AstraZeneca PLC (AZN) 2015 Q3 法說會逐字稿

Good afternoon.

Welcome, ladies and gentlemen, to AstraZeneca's Q3 results analyst's conference.

Before I hand over to Pascal Soriot, I'd like to read the Safe Harbor statement.

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

Participants on this call may make forward-looking statements with respect to the operations and financial performance of AstraZeneca.

Although we believe our expectations are based on reasonable assumptions, by their very nature, forward-looking statements involve risks and uncertainties and may be influenced by factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements.

Any forward-looking statements made on this call reflect the knowledge and information available at the time of this call.

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

I will now hand you over to Pascal Soriot.

Hello, everyone.

This is Pascal Soriot; I am the CEO of AstraZeneca.

Welcome to the Q3 results conference call for investors and analysts.

Our slides are posted online for you to download, and follow.

I am joined today by Marc Dunoyer, our CFO; Luke Miels, our EVP for Global Product and Portfolio Strategy; and Sean Bohen, our new Executive Vice President for Global Medicines Development, and our CMO.

In addition, we have other key members of the AstraZeneca team ready for your questions.

We have Paul Hudson, EVP Head of North America; Elisabeth Bjork, our Clinical Development Head for CV Metabolism; and Mondher Mahjoubi, the head of strategic business, Oncology.

It's great to have so many of you present today, despite competing events.

And we look forward to taking you through the results and achievements so far in 2015; and, importantly, we look forward to the Q&A session.

Before we get started, this is the usual Safe Harbor statement.

But please turn now to slide 3. The plan today is for me to provide a short introduction and a summary.

I will then hand over to Luke for an update on our growth platforms and our products.

Marc will cover the financials and the guidance.

Sean will provide a pipeline update.

And I will end with concluding remarks, before we take your questions.

We plan to have about 30 minutes for the presentation, and a similar amount of time for Q&A, so one hour in total.

For the Q&A, I kindly remind participants to limit questions to one or two per person, so we have time for everyone.

We can do a second round, too, if necessary.

Turning to slide 4, within the results today, total revenue was stable at $18.3 billion, year to date.

We are pleased with this performance, and the resilience of our top line, despite ongoing patent expiries, and competition from generic products that are creating substantial headwinds for us.

The growth platforms grew double-digit at 10% in the year to date, and now represents 57% of our total revenue.

Core EPS was up 2% in the year to date.

But, more importantly, we were up 8% in the quarter [here], reflecting an increase in gross margin, but also the management of our SG&A expenses.

We delivered strong news flows from the pipeline in the third quarter, including one new approval and several regulatory submission acceptances.

The importance of our new medicines was highlighted by the granting of priority reviews, accelerated assessment in number of FDA fast-track designations.

Further, based on our performance so far this year, we've upgraded to the full-year CER guidance as we see total revenue now being much more in line with last year, and core EPS increasing by mid to high single-digit percent.

Marc will provide more details later on.

Turning to slide 5, and looking at the third quarter, there was continuous strong pipeline news flows.

Brilinta was approved in the US for the treatment beyond one year, based on data from the PEGASUS study.

As you would expect in our industry, some projects go well and others suddenly you can face setback.

We did receive a complete response letter from the FDA for saxa/dapa, and we are currently assessing exactly what needs to be covered, before we can bring this medicine to patients in the US.

It's important to remember that, in the meantime, we are pursuing approvals in Europe, and elsewhere.

And we'll hear more about that in 2016.

Sean will provide more details later, but it was reassuring that this complete response letter didn't refer to heart failure for saxa/dapa, or diabetes ketoacidosis for the SGLT-2 class.

More to come during Sean's presentation.

PT003, Brilinta, and AZD9291 all received regulatory submission acceptances in various geographies.

And 9291 received priority reviews in the US and Japan, and accelerated assessment in the EU.

Further, we received FDA fast-track designation for anifrolumab, tremelimumab, and durvalumab.

So, quite a rich news flow for the quarter.

Please turn to slide 6. Total revenue was stable year to date, down 2% in Q3, reflecting the ongoing patent expiries and the generic competition, as well as a lower level of externalization revenue compared to previous quarters this year.

Our growth platforms continued to perform well, growing by 10% in the year to date; and they now represent 57% of total revenue.

We continued to manage SG&A cost while investing in R&D expenses that grew by 22% year to date, and we started new trials in oncology and elsewhere, including COPD and lupus.

We continued to have a very rich late-stage pipeline with 15 new molecular entities in Phase III, or under registration.

And we support those through this R&D budget increase.

We expect, however, R&D costs for the full year to remain in growth mode, but moderate next year; and we would see 2016 R&D costs to be broadly in line with 2015.

We expect this year SG&A costs will decline versus last year, as we told you earlier this year we would deliver.

More to come, during Marc's presentation.

We leveraged our stable revenues down the P&L with the core gross margin up by 1 percentage point so far this year.

Core EPS for the year to date grew 2%.

Importantly, we grew 8% in the quarter, which supports our upgraded guidance.

So, to sum up, given the top-line resilience and the SG&A management, we've been able to continue investing in R&D, but still deliver on our core EPS growth.

The results today provide reassurance about our ability to fund R&D investment without negatively impacting earnings.

And this will be important as we move into 2016.

However, medium term, the continued performance of our platforms and our upcoming launches will combine with our increasing focus on cost and cash generation to help us fight short-term headwinds and return our Company to sustainable growth.

With this, I'll hand over to Luke.

Thanks, Pascal.

And if we could just go to slide 8, please.

Starting with the growth platforms, we had the headline progress across all markets; and that's exactly what we saw in Q3, which is encouraging.

These main therapeutic areas and fast-growing geographies are the key contributors to returning the Company to steady growth, and to achieving our medium- and long-term revenue targets.

Over the course of the next few slides, I'll review each of these in more detail.

But overall, respiratory was driven by strength in emerging markets, plus the new products.

Brilinta made an important regulatory stride in the quarter, on the heels of the positive PEGASUS study results.

Diabetes was driven by the progression of strong launches, and our global footprint.

And it may be the fastest-growing global diabetes franchise at the moment.

Emerging markets showed notable strength, particularly in China.

And finally, Japan maintained solid growth in the third quarter.

If we go to respiratory, on the next slide, you'll see respiratory grew by 8% year to date, driven by the strong performance of our emerging markets business; and also, the availability of new products in the US and the EU.

We believe this is comfortably ahead of global market growth of around 5%.

If we look specifically at Symbicort, it declined by 2% year to date.

In the US, sales were down 1%, with volume growth offset by additional access and copay assistant after formulary changes at the beginning of the year.

And this is what we discussed in Q1 and Q2.

Symbicort achieved share growth every month since February, and in September achieved an all-time high for total prescription share.

The maintenance of positive volume in growth of the share in the US speaks to the strength and resilience of this medicine in the eyes of doctors and patients, and device loyalty.

For Europe, a different set of dynamics.

The business remains impacted by the three analogs now on the market, but we have a pretty good picture of what is at play there.

Symbicort and Pulmicort both have notable growth in emerging markets, particularly in China.

And China, specifically, represents an opportunity with a large unmet need in terms of untreated patient populations, both in asthma, but also COPD.

Pulmicort was up 47% and remains our leading product in China by sales.

Substantial growth potential continues to exist in the market with trends shifting from acute treatment to chronic maintenance treatment; the treatment expansion from large tier cities to more rural and community-based treatment centers.

As for the new products, Tudorza and Eklira saw nice progress in the US and Europe, and also the fastest-growing line of bronchodilators in some markets.

If we look at Duaklir, the dual LAMA/LABA, the launch is progressing well in about 15 markets where it's launched, and continues to gain share: up to 15% to 20%, depending on the market.

Next slide please, slide 10.

Brilinta, it was a good quarter.

Brilinta grew by 44% year to date, with particular strength in emerging markets, and also the US.

In the US, approval was granted for the post-MI indication during the third quarter.

It's an important milestone that underscores a role Brilinta can play in reducing the risk of subsequent cardiovascular events for patients both in the acute setting, and now in the longer term.

The expanded FDA label for Brilinta for post-MI patients also reinforced, critically, Brilinta's superiority over Plavix.

The launch took place in October.

And there was some inventory benefit realized already in Q3, as we prepared for that launch.

The halo effect of the US label will increase market share, currently at 10.1%, as you can see from the chart; and should also increase the duration of treatment with more patients now staying on therapy for longer.

We're also encouraged by the increasing awareness and confidence shown by prescribing physicians and the feedback given to us, following the label change.

In the EU, Brilinta reinforced its position as the standard of care in the ACS market.

And in Japan, regulatory submissions were completed, both to the ACS, and also the post-MI indications.

We move next to diabetes.

If we look at the total portfolio, it was encouraging growth, 26% year to date.

And it was driven by Forxiga, and also the Bydureon pen.

Geographically, emerging markets were up 73% year to date.

Onglyza sales were up 2% globally, driven by Europe and emerging markets, and also Japan.

US sales were down 15% as the medicine continued to experience challenges from a competitive market, and also our very deliberate focus on Forxiga and the Bydureon dual-chamber pen.

And finally, we still await the label update for Onglyza, following the April 2015 advisory committee meeting on the SAVOR trial.

For Forxiga, continued strong growth across all geographies, including the US, Europe, and emerging markets.

As we look into next year, we expect the US to soon benefit from improving pulmonary access and improvements around the patient access programs.

Bydureon sales growth was 38%, ahead of a growing market of GLP-1s, and reflected the successful launch of the dual-chamber pen.

US conversion, from the single-dose tray to the pen, is around 60% of TRXs; up from 50% that we explained in the first half.

Next slide.

Thanks.

For emerging markets, a balanced performance.

Double-digit growth continued in Q3.

China maintained double-digit growth, though at a slightly lower rate, with strong underlying market dynamics.

Our expectation is to continue delivering strong growth in China.

There was also notable growth outside of China.

Russia and Brazil are both growing ahead of the market, and at double-digit rates, with many other countries following at high single-digit rates.

Emerging market growth overall was spread across all the main therapeutic areas, which we think is encouraging.

Year to date, respiratory is up 32%; Brilinta up 93%; and diabetes up 73%; and, finally, as we start to focus more on it in preparation for the pipeline, oncology was up 19%.

Next slide, please.

For Japan, maintained growth in Q3 with an increase in sales of 6%, and 3% year to date.

Key growth medicines were Symbicort, Nexium, and Crestor.

And these all saw continued progress in Q3, and maintained leading market-share positions.

In Q3, Symbicort was negatively impacted by the comparative year's, for 2014, strong performance as shipments in the first half of 2014 shifted into Q3.

Nexium maintained its leading market position, despite increased competition.

And Crestor benefited from increased usage of the 5 milligram dose.

We also progressed the pipeline in Q3.

And we expect several regulatory milestones in Japan in 2016, including, for Brilinta, we submitted for ACS in the post-MI indications, and we anticipate being able to launch in Japan in 2016.

Also, as planned, we submitted AZD9291 for regulatory approval, and obtained priority review.

This regulatory submission immediately followed the ones in the US and the EU by only one quarter.

And, just to place this in context, if we look at Crestor and Symbicort, the time lag between the US and EU was between 10 and 12 years.

So, again, the focus on accelerated R&D in Japan is paying off.

I'd also like to thank the scientists and clinicians and product teams involved for their important contributions.

We all look forward to bringing this important oncology medicine to patients as soon as possible, potentially, ahead of the first half in 2016.

All in all, with the progress made, AstraZeneca's presence in Japan is expanding; and the Company now ranks seventh in the country, as you can see on the right-hand of the slide.

On the next slide, new launches.

For an update on our most recent launches, starting with Lynparza, I think it's very fair to say there's a strong uptake in the US.

Approximately 75% of the estimated 1,200 prevalent BRCA-tested fourth line patients are already treated with Lynparza.

BRCA testing rates have reached approximately 75% in the US, and they have now doubled in the EU to about one-third of patients.

Sales in Europe are growing, and they now represent around 20% of total Lynparza sales.

The product is now launched in around 10 countries, including emerging markets, with more than one in five -- sorry, with more than five more countries expected to launch in the final quarter.

We look forward to upcoming data on Lynparza in the program, potentially to expand the use of this important product.

Turning to Iressa, it was approved in the US in July for first line use in metastatic EGFR-mutated lung cancer, with the first commercial sales recorded just a few days later.

Critically, the launch of Iressa has enabled us to accelerate the construction of our medical and commercial capability, which we expect to actively deploy prior to the launch of 9291.

Finally, Movantik continues a good trajectory in the US.

I'm encouraged by the broad awareness level that has led to trials, and good repeat scripts, and more expansive use.

Importantly, the patient experience has been very positive, and the abandonment rate is very low.

Finally, the product has been made available to patients in Nordic countries, with recent additional launches in the UK, Ireland, Germany, and Canada.

Overall, year to date, and in Q3, our main therapeutic areas and geographic areas have focused, delivered steady growth.

With this, I'll now hand over to Marc for the financials.

Thanks, Luke.

Hello, everyone.

I'm going to spend the next few minutes taking you through our financial headlines, and the upgraded guidance for 2015.

Please turn to slide 16.

Looking at the year to date, we delivered another robust performance.

As Pascal said, total revenues were stable over the year to date.

Externalization revenue represented about 5% of the top line.

As we continue to experience high R&D productivity and focus on three main therapeutic areas, the externalization revenue will remain important in 2016.

Our gross margin improved further, this time to over 83% of year-to-date product sales, reflecting the mix, as well as manufacturing efficiencies.

Core SG&A declined by 3% in quarter 3, but increased by 2% in the year to date.

You may remember, however, the phasing of spend last year that was weighted toward the final quarter.

We, therefore, remain fully confident of lowering core SG&A cost over the full year, both in value and in percentage of total revenue.

The combination of top-line stability, the stronger gross margin, and a favorable outlook for core SG&A enabled us to continue the significant growth in core R&D investment in the period.

The increase of 18% in the third quarter reflected the recent start of a number of clinical trials, in particular, in oncology.

The results today provide reassurance about AstraZeneca's ability to [further] our investment without negatively impacting earnings.

In a moment, I will take you through our fully-year guidance.

Please turn to slide 17.

Turning to the P&L in more detail, the total revenue was stable year to date, but down 2% in quarter 3, reflecting the ongoing patent expiries and generic competition; as well as the low level of external revenue in the third quarter.

Encouraging progress is here in the cost of sales.

And our gross margin was accompanied by a 3% reduction in core SG&A cost in the third quarter.

This came on the back of a 1% decline in core SG&A costs in quarter 2.

The core tax rate fell to 16% in the year to date, after one-off benefit in the first half.

Anticipated full-year tax rate to be in the lower half of the 16% to 20% range, outlined earlier in the year.

The 8% increase in core EPS in the third quarter supports today's upgrade to guidance.

Please turn to slide 18.

Core SG&A cost reduction has been a focus for the business this year, and we have seen good progress.

I'm pleased that we delivered a decline in the ratio of core SG&A to total revenue year to date versus fiscal year and full-year 2014.

Core SG&A costs also fell by 3% in the quarter, following the decline in quarter 2.

As example of the actions we are taking, we continued to improve our sales, marketing, and medical effectiveness, which includes leveraging programs globally, rather than a country-by-country basis.

We also focus on centralizing select functions and processes to deliver standardization and economies of scale.

Please turn to slide 19.

Turning to our upgraded guidance for 2015, total revenue is now expected to be in line with last year, given our performance over the last nine months.

While maintaining good level of investment in R&D as more of our projects enter late stage, we expect core EPS to increase by mid to high single-digit percent this year.

These upgrades reflect the cumulative effect of, among other things, revenue stability; a strengthening gross margin; and successive reduction in core SG&A costs.

Although not guidance, we also try to help you to understand the impact of exchange rate movements in the year.

Based on current exchange rates, total revenue is still expected to decline by high single-digit percent.

We continue to expect full-year core EPS, at current rates, to be broadly in line with 2014.

Given the increase in guidance at CER, this reflects a continued tough drag from global currencies versus the US dollar.

Thank you for listening.

And I will now hand over to Sean.

Thank you, Marc.

It is a pleasure to be here speaking with you all today.

I am both proud and excited to have taken over this role in September.

By way of introduction, I trained as an MD PhD at the University of California, San Francisco, and the National Cancer Institute; then, as an oncologist at Stanford.

I was previously at Genentech for 12 years, where I gained experience across the various phases of development in a broad spectrum of therapeutic areas.

In the short few weeks since I've joined, I've been extremely impressed with the breadth and depth of the pipeline and high caliber of the individuals in the organization.

I would like to assure you that, together with the GMD team, we are committed to advancing the pipeline by pursuing a clearly defined science-led strategy to translate scientific knowledge to good clinical experiments to new medicines to benefit patients.

I welcome the challenge of executing our pipeline, and look forward to meeting many of you over the coming months.

Please turn to slide 22.

Next, I would like to review some late-stage pipeline highlights in our three main therapy areas for the third quarter.

Starting with RIA, we received acceptance for the PT003 regulatory submission in the United States for COPD; and the detailed results for the Phase III trials were presented at the ERS Congress in Amsterdam, in September.

In CVMD, Brilinta received approval in the US for the post-MI indication and regulatory submission acceptance for both the ACS and post-MI indications in Japan.

As for saxa/dapa, we were disappointed to receive the complete response letter, which stated more clinical data are required to support the application.

No concerns were raised related to hospitalization for heart failure, or diabetic ketoacidosis.

We will work closely with the FDA to determine the appropriate next steps, and remain committed to the program.

As for Duaklir, our SGLT-2 outcome study, the trial is fully enrolled.

Finally, for oncology, we received priority review designation in both the US and Japan, and accelerated assessment in the EU for AZD9291.

We also received FDA fast-track designation for durvalumab, for head and neck cancer; and tremelimumab for mesothelioma.

Q3 was a busy quarter for us and illustrates the steady progression, as well as our commitment, to the pipeline.

Please turn to slide 23.

Given a fast-evolving treatment landscape in immune-oncology, I wanted to provide some perspective over the 2015 to 2017 timeframe for the AstraZeneca portfolio and key ongoing trials.

By the end of the year, we expect data from the durvalumab ATLANTIC trial in third line PDL-1 positive non-small-cell lung cancer.

The ATLANTIC study, as well as the HAWK study in second line PDL-1 positive head and neck cancer, are both single-arm Phase II trials designed as potential fast-to-market trials.

Assuming positive trials and unmet need in their intended indications, they could potentially lead to regulatory submissions in their respective settings.

However, given the evolving treatment landscape in lung cancer, there is now a lower likelihood that ATLANTIC can be used for regulatory submission.

But we're still awaiting the data to make that determination.

HAWK, in head and neck cancer, is expected to have data in the second half of 2016.

Further, in monotherapy, specific in earlier-stage lung cancer, as well as the sub-study A of the ARCTIC trial in third line PD-L1 positive lung cancer, are both scheduled to report in 2017.

The DETERMINE trial of tremelimumab in second line mesothelioma is now expected to report in the first half of 2016.

As with so many clinical trials, the final analysis of DETERMINE is event driven, and events have been coming in slower than anticipated.

DETERMINE is a randomized Phase II with more than 500 patients in total.

Outside monotherapy, AstraZeneca is continuing to lead the efforts in combining IO medicines.

In particular, our anti-PD-L1 and anti-CTLA-4, durvalumab and tremelimumab, it's evident, from many data sets, that patients whose tumor does not express PD-L1 do not derive much benefit from monotherapy, but need a combination approach.

PD-L1 negative patients represent about two-thirds of our patients, and, thus, a very large opportunity to make a real difference in the treatment of their cancers.

We have started [some] registrational studies of the durva-plus-treme combo, and are rapidly moving forward and consolidating our leading position in IO combinations.

The first studies will read out in 2017, including sub-study B of the ARTIC trial; as well as MYSTIC, our first line trial in non-small cell lung cancer.

Similarly, in head and neck cancer, CONDOR is expected in 2017, as well.

Please also watch out for updated durva-plus-treme data at the upcoming [CTSE] meeting.

Just a few words on CAURAL and TATTEN.

As you know, there is a partial clinical hold on recruitment for these combination trials, but patients already enrolled can continue treatment after re-consent.

There was an increased incidents of interstial lung disease with the combination therapy, as compared to each drug as a single agent, and we are working with regulatory authorities on how to monitor these events.

There is no impact to ongoing discussions with regulatory authorities on AZD9291 approval.

In summary, as a newcomer to AstraZeneca, I am very impressed by the IO program; and, in particular, the combination work, where we are in leading position with durva and treme, as well as many earlier-stage programs.

And I am looking forward to keeping you updated on our continued progress here.

Please turn to slide 24.

Between now and the end of 2016, we expect steady news flow from our advancing pipeline, including regulatory approvals, regulatory submissions, and Phase III readouts.

Focusing on events through the first half of next year, for regulatory approvals we expect to hear on lesinurad in the US in late December.

And in the first half of 2016, AZD9291 has its official PUDUFA date, and EU anticipated approval for lung cancer; and PT003 its PUDUFA date for COPD in the US.

As for key regulatory submissions, we expect to submit brodalumab for psoriasis by the end of this year; and in the first half of 2016 Brilinta in stroke, and durvalumab for lung cancer, and tremelimumab for mesothelioma.

Our first potential entrants in immuno-oncology market.

As for key Phase III readouts, we expect durvalumab for lung cancer in the current quarter, and in the first half of 2016; tremelimumab for mesothelioma; benralizumab for severe asthmas; and Lynparza for metastatic breast cancer.

As you can see, there are many key data points expected in the coming months.

To highlight our key late-stage pipeline programs, we will be hosting a late-stage pipeline conference call on December 2. We look forward to exploring these important programs in more depth at that time.

With that, I would like to hand back over to Pascal for closing comments.

Thank you, Sean.

And, again, a warm welcome to the AstraZeneca team; it's great to have you here with us today.

Please turn to page 26.

I would like to summarize the year-to-date and Q3 results.

Total revenue was stable, despite the ongoing patent expiries and the generic competition, and they are strongly supported by our growth platforms.

The core EPS was up 2%, up 8% in the quarter, as we managed SG&A costs.

But R&D investments increased to support our very rich pipeline.

We saw very good news flow from the pipeline, and we are able to upgrade full-year 2015 guidance.

We remain on track to deliver on our medium- and long-term goals.

With this, I would like to thank you for your attention.

And I will now hand back over to the operator for Q&A.

For the Q&A.

I kindly remind participants to limit questions to one or two questions per person.

so we have time for everyone.

Thank you so much for your cooperation.

Operator, over to you.

(Operator Instructions).

Maybe we can start with James Gordon, JPMorgan.

Two questions, please.

The first one was about diabetes.

And the question was that last year you'd given a target for 2023 of [$8 billion] for diabetes.

And there's been a lot going on in diabetes in terms of side effect issues and regulatory.

My question is do you still see that as potentially achievable, that would mean that the business had to triple between now and then, or could that now be challenging?

The second question was just on 2016.

Obviously, US Crestor generalization to navigate, there's a few different levers to get there: SG&A cuts, or divestment income, but also potentially a buyback, or doing a bolt on.

Just how do you think about the weighting of those different drivers?

And could we see you actually [deploying] the balance sheet to help you get there?

Thanks, James.

Me to cover, first of all, the diabetes question.

I think what I would like to say, first, is that we remain committed to our long-term goals.

In fact, we just finished our long-range planning process and we presented it to the Board this week, as we do every year.

And I can tell you that our plan is very much in line with previous planning, and reflects that our 2023 goals are achievable, from our perspective.

Having said that, as you would imagine, in every plan you have ups and downs.

What our planning reflects now is lower diabetes sales, but higher oncology sales.

If I talk about diabetes, in fact, we are doing better outside the US than we had expected originally.

And in every emerging market I go to, I can tell you that when I ask people about their growth story their growth story is very much about diabetes.

So we're very delighted to have diabetes as part of our portfolio.

We are a global company.

And even though every geography behaves a bit differently, and it's clear that diabetes is a bit of a competitive shield today in the US, outside the US there is enormous opportunities.

We do very well in Europe; and in the emerging markets, in particular, we do very well.

Got to realize, in those countries cancer, of course, is an issue.

But the big issues that they are dealing with today are cancer, hypertension, diabetes, COPD asthma.

Enormous opportunities in all of those, this is to help patients.

So, we do very well outside the US.

In the US, we are, I would say, doing okay, but certainly not as well as we were expecting originally.

If you take the totality of global sales, we see less diabetes sales and we see more oncology sales, simply because we have more clinical data.

We have launched [Laparit], so now we -- it's not a risk-adjusted forecast for Laparit, it's a full Laparit forecast.

And then, we have more data from N2 and M1, so we become more confident with our oncology business.

We've also, in the last year, recruited even more people around the world who understand oncology, so our forecast is even more robust that it was before.

That's kind of, if you want, the net-net of our forecasting, our long-range plan.

As far as US Crestor, and the pressures that are applied to our business, well, the way we deal with this is continued focus on managing our SG&A expenses.

We reduced them in absolute value, and as a percentage of revenue.

As we said before, we'll continue to deliver externalization revenue.

And I think it's important to keep in mind those are here because our research engine is very productive.

In fact, we cannot develop and commercialize everything that comes out of this research engine.

And we have said we're going to be disciplined and only pursue projects where we -- where they are in our core disease areas, oncology, CVMD [area].

And even -- so anything that is outside our core disease area, we partner, and we retain some long-term value.

We also do it in core areas where we believe we don't have the -- we don't have the capabilities today, and hematology is a good example.

So, externalization.

And finally, the last thing is bolt-on.

Certainly, we'll pursue M&A and potential bolt-on.

And if we cannot do any -- if we cannot do those, certainly, we'll have to consider, or we will consider, share buyback.

But in term of how we deploy capital, our priority will be to pursue bolt-ons and M&A, so we can build long-term value, before we consider share buybacks.

Marc, anything you want to add?

No, I think you're absolutely right.

We constantly look at a share buyback, but we also benchmark them to potential opportunities we see outside.

And until now, our eyes have always been towards the bolt-ons.

Thanks, Marc.

Jo Walton, Credit Suisse.

Two questions, please.

One, going back to diabetes in the US, the Forxiga sales were actually lower in the third quarter than they were in the second quarter.

I'm wondering if there's some element of competitive aspect that is important there.

Perhaps you could address whether there's any shift in patients away from commercial plans towards government plans, or whether this is just settling in of new promotional programs and we should start to see a strong acceleration.

The second question is one for Marc, please.

I believe most of our -- most of the sell-side earnings per share numbers are fairly similar, but they may be made up in different ways.

And one of the areas where our forecasts really are quite different is looking at the level of net debt at the end of this year, and at the end of next year.

I wonder if you could just help us with some sense of actually how much cash is going out in restructuring, both in 2015, perhaps how much you've done this year to date, how much you expect for the whole year; and again, so that we get things right for 2016, how much more cash is going out in 2016.

Many thanks.

Thanks, Jo.

Maybe, Luke, you could cover the diabetes Forxiga question; and then, Marc, of course, the next one is for you.

Jo, I think there was an overall impact on the class with the signal that we're seeing with DKA in May and June, and the subsequent letter from regulators.

And you can really see that effect on the overall class.

We, obviously, were impacted by that with Forxiga.

If you look at the share trends, that volume was picked up by GLP-1s, which clearly we benefited from; and also by DPP4s, which we didn't.

I think as we look further out, clearly, there's some positive trends to SGLT-2s in terms of the infrared data.

Also, in October we tightened up some of our access programs and affordability programs, particularly in terms of cash.

In terms of movement between government and other programs, no, not a huge amount of movement.

And again, just in terms of actual sales, it was around [$9 million].

Again, we remain confident about the class.

It's important to keep in mind, Jo, of course, as SGLT-2 class is a new class, and it's an innovative new class.

And, of course, as with many new classes, you expect a few bumps in the road as you get started.

If you go back to the statins, if you go back to Crestor when it was launched, we certainly experienced quite a number of eventful developments as we launched it, many years ago.

If you look at the SGLT-2 class, in Japan, we've had, we, being the whole class, this issue of dehydration of patients that has really slowed down the class.

But we see a pick up now.

It's a good class, and we believe it helps patients, and it will grow, and we see a pickup in Japan.

In the US, DKA has certainly slowed it down.

I believe that it's going to pick up again.

Especially, this cardiovascular risk reduction is really the first time that you see it in an anti-diabetic class.

Marc?

Yes, your first question on the net debt, I believe that for the end of September net debt will be about $5.8 billion.

Then, your next question on the estimation of cash restructuring for 2015, it will be slightly inferior to $1 billion.

And what we can say, as of today, for 2016, that the number should be slightly lower for 2016.

Thanks, Marc.

There's an online question from Sachin Jain at BoA.

Sachin is asking whether we have met with FDA regarding saxa/dapa FDC, and whether we have a better idea of what the delay might be.

Sean, the question is for you.

Thank you, Sachin, for the question.

The complete response letter, as I said, stated that we would need more clinical data to support the application.

We are committed to the saxa/dapa combo approval.

And we have not yet met with the FDA.

As a result of that, we don't know exactly what more clinical data will be required, and that leads us to not being able to provide any clearer guidance with regard to how long the delay might be.

We're hopeful to meet with them soon, and then we will have clarity around that.

I think it's important to recognize that we do not believe that this particular complete response letter will affect filing outside the United States.

Thanks, Sean.

Tim Anderson?

Yes, a couple of pipeline questions, if I can.

You mentioned durvalumab and tremelimumab and the potential in lung, and I think you referenced some PD-L1 negative patients.

I think the most recent data [set] from Bristol on nivolumab and ipilimumab showed the greatest efficacy, surprisingly, in PD-L1 positive patients, which came as a surprise.

And it goes against what's been seen in the melanoma setting, with the combination of those two mechanisms.

I guess a question for Sean, perhaps, is how should we think about what seems to be discrepant data between Bristol's combo in PL-1 positive lung and your combo in PL-1 negative lung?

Then, second question on your OX40 program.

Looks like you terminated murine version of that antibody that's been in development for a long time.

It was odd to have a murine antibody in development, but you said you would pursue it as a tool to learn about the class.

I'm wondering what you did learn, and why the sudden termination of the program?

Two questions for Sean.

Maybe, quickly, the (inaudible), just to remind of the CTSE meeting this week look at this data, Tim.

Sean, go ahead.

Yes, Tim, the question will probably be a little easier for me to get into after tomorrow.

In the [murine], the CTSE meeting, we will present some early data, I think intriguing, on the PD-L1 negative non-small cell lung cancer and the durva/treme combo.

How to think about the difference between the different molecules, I'd say they're dosed quite differently.

I think one of the things the world is dealing with is trying to figure out the way PD-L1 negative and PD-L1 positive are defined, and I think we're going to have to work with that as well.

There are number of variables there, but I think the conversation will be richer after we've made the data public.

The murine OX40 antibody, it is terminated -- it's really terminated and replaced by the molecule that is human.

That provides, I think, some pretty obvious advantages as we move that forward in development.

We have shared most of the data that we have on that murine molecule already.

I think it has given us some idea of what we might look for as we move forward with the molecule that's currently in development.

But it's terminated -- I think it's really switched to what we believe is a superior molecule for that particular target.

Thanks, Sean.

And it was always the plan.

As you highlighted, Tim, we were never going to take three molecules in the clinic.

We always said we are going to take only one, and it was unlikely to be the murine one, of course, for obvious reasons.

Nicolas Guyon, Morgan Stanley.

Thanks for taking my questions I have two, please.

The first one is one saxa/dapa.

Obviously, you've been pretty clear as to which concerns the FDA did not raise in their complete response letter, i.e., increase risk of hospitalization for heart failure and diabetes ketoacidosis.

Any chance you could be a bit more specific about which concerns it did raise?

Is it a problem related to manufacturing, efficacy, safety, or dosing?

My second question is on durvalumab.

I've seen that a Phase III in first line head and neck is in preparation, called the KESTREL trial.

Could you please elaborate on the design of that trial; and notably, whether you will include those HPV positive and negative patients, and whether other criteria could be important?

Thank you.

Nicolas, can you -- the second question, the first line, the study name (multiple speakers).

KESTREL, got it.

Sorry, I missed that.

Maybe I could quickly cover the saxa/dapa question.

And maybe, Sean, if you have anything you want to add, please add; and I'll ask you to cover the second -- the other question.

The saxa/dapa, Nicolas there is no real serious concern attached to the questions.

They're more to do with producing clinical data supporting the combination of the various dosage regimens.

We can't be a lot more specific than this because we haven't met the FDA.

We need to understand exactly what they expect of us.

But it has nothing to do with any safety adverse events, like [NKK], or (inaudible), has nothing to do with CMC.

It's really purely producing the clinical data that they need to see to approve the fixed dose combination across both these regiment.

We need to talk to them before we can answer specifically, because the important part is to understand how long it's going to take to produce those data.

Elisabeth, anything, since you are here?

Elisabeth is our Head of Development for diabetes.

Anything you want to add, Elisabeth?

No, I think you describe it very, very clearly, Pascal.

And we will hopefully meet with the FDA very soon and get a clearer picture around the amount of clinical data we need to produce, and how long time that will take.

And then, we will get back and update everybody around that.

So, Sean, the durva question for you.

Yes, so the KESTREL -- I think I'm going to call it a durva/ treme combo question.

The KESTREL trial is a squamous cell carcinoma of the head and neck in the frontline.

And the trial, the Phase III trial, randomized has got three arms.

The arms are MEDI-4736 durvalumab as a single agent; second arm is the durva/treme combo; and then, the third arm of that trial is standard of care as the control.

And, I must admit, I am not -- I don't recall any exclusion of HPV carrier patients on that trial, so we might have to get back to you with the specific information on that.

My recollection is that it's all comers, and they were both be HPV positive and negative.

But we can follow up with you on that specific criterion.

[Maybe], anything you want to add, or shall we follow up later on?

Okay.

Thanks very much, Sean.

Richard Parkes, Deutsche Bank.

Thanks for taking my questions.

Just got a couple.

Pascal, your statement in the release seems to focus a little bit more clearly on cost savings and cash generation than maybe it has in the past.

Maybe it's just my perception.

But you've given us a bit of a steer on what to expect in terms of R&D costs for 2016.

Maybe, in terms of SG&A, you could give us some kind of where the pushes and pulls there that will be -- might drive SG&A costs in 2016; what we can think about there.

The second one is just on PD-L1, durvalumab, and the approvability though via the accelerated pathway with the FDA, which you said you think is now a lower probability.

I just wondered if you could talk around the drivers there, and in terms how quickly you can get that package together.

And maybe, do you think the FDA would still be willing to approve a PD-L1 therapy if there was a PD-1 targeting therapy with a full approval?

Thanks.

Richard, so, the cost question first; and maybe, Marc, jump in if you want to add anything.

For 2016, you know we can't be very specific until we give you guidance for 2016.

As usual, we do that at the beginning of the year, so we'll do that next year, early next year.

But what we've said so far is that we will continue to support our pipeline; but, having said that, R&D budget is expected to be broadly in line next year to what it is this year.

What that means is because their research engine is very productive there will be more products for us to partner, and so more externalization opportunities, next year as we continue focusing on our core TAs, and partner anything that is outside of those.

As far as SG&A, I can't say more than what we've said before, which is that SG&A will decline in absolute value, and as a percentage of revenue, next year.

That's our expectation.

And we'll deliver our core EPS goal for next year of SG&A cost management growth of our core platforms, and also externalization revenue.

That's really the -- those are the levers for us to achieve our EPS.

Marc, I don't know if you --

No.

Just to emphasize that we will continue our effort in 2016.

The effort we have showed the progress on in 2015, we will continue the effort for SG&A in to next year.

So, nothing changes.

I think it's really important to really say something, maybe here, that maybe we haven't really talked about as much as we should.

But we have been working very hard on productivity improvement over the last two years, and for next year we'll do even more of that.

These productivity improvements have driven a lot of savings, and those savings have been reinvested.

So, essentially, if R&D is growing it's not because we're not improving productivity.

We are tremendously improving productivity, but we reinvest all our savings in to more projects.

If you look at the volume of projects, it's grown enormously.

We have reduced many, many cost, and in many areas of the Company.

So we -- and the same in SG&A.

With durva, Sean, maybe you want to cover this one.

But just to remind everybody, the accelerated approval, as you know, I'm sure, is only valid until someone else, another product, has received full approval in the indication you are targeting.

So when a full approval has been achieved, you need to demonstrate that there is a [net] need and you new address it with your product.

It's not -- in that instance, we are not delayed against our own plan.

It's actually other [compounds] of the class have been able to file earlier than expected because many of them had earlier readout of their study, and the FDA has been reviewing their submissions extremely quickly.

Time lines have changed not because we are slower than we planned, but because the competing agents are moving much faster.

There are still opportunities left for us, and we're exploring those, but the project has dropped a bit.

Sean, do you want to add more?

Thank you, Pascal.

I'll take a minute for this.

I want to do one -- clean up really quickly and get back to Nicolas' question about HPV in KESTREL.

That is all comers with regards to HPV; there is no exclusion of HPV positive patients, or selection for HPV positive patients.

Now, yes, back to ATLANTIC.

I think -- and accelerated approval.

This is indeed not a delay.

We expect the data from ATLANTIC in third line PD-L1 positive non-small cell lung cancer patients in by end of year, this year.

I guess the question is, is there an opportunity?

I think if we look at the data, we look at the line of therapy, we look at the difference in the target, if the data is compelling it's certainly the kind of thing that we can approach the FDA with.

I just, as Pascal said, when we look at how crowded the field has become, and quickly so, we do believe the probability of success for that approach may be less than it was a while ago.

I just want to remind everybody, by the way, I should have said it earlier, is that our long-range plan of last year was based on our best-case scenario -- base case for the IO platform.

And that relied on -- that was based on a full approval of the [mono-substance], not the accelerated approval.

The accelerated approval we always pursued as an upside to our base plan and our [peer] of last year.

From that viewpoint, we continue building our LRP with the full approval, as opposed to the earlier accelerated approval from mono-substance.

That's maybe a point to remember.

And the second is you can go back to our first presentation to investors early 2013: our strategy has always been combination.

And in that area we are certainly leading.

We believe we are leading.

And we have early data, admittedly early data, but very encouraging data, which, again, we invite you to look at tomorrow.

Moving to Sachin's question, online question, it's again for you, Sean, AZD9291 regulatory discussions, are you still hopeful of approval ahead of PDUFA?

And also, if you could give Sachin, and everybody, an update on whether the recent safety update impacts our view on commercial partnering with PD-L1 combo?

Let me go with the AZD9291.

Am I hopeful of approval?

I am always hopeful.

You have to be hopeful in the drug development business.

Our PDUFA date is in February, but there is a possibility that FDA will act on the molecule before the PDUFA date.

And I think I mentioned that in reviewing the slides.

The other thing that I did mention with regard to CAURAL and TATTON is the partial hold from those trials does not impact the AZD9291 filing.

And then, the recent updates on safety, I'm guessing that you mean the PD-L1/9291 combo, and in terms of a commercial partner.

We really think that, that ILD signal is confined to that particular combination of agents, and really doesn't affect our ability to combine PD-L1 with other agents.

What we're seeing was an increase in the frequency of ILD and not the severity, as such.

I think what we need to do is have a management plan that allows us to collect more data on that combination in lung cancer patients, and understand better to what extent is this manageable, and to what extent can we see if there really is activity.

Maybe one thing, too, maybe that I could add actually, Sean, here is that the population of patients who received this combination was -- a great majority were Asian patients.

So we need more data, as Sean said, just to understand.

One of the things we need to understand is that issue limited to Asian patients; is it a border issue?

And today, basically, the patients we were -- that were enrolled were mostly Asian patients.

So, but we clearly need more data and more time.

Simon Baker, Exane.

Thanks very much for taking my question.

I've also got two.

Firstly, on Nexium, yet again this quarter we've seen a slightly slower erosion rate in the US than expected.

I was wondering, your thoughts as to why that's been the case.

Is this a question of the attractive levels of rebate that you're already offering, meaning that the price differential between you, and even multi-sourced generics, is not as high as perhaps we thought?

And I was wondering what that meant for the Crestor erosion next year.

If I look at the discounts that -- the maximum discount, if you like, using the VA as a proxy for Nexium, and then look at Crestor, the discounts from Crestor are even higher than the fairly significant discounts on the Nexium.

So any thoughts in how we should think about the Crestor erosion in light of the Nexium experience would be great.

And then a quick question for Sean.

Just now that you've decided on the human over the murine OX40, I wonder if you can just give us an expected timeline for development there?

Thanks so much.

Thanks, Simon.

We have Paul Hudson, our Head of North America.

He was smiling when you are talking about Nexium because he felt probably you're telling him he is doing a good job.

But then he stopped smiling when you talked about Crestor, because we are in budget mode.

So, maybe he thought we might expect more from him, as a result of your intervention.

Should I actually -- Luke, ask Luke to cover both of those questions?

Yes, sure.

Simon, naturally, we know when these events are going to occur, so we have some time to prepare.

And the US team did do a very good job defending Nexium, and we've kept actually comfortably more than half of the volume.

But we are entering a multi-source period, of course.

So the relative stability that we've seen so far, I certainly wouldn't expect that, that would continue, because there's going to be more competition between these parties.

For Crestor, our current assumption is it's a more competitive dynamic.

The key thing to remember, of course, is that we expect these first entrant on May 2, and we do expect a more rapid erosion.

However, between then, of course, we're continuing to grow Crestor and take share.

Really, remember, the Crestor environment is going to be very different with many different products, and a much more rapid erosion of price and market share for Crestor next year.

Having said that, I think the US team has done a tremendous job with Nexium this year.

Mark Purcell, Barclays.

I think there was a question still on OX40, but for me there are two.

The first is on AZD9291.

I hoped you could help us understand the opportunity initially in second line, and then in the first line setting?

And then, also, there's some emerging data that the [upfront] use of EGFR inhibitors reduces the effectiveness of PD1 and PD-L1s further down the line.

And given that you included -- there a number of trials recruiting PD-L1 and PD1s first line in patients with EGFR mutations, you can see how quickly in the second line this class of agents has been taken up and has put pressure on other classes.

I just wondered, putting all this together, whether you can help us understand the medium- and long-term opportunity for AZD9291, and the class?

The second question is on lesinurad for gout.

I wondered if you'd just comment on the commercial opportunity and the launch readiness, ahead of the PDUFA from the FDA on December 29.

Apologies to Simon about OX40.

Sean, you can cover OX40 and then 9291.

Let me just quickly give a -- make a comment on lesinurad, so we can deal with this one.

I think we wait to see whether we get approval to start with, and also to look what -- to look for what the approval looks like, and then we'll make a decision as far as lesinurad.

We're very encouraged with that we've seen so far, in particular, the advisory committee.

But we really would like to wait a bit longer, before making any comment on lesinurad.

Certainly, one of the options for us for the gout franchise is to potentially partner that.

So we have to wait a bit to decide whether we do it ourselves, launch it, when, and -- or whether we partner.

Sean, you want to cover the two?

Yes, I'm sorry.

First of all, again, apologies on the OX40.

But let me go ahead and answer that with regard to the human molecule.

It's -- that molecule's in Phase I. It's actually in two Phase I trials.

One is a single agent; and then the other is, again, in combination with durvalumab.

Obviously, you start out those trials with those escalation to establish safety, and there are plans to expand in patients once we've established a dose, as well.

Both of those trials are ongoing, they're running.

We expect top-line results in 2017 in both cases.

I think that's really all we have on those.

Back to 9291, there were a couple of questions in there.

One was in the lines of therapy.

And I think it is true that, particularly in patients with a mutation, the drug is probably likely to be active in many different lines of therapy.

So the question would be where is it best used?

And I think that that's a question that we are studying separately, is the 9291, with regard to non-mutants.

Again, we have a bunch of trials, the AURA trial series.

I think that those are being shared with you, and you might want to take a look at that trial list to see where we're studying it.

The other question you asked was about EGFR mutant.

There were two things in there: one was a class of -- was using EGFR inhibitors and then PD-L1 inhibitors, or PD1 subsequently.

One of the things that's been noticed is that if you're EGFR mutant it looks like you're less likely to respond to the single agent, anti-PD1 or anti-PD-L1.

I think there is a confounded situation there, which is people who have received and stayed on anti-EGFR compounds for some time, is that a selection for another attribute which makes you resist to immune-oncology?

Or is there truly resistance, having being previously treated?

I don't think you can sort those two things out based on the data we have right now.

I think, Mondher, do you want to talk about the lines of therapy question?

Yes, thank you, Sean.

I completely agree with you.

Just to add three points.

First of all, in second line, you know that almost 60% of the patient who progress on first line TKI EGFR inhibitor are progressing through the [T79] and zero mutation.

So, clearly, the second line opportunity is an important one.

But we are not stopping there.

We are, of course, exploring the benefit of this molecule in first line.

You may remember the data we presented at WCLC in Denver with a significant, of course, it's a single-arm Phase II trial for now, but a 75% response.

And, more important, we did a landscape analysis with a PFS at 12 months, which is 72%.

As a matter of reference, first line TKI EGFR inhibitors medium PFS is 50%.

So, clearly there is a signal, and there is a much better tolerability, of course, of 9291 compared to first line TKI.

So there is an opportunity in the first line, and we are doing the AURA trial, comparing AZD9291 to either IRESSA or [SAVOR] in order to demonstrate a significant PFS benefit.

And finally, we are not stopping in first line in [advanced] disease.

We are developing 9291 in adjuvant.

And, as you may know, we have our first adjuvant trial active, and, hopefully, recruiting soon; and that, of course, is of paramount, because we are there targeting disease-free survivor benefit and cure.

So there is, clearly, a potential, and opportunity, to maximize the value of 9291.

Thanks, Mondher, and Sean.

We'll take the last question.

Jo Walton.

I'm sorry, it was a clarification; one clarification, one question.

Did you say that there would a delay to the [Faxodapper] filing outside of US?

The line clicked off and I couldn't hear the answer to that.

Secondly, could you just tell us again, and I may have missed it, I think you said that you were already addressing 70% of the addressable population for Lynparza in the US.

Could you just go through, again, what proportion of Lynparza eligible patients are already being reached in the US?

Yes, thanks Jo.

The first one, for clarity, we are proceeding outside the US as per the plan.

There is no -- we didn't refer to any delay, any issue outside the US.

We are fully on track.

As far as Lynparza, I'll ask Luke.

But remember that the indication in the US is more restrictive than the indication in Europe.

As you'll probably remember, we had a [pulling up] with the indication we requested upfront in the US.

We had a negative advisory committee, if you remember, mid-2014, and then we re-filed with a more restricted indication.

So, Luke, go ahead.

Yes.

And I'd also add, you've got the [G-BACA] dimension there, as well.

It's 75%, not 70%.

And I think the uptake has been very positive.

And also, people are staying on the product slightly longer than we would expect, which, again, is encouraging in terms of the tolerability.

And the testing rate continues to trend upwards in all markets.

And the other thing to remember when you look at the sale is that we have a sequential launch process across the globe, so it should provide more color as we look into 2016.

And then finally, we have quite a dense program with Lynparza, and we'll get more color around that next year.

Thank you.

Very good.

So, let me thank everybody for your active participation.

I'd like to just, maybe, close by reminding you that we believe we had a good, solid Q3.

And our year-to-date results allow us to upgrade our guidance.

We'll continue to manage our SAG&A costs, and we'll deliver on our commitments to you.

We continue doing what we told you we would do: progress our pipeline, invest in science.

But we also look for productivity improvements, and certainly manage our costs, to deliver our EPS goals this year and next year; and, more importantly, deliver our long-term sales goals 2017 and 2023.

Thank you for your attention.