AstraZeneca PLC (AZN) 2004 Q1 法說會逐字稿

Good day ladies and gentlemen.

Welcome to the AstraZeneca First Quarter Results briefing conference call.

For your information this call is being recorded. [Operator Instructions] At this time I would like the turn the call over to Mr. Ed Seage.

Please go ahead sir.

Thank you operator and good day everyone.

Joining me on the call today is our Chief Financial Officer, Jon Symonds and of course Mike Rand, Director of Investor Relations team here in London.

Before I turn the call over to Jon, I'd like to read the following statement.

The Company intends to utilize the safe harbor provisions of the United States Private Securities Litigation 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 risks and uncertainties.

Results may differ materially from that expressed or implied by these forward-looking statements.

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

With that I'll turn it over to Jon Symonds.

John.

Thank you Ed and good afternoon everyone.

As it's late in the day, at least in Europe, I'll be brief with my opening remarks, touching on a few product financial and product highlights from this morning's release.

Devoting the balance of your time to questions.

First the headline numbers.

Sales were just over $5b in the quarter, a record for AstraZeneca.

That was an increase of 7% on a reported basis.

Currency benefited reported sales by 8%.

So, on a CER basis sales were down 1% versus the first quarter of 2003.

You will of course recall that the first quarter last year was affected by significant wholesaler stocking, where we estimated that by the end of the quarter trade inventories were some $400m higher than normal.

Of course we're still feeling the effect of generic erosion.

Some $234m in the US in this quarter.

As I mentioned at the year-end, we've been moving towards implementation of inventory management agreements with the major US wholesalers.

Three agreements are now in place with wholesalers that account for around three quarters of our US sales.

Going forward this should better align 2004 reported sales with prescription demand.

But we still carry a rather volatile four quarters of 2003 sales history that will affect the year on year comparisons for the balance of this year.

In this quarter, since the agreements were not in force for the entire quarter, some buying ahead of demand occurred.

We estimate around $100m, but still greatly overshadowed by the prior year effect.

With the excess inventories we had coming into 2004, this leaves around $200m of excess inventories to be worked off over the next two to three quarters.

Nexium, Toprol-XL and Atacand are the main products affected.

Adjusting for inventory movements between the periods, we estimate global sales were up 6% in CER terms, with global sales of the ten key growth products up by 34%.

So, the underlying product momentum remains robust.

I'll touch on some of the individual product highlights in a moment.

Turning to profit, operating profit was down 15% as reported and by 20% in CER terms.

Not a pretty start to the year, but given the sales phasing I've just been through and a cost comparison against the lightest cost quarter of 2003, it's very much as we expected.

If anything, it's a little better.

Currency benefited sales by 8%, and profits by 5% in the quarter.

On the cost side R&D and SG&A combined were $2.85b, actually lower than the fourth quarter last year.

But broadly at the level of promotional support and development spending that we reached in the second half of 2003.

But this level of expenditure was 13% higher than the first quarter of 2003, and including the exchange impact was up 23% on a reported basis.

So, together with the sales phasing, there were no real surprises to operating profit.

The same broad comments apply to margins, operating margin in the quarter was 21.3% up from the fourth quarter last year, but down on the strong first quarter of 2003.

We estimate that around half the margin decline of 5.6% in the first quarter is attributable to underlying cost growth, with most of the balance mainly down to sales phasing.

Gross margin improved by 1.4% principally as a result of lower payments to Merck as a percentage of sales.

Payments which aggregated 5.6% of sales in the quarter.

Earnings per share in the first quarter was $0.47 compared to $0.54 in the first quarter of 2003.

Turning now to the product highlights and first Nexium.

Global sales were up 7% to $935m.

Outside the US sales were up 36%.

But in the US reported sales were unchanged, with the wholesaler stocking we saw last year significantly out weighing the slight stocking we saw in this quarter.

Total prescription growth in the US was 19% in the quarter.

Well above what we call the branded PPI segment.

That is excluding omeprazole products.

The branded products grew by 10% in the first quarter.

But, as we said at the year end the lion's share of negative impact of Prilosec OTC continues to be confined to the prescription and omeprazole products.

They were down some 44% in total prescriptions against first quarter of 2003.

Crestor sales were $129m in the quarter as market share continues to grow in the early launch market.

US sales in the first quarter were $72m as factory sales begin to normalize to prescription demand.

You will have seen that on the latest weekly data, Crestor's share of the new prescriptions in the US was 6.2%.

The dynamic share, a measure of new starts and switches provided by the Varispan Data is still much higher at 16.3% in the latest week.

The market is intensely competitive, but we've achieved a very competitive level of share of voice.

Our DTC campaign is underway and we're determined to win our fair share of this market, based on the winning attributes of the product.

Seroquel had another strong quarter in prescription growth, up 36% in the US.

Although reported sales were down on stock movements, which occurred in the first quarter of last year.

As we've added bipolar mania to the list of indications.

The market share gains for Seroquel continue.

Seroquel's share of new prescriptions in the US antipsychotic market in March was 24.5%, 4.4 points higher than a year ago.

During the quarter Seroquel overtook [Alanzopene] to become the number two product in the US market in new prescription share.

Iressa sales were $93m in the quarter.

Prescriptions in the US were just over 22,000 an increase of 8% over the fourth quarter of last year.

But, be in no doubt we are very encouraged by the [Task Sever] study result that was announced earlier this week.

From the limited data we have available to us, the results would appear to be consistent with our experience of Iressa.

It is good news for patients and for the class.

We, like you, are looking forward to hearing more details at ASCO in a few weeks.

I'll let the press release speak to the other key growth products.

There were strong performances for the oncology products, especially Arimidex and Symbicort also showed good growth and market share gains.

But it's all there in the pres release.

So, before closing a few words on the outlook for the rest of the year.

You've seen that we've reiterated our expectations for earnings per share for the full year, in the range $2.00 to $2.15.

We've also given you our best view in terms of how that will play out over the remaining three quarters.

As mentioned in the release more than half of 2004 profits and nearly all of the earnings per share growth versus 2003 will occur in the second half of the year.

There are three factors at work to explain this second half weighting.

First the remaining impact of patent expiries will diminish over the course of the year.

As I mentioned earlier, we lost a further $234m to generics on the year-on-year sales comparison in the US in the first quarter.

We have another two quarters of tough comparisons to go yet.

Secondly, even though we should get a profile of sales this year, which more closely reflects underlying demand.

We still have to contend with the sales phasing in 2003, as a confounding factor on reported sales growth rates going forward.

Finally, on the cost side, R&D and SG&A, while we still aim to achieve annual growth around the double digit mark in CER terms.

The profile of spend will show higher growth in the first half, as the launch programs didn't kick in until the second half of last year.

Currency still remains a variable, but as the dollar has now moved off its lows, we don't see much additional benefit occurring over the remainder of the year.

So, I'll wrap up the formal remarks here and turn it back to the operator to begin the Q and A session.

As we are quite late with our call today, because of the AGM and the GSK results, I'd be grateful if you could keep your questions brief, so as to give everybody a chance to be heard.

Operator.

Thank you sir. [Operator Instructions] We'll now take our first question from Mr. Craig Maxwell from JP Morgan.

Thanks a lot.

Thanks Jon.

Could you just update us on guidance now for SG&A and R&D growth?

Is it still on track for high teens for the year as a whole?

Any guidance on the timing for a potential Exanta advisory committee, and potentially which committees would these be?

Then on the Iressa - the results that I [received] were good.

A slightly techy question, can you give us the timing of last patient or expected last patient in for Iressa control studies?

Is there any chance that could be speeded up at all?

Okay, I'll ask Mike to cover the last point.

We're really not changing any of the parameters within our guidance at this stage.

So, what we talked at the end - or with our - our year-end results, was that we were expecting high teens growth in reported currency terms, with an underlying growth around the double digit mark, so the 9% to 10% range.

Although there is a little volatility in terms of the reported numbers, we're still very much - we're very much in tune with the underlying numbers, which is principally what we focus the organization on.

Nothing really more to say on Exanta.

It is still progressing through it's regulatory phase.

When there is some clarity about timing of some of these events then we will inform you then.

But there's nothing formal there now.

Mike.

Yes Craig thanks for that.

Not surprised to get the question.

As Jon said earlier, from our perspective [BR21] study is ultimate - is good news for the class and the patients.

But it has the potential to influence and certainly focus attention on our study [709].

So, it's actually quite nice to be able to tell you that we've been proceeding quite rapidly over the study of recent months and we've already entered more than 1,000 patients in that study, that's actually 50% more than participated in total in [BR21].

Of course the event [indiscernible] in new patients is high.

Now, I can't give you details right now about last patient in and timetables.

But I can say that we are planning discussions with investigators and with regulators following the publication of the [Task User] data at ASCO to review timetables of analysis of 709.

I can't be precise about timing, but I can say that our confidence is increasing that we'll be in a position to determine the survival benefit of Iressa in this trial ahead of our originally announced timetable of the second half of 2005.

That's great.

Thanks.

Next we will take a question from Max Herman from ING Financial Markets.

Please go ahead sir.

Thanks gentlemen.

Two quick questions.

Firstly on Nexium.

What has - given all the stock movements - what is your view on the discounting that's happening in the PPI market?

Perhaps a different way of the same question is the - what was the net stocking movement on Nexium in the quarter?

Secondly, just on the quarterly progression.

Again, just firstly on the - on the first quarter I am assuming this is going to be the low quarter in the year and that you should, despite the fact that the first half will, as you say be weaker than the second half of the year - the first quarter will also be perhaps the lightest of all - all in the year?

Thank you.

Okay Max.

Thank you.

It would be wrong to say that the PPI market is not competitive.

It is very competitive.

We are clearly maintaining our competitive position, both in terms of share of voice and detailing and so on.

Although contract negotiations by that tone get tougher, so the incentives are also there in terms of pulling through, through market demand.

So, when you look actually at the price - at the price and volume variations I think we're still in a position that we're pretty comfortable with.

We're not seeing significant priced - net price erosions coming through although it is competitive, I think we're pretty comfortable with the type of business that we're seeking to attract, which is not necessarily the lowest priced volume.

Nexium was certainly one of the products that was most significantly affected by wholesaler movements.

What I was indicated in my opening comments, was although there has been some stocking - some additional stocking in Nexium in this quarter, it was significantly outweighed by what we saw last year, with a gap of in excess of $100m.

So, I think that puts the - we would see the underlying demand year-on-year equation for Nexium to be - to be ahead of 20%.

So, I think we are still seeing some pretty good - some both good growth and good profitability on Nexium.

On the quarterly profile, I think it follows that this should be the lowest point.

With more than half of our profits occurring in the second half, I think the maths is relatively straightforward from here.

Okay.

Thanks very much.

Our next question will come from Andrew Baum from Morgan Stanley.

Please go ahead sir.

Good afternoon.

A couple of questions.

One just to revisit the Nexium.

Could you just break down for us that $200m excess inventory, particularly relating to Nexium?

Then, could you just indicate for us from the beginning of this year how Nexium inventory has moved to about above what you regard as normal inventory levels?

Just so that we can get some sense of the kind of competitive scenario in which you're operating.

Well, let me talk a little bit more generally about - about the IMA's because I think we've been improving the quality of our own analysis and computations of excess inventories pretty well every quarter.

But this quarter now has marked the position, where with the signing of the IMA's we have real market data in terms of what is out - what inventory is out in the market.

We're also now, rather than estimating what we think normal levels of inventory in the market might be, on a product by product basis.

We're now able to put targets in place with wholesalers in terms of - at the actual level of inventories that we will seek to have in the market.

So, I think in terms of our understanding of the position.

It's better than it has been at this point.

As we begin to go through the analysis at a product by product and wholesaler by wholesaler level then I think we'll increase our confidence.

The number of - around $200m does include some adjustment in terms of that better understanding.

So, you can't necessarily reconcile the numbers from precisely - from what we said at the end of last year to what we've got now, because there's been that greater level of accuracy in it.

But the bulk of that $200m was indeed Nexium?

I wouldn't go so far as the bulk.

I mean I think it's - we've given you the three products that principally make it up.

But the lion's share of it is Nexium, Atacand and Toprol-XL.

Just the final point was, could you just give a comment please Jon on the - an update on managed care cover to Crestor in the US?

It's still pretty good.

Our top accounts are very high performing accounts.

I think that we increasingly are segmenting the type of business that we're looking for, for those that really can put higher volume through.

Indeed those contracts that can really access the high market share - at a higher level of discounts that come from delivering higher market share.

So, increasingly we're focusing on those key accounts that can really move the product forward.

Therefore, we're seeing more concentration.

But nothing - we're not otherwise seeing any fundamental changes in the nature of our contracts.

One thing that this does mean - something that we're starting to shift our focus on is because there is a higher mail order component that comes from this, is actually that we're finding that the NRX data tends to understate some of the volume gains that we get, and we are now starting to look at extended units, i.e. individual category capsules in their aggregate because prescriptions tend to be longer in the mail order trade.

So, we're looking at underlying growth in the NRX for the quarter at a little under - being a little under 10%.

We've been seeing more volumes than that.

Thank you.

Jon, just before we go on guys.

We've just been told that we've got a microphone that doesn't work here.

So, it's possible that people didn't hear my answer to Craig Maxwell on the Iressa survival study.

So let me just take 30 seconds to repeat the key elements of the answer.

I apologize if you all heard it in the first place.

But we've entered more than 1,000 patients into that study.

That's 50% more than participated in BR21.

We're planning discussions with the principal investigators and with the FDA around ASCO this year, when more details of the [Task Sever] study will be available.

Without being precise about finishing, we can say we are increasingly confident that we'll be able to determine the survival benefit of Iressa ahead of our originally announced timetable of the second half of 2005.

Thank you sir.

The next question will come from Marcel Brand from Chevereux.

Please go ahead.

Yes, good afternoon gentlemen.

A brief question again on [Traseva] and then on Seroquel.

If I take a look at Seroquel - clearly for the full year 2003 it clearly appears that underlying demand has been significantly stronger than sales growth.

So, I am wondering why the first quarter was not somewhat stronger, and what you think the outlook is going to be for the next quarter regarding stocking patterns there?

Then the second question is - clearly timing is of the essence for [Traseva] now.

What is your plan in Europe?

Are you planning to withdraw the application in Europe, wait for the survival benefit and re-file, since you can't submit on a rolling basis?

What's your strategy there?

Thank you.

Okay Mike I'll ask you to pick up Iressa again.

But on Seroquel it is again a straightforward inventory question.

If you look at the distribution last year, we did 60% of the business sales of Seroquel in Q1 and Q4.

So, 30 in each quarter with Q2 and Q3 significantly lower.

Although--

So, what that means is that the comparison with Q1 last year, which had sales of $444m included a substantial amount of that - maybe a quarter of that was an inventory boost.

So, when you actually look at Q1 to Q1 on an inventory adjusted basis, our demand based growth for [inaudible].

I know it's been a number of quarters where we've had a distortion.

I think we've pretty well - Seroquel we deliberately didn't mention as a product that was excess.

I think we're in a pretty clean inventory position from here, so, you should, fingers crossed, start to see the sales now consistent with prescription trends.

Is there some discounting going on with particular customer groups?

Maybe is there a reason?

There's lots and lots of things under the surface in Seroquel in terms of average daily dose yields and distribution of business across different class.

But nothing - the explanation is all - it's all explained by wholesaler movements.

Mike.

Yes.

You're absolutely right in saying that timing is of the essence around Iressa and Tarseva.

I don't want to share the details of our discussions - detailed discussions with the European authorities.

But it is probably appropriate to say that we have an effective regulatory process in place that we hope will result in the appropriate approvals and that process does indeed recognize the timing challenges we face.

But you cannot submit on a rolling basis.

You have to wait for mortality benefit and then resubmit and probably get a kind of in-official fast track - isn't that the realistic assumption?

We have a regulatory process in place that we believe addresses the problems that we face.

Okay.

Thanks.

Next we will take a question from Tamazie M Drusan(ph) from Prudential.

Please go ahead.

Thanks.

I've got a couple of questions.

Just going back to Seroquel and the atypical market in the US.

Can you just talk about specifically the pricing environment?

Is there ability to take net price increases, net of rebates and discounts or are you actually seeing pricing deterioration in the market place?

One of your competitors has suggested there is pricing deterioration.

Then on Nexium you talk about being fairly comfortable with your strategy.

But when I look at NRX prescription growth on a weekly basis, it looks like you guys are headed into negative territory.

I mean - you're now growing NRX's week over week - sorry year-over-year on a weekly basis by something like single digit percent.

One of your competitors in the States has been very open about stepping up the rebates.

Their script trends look like they're the best in the class.

I'm just wondering if you guys aren't willing to play the price game.

I'm just not clear what you guys are going to do to kind of changes this trajectory of growth.

Ed will check the Seroquel-- The price volume variance is - the price effect is flat.

We are making - there have been nominal price increases.

But I think, as is generally the case in the US, there is not much of that on a retained basis.

A lot of it gets largely reinvested back into contract terms.

We're certainly not saying that - unlike some of our competitors, that we're achieving valueless growth for additional volume.

That's not the game that we're playing.

We have a product with clinical differentiation.

Therefore continue to sell it on a value basis.

I think you can look at all of this data in a whole variety of ways.

We would certainly regard monthly data as more reliable than weekly data.

There we've seen in January 6.8%, February 10% and March 11.8% growth.

So, on a monthly basis NRX's look as though they are picking up.

As I said earlier, we are seeing more of our business going through key contracts, some of which don't get reflected in NRX data.

That's not to deny that this isn't an increasingly competitive market.

We think very hard about every individual contract and the value of it and the cost of it.

Certainly there are some things that the OTC effect is - looks as though it is having some overall dampening.

But we are far from being in a position of valueless volume growth.

Okay.

Thank you very much.

Our next question comes from Kevin Scotcher from SC Cowen.

Please go ahead sir.

Jon, just really trying to put some numbers on the stocking issue.

If I take you 6% US growth ex-de-stocking and relate that to the sales you reported, I've got $330m of difference in sales, against $400m relative to a normal level in the first quarter of last year.

So, it looks like you've de-stocked about $330m relative to that measure.

But you're saying there is $200m of stock.

Which suggests to me, therefore, relative to what you're now calling the target, you basically have an additional stocking of about $140m in terms of what you're saying to us.

You're basically going to de-stock by another $140m.

Is that the correct analysis?

Is that the difference between what you call target and normal?

The logics not bad, but the answers off.

Right.

The simple difference that you were trying to - that you were trying to I guess explore, is partly explained by the fact that we have gone from estimated wholesaler holding targets to real commitment, so, there has been some adjustment from that.

Plus having done the detailed calculations and reconciliations, in one or two cases there's been more inventory out in the market than we thought.

So, when you're doing your movement and to try and then reconcile that movement to the absolute numbers you do get a gap.

But it is a lot, lot less than $140m.

Right.

Okay.

Thanks.

Our next question comes from Ken Aracci(ph) from Numero Securities.

Please go ahead.

Thank you for taking my questions.

Could you please introduce kind of market dynamics regarding OTC Prilosec [erosion] in branded PPI markets?

I'd very [indiscernible] organizations to give some incentives to encourage from branded PPI prescription to OTC Prilosec switching.

How does this strategy work from the point of economics for patient?

Also, are you expected that trend is continuing?

Thank you.

Certainly some managed care are offering that incentive.

I guess the strategy is that if you can't get hold of low priced generic omeprazole in the prescription market, which you can't because the generic prices are still high, then you try and access lower priced omeprazole through the OTC market.

That's what some people are doing.

Many have thought about that and are not doing it because of the label differences between the two, and that the OTC Prilosec product has been deliberately separated from the prescription market product.

Others are attempting to access lower priced PPI's by seeking contractual benefits with competitor's that offer - who are prepared to put price as the only selling mechanism.

It is a complex market.

But I think you are not seeing as dramatically different inroad curve of OTC Prilosec than that which we saw in the final quarter.

We talked there about a rapid penetration and then it tending to flatten off, although it's up a little bit from where it was in the final quarter of last year.

We're not seeing major OTC erosion into the prescription market for the reasons that I've just given, principally one around labeling.

So, I think this is one of the interesting features of this market, is that despite an OTC product, despite three generics, we're still seeing some good branded growth in the remaining - for the remaining PPI's.

So, it's not in that sense as volatile as I think many were expecting that it could be.

Thank you.

Our next question will come from Ann Martin from JP Morgan.

Please go ahead.

Yes.

I was wondering about a couple of products you haven't really talked about much.

Atacand - you seem to have lost some momentum there with flat script growth in Q1.

Are you happy just to kind of give up on this, since it's less profitable?

Then on Exanta have you actually launched it in Europe?

Can you just repeat the FDA - any FDA dates that we should be aware of.

Thank you.

Clearly I wouldn't use, by any means, the words that you've used, Ann, to describe Atacand.

But certainly its relative profitability is factored into our resource allocation model.

On Exanta, apart from really giving you the filing date and the producer date that can be computed from that, there are no specific dates which we can give.

Yes, and we're not launched yet anywhere in Europe, Ann.

We are currently going through the stage of the mutual recognition process.

When we've got some news to tell the markets we'll let you know.

Okay.

Are we right to assume a sort of ten-month clock?

People are talking about an October date for the US?

In the US?

That's the producer target.

But it's not a - it's what the FDA aims for, but it's not a sacrosanct target, but that's the sort of timing that we would expect to hear something.

Okay.

You don't know anything about a Panel meeting or anything like that at this stage?

There's nothing we can inform you of, [no].

Okay.

Right thank you.

Next we'll take a question from David Moskowitz from Friedman, Billings, Ramsey.

Please go ahead sir.

Yes, thanks and good morning.

I know you have nothing to report from FDA.

But there has been chatter about the potential for two FDA panel meetings.

One at the GI meeting mid summer, and another one in the Cardio-renal meeting in September.

Can you at least speak to that [indiscernible]?

Do you believe there could be two panels for Exanta?

Second question would be, can you characterize the wholesale stocking on Iressa that you mention in your press release in the first quarter?

Lastly, could you speak to the 3% market share in the UK on Crestor?

Can you let us know why it seems to be so low in that market?

Thank you.

I think on Exanta there is really nothing more I can say.

When there is a clear - there is something clear to say we will communicate it.

As we all know speculating about what may or may not happen with the FDA is something that is pretty - that is dangerous at best.

On Iressa there's a little bit of inventory.

But the excess you're talking about relatively small amounts of dollars.

It's not a significant part of the overall inventory at the end of the period.

Yes.

By other market standards the 3% Crestor share, after its time on the market in the UK might be regarded as disappointing.

The UK is a disappointing market however, that has a very slow uptake for new products.

Against what has been achieved in other products, this still remains a pretty solid launch.

One that ranks well in the UK context.

But clearly against what we've seen in Canada or the Netherlands or the US, this is a much slower - it's a much slower trajectory.

But that's the UK for you.

Okay.

Thanks very much.

Now we have a question from Mark Purcell from Deutsche Bank.

Please go ahead sir.

Thanks for taking my questions.

Just a couple of questions please.

On the PPI market, can you confirm that OTC Prilosec sales have been broadly flat for the last four months?

In terms of Nexium, if I were to assume about $200m was stocking in Q1 2003 and slightly less than $100m in Q1 2004, I'd be generating over 27% value growth.

I just wanted to check that figure with you Jon.

Secondly on Seroquel, could you also try and give us a - kind of ex-wholesaler stocking adjusted number on the 36% growth in the States and actually highlight some of the data we're going to be seeing at APA this weekend in New York.

Thirdly, just quickly returning to Nexium, I just wondered if you could comment on the timing of the IV launch and the prospects for that, versus the platonic IV formulation.

Then, lastly just finishing up with Iressa.

I guess the 709 study started in July last year and you started some studies versus Taxotere and some symptom studies towards the end of 2003.

I was just wondering if we're going to get the 709 results in the first half of next year when we should get more data in lung cancer on Iressa.

So glad I mentioned in the introduction to keep the number of questions short - not!

Quickly running through yours.

I think on OTC Prilosec - I think that was what I was broadly saying in terms of the penetration, it is flattish.

It is certainly a little bit up from where it was in the fourth quarter.

But we're not seeing any shift in its penetration.

I think you're trying to do the same sums on Nexium as Kevin did.

I think I said that the underlying demand was in excess of 20%, so, your calculations - sort of within the reasonable range.

Similarly with Seroquel, looking at the inventory movements, with probably demand around - right around the - right around the prescription growth.

So, we're in the 30s.

APA - I think there's nothing we wish to say at this point.

IV formulation?

Launched in Sweden, under review in the States.

Did you get that Mark?

Yes.

The Iressa 709 study.

Well I think we covered that earlier.

The recruitment is going well and we're moving as quick as we can.

There is a confidence that we can beat the timetable that we originally set.

In terms of the other studies Mike versus Taxotere and the symptom studies, any other kind of post marketing commitments.

Are we expecting data again in the first half of 2005, or would that be later in the year?

Well, I think, as one of the other questioners said earlier, in terms of the regulatory process and the positioning of the products.

It's the survival study that's the key one.

Thank you.

You mentioned the APA.

We do have some information on Seroquel at the APA.

But that meeting, like a lot of US meetings, has an embargo.

So, we can't talk about it until the time of the meeting, which is next week.

Sure.

Thank you.

Thanks Jon.

Our next question will come from Nick Turner from Jeffries International.

Thank you for taking the question.

I wonder if you could give me two pieces of information.

The first is that looking at your Iressa sales development.

Sales growth in the US in the quarter on quarter, fourth quarter compared to the fourth quarter last year was only a percent, whereas sales development outside of the US was negative.

I just wonder if you could give me some insight into what you think the sales dynamics are, as far as Iressa is concerned.

Is there - or was there anything specific that held back sales development in the first quarter this year.

Then the second question would be that - unless I've missed things - what is the timing for a Crestor launch in Germany?

Are there still problems with reimbursement discussions in Germany that's holding back a launch there?

Then a final point would be, I think at the end of last year, at the full-year results you mentioned that you thought that the inventory levels in the US had normalized at the end of the year.

Because I think now you're saying that in fact there are $200m in - $200m worth of sales still in the inventory channels.

Could you confirm that that's correct?

Okay.

I'll deal with your last one first.

We didn't say it had normalized.

We said it was a bit below $100m, sSo, there was certainly some excess inventory at the end of the year.

Obviously what we are seeing now in this quarter is both new inventory - excess inventory that's occurred in the quarter, as well as the effect of the recalculations that I talked about earlier.

Crestor launch in Germany, still under discussion.

When there's anything that we can say clearly to you, we will do so.

But as of today there's nothing extra I can say.

Iressa sales it's really a question of two markets.

What we are seeing in Japan is the continuing recovery, if you like, of the situation that we experienced at the beginning of last year.

When we had the effects around ILD and in the US.

I think as we said, we've seen increased prescription growth over the fourth quarter of last year.

So, we're still seeing a good up tick in Iressa, both in terms of the number of new patients that its accessing, but also slight improvements in duration too.

I don't think there's anything that I can point out more than that really.

I think the trends in both markets are clear.

There's a bit being sold elsewhere, but it's essentially US and Japan.

Thanks.

Our next question will come from Jason Calalas(ph) from Capital International.

Please go ahead sir.

Thank you.

Jon I know you like careful phrasing.

I have been listening carefully.

I think what you said was the bulk of the growth for this year will come in the second half.

That implies there will be some growth in the first half.

Given that first quarter EPS were down a bit, that implies a very strong second quarter.

I know you hate to talk about quarters.

I know that last year had a very uneven pattern.

But if you also look at the latter nine months of the year to get to the mid point of your guidance [208], that implies an earnings per share growth rate for the latter three quarters of the year of about 30%, to get to the mid point of the range.

Lower if you go lower, higher if you go higher.

What does this tell us about the launch pace of the underlying profitability of the company and the business as you enter and progress through 2005?

Well, I think there are a number of dynamics.

Clearly as we've described on a number of occasions, the first quarter is a feature - is more a feature of last year.

If you're aiming to grow earnings per share over the year and you start with a decline, then clearly you're put a more accelerating picture into the remaining three quarters.

It's also why we picked out of the sales performance, which wasn't visible, the - what we saw as the demand adjusted underlying growth of our 10 growth products as being at 34%.

If we continue to manage our costs in the way that we are, then clearly we are looking for a strong performance in the second - over the remaining quarters.

We have not given you a forecast deliberately for the second quarter.

Because there are still a number of variables that can move it around as a percentage of the annual total by a few percentages.

I'm certainly not going to commit to it here.

But I think we've given enough indications around the shape of the remaining three quarters to draw those sort of conclusions.

I chose my words carefully again Jason.

But I think the messages ought to be clear.

It is, thank you.

Next we will take a question from Jo Walton from Lehman Brothers.

Please go ahead.

Just two quick questions please.

I wonder if you could tell us a little bit more about market shares for Symbicort in Europe.

You've done very well where Glaxo's recently result - recently reported numbers don't seem to be so go in the respiratory area.

Secondly, could you just tell us why Prilosec sales went up in the first quarter of this year, versus the fourth quarter of last year?

Is this sustainable?

I'll deal with the latter bit while we'll try and get you some helpful information on the - on Symbicort's market shares.

Actually if you look at the profile of Prilosec we've remained pretty stubbornly in the 25% to 30% share of the molecule.

That's really for two reasons.

One is we've obviously got the 40mg strength which others don't.

That's not affected by generic competition.

So that piece is sustainable until we see 40mg competition.

The balance of it is really contracting.

Where we are still able to offer attractive contracts to a number of mail order, particularly, customers.

Those are probably less sustainable.

So, I don't see - I don't see the first quarter being replicated four times.

But as long as we've got the 40mg strength ourselves we will still see some - we will see some reasonable value.

But the contracting is a lot more variable.

Yes, on the Symbicort Jo.

Yes, I think Glaxo, I think reported about 18% or so growth in Europe.

Our growth in Europe for Symbicort is about 25% in the quarter.

So, that indicates growing market share, both on the growth of the class as well as factory COPD that we've launched, as well as new dosage strains that are helping fuel the growth of Symbicort.

We've got market shares - you know shares in some of the major markets up in the high teens to up well above 30% in some countries.

But it probably is averaging out "hunting" on 30% across Europe.

Can you tell us why - what is the - what are people finding so attractive for Symbicort versus [Advere], if you're gaining market share?

Jo, I think we've made it very clear to the markets that we see Symbicort as a differentiated product.

It's got the same shape as a combination as [Advere] but our - you know - flexible dosing regime is a different positioning.

It would appear to be attractive to customers.

Thank you.

We've got single inhaler therapy to come.

Now we have a question from Mara Goldstein from CIBC World Markets.

Thank you very much.

My question relates to Merck.

It has to do with the [true out] payment that was agreed upon I suppose, or is yet to be calculated with respect to the AstraZeneca and Merck partnership.

I know it's a bit early, but I'm just curious as to when this calculation, over what period of time you're making it and when you'll have to disclose it?

Is it in 2008 or will it come before then?

Well, the base of the calculation is over 2005 to 2007.

Okay.

So, the computation of anything approaching definitive numbers won't occur until you get into 2008.

Okay.

I think - and I'm not sure - well I mean I can't project what we'll be saying then.

But it is a calculation that's still some way off.

Our best view of those payments, because of course we do model it, continues to be the number disclosed in the Annual Report, which is $4.7b gross, before repayment of the $1.4b loan.

So, our best view of what will happen then is the - will be an outflow of $3.3b.

But of course that's based on what we know today and it is a long way off when the final calculations will be done.

Okay.

Thanks very much.

That concludes the question and answer session today sir.

So, I'll pass the call back over to you for any additional or closing remarks.

Thank you.

Well I think it's been a very full discussion.

Thank you all very much for joining the call.

If there are any remaining questions, or questions that occur to you, you know I hope by now, that our IR function are very willing to help you.

So, thank you all very much indeed.

That will conclude today's conference.

Thank you for your participation.