AstraZeneca PLC (AZN) 2011 Q4 法說會逐字稿

Good morning, and welcome to AstraZeneca's full-year results analysts' conference.

The meeting is scheduled to start in a short while.

Firstly, a cautionary statement regarding forward-looking statements.

The Company intends to utilize the Safe Harbor provisions of the United States Private Securities Litigation Reform Act 1995.

Participants on this call may make forward-looking statements in 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 by those forward-looking statements.

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

Information about the principal risks which may affect the Company can be found in the Company's annual report and Form 20F information.

At the end of today's presentation, there will be a Q&A session for those listening via this telephone service, together with those attending in person or participating via the webcast.

(Operator Instructions).

The meeting will start in a few moments, with opening remarks from AstraZeneca's CEO, David Brennan.

I will now connect you with the auditorium in London.

Well, hello, everyone.

Welcome to our full-year 2011 results briefing, as well as some comments that we'll make about 2012.

Tony is here, Tony Zook, the Executive VP of Global Commercial Operations.

He'll present a bit about what's going on commercially in the organization.

Simon is here.

He will cover the financials.

Martin Mackay is joining us via video from Sweden, where he is today, and he'll provide an R&D update.

So -- and then after my formal remarks, I'll chair a Q&A session with all of you to try to take questions, both from the live audience here, as well as from the people that are on the Internet and on the phone.

Before I get into the financial results, I thought I'd maybe just cover a couple of numbers that don't necessarily come through in the financial report but I think are very indicative of AstraZeneca's strategy and illustrate what I believe are the challenges we face in the market and in the macro economy.

And I think it defines, to some degree, the actions that we're taking to try to respond to those challenges.

So the first number that I want to put out is 30,000.

According to the landmark PLATO study for Brilinta, 30,000 is the number of cardiovascular deaths that could be prevented each year in the G8 countries if the 3 million patients who experience acute coronary syndrome were actually treated with Brilinta instead of the current standard of care.

30,000 lives is really, from my perspective, what this business is all about.

It's why I've been very proud to be part of it now for over 36 years, because of the impact that it has on people's lives.

And I think it's an example of where our strategy is brought to life in a single number.

Making a meaningful difference to patients' health through great medicines is what we are here to do, and we are committed to that strategy of being a focused integrated, innovative, global biopharmaceutical company.

So we believe that the successful execution of the innovation-based model is going to continue to deliver an important group of new medicines that can make a difference to patients, to patients' health, and to earn attractive returns for our shareholders.

As we all know, the underlying demand is there.

I think significant opportunity remains for innovative medicines that can address unmet medical needs; and growing and aging populations need good medicines, too.

Economic growth in the developing countries, as you all know, and have heard me say, is really driving greater demand for healthcare and for access to healthcare, and that's an important demographic driver.

Another number that comes to mind is 65%.

65% of AstraZeneca's constant currency growth over the last five years has come from emerging markets.

We've made significant investments to become a global player in emerging markets, and I think that we've expanded our marketing and sales footprint, as well as our research and development footprint, and our supply chain footprint in the appropriate markets to try to have ourselves a much better position to take advantage of those opportunities.

And at this point, I would say to you, it's delivering results.

I think we see the growth in areas, like emerging markets, as an example of where we believe our business can grow more going forward.

But the challenges in the market are growing and are enormous.

$3 billion is another number I would use.

$3 billion is the AstraZeneca revenue that was lost either to generic competition, which was about $2 billion, or government interventions, which was another $1 billion, in 2011 alone.

It's had a -- it's got a major impact on our business.

I think the same forces that underpin the underlying demand for products in our industry are driving healthcare cost and growth faster than GDP and that strains the public and the private payers' ability to keep up with the cost of paying for, and delivering, and providing healthcare.

The result's a continued pressure, as I see it, to lower prices, to control utilization for biopharmaceuticals.

And I think all of us would say it's a trend that's expected to continue and is really been exacerbated by the current economic turmoil, and it's not just in Europe.

The revenue pressure from government interventions is significant.

When you combine that with the revenue lost to generics, it puts a squeeze on research and development investment.

There's another squeeze on research and development investment in these figures, which is 3% to 6%.

3% to 6% is the probability that a pre-clinical compound will make it through to successful regulatory approval and launch in the world that we live in today.

3% to 6% depending on the source you cite lays out how challenging it really is.

And when you look at that success rate and couple it with the revenue headwinds that we face, it's not surprising that there's a growing body of published research by a number of people that says the downward pressure on R&D investment is continuing, and that it will continue.

And I think the ROI challenge has to been solved or our investment in innovation is ultimately going to decline, and society will be the worse for it.

Having looked at the pharmaceutical industry, as I have now for going on 37 years, it becomes pretty obvious that you can see the advances and the changes that have been made that make a big, big difference in the delivery of healthcare.

And I think tackling the challenge that drives everything that we've done, and we are going to continue to do that as a management team at AstraZeneca, is to try to drive this issue around innovation and return on investment.

I think, and we think as a management team, that it can be solved, but it will certainly take more than just driving the success rate higher.

We have to pull more than just the research and development lever.

We believe that this is a Company wide effort that's required, that the manufacturing and sales cost of commercializing an approved product are just as relevant to R&D returns as the costs, the time, and probability of technical success that it takes in development to get a drug through.

And that leads me to another number, which is $4.3 billion.

$4.3 billion from the beginning of 2007 through the end of 2011 is then undertaken -- has been delivered in two distinct programs of restructuring that we've undertaken.

We expect that, that will result in an achievement of reduction of $4.3 billion annual benefits by the end of 2014.

I think the actions that we've taken span the entire investment and return cycle in research and development.

As you know, we're reducing our function costs and our site footprint.

But we're also investing in new talent.

We're investing in critical capabilities.

We plan to do more than we've done in the past in externalization.

All of these things are designed to improve the probability of technical success.

On the return side of the equation, we're rationalizing production capacity, we're reducing our sales and marketing footprint in mature markets, as Tony will say in a few minutes, and we're also reducing our non-customer facing costs above market around the globe.

But we are also investing.

We're investing in new leading-edge commercial channels, which provide effective customer support at lower cost.

You'll see some of that in a minute.

And in emerging markets, both in sales and in marketing, but also in selective supply chain investments in China and Russia, we're seeing that return.

Now, some of the restructuring benefit is being absorbed on the top line, and some is being reinvested, just as I described it.

But the net benefits overall are really the key to the 10 percentage point improvement in core pre-R&D operating margin since we started the restructuring in 2007; from 44% of revenue at the end of 2006 to over 54% at the end of 2011.

So that's been a big improvement in the pre-R&D operating margin, and it's given us an opportunity to step up cash distributions to shareholders while investing for future growth and for value in the business.

You'll have seen it in our press release this morning, in 2011 we returned nearly $9.4 billion to shareholders, and core R&D investment was about $5 billion.

This structural improvement in pre-R&D margin is going to continue to be an important component of cash flow when the products from today's R&D investments reach the market and enter the returns cycle, the returns period of their lifecycle.

You have probably seen today, we announced a new phase of restructuring as part of this strategy; this broad strategy that we implemented a few years ago to improve returns.

It's not just a tactical response to a pending patent expiration, it's part of a much bigger set of changes.

Some of these changes have been announced today; others will be announced shortly.

As a management team, and as a Board, we recognize that these changes are painful, that they affect many, many people, colleagues, family, communities, and we respect the fact that we've got to deal with that as professionally as we possibly can.

Martin and Tony will cover some of this in their presentations, and Simon will cover the costs and benefits in his presentation.

So let me just take a moment to do a brief summary of the headline financial results for the full-year 2011, which we reported on earlier today.

We achieved revenue of $33.6 billion.

That was a 2% decline in constant currency terms.

Core operating profit, at $13.2 billion, was down 4% in constant currency.

That was down a bit more driven by the higher R&D expense, which, at the end of the year, was driven primarily by the intangibles.

Core earnings per share were up 7% in constant currency at $7.28.

That was in line with our latest guidance, and it benefited from the tax settlements earlier in the year and from the increased share repurchase program.

And then if you make the bridge from core EPS to reported EPS, well, there are a number of adjusting items with significant variances between periods.

The Astra Tech gain is actually responsible for about two-thirds of the 29% increase in reported EPS in constant currency terms.

So the dividend for the full year was increased by 10% to $2.80, which, again, is indicative of our dividend policy and demonstrates the commitment we have to return cash to shareholders through a number of different methods.

So, with that, I think I'll stop and turn it over to Simon.

He can take you through the further details on the financial performance.

So, Simon, over to you.

Thanks.

Well, thank you very much, David.

Good morning, good afternoon to everybody.

I'm going to cover five topics.

I'm to summarize our full-year results for 2011, and I'm going to focus on the core P&L; I'll then provide an update on the restructuring and productivity improvement programs; I'll describe our cash performance and the increased cash returns to shareholders delivered this year; I'll then review our mid-term planning assumptions that we set out for the period 2010 to 2014; and then, finally, I'll set out our financial guidance for 2012.

So let me start with a summary of our full-year results for 2011.

I'll focus here on core profit and margins.

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

When I refer to growth rates, they will all be on a constant currency basis.

Now the starting point is revenue, which for the full year was $33.6 billion; down 2% compared with 2010.

I will leave Tony to describe the performance of our key brands and markets, and I'm going to concentrate my attention on costs and margins.

Core gross margin, at 82.2% of sales, was 130 basis points higher than last year.

You will recall that we took an intangible impairment on lesogaberan in the third quarter of 2010, and we had the benefit of the patent settlement with PDL BioPharma in the first quarter this year.

Together, they accounted for almost three-quarters of the improvement.

Core SG&A expense was $9.9 billion; 2% lower than last year, as restructuring and productivity initiatives across our established markets provided the headroom for continued investments in emerging markets and recent launches.

We also absorbed the impact of the excise tax component of US Healthcare Reform, which was 2% of SG&A expense for the year.

Core other income for the year was $845 million; down about 8%.

Core pre-R&D margin was 100 basis points higher than last year, reaching 54.2% of revenue; just above the top end of our planning range.

Core R&D expenditures were 15% higher for the full year.

Intangible impairments accounted for half of this increase.

The remainder was attributable to increased project spend and continued investment in biologics.

Core operating profit was just under $13.2 billion; down 4%.

Were it not for the R&D impairments, this would have been down more or less in line with the revenues, 2%.

Core operating margin was 39.2% of revenue for the full year.

I will now turn to our restructuring programs.

I'll start with a brief summary of the first two phases of restructuring and then provide details on the new program that we've announced today.

The first phase of our restructuring, initiated in 2007, delivered exactly as planned.

We kicked off Phase II in January 2010.

The restructuring actions associated with this second phase are now complete.

The final cost charged to Phase II has been $2.1 billion; that was $1.2 billion in 2010 and $0.9 billion in 2011.

This is just $100 million higher than the original estimate.

The target gross benefit to be realized from Phase II was, and still remains, $1.9 billion by the end of 2014.

We have realized $1 billion in annual benefits through the end of 2011, and we're on track to deliver about two-thirds of the remaining benefits by the end of 2012, with the remainder by 2014.

Phase II will deliver a gross headcount reduction of just under 9,000 positions.

Bringing together these two phases, we have reduced gross headcount by around 20,500 positions by the end of 2011.

After reinvestment in biologics and emerging markets, we've achieved a net reduction of approximately 9,600 full-time equivalents.

This has been an important driver of the 10 percentage point improvement in our core pre-R&D margin over this period.

Today, we have announced a third phase to our restructuring program.

This new phase, when completed, will entail a total program cost of around $2.1 billion, with around $500 million in the supply chain and $800 million each in SG&A and R&D.

Now, we charged $261 million of this $2.1 billion in the fourth quarter 2011.

Phase III is expected to deliver gross headcount reductions of approximately 7,300 positions, and total annual gross benefits of a further $1.6 billion by the end of 2014.

Of course, all these are estimates.

They are subject to the requisite consultation process before they can be finalized and that process is underway.

So let me now turn to cash flow.

We create value for our shareholders by driving pre-R&D post-tax cash flow through investment in our brands and continued productivity improvement; and then optimizing the deployment of this cash flow between disciplined reinvestment in the business and distributions to our shareholders.

Pre-R&D post-tax cash flow, which is a non-GAAP measure, amounted to $12.9 billion in 2011, including $1.8 billion from the disposal of Astra Tech.

We reinvested $3.3 billion in after-tax R&D expenditures, that includes both in-house R&D and externalization, and $1.1 billion in capital expenditures.

This represents a reinvestment rate of around 40% of our cash flow, excluding the Astra Tech disposal proceeds, and that's in line with our planning assumption of a 40% to 50% reinvestment rate.

Our commitment to shareholder value is evidenced by the $9.4 billion in cash returned to shareholders; that's a 71% increase over last year's $5.5 billion.

We ended 2011 with net funds of $2.8 billion, comprising gross debt of $9.3 billion and cash, cash equivalents, and other short-term investments of $12.2 billion.

Let me put our cash position in the context of the Board's thinking on capital structure.

We intend to maintain a strong investment grade credit rating.

Given this rating objective and our pension position, we remain comfortable with carrying gross debt at the current order of magnitude.

Alongside gross debt, we need to hold a meaningful cash balance in order to meet operational funding needs and periodic liabilities.

The target cash balance will fluctuate with business needs, but the size of the current balance was clearly considered in the Board's decision for the 2012 share repurchase program, which I'll come to in a moment.

Before turning to shareholder distributions, let me just briefly recap our cash deployment priorities, and these remain as previously stated.

First, investment in our business.

This is chiefly organic investment in our own in-house R&D, combined with external investments in technology, and product licensing, and acquisition.

In addition, we will decide whether to exercise the second Merck option in 2012 during a six-month window starting in May.

We are evaluating our options; we haven't yet reached a decision.

If we chose to exercise, there will be a cash outlay during the year.

Over and above our normal contributions to meet ongoing requirement by the Company, we have agreed to make lump sum contributions to the UK pension fund totaling approximately $1.1 billion before the middle of 2013.

The next priority is debt service.

This year, we have a $1.75 billion note coming due.

We will evaluate market conditions at the time and decide whether to pay it down or to refinance.

Our third priority, funding for progressive dividend.

Then, the Board reviews the opportunity to return cash in excess of these requirements to shareholders through periodic share repurchases.

Today, we announced a second interim dividend of $1.95, bringing the dividend for the full year to $2.80.

That's a 10% increase.

This is consistent with our progressive dividend policy, by which we aim to maintain or grow the dividend each year over our planning cycle, with a target dividend cover of 2 times over the course of the cycle.

Subject to market conditions and business needs, the Board has approved a target of $4.5 billion in net share repurchases for 2012.

Now, back in January 2010, we first outlined our planning assumptions for the 2010 to 2014 period.

We re-affirmed the principal assumptions last year, with a recalibration of the pipeline contribution to revenue by 2014.

We reiterated these planning assumptions in our guidance update a few weeks ago.

Despite significant external pressures and the divestment of Astra Tech, we continue to plan on the basis that total Company revenue will be in the range of $28 billion to $34 billion over the 2010 to 2014 period.

Although based on the evolution of these assumptions, the center of gravity for revenue is likely to be the lower half of that range going forward.

Pipeline and launch estimates are dynamic.

We review our forecast as part of our annual planning cycle, ahead of our annual results announcements.

Based on our latest estimates and assessment, and this does include the recent disappointing news related to the CRL for dapagliflozin in the US, we've lowered our risk adjusted view of the potential revenue contribution from the recently launched pipeline products to between $2 billion and $4 billion.

That's down from the previous $3 billion to $5 billion estimate.

We continue to expect double-digit revenue growth from our emerging markets.

Based on continued strong execution on productivity improvement programs and on disciplined management of cost, we still plan for core pre-R&D operating margin in the range of 48% to 54% of revenue.

Our plans for driving a strong cash performance over the period and the allocation between reinvestment for future growth and value and cash returns to shareholders remain firmly in place.

So let me finally turn to our financial guidance for 2012.

Aside from the headwinds from government interventions in the marketplace and continued erosion from recent patent expirations, we do face the pending loss of worldwide exclusivity for Seroquel IR, and Atacand, and for Crestor in Canada.

Not surprisingly, therefore, we are expecting a significant decline in revenue for 2012, to the order of a low double-digit decline in constant currency terms compared with 2011.

Also contributing to the decline is the absence of the Astra Tech.

We are also in the process of divesting the remaining Aptium Oncology centers and to finalize the deal on Zomig in the US; that means future revenues on Zomig will be classified as other income.

Combined, this accounts for around $770 million of the anticipated revenue decline in 2012.

We expect double-digit revenue growth in emerging markets for the full year, but perhaps not in the first quarter when we face some particularly challenging year-on-year comparisons for Turkey, China, and Brazil.

Core gross margin should be lower than 2011, but above the 80% planning range.

We will remain highly disciplined in our SG&A spend.

Core other income, barring any unusual items, will likely show a low double-digit decline.

Given the decline in revenue, core pre-R&D operating margin will be lower than 2011, but it should remain in the upper half of the 48% to 54% of revenue planning range.

Net finance expense should be broadly in line with 2011.

We anticipate a reported tax rate for 2012 of around 24% as we see the benefit of the trend to lower corporate tax rates around the world start to show through more clearly now that we've resolved two of our major tax issues; the APA and related valuation in 2011, and then our settlement with HMRC in 2010.

Our core EPS target is based on the January 2012 average exchange rates for our principal currencies.

On that basis, we anticipate core earnings per share to be in the range of $6 to $6.30.

So that concludes my review of 2011 performance and our outlook for 2012 and I'll now hand over to Martin, who joins us from Sweden.

He'll provide a review of our R&D strategy, portfolio, and progress.

Martin?

Thank you very much, Simon (technical difficulty).

[It's been] nearly two years since we began to make significant changes to the way that we discover and develop new medicines.

And, as announced this morning, we are in the process of taking a further step in accelerating our R&D strategy, which I will come back to shortly.

I would like to provide an update on the progress of implementing our strategy; discuss our portfolio, including some exciting early stage projects and upcoming milestones; and lastly, some insight and reflections on today's R&D announcement.

In 2010, we announced a plan to increase our focus on a selected number of disease areas, to build key capabilities, transform our R&D operating model, and change the organizational culture and leadership.

Since that time, we have simplified our footprint and operating model.

We have made significant progress, including five new product launches, and we are delivering on the key capabilities we decided to invest in two years ago.

Our expertise in these four areas has grown significantly, and we are consistently applying these to our portfolio.

One highlight is our payer evidence capability, with 90% of our projects addressing payer evidence needs and supporting payer decisions globally.

For example, the combination of real world evidence with strong clinical data supported a number of successful reimbursement submissions for Brilinta, our oral anti-platelet medicine.

This includes a recent positive recommendation by the Federal Joint Committee in Germany, which acknowledged the additional benefit that Brilinta provides to approximately 80% of the acute syndrome patients in that country.

We have made progress in our late stage products and pipeline, both internally, as well as through licensing and partnerships.

Brilinta continues to make progress, with 15 approvals this quarter, 64 approvals to date, and under review in more than 30 markets, including China and India.

Our lifecycle management program for Brilinta is significant, with over 11,000 patients involved worldwide.

Brilinta is now included in a number of important clinical guidelines; a recognition from the medical community of the cardiovascular mortality benefit that this medicine can provide to physicians treating patients with acute coronary syndrome.

ONGLYZA has been approved for use as a combination therapy with insulin, with or without metformin, to improve blood sugar control in adult patients with Type 2 diabetes in the United States and Europe.

We have just completed recruitment in the Cardiovascular Outcomes Trial, SAVOR, ahead of our planned timeline.

Our fixed dose combination, KOMBOGLYZE, received marketing authorization from the European Union.

The reimbursement and launch process will occur on a country-by-country basis throughout the year.

Caprelsa, for the treatment of advanced medullary thyroid cancer, has received a positive opinion from the CHMP in Europe, and we have submitted it for regulatory approval in Russia.

This compound truly represents our commitment to developing meaningful medicines for those who need them most.

Our current pipeline reflects 86 projects, of which 79 are in the clinical phase of development.

Fostamatinib, a Phase III program in rheumatoid arthritis, is progressing well.

This project was in license from Rigel in 2010.

Phase III trials for NKTR-118 continue to progress, as expected.

NKTR-118 is being investigated for the treatment of opioid-induced constipation, a common side effect of prescription opioid when used for chronic pain.

This product has been developed with Nektar Therapeutics.

Lastly, CAZ AVI, our beta-lactam/beta-lactamase inhibitor combination for the treatment of a serious gram negative bacterial infections, has moved into Phase III development, jointly with Forest Laboratories.

We are excited about the potential help CAZ AVI will bring to hospitals facing additional costs linked to a rapid increase of antibiotic resistant micro organisms.

Clearly, we are disappointed by the recent Complete Response Letter from the FDA for dapagliflozin.

But we remain committed to dapagliflozin and its development as a therapeutic option for adults with Type 2 diabetes.

We remain on track with our global regulatory commission, including the recent filing in Mexico, and continued discussions with health authorities in Europe and other countries.

We discontinued the development of olaparib for serious ovarian cancer following an interim analysis of a Phase II study.

With TC-5214, the second of five Phase III studies as an adjunct therapy for major depressive disorder did not meet its primary endpoint.

We will continue with the development of the remaining studies.

Regulatory filings will be reviewed following analysis of the [pool] results.

I would like to highlight a core part of innovative medicines coming up for Phase III development decisions that will address significant unmet medical needs.

We are targeting seven assets, which is a good reflection of our portfolio strategy at work; three assets are large molecules, and four are the result of licensing, partnering, or acquisitions.

AZD6244 is for a population of patients who do poorly on current treatments for lung cancer where median overall survival is less than six months.

Phase II data showed significant improvement in progression-free survival, plus a trend to improvement in overall survival.

In Phase II, CAM-3001 is for moderate to severe rheumatoid arthritis.

Despite current treatments for rheumatoid arthritis, significant unmet medical need exists for a treatment that has efficacy of disease remission, improved physical function, and quality of life.

In concluding my portfolio review, we anticipate regulatory decisions in Europe for dapagliflozin and Caprelsa, as well as the US FDA decision for our seasonal influenza drug, MEDI-3250.

We are expecting data to read out on numerous projects by year end, including Fostamatinib and the remaining studies for TC-5214.

As I mentioned, in 2010 we began to make significant changes to our disease area focus, capabilities, our R&D operating model, and leadership, all with a focus on product delivery.

However, as David and Simon have mentioned, the environment continues to be a challenging one and we are responding in research and development by announcing an acceleration of our transformation.

This will result in a leaner, simpler, more innovative organization, with a lower and more flexible cost base.

We will be better suited to access the best sites available in order to discover and develop great medicines and bring them to patients.

The changes will have a profound impact on research and development.

For example, we will exit all R&D operations in Sodertalje, Sweden.

We will close our R&D presence in Montreal, Canada.

In addition to site closures, there will be a gross impact of 2,200 R&D staff globally, subject to consultation.

We have also decided to make an innovative change to our neuroscience area.

This is a challenging disease area with a high unmet medical need.

We strongly believe in the opportunity, and are announcing today the creation of a virtual model.

In this model, we will tap into the best available external science, while sharing cost, risk, and reward with other research partners active in this field.

This approach will introduce fundamentally new ways of working, through which we aim to deliver greater innovation and improved productivity.

Our virtual team will be based at major neuroscience hubs, like Boston in the US and Cambridge in the United Kingdom.

In addition, we will work closely with the best partners in other locations.

I believe that this is a bold move and that further changes to accelerate the transformation of our R&D organization are the right decisions.

Our aspiration is to become a leader in biopharmaceutical research and development, innovation, and productivity.

Since 2010, we have transformed our internal leadership with over 60% of our AstraZeneca senior leaders joining from other pharma and biotech sectors.

As I mentioned at the outset, we are seeing the benefits of our enhanced capabilities in every project; payer evidence, personalized healthcare, predictive science, and innovative clinical trial design and interpretation, all with relentless delivery of innovative medicines that meet the real needs of patients.

Our portfolio has a renewed focus on quality, as exhibited in the launches of Brilinta, KOMBIGLYZE, and Caprelsa.

We increased our externalization capabilities, have partnered with a range of companies, and now 40% of our clinical pipeline is in-licensed.

We continue to build and strengthen our biologics portfolio.

At the end of 2011, we had eight biologics candidates in Phase II development.

We have made significant investments in Asia, with AstraZeneca being at the forefront of establishing research laboratories in both Shanghai, China, and Bangalore, India, while building new capabilities to our R&D center in Osaka, Japan.

I believe the strategy set forth is the right one.

We are responding to the environmental challenges, and we are making the necessary transformation to meet our commitments and ensure the success of the Company in delivering great medicines for future generations.

With that, I would now like to pass onto Tony.

Well, thank you, Martin, and hello, everyone.

Despite the revenue headwinds from pricing in generics, our marketing companies turned in a good performance in 2011.

I'm going to cover the highlights and, when I refer to revenue growth rates, they'll be on a constant currency basis.

For the full year, revenue in the US was just over $13.4 billion; down 2%.

That includes a 3.3% hit on the revenue line from US Healthcare Reform.

We drove good performances for Crestor, Seroquel, Symbicort, and ONGLYZA.

Nexium was down in a highly generic PPI market, and we had generic erosion on Arimidex, Toprol-XL, and Merrem to contend with.

Revenue in Western Europe was down 11%, on mid-single-digit declines in both volume and price.

There was growth for Seroquel XR and Crestor, but we lost nearly $1 billion to generic competition; chiefly, Nexium, Arimidex, and Merrem.

Revenue growth in established Rest of World was largely due to Japan, fuelled by the launch of Nexium, and good growth for Symbicort and Crestor.

Crestor is driving the net growth in the other markets.

Revenue in emerging markets was up by double-digits for the full year and the fourth quarter, when the expected tender offers in the Middle East came through.

Revenue grew in the mid to high teens in China, Russia, and in the Middle East North Africa region.

Brazil was a counterweight to performance as a result of generic competition for Crestor and Seroquel IR.

Looking at revenue from the brand perspective, you can see here that we have had excellent growth in the brands that have exclusivity.

Nearly $1.5 billion of incremental growth from Crestor, Seroquel, and Symbicort combined.

The brands that have lost exclusivity, Nexium in Europe, Arimidex and Merrem globally, they're down $1.6 billion in aggregate.

I'm going to leave most of the brand commentary to the press release.

I want to focus on Crestor and the Brilinta launch rollout, if I may, and I'll begin with Crestor.

Sales were up 13% to $6.6 billion globally.

Crestor volume growth was around 12%, and that's twice the rate of the overall statin market.

In the US, sales were up 16%; nearly $3.1 billion.

Total prescriptions were up 4%, compared with 1% for the statin market.

Of course, the big event in the US statin market was the launch of generic atorvastatin at the end of November.

The first thing I want to say is that it's still very early days to be drawing firm conclusions in terms of its impact.

That said, however, based on the limited data available so far, Crestor prescription volume is holding up pretty well.

The top line on the chart is Crestor total prescriptions.

In the eight weeks prior to atorvastatin generics, Crestor total prescriptions were growing at 2% year over year.

For the eight weeks post atorvastatin, Crestor is still growing 2%.

The fact that total prescription volumes are holding up well is consistent with the fact that around 94% of Crestor usage in an average week prior to the atorvastatin launch is for patients on continued therapy.

Despite the availability of many low cost options, these patients are on Crestor because their physicians felt it was the right treatment choice; in many cases, because they failed to achieve goal on other regimens.

And we believe that we'll hold on to most of these patients.

We've also said that we think the market share pressures will be on a 6% of volume, which is dynamic; around 4% from new starts, and around 2% from [patient] switches from other therapy.

That's the bottom line on the chart.

And we have seen a reduction in Crestor growth, as we expected.

So, again, early days but, so far, volumes are holding up pretty well.

Crestor also had some very good performances in other markets.

Sales were up 5% in Western Europe, where we had good double-digit growth in France, in Spain.

Sales in established Rest of World were strong, with Japan accounting for half of the increase.

Sales in emerging markets were up 8%, where good growth in China was partially offset by the generics competition in Brazil.

Next, I'd like to give you an update on our launch rollout of Brilinta, or Brilique, as it's known in many markets.

Brilinta has now been approved in 64 markets worldwide, with the biggest event clearly the US approval in July.

But regulatory approval is only the first step in the process.

We've now launched in 37 markets.

To date, we've achieved reimbursement in 20 markets, and a further four markets which we would characterize as patient-pay markets.

Where we have achieved reimbursement, we're achieving a price that reflects the value proposition delivered in [palatal] results; a premium price for a significant reduction in cardiovascular morbidity and mortality.

We're now in the price negotiation phase in Germany and France, and we believe the price that is achieved ought to reflect the CV mortality benefit we bring over clopidogrel.

Now, the real rate-limiting step is achieving formulary acceptance, and adoption on hospital protocols.

Access to new ACS patients narrows as you work your way through this cascade of events.

So, starting at access to 58% of new cases in the 64 markets where we have approval, when you get to access at the protocol level, we only have access to around 12% of the new ACS patients at this stage of the rollout.

I'm confident that we'll steadily build on that figure.

We knew it would be slow, and it has been predictably slow.

Where we have achieved protocol adoption, the early results are encouraging.

We're furthest down this track in Germany, where we saw a real step up from the third to fourth quarter.

Based on our market research, cardiologists in Germany report that Brilique is on protocol in 70% of our 1,000 target hospitals.

In these on protocol hospitals, Brilique captured 31% new ACS therapy initiations; second only to clopidogrel.

Our US launch is probably where Germany was six months ago.

We have managed care reimbursement for nearly 60% of covered lives.

Formulary access in our top 400 targets is around 46%.

We're on protocol in only 14% so far.

We only fielded a full complement of promotional materials in mid-November after receiving comments from the FDA's review so now we can finally accelerate our commercial efforts.

As I said, I'll leave the rest of the brand comments to the press release.

I'd now like to provide some of my thoughts on commercial organization as responding to the ROI challenge that David talked about.

We built a track record of considerable achievement.

We currently have seven brands that are $1 billion or better in revenue, and we've built global scale and reach.

But we haven't let success breed complacency.

We've created an innovative and adaptive organization.

Our traditional customers are changing.

They're increasingly working in large group practices, more part-time and less full-time.

They're younger, and they're very comfortable in an on-demand information age.

They want a different experience with our brands than just the traditional field selling model, and we're responding.

The influence of payers is increasing.

They're demanding a value proposition that requires us to be disciplined in finding new, more cost-effective promotional channels.

We need to prune non-customer-facing costs that we are finding hard to recover in pricing.

We believe we are at the forefront in adapting our customer service approach from one that's reliant on traditional field sales force model to one that incorporates innovative, customer-centric channels and approaches, such as service teams; reps that service the doctors' office with samples and patient education materials, for example, but do not engage in product promotion discussions.

Inside Sales; inbound and outbound telemarketers that have all the training of our professional field representatives without the downtime and costs of travel between appointments.

Digital and inside medical; similar to inside sales but for scientific and technical support not product promotion.

These new channels were originally piloted and deployed in our mature developed markets.

Many of you may be familiar with our first scale rollout of these new capabilities when we replaced all traditional field force promotion for Nexium in the US with these new channels in the second half of 2009.

We've been able to sustain prescription volumes for Nexium in a highly generic PPI market at a significantly lower cost.

Building on the success with Nexium in the US, we're now rolling out these new channels globally; not just in developed markets, but in emerging markets as well.

As with Nexium, they're being deployed as resource substitution for sales force support for late life cycle products.

We're also using them to extend reach to customers previously not called on by our reps.

In addition, we're using a blended approach of field force, plus new channels, to support products in their launch or early life cycle stage.

So I think I can say, with confidence, that AstraZeneca has now created a global, cross-channel commercial model that's achieving high customer satisfaction.

We now have service teams in 19 countries, making nearly 14,000 contacts daily.

Inside sales agents in 24 countries are making over 6,000 customer contacts daily.

We're reaching more than a quarter of a million healthcare professionals around the world with a comprehensive digital offering, supporting a dozen brands.

It's effective in value customer support, provided at a cost-per-contact materially lower than traditional sales force coverage.

For example, service teams are 28% of the cost-per-contact compared to a field rep, and inside sales are at 28% relative cost position.

We believe that the creative and disciplined use of traditional field force support, plus innovative new channels, can, when applied strategically over the entire lifecycle of a brand, significantly lower the total commercial cost without sacrificing the top line, and do so while providing enhanced customer service.

We're also doing our part in Phase III of the restructuring program.

We're consolidating our global commercial operations from five regions into three.

We're simplifying our above-market organization structures to allow us to reduce our non-customer-facing positions in commercial, finance, IT, etc.

We'll adjust our field force to the evolving portfolio, including the shift from developed to emerging markets.

We're committed to doing our part to delivering the top line with a level of innovation and discipline in sales and marketing that's providing that additional leverage in pre-R&D margin, providing the headroom for increased shareholder returns, and investments in the pipeline.

With that, I'll turn it back to David.

Tony, thank you.

Thank you very much, Tony.

And thank you, Martin and Simon, as well.

I hope you've heard a common theme throughout the presentations, which we have a strategy; I think we're working to that strategy and that plan.

The market is clearly changing, and we're doing everything to try and keep pace.

As you've heard, certainly from Tony, and from Martin, we are pushing for innovation, both in research and development, as well as in commercial channels, to try to drive more productivity in all the areas where it really matters.

I think our 2011 performance was pretty good given the headwinds that we ran into and the increase we provided in cash returns to our shareholders.

We are investing where we see opportunity, but we're not complacent.

I think the new steps that we talk about moving forward today, both in terms of the restructuring, as well as meeting the challenging needs of return cash to shareholders, is very important.

So, I think that's good.

We'll go on and take questions.

If you're on the telephone, (Operator Instructions).

For those of you that are watching the webcast, you'll find a text box on your screen where you can type your question in.

And for those of you who are here in the room, we'd ask you to just identify yourself as you raise your hand before you state your question.

We'll start here in the room.

Andrew Baum, Citigroup.

Three questions, if I may.

Firstly, David, could you just reiterate your aversion for material transactions?

I read recently that you are comfortable with $1 billion, but you were adverse to any material transactions greater than that.

If you could quantify it, that would be helpful.

Second, of the incremental $2.5 billion of cost savings that you've outlined between now and 2015, including the one from the previous program, how much is actually be realized and taken out of the absolute operational expense, as opposed to reinvested in the business, given that under the previous program there's very heavy reinvestment?

And then, following on from that, how much larger can it be?

The final question is on enforcement risk.

How much is the impact of growing international enforcement, and fines associated with it, impacting both your G&A, your revenue momentum in emerging markets, and the extent to which you're willing to gear your balance sheet?

Okay, well, why don't I take the issue around the material transactions and the size of those; and then I'll ask Simon, maybe, to comment specifically about the restructuring and the benefit we'll see from that.

And, Tony, maybe you can give a little bit of thought to how much the interference from the government, interference -- the challenges we get, from a government perspective, impact our G&A and our revenues.

So we have said that we're not interest in transformational transactions, Andrew; that's then something that I think we've been consistent about, and we'll stay that way.

Not sure exactly when or where I said that we would be happy with $1 billion, but not much more.

But we're in the range of that $1 billion or a few billion dollars in acquisition costs, or acquisition of product, intellectual property patents, technologies that we think would add value to our marketing and sales operation.

I haven't really put an upper limit on it, but we're not looking to do things that would be as significant as some others that we've seen in the industry in the last few years; nor do I think it's what our shareholders are looking for.

Simon, over to you on restructuring and how that benefits the operating line.

Sure.

Well, [straight to] the question, I think you're right; there's about $2.5 billion of the program still to come through in annualized benefits through 2014.

If we look at the program to date, you'll have seen about 50%, a little over, was reinvested from a headcount perspective.

As we go forward, the amount that's reinvested will depend on the opportunities that we see to invest behind our brands in emerging markets, and, indeed, in many established markets as well; and also the investment we look to make in R&D in terms of pipeline progression.

But I certainly wouldn't expect the level of reinvestment to be larger than that, that we've seen over the program to date.

In terms of the future, as you've seen, as a Company, we look very hard at how we can use innovation and productivity to improve the way in which we undertake everything that we do.

We don't think that's a journey that has an end, so we continue to look for productivity improvement, ways of meeting our patient needs more effectively.

That's part of what we do as a Company.

Good.

And maybe I'll make just one other comment about the transactional types of things, Andrew.

Just to say that I think in emerging markets, and branded generics, and some areas where we might not necessarily have commercial capability but we would want to be in those businesses, if we look at that at a country level, we're certainly no more than a regional level.

We might even engage in activity around that.

So that would be the other area because I think the technology side of things, from a product perspective, is very, very important and I wouldn't necessarily buy commercial capabilities in that area.

But I think in areas where we are -- where we don't have the expertise then that might be an opportunity to make some investments.

Tony?

Yes, when it comes to some of the steps that we and industry have had to take because of an ever changing external environment, it's hard to dimensionalize it the way you would probably like to see it because there are so many variables that are happening in any given market.

But we do recognize that we need to earn the trust of our customers each and every day and, as an organization, for example, we did institute new practices and policies.

We, for example, stopped travel for physicians to conventions.

We stopped doing gifts.

Anything that could have been misinterpreted as an inducement.

And any time you stop certain core activities, you do get a flattening trend until you then re-energize with new marketing initiatives.

And we saw that in our US experience about 18 months ago.

We saw that a little bit in China in Q2.

But as we then institute becomes driver for innovation, we started to introduce new webcast formats, new ways to get information out from our field force to customers that serve their offices, we start to see that momentum building again.

So it puts an added challenge because we had to set a global standard and reinvent some of the new ways of going to market, but it's hard to pinpoint the exact rationale or the exact reason for any one activity in the market.

(Operator Instructions).

I have two questions on the telephone.

I'll come back to Tim Anderson in just a minute, but, first, let me start right over here.

Brian Bourdot, Barclays Capital.

A couple of questions, please.

Simon talked about the center of gravity that is influencing the medium-term picture.

For an aircraft to maintain straight and level flight without descending it requires an off-seating -- center of lift, and I suppose for your Company that is growth in existing franchises bringing the pipeline through.

And just thinking about your emerging franchises, one of these is Brilinta, now Brilinta sales so far appear, certainly in our view, to be slightly disappointing so far, particularly in the US.

Tony, I appreciate your comments about taking time to get on to formularies, but when we benchmark it against Daiichi Sankyo and Lilly's Effient, it looks like you've taken about six months to achieve what it took them two months to achieve.

So I was just wondering if you could give us any information on new to brand share?

If you would agree with us that those sales look disappointing so far, and whether there is a problem?

And, if there is, how do you propose to improve that so we have more confidence in this emerging franchise in the future, bearing in mind that Effient has indicated more restrictive patient population and you hear all sorts of wonderful things, like immortality benefit label?

The second question is a simple one regarding tax.

Simon, you're guiding for an effective tax rate of 24%, could you talk us through the differences between 2012 and 2011?

Also, whether there are any changes in the structure of your operations going forwards, through restructuring, could further influence that tax rate, please?

Thank you.

Okay, good.

Well, thanks for those questions.

Maybe I'll make a comment about Brilinta, before I give Tony a chance to provide some additional information.

Certainly, our view on Brilinta, as we have said before, is the data that came through in the PLATO trial was compelling.

It absolutely reduces morbidity and mortality, better than clopidogrel.

And I think we just -- as we said six months ago, and as we say again today, we figure it's going to take some time to work all the way through the process to create access for the drug in multiple markets.

It just takes some time.

And it's not a primary care product where GPs will automatically pick it up.

It's an acute care product that needs to be ultimately included in the protocols that are used for treatment.

And just getting those through to the point where people are comfortable doing it, takes some time.

You want to comment on patients new to starts, or overall pickup?

Yes.

I think exactly your points are the right ones.

We are very confident in the value that Brilinta brings to ACS patients.

But while we are extremely excited about what the long-term prospect of the product is, we recognize the challenge that it takes in displacing a product like clopidogrel, that's been well entrenched for over a decade.

For this to happen, we had always suggested that it would take the better part of six to nine months before you would work your way through the protocol process in the major institutions in any launch country.

And that has exactly been our experience.

What I can share with you is some of the research that we've seen in the marketplace that we have the most experience, because it's been out there the longest, is Germany.

In Germany, it took us, again, about that nine-month period to really break through.

We saw a noticeable uptake from Q3 to Q4 in protocol inclusions.

We're now on 70% of our targeted hospital protocols, and I think that's up from about 50% in Q3.

We're now seeing nearly 31%, over 31% new start share in the German market, which is second only to clopidogrel, and well past Effient in that dataset.

In the US marketplace, because, again, very early days, we're looking at attitudinal market research from customers.

In there, we're now seeing physicians beginning to really stress the mortality/morbidity benefit that's associated with Brilinta beginning to come through the system.

But as I stated in my opening comments, we're about six months behind where we were in the German experience and so I think it's still going to take some time before you start to see the protocol inclusions, which is the key success to here.

You're not going to get switches.

You have to win at the hospital institution level.

Unfortunately, that's a hospital by hospital, formulary by formulary, protocol by protocol process and it takes time to pull it through.

Okay, good.

Thank you.

Simon, you want to comment on tax and some of the differences from '10 to '11?

Yes, sure.

So the tax rate, probably worth -- let's work '10, '11, and then into '12.

So '10 reported tax rate, about 26%, a little north of 26%, dropping down to 19% for 2011.

Two main drivers in that.

The first is that we've now settled a longstanding issue, which was the US APA and valuation issue, and, as you recall from earlier in the year, we were able then to release a provision associated with that; and then secondly, as you also know, the Astra Tech disposal gain was also tax free.

Those two, broadly, explain the reduction from 26% down to 19%.

So that's '10 into '11.

If we then go forward into '12, when we're guiding to 24% we obviously don't have those two one-off items.

But what we do see is an environment where corporate tax rates, particularly in a number of our key areas, Sweden, the UK, you both know, have had downward trends on corporate tax rates.

And in addition to that, we do get the benefit of some shift in geographic mix, which is also helping the tax rate.

So that gets you from the 26% down to the 19%, back to the 24%.

That gives you what you need.

Good.

I'm going to go to the phone, and then I'll come back in here.

Tim Anderson?

On the 2014 revenue guidance, it's the second time that you've kind of walked down where you would be in that range.

It used to be in the upper end, then in the middle, now it's in the bottom half, and over a two-year period that's a reduction of, perhaps, $4 billion, which, when your revenue base is just over 30, is a pretty big change.

And I know you mentioned dapagliflozin as one of the reasons, and I'm wondering if -- what else is driving this, specifically in terms of other products.

So could it also include a more temperate outlook for Crestor and Brilinta?

And then on Crestor, can you give some detail on what you're seeing specifically in terms of Crestor's share in new patient starts since LIPITOR has gone generic?

I know with many chronic therapies the rule of thumb is that about 50% of patients stop taking their medicines after the first year so there's a fair bit of turnover in any category, and I'm wondering if that implies we'll see a slowdown in Crestor scrip trends as 2012 marches on, and beyond 2012.

Okay, well, I'll let Tony maybe answer that second question.

Why don't I just take a shot at the first question around overall revenues from products that are launched in the timeframe 2010 to 2014, which, by virtue of the fact that we received a CRL for dapagliflozin, we just risk adjusted it downward.

We also do not include Crestor in that.

So I know you have a question about will Crestor impact that, but the primary products that are included are Brilinta and Vimovo, and ONGLYZA, I think, to drive most of that.

And they are just, right now, based on our estimate, because there aren't as many of them, a little bit lower than we were last year.

So we're trying to be transparent, if we can, and adapt as quickly as we can.

Simon, you want to make a comment about this?

No, I think the -- I think you've touched, David, on the main driver of this.

To be very clear, we set out our mid-term revenue range of $28 billion to $34 billion.

We're two years in, and in both of those years we've been above $33 billion; in fact, we're just short of $34 billion this year.

And we continue to see good growth potential in our business.

We've got strong brands, with really differentiated propositions.

We've talked about Crestor; we've talked about the patient benefit Brilinta can bring.

Seroquel XR meets a very specific patient need.

We see continued strong growth of that.

Symbicort continues to perform well.

ONGLYZA.

If you look, you'll see Faslodex and Iressa got strong growth this year.

So first driver, which we talked about when we set that revenue guidance out, was growth of brands.

Where we've got exclusivity, they continue to deliver strongly.

Secondly, we talked about growth in our emerging markets, and you've seen the significant investment we've made there.

They continue to grow at double-digits.

And those growth drivers remain with us as we go into the next period of that revenue guidance range.

We do, as we drew out in our press release -- there are some structural headwinds, and they're not specifically related to brands.

But there's no doubt that we face an environment of tougher government price interventions, reflecting the macroeconomic environment.

We've seen price interventions in Europe rising up to the top end of our low to mid-single-digit price productions each year.

We've had US Healthcare Reform.

This is a tough pricing environment amongst payers.

We recognize that; we're adapting our business to it.

Secondly, we've divested Astra Tech; and, as you heard, we're completing the divestment of Aptium Oncology.

These are divestments of the business where we've got real value through that divestment program.

It's the top line, but it comes through in terms of cash and value for our shareholders.

Thirdly, it's also fair to say, the weakened euro, on a business with $8 billion to $9 billion of euro-denominated businesses, or euro-linked business, that has impacted us.

So there are some structural issues separate from the brand, which has impacted.

And then, finally, I think David's point, that the pipeline, we've had some setbacks that have impacted that guidance in the period.

Clearly, we're taking considerable action over time to step up innovation, and productivity, and R&D in response to that.

That's good.

Tony, you want to talk about the Crestor/atorvastatin performance, and where we see things now and in a year?

Yes, I'd be happy to.

I think you're -- the premise of your question is right; that over time you still need to be able to generate new prescriptions to sustain your TRx volume.

My only caution, when you look at the data over the next, I would suggest, upwards of two months, because any time we see a major generic entrant into the marketplace the data just can be very -- it's not very aligned to what we see in daily practice.

So, for example, you'll see the influx of LIPITOR, and then you'll see Atorva, and those news can get overinflated.

And so we tend to look over the initial short-term period what's happening relative to total prescription volume.

And during this period, we've not seen any degree of change, of significance, in the total prescription volume for Crestor.

We believe that it's well positioned.

Remember, people have had access to multiple generics, before using Crestor, for the last few years.

And we believe that the (inaudible) for the high risk patients is the right thing and, therefore, your managed care access points become very important.

Again, there's been no significant change in our formulary access positions that would indicate that we can't generate some percentage of that new and dynamic switch business as well.

And third, when we look to some other markets that have had to face the generic atorvastatin entry, again, there's this period of initial disruption where we have seen markets, like Spain, that have been able to grow its overall share in light of generic entrants.

We've seen Canada, where it's been able to grow its share position as well.

So we're confident that Crestor can continue to be a growth driver for us organizationally, but we acknowledge, over the next six to eight weeks, the new to switch data is something we're going to pay close attention to.

But we don't obsess on it right now.

Sachin Jane, Merrill Lynch.

Just three questions, please.

Firstly, on the R&D productivity, you quoted industry stats at 3% to 6%, just where do you see AstraZeneca fitting within that?

And then more importantly, how do you think that has changed over the last four to five years as you've put through your productivity changes?

Externally, it's hard to feel that it's improving but any stats you can provide there would be interesting.

Secondly, on the Merck option, you referenced a decision at some point this year.

Can you just clarify whether the decision has any bearing on the buyback, i.e., if you don't exercise, is there a potential for the buyback to be higher?

And then thirdly, just picking up on your comments, David, on the $2 billion to $4 billion being predominately Brilinta, Vimovo, and ONGLYZA, if I understood you correctly, those sold, if I just tally them up quickly, $250 million in 2011.

To get to $2.4 billion requires a fairly matured inflection pretty quickly.

You've described how that might happen for Brilinta, I wonder if you could just discuss similar aspects for ONGLYZA and Vimovo.

Thanks.

Okay.

Well, Martin, you've gotten off pretty easily so far so maybe I could ask you to just make some comments about the 3% to 6% success rate.

My guess is we're at the lower end of the 3% to 6%, but you've been around 18 months, not 15 years with us, so tell me how you see AstraZeneca.

No, I think that's exactly right, David.

These percentages have dropped; not only across the industry, they have dropped in AstraZeneca.

We're certainly not happy with the percentage and, as you say, it's at the lower end of that.

A couple of things I'd mention, though.

The strategy that we put in place in 2010, and all the elements of it, aim to get that percentage up.

And we've had a real focus on quality; much less on volume coming through the pipeline, much more on quality targets with quality molecules.

The second piece is our investment in biologics, where historically, although the numbers are lower, we've seen a better percent of success in biologics portfolio.

Our biologics portfolio's relatively early.

Otherwise, I mentioned, we have a number of molecules in Phase II now that we're seeing coming through, and they're very pleased with those.

So it's certainly our intent to get that percentage up over the next few years.

Good.

Thank you, Martin.

Simon, do you want to comment about the Merck option decision and the impact on the share buyback?

Sure, yes.

No, thanks for the question.

We have a decision to take during the course of 2012.

It's a decision that we're currently evaluating hard.

It's not one that we've yet taken, but obviously our intent would be to go ahead and do that and move on from that arrangement and we reflect that in our share buyback announcement for today.

But, clearly, it's something that we're evaluating and a decision will be made during the course of the year.

And as it relates to the $2 billion to $4 billion and your question about ONGLYZA and Vimovo, I think we have work to do to get them up.

I think the growth that we've seen with ONGLYZA would suggest that it's -- and KOMBIGLYZE, and fixed dose combination, with the extended release metformin, all have good opportunity for upside.

Vimovo's been slower than we thought it would be.

It's just difficult to get the position in the US market.

We have launches underway in a number of Rest of World countries, which we hope in 2012 will demonstrate that this product can do better.

So we -- and Brilinta, Tony's commented on.

So we recognize we've got work to do, and we're working to bring through the rest of the portfolio.

Alex Evans, Deutsche Bank.

Question for Tony, and then for David.

Tony, you said that 31% of your -- or you're getting 31% of new patients in your German target hospitals on Brilinta.

I was just wondering what the size of the new patient market is, how fast the market turns over, because you said you weren't getting any switches.

And then for David, a different slant on some of the questions that have already been asked.

But when you look at your strategy, you're clearly delivering very strongly on margins and cash returns; however, I think the perception amongst investors is that the pipeline isn't delivering.

Do you agree with that?

And how long would it take?

Or at what point do you decide to alter strategy and look for alternative sources of growth?

Well, why don't I take the second one first and give Tony a chance to just dig up the German numbers.

Yes, I think our pipeline has underperformed relative to our expectation.

Martin, I think, addressed that during the course of his comments.

I'm not sure how much more he could add; he can add if he wants to.

But it doesn't deter me from pursuing the innovation-based strategy.

The question is what changes do we need to make to get it right so that it delivers more consistently than it has in the past.

And we're going through a period of transition; that takes some time.

So we're not considering an alternative.

What we're considering is what does it take to really get much more focused on what it takes to pull things through.

The most significant change I think we made in R&D in the last 18 months or 20 months that Martin has been in, it's the number of new people from outside of Zeneca that we brought into the top two or three layers of R&D management.

So, more than two-thirds now of our R&D management team came in from outside of AstraZeneca.

They have a different point of view about how we might go about doing things.

We've changed some governance.

We've changed some structure.

We've changed some people.

And I think, from my perspective more so than some of the process-related things, we've got some good people that are thinking some good things about what we need to do.

Martin, over to you.

No, I think you've answered it very well, David.

The people that we've brought in are really outstanding discovery and development folk.

The other piece I'd say is I'm not happy with the way that the pipeline's delivered over this last period, and nor will I be until I see a consistent production of innovative new medicines.

That's certainly what we're aiming to do.

Good, thank you.

Tony, Germany?

Yes, I don't have on hand the actual incidence rates by country.

But the overall, as you know, ACS incidence rates hasn't changed drastically year on year and so this is still a new start business opportunity for us in generating those.

Because physicians are quite reluctant to switch anyone that's been effectively managed on a course of therapy post discharge.

So it's still about the new starts.

I'll have to get you the actual ACS incidence by country; I don't have it handy.

Go to the phone for a minute.

Mark Clark from Deutsche.

A couple of quick questions, please.

Firstly, on Brilinta, are you getting any pushback from the vagary surrounding the discrepancies in the US clinical trial data in the discussions with the payers, etc?

One's thinking in the background that they will be fully aware that in May PLAVIX loses its patent and they have a massive opportunity to save money there.

And secondly, on Crestor, discussions with the PBM manager suggest that right now, with one generic LIPITOR on the market, there's not as much facility to save money as they would like but that will change when multiple generics arrive in May and that they will attempt to increase the rate of pharmacy switching, etc., etc.

Do you think that's reasonable?

Do you think that you will face incremental pressure from May?

Or do you think you will continue to hold up well, as you've done so far?

Thank you.

Well, I'm going to push both of those over to Tony.

The North American dataset is what it is, not reflected in our label, but maybe you want to comment.

I don't know if you're getting any pushback or not.

First question, relative to Brilinta, as I said, we have about 60% reimbursement for covered lives now.

A big part of that remaining gap is Medicare Part D, which is something that we are only in process now because we missed that window based on the approvals cycle.

We have not gotten any degree of significant pushback from the payer community based on the North American results and the addition of Aspirin, so it's not been an issue that we can't easily address in the strong efficacy.

Because no matter how low the price of clopidogrel would go, it doesn't improve its efficacy and so there is still only one way to really realize a significant benefit relative to mortality and morbidity.

That's the message that we deliver, and the payer community has been broadly acceptive of that.

Relative to Crestor, I think your thinking is certainly a scenario that we envision could play out.

As you see multiple generics coming into the marketplace, our ability to realize ongoing net sales gains will be more challenging, and we understand that.

Crestor has been quite resilient up to this point.

We've not had any significant reductions at all in our net price per tablet.

In fact, it's been stable to slightly positive.

But we do know that, moving forward, it will be a more challenging environment and, as you suggest, that would be in a post multi-generic world.

And we would expect those conditions to manifest itself relative to 2013 formulary placements because we're fairly well established for 2012.

Thanks very much.

Savvas Neophytou, Panmure Gordon.

I have three questions, and I'll press on with Brilinta.

The question that I have is from Germany, which is obviously where you have most experience, are you seeing any evidence at all?

I know it's early days.

The median use for PLAVIX is something like 270 to 300 days, are you seeing any evidence yet of longer use with Brilinta?

The second question, which is again staying on the Brilinta aspect, is have there been any structural changes over the last two years in the US which may affect the launch trajectory?

I'm referring to the use of promotional material, etc.?

And is that actually something that may change how we look at the profitability of new product launches, i.e., you don't -- obviously, Brilinta is not a primary care product.

But if you don't make the same investment in launch costs then it could actually be profitable much sooner than products used to be.

And the third question that I have is, obviously we've seen some evidence in France of certain products being delisted, are you aware of any of AstraZeneca's products being delisted?

Or are any of them under consideration, to your knowledge?

Well, let me quickly talk about France.

I'm not aware of anything that might be delisted.

I'll let Tony comment on that, if he wants to.

And on Germany, in terms of utilization of PLAVIX over 270 days, they have done some structural changes in the US, especially within the FDA, around approval of promotional material.

So I think, on average -- well, our experience with Brilinta is it took over five months from the approval to actually get something that we could promote with other than the package circular.

So the impact of that on overall uptake I think varies by product, but it definitely has an impact.

I don't think it impacts our decision about levels of investment.

I think it does impact our ability to deliver a meaningful promotional message.

Back to you.

[I think that's absolutely right].

Yes, the only builds, I would say, on the data that you're requesting, have we see anything materially change, the PLAVIX data, the answer is no.

And for Brilique, it's probably too early because you're just getting that hospital discharge data set now.

And so we'll have to see how that plays out.

I'm in full agreement with David on some of the changes out of FDA.

We do like to get the comments before we really fully leverage our commercial activities.

That's the environment we're in.

So these slowdowns hurt what we want to do initially in the early days of launch but, again, this is not a primary care launch in the traditional sense.

You're going, first, in hospital initiations.

And so we're very focused.

I's not what you would have to see in large ramp-up expenses from primary care.

That will happen as we build base and we need to continue to hold on to patients that you generate through the primary care physicians, but not for a generation.

Okay.

Simon, do you want to answer quickly the written question about percentage of total charges from the restructuring booked over the next three years?

Yes, certainly.

So, the question is the extent to which -- or the timing for the restructuring for Phase III.

As I said in my remarks, we've now taken all -- completed the restructuring actions associated with Phase II, and we've booked the charges associated with Phase II, so the charges going forward relate specifically to Phase III.

I said that the total charge was $2.1 billion.

Further, I said that about $0.3 million, about $260,000, we actually charged in the final quarter of 2011.

So the remaining $1.8 billion, most of that will come through in 2012, with some further in '13.

A small proportion in '13 and '14, but most in '12.

Of course, the absolute phasing will depend upon the process of consultation that it currently undergoing.

Good, thank you.

I have to come back to Brilinta because I'm still surprised at your protocol adoption is only 14%.

We did a survey among cardiologists in September and could be that we asked the wrong people but they seemed to expect to get access to the drug within six months.

So why is it not happening in the hospitals?

Is it that the committees are in meetings?

That you don't get on the agenda?

That it needs several meetings?

Or there is big disagreement about it?

What needs to happen to change that?

And from your comment that you're about six months behind -- that you're about where you were in Germany six months' ago, can we infer that you would expect that by the anniversary of the launch you have roughly about 70% protocol acceptance, just as in Germany?

Moving onto R&D, is there any reason why neuroscience will be particularly suited to a virtual R&D network?

Or should we more see this as a pilot that you're trying out in this area, which may be rolled out to other areas?

And the final question is on the Phase III restructuring you're doing on sales and marketing organization.

You're going from five to three regions, can you just tell us what the three regions are?

And also, there must be reason why in the past it has been five so what are the key [challenges] to make this happen?

I can just imagine the poor regional head has now, all of a sudden, 50 direct reports and spends up all his life on a plane.

What are the resistances and execution risks around taking it that far, and potentially even further, beyond that, in a Phase IV?

Well, Martin, I'll come to you in a minute on the CNS virtual issue, but, Tony, maybe you want to comment a little bit about your views on what's happening at a hospital level vis a vis Brilinta and uptake, or lack of uptake, in the United States specifically.

Yes, when we do our own research, I think there's a higher expectation on formulary because they want to be able to try and use the product.

But what our experience has been, when it comes to the actual protocol inclusions, these are fairly rigid protocol processes that are put in place.

They tend to honor the timelines that are put in place.

They tend to happen on a quarterly rolling basis.

And so the ability to jumpstart that, which obviously would be our desire, it's a higher challenge than I think the practicing cardiologist acknowledges.

When you get into the hospital environment, they are fairly rigid, and that's been our experience now in four launch markets; that it does take that amount of time.

[You mean] quarterly?

They do.

Yes, they tend to happen on a fairly routine basis, but on their schedules on a quarterly basis.

Martin, do you want to comment on why CNS is the virtual iMED?

Is this a test balloon?

Or are you going to switch all the innovative medicine units over to virtual?

Yes, I'll take it in the order that was asked.

This is not a pilot.

We don't intend -- we have no plans to roll this out over other therapeutic areas.

If I look at the productivity expectation in cardiovascular oncology, infectious disease, and respiratory and inflammation, I can see a number of molecules coming out of our own laboratories into the proof of concept area.

Now, to go back to neuroscience, we do see this as a really good area to run a virtual model.

There are some real academic and biotech hotspots in the world.

We will base our -- a small group of virtual discovery and development people in Boston, Massachusetts, Cambridge, England, and of course in other centers where we see the very best science.

So, yes, we do see neuroscience as being particularly good for this.

It's a really tough area.

The industry hasn't produced enough.

We haven't produced enough.

And yet the science is breaking in many disease areas and the medical need is so high, so that's why we're using neuroscience in the virtual model.

Good.

Thank you, Martin.

And, Tony, back to you now on the regional question and maybe simplicity or how you see why the regions smaller in number are better and not worse.

Yes, if you go to where we were historically, we did have five regions.

We had North America; Latin America; Europe; we had Central Eastern Europe, Middle East and Africa as one region; and then we had Asia Pacific.

And we found that as, number one, our marketing leaders have matured and grown that they are able to take the bulk of the day-to-day business decisions that are within the organization.

We found that by consolidating we, in fact, can more easily leverage best practices that are happening from country to country and so the natural places where we can grapple and share those ideas even more fluidly was rolling Latin America in with the Americas.

Therefore, we placed one of our hubs in North America; that's going to service both North America, as well as Latin America.

We're going to have an EMEA region, which takes care of Europe, the Middle East, and Africa.

And that will be hubbed out of London.

And then we're going to have a concentration of our talent above market in Shanghai to take more complete advantage of the growing business opportunity there.

And by moving to these three regions, we also can simplify our interactions with our global marketing colleagues.

So we feel that we have good talent at the country and area level.

We get better synergy flow of information from global marketing aligned with the three regions, and that's speeding up delivery to the marketplace.

We're also getting better at putting things as business as usual into the market, instead of always having to have these things above market.

Much of that new channel work that I shared with you is becoming almost business as usual at AstraZeneca.

You don't need lots of infrastructure above country to convince marketing company leaders to really try and adopt new practices to reach more customers the way they want.

They're pretty much, just give it to me and get out of the way.

And we find that we can do that with fewer regions and that was the rationale and logic to what we were doing.

So why don't you need just one?

Excuse me?

Why don't you need just one?

Well, don't put any ideas in his head quite yet (laughter).

No, I think, like anything else, you still need to coordinate activities that are coming out of R&D.

You need to coordinate what we're doing in a lot of different parts of the business.

I think we'll do everything in our power to simplify our processes but, will we ever get to the point where it's one; it's a nice aspiration but for now we'll make it work with the three.

I'm going to go to the phone for a minute.

Mattias, you've been hanging on for a while.

Mattias Haggblom.

Danske Markets.

Thanks for taking the questions.

Two, please.

David, we have seen a number of different strategies been employed during the last few years within your industry; some are going for diversification into the generics and consumer business; others are going through streamlining, splitting companies in two or selling off different parts to illustrate value; while others do more of the same, which is the class where I would put AstraZeneca in.

Given how the last couple of years have panned out for AstraZeneca, both from the point of view how your pipeline's failed to deliver, but also from the perspective that pressure from payers has increased, do you see any need to amend your strategy in some way?

If yes, how?

If not, why not?

And then secondly, for Martin, with regards to diagnostics and tools to find markets for various diseases and sub-types of those, how important is it for AstraZeneca to get access to such tools inhouse that some of your peers strive to secure, not only to satisfy payers going forward that expect patients that can benefit from treatment?

Or perhaps more so, as a way to lower attrition rates in development?

And linked to that, what portion of your molecules in the pipeline today has approval market that can be used for patient selection in patient enrolment?

So let me go to strategy first, and then, Martin, I'll let you handle the second question.

I agree with you; I think you've seen execution against a number of different choices in strategy based on what different companies think is the best opportunity for them to deliver shareholder value.

We have opted to stay focused, from an innovation perspective, on a pipeline that we discover and develop ourselves, or that we in-license or acquire, because we believe that's the best place for us and the best way for us to create value.

I don't feel any pressure to change that.

I said before, I think we're underperforming from a pipeline perspective.

But that's no secret, and we're working very hard with our entire organization, not just Research and Development, to make the pipeline delivery more consistent.

Martin's said it.

I've said it before.

And he and I agree; what we'd like to see is consistent delivery from the Research and Development organization over time.

So that's my view on strategy.

I don't think we need to change.

Martin, you want to comment?

Yes, for sure.

In terms of the productivity piece, you know I think it's well stated, we're not happy with where we are.

We have delivered some, what I think are, very good medicines over the last couple of years, but not consistently enough, and not in the flow that we need to sustain our business.

Again, that's what we aim to do.

And, actually, [one way] we aim to do that is a second part of the question.

Personalized Healthcare was one of the capability builds that we established in 2010.

And, actually, the name of the group is Personalized Healthcare and Biomarkers, which speaks exactly to your point.

And just a statistic for you is that 60% of our projects now have a personalized healthcare element.

That is often a biomarker, but not exclusively.

It may be another element that we're working on.

As part of that strategy, we're working with a number of external companies in terms of the diagnostic piece.

We have decided not to build that capability internally but rather work with the numerous vendors that are out there across different types of biomarkers.

It's difficult to get one (technical difficulty).

[But it's] certainly a big part of our capability build.

And the fact that we're up to 60% now really gives me a good feeling that we can carry this through, basically, the entire portfolio.

Good.

All right, let's take our last couple of questions.

Michael.

Thank you, David.

Michael Leacock, RBS.

Just on R&D, really.

I notice, if my math is correct, you've lost around -- or you plan to eliminate some 7,600 jobs in R&D between '06 and '14, which is somewhere around 40% of the people who were employed in R&D in 2006.

I wondered how many of those people were you net recruiting excluding MedImmune?

I think the chart you showed today included MedImmune staff.

And, b, I wondered how many people you have in Biologics.

C, I wondered how are you ensuring that you retain the best R&D people who you have?

It seems that you're closing other sites or therapeutic areas down; how are you going about making sure you extract from those areas the best people to keep?

And perhaps, fourthly, coincidentally, it seems that you've lost about 40% -- or you plan to lose 40% of your R&D staff.

You're at about 40% of projects externalized.

I wonder how far that trend could go?

Okay, there's a lot of questions in there.

I'll come back to Martin in a minute maybe to provide a couple of contextual comments around how he sees things developing over this five year/six-year period of time now.

He's only been here for 18 months.

I think that we have been selective in the sites that we've gone to where we've decided to close them.

We have been able to attract from those sites some key people, moving them to different sites, hundreds and hundreds of them, to try to narrow our site footprint but retain the knowledge and expertise.

So some of the key people from places like Charnwood, or Lund, or whatever.

And I think that's worked reasonably well.

Not great, but we're overall trying to reduce our overall cost and the footprint associated with it.

I don't know exactly how many people are working in Biologics in the R&D side, so I'll let Martin take a stab at that, as well as maybe what he and his leadership team are doing to try to retain the very best people in the R&D organization.

Martin.

Yes, happy to do that.

And I'll keep it brief.

I counted five questions in there, let me try and knock them off one by one.

You are right; over a sustained period, the headcount in Research and Development has dropped.

And with the changes that we announced today, we will be looking at a gross drop of some 2,200 scientists; a net drop of around 1,800.

You're also right; as part of the reinvestment, we've grown our Biologics business.

As you know, MedImmune is the Biologics division.

There's one element to grow headcount, but more importantly is the percentage of programs that are now biologics programs in our portfolio.

I mentioned the fact that we had a number in Phase II development; eight.

If we look earlier than that and just take the pre-proof of concept area, almost 40% of our projects now are biologics.

I don't put an exact figure on what it should be.

I just know that it should have been more than the 15% to 20% that we were a few years ago.

So we're building that capability.

We're also investing in other areas, so like Personalized Healthcare and biomarkers.

So as some colleagues have left the Company, we've replaced them with people that have a better scientific background in that arena.

The last point you raised I think's a critical one.

You know the strength of an organization is on the talent that you have.

As David alluded to earlier, we've brought in a lot of outstanding talent in the senior levels.

But a big part of the cultural changes that we made over the same time period was to retain key talent.

You know, I think we've done quite a good job at that.

As I move round our sites now, whether it's Gaithersburg, Wilmington, Alderley Park, Mundahl, I see people that had worked on other sites.

It was something that I had set out to do to get that mix of people and it's going quite well.

But I never am complacent in this area.

And the changes that we announced today will have an impact on R&D.

This is where leaders need to step up, be very visible, and work with our people.

One of the reasons that I'm in Telia today.

Good.

All right, we'll take one more question, and then we're done.

In the back, sir.

Keyur Parekh, Goldman Sachs.

I have three questions, if I may.

First, in the context of the revenue guidance you've just issued for 2012, should we assume that this will be the nadir of your long-term revenue guidance range?

Or will 2014 likely be below 2012?

Secondly, David, you mentioned that R&D is in a phase of transition and you're 18 months through that phase, should we think of this as a 24-month transition, a 36-month transition?

When do we come to the end of this transition?

And lastly, Simon, in the context of the long-term planning ranges you've kindly offered us, I believe you've historically said if you are towards the lower end of the revenue range you will likely be at the upper end of the margin range.

Now with the new $1.6 billion in additional cost savings, which on my numbers work out at about 500 basis point of margin improvement, is there scope for you to take the higher end of that range up even beyond the 54%?

Thank you.

Well, let me -- I guess what I would say about our revenue guidance for 2012, and then the mid-term planning assumptions through 2014, 2012 is what we base our budget on and what we expect to deliver against.

And through 2014, I think the guidance -- our planning assumptions, that's the guidance.

Your question's very specific; is 2012 the low point?

I hope so.

But I don't know that it absolutely is given the challenges that we face in the marketplace today.

I think a couple of years ago I might have answered that question differently.

But when I see what's going on for price cuts in places like Spain, Italy, the way the Greek government is treating us, Portugal, I would just say to you that I don't think we're anywhere near out of the government price intervention as we might like to be.

So while our plan calls for a certain level of recovery, I'm a show-me person and I'll wait and see.

As it relates to the R&D transition, it can't happen fast enough.

So Martin's in Sweden today instead of here because that allows him to work more closely with the R&D gang, both to understand why he's making the changes, but also to think about what else we need to do to be more productive.

So I can't put a timeframe on it.

I wish we weren't in it because I wish it was over and we had accomplished what we set out to do.

But we've set out to do something, and I expect we will accomplish it.

Simon, over to you on margins.

Sure.

Our pre-R&D guidance remains 48% to 54%.

You're absolutely right; we're making very meaningful improvements in productivity, cost savings, and efficiency.

And if you add together the three restructuring programs, accumulatively, it's something like $6 billion of gross benefit.

It's a very substantial improvement in the cost base of our business.

But we're also continuing to reinvest, and we will continue to do that where we see good opportunity for our shareholders, whether that's in brands, in key markets.

And we'll stay absolutely resolutely behind that.

And I think -- and you look at we play out over this time period, we continue to see good opportunities to reinvest in our business.

And we'll continue to redeploy some of savings back into growth into the future.

But we feel very comfortable with the 48% to 54% range.

And, as I said, we equally feel very comfortable we're beginning to top half of that during 2012.

Thank you.

Okay, good.

Thank you, Simon.

Thanks, all of you, for your questions.

We appreciate it.

I'll just let you all know, I think you've gotten a pretty clear picture of where we see the business, where we believe it stands.

And we're happy to engage with you in any way, shape, or form through our Investor Relations gang.

So, thanks to all of you.

Thank you, Martin.