AstraZeneca PLC (AZN) 2005 Q4 法說會逐字稿

Okay.

Thank you, Jon.

Well, good afternoon everyone.

I apologize for the brief delay in getting us started here but we can get started now.

So, I’d like to welcome you all to this presentation of our financial results for AstraZeneca, for both the fourth quarter and the full year for 2005.

We’ll also be discussing today our guidance for 2006 and some updates on information about our pipeline, so we have plenty to cover.

I’m David Brennan, Chief Executive Officer of AstraZeneca.

I’m joined for today’s presentation by my two Executive Board colleagues, Jon Symonds, our Chief Financial Officer, and Dr. John Patterson, Executive Director for Development, and you will hear from both of them later.

We also have several other members of our Executive Team here with us today, and they’ll also be available to answer questions for you.

Jon Symonds will take you through the details of our financial performance in a few minutes.

But as you can see here from the headline results, 2005 was an exceptional year for AstraZeneca.

Sales were just under $24b, up 12% as reported.

And at constant exchange rates, growth was 10%, which is ahead of the target that we set at the beginning of last year.

Operating profit was up 39% in constant currency.

Earnings per share, at $2.91, were up 41% in constant currency before exceptional items.

The Board has recommended in the second interim dividend an increase, bringing the full-year dividend to $1.30, up 38% over last year.

Our business generated $6b in free cash flow, cash that is being used to grow our business and to add to shareholder value.

In 2005, $4.7b was returned to shareholders by way of dividends and share repurchases.

Looking at sales by region, you can see a strong performance across the board.

Sales in North America were up 11% on a strong U.S. performance.

Europe and Japan were up 8%.

The 15% growth in the rest of the world includes strong growth in emerging markets, such as China. 53% of sales now come from outside the U.S. in our business, and by the end of the decade that could be approaching 60% as these emerging markets continue to develop.

Our portfolio of currently marketed products has significant momentum to carry us forward, and they drove 2005 results to levels which exceeded our initial expectations for the year.

Just five years ago, AstraZeneca had only two products with annual sales of over $1b.

Today, despite some disappointments along the way, we now have 10 products with sales of over $1b.

Five of these - Nexium, Seroquel, Crestor, Arimidex and Symbicort - will continue to be our engines for growth.

These very successful products have been created by excellence in clinical development and further enhanced by very effective lifecycle management.

For example, Seroquel was first launched in 1997 with an initial indication in schizophrenia.

Now, its marking -- its market-leading sales growth is being fuelled by a successful extension for use in bipolar mania.

And we just filed an NDA in the U.S. for use in bipolar depression as well.

The story’s much the same for Arimidex.

It was initially approved for the treatment of advanced breast cancer after Tamoxifen failure.

As a result of the landmark ATAC trial, Arimidex is rapidly replacing Tamoxifen as the drug of choice for treatment in the earlier stages of the disease.

It is now the market-leading hormonal treatment for breast cancer.

Our highly effective sales and marketing organizations throughout the world have translated this good science into very successful products.

The strength of our current portfolio, and the momentum it has created for our business, represents a performance record of which all in AstraZeneca, under the leadership of my predecessor, Sir Tom McKillop, can be proud.

Now, I have the challenge and privilege to build upon this record and to lead our company into the future.

And we know where our future lies.

The people of AstraZeneca are committed to making a meaningful contribution to improving human health and making a difference in the lives of patients.

We will do that by discovering, developing and effectively commercializing differentiated prescription medicines that are valued by society and by our customers.

And the people in this organization are more committed than ever to making that kind of a difference.

When we do that effectively, we know that we create sustainable value for society and for our shareholders.

Delivering on that promise will require more from us than ever before because of the changes we face in the environment.

The industry has its challenges and they’re well documented.

The continued pressures on pricing as society’s increased demand for quality healthcare strains the ability of governments and the private sector to pay for innovative products.

The upward pressure on the costs of innovation, as we tackle more challenging diseases, while the regulatory hurdles seem to be getting higher.

And the impact of our industry’s reputation on our license to operate, and on society’s willingness to accept the benefit/risk tradeoffs inherent to modern medicine.

But we must not lose sight of the opportunity to meet the growing needs of patients worldwide.

These needs are driven by the ageing population throughout the world, and in emerging markets, the economic development which is improving access to modern medicine.

All of which fuels increased demand for innovative products.

A demand that can only be met by our industry’s continued investment to effectively harness advances in science and technology, and turn them into the medicines of tomorrow.

And this is where I plan to intensify our focus.

It’s where we have demonstrated success before and where we will do it again.

That is why, at the heart of this company, there is an enduring commitment to innovation and investment in research and development.

Over the past five years we’ve increased our investment in R&D at 7% per year, to nearly $3.4b in 2005.

And as you will hear from Jon Symonds in a few minutes, we’re planning further increases in 2006.

We will increase that amount in future years as necessary to ensure that we create a portfolio of medicines that improve the quality of life for patients who need them.

So, further strengthening the pipeline is my number one priority as we begin 2006.

Our sustained investment in discovery research has resulted in a growing pipeline of early stage compounds.

While good progress is being made, we still need to make greater strides in increasing the productivity of our discovery activities.

We also need to increase our access to innovation originating outside AstraZeneca.

External partners, such as Avanir, Cambridge Antibody Technologies, Abgenix and Array are now starting to feed candidate drugs into our early stage pipeline.

As you will hear from John Patterson, we continue to make good progress with lifecycle management programs for Seroquel, Crestor and Symbicort.

And recently, we’ve also advanced promising internally discovered drug candidates into the later stages of development - Zactima and AZD2171 and AZD6140.

They have all progressed during the last several months.

But more needs to be done here in order to meet the challenge of the next phase of patent expirations that we face later in the decade.

And our recent licensing and business development activities reflect a greater focus on later stage opportunities than we have had in the past.

In December we announced three significant licensing transactions for products in later stage clinical development.

A late Phase II [sic - see presentation slides] compound for the treatment of atherosclerosis from Atherogenics.

That brings the total Phase III pipeline up to six compounds, compared with two at the same time last year.

We licensed two promising Phase II compounds - Cytofab in development for the treatment of sepsis from Protherics, and Targacept’s compound TC-1734 for the treatment of Alzheimer’s disease and other cognitive disorders.

In addition, we’ve acquired KuDOS Pharmaceuticals, a U.K. biotechnology company.

This acquisition will further strengthen our own internal capabilities in oncology, one of AstraZeneca’s key therapy areas.

I believe that these recently announced opportunities are exciting, both clinically and commercially, and they have been concluded on terms that can create significant value for both AstraZeneca and our partners.

We are determined to continue to utilize our strong financial position to further strengthen the portfolio as attractive internal and external opportunities are assessed.

So, the number one priority is to continue to build the pipeline, because that is the route to sustainable growth over the long term.

And while John will briefly update you today on some of the progress we’ve made in the last year, we will conduct a business review day on June 8 to provide a more in-depth review of the pipeline.

In addition to strengthening the pipeline, I’m also committed to building upon our track record for delivering excellent commercial, operational and financial performance.

Effective execution in sales and marketing, augmented by our efforts in lifecycle management, will drive the growth of our current portfolio in the developed markets.

And while we are already well-positioned in emerging markets, we are prepared to make further investments, such as the expansion of our sales and marketing organizations in China and Russia, to drive growth in these markets.

So, driving sales growth, making the critical investments in research and development required to further strengthen the pipeline, creating sustainable value for shareholders, all in the context of an increasingly competitive pricing environment, is an equation that will only balance for AstraZeneca, and for our industry as a whole, through a commitment to further improvement in our productivity.

This is why we will continue to challenge our entire organization to bring greater efficiency, effectiveness and discipline to our resource allocation decisions, in conjunction with, and not as a substitute for, top-line driven growth.

It’s not a one-off program or initiative for us.

It is being embedded across the entire value chain, from research, development and manufacturing to sales and marketing, infrastructure and administration.

One thing that is clear to me is the commitment of AstraZeneca people to make this happen.

This organization has faced some difficult challenges over the last six years, and when the issues are identified and the direction made clear, they have delivered and at times over delivered.

They are focused on our mission to provide medicines that improve the quality and length of life for people around the world, and I am committed to providing them with every opportunity to further succeed.

So, in conclusion, my priorities are clear.

Maintain the business momentum.

Deliver top line growth coupled with improved productivity in order to maintain strong cash generation with which to grow the business and create value for shareholders.

And to further strengthen the pipeline through a sustained and focused commitment to the discovery and development of new medicines, both from within our own laboratories and from external sources.

Now, let me hand over to Jon Symonds, our Chief Financial Officer, to take you through the details of our strong financial performance for 2005 and to give you our view of what to expect in 2006.

Thanks.

Jon?

Thank you, David, and good afternoon everyone.

Let me now turn to the financial components of our performance for 2005.

And in terms of format I’d like to cover two broad aspects - the key highlights for 2005 and how we see 2006 developing, in particular our assumptions behind Toprol-XL.

Without a doubt, 2005 represents the best operational performance I’ve seen for AstraZeneca and I would assess our overall performance as excellent.

So, let me now give you the scorecard in more detail.

Whatever financial strategy a pharmaceutical company may employ, it all begins with the top line.

Our 2005 performance was strong across the board.

And against our initial growth targets we set at the beginning of the year, we’ve managed to push sales growth to the double-digit mark.

As David has said, it is the strong growth from the five key growth products that’s driving performance.

These five products reached combined sales of $10.8b and now represent 45% of our total sales portfolio compared with 39% a year ago.

As you see here, for those products available in the U.S. we have in each instance grown market share in tough, highly competitive segments.

This excellent performance in the U.S. is matched in every respect by the results we’ve achieved in the rest of the world.

Secondly, focusing on -- our focus on separating the top line from the cost inputs necessary to achieve it has enabled us to deliver growth in operating profit at a multiple of sales growth and expand our margins.

R&D and SG&A costs grew at an underlying rate of 2% through a combination of productivity improvements and where we fall in the investment cycle.

And together with the growing top line, this has led to the achievement of the 27% margin target, a target we set at the time of the merger.

I’m delighted that we’ve hit it, but it doesn’t represent the end of the story.

We’ve used this picture before and I think it illustrates clearly what I have been describing, that by focusing on sales and costs independently, substantial operating leverage is possible in this industry.

And I believe that we have gone a long way, perhaps more than most, in institutionalizing it as a core AstraZeneca behavior.

And this separation between sales and cost growth is what has led to the six-point margin improvement in 2005.

This operational leverage has largely dropped through to the bottom line, producing earnings per share growth of 44%.

This is significantly ahead of the expectations we set at the beginning of the year, when we thought earnings per share would be in the range of $2.35 to $2.50.

Frankly, however, we underestimated the strength of the trends in the first quarter and our ability to drive market share gain while controlling costs.

And in the event, we exceeded our expectations in both sales and cost growth.

And when that happens, earnings per share really motors, given that it only takes $20m of operating profit to move earnings per share by a single cent.

Our cash flow performance has also been outstanding, generating free cash flow of over $6b, also significantly ahead of last year.

It’s not just the benefit of higher profits, but continued focus on all elements of cash flow and, in particular, working capital and capital expenditure.

And it’s shareholders who have benefited directly from this, as much of our cash flow has been distributed via dividends and share buybacks.

As you can see, we’ve not quite managed to distribute all of the cash flow but it’s still an order of magnitude greater than that which we’ve achieved in the past.

Before looking at the prospects for 2006, let me spend a few moments on the fourth quarter, so you have a clear picture of the exit from 2005.

Here’s a summary, starting with sales of $6.3b, the highest quarterly sales performance we’ve ever achieved.

Although there have been some inventory movements in the U.S., I believe that the constant exchange rate growth of 9% is a fair reflection of our underlying growth.

Gross margins of 77.9% are lower than we have seen in the last two quarters, as a result of around $100m of provisions to achieve further manufacturing efficiencies, provisions I indicated that we might take in the third quarter.

This allows us to keep up the pressure on gross margin and will facilitate further improvement in the years to come.

R&D and SG&A costs increased by 11% in constant currency terms, well ahead of the annual rate -- run rate.

All of this increase is attributable to SG&A, and most of this is down to specific sales and marketing programs initiated in the fourth quarter, together with support to educational programs to aid the rollout of the new Medicare plans in the U.S.

The higher growth of earnings per share over operating profit is the result of a lower tax rate.

And as the press release records, this is due to a movement in year-end provisions rather than a signal that tax rates will be lower going forward.

Finally, in taking an overview of the final outcome of the year as a whole, the manufacturing provisions that I’ve just referred to were offset by a favorable exchange effect in the quarter, rather than the negative scenario we anticipated in the third quarter guidance.

The strengthening of the dollar against sterling, and the Swedish kronor in particular, benefited the cost base and outweighed the reduced sales value.

All in all, therefore, I think the final outcome of $2.91 is a fair reflection of the underlying performance for 2005.

So, that was 2005.

Let me now begin to construct the 2006 performance baselines.

In setting the template for 2006, it’s important to recognize that there are two important additional features.

Firstly, Toprol-XL and the scenarios which potentially affect earnings in the short term, but more important is the priority to further strengthen the research pipeline.

While a lot is being done to improve our internal capability, it’s clear that we also need to access external sources of products as well, and I’ll lay out some of our thinking on this in a moment.

So, let me start with the bottom line and then develop the individual pieces from there.

Including a full year of Toprol-XL sales, we expect earnings per share for 2006 to be in the range of $3.40 to $3.60.

From the midpoint this represents a further 20% growth in earnings per share.

And as you can see, it’s two and a half times the earnings of 1999 and nearly twice the earnings we achieved in 2003.

This demonstrates that the fundamentals underpinning our performance in 2005 - excellent execution in the marketplace combined with disciplined cost management and productivity improvements - forms the heart of 2006 as well.

And it should do, because it’s at the core of our operating philosophy now.

Clearly the potential early entry of generic competition to Toprol-XL represents the potential swing factor to the achievement of these targets.

While we’ve already taken the decision to appeal against the summary judgment, we need to recognize that one or more of the generic companies could launch at risk.

As we saw with Prilosec, we face a situation of many possible outcomes in respect of the timing and outcome of the appeal - the erosion curves or the different strategies that the generic companies could employ.

Consequently, until the potential scenarios become clearer, I believe that the simplest approach is to say that as of today we have 11 months of potential profit exposure remaining in 2006, and that were generic competition to occur today, the total profit exposure is around $0.45.

Obviously, as each month goes by without generic competition, this exposure narrows.

And in addition, depending on the actual timing of the generic entry, there may be some additional asset or inventory adjustments, but they will be one off and probably in the range of $100 to $200m.

So, let me build up the rest of the P&L.

And, so as to keep it simple, let me work off the scenario that includes a full year of Toprol-XL.

Firstly, sales, and back to the key growth products.

Here are the full-year growth rates and the fourth quarter exit rates for our five key growth products.

You can see that the fundamentals are firmly in place for continued growth in 2006.

Of course, it won’t continue at the same rate, but we’re targeting combined growth in the high teens for this group of products.

In further calibrating expectations for these products in 2006, there are two aspects of U.S. performance worth noting.

First, the Nexium performance in the fourth quarter is probably more indicative of the dynamics to expect in 2006, where strong double-digit bullion growth, well ahead of the PPI market, will translate into single-digit revenue growth as a result of more keenly priced contracts.

Secondly, Crestor.

The fourth quarter growth was against a difficult comparison, stemming from the events surrounding Dr. Graham’s testimony at the end of 2004.

Based on current performance, growth rates should improve going forward.

For example, prescription growth in December was 16%.

However, I think it’s fair to say that the statin market is in for some turbulence in 2006, as managed care formularies have already pre-positioned themselves ahead of the arrival of generic simvastatin.

We believe Crestor’s clinical profile leaves it well-positioned for continued growth, although in this environment it’s likely that prescriptions will grow faster than revenue.

To finish off on the U.S., one other factor we have to watch through 2006 is how Medicare unfolds.

We are confident that in 2006 the overall effect will be neutral to slightly positive, but we need to get a really clear picture on enrolment rates and, more importantly, understand the type of plan people enroll in, whether it’s a plan based on branded products or generic products.

And it’s from this data that we can begin to work through the longer-term effects.

It’s clearly important for the industry that Medicare is a success and that drug coverage is available to all.

We’re committed to supporting the program and that’s why we’ve supported educational programs to promote awareness amongst the elderly.

Finally on sales trends, you can see the strength and the consistency of the business outside of the U.S., a performance generated by both strong underlying market growth and share gains.

Across the total business, therefore, we’re looking at sales growth towards double digits, but this is likely to be reduced in reported terms by a negative currency impact of around 2%, subject of course to the possibility of early generic competition to Toprol-XL.

Let me now turn to costs.

With a continuation of the trends we saw in 2005, we expect to see further improvement in our operating leverage, leading to higher margins.

And in the best case outcome, we could see margins approaching 30%.

Obviously, if we find ourselves facing generic competition to Toprol, then margins will be somewhere between 27 and 30%.

For SG&A and -- R&D and SG&A combined, we expect to see underlying cost growth to be in the mid single digits, with currency reducing this to the low single digits.

However, with the emphasis on the strengthening of the pipeline, R&D costs will grow well above this average, because of increased investment.

While we expect our underlying R&D costs in 2006 to grow towards double digits, including the products in license at the end of last year, this could be further supplemented by externally acquired products.

There is cyclicality in R&D costs.

And as our current pipeline matures, we would expect the ratio of R&D to sales to begin to edge up again, with 17% perhaps a better long-term average than where we are today, but of course with the same commitment on driving productivity.

Before moving on, it’s perhaps worth a quick word on accounting for externally sourced R&D.

Under IFRS you do not achieve symmetry between internally and externally developed products.

Internal research costs are written off as incurred, whereas the acquisition costs of externally sourced R&D, whether via upfront or milestone payments, are capitalized irrespective of the stage of the development of the project.

Consequently, with an externalization strategy you don’t necessarily see the full cost of research through the P&L.

And you have to recognize that part of it can be in the balance sheet, amortized over the patent life if the project is successful, or written off in a single lump sum if a project fails.

So, taking the four deals recently signed, by the end of 2006, if they all progress successfully, we will have capitalized some $360m in the balance sheet and incurred around $60m in the P&L.

As our externalization program progresses, we’ll ensure that you’re able to understand both the revenue and balance sheet consequences.

So, taking all of these factors together, we still expect to see another strong performance in 2006, assuming no early generic competition to Toprol.

Finally to share buybacks.

Last year we declared a policy of fully distributing cash flow and that remains our intention.

For 2006 we anticipate a minimum share buyback of around $3b, including an element of catch up from last year.

It could well be higher than this but for now I want to retain some flexibility to cover further investments in the pipeline.

So to conclude, operationally 2005 was an outstanding year with a top -- strong top line driving an even stronger bottom line.

We have expanded our margins, hitting 27% for the first time, but more importantly, have the operating fundamentals in place to deliver another strong performance for 2006.

Alongside this is the shift in priority to strengthen the pipeline through both enhanced internal performance, but also external sources.

And this now becomes our highest priority and the one on which we are all focused.

And with that, I’ll now hand you over to John Patterson for the review of research and development.

John?

Thank you, Jon, and good afternoon, ladies and gentlemen.

One year ago I was given the responsibility for the AstraZeneca development organization and, in particular, the Company’s product pipeline.

It’s been a busy year but we start 2006 with a much stronger organization and a significantly improved product portfolio.

Before I take you through the portfolio, let me share with you some of the changes that I’ve made to improve the productivity and effectiveness of our organization.

I’ve changed our operating model to give greater focus to individual projects, as well as strengthening areas of governance, decision making, risk identification and management.

We’ve formed a Project Management Organization and R&D are now aligned behind four key therapeutic groups.

Importantly, we’ve recently created a fifth team, whose role is to look at new opportunities outside our current expertise.

And another very significant difference is that each therapeutic area is run through a cross-functional portfolio team, whose role is to create a portfolio of products against agreed disease targets, whether they come from our own laboratories or from outside.

To ensure this broad external and internal focus against strategic targets are deliverable, Licensing and Business Development are core team members.

These teams operate from lead optimization and into Phase II.

By the time projects enter Phase III, they have transitioned into our Project Management Organization.

In addition, and as part of the learning from the past, a Project Review Board has been established, we’ve created the role of Chief Medical Officer and a new Global Head of Regulatory has been appointed.

In parallel, we’ve continued to drive for increased efficiency and effectiveness, and have metrics in place that are showing clear improvements.

These benefits are allowing us to free people and budget to support the portfolio and to strengthen key strategic areas.

Whilst organizational issues are important, what really matters is the delivery of new medicines to patients.

The changes to the portfolio have been communicated to you as the year has progressed.

I’ll now update the portfolio, with the focus on the late stage projects, as we intend to give you a more in-depth view of our developing portfolio at a business review day on June 8 in London, as David has already mentioned.

Starting with the marketed products and with Seroquel.

A number of key activities were completed during the course of the year.

Licenses have now been granted for bipolar mania in 73 countries.

The completion of the Bolder 2 study in bipolar depression reconfirmed the benefits of Seroquel seen in Bolder 1 and gave us the second adequate and well-controlled study needed for FDA submission.

This NDA was filed in December 2005 and, when granted, will give Seroquel a unique position in bipolar disease.

We’ve initiated a large new Phase III Seroquel program in major depression and anxiety, so-called MDD and GAD disorders.

This program will be undertaken using our recently developed slow release formulation.

Whilst we’re comfortable with the pharmacokinetic profile of sustained release, the SR schizophrenia program, which we’ll report in 3Q ’06, is not yet completed.

For Symbicort, the NDA for fixed dose treatment of asthma in adults and adolescents was filed on September 23, 2005.

Both the FDA review and the U.S.

Phase III COPD studies are ongoing.

In Europe, Symbicort is registered in asthma and COPD as a maintenance therapy.

An enlarged MAA package for use as maintenance and reliever therapy was filed on schedule at the end of September 2005 and is now going through mutual recognition with Sweden as the reference member state.

The European pMDI program has been filed and needs to be modified to include two extra strengths for easier switching between dry powder and pMDI presentations, and will now be supplemented in 2008.

Our focus on Crestor is on the delivery of the Galaxy program, as well as the emerging epidemiological studies.

We expect publication of both Asteroid and some of the epidemiology studies later this year.

Let me summarize the epidemiology work.

The overall program consists of nine studies in four countries, including more than 50,000 Crestor users.

Put very simply, results of the first studies and our in-market experience show the safety profile of Crestor is similar to that reported for other marketed statins.

Whilst there are many ongoing lifecycle projects, my final comments in this section will refer to Iressa.

We’re continuing to develop Iressa in the Far East.

We’ve completed a 5,000 patient case-controlled study in Japan and are very close to completing recruitment into a head-to-head study versus Docetaxel.

We have expanded our trials into first line lung cancer across Asia and completed recruitment into the ongoing global head and neck cancer program, where the first data are scheduled for fourth quarter this year.

We continue to invest a lot of time and effort on unraveling the mechanisms behind Iressa responders and non-responders.

This will have benefits, not only for Iressa, but also as part of our science package to support lung cancer projects in general and those emerging from our early phase work in particular, for example, Zactima.

The Phase III portfolio has grown with the addition of 6140, an ADP receptor antagonist which prevents arterial thrombosis by reducing platelet stickiness.

It joins Zactima, which blocks the action of VEGF, EGF and RET kinase, and will be developed in medullary carcinoma of the thyroid and non small cell lung cancer.

We have also recently licensed AGI-1067, which is in Phase III development as an anti-atherogenic agent.

These products, together with the combined Phase II/III program for 2171, an oral VEGF signaling inhibitor, have considerably strengthened our Phase III portfolio.

Over the last 12 months we’ve tripled the size of our Phase III program.

We’ve also reduced the risk profile qualitatively through the addition of Zactima, 2171, and 6140, three molecules with proven mechanisms of action.

We told you that we were reviewing our anticoagulant strategy in the fourth quarter of 2005, and this we’ve now done.

Regarding 6140, data has emerged externally showing that there is less of an overlap between anti-platelet agents and anticoagulants than previously thought.

Therefore, we have decided to take 6140 into Phase III in acute coronary syndrome.

The Phase II data has shown more predictable efficacy than Clopidogrel and reversibility leading to a rapid offset, which may have clinically significant advantages.

In addition, Disperse2 showed a trend towards a reduction in cardiovascular events, in spite of the fact that the study was neither powered nor intended for this purpose.

Our end of Phase II discussions with the FDA are complete and we’ll be entering into a large Phase III outcomes study this year.

The 0837 Phase II study confirmed the pharmacology and that it could be differentiated from Exanta with regard to the liver signal, but it also showed a short half-life, which precludes once daily dosing.

Taking into account the full data set, our previous experience and the competitive situation in this field, we have decided to develop this product through an extended release formulation.

Whilst we have early data to show that such a formulation is feasible and lowers maximum plasma concentration, 0837 will not enter Phase III until we have data on the definitive formulation, which could take up to two years.

With Exanta we have 21 approvals and 12 launches for orthopedic surgery, with no significant reports or problems from the marketplace.

We’ve initiated the Extend study for 35 days use in this indication.

To date, recruitment stands at more than 700 of the intended 3,300 patients.

In the U.S.A., whilst we continue to have interactions with the FDA, our current assessment is that it is unlikely that a way forward for Exanta will be identified.

We’ve submitted a centralized European MAA for chronic usage in atrial fibrillation, with a regulatory clock start of December 28, 2005.

This is a new application under the revised centralized rules, which enables Europe to grant conditional approvals.

France and Spain are the co-rapporteurs, the regulatory clock is now running and we must await the outcome of this review.

NXY-059 will no longer be referred to as Cerovive, due to difficulties with the trademark.

The revised Saint II study is running very well and is on track to give us data in the first half of 2007.

The Chant study was designed to assess the safety of NXY-059 in hemorrhagic stroke.

Results will be available this quarter.

Unlike Saint II, Chant is not essential for registration but, if successful, will give the potential to use NXY-059 without a pretreatment brain scan to exclude hemorrhagic stroke.

2171 is moving forward rapidly in first line lung cancer and colorectal cancer.

Patients were entered into the first pivotal study within six weeks of our decision to move forward and we’ve already started seven studies in the Phase II/Phase III program.

In addition, the U.S.

National Cancer Institute has a collaborative research and development agreement with AstraZeneca for the broad exploration of clinical activity for 2171 through NCI clinical trial mechanisms and non-clinical work.

Zactima is in Phase III in non-small cell lung cancer and in addition has been granted orphan and fast-track status for medullary carcinoma of the thyroid in the U.S., and orphan status in the E.U. and Australia.

With Galida the situation is more complex and remains high risk.

The program that we’ve described to you previously is progressing, with over 5,000 patients randomized.

And we expect to have data on four of the randomized Phase III studies, together with the Armor study, ahead of the business review day.

The impact of the muraglitizar registration process, together with two major outcome studies with alpha and gamma PPARs, are still being assessed and discussed with the regulatory authorities.

We will continue to review and to adapt this program as the situation develops.

Finally, our recently announced licensing deal with Atherogenics’ 1067 gives us access to a product that’s in Phase III with a very major outcome study, the results of which will become available late in the year.

If successful, the Arise study should lead to a global license application in atherosclerosis in the first half of 2007.

Turning now to our Phase I and Phase II portfolio, Zactima, 2171 and 6140 have all moved out into Phase III.

Our anti-arrhythmic, 7009, continues in development, but only in the intravenous formulation, and our endothelin A antagonist, 4054, has now completed recruitment into its Phase II study in hormone-resistant prostate cancer, with the results expected towards the end of the year.

We've strengthened Phase II externally, including both Cytofab, an anti-TNF alpha polyclonal antibody for use in sepsis, and TC-1734 for use in cognitive disorders, such as Alzheimers disease.

Early but exciting data with this selective neuronal nicotinic receptor agent show pro-cognitive effects in small numbers of patients from two disease models for cognitive impairment in the elderly.

These studies showed improvements in attention, episodic memory and speed of memory in patients with memory impairment.

During 2005, eight products entered Phase I development.

These include an acquired DNA repair inhibitor from Kudos and the MEK inhibitor, 6244, from Array.

The latter we expect to enter Phase II in the first half of this year in malignant melanoma with a bio-marker.

In 2006 we anticipate up to nine new molecules going into human testing.

Last year was a very productive year in our Discovery organization, with 25 candidate drugs nominated across all therapeutic areas.

The highlights include the first monoclonal antibody from our Abgenix collaboration, 5180.

The pre-clinical portfolio now has 45 new medical entities.

In addition, we recognize that early clinical evaluation of novel medicines, based on unproven animal models, requires significant human marker and model validation work.

To meet this, we've increased our Discovery Medicine organization by around 100 staff during the course of the year, and have plans for a new Clinical Pharmacology Unit in the United States.

In summary, the AstraZeneca R&D organization and pipeline have been strengthened significantly over the last year.

We've moved from two to six products in Phase III, significantly enhanced the early portfolio with new candidate drugs from our own laboratories, and selectively strengthened the mid-phase with externally sourced opportunities.

This mix of internal and external sourcing will be our forward-going strategy, together with a constant search for improved R&D efficiency and effectiveness. 2006 will see the continuation of our pipeline replenishment.

Thank you for your attention and I’d now like to pass back to David Brennan to conclude the formal presentations.

Well, thank you, John.

In summary, we had an exceptional financial performance in 2005, as a result of strong top line growth and improved efficiency.

Our priority is to maintain this momentum in 2006.

We've made progress in strengthening the pipeline, in the early portfolio and in Phase III, supplemented by licensing and business development activities.

And further strengthening the portfolio from within our own laboratories and from external sources is our number one priority.

I’ll now chair the question and answer session.

I would like to remind everyone that we will take questions both from here in the hall, as well as from people on the conference call and participants who are on the Internet.

For those of you who are in the room here, I would ask that you wait for a microphone before you start your question and that you identify yourself, both with your name and the name of your firm.

Thank you for your attention to the presentations and let me -- I'm going to join my colleagues here at the table as we move on to the Q&A.

I see a hand up back there, first question.

Thanks very much.

It’s John Murphy, Goldman Sachs.

David, a question for you.

You talked about a key priority being pipeline build.

Can you maybe talk about how you view importance of late stage versus early stage?

Is it important to in-license something that’s going to generate very near-term revenues?

Are you more focused on the longer term?

Can you talk about any disease areas or how you view disease areas specificity?

And then bringing into the --- I guess the experience you’ve had in the U.S. and the marketing background, what do you feel that AstraZeneca has to offer any potential licensor specifically?

Well, let me start with some comments about where we’re focused.

I think that the -- in building our pipeline we intend to strengthen it in all three phases of development.

So I would say to you that we’re not exclusively looking in one area or the other.

We recognize the need for -- in the mid term to drive our sales lines, so that’s certainly part of our priority.

But I think when we look across we see the strength of our discovery laboratories.

We had 25 new candidate drugs in 2005 come out of discovery to go into -- to get started in development.

And I think we've brought in things in Phase II as well as Phase III to continue to supplement.

So broadly, we’re looking at strengthening the entire pipeline.

From a therapeutic category perspective, or where we’re specifically looking, I would say we’re primarily looking within the categories where we currently have our business - GI, CV, respiratory, oncology, pain, anesthesia, infection.

We have a broad area of expertise within the Company and a broad portfolio, and I -- for the most part I think we intend to stay focused on that.

I’ll ask John to comment on that in just a moment.

And finally, to your point about what does AstraZeneca have to offer, I -- we have a very strong history of success in bringing products through the development process, as well as getting them to market.

And we've demonstrated, I think, with results again in 2005 we also have a very strong sales and marketing organization to deliver those products to the market.

So whether it’s specialty products, oncology, C&S, or whether it’s primary care products in the Nexium/Crestor kind of model, I think we’re -- that’s what we have to offer is a pretty robust organization to deliver.

John, would you like to comment just --?

Okay.

Just things that are pretty obvious, actually.

We start with medical need, we then work through things like ability to differentiate from products on the market or under development; then we go to the therapeutic area to see if it’s a fit.

We look at primary care versus secondary care.

So all of those things play a part.

But the one thing, I think, that we can offer that is very successful with our discussions with these other companies is our science and our ability to work with them, not just on the lead compound but also on backups.

So you’ve seen a number of the deals that we’ve done have been not just simply for the compound.

It’s actually been about cooperating to actually develop the whole line for that particular area.

Great.

Thank you.

Come up front here, please.

It’s Graham Parry from Merrill Lynch.

I've got four questions.

Starting off on the margins, a question for you, Jon.

You talked at the third quarter results about margins oscillating around the 27% mark, I think you said.

And if we do a see generic Toprol this year, that’s actually where you would look to be ending up.

But looking forward, you’ve clearly got a real interplay of increasing R&D, patent expirations, potentially the need to launch some products.

So do you still see that 27% mark as the area to oscillate around?

Secondly, just looking at your R&D guidance for 2006, you talked about R&D growing in the double digits but combined R&D and SG&A growing in the low single digits.

Does that imply declining SG&A costs for 2006?

Then, thirdly, a question for John Patterson.

Could you just give us a bit more color on the 6140 Phase III study protocols, and also the same for AZD2171, and in particular whether there's any Avastin included in any of those studies?

And finally, also on 6140, could you just give us a feel for whether you do intend to take that into Phase III for any other indications, or whether you just follow on from ACS?

Thanks.

Jon, do you want to start then with margins?

Yes.

I thought the oscillating point might come up.

There are a few occasions when I probably want to recalibrate some of the things I said.

And what I was really trying to give then was the message that the productivity programs and the -- would lead to margin expansion into perpetuity.

And I think what was beginning to signal then was that, while we’re very satisfied with the progress of the productivity programs, they will continue and the quality of our business will improve, that the overriding priority was to make sure that we get the right mix of profitability and investment in the long term.

And so they will go up in some years, as they will again in 2006, and other years they might come down.

I don’t think we yet see clearly enough a floor to say that they’ll always be around 27%.

There will be occasions when they will be higher because of the mix of opportunities we have.

There may well be times when they are below, and we will clearly explain to you what the opportunities that lie behind it.

I was just trying to get some degree of perspective in the way we look at margins.

The thing that drives us is in investing in the long-term future of the business.

But I think we’ll give you a clearer picture as where -- how we see those opportunities unfolding as they arise.

The second part of the question, on will SG&A decline.

I said R&D costs will move towards double digits, and there certainly will be a higher emphasis on spend in the second half of the year than there is the first half.

But SG&A costs will grow, although by relatively small amounts, because that’s where we see a lot of opportunities to get more efficiency out of our marketing machine.

Good.

Thank you.

John, you want to comment on 6140?

Yes, and 2171.

I think we’ll give you much more detail, obviously, in June at our business day.

But, in brief, the major program for 6140 will be acute coronary syndrome but there are other things that we are doing alongside it.

Secondly, on 2171, yes, it will be hard to do any studies, I think, in colorectal cancer these days without including Avastin.

We are going to be going up against, or with, the gold standard.

That’s what you have to do in these patients.

Great.

We’ll take one more from the floor and then I’ll take our first call on line one.

But why don’t I -- let me go to the back.

You had your hand up a couple of times there.

Thank you.

Thank you.

It’s Alex Evans from Deutsche Bank.

Just in terms of pipeline, as you said, that’s your number one priority.

I was wondering, how do you decide how many projects you actually need in development?

Do you have a required sales level, which you apply attrition rates to, and then work back to number of products in development, or are you just simply going to develop as many projects as your budget will allow?

And on the second point, in terms of business and financial measures, I wonder what financial measures you're trying to maximize, what you try and get your employees to maximize, and whether, David, that’s -- whether that’s changed as you’ve taken over as CEO?

Well, on the first one, the projects in development are really driven by a portfolio process that we use regularly to just calculate -- to look out into the future about what we believe the risk-adjusted value of the number of things that we have coming through really is, and how we think that compares to the top line and bottom line growth we think we should expect.

Our targets are always to be a top-tier performer from the financial perspective.

And so we use that to gauge the kinds of things that we’re looking for, I think, and the phase at which we should be bringing them in.

Obviously, the further out they are, the higher risk they are.

And I don’t think we’re constrained by a particular amount of money in R&D.

I think we’re probably headed toward 17% of R&D as a percent of sales, but we’re not yet there yet and I think we will get there when we see the right projects.

As Jon says, it’s not a quick fix.

We need to focus on quality and do the right thing at the right time.

So we’re going to be very selective.

Some of the deals that we concluded late last year we had been working on for a while.

Some of them we had worked through pretty quickly when we saw the need to get them done.

So I think we see an opportunity for both to drive the longer-term view.

Regarding the business and financial measures, we instituted within the Company a couple of years across the board, as I mentioned, through every single functional area, a focus on some specific things that go everywhere, from purchasing systems to discretionary spending on things that don’t directly contribute to R&D or sales and marketing, and asked our employees to participate in that rather than just send it out as a budget-cutting memo.

And what we've gotten, I think, is some engagement from within the organization.

Jon, maybe you want to comment a little bit but I think, as Jon mentioned, we over-performed a little bit relative to where we though we would end up for the year, because we have a number of measures in place and we exceeded them.

Yes.

No, I think we've been -- we’ve always sought to get balance in the way that we motivate people.

Because it’s very clear that if you focus on one measure and one measure alone, other things that you also want to happen don’t happen.

So we try and make sure that people are incentivized to do the right things across the longer term.

For sure there are clear short-term targets and we absolutely expect those targets to be met.

But we also make sure that we don’t do that to the detriment of investing in the longer term.

So we have market share targets.

We have development productivity targets.

We have discovery targets.

And I think that’s what we try and do to make sure that we get balance, and they go right across the Company.

And they are most certainly not entirely financially driven, although we expect high-performing financial outcomes to come from them.

Great, good.

Let’s go to line one.

We have Tim Anderson from Prudential.

Tim, are you still there?

Yes, thank you.

A few questions.

On Toprol-XL, I'm assuming the $0.45 is the worst-case scenario of generics launch.

I'm wondering what would be a best-case scenario, because it seems you would have some likely cost offsets if generics launch.

The second question is your 2006 earnings guidance.

I'm wondering what this assumes for the potential launch of Symbicort in the U.S, because the 10-month producer date puts that right around mid-year.

And then third question is on Seroquel in the quarter.

As you’ve mentioned, sales growth was ahead of scrip growth.

You say the difference was due to price and rebate adjustments, but on price it looks like maybe only 6% was taken over the last year on a WACC basis.

And I can’t really understand how the magnitude of that difference there just comes from change in rebating.

Okay.

Well, I tell you what, we’ll -- I’ll ask Jon in a minute to start with the Toprol-XL question.

I’ll then ask John to comment on Symbicort, and Tony Zook is here who runs our North American business.

I’ll ask Tony to comment on the performance of Seroquel in the U.S., as well as any pricing issues that he may see on that.

Jon, you want to start us off?

Yes.

Well, we try to keep Toprol-XL as simple as possible.

And what we've shaped out for you really is the likely profit that we would expect Toprol to contribute from today, and that represents $0.45.

We've avoided making any kind of speculation as to scenarios.

As I said in the script, you’ve got to then make judgments about when the FDA will grant an ANDA, what the manufacturing capabilities of the three generic companies are.

We know that one of them has got some manufacturing restrictions.

Then you have to decide your appetite for risk.

So I clearly can’t make any scenarios.

As you recall, we've been in this situation in the past and predicting outcomes is a very difficult thing to do.

So we've given you the full magnitude of it.

I've not tried to complicate it by saying what other initiatives the Company might undertake to mitigate it, albeit there's not a great deal because this is a product nearing the end of its patent life anyway.

So we’ll work this as we go through the year, and as the scenarios become clearer we will of course modify our guidance to reflect what we actually see happening in 2006.

Good.

John, you want to comment on U.S.

Symbicort launch, as well as maybe the timing of the spend, as you see it?

As you know, we don’t actually comment or provide information on launch dates when there's a regulatory process ongoing.

But we have said in the past, and I will just reiterate it, with devices in this division the first time through the cycle rate is about 10%.

So, generally speaking, most companies can expect to have at least two cycles through the process.

And so, for your planning purposes, you should take look at that and make your own decisions.

Good.

Tony Zook.

Tony, would you like to comment on Seroquel’s performance in the fourth quarter, and any issues around pricing that you see?

Sure.

Relative to Seroquel, we did enjoy very strong growth this past year with Seroquel.

The market, as you know, is up about 4% yet Seroquel was up in excess of 20%, and our share now is approaching a 30 share.

So we have seen steady month-on-month increases in share, and our dollars -- the price increases that went into effect I think are very much in line with the industry norms.

Not concerned.

Good.

Back to the floor here.

Come up front again.

Sorry.

Yes, go ahead.

Thanks.

It’s Mark Purcell from Deutsche Bank.

Just a couple of questions.

On Toprol-XL, I just wondered whether you could give us any insights into the impediments you saw to an FDA approval for the generic competitors.

On Seroquel, I just wondered on -- if you could give us some indication as where you see the potential of this product moving.

Obviously you're moving from bipolar to bipolar maintenance, to adding in depression, GAD.

I just wondered if you could give us some idea of how large these individual opportunities are that you're gradually aiming to achieve.

And then secondly on Seroquel, if you could comment on the SR formulation, how strong you feel the patent protection could be on that?

On the Atherogenics drug, we haven’t had a chance to quiz you on this yet.

So I just wondered if you could give us some idea of why you're confident of this product, what you saw in Phase II -- Phase I/Phase II testing that led you to believe that this could have a shot at reducing inflammation, [aslotic] back volumes, reducing mortality, morbidity.

And lastly, on the statin market in Crestor in the States, if you can give us some further perspective as to how you see this market playing out in 2006 and how you feel the Asteroid study could help Crestor through the first half?

Good.

Okay.

Well, we’ll come back to Tony on statin market in a minute, as well as John on the Atherogenics and Seroquel.

I’ll just comment on the Toprol-XL for a minute and then ask John.

But to comment, I think, as you said, the reason we’re trying to be as transparent as we can because there are more on -- it’s quite a bit of variables there.

There aren’t any products that are approved yet.

We don’t really know what the manufacturing capacity are.

There are three products, each of whom could have exclusivity for a particular dose, depending on the six-monthly time, if they choose to take it.

So I think we see a number of potential outcomes and variables, and we’re just trying to be as transparent as we can be.

You want to add to that?

I've got nothing more to add.

If you want more information, you're at the wrong conference.

Go to the generics and ask them.

John, Seroquel lifecycle management and the SR.

There are a whole series of things in there.

Potential for the product, yes, we see it moving into MDD and GAD, based on data that we've seen from subsets from the bipolar studies that we’ve done and some other publications from investigators.

It will be at the severe end.

So we’re talking about the high end of DSM4 without suicidal ideation, for instance, but non-hospitalized patients.

So we’re talking about -- well, it’s a therapeutic area where sales at the moment are around $16b or $17b for SSRIs, and for GAD sales globally are around $6b.

That doesn’t mean to say we’re aiming to take all of those but that’s the size of the market that potentially we’re entering if these programs go well.

Turning to the SR formulation, yes, we believe we have good patent cover through to 2017.

And on AGI.

This question was just to give -- I think Mark said can we give a little bit of color to what you saw that caused us to go.

And there's also a question in email.

Maybe the second part of that you might want to just add in for our Sanford Bernstein colleague here and --

Okay.

And the question on the email is, to what extent is it compatible statins?

Have we got the rights to co-develop the statins if necessary?

So, to answer that, the license is -- we have a license for the compound.

So that includes development for whatever we need to do for lifecycle.

In terms of confidence, you’ve seen the current data, you’ve seen what they've got.

The IVUS study is -- or studies are not always easy to interpret but the Arise study is done in the population that will make or break this product.

So this is in patients who are at high risk, recent myocardial infarction or unstable angina, and it’s on top of standard therapies.

And standard therapies, in answer to your question, will include statins.

And no doubt, if we get the right result in the primary endpoint, then we’ll be doing all the subgroup analyses of the kind you would imagine.

Yes.

Go ahead.

Looking at plaque regression, have you seen any interesting anti-inflammatory properties as well in animal models, etc?

Is there anything else other than just looking at IVUS models?

We've just completed the deal and we’re in the process.

Obviously we've seen data in the run-up to the deal.

We’ll share what we can with you at the appropriate times.

Good.

Tony, would you like to comment on the U.S. statin market?

Well, I think certainly, moving forward, we see the market is going to be very, very dynamic, that’s for sure.

In the early days we would expect movement towards more generic use of Lovastatin and Zocor, in anticipation of when Zocor would go off-patent.

Ultimately we see a marketplace that is going to be one where you have very low-risk patients that can be effectively managed with a generic Simvastatin or a generic Lovastatin.

But we also believe that, moving forward, that the Crestor position is a strong -- is a very sound one.

We know that there is a great majority of patients that still aren’t getting to goal; in excess of 30%.

That moderate to high risk patient population is also a group that we know can benefit most from Crestor.

And the positioning there on its efficacy profile, we think, is going to allow us to continue to grow the brand in that very dynamic market.

Thank you, Tony.

Go back there.

Thanks very much.

Shawn Manning, Societe Generale.

Three quick questions, if I may.

Firstly, regarding NXY059, as we must now learn to call it.

Clearly, if Chant’s successful you'll be able to use the drug in hemorrhagic stroke, implying that perhaps you won't be using it alongside TPA.

And I just wondered when you intend to give us a breakdown of data from the trials at the moment, in terms of results of the drug when used without TPA alongside it.

Second question, regarding your Arise trial for the -- or the Arise trial, rather, for the atherosclerosis drug that you’ve in-licensed.

Given that the patients in the placebo arm are so well-treated, do you think the trial is appropriately powered enough to show an advantage?

And then thirdly, at a risk of laboring this point, I do apologize but clearly Toprol’s quite an important component to your earnings growth for 2006.

If we see generic competition fairly early on, it could clearly knock your earnings down to -- or growth down to less than 10%.

Is there any operational flexibility in your operating costs that you can further reduce your costs to account for this?

I know it’s a difficult question.

Okay.

Well, we’ll let Jon handle the earnings question around Toprol, but let me ask John to just comment quickly on what you believe the timing of the date for results without TPA would be.

I think that’s the essence of the question here, and then --

Okay.

Well, TPA has been used in a percentage of the patients in both Saint I and Saint II, and I'm sure when you see the Saint I publication in the near future it’ll give you that kind of a breakdown.

In terms of the other question on Arise power, the answer is watch this space when we get the data.

Yes.

Good.

Then, on Toprol, ironically, if you take all of it out this year, you're raising -- you increase the growth rates in the subsequent years because you are starting off a lower base.

So in terms of operating flexibility, I think when your products do go towards the end of their product life, then clearly you look more carefully than at early stages about the resources that are allocated.

So there's some operating flexibility and we’re looking at that very carefully.

But I think the signal that we've given to Tony and the U.S. business is, while we expect them to do some mitigation, not at the expense of the resources that we need to put the full weight behind the rest of the product portfolio, and to keep our resources where we need to be for the medium and long term.

And that’s the discussions that we’ll be having with Tony over the coming months.

Good.

In the back there.

Yes.

Hello.

Francois Schmitt from Exane BNP Paribas.

Three questions, please.

First, on the use of free cash flow, you mentioned you were cautious on giving -- or on share buyback this year.

Does that imply that if we deduct dividends and share buyback, that your CapEx budget for R&D acquisitions might be in the area of $1b to $1.5b?

Second, on Galida.

Do you estimate that with the data, or the way the Galida trials were designed, that you will have enough data to address possible issues raised by the regulators?

And lastly, on NXY, is there a chance that you may file separately if Chant becomes -- is -- has a successful result?

Thank you.

Okay.

Well, Jon, do you want to comment on the share buyback and how much that leaves for -- I mean not approaching it that way, so?

Yes.

Don’t read too much into it.

There is no signal in what we've said that implies the kind of magnitude of the amount of money that we’re prepared to spend.

We clearly have a huge amount of financial capacity, as David said in his opening presentation.

And as we bring things to you and we bring products in, then we’ll recalibrate what it means for cash flow and what it means for investment capacity work.

Right now, again, I wanted to keep it fairly simple, and so you can work off the basis of $3b of share buybacks for 2006 under almost all circumstances, and that just gives you a baseline.

We’ll adjust the balance according to what happens during the course of the year.

John, is there anything you want to add about regulatory discussions around Galida?

Just to say we’re going to be data driven, and when we have the data on the risk/benefit ratio then we can make those decisions, in conjunction with the regulators.

And just to follow up again on Chant --

[Inaudible] it’s not a filing.

Absolutely not.

Chant is a safety study.

So Saint II is what’s needed as the second adequate and well-controlled study.

Great.

Over here.

Jo, here.

Jo.

Wave your hand.

Throw the mike.

Jo Walton at Lehman Brothers.

Two questions, really.

Firstly, on R&D, I'm intrigued that you’ve now got this strong policy of both internal and external sourcing.

I wonder if you could give us some idea of what sort of hopper size you think you need to fill.

You’ve got twice as many products in Phase II as you have in Phase III, so presumably that isn’t good enough, you need -- I don’t know.

Do you need three or four times the size?

Those 45 products in pre-clinical, is that the right sort of hopper size eventually to fill or --?

And if it is, then presumably you only need to do a lot of external deals for a few more years because you’ve got a lot of early -- of your own products.

So I wonder if you could just tell us -- what I'm trying to get at, really, is how many external deals we should be looking for.

You did a flurry of them at the end of last year, but should we be looking for the same sort of rate of external deals to fill up your hopper?

The second question is just on marketing productivity.

You’ve talked about productivity everywhere, and I’m assuming you're going to do that in marketing and in R&D.

How much can you do without the industry doing other things?

Is every -- is it your view that the industry will pull back on large sales forces in the U.S., and that everyone will get sensible, or can you actually make progress if the rest of the industry does nothing?

Well, I think on your second one on marketing productivity, specifically sales force, I’ll give a perspective and ask Tony to also give a perspective.

Maybe ask Martin to talk a little bit about marketing productivity projects a bit more broadly.

On the how much externalization should we do, we won't do four deals a month.

It’s not quite the capacity that we can handle.

But I wouldn’t say to you that we have a specific target that we would share.

I think the question earlier about what's our planning cycle, how do we look at the portfolio, I think we look at the portfolio in value terms, as well as in terms of the numbers of compounds that are in different stages of development and the risk profile that each one of them has.

And I -- it is the integral of a number of those factors, I think, that causes us to get a sense of where we’re headed, and then we go out and look.

It’s for the very reason that each product has a different profile and potentially represents a different point of view -- a different value point.

It’s hard to put a number on it specifically.

I think the market opportunities in diabetes in some of the emerging markets are significant, and we want to take advantage of those as well.

So I don’t want to put a number on it.

I think we will know when we have enough.

We’ll be confident in the attrition rates.

Johannes here, he may want to comment on the attrition rates about this.

But we’re not satisfied yet, Jo, I can tell you that.

There was the sales and marketing question around productivity.

Martin, you want to comment a little bit on marketing productivity?

Well, this is, of course, a very important question and we've put a lot of emphasis in improving our marketing productivity.

And we have had a program in place for almost 18 months, together with our commercial colleagues, to really experiment on new practice and new way of enhancing value around our products, which not necessarily have to be around new labels and new clinical trials, but it’s part of the mix.

So it’s definitely a high priority and we start now to see the outcome of that work.

And we scrutinize all our existing brands to revitalize them, and we build and shape the new brands in Phase II and Phase III towards those new demands.

So I'm pretty optimistic that we will set new standard as we move forward.

Tony, you want to comment on sales force size in the U.S. and what you see happening with some of the other companies or where we’re headed?

Sure, I’d be happy to.

Relative to the U.S. market, we have certainly seen some sales force size contraction.

I think a number of our competitors have pulled back for a number of different reasons.

I can give you our approach to what we -- how we look at sales force size.

For us, we have two primary objectives, the first being how can we increase market value in a responsible way?

And then second is how do we best deploy our sales force so that we can enhance customer relationships?

And as we have improved our own productivity measures, we leverage outside sales groups, contract sales organizations.

We found that, as we have increased our own productivity, we've also been able to down titrate our reliance on contract sales organizations.

We expect that we will continue to find efficiencies in our operating model, and that will allow us to further down titrate some of the reliance on contract sales groups.

So our approach is one about creating market value and doing so that builds better customer relationships, and we think we’re on the right track.

I would only add to it, Jo.

I think some companies will be driven by financial need or a lack of products that they have to promote in the marketplace, because of patent expiry, so.

We’ve got a call on line two from Stefan Wikholm.

Why don’t we go to that?

He’s been holding for a few minutes now.

Stefan, are you there?

Okay.

We’re running out of time.

We’ll take one more question here from the floor and then we’ll wrap it up.

Over here, please.

It’s Max Herrmann from ING.

A couple of questions.

Just on AGI-1067, just to get a better feel for the commercial terms of that product.

What share of the cake do you think you’ve actually ended up with, with that deal?

And then perhaps on 6140, you talked about the reversibility advantage of 6140, and I just wondered if you could elaborate how you think that will differentiate the product.

Thanks.

Okay.

I’ll just -- I’ll comment first on the share of the deal.

We’re not commenting about the share of the deal.

I think what we see is, with a positive outcome in the Arise trial, a potentially significant opportunity that'll benefit both partners.

So we’re pleased about it and I think both sides can be happy, if that product gets approved.

John, you want to comment on 6140?

Very briefly.

The current agents knock out platelets the whole of their life, and you have to completely renew your platelets before you have platelet activity, and that can take five days or even longer.

With this agent that has reversibility, it goes with the half life.

And the advantage of that is, if you are coming into hospital with a suspected coronary, you’re given one of these agents to stop any further damage.

And then if somebody decides that they need to operate on you, if you’ve got Clopidorel on board, you’ve got to sit on your hands and wait for four or five days because the person’s got no platelets.

Whereas within 24 hours we should be able to operate on somebody who’s had 6140.

Great.

Now, I know there were a number of other questions.

What I want to do is encourage everybody to find our Investor Relations people to make sure that those get answered.

We’ll be here for a few minutes also to answer questions.

I certainly want to thank you all for attending today, and for your interest and for your questions, and thank you.