AstraZeneca PLC (AZN) 2010 Q2 法說會逐字稿

Good afternoon, and welcome, ladies and gentlemen, to AstraZeneca's half-year results analyst conference. Before I hand over to David Brennan, I'd 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 expressed or implied by these forward-looking statements. The Company undertakes no obligation to update the forward-looking statements. (Operator Instructions). I will now hand over to AstraZeneca headquarters in London. Thank you.

Good afternoon, ladies and gentlemen, and good morning to those of you in the states who are joining us. I'd like to welcome you to our webcast and conference call to go through our second-quarter and half-year results for 2010. So, let me just start with a review of the key events since we last convened for our full-year results back at the end of January and then look at the headline numbers for the first half of the year.

Simon Lowth is here. Simon will take you through the second quarter. He'll focus on revenue by region and by key brand and also take a detailed walk through the P&L, and then we'll end up with the updated outlook that we have announced around our financial guidance for the full year.

Anders Ekblom is also here, and he's going to provide the half yearly update on the pipeline, and I expect we will have plenty of time for questions, so look forward to that as well.

Let me begin with an overview of some of the key developments that have taken place in the past six months. And I guess it's hard not to start anywhere except yesterday's FDA Advisory Committee review of Brilinta. Clearly, we're pleased that the Committee recommended the approval of Brilinta at yesterday's meetings. I'm sure that the views that have been expressed by the Committee and the Committee members will help to focus our continuing discussions with the FDA. Obviously, that's now our priority for the US submission.

We believe that Brilinta should be approved, not only in the US, but in other countries around the world. And to that end, we have made nine submissions in territories, including the European Union, Canada and Brazil, and we expect to pursue further approvals in the coming months.

The second event I'd highlight is the US court decision upholding the patent for Crestor in the United States. This was announced at the end of June. It's a very important affirmation of the strength of our intellectual property, and it derisks our US Crestor revenue, now closing in on and an annualized basis of about $2.5 billion. So, a very significant event.

At our full-year results, we affirmed our commitment to a business model that, at its core, is driven by investment in innovative prescription-based biopharmaceutical research and development, and with that commitment, comes a responsibility to ensure that investment earns an attractive return for our shareholders.

We launched a major set of initiatives to tackle, head on, the need to improve the productivity of the investment in research and development. So the third item I will highlight in my review is the progress that we've made on the R&D change program since the turn of the year.

We've made three significant leadership appointments, two from outside the Company. I'm delighted that Martin Mackay has joined us as the President of our Research and Development organization. Martin has impeccable scientific and leadership credentials, combined with extensive experience in our industry. Martin's appointment to this new role is going to provide a single point of accountability and senior accountability as we continue to make the changes necessary to improve the productivity and efficiency of our research and development organization.

We also recruited Mene Pangalos to be our new Executive Vice President of Innovative Medicine. This is the newly created organizational structure where our discovery, research and early proof-of-concept development work has all been consolidated into these innovative medicine units.

And the third major appointee was the internal appointment, when we named Anders Ekblom as Executive Vice President of Global Medicines Development. This is a group that will undertake the late stage development work for both small molecules and Biologics.

But we didn't wait until the leadership positions were fully staffed to get on with the business of change. And under the leadership of Anders and also Christer Koehler, who has helped Anders and the rest of the organization with this, he's now heading up the Neuroscience Innovative Medicines unit. The entire organization has been engaged and energized to transform the way we conduct the research and development.

Our disease areas have been thoroughly reviewed and prioritized. As you know, a few of them have been marked for disinvestment as we focus our resources following a rigorous portfolio assessment. It included analysis of technical risks and organizational capability, as well as a thorough exploration of market attractiveness, including disease prevalence; degree of unmet need; competitive intensity; and increasingly importantly, as you all know, society's willingness to pay for incremental innovation.

Our portfolio investment board is up and running. This is the cross functional governance group, chaired by me, that's now accountable for allocating all research and development investments within the group. I want to personally thank Anders and Christer for their leadership and their contribution during this period of significant change and transition. As I said, you'll be hearing from Anders a bit later for the pipeline update.

The fourth area I'll cover and focus on is Emerging Markets. At our Emerging Markets Analyst Day back in March, we provided a comprehensive look at the Emerging Markets opportunity, our historical performance and most importantly, a look at the strategies we are pursuing to profitably grow in this important part of the world market.

At that meeting, we showed this slide based on IMS data, indicating that 70% of the incremental growth in the world pharmaceutical market over the next several years is projected to come from emerging markets. That evolution is certainly evident here at AstraZeneca.

Here is a snapshot of our revenue picture in the first half of 2010. You can see that Emerging Markets, which account for about 15% of our total revenue, contributed around 60% of our incremental revenue growth in constant currency terms.

We followed our Emerging Markets day with enhanced regional disclosure, beginning with our first-quarter results, providing greater transparency for product sales at the regional level. Analysts can now track sales of our key brands in the US, Western Europe, other established markets, and emerging markets, and we appreciate the feedback and the positive feedback that we've received on this move.

Healthcare reform has been seen as an important part of the agenda in the first half of 2010. First there was the passage of the landmark US healthcare reform legislation. As we mentioned at our first-quarter results, we estimate the impact in 2010 to be around $300 million, and that was fully considered in the financial guidance we gave back in January.

Our first pass assessment of the impact for next year is for a bit more than double this year's revenue hit, but I'm sure we will have a better handle on that as we work our way through the actual implementation of this very complex piece of legislation and its enabling regulations.

More recently, attention has been focused on government pricing interventions in Europe. We all know it's not a new phenomenon. It's been a feature of the market landscape for years. Over the past several years, we've budgeted for and absorb around low to mid-single-digit price erosion in our pan-European business every year. These interventions tend to be system-wide, so aside from slight differences in regional or product mix, most major pharma companies are similarly exposed.

So far, we estimate that the impact on our first-half results has been more or less in line with this historical trend. The head wind will be a bit stronger in the second half, and of course, we won't see the full annualized effect of these changes until 2011.

As you'd expect, we will monitor the developments closely, particularly as we complete our planning cycle in the autumn, but as yet, I wouldn't call it a step change in the market environment. But it certainly is a bit more of a squeeze than we would have otherwise planned for based on historical trends.

The final observation I would like to make before I turn to the headline numbers is on the response to our full-year results presentation, where we communicated our planning assumptions for revenue and margin evolution over the 2010 to 2014 planning period. And our assumptions for the generation of -- and utilization of the significant cash flow that could be achieved if we perform to plan. We don't plan on revisiting these midterm assumptions every quarter. We're going to review them on an annual basis at our full-year results presentation.

As we said at the full year, subject to investment opportunities and prospective returns, our aim is to re-invest approximately 40% to 50% of our pre-R&D post-tax cash flows to drive future growth and value.

After reinvestment in the business, the residual cash flow will be available for any other business needs that arise for repayment of debt as it comes due and for distribution to our shareholders.

At the heart of our shareholder distribution policy is funding the progressive dividend policy. You will have seen today that we announced a first interim dividend of $0.70 per share. This is the first dividend announcement since we adopted the new policy. The press release covers the rationale for the first interim dividend, and Simon will touch on that in his remarks in a few minutes as well.

The second element of shareholder distributions is the share repurchase program. We've said that the Board will keep under review the opportunity to return cash in excess of our requirements to shareholders through periodic share repurchases.

In the first half of the year, we completed $516 million towards our initial target of $1 billion in net share repurchases in 2010. Today, the Board announced a doubling of that share repurchase target, aiming to repurchase a net $2 billion for the full year.

So, with that as an overview, let me turn to the headline results for the first half 2010. And when I refer to growth rates, they will be on a constant currency basis.

Revenue in the first half was nearly $16.8 billion. That's a 4% increase. As I mentioned earlier, a large part of that was driven by Emerging Markets, where revenue was up by 18% (sic - see presentation). Core operating profit was up 5%, so once again, we are able to achieve profit growth ahead of revenue growth as we maintain the cost discipline and as we drive efficiencies throughout our organization.

Core earnings per share increased by 16% (sic - see presentation), benefiting from lower net finance expense and a lower effective tax rate, and in bridging from core earnings per share to reported, total adjusted -- the reported total adjusting items to core earnings were higher than in the first half of 2009. Although restructuring charges were lower in 2009, they were more than offset by the legal provision. Therefore, the growth in reported earnings per share was higher than that for core earnings per share, and that was up 23% for the first half of 2010.

As I already mentioned, the Board has declared a first interim dividend then of $0.70 per share. So now let me hand it over to Simon, who will take you through the second-quarter performance. Simon, over to you.

Well, thank you, David, and good afternoon or good morning to everyone. David summarized the first-half financials, so I will cover five topics. First, I will describe the headline numbers, revenue highlights, and operating profit for the second quarter. Second, I will provide a brief update on our restructuring and productivity improvement program. I will then touch on cash performance and our steadily improving net debt position. I'll explain the details behind our actions on the dividend and share repurchases, and finally, I will explain the upward revisions to our target for the full year.

So turning first to the headline numbers for second quarter -- we achieved revenue of nearly $8.2 billion, a 1% increase in constant currency terms. You will have seen that the positive impact of currency movements on the top line increased the reported sales growth rate to 3%. Core operating profit for the quarter was unchanged at constant currency to $3.65 billion.

In the quarter, the contribution from the increased revenue and lower operating costs was offset by the decline in other operating income. You will recall that last year's second quarter, including the Nordic OTC disposal gain.

Core earnings per share in the quarter were $1.79 compared with $1.64 last year. This is a 9% increase at constant currency.

Lower net finance expense and a lower effective tax rate in the quarter provided the uplift to core EPS growth over the growth in core operating profit.

Making the bridge from core EPS to reported EPS in the quarter, we have the usual adjusting items. In this case, restructuring costs were higher in this quarter, chiefly due to the R&D restructuring that we announced at the full year. But this was more than offset by the $0.30 per share legal provisions taken last year.

So, net of these adjusting factors, that left the growth rate in reported earnings per share to 22% in constant currency terms; that's to $1.46 compared with $1.18 in the second quarter of 2009.

I'll now take a closer look at our revenue performance for the quarter. First at the regional level and then for the key brands. When I refer to growth rates, they will be on a constant currency basis.

As I said in the headlines, revenue growth was 1% in the quarter. Revenue in the US was down 4%. Good growth for Crestor, Symbicort and Seroquel was more than offset by generic competition on four products -- Toprol-XL, Pulmicort Respules, Casodex, and Arimidex. Together, these four products took more than $300 million on nearly 9% out of second-quarter revenue in the US compared with last year.

Turning now to Western Europe, revenue was up 1% in the quarter as volume growth just exceeded the price decline that David mentioned in his opening remarks. Prices were generally down across the portfolio with Nexium being the largest price decline in dollar terms.

You will all be aware that Nexium in Europe has been at risk to generic filings and approvals since March, when data exclusivity in the so-called ten-year market, expired. So far, the pace of approvals has been slow, so actual results are towards the higher end of the scenarios that we contemplated at the beginning of the year. And I'll come back to this when I talk about our revised guidance. In mid July, we did see a generic approval in the UK, the first in a major European market.

Revenue in other established markets, and, as a reminder, that's comprised of Japan, Canada, Australia, and New Zealand, was up 4% in the quarter. Here, you can see the impact of the biannual price cuts in Japan, where revenue was down 1% despite good volume growth.

Revenue in Emerging Markets was up 16% in the second quarter. Strong high teens volume growth in emerging Europe was reduced to 6% revenue growth as a result of price reductions largely in Turkey. Revenue in China was up a strong 27%, and other emerging rest of world was up 24%.

I'll now call out some of the key brand highlights for the quarter, beginning with Crestor. And in all instances, the growth rates will be in constant currency terms.

Crestor sales were up 23% in the quarter to $1.4 billion. Sales in the US were up 24% to $679 million. Crestor total prescriptions increased by 12%. That is 4 times the statin market growth rate. Crestor's growth is supported by the launch of the new indication based on the JUPITER study.

Crestor's share of total prescriptions in the US continued to increase, reaching 11.8% in June. Crestor's dynamic share, so that's new and switch patients, is now over 16%, ahead of Lipitor, and now second only to Simvastatin. Indeed, our share of the switch market is well over 20%.

Crestor sales in the rest of world were up 22% to $751 million. Crestor volume growth is 3 times the statin market in the rest of the world. Sales in Western Europe were up 22%. Sales in established Rest of World were up 20%, with all of the individual markets contributing to the strong performance. And sales in Emerging Markets were up 28%.

Turning to the Seroquel franchise, second-quarter sales were up 8% to $1.35 billion. We're now providing the revenue breakdown between Seroquel Immediate Release, or IR, as we call, and the extended release, Seroquel XR. And you can see that sales of Seroquel XR has nearly doubled in the quarter, to just over $300 million. That's [a] 22% of the total franchise.

In the US, Seroquel sales were up 8% to $965 million. Total prescriptions for the Seroquel franchise increased by 70 basis points in the quarter. That's behind a 120 basis point increase in the atypical antipsychotic market. So, market share for the total franchise is down just a bit, around 36 basis points since March of this year.

Fueled by the bipolar depression and the adjunct MDD indication, Seroquel XR now accounts for 15% of franchise prescriptions in the US in June 2010.

Seroquel XR sales in the rest of the world were up 51% in the quarter, and now account for nearly one-third of franchise sales outside the US. Total Seroquel franchise sales in established Rest of World were up 27% on growth in Japan. There was even some growth in Canada now that generic erosion of the immediate release form has stabilized following the loss of exclusivity last year.

Franchise sales were up 17% in Emerging Markets. Sales were down 2% in Western Europe. We're expecting approvals for the adjunctive treatment of major depressive disorder in Europe shortly.

Symbicort sales in the second quarter were up 20% to $664 million. Sales in the US were up 63% to $181 million. Symbicort prescriptions were up 57%, accounting for nearly all of the 6% growth in prescriptions for fixed combination products in the quarter.

In the US, Symbicort share of new prescriptions for fixed combination products increased to 18.8% in June 2010; that is up nearly 5 percentage points compared to June 2009. Market share of patients new to fixed combination therapy is now 27%.

Symbicort sales in the Rest of World were 9% ahead of last year. Sales in Western Europe were up 3%. Sales in established Rest of World were up 38%, reflecting the launch in Japan. And sales in Emerging Markets were up 18%.

Nexium sales in the second quarter were unchanged with sales of just over $1.2 billion. Sales in the US were down 4% to $695 million. Dispensed retail tablet volume declined by 5%, although we are doing an excellent job of holding share. Nexium market share of dispensed units is only down 6 basis points in June 2010 compared with December 2009. And that is without any direct field sales force promotion as we have transitioned all promotional support to new channels, such as our customer service associates, inside telephone sales, and Internet-based support.

Average realized prices were just about flat versus the second quarter last year, and that follows a 6% decline in the first quarter.

Sales in Western Europe were unchanged, but as I mentioned earlier, better than our guidance assumptions around timing of possible generic entry. Sales in Emerging Markets were up 18%, including 35% growth in China.

The last product I will mention is Arimidex. Sales of Arimidex were down 10% in the second to $439 million. Sales in the US were down 17% to $185 million. Multiple generic products were approved and launched in the US at the end of June. They haven't affected prescription volume in the quarter, but our ex-factory revenue includes a provision against pipeline inventory in the marketplace. We would expect rapid erosion of Arimidex sales in US in the second half of the year.

The situation in Western Europe is different. Sales in the quarter were down 5%. Under the terms of the European Union pediatric regulation, we have filed applications for extensions for the supplementary patent certificate, or SPCs, in 12 applicable member states. If granted, this would extend market exclusivity from August 2010 until February of next year.

Extensions have now been granted in 10 of the 12 member states so far, including France, Italy, and the UK. So this also factors in our revised guidance for the full year.

I will now turn to the second-quarter P&L. 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 all be on a constant currency basis.

Core gross margin, at 83% of sales, was an 80 basis point improvement over 2009 in constant currency terms. The principal contributors were lower Merck payments as a percent of sales, efficiency gains, and favorable product mix, partially offset by higher royalty payments.

Now, the first quarter, I said that the Q1 gross margin of 80% was likely to be represented as the run rate for gross margin for the full year. And I still think that that is the case. So put the higher Q2 margin down to phasing, ahead of the tougher revenue outlook in the second half.

Core SG&A expense was up just 1% ahead of the second quarter last year, but we continue to invest, to grow our emerging markets business, and there were some higher legal costs in the quarter, but these were largely offset by operational efficiencies across the established market.

You can see here the impact of lower core other income for the quarter. Last year, we booked a $220 million gain on the Nordic OTC disposal. I still expect core other income to be lower than last year. And that leads to a core pre R&D operating margin of 56.4% in the quarter. That's down 150 basis points in the quarter, chiefly on the decline in other income.

Core R&D expenditures were 9% lower in the quarter. The increased investment in Biologics was more than offset by reduced activity across the small molecule portfolio, which includes the impact of several late stage projects completing their trials. The prior-year quarter also included the $44 million impairment on the MAP respiratory project.

Spend on the small molecule portfolio is expected to increase in the second half of the year, driven by the Phase III trials for the antidepressant TC-5214 that are now underway, as well as the anticipated start of the Phase III program for the FosD project in rheumatoid arthritis that we in-licensed from Rigel earlier this year.

So, core operating profit was unchanged in the quarter in constant currency terms. Core operating margin for the quarter was 44.6% of sales, down 30 basis points compared to the second quarter of 2009.

Just a brief word on restructuring. We've taken $470 million in restructuring charges in the second quarter. Around three-quarters is related to the R&D restructuring activities announced at the full year. These R&D restructuring costs are largely related to cash costs that are incurred for the portion of the estimated reduction of positions identified to date.

In aggregate, restructuring costs across all functions of $565 million have been charged in the first half. The 2010 phasing of costs and benefits for the total program is broadly in line with that communicated in our full-year results announcement.

We now turn to cash flow. Net cash from operating activities would have grown more or less in line with the increased EBITDA were it not for the impact from payments of the first installment in respect of the UK tax settlement and for the Seroquel sales and marketing practices in the US. These payments resulted in the $[567] million decline in net cash from operating activity.

This cash was used to fund increased external expenditure through the Merck option first payment of $647 million, the acquisition of Novexel and late-stage in-licensing deals with Targacept and Rigel.

Returns to shareholders increased by nearly $800 million to almost $2.9 billion as a result of the increased dividend and the resumption of our share buyback program.

After the increased levels of investments and returns to shareholders, the residual cash flow increased our net cash position to $903 million, an improvement of over $5 billion since June 2009.

David already alluded to our commitment to return cash to shareholders via our progressive dividend policy and to returning cash in excess of our business requirements through periodic share repurchases. So let me just touch on the specific actions that we've taken on each of these two elements of the first half.

In implementing the new dividend policy, the Board has recommended a first interim dividend of $0.70. This reflects the Board's intent to rebalance over time the first and second interim dividend with the aim of setting the first interim dividend at around one-third of the prior-year dividends, which last year, you will recall, was $2.30.

As for share repurchases, you will recall that the Board initially set a target of $1 billion for net share repurchases for 2010. And through the end of June, we were just over halfway there with net share repurchases of $516 million. Today, the Board announced a doubling of the net share repurchase target to $2 billion for the full year 2010. So we'll be looking to achieve net share repurchases of around $1.5 billion during the second half.

Finally, I'll explain the drivers of the increase in our full-year guidance.

We generated a good performance in the first half with revenues up 4% and core earnings per share 16% ahead of last year. We always knew that the full year would have a strong first-half bias. We cautioned when we set our guidance that the loss of exclusivity for Arimidex, more competition for Toprol-XL, and the absence of the H1N1 flu vaccine revenues, would make for a difficult second-half comparison on revenue and core EPS.

In fact, we've already seen some of this in the second-quarter revenue performance in the US. And as David mentioned, European government pricing interventions will grab a bit more in the second half of the year as well.

So, what is behind our increased full-year guidance? Well firstly, it does reflect the good first-half performance. [And though] the second half will still be difficult, it should be better than our original expectations, chiefly due to the timing of generic entry for Nexium and Arimidex in Europe.

We now anticipate a revenue decline in the low single digits for the full year in constant currency terms. And for core EPS, we now expect core earnings per share of between $6.35 and $6.65. Just to remind you, this guidance is based on actual results for the first half and the forward-looking is based on the same January 2010 average exchange rates, upon which our full-year targets were initially set.

Actual currencies for the first quarter were broadly neutral to January 2010 guidance rates, but we've seen around a negative impact of $0.03 per share in the second-quarter number.

Of course, we're taking [no] view for future movements for currency, so, 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 2010 average. As usual, I point you to our currency sensitivity chart to help you flex your own estimate on the currency impact of sales and earnings.

I will wrap up my formal remarks here, and turn things over to Anders Ekblom, who will provide a pipeline update. Anders?

Thank you, Simon, and I would now like to provide you with an update on our pipeline on medicine in late stage development.

It's been a busy first half of the year, and over the next 20 minutes or so, I'd like to run through three main areas. First, I will review the key events in our late stage pipeline for the first half of the year. I will then highlight some of our most advanced development projects to give you a flavor of the potential pipeline delivery over the next two years. And finally, I'll touch on the expected news flow for the second half of the year, highlighting those areas that are most significant. So let's start with the first six months of the year.

The first half of 2010 has seen the approval of new products in the US and approval of new indications for a number of our global brands. In April this year, the US FDA approved Vimovo, a combination of naproxen with pain relieving end state with our immediate release [PPI estimate result] was developed in collaboration with POZEN to offer a new treatment option for patients with certain types of arthritis or spondylitis who are at risk of developing NSAID-associated gastric ulcers. We will begin the commercialization of Vimovo during the second half of the year.

As I'm sure you're all aware, yesterday, the US FDA's Cardiovascular and Renal Drugs Advisory Committee issued a positive opinion for our investigational oral antiplatelet treatment, Brilinta.

Despite advancements in the treatment of ACS, [most] ACS mortality rates remain high and there's a real need for new products for these patients. Brilinta works differently to existing therapies, as it binds reversibly to its target, without the need for metabolic activation, leading to more rapid and [consistent interventional] platelet desegregation and ultimately, improved cardiovascular outcome. Indeed, this is what was shown in the [renal world] PLATO study, which showed the compelling improvement in the [complicated] primary endpoint of the study. It has proved Brilinta could provide an alternative to Clopidogrel for patients with ACS.

We are obviously pleased with FDA Advisory Committee's vote, which supports our own views of the strength of the Brilinta profile. We look forward to continuing to work with the FDA at the complete NDA review for Brilinta ahead of the PDUFA action date in September.

It's also important to remember that today, we have made eight additional major submissions around the world with many others planned. We anticipate the CHMP opinion in the latter part of the year, with subsequent EU Commission decision in the first quarter of 2010.

We've also seen Crestor approved for new indications in both the US and Europe, based on data from our large-scale JUPITER study, which is helping to reinforce the best-in-category status of Crestor.

Seroquel XR took an important step toward helping patients with major depressive disorder in Europe. CHMP issued a decision that the benefit risk profile for Seroquel XR was positive for use as an add-on medication in major depressive disorder patients who have had suboptimal response to treatment with other antidepressants. We anticipate the final approval by the EU very soon.

You will also note from our updated pipeline table that following the CRL for (inaudible) monotherapy and (inaudible) in the US, we have withdrawn this application.

This effectively completes the Seroquel R&D program, and I think it's fair to say that this program has delivered the most comprehensive label of all atypical antipsychotics.

The strength of our commercial organization has then been able to translate that into the successful product we have today, helping many patients worldwide.

We've also gained approval for a new higher dose of Faslodex, which has been shown to be associated with delayed tumor progression and a trend for better overall survival. Other regulatory submissions are ongoing, and we see this as being a significant growth driver for Faslodex in the future.

Nexium was submitted for the first time in Japan, and this comes on the back of what looks to be a strong launch of Symbicort in Japan early this year.

Finally, we've spoken a lot in recent months about our progress and plans in emerging markets. This is not only confined to our commercial organization, as we and R&D are also focusing there, both in terms of our regulatory submissions, but also in terms of our clinical trials. The approvals for Faslodex, Nexium for peptic ulcer bleed and the filing of ONGLYZA in China, will help drive this aspect to our business in the short term, as the portfolio of medicines we have in emerging markets catches up with many Western countries.

We're also focusing on bringing our new medicines into emerging markets more rapidly. And Brilinta is a good example. The platelet trial was conducted in 43 countries worldwide, and we have already submitted the first regulatory [authorities] in some emerging markets.

While we are delighted with this clear progress in some areas, it's fair to say that it hasn't all been plain sailing, and there have been some disappointments in the past few months.

The disappointing Phase III results for Recentin have led to the decision not to file any regulatory application in first-line colorectal cancer or recurrent glioblastoma. While Recentin showed clinical activity, we did not consider it sufficient to offer a viable alternative to the current standard of care. We will continue to investigate the application of Recentin in a number of ongoing studies and will publish results as they become available.

In terms of regulatory submissions, our antibody against respiratory syncytial virus, or motavizumab, received a negative (inaudible) Advisory Committee opinion in June. We will continue to work with the FDA as they complete their review of the dossier with a PDUFA date of August 27.

Also in the US, we have received complete response letters for Axanum and Certriad. They are currently available -- sorry, evaluating the CRMs, and talking with the FDA to determine the next steps of the application. Meanwhile, we submitted our Marketing Authorisation Application for Axanum, to the [DMA] in June this year and are continuing with plans for submissions in the rest of the world in the second half of the year.

I would like to take a look at some of the key late-stage products in our pipeline.

Let me move on to dapagliflozin, one of two novel agents that we're developing for the treatment of type II diabetes in collaboration with our partner, [FDMA]. Dapagliflozin could be the first in a new class of antidiabetic agents that work by increasing the excretion of glucose by the kidneys.

The mechanism of action is completely independent of insulin, which is attractive, as it could therefore be used at any stage of the disease, and in combination with any of the currently available therapies in diabetes. Following the initial Phase III data presentation in 2009, we have reported the later Phase III data at the ADA meeting this June.

These data as add-ons to insulin help build the picture of the overall benefit risk profile with dapagliflozin, and hopefully, we're now starting to get a sense of it. The impression I took away from those attending the ADA meeting was of increased confidence in the SGLT2 inhibitor class generally, and in dapagliflozin in particular.

There will be further Phase III data presented at the ESC meeting in Stockholm in September, including active comparator data, which will provide a final piece of the jigsaw ahead of our anticipated local regulatory submissions in the fourth quarter of 2010.

I just remind you at this point that the FDA submission is contingent on meeting their requirements for cardiovascular events as part of the package supporting any new antidiabetic therapy, and this is something we are closely tracking as we approach the fourth quarter.

Moving on to the oncology therapy area, let me update you on our novel oral PARP inhibitor, olaparib. At ASCO last month, we saw the PARP inhibitor story evolve beyond the proof of concept data presented last year, in breast and ovarian cancers in patients with mutations of BRCA. We presented Phase II data in serous ovarian cancers, showing clinical activity over of olaparib in patients without the BRCA mutation, confirming that PARP inhibitors could be valuable in treatment in broader patient groups.

The costly proof of concept data has provided a good platform to start our Phase III program in breast cancer in patients with the BRCA mutation. These trials will start in 2011 and are contingent on completing work to deliver a more convenient tablet formation. [issued] regulatory filings are expected in 2014.

In the meantime, around the (inaudible) trial in various ovarian cancers, we delivered data later in the year, and it will help us evaluate the path forward in ovarian cancers.

Staying with oncology, let me say a few words about Zibotentan, as it's the next Phase III project to deliver data. Prostate cancer is the most commonly diagnosed male cancer in many Western countries, and its incidence is increasing. Hormonal treatments (inaudible) testosterone, provide a great benefit for many men, but the majority of patients eventually become resistant.

For these men, chemotherapy is the only widely available treatment that has demonstrated a survival benefit. Over 300,000 men with prostate cancer will develop castration-resistant prostate cancer each year, and it is here we are investigating Zibotentan.

Zibotentan is an oral, once daily endothelial receptor antagonist under development in prostate cancer. You remember that the Phase II data, which demonstrated a meaningful improvement in overall survival compared to placebo. This was the foundation to initiating our ENTHUSE Phase III program.

The ENTHUSE program comprises three trials involving over 3,000 patients worldwide. The trials are designed to evaluate the clinical benefit of Zibotentan across the spectrum of castration-resistant prostate cancer.

ENTHUSE M0 is looking at one [and deuce] in non-metastatic (inaudible). This trial is actively recruiting and is due to report in 2013.

ENTHUSE M1 is investigating Zibotentan in metastatic disease that is asymptomatic or mildly symptomatic for pain. This trial has now fully recruited its target of 580 patients worldwide, and it's due to report its pure overall survival data in the last quarter of this year. It's possible this would enable the first regulatory submission in 2011.

Finally, ENTHUSE M1C is examining Zibotentan in combination with docetaxel for the treatment of symptomatic metastatic disease. This trial is fully recruited, and it's due to report in 2011. I look forward to updating you with the first Phase III data from this program towards the end of the year.

Now, looking at the new science therapy area, I will highlight our exciting late-stage project for the treatment of major depressive disorders, which we in-licensed from Targacept last year. Major depressive disorder is the common condition affecting approximately 42 million people in Europe, Japan, and US. First-line therapy consists of SSRIs or SNRIs. No more than half of the patients fail to achieve remission in these therapies. New antidepressant therapies are clearly needed to complement existing drug approaches, and this is why we see an opportunity here for 5214. Results from the 5214 Phase II study were first announced by Targacept in 2009.

The trial delivered impressive results with 5214 improving the Hamilton Depression score by 6 points more than placebo at eight weeks of treatment when added to first-line SSRIs. All secondary endpoints were also significantly improved, and a good tolerability profile was demonstrated.

Building on this study, the first half of 2010 saw the launch of our Phase III development program, with enrollment for the first patients in June. Three of the Renaissance studies to support the planned FDA filing have now started, with the remaining two due to start within the coming months.

The US submission is planned for the second half of 2012, with a Marketing Authorisation Application in Europe planned for 2014. The longest time scale for submission in Europe is a utilizational data requirement for regulatory submission (inaudible).

The further Phase II studies explored 5214 as a monotherapy switch agent for patients with an inadequate response to their first-line therapy, is also due to start shortly.

Finally, we turn to new opportunity in the respiratory inflammation therapy area, Fostamatinib, or FosD, as we call it. This is a potential new oral treatment for rheumatoid arthritis, which we in-licensed from Rigel earlier this year.

Rheumatoid arthritis is a very common joint disorder, affecting approximately 1 in 100 people worldwide. FosD is a next-generation therapy being investigated in patients who have failed to respond adequately to first-line therapy, such as methotrexate.

This slide shows some of the data from the completed Phase II program. The study showed the similar effect to methotrexate, TNF-alpha combination with efficacy seen as early as one week of treatment. FosD was generally well tolerated in Phase II trials, but this is something we will obviously keep an eye on during Phase III.

The Phase III trial program is due to begin later this year with regulatory US and European filings planned for 2013.

So while the first half of 2010 has seen progress across a number of our core therapy areas and global brands, the second half is likely to be [uplifting]. We will receive the outcome of five regulatory submissions during this time.

We think with Brilinta, motavizumab, Faslodex, and ONGLYZA metformin in US and also Seroquel XR GAD in Europe. We're planning on four major submissions, these being Ceftaroline, dapagliflozin, Vandetanib, and ONGLYZA-metformin in Europe. Finally, we will present further Phase III data on dapagliflozin and get the first Phase III data with Zibotentan.

I've not covered the full R&D pipeline today, given this was covered in depth at the full year, but as usual, an update pipeline data is available at AstraZeneca.com.

So to summarize, in the midst of first half of 2010, there's quite a number of significant events still to come. While not everything has gone according to plan during the first half of the year, on balance, we have made significant progress with many projects, culminating in the positive Brilinta Advisory Committee yesterday.

We hope to continue building on these in the second half of the year, and we look forward to updating you on these events at the full year. And with that, I'll hand you back to David.

Great, Anders. Thank you for that thorough review of the later stage activity. Simon, thank you for your update as well. And what I would like to do now is just invite everybody to start questions.

Some of you I think already know how, but let me just remind everybody on the telephone that you can press star one on your keypad, and that will alert the operator that you would like to be called on for a question. And then those of you that are on the Internet, there's a box underneath the slides that you can type your question in and send them to us. So, with that, I'm going to go to the first question up. It's Tim Anderson. Tim, you're on.

Thank you very much. A couple of questions, please. On Emerging Markets, how should we think about loss of exclusivity in that broad basket of countries? In the US, we have a pretty good idea of what generic erosion looked like. Same in Europe, but what should we expect for Emerging Markets? So if we look at something like Nexium, should we just expect that to continue growing for the next many years despite generic entry in established markets? Or are there going to be some countries in the mix where a loss of exclusivity will be felt at some point over the next three to five years?

And then, a question on M&A. There's lots of press stories about Genzyme potentially being pursued by one or more companies. And I'm wondering if you can say definitively that you are not one of the companies in the mix. And if you're not in the mix, why not? And can you remind us of where you stand on doing bigger transactions that can be in that $10 billion to $20 billion range?

All right, Tim, good. Thank you. Let me start with a bit on the Emerging Markets. I mean our Emerging Markets business, as I said, is the source of a significant proportion of our absolute growth first half of the year, and that is due to the success of products like Nexium and Seroquel. Some of the products that I think are a bit more mature in the developed markets are now finding more success and opportunity in the emerging markets because, in fact, there is less of a generic curve. You mentioned the comparison to the US, and we know it well I would say. The US is probably the most efficient generics market in the world, whereas a number of these others provide reimbursement levels that are a portion of the branded product when there has been a branded product.

So, it's difficult to say what the curve looks like broadly across all of them. I think it varies from place to place. Certainly, India is a very different type of market than China, but, that kind of bridges for me into the branded generics discussion, which is while we talk about getting products from other companies that we could potentially put our brand on, and then move along, the fact is, in many of these markets, these products have already lost exclusivity. We're marketing our brand that the branding that we do and the promotion that we put behind them establishes the brand. And some of these markets are planning to give more exclusivity to newer products as they come on the market. So, I think it varies from place to place, and it causes us to invest as appropriate, and that's due to our local success on the ground.

As it relates to M&A, I'm not going to comment about any specifics on any deals that are being potentially rumored in the marketplace. Our view on things, as you may have heard before, is we are opportunistic. We're looking for opportunities, but collaboration and cooperation for me trump large-scale consolidation. So I'm not -- I think we've concluded from a strategic perspective that scale in and of itself is not a compelling reason to go forward for some of these things.

I think we're looking for smaller opportunities, new technologies, later-stage products, intellectual property, things that are complementary to our existing disease areas. Not going to come up with a dollar number or figure as to what we are or aren't willing to do. If there's a business case, we're willing to do things, but our targets tend to be on the smaller side.

Thank you.

Sachin Jain, Merrill Lynch.

Thanks for taking my questions. A couple of financial and a couple of R&D. First on the guidance, the guidance seems to be largely top-line driven. I just wondered if you could clarify whether there's any margin uplift associated with that. I guess there isn't a point estimate for margins but just directionally I would imagine that Nexium and Arimidex, higher margin products.

And secondly, on the cash flow, up the share buyback. You talk about the payments out of business cash flow. Just wondered whether you could revisit balance sheet structure and what your thoughts are on the net debt position over time, particularly given recent events.

And then two quick pipeline questions. On dapagliflozin, Anders mentioned [EFD]. I guess the abstracts are up there; I wonder if you could comment on a couple of cases of upper urinary tract infection that have been seen; it's the first time we've seen that. And then the 48-week and 52-week data, where there is no real change in UTI rates.

And then, one quick question was on Zibotentan, I wonder if you could just frame the market opportunity for us in the first indication with the data coming towards the end of this year, particularly in reference to Roche's comments on Avastin, and a similar indication they had kind of indicated potentially a $1 billion market opportunity. Thank you very much.

Okay. Good, Sachin. Thanks. I think what I'll probably do is turn to Simon to cover the financial questions about guidance and the margin uplift, cash flow and balance sheet structure. And then we will switch to Anders to comment both on Dapa and on Zibotentan. So, Simon, you want to start with the guidance and does it assume a margin uplift and what -- or is it driven by the top line?

Sure. Well I think on the guidance for the full year, in my remarks, I indicated that the uplift is really due to a couple of things. Firstly and perhaps most importantly, continued strong performance in the first half of the year. And, much of that was indeed driven by a strength on the top line relative to our initial expectations.

I also indicated that for the second half of the year, relative to our initial expectations, we see similar upside coming through from later generic entry on Nexium and the pediatric extension on Arimidex. So, the uplift is principally from the top line, but we continue to drive our cost and productivity improvement program. And you will have seen good cost discipline through the year, and you can expect to continue to see that from us.

And so in terms of overall margin, I think we've guided the pre-R&D margin level to be at the top end of our sort of mid-term guidance range. That very much remains our view for the year.

The only other remark I would make on margins is really just to reiterate a comment I made in my remarks, which is that I had indicated our gross margin for the full year to be around about the first-quarter level. We saw a bit of an uplift in the second quarter relative to that with 83 [plays] 81, but we view that down more to phasing and revenue mix. So I'd just reiterate Q1 margin, gross margin, remains a pretty good indicator for the year.

Turning to your second question, Sachin, on cash flow, we as a company, as you know, are very focused on driving operational cash flow from our business. We continue to demonstrate strength in the cash generation potential of the business.

The priorities for deployment of that cash are again very straightforward and very clear. We have reiterated them a number of times. But firstly, to invest in specific business needs and investments to drive future growth in value. Secondly, repayment of our debt. And thirdly, dividends, a residual of that, those three, if it is residual cash from those three, to return that to our shareholders over time through periodic share repurchases.

I think David touched on our priorities for the first of those uses of cash, business investment. Very clear, we're looking for value-creating product in-licensing, and investments in our own R&D; some smaller scale acquisitions that are consistent with our disease there and market strategy. Very clear, that focus.

In terms of balance sheet, we've got a schedule of debt repayment over the coming years. We identified a couple of repayment points coming up in the next 12 months in our release. Each time we face a debt repayment, we look at the economics of repaying our financing. In light of credit costs and business shape, we'll continue to do that as we move forward.

So, summary, pleased with the cash generation performance; focusing on investing to drive future growth and value. We will repay the debt and actually see strong case for refinancing at the time. But we will take that each instance by incident. Thanks, Sachin.

Thanks, Simon. Now I'm going to go over to Anders to take the question about Dapa and Zibotentan. And Anders, just before you comment on Zibotentan, we have a written question in as well from Craig Gaskin, which asked how did Zibotentan compare to the drug from Abbott as well, the drug that failed in development? I think Sachin's question was also -- can you frame the opportunities as it relates to the Roche product? So, over to you.

Okay, David. Think you very much. And Sachin, to your questions around Dapa first, it's of course right that the aspects are up. And, I would like to sort of start and then by saying I think Dapa represents a very sort of interesting clause; and as you know, it's the first in the clause of the SBL T-2 compound.

And, if you look on its sort of modality and its action, mode of action, I think it's extremely interesting with a sort of non-insulin-dependent mechanism, because that means we can combine it with basically all treatments available today for type II diabetics. And, what is very good, as you have seen in the data, is that the glucose data are there. We also see a meaningful effect on blood pressure and weight loss. But if you start to sort of hinting at quite unique profile for Dapa.

And what is also very interesting is on from the safety perspective, is we start with a incidence of hypoglycemia, it's extremely low. It's basically placebo line.

The thing that you highlight is of course around the frequency of in a way, genital and urinary tract infections, and this is something we have been showing going forward, that this is sort of a frequency which is a bit higher than the competitors. But, I think it's important to understand that so far, in the program, they have been manageable and of very little clinical consequence for patients that are also responding very favorable to the treatment.

So I think we are now starting to generate long-term data, as you highlight. We will sort of monitor that in the program. And you have to realize this is a program in progress. We will update that sort of going forward.

With respect to Zibotentan, what we have provided in one of the slides that I showed today was the patient numbers for the various indications that we are studying. And, that I think is a good indication for you on the market opportunity. I would not like to comment on any forecasting from a financial point of view.

When you come to the class of Zibotentan per se, it is, as you know, Zibotentan is actually a more selective endothelin A receptor compound than Abbott's compound. And, we don't see necessarily an increase in both (inaudible) and endothelin 1 levels in that outcome (inaudible) doesn't touch the [bigger] receptor.

I think though it's still early days and I think we are [just need] to see the data from both programs coming out in April for a really full head-to-head comparison. So I would be happy to come back to that when we see further data. So back to you, David.

Okay, good. Thanks. I'm going to take a written question from [Vichelle] at Mehta Partners and then I will go back to the telephone to Gavin MacGregor. But let me take this written one first. Should we expect any generic entry for Nexium in the next six months in Germany or France?

And I think the question really gets at that issue we talked about before, which is the likelihood of losing exclusivity, the time frame within which generics can actually come on the market, get approved and get distributed. So we don't have -- it's very difficult for us to give any insight into that. We know that of the major ten-year markets where we had data exclusivity, only -- there's only been one approval, in the UK; there hasn't been any product launch. And there haven't been any approvals in any of the other markets. But I think this is something that we have been trying to anticipate in our own planning, but it's hard. Simon, you want to comment on that?

Yes, David, I was just going to say that building on that point, that there's a whole sort of range of different scenarios for timing of Nexium generic entry in Germany, France, and indeed other European markets. We take account of those scenarios in our guidance. And that's one of the factors, one of several factors, which frames the range that we provide today.

Good. That's good. And then there's a second question from Vichelle, which is just if Brilinta gets timely approval from the US FDA, do we see issues in achieving favorable formulary status? And I think the -- certainly our experience with the US is that obviously payers are challenging to make sure the products that they do put on formularies that are new need to demonstrate that they have a differential and a value proposition that makes good sense for that formulary, that makes good sense for the payers as well as for the patients.

And I think that we believe that the profile that has come out of the PLATO study around Brilinta will make for a very good discussion with formularies as to why they can improve overall outcomes, reduce morbidity and mortality, death rates in patients with acute coronary syndrome, if they have it available on their formulary. So we will obviously be working hard to do that. I think the issues will be similar to the same ones we face with other products.

Okay, I'm going to go to Gavin MacGregor at Credit Suisse. Gavin?

Thanks very much. Two questions if I can. First on Emerging Markets related. And from that perspective, thinking about margin progression, which is obviously a major topic of focus. And it's coming back to how can you guys manage that and look to improve that over time? To what degree can you move cost base out? Have you got plans to do that? What sort of impact might that have?

And then the second question has largely been covered really already around use of free cash. But you've obviously had favorable decisions with Crestor and now it looks like Brilinta, which gives you a nice cushion in the near term, looking out one, two, three years. So just, sort of, what was preventing you from going for a bigger share repurchase program in 2010? And maybe giving some guidance for 2011? Thanks.

Okay, good. Thanks for that, Gavin. I'll make a couple of comments about Emerging Markets and then turn it over to Simon maybe if he wants to comment on that, but I know he can comment on the share buyback, free cash flow and his view on the impact that the Crestor and Brilinta decisions had on that.

I think our investment in the Emerging Markets is one that we've had in place for several years to establish in many of these markets, a presence that will allow us to be competitive. And when I look regionally across the world where we have made investments over the last five years, whether it's Latin America, Asia Pacific, Central and Eastern Europe, the Middle East and Africa and South Africa, we've got the second-largest business -- pharmaceutical business there.

What I see is that we have demonstrated that the investments that we have made can position us in the top two or three companies for growth across all of those regions, which I think speaks well to the plan that we've had in place as to how we want to invest, the levels at which we would invest, and then what kind of return we expect to get on it.

Margin progression, well, I'll let Simon comment on that. We have -- during our Emerging Markets Day back in March, we talked a little bit about what those margins are. But I would just say, where we see an opportunity to invest that we think we can get a return in a relative good period of time, then we will go ahead and make that investment because we know that this is a longer-term kind of investment that we make.

But, Simon, do you want to maybe comment on margin progression for Emerging Markets and what's the opportunity to manage and improve or potentially take some things out?

Sure. Well thanks, David and for the question, Gavin. So in Emerging Markets, I think when we had our session on Emerging Markets earlier this year, we laid out a chart you may recall, where we showed our emerging market country margins, that's revenue minus cost of goods minus SG&A in the markets, for our portfolio of Emerging Markets versus our more established markets, we showed that as the around about, if the established markets were at 100, we said that the Emerging Markets back in '04 were sitting at around about 55. And then we showed that more in the recent year, it was up in the 70 to 75 mark. So we've got a track record over the last five, six years of consistently improving our margins in the Emerging Market.

Now clearly, as we look ahead, across all of our businesses, we continue to see payers seeking more value and we see price pressures. We recognize that. We take that into account in developing our strategies and our midterm planning assumptions. We've got many levers that we can pull to improve margins, and/or counteract price pressures in all our markets, but including Emerging Markets.

Firstly, we're moving our supply chain increasingly eastwards and southwards to reduce the unit costs of producing our medicine in order to meet emerging markets.

In terms of SG&A, obviously, when we are in initial growth mode, we're putting a lot of fixed costs ahead of demand. As the markets continued to grow, they get size. We get more operating leverage, so second lever.

The third is, by bringing together all of our commercial organization into a single global commercial organization, we're getting much faster transfer of best practices and ideas from our more established, more competitive markets into the Emerging Markets, so sales force effectiveness; some of the new channels that we are deploying in the US and Western Europe, we're moving very rapidly into our Emerging Markets.

And thirdly, we're taking infrastructure, for example, back office infrastructure in Emerging Markets that has been done historically in individual markets into region service centers. So a number of levers we've got to either improve margins or offset price pressure.

And when we set out our midterm planning assumptions of 48 to 54 pre-R&D margin, that factored in a growing mix of Emerging Markets within our business, and that was very much built into our forward look on margin.

So, that's on the Emerging Markets. Thank you. It's a very important question. It's an area that we are very focused on as a business.

Turning to cash and share buyback, for 2010, we're very pleased to double the net share repurchase program for 2010, and that's a reflection of the strength of the performance of the business during 2010, and indeed, I think also improved by the successful outcome on the Crestor IP situation clearly helps. So that's on 2010. Pleased to double the returns.

As we look forward, our policy remains the same. I mentioned it earlier, but again, our first use of cash generated from our operations is value-creating business investment. We then service our debt, meet our dividend commitments; any spare cash, residual cash, return to shareholders over time through periodic share repurchases. That remains our policy. And also as is our practice and custom, we update on - at the beginning of each year, and we'll do so for 2011 and share with you any plans we've got then in January. So we're not going to make any further statement on 2011 at this point. So Gavin, thanks very much.

Good. Thank you, Simon. I'm going to take a quick written question, and then I will go to Gbola Amusa. But let me just answer the question is, is the ONGLYZA metformin fixed-dose combination in the EU, is that metformin extended or immediate release?

That's an immediate release form of metformin. Now, Bola, over to you.

A question on China and one on Brilinta. I noticed in China, your second-quarter growth decelerated to something like 27% from Q1, which I think was at 36%. How much of that deceleration is signal and how much is noise? And when do you think that the NDRL additions last year will start to affect your growth rate?

And then on antiplatelets, I was interested in feedback perhaps from Anders in terms of what doctors are saying the boxed warning for Plavix means for off-label use for Effient or Brilinta if approved in the non TRITON-TIMI 38 non-PLATO indications like peripheral artery disease, for example?

Okay, good. Thanks, Bola. I think our business in China is strong. We're not -- while it did slow down, it had slowed down in the fourth quarter, picked up again in the first, there is some fluctuations. We see it.

We have increased our overall presence there in preparation for the regional drug listings for the four new products that were approved late last year, but they are just working their way through the more regional approvals. And we think that we will start to see the impact of that in the second half of this year, but certainly in 2011. So we think that those four new products represent some nice opportunities to continue to grow our business there. And we're not reading any signals into second-quarter performance.

Anders, I think it's best for you to handle your view of the potential implications of the boxed warning that's in the Plavix label on -- potentially on Brilinta, in those patient groups.

Yes, thanks, David. I would rather sort of put sort of the comment back to you, Bola, in saying that, as you heard yesterday, and I must say, we're very pleased with the discussion when we talked about the indication per se. And as you could see if you followed the AC meeting yesterday, there was a lot of discussion, whether it was one indication or several.

And actually, our view is that they [are actually] part of a [compendium], but it's still sort of under the same umbrella, and that was I think where the Advisory committee landed yesterday.

So I think it's too early to speculate on different aspects of the label. We will obviously discuss this with FDA going forward. But as you could hear, our decision on ACS as a disease and sort of as one umbrella is where we would like to be. And we'll come back to that, I'm sure, when we have a more detailed outcome of the label discussion with FDA.

Thank you, Anders. Thanks, Gbola. Let me go to Andrew Baum at Morgan Stanley. Andrew, go ahead.

Hi, good afternoon. A couple of questions. First of all, Zibotentan came from the same vintage as Zactima, Recentin, which made it in a meaningful way. Do you have any clarity on why Zibotentan failed to meet the primary endpoint of the Phase II trial, progression-free survival, just to try and get us more confidence about why you think it's going to meet the primary endpoints of the forthcoming Phase III trial.

And then second, on China, obviously, the Chinese authorities, they've increasing looking at their markups and pricing of pharmaceuticals, which indirectly has an impact on volumes and prescribing and demand, particularly for Western drugs. Do you see any risk of potential separation of the hospital budget and prescribing that could negatively impact the current Chinese model for you and some of your peers?

And then finally, the PEGASUS trial, as outlined yesterday, as a potentially supportive as well as an expansion trial for Brilinta, could you just outline the basic details of design and when you would hope to file that trial in both the US and Europe? Thank you.

Good, Andrew. Thank you. So in one minute, I will just flip back over to Anders to cover the reason why we have confidence in the program for Zibotentan given some of the Phase II data, as well as to comment on anything he might want to say about the Pegasus trial.

On Chinese pricing, a significant portion of overall Chinese payment for the segments of the market that we work in, Andrew, are out-of-pocket payments by Chinese patients. So, we are in the -- primarily in the upper -- the more premium side of the market for the Chinese. So I think there's obviously always a risk.

On the other hand, I think that we have been able to price our products competitively there, and be able to grow them. And I know that having met with the government authorities there myself about the principles and philosophy they have on pricing, I think we are positioned reasonably well.

I'm not sure what the risk of the separation of the hospital and the prescribing is in the context of our business, but I've not heard it brought to my attention by the gang there as a particular issue.

Is Anders back on the line? I'm sorry, I know there was a connection problem. Anders, are you there?

I'm here, David.

Okay, good. So there was the question about confidence in Zibotentan; and then a question about, what can you describe about Brilinta and PEGASUS?

Thanks, David. Andrew, with respect to Zibotentan, I think that what is different with Zibotentan versus a couple of the other compounds you mentioned is that we had overall survival at positive data already in Phase II, which is obviously a strength compared to where you normally would be with sort of good PSF data, and then going for overall survival in Phase III.

But, I mean as you know, oncology is a tricky area sometimes to predict. But, I would argue that the overall survival in Phase II is an advantage, and then we just have to see what the Phase III data means for us.

My question is really -- do you have any clear understanding why the progression-free survival endpoint was missed in that Phase II? Why [the] --?

Well, I think, you know, I mean, Anders, Phase II is Phase II. It's exploratory, and based on the data you have, you're moving to Phase III. So I wouldn't like to sort of claim victory in any way and claim absolute understanding.

I think, though, it's a mechanist that is of interest; there are good mechanistic data behind it. But to provide absolute scientific clarity, that would be foolish to do that. So I think, coming back to it, we know we have good overall survival data. We just need to see how it translates into Phase III.

With respect to Brilinta, I would just say that as you heard, as discussed yesterday, we shared the details on a potential follow-up study. And as you know, we are of course in negotiations with the FDA on how to design studies going forward to further detail the advantages of Brilinta. And, actually on one of the slides at Advisory Committee yesterday, which was slide 118, for those of you who followed that, we talked about the large multinational randomized double-blind study going forwards in a stable coronary artery disease patient population, and where we like to see the advantage of treating a longer period. Because, as you know, from the curve on the primary [sick] yesterday, they continue to separate, even after at the end of the trial. So we'll have to come back to that. It's a good vehicle for us to discuss with FDA. And we will now sort of go into more detailed discussions and come back to you, Andrew, at a later point on the absolute design and where we will do it.

And Andrew, one other point, I recall the discussion when we looked at Zibotentan going forward was the difficulty in measuring PFS in prostate cancer. And I think I recall that it was confounded by both pain as well as elevations in PSA during the course of things, which may or may not be included in the scaling, so -- but I'm not absolutely certain on that. So we can have somebody get back to you on that.

In a moment, I'll go to Marcel Brand, but let me just ask Simon. There was a written question, Simon, about, would you repeat what you said about gross margin in the second half?

Yes. And, sorry, if, Christopher, I've left you in any confusion. The facts are as follows -- the Q1 gross margin was about 81%. Q2 gross margin was 83%. I guided in my remarks earlier, we still expect our Q1 gross margin around 81% to be the likely sort of outlook for the full year, and that simply reflects the fact that moving from the Q3, the 83 at Q2, we just expect, as we'd see the revenue outlook the remainder of the year, the pressures, particularly on drugs like Arimidex, will have some pressure on the gross margin in the second half. So hopefully that's clear.

All right, good. Thank you, Simon. I'm going to go to Marcel Brand at Cheuvreux, and then, Anders, I'm going to come back to you with a question about Dapa.

Yes, thanks very much. The two questions -- one broad question on price, the second question on Crestor, the blended trial data.

First, on price, I think the big surprise in the quarter has been actually pricing in the US, we see Nexium price flat after a high single-digit decline last year. We see Seroquel with continued or unabated price increases, even though there's probably 30% of sales going to Medicaid, where we expect significant rebates. And last year we saw Crestor without a price increase, probably, based on prescription numbers, and now we're probably up 10% in the half year. Could you please explain what's behind the past pricing of the last two quarters and also give us an outlook?

The second question is related to Crestor. The blended trials 1 and 2, they suggest that you have significant increase in side effects and renal side effects compared to Lipitor. We saw 4% versus 4.9% acute renal failures, at least under the high doses, in diabetic patients with pre-existing protein urea. So the question is whether the US label that says that protein urea is of unknown relevance, whether that is going to maintain or what you expect to happen as a result of those trials that you have sponsored? Thank you.

Okay, good. Let me make a few comments about pricing and then ask Anders to comment specifically about the PLANET study. I'm not sure we interpreted that data the same way. I think you're going to continue to see variations in pricing in the US market based on the -- as you cited, the split of the utilization of the product in Medicaid versus Medicare versus the private sector of the market, and whether it's government reimbursement or private reimbursement.

I think we have done a good job in maintaining the Nexium price in the face of increasing generic competition, as well as over-the-counter competition. We have -- we expect to continue to see some erosion, the rate of which is probably more market determined than predetermined from a forecasting perspective. And I think the other thing you will see is that any price increases that we do take reflect the market opportunity as it relates to other competitive products within the market. So there are a number of factors within the US market, and quite frankly, the way we treat our Medicare book of business is different than our private book of business, which is, as you said, different than the Medicaid rebates, which have made up a significant part of the $300 million P&L loss we mentioned we have in our business this year, because we do have a higher segment of Medicaid business with products like Seroquel and Synagis, and we are paying a more significant rebate. So, I think I understand why you're asking the question, but I think it's very difficult to project this out further. There's a lot of pressure on pricing. Anders, over to you to comment on the PLANET study.

Yes, thanks, David. And Marcel, to your -- let me just first state that not surprisingly, I'm not sure I agreed with your analysis of the PLANET data. The PLANET studies were designed to explore the effects of Crestor 10 and 40 versus Ator of about 80 on urinary protein excretion in patients with chronic kidney disease with sort of high cardiovascular risk.

And, actually, what we saw was that that the main result, from our point of view, that Crestor 10 and 40 did not have a statistically significant change from baseline on protein excretion, whereas Ator actually had a statistically significant reduction, which means an upside for them. So, the way we looked upon the data is basically suggesting that there is no change with Crestor, but there may be an upside for Atorva. And I think that is the important aspects going forward.

And the second thing that I think you need to sort of keep in mind is that the plan studies did not have a placebo arm. And that means that that is very tough to make a direct comparison on eGFR, (inaudible) the trading rate effect in similar patients not receiving a statin.

So that means that we have compared well historical data and data based for Crestor, which is pretty expensive. And we don't see any [single] suggesting a deleterious effect. So, this is something we have shared with regulatory agencies. We're updating our safety reports in the normal way. And so I would argue -- and I would summarize it by saying we don't see any significant [signal] for Crestor, but there may be something on the positive side for the comparator in that trial.

But the 4% acute renal failure, this is a fairly high number compared to 1% and that was statistically significant. That is something certainly that keeps the Office of Drug Safety a little bit busy, isn't it?

As I said to you, we are updating and we are in a dialog. And you have to remember this is a small study in a selected population, and you have to sort of put that into perspective when you get the real numbers from a large population. And our safety database now is pretty significant. So that's why we are confident in the safety profile of Crestor. And the safety updates have been sort of continuing in the normal pace. And we have no signals when we put this in perspective suggesting any sort of negative outcome of PLANET for Crestor as such.

All right, good. Marcel, thanks for the question. Anders, thanks. We're running out of time, but why don't I try to take a couple of quick ones. Lars Hevreng at SEB?

Yes, thanks. Quickly, could you just remind us regarding this intangible assets on motavizumab, you mentioned $445 million in the press release. Will there be any other charges against second-half results if that product will be turned down eventually by the FDA?

Simon, can I put that one over to you?

Sure, yes. No, we did call that out as the intangible asset that relates specifically to motavizumab, and that would be the full extent of the impairment that we envisage. That's a pretax number. And obviously, the key decision point is the FDA -- is the sort of forthcoming FDA decision.

Good. All right, good. Last question, I think we'll go to Seamus Fernandez at Leerink Swann.

Yes, I am. Thanks so much. So, I guess two questions. Can you just discuss for us how you would see the launch of Brilinta progressing internationally and in the US, given the slow launches that we've seen for all products globally in the last two years? And maybe you can just give us a little context around the issues that you are seeing with the ONGLYZA launch. You mentioned DDMAC historically, etc. So, maybe you can just give us a little context there.

And then, separately, the second question, in terms of what inning you would say that you are in, I guess just using a baseball term there, you would say you are in on cost reduction, cost efficiencies. Do you really feel that a lot of the low-hanging fruit has been picked and now kind of the harder work is ahead of you? Or is there plenty to go from here?

Let me -- yes, that's good, thank you. I will try to explain to Simon something about baseball before he answers just in case. No, I'm just kidding.

On the launch of Brilinta, I think we have seen slower uptake on some of these products. That probably reflects the market as much as anything, which is both access as well as affordability and demonstrated differentiation.

As I said before, I think that the profile for Brilinta relative to the comparison to Plavix and the overall patient benefit both for morbidity and mortality is pretty significant. So we think -- it's very difficult for us to tell you what we think the ramp is going to look like. But we expect that the product can be successful globally, but it will depend on the label, it will depend on the timing, etc.

So, but I do agree with you; I think we have seen a shift in some markets on the uptake curve. Simon, last points on cost efficiency and where you think we are from a opportunities perspective?

Yes, I mean I think we're in sort of Phase III of a test match, Seamus, is how I would describe it. The -- but I would also say that another test match will begin on day six. This is not a journey that has an end. This is a process of continuous improvement, and we are looking to drive productivity improvement across our business.

But if you think just to try and dimension this for you, on the restructuring component of our cost improvement agenda, you will recall that we've outlined total benefits of the announced program to date of about just over $4 billion, $4.3 billion. And we said with our full-year results that we expected by the end of 2010 to be at a total of $2.4 billion, hence, my comment, we're in about in day three of a five-day test match.

All right, good. So I think I'm going to thank everybody for joining us today. It's right on the hour. As I said, our first outperformance; I think it demonstrates that we're going to continue to grow well ahead of the market with our key brands and the ones with market exclusivity. And together with the strong performance in emerging markets, as I said earlier, gave us a very good start for the first half of the year.

We know we have a more challenging second half ahead of us. There are some comparisons to H1N1 flu, more generic competition in the US for things like Toprol-XL and Pulmicort Respules, and Arimidex. But nonetheless, despite the headwinds, we are committed to doing our best. We've raised our revenue and core earnings guidance for the full year. And, certainly, I think that demonstrates the kind of performance we want to put out.

So with that, I wish you all a good day and thank you for participating.