AstraZeneca PLC (AZN) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the AstraZeneca first quarter results 2011 analyst call hosted by Simon Lowth.

My name is Sharon.

I'm your event manager today.

All parties remain on listen-only until the question-and-answer session.

(Operator Instructions).

I'd like to advise all parties that this conference is being recorded.

And now I'd like to hand over to Jonathan Hunt who will read the Safe Harbor statement.

Thank you Jonathan.

Thank you, Sharon.

Good afternoon and welcome, ladies and gentlemen, to our first quarter results analyst conference call.

Leading today's call is Simon Lowth.

Also on the call are members of the IR and the finance team.

Before I hand over to Simon, let me just remind us of 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 forward-looking statements.

And with that, let me hand over to you, Simon.

Thank you, Jonathan and good afternoon, or good morning, to everyone.

Aside from the one-off impacts from tax and patent settlements, the underlying business performance in the first quarter has turned out largely as we anticipated.

We're driving growth from the brands where we retain exclusivity and from the emerging markets, so we are facing headwinds from the realities of increased generic competition and government interventions in pricing, both in the US and in Europe.

We're focused on productivity and efficiency.

And, at the same time, we're making the necessary investments in support of new product launches, growth in emerging markets, and, of course, in the pipeline.

Our cash generation is strong and we've significantly increased our cash returns to shareholders in the quarter.

On today's call I'm going to cover four topics, and this quarter I think it will be clearer if we start with the P&L, as there are a number of items we need to address to make the performance bridge from a revenue decline to a core EPS increase.

Then I'll come back to the revenue commentary on a region and brand basis.

I'll then make a brief comment on cash performance and shareholder distributions.

And then finally, I'll provide an update on our guidance for the full year.

So, firstly let me turn to the core profit and loss account.

The press release does, of course, contain the statutory numbers and a detailed reconciliation to these core measures.

When I refer to growth rates, they'll be on a constant currency basis.

We achieved revenue in the first quarter of nearly $8.3 billion.

That's a 4% decline in constant currency terms.

A positive impact from currency movements resulted in actual revenue being 3% down.

As I said in my opening remarks, revenue in the quarter was pretty much in line with what we'd expected.

Generics provided a more than $550 million drag on revenue; around $400 million just from the US, and the balance being in Western Europe.

The first quarter revenue performance also reflects the impact from government price interventions and this was only partially mitigated by continued good double-digit growth in emerging markets.

I'll come back to revenue later in the call, but let us continue down the P&L.

In contrast to the 4% decline in revenue, core gross margin was down just 1% in the quarter.

Core gross margin included a $131 million benefit from the settlement of patent disputes between MedImmune and PDL Biopharma.

We are to receive $92.5 million in payments from PDL in two installments, all of which has been recognized through cost of goods in the first quarter accounts.

We also released a $38.5 million provision in respect of accrued royalties that were not paid to PDL for the period from December 2009 to the end of 2010.

So, core gross margin in the quarter was 84% of sales, 3 percentage points higher than the first quarter of 2010, and just over half of this increase is due to the PDL settlement.

You'll recall at the full year results' conference I said that we expected core gross margin for the full year to be above our 80% planning assumption, but probably below the 2010 level, which was 81.2% of sales.

With the PDL benefit, we expect that core gross margin will now probably be broadly in line with 2010.

Core SG&A expenditures were up 1% in the quarter.

We continue to invest to grow our emerging markets business, as well as invest behind the launches of new products, such as Brilique and ONGLYZA.

This was all largely funded by efficiencies achieved in our developed markets.

The other new factor in SG&A this year is the impact of the US healthcare reform.

Most of the effect is seen in the revenue line, but the excise fee that has been imposed on companies is taken through the SG&A line and, for the first quarter, that was around 2% of SG&A expense, effectively responsible for the increase in SG&A for the quarter.

So the 4% revenue decline becomes a 2% decline in core pre-R&D operating profit as the uplift of core gross margin is partially offset by the slight increase in SG&A expense and a reduction in core other income for the quarter.

Core other income might not get to the $800 million that we guided to for the full year.

Core pre-R&D margin in the quarter was 57.3% of revenue.

That's above the top of our 48% to 54% planning range for the full year.

Core pre-R&D margin should remain comfortably near the top of our planning range, but probably below the 2010 level.

Core R&D investment in the quarter was $1.07 billion.

That's a 7% increase.

Now you'll recall that spending on late-stage projects began to ramp up in the latter part of 2010, and that continues into 2011.

There were also higher intangible asset impairments compared to the first quarter last year, and that accounts for about 3 percentage points of the increase.

So this leads to a core operating profit of $3.7 billion in the quarter, 5% lower than last year.

Net finance expense was just slightly lower than last year, and a full-year net finance expense in the range of 2010's level still looks about right.

Core earnings per share in the quarter were $2.23 compared with $2.03 last year, and this is a 10% increase at constant currency; a portion of which is due to the benefit of lower number of shares outstanding as a result of share repurchases.

But the biggest driver is the movement in tax provisions.

As we announced on March 28 this year, agreements were reached between the UK and the US tax authorities regarding transfer pricing arrangements that cover a 13-year period from 2002 through to the end of 2014, as well as an agreement on a related valuation matter arising from the integration of our US business units following the AstraZeneca merger in 1999.

The cash impact from these settlements will result in AstraZeneca paying a net amount of $1.1 billion.

The P&L impact arises from the release of a portion of the provisions we've carried on the balance sheet for the outcome of these complex issues.

In the first quarter this resulted in a $540 million benefit; that's $0.39 per share on the tax line of the statutory P&L.

This resulted in an effective tax rate for the quarter of 11.3% on a reported basis.

If you exclude the $540 million, the effective tax rate in the quarter was 27.8% on a reported basis.

The effective tax rate on a core basis is 12.3%, and this is higher than the reported tax rate because when we make the adjustments to reported operating profit, such as the restructuring costs and the MedImmune related amortization costs, to reconcile to the core P&L, we applied a 27.8% tax rate to these items to arrive at core earnings.

And we'll take this same approach in reporting the tax rate for the remaining three quarters of the year.

We expect the effective reported tax rate for the full year to be around 21%, whereas the core tax rate will probably be a touch higher.

The first quarter 2010 also included a benefit related to adjustments to tax provisions, which amounted to $0.13 per share.

So the net result is that the 5% decline in core operating profit becomes a 10% increase in core earnings per share.

The core adjustments to earnings for restructuring costs, and the amortization related to Merck and MedImmune, are broadly comparable year on year, so the growth in reported earnings per share is also 10%, to $2.08.

While I'm on restructuring, we charged $143 million in the quarter and the program is on track for costs and benefits, as previously disclosed.

Before I return to our revenue performance, a brief word on cash.

Cash generated from operating activities was up 9% in the quarter, to nearly $1.9 billion.

As the cash distributions to shareholders, the $2.6 billion payment of the second interim dividend for 2010, combined with net share repurchases of $1.2 billion, resulted in cash distributions to shareholders of more than $3.8 billion in the first quarter of 2011.

That's a 57% increase over the first quarter last year.

I'll now turn to our first quarter revenue performance.

For the avoidance of doubt, when I refer to growth rates, they will all be on a constant currency basis.

As I mentioned at the outset, revenue in the quarter was down 4%.

Revenue in the US was down 11%, where we had to absorb more than $400 million in revenues lost to generic competition -- that's chiefly from Arimidex, Toprol-XL and Merrem -- as well as the pricing impact from US healthcare reform.

Revenue in Western Europe was down 7%, largely due to generic competition for Nexium, Merrem, and one month's impact from the loss of exclusivity on Arimidex.

In the rest of the portfolio in Western Europe volume growth of 4% was more than offset by lower realized prices as a result of government interventions.

Revenue in the established Rest of World was up 4%.

Good growth for Crestor fueled a 12% revenue increase in Canada.

Revenue in Japan was down 1%, as volume growth was more than offset by lower realized prices, following the biannual price reductions in April of 2010.

Emerging markets' revenue increased by 13%, with particularly strong performances in our oncology and respiratory products.

Turning now to revenue at the brand level, I'll begin with Crestor.

Worldwide sales of Crestor increased by 12%, to $1.5 billion.

Across the world, Crestor is growing well ahead of the statin market growth rate.

In the US, sales were up 17% to $682 million.

Total prescriptions were up 9.3%, which is 3 times the market growth rate.

Market share of total prescriptions was 12% in March, which is down 10 basis points since December.

Market share for generics is up 1.2 percentage points.

We typically do see an increase in the market share for generics in the first quarter, as a result of the churn caused by the rollover to a new plan year in the managed care segment.

So we will see if this moderates as we move into the second quarter.

Crestor sales in the rest of the world were up 8%, to $796 million.

Sales in Europe were up 6%; market growth has slowed, and we're also seeing the effect of price reductions.

Crestor volume, though, grew by double digits.

I already mentioned the strong performance in Canada.

Sales in Japan, though, were down 3%, but this is due to the phasing of shipments to our marketing partner; underlying market share was up compared to last year.

Sales in emerging markets were up 8%.

Global Seroquel franchise sales were up 3% to $1.35 billion, fueled by Seroquel XR, where sales are up 33% to $339 million.

Seroquel XR sales are 18.9% of total franchise sales in the US and account for 39% of sales in the Rest of World.

Symbicort sales were up 8% in the quarter, to $752 million.

In the US, sales in the first quarter were up 14%, to $197 million.

Total prescriptions were also up 14% compared with a 0.5% decline in the US markets for fixed combination products.

So market share is up, reaching 20% of new prescriptions in March 2011.

Market share of patients newly starting combination therapy is 25.2%.

Sales in the Rest of World for Symbicort were 5% ahead of last year, to $555 million.

Sales in Western Europe were down 5%, largely on price reductions in Germany.

Sales in established Rest of World increased by 40% as a result of the continued strong performance in Japan since the launch in early 2010.

Sales in emerging markets were up 26%.

Alliance revenues from ONGLYZA were $35 million in the first quarter.

KOMBIGLYZE XR, the first, and, indeed, the only, once daily fixed dose combination of a DPP4 inhibitor and Metformin, was launched in the US during the quarter and is off to a good start.

ONGLYZA's share of new prescriptions for DPP4 products in the US was 11.8% in March, and KOMBIGLYZE XR added a further 3.4% share, bringing the total franchise to over 15%.

KOMBIGLYZE's share of new DPP4 starts is now 29%, with one-third already coming from KOMBIGLYZE XR.

It's still very early days in the rollout for Brilinta and Brilique.

We recorded $1 million in revenue in the first quarter, largely on the initial launch sales in Germany.

Reports from our German marketing company indicate that the product is being well received in the market, with formulary acceptances being achieved at a good pace.

As we have said before, most of the launches that will occur in 2011 will be towards the second half as we work our way through the reimbursement process in many markets.

Arimidex sales were down 55% to $233 million in the quarter.

The US market is now largely generic; Arimidex sales were just $19 million.

Exclusivity expired in Western Europe in February, and we're already seeing the impact with sales down 33% in the quarter.

Finally Nexium.

Sales were down 6% to $1.2 billion.

Sales in the US were down 8%.

We're starting to feel the impact from generic competition in Western Europe, where sales were down 18% in the quarter.

Sales in emerging markets, however, increased by 20%.

Final point I'll cover before moving to Q&A is our guidance update.

The underlying performance in the business in the first quarter has evolved in line with our expectations.

We're driving the performance of brands where we retain exclusivity; we're focusing on productivity and efficiency so that we can continue making the necessary investments to drive growth in emerging markets and to successfully launch the new products ,while still navigating the impact of generic competition and government price interventions on our portfolio.

So revenue for the full year still looks to be flat to a low single-digit decline on a constant currency basis, with the year-on-year comparisons becoming less demanding in the second half.

We've made two changes to guidance since the start of the year.

We increased the core earnings per share target by $0.45 in conjunction with the announcement of the tax settlement at the end of March.

And today, we've added a further $0.05 per share to the target to recognize the one-off benefit from the patent settlement with PDL.

So underlying business performance is in line with our expectations, with core earnings per share target raised on the back of the tax and patent settlement matters, resulting in a new full-year target for core EPS in the range of $6.95 to $7.25.

As a reminder, our core EPS guidance is based on the average exchange rates that prevailed during January 2011 when the targets were communicated.

The actual rates in the first quarter haven't given rise to any meaningful currency variants 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 average.

And, as usual, I'd point you to our currency sensitivity chart to help you flex your own estimates on the currency impact to sales and earnings.

So I'll wrap up my formal remarks here and turn the call back to the conference operator to begin the Q&A session.

Thank you.

Ladies and gentlemen, your question-and-answer session will now begin.

(Operator Instructions).

Tim Anderson, Sanford Bernstein.

Okay, we'll go to another question.

(Operator Instructions).

Gavin MacGregor.

Two questions, please.

The first question on Vimovo.

We've not seen much in the way of sales coming through yet for that and I know you cited some sampling and discounts, but when might we start to see true demand coming through for that drug?

And then on Crestor, outside of the US.

You've given a bit of background but there's a real step down in growth across all the markets outside of the US.

For Europe specifically, could you talk about which markets you've seen generics and then any other reasons why we've seen that real step down in other markets?

Thanks.

Gavin, thanks very much for your two questions.

On Vimovo, we launched the brand, obviously a product in the US, and then begin launches beyond the US during the course of this year.

We continue to see Vimovo as having a very important part to play in the market and we expect to see the sales beginning to develop during the course of this year, and we'll be able to report on that as we go through the course of the year.

But you're right, at this stage, the sales are at a relatively low level.

I don't think there's more comment I can give other than to say that we're on track with our plans for the brand.

In terms of Crestor, the business -- Crestor obviously continues to grow strongly.

We're outstripping the statin market growth significantly in pretty much all markets for Crestor, typically to the range of about 3 to 4 to 1, so Crestor continues to grow strongly.

In terms of the underlying shape of the market, we've seen overall statin growth remaining fairly much constant year on year.

There have been one or two markets where growth has been down a little bit, and one or two markets where growth has been up.

So overall, the statin market continues to show healthy growth and Crestor, as I said, comfortably outstripping that.

When we look at the specific performance of Crestor, there are a number of factors and I called out a few of those in my remarks and, indeed, we referenced a few of those also in the press release.

But to recap on those, in the US, as I mentioned, we've seen, as we typically do in the first quarter when we get a change in managed care plans, there tends to be a jump up in generic growth in the first quarter and we saw that in the US.

I called out, I think, 1.2 percentage points increase to generics and therefore we saw just a flattening in that quarter of the share for Crestor.

We'll obviously see how that unfolds during the rest of this year.

That was in the US.

And we also -- I mentioned in my remarks, in Japan, where we've seen very strong growth from Crestor and continued share growth in the overall end-use demand, continues to grow but we did see some phasing of shipments to our marketing partner, so Shionogi in Japan, which led to some reduction in sales for Crestor in Japan.

And then if I turn back to the press release, we called out there has been some generic entry against Crestor in a few of our Eastern European markets and that just reflects -- this isn't, I should hasten to add, is not premature loss of exclusivity; this is markets where essentially the protection was data exclusivity and that period has expired, so it's in a number of our Eastern European markets.

And then in Western Europe, again as I think we called out, both in the release and in my remarks, good strong double-digit volume growth for Crestor.

The brand continues to perform well, but we did see the impact of government price interventions pulling that double-digit volume growth back to single-digit growth in terms of revenue.

So, Gavin, I hope that gives you some color to the Crestor performance.

Thanks for the question.

Thanks.

Can I just follow up briefly?

On the European pricing pressures, is that something -- is there any reason to see that becoming less of a pressure as we go through the year?

Or should we now look at this as a growth rate going forward?

Well, I'm not going to comment on the growth rate for a specific brand in a specific region, but perhaps let me just remind you, recap on the guidance we have provided on the overall pricing pressure that we face.

And I'll take you back really to January, when we gave our full-year results.

We gave some guidance on pricing, government price interventions and actions during the course of 2011.

We described, you may recall, Gavin, the US impact of healthcare reform being a bit over $700 million, of which between one-quarter and one-third was the excise fee, which we record through our SG&A line.

You'll have heard I referenced that as being responsible for a 2% of sales growth in SG&A this quarter, so that gives you an ability to look at the dimension of the excise fee.

The remainder of that $700 million for the full year is going to impact the revenue line.

Obviously its phasing will depend a bit on the individual brands, but you can think about it being reasonably well spread through the year.

And then in Europe, we said that we had seen historically low to mid-single-digit price declines in Europe.

It's a past feature of our business over many of the recent years.

We also said that during the course of 2011 we expected that to be more at the mid-single-digit level of price action for 2011.

Given that we'd seen volume increases of 4% in Europe, which I referenced in my remarks, you'll see that again that points to mid-single-digit price declines in Europe.

That's spread across a number of markets, many of the brands and, again, you can think of that as well phased through the course of the year.

So hopefully, that gives you some color on the pricing pressures that we face.

Thanks very much.

Okay.

Thank you.

Tim Anderson.

On your R&D spend, even if I exclude the asset write-down, the spend level was fairly high year on year and I'm just trying to understand what run rate we should be thinking about, not only in 2011 and beyond.

So just directionally, is your R&D spending likely to be up, flat or down over time?

And also on R&D, just in a broader sense, can you say whether your return on investment is currently greater than your cost of capital?

And then last question is on the tax settlements with the different tax authorities.

Why won't that have a favorable impact on the tax rate beyond 2011?

Thanks for the questions.

Starting with R&D and the -- I think you're asking for some indication of the P&L expense for R&D trend for this year and perhaps beyond.

For this year, we've seen a 7% increase in the quarter.

I mentioned that 3% came from an intangible asset impairment.

The remainder was really a function, Tim, of a number of late-stage programs starting at the back end of last year and then the beginning of this year, specifically the Fostamatinib, the TC-5214, the Brilinta Pegasus and then, in this quarter, the Nektar late-stage program.

So those are the main drivers of the increase.

Those being offset, Tim, by the continued cost reductions coming through from our R&D change program.

If we look for the whole of this year, we obviously expect to see those late-stage programs giving some modest uplift to the R&D expense for the year, but I'm not going to make any comments about the absolute level because it will, as you can see from this quarter -- I'm not going to predict if or what quantum of any further intangible asset impairment we might have, but -- so that's the likely drivers of R&D spend for the year.

In terms of looking beyond 2011, we actually look at our R&D spend as an investment of cash.

What goes through the P&L versus what goes straight to the balance sheet depends upon the mix of in-licensing in a particular period.

But to give you a sense of the -- and to quantify that, as you know, and it's part of our midterm planning assumptions, we said that we expect to be reinvesting some 40% to 50% of our post-tax, pre-R&D cash flow and of that 40% to 50% -- and 2010 actually the number was just under 40% -- but 40% to 50% remains our view through the midterm.

And of that 40% to 50%, about $1 billion of that gets put against capital investment, the rest into R&D, whether in-house or cash in-licensing.

So that gives you some sense of the prospective level of investment.

In terms of your question on return on investment, a question I welcome, this is a hugely important metric for us and we follow it closely.

There are two ways of answering your question; firstly, what has been the return on investment on historic investment and secondly, what do we expect the future return on investment to be, what will it take in order to deliver that prospective return.

Dealing with the first of these, which is the historic return, we look at that in a number of ways, but essentially what we do is look at the historic investment.

We recapitalize.

We adjust it for the time value of money and then we calculate a post-tax return on that cumulative investment.

And I can report that when we run that analysis, our return on R&D investment is comfortably above our cost of capital, although, Tim, you'd not be surprised to hear that in later years it's trended down relative to the historic years as a function of two things.

Firstly, the cost of -- well, clinical development requires more data.

That's expensive, so the cost of R&D rising.

And secondly, the industry and, indeed, AstraZeneca's output has, in recent years, as you know, been disappointing and has driven a lot of the changes we're making, so comfortably above our cost of capital historically.

And I think what I've just said is very much true not just for AstraZeneca but for the industry at large.

Prospectively, again, we're investing 40% to 50% of our post-tax pre-R&D cash flow in R&D because we believe it will drive value and a return for our shareholders.

We believe it will generate a spread above and beyond our cost of capital.

To do that, we need to sustain the commercial value of medicines at their historic sorts of levels.

We believe that's possible given the strong growth in emerging markets.

Pre-R&D margin's a critical measure and take AstraZeneca as an example; our pre-R&D margins are now 10 percentage points higher this year than they were for the average of the last decade.

That creates a very substantial amount of additional return and helps us to compensate for the increased unit cost of R&D.

And obviously, we're also making substantial changes within R&D to improve that unit cost efficiency.

So those are the levers we're pulling to ensure we sustain that return above our cost of capital going forward.

So great question and thanks for that, Tim.

And then finally on tax, the provision -- the $0.45 uplift to guidance that we announced back in March had two components to it, Tim.

The first was the provision release which we'd mentioned there at $0.39, and therefore a little bit of additional benefit coming effectively from the settlement on this year's tax rate.

We've also incorporated into that some changes in the -- for example, the UK tax rate this year has also had a modest impact on that.

And therefore we're guiding to an overall 21% for reported tax rate this year.

I'm not going to comment specifically on tax rate beyond, other than to restate what I said in January, which is, we are seeing corporate tax rates around the world trending downwards, and particularly in a couple of key geographies for us -- UK and Sweden, where a lot of our intellectual property is -- tax rates in both those countries is coming down.

So, thanks for the questions.

Thank you.

Peter Verdult, Morgan Stanley.

Some of my questions have already been answered, so just three quick ones, Simon.

Brilinta in France; we're obviously aware of the Mediator situation with Servier and how that's held up a lot of drugs.

I just wanted to get an update as to where we are in terms of reimbursement timelines there.

Jumping then, secondly, to China.

Any chance of getting an update on where we are on replacing your head of China.

And any further comments, further to the press release regarding, the DoJ investigation using the Foreign Corrupt Practices Act?

Any more comment there , better understanding of what's going on?

And then lastly, staying on the theme of R&D, just as we -- it's a big event coming up in July; there is scenario analysis to be done.

I just want to get a sense of how much flexibility there is in the current R&D budget, in the event Brilinta and then Dapa don't go your

Okay, well look, Peter, thanks very much indeed for the questions.

Starting with Brilinta, or Brilique, I think you were specifically asking about the situation in France, where -- just to recap on the situation, the French Transparency Commission, which is the group that provides advice to, ultimately, the Minister of Health of France to assess reimbursement prices, the Transparency Commission met, I think, back in January and asked for some additional clinical data from us.

We're in the process of aggregating that information and providing it to the TC, and we expect that we'll be resubmitting within the second quarter of 2011.

I can't provide you with anything further on that at this point.

Perhaps while on the subject of Brilinta/Brilique, moving to your question about the upcoming events in July, where indeed we have the PDUFA date for Brilinta, and given the Dapa registration, we obviously expect that there could well be an advisory committee in and around that sort of time.

The outcome of those events, clearly we do look at a whole variety of different scenarios.

I think the progress, or the outcome, of specific late-stage or registration decisions doesn't really have an impact on what we're doing in terms of progressing the overall R&D portfolio.

We look to invest in R&D to drive a return; that's somewhat independent of what happens in a particular decision on a particular product.

But, more generally, we are looking to bring more flexibility into our R&D organization.

We're looking to bring more flexibility in order to be able to ramp the costs up and down on in-house R&D if we see good opportunities externally.

We also think that increased cost flexibility provides an excellent discipline for decision making.

We don't need to invest, because we've got the fixed cost there.

So, flexibility in R&D is a huge priority for us.

If I turn to your final question on China, the -- I think you're probably referring to the disclosure on the final page, or penultimate page of our press release today, where we do state that we have received enquiries from the DoJ and the SEC in connection with a range of investigations into the FCPA.

We're obviously cooperating with all of those enquiries, and we're investigating inappropriate conduct in certain countries, including China.

I can't, at this stage, give you any more information on that.

And then, I think your final question was the head of China, and we obviously have had -- our head of China has moved on.

A consequence, I think, of having a strong commercial organization around the world; that happens from time to time.

We have already replaced the head of China with one of our strongest commercial leaders, who'd actually been in Japan, and that transition has already taken place very smoothly, and we continue to drive our business in China successfully.

So, Peter, thanks very much indeed for the questions.

Thanks.

Steve Scala, Cowen.

I have two questions.

First on Brilinta.

Does the nature of the dialog with the FDA to date leave you fully confident in an approval in July?

So that's the first question.

And secondly, on Nexium, is it a near certainty that generics will launch in 2014, when considering the manufacturing capability of the generics and the volumes necessary?

And how does your view impact the decision regarding the AZLP second option in 2012?

Thank you.

Steve, thanks very much for the questions.

Starting with Brilinta/Brilique, so more generally, obviously, we're in the relatively early stages of the launch and ramp up for Brilinta/Brilique around the world, and we do now have approval in some 30, slightly over 30 markets, and filings in place in another 31, I think.

Obviously, we launched in five markets; the most significant being Germany, I would say.

I made some comments about the progress in Germany.

We have got off to a good start.

I know that we've got something like 44% trial rate amongst cardiologists in Germany.

So obviously where we've got the brand out on the market, it's got a very strong pick-up from the specialists that we're targeting.

Specifically moving back to the US, PDUFA date coming up on July 20.

We responded very swiftly to the CRL.

We provided the information that was requested.

A series of discussions are ongoing.

I'm not going to provide any further commentary on those; that's not our practice so to do.

But yes, we remain very confident in the role for Brilinta as an option for patients going forward.

So we look forward to the July 20 date.

In terms of your question on Nexium, you're asking, is it a certainty that we will have generic Nexium in the market in the US in 2014?

As you know, we entered into a settlement covering a variety of matters with Ranbaxy a couple of years ago, and, as the first filer, they have the option to come into the market in 2014.

And our planning assumption is that that, indeed, will happen.

Whether and what sort of execution issues they may or may not have with that is very much a question for them, and I direct you to them.

Thank you.

And -- sorry, and you did have a third question, Steve, I'm being reminded here.

I beg your pardon.

In terms of the final step in the Merck exit, you're absolutely right; there is an option on us in 2012, again through to 2017.

We will look at that in light of the prospective value we see on the remaining products within that, one of the components being Nexium, but there are others, and we'll make that decision when the time comes.

Thank you.

Brian [Bordeaux], Barclays Capital.

Three questions, please.

The first one on Brilique.

Could you talk about how you've priced that drug in Germany and in the five markets that you've launched relative to branded plavix and generic plavix and whether you're pursuing a similar pricing ambition in the other markets?

Second -- so that's the first question.

The second question is on Dapagliflozin.

You alluded to a possible panel.

I note that there is an endocrinology panel tentatively scheduled for July 19.

I'm just wondering if you had any confirmation from FDA whether they've asked you to appear at that at this stage?

So that's the second question.

And the third question is related to LABAs.

You mentioned increased requirement for data causing returns to research and development to trim down in recent years.

I guess we've just seen a recent new imposition of additional data requirements.

I guess it's reducing the profitability of Symbicort, but it could also reduce the potential profitability of respiratory projects including LABAs that you have in development currently which you have.

I was just wondering if you think that there will be any pre-approval requirements for any of those sorts of medicines coming through and whether that could affect your decision to invest further in that program or whether it's too early to tell?

Thanks very much.

Brian, thanks very much for your questions.

Perhaps just dealing with them not strictly in the order you asked them, just to knock off easy ones first.

Dapa, I can't confirm specific -- my comment was most medicines now the FDA's looking for an advisory committee.

We expect that on Dapa.

We'll wait to hear precisely if that will happen and when.

Brian, and also our custom and practice, you normally see an announcement from the FDA directly.

They tend to drive the scheduling of those meetings.

They put an agenda out and a roster for that.

So I'd look for the FDA to lead on that.

We don't have any comment beyond that.

On the LABA, I think the point I made was a general one, which is, as we have seen, as you know, Brian, that the number of patients besides the scale of clinical trials has trended upwards, and that's been a pressure on R&D cost.

We feel very comfortable that we are taking all of the steps needed within R&D to improve unit cost efficiencies to offset that.

In other words, more data but at substantially lower cost per data, and that's a key driver of our confidence in sustaining returns above our cost of capital as we go forward, which was a comment I made in answer to Tim's question.

So we do see that.

It's a fact of the business that we're in and one that we will mitigate through efficiency and efforts within R&D.

I'm not going to make any more specific comment about LABAs.

Yes, there are some additional data requirements there; there are in a number of other categories.

We take that into account when we design clinical trials.

When we make investment decisions, I won't judge the outcome on LABAs specifically.

In terms of Brilinta/Brilique pricing, the [think I might say] it's at that -- the whole PLATO program demonstrated Brilinta's efficacy relative to plavix, and that's clearly a key driver of our pricing decisions.

Yes, Brian, and if you wanted to take a look at -- you can get the public domain prices, so if you judge it through the lens of those markets we've already launched in where we've got a price established in the marketplace, typically if you looked at something like plavix maybe in the German market, a little over EUR2 a day, Effient would be EUR2.20 and we're a little bit above that, at just under EUR2.50 per day.

Great thanks very much.

Operator, I think we probably have time for one more question.

Michael Leacock, RBS.

I have two, if I may.

Firstly on pricing, according to Thomson MarketScan the price rises on Crestor and Seroquel were running at 12% to 16%, and Thomson MarketScan suggests that their data is from insurers who actually paid these prices, rather than a list price.

If one were to apply those price rises to the $60 billion of sales for Crestor and Seroquel that you had in the US in 2010, that would broadly cover in its entirety the $700 million you suggest is a cost from the US healthcare reform.

Is that a fair statement?

And, if not, what's wrong with it?

And secondly just on Brilinta, much more clearly.

I think Lars Wallentin hinted in one publication that your aspirin analysis will be published soon.

It was in peer review, I think, about a month or two ago.

Have you got any visibility on when that might be published and will you let us know as soon as it is?

Thank you.

Okay.

So I believe that there's likely to be a forthcoming publication with more detailed findings on the aspirin hypothesis.

Jonathan, I don't know if you've got anything to add to that?

Michael, I think your question shows you are absolutely up to date; that's exactly where it is.

As far as we know the paper's been written, it's out on peer review and after that your guess is as good as ours, how long that peer review and publication timeline will be.

But I certainly get a sense that it will be sooner rather than later.

I just couldn't give you a specific date.

And in terms of I think your question on pricing, there were gross price increases, so list price increases, on a number of our medicines, including Crestor and Seroquel, in the US during the course of 2010.

The net price that we receive is obviously a function of the formulary positioning and the rebates and discounts negotiated with a whole range of individual customers.

We did sustain some net price increase on Crestor and on Seroquel during 2010 and into the first quarter of 2011.

That has partially mitigated the wider US healthcare reform impact, but by no means fully mitigated it; that remains a net headwind on the business.

But Michael, thanks for the question and my apologies, I'm afraid I have to move on.

So operator we'll need to bring the call to a close.

Thank you.

Thank you, ladies and gentlemen.

That concludes your conference today.

Thank you for joining.

You may now disconnect.