AstraZeneca PLC (AZN) 2006 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to today’s Q1 results teleconference AstraZeneca.

For your information, this conference is being recorded.

At that time for opening remarks, I would like to hand the call over to Mr. Jonathan Hunt.

Please go ahead, sir.

Thank you, operator, and welcome, ladies and gentlemen.

Chairing the call today from London is AstraZeneca’s Chief Financial Officer, Jon Symonds.

We also have on the call Dr. Mike Rance, Vice President of Corporate Affairs, and, of course, the rest of the IR team.

Before I hand over to Jon, I’d like to read the following.

The Company intends to utilize the Safe Harbor provisions of the United States Private Security Litigation Reform Act of 1995.

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

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

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

With that, I’ll now turn the call over to Jon.

Thank you, John, and good afternoon, everyone.

I intend to follow our usual first quarter agenda.

That is, some brief introductory remarks on the headline figures, some of the key product highlights, some additional commentary on the P&L and then finish with some comments on why we’ve increased our financial targets for the year.

We’ll leave ample time for your questions.

Before I turn to the results, a brief word on today’s other announcement.

You’ll have seen that earlier this morning we’ve announced an agreement with Abraxis BioScience to co-promote their cancer therapy product, ABRAXANE in the U.S.

In addition to the co-promotion agreement, we also announced the divestment of our U.S. anesthetic and analgesic products to Abraxis.

The ABRAXANE co-promotion gives us access to the U.S. chemotherapy markets and complements our U.S. oncology portfolio.

It’s further demonstration of our pursuit of attractive external opportunities designed to strengthen our business.

The financial terms are in the announcement, and the impact of the agreement is anticipated to be broadly neutral to earnings in the first 12 months and accretive thereafter.

Drawn to the headline results for what was another strong quarterly sales and earnings performance.

Sales increased by 12% in currency to nearly $6.2 billion.

Currency movements had a 4% adverse impact, bringing the reported sales growth rate down to 8%.

We continue to make the necessary investments in R&D and sales and marketing, and these expenses grew in aggregate by 10% in CER terms for the quarter, including 9% growth in R&D.

Within aggregate, this growth rate was below the rate of sales growth.

Currency moves benefited the costs line.

Reported growth in R&D and SG&A was 4%, some 6 percentage points below the underlying rate.

As a result, the strong top line and margin expansion fueled a 33% increase in operating profits in constant currency. [Inaudible] the currency benefit to our cost base more than offset the reduction in reported sales.

Reporting operating profits grew by 36%.

Earnings per share were $0.90 in the quarter compared with $0.63 last year.

That’s a CER increase of 40%.

So, on to the highlights, and let’s start with sales, which, as I’ve already said, grew by 12% in CER terms over the first quarter of last year.

Sales in the U.S. were up by 15% on strong prescription growth but also benefiting from the earlier price increase taken this year compared to last.

In other words, quarter one benefits from two price increases, a benefit that we will only see for one quarter.

After making the usual adjustments for managed care accruals, the small movements in inventory and other factors, we estimate that underlying demand in the U.S. was a point or two lower than the reported 15%, a good performance by any standard.

As you’ll all recognize in your pre-results notes, this performance is being generated by excellent performances from our key growth products, and I’ll come back to those in a moment.

Sales outside the U.S. increased by 9%, including a 10% increase in Europe.

Japan, up by 1%, was affected by wholesaler stocking ahead of the biennial price cuts, which were anticipated for April.

The momentum behind our five key growth products continued in the first quarter with combined sales for Nexium, Seroquel, Crestor, Arimidex and Symbicort, up 25% to just below $3 billion for the quarter.

This portfolio comprises 48% of total sales, and that’s up from 43% a year ago.

Let me pick up on some of the detail now for Nexium and Crestor and leave the press release to handle the other product performances.

First Nexium.

Worldwide sales were up 16% to $1.189 billion.

In the U.S., the entire PPI market was up 6% in total prescriptions, the strongest quarter we’ve seen for some time.

If you drill down further, you will see that there are two products driving that growth, generic omeprazole and Nexium.

All of the other brands were down in the quarter.

This is a scenario that we’ve envisaged for a long time - that generics would appeal to the highly price-sensitive segments of the market but that Nexium as the market-leading, clinically differentiated brand would also be in a strong competitive position.

The result?

Dispensed tablet growth for Nexium increased by 18% in the quarter with lower price realization, again, as anticipated.

Nexium sales in other markets were up by 17%.

Turning to Crestor, sales were $387 million in the quarter.

That’s up 45% on the first quarter of last year.

The U.S. statin market grew at double-digit rates in new and total prescriptions in the first quarter.

Crestor new prescriptions were up 44%, and the new prescription market share in the week ending April 14 was 8.6%.

Dynamic share has increased to 12.7%.

And the unprecedented results from the ASTEROID study speak volumes.

Crestor’s efficacy profile does make a difference.

Outside the U.S., Crestor sales were up 46% on good growth in France and Italy.

The three other key growth products also did very well in the first quarter.

Arimidex was up 38%, Symbicort sales increased by 21%, and Seroquel was up by 29%.

As we noted in the press release, in the U.S., Seroquel value growth was ahead of prescription growth and was partially offset by the wholesaler stocking that occurred in the first quarter of 2005.

Turning to the P&L, as you would expect, with a strong top line growing faster than costs, it’s had a favorable effect on operating margin, which was 32% of sales in the quarter and the highest margin we’ve ever reported.

When looking at the margin this quarter against the first quarter of last year, it’s the movement in gross margin that stands out.

Gross margin this year is 79.8% of sales compared to 75.4% a year ago.

We know the gross margin a year ago was depressed by the provisions made to terminate the MedPointe Zomig distribution agreement, and it’s therefore the 2005 gross margin that’s the anomaly.

In 2006, it’s actually pretty close to the fourth quarter gross margin last year, after adjusting for asset provisions.

I’m pretty comfortable that the first quarter 2006 gross margin is representative of the gross margin we expect to see throughout the year, which continues to reflect benefits from both mix and operating efficiencies.

Despite growing by 10%, R&D and SG&A added 1.8 percentage points to the margin improvement.

R&D costs grew by 9%. [The remainder of] the fourth quarter level of 13.9% of sales.

We expect to see this level of growth continue through the year.

SG&A on the other hand is running well ahead of what we expect for the full year, and a number of the specific product programs initiated in the fourth quarter last year have run into the first quarter of this year.

Other operating income was also higher in the first quarter on an increase in royalties.

Before accounting for the impact of today’s agreement, I would anticipate that other income to be around this sort of level for the first three quarters of the year and then to drop off in the fourth.

As I’ve already noted on currency, the negative impact on sales was more than offset by the hedging effect of our cost base.

On a net basis, currency added around a $0.01 benefit to earnings per share in the quarter.

If current rates hold for the rest of the year, and they never do, we would expect to see-- we would not expect to see any further benefit from currency.

So, what does this strong start mean for the outlook for the full year?

As you’ve already seen in our press release, the bottom line is that we are now anticipating earnings per share in the range of $3.60 to $3.90.

In essence, we have only adjusted one of the performance metrics I gave you with the year-end results, and that’s sales.

From having thought sales growth could be towards double digit, we now believe that we can get to the double-digit level.

Currency will continue to depress this, and in reported terms sales will be reduced by 2 to 3 percentage points.

As we haven’t changed our estimates on cost, the benefit of higher sales will drop through to the bottom line, improving margins on the way.

The reasons should be obvious enough for this, given the strength of our five key growth products in the first quarter.

There are no signs of imminent [inaudible] of generic competitors to top [inaudible].

With eight months remaining in the year, and based on our latest forecasts for the product, we estimate the profit exposure at $0.33, a gain excluding any one-offs from asset or inventory provisions if they are required.

My final comment on share repurchases.

Our target for the year remains at at least $3 billion.

We repurchased $564 million of shares in the first quarter, a little behind this pace; but we still intend to get to $3 billion or maybe even a little higher, given that the cash flow will increase in line with the higher earnings.

In our year-end results presentation, we outlined our priorities for the year - maintain the business momentum, deliver top line growth, and continued productivity improvements to drive strong profit and cash generation, and to further strengthen the business through a sustained commitment to the discovery and development of new medicines, both from within our own laboratories and from external sources.

With our first quarter results and today’s ABRAXANE co-promotion agreement, we’re off to a good start in delivering on these objectives.

I’ll leave my formal remarks here, and I’ll now hand you back to the operator to begin the Q&A session.

Thank you, sir. [OPERATOR INSTRUCTIONS].

Today’s first question comes from Kevin Wilson of Citigroup.

Thanks very much.

Jon, could you talk a little bit more about two things, really - other operating income line and the royalties that you currently receive there?

They obviously jumped last year as well.

This will give us a sense of a bit more granularity of what we’re looking at in terms of that going forward before we add in what comes through from Abraxis.

Secondly, on the payment you’re going to receive from Abraxis, can you talk a little bit about how much you’re going to capitalize and amortize over time?

Okay.

[inaudible] disposal as well.

Okay.

I think I’ll cover all the elements of that deal.

On other operating income, you’re quite right, Kevin in saying that it tends to bob up and down.

It’s essentially due to royalties.

I think what we have seen in the last two or three quarters is a group of royalties that are slightly higher.

Rather than picking out any individual elements, what I tried to give you in my guidance was to say think of the first quarter for the next two or three quarters at this rate; then it will begin-- we do envisage it dropping off.

I think rather than try and pick out some of the individual components, it’s probably easier for us to just be reasonably clear about what we’re expecting for the full year.

Clearly, if there’s any change to that, we’ll signal it as we go through the year.

In terms of the accounting for the deals with Abraxis, firstly, the up-front payment of $200 million will be capitalized and will be amortized over the period of the co-promotion agreement, which is five primary years and two secondary years, so broadly spread over seven years.

On the divestment of the anesthetics and the analgesic products, I guess it’s fair to say we are still finalizing the accounting treatment of that.

So, we’re not-- can’t be specific yet on precisely which lines you will find it.

But, in principle, because the divestment still has a supply contract, the vast majority of the $350 million payment will be spread over the life of the supply contract.

There may be a small amount that is regarded as a one-off [gain], but it will be a relatively small amount.

So, if you’re looking for a big, exceptional profit, that is unlikely.

Therefore, when you think of our guidance upgrade, it is neutral at this item.

As I said in my comments, there is only one variable we have adjusted in guidance, and that’s our expectations for sales.

But, as this agreement is completed and we actually get into the detailed accounting and its auditing, then we’ll be more specific about precisely how it’s being done.

But, basically, both amounts will be spread.

Thanks very much.

The next question comes from John Murphy of Goldman Sachs.

Thanks very much.

Jon, just a question with regards to R&D.

You made a comment on it.

I’m just wondering about phasing through the year and whether or not you still expect it to be second-half loaded.

In addition to that, as well, just thinking long term, is it still a belief that over the long term an R&D to sales ratio around 17% is possible; or is a lot of this going to be dependent on your top line movements over the next couple of years?

Well, clearly, it is dependent on what the top line is.

The faster the top line runs, the R&D expense rate-- expense in a year has to run a lot faster if it’s going to run up to 17% of sales.

I think what we are clearly saying is, and you all know it, that we are in the low cycle - the low part of the R&D investment cycle.

As our portfolio matures, either our own portfolio or products we bring in, we would expect over time for the rate of growth of R&D to be at or potentially even above the rate of growth of sales, such that we are suggesting that it may be 2 or 3 points higher than the 14% of sales that we have today, which we clearly recognize not to be its normal level.

It will take-- The faster the top line grows, the longer it will take to get to, if you like, the normalized percentage of sales.

If we continue to do as well on the sales line as we’re doing, well, maybe we won’t get to 17%.

But I think the primary message that we were conveying on that was we’re at the low point of the cycle.

As you model margins going forward, you should be taking account of the high level of R&D spend.

Phased across the year, I think there’s probably a slight burden in the second half.

But, we’re tried for some time now to even out the quarterly flows.

But, typically, the third quarter tends to be the lighter quarter, and the fourth quarter tends to be a little bit higher.

Thanks a lot.

The next question is from Andrew Baum of Morgan Stanley.

Good afternoon.

If I may, can we discuss the “M” word, Jon?

That hasn’t come up so far; i.e., Medicare.

I had lots of “M” words going through my mind there, Andrew.

Could you just give us some sense over the magnitude of the effects or lack of effects that you have seen thus far in your portfolio and your outlook in terms of potential impact over the next 12 months?

And, then, finally, really following on from some of Pfizer’s comments on the duration of their Lipitor contracts with managed care under Medicare, could you give us some sense, particularly for Nexium, as to how long the current contracts you have negotiated in terms of formulary access and pricing?

What’s their duration?

When do they get renegotiated?

Okay.

Clearly, the impact of Medicare is something that we’re all looking at very carefully as we review our performance to try and isolate the effect that it has.

Unfortunately, we’re probably a quarter ahead of being able to give any information or draw any conclusions that we are confident in.

I think we can say a number of things.

Number one, I think we are very happy with the distribution of our products to Medicare plans and Medicare formularies.

So, the targets that we set ourselves for access have probably in most cases been beaten compared to what we were even expecting at the end of last year.

Indeed, enrollment is still continuing.

I think 18 million people have been enrolled at the end of March, and there could be still another 3, 5, or more million patients to have come in.

What we can’t see clearly enough is the plans that they’ve enrolled in.

So, we don’t know, clearly, whether they favor branded or generic products.

I think what is clear, and I think everybody has seen it, and we’ve seen it very much in the statin market or the PPI market and also for Toprol XL, is that the volumes have been very strong; and there has been a kick up of volumes in the first quarter.

But, perhaps there’s a bit of a trend break from where it was in the fourth quarter.

But, I think it’s very early to be able to say I think it’s X percent.

I think we will have a better idea the next-- The reason why I’m still-- The reason why I’m still hesitant on this, Andrew, is that legally, when a patient enrolls in a plan, the plan is unable to intervene in any way in the prescribing for the first 90 days.

So, if a patient enrolls in a plan and is a Nexium user, he will continue to get Nexium for 90 days.

But, if the plan intends to switch to generic omeprazole or vice versa or in any other combination, that intervention is unable to be done for the first 90 days.

So, we don’t feel yet that we’ve got a clear picture as to where actually these patients are going to end up and what the distribution will be across our brands.

So, I think we’re a quarter early on this one, Andrew.

But, clearly, volumes suggest, at least in the short term, that Medicare has accounted for some uptick.

But what it will settle at I’m really not confident enough to tell you.

And then on the duration of your Nexium contracts as to when they get renegotiated for the Medicare part of your business?

Well, I think most of the formularies were set for certainly the duration of 2006, and some of the access contracts were for longer than that.

But I think as we all know, contract terms can live their full term, or they can be shorted, depending on the competitive dynamics in the market.

So, I wouldn’t build anything one way or the other on that.

I think it is still fairly fluid.

It’s clear that some of the plans are already interested now in beginning the negotiations for the 2007 Medicare formularies.

Thanks.

Pardon the delay.

The next question comes from Alexandra Hauber of Bear Stearns.

Good afternoon.

I have two questions, first on ABRAXANE.

Do you know when in that five- or seven-year period there will be any additional indication getting onto the label and also whether you have any idea when that product could possibly be introduced in Europe?

The second question is I was wondering whether after the ASTEROID data you had-- your German team had any plans of discussing with the [inaudible] [Price] people again whether Crestor could maybe be taken out of the other statin class or whether with the ASTEROID-- either just based on the ASTEROID data alone or potentially with some future data coming up?

Or, have you totally put Germany-- the German case to rest and not planning to introduce it there ever?

On the question about ABRAXANE, I’m afraid I’m not going to be drawn on that because although in our plans we do have a view on when some indications may come through, and indeed what could be a likely timing for European approval, I really think that those questions have to be answered by Abraxis.

I would hate on day one of what I think is an exciting new partnership to contradict any guidance that they may have given.

So, I think you really need to divert that to Abraxis.

Although, having said that, we are very excited about this as a product.

It is a very novel and interesting product that we believe has huge potential in the U.S. and in [the rest of] world markets.

It is a very, very exciting product.

Germany?

Well, hopefully, this might be one of the opportunities to differentiate Crestor from the other statins.

Clearly, the jumbo reference pricing in Germany is not a very attractive-- is not a very attractive pricing proposition.

If we can argue that Crestor falls outside of this, then we have good commercial prospects.

The first thing, of course, is to get the German regulators to agree the approval of the product.

And then at a second point, we’d have to consider the commercial prospects.

We never give up.

But, the pricing structure of the statins in Germany is tough one to get your mind around, particularly given the interrelationship between pricing in Germany and other parts of Europe.

So, it’s a tough one, Alexandra.

Okay.

Thank you.

The next question comes from Shawn Manning of Societe Generale.

Good afternoon, gentlemen.

Two quick questions, if I may.

Firstly, you mentioned two price increases over this quarter.

Does that mean you’re not going to have a price increase next quarter?

And, what impact did those price increases have on your sales growth?

Secondly, on [inaudible], as a percent of your sales, your SG&A is probably lower this quarter than it’s been at any point over the past year.

I just want to know how you see that SG&A spend going forward.

Okay.

We made one price-- We don’t pre-declare price increases, but we made one price adjustment last year at the end of March, and we’ve made one this year.

I would not expect that we’ll be doing quarterly price increases.

But, clearly, I wouldn’t-- I would not rule out that there may be some price adjustments later on in the year.

It has contributed to the overall benefit in sales.

I just-- Of course, for the group as a whole, positive price in the U.S. is largely offset by negative price elsewhere.

I haven’t got the number to hand, but I’ll come back to that.

Thanks.

If I could add-- The typical price increase for our line across the portfolio was on the low end 3%, and maybe the high end is 6% or 7%.

So, you’re looking at that occurring in 2005 and 2006.

One of those price increases is the extra benefit in the Q1 results for 2006. [That list] not realized.

I think if you look at the total numbers for the group, the net price benefit in the quarter was very, very low single digits.

So, it hasn’t-- Most of the benefits in the first quarter are volume driven.

I think on SG&A-- I think we do have a very clear set of targets to reduce the percentage of SG&A to sales.

And, we are continuing to be much more effective in the allocation of our resources.

We are prepared to invest behind products where they can boost sales.

But, I think the overall proposition of being more efficient and effective in the use of our sales and marketing costs such they don’t-- such that they don’t increase at the same rate as sales.

Here’s the kind of target that we’ve got.

In fact, our internal management attempts to achieve that - to have sales and marketing costs lower than sales rates.

So, I’m not going to make any predictions about where the long term rate may be.

But, I would expect-- I would expect the sort of rolling cumulative sales and SG&A to sales to continue to keep going down.

In fact, as we’ve talked about margin in the past on an earlier question-- indicated that we would expect to see R&D as a percentage of sales to increase.

I would expect that to be at least offset by further improvements in efficiency and sales and marketing costs.

Okay.

Thanks.

The next question comes from Lars Hevering of Enskilda.

Yes.

Thank you.

Just following up on your comments on prices, is it still fair to assume that the net realized prices for 2006 regarding U.S. sales will be negative for all key products apart from Seroquel?

Is that still a fair assumption?

Probably not.

The trouble is the generalizing on something where there are unique attributes for each product and different natures of combinations of contracts.

I think it is clear that it will be negative for Nexium.

It will probably be positive for Seroquel.

It will probably be [inaudible] for Crestor and so on and so forth, and the oncology products are not subject to heavy contracting.

So, I think it will vary across the portfolio.

I think directionally we still remain cautious about net realizing pricing.

That’s why much of our contracting activity is positioned as it is - to make sure that we achieve the best medium or longer term positioning and profiling of our drugs because that’s what we think will give the best value proposition rather than trying to maximize price or maximize discounts in any short term period.

But, it’s-- There are a lot of variables in this, Lars, but probably net/net will be on the positive side in the U.S., but the pricing pressure outside of the U.S. is still pretty tough.

Okay.

Just following up, would you say these comments are sensitive to a sudden change in the inflationary environment in the U.S., or is that a longer term issue?

I don’t think the competitive dynamics of, certainly, some of the big therapeutic areas that we’re operating in-- they don’t change overnight.

We’ve been signaling the pricing effects in the PPI market for a long time now.

It’s consistent price pressure.

But we haven’t seen a break.

I would expect directionally prices to be pushing down, but I haven’t seen a change in the gradient of that float.

Okay.

Many thanks.

The next question comes from Mark Purcell of Deutsche Bank.

Yes.

Thanks very much.

Good afternoon, everyone.

Just two questions.

First, I just wondered, Jon, if you could give us a better idea of this volume mix and price components of Crestor and Seroquel growth in the U.S. specifically?

And then secondly whether you could discuss any new initiatives, whether they be promotional or not, behind Crestor post-ASTEROID data and when we should expect to see data on the sister study, METEOR?

Let me see.

The price-- Let me just see.

I’ve just been past the-- Yes.

In the U.S., I think on Crestor, volume growth is a heavy multiple of the price benefit.

So, the 43% or 44% increase over the first quarter last year is substantially due to volume.

And, the price effect is in single digits.

In terms of what we are doing in the future, we clearly are very, very encouraged by the reaction that we’ve seen post-ASTEROID.

We were clearly delighted with the data, but I’ve been overwhelmed by how strong the reception of it has been.

And we have seen an even stronger short term growth in dynamic share and new prescriptions, although I think it’s fair to say that, actually, if you look before ASTEROID, we were also seeing benefits in volume growth because the promotion that we were making to cardiologists and what we call as our core prescribers was really building on the position of Crestor.

We’ve been talking throughout this year-- As the product of choice for the patients with complicating factors difficult to treat cholesterol levels, so you need substantial reductions in cholesterol to get to goal.

I think what the ASTEROID data and the reception that we’ve had is encouraging us to expand the base of which we are currently promoting to.

So, we will increase the scope of physicians that are promoted with Crestor, but keeping within sort of the bounds of the core people that really understand the Crestor proposition.

So, we are enhancing our activities.

I believe that you will see the benefits of that through strengthening market share.

Mark, it’s Mike Rance.

Of course we’ve got a second study, which is METEOR, which is looking at carotid artery atheroma.

That will report towards the end of the year.

With fingers crossed, if we get the sort of results that we hope, then we will have a regulatory package that will move us forward.

The other thing I would say is-- You asked a question about mix.

It’s very early date post-ASTEROID, but there hasn’t been a substantial change in the mix across the doses that are used.

That’s an important point.

And the same question just on Seroquel, Jon, if I may.

Seroquel has benefited a bit more from the double pricing effect.

So, the 29% growth that we have seen in the first quarter-- probably something towards half of the underlying growth is due to price.

I think we set out in the press release the volume - the prescription volume.

The prescription growth was 14%.

The price component is not just the double price increase too but the difference in the managed care rebate accrual adjustment that we occasionally make also happened to go through the price line in our price volume report.

So, it’s not all actually end market price change.

And, in terms of dose, is that still going up in terms of duration; you see all the same benefits with Seroquel as well?

I don’t think we’re seeing anything that-- The average dose size is creeping up, but I don’t think it’s such a big factor in the prescription volumes as it was.

Okay.

Thanks very much.

Mr. Martin Hall of Eden is the next question.

Thank you.

Can we just focus in again on the cost of goods sold, Jon?

There are two components, of course, to the cost of goods sold.

One is the underlying cost of manufacturing and the other essentially the payments to Merck.

I understand what you’re saying about the exceptionally high charge last year, but the reality is that it only went up by about 2 percentage points as a percent of sales, whether you look at the underlying or whether you look at the reported cost of goods sold.

Whereas, the gain this quarter seems to be about 5 percentage points and 4.3% on a reported basis.

Yes.

So, what I’m trying to get at is-- Merck reported a very strong figure from yourself for their first quarter.

I know the two are not directly comparable.

Is there anything that’s causing the underlying costs to be artificially high or artificially low compared to normal quarters?

Yes.

Okay.

Well, the Merck payments are not an influence in the margin, so none of the benefit that we’ve seen this quarter over last quarter is attributable to any shift in the percentage of Merck payments to sales.

So, it’s all underlying.

Clearly, with something that’s as broad as cost of goods, you end up with a long list of things that quarter on quarter change, which is really why I tried to shortcut the discussion in my opening remarks by saying we’re pretty comfortable with the first quarter gross margin of 79% as being the sort of gross margin that we would be targeting for this year.

So, I don’t think there’s anything unusual or wrong about Q1.

It says more about the size of some of the moving parts in the year ago.

Actually, if you look at-- If you look at Q4 in 2005 and make the adjustments for, in particular, some of the asset provisions that we made in quarter four, we were around 79% then anyway.

So, I think Q1 this year is consistent with recent quarter trends, and I’d be using that as an indicator for the quarters in the rest of the year.

Okay.

Thanks very much.

The next question is from Michael Leacock from ABN AMRO.

Just a couple questions, if I may, firstly on pipeline.

I wonder if you could just comment if there’s been any material issues in the pipeline in terms of changes of [inaudible].

Is there any product comment, particularly [on galeda] given what we’ve seen in terms of recent news flow and a recent dropping of another [inaudible] from development - whether you have any change in your view to the marketing risk or the approval risk of your compound and when we might get news flow on that?

And, finally, just on products, clearly the [inaudible] and the Abraxis deals got some sort of swap component to it.

What other parts of your business might be available for swaps?

Okay.

On the first part of your question, if there were any material developments in R&D in the pipeline, they would be in the press release.

So, the fact that we’re not highlighting any material events in the pipeline suggests that nothing has really changed since the beginning of the year.

We will either update-- We will update all of the pipeline [inaudible], if there’s anything material that happens between then and now.

We have an obligation to inform you as and when it comes, and the discussion of the [inaudible] really falls into that category.

I think in terms of asset swaps, I think this was a transaction that fitted beautifully with Abraxis Bioscience.

Not only do they have an innovative oncology activity, but it fits beautifully with our own.

They also have an injectable generics business, so it made sense on this occasion to do, if you like, a double deal, which is gaining access to their product and-- that gave access to their product and selling them the U.S. anesthetics.

So, this fitted Abraxis.

I wouldn’t be looking at this as we’re now intending to sell off products to get new.

I think this is a bit of a one-off, although, clearly, where you can leverage products in this way, we will do it.

I think they were two good deals that stand on their own-- that stand on their own that just happened to be done together.

Okay.

Thank you, Jon.

The next question is from Jerry [Bermier] of Dresdner Bank.

Yes.

Thank you.

Can you quantify the impact on Nexium from the Medicaid contracts, the other “M” word, entered into late last year; and give us some guidance on price concessions that were necessary to get on those and other U.S. formularies.

Also, if I may, how specifically are you using the ASTEROID data to assist Crestor, particularly in the U.S., where Pfizer said that the publicity impact of that study lasted only one week for the drug.

Well, on the first one, I’m afraid I’m not going to go into the specific details of our pricing.

In any event, it’s quite difficult to independently unpick some of the components.

With regard to ASTEROID, I’ll make two comments.

Number one, Pfizer would say that; wouldn’t they?

Secondly, clearly, we cannot promote ASTEROID as part of our promotion to the physicians because it’s not within our label.

We are scrupulous about that.

Jerry, we will be using that data along with the rest of the package to make a submission in the first half of ’07.

Should that go through, of course it gives us the opportunity of getting it on the label.

Yes.

It’s our absolute intention to do that because we believe that this is very significant and important information that prescribers should understand.

But, as it stands today, we can only talk about it if a physician actually specifically requests us to.

We cannot promote on it.

Thank you.

The next question is from Tim Anderson of Prudential Securities.

Thanks.

A couple of questions on Crestor.

Just going back to ASTEROID, are you pretty confident you can actually get ASTEROID on the label, because my understanding was that there was a reasonable chance you will not because it wasn’t a double-blind, randomized, controlled trial.

The second question is on your formulary coverage going from 2005 to 2006.

I’m wondering what your tier 2 coverage has been on commercial formularies going from last year into this year.

And then, what’s your coverage in Medicare formularies for ’06?

Tim, let me deal with your ASTEROID question.

It was a controlled trial.

And, the patients were their own controls.

So, it was a comparison with measurements prior to two years of treatment with 40 milligrams, and the evaluation was fully blinded by the evaluators.

The reason there wasn’t a control group was that the safety committee monitoring the study determined that it would be unethical to treat patients with a placebo or low-dose statins in order to control it in the way that the previous studies have been done.

And, so the design of the study, I think, was in the context of the ethics of medical research, as robust as was feasible based on those constraints.

I think that gives us a reasonable belief that this was wholly legitimate and a valuable study.

I don’t have the specifics on formulary coverage, other than to know that it is still improving.

It’s improving month by month, and there certainly has been more interest in positioning of Crestor since ASTEROID than there was before.

I haven’t got the specific details, but we’re certainly comfortable with the formerly positioning of Crestor is improving.

Okay.

If I could just go back to that first answer.

Should I assume that you’re saying that you’re comfortable that ASTEROID will in fact get on the label?

I think what we said earlier in the call is that we need to complete a package of work and that the second study, which is on carotid arteries, METEOR, is a key part of that package.

We won’t get the data on that study until later in the year.

It’s in many ways similar.

It’s 40 milligrams; it’s two years’ treatment.

If we get a result in that study, then we think we have a relatively strong package for registration purposes.

Kind of like, Tim, a very good question for the annual business review, where you’ll have the full Crestor team available on it.

Yes.

Okay; thank you.

The next question comes from Eric [Ladigle] of Raymond James.

Yes.

Good afternoon.

Two questions on products, please; first on Arimidex U.S.

Could you elaborate a little bit on either the dynamic of the market and the trend in your specific market share?

Secondly, on Casodex ex U.S.; perhaps to understand whether there is any slowdown in the overall market, slowdown in your own prescriptions, or if there is first generics on Casodex anywhere in the world.

Thank you.

I don’t think there’s much generic competition to Casodex, and I think the issue with Casodex is in many markets we have market shares in the 80%-plus.

So, we are-- Our growth is limited to market growth and not share.

Jonathan?

Yes.

We’re on the Arimidex one.

Specifically in the U.S., if you’re looking at prescription volumes, the market in general is growing about 4.5%.

Arimidex continues to gain market share within that with a TRX growth year to date of about 30% or just a shade under that.

Compared to a year ago, our market share is 6.3 points higher, and that’s beating all comers.

Thank you.

We’ve probably got time for one more question.

I know you’ve got an afternoon as busy as ours is; if not, it’s more busy.

So, perhaps we can just take one more question, and then any further questions we can cover off with the IR team.

Thank you, sir.

The next and final question comes from Andy Kocen of Redburn.

I tried to withdraw my question earlier, so I think we’ll leave it at that.

Okay; you can replace Andy with another one.

Thank you, sir.

We now move to David Moskowitz of Friedman, Billings, Ramsey.

Thanks;

I guess it’s my lucky day.

Let’s hope it’s mine too.

Good morning, and congratulations on a very fine quarter.

In terms of the ASTEROID data and potential METEOR, we’ve got 40 milligrams in that trial, which in our research is still under, I believe, a risk management program in the U.S.

So, are you looking to remove the restriction on the 40 milligram?

Will you start promoting that more heavily, given the ASTEROID data?

No.

I don’t believe we will be promoting 40 milligrams more heavily because for the vast majority of patients in the U.S. getting to go on a 10 milligrams is sufficient.

Mike?

I think what ASTEROID has done is two things.

One is it’s establishing a greater credibility associated with the additional efficacy of Crestor, both, I think, on HDL and on LDL.

I think it’s supporting the lower is better argument.

Under those circumstances, I think what we’d expect is that if everything else is equal, then there’s a strong rationale across the dose range to use the most effective statin that changes the lipid surrogates in the appropriate way.

The data we have means that that is clearly, compared to the other statins, Crestor.

That just seems a little odd to me that if you were to get this on the label, you wouldn’t be putting promotion behind the 40 milligram strength.

I think that’s to be determined when we have the full package.

Okay.

Thanks very much.

Okay.

Well, thank you, everybody, for your interest and your questions.

For those of you who have a question but haven’t asked it, let me apologize.

But, the fact that you have recorded your interest, we will have your names; and a member of the IR team will endeavor to get back to you.

So, thank you all for joining us, and good afternoon.

Ladies and gentlemen, that concludes this afternoon’s AstraZeneca teleconference.

Thank you for your participation.

You may now disconnect.