AstraZeneca PLC (AZN) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the AstraZeneca first-quarter results 2009 analysts call. My name is Sharon; I am your event manager today. During the presentation your lines will remain on listen only. (Operator Instructions) I would like to advise all parties this conference is being recorded for replay purposes.

And now I would like to hand over to your host, Jonathan Hunt. Thank you, Jonathan.

Thank you, operator, and good afternoon, everybody. Welcome to AstraZeneca's first-quarter conference call. Leading today's call is Simon Lowth, CFO of AstraZeneca; and also on the call are members of the finance and the investor relations team.

As you know, today is a busy day for reporting in the sector. It's also our AGM. So with that in mind, we do have a hard stop today just before two o'clock UK time.

And before I hand over to Simon I would like to read the usual Safe Harbor statement. The Company intends to use 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, and by their nature forward-looking statements involve risk and uncertainty, and results may differ materially from those expressed or implied by those forward-looking statements. The Company undertakes no obligation to update forward-looking statements.

And with that, I'll now turn the call over to Simon Lowth. Simon?

Thanks, Jonathan, and good afternoon to everyone. I'm pleased to be able to present a good set of first-quarter results for AstraZeneca, particularly given the tough economic conditions. Our performance is the result of excellent execution, driving growth in key product franchises and in all regions, including continued growth in our emerging markets as well as continuing to progress the reshaping of our cost base for long-term competitiveness.

We also experienced some revenue upside in the quarter from Toprol-XL, as we were successful in our efforts to ramp up production to meet the shortfall in the market caused by the withdrawal of two generic competitors, which I will come back to later.

Today I'm going to cover five topics on the call. First, I'll summarize the headline numbers for the first quarter. Then I will describe first-quarter sales performance by region and by our key brands. (technical difficulty) describe the sales trends I'll turn to operating profit, and I'll highlight the key drivers of our continued growth in core operating profit. I'll briefly touch on cash performance and our improved net debt position. Finally, I will confirm our guidance for the full year.

You will have seen from today's press release that we achieved a sales in the first quarter of just over $7.7 billion; that is a 7% increase in constant currency terms. You'll also have seen that the adverse impact of currency movements on the top line reduced the reported sales growth rate to zero.

Core operating profit for the quarter was up 19% at CER to $3.36 billion, chiefly as a result of the increased sales, efficiencies in all our operating cost lines, as well as the increase in other operating income, which benefited from the gain on the disposal of the Abraxane marketing rights. Core earnings per share in the quarter were $1.58; that's compared with $1.28 last year. This is a 20% increase at constant currency.

It was a busy quarter in terms of news flow in the pipeline, and these are summarized in the press release. They include Advisory Committee hearings on ONGLYZA and Seroquel XR; an approval for Symbicort in the US for COPD and a response on our Symbicort pediatric application; the Crestor filings in the US and Canada based on the JUPITER trial; and a positive opinion on Iressa in Europe.

I now turn to our first-quarter sales performance. For the avoidance of doubt, when I refer to sales growth rates they will all be on a constant currency basis.

We achieved sales growth of 7% in the first quarter. Sales in the US were up 7%. As I mentioned in my opening remarks, Toprol-XL sales benefited from the market withdrawal of two generic competitors; so sales of Toprol-XL plus the authorized generic increased by $112 million. If we strip out the Toprol-XL, the sales in the US were up 3%; and that includes strong underlying growth for Crestor and Symbicort.

Sales in the rest of the world were up 7%. In our established markets, sales in Western Europe were up 2% as growth for Crestor, Seroquel, and Symbicort more than offset the decline in Casodex sales resulting from generic competition. Sales in Japan were up 10%, chiefly on sales growth of Crestor and the oncology franchise. Crestor was the primary driver of the 14% increase in Australia for the first quarter.

In emerging markets, sales were up 15%. More than one-third of the increase was attributable to Crestor and Nexium. The balance was achieved across a broad range of product franchises. China again showed strong growth, with sales up 35%.

Turning now to our key brands, I'll begin with the star performer for the quarter, and that is Crestor. Worldwide sales of Crestor increased by 35% to $969 million. In the US and in our rest of world markets, Crestor is growing at 4 times the statin market growth rate.

In the US, sales were up 35%. Market share of total prescriptions increased to 10.3% in March, and all the other important indicators are looking strong. We saw positive net switches from other statins, including generic simvastatin. Dynamic share is around 15% and Crestor enjoys a 15% share of total prescriptions written by cardiologists.

Sales for Crestor in the rest of the world also grew strongly, up 34%. Sales in Western Europe were up 22%, where volume share is over 20% in France and Italy. Japan and Australia continue to perform very well.

Sales in our emerging markets for Crestor were up 41%. In Mexico, Crestor just overtook Lipitor to become the market-leading statin by value and volume share. So, a very strong quarter for Crestor.

Next I'll look at Nexium. Sales were up 2% in the quarter to nearly $1.2 billion. Nexium sales in the US were down 4%. Dispensed retail tablet volume increased by 3.6%, although changes in IMS mail order data reporting may be causing an overstatement of a couple of percentage points; but it's still a very good performance in the US PPI market. As expected, average net selling prices were lower by around 9% in the quarter.

Nexium sales in the rest of the world grew at double-digit rates. Sales in Western Europe increased by 8% despite the 35% decline in Germany. Sales in emerging markets were up 19%, including good growth in China.

Globally, Seroquel sales were up 11% to $1.1 billion. Sales in the US were up 14% to $800 million. We've launched Seroquel XR for the bipolar depression and bipolar mania indications; and while it's still early days, prescription growth for XR is encouraging.

Total prescriptions for the entire franchise including Seroquel IR increased by 3% in the US in the quarter, with more than 80% of the increased coming from the XR formulation.

In other markets, Seroquel sales were up 6% to $325 million despite a 68% decline in Canada due to generic competition and on the strength of a 19% increase for Seroquel in Western Europe.

I'm sure by now you're all aware of the FDA Advisory Committee meeting on the MDD and GAD applications. And we look forward to having further discussions with the FDA regarding both sNDAs.

It was another good quarter for Symbicort, where sales were up 24% to $515 million. In the US, sales in the first quarter were $99 million, fueled by continued growth in asthma and the launch of the COPD indication. Symbicort's share of new prescriptions for fixed combination products in the US increased to 12.8% in March, paced by a market share of patients new to combination therapy that is now over 20%.

Sales in the rest of world were 13% ahead of the first quarter last year to $416 million. Sales in Western Europe were up 12%, and emerging market sales increased by 19%.

The other item worth mentioning is Pulmicort. As you know, whilst we settled the patent litigation on Pulmicort Respules with Teva in the fourth quarter last year, the approximately three-month supply that they shipped into the market at the end of 2008 was committed to be sold through to patients.

The Teva product had a market share of around 52% in the first quarter, which reflects a lower pullthrough than we'd expected. As a result, the impact on our Pulmicort ex-factory sales, which were down 37% in the first quarter, will likely persist through the second quarter.

I'll now turn to the first-quarter P&L and the drivers of the growth in core operating profit. I will focus here on core margins and profit. The press release does of course contain the statutory numbers and a detailed reconciliation to our core measures. As with sales, when I refer to growth rates they will be on a constant currency basis.

Core operating profit rose by 19% to $3.36 billion in the quarter. That's $525 million in constant currency. The sales increase, efficiencies in all the operating cost lines, and the higher other income all contributed to this increase.

Core gross margin at 82% of sales was a 90 basis point improvement over 2008 in constant currency terms. Principal contributors were lower Merck payments as a percent of sales, efficiency gains, and favorable product mix, partially offset by higher royalty payments.

Core R&D expenditures were unchanged in constant currency in the quarter, although with the currency impact reported expenditures were 17% lower. We continue to drive productivity and efficiencies in R&D, which allows us to absorb increased activity related to the maturing pipeline.

Core SG&A expense was 5% higher than the first quarter last year. We continue to deliver efficiencies in our underlying SG&A costs, but the phasing of certain items in SG&A -- such as employee benefit costs and higher legal expenses -- are biased towards the first quarter this year. I still expect the combination of R&D and the SG&A to come in broadly flat in constant currency terms for the full year.

Core other income for the first quarter was $293 million, $142 million higher than 2008, chiefly as a result of the Abraxane disposal. With the April approval of the Nordic OTC product disposal by the Swedish Competition Authority, those proceeds -- some $220 million at current exchange rates -- will be booked in the second quarter.

Reported core operating profit for the quarter was 43.6% of sales compared to 36% in the first quarter of 2008. But please note that 340 basis points of that improvement were related to currency. Of the 420 points of constant currency margin improvement, 190 basis points came from other operating income, with the balance of 240 basis points coming from operating leverage. Thus the 7% increase in sales has resulted in a 19% increase in core operating profit.

Turning to our productivity and synergy initiatives, there was $72 million in restructuring and synergy charges taken in the quarter. The program is on track as to costs incurred and benefits being realized.

I now turn to cash flow. Cash generated from operations increased by $190 million in the quarter, driven by strong underlying operational performance. This is offset by a phasing-related increase in tax payments of $325 million, resulting in a small reduction in net cash inflow from operating activities compared with the first quarter last year.

Net debt at $6.85 billion has decreased by a further $321 million since the year-end; and that is even after paying the increased second interim dividend of $2.1 billion. As you know, there were no share repurchases in the quarter.

I will conclude my remarks with some comments on our full-year guidance. In the context of the continued deterioration in the general world economy, we as a management team do remain cautious in our near-term outlook for the pharma sector in general and for our business. You will have seen these concerns echoed in IMS's revised forecast for the global pharma sector for 2009.

We've posted a good set of first-quarter results, and that's a reflection of excellent execution on all fronts. Key franchises such as Crestor, Symbicort, Seroquel, and Nexium are performing well against the competition. We are driving continued growth in the emerging markets. We are making steady progress in our business reshaping initiatives and exercising discipline in managing everyday costs.

We are also mindful that the revenue growth rate in the quarter was somewhat flattered by an easier comparison against the first-quarter '08 in terms of destocking, as well as the unanticipated upside to Toprol-XL in the US, where we have limited visibility as to how long that may last.

For the full year, our guidance for core EPS is unchanged. We continue to target core EPS in the range of $5.15 to $5.45.

The other guidance I gave at the year-end for gross margins, operating costs, other income, net finance expense, and the tax rates still hold. Just to be clear, there are no currency-related changes to our full-year guidance. As a reminder, our core EPS guidance is based on the average exchange rates that prevailed during January 2009 when the targets were communicated.

Despite volatility, the actual rates in the first quarter have not given rise to any meaningful currency variance on core EPS versus our guidance basis. Going forward, this guidance takes no account of the likelihood that average exchange rates for the remainder of the year may differ materially from the January 2009 average. As usual, I point you to our currency sensitivity chart to help you flex your own estimates on the currency impact to sales and earnings.

I think I'll wrap up my formal remarks here and turn the call back to the conference operator to begin the question-and answer-session.

(Operator Instructions) Tim Anderson, Sanford Bernstein.

Thank you. A few questions. On emerging markets, you talk about growth being 15% in constant exchange rate terms. What would it have been in reported terms? Can you tell us what your top five products are in sales terms, not in growth terms in these markets?

On ONGLYZA, can you talk about the competitive positioning of this product versus Januvia? Wondering what the subtle differences are that will help you differentiate the product.

And you've got AZD6140 data coming up. I'm wondering if you can talk about your level of excitement with that product. It doesn't seem like you mention it very often.

Okay. Well thanks very much for the questions, Tim. In terms of the emerging markets I'll just get Ed to get that number for you.

But in the meantime, on ONGLYZA we're obviously pleased that the Ad Comm voted 10 to 2 that there was sufficient evidence to conclude that ONGLYZA didn't cause an unacceptable excessive CV risk relative to comparator; so we are pleased with that. We obviously announced last week that the FDA has determined it needs a bit more time, so the PDUFA date has moved from the 30th of April to end of July.

We continue to work very closely with our partner BMS to support the review of ONGLYZA. New timeline has not changed our view on the drug, which we believe can play an important role in addressing the diabetes market. We're not going to be sharing our thinking, positioning on marketing and plans until the drug is approved.

On Brilinta, obviously, it is one of 10 drugs that we've currently got in Phase III and registration. It's an important part of our development portfolio. We had indicated that we expected to be able to share the headline results of that by midyear; and that remains the timetable. So obviously we had hoped to be able to share the results during what is now the second quarter. But it's clearly an important drug in what we see as a strengthening pipeline.

Ed, did you want to just touch on the emerging markets' reported growth rate in stripping out -- well, in actual terms?

Sure. It was 15% CER as you mentioned. There was a minus-16% exchange headwind in that. So obviously that is the currency difference between reported and CER for the emerging markets.

In terms of the top five products in emerging markets, it's Nexium, Crestor, Seloken, Symbicort, and Seroquel.

That's right. I think the other thing to add, Tim, is that those are the top five. Actually if you look at the total portfolio, it is less concentrated than our Western Europe and North American business; so there is a larger proportion of the sales that are represented by a broader set of product franchises.

Thank you.

Paul Mann, Morgan Stanley.

Thank you. Just a couple of questions. Your guidance is starting to look quite conservative, but clearly there are a number of fairly significant unknowns. I'm guessing the most imminent is the court hearing on Pulmicort Respules. When will we get an update on that? And how might that affect your guidance if it was to go in your favor or against you?

Then secondly, just thinking about the timing of SG&A expenses, obviously your guidance is for flat combined SG&A and R&D in constant exchange rate terms. You [clued] Q1 by 5%. Are there any specific large quarters or quiet quarters we should think about going forward?

Then finally, just thinking about [Monexia] has had a trial ongoing head-to-head, ONGLYZA versus Jenuvia. Could you say if it's clear when that trial may report? Thank you.

Okay, Paul. Thanks very much. Let me deal with SG&A, then I will talk about the Pulmicort situation and Jonathan can update in terms of the head-to-head.

No, SG&A, our guidance remains that we expect R&D and SG&A together to be flat in constant currency rates. You're absolutely right, Paul. SG&A was up a bit in the first quarter as we mentioned in both the release and I mentioned again in my remarks.

We had a few essentially phasing costs in the G&A area around employee benefits and some legal costs. But the run rate for SG&A, I don't think there are any particular seasonal issues that I'd draw your attention. We have obviously some of those phasing issues that smooth out for the year. So no particular seasonal picture that I would draw to your attention.

In terms of the Pulmicort situation, there is a court hearing underway during the course of this week. It's not yet concluded. As soon as it does we will obviously update the market with whatever the outcome.

In terms of its impact on our guidance, we face a number of opportunities and some risks for the year. Those are reflected, including potential outcomes on Pulmicort, in the $0.30 guidance range that we have reconfirmed today.

And Paul, on the ONGLYZA question, I don't have a specific timeline around publication or first presentation for that. But to some extent it goes back to the question that Tim Anderson asked around the rounding out the competitive commercial profile for ONGLYZA. I think that's something that we will look at once we get through the regulatory process. And as you know, that is ongoing.

Okay. Thank you very much.

Dani Saurymper, Goldman Sachs.

Good afternoon. Three questions if I may. Toprol, the Toprol contribution in the quarter, you mentioned that the operating leverage at the core EBIT line was approximately 240 basis points. What proportion of that came from Toprol, if you're able to quantify that?

Secondly, if you could just indicate the significant price increases you took in the first quarter, in particular as it relates to Arimidex and Crestor.

Then thirdly, just coming back to the guidance, just trying to understand given the favorable currency movement through the P&L, can you maybe just talk through a little bit more -- obviously, we have mentioned Pulmicort -- but the other items that you're focused on as to what would limit you taking up the lower end of the guidance range, given the strength of the performance in Q1?

Okay, well, thanks for those questions. If I start with the improvement in the core operating margin at 420, and if you strip out the operating income effect, 190, you are at the 240 improvement on the core operational items. The majority of that comes from the factors that I called out in my remarks and we put in the release, which is operational efficiencies coming through in our cost of goods sold, R&D, and underlying in our SG&A. And we've had a bit of a mixed benefit in the margin side.

But essentially this is the result of the efficiencies and the operating leverage from getting more sales through what is an increasingly efficient cost base.

The Toprol effect will have had some impact, but really not of a significant quantum that I would call out.

In terms of the pricing questions you posed, I think overall we face a tough pricing environment across our global business. Price has not formed a key driver of the revenue growth in the quarter. It's essentially driven by share growth and some market growth in certain markets.

In a few areas, we've had some positive net price movement. We've also had some negative net price movement; I called out the decline in net price on Nexium. It's true that some positive price increases have flowed through and have driven some of the growth of Arimidex in the quarter in the US.

If we look at Crestor that has not really been a contributor to the revenue growth on Crestor in the US. That has been a share and some market growth story. So those are the price movements.

In terms of some broader perspective on earnings guidance, we've had a strong quarter. We are pleased with the execution really on all fronts in the business at this stage.

I did mention in my remarks, but let me elaborate on them a little bit for you, that the first-quarter performance benefited from a number of specific factors, mainly upside, for the quarter.

I talked about the benefit from Toprol-XL. We talked about the one-off gain, obviously, from the disposal of Abraxane. Just let me add a few others which you will probably have been able to sort of pull out.

The tax rate you will have seen was a little lower than our full-year guidance, and that is principally around timing and doesn't impact our tax rate for the year.

We had from a year-on-year comparison a benefit due to the destocking in '08 relative to '09.

Then I think relative to our views at the beginning of the year, we have perhaps seen slightly lower than expected sales of Teva's Pulmicort product. And I mentioned in my remarks that we think that impact may sustain through into the second quarter.

So a number of factors which gave us some positive upside in the first quarter and supplemented what I think was a strong quarter in terms of just underlying performance.

If you look ahead though, as I mentioned we do remain cautious on the outlook for the global economy and its impact on the pharma sector. I think our views have not really changed since we gave our guidance at the beginning of the year.

In addition, there are some further uncertainties that we need to take into account for the remainder of the year. We don't know, as I mentioned, how long the Toprol-XL upside will last. Paul raised the question about the Pulmicort situation. I think I mentioned at the beginning of the year that it's possible we may get multisource generics into the US PPI market in the second half, impacting Nexium. And we've also obviously got the Casodex patent going off-patent in the US; so that will also be impacting our run rate.

I think you'll also recall we mentioned the unwind of the fair value on the bonds, which we've had a little bit of that unwind that potentially could have some further impact from that for the remainder of the year. So there are some uncertainties. There are clearly some opportunities for the business as well, and we will be looking to drive those.

So those are the factors that flow into our guidance and why we have confirmed the $5.15 to $5.45 position that we took at the beginning of the year.

Kevin Wilson,

Yes, it's Kevin Wilson from Citi. Apologize in advance for these two questions, Simon, because they kind of go over ground you have already covered. But I just want to be sure that we're not missing anything in your thoughts about the underlying business.

Given that I don't believe that you assumed the level of benefit you achieved from Toprol in this first quarter when you set your guidance back in January, can you confirm that there is no new negative individual item in the business that would lead you not to change guidance or amend the guidance up, which would make sense at this time of year?

Is it just that the business has to run a bit harder to do what you thought?

And secondly, it was my impression from Bruno Angelici's comments back at the fiscal year results that emerging markets were likely to slow in their growth from, I think, the 12% that we saw at the end of -- at that point. And here we have a 15% performance, which is impressive. Could you tell us whether you expect a slowdown from this double-digit growth to a lower level? And whether you now think actually emerging markets may do better than you had previously thought, which causes another element on the positive side? Thank you.

Yes, okay, I think to your first question, there are no sort of -- I don't think new risks that we envisage at this stage that we didn't envisage and think and plan for at the beginning of the year. I touched on some of those just a moment ago.

To the first part, which was our thinking on Toprol at the time we set our guidance, at that stage we recognized there was a possibility that we might be getting some upside from Toprol. But we've now had three months of that, but again really no visibility on how long that might sustain. But no new significant risks or issues other than that that was factored into our thinking at the beginning of the year.

Emerging markets, we got good growth for the quarter and I think we've seen strong growth in many of our brands. We haven't seen across the markets a discernible slowdown in terms of market development and growth, although there are one or two markets we've seen some of that. But I think as we look into the remainder of the year, our caution I think remains.

Kevin, just to make sure we get the numbers right, the growth for emerging markets at the full year was 16% CER, so it dropped 1 percentage point to 15% in this quarter, rather than as you described it an acceleration up from 12%.

Yes, thanks for that, Jonathan.

Thanks.

Marietta Miemietz, Societe Generale.

Yes, good afternoon. My first question is on CytoFab. I was just wondering, do you already have the data from the additional Phase II trial in house? Are you going to move that into Phase III? Or could you actually even file on the Phase II data if it's very good?

Second question on Nexium pricing pressure. You gave us the year-over-year pressure. I was just wondering how the pricing pressure is actually developing sequentially.

In particular you mentioned additional competition coming in, in the second half of the year. I was just wondering in terms of the dynamics, when would that actually have a negative effect on your pricing for Nexium? I.e. would that basically already be affecting prices now? Or would that actually then play into the negotiations you have later in the year?

Then I just wanted to really push my luck on the guidance question. Would you say that the following is a fair comment? If Pulmicort Respules' sales were to stay at the current levels, and if you have at least one more quarter of Toprol-XL to yourself, then basically -- given that there are no new negatives cropping up -- you almost can't help but beat the current guidance. Is that a fair comment?

Let me deal with the third question; and then, Ed, why don't you pick it up and talk a bit about Nexium pricing and the potential for multisource generics and its impact on the class. Then Jonathan, do you want to pick up CytoFab?

I mean, I'm not -- there is a whole variety of different scenarios that one could paint around plusses and minuses during the course of the year. I don't think it's -- I don't want to sort of hypothesize a particular one. I think I've laid out as we go forward in the year, good first quarter. We've got some opportunities ahead of us, some risks ahead of us. That is built into the guidance range.

We will look forward to updating you all at the second quarter. Ed, do you want to pick up Nexium?

Sure. In terms of price variances, we flagged them. Minus 9% in the quarter. Sequentially of course it was against a flat price Q4 of last year, but that was an artefact of the phasing. That is why we pointed you to looking at the full year price effect last year, which I believe was low double digits.

So in that sense, it's not -- except the deterioration in price from our strategy of trying to maintain competitive formulary position -- hasn't accelerated. It's just an artefact of that quarterly phasing in the year ago period.

In terms of second half of the year, it's the potential for multisource competition in pantoprazole as well as the risk that there might be a generic lansoprazole that factors into our thinking that there is a second half for Nexium that we will -- just want to keep a close watching brief on. That could certainly see its -- manifest itself in contract negotiations.

But also could have a volume effect, too. As these products go generic you do see a bit more of accelerated substitution. So I wouldn't lay it down to strictly price. It's just that the market environment, when we are competing in that marketplace, we are a rival to the other brands in terms of the preferred brand position in what is otherwise a heavily influenced market for generics. Having more generics and less branded product to go after in those formulary wins and gaining market share is the factor that we would be thinking about in terms of the second-half dynamic in the PPI market.

Could I just clarify? If you compare the pricing in Q1 '09 with Q4 '08, how does that actually compare? Is the price down mid-single digits compared to Q4? Would that be a fair assumption? I am just trying to reconcile like all the year-over-year rates you have given us to really see what's happening sequentially.

The best thing I can point you to was our full-year guidance, which is that we still expect selling prices to decline year-on-year. But I think our guidance was it's probably not at the same rate that we saw in 2008.

In terms of parsing that out to a sequential quarter the best thing I can do is give you that full-year effect. Because it is difficult to follow on a quarter-to-quarter basis.

Yes, and there was an 11% effect last year, Marietta, so that gives you some way at least of calibrating for the full year.

Okay, thank you.

Then just the other, I mean the impact in the second half, I think it's -- the primary factor we watch is volume. Clearly the formulary access, the formulary discussions start fo impact in the following year in terms of the price for access.

In terms of CytoFab, Jonathan, do you want to just --?

Yes, no real change to the program there. We expect to have that study result in the first half of the year, which means the second quarter. We haven't got it yet.

But as usual we tend to do a more comprehensive R&D update at the midpoint of the year, and that is maybe where you should look for an answer.

Okay, thank you.

[Naresh Shine], ING.

It's Naresh Shine from ING, three questions for me. Firstly, could you tell us how much the destocking benefit was on Crestor, Seroquel, Nexium, and Arimidex?

Secondly, could you give us a bit more color on the launch of generic Seroquel in Canada? Did the composition-of-matter patent just end earlier than the US, or is there more to it than that?

Finally, I appreciate the guidance has many moving parts within it, hence the fairly wide range. So maybe we should just take one of those components. If Toprol was to stay at the current level for the remainder of the year, what would be the uplift to the guidance range? Thank you.

Okay, I can only really refer you back to my answer to the prior question, which is we have a range of factors and that is built into the guidance. So I think I probably can't elaborate further on that question.

In terms of the generic competition for Seroquel in Canada, Jonathan, do you have a (multiple speakers)?

(multiple speakers) the question got it absolutely right. It was just the fact the Canadian patent expired a little bit sooner than the IP in the rest of the world. So nothing unusual there, just the natural end to the intellectual property in the Canadian market.

Great, thanks.

In terms of your destocking, we mentioned a year ago that we had something like a $200 million impact on destocking that impacted us in the first quarter across the US business. What we've seen this quarter is a much more normal pattern in terms of pullthrough through the value chain. So that is the -- I mean it is actually slightly little under that -- but that is the sort of year-on-year comparator. I'm not going to break it out by the individual brands.

Thank you.

Alexandra Hauber.

This is Alexandra Hauber from JPMorgan. I have two questions. Just on the general cautious outlook for the pharmaceutical industry in the context of global economic conditions, can you just tell us what you are most worried about? Is it slowdown of everything which requires out-of-pocket costs? Is it government actions tightening in sort of the later end this year, as in we haven't seen it yet but we may see it? Or is it just more wholesaler problems? So that is question number one.

And question number two is on Seroquel XR, on the MAD indication, MAD-GAD indication. Is there any timeline you can point us to? I know you are in discussions with the FDA. It appeared from the briefing documents that the review of the pediatric data was an important step in June. Is there anything, is there any timeline you can point us to? Or is it just like we have no idea when the FDA is going to move on that?

Well, let me -- the first one is I am afraid I can't really give you a specific timeline. We are obviously in discussion with the FDA, that is a [firmer] time frame.

But the first, having had [biaxalom] on MDD and GAD we have not yet -- we now need the opportunity to discuss the CRL more broadly with the FDA, and that will then start to define the timetable. So too early for us to update you on that.

Alexandra, don't forget as well that there is the -- FDA is scheduling an Ad Comm on the pediatric use of atypicals, and that is in June.

June, yes.

Yes, but is the understanding that we have to wait for that in any case before even further timelines start on the firming of the timelines?

I don't think we can give a specific comment on that.

If I go back to your question about the sort of broader macroeconomic environment and its impact on the pharmaceutical sector, I think that there's a couple of areas that we are watching and built into our thinking for this year.

I think you touched on both of them, really. There is clearly a key feature of our business is and has been, in particularly public payer markets like Europe, governmental involvement in pricing. We have seen some of that in the past. Germany and Italy for example in Nexium.

That could be a feature and an increasing feature as we move forward. So said that is one risk factor that we are watching.

The second is that in those markets where there is a heavy out-of-pocket expenditure -- and some of our in emerging markets would fall into that category -- we are cautious about the extent to which the economic conditions flow through into personal disposable incomes, and then into the buying behavior on some of the medicine.

So that is the second risk factor we are watching. As I mentioned, there has not been a discernible trend across our business for the first quarter, although we have seen some impact in some of our markets.

So I think overall we remain recession resistant. I think we said that there is no reason to think that we're entirely recession proof. Indeed I've seen some of that echoed in IMS's latest update. So thanks, Alexandra.

[Stan Westenberg], [Erman Equity].

Good afternoon. I wonder if you could discuss the potential impact from the supply shortage of Par Pharmaceuticals' metoprolol ER product in the second quarter? If this may result in an even more favorable impact on Toprol's sales for the second quarter.

And my last question, if you can confirm that the PLATO study will be released as a latebreaking trial at European Society of Cardiology. Thank you.

Just dealing with your second one, in terms of PLATO, I would certainly like to be able to reach the ESC in August, so that is certainly in our planning and thinking at this stage. Do you want to pick up the first question, Ed?

Yes, we had to ramp up our production both on the branded product as well as the supply that we provide to Par as part of the authorized generic. We have been working on both of those levers to try to get product to the market.

You might see in sporadic regions one supply in a particular region rather than the other because the wholesaler is trying to allocate what were tight stocks. But I think the bottom line is we are looking to serve both the brand and the authorized generic with the increased supply to satisfy patient needs. There is no -- I wouldn't say there is any differential gearing to the outlook going forward. We are trying to supply both arms of the metoprolol market.

Graham Parry, Merrill Lynch.

Thanks for taking my questions. You will be please to hear I have not got a question about the guidance. I was wondering, Simon, if you could update us on your thoughts on acquisition policy. I think you talked briefly about smaller deals. But David was recently quoted as expressing interest in EUR3 billion to EUR5 billion size deals.

I was just wondering if that actually marks any kind of change in thinking. So an update on where you are on thoughts of acquisition.

Similarly, I was just wondering if you could fill us on how you're thinking about the need to buy-in further R&D versus buying-in in-market products as the patent expiration of Seroquel approaches. Are you actually comfortable to see your comment top line drop for a period before the pipeline comes through? Or do you actually feel that you actually need to sustain revenues to justify an ongoing cost base?

Then thirdly, just on the outsourcing of manufacturing, I was just wondering if you give us an update on progress of how much of your product volume now comes from third parties. And if you had to try and split out fixed versus variable costs therefore on your costs of goods lines, where that is now and where you would expect it to be in 2012. Thank you.

Okay, thanks very much indeed. Let's start with the acquisition policy and strategy. To some extent that links really into your second question.

Our strategy as a business is an R&D-driven integrated pharma business. We've got three key planks of that driving the top line of our marketed product, reshaping our cost base for long-term competitiveness, and investing in in-house and indeed externalized R&D to strengthen our pipeline. And I think we are making good progress on all three planks of that strategy. You've seen I think some of that coming through in the results in the quarter.

So within that strategy, a central focus for us in terms of acquisition and externalization is bringing in technology and products that complement our therapeutic and disesase areas. That remains a strong focus for us. That might be sort of early stage, or in some cases it could be later stage products and indeed potentially marketed products where they complement our market positions.

If there are opportunities to move from individual small products, in-licensing deals, numbered in tens and hundreds of millions in dollars up to larger acquisitions in the sort of scale that you mentioned, if we see value-creating opportunities to do that, we would take them into our sort of radar and screen them to see how they fit with the market and pipeline strategy.

So I don't think there is a significant change there in terms of strategy.

To your question of what is the driving objective for the acquisition of product or marketed -- R&D or marketed product, it is very simple. It is to create value. Which means looking at investing to get a return.

We're not investing and pursuing acquisitions to fill any particular revenue target in any particular year. So that's what guides the acquisition strategy.

Turning to your final question on outsourcing, the strategy really is to outsource all of our API over time, within the next five to 10 years, ideally towards the five-year time frame. I think the current percentage, I think we are moving up into more than half I think now of API. About 60% I think is now outsourced.

And some of the deals that we are currently working on will continue to raise that level up. So we're well on track with that strategy.

To your question, that obviously does both improve the absolute cost level but also the flexibility of our cost base, and improving the variability of our cost base is a very important part of the strategy. So thanks, Graham, for the question.

And operator, before we go to the next one, could just make it one more question? I'm quite conscious of time given we are butting up against, I know, other people's conference calls and our AGM.

Steve Scala, Cowen.

Thank you. I have three questions. First, assuming AstraZeneca is successful in the Pulmicort TRO hearing, should we expect a preliminary injunction hearing to follow? And when would you anticipate that to occur? Would it be on the order of weeks or months?

Secondly, what is the timing of the filing Zactima? I believe the Company had said it would be a second-quarter event. Is that still on track?

Then thirdly, you mentioned that we will get the top-line PLATO results in the second quarter. Could you tell us whether the last patient visit has occurred, and has the data been locked, and is it now being analyzed? Thank you.

Well, on PLATO, I said we would expect to share the top line by mid-year, about in the second quarter. I can't give you exactly where we are in the process, but we are certainly on track for that time frame.

Jonathan, on Zactima, do you want to --?

Yes, no change to the plan. We're on track for the guidance which was to do a filing in the second quarter.

Yes. And the Pulmicort hearing, the outcome of that, if we are successful we would hope that that would indeed keep an injunction in place for us as we go forward. But we will update the market as we hear the outcome of that trial.

Thank you.

Thank you. There are no further questions.

Okay. Well, look, thanks very much indeed. Thanks for joining us on the call this afternoon.

Just to close, it's been a strong first quarter. A good set of results posted. We've driven our key product franchises and growth in all our regions, and I think continued to deliver improvements in operating efficiency.

As I said on the call, we are cautious in our outlook for the year in the context of difficult global economic conditions; and we've confirmed our guidance of core EPS for a full year. So with that, I will be bid you all a very good day.

Thank you. Thank you for joining, ladies and gentlemen. That concludes your conference for today. Have a good day.