葛蘭素史克 (GSK) 2023 Q4 法說會逐字稿

Welcome, everyone, to our year end conference. We are going to have the usual suspects, John Coombe, our Chief Financial Officer, and David Stout presenting to you about what happened in '04 and how we envision '05. But before we do, and I will come back actually to talk about the pipeline some more, but we wanted to make a special announcement today because, believe it or not, this is the last time John Coombe, our fantastic CFO, is going to be here to explain to you the fine points of U.K. GAAP and IFRS and many other things. So I think, because of course he will be retiring in April, so I think we should give John for all the times he helped you out, we should give him a big round of applause and thank him for his fantastic services. [APPLAUSE] I'll tell you, CEOs don't get that kind of applause when they finish their term.

We have a lot of of bench [ph] strengths among executives at GlaxoSmithKline, you know, many of our top notch people. And I'm very glad that we were able to actually replace John with an internal candidate which really, on all counts, was fantastically competitive, we compared him to outsiders to make sure that we were promoting the top CFO we could get and, on that note, I want to introduce him to you, some of you have met him already. Julian, can you - - Julian Heslop, our new CFO, give him a big - -. [APPLAUSE] So John, I guess, for the last time, please tell us the dollar is not going down enough.

You know more about the dollar than I do, JP. Okay, good afternoon, everybody. And thank you for your warm, warm applause. Just before I go, I have some golf clubs outside, I also have one or two nonexec jobs to go and do. Just before I do, though, this was - - I was determined to see out the year and see out the responsibilities relating to the year. And so I'm going to go through the numbers just one more time.

We start off with a summary P&L account. And remember, the usual warning I've given every time since we did the merger, that here we are comparing statutory, this year statutory '04 numbers with business performance. So for the first year we've dropped the middle column, but the comparison back to '03 is still against business performance.

Overall in the year, the sales grew 1 percent in CER terms, despite the significant impact of generic Paxil and Wellbutrin. Total pharmaceutical sales were up 1 percent and consumer grew 3 percent. Trading profit was down 1 percent on the year, but profit before tax was up 2. And EPS was also up 2 percent. A number of factors come into play here, including legal charges, operational excellence charges, these are the charges we put in to save money in the future, and asset sales. And I'm going to address these on the next slide.

Other operating expense, as you can see, is lower than last year; there it is, primarily due to the legal charges. Remember, we have legal charges both in SG&A and in other operating expense. The interest charge is higher than last year due to the usual combination of factors, slightly higher level of borrowing, slightly higher interest rates. And last but not least, the good news, we've carried on increasing the dividend and we're up a penny from 41 to 42p. I checked back, as one tends to do at this time of the year, and the dividend has gone up a penny pretty much every year for the last 6 or 7 years. So moving on, I said I would try and bring some clarity to this area.

We've had a lot of questions in the past about the one-offs, these are one-offs of course that occur every year, but it is important that you understand the impacts of the numbers. And what you get here is legal operational excellence costs and asset disposals, and you can see that where as they've all fluctuated in CER terms, the group taken as a whole, generated a net cost round about 120 million pounds lower in 2004 than in 2003. Hopefully that helps you understand the figures a bit more. I will now move on to currency.

You saw in the first P&L slide that currency had had a negative impact on our numbers. And that in 2004 this was principally due to the U.S. dollar. The usual other culprits of the Japanese yen and the euro didn't have too much impact in 2004. You can see from the slide at the beginning of the fourth quarter, the dollar weakened again after having stabilized somewhat during the second and third quarters. The difference in average exchange rates for the year is about 10 percent.

Looking forward into 2005, we've already started the year with a difference of $0.06 or it was $0.06 when we prepared the slide, it is a little bit narrower now, and that relates to the 1.83 average rate for the year, and we've put together a slide to help you understand the impact of the rates. You've seen something like this from us before.

It gives a broad indication of the impact of the dollar and the euro on our business. To be specific, if exchange rates were to hold at levels seen at the end of January, that was the 1.89, and with the euro at 1.45, we would expect an overall EPS impact of 2 to 3 percent. Obviously negative with the dollar going weaker again. In 2005 and as we report through the year, as we've gone through all the other years, we will keep you updated as to what that likely impact is going to be.

If we turn now to the analysis of trading profit, the margin is down 2 points. 1.3 of that 2 is due to currencies. If we look at the component parts, starting with cost of goods, as a percentage of sales, this increased by 1.7 percentage points. 1 percentage point of that came from adverse regional and product mix, principally the loss of -- of the higher margin Paxil IR and Wellbutrin SR sales. The remainder of the difference primarily affects currency. So 1.7 impact, 1 percent mix, 0.7 currency. Overall COGS, just to remind you, was in line with our forecast that we gave you a year ago of an increase of 1 to 2 percentage points versus 2003. SG&A improved by 0.7 points versus 2003. Currency had an adverse effect of 0.5 percentage points, so the net improvement was actually 1.2.

We achieved this through through lower charges relating to future cost savings programs, those operational excellence programs, reduced asset write-downs and other general savings. This was partly offset by higher legal provisions including the impacts of moving to an IBNR provision for estimating product liability claims. Third line there, R&D investments increased by 1 percent of sales, principally increased clinical trial activity, that was 0.8 and 0.2 of currency impact there. So if we take a look now, that's the year, we take a look now at the fourth quarter, that showed an improvement in sales growth of 3 percent, and earnings growth of 15 percent. Trading profit actually declined 7 percent, but this was largely due to the higher legal provision that I've mentioned earlier, together with higher cost of goods in the quarter. These items were partially offset by cost savings in general in admin, and lower charges relating to future cost savings programs. Other operating income was 40 million, in the quarter, compared with an expense of 167 last year.

Again, the benefit here coming from lower legal costs in '04 compared with '03. Part sale of associate reflects the gain on the sale of some Quest shares. We still, for your information hold 18.6 percent of Quest, and we continue to account for it as an associate. The tax rate in the quarter is higher than last year, primarily because of the relatively high tax cost of the Quest sale, the profits on Quest for a higher rate of tax.

Going into 2005, we expect a slightly higher tax rate, 28 percent, and that equates to 28.3 on an IFRS basis. As we did for the full year, I'm now going to look at the one-timers within the quarter and, as you can see, there's been a big impact from exceptionals. This was forecast to you when we dealt with the fourth quarter last year, remember there was some big one-offs in that fourth quarter, so again it was important to make it clear to you what falls into this quarter. Here you can see the net total of these items has actually decreased by over 200 million, mainly lower operational excellence charges and higher asset disposals in the year. This benefit can clearly be seen on the PBT line on the previous slide.

If we move on to the cash flow. Operating cash flow 6.5 billion pounds. Unfortunately, this was 0.5 billion pounds lower than might have been expected. And that was due to the negative impact of exchange, the lower dollar. About half the increase in taxation, the second line there, is - - sorry, the decrease in taxation was due to a tax payment we made in Japan last year that some of you will remember. The higher dividend figure represents the rebalancing of dividends. In '04 we paid the final '03 and then three lots of 10p interims whereas in '03 we paid the final '02 and three lots of 9p interims. So it is nothing more than that. It still, at the end of the day, reflects the benefit from the share buybacks that we do on a regular basis.

We continued the share buybacks. We spent a billion in the year bringing total spending out of the 4 billion program to 2.2 billion, and we're expecting to purchase around 1 billion pounds of the shares again in 2005.

So though we've got a negative cash flow for this year, the minus 336 at the bottom there, it is worth just dwelling on why that happened. And there are two reasons. One was the terrific opportunity we got as a result of the Sanofi-Aventis merger to buy Fraxiparine and Arixtra; that's the 297 million there. So that's an outflow being reinvested in the business.

And the other reason was the refinancing of preference shares which previously were in a lower part of the balance sheet and not forming part of borrowings so, in accounting term, it is just a rejigging of positions in the balance sheet. If you take those two out of it, then clearly we were still positive as we were the previous year.

JP's already mentioned international accounting standards, as indeed I have, and I've just got one slide on it to try and be clear. You all know we're going to account under international standards in 2005. We've already given you the restated figures for full year 2003 and the first two quarters of 2004. With today's announcement, you've got - - n the preliminary announcement you've got a page at the back which sets out the main adjustments for 2004. We've also issued a very detailed pack, giving you just about every number you might ever want to know about the impact of IFRS on GSK. The impact in 2004 is a reduction in turnover of 373 million, about 1.8 percent. And that was similar to 1.7 percent that we saw in 2003. Remember, this turnover difference is simply a reclassification of customer allowances between turnover and expenses, has no impact on profit whatsoever.

The primary impact on the profit is the share base compensation, the 309 million. That's lower than the 368 million we told you for 2003. You may recall that the 2003 charge was high because it included more than one grant in '01, as we rejigged both companies following the merger and, of course, sadly, the share price was higher in those earlier years, so that falls into these calculations as well. Going forward, the fact is we will fall away. We expect the charge for share base compensation to fall to between 200 and 250 million pounds.

In 2004, we needed to make a P&L adjustment for additional pension charge under IFRS. We expect a similar impact in '05. The deferred tax charge there, 110 million, is higher than we originally expected. It is related to inter-company profit adjustments, giving rise to a deferred tax credit on the U.K. GAAP, which you don't get under IFRS because IFRS accounts for inter-company trading on a different basis. I stress it is a one-off profit - - a one-off impact. We do not expect it to arise in 2005. You may also recall we've elected not to adopt the accounting change on financial instruments, IS 32 and 39 in the years 2003, 2004. It will come in in 2005, so that had no impact on the '04 results.

Overall, if you compare to U.K. GAAP we had IFRS adjustments in 2004 amounting to 6.9p in EPS terms. In 2005, because that deferred tax drops out of it and because the share base compensation falls lower, we expect that to be around 4p per share. Finally, I do like to remind you, although IFRS is moving the numbers around, these are just numbers on a sheet of paper. No cash flow impact. So what about the guidance for '05? This is the guidance we've given you for '03 as well as '04. As you can see, we've met or exceeded the guidance for each one of these years. And just a reminder, these of course are both under U.K. GAAP. For '05, we are under IFRS. And looking at '05, we expect the EPS for the year to grow by low double digits.

This would correspond to high single digit growth in U.K. GAAP terms. So that's the forecast. We've come through '04; it was a challenging year, 1.5 billion of generic sales losses. We've come through that. We have delivered a strong performance against that background. And we're entering 2005 with a strong and growing company.

Just before I hand over to David, I just want to take the opportunity to thank you all for the interest you've shown in GSK over the years. I know you are going to go on showing interest in it. Julian is a great follow-on act and I'm sure will do a terrific job as CFO. I'm very proud to hand over to him. Many of us here have seen both legacy companies grow into a truly successful and global health care company, GSK. I've been very proud to be associated with that group. And I wish you and all my colleagues who carry on with the legacy every success in the future. Thank you very much. [APPLAUSE]

Thank you very much, John. And good afternoon, everyone. Just to set the stage, our pharmaceutical sales in 2004 were up 1 percent to just over 17 billion pounds. Now, typically, in the U.S., we wouldn't be very proud of a year where we had flat or zero percent growth.

But in 2004, we were actually very thrilled with that, given the fact that we did face generic competition to Paxil, Paxil IR, particularly in the first three quarters of the year, and with Wellbutrin SR in the last three quarters, quarters 2, 3, and 4. So given that impact, we're very pleased. And in our Europe and our international markets we also saw some modest growth. They were also impacted by generics to Paxil as well as some price cuts. And in Canada, in particular, we also had the loss of Wellbutrin which we had sold to Biovail.

Now, one major contributor to overcoming these losses, of course, was the way we manage our life cycles with products such as Paxil and Wellbutrin and, of course, we introduced several years ago Paxil CR and last year or in late 2003 our Wellbutrin XL. And here you can see that the net effect for 2004 where we were able to offset almost 40 percent of the losses, John talked about 1.5 billion pounds of losses, and we gained back, and this is just in the increase in sales in 2004 over 2003, it doesn't include the total sales for these products, we were able to claw back 600 million pounds. Although you can see we still had an almost 900 million pound hole to fill.

Now, we know that patent expirations are a way of life in our business but unfortunately they don't often come in very predictable or orderly fashions. So this is why we like to show this slide, just to show what the underlying business is behind the generics, as they come and go. And, of course, as you can see here, we had very strong growth in the U.S. We're up 10 percent excluding the generics. It's still not quite as good as the U.S. but very good growth in Europe and international for a total of 7 percent.

Now, as we look out and look forward to 2005, we still do have one more quarter of the Wellbutrin SR to get behind us and a little bit of Augmentin ES, but we do expect to return to growth in the U.S. And in Europe, of course, we will also have the full year impact of Fraxiparine sales, and I will highlight some of our growth franchises that will help all of these markets going forward. We also expect to have some very good years coming up in Japan including 2005 and in many of our international markets, especially some of the growth markets such as China and India.

Now, over the last few quarters we've tried to highlight what our really key growth drivers are, and you will notice, if you remember this slide, that we've added vaccines to this group, which recognizes not just the growth that it's contributing now which is substantial, but also the importance of this segment business to our future and the future potential in GSK. I will talk more about vaccines in a moment. But as you can see, this group of product, it represents almost 40 percent of our pharmaceutical portfolio. And with 22 percent growth in 2004, that means this group of products contributed 1.2 billion pounds of growth.

So I think the important thing and what I want to talk about over the next few slides is not just the fact that these products are growing well now, but they also have very strong platforms for growth for the next several years. And I want to highlight those platforms. But just first a quick word about the fourth quarter, and the reported versus the underlying growth. Overall the seasonal and the other buying patterns had a minimal effect on the portfolio.

For a couple of the brands such as Avandia and Coreg, you can see that the sales actually lagged the underlying estimated growth, while for Lamictal it exaggerated the growth somewhat, although I would say a 51 percent underlying growth is still quite substantial. For Advair and Valtrex, the sales were within a few percentage points of the underlying growth.

Let me also just show you how our products are ranking in the marketplace and you can see that we do have very strong global positions for these eight key brands. There is really two major points I'd like to make about this slide. First, I think it emphasizes the fact that we have a very strong sales and marketing organization. We've done a lot over the last three years to continue to build on that with sales force excellence programs and marketing excellence programs but this also means that when Tachi and R&D delivers the new pipeline, we will be very well prepared and ready to maximize the opportunities that were presented.

I think second, and more important for the short term, is as managed care controls continue to grow, and as we start to get ready for the Medicare legislation that's coming into effect, we have a very good position when we begin to negotiate with these organizations. And I think it is important to point out that we don't want to abuse our market position but in fact part of the reason we've gotten to this position in the marketplace is because we're known as a Company that is a good marketing partner and we've worked very well with managed care organizations, and will continue to do so, and we think that will carry over into the Medicare arena as well.

Now, let me look at some of the key trends for these key products. First, let's talk about the biggest product in GSK and that's Seretide and Advair. Here you can see that European sales for Seretide were up 18 percent in 2004 which actually is an acceleration of growth over 2003. In 2003, we only grew the brand 14 percent. Now, during this time, I think equally important, people were concerned about the impact of Symbicort but we have shown that we can actually continue to grow our share and we've grown faster than Symbicort in 2004 than we did in 2003. And how do we do it? We did it on the strength of our goal data which we've talked about in some of the previous quarters. Just to refresh your memories, the goal data clearly demonstrated that the benefits of keeping patients on continuous therapy were much better, and that total symptom control is really possible for the majority of asthmatic patients.

So our message really is pretty simple and straightforward. It is that we want patients to actually avoid symptoms and not to treat them as they occur. Now, based on this belief about total symptom control, we wanted to do a head-to-head study versus Symbicort that looked at this adjustable dosing approach which Symbicort has been touting in the marketplace. And we have some very exciting and hot data that I just want to share with you, and when I talk about a platform for future growth, I think this is really some outstanding stuff. This is a study, it's called the CONCEPT study. Now, don't ask me what CONCEPT stands for. I've seen too many of these acronyms lately to remember them all, but I don't think that's what is important. What is really important is the results that we showed.

This is the first long-term study, this is a 12-month study which was a double blinded, double dummied approach. So in this case, actually it was as fair a balance as you can have in a head-to-head study, but equally important, the dosing regimens that we used in this study were the ones in the package inserts. So for Seretide we used a 50, 250 milligram dose and for Symbicort we used the adjustable dosing that is in the approved license for Symbicort, and what is basically the platform for their promotion these days. Let me share with you some of the top line results.

Now, this first slide shows the primary end point of the study which was the number of symptom-free days. And when we said symptom-free in the study, that means no wheezing, there is no shortness of breath, no tightness, the patients are leading a normal life on a day-to-day basis. And, as you can see here, the patients had significantly more symptom-free days with Seretide than they did with Symbicort, and if you were to extrapolate this out over the course of a full year for the average patient, that would mean the average patient would have 24 more symptom-free days in the course of the year. That's almost a full more month.

And actually, when you get to see more of the data, when we publish it, you will see that after the run-in period, it actually does go up to a higher rate, and would equate to more like 32 days during the course of the year. And although I'm not an asthmatic, I think there is probably only one thing that would be better than symptom-free days, and that's a total reduction in symptoms. And as you can see here in the next slide, the data is even more impressive.

Over the course of the 12 months, the patients on the Seretide 50, 250 milligram dose had half of the exacerbations of the patients using the adjustable dosing schedule for Symbicort. And I guess this really shouldn't be too surprising because we have said all along that you need to treat the underlying cause for the disease and that's the inflammation. You shouldn't wait until patients break through. This methodology would be almost a step backwards to where we were in the '80s, before we were starting to educate the public on not treating the symptoms but treating the underlying disease. And so these are just a couple of the highlights from the study. There is a lot more that you will see. We expect to publish it next month. And you will be certainly hearing more about it in the following quarters.

If I just follow up with what we're doing in the U.S. with Advair, you can see that the U.S. performance, our sales and our market share continue to grow. Our sales grew 20 percent. And we're now more than 1.3 billion pounds. And our total RX share also is growing. We're now up over 27 percent. Now, it is not surprising we are outgrowing the market and we're continuing to build the dosage through earlier use of Advair in the treatment of asthma, and this is a very big opportunity for us in the U.S. And we're also gaining our share in the COPD markets and in the pediatric populations. And I'm happy to also say in the first few weeks in January, the growth that you see here has continued.

Let me move now to our second biggest franchise which is our Avandia and Avandamet family of products. As you can see we now have over 1.1 billion pounds and is growing at a very, very robust 32 percent. U.S. growth continues to be very strong with 26 percent growth. But I think I'm even more impressed with what we're now seeing in Europe - - in the European and international markets. We grew 57 percent, we're up over 250 million pounds, and I think when you think back to the launch of these products, the U.S. had quite a bit of a head start because there had been sort of a seeding of the marketplace, Rezulin had been launched, the information about TZDs was already out there.

Europe and international didn't have that advantage. In fact, if anything, they had the disadvantage, because they only heard about the negative effects of this class of drugs when they were launched. So there is much more room for continued growth both in Europe, International and the U.S. markets. There's growth through market expansion. There's also growth through market share. Our total market share in the U.S. is still only 12 percent. Our platforms for growth for these going forward are continuing to be the line extensions, we have Avandamet launched in Europe now, we also expect to launch Avandaryl this year and we have in development Avandamet XR, which is a sustained release formulation of both Avandia and Metformin.

I do want to remind you all that we also invested heavily in this franchise when we launched. We have 6 outcomes trials currently under way, ranging in everything from glycemic control to cardiovascular outcomes, and adopt which is the first of these trials we'll report at next year, and this will start to measure the long term glycemic control that we believe you will achieve using Avandia.

Turning to Lamictal, at the time of the merger, I was told the real hidden asset in the pipeline or in the marketplace was Lamictal which was an anti-epileptic that was just starting to take off. And as you can see here with sales now approaching 700 million pounds with robust growth being driven by bipolar indications, as well as the epilepsy, it is no longer a sleeper product. A platform for growth going forward, we have in development a Lamictal CR, which will be developed for epilepsy but also for 2 new indications, and that will be for diabetic neuropathy and also for schizophrenia. So we so we believe there is a lot of life left in Lamictal and in the Lamotrigine franchise.

Now, as someone who grew up on the sales and marketing side, I have to say I really do love the Valtrex story. Let me remind you that this is a product going into its ninth year on the market, yet it still grew by 24 percent in 2004, and was accelerating over the growth in 2003. And the way that we have really done this is we've taken what is basically -- what was basically an acute care product and turned it into a chronic care market. We've done this by expanding the indications from the treatment of the symptoms of genital herpes, to the prevention of outbreaks and the prevention of the transmission of the disease. So now we have a chronic care product, which as you can see is driving the growth. And, of course, we are going to continue to educate the public about the reducing the outbreaks and the prevention of transmission through our direct-to-consumer campaigns.

And I have to say, I don't think there is a more compelling story for life-saving medicine than there is with Coreg. Our sales, which are almost entirely in the U.S. by the way, were up 33 percent in 2004. And they're easily tracking in the U.S. to U.S. blockbuster standards, that being a billion dollars in the U.S. for 2005.

Now, since the launch, we've continued to build the clinical profile through the landmark trials such as Copernicus and Capricorn and last year, the Comet trial, which showed that we had a 1.4-year survival rate over Metoprolol. And I always tell a story when I talk to our training classes about Coreg and a good friend of mine who is a heart transplant surgeon. And he told me one day that we had actually ruined a study that he was starting to do when he was working on a heart assist program. But all of the patients coming into the program had to first be optimized on their congestive heart failure medicines, and he said almost none of them were on Coreg and of course that was the standard in his hospital. He put all of these patients onto Coreg, and by the time they were finished they were no longer eligible for the heart assist program.

They didn't need it any more. So it is a good story that I love to tell but it really does talk to the benefits of the product.

And now, in terms of a platform for continuous growth, we have yet another landmark trial that we think will help us to get better penetration of the CHF markets but also is going to help us to start penetrating the hypertension market. This is a trial called Gemini. Now, if you recall when we launched Coreg, most people didn't think that beta blockers should be used for congestive heart failure, and over the years we've overcome that with very strong clinical data. But another common belief about beta blockers has been that they're inappropriate for the use in diabetic patients because they actually cause rises in the blood sugars and they also can cause weight gain. Now we've been saying all along that not all beta blockers are alike.

And now, we've demonstrated this once again with a head-to-head trial against Metoprolol in diabetic patients with hypertension. This was a 1,250 patient trial in patients with hypertension and it was presented in November at the AHA meeting as a hot line session. And JAMA actually put it onto a fast track publication, and you can see here the results. You can see that compared to Metoprolol, we had no effect on HbA 1c. We had fewer, much fewer patients progressing to micro Albuminuria [ph]. And I think equally important when we talk about the hypertension market, blood pressure was actually controlled and goals were achieved at very normal doses for Coreg, whereas with Metoprolol, they needed much higher than average doses that are used in the marketplace. And regarding the diabetic patients we had no weight gain compared to the 1.2 kilos that you see with Metoprolol. So these are all statistically significant differences, and these are all what is driving and will continue to drive the growth for Coreg.

Now, we've had strong growth across the portfolio of vaccines, especially the pediatric vaccines in 2004. And all total the vaccines added about 120 million pounds of new business in 2004. Some important milestones. We entered the U.S. market for the flu with our Fluarix, under our treatment IND. We continue discussions with the FDA over a registration strategy that we hope will allow us to come to the market for the 2005 and the 2006 flu season.

We also hit a significant milestone with the approval of Rotarix in Mexico late in the year. And just this month, we've launched into the private markets and we expect to launch into the public markets later in 2004. Our pipeline is also very exciting with more international and European approvals for Rotarix anticipated this year. We also anticipate the launch of Boostrix in the U.S. which is a booster pertussis vaccine. We have our [Mostrix] which you saw some very important clinical data on this year. And finally, Cervarix, which JP will talk about more in just a few moments.

Now, before I talk about some of the key launches in 2005, I did just want to highlight one last key success story in 2004. Now, I alluded in one of my first slides to the success of Wellbutrin XL. But here, I think you can see just how successful Wellbutrin XL has gone. We now have over 6 percent of the anti-depressant market in the U.S. and we had sales of almost 0.5 billion pounds in just the first full year. We've converted over half of the Bupropion molecule market to the Wellbutrin XL and we have two new opportunities for continued growth. We will be launching a 450 milligram strength this year, and we also have received fast track review for a new indication for seasonal affective disorder.

With my remaining slides I just wanted to talk about some of the key launches that we will have in 2005 and I've already talked about Avandaryl. And I'm going to focus primarily on the first three products, but just a quick word about what we're doing with Vesicare. In mid January we launched Vesicare, along with our marketing partner, Yamanouchi, with over 1,100 sales representatives. The launch started, commenced on January 17th. We've stocked in orders of about $10 million. We have an excellent label. We really have a very competitive label. And, although it has only on the market now three weeks, what's feeding back to us is physicians are very impressed with the fact that not only do patients get better control over their bladders, but 51 percent of the patients actually achieved total control. And that's a claim I don't think that any of the other products can make.

Okay, so I've mentioned Avandaryl and Vesicare, let me just talk a little bit now about Bonviva, Entereg, and Requip, for restless leg syndrome. With Bonviva, I think we're really getting into a great marketplace. We have an aging population. We have greater awareness about osteoporosis. And these are going to continue to drive the expansion of this market which is already at 3 billion pounds and growing 23 percent in 2004. Along with our marketing partner, Roche, we will be the first and the only company to have a once-a-month product for the treatment of osteoporosis. And I think, as you can see on this slide, more convenient dosing does make a difference. As you know with these products patients have to stay standing while they're taking it for at least an hour to an hour and a half, and clearly that becomes an inconvenience for some people. With monthly dosing we expect that to have a major impact. You can see now, weekly has taken over virtually the entire market. We expect our approval at the end of the first quarter. I can tell you our sales forces are all coordinated with Roche and we're ready to go.

We also have a quarterly IV dose which you might not think too much about at a first glance. But just let me remind you, first of all, in nursing homes where you have a lot of of patients who are typically falling down with fractured hips, this is an ideal place for bisphosphonate. But one of the big problems, again, is sometimes these patients are bedridden for most of the time, and they can't stand up as much as they would like, and they certainly can't stand up for the hour and a half that they would need to after taking the product. So an IV dosing on a quarterly basis could be a very interesting market and we're very excited about it.

Entereg is our treatment for post-operative ileus, and the file was completed in 2004, with our marketing partner, Adolor, and we expect an FDA decision sometime in the third quarter. What Entereg does, it accelerates the GI recovery and allows patients to leave the hospital earlier. And it also lowers the readmission rates for GI complications due to the surgery. We're also going to be filing additional indications for chronic obstructive bowel disorder and for chronic constipation in 2004. And what I wanted to do was just talk briefly about some of the studies that we've done and will become the basis for our submission for the FDA.

And you can see in this study, this is a summary of the four studies that have been done to date, three in the U.S. and one in Europe, which was done for the European submission. Now, in the U.S., you can see that we achieved a primary end point, which is called GI-3, with one or two of the doses in two out of the three clinical studies. We hit the secondary end point, GI-2, which we actually thought would be the more difficult of the end points, in all three of the U.S. studies and in the European study. And if you would like an explanation of the difference between GI-3 and GI-2, maybe after the break I would be happy to do it but it is quite complicated. But on all three U.S. studies we also showed an improvement in time to discharge.

In Europe we failed on the time to discharge and quite frankly this was just a misread on our part. We didn't fully comprehend that discharging a patient in the European hospitals wasn't totally dependent on a return to normal bowel function and often involved other factors and, therefore, that's why we believe we missed. So we think we have a very strong case for approval and we're very excited about the opportunity.

And finally, the U.S. approval on ReQuip is expected at the end of this month for restless leg syndrome or, as we call it, the most widely spread malady that no one has ever heard of. And while it is becoming much more known, really the constant interruptions to sleep that are caused by these periodic leg movements are more than just a nuisance. In fact, 1 out of 7 patients said that they do miss time from work because of the restless -- their restless leg syndrome. And the data for ReQuip are very striking. And as you can see here, with less than - - with three less arousals per hour, that means the average patient will have 24 less awakenings, or 24 less arousals during the course of an evening sleep. That's very meaningful. And getting people back to more productive daytimes.

So, in conclusion, I just want to say, you know, if you were to ask a rep and, being a former rep myself I can tell you, the one - - the things that reps want, they want new products and they want new information. And especially in the U.S. markets where it is becoming more and more difficult to see physicians. Having new products and having new information is all the more critical. And as I hopefully have shown you today, for all of the products that we have, that we're promoting, we continue to generate new and exciting stories that will allow our reps in and continue to build on the products.

They're also very thrilled about the new products we're launching. They're thrilled about Vesicare and all of the launches planned for 2005 and beyond. And I can tell you the R&D portfolio will only continue to build on that. And so I think this is why we have a very low turnover rate with our sales forces. I think it is why we get the most out of them. And as I look out at the environment we compete in, you know, I continue to read negative stories but I would just like to always remind everyone that what is driving all of these controls, it is not to try to reduce costs, but it is to try to reduce the increase in costs. Because the demand for health care and the demand for pharmaceuticals has never been better, and with the aging population, we think we have a great opportunity, and we really like the markets that we're participating in.

So with that, I would like to now turn it back over to JP Garnier to talk a little bit about the future.

Thank you, David. I just want to add a few remarks concerning the pipeline. Tachi Yamada will be with us on the panel to answer any specific questions. We have had some clinical data that has come in he can talk to you about.

But let me just remind you of where we are because this is clearly the most important challenge facing any pharmaceutical company and for us, it is all good news, really. We have pipeline momentum. You've seen that in '04. We met other challenges, meeting difficult financial guidance under the circumstances of generic erosion, continuing to keep our product drivers healthy and growing fast, and also preparing for the future, so there would be continued entry into the competitors' positions. And you have seen that we have now formed a product offering in asthma and diabetes and other diseases, where we are second to none.

So in terms of the pipeline momentum, I mean the way we look at our pipeline is, first of all, we do want as many shots at the goal as possible. So, as soon as a product gets to pass proof of concept, it gives us a chance at creating a new product. But we also look at the balance of innovation. It is not good to have a pipeline that is, you know, large but every project is a very low probability of success. It is not good either to have a large pipeline with a bunch of me-toos around, which will not get sufficient pricing in the world in which we live today. We think we have actually the best pipeline in the industry today because of our volume and balance of innovation.

We are the #1 vaccine company and that's really good from a pipeline balance standpoint because vaccines are much more likely to complete their clinical development. If you have a vaccine prototype and you're able to produce an immune response, the odds of conducting that proof of concept experiment into full clinical development successfully are very high. This is nothing to do with the kind of percentages in terms of attrition you see on drugs going through the clinical program. On top of that, we have some very important line extension which independently can produce a lot of value for GlaxoSmithKline in the future and I would like to comment on that as well. I mean basically, the volume you are well aware, this is the latest update of our pipeline, which we produced in December. It is not the 148 that should impress you, it is the fact that we have now over 80 new chemical entities, most of them in Phase II or III. So the pipeline is aging as it should.

And now, we're going to find out exactly how many of those assets are going to see the light. But from an R&D productivity standpoint, clearly the program has paid off. And we're seeing - - we have more than doubled the number of innovative drugs in our pipeline since the merger and that's a good achievement in three or four years.

In terms of innovation, you can look for yourself. We are in many of the major new promising battles in science. Some of them, we have pioneered like the PPAR program and the Lp-PLA 2 and frankly there aren't too many people who can compete with us on this. In some we are actually the ones trying to carve a new position, like in oncology where we have some very exciting programs, some of them mentioned on the right side. But basically lots of shots at the goal.

Now, for 2005, what's going to happen as far as the pipeline is concerned. There are really three chapters to the 2005 book. The first one is we're going to get news on major assets in life cycle management. The second one is we're going to find out in terms of the near-term big assets which ones are going to, you know, truly succeed and which ones are going to bite the dust. And then the third chapter is more of the Phase II. We have a massive number of compounds, 45 of them, but 15 will reveal their profile to us before the year is over. So there is a lot of news coming out of different parts of the pipeline. In terms of life cycle management, I just want to remind you of what is in that bucket. This is not the whole list. Those are some of the more meaningful opportunities. Let me just say that the yellow box refers to the expected filing date.

And you see for instance Coreg CR and Lamictal XR. Those are billion dollar opportunities. They are as big commercially as a good NCE would be for our Company. And they will allow us to continue to expand the life cycle of our new molecules. We've done it successfully in a number of cases. Remember Wellbutrin XL and Paxil CR and the like. But we can do it for more of those molecules. The key, of course, is that the new form must provide a significant clinical advantage. This is not smokes and mirrors. This is a drug that either increases compliance and safety or, in some cases, can increase efficacy as well.

So we are working on in fact creating entirely new drugs. It is just that it is a lot easier to do it within the life cycle management bucket, than to do it with a brand new NCE which has never been tried before. I want to mention also Trexima because Trexima is not getting much in terms of consensus forecast from some of you. But you should remember that Trexima in smaller, granted, Phase II studies beat the pants of the market leader. It happened to be the golden standard for migraine treatment, Imitrex. I mean the drug was faster acting. Migraine treatments are ineffective in roughly 40 percent of the cases, so there is a lot of room. It is an unmet medical need. And anybody who is going to come up with a direct comparative claim of superiority is going to come into this market very successfully.

And the market is well developed in terms of value. So we're hoping that Phase III will confirm what we have seen in Phase II. And if it does, I think we have a real winner from a commercial standpoint and we will find out this year. We are also trying on the other side of the coin, a very low probability of success kind of experiment, with Avandia and Alzheimer's. There is a good scientific logic to try this but I have heard many scientific explanations that don't translate very well in the clinic. So we're going to just hope that we have a good surprise. We will see the data fairly soon, actually, the second part of this year. But clearly, this is a long shot. But it is part of our clinical development program.

And finally, I rarely mention consumer health care pipelines, but Orlistat it is a really good opportunity for our consumer health care business. And today we are announcing that we will be filing earlier than expected, 2005, the low strength Orlistat, which is not the same as the product currently in the prescription market from Roche. This is a lower strength, lower concentration, new formulation agent, and that new formulation allows us to avoid some of the side effects that are well known and related to the prescription strength product, while not giving up much in terms of efficacy.

So we are demonstrating a double blind placebo controlled study of Orlistat 60 milligram, that there is efficacy in weight loss and at the same time the kind of really uncomfortable side effects that results from the use of Orlistat is reduced to a much lower and much more manageable percentage. This could be, if the FDA goes along with our petition to switch, this could be the first ever FDA approved weight loss agent in America. And I can tell you for many of you who visit America, that obesity is a truly dramatic clinical condition. It is not just about aesthetics anymore. Obesity is killing many, many Americans. And, therefore, there is a desperate need for new approaches and complementary approaches as well. And this could be the first serious product to be sold over the counter. So we are hopeful to be able to conduct this one to its conclusion. We have received good encouragement from the FDA.

In terms of the near-term assets, clearly, this is going to be an exciting year to find out what is happening with our breast cancer treatment. We have seen some exciting data that was reported very recently. We're still hopeful for a filing in '05. Based on the strength of the efficacy of the product in patients who have been treated for breast cancer, without any success, in other words they have tried Herceptin, they have tried other modalities and nothing works anymore. If we can get this percentage of efficacy to go - - to stay where it is today, we think we have a very good case to convince the FDA to give us an accelerated review of the file. There are, of course, many other studies ongoing on behalf of this product. We hope to give you all the details at some workshop in '05.

Allermist is our once a day treatment for allergic rhinitis; this is going very well. Phase II was very successful. We showed it to you last year. And we will be soon, hopefully, finishing the program with success.

And then there are two compounds which are starting to produce clinical data of interest to us, and that's '115, which is a treatment for low platelet counts, not just in chemotherapy but also in chronic liver disease and also some autoimmune diseases, where really nothing works except transfusion, and sometimes interleukins. But this could be a really interesting product. It is an oral treatment. It seems to work very well, and the very - - the dose response curve is fantastic, as you have seen, I think we did present this data last time. So we're very, very hopeful and this is a multibillion dollar opportunity as well.

And then '140, the CCR5 antagonist, we're in a race with Pfizer and we are continuing our development, also interesting compound. '381, no news. We are going to wait for the FDA to speak which they will do very soon, a few days. After the advisory committee we will meet privately with the FDA to present our plan. This is a full load clinical development plan.

We are excited about '381. I remind you that in head-to-head comparison against the market leader Cerebrex, we came on top. And you know, quite convincingly so in terms of efficacy and so forth. So we don't want to give up on the molecule. The class, of course, is going through this difficult time because the FDA is going to redefine what it takes to get a Cox-2 approved and maybe redefine the labeling. It could very well be that the labeling becomes more restrictive. We just don't know what is going to happen next but we will soon find out in a few days.

Either way we're committed to '381 because on the other hand the door is, you know, not so easy to open, but the reward will be significant, because, you know, there are so many chronic diseases where a good pain killer is necessary. And today, if you didn't have too many of the Cox-2s, that just means that the market opportunity got bigger.

Cervarix, we feel very good about the clinical program. This was the best piece of news in 2004 in terms of shareholder's value creation. This is not just another vaccine. This is an amazing proposition. There are very few similar experiences to draw from, and I think the consensus forecast is too low and for a simple reason. This is a product that in the most safest way you take one time in your life, and will protect you against 70 percent of all cervical cancers. And cervical cancer is the second most frequent cancer for women. I want my kids to take it. I want my wife to take it. I want everybody, because 70 percent of people in this room have an HPV infection. This is not an uncommon condition. This HPV infection might turn into a chronic infection, and that chronic infection over time might create a condition that is pre-cancerous. This can all be avoided with vaccination with a product such as Cervarix. So we think this is a very, very large opportunity. It is a great product offering because it does what very few products do. It eliminates with no doubt whatsoever a high frequency of cancers. The product works very well. You have seen the clinical data.

Again HPV 16 and 18, they are the most common viruses. They represent roughly 70 percent of all causes of cervical cancer. During the clinical development, we are going to see also if our vaccine has some effect in terms of cross protection to other less common HPVs. So that the 70 percent might be a bit higher, actually, in real terms. The key to our vaccine is the adjuvant that it contains, AS 04. And the adjuvant is providing greater immunogenicity to our vaccine, and that may become very relevant clinically in terms not just the extent of the protection, but the duration. Remember, you are trying to protect those people for life. They can recontact HPV infection for many, many, many years so it is important to have an effective immune stimulant in the vaccine.

As you know, we are trying to file in '06 in International, Europe and, of course, we are in conversation with the FDA to find out exactly what it will take to also file in '06 in the U.S. The intellectual property issue was settled in the sense that Merck is paying us milestones and royalties because we had a dominant portfolio of patents. So the road is clear. This is what differentiates our vaccine and the Merck vaccine. The red bar shows you what happened after seven months, in terms of circulating antibodies with the Cervarix vaccine. The brownish bar is actually a comparer with a vaccine that would have the same formulation as the GSK vaccine, but would not include the ace - - AS 04 adjuvant but instead would rely on the classic aluminum based adjuvant. And you see that the footprint of the immune response is going away faster. And that could be very meaningful again in terms of duration of protection. So we will have to do more work on this, but this is encouraging.

And then finally, I'm not going to go through this list, but you know that there will be a lot of news coming out of R&D on Phase II opportunities, sort of the next wave of new products, and starting with '093. '093 I was going to show you some data just to let you know it is a once-a-day, we're not alone in that race, but I think we got the right profile and we are moving forward. We will show you this is Phase II-A stuff and we will show it to you when we get a chance. But there are lots of really exciting products in really unmet kind of conditions. Diabetes clearly is going to be the market of the future. As far as I'm concerned this is probably one of the biggest opportunities for the pharmaceutical company.

We are seeing now exponential growth in diabetes and not just in Europe and U.S., in India, in China. As those countries are getting wealthy, they also are acquiring some of the bad habits of the developed world. And paying the consequences. So in 10, 15 years out there, companies well positioned in diabetes will have a very large population of patients to service. So there will be lots of news from those compounds.

Clearly, don't expect all those news to be positive. We will have to bury quite a few bodies during the year. Because the odds, if we follow the industry statistics, the odds are that two-thirds of those end points will be negative. Now if every Phase II compound was successful, we wouldn't have to spend that kind of money on R&D. But the fact is, it is a hard - - it is a hard task, and it is a high hurdle. But at least we have lots of chances to pass on some more products into our Phase III portfolio.

So I think if you compare our Company to '04, and you say what's new for GSK, we're a stronger company. I mean you have seen '04 wasn't a great year from an industry perspective, and many of our competitors have stumbled or shown to be accident-prone. Not so for GSK. GSK is a stronger company today because we have now left at least a big hurdle of generic exploration behind us. We have renewed our product line. We're no longer the Paxil/Wellbutrin/Augmentin company, which we used to be 3, 4, years ago. We are the Advair/Avandia/Coreg company. Products with long half lifes ahead of them, and we are introducing new sources of growth for the Company. But all this wouldn't matter if we didn't have a reasonably successful march towards what I have predicted would be the best pipeline in industry.

I want to thank three of you who have already written that we're there. I don't think so. I think we have to deliver those molecules to claim to have the best pipeline in the industry. But in terms of diversity, in terms of balance, in terms of size, there is no doubt that GSK's pipeline is worth a lot of value, and is clearly very exciting.

So we feel good about the future even though the environment continues to be challenging. But if we continue to invent new drugs, and new propositions, such as Cervarix, we'll be in very good shape. On that note, I'm going to now ask my friends David Stout, President of Pharmaceutical Operations, and Tachi Yamada, Head of R&D, and John Coombe, CFO, to join me on the panel and we'll take Q&A. Please remember to mention your name and the institution you represent. And we'll try to answer all the questions as efficiently as possible.

Who wants to start? Yes, young lady in the back, number two.

Jo Walton from Lehman Brothers. We've seen a lot in the press about potential cost cutting in the industry with potential sales force cuts. You've said in the past that scale has been an advantage. Could you repeat for us or share your views, your current views on the value of scale, and the opportunities to do a more serious restructuring of costs in the industry? And perhaps on that note, if I could ask John, we've had two years now, more or less, of - - or the last year, 400 million of one-offs. Would you care to speculate as to what the aggregate of the one-offs might be for 2005 please?

I think there are two dimensions to the question. First of all, do we need to reduce our costs and cost structure. Absolutely, and we've been doing that, as you know, Jo, for I don't know, forever, frankly. And as a percentage of sales, our infrastructure is far less than it was 5 years ago. In fact in absolute numbers we have reduced our infrastructure many years. Even in R&D where we grow the budget in line with revenues so it doesn't look like we're saving costs, we are actually able to handle a pipeline that is twice as big as 4 years ago, was pretty much - - I mean a budget that is maybe 15 percent higher. Why is that possible is because there is a culture of continuous improvement and search for efficiencies.

There are a number of programs underlying Tachi's work that are critical, I've mentioned because it's very easy to understand the kind of saving we are talking about the one that deals with taking clinical trials and making more clinical trials out of low cost countries, at a considerable savings, instead of doing the entire file out of the U.S./Europe. But there are many others, capture electronic data is a big program that saves money, offshoring our data management and vaccine is a done deal. We've already done that. We're in Bangalore. So we are working very hard, the efficiencies, within every function of the Company.

The big piece of news maybe when we hear Pfizer in a few days, is whether there is a reshuffling of the sales force counts. And the size of the army, in other words, led by one of the big players. And we would welcome this. I have said many times that we do not need those large sales forces to do the job. We need them because the competition is trying to, you know, increase their noise level. It is a competitive world. And people are throwing more armies at the problem when they have products to launch. And this has been, over time, an expansion of sales forces, which is starting to create all kinds of bad secondary effects, including it is difficult to see physicians.

Physicians are overwhelmed in some countries by the number of sales representatives. You know, Crestor in France was launched with 11 sales forces. How many time do you want to hear about Crestor if you're a French practitioner? So we think that if sanity can be restored, and if the arms race starts to slow down, it will be good for the industry. We have said before that if we have the opportunity we would like to shuffle some of the resources used for promotional intensity back into R&D, not necessarily into the profit line, but we think that there are more things we could be doing in R&D in terms of, you know, ongoing budget expenses. So, you know, let's see what happens. It is just a rumor right now. And we are eagerly awaiting for those news. And now John on the specific question.

The one-offs, Jo, as you know, this all starts with the legal charges. We are coping with the necessity to make provisions for legal charges. We have been able to offset that in years gone by with some asset sales. And, of course, at the same time we've been investing money in what we call operational excellence to continue the drive that we started with the merger, continue to save costs. That process is going to continue. We have planned for some operational excellence expense. But remember, we absorb all this within the business. We're not - - we've moved away from the middle column now.

We're trying to deliver you just straight business numbers. Currently, we do expect the exceptionals to be lower in '05 than they were in '04. But we're not going to quantify that. We've given you our earnings forecast which is low double digit growth under IFRS. But the one-timers will be a little bit lower in '05, all things being equal.

Thank you, John. Yes, sir? Number one.

Kevin Wilson from Citigroup. Three questions, if I may. First, could you talk a little bit about price volume mix in your 1 percent growth number overall? And talk about where you see that going in '05?

Secondly, on the Lamictal patent, resolution of your dispute with Teva, could you give us some more detail on that? And also talk about what shortcomings in Lamictal the XR will overcome apart from the obvious. And finally, could you give us a little color on the DPP IV inhibitor '093 in terms of selectivity, and also half life?

Very good. Let me maybe take a couple and then pass on to David and then Tachi. Let me talk Teva. We can't. This is - - we have an agreement in principle and that's all we're going to say. Life goes on. You know, we gave our financial guidance. So this is well known territory. So I can't help you on this one. Sorry. On Lamictal XR, maybe you want to - -

Well, with the epilepsy indication, right now Lamictal, it's a twice-a-day, so once-a-day would be very appropriate. For the schizophrenia and the diabetic neuropathy, they are just two new indications so we will be developing them with the CR formulation, and they won't be indications with the current formulation of Lamictal.

On the price volume, pre-cancer, less than 1 percent price increase, a little bit of price increase in the U.S., but the usual negative impact in Europe. You want to comment on '05, what's your view on '05?

We don't see it changing dramatically. We've built into our plan anticipated price decreases in Europe continue, although not as much maybe as the last two years. Japan, with '05, there is no price decrease, so it is a good year for Japan. '06 we'll hit another negative year. International markets is pretty much a mixed bag.

And the DPP IV, Tachi?

Yeah, on '093, the DPP IV inhibitor, we believe this is the most potent, most selective DPP IV inhibitor out there. We've done Phase II-A studies and it is clearly a once-a-day product. Not only has an effect on increasing GLP 1 in insulin but it also decreases glucosan [ph]. No weight gain. Totally safe as far as we can see. And so we're very excited about it.

All right. Good. Next question, please? I can't see you but in the middle, number four.

Duncan Moore from Morgan Stanley. Couple of questions if I might. Following on from Jo's question about sales force reduction, is - - and David mentioned in his talk, that now the Medicare organization [ph] regs have been published, you can give us a sense of what that will mean for the U.S. market beginning in January 2006? Do we expect a significant step down in the value of the market due to the additional discounts? And then growth thereafter, can you give us some idea about the shape of that? And could that be the stimulus for a major rethink on cost cutting because there is not much evidence that industries usually change internally. It is usually external factors that force change.

And two product questions. Lamictal was undoubtedly doing very well. It seems to grow a little bit slower, significantly slower than the U.S. scrip growth. Is there an inventory issue there that is being wound down? And should we assume that the Cervarix royalty from Merck is going to be mid single digit?

Okay, I will take the last one. As you know, we can't comment on the royalty rate or the milestone paid by Merck. Once they are on the market, I guess we will make it clear what payments we're getting. But at this point, you just have to continue to guess. On the other questions, I'm going to ask David to do.

On the Medicare, we haven't done any detailed analysis. Our overall analysis so far has been that the discounts that you're going to see will be offset with volumes. We've always said that we see it as a slight neutral to positive, the increased volumes versus the discounts. Remember, a lot of these patients are already getting discounts through some other mechanism. A lot of these patients are on Medicaid programs that will be transferred over to Medicare. Some are in other kinds of programs. Or, for the most part, the really - - the ones that the program is designed the most are the needy and the poor, they're not getting their medicines at all. So we see it as neutral to slightly positive.

In terms of the Lamictal inventory, it is not a huge difference. I think we showed 59 percent growth in sales versus a 51 percent underlying growth. And we don't have a real explanation for it. It is seasonal buying patterns. It could have been a little build-up. But that should be cleared up by now in fact.

Okay. Thank you. Yes, number two, please?

Alexandra Hauber from Bear Stearns. A couple of questions. Starting with Cervarix. JP, did you allude to that you would also vaccinate women who are already infected because you seem to indicate that it would potentially prevent a transient infection from becoming chronic? And also, in terms of duration of protection, will this require at some point a booster vaccination, and will that booster concept require a second set of trials, and when will they become available?

Also, coming back to the royalty question, will you actually keep any of that or do you have to pass it straight on to MedImmune? And the second set of questions related to Advair. This may be very naive but could you maybe just please explain how you do a double blind, double dummy study with different dosings? And just also, David, you mentioned last year about a million I think was the number of patients on COPD you had in the U.S. Can you give us an update on that number? I also have a question on the Nelaribin delay - -

You want to take a break and maybe come back.

If I can continue asking, then I'd be happy to take a break.

Go ahead. Nelarabin.

Nelarabin, looks like there as - - filing is delayed by a year. Is there any ongoing studies and maybe some explanation why the pro-drug concept would actually increase efficacy compared to the old formulation? And then just coming back to the Lamictal settlement, while you can't say anything but can we assume though that it is safe until 2009?

Okay, on Lamictal settlement, when the settlement becomes public, you know, you will find out all the details. But the mere fact that we can give very good guidance at least for '05 should be reassuring. This is a trial where we were highly confident we would win, but in some cases, you know, highly confident doesn't equate to 100 percent chance of success.

In terms of whether there is going to be a need for a booster for Cervarix, and whether, you know, infected women should be getting the vaccination, I think that those questions have not been resolved yet. The booster we're going to have to wait a long time to see, you know, how much time the protection lasts, and you've seen with our adjuvants, we probably have a longer period of time that we can cover with one set of injections. The - - our scientists have a feeling that we should also vaccinate people even if they have been exposed to HPV.

We have a clinical development program that will actually answer the question, whether this is helpful or not. So in the protocol of our clinical program, our Phase III program, we have put in place the necessary patient selection and treatment modalities to be able to answer that question. Which, of course, has, you know, huge consequences.

Is that part of the current program that you will be filing?

Yes. We will have the information at filing.

I think it is also - - one thing that people don't understand is you can get infected and then you can clear the infection. So it would be important for people to get revaccinated. In fact, if you look at the peak infection rates, they occur first between I think it is the ages of like 15 and 25, and then there is a second peak of between 40 and 50. So it is not just necessary to vaccinate the adolescents or the younger people, but people that maybe get it, clear it, it is still worthwhile vaccinating to prevent a reinfection.

In terms of your question on COPD, I don't have the actual number of patients but we have - - our percentage of business that's now coming from COPD is up to around 27 percent for the patients coming from COPD. And I know Tachi wants to talk about the double blind, double dummy.

Two questions there they were related to R&D. First of all Nelarabin, let me just say that Nelarabin received a fast track status, and the fast track status allows us to submit a rolling file. We started the file in December and we're going to complete it in March. So it's essentially - - the date hasn't shifted at all. It has always been a rolling file according to the fast track approach to filing.

As for the double dummy, double blind studies, essentially every patient gets treated as if they're being treated with two different medicines. So they have one device which is Seretide, and they get treated with Seretide the way they would be treated with Seretide, constant dose. And they would be treated with Symbicort, or the device that looks like Symbicort, according to the Symbicort way, which is to vary the dose.

It's a placebo, of course.

But every patient gets treated as if they're being treated with two different treatments. That's how it was done.

That is the first time I want to stress that because I know our friends from AZ have mentioned some comparative studies in the past where they had some minor claims which led to nothing actually in the market place. But the reality is it wasn't a double blind, so that is the reason we wanted to have the absolute undeniable scientifically valid comparison. So that it would be genuinely credible study. And you can't make more credible than double blind, double dummy, 52 weeks. This is a milestone study. And it is seen by the pneumologists [ph] as a milestone step. Yes, there in the back.

Max Herrmann from ING. Three quick questions. Firstly, just on your guidance and what you know currently of the situation with the patent situation on Flixonase and Flixotide in the U.S. Secondly, just obviously we've seen with the GMO response may be misleading given what's happening with Arestra [ph], I wondered whether for Lapatinib, the FDA may take a different view now on tumor response.

And finally, just to recap on the IFRS impact, obviously you've guided that earnings growth under IFRS will be faster than under U.K. GAAP. Is that just the fact that you don't have the deferred tax, I think it is minus 1.9p, impact in 2005? Thanks.

Okay. Okay, you want to try it ,John? [multiple speakers]

I will pick up on the accounting. Dealing with the last one first, Max. No, it is more than the deferred tax. That obviously contributes in '05 but will drop out thereafter because it is, we believe, a one-time effect. The additional growth is coming from the decline in the share option charge. The decline in that, as the earlier multiple issues and the higher prices drop out of the equation, that is giving us the additional growth under IFRS. That should obviously fall out at some stage.

And then we will have to give you new guidance. But that's the underlying reason for that. On the guidance, your question was about Flonase in the U.S., and what we've assumed. I remind you the FDA still has not issued guidelines on bio equivalents. And we still hear nothing in spite of some stuff towards the end of last year, that there was some gossip that something was imminent. We've still heard nothing that anything is coming on the market. We've made our assumptions inevitably in the plan. And it is all built into the guidance. And I would expect us to deliver the guidance. But we are not going to disclose precisely what we have assumed.

Very good. And then on the FDA's attitude on tumors?

Let me first state categorically, that I can't predict what the FDA is going to do but at this point, they certainly haven't indicated that they are going to pull Arestra [ph] off the market. I believe that the mechanism of sub part H approval is a very important one for patients that had no other options, and these patients, of course, are treated with multiple chemotherapy regimens and they fail.

And if you have no other option, then you have a possibility of a response, and I think there is a very compelling pressure on the FDA to consider at least some sort of conditional approval under the sub part H rules.

Now having said that, I think the patent is very different from Arestra. And all of the trials of Arestra, it it was very hard to get a response rate that was very high. Anything over 15 percent was just not seen. And we now know some of the reasons for it.

In the case of a patent, we have had very exciting response rates, and very exciting evidence of efficacy that is substantially greater than has been seen with Arestra. For example we reported in San Antonio a 23 percent response rate. Excuse me, 26 percent response rate in patients who were Herceptin failures, [indiscernible] positive Herceptin failures treated with - - continued treatment with Herceptin and with the patented Mataron [ph]. And when you get this kind of response rate, we're not talking about a very minor response rate. We also had some hopefully exciting news to tell in the ASCO meetings in May about some other studies that we've done.

Which we won't divulge today, unfortunately. Okay. Next? Right on time. Well, thank you very much for your support. And we look forward to see you in the quarter. Good bye.