly in terms of operating costs, as I mentioned, we have a significant restructuring program underway; I dimensioned that for you earlier.

That program continues.

It's very much on track, and it's going to deliver reductions in our cost base and improvements in the flexibility of our cost base.

In addition to that, we have a wide-ranging series of productivity improvement programs underway across the business.

Again, will improve our efficiency and give us the headroom to invest.

We do see significant opportunities for continued growth behind our growth platforms, and I indicated that we're going to sustain that investment where we can see that it drives long-term value and growth.

So that's behind particularly sales and marketing costs.

But predominantly, Tim, there's some increase in field sales and some selling resources, but there's also a significant investment in variable promotional and [KOL] support, medical spend as well.

So there's a high degree of flexibility behind that investment and we're putting it in, in a targeted way, during the course of this year.

And then in addition to that, we've obviously brought in a number of late-stage and later-stage assets this year, which as I said, do bring some upward tension on our late-stage development budget.

And of course, we've also, as Pascal described, had one or two progressions into late-stage developments, and we'd hope to see some further late-stage progressions during the course of this year.

So we do see increased investment opportunity this year, which is why we've moved our guidance in 2013.

As we look into 2014, as you'd expect, we'll update you with our full-year results as we've shaped up our plans for 2014.

What I would say, I think, is to reiterate the guidance we provided back at our Investor Day, which is we will continue to maintain our pre-R&D margins in the 48% to 52% range, and we very much see our R&D investment level as remaining broadly flat through this period.

And you'll recall, Briggs, laid that out back at the Investor Day.

So that's a view on costs for you, Tim.

And moving to your second question, which was on, I think, the year in which we expect earnings to reach a trough.

Tim, I'm going to reiterate the sort of remarks I made, again when we were all together in New York, which is we've got a strong, stable base of revenue from established products, from our respiratory franchise and from biologics products.

We've got known and certain expirations of products coming off patent, of which Nexium in the US is '14, and then Crestor at '16 and '17 are clearly the most significant.

So what happens on the top line is all about what we do in terms of driving the growth platforms, and exactly where the earnings trough add is going to be a function of the success in driving those growth platforms and the market opportunity it presents with.

And I think you can see from our actions this half, we are intent on investing behind those opportunities where we see them.

Exactly which 12-month window that trough appears, we're not going to specify.

I'm not sure it's helpful to specify.

And certainly, that's not a key metric for management as we drive forward.

Pascal, over to you for the other question.

Thanks, Simon.

That's very clear.

And, Tim, just to repeat again what Simon said is that our guidance for 2014 we'll precise it early next year, but what we said in March remains correct.

We will keep targeting the pre-R&D margin that Simon described for you, and we will keep targeting an R&D budget that is broadly flat.

And so that's what we said in March, and it remains valid.

As far as M&A, what we said before is also still valid.

And I think what we said was that we don't see the need for a large acquisition for us to succeed.

We believe we can actually succeed through acceleration of some of our pipeline, reshaping of our internal project pipeline, accelerated business development, what you called these bolt-on acquisitions or collaborations.

Some of those you've seen in the last few months and we keep doing this.

So this is really our base plan is get the best out of our own portfolio; complement this with business development activities.

And we believe we can actually succeed with that approach.

Now that doesn't mean we'll not consider a larger acquisition, but we'll only consider this if we think we can add value.

And if you look at all the business development initiatives we've launched in the last few months, those are projects where we think we can add value.

We can add value because they are in our core therapy areas where we believe we know the market.

We can add values in the way we develop those products, in the way we commercialize them.

And we will keep doing this.

So if we find an acquisition of a larger size where we believe we can add value one way or another, whether it is geographically driven or because of our capabilities, we'll do that.

But it is not our best plan.

The best plan is really our internal pipeline and business development activities.

Thank you very much.

Andrew Baum, Citi.

A couple of questions.

First, you've clearly got a very large 60,000-odd patient trial population ongoing for Brilinta.

Could you remind us how many years of patent term extension you think Brilinta's eligible for?

I'm just thinking about the period of economic return for that drug, given the investment taking place.

Second, on SAVOR, are there any circumstances that you feel the disclosure from that trial could be used to actually constrain class and Onglyza growth, given the pressure, particularly in Europe, from [Pears]?

Finally, on Tremelimumab, could you comment whether you would consider licensing the compound to be co-developed with another PD-1, aside from your own?

And then finally, just on the outlook for Symbicort in the US and Europe, given the impending launch of BREO, to what extent do you anticipate the impact on volumes and pricing as GSK increase their efforts and there's a new differentiated compound.

How will that impact Symbicort over the near term?

Thank you.

Thanks, Andrew.

So maybe what I could do is ask Briggs.

Do you want to comment on SAVOR and the inception of Tremelimumab?

The one thing I could do, as far as Treme, is tell you that is we're certainly always open to collaborations with other companies in terms of combinations.

We believe that Treme has potential for combinations with a variety of products, in particular for sure, PD-L1 or PD-1.

But we certainly would not license this product, [that we'd] combine it.

So if you want to say a few words on Treme, Briggs, and SAVOR as well?

So, Andrew, let me just finish off Pascal's comments on Treme.

We think Treme is a very important part of our portfolio and we're not interested in licensing out.

We were quite interested in licensing it in, actually.

And so, in combination with other things in our portfolio, we think it's quite important.

And as Pascal said, we have entertained and we continue to entertain overtures from others who want to partner with us.

In terms of SAVOR, as Pascal said, the full results will be presented at ESC at the end of August/beginning of September.

You can imagine from a 60,000 patient trial, we've generated -- we think the largest data set now on DPP-4 inhibitors and are able to answer many of the questions that have been raised around this class.

So we think that the ESC presentation will provide quite a bit of information.

I think that your question was, do we believe there's anything in there that would in any way dampen the enthusiasm for the class as a whole.

Again, until you see all of the data, I don't know it's fair to have that conversation.

We can talk about that once we've all had a chance to review the totality of the information.

Thank you, Briggs.

Let me just cover the other two questions.

I think one was Brilinta and the patents expiry range from [2018] to 2019 in Europe and up to 2021 in the US.

We have filed for extensions.

We don't have a time yet in terms of the [period of the] extensions, but the extension would extend the patent protection to 2023 and beyond in the various geographies.

So we still have quite a number of years in front of us to gain a return out of this product.

As far as BREO, we certainly expect some impact of this class on Symbicort but, in the short term, we don't expect that there will be a very substantial impact, because Symbicort is used for different type of patients who have a more advanced form of the disease.

So our assumption at this point, is that BREO and other similar products will -- sorry, actually I thought you were talking about Laba/Lama.

You're talking about BREO, the new combination of products; I've got to start again.

So BREO, essentially, the expectation is that we will have an impact there for that one.

The pricing, I would imagine, will be in the same range as Brilinta would be -- as Symbicort would be, and it will be competing with Symbicort.

But it will also be competing with [Adverd].

And we have to see what they're actually are able to, for instance, in the United States.

The launch has been delayed, as you know, and the access -- we'll have to see what kind of access this product can achieve.

There will be pricing competition; we don't believe that it will impact Symbicort so much but there will be, of course, growing competition there.

As far as the Laba/Lama competition, that's more distant and as we've talked about before, we believe that the impact on Symbicort will be progressive.

But over time, it certainly will impact it, which is why we decided to proceed with this Pearl acquisition, so that we could actually be present in this market.

Thank you.

Peter Verdult, Morgan Stanley.

Just a few for you actually; two product, one strategic.

It's been reported that you are considering exploring some sort of biosimilar strategy.

So the simple question from me is how does that jive with your views on biosimilars when you were at Roche and the overall commitment at Astra to be focused on innovation?

And then the two product questions; if we take the Brilinta run rate now, it's less than $300 million.

I'm assuming the investment you're making behind the product is multiples above this.

Are you willing to sustain this level of investment until we see the data from Pegasus, which I believe is end of '14?

Or is there a plan B for Brilinta?

And then on Diabetes, competitive landscape heating up, can you shed some light on what you're doing or any incremental investment you're having to make on the sales force to maintain your share of voice?

Thanks.

As far as Brilinta, our investment is, indeed, substantial.

We basically repeat what we said earlier, which is we are going to invest very substantially this year to drive the penetration of this product, and we will actually look at how we're progressing early next year.

So we always said, we have to wait 'til the last quarter of this year and, therefore, we look at it again early next year and we decide what we do.

Now, if we were not on track with our plan, we certainly would have to revisit what we do.

We can't wait until 2015 to adjust our investment if sales don't come through.

But so far, I have to say we are on a good track.

I think the problem is that everybody has to realize that there is a big pool of prescriptions, of course, for OAPs.

First of all, a big pool covers a variety of indications; we only have access to one indication to the ACS.

That's the first point.

The second point is that the big pool of total prescriptions is filled by new prescriptions, and the only access we have is through these new prescriptions, new patients.

We get those new patients and then, of course, we lose prescriptions when patients are discharged.

So many of the things we do or are targeted at, of course, increasing our share of new prescriptions, so retaining patients when they leave the hospital.

The large part of our plan, as you know, was to put in place 200 critical care nurses in the United States.

But I think it's important to remember when you look at the progression of the product, to remember that we only gain access to new prescriptions in one indication.

But so far, what we see is we are on track.

Of course, you always would want to progress faster, but personally, I think we're on track, but we look at it at the end of the year and if we can't justify the investment, we will have to adjust it.

As far as biosimilars, I can only repeat also there what we've said before.

What we've said is our strategies for [breakthrough] innovation; I will not comment on the market [very much], as you can imagine.

We've also said in March that we would look at whether some of the capabilities we have in (inaudible) MedImmune in the UK could be leveraged in the biologic field.

That means biosimilars could also mean biosuperior, our products that are differentiated, and that's what we are looking at, and we haven't really concluded yet what we will do.

But certainly, our focus remains innovation, but you have various degrees of innovation.

You have the breakthrough innovation of a new medical entity that really transform a disease treatment, and you have the innovation of an incremental benefit that you bring to an existing product, so that's really what we are looking at.

But we will remain true to our focus on innovation and, as far as biosimilars themselves, I can only tell you what I've said in the past, which I would add has actually come true really, which was that the biosimilars will make it one day, but it is proving more challenging than many people through three years ago.

But it doesn't mean that biosimilars will never make it to the market.

At some point they will.

It's just taking more time than many people thought.

Now the last question you asked, Peter, was about Diabetes.

I have to say certainly our performance as far as Diabetes is concerned is not what we would like to see.

So we have to address some of the challenges we are facing in the US in particular, and we are doing this.

We're planning to increase our Diabetes investment in the US.

In fact, we've already done that in discussion with our partner, BMS.

I think you heard the same message from Lamberto from BMS last week during their call.

We're very committed.

It is a very competitive market.

You know very well that we're competing with big companies that have large resources, a strong presence, and they are investing heavily, but we're certainly committed to compete at the right level, in the US in particular, everywhere but very much in the US.

And I'd just like to repeat that, starting early July, we have the level of investment that is actually required to be competitive.

We lost share of voice for a period of time, that's for sure, and we've correct this.

In the end, you have to look at this from a long-term viewpoint that Diabetes remains a great, long-term opportunity, even though we have to accept it will be challenged here and there from a pricing viewpoint, possibly in Europe, from a competitive viewpoint.

There are lots of patients, a growing market and we remain committed.

Thanks.

James Gordon, JP Morgan.

I just had a question on the pipeline on the FibroGen deal.

[I wondered, the] FG-4592, there's been a previous clinical hold for hepatitis, and I know Takeda's Omontys also ended up getting withdrawn from the market and, in that case, it was due to a worse adverse event profile than EPO.

So in the two different indications you're going for, the pre-dialysis and post-dialysis, how competitive does this look in terms of the pre-dialysis?

Could safety be an issue, and for patients who are on dialysis, what's the real advantage to having an oral product if patients are already getting dialysis?

Thanks James, great question.

Can I ask Briggs, do you want to address the --?

Yes, let me talk specifically about the molecule that we're partnering with FibroGen on.

There was an earlier molecule they had that had an LFT issue, but this molecule, in our review of the safety data and the trials they've done to date, it actually looks quite clean to us so far.

Just going into Phase III, so more data will come out, but from what we've seen so far, we think the molecule's clean.

The question about the use in both dialysis and pre-dialysis, clearly in the chronic kidney disease patients having something that's not parenterally administered, we think provides an important advantage to the decisions the dialysis segment.

I think the safety questions around [uses] opens up an issue for -- an opportunity for new mechanisms.

Again, this mechanism keeps your EPO levels almost at physiologic ranges, which we think potentially could provide a safety advantage, so it is -- I'll let [Pascal know what's] coming on the market, but from a medical and scientific point of view, I think there are theoretic advantages to this mechanism over parenterally administered uses.

Marc, do you want to add a few comments on this and the market circumstances as well?

Yes, basically the pre-dialysis market will, if we succeed in our development program, be about two-third, and the dialysis market will be about one-third.

So this is basically a different territory from the electro (inaudible).

Thank you.

You have a large number of patients in pre-dialysis who have an [immune] should be treated who they are not treated because EPO is not necessarily the best response for this, and there's a substantial opportunity there.

In dialysis, of course, a bit different and EPO will still play a big role in the future, even though you could also make an argument that if a patient has started on an oral agent when they get to dialysis, they might stay on it.

But really the core of this problem would be pre-dialysis.

Keyur Parekh, Goldman Sachs.

I have three, if I may?

One, just a quick R&D question.

I believe my understanding is when you bought Tremelimumab from Pfizer, they did retain their rights to combination therapies.

I was just wondering if you would be able to confirm that, and if that is indeed the case, then do they retain rights to all combination therapies or only combination therapies that are in other Pfizer compounds?

Second, again on the [immunotherapy] side, recent updates on clinical trials on Moxetumomab seem to suggest that all of your trials for the mOX40 are either suspended or on hold.

I was wondering if you might be able to confirm that and confirm that you haven't seen any [new safety signals] there.

Third question on the SG&A level, I realize that you're guiding to a 48% to 52% pre R&D margin for next year, but if you could think about it in absolute dollars senses, can you help us think about costs that you are incurring this year that you may be able to roll off next year?

If I am understanding you -- if I'm hearing you correctly, Pascal, you're investing more behind Brilinta, you're investing more behind Diabetes starting July.

Can I ask you absolute levels of cost be same or higher than this year?

Thank you.

Can I start with the general level question.

Simon, do you want to address that one?

Yes, certainly.

As I mentioned, for a combination of restructuring and productivity improvements, efficiency care, we are continuing to reduce the fixed costs base, so employee numbers, physical infrastructure, the fixed cost base, across SG&A, particularly in the established markets and also in R&D.

And that's a trend that will continue on behind 2013 and into '14 and '15 as our productivity and restructuring programs progress.

Therefore, an increasing proportion of our cost base is pretty variable.

What do I mean by that?

I mean promotional spend, I mean external physical project spend and also, in fact, we can move up and down field sales resource in a pretty flexible, variable way.

So the increase this year, relative to our expectations at the beginning of the year, is coming, as I said, from field selling activity, promotional spend, and external clinical project spend.

As we roll into 2014, in the same way that we have the flexibility to lift up our investment where we see good opportunity, in that same way, we've got the ability to dial it down where we see opportunity diminished, or indeed, maintain it if we see the opportunity there.

So it's a very flexible cost base.

I'm not going to, on this call, look into 2014 and tell you exactly what the run rates are going to be.

We'll be doing that at the full-year results in January.

But I think what I can leave you with is that the cost base is flexible and variable, and we can dial it down or dial it up, depending upon the opportunity within that overall frame of goals for our pre R&D margin.

Pascal, back to you.

Thanks, Simon.

In terms of your other two questions, Keyur, the combination [CRP rights], we have to, ourselves, basically -- this was a full acquisition.

Having said that, indeed, if Pfizer or any other company had a good combination proposal for us to propose, and we've been in discussion with these other companies, we would certainly consider it.

But it's a full acquisition, full rights for Treme.

And the other one is -- I hope I understand your question, but if I understood it correctly, it relates to Moxetumomab.

And it's actually not on hold, it's in Phase III.

Unless your question was about OX40 (multiple speakers).

Sorry, Pascal, it was about the OX40.

So essentially, what we're doing here with OX40 is, we're bringing a humanized version of OX40 --

Yes, there's a current OX40 [is not on] clinical, to my knowledge, Keyur.

We have some drug supply issues that are delaying the progression of the program, but not a safety hold.

And because we're developing this humanized product, we've had delays in supply and, therefore, the clinical trials are not started yet.

But there's no clinical hold.

We'll double check this.

Briggs, maybe we could double check this, and get back to you if what we tell you is not correct.

But to my understanding, there's no clinical hold.

Thanks, Pascal.

There is an email question from (inaudible).

The question is, what is your target for Brilinta in the US, in terms of the total market share?

I don't know how to answer this one because, as you know, we don't give specific guidance.

I can only tell you as high as possible, but I don't know that it would satisfy you.

We typically don't give targets.

If we gave you a target for a share in prescription, it would be giving you a target for Brilinta sales.

So I'm really sorry, I can't really be specific for that one.

The other thing I can remind you is that we only compete at this point, as you know, in the ACS segment.

And the ACS segment represents 20% of the total volume.

So we only have access to 20% of the total volume.

But that's as much as I can tell you.

Kerry Holford, Credit Suisse.

Three questions, please.

Firstly, just quickly going back to your operating costs.

You've talked a lot about SG&A, and clearly, it was higher than we had anticipated in Q2.

And you've talked about that being part of the reason for higher cost guidance for the full year.

But I guess I'm just interested to understand which of your franchises now require more promotional effort than you thought they would do, say, three to six months ago.

Sorry, you touched briefly on Diabetes, but I wonder where the surprise has come for you?

Secondly, on Symbicort in the US.

The sales were up in line with prescription growth, suggesting no benefit from price and mix.

And I know that you've got a benefit from a list price perspective year on year.

Does that reflect increased rebate pressure?

Or are there stocking issues that we should be aware of there?

And finally, on the Pearl acquisition.

Just interested in hearing your thoughts on the competitive positioning of the lead product there, the twice-daily Laba/Lama, which looks, at least currently, to be [fore to] market.

And also, whether you can confirm whether the MABA compound has started Phase II with you yet, and when we might expect to see that data.

Thank you.

So quite a number of questions, Kerry.

So let me start with a couple of comments on operating costs, and Simon will add a few comments in a minute, and then also, comment on Pearl operating costs.

I would say the only place where we really can say surprise, it may not be the right word, but where, let's say, the landscape has changed, compared to what we had in mind late last year, when we designed our plans, is really Diabetes.

Brilinta is on track with what we had in mind.

But Diabetes, suddenly the promotional pressure has increased, and the market growth is a little bit slower than most people, I guess our peers and us, we expected and the promotional spend has increased.

Essentially, the delay in the approval of Deguldec led, clearly, Novo to reallocate those promotional resources to their product and, therefore, increased the competition, increased the promotional pressure there.

And the same increase in promotion behind Januvia was applied by Merck.

So we've seen increased promotion coming from Merck, and also from Novo; therefore, this is probably the place where we could say we have seen a little bit of a difference.

And Simon will add more on that in a minute.

Pearl, the biggest differentiation here for us would be that, in the US marketplace, this would be the only pMDI available.

And in every country where you go, you see that patients -- in fact, some patients prefer MDIs, others prefer DPI; ideally, you'd have both.

And in the US marketplace, essentially having -- the only NDI launched -- the pMDI launch would be critical differentiation.

Now, we also accept the fact that this is going to be very competitive.

And the reason we went forward with this product is to maintain our presence in the field.

Symbicort is a critical franchise for us.

We believed we needed to be present in that Laba/Lama market segment, and that's why we acquired Pearl.

But as I said, we realize it's going to be very competitive.

Briggs, do you want to add anything on the MABA?

But first, maybe Simon on the increased cost.

Yes.

I think, Kerry, the question you raised on costs around where are the differences versus our expectations at the beginning of the year, any surprises.

I think Pascal mentioned probably the most individually significant, which is that we have seen an increased promotional cost across Diabetes.

And we're intending to respond to that and match, in order to realize the full potential of our brands.

But I would say that we have a continual process of looking at the momentum in our different markets, developments in our markets, and making decisions about where we lift investment where there's a good opportunity.

So we've put more resources into some of our emerging markets.

You saw China performing very strongly.

We ensure that we adequately resource that market, and one or two other emerging markets.

We've seen some positive developments in Japan, for example, strong growth in Nexium, but also our other the two primary care brands, Symbicort and Crestor and, at the same time, an opportunity to launch Forxiga, if we're successful with our filing there, alongside the Exenatide.

So we're wanting to put a bit more resource behind those opportunities in Japan.

Symbicort's performing well, and so we've dialed up a bit of promotion effort in certain markets with Symbicort.

So I think those are all areas that we've taken some increase.

It's fair to say there are also other areas where we've taken some cost away, because we've seen markets being less promotionally responsive.

As I've stressed throughout, these are investments we're making that we will dial up or dial down, as the opportunities move.

The other area perhaps we've not focused on as much is R&D.

We've spent a bit of time talking about SG&A, of course, you've seen -- and this is another important factor behind our views on cost, we've taken on board a series of late-stage projects.

Briggs is bringing those into his development programs and the team there, and we need to -- and as we look into '14, we'll seek to really prioritize our portfolio and spend, but clearly, in a six months' timeframe, that's going to give us some upward tension.

So that's on the costs.

May I just pass because I'll just do it very quickly, there was a question on Symbicort, I think a question around the underlying drivers of the Symbicort US revenue, which was up 16% in the quarter.

Prescriptions overall were up 16%.

There was a very small destocking effect, but really not material for the quarter.

In terms of pricing, we did have the benefit of some mix effects from some good volume growth in some non-retail channels, but essentially, the story for Symbicort is strong underlying growth in market share in a market that continues to show a little bit of growth as well.

Thanks, Simon, yes.

So again, we dial up and down the investment.

We run various products throughout the year, but China was a big one.

But the biggest one really at the end of the day is nobody expected Deguldec to not be approved, and I'm sure no-one expected it to be approved and launched.

When it didn't get approved and Victoza ended up being promoted by the sales forces that was ready to launch, they knew that it created a substantial increase in promotion which we ended up having to match and we are now matching.

But certainly, that was not in the plan.

Do you want to cover on the MABA question?

So MABA's in Phase II.

I can't tell you exactly when we'll be presenting data at scientific meetings.

I would anticipate it probably wouldn't be until at least the beginning of next year.

Okay.

But the Phase II has started did you say?

Sachin Jain, Bank of America.

Three product questions, if I could?

Firstly, on Brilinta, the New to Brand chart for the US that you have is now a share chart, not absolute scrips.

So firstly, could you comment on absolute trends recently, which I think have been flat?

And then secondly, with the New to Brand market in the US, I think the overall market has been declining, so any particular reasons for that and would you expect that to continue?

Secondly, on Onglyza, as you look to increase SG&A, your comment where your focus is there?

The reason for the question is I think Merck is flagging market growth and chasing the SUs.

I think Lilly's commentary was more focused on the share gains as their commercial axis improves.

So just where is your focus?

And then the final pipeline question, Benralizumab, I think you'd flagged at the March Investor Day potential for Phase IIb data in asthma in the first half.

Just wondering whether that data was in-house and whether we could see that at [ERS].

Thank you very much.

Thanks, Sachin.

Briggs, do you want to take the [very last] question?

The Phase IIb data for Ben is in-house and I'm pretty sure that it will be presented at ERS.

I don't know for certain, but I'm -- I think -- no?

But what I can say is I've seen it and we're just as bullish on the [model] as we were when we talked to you guys in March.

We'll get back to you as to when it's going to be presented, as soon as we know to be honest.

But I can't remember.

But we've seen the data and, as Briggs said, we are very confident in the data we saw in asthma.

[Next year at HES].

Okay.

So we have the answer; next year at HES.

The second question you ask, Sachin, relates to Brilinta and the share is increasing.

You're right to say that in the last few weeks the volume has been flattish, because the market is actually impacted, the total market is down.

And, of course, the total market, I think you've got to look at it on a long-term trend basis, not week-to-week basis.

We've had a few weeks of flattish volume growth.

I focus on the market share and influencing that, because that's really where we have the biggest progression we can make.

We've looked at it, we have no specific reason why the market would be flattish to down in the United States.

But it is true that the total OAP volume has been relative flat.

But the market share, again, still is going up.

As far as Onglyza, the primary focus is really access, making sure that we restore good access for this product and we regain some of the access that has been challenged, has been difficult for us.

And, of course, growing our market share; those are the two focus areas.

To grow our share, we have basically increased our promotional effort.

In particular, our sales force deployment has gone to Onglyza on the one hand and Bydureon on the other hand, and we have now new sales force deployment from late June/early July in place.

So we should see the impact of these changes in the next few months.

In fact, in July, we already had a slight impact on the market share of Onglyza, as we could see.

It's not only stabilized, but we saw a slight pickup.

Very early days to say, but certainly sales force investment and access are the two priorities.

Can I just take a quick follow-on, sorry, just on Brilinta?

When you say your focus is share, and we think about your inflection comments in assessing the product to the end of this year, early next year, it's fair to think that you'd be looking for inflection of volume not just share, relative to whatever the market's doing.

Well, it's actually both.

The thing is that the total market is really not something we can influence a lot.

First of all, just to repeat, we only access 20% of the total volume.

So there's not much we can do to influence the entire class, the entire OAP market.

There are so many other indications that we don't have yet, that we cannot say a word about, so we can't influence the real market.

So our real focus is growing our share in ACS, and certainly growing that ACS segment from a volume viewpoint, but the priority is the market share.

Now, of course, if we had good share progression at the end of the year and the market was completely declining and our sales, as a result, were flattish or certainly not growing, we would have to revisit the level of investment.

But I would not try to conclude anything out of three weeks of flattish volume in the market.

I've been around long enough, and work in the US long enough, to learn to not overreact to three weeks of data points.

As long as your market share goes in the right direction, I think for a new product like this one, you stick to what you are doing.

Now, of course, we'll have to monitor this over the next few months; that's the best I can tell you at this point.

Very clear.

Thank you very much.

Mattias Haggblom, Danske Bank.

Given that there are a number of omega-3 assets out there in various stages of development, I'd be interested to hear why [Ontirum] as some would argue that there are other compositions superior to theirs?

Secondly, when could theoretically a once-daily fixed dose combination of Crestor and Epanova beyond the US market?

And lastly, you've done a number of deals in cardiovascular and in respiratory, but no late to mid-stage such for oncology, an area you've emphasized repeatedly that you want to rejuvenate.

So is it fair to assume that upcoming business development deals should have a higher proportion of oncology deals going forward, or has something changed?

Thanks, Mattias, a good question.

Your first question is sort of answered by your second question in fact, is that the combination of Crestor with Epanova is a very attractive aspect of this acquisition.

Epanova is a once-daily omega-3 that is, therefore, easy to combine with once-daily Crestor.

So clearly, our focus is on developing a fixed combination of Epanova and Crestor.

I don't think we have communicated a date, or have we a date for a fixed combination.

I think, at some point in time, we will communicate this, but I can tell you it was, of course, a critical part of this acquisition to have a fixed combo on the market as quickly as possible.

It's actually part of the deal construct and our goal, as you can imagine, is to get that fixed combo in the marketplace before the patent expiry of Crestor in the United States.

And with that I guess you can get a sense for when we would expect to introduce it.

The second question, as far as deal, I think just a couple of points here.

One is, we said we would focus on oncology, respiratory and cardiovascular metabolism, and that is what we are doing.

Then having said that, basically you have to -- we focus on acquisitions where we believe we can add value, as I said before, so you have to find those opportunities and you have to convince yourself you can add value.

So anyway looking on oncology, but we'll only do acquisitions or business development is we can add value those.

The second comment I would like to make is that we don't -- that the way we will build our pipeline is not only through business development; it's also through our internal pipeline.

We've moved, or we're moving Olaparib in Phase III, we've moved Moxetumomab in Phase III, admittedly it's a smaller opportunity, but Olaparib, we believe, is a large opportunity.

We're moving Selumetinib in Phase III.

We have immunotherapies which we have presented to you in March which we believe have the potential to move into Phase III relatively rapidly.

So over the next say year, or so, you should see a very different late-stage oncology pipeline of AstraZeneca very much for the progression of our internal pipeline.

But again, we'll keep looking for acquisitions, we just have to find acquisitions that make sense and we think we can add value.

But the internal pipeline is, certainly in oncology, stronger than it is in cardiovascular metabolism, and I think we will see a very strong pipeline just based on what we have in our hands.

Thanks very much.

Anything, Briggs, you would want to add or not?

I agree entirely, and we did emphasize in March that when you looked at our pipeline, what was missing was cardiovascular metabolic, so we've put a lot of emphasis on trying to fill that hole.

But the Phase I and Phase II with our own products in oncology is actually a much stronger part of our portfolio.

Thanks.

Lars Hevreng, SEB.

Can you say anything about the size of the Phase III programs that you're now targeting both for the omega-3 tablet, but maybe also for the Pearl development?

I guess it's not only the double-acting product but also the triple-acting, and if you could shed some light there of the magnitude of trials you will now undertake?

Yes, a great question Lars.

Briggs, do you want to take that?

On the Pearl program really the focus will have to be on the Laba/Lama because the triple combination is a little bit further away, and before it impacts us from a cost viewpoint, it will be a little bit of time.

But certainly in the short term it's the dual combination and the omega-3 programs.

Yes, so dual combination Lama/Laba I would say is sort of ballpark comparable to what a big Phase III program would be on the order of 2,000 or 3,000 patients.

The triple therapies are a little further behind, so we don't really have the sizing of that yet.

Omthera, as you know, they've done a fabulous job and they've already filed for their high triglyceride indication in the US.

The big next piece of investment there is both the Crestor fixed dose combination and, of course, the outcomes trial.

So the outcomes trial for Omthera, given what they've told us and the work we've been doing with them, looks like that'll get underway this year.

So over the next period that's another cardiovascular outcomes trial type expense that is similar to what we've seen in many of the other cardiovascular outcomes trials we've done over the past couple of years, and we have ongoing.

Thanks, Briggs.

We have an email question from Kristofer Liljeberg from Carnegie.

The question is, given the projection of a higher operating costs for this year, how should we think about costs going forward?

Can you compensate on underlying expansion by the savings from restructuring in the past year -- from restructuring in the past year sorry, or are you entering a period of forced increased operating costs?

Simon, do you want to take this one?

Certainly, Kristofer thanks for the question.

We've responded to a number of questions along this theme on the call, but I think the two or three points.

Firstly, we have a restructuring and productivity improvement program underway, and that will deliver significant benefits.

And we're always looking to identify opportunities to find further sort of underlying efficiencies in our business; that will continue.

And I think we drive that, Kristofer, somewhat independent of where we see short-term investment opportunities.

That's about creating a very efficient and flexible cost base for the long term.

Secondly, as we look at opportunities and imperatives to invest behind our growth platforms and in late-stage development, of course there's another side of that, which is we're also looking at where can we de-prioritize investment and resource which has not delivered a sufficient return, or where we can sustain the same level of sales activity with a lower level of resource.

We will continue to seek out those opportunities and, yes, that provides an opportunity over a period to, if you like, recycle, or reallocate resource from one area into another.

And we will actively, and always are, looking at those opportunities.

And just the third thing, as I've again stressed on the call, the investment we're making and the step up in cost is predominantly of a variable nature.

We will invest where we see the opportunity and, equally, we've got the ability to dial it up or dial it down.

I confess I took a slight objection to the word, a period of forced operating cost increase.

These are investments in cost to drive future growth and value, and what we're absolutely doing is making that investment to drive long-term growth and value.

And if that puts some pressure on the operating cost base and margin in a short-term, narrow time window such as this year, that's something we're prepared to do because we believe it's right for the long term of the business.

So Kristofer, I hope that helps you with your question.

We've got another question from Mark Clark from Deutsche Bank on margins which I'm probably I think Pascal needs to make the last question, shall I deal with this one and then --?

Okay, so Mark, you've asked, will the core pre R&D EBIT margins still be above 48% threshold even with higher operating expense growth?

And as I said, we provided that view back at our Investor Day, between 48% and 52%, and that remains our view as we look forward, and so that is unchanged Mark.

And I think that probably brings our Q&A to a close.

Pascal over to you.

Yes it does.

Let me thank you very much for your participation, and your active questioning; we always appreciate it.

We'll close this session for today.

Thank you so much.

Good bye.