AstraZeneca PLC (AZN) 2008 Q4 法說會逐字稿

Good afternoon.

Welcome, ladies and gentlemen, to AstraZeneca's annual results analyst conference.

Before I hand over to the auditorium, I would like to read the Safe Harbor statement.

The Company intends to utilize the Safe Harbor provisions of the United States Private Securities 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 risk and uncertainty, and results may differ materially from those in expressed or implied by these forward-looking statements.

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

We will now be joined to the auditorium ready for the start of the conference.

Great.

Well, good afternoon, everyone.

Welcome to our AstraZeneca's full-year results presentation for 2008.

So a pleasure to be here with you, and thank you all for coming, and welcome to those that are online with us.

After my opening remarks, you will be hearing from Simon Lowth, our Chief Financial Officer.

Simon will take you through in some detail a very thorough review of the financial performance of the business in 2008.

And then John Patterson, Executive Director for Development will review our R&D pipeline.

I think following that there should be plenty of time for questions.

We have a few other members of our executive team here as well who should be able to help with the questions that might come up.

Against the backdrop of virtually unprecedented global economic distress and financial market volatility, AstraZeneca has delivered a robust financial performance in 2008.

That performance is strong testimony to the determined execution of our business plan by people at every level of the Company.

These strong results are underpinned by the underlying organizational and financial strength of the organization that we have created, and I would like to personally thank the entire team for our performance in 2008.

Our strategy remains unchanged.

So I will just quickly summarize it for you now to put in the context for our results.

We are a research-based pharmaceutical business focused exclusively on human health.

In order to achieve our short and long-term objectives, there are four dimensions to our plan, and we are confident that success in each area will deliver sustainable return for our shareholders, while creating a business that is lean in its approach and agile in its thinking.

Here are the four dimensions.

First is building a portfolio of medicines that are valued by payers and by patients.

Those medicines will come from a pipeline that is efficient, cost-effective and reflects leading-edge research both from our own laboratories and those of our alliances and our partners.

We have made significant progress in this area over the last few years, and John Patterson will take you through the current status in just a few minutes.

The second dimension is about driving growth of our existing and future brands through innovation in our sales and marketing activities.

Our key brands are continuing to grow in their respective segments as you will see in Simon's presentation.

In addition, 2008 was characterized by serious patent challenges which we navigated successfully while defending our intellectual property.

Expanding our global footprint also falls under this dimension, and we have talked previously about our ambitions in the merging markets of Asia, Latin America and Russia.

As you will see, our early investments in these markets are delivering strong growth in the business.

The third dimension relates to the way we run our business.

We are determined to reduce our cost base and increase productivity.

We will do that by focusing and delivering on core activities really well and using technology and outsourcing to drive efficiency in noncore areas of our business.

You will have seen in the press release that we have expanded our restructuring program since it was first announced in July 2007.

Simon will cover the additional costs and benefits of this program in his remarks.

Personally I believe that we are making real progress here.

Not only in what we have been able to deliver so far, including the investments that we have been able to make in biologics and in the merging markets, but also in changing the way we think.

We no longer believe we have to do everything in-house.

Our experience in scientific collaboration has extended into relationships with companies which manage clinical data, run global IT infrastructure for us and manufacture active pharmaceutical ingredients externally to name but a few.

It is a new way of doing business for AstraZeneca, and we are leveraging every opportunity that we can to change the way we work.

The fourth dimension in this strategy is about doing business responsibly.

This is an absolute requirement of every employee in AstraZeneca, and we take it very seriously.

An example of what this means in practice is the training provided to every employee in the Company last year to ensure that they were aware of our recently revised code of conduct.

We operate in 50 countries around the world and distribute products in many more.

We want AstraZeneca to be recognized as making a valuable contribution every place that we do business.

The strategies delivered robust results that we are announcing today, so let's take a look at headline.

On a worldwide basis, we achieved real revenue growth, up 3% in constant currency terms to $31.6 billion.

That $31.6 billion represents actual sales growth of 7% when you take in the benefit of currency.

We achieved that growth against a background of a US market, which grew at just 1.4% in value terms according to IMS, and that is the lowest rate of growth reported in the United States since 1994.

We outperformed in the US market, and that is because excellent commercial execution drove the growth of key brands like Crestor, Symbicort and Seroquel ahead of their respective markets, and we gained share in each of those markets.

Nexium did not quite keep pace with the overall proton pump inhibitor market growth rate because it was fueled by generic products.

But Nexium did outpace every other major brand in the category, and it was the only branded proton pump inhibitor to actually grow volume in 2008 in the US market.

Moving on, we're also continuing to drive strong growth in our emerging markets.

Full-year sales for 2008 were over $4.2 billion.

That is a 16% increase over 2007 on a constant currency basis.

The emerging markets account for just under 14% of total Company turnover.

But they accounted for more than half of the Company's constant currency sales growth in 2008.

Very important to us.

The entire industry has produced good growth in the emerging markets.

Our performance at AstraZeneca is well ahead of market growth, and we rank among the best of our peers in these markets.

Clearly our strategic investment is driving strong performance throughout these markets.

Moving on in three sets of patent litigation, we successfully upheld our intellectual property and mitigated near-term risk to revenue.

You all know in April we reached a settlement of the Nexium patent litigation with Ranbaxy.

In July we successfully achieved a summary judgment in AstraZeneca's favor in the Seroquel patent litigation with Teva and Sandoz.

And in November we reached a settlement of the Pulmicort Respules patent litigation again with Teva.

All three of these actions have given us important clarity and stability as we develop our business plan for the next several years.

Now turning to core operating profit, we were able to leverage 3% sales growth into a 9% increase in core operating profits.

Again, that is in constant currency terms, and we reached $10.9 billion as you can see on the slide.

We have made a determined effort to drive efficiencies in the day to day operations throughout the organization.

That effort has enabled us to make those strategic investments that I mentioned in emerging markets and to invest in strengthening the pipeline, while at the same time, we have been improving our operating margins.

Going forward we will continue to drive efficiency and productivity, and we will seek to derive every bit of leverage between sales and profit growth that is available while at the same time managing the business for sustainable performance in the long-term.

And with that long-term sustainability objective in mind, we have expanded the scope of our restructuring in reshaping program.

In a few moments, Simon will go into the details of what we have accomplished to date and our plans for the future.

Moving on, core earnings per share for the year were $5.10.

That represented an 8% increase at constant currency.

The board has recommended an increase in the second interim dividend, bringing the total dividend for the year to $2.05.

That represents a 10% increase over the 2007 dividend.

As you will recall, this is in line with our policy to grow dividends in line with earnings before restructuring costs while still maintaining two times cover.

And we executed net share repurchases of $451 million in 2008 prior to suspending the program at the third quarter to maintain flexibility to invest in our business.

The board has reviewed that decision and has decided to maintain this stance, so we have no share repurchases planned for 2009.

And while it is not on this slide, I would be remiss if I failed to mention our strong cash performance in 2008.

Our strong operating cash flow and management focus allowed us to reduce net debt by $1.9 billion to $7.2 billion.

We are well ahead of our plan to get to these sorts of levels by 2010.

The final element of 2008 performance I would like to address in these opening remarks is the progress we're making on the pipeline.

As you can see from this chart, we have made some big strides in expanding the pipeline over the last few years.

From 2004 we have increased the number of projects in clinical development by more than 60%, and we have doubled the number of projects in Phase III for registration.

In 2008 alone our Phase II portfolio has increased by more than 50%.

We currently have four important projects, including two new molecular entities awaiting registration, and most importantly, we have plans to file up to four new products for regulatory approval in 2009.

And just to be clear, although the intermediate markers for progress are all pointing in the right direction, it is successful registration and launch of new products that will ultimately be the measure on which we judge the progress of our pipeline.

So those are some of the headlines of our 2008 performance.

What I would like to do now is turn the podium over to Simon Lowth who will take you through the details of our overall performance and give you a sense of how we see 2009.

Thank you.

Simon over to you.

Thank you, David, and good afternoon to everyone.

I'm going to cover four topics.

First, I will summarize our financial results for 2008 and demonstrate that we 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 topline growth of our key brands and markets and in improving profit margins through operational efficiencies and restructuring.

I will then review our strong performance in generating cash and how we have allocated our cash between business investment to drive future growth and returns, debt repayment and distributions to our shareholders.

And finally, I will describe our business performance priorities and the financial targets that we set for ourselves in 2009.

AstraZeneca has delivered a strong set of financial results for 2008 against the backdrop of a volatile and challenging external environment.

We performed well against the targets that we set for ourselves during the course of the year.

The business delivered sales of $31.6 billion, representing constant currency growth of 3%, in line with our guidance of low to mid single digit growth.

We improved our operating margins by 150 basis points in constant currency terms.

Our efficiency and restructuring programs have helped to deliver improvements in gross margins to reduce our R&D expenditures despite increased biologics investments and to deliver underlying SG&A efficiencies that have offset the addition of MedImmune and increase investments in emerging markets.

Improved operating margins translated into core operating profit growth well ahead of sales growth but 9% in constant currency terms, taking core operating profit up to $10.9 billion.

Net finance expense was $463 million.

That is $352 million higher than 2007, which only had net debt for seven months of the year following the MedImmune acquisition.

Included in the net finance expense for 2008 is a net fair value gain of $130 million relating to two long-term bonds.

The full details of the accounting treatment are in the press release, but simply put, the gain has been driven by the widening of credit spreads seen during the year.

Core EPS increased by 8% in constant currency to $5.10.

Core earnings benefited from about $0.07 of currency gains in the fourth quarter compared to the Q4 '07 rate embedded in our guidance.

Taking account of this, we delivered core EPS for 2008 at the top end of our guidance range of $4.90 to $5.05.

To move from core to our reported EPS, we adjust for four categories of cost.

First, we deduct restructuring charges of $0.43, which is $0.03 lower than 2007, but it is around $0.11 higher than our guidance for 2008 due to the expansion and scope of our restructuring program.

I will describe the benefits and the cost of the expanded program later in my presentation.

Next, we deduct the amortization of the intangible assets acquired with MedImmune, amounting to $0.21 for 2008 compared with $0.12 for the seven months of amortization incurred in 2007.

Third, we deduct intangible asset impairments associated with corporate acquisitions, which amounted to $0.19 for the year.

Our core earnings exclude the amortization of significant intangibles arising from corporate acquisitions, most notably MedImmune.

Consistent with this, our core earnings also exclude any impairment of these intangibles.

The $0.19 comprises $0.12 from the Ethyol impairment taken in the first quarter of 2008 and a further $0.07 in the fourth quarter.

The fourth-quarter impairment of $0.07 in earnings or $150 million in operating profit include $60 million in reported R&D expense principally related to the return of the worldwide rights to the Hsp90 drug candidate to Infinity, and $90 million charge to reported other income, which relates to revised forecasts, the royalty stream from HPV vaccines filled by Merck and Glaxo.

Finally, we deduct the amortization expense related to intangible assets arising from the Merck exit arrangement, which was $0.07 for the year, up by $0.01 over 2007 as a result of the payments we made to Merck in March 2008.

Deducting these costs from core earnings, the business delivered reported earnings per share of $4.20, up 2% in constant currency terms.

On our terms, the first key driver of our earnings growth, namely our progress in sustaining our topline sales growth for the year and for avoidance of that when I refer to sales growth rates, they will all be on a constant currency basis.

Sales in North America were up 2%.

In the US sales were up 1% as the inclusion of a full year of MedImmune sales and modest growth in the rest of the US business more than offset the $674 million of Toprol XL sales lost to generic erosion.

Also, within North America, our Canadian affiliate delivered a strong performance of 8% topline growth.

Sales in the established rest of world markets were up 2%.

Sales in Western Europe increased 1% as volume grew slightly ahead of price declines.

Given the significant restructuring in our European sales and marketing operations, we're now generating a similar level of sales with significantly lowered cost.

Sales in Japan were up 4% with Crestor the biggest driver.

Australia also grew strongly on the back of Crestor and Nexium.

Sales in emerging markets were up 16% to more than $4.2 billion, and our increased investment in our emerging markets is driving strong topline performance, and it is driving contribution growth ahead of sales growth.

Our five key brands delivered sales growth of 9% for the year, equivalent to $1.3 billion in constant currency terms with Crestor, Seroquel and Symbicort delivering most of this growth.

Globally Nexium sales were down 2% to $5.2 billion.

Sales in the US were down 8% to $3.1 billion.

Dispensed retail tablet volume increased by 2%.

Nexium was the only major PTI brand to deliver volume growth, a truly robust performance.

As expected, the significant adverse price variance that was a feature of the performance in the first three quarters of the year normalized in the fourth quarter with realized prices broadly flat in Q4.

On average over the entirety of 2008, average realized prices were down around 11%.

Nexium sales in the rest of the world were up 9% to $2.1 billion.

There was continued strong growth in emerging markets where sales were up 26%.

Western Europe saw a 2% increase despite a significant decrease in Germany as the result of a material reduction in the reference price of PTIs, which we have chosen not to follow.

Looking forward in the US, we know based on contracting for 2009 that average prices will decline but probably not in double digits.

Volume should be stable through the first half of the year.

The unknown factors in the second half are whether the market sees multisource generic pantoprazole or the launch of generic lansoprazole, both of which could add some downward pressure.

We will also be seeing the full-year effect in 2009 of the German market changes.

Seroquel sales were up 9% to nearly $4.5 billion.

In the US sales were up 5% to $3 billion.

Total prescriptions for the year were up 6.5%, which is ahead of the market growth in the US antipsychotic market of around 5%.

Around 37% of the increase in Seroquel prescriptions is attributable to Seroquel XR.

Seroquel's share in the US is a market-leading 31.6% in the antipsychotic market in December 2008.

Seroquel sales in the rest of the world grew by 17%, $1.4 billion with a value and volume growth well ahead of the market in all regions.

John Patterson will cover the extensive lifecycle management program for Seroquel and for Seroquel XR that are important drivers of future growth.

Crestor sales were nearly $3.6 billion, a 26% increase over last year.

Sales in the US were up 18% to nearly $1.7 billion.

Fueled by the promotion of the atherosclerosis claim, Crestor prescriptions increased by 10.8%, well ahead of the statin market, which grew by 4.4%.

Crestor was the only major brand of statin to increase market share in 2008.

Crestor's share of total prescriptions reached 9.9% in December, up 125 basis points.

Importantly in the dynamic market, we gained more than 2.5 points in share of new patient starts to over 12.5% in the weekly data at the end of December, and we have been experiencing net gains in the switch to market full year.

Towards the end of the year, we even saw positive net switches versus simvastatin.

We enter 2009 with our strongest position ever in managed care access for Crestor in the US, and this has been achieved with pricing stability.

Turning to the rest of the world, Crestor also performed very strongly with sales up 34% to $1.9 billion, and there were strong performances across the board.

Sales in Western Europe were up 16%.

Canada was up 30%.

Crestor sales in Japan were up 93% where we've just overtaken Lipitor to become the number one statin in dynamic market share with Crestor garnering 26.4% of the new and switched patients.

Australia also turned in an outstanding performance with sales more than doubled in 2007, and Crestor sales in emerging markets increased by 41%.

Crestor's position will be further strengthened on the back of the JUPITER trial results.

But keep in mind that we will start the process of regulatory submissions based on JUPITER in the second quarter of 2009, so promotional use will not start until sometime next year.

Globally Arimidex sales for the year were up 4% to $1.8 billion, although the decline of 1% in the fourth quarter is a reflection of the maturity of the brand and, indeed, the aromatase inhibitors as a class as there is less and less headroom for the market to move away from tamoxifen.

We're also seeing the effects of patients reaching the end of their five-year treatment regime on Arimidex.

Sales in the US dropped 9% to $754 million and were up 1% in the rest of the world at $1.1 billion.

Worldwide sales for Symbicort increased 22%, exceeding $2 billion per annum for the first time.

Sales in the US reached $255 million for the full year, $90 million in the fourth quarter.

The launch continues to go well.

Our product trial rate amongst target specialists is now approaching 90%, and more than 30% of their new patient starts for fixed combination therapy are going to Symbicort.

More than half of our target primary care physicians have tried Symbicort, and that is up from less than 20% trial rate at this time last year.

So we have made great strides on that performance metric in 2008.

Share of new starts for fixed combination therapy in primary care is over 17% in the latest week.

Overall Symbicort's share of new prescriptions reached 11.7% in the week ending 16th of January with share of patients new to combination therapy at 18.3%.

Symbicort sales in the rest of the world were up 9% to $1.7 billion, chiefly as a result of 6% sales growth in Western Europe.

Sales in emerging markets were also up 21%.

Symbicort growth is being fueled by increased usage in COPD and market share gains and asthma driven by launch rollouts of Symbicort SMART, which is now being approved in 91 markets.

Although not classified as a key brand, the performance of Pulmicort is worth a mention.

Worldwide sales of Pulmicort were nearly $1.5 billion, unchanged at constant currency.

US sales of Pulmicort were up 2% for the full year to $982 million, around 90% of that in Pulmicort Respules.

In the fourth quarter however, Pulmicort Respules were down 18%.

This decline was a result of the at risk launch of generic budesonide inhalation suspension or BIS by Teva on November 18.

The patent litigation between AstraZeneca and Teva was settled on November 26.

The agreement allows Teva to commence sales of BIS under an exclusive license from us beginning December 15, 2009, the details of which were included in the settlement announcement.

The agreement also provided for any product already shipped by Teva to remain in the market to be further distributed and expensed.

As a result, Teva product accounted for nearly 15% of total prescriptions to BIS product during the fourth quarter, including a 40% share in December 2008.

If we assume that Teva shipped around three-month supply, which represents typical at risk launch, there may still be products to displace branded prescriptions in the market in the early part of 2009.

You may, therefore, see a slow start to Pulmicort Respules sales in the first quarter of 2009.

So the five key brands are still the engine that drives overall sales growth -- $1.3 billion in constant currency growth.

But there is a lot of movement in the product portfolio aside from these five products.

A full year's worth of sales contributions from MedImmune products added a further $648 million.

On the negative side of the ledger, Toprol XL and Seloken declined by the same order of magnitude.

Losec continued the decline, and Casodex now has generic competition.

Pulmicort just about held its ground in 2008, although as I said, the fourth quarter was down.

The remaining base business of $8.5 billion was flat.

The net result from these dynamics was sales growth of 3% or just over $1 billion in constant currency sales growth.

Having described the sales trends, I will now turn to the second key driver of core earnings growth for 2008, namely the improvement in core operating margin.

I will focus on core margins and profit as this is the basis of upon which we set our guidance.

As always, the press release contains the statutory numbers and a detailed reconciliation to our core measures.

As with sales, when I refer to growth rates, they will all be on a constant currency basis.

For the full year, core gross margin increased to 80.4% of sales.

That is an improvement of 80 basis points on a constant currency basis.

Continued efficiency gains and lower payment to Merck and favorable mix effects were partially offset by higher royalty payments and intangible impairment in certain other provisions.

The intangible impairment comprises a $115 million charge to cost of goods sold to the impairment of intangible assets relating to Pulmicort Respules following the at risk launch by Teva and the subsequent settlement of the patent litigation.

Core R&D expenditures were broadly level with last year at a 1% decline in constant currency terms.

Productivity initiatives and restructuring benefits combined with some portfolio changes and lower impairment charges primarily for in-licensed intangible assets have offset the impact of increased investment in our biologics capability and the maturing of the R&D portfolio.

Intangible impairments taken through the R&D costs amounted to $84 million for 2008 compared with $120 million in 2007.

Core SG&A expenditures were up 3% for the full year with the inclusion of a full year of MedImmune, increased investment in our emerging markets, and higher legal expenses mitigated by the efficiency gains and the benefits from our restructuring program.

Core other income of $734 million was broadly flat compared with 2007 as the inclusion of MedImmune licensing and royalty income streams offset lower levels of onetime gains and royalty income in the rest of the business.

Overall on a constant currency basis, core operating margin increased by 160 basis points, driving core operating profit of 9% growth compared to sales growth of 3%.

The expansion in our core operating margin demonstrates the successful delivery of our restructuring program and, indeed, our broader efficiency initiatives.

Since 2006 we have removed just under 8,000 positions across AstraZeneca.

The headcount reductions are being delivered in our supply chain and established market salesforces across our management and support functions and in our R&D organization.

These efficiencies have allowed us to expand operating margins while increasing investments in driving our future growth.

Specifically we have added 3000 positions through the acquisition and subsequent expansion of MedImmune, and we have added 2300 new positions in our emerging markets.

Overall AstraZeneca's net headcount has been reduced by 2300 positions.

Now we have announced today the expansion of our restructuring program to drive further improvements in our long-term competitiveness.

The new initiatives include further rationalization of the global supply chain, additional restructuring of our sales and marketing organizations and further restructuring of our support functions and business infrastructure.

Total program charges for restructuring and synergies are now estimated to reach $2.9 billion.

That is up from just a little under $2 billion.

I anticipate that most of the remaining $1.1 billion will be charged by 2010, say roughly evenly between 2009 and 2010.

When fully implemented, the program is expected to result in the reduction of about 15,000 positions.

Overall the program will deliver benefits of an estimated $2.5 billion per annum, up from $1.4 billion with $2.1 billion in annual savings expected before the end of 2010 and the balance to be realized by 2013.

And we plan to deliver two-thirds of the original $1.4 billion benefit by the end of this year, and we have accomplished that.

The remainder of the $2.1 billion target for 2010 will be delivered evenly over this year and next.

Let me now turn to cash flow.

This is a dimension of business performance upon which we have placed increased emphasis, and this is reflected in a strong cash performance in 2008.

Cash generated from operating activities increased by over $1.2 billion to $8.7 billion.

The increase in operating cash flow was driven principally by an increase in EBITDA of $1.8 billion and reduced working capital outflow.

Turning now to the deployment of cash, we invested $2.6 billion in the payment to Merck in March of 2008 as part of our phased exit from that venture and a further $1.4 billion in capital and in intangible assets to drive future business growth and productivity.

We distributed $3.2 billion to shareholders through net share repurchases of $0.5 billion and dividends of $2.7 billion.

The remaining $1.6 billion of operating cash flow, combined with some of our opening cash balance, was used to repay $3.3 billion of gross debt.

Overall net debt was reduced by more than $1.9 billion to $7.2 billion at the end of 2008.

This is a very strong performance, well ahead of our original plan to reduce net debt to $7 billion by the end of 2010, and it leaves us well placed in these turbulent times.

We have just under $1 billion in debt that is all due in the next twelve months, which we anticipate repaying from current cash balances of nearly $4.3 billion and the strong cash generation in the business.

Our performance priorities for 2009 are a continuation of our focus in 2008.

We will sustain our investment in lifecycle management and targeted sales and marketing development to drive our key brands and markets.

We will deliver broader further productivity improvements through continued cost efficiencies and discipline and through delivery of the expanded restructuring program.

We will maintain our strong focus on cash management, ensuring that we convert growth in EBITDA into cash, through continued improvement in working capital utilization and investment discipline.

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 set for ourselves.

As David mentioned, we are not immune from the pressures that conditions in the global economy bring to bear.

We are recession-resistant, but we're not recession-proof.

For 2009 we expect revenues to be in line with 2008 levels in constant currency terms.

Our plans take account of some impact of the global economic conditions on demand for pharmaceuticals in general and on AstraZeneca's products and markets specifically.

We aim to grow core earnings per share on a constant currency basis.

With continued efficiency gains mitigating the downward pressure on pricing and the effects from patent expiration such as Casodex, we anticipate a slight improvement in core gross margins compared with 2008.

For both R&D and SG&A, the same dynamics seen in 2008 should be in place in 2009.

We aim to deliver enhanced efficiencies to provide the headroom to invest in those areas that will drive the business forward in the long run whilst holding the line on our net expense trends.

Overall we expect to absorb inflationary increases and hold the combined R&D and SG&A expense flat in CER terms.

Within R&D our planning assumptions for 2009 do allow for increased levels of intangible asset impairment, perhaps twice the $84 million in 2008, but clearly it is one of those swing factors that cannot be called with precision.

You will have seen the announcements on the termination of the Abraxane agreement and the disposal of our Nordic over-the-counter product portfolio.

Assuming competition authority approval of the Nordic disposal, both will be realized in the third quarter.

This should lead to some increase in core other income in 2009, up to around $900 million.

Net finance expense will likely increase in 2009.

The benefit from the reduction in net debt will be partially offset by the low yield on cash.

The bigger factor is that our planning assumption is that the net fair value gain of $130 million that we experienced in 2008 will largely reverse as credit markets stabilize, in which case net finance expense could be around $700 million in 2009.

The tax rate should be around 29.5% in 2009.

Translating this anticipated performance on a constant currency basis into a target core EPS given the tremendous volatility in the world currency market presents quite a challenge for AstraZeneca and I imagine the analyst community as well.

It is important to understand the assumptions for currency upon which we are basing our target core EPS range for 2009.

We have decided to use the average exchange rates that have prevailed in January 2009 as the basis for setting our guidance range.

We looked at the fourth-quarter 2008 rates, and concluded that with the significant move in rates from November, particularly in Sterling, this was not appropriate for providing guidance for the current year.

Based on the January '09 average, the specific rates (inaudible) are shown on the chart.

On this basis the target for core EPS is in the range of $5.15 to $5.45.

Actual performance within this range is, of course, dependent on business performance and the extent of the down side pressures from the global economic conditions.

This target takes no account of the likelihood that actual exchange rates for 2009 may differ materially from the January 2009 average rates upon which our guidance is based.

As we did in 2008 at our quarterly results announcement, we will endeavor to be as transparent as we can in terms of how actual rates are affecting our performance, and we will be clear as to how much any guidance change is driven by underlying business performance versus the currency adjustment, an updated currency sensitivity estimate that has been provided to assist you in modeling your own currency assumptions.

There will, of course, be the usual adjustments to core EPS that will bridge to EPS on a reported basis.

For 2009 restructuring Infinity costs will likely be in the order of $0.24 as we incurred a cost for the expanded program.

MedImmune amortization and Merck amortization should be around the same level of 2008.

The final potential adjustment is from impairments that may arise related to intangible assets associated with corporate acquisitions.

What I can say is that we have $0.19 worth in 2008 related to Ethyol and other MedImmune assets, but it is an item that we will adjust comp call ahead of time.

Before I conclude, just a quick word on distribution to shareholders.

The board has today declared a second interim dividend for 2008 of $1.50 per share, bringing the total dividend for the year to $2.05 a share.

That is a 10% increase over last year.

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 drawn attention to core EPS in giving our earnings guidance as we think this best reflects the performance of our underlying business.

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

In the third quarter of 2008, the board took the decision that no further share repurchases would take place in 2008 in order to maintain the flexibility to invest in the business.

And after reviewing 2008 performance, market conditions and business development opportunities, the board has again determined there will be no share repurchases in 2009.

So with that, I will hand over to John who will provide an update on the progress of the R&D pipeline during 2008.

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

Today I'm going to give you our customary annual review of R&D and then close with a brief review of the progress that we have made over the last four years.

Whilst we have achieved a lot in that time period, this industry with long cycle times, it is worth noting that four years only amounts to a third of a 12-year development cycle at our old speed and half an eight-year cycle for the data programs.

During the year we have continued to strengthen the pipeline.

There is evidence that it is growing maturity that completed three Phase III programs and delivered two first new chemicals into submission.

In addition, we have maintained the momentum of our lifecycle programs with eight major new packages submitted and three approvals to date.

We started 18 Phase II programs in the year, more than double the number started in 2007 and tripled 2006.

Our productivity initiatives continued to deliver benefits, and we're making the progress towards delivering an eight-year median cycle time by 2010 and with a leaner and more cost-efficient organization, and we are delivering a larger portfolio.

And 2009 could be an even better year with up to four new product submissions planned.

Let me turn now to our Phase III portfolio, which I will cover in the next few minutes in some depth.

There are now four cardiovascular Phase III development projects.

The most mature is our joint development with Bristol-Myers for Onglyza, the DPP-4 for the treatment of Type II diabetes.

The NDA was submitted in America in June, and the MAA accepted for review by the European authorities in July.

The European submission is 15 months ahead of previous plan.

This large clinical development program involves over 5000 individuals with a significant cohort I think had a long-term follow-up with no discernible safety signal affecting tolerability across the dose range tested in Phase III.

Those regulatory processes are ongoing, and we are preparing for the scheduled PDUFA date at the end of April.

The other BMS shared development in Type II diabetes is dapagliflozin.

Phase IIb data were presented at the major US and European diabetes conferences last year.

The Phase III program is now maturing with nine studies ongoing, of which four are now fully recruited.

We will roll out the results of these at the major diabetes meetings as they occur.

The program is designed to meet the recently published FDA requirements on cardiovascular safety, much of which was already built into the plan database.

And following our announcement that we have extended our BMS alliance to include Japan, studies there will start this year.

Today we're announcing that 6140 has the trade name Brilinta.

The 18,000 patient PLATO study has completed its recruitment phase, and data will be available around midyear following independent adjudication of over 9000 events and looking forward to the results of this large study, alongside the onset and offset trials that should show Brilinta to be a real improvement over current therapies.

The approval of Abbott's Trilipix monotherapy in December has paved the way forward for the fixed dose combination treatment with Crestor, which is targeted for a third quarter '09 NDA.

Trilipix is the first fibrate indicated for use in combination with a statin, making this fixed dose combination an obvious next step.

Extended release formulation of AZD-0837, the oral reversible thrombin inhibitor, completed Phase II in the year, but an unexpected stability issue has delayed the start of Phase III.

We now believe that we understand the problem, and if the ongoing stability studies prove satisfactory, dosing will commence in the second half of this year.

In the meantime and for absolute transparency, we have placed AZD-0837 in the Phase II column of our pipeline tables.

PN 400 is a fixed dose combination of Naproxen and esomeprazole that we're developing together with POZEN.

The two pivotal risk alteration of sir ulceration reduction studies or the two pivotal alpha risk reduction studies have now been completed and met their primary endpoints.

Two additional Phase III studies are still ongoing, and the US NDA submission is planned for mid-2009.

The FDA have just confirmed the validity of the gastric ulcer endpoint for these studies.

So we can continue to plan for this NDA as one of four potential filings in 2009.

All the (inaudible) Phase III studies in lung and thyroid cancer completed recruitment on schedule.

The slower than anticipated rate of events in lung cancer has delayed the license submission for approximately six months.

We released the headline study as ZODIAC, the primary study in combination with docetaxel in November.

The first Kaplan-Meier curve shown here shows a clear and statistically significant improvement in PFS, progression-free survival, the primary endpoint agreed with the FDA, as a result of giving Zactima in addition to optimal chemotherapy as a second-line treatment.

In addition, the second Kaplan-Meier curve shows that in the ZODIAC study, patients who received Zactima also had a significant improvement in their quality of life.

No other targeted agent to date has achieved significant clinical benefits when added to chemotherapy in the second-line non-small cell lung cancer.

Furthermore, although only just over half the patients have died at the time of analysis, the trends in the prolongation of overall survival we're seeing did not reach statistical significance.

In the smaller pemetrexed combination study, ZEAL, although there is no significant difference, the Kaplan-Meier curves for PFS and overall survival are virtually identical to those from the ZODIAC study.

In both studies the combination therapy was well tolerated.

In both studies it increased objective response rates and improved the symptoms of lung cancer.

As a result, we're planning to file a regulatory package for Zactima in combination with chemotherapy in the second quarter of this year.

The ZEST monotherapy study head-to-head with erlotinib drove noninferiority, but did not achieve superiority on either progression-free survival or overall survival.

Our monotherapy claim will now have to wait for the ZEPHYR study in EGFR failure patients, which is completed recruitment and subject, of course, to the event rate we report in the second half of the year.

The medullary cancer of the thyroid study, ZACTIMA, is also fully recruited and will be analyzed when the number of progression events reaches its target.

The symptom efficacy and safety targets in first-line colorectal cancer triggering a continuation of the HORIZON III study into Phase III.

This study completed recruitment on schedule at the end of last year.

In addition, the Phase III recurrent glioblastoma study is recruiting, and a new lower dose combination study in first-line non-small cell lung cancer is about to start with the National Cancer Institute of Canada.

Finally, in the cancer program, the endothelial antagonist, AZD-4054, is now recruiting well and ahead of schedule in the Phase III study in hormone-resistant prostate cancer, patients with metastatic disease.

This study is very similar in design to the Phase II EPOC study or 36 published in December and shown here in this graph.

The 10 milligram dose that we're studying in Phase III gave a significant overall survival benefit in Phase II, something we simply do not see very often.

The motavizumab BLA was filed in the US in early February and received a complete response letter from the FDA late last year.

Until we have met with the reviewing division, the timing of our response cannot be finalized.

Whilst we believe that no new studies will need to be performed, they have requested additional clinical data on our completed study in infants born at term with congenital heart disease.

This study is completed, but remains code unbroken for efficacy, and the RSV assays will only be performed after the code has been broken following our FDA discussion.

Thus, our late 2009 response is currently planned.

The large database on our nasal spray influenza vaccine was submitted in Europe on schedule in fourth quarter.

FluMist, as it is known in the United States, is now undergoing a European centralized registration process and has been accepted for submission by the EMEA.

We signed a deal for a new addition to our lifecycle management portfolio Unit Dose Budesonide, or UDB.

In December 2008 we announced that we entered an exclusive worldwide agreement to develop and commercialize UDB with Map Pharmaceuticals.

It is being developed as a potential treatment for pediatric asthma.

UDB has the potential to be nebulized more quickly and as a lower normal nominal dose than the current commercially available product, and it also clearly seems to be compatible with the new generation of nebulizers.

This deal is still subject to review under the Hart-Scott-Rodino Act.

All four Crestor outcome studies reported to date are given strong support to the safety of Crestor at doses up to 20 milligrams.

And whilst JUPITER, CORONA and [JESSE] have all been published, AURORA, a study in patients with end-stage renal disease is targeted for publication this spring.

The JUPITER study is a landmark study.

Patients were selected with levels of LDL within normal limits, but with an elevated C-reactive protein fraction, hsCRP.

This primary prevention study in men over 50 and women over 60 with a number of non-lipid-related risk factors demonstrated Crestor's unprecedented beneficial effects irrespective of gender.

In addition to the reduction of CRP, this was a very significant reduction in LDL lowering in spite of the low baseline -- normal baseline value.

A regulatory package is now under preparation for submission in the second quarter of the year.

But we should not on Crestor overlook the fact that we successfully concluded a repeat mutual recognition process in the EU last year, gaining approval in five new markets, which means that we now have marketing authorization in every EU market.

This will allow us to gain an additional six months of market exclusivity in the EU upon the approval of our now agreed pediatric investigation plan.

Seroquel lifecycle management has begun to repay the major investment we have made over the last few years with both the immediate release and the XR gaining new indication approval in the multiple jurisdictions throughout the year.

The extended release FDA package for major depression generated a complete response letter at year-end.

We do not anticipate the need to generate more efficacy data to gain approval, but do recognize that there are bound to be questions to resolve with the regulators as we move into this different patient population with Seroquel.

Lifecycle management continues with Symbicort with both the COPD and pediatric submission filed in the US, as well as the pMDI formulation in the UK.

We launched our dose counter in the US, but the Japanese NDA remains in the backlog of reviews at the regulatory agency.

We were pleased with the outcome of the triple FDA advisory committee on the benefits and risks of long-acting vitro agonist in asthma.

The panel voted unanimously to start the continued use of long-acting beta agonist in combination with steroid therapy in adults in general and for Symbicort in particular.

The final lifecycle management project worthy of mention is Iressa.

In Asian patients preselected to have a high likelihood of an EGFR mutation, Iressa proves superior to standard first-line chemotherapy with carboplatin and paclitaxel.

The progression-free progression survival curves are shown on the graph.

Taken together with a very favorable tolerability profile, these data will allow commissions to deliver personalized health care with Iressa or stratify their patients on clinical grounds and where possible mutation status.

European license applications for Iressa was submitted in May, and it's based on noninferiority against docetaxol in second-line treatment for non-small cell lung cancer, a setting where interestingly clinical factors and mutation status do not appear to be as useful as stratification tools.

But the interest in the [IPATH] studies are part of the ongoing regulatory review through the centralized procedure of the EMEA.

So now if I can move from the late stage projects to the ongoing and continuous improvement process.

2008 was the year when a number of our efforts in this field started to bear fruit.

We promised you $100 million of R&D synergies following the MedImmune acquisition, and these were delivered in 2008 ahead of schedule using both our disease area strategy to focus our activities and operational efficiencies such as clinical data and other process outsourcing.

In 2008 these changes allowed us to invest for the future through the expansion of our MedImmune biologicals organization while delivering an essentially flat year-on-year budget and supporting a much bigger development portfolio.

We're making good progress towards delivering an eight-year median development time in 2010 as previously promised.

And as the (inaudible) of clinical projects goes through Phases I and II, we're able to generate meaningful statistics to show that we are meeting our intermediate time targets as shown for Phase I in the bar chart.

Our focus in 2009 will be on improving the speed through Phase II in particular.

We undertook to develop all our new projects where possible with an element of personalized health care, and we have now evaluated every project in the portfolio against this challenge.

And today we have 10 projects in Phase I and Phase II where we are testing an element of personalized health care as part of the program.

In a portfolio as large as ours, there will inevitably be a significant number of projects that fail or have stopped for different reasons.

However, in 2008 these were more than matched by projects that have progressed to the next step or regulatory filing.

The green boxes represent the projects that progressed to the next phase, whilst the amber ones are those that have been filed with the registration authorities.

Now, of course, we continue to introduce new molecules shown here in red.

We have entered 32 new compounds into formal developments in 2008, of which eight are biologics, and taken 17 into Phase I human testing, for which two have already progressed to patient studies.

This final slide in the sequence shows the pipeline today and its composition based on all of the changes during the course of the year.

And as always, it is quite a dynamic picture.

Looking at the pipeline, of particular note are the 18 projects that have their first patient exposure in the year, double the number from 2007 and further evidence of the increasing progress with the portfolio.

We said that we had a significant number of proof of concept and proof of principal decisions during the course of 2008, and of those, six proved positive and have entered Phase IIb does-finding studies during the course of the year, in addition to the three that were ongoing in Phase IIb from 2007.

Overall the pipeline has grown in the course of the year from 137 to 144 projects.

And whilst the preclinical program has remained relatively flat as we expected, the growth in Phase II from 20 to 31 represents excellent progress as is the very significant increase across the whole of the portfolio from 2004 with now a much better balance across the phases.

Four years ago I said to you that we had a number of actions to take to strengthen the AstraZeneca pipeline.

In the short-term, we wanted to optimize our marketed products through lifecycle activities.

We needed to increase the discovery output and speed up our development processes.

Improve the quality of our molecules and reduce our attrition rate, especially in the later phases, and to strengthen the short and medium-term through in-licensing, acquisitions and dealmaking.

We also set out to move from a small molecule focused organization to one with a significant biologics presence.

So how have we done?

Overall there has been an 86% growth in NMEs over that period.

We have delivered 33 significant lifecycle management approvals, altered the risk profile through first and best-in-class approaches, more than doubled our research output and doubled every clinical phase in the portfolio.

We delivered two license applications in 2008 with a further four first potential submissions in 2009.

We have also taken steps to improve our strategic position for the long-term.

Through our disease area strategy, we have focused our research and spun out or closed some areas such as (inaudible) and osteoarthritis.

In a step-wise fashion, we have created and acquired a biologics portfolio and gained a foothold in vaccines.

Biologics makes up approximately one quarter of the portfolio to date.

We have also stepped up our licensing activities to bring in significant numbers of new molecules and technologies, closed the late phase gap and to build for the future.

I believe that however you look at this, AstraZeneca has created a much more attractive portfolio of products and projects all the way from discovery through to the marketplace.

Our pipeline is bigger and more mature and has a better balance of high and low risk projects.

We set ourselves some challenging time targets for 2010, and we are on track to meet them.

In 2004 we were slow in comparison to our peers.

Today we're amongst the best in discovery and early phase development, having already taken two years out of the overall process and with more to come, and we have done it whilst increasing our overall efficiency and productivity.

We undertook some major outcome studies in both lifecycle and Phase III.

JUPITER is a prime example.

But perhaps the most important step that we have taken over this time period has been to establish a strong culture of continuous improvement across the whole of R&D with lean Six Sigma at its core.

We have delivered a lot, but as ever, there is still more to come.

This is my last annual results presentation, and as I hand over to my successor, Anders Ekblom, I will be watching from the sidelines both as a shareholder and a pensioner.

I have every confidence in Anders, Jan and the team, and I wish them every success in realizing our dream of turning molecules into medicine.

Now for the very last time, I will hand you back to David Brennan.

Okay.

John, thank you.

Simon, thank you for your comments as we move to the Q&A.

I think we have got about 30 minutes or so.

There are three ways to get questions for today's meeting.

First of all for those of you that are in the room, when you raise your hand and I call on you, you need to push the button to turn the microphone on in front of you.

Please remember to just give your name and your company.

If you are on the telephone, you can press star one, and we will try to pick you up as soon as possible.

And those that are on the Internet, there should be a box on your screen where you can submit questions in writing.

So with that, we will go ahead and get started, and we will start with the floor here.

Please.

Paul Mann, Morgan Stanley.

Just a couple of questions, please.

First of all, you talk about flat fee revenue growth in 2009.

Can you just talk about what your expectations are in each region and what you are seeing at the moment in each region?

Also, have you seen any evidence of a slowdown yet in the emerging markets?

And then secondly, just looking at your net debt, obviously you have already achieved your 2010 target.

Surely that leaves some strategic options open to you now that we are otherwise unavailable.

What sort of leverage would you be able to take in the current market?

Could we see you take on leverage to make acquisitions, and if so, what sort of things would you be looking at?

Thank you.

Okay.

Well, let me start with just regional performances.

As I said, the US market has slowed down to less than 2%.

That is a pretty slow rate of growth, and the branded segment of that market has actually gone negative.

So the area -- our opportunity addressable market has decreased.

I think that we see -- we had 1% growth in total in our US business in 2008, and I think our view is, given the way the market has gone and some of the economics and conditions we see, that that market will probably perform at about the same in flat rate.

In the developed markets in Western Europe, I think we have seen the same thing.

There's a couple of percentage points growth.

Is that about, right?

Yes, but our growth had been a little bit less than that in those markets.

I think we still performed fourth or fifth amongst all companies there.

Again, the market there is being driven primarily by the specialty products.

I think that you see Roche, Novartis and a couple of companies with big oncology products at the top of the lead table.

In emerging markets we have not seen any particular part of the market slowing at this point.

I think it is early days, but looking at the GDP forecast, I think we just believe while we expect them to continue to grow, they will decline.

The rate of growth will decline.

Simon, do you want to add anything to that or pick up on the second question?

No, I mean I guess perhaps to elaborate a little on our guidance for the top line might be helpful.

We continue to see strong growth in a number of our key brands -- Crestor, Seroquel, Symbicort and, indeed, in our emerging markets.

We certainly see continued strong growth in the emerging markets.

We do, though, have some product-specific challenges, and you understand those, Paul.

We have seen challenges with Nexium.

You have seen from the sales growth that Arimidex is beginning to reach maturity.

We have obviously had a launch in Pulmicort Respules as a settlement, which has helped through this year, but as I mentioned, there will be potentially a slower start in the first part of the year, and we have the Casodex patent expiry.

So there are some product-specific challenges.

But we have also taken account of what is a significant slowdown in the global economy.

And, indeed, in many of our major markets, we do have recession, and forecasted GDP growth in some of the emerging markets in some places is hard.

As a business, we are clearly recession-resistant, but we are not recession-proof, and we do anticipate that the slowdown in economic activity and the associated pressures on payers, whether they are private or public, could have an impact on demand for our medicine.

Obviously as we go through the year, we will be taking a close look and updating on how we're seeing the economic impacts and update you on how that is going to come through into demand for our products.

So that is a little bit more color to the top-line guidance.

If I can come back to the question of net debt, driving cash performance in the business has been a key priority for us.

We have, as you have seen, reduced our net debt down to about $7.2 billion.

That is right in line with the 2010 goal we set.

We have done that to give ourselves of flexibility to take advantage of opportunities that may arise in the environment we are in.

Our strategy of externalization is very clear.

It is about in-licensing and bringing in compounds, projects, technology that support our R&D pipeline.

So you will see the similar sorts of activity that you have seen, and where there's opportunity to expand that, we will pursue it.

This is not large-scale activity.

It is really focused on the technologies, the compounds that build on our capabilities and our market positions, and we would like to have the flexibility to take advantage of that.

We also think that it has proven in these times to maintain strong cash balances, and that will -- it also forms a part of it.

I think to talk about our long-term financing and leverage strategy is something we should return to at the back-end of this year as we see how the economy and the circumstances unfold.

Thank you, Simon.

We will take another one from the floor, and then after that, we will take a telephone call from Marcel Brand.

But let's take one more from the floor first, please.

[Dan Esterim], Goldman Sachs.

Two quick questions if I may.

With regards to the '09 core EPS and to aim to grow that in CER terms, do you think that would be possible if it were not for the disposals you have invested with regard to the Nordic region?

And secondly, just in regards to the top line, can you may be just update us in terms of what you're seeing in Toprol given the withdrawal of supply from, I think, KV and Sandoz?

I think you're the only ones left, and you're supplying par with their generics.

So is that upside opportunity?

And then just lastly, any assumptions regarding pricing for Crestor either taken in 2008 or anticipated you will take in 2009?

Simon, do you want to pick up the first part of that question on -- how the disposals might affect core EPS, and then, Tony, I will you comment on pricing on Crestor, as well as Toprol XL.

Certainly.

In terms of core earnings growth, we indicated that clearly the part of the guidance is to deliver core earnings growth in constant currency terms.

The foundation of that is continuing to drive operational efficiencies, and I mentioned that we anticipate a slight improvement in our gross margin.

We are going to continue to drive efficiencies through our fixed cost base in R&D and in SG&A, and that is the foundation of the program to drive profitability going forward.

Yes, we have benefited in in terms of the other operating income if we are successful in completing the divestment.

Offsetting that, of course, I mentioned in part it could a reversal of the fair value gain on the bond.

So the key for us operationally is driving operating margin and driving our cost base to focus on the operating margin.

In terms of Toprol, Tony, do you want to pick up on Toprol?

Tony, do you want to comment on Toprol?

On Toprol XL there was the pullback from KV and Sandoz.

We have been in discussions with FDA.

We have rammed to our own manufacturing and supply and believe that we will be able to meet market demand in the form of Toprol XL and supply for par by the end of the quarter.

So we have moved that along quite well.

And then the follow-up question I guess relative to Crestor, we did have a price increase for our brands at the beginning of the year.

We had approximately a 7.5% price increase for Crestor for the year.

If you look to net price overall because of our status in formularies across the country, we have improved our formulary status, and our net prices remained relatively constant year-to-year.

So no price degradation.

I would just add to that because you asked, is that upside?

I think it really depends on your assumption about when the two generic companies could potentially come back to the market or the third one could be approved.

So what we're doing is trying to supply product to the market right now.

That is our goal.

We will see what the impact is over the course of a few months.

Marcel Brand, number one.

Sorry to come back to the question on the disposals.

Could you please give us the absolute numbers for what you expect for the Abraxane deal and then the OTC divestiture.

I think that is about $250 million proceeds, but obviously we do not know how big that gain is.

And then also the absolute number on that fair value reversal of bonds, I do not understand -- I did not hear maybe the absolute number.

I reckon that is the $300 million.

And then further questions, you said, if I understood correctly, that the incremental restructuring costs of roughly $1 billion is going to be split evenly 2009 and 2010, is that also true across the middle cost lines, global supply chain, SG&A, R&D?

And then the last question, could you also remind me how the benefits will be gained from the restructuring in 2009 versus 2010?

I guess you have said that, but maybe I haven't heard that correctly.

Okay, a four-part question, but we got it.

Simon, it is kind of going your way.

I think the specifics around Abraxane and the OTC divestment, what is the value.

I do not quite know what we have said.

Some maybe you want to just --

I think there have been two divestments that were announced at the back-end of last year.

We are currently working on the process to complete those.

If they are completed, we indicated that in the case of Abraxane, it was at the order of $250 million and about the same number for the OTC deal.

In terms of the OTC deal, this is a sale of our intellectual property given the way that R&D is accounted for.

Most of that is expense, so there is not really an intangible asset on the balance sheet.

So you can think about cash and P&L being closely linked.

In the case of the Abraxane deal, you go back and look at the original deal, I think it was in mid-2006 where there was a payment made, around about $200 million, and that would have been amortized.

So there will be an intangible asset -- there is an intangible asset, indeed, on the balance sheet -- and therefore, the P&L gain will not be the full cash amount.

The other thing you need to bear in mind in thinking about the overall impact of that transaction is we do have sales of Abraxane, and clearly in exiting from that, there is a portion of sales that we will no longer get.

So that is the two disposals.

On the fair value, we mentioned in the release and I mentioned again, it is $130 million gain in the course of '08.

And therefore, that improved the net interest line in '08, and the reversal of that, therefore, will have the increase that I indicated taking on that finance.

I sort of guided to around about $700 million for the year.

That was on the fair value.

The restructuring program, in terms of the costs, I indicated that the remaining $1.1 billion that those close would be charged by 2010 roughly evenly over the two years, and that should tie to the guidance I have provided in the restructuring EPS costs.

We have not indicated where those sit across the P&L line, but clearly if you look at where the reductions were occurring, that would provide you a sensible indication of where those costs will likely be incurred.

In terms of the benefits, what we indicated was as follows.

We have delivered two-thirds of the original $1.4 billion by the end of 2008.

So we have accomplished and met the objectives there, so two-thirds of the original 1.4 has been delivered.

But the remaining $2.1 billion by 2010 and we expect those, the benefits to be spread roughly evenly over 2009 and 2010 with additionally a balance of just under another $0.5 billion beyond 2010 as well.

So hopefully that answers your questions.

Good.

Thank you, Marcel.

(multiple speakers) Let me go back to the floor here now.

[Ken Misochya], [Lebrihm Capital].

I have just got one question.

I looked at the currency crib sheet, and I'm not a mathematician, so I may beginning this wrong.

When I looked at the guidance, including the currencies for January effectively, I get to a 2.5% currency benefit in your guidance relative to the cost constant currency for 2008.

Is that number roughly correct?

And if it is, your guidance range at constant currencies has a number of the bottom which is lower than your 2008 number.

So I'm sort of interested in that conundrum as well.

The sensitivity analysis that we provided, which looks at the currency impact and, indeed, if you were to compare the final quarter of -- I'm sorry the average rate for '08 and Jan '09, that is the sort of order that you would get.

And as always when setting the range, the bottom end of our range reflects the risk to our business that we may face during the course of the year.

Okay.

I think what we will do is take another one from the floor, and then we will go to the phone again.

Just a couple of product related questions.

It is Nick Turner from Mirabaud Securities, by the way.

If we assume that the FDA might respectively apply their guidance on cardiovascular safety on drugs and diabetes, can I ask you whether or not you have conducted a meta-analysis of your Phase II and III trials with Saxagliptin, and if so, could you share the hazard ratio with us?

I suppose that is a bit optimistic of me, but there we are.

I thought I would ask anyway.

And then the other question would be, as far as Seroquel is concerned, could you give me some indication as to what the diabetes risk is with Seroquel in the additional indications that you are rolling out in and whether that changes the risk benefit profile of the drug for those indications, not for --?

All right good.

Well, John, I think we will put those over to you.

I meant the CV safety questions around Saxa and the discussions we have had I think we have talked quite a bit about but go ahead.

Okay.

We did not receive the letter from the FDA in relation to CV safety because the Onglyza NDA was submitted ahead of that being put out.

Having said that, not surprisingly, yes, we have gone back and looked at the database.

We have 1500 patients treated for a year.

We have 4000 patients on drug, and we have applied the kind of criteria that you would expect.

And we believe that we meet those appropriate safety criteria.

So as of today, that review is ongoing with the regulators, and we will have to see what their interpretation is.

But certainly ours and BMS's interpretation is that we have done what we needed to do to meet those guidelines.

As far as Seroquel is concerned, the whole issue of diabetes in relation to atypical antipsychotics has been something that has been on for a long time and is subject to a significant amount of litigation.

So I actually do not think I want to comment today on the relationship.

What we got from the FDA in complete response letter was a series of questions in relation to where we should be placing warnings and where we should have adverse events placed in that data sheet.

I can say that certainly since the drug was introduced in 1997, there have been multiple reviews both within the Company through what is called our [term] process and also with the regulatory authorities starting in 2000 when the FDA first asked us to do an update.

And over that time period, there have been appropriate warnings placed on the labels that matched the database.

Thank you.

There was an e-mail about the risk to the revenue outlook from a slowdown in emerging market.

But I think we kind of hit on that on the first question, so I hope that one was answered.

May be if there are anymore e-mails, we can get them.

Andrew Baum from Morgan Stanley.

A couple of questions.

Firstly, just back to emerging markets, could you just give us some sense of what is driving your growth there whether it is purely GDP; whether it is AstraZeneca increasing its men on the ground; whether it is a change in intellectual property being strengthened, just so we can understand some of the levers that are being pulled there?

And the second question is for John related to Crestor.

Does JUPITER open the doors to getting alternative starting dose as opposed to the 10 so leveling the playing fields with Lipitor?

All right.

Well, thank you, Andrew.

Bruno Angelici, who runs our business outside of North America and is the champion for our emerging market strategy amongst other things, is here.

Maybe I will lead him comment a little bit about the diversity of the markets, as well as what has made us successful.

Bruno?

Yes.

First, regarding the emerging market, the growth rate of the market, of the pharmaceutical market, over the last few years has been around 20%, so significantly faster you see than the pharmaceutical markets in the rest of the world.

(inaudible) is true by the fact that the economy in these three countries we are doing very well.

The GDP was growing 7%, 8%, 11% in China.

And there is a link between the pharmaceutical market and the GDP rolls without any doubt.

Having said that, we have seen an emerging middle-class growing fast in the market, which is there, which is buying our kind of product, and the medical needs are very important.

So even if the GDP growth is slowing down right now a little bit, we are, as far as we're concerned, believing that this market, the pharmaceutical market in the emerging market is going to be still growing significantly faster than the rest of the world in the established market.

And we certainly saw (inaudible) attractive and attractive countries.

And so we're concerned we had a strategy to very early in the game, especially in China to build our organization, to build sales force, to develop our organization in a way which was in some cases significantly faster than our colleague, which is still in China.

And that is why we have become the number one company in China, beating all the (inaudible) which are there.

So we are (inaudible).

We have an expertise.

We know how to compete in this market, and the way you do that is it will obviously be important to compete and grow faster than the market and grow faster than the competition.

Thank you.

John, over to you on Crestor, JUPITER and starting dose.

JUPITER opens the door to a lot of things.

But actually the issue of the safety of the drug in terms of the starting dose is dependent on a number of factors, including the safety database that we're growing for the product across the whole series of studies, the epidemiology we have and across the JUPITER study.

It is something that we certainly give consideration to inside the Company.

It is something that we have and will talk to the regulators about.

The important thing for us is that we make sure that we maintain the safety profile for the drug and that people start on the right dose.

Thank you.

We will go back to the floor.

Kevin?

Let me come back to the issue of price.

You talked about there being no net price realized in the US.

How long is that going to go on for thinking in the context of a congressional bill regarding health care coming through yesterday?

Secondly, outside the US in the emerging markets, is price at all important?

What is your strategy there?

I am thinking about how you guide us to thinking about the business over the next few years, particularly with respect to that top line.

Okay.

Well, good.

I will comment a bit on health care reform maybe in the US just briefly, and then I will let Tony comment specifically on the views on price in the US and what he thinks is going to happen potentially this year or next.

But I think clearly there is a move afoot in the United States for a comprehensive approach to health care reform.

I think the discussions that are being had through our trade association in pharma with some of the people that are talking about this policy would suggest that there is going to be a broad approach, and the pharmaceutical industry should be part of the discussion to figure out the way forward because of the view that we do add value.

So I think as a Company, our view is that we believe that it is time to have complete coverage for all Americans that includes drug coverage and that represents an opportunity for the market to be expanded.

Relative to the impacts on price, you know, it is a very diverse market as you know.

The Medicare Part D operates very differently than the commercial books of business and Medicaid.

Tony, maybe just give a sense from your perspective on what you have seen happening in Medicare Part D in the commercial books with the managed care organizations on price now in the next couple of years?

Yes, I would be happy to give you a sense of how we have been impacted and how we have navigated those markets.

As David said, it is very difficult to try and give you an answer for the broader market because it all depends on which legislative agenda takes root and when.

What we have seen in select markets has been downward pricing pressure obviously in some of the more competitive markets such as the PPI market.

But in spite of that, we have been able to actually enhance our commercial access rates, for example, for Nexium coming into 2009.

We have also been able to enhance our commercial position, as well as our Medicare Part D position for Crestor, and we have been able to maintain that position with Seroquel as well.

So while there may be market selective pricing pressures, we believe we have been able to navigate that quite well and have a very strong presence going into '09.

Yes, you take a look at a product like Crestor it is flat priced in the United States, so the 20 milligrams dose, if that were the dose recommended because of JUPITER, would not -- you know, the economics would not be met.

I'm sorry.

In pricing and emerging markets, Bruno, would you like to make a quick comment about that?

(inaudible) -- our statement because you have a country where the price -- in many countries the price is free, free pricing (inaudible).

Other countries it is regulated.

Let me focus one minute on China because (inaudible) example.

In this country the price is regulated.

However, as far as we're concerned, right now we're waiting for the listing, meaning the reinvestment of five key products, especially Crestor, Symbicort and Nexium.

That is going to take place hopefully this year and that we make that we have a new wave of product, of new product for the Chinese market, which we be growing fast in this country.

In a regulated environment, however, it will open to (inaudible) business.

There is a written in question about when -- from [Peter Penachet], Credit Suisse.

When capitalizing on business opportunities, you also take into account larger acquisitions are only bolt-ons.

Our strategy -- I just want to state it again -- is very clear.

We have been looking to acquire technologies to bring in whether they are acquisition technologies or product licensing opportunities, but it is really focused on making sure that we can strengthen our research and development pipeline in the products we bring through.

I think our view is that we have a critical mass in our organization in commercial -- in the commercial organization, as well as in research and development that we do not have a scale issue because we can scale up or down as we think it is appropriate.

And I think our view is we're focused on bringing innovation in.

So the kinds of things we're looking for would be technologies, and I believe with our acquisition in biologics, our relationship with Silence in the small interfering RNA area, plus the vaccines in the small molecule platform we have, I think we have covered most of the technology platforms we want to be in right now.

Back to the floor.

Craig Maxwell, ING.

A couple of questions.

On JUPITER with the data being so, so strong and you said yourself (inaudible) risk reduction, is there no way that the filing can be fast-tracked and maybe get a six-month review and actually have it on your label for the US for 2010 negotiations of managed care?

It seems like such an opportunity.

The second question, and I am not being factious here, but this is a serious question.

With Seroquel, Symbicort, Arimidex, Casodex, Zoladex, Merrem and EU Nexium all losing their patents over the next five years, the earnings loss is substantially more than the $1.5 billion of cost savings over that same period in time.

Just strategically as a team, how do you think about dealing with that?

What options do you consider?

Just your thoughts on that?

Then just lastly, John mentioned a balance of high and low risk projects in the R&D pipeline.

I just wondered if you could identify the low risk ones.

Well, John, do you want to talk a bit about likelihood of fast-track for Crestor?

That is not in our hands.

We will submit the application, and the regulators will decide how rapidly to take it through.

Obviously we will push quite hard to get it through as quickly as we can, and you would hope that they would react appropriately.

But at the end of the day, I do not control the FDA.

In terms of low risk projects, well, the kind of things that we have got for instance coming through are things like the four projects going through this year, a combination of Crestor with Trilipix, we already know that both agents work very well, and we have got good data to support that combination.

So the mechanism of action is well proven as it is superior in 400.

Within the other Phase III area, we've got something like Onglyza, which is again the DPP-4, which is a proven mechanism of action.

So I guess I look at things as being, is the mechanism proven?

Are there then benefits to be had from the product over and above those that are around.

There are other things like the SGLT2 dapagliflozin that is quite high risk.

It is a novel mechanism but potentially a high reward.

And you can go back into our Phase II and Phase I and see a balance of those.

And then your question around patent losses and what do the next few years look like?

I mean we recognize there are dates out there when we will lose exclusivity.

They will vary from place to place, but obviously we will lose our opportunity to grow those.

It is why you said, how do we as a management team look at it?

We are very, very focused on getting our business to operate as efficiently as we possibly can and bringing as many products and projects through as we possibly can.

We're looking for late stage licensing opportunities to bring in.

We think we've got a very, very strong commercial organization globally.

It is certainly one of the -- in each of the markets or regions we operate, it is one of the fastest-growing.

We have one of the fastest-growing businesses on the back of our older products.

So our goal is to get as many products into our pipeline and into the bags of our people as we can and recognize we're going to lose exclusivity on some of these things and figure out on a time by time basis how to deal with it.

Alexander Hauber, JPMorgan.

Two questions.

Firstly, on the restructuring program, I'm just wondering whether this restructuring program coming up, whether you think you can at least protect your 2009 earnings base for another two years or whether you can even grow that?

And looking at your headcount charge, the incremental headcount reduction, do you expect sort of a similar recycling rate other than you're going to have 70% new positions and 30% net benefit?

And the second question is, again, on the emerging markets.

So far the feedback we have got from the companies has been pretty consistent that there is no impact.

But then just what -- no impact yet from the economic crisis.

But I'm just wondering how much do you really have the finger at the pulse in terms of what is going on?

Because I would assume you ship into some channel, and then you take some time before you get the feedback from those channels.

If there is really a slowdown, how quickly will you realize?

Okay.

That is good.

Simon, can I ask you about the restructuring, the headcount and the net benefit and how you look at that?

Yes, certainly.

We have not provided aggregate guidance on earnings beyond 2009, and you won't expect me to do so.

In terms of the impact of the restructuring program, you saw that we have reduced the number of positions by 8000.

You saw that we had reinvested 2300 into emerging markets, and that is an area where we will continue to invest.

You did see a significant stepup of 3000, which was associated with the acquisition of MedImmune and then some expansion of MedImmune.

So if you look forward, we would expect to see a rather larger net incremental impact than you saw in the the first 8000.

Bruno, over to you on emerging markets, how quickly you expect to see something?

We are not saying there will be no impact.

There will be an impact in this market, which has been growing, as I mentioned, at 12%, maybe growing this year and next year at a rate which will be lower than that, maybe 6%, 7%.

But that will be -- or 7% or 8%, if you want.

But that will be significantly better than what we have seen in the US and in Europe.

Significantly better.

The second point, what we are saying is that we are well positioned in this market to still deliver a very strong performance.

Coming back to China, the pharmaceutical market in China may be growing this year less quickly than it used to grow.

But we're waiting for this listing on major products, and that we view as even in the context of the market, which will be growing at a rate lower than it used to be, still very good perspective.

So the market is likely -- the growth rates of this market are likely to decrease somewhat for sure.

We're saying that they will be still attractive and that we're in this context well-positioned.

Okay, good.

I want to respect everybody's time, so what I will do is stop here.

We're going to be around for a little bit afterwards if you want to come and ask individual questions.

But I just thought I would do a quick summary to say, we turned in a solid performance in 2008 with earnings per share growing faster than sales.

We're driving efficiency and productivity throughout the organization and improving our operating margins.

At the same time, we're making investments that are vital to our long-term performance in emerging markets and in R&D.

But I think as you heard from us and know yourselves, market conditions have never been tougher than they are today.

The contraction to GDP and emerging markets, as well as the US and Western Europe is going to change the environment for our business.

We just have to deal with it.

I think our performance targets reflect what we believe is the relative resilience of our business, especially compared to other industrial sectors, and it will not be easy to deal with from my perspective.

But I think the actions that we have taken over the last several years have positioned us well.

We have driven more than 20% compound growth in earnings and dividends per share.

I think we have created an operating and financial strength that should allow us to navigate what I believe will be some pretty choppy waters ahead.

But we need to execute our plans.

We need to deliver on the targets we have set.

We have been able to do that so far, and we're committed more so than ever to doing it again.

In closing, I just want to say a few words to Mark Jones retirement.

As I have said before, innovative research and development is the heart of the lifeblood of our Company, and John has been at the heart of our research and development organization and led real change that has made a difference in the shape of our pipeline and the position we find ourselves in today.

As he signs off on his last set of results here, I would just like to take this time to thank him for his leadership, for his friendship, which has been great, and his contribution to this Company, which has been over 34 years in the making, and he has worked both in the commercial and the R&D space.

He has worked all over the Company.

He is leaving the function in good hands, but I want you all to know we will miss John's presence in our executive room, as well as in the boardroom.

So that brings us to the end of our presentation today.

I thank you all, and as I said, we will be around to take on questions.

I know I cut off the end of Alex's question.

We will get back to her and tell her.

So thank you very much.