AstraZeneca PLC (AZN) Q2 2010 Earnings Report, Transcript and Summary

Good afternoon ladies and gentlemen and good morning to those of you in the States who are joining us, I would like to welcome you to our webcast and conference call to go through our second quarter and half year results for 2010. So I am going to start with a review of the key events since we last convened for our full year results back at the end of January and then look at the headline numbers for the first half of the year. Simon Lowth is here, Simon will take you through the second quarter, he will focus on revenue by region and by key brand and also take a detailed walk through the P&L and then will end up with the updated outlook that we have announced around our financial guidance for the full year. Anders Ekblom is also here and he is going to provide the half yearly update on the pipeline and I expect we will have plenty of time for questions. So look forward to that as well. Let me begin with an overview of some of the key developments that have taken place in the past six months and I guess it’s hard not to start anywhere except yesterday’s FDA Advisory Committee Brilinta. Clearly we are pleased that the committee recommended the approval of Brilinta at yesterday’s meeting. So I am sure that the views that have been expressed by the committee and the committee members will help to focus our continuing discussions with the FDA. Obviously, that's now our priority for the U.S. submission. We believe that Brilinta should be approved not only in the U.S. but in other countries around the world and to that end we have made nine submissions in territories including the European Union, Canada and Brazil and…

Well, thank you, David, and good afternoon or good morning to everyone. David summarized the first half financials, so I will cover five topics. First, I’ll describe the headline numbers, revenue highlights and operating profit for the second quarter. Second, I will provide a brief update on our restructuring and productivity improvement program. I’ll then touch on cash performance and our steadily improving net debt position. I’ll explain the details behind our actions on the dividend and share repurchases. And finally, I’ll explain the upward revisions to our targets for the full year. So, turning first to the headline numbers for the second quarter, we achieved revenue of nearly $8.2 billion, a 1% increase in constant currency terms. You’ve ever seen that the positive impact of currency movements on the top line increased the reported sales growth rate to 3%. Core operating profit for the quarter was unchanged at constant currency to $3.65 billion. In the quarter, the contribution from the increased revenue and lower operating costs was offset by the decline in other operating income. You’ll recall that last year’s second quarter including the Nordic OTC disposal gain. Core earnings per share in the quarter were $1.79 compared with $1.64 last year. This is a 9% increased at constant currency. Lower net finance expense and a lower effective tax rate in the quarter provided the uplift to Core EPS growth over the growth in core operating profit. Making the bridge from Core EPS to Reported EPS in the quarter, we have the usual adjusting items. In this case, restructuring cost was higher in this quarter chiefly due to the R&D restructuring that we announced the full year. But this was more than offset by the 0.30 per share legal provisions taken last year. So, net of this adjusting factors…

Thank you, Simon. And I now like to provide you with an update on our pipeline on medicine in late stage development. Just in the busy first half of the year and over the next 20 minutes or so, I’d like to run through three main areas. First, I’ll read you the key event in our late stage pipeline for the first half of the year. I’ll then highlight some of our most advanced development projects to give you a flavor of the potential pipeline delivery over the next few years, and finally, I’ll touch on the expecting news flow for the second half of the year highlighting those areas of most significant. So, let’s start with the first six months of the year. The first half of 2010 has seen the approval of new products in the U.S. and approved (inaudible) indications for a number of our global brands. In April this year, the U.S. FDA approved the Vimovo, a combination Naproxen, a pain relieving NSAID with our immediate release PPI esomeprazole. It was developed in collaboration with POZEN towards the new treatment option for patients with certain types of arthritis or spondylitis, who are at risk of developing NSAID associated gastric ulcers. We would begin the commercialization of Vimovo during the second half of the year. As I’m sure you’re all aware, yesterday the U.S. FDA Cardiovascular and Renal Drugs Advisory Committee issued a positive opinion for our investigational oral anti-platelet treatment Brilinta. Despite advancements in the treatment of ACS, post-ACS mortality rates remain high and there’s a real need for new products for these patients. Brilinta works differently to existing therapies as it binds reversibly to its target without the need for metabolic activation leading to more active and consistent inhibition of platelet aggregation and ultimately, includes…

Great, Anders. Thank you for that – thorough review of the later stage activities. Simon, thank you for your update as well. And what I’d like to do now is just invite everybody to start questions, some of you I think already know how. But let me just remind everybody on the telephone that you can press star one on your keypad and that will operator that you’d like to be called on for a question. And then those of you that are on the internet, there’s a box underneath the slides that you can type your question in and send them to us. Tim Anderson – Sanford: Thank you very much. A couple of questions please. On emerging markets, how should we think about loss of exclusivity in that broad basket of countries? In the U.S., we have a pretty good idea of what generic erosion look like, same in Europe, but what should we expect from emerging markets? So, if we look at something like Nexium, should we just expect that to continue growing for the next many years despite generic interim established markets or they’re going to be some countries in the mix where a loss of exclusivity will be sold at some point over the next three to five years. And then a question on M&A, there’s lots of press stories about Genzyme potentially being pursued by one or more companies and I’m wondering if you can say definitively that you’re not one of the companies in the mix and if you’re not in the mix, why not and can you remind us of where you stand in doing their transactions that could be in that $10 to 20 billion range.

All right, Tim. Good, thank you. Let me start with a bit on the emerging markets, I mean our emerging markets business as I said is the source of the significant proportion of our absolute growth first half of the year and that is due to the success of products like Nexium and Seroquel. Some of the products that I think are a bit more mature in the developed markets are now finding more success and opportunity in the emerging markets because in fact, there is a less of a generic curve you mentioned that comparison to the U.S. and we know it well. I would say the U.S. is probably the most efficient generics market in the world, whereas a number of these others provide reimbursement levels that are a portion of the branded product when there has been a branded product. So, it’s difficult to say what the curve looks like broadly across all of them. I think it varies from place to place. Certainly, India is a very different type of market than China, but that kind of bridges for me into the branded generics discussion, which is well, we talked about getting products from other companies that we could potentially put our brand on and then move along. The fact is in many of these markets, these products have already lost exclusivity. We’re marketing our brand that the branding that we do and the promotion that we put behind them establishes the brand and some of these markets are planning to give more exclusivity to newer products as they come on the markets. So, I think it varies from place to place and it causes us to invest as an appropriate and that’s due to our local success on the ground. As it relates to M&A, I’m not going to comment about any specifics on any deals that are being potentially rumored in the marketplace. Our view on things as you may have heard before is that we’re opportunistic. We’re looking for opportunities with collaboration and cooperation for me tramps large scale consolidations. So, I’m not – I think we’ve concluded from a strategic perspective that scale in and of itself is not a compelling reason to go forward for some of these things. I think we’re looking for smaller opportunities, new technologies, later stage products and intellectual property, things that are complementary to our existing disease areas. I’m not going to come up with a dollar number or figure is to what we are or aren’t willing to do, if there’s a business case we’re willing to do things, but our targets tend to be on the smaller side. Tim Anderson – Sanford: Thank you.

Thanks, Tim. Okay, go to second question, which is Sachin Jain from Merrill Lynch. Sachin? Sachin Jain – Merrill Lynch: Hi. Thanks for taking my questions. A couple of financial and a couple of R&D. First on the guidance, guidance since we last saw top line driven. I just wanted if you can clarify where there’s any margin uplift associated with that, I guess there isn’t a point (ph) of margins, which is directionally with the management of Nexium and Arimidex high margin products. And secondly on the cash flow up the share buyback and you talk about the payment (inaudible) business cash flow, just wondering whether you could revisit balance sheet structure, what your thoughts on the net debt position over time particularly given recent events. And then quick point blank questions, on Dapagliflozin, Anders mentioned EFG (ph), I guess the abstracts are up there. I wonder if you could comment on the couple of cases of upper urinary tract infection that have been seen, including it’s the first time we’ve seen that, and then the 48-week or 52-week data where there’s no real change in UGI rates. And then one quick question on Zibotentan, I wonder of you could just frame the market opportunity for us and the first indication with the data coming towards the end of this year, particularly in reference to Roche’s comments on Avastin and the similar indication, they’ve kind of indicated potentially $1 billion market opportunity. Thank you very much.

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

Sure. Well, I think on the guidance for the full year, in my remarks I indicated that the uplift is really due to a couple of things firstly and perhaps most importantly continued strong performance in the first half of the year and much of that was indeed driven by a strength on the top line relative to our initial expectations. I also indicated that for the second half of the year, relative to our initial expectations. We see some upside coming through from later generic entry on Nexium and the pediatric extension on Arimidex. So, the uplift is principally from the top line, but we continue to drive our cost and productivity improvement program and you all has seen good cost discipline through the year and you can expect to continue to see that from us. In terms of overall margin, I’d be guided that the pre-R&D margin level to be at the top end sort of midterm guidance range that very much remains our view of the year. And the only other remark I’d make on margins is just to reiterate a comment I made in my remarks, which is that I’d indicated our gross margin for the full year to be around about the first quarter level. We saw a bit of an uplift in the second relative to that, sort of 83 plays 81. But we view that down more to phasing in review mix, so I just reiterate Q1 margin, gross margin remains a pretty good indicator for the year. Turning to your second question, Sachin, on cash flow, we as a company as you know very focus on driving operational cash flow from our business, we continue to demonstrate strength in the cash generation potential of the business. The (inaudible) the deployment of the…

Good. Thanks, Simon. Now, I’m going to go over to Anders to take the question about Dapa and Zibotentan, and Anders just before you comment on Zibotentan, we have written question in as well from Craig Gascon (ph), which asks, “How does Zibotentan compare to the drug from Abbott as well, the drug that failed in development.” I think Sachin’s question was also – do you have any – can you frame the opportunity as it relates to Roche product. So, over to you.

Okay, David. Thanks very much. Sachin, to your question on Dapa first. I mean he’s of course right that the abstracts are on then I would like to sort of start in them by saying I think Dapa represents a very sort of interesting clause and as you know it’s the first in the clause of this GMT2 (ph) compound. Then if you look on it’s sort of modality and it’s action, mode of action, I think it’s extremely interesting where they sort of non-insulin dependent mechanism because that means we can combine it with basically all treatments available today for type 2 diabetics. And what is very good as you have seen in the data is that the glucose data are there. We also see a meaningful effect on blood pressure and weight loss. So, it starts sort of painting a quite unique profile for Dapa and then what is also very interesting is from the state (ph) to perspective, if you start with the incidence of hypoglycemia, it’s extremely low. It’s basically placebo lie (ph). The thing that your highlight is just of course around the frequency of, in the way genital and urinary tract infections and this is something we have been showing going forward that this is sort of a frequency, which is a bit higher than the competitors, but I think it’s important to understand that so far in the program they had been manageable and obey little clinical consequence for patients that also responding very favorable to the treatment. So, I think we are now starting to generate long-term data as your highlight. We will sort of monitor that in the programs. You have to realize this is a program in progress, so we’ll update you on that sort of going forward. With respect to Zibotentan, what we have provided in one of the slides that I showed today was the patient numbers for the various indications that we’re studying. That’s I think is a good indication for you on the market opportunity. I would not like to comment on any forecasting from a financial point of view. When you come to the class of the Zibotentan per se, it is as you know Zibotentan is actually a more selective endothelin A receptor compound than Abbott’s compound, and we don’t see necessarily an increase in circulating endothelin-1 level, meaning that our compound doesn’t touch the B receptors. I think though it’s still early days and I think we have needs to see the data from both programs coming out and have a really full head to head comparison. So, I would be happy to come back to that when we see, as far as the data. So, back to you, David.

Okay, good. Thanks. I’m going to take a written question from Vishal (ph) at Media Partners and then I’ll go back to the telephone to Gavin Macgregor, but let me take this written one first. Should we expect any generic entry for Nexium in the next six months in Germany or France? And I think the question really gets at that issue, we talked about before, which is the likelihood of losing exclusivity, the timeframe within which can actually come on the market, get approved and get distributed. So, we don’t have – it’s very difficult for us to give any insight into that. we know that of the major ten-year markets, where we had data exclusivity, there’s only been one approval and the U.K., there hasn’t been any product launch and there haven’t been any approvals in any of the other markets, but I think this is something that we have been trying to anticipate in our own planning, but it’s hard. Simon, you want to comment on that?

No, Dan. I was just going to say that building on that point. That was a whole range of different scenarios for timing of Nexium generic entry in Germany, France and indeed other European markets. We take account of those scenarios in our guidance and that’s one of the factors, one of several factors, which frames the range that we provide today.

Good. That’s good. And then there’s a second question from Vishal (ph), which is just, “If Brilinta gets timely approval from the U.S. FDA, do we issues in achieving favorable formulary status?” I think – certainly, our experience with the U.S. is that obviously players are challenging to make sure that products that they do put on formularies that are new need to demonstrate that they have a differential and a value proposition that makes good sense for that formulary that makes good sense for the players as well as for the patients. And I think we believe that the profile that has come out of the PLATO study around Brilinta will make for a very good discussion with formularies as to why they can improve overall outcomes, reduce morbidity and mortality death rates in patients with acute coronary syndrome, if they have it available on their formularies. So, we’ll obviously be working hard to do that. I think the issues will be similar to the same ones we faced with other products. Okay. I’m going to go to Gavin Macgregor with Credit Suisse. Gavin? Gavin Macgregor – Credit Suisse: Thanks very much. Two questions, if I can. First one, emerging markets related and from that perspective, thinking about margin progression, which is obviously a major topic of focus and just coming back to how can you guys manage that and look to improve that over time, to what degree can you move cost space out, have you got plans to do that and what sort of impact might that have? And then the second question is (inaudible) covered really around used of free cash, but you’ve obviously had favorable decisions with Crestor and now looks like Brilinta, which gives you nice cushion in the near-term looking out to one, two, three years. So, just sort of what was preventing you from going for a bigger share repurchase program in 2010 and maybe giving some guidance for 2011? Thanks.

Okay, good. Thanks for that Gavin. I’ll make a couple of comments about emerging markets and then turn it over to Simon, maybe he wants to comment on that. But I know he can comment on the share buyback free cash flow and he’s view on the impact that the Crestor and Brilinta decisions had on that. I think our investment in the emerging markets is one that we’ve had in place for several years to establish in many of these markets a presence that will allow us to be competitive and when I look regionally across the world where we had made investments over the last five years, whether it’s Latin America, Asia Pacific, Center and Eastern Europe, the Middle East and in Africa and South Africa, we’ve got the second largest business pharmaceutical business there. what I see is that we have demonstrated that the investments that we have made can position us in the top two or three companies for growth across all of those regions, which I think speaks well to the plan that we’ve had in place as to how we want to invest the levels that which we would invest and then what kind of return we expect to get on it. Margin progression – well, I’ll let Simon comment on that. We have – during our emerging markets stay back in March; we talked a little bit about what those margins are. But I would just say where we see an opportunity to invest that we think we can get a return in a relative good period of time then we’ll go ahead and make that investment because we know that this is a longer term kind of investment that we make. But, Simon, do you want to maybe comment on margin progression for emerging markets and what’s the opportunity to manage and improve or potentially take some things out.

Sure. Well, thanks, David, and for the question, Gavin. Okay, so emerging markets. I think when we had our session on emerging markets earlier this year, we laid out a chart, you may recall where we showed our emerging market country margins. So, that’s gravity minus cost of goods minus SG&A in the markets. For our portfolio of emerging markets versus more established markets, we showed that as a roundabout, if the established markets were the hundred, we said that the emerging markets back in ’04, we’re sitting at around about 55 and then we showed that more in the recent year was up in the 70 to 75 mark, so we’ve got a track record over the last five to six years of consistently improving our margins in the emerging markets. Now, clearly, as we look ahead across all of our businesses, we continue to see players seeking more value and we see price pressures. We recognize that. We take out into account in the developing our strategies and our midterm planning assumptions. We’ve got many levers that we can pull to improve margins and/or counteract price pressures in all markets, but including emerging markets. Firstly, we’re moving our supply chain increasingly eastwards and southwards to reduce the unit costs of producing our medicine in order to meet emerging markets. In terms of SG&A, obviously when we’re in initial growth mode, we’re putting a lot of fixed cost ahead of demand as the markets continue to grow, they get sized, and we get more operating leverage, so second lever. The third is by bringing together all of our commercial organization into a single global commercial organization. We’re getting much faster of best practices and ideas from our more established, more competitive markets into emerging markets the sales force effectiveness,…

Good. Thank you, Simon. I’m going to take a quick written question then I’ll go to Gbola Amusa. But let me just answer, the question is, “Is the ONGLYZA-metformin (inaudible) in the EU, is that metformin extended or immediate release?” That’s an immediate release form of metformin. Now, Gbola, over to you. Gbola Amusa – UBS Investment Bank: Question on China and one on Brilinta. Noticed in China, your second quarter growth decelerated to something like 27% from Q1, which I think was at 36%. How much of that deceleration is signal and how much is noise and when do you think that the NDRL additions last year, will start to affect your growth rate? And then on anti-platelets, I was interested in feedback perhaps from Anders in terms of what doctors are saying, the box warning for Plavix means for off label use for Effiant or Brilinta, if approved and the non-Triton-TIMI 38 non-PLATO indications like peripheral artery disease, for example.

Okay, good. Thanks, Gbola. I think our business in China is strong. We’re not – well, it did slowdown. It had slow downed the fourth quarter, picked up again in the first. There are some fluctuations. We have increased our overall presence there in preparation for the regional drug listings for the four new products that we’re approved late last year, but they are just working their way through the more regional approvals and we think that we’ll start to see the impact of that in the second half of this year, but certainly n 2011. So, we think that those four new products represent some nice opportunities to continue to grow our business and we’re not reading any signals into second quarter performance. Anders, I think it’s best for you to handle your view of the potential implications of the box warning that’s in the Plavix label on potentially on Brilinta in those patient groups.

Yes. Thanks, David. I mean I would rather sort of put some of the back to you Gbola in saying that as you heard yesterday and I must say, we’re very pleased with the discussion when we talked about the indication per se and as you could see, if you followed the ACS meeting yesterday, there was a lot of discussion when it was indication or several and actually our view is that they have this part of a continuum, but it’s still sort of under the same umbrella and that was where the advisory committee landed yesterday. So, I think it’s too early to speculate on different aspects of the label. We will obviously with FDA going forward, but as you could hear, our decision on ACS as a disease and as sort of as one umbrella is where we would like to be and we’ll come back to this I’m sure when we have the more detailed outcome of the label discussion with FDA.

Good. Thank you, Anders. Thanks, Gbola. Let me go to Andrew Baum at Morgan Stanley. Andrew, go ahead. Andrew Baum – Morgan Stanley: Hi. Good afternoon. Just a couple of questions. First of all, Zibotentan came from the same vintages (ph) that team in Recentin, which have made it in a meaningful way. Do you have any clarity on why Zibotentan failed to meet the primary end point to the phase 2 trial progression of free survival, just trying to get us more confident about why you think it’s going to meet the primary end points of the forward coming phase 3 trials. And then second, on China, honestly, the Chinese authorities have increasing looking at the markups and pricings of pharmaceuticals, which indirectly have an impact on volume and prescribing and demand, particularly from western drugs. Do you see any risk of potential separation of the hospital budgets and prescribing that could negatively impact the current Chinese model for you and some of your peers? And then finally, the PEGASUS journal is outlined yesterday’s potentially supportive as well as an expansion trial for Brilinta. Could you just outline the basic details of design and when you would hope to file that trial in both the U.S. and Europe? Thank you.

Good, Andrew. Thank you. So, in one minute, I’ll just flip back over to Anders to cover the reason why we have confidence in the program for Zibotentan given some of the phase 2 data as well as to comment on anything he might want to say about the PEGASUS trial on Chinese pricing. Significant portions of overall Chinese payment for the segment of the market that we work in Andrew are out of pocket payments by Chinese patients. So, we are in the primarily in the upper, the more premium side of the market for the Chinese. So, I think there is obviously always a risk. on the other hand, I think that we have been able to price our products competitively there and be able to grow them and I know that having met with the government authorities there myself about the principles and philosophy they have on pricing, I think we are positioned reasonably well. I’m not sure what the risk of the separation of the hospital and the prescribing is – in the context of our business, but I’ve not heard it brought to my attention by the gang their as a particular issue. Is Anders back on the line? I’m sorry. I know there was a connection problem. Anders, are you there?

I’m here, David.

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

Thanks, David. Andrew, with respect to Zibotentan, I think what is different with Zibotentan versus a couple of Plavix (ph) you mentioned is that we had overall survival, positive data already in phase 2, which is obviously a strength compared to where you normally would be with sort of good PFF date and in going for overall survival in phase 3. But, I mean as you know oncology is a tricky area sometimes to predict, but I would argue that the overall survival in phase 2 is an advantage and then we don’t have to see what the phase 3 data means for us. Andrew Baum – Morgan Stanley: My question is really –

(Inaudible). Andrew Baum – Morgan Stanley: Do you have any clear understanding why the progression fee (ph) survival end point was missed in that phase 2? Why did it?

I mean, Andrew, phase 2 is phase 2. It’s exploratory and based on the data you have, you’re moving to phase 3. So, I wouldn’t like to proclaim a victory in anyway and claim absolute understanding. I think that was – it’s a mechanism that is of interest, that a good mechanism data behind it. But to provide absolute scientific clarity, that would be foolish to do that. So, I think coming back to it, we know we have good overall survival data, we just needs to see how it translates into phase 3.

Yes.

With respect to Brilinta, I would just say that as you heard as discussed yesterday, we shared the tape (ph) on the potential follow-up study and as you know we are of course in negotiations with the FDA on how to define studies going forward to further detail the advantages of Brilinta. And actually on one of the slides at the advisory committee yesterday, which was slide 118 for those of you who follow that, we talked about the large multinational randomized double blind study going forward in a stable coronary artery disease patient population and where we would like to see the advantage of treating longer periods because as you know from the curve on the (inaudible), they continue to separate even out sort of at the end of the trial. So we will have its come back to that, it’s a good vehicle for us to discuss with FDA and we will now sort of going into more detail discussions and come back to you, Andrew, at a later point on the absolute define (ph) and where we will do it.

And Andrew, one other point I recall the discussion when we look at Zibotentan going forward was the difficultly in measuring PFS in prostate cancer and I think I recall that it was confounded by both pain as well as elevations in PSA during the course of things, which may or may not be included in the scaling, but I am not absolutely certain on that. So we can have somebody get back to you on that. In a moment, I will go to Marcel Brand but let me just ask Simon, there was a written question, Simon about would you repeat what you said about gross margin in the second half?

Facts are as follows. The Q1 gross margin was about 81%, Q2 gross margin was 83%, I guided in my remarks earlier, we still expect our Q1 gross margin around 81% to be the likely sort of outlook for the full year and that simply reflects the fact that moving from the 83% at Q2, we just expect as we see the revenue outlook for the remainder of the year, the pressure is particularly on drugs like Arimidex will have some pressure on the gross margin in the second half.

I am going to go Marcel Brand at Cheuvreux and then Andres, I am going to come back to you with a question about DAPA? Marcel Brand – Cheuvreux: One broad question on price, the second question on Crestor, the planet trial data. First on price, I think the big surprise in the quarter has been actually pricing in the U.S. We see mix in price flat after a high single digit decline last year. We see Nexium with continued unabated price increases, even though there is probably a 30% of sales going to Medicaid where we expect significant rebates. And last year we saw Crestor without a price increase, probably based on prescription numbers and now we are probably up 10% in half year. Could you please explain what's behind the past pricing of the last two quarters and also give us an outlook? The second question is related to Crestor. The planet trials, one or two, they suggest that you have a significant increase in side effects and renal side effects compared to Lipitor, we saw 4% versus 4.9% acute renal failures at least under the high doses in diabetic patients with pre-existing protein urea. So the question whether the U.S. label that says that's protein urea is of unknown relevance, whether that is going to maintain or what you expect to happen as a result of those trials that you have sponsored?

Okay, let me make a few comments about pricing and then ask Andres to comment specifically about the planet study, I am not sure we interpreted that data the same way. I think you are going to continue to see variations in pricing in the U.S. market based on the, as you cited the split of the utilization of the product in Medicaid versus Medicare versus the private sector of the market and whether it’s government reimbursement or private reimbursement. I think we have done a good job in maintaining the Nexium price in the face of increasing generic competition as well as over the counter competition, we expect to continue to see some erosion, the rate of which is probably more market determined than pre-determined from a forecasting perspective. I think the other thing you will see is that any price increases that we do take reflect the market opportunity as it relates to other competitive products within the markets. So there are a number of factors within the U.S. market and quite frankly, the way we treat our Medicare book of business is different than our private book of business, which is as you said different than the Medicaid rebates, which have made up a significant part of the $300 million P&L loss we mentioned we have in our business this year because we do have a higher segment of Medicaid business with products like Seroquel and Synagis and we are paying a more significant rebate. So I understand why you are asking the question but I think it’s very difficult to project this out further, there is a lot of pressure on pricing. Anders, over to you to comment on the planet study.

Thanks David. Let me first state that not surprisingly, I am not sure I agree with your analysis of the planet data. I mean the planet studies were designed to explore the effects of Crestor 10 and 40 versus (inaudible) 80 on urinary protein excretion in patients with Chronic kidney disease where it’s sort of high cardiovascular risk. And actually what we saw was that the main result from our point of view is that the Crestor 10 and 40 did not have a statistical significant change from baseline on protein excretion (inaudible) statistical significant reduction, which means an upside for them. So the way we look upon the data is basically suggesting that there is no change with Crestor but there may be an upside for (inaudible). And I think that is the important aspect going forward and the second thing that I think you need to sort of keep in mind is that the planet started did not have a placebo arm and that means that that is tough to make a direct comparison on the EGFR, the (inaudible) mutation rate effect in similar patients, not receiving a statin. Well that means that we have compared our historical data and database for Crestor which is pretty extensive and we don't see anything of suggesting its effects. So this is something we have shared with regulatory agencies, we are updating our safety reports in a normal. So I would argue and I would summarize it by saying we don't see any significant effect for Crestor but there may be something on the positive side for the comparator in that trial. Marcel Brand – Cheuvreux: But the 4% acute renal failures, I mean this is a fairly high number compared to 1% and that was statistically significant. That is certainly something that keeps the Office of Drug Safety a little bit busy, isn't it?

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

Marcel, thanks for the question. Anders, thanks, we are running out of time but why don't we try to take a couple of quick ones. Lorris Habring at SEB (ph). Lorris Habring – SEB: Can you just remind us regarding this (inaudible), you mentioned $445 million in the press release, would there be any other charges against second half results, if that product would be turned down eventually by the FDA?

We did call that out as the intangible asset that relates specifically to Motavizumab and that would be the full extent of the impairment that we envisage, that's a pretax number and obviously the key decision point is the forthcoming FDA decision.

Last question, I think we will go to Seamus Fernandez at Leerink Swann. Seamus, are you still there? Seamus Fernandez – Leerink Swann: I guess two questions. Can you just discuss for us how you would see the launch of Brilinta progressing internationally and in the U.S. given the slow launches that we have seen for all products globally in the last two years and maybe you can just give us a little a context around the issues that you are seeing with the Onglyza launch, you mentioned DDMAC historically etcetera, so maybe you can just give us a little context there. And then separately the second question, in terms of what inning you would say that you are in, I guess just using a baseball term there, you would say you are in on cost reduction, cost efficiencies. Do you really feel that a lot of the low hanging fruit has been pecked and now a kind of harder work is ahead of you or is there plenty to go from here?

I will try to explain to Simon something about baseball before he answers just in case, I am just kidding. On the launch of Brilinta, I mean I think we have seen slower uptick in some of these products that probably reflects the market as much as anything which is both access as well as affordability and demonstrated differentiation. As I said before, I think that the profile for Berlinta relative to the comparison to Plavix and the overall patient benefit both from morbidity, mortality is pretty significant. So we think that's very difficult for us to tell you what we think the ramp is going to look like. But we expect that the products can be successful global but it will depend on the label, it will depend on the timing, etcetera but I do agree with you, I think we have seen a shift in some markets on the uptick curve. Simon, last points on cost efficiency and where you think we are from a opportunities perspective?

I think we are in sort of day 3 of a test match, this is how I would describe it but I would also say that another test match will begin on day 6. This is not a journey that has an end, this is a process of continuous improvement and we are looking to drive productivity improvement across our business. But if you think just to trying to mention this for you, on the restructuring component of our cost improvement agenda, you will recall that we have outlined total benefits of the announced program to date of about just over $4.3 billion and we said with our full year results that we expect it by the end of 2010 to be at a total of $2.4 billion, hence my comment, we are about in day 3 of 5 day test match.

So, I think I am going to thank everybody for joining us today. It’s right on the hour, as said our first step performance, I think it demonstrates that we are going to continue to grow well ahead of the market with our key brands and the ones with market exclusivity and together with the strong performance in emerging markets as I said earlier, it gave us a very good start for the first half of the year. We know we have a more challenging second half ahead of us, there is some comparisons the H1N1 flu, more generic competition in the U.S. for things like TOPROL-XL and (inaudible) and Arimidex but nonetheless despite the headwinds, we are committed to doing our best, we have raised our revenue and core earnings guidance for the full year and certainly I think that demonstrates the kind of performance we want to put out. So with that I wish you all good day and thank you for participating.

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