AstraZeneca PLC (AZN) 2007 Q4 法說會逐字稿

Well, good afternoon everyone.

Welcome to AstraZeneca's review of our 2007 performance.

In addition to hearing from me today, which, depending on how my cold goes, John's my rescue man if something goes down here with my throat.

Simon Lowth, our Chief Financial Officer and John will also be making more in depth presentations; Simon on the financials, John taking you through the changes and the activities that are really driving our view of our pipeline.

And then there are several of our Executive team are here, notably from the Rest of World business is Bruno Angelici, and then Tony Zook, who runs North America as well as our Global Marketing Group.

They'll pitch in during the Q&A session with any questions you have that are specific to them.

I'm sure there will be some.

We're looking forward to the review this afternoon to talk about how our business performed over the course of the last year, to talk about the prospects for the future and then to engage in discussion with you and to answer any questions that you might have.

Now, despite the increasingly challenging environment that affects the research-based industry that we're part of, I think 2007 was a year of pretty significant achievement for AstraZeneca.

We made progress in all areas that we've identified as our strategic priorities.

In terms of the underlying financial performance, we delivered earnings per share that were ahead of the targets that we set at the beginning of the year.

This was a result of both sales growth as well as operating margin improvement when you adjust for the one-off changes that we put in the figures.

We made excellent progress for delivering on what I believe is a comprehensive program that we're using, to reshape our cost base and to improve the efficiency and the effectiveness of the Organization globally.

And it has affected all parts of the Organization.

It's not something that is exclusively done just in G&A, or in a particular part of the Company.

And that includes some restructuring in the R&D area as well.

So if we want to talk about that, we can.

I am very pleased with the way the entire Organization has embraced what I think of as a culture of continuous improvement in meeting this productivity challenge, not just in formal restructuring initiatives but the day-to-day performance of people and the work that they do in their jobs.

I think the formal restructuring program is proceeding to plan; Simon will take you through that.

We realized $300m in benefits from the program.

And that's a good start toward the target we have of $1.4b in annual restructuring and synergy benefits that we will deliver by 2010.

More importantly, I think, delivering on our earnings target, reshaping the cost base continues to provide funding for us to invest in strengthening our pipeline.

Revenue investment in research and development in 2007 reached over $5b last year, excluding restructuring costs.

And we also made significant capital commitments to increase strength of our pipeline, in terms of both quality and quantity.

Clearly, the most decisive step that we took was to create the New MedImmune, strategically integrating the former Cambridge Antibody Group that was part of AstraZeneca, as well as our other Biologics assets and put them all together after we acquired MedImmune to create a Biologics business.

We now have one of the world's largest Biologics pipelines and we have established AstraZeneca as a leader in biotechnology among our pharmaceutical peers.

I know that some of you gathered with us in -- at MedImmune in Gaithersburg, Maryland, last month for a review of the Biologics business.

And the feedback that we received is that you were impressed by the quality of the people there, the depth and breadth of the technology platform and the pipeline, which now has more than 100 projects in it.

In addition to the acquisition of MedImmune, we made capital investments for smaller acquisition to access technologies and products to further strengthen our business in the fields of diabetes, obesity, asthma and COPD, in oncology, as well as an acquisition for our Dental Implants business.

In 2007, we made excellent progress across all fronts in our R&D organization.

And you will get a complete update on that from John in just a few minutes on what has been accomplished.

But let me say this; it's been a record year for new candidate drugs entering development, as well as for the number of projects reaching the first time in Man milestone.

Six new Phase III compounds were added in 2007, bringing the total number of Phase III projects in the pipeline to 10.

Then, on balance, it's been a year of significant achievements, despite the ever-challenging environment.

Achievements that are a credit to the efforts of all of our people, all of the employees across AstraZeneca, people that are committed to making a meaningful difference to patients' health.

Now let's move to an overview of the financial results for the year.

Just a quick look, first at sales.

Sales for the full year were nearly $29.6b.

That is an increase of 12% on a reported basis, or 7% at constant exchange rate.

That's a good performance.

The sales contribution of MedImmune, since the inclusion of MedImmune on June 1, was about $714m of that.

The addition of MedImmune more than offset the $413m in lost sales in the U.S.

from Toprol XL.

As you know, Toprol XL experienced generic competition across the entire dosage range from August onwards.

The five key brands delivered sales growth of 11% in constant currency, with Crestor and Seroquel the key drivers this year.

And we are continuing to reap the benefits of our increasing investment in the emerging markets, where sales were up 17% in constant currency.

Moving down the P&L, operating profits were just over $8b; that's down 4%.

If you exclude the restructuring and synergy costs, operating profit was just over $9b; that was 8% increase at CER.

The reported earnings per share were $3.74 for the year; that's down 5% in constant currency.

However, if you exclude the restructuring and synergy costs, which was the basis for our guidance, earnings per share were $4.20, which is ahead of the target range that we finalized at third quarter results.

And that was range was $3.98 to $4.13 that we -- that range on the same basis.

So the $4.20 was ahead of what we thought we would do.

The Board approved the 10% increase in the second interim dividend, which was announced today and that brings the full-year dividend to $1.87.

That's a 9% increase in the dividend over last year.

In addition to that, we had a net repurchase of our shares of $3.95b last year.

Our target was $4b, so we were right on there for that.

I think what I'll do is stop here for now, and ask Simon to come up and get into much greater detail, including product highlights for you.

Then the balance of the program will be given over to John, to go through what's going on in R&D.

Following that, we'll open it up for Q&A.

And then, right at the end, I'll just get up and make a few closing comments.

So, thank you for your attention, and let me turn it over to our Chief Financial Officer, Simon Lowth.

Simon.

David, thank you, and good afternoon to everyone.

I'm very pleased to be here today, presenting to you a fine set of results, and my first at AstraZeneca.

I'm going to cover four topics.

First, I'll summarize our financial results for 2007 and demonstrate that we've broadly met, or exceeded the performance targets that we set for ourselves and communicated to you.

Next, I will describe the principal drivers of this strong financial performance, focusing in particular on our progress in driving the top line growth of our key brands and markets and in improving profit margins through operational efficiencies and restructuring.

I will then review our performance in generating cash and how we allocated our cash between investment in research to drive future growth and returns and distribution to shareholders.

And then finally, I'll describe our business performance priorities and the financial targets that we've set ourselves for 2008.

AstraZeneca has delivered a strong set of financial results for 2007.

We've broadly met or, in some cases, beaten the targets that we set for ourselves during the course of the year.

Excluding MedImmune and Toprol in the U.S., the business delivered sales growth of 7% in constant currency terms, consistent with our goal of high single-digit growth.

We reduced our SG&A costs in constant currency terms, we increased our investment in R&D by 16% and we still delivered a 180 basis point improvement in our underlying operating margin.

We delivered earnings per share, excluding restructuring and synergy costs, of $4.20, compared with our latest guidance of between $3.98 and $4.13.

We charged $966m in restructuring and synergy costs, slightly ahead of our estimate of $900m for the year, reflecting the pace of our restructuring efforts.

And finally, we completed net share repurchases of $3.95b; nearly spot on with our $4b target.

Reported earnings per share was $3.74, down 5% on 2006 in constant currency terms.

However, adding back restructuring and synergy costs of $0.46 per share, we delivered earnings per share of $4.20, and this represents growth of 7% in constant currency terms.

MedImmune's contribution for the last seven months of the year was, as expected, dilutive to earnings by $0.32 per share, due to the combination of intangible amortization of $255m and additional interest costs of around $500m.

Adding back the MedImmune dilution, the underlying business delivered earnings per share of $4.52, representing growth of 15% over 2006 in constant currency terms.

This 15% growth in underlying earnings was driven by a combination of top line sales growth and operating margin improvement.

And it was achieved while significantly increasing our R&D investment [to last] to drive long-term growth and value.

So, let me now turn to the first driver of that earnings growth, namely, our progress in sustaining our top line sales growth.

Despite a challenging external environment, characterized by pricing and market [access] pressures, we achieved sales growth, excluding MedImmune and Toprol XL, of 7% in constant currency terms.

We believe that this was broadly in line with, or perhaps slightly ahead of, overall market growth.

Our five key brands delivered 11% growth, equivalent to incremental sales of $1.5b in constant currency terms.

These five products now generate revenue of $15.3b; just over 50% of total Group sales.

Seroquel, Crestor, Arimidex, and Symbicort all showed double-digit growth, offsetting the decline in Nexium and demonstrating the impact of our investments in life cycle management, sales and marketing effectiveness and emerging market development.

I'll now describe in more detail the performance of our key brands, starting with Nexium.

Sales for Nexium for the full year were $5.2b, down 2%, in line with our guidance that the brand would experience a slight decline in the year.

Sales in the U.S.

were $3.4b for the full year; down 4%.

Underlying volume growth was 2%, with some one-off movement adding a further 2%.

There was an 8% decline in net realized prices for the year.

Our strategy of focusing our sales and marketing efforts on growing share in the branded segment has ensured volume growth and it's positioned Nexium as the only product to gain share in the branded segment.

However, as part of our strategy we have increased our rebate to key customers in the managed markets, placing some downward pressure on net prices.

Average net price realization has also been adversely impacted by shifts in our sales mix, notably in the movement of Nexium volumes away from the non-contract market and towards higher rebate contracts with the managed market segment.

In the fourth quarter, U.S.

sales for Nexium were down 18%, with underlying volume growth of around 2% being offset by a significant price variant.

The same pricing effects that we'd experienced through the year were evident in the quarter, but they were exacerbated by two additional factors.

Firstly, the release of the TriCare provision in the fourth quarter of 2006 contributed around 5% in the year-on-year revenue decline.

Secondly, the decline in average prices that we experienced during the course of the year disproportionately impacted revenues in the fourth quarter.

This was due to the fact that, in common with the rest of the industry, our average rebates for revenue recognition are based on actual invoices which can be received up to eight months in arrears.

In effect, a disproportionate amount of the average price declines experienced in the year hit our revenues in the fourth quarter.

Nexium sales in the Rest of the World were $1.8b for the full year, up 2%, with strong double-digit growth in the emerging markets more than offsetting the decline in Western Europe, where the brand faced similar competitive pressures to the U.S.

What does that mean for Nexium sales in 2008?

In the U.S., we believe that we can still grow volume in the branded market, but with continued price declines, although not at the kind of rate implied by the fourth quarter exit.

Overall, we anticipate that worldwide sales of Nexium in 2008 will be lower than 2007 in constant currency terms, potentially by up to mid-single digit following recent developments in the PPI market.

Seroquel exceeded $4b in annual sales for the first time in 2007, with mid-teen sales growth both the U.S.

and our established markets, and growth of 32% in our emerging markets.

In the U.S., total prescriptions for Seroquel increased 10%; more than twice the market rate for anti-psychotics.

Seroquel XR received its first approval during 2007, limited, in the first instance, to the schizophrenia indication.

We launched in August in the U.S.

and just last month we received mutual recognition approval in Europe.

So those launches will roll out over the course of the year.

However, it's the comprehensive program of life cycle management beyond schizophrenia that will really drive the growth of Seroquel XR over time, as we add the full complement of indications for bipolar mania, bipolar depression and the new indication for major depression and generalized anxiety disorders.

Crestor sales were $2.8b for the year; up 33%.

Crestor sales outside the U.S.

grew at 45% over the year and now represent almost half of total Crestor sales.

Crestor performed particularly strongly in Western Europe, where sales grew 26%, with notable performances in France and Italy and in Canada, where sales grew 43%.

And the Crestor launch in Japan continues to go well.

Volume share had reached 8.8% by November.

In the U.S., Crestor sales were up 24% for the year due, principally, to the year-on-year prescription volume growth of 22%, well ahead of the statin market growth of 8%, reflecting a 90 basis point share gain in average market share over 2006.

We held ground in market share in 2007, hovering around 8.6% for the year, weathering the 8 percentage points in market share gained by simvastatin during the year.

Crestor's new indication to slow the progression of atherosclerosis was approved in November.

Given recent developments surrounding the Vytorin enhanced trials, the timing couldn't be better for the rollout of this indication.

Our aim is to restore Crestor to market share growth in the coming year, based on the promotional campaign for this exciting new indication.

Arimidex sales reached $1.7b in 2007; up 10% year on year.

Sales in the U.S.

were up 13%.

Total prescription volume growth of 5% was ahead of the market for hormonal treatments for breast cancer.

And in November, the FDA granted an additional six months of market exclusivity for Arimidex, taking the effective patent life out to June 2010.

Arimidex sales in other markets were up 8% for the year.

Sales in Western Europe were up 6%, sales in Japan were up 9%, reflecting the strength of our oncology business in that market.

Worldwide sales of Symbicort increased 22% to just over $1.5b.

Sales in Western Europe were up 16%, with market share up a full point.

Symbicort SMART is improving our competitive position in asthma, and we are growing usage in COPD.

In the U.S., we launched Symbicort in June.

We're pleased with the early uptake among specialists where, among our target audience, nearly 75% of allergists and more than 60% of pulmonary specialists have prescribed Symbicort.

These specialists are now prescribing Symbicort to nearly one out of four patients that they start on combination therapy.

Clearly, we need now to translate this performance with specialists into the broader GP market.

And that will be a primary focus for our sales and marketing effort during 2008.

Alongside our portfolio of key brands, our investments in building our presence in emerging markets are also contributing strongly to top line growth.

Our emerging markets business delivered sales growth of 17% in 2007, and accounted for nearly 45% of the total constant currency sales growth outside the U.S., and this is profitable growth.

Operating contribution in these markets grew faster than sales, despite the investments we are making.

I will now turn to the second key driver of earnings growth in the underlying Business; the improvement in operating margin.

Underlying gross margin improved by 80 basis points on a constant currency basis.

Market price pressures were more than offset by efficiency gains, reduced Merck royalty payments and the impact of prior-year asset provisions.

The supply chain restructuring program is proceeding to plan, although it will not meaningfully impact our gross margins before 2009.

Our focus on cost discipline and efficiencies, combined with the early benefits of restructuring, reduced our underlying SG&A costs by 2% and drove a 230 basis point improvement in SG&A as a percent of sales.

Other income and distribution costs were flat as a percent of sales.

The gross margin improvement and SG&A efficiencies created a potential 310 basis point improvement in our operating margins.

To fund the development of our expanded late-stage pipeline and the early stage research needed to sustain this pipeline, we invested over half of the improved margin capacity into increased R&D investment.

Specifically, we increased underlying R&D investment by 16%, and R&D as a percent of sales by 160 basis points.

As a net result, underlying operating margin still increased by 150 basis points in constant currency terms.

In 2007, therefore, we've delivered on our performance priorities for our underlying business.

We have sustained top line growth and driven efficiency improvements across the business in order to fund increased investment in value-creating R&D, while providing year-on-year earnings growth.

Having described the performance of our underlying business, let me now turn to MedImmune and its performance since our acquisition on June 1.

MedImmune sales for the seven months were $714m, the lion's share of that coming in the fourth quarter, reflecting the seasonal bias in the sales of both Synagis and FluMist.

The other income contribution is a significant profit stream, principally derived from royalties on HPV vaccines.

This income contribution should continue to grow as MedImmune earns royalties on the sales of the new vaccines for HPV from Merck and GSK.

MedImmune's operating profit for the seven months, excluding the impact of acquisitions and amortization costs, was $126m, with all of that profit being made in the fourth quarter, given the strong seasonality of the current products.

MedImmune's operating profit reverts to a loss of $178m once we incorporate the one-time costs for the acquisition and the $255m amortization charge on the acquired intangible asset.

Including the interest on the debt financing of the acquisition, MedImmune contributes negative $0.32 for the Group's earnings per share.

This breakdown of MedImmune's performance explains the impact of its partial year of consolidation into our accounts, and should provide a sound basis for your future modeling.

I should stress, though, that MedImmune is an integral part of AstraZeneca and we will not report its performance in this level of detail going forward.

I will now turn to our productivity, restructuring and synergy initiatives, which are a key component of our strategy and our performance priorities.

We are now managing the restructuring programs and the integration and synergy projects with MedImmune on a combined basis.

The total program and its constituent parts is firmly on track to deliver the targeted benefits.

The total restructuring and synergy costs charged in 2007 were $966m; just under half of the estimated total program costs of $2b.

On the benefits side of the ledger, $300m in savings have been realized to date out of the target of $1.4b in annualized benefits from 2010.

The majority of these savings will come from our SG&A cost base.

In terms of saving, I expect around two thirds of the remaining restructuring and synergy costs will be charged in 2008.

And of the anticipated annual benefit of $1.4b by 2010, cumulatively, two thirds will be realized in 2008.

Now let's look at cash flow, which will be an increasingly important blend through which we will review and manage our performance.

We entered 2007 with $6.5b of net cash.

Our EBITDA, at just under $10b, was up $389m on 2006, reflecting the combination of top line sales growth and increased cash operating margins after funding the increased investment in R&D.

EBITDA growth was, however, offset by higher working capital requirements due, substantially, to the entry of MedImmune and the seasonal nature of its business.

Overall, we generated $7.5b of operating cash flow, broadly on a par with our performance in 2006, bringing our total cash available for investment distribution to $14b.

Turning now to the deployment of cash.

We invested $16.5b in building AstraZeneca for the future.

Most significantly, we transformed our position in the Biologics arena through the acquisition of MedImmune 14 -- for $14.9b, establishing AstraZeneca as a leader in biotechnology with one of the world's largest Biologics pipelines.

We continued our efforts to secure attractive new molecules for development to complement our in-house discovery program, investing a net of $549m, primarily in our externalization activities.

And finally, we invested capital of $1.1b in extending and improving our R&D facilities and our supply chain operations.

Finally, we distributed a total of $6.6b to shareholders through dividends of $2.6b and net share repurchases of $4b.

We have met the shortfall between our available cash and our investments in distribution through increase debt, taking us to net debt of $9.1b at the year end.

Turning to our capital structure.

Our overarching objectives have been to fund the acquisition of MedImmune and our wide R&D program, while maintaining a strong investment grade credit rating.

We have met our investment objectives, and our ratings confirmed in July at A1 with Moody's, AA minus with Standard and Poor's, both with a stable outlook.

Since the mid year, we have completed the refinancing of the short-term debt used initially to fund the MedImmune acquisition.

We've issued Bonds and Notes totaling $9.8b, with maturities ranging from two to 30 years.

The result has been to significantly reduce the level of short-term borrowings, which now stands at $4.3b.

The effective interest rate on our gross debt was 5.5% at the end of 2007.

Looking ahead, we aim to reduce our level of net debt outstanding to our targeted level of $6b to $7b over a three to four-year period.

Over the first quarter of 2008, our net debt will increase as we use part of our current cash balance to fund the second interim dividend and the exit payments to Merck.

But we do expect to begin to reduce our net debt over the remainder of 2008.

Our performance priorities for 2008 are very clear.

We will sustain our investment in life cycle management, sales and marketing effectiveness and targeted market development to grow our key brands and markets.

We will deliver further productivity improvement through continued cost efficiencies and disciplines, and through delivery of our restructuring program.

We aim to bring an increased focus to cash management, ensuring that we convert growth in EBITDA into cash.

And finally, and critically, we will continue to invest in R&D to support and build our growing pipeline, and to drive long-term growth and value.

Having described our performance priorities, let me now describe how these translate into the financial targets that we have set for ourselves.

The first thing I should do is to make clear the basis upon which we are communicating our financial guidance for 2008.

Our target, and the guidance we're providing, reflects the operating performance of AstraZeneca and MedImmune on a combined basis.

As we stated at the time of our third quarter results, we will provide earnings guidance on a core EPS basis for 2008.

For 2007, we determined core EPS by starting with the reported EPS of $3.74, adding back the restructuring and synergy costs, which were $0.46, the MedImmune amortization of $0.12 and Merck-related amortization of $0.06, to arrive at a core EPS of $4.38 for 2007.

For 2008, restructuring and synergy costs will, as I said earlier, amount to two thirds of the remaining program.

The MedImmune amortization charge will continue to run at the $36m per month exit rate for 2007.

And, in addition to the existing $0.06 with amortization related to Merck, the 2008 exit arrangement may add to the Merck amortization by up to $0.04, depending on Merck's election regarding the first option.

As we explained at the third quarter, our core EPS measure includes intangible asset impairments.

For 2007, these amounted to about $100m.

Our 2008 guidance range for earnings per share assumes a comparable level of intangible impairment.

Our guidance for tax rate, both on a core and a reported basis, is for around the 29.5% level seen in 2007.

In providing our core EPS guidance, we have had to make some assumptions about currency exchange rates.

Specifically, we've assumed that the U.S.

dollar exchange rate for 2008 would follow the average rates experienced in the fourth quarter of 2007, being $2.04 to the pound, $1.45 to the euro and SEK6.42 to the dollar.

As you would expect, our earnings guidance is sensitive to exchange rate movement, and there is an appendix in the handout that provides you with the sensitivities to sales and earnings and movements in each of our principal currencies versus the dollar.

Over the course of the year, I intend to review the various performance metrics that we use to measure the performance of the business internally.

And this may have some implications for how we communicate our targets externally, and I'll keep you updated on any changes in our thinking.

Our target for 2008 is to deliver core EPS in the range of $4.40 to $4.70.

The lower end of the range is set to reflect some of the uncertainties we face going into 2008, for example, the potential impact of recent events in the U.S.

PPI market.

For 2008, we expect to achieve constant currency sales growth in low to mid-single digits.

The impact of a full year of MedImmune sales should broadly offset the further declines from a full year of generic competition for Toprol XL.

I emphasize that this sales growth is, as is our standard practice, in constant currency terms.

At current exchange rates, reported sales growth would be higher.

We aim to hold our core gross margin at the same level achieved in 2007 in constant currency terms, with the early benefits of our restructuring program benefiting the second part of the year and largely offsetting [out] the price and mix effect.

We will continue to drive efficiencies in our SG&A costs which, together with the further benefits from our restructuring program, should keep core SG&A costs flat in constant currency terms.

We intend to increase our investment in R&D, net of improved efficiencies in that function, by high single digits in constant currency terms, as we deliver and expand our strengthening pipeline.

We expect other operating income at around the same level as 2007, with growth in the royalty streams from MedImmune offsetting some decline in the Company's other activities.

These are demanding targets in a challenging environment, but they're targets that we're determined to deliver.

The Board has today declared a second interim dividend for 2007 of $1.35 per share, bringing the total dividend for the year to $1.87; a 9% increase.

The Board's dividend policy is unchanged.

We will continue to grow the dividend in line with reported earnings before restructuring costs, while maintaining two times dividend cover.

We have provided guidance for 2008 on the basis of core EPS.

However, for dividend purposes, we will continue to measure growth against reported earnings before restructuring costs to ensure that we maintain our target level of dividend cover and reserves.

Moving to the share buybacks, when we laid out our financial policy in July 2007, we emphasized that the buyback is a return of surplus capital after providing for dividends, debt pay down and business investment.

We also made clear that the level of buybacks will be assessed annually by the Board, taking into account business needs.

2008, I can confirm, the guidance that we gave in July 2007 that we expect the share buyback for this year to be in the region of $1b, subject to business needs.

I will now hand over to John Patterson, who will describe the significant progress that we have made this year in improving our R&D productivity and strengthening pipeline.

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

2007 was a year of significant achievement as we continued to strengthen our pipeline with more new potential medicines, faster cycle times and a leaner, more cost-effective Organization.

We presented our biologicals pipeline in great depth in December.

But today, I'm going to focus on the small molecules and, in particular, on those projects in Phase III or undergoing life cycle management.

I plan to conclude by giving you an update on our 2008 deliverables and, in doing so, to cover our recently completed Disease Area Strategy and its implications, and the record number of planned registration applications and projects that we see going through proof of concept into Phase IIb in the second half of the year.

Over the last three years, we have invested considerable time and effort improving the quality and the speed of our development cycle.

We're on track to deliver a medium cycle time of eight years, from start the first GLP tox all the way through to launch, by 2010, and have already taken 18 months out of our achieved and planned cycles.

And we believe we are well on track for upper quartile industry performance.

We've speeded up our programs and doubled our Phase III pipeline with a flat to reducing headcount, through multiple R&D-wide activities and initiatives across the whole breadth of our activities.

One achievement in 2007 was to deliver a record number of 36 candidates that were selected to progress into development.

This compares with 22 in 2006.

Our efforts to reduce attrition have resulted in 24 molecules entering human development during the course of the year; double the 2006 number which was, in itself, a record.

Through the acquisition of MedImmune, our pipeline has grown considerably across all phases.

And I'll come back to the 10 phases -- 10 projects in Phase III in some detail later in my presentation.

Taking MedImmune, CAT and our previous Abgenix alliance, we now have a highly competitive world-class Biologics capability, all the way through from target identification through all the key delivery technologies in discovery, process development and manufacturing, to enable us to discover, develop and sell Biologics with a highly skilled, knowledgeable and experienced workforce.

During the year, we've continued our emphasis on quality, speed and cost, leading to a better R&D performance.

We will maintain the emphasis on quality, as exemplified by the increasing number of CDs coming through pre-clinical testing and entering Man, together with a much stronger emphasis on families of molecules in our most important areas, meaning that we will always seek to have back-ups and follow-ups should the lead molecule fail.

We're putting increasing emphasis on maximizing the cost effectiveness in our Organization, and this led us last year to reduce the layers of management and increase productivity in regulatory affairs and pharmaceutical analytical development.

The outsourcing of our clinical date processing activities, as well as a number of lean [sigma]-driven cost effectiveness initiatives across all discovery areas, are part of the drive for more project speed and reduced complexity.

We have delivered significant improvements in our cycle times through the pre-clinical and clinical development phases.

As with all research-based pharmaceutical companies, improving Phase II and Phase III timelines is a particular challenge in the face of increasing regulatory demands and hurdles.

As our pipeline matures and more products are entering late Phase II and Phase III, we're placing particular emphasis on improving the quality, speed and cost elements of those parts of the program and embedding a performance-driven culture across the whole of R&D.

By selecting an increasing number of candidates to enter development over the last three years, working hard to lower early attrition rates and speeding up the projects, we've created a bow wave of projects that has now entered Man and is moving rapidly towards a record number of proof of concept decision points in the second half of this year and early 2009.

As the pipeline progresses, in presentations like this I'll focus more and more on the clinical development projects in these presentations.

But let me now focus on the pipeline.

As in previous presentations, I'll start with the pipeline as it was this time last year.

Since then, we've stopped or delivered a number of the projects.

In addition, we've progressed a larger number of projects, as shown by the green boxes.

And then, we've added even more from our own laboratories through licensing and acquisitions, as shown in red.

So that today, looking at the total pipeline, we have 95 projects in clinical development, of which 20% are now Biologics, getting us very close to the 2010 ambition that we stated at the time we bought Cambridge Antibody Technology of having 25% of Biologics as the molecules offered for Phase III development.

As you can see here, in a graphic representation of that bow wave of internal projects, as Discoveries its increased its productivity and delivered more molecules, this is how it is translating into an increasing number of early human projects.

I've been absolutely consistent in telling you that our strategy was to increase the output from our Discovery laboratories and speed up delivery of the projects in our pipeline, together with an increased emphasis on externalization to deliver our long-term strategic and our short-term tactical objectives.

In 2007, we completed a number of transactions to help us fulfill our goal of strengthening the late phase pipeline and delivering a fully-fledged and competitive Biologics strategy.

Our co-development profit sharing deal with Bristol Myers Squibb on Saxagliptin and Dapagliflozin met a key disease area strategic target in the diabetes and metabolism area, as well as giving us two new Phase III projects by year end.

Our Arrow acquisition broadened our small molecule approach to infection into anti-virals, and is complementary to our increasing infection research commitment and our capability increase in Boston.

With the large molecule and vaccine approaches gained through the acquisition of MedImmune, which propelled us into a strong position in biotechnology, as well as considerably strengthening our anti-infective, respiratory and inflammatory and cancer approaches, MedImmune gave us the long-term platform for growth and delivery in these fields that our previous licensing, or smaller acquisitions, simply could not deliver.

Other key deals such as Palatin, Regeneron and Silence gave us access to key Discovery technologies.

Resulting from our internal efforts, together with our externalization activities, we now have a larger, stronger and less risky Phase III portfolio that's grown from five projects this time last year, with the loss of one project and the inclusion of six others, to a total of 10 projects covering nine potential medicines, one of which is a biologic.

I will now update you on the individual projects in Phase III in some detail.

Starting with Saxagliptin, this DPP-4 inhibitor has both mono and combination therapy in Type 2 diabetes, is on track for an NDA submission mid 2008 and an MAA in the European Union in the second half of 2009.

One of the Phase III studies was presented at the ADA meeting in 2007 and further data will be presented in June and September this year at the major meetings.

We now have available to us clinical data from five of the six pivotal studies for the NDA, all of which demonstrates consistent glycemic control across the Phase III program.

More than 2,700 patients receiving Saxagliptin have, to date, been evaluated across the clinical program through Phases I to III.

We've evaluated across a range of doses, across all phases of the trial program, including up to 40 times the likely top clinical dose, with no evidence of any skin lesions that might give cause for concern.

Through multiple FDA interactions over the course of last year, during which we shared with them the pre-clinical and clinical data, today we've been given no reason to believe that the current NDA package is anything other than acceptable in terms of safety, efficacy and exposure.

In particular, whilst we have chosen to initiate a chronic study in renal failure and share the design with FDA, this is not on the critical path to the NDA.

Saxagliptin is currently on track for a mid-year filing subject, of course, to the findings as we continue to analyze the Phase III program.

Turning to Zactima, the coming year is the key year for this new medicine for non-small cell lung cancer and medullary cancer of the thyroid.

Both submissions being currently on track for simultaneous delivery by year end.

Recruitment into the development program is either on track or completed, with over 3,500 patients recruited.

As with all cancer programs, completion of the studies will be event driven and, subject to the required number of disease progressions, we will have a clear picture on the activity of this drug as a second line treatment for lung cancer, in combination with docetaxel or permetrexed, as well as head to head with erlotinib as monotherapy by the end of the third quarter this year.

We are also generating data on EGF receptor inhibition failures versus best supportive care, but this time on a longer time scale.

A recent pre-planned independent data safety monitoring committee interim analysis and safety review of the lung cancer program passed without any issues being flagged to the Company.

Our other cell signaling inhibitor, RECENTIN, an oral [digest] inhibitor, is an anti-angiogenic whose mechanism we've previously shared with you.

It's being assessed in a wide range of solid tumors, both by ourselves and through a clinical research and development agreement with the United States National Cancer Institute.

Our Phase IIb program concentrates on first-line treatment in non-small lung cancer and colorectal cancer.

Those programs are on track for the first decision point in the first quarter of this year.

And in addition, you will have seen presentations externally on encouraging Phase I and Phase II data in a number of tumors, including gliobastoma and renal cell cancer.

This has led us to initiate a new program in gliobastoma during the course of 2007, with the intention of delivering a separate registration package in that tumor ahead of lung and colorectal.

The 18,000 patient PLATO outcome study of 6140 in acute coronary syndrome is recruiting well, and more than 11,000 patients are now on the study.

To date, no significant safety concerns have been identified.

The TRITON study has shown that greater platelet inhibition can lead to improvements in cardio vascular endpoints, with the obvious implications for 6140.

Unlike Prasugrel and Plavix, 6140 is a reversible platelet inhibitor, which we believe will confer considerable advantages in the marketplace through its rapid onset and offset, reliable efficacy and, therefore, a much more patient-friendly profile in many real-life situations.

The speed with which we are now delivering PLATO has allowed us to bring the 6140 license submission date forward into the second half of 2009.

Dapagliflozin has a novel insulin independent mechanism of action, which suggests it should be effective alone, or in combination with any other anti-diabetic medication across the spectrum of patients with Type 2 diabetes.

You can expect to see the Phase IIb data at the ADA meeting this coming June.

A comprehensive Phase III program is planned that capitalizes on both Dapagliflozin's broad clinical applicability and the collective development power of BMS and ourselves.

The first two studies began in the third quarter of 2007.

4054 is an Endothelin A receptor antagonist being developed in hormone- resistant prostate cancer.

The Phase II data produced overall survival benefits in this hard-to-treat group of patients and these results were obtained with a good tolerability profile.

We have now started recruitment in all the Phase III studies that will test this drug in non-metastatic and metastatic disease, as well as in monotherapy and in combination with chemotherapy.

The study program is outlined and is in your pack for completeness.

PN400 is a project that we are running in combination with Pozen using a fixed combination of enteric coated Naproxin and immediate release esomeprazole in patients who would receive a non-steroidal anti-inflammatory drug for pain relief in arthritis.

We expect this fixed combination to produce a significant reduction in NSAID-related gastric ulcers which can lead to GI bleeds, which are a significant cause of morbidity in this population.

Whilst approximately 20% of NSAID patients are currently prescribed a PPI with their pain relief, over half are non-compliant with their PPI medication.

The fixed combination seeks to address both the adherence to PPI therapy and the timing of NSAID released into the gut, and the overall morbidity associated with the problem.

The Phase III program is now running well and the Phase II data has been submitted as an abstract to DDW.

The last of the small molecule Phase III projects is a combination of Crestor with Abbott 335, fenofibric acid, a fibrate that has recently been submitted by them for registration as a monotheraphy and for concomitant use with statin.

A number of studies have already been completed with the free combination of these two agents.

And Crestor 335 data are planned for presentation by Abbott in the first half of this year.

Additional studies of both free and fixed combinations are currently in progress, with a planned NDA submission in the second half of 2009, dependant upon the status of the 335 monotherapy NDA review.

Finally in this section, just to remind you from December that the Motavizumab BLA is imminent, with further supplemental packages to follow, and there is continued progress with the Biologics portfolio as outlined in December.

Before I move on from the individual projects, I want to highlight just three of the most important life cycle management programs.

The Crestor Atherosclerosis Supplemental NDA was approved and the METEOR labeling accepted in Europe.

We are now able to claim that Crestor slows the rate of progression of atheroma based on ASTEROID, which showed regression of plaques in an open study in severe patients, and METEOR, which compared Crestor with placebo in patients with minimal disease.

The graph shows the [internal] thickening as the atheroma progresses on the placebo arm, and a complete lack of progression on Crestor.

Crestor is now the only major statin, or statin combination to have a broad labeled claim in this indication.

Further data from METEOR will be presented in April, Health Economics from CORONA in June and we expect the first data from the GISSI heart failure study in the second half of this year.

We've also recently announced the SATURN study; a direct head-to-head comparison between Crestor and atorvastatin looking at plaque progression and regression.

And the first patients have already entered this program.

In the United States, Symbicort was launched during the year.

As a supplementary program, we now have approval for an actuation counter and are on track to file for pediatrics by mid year.

The next major supplemental program is in chronic bronchitis, or COPD.

Two major studies, SUN and SHINE, have both completed, and the Symbicort 164.5 dose met the pre-specified co-primary end points in both studies.

This graph shows the clear benefits achieved over 12 months for one of those endpoints.

Therefore, we plan to submit this indication by mid year in the United States.

In addition, we will also be filing for a pMDI formulation in Europe later in the year.

Last, but by no means least of the life cycle programs, are the Seroquel IR and XR programs.

The list of submissions and approvals is extensive.

Many of the studies in these programs have been presented last year, or will be presented during the course of this year.

In particular, the major depressive disorder and generalized anxiety disorder programs for the XR have been an outstanding success.

Six out of the seven of the depression studies have generated a statistically and clinically positive result, whilst all four of the reported anxiety studies are positive.

In psychiatry, consistently positive data like these are most unusual.

The slide just shows you one example of a placebo-controlled depression study with a positive control arm.

We are positioning Seroquel at the severe end of these diseases, both as single therapy and as an adjunct to existing therapy.

Both packages will be submitted to the U.S.

and European regulatory authorities over the course of the year to allow us, when approved, to promote these findings in both specialist and primary care settings.

Having reviewed our activities in 2007, and the key later-phase projects, let me now turn to the future focus of our R&D activities.

Following the purchase of MedImmune and our desire to rebalance our resources between small molecules and biologics, in favor of biologics, we refreshed our Disease Area Strategy across all therapeutic areas, but with specific emphasis on those areas where we had activity in both MedImmune and AstraZeneca.

Our objective was to optimize our Discovery investment, in particular, to reduce duplication and focus on delivery of a strong biologic portfolio, as well as our committed synergy and budget targets.

In summary, we've decided to exit osteoarthritis disease modification, whilst maintaining, or increasing our biologic focus in [rumatology], COPD and asthma.

In cancer research, we are exiting one of our five mechanistic approaches, that of cell cycle blockade, and rebalancing again our resources between small molecules and biologics.

Our activities in anticoagulation, anti-platelets in arrhythmia and psychiatry will be maintained, but with success-related reviews.

Taken overall, the effects of the Disease Area Strategy will be to reduce our small molecule R&D headcount.

However, with the addition of MedImmune and Arrow and the planned increases in our Biologics R&D activities, overall, the Company's R&D manpower will remain essentially flat in 2008.

These changes also allow us to increase our investments in developments as the pipeline grows and enters the later, more expensive phase, whilst keeping our overall R&D budget increase to high single digit in 2008.

In summary, we are achieving faster cycle times with a leaner Organization and a more focused Disease Area Strategy.

We have made significant improvements to our pipeline in 2007, with a record number of CDs entering first GLP tox, in spite of increasing our pre-nomination quality demands.

There has been a doubling of Phase I transitions with 24 medicines entering Man, a one third increase in our total clinical portfolio and a much stronger and more mature Phase III portfolio.

We are delivering our Biologics strategy and supporting the marketed products.

Looking forward to the rest of this year and, of course, subject to data, we are on track to deliver up to three NDAs and up to 14 Phase II projects will reach proof-of-concept decision points by the year end, against a background of increased productivity and high single-digit cost growth.

Two years ago we set ourselves targets for 2010.

As we enter 2008 we've already achieved our Phase III project portfolio target.

We have in place an excellent Biologics pipeline and capability and we are well on track to delivering an eight year median development cycle time.

We expect to be in a position, by 2013, to bring on average two new medicines to the market on an annual basis.

We now believe that that target can be achieved, based on our current portfolio, from 2010 onwards.

This year, through license applications and clinical data, our aim is to show you that AstraZeneca R&D is fit for the future and we are, indeed, turning molecules into medicines.

Thank you for your attention, and I now hand over to David who is going to conduct the Q&A session.

Great, thank you, John.

And thank you, Simon, for your comments.

Just a few points around the Q&A.

Number one, please wait to get a microphone and, when you do, please identify yourself just so we know who you are.

And to let you all know we also have the facility to take some questions on line here, or from people who are on the webcast.

So we will go back and forth, but we will start here on the floor.

So, let me open it up for questions.

Here.

Kevin.

Thank you.

(OPERATOR INSTRUCTIONS).

(Multiple speakers) John -- I've got two questions for John and one for Simon, or the other way around.

Simon, could you give us some more detail on the breakdown of other operating income, broadly?

Its clearly above the levels of previous guidance, partly due to MedImmune, I understand that.

But -- and going forward, perhaps, as a run rate.

That would be helpful.

And secondly, could you make a comment on the payment you will be making to Merck, whatever happens regarding the first option, in other words, the partial redemption?

I think $2b has been mentioned by Merck.

And for John, could you comment on your CB1 antagonist program?

Given the competitive nature of the space, what other people are doing and your stage of development, why you think you are going have a winning molecule there?

All right, good.

Thank you, Kevin.

Simon, why don't we go to you on other operating income, you want to --?

Yes, if we take the Medi operating income, we showed that to you for 2007 at $169m.

That does include the royalty streams from the HPV vaccines.

It also includes some royalty streams coming from Abbott International associated with the arrangements that we have with Abbott for selling RSD products internationally.

There are also some income from government contracts associated with the Vaccine business, so a variety of sources of income there.

You've seen that for a seven-month effect; you can think about annualizing that.

But also, clearly, we expect the HPV Vaccines business to grow over time.

That will -- if we then turn back to the underlying business, you will have seen a operating income for about $560m.

There is royalty income in there associated with a, for example, trail of [Echo CC] that's declining.

We've also got some gains associated with some asset divestments and some other sources of income and some reclassifications.

The AstraZeneca component we expect, as I said, to decline a little to be then compensated for by growth in the MedImmune operating income, thus, leaving that flat for this year.

Obviously, we can update you in future years as we go.

But I think I've given you enough to get a sense of the overall dynamic.

Shall I turn to Merck and do that?

Please.

I think, as you are all familiar, the arrangements with Merck are such that there is one set of actions that will definitely take place at the end of the first quarter in 2008, namely, the partial retirement.

Under that, AstraZeneca will pay to Merck a sum which -- the quantum of which is the function of independent valuation.

And that will allow AstraZeneca to exit from the Merck arrangement a tranch of products associated with the old Astra U.S.

In addition, Merck has the option to exercise the first option.

If it were to do so, if Merck were to do so, the total payment is $3.3m.

If it did not do so, then the number depends upon the valuation.

But if it doesn't exercise the first option, its likely to be towards the top end of the two's, coming up to $2.7m to $3m, that sort of area.

So those are the payments that we will make; a definite payment of something under $3m at the end of the first quarter rising up to $3.3m if Merck exercise the first option.

Good, thanks.

John, do you want to comment on the CD-1 antagonist?

Briefly, Kevin, when we took this agent, in fact, there were two in the pipeline table, so we have the beginnings of a family into development.

We have clear views as to what might differentiate them.

But today, rather than telling you what it might do, we are going to wait until we've done the Phase II work.

And then assuming it gets through the hurdles that we've set, we will tell you what it does do.

Okay.

Next question.

We'll stay on the floor, here.

I got things popping up on the screen, but you are here, so we will stick with you guys first over there.

Thanks, it's Graham Parry from Merrill Lynch.

Just looking at your cost saving targets, which seem to have gone up, and I think have been brought forward a little bit as well, and you appear to be guiding to around $900m, or two thirds of the $1.4b in 2008.

So just three questions on this.

Firstly, given that the higher savings in 2008 and apparent bringing forward is news to the market, I was just wondering why it is that you've only guided to EPS which is in line with market estimates.

Do you think the market is still underestimating the pressure on your margins from the slowing top line and generic pressure?

Point of clarification; just wanted to be clear that the two thirds of cost savings that you are talking about delivering cumulatively in 2008 does mean that you expect this to be delivered by the end of the year, rather than throughout the course of the year.

And thirdly, can you just clarify that the timing of that realization has changed versus your original guidance, so have these been brought forward in any way.

Thanks.

I'll let Simon get to those in just a minute.

I think the approach we've taken to restructuring and the ability to execute it are rather dynamic.

So, while we put a program in place and think we know it's going to run, then we look for opportunities to potentially accelerate it, or do more.

And I think it has influenced our guidance to some degree.

But as you've mentioned, our top line has slowed down a little bit.

So there is some -- that's a dynamic as well; there is pressure points in there.

I think what we've done with the guidance is try to recognize that there is a fair amount of volatility in the established markets which, especially given that we operate in the two classes that are the most disruptive by generic in therapeutic substitution, I don't think we can predict as clearly as we could before, what the PPI and statin markets are really going to do.

And I think we have demonstrated over the last couple of years that we intend to deliver, or over-deliver on what we commit to on a day like this.

And I think accelerating the programs gives us some flexibility in what's going to take it if the top line softens up.

And we will go to Simon and let's just get some concepts here.

We announced the program, if you combine restructuring and synergy, the total annual benefit by 2010 of $1,400, $1.4b.

What we said today is that we will deliver two thirds of that in 2008.

To be specific, that means two thirds of the $1.4b is in the P&L in '08, okay.

And we have seen that our restructuring programs are on track.

We are pleased with the progress that we are making.

And we will obviously update you if we see and get some visibility on future timing.

But that's for 2008.

If we go back and talk about the impact of that on the overall shape and profitability of the business, we have said that we see sales growth in low to mid single digits for 2008.

We've also talked about a flat SG&A.

So we've got the benefit of the restructuring costs coming through.

But we do have some other upward pressures on our SG&A costs.

We have the full-year effect of MedImmune.

We have increased sales and marketing investment in the markets which you saw are delivering very strong growth for us, and we are investing to grow and support the top line.

We do have other inflationary pressures; litigation costs continued to rise year on year, so our legal costs go up.

But overall, our SG&A total costs we expect to remain flat in constant currency terms.

But in addition, we are investing high single digit in our R&D.

We are investing for the future.

And we've made a decision to maintain our operating margins at, or above, our target of 30%, but to put the benefits of some of that top line growth and some of the potential margin expansion into driving R&D for the future.

Okay, we will take another one on the floor, here.

Jo, and then we will come up here.

You had your hand up; we'll get you next, okay.

Jo, go ahead.

Jo Walton from Lehman Brothers.

Three quick questions.

Looking at your SG&A, you've done a fantastic job at bringing it down and you say that you should be able to keep it stable for this year.

Can you look any longer term, considering the changes that there are in the industry?

Is this an area where you think that there are opportunities to continue to take out money?

I guess that John is going to want to continue to raise R&D.

And gross margins are slightly more intractable to change.

Is it going to be reasonable that you can continue to take SG&A out to fund R&D?

That's the first question.

The second one is just a quick product question.

Seroquel XR, you say, major depressive order generalized anxiety disorder.

You had an excellent chart there showing it was as good as Duloxetene.

Well, Duloxetene is a damn site cheaper than Seroquel XR.

So is there an issue in the brave new world that you can't get the right price for these sorts of line extensions?

And the final question, I am not quite sure whether we are going to get -- whether you will be able to help here, but with generic protonics appearing quite suddenly in the U.S., you've got two dates coming up where you could get a challenge for Nexium and Seroquel.

What sort of visibility do you have of those potential filers and whether they might launch at risk?

Is it you'll just wake up one morning and find out that they have?

Or can you get a sense of whether they are likely to from your discussions, perhaps, with Medco, or other people?

Okay.

Let me -- I will take the first one there just around opportunities on SG&A and funding R&D and make some comments.

I don't know if Tony, Tony is in global marketing, might want to comment on XR and the positioning of it vis a vis Duloxetene.

Or maybe, John, you want to comment from a clinical perspective and then we will give some context to the third one too.

I think that there are a couple of points to make about SG&A, Jo.

One of them relates to separating out the G&A from the sales and marketing activities.

And I think we have taken a very aggressive approach in trying to become more efficient in our G&A activities.

And in the sales and marketing activities, I think it self-corrects to some degree.

You saw that in Western Europe last year we took out a fair amount of sales and marketing capacity in some of the markets where we didn't think we needed that much.

And we have, at the same time, added that.

I think Bruno said earlier today several thousand positions in the emerging world where we see opportunities in places like China, Brazil, Mexico etc.

So, I think there is some self-correction there, but we will continue to push it because it is an area where we think the model will continue to change and it's a big part of our overall expense base, relative to -- do you want to make a comment about G&A, and [funds] R&D?

Sure.

I think, if you ask, Jo, are there opportunities, there are always going to be opportunities.

And our job is to seek them out, and I think that one benefit in coming new to the Company and from a different sector is that I will see things, perhaps, in a different way with a different perspective.

I think there is an opportunity for us to benchmark ourselves against, perhaps, a different group than we might have done in the past.

And I think that will help us understand at quite a granular level if there is more opportunity.

There is further scope for us to draw on best practices that we've seen again in other arenas.

We've made terrific strides, I think, in AstraZeneca over the last couple of years, and I think we probably got started on this earlier than many.

In my mind, that build us a capability to keep ahead of the pack and adopt practices from elsewhere.

I know that I'll want to look at that in my own area of finance, so we are doing the right activities in the right place and as efficiently as well can.

We also have a program of lean sigma in operating in a number of parts of the business, which I've been impressed with, and I think there is much greater scope for applying that outside the traditional operating environment into some of our back-office functions.

And in addition, I can bring, and will be bringing, continued focus on cost and cash discipline.

All of this gives us the opportunity to keep us the focus on G&A and that's going to be important, because we want to put our investment behind R&D for the future.

I will take the third one real quick on the specific visibility to filers for the 30 months' phase.

No, we don't have any particular visibility into that.

You'd have to ask them what their plans are.

We obviously plan contingently and try to understand what's going on, but it's not obvious.

And it is dependant upon approvals, which we haven't seen yet.

John?

Yes, Jo, you posed a couple of good questions.

First of all, we are not going for the broad antidepressant, anti-anxiety indication.

We are going to go for the bottom 20% who are the most severe, many of whom will be failures on SSRIs, or will get this agent on top of others.

You are right, Duloxetene is a very good agent.

But if you look at that graph, and you've obviously looked at it fairly carefully, you will see that it takes until week four before Duloxetene actually gets the same level of effect as we were getting with Seroquel XR.

And in fact, in the first week it was not significantly better than placebo.

So we do see the differentiation, the speed of onset, which we believe will also help us in this field.

Good.

We will take one right up here, and then I will take one from -- number one from the screen and then (multiple speakers).

It's Paul Mann from Morgan Stanley; just a couple of questions.

Firstly, on the patent challenges from [Cheever] and Ranbaxy, are you actively in settlement discussions with those companies at the moment, or can you talk about it in any way?

And can you get that [premium] injunction ahead of them launching, or it's given any signal to launch?

Do you actually have to wait for them to launch before being able to go to court and try to get a premium injunction.

And then secondly, just on PN400, what percentage of your Nexium prescriptions is currently prescribed with an non-steroidal anti-inflammatory?

And do you have any plans as to how you are going to price that product, relative to say [Ensade] or Nexium?

Thank you.

Okay, I would acknowledge that Andrew Baum from Morgan Stanley has also asked the same question about are we involved with any generic parties in Nexium and Seroquel for settlement purposes.

I would just say we have resolved patent disputes over time with generics, both through the final court decisions on appeal.

We did that with Toprol XL, with Diprovan, with Prilosec.

And at the same time we have settled.

We had a settlement with Tamoxifen back then.

So I think we look at each situation independently.

We look at the strategic alternatives we have available to us.

We strongly believe in the intellectual property behind both of the products Nexium and Seroquel.

And that's the position that we have taken to date.

I am not an expert on this, but I believe for a preliminary injunction to take place there has to be some activity by them in the market for us to take action.

But, quite frankly, it's not my area of expertise.

But obviously, we watch this very closely, and will be at the appropriate times.

Tony, do you have the information on concomitant use of --- [NSAIDs] and, yes, and the opportunity, maybe you want to talk about the PN400.

Yes, I think the concomitant use of those patients that are on NSAIDs along with the PPI, [give it] in that 25% to 30% range.

It is the concomitant percentage.

And for us, we see an opportunity here to position one of the big issues with NSAID use is, of course, is the stomach upset and potential for bleeding.

And that's what we think the combination of the two products brings significant advantage to patients and that's how we will be positioned.

We'll go to the phone for --- the telephone [Ira Dass] from Sanford Bernstein.

Ira, are you there?

Yes, I am here.

This is Ira for Tim Anderson at Sanford Bernstein.

The question is you have a substantial clinical trial development program in the form of Galaxy with Crestor, yet I don't see that you have any hard outcome studies versus any active comparator.

Many of these programs are versus the placebo.

I know you recently announced the statin trial which is a [high vis] trial, but it does not have a major outcomes trial, like one thing with Vytorin, the [improved] trial.

And it just seems like a noticeable gap in the Galaxy program.

Thank you.

Okay, John, do you want to comment on our Crestor life cycle management programs?

Yes.

Crestor was a relatively late entrant to this field and at the time there was a huge body of evidence that statins were giving good outcomes in a number of situations.

So it was actually deemed to be impossible and unethical to do placebo-controlled trials in the major outcome areas.

So what we did was we looked at areas where there was little, or no statin use for potential usage, such as in heart failure associated with atheroma or coronary heart disease.

In terms of positive control studies, going head to head against other agents such as other statins, when you do the mathematics of how many patients its going to take in such a study, the cost of doing it and the duration of doing it, I suspect many of you will still not be working by the time the answer comes out.

So it was just viewed by the expert working with us as impractical to do.

We've approached it on a number of questions -- number of times for the obvious reason that you ask the question.

So it's a matter of in the core indications it is widely accepted by all the experts in the field that it's proven for statins by lowering HDL give benefits and outcome.

And that generally, the more you lower HDL the better the outcome benefit has been.

And, therefore, they are not prepared to let you do another placebo-controlled study in that situation.

Right, good.

Back to the floor, here in the back.

(Inaudible) JP Morgan.

I just want to follow up on some of the Crestor comments just made there.

We've got a launch, or a major push on the data from METEOR.

How long should we wait before we decide whether or not that launch has been successful, that push has been successful?

The exit rate in the U.S.

is around about 8%, probably a bit lower on volume growth, so it's come down an awful lot.

But then looking forward on the SATURN study, can you just give us the dose of Crestor and the dose of (inaudible) statin that we have in that [high vis] study, and about how long that study is going to take if it's just starting?

And then even further forward, I remember the JUPITER study looked, once upon a time, to be potentially a very, very big upside for Crestor, maybe around about 2009.

But I know it's slipped a bit.

What's the latest timing on the JUPITER study?

And how can you brand the results of that study for Crestor rather than [avistatin]?

Very good.

I will make a quick comment on the market dynamic in the U.S..

I will ask Tony then to make a comment, and ask John to comment on the SATURN dosing as well as the JUPITER question that was asked.

I think, as Simon said in his comment, our aim is to see a change in that line and to begin to see it move up.

It's really on the back of being able to make that claim from the METEOR data also on the progression of atherosclerosis.

And our expectation, our aim is to see that happen.

I don't want to put a timeframe on it.

We have assumptions built into what we are doing, but we think it does take a little bit of time, especially given the unexpected dynamic associated with the outcome of the enhanced trial.

Tony, do you want to add to that?

Can we get a microphone up here?

David, the -- I guess the only areas I would add is that, clearly, we want to get back on a growth trajectory.

Our strategy is absolutely to redefine success within those patients fighting [dislofenia] as inclusive of LDL and HDL impact, but as well the slowing of progression of atherosclerosis.

The early indicators for us is certainly position, attitude and awareness.

So we've been doing a lot of research to understand how physicians and our message is resonating with physicians and the early read on that data is quite positive.

They see the credibility of our message at all-time highs.

They also see the relevance of the message, which is not surprising based on the noise on the marketplace.

So it gives us a confidence that we go into the new year with.

John, do you want to comment on the studies?

Yes, okay.

Easiest bit first.

SATURN is 40mg of Crestor against 80mg of Lipitor.

It will be dosing for two years in order to show regression, or change of the rate of progression of the plaques to [Isis].

And therefore, having just started recruitment we are talking about a 2011 timeframe.

And that, again, is part of the issue in terms of the long-term studies there.

JUPITER is going to be, to some degree, event driven.

It may well give us that outcome study we are looking for.

But, of course, recruitment was based on [C] reactive protein and from the activities associated with that.

So it's a big study.

It's -- after a relatively slow start its moving well now, but we are not in a position to give you any information to exactly when it's going to complete.

And then the other one we should probably just mention is a study starting up from Canada is [HOPE 3], which is actually looking at people who are relatively normal in terms of lipid profile, and looking at long-term outcomes in those people, both with Crestor and with an anti-hypertensive in a 2x2 [pectoral] design.

So there are a number of approaches to this, so they all seem to come at it slightly from one side.

Right.

We will take another one from the floor, then we will go to questions, to over there, which is from -- [Bolam Yusef] from UBS will be after this question.

Thanks.

It's Mark Purcell from Deutsche Bank.

First question, could you just provide us with the Phase III Go/No-Go decisions you expect in the course of 2008?

Secondly, could you provide us with any idea what the target product profile was on ABT335 in terms of the renal profile, as well as efficacy as well?

Third, on the anti-psychotic market, clearly Respedol generics entering in June, could you discuss your thoughts on the potential for therapeutic substitution pressures on one hand and opportunities to gain market share on the other?

And lastly on RECENTIN, could you remind us of the trials that were reporting during the first half of 2008, which dates we may or may not see and how those trials are designed?

Okay, that's plenty.

The -- John, those will come to you in a minute.

But maybe we will just make a comment about the expectation on the Respedol generic, and I think our expectation is that that anti-psychotic market is quite unique and a product is a product.

There's not a history of therapeutic substitution in that area, and I think we expect to continue to grow our Seroquel franchise through the expansion to the XR formulation and the expansion of regulatory approvals in multiple areas, including bipolar disorder as well the claim we have now for schizophrenia, in the MDD and GAD at the more severe side, as John said, and I think that's an important point.

I think any generic entering the market does create some pressure, but at the same time this is a very unique class of age and patients are treated very, very differently on a product-by-product basis.

And it certainly does seem like one to switch from.

Tony, is there anything to add to that?

All right, John, then maybe we can go to Phase III Go/No-Goes, if you want to start with that.

Thanks, David.

If you look at the back of the slide pack, there is an H1 and H2 '08 news flow, so a number of those Go/No-Goes are actually in there.

And I'd be happy to talk you through any of them in particular.

Obviously, RECENTIN is one you particularly picked out.

And the answer is that, in colorectal cancer from the Horizon program, we have Go/No-Goes based on the completion of the second line Phase II study.

We have Go/No-Go on the Phase II/III study which is, at this Go/No-Go point, both of them the first quarter of the year.

We are, for lung cancer, also in a Go/No-Go with the National Cancer Institute of Cancer study in lung cancer, so all of those are first quarter this year.

In terms of the other projects, quarter three is Zactima where we will see pretty well all the Phase III data and we'll know whether we have the profile that we were looking for, so for the end of year presentation.

And Motavizumab, been through all it's Go/No-Goes already and a package is being put together as we speak.

Just briefly on Abbott 333 (inaudible) Abbott 335, you should ask that of Abbott rather than us.

Good.

Let's go to the phone, then.

Bolam Yusef from UBS.

Thank you.

I recall from your business review in '06, a slide showing requests for (inaudible) the most cost-effective [statin] formula in combo.

Would you be able to still say that?

And I guess a different way of asking that is how does the Crestor price compare to the [Lipitor] price in recent times?

And then secondly on Crestor, do you have a view for 2008 as to whether the realized price goes up or goes down?

And my last question is on RECENTIN.

Given the adapted clinical trial design which is highly innovative, but a bit different just given the FDA guidance given on adapted trials.

Is there some risk that that program might be -- might the goalposts effectively change at the FDA and cause problems with your filings?

All right.

I don't know the -- I'll go to Tony for Crestor pricing in 2008, but let me just comment.

I think the first part of your question, and I'm sorry we couldn't quite hear perfectly, was around the LDL lowering and the cost-effectiveness of Crestor because it lowered so much was that much better from a health economic cost perspective.

But the question I think on Crestor looking toward pricing, Tony, do you want to make a comment about it in the U.S.?

Yes.

I'll start by emphasizing what our go to market strategy is, David, and that is continuing to talk about the efficacy that the product brings in both LDL and HDL and now the slowing of progression, because I think that is an important point.

We believe that this is the right agent for certainly at-risk patients and we positioned it as such relative to, in broad terms, our commercial access.

We enjoy a fairly board coverage for Crestor in the marketplace.

We have well over 85% to 90% of covered lives are reimbursed, so we feel good about that.

Relative to the impact on price, in fact, we saw a slight increase in our net realized price through 2007 and we think that that trend can continue going in to 2008.

Good.

Thanks.

John, do you want to talk about the risk associated with an adapted clinical trial and whether it's different than the risk associated with any clinical trial.

I would remind everybody here that when I talk to John about clinical trials my question is, when is it going to be finished?

And he reminds me that it is a scientific experiment that it's not a timeline, and I might not like the answer so.

Okay.

Well, you've taken some of my lines there David.

The answer is, it's always a balance.

And in this occasion we believed that by going into this adapted design we would get a very early view on decision point, faster and cheaper than doing it any other way.

We'd get a good view as to comparable efficacy or lack of it, versus Avastin, which is the gold standard in this area.

And we would also get some good dose information to allow us to make a dose decision.

So those are the three very important things that we could do whilst building in to the program a number of fallback and fail safes, and also discussing whether the regulators, who knew what we were trying to do and have bought into it.

And we've talked long and hard with them about what statistical penalties we may or may not pay and how do deal with changes that we might make as a result of any decisions that come from that.

So the answer is, we're in there, we're going to see the data and when we have that we'll share that with you and with the regulators.

And that's the point at which we'll see whether we've made the win or the lose.

But we believe it was well worthwhile doing and it's something I would certainly do again.

Okay.

While we got a microphone right up here to the middle, there's a quick email question.

Simon, maybe you could handle that, pro forma sales percentages in 2007 from Kristofer.

Yes, Kristofer Svensson from Carnegie is asking what the pro forma sales for Synagis in 2007 are.

We do not provide and we won't provide pro forma sales for Synagis in '07.

What we can say, though, is that sales for seven months within AstraZeneca was $618m, sales for the fourth quarter were $480m and the bulk of the sales for Synagis, given the nature of the product, are in the fourth and the first quarters.

I think adding that together will give you a good handle on the sales.

Great.

You.

Yes, Savvas Neophytou from Panmure Gordon.

Just to carry on on Crestor.

Do you keep a close eye on dynamic market shares and, essentially, I'm trying to get a handle on how you see patients that have been actively switched from Lipitor to simvastatin and may not be getting to goal.

When those patients are turned to a statin that may get them to goal, are you seeing Crestor getting a fair share of that, or are they being switched back to Lipitor?

And I have a second question which is, essentially, looking at the emerging markets and, you know, China is a big country, where do you see in five year's time, for example, your sales force requirements be?

Are we looking at 2,000 reps?

Are we looking at -- are you forming JVs there?

And how do you actually make any money in China?

Great.

That's great.

You know what, I think I'll rephrase your first question, because I think your question is for patients that don't get to goal, what's the dynamic market share?

Like, is Crestor doing better than, the same as, or worse that Lipitor on the patients that do get switched.

I don't know how much insight we have as to who gets switched, but I'll let Tony think about that for a minute.

Bruno, do you want to talk about China?

Bruno Angelici runs our Rest of World operations and was very involved in the strategic decision for AstraZeneca to invest in China several years ago, in a way that I don't think we were planning to do at the time.

So he knows quite a bit about the market.

Let me give you the context regarding China.

First, China is a market which is growing at a very fast speed.

It's a $17b market right now and many people forecast that this market will be probably $30b, $34b in, let's say, four or five years, which means that China will be a market as big as Germany.

The growth rate and the development of this market has been quite spectacular over the last few years.

AstraZeneca has been one of the -- probably the first, or one of the first, multinational corporations to recognize that China was going to be important.

And we are now the number one prescription Company in China.

We have achieved, last year in '07, $400m of business, with a growth rate of 26%.

If you project a growth rate like that a little bit, you will see that China in itself is the equivalent of a new product which start to be significant.

Let mention one thing; it's profitable, it's nicely profitable.

So a little bit less profitable than an established market, obviously, but we are making money.

To look at your question, is the future, the prospects for AstraZeneca in China are good because we are waiting for the listing of a good number of new products.

The timing in China is, they were behind the timing of entering products in the market, significantly behind the rest of the world, so we are waiting for the listing of Nexium, Crestor, (Evistat), Symbicort.

This listing of these new products should happen, hopefully, in 2009.

The government in China is listing pharmaceutical products every four or five years.

So we will have an access to the market for all these products probably in '09, which will put us in a very nice position to continue to grow at the fast rate.

Now for your specific question, we have right now approximately 1,800 reps, commercial people in China, and our model is to grow by -- it has been very successful so far, is to increase our sales force in an appropriate way covering the major cities, the tier-two cities and as we grow we have a strategy to target exactly the different parts of the country as this country is growing.

So we will continue to grow and to grow -- to have a strong organic growth, investing and development our sales organization.

Tony, do you want to make a comment about our dynamic market share.

Yes, I'll give you some insight.

First off, we don't track just on the failures only; we do look at net switching fairly closely.

And in the run-up to 2007, obviously, you saw the steady growth of generic simvastatin and most of those switches were coming at the expense of Lipitor, where they almost traded equal amounts of share performance.

Vytorin, certainly, was getting some net switching positive because of the base of simvastatin.

It was a logical alternative for physicians if they were upgrading.

And Crestor was slightly on the negative side on the net switches.

As we became more aggressive with our own message, with the addition of the METEOR data, what we did see is some subtle changes and shifts on those net switches, to the point where through the early weeks now of January the net switches are positive for Crestor.

And we are not losing on the downside to simvastatin.

In fact, we are picking up some prescription activity in overall switches.

Good.

Thank you, Tony.

John, a quick question on email, can you handle that one?

It's Mike Ward at Nomura.

What's your view of recent calls for long-term active comparator outcome studies in diabetes as a requirement for U.S.

registration?

The answer is not a lot.

It would totally change the way we develop medicine for this, or any other market if we have to get to the point where we know where it fits in the medical marketplace before we actually register a product, rather than state the efficacy and quality as we do today.

It would change, not just the diabetes, it would change the whole registration process, timing and effort.

So I don't believe FDA are going down that route; they've not indicated it for either (Dapa glyprophen) which we talked to them, or (pefulis).

Good.

All right, we'll take one more question from the floor and it can't be a four-part question.

One question and then we'll wind up.

We're going to hang around a while, so you can come and find us if you want to.

I want to respect time because we did run over a little bit.

(Mary Letterman) from (Societe); really quick product questions.

Just quickly on Horizon I, will that also report in the first quarter in terms of actually seeing data, or can you give us any feel that would -- for information that would give us a feel as to when in the first half it might report?

And quickly on 6140, is that non-major safety concerns.

There was 10% this year in the Phase II study.

Was that not seen in Phase III, or was it seen but it looks very manageable?

And a final question, just really on Advair trying to get a feel for what switch rates you see from Advair into Symbicort.

When you say one out of four new starts is on Symbicort, is that people who were previously on Advair?

And generally, how do you think things will pan out in the GP market in terms of going for new patients versus actually getting patients to switch over from Advair?

I just want to start by saying you broke the rule.

John, the Horizon I report is quick though.

We said with all the Horizon, with two out of the three Horizon studies, one will complete, the other one, Horizon III, will have interim analysis.

They're with the Data Safety Monitoring Board this quarter and, depending on what they say depends on what you see, and what we see by the way.

As far as 6140 is concerned, there is a Safety Monitoring Board that reviews data every month.

They've seen more than 2,000 ECGs.

They've seen all of the data.

We look at the fallout rates and we look at the bleeding rates, and that's why I said, to date, we've seen no evidence of any significant issues.

On switch rates, I don't know about switching, I'll let Tony give a quick answer.

But when we said one out of four new patients, they were patients new to combination therapy.

So from specialist switch rates, is there anything about at switching?

At this point, we don't have anything.

All right.

With that, what I would like to say is we've tried to focus on what I believe are the four key things we need to do; we've probably focused on three.

Because strengthening the pipeline, and you've heard a lot about R&D and what we're doing there today, and I think that we are making progress.

We said we need to grow our business to be successful; we continue to do that.

There is pressure on the top line, but that doesn't cause us to do anything but drive harder to make sure that we can deliver the business, given the context that we have.

Reshaping our business says a lot about preparing for the future.

We're operating more efficiently and more effectively.

The fourth initiative that we have underway is about changing the culture and the behavior of the people within the Company.

And, while we don't spend a lot of time talking about it at conferences like this, I can tell you there's a tremendous amount of energy within AstraZeneca to prepare ourselves to be successful as we approach a more dynamic, challenging market in the turn of the decade.

So, I will leave you with that thought.

I will thank you for your participation and attendance.

Everyone will stay here for a while from our group, although I do have to start a conference call in few minutes, but please come on up and say hello.

Thank you.