AstraZeneca PLC (AZN) Q2 2015 Earnings Report, Transcript and Summary

Hello. Thanks for taking my questions. I had a few Oncology questions and one on the base business as well. On the Oncology business, one was I saw that the biosimilar Avastin program. My question on that was, when do you think you could start combo studies with Avastin with your immuno-oncology agents? And also would you initiate it with Avastin? Or would you do the initial trials with the biosimilar immediately? Another question was just clarifying that for PD-L1 plus chemo for the combo studies, when do you think you could start the Phase III program? And the third Oncology question was just on the NEPTUNE study. So that's a version of MYSTIC, but with an overall survival endpoint in first line. Is a crossing over going to be an issue? Or will you stop patients from crossing over to the PD-L1 therapy if they're in the placebo arm? And then – and so one base business question, which was just contracting for next year, do you think pricing and mix is going to be any better for Diabetes and Respiratory next year, based on the discussions you've had so far? Or should we assume similar pressures? Pascal Soriot - Chief Executive Officer & Executive Director: Thanks, James. So quite a number of questions. Maybe I could allocate the questions. I think we have Rob on the line, and Rob will cover the NEPTUNE question. The PD-L1 combo, Mondher, do you want to cover that one? Mondher Mahjoubi - Head of Oncology, Global Product & Portfolio Strategy: Yeah. Pascal Soriot - Chief Executive Officer & Executive Director: And, Luke, if you want to address the contracting question, would that be okay with you? And maybe, Mondher, you could also comment on the Avastin program? Just a very quick comment here, James, is just to answer a question that I've read a little bit about. I mean essentially our idea with this bevacizumab program is really to look at combination. We're not launching into a biosimilar program. We are doing what we said we would do before, which is to look at combinations and try to develop regimens that we can offer to payers at a manageable cost. And so we'll consider biosimilars like Avastin in the context of that strategy. Now maybe, Mondher, you could cover this – say a few more words on that and cover the PD-L1 combo question? Mondher Mahjoubi - Head of Oncology, Global Product & Portfolio Strategy: Yeah. So you asked a question about whether we are using our own biosimilar or the Avastin product for the combination. The answer, for the ongoing trial we are using Avastin, because the biosimilar has to go through the regulatory process. And we will be starting the combination with our own biosimilar when it's approved by the health authority. For the PD-L1 chemotherapy we cannot disclose details about the design. And we will be sharing this when it is posted on the clinicaltrial.gov, but we are working on implementing the Phase III with the same pace as we've done with MYSTIC and NEPTUNE. For NEPTUNE I will hand over to Rob to give you more details about the design of the trial and in particular the crossover question. Robert Iannone - SVP & Head-Immuno-Oncology, Global Medicines: Yeah. So NEPTUNE is a very large global trial, which we'll initiate very shortly. And we think crossover will be minimized, given the current availability of alternative PD-1 therapies across the world. Pascal Soriot - Chief Executive Officer & Executive Director: Thanks, Rob. Contracting question? Luke Miels - Executive Vice President Global Product and Portfolio Strategy (GPPS) & Corporate Affairs: So, James, we expect a number of decisions over the next couple of months in Diabetes and also our Respiratory bit. I think it's fair to assume that the pressure will remain on those two areas. And that's certainly our planning assumption for 2016. Pascal Soriot - Chief Executive Officer & Executive Director: Yeah. Absolutely. We'll hear more over the next month or two months. The negotiations are ongoing now, but certainly we don't expect that things will improve dramatically. It's going to be a very competitive marketplace, no doubt. Andrew Baum at Citigroup has the next question. Andrew, do you want to add a carrier question? Andrew?

Hello. Could you... Pascal Soriot - Chief Executive Officer & Executive Director: Yeah, go ahead.

Hello. Can you hear me? Pascal Soriot - Chief Executive Officer & Executive Director: Yeah.

Hi. Sorry about that. Three questions please. Firstly there has been significant discussion about the cost burden for Medicare and alternate payment models. Given we're going into a Presidential election year and Astra is becoming increasingly geared towards Oncology, any thoughts on both noise and ultimate evolution and timeline for changes in Medicare reimbursement will be interesting. Second, Luke, perhaps if you could comment on the outlook in China in terms of pricing? Several of your competitors have outlined increasing pressure on pricing in that market. And then finally, given your legacy presence with Crestor and more recently with Epanova, perhaps you can talk about your interest in CETP inhibition as an interesting modality to continue to extend your cardiometabolic franchise? Thank you. Pascal Soriot - Chief Executive Officer & Executive Director: So, Luke, do you want to cover the last two? Luke Miels - Executive Vice President Global Product and Portfolio Strategy (GPPS) & Corporate Affairs: Sure. Pascal Soriot - Chief Executive Officer & Executive Director: And, Mondher, would you – will you cover the first one later? Or... Luke Miels - Executive Vice President Global Product and Portfolio Strategy (GPPS) & Corporate Affairs: Yeah. Sure. So on CETP we wouldn't speculate. If we look at China I think it's fair to say that there is a structural slowing in the market, which I don't think is a surprise to anyone who's following the overall economy in China. That being said where our focus is, I mean clearly we have a strong position in the large Eastern provinces. But as we go to lower tier cities in the West, we have a concentrated expansion program there. Also our mix of products right now, there is a lot of volume reflex. Of course if you do see pricing pressure with products such as Crestor and Nexium, you do tend to see an offset in terms of volume. So again we believe we can grow ahead of the market. But there will be some more pricing pressure. But again that should be offset by uptake in volume. If we look into the future again if we look at products such as Pearl and also the Oncology portfolio, again we're well placed if we look at the 5- to 10-year horizon. Pascal Soriot - Chief Executive Officer & Executive Director: And although this evolution in China is something that we have been expecting a long time, we have said many times, there will be as Luke said a price pressure. And so we are expanding in the West. And we have a very substantial expansion program in China to unlock growth potential in those areas that are economically developing, so we expect to maintain this. The same for Medicare. We have expected cost prices – cost pressure, sorry, in Oncology to grow. Everybody is talking about Diabetes and Respiratory price pressures, but those cost considerations will expand to the entire marketplace including Oncology. So we've been expecting this. And that's essentially why we've embarked on this combination strategy, where we think we have our plans in place to manage the total cost of combinations. Mondher, if you want to add anything? Mondher Mahjoubi - Head of Oncology, Global Product & Portfolio Strategy: Yeah, yeah, thank you, Pascal. As you know, Andrew, the combination strategy is something we don't know actually where are we going to go, because there are so many potential combination for so many segment. But the name of the game is that the more assets you have in your portfolio and your more flexibility you have and when negotiating the price. And so clearly the ability to have in our portfolio 27 different entities, both small molecular and immuno-oncology, help us in this endeavor. The second element is clearly the biosimilar strategy. And whenever it's possible to include generics in the portfolio that can help manage the pressure on the innovative drug is something we will do. And last but not least I think we have clearly with the duration of therapy, one way to limit the cost. And to make a long story short we are looking at innovate pricing model, where we can look at the disease from – look at treatment from a disease perspective, rather than from a product or from a cycle perspective. I cannot provide more details here, but think of lung cancer as an entire basket of drugs that could be used. And this is probably also something that we will leverage given the multiple assets we have in the portfolio for each indication. Pascal Soriot - Chief Executive Officer & Executive Director: So maybe we can move to Sachin. Sachin, do you – Sachin Jain at Bank of America, do you have a question, Sachin?

Hi. Thanks for the questions, a couple of financial and a couple of product. Firstly on SG&A, a couple of slides talking about it declining as a percentage of revenues. That's obviously influenced by lumpy externalization. I think it's roughly flat year-on-year in percentage of sales and a 1% decline CER. So given that, which doesn't seem a particularly aggressive decline, could you just sort of give some color on what CER declines you're looking at for the rest of this year? And then more importantly into 2016, as you think about offsetting the Crestor patent expiry and the various one-off incomes that you've had this year that probably won't repeat next year. Secondly, a question on slide 38, which you talked about, Pascal, where you listed the various product launches. I think when you first gave the full year 2017 guidance, the commentary was limited pipeline contribution within that. Given the various pipeline launches you're now listing, I wondered whether the pipeline contribution to maintain 2017 flat has increased, given various pressures you're seeing in the base business. A couple of product questions on the Onglyza/Farxiga fixed-dose combination, just wondering what your perspective on the potential heart failure safety label is, as you head into the PDUFA? And if you do have that safety label, how do you think you position relative to Januvia monotherapy, which might not have that, or the competitor fixed-dose combination, which also might not have that? And then a final question just on the IO lung positioning post-ASCO, now that you've had more opportunity to take feedback from KOLs. Just wondering, you could give us an updated perspective of your IO IO in lung relative to chemo combination, firstly. And then secondly, relative to Bristol where some feedback remains that Bristol's first mover advantage in second line will give them a substantial halo effect in the first line setting. Thank you. Pascal Soriot - Chief Executive Officer & Executive Director: Okay. Thanks, Sachin. Mondher, maybe you can cover the last one. Mondher Mahjoubi - Head of Oncology, Global Product & Portfolio Strategy: Yeah. Pascal Soriot - Chief Executive Officer & Executive Director: I'll ask Elisabeth, who is on telephone line, to cover the safety label for Onglyza. And maybe, Luke, if you have anything you want to add to this. The pipeline question actually such in the – we stand by what we said before. I mean the – I would say the pipeline contribution will not be massive by 2017. As you can expect we are in launch mode. I would say it's probably going to be a little bit better than what we had expected of course, because we have made more progress with our pipeline than we expected back in 2013 or early 2014 when we made that forecast. 9291 is progressing very nicely, actually faster than we thought. Movantik is now on the market in the U.S. and doing well so far. Lynparza is on the market, even though in a small indication, is doing well. And it will be expanding in other indications. So then in the greater contribution, but still from a relatively small base. So I think broadly speaking we can say we are more or less on track with what we said back then. Over a longer period of time I think it would be fair to say that there's probably a bit of downward pressure on our forecast in Diabetes, as you all would expect from the price pressure in the marketplace. And there is upward pressure, positive pressure, on our Oncology portfolio products are looking pretty good. So we still confident that we are on track, probably with a slightly different mix of products overall. Which actually is a positive, because the products that are up are more profitable. And overall – but overall I would say more or less on track. As far as SG&A I'll ask Marc to give you more color. But just to correct maybe a comment you made actually, Sachin. You said marginal decline versus last year. Q2 last year if you go back to Marc's slide, the SG&A was 38% of sales. And Q2 this year it's 35%. So we have a decline there. And we expect to continue managing these costs. Marc, do you want to comment there? Marc Dunoyer - Chief Financial Officer & Executive Director: I think the...

That's as a percentage of revenues, which includes externalization I think, but I may be wrong. Excluding externalization it's flat and 1% CER decline. Pascal Soriot - Chief Executive Officer & Executive Director: I see, yeah. Marc Dunoyer - Chief Financial Officer & Executive Director: So just to cover this, so I think we need to see this as a time series. If you look at quarter four of last year, quarter one of this year, where the SG&A, we're still increasing at plus 10%. I think you will see that the reduction of the SG&A on the second quarter was quite impressive. And we are nowhere near the end of our effort. We need to redouble our effort to be in line with what we provided early in the year, which is we will have an SG&A which is under the level of 2014, and also the ratio will be under the ratio of 2014. So we need to – and we are determined to continue our effort in that direction. Pascal Soriot - Chief Executive Officer & Executive Director: Elisabeth, do you want to cover this, the Onglyza label question? Margareta Elisabeth Björk - Interim Chief Medical Officer: Yes. (57:16) and I'm very happy to do that. We are still in discussions with the FDA around what the exact label update will be for Onglyza based on the (57:26 – 57:32). I can't comment exactly on what that outcome is going to be. What I can say is for the combination of saxa/dapa, we are ignoring the potential to do more mechanistic work, to see really the impact of the two-for-two parts there, reminding everybody of the fact that also dapa has a small diametric impact effect that very well could counterbalance whatever is seen with saxa. So we have a lot of confidence in the combination in treating patients broadly and across the board. Luke Miels - Executive Vice President Global Product and Portfolio Strategy (GPPS) & Corporate Affairs: Yeah. And I would also add if we – it's potentially you can over read the results with Onglyza, because we'd made the decision last year to reduce resources. And then earlier this year we further reduced resources around Onglyza to concentrate on Farxiga. So I mean what saxa/dapa offers is – I mean there's profound efficacy around A1C, a very strong weight reduction. And again there's another factor, we have the advantage of being one company promoting a combination of our own two products, which as you can no doubt imagine gives us a fair amount of flexibility in terms of how we market that and structure that and price that compound. So we remain confident. Pascal Soriot - Chief Executive Officer & Executive Director: Thanks, Luke and Elisabeth. I mean the key message as you can hear it, Sachin, is that Onglyza is a secondary priority for us. In fact the two priorities are Farxiga and Bydureon as you said. And the key question for us as far the label is the combination. And what label the combination is able to get. And the addition of mechanistic work Elisabeth was referring to is very important in that context of the combination of the two agents. The final question on lung, Mondher? Mondher Mahjoubi - Head of Oncology, Global Product & Portfolio Strategy: Yeah. Actually, Sachin, you had two question. One is about the IO IO combination and feedback from the KOLs and investigators. It's consistent with what we had seen at ASCO, very positive, pleased with the safety profile, the very low discontinuation rate, and of course the high response rate of (59:38) in the PD-L1-negative. I think the fact that we have been able to randomize already the first patient in MYSTIC is clearly a sign of this excitement. We have all the big names and the big sites participate in this trial. And everyone is looking forward to develop the first chemo-free regimen in first line non-small cell lung cancer. With regard to your second question about the availability of (1:00:10) and the halo effect, I cannot comment. What I can say is that the second line trial was against docetaxel. Docetaxel is approved but has a very bad safety profile. And the response rate as well as the duration is not as good as what we have in first line. In first line the standard of care has 15-, 16-month median survival response rate in the range of 40%. So it's really hard to think that the monotherapy can beat such combination of chemotherapy. But again I think only data can answer this question. Pascal Soriot - Chief Executive Officer & Executive Director: Thanks, Mondher. So we'll take maybe one e-mail question and return to the online questions in a minute. So the e-mail question is for you, Marc, it's from (1:00:57) at Carnegie. Given the low tax rate of 14% in the first half, what is the tax rate assumption in 2015 for the core EPS guidance? Marc Dunoyer - Chief Financial Officer & Executive Director: In my prepared remark I had commented on this. We anticipate the full-year tax rate to be in the lower half of the 16% to 20% range that we had described earlier in the year. So that's the best indication we can provide. Pascal Soriot - Chief Executive Officer & Executive Director: Thanks, Marc. Returning to the online questions, Jo Walton at Credit Suisse. Jo, go ahead. Matthew J. Weston - Credit Suisse Securities (Europe) Ltd.: Thank you. It's actually Matthew Weston for Jo. A number of questions please. The first, Pascal, on brodalumab you've made your position clear. I think in the past you've also suggested it may be a product that needs a partner. Have you had any expressions of interest since you've had the rights returned back from Amgen? Secondly, on Iressa in the U.S. and the launch. Can you tell us how you're trying to position that with managed care? Are you using it to try and make way for a smooth ride for 9291? And thinking other strategy where you offer both product for first and second line? Or are you treating it as a completely separate launch? Thirdly, you made comments around saxa/dapa. How do you expect that to be positioned in the market? It has always surprised us that Glyxambi is already there and seems to be being forced to offer exactly the same discounts and free access as the single agent new molecules, despite the fact that it has no direct competition. So do you think you'll be able to position that product with less competitive? Or do you think it will be more so? And then finally a numbers one. Working capital in first half last year, there were inflows of $700 million in first half. This year there seem to be outflows of $760 million. Marc, can you tell us what's happening in working capital? Pascal Soriot - Chief Executive Officer & Executive Director: Okay. So marked here I have this question. The broader – thanks, Matt. Many good questions here. The broader question, we've actually had several expression of interest. In fact we've also – we've already received offers, and we are considering those and engaging in discussions with potential partners. But it was really encouraging to see that we didn't get one, we got several expressions of interest from a variety of partners. But the key is really first of all to go through the data in more details, and that's what we are still doing. And suddenly decide how we progress this together with the partner that we would select. The Iressa question, let me just give it a try. And, Mondher, if you have anything you want to add. For us actually the – first of all bringing this out, Iressa to patients, is really exciting, because this product we invented, we brought to patients around the world everywhere. So we wanted to bring it to U.S. patients. As well secondly, it is a nice launch for our Oncology sales force, the lung Oncology sales force. And they can re-establish contacts with key customers, introduce a product that many oncologists in the U.S. know of course from their global experience and historical experience. So it's kind of a nice training ground if you want for our sales force. But I also have to refer back to Mondher's slide, which showed you clearly that in the initial phase, 9291 will be labeled for second line. So there is a need for first line use for Iressa for a period of time over the next few years. As 9291 gets developed and approved for first line use, we'll be able to shift our focus to 9291. But in the meantime clearly Iressa goes into first line and 9291 in resistant form of EGFR mutated cancer. And finally, it is also true that from a price – from an access viewpoint suddenly having two products to treat lung cancer helps us a little bit. But it's essentially really a portfolio play if you want, addressing the various needs of lung cancer patients. And the saxa, Mondher, anything you wanted to add? No? Okay. So the saxa/dapa question, Luke, do you want to cover that one? Luke Miels - Executive Vice President Global Product and Portfolio Strategy (GPPS) & Corporate Affairs: So I mean I think it's always good to be first to market, but there are some advantages in being second. And I think this is one of the examples where I mean we're actively looking at the positioning of this product, their contracting strategy. And again I think we believe that we have a competitive offering for the reasons I outlined before, and also the simplicity of one company. And we have a good understanding of what drives behaviors around combination. So that's probably all I'll say today, but we'll certainly communicate more on this as we get closer to the launch. Pascal Soriot - Chief Executive Officer & Executive Director: Marc, do you want to comment? Marc Dunoyer - Chief Financial Officer & Executive Director: Yes. So regarding the movement in the working capital, the largest volumes comes from the unfolding of rebates of Nexium, the rebates that are due to managed care organization. This has been the largest movement. There are two other movements to consider. We have integrated the inventories of Actavis (1:06:27)in the first half of the year. And there was also a third factor, which is the outflow of expenses that we incurred in the latter part of 2014, which obviously were at a relatively high level. So these are the three main factors. Let me mention though that we are still making progress on our receivables. And we have – we are continuing our effort, in particular to collect overdues. And we have improved our receivable by a few days. The trade variables, if I include the specific case of Nexium in the United States, have also improved. So we are continuing our effort on working – toward the working capital. Pascal Soriot - Chief Executive Officer & Executive Director: Thanks, Marc. The next question is from Tim Anderson at Bernstein. Tim, go ahead. Timothy M. Anderson - Sanford C. Bernstein & Co. LLC: Thank you. A few questions please. I guess when we look at spending ratios it does seem to us more purport to look at the percent as product – as a percent of product revenues, because externalization, obviously it's not something that's going to continue in perpetuity. When I look at R&D spending on that basis, it hit 23% in the quarter. It has been steadily marching up. Of course you're making pipeline progress. My question is, where can we expect that ratio to settle out as you really look beyond 2015 but into 2016 and 2017. Is 23% a good run rate? Or could it actually go higher? Second question is on externalization itself. It has obviously been a source of controversy for some investors. And my question is whether there's any chance that the company would reconsider the earnings targets that kind of drive that need to do externalization? Is that something the board might reconsider? Or should we expect that's going to continue? And then last question is on durvalumab. In the past you've talked about your early filing strategy, how that's partly contingent on what happens with the competition. We've got Merck's application pending before FDA. We could get a decision fairly soon. And if that gets label just in PD-L1 positive patients, that could potentially close your window. And I'm wondering if you – I'm assuming that you have a view on what Merck may get because of that direct impact it would have on your product. And I'm hoping you can share that view. Pascal Soriot - Chief Executive Officer & Executive Director: So thank you very much, Tim. So three questions here. Maybe, Rob, to give you a couple of minutes to answer this, I'll turn to you in a few minutes to cover the durvalumab question. Let me just address the externalization one. I think what I would like to say here, Tim, is that to be honest if we didn't have these goals we would probably – for sure in fact surely do the same as we are doing today. Because what we are doing really is partnering where we don't have the capabilities to develop and market products. I mean the BACE inhibitor partner was really the great example of this. The partnering of (1:09:34) because we don't have the presence in the patient – the prescriber's group, sorry, that we wanted to target in the U.S. Those are good examples of partnering where we don't have the capability. And where we keep doing this, especially in areas that are not main, these areas. We also do it in our, these areas, where we need this capabilities. I mean the Celgene deal to be honest for me is sort of mind-boggling that people are kind of wondering about it, because it's a no brainer. I mean we're partnering with the best hematology company in the industry. Nobody has any value for hematology in their spreadsheets for durvalumab. We are potentially going to create enormous value in hematology. Of course we'll have only 50% of that value, but it will be 50% of a large value, because now we have the ability to be a leader in the field of hematology. Whereas before we would have been sort of trailing the pack and building capabilities that we don't have. We have strong capabilities in solid tumors. We also have a few hematologists in our company with no hematology, but we don't have company's capabilities if you will. So I would still do that, because strategically it makes sense. It also strategically makes sense for us to keep pruning our portfolio. We buy assets because we believe we are better owners of those assets than the company that is selling those assets. In the same way we are selling assets that we don't believe we are the best owner for. And if we can extract immediate value for those assets that would be declining in our hands, because we are focused elsewhere, why not do it? And then (1:11:14) is a good example of this. It enables us to really focus our efforts in where we need to be focused. And finally, what we do through all of this is generating cash flow that enables us to reinvest in our business and delivers our dividend comfortably. So I really don't believe I would manage the business very differently. Because at the end of the day the company has to be profitable. It's pretty simple. I mean we have to deliver our cash flow. We have to pay our dividends. And so the goal would not change dramatically what do quite frankly. But as far as the board changing it, I would leave you to ask that question to our Chairman at some point. But quite frankly again it would not change our approach. The question about R&D maybe, Marc, you want to cover a little bit more? But just briefly I would say I think where you see us spend in R&D from as a percentage of sales, product service, or revenue, look at it the way you want it. You're probably in the sort of right ballpark of where we would be. Certainly we do not expect R&D to keep growing at the same clip as we see this year. That's very clear. Marc, can you... Marc Dunoyer - Chief Financial Officer & Executive Director: Yeah. I think this is exactly this. We are going to – we continue managing our cost. And we have done some great effort on the SG&A in 2015. And this has enabled us to fuel the investment on the R&D. As we move to toward 2016 we will also have to manage our cost on the R&D line. And the growth will obviously slow down. We are – it's a bit too early to provide any more precise color on this. And we will do it as we come toward the end of the year or to our guidance next year. But you can expect a slowdown in the rate of increase of the R&D in the future. Pascal Soriot - Chief Executive Officer & Executive Director: Thanks, Marc. Rob, are you ready for the durvalumab question? Robert Iannone - SVP & Head-Immuno-Oncology, Global Medicines: Yes I am. So I would just remind you that only full approvals based on randomized control trials would exclude additional approvals in the same indication for an accelerated approval. But I would also reinforce that to Mondher's earlier presentation, we have many opportunities to be highly competitive, especially with our combination therapy across indications, especially the very important lung cancer indications. Pascal Soriot - Chief Executive Officer & Executive Director: Thanks, Rob. Mondher, anything you want to add to that? No? Okay. So we'll move to Alexandra Hauber. We will start with a question, Alexandra Hauber, we'll go to you.

Thank you very much. Two questions left. Two on 9291. You said you're going to submit in Japan this quarter. Unfortunately I don't know the Japanese regulatory situation very well. Is there any way for accelerated approval there. Or when is the earliest time you can actually not file but get approval for it? Also on 9291 you said the filing is the second line in patients with the T79 (sic) [T790M] (1:14:12) mutations? Various commentaries from KOL whether we really need that mutation as an – in the indication. Do you expect that to be a – that that is actually required or be used in practice? Or is it just going to be anyone who progresses from sort of first-generation EGFR inhibitors? Moving on to Lynparza, a really great progress here. But when is the first – the earliest time you can get a label expansion in ovarian cancer? It appears that all the SOLO studies are still recruiting. So are those readouts being pushed out? And then final question on, I still call it MEDI 4736, the new studies which were those described in the press release today but also at ASCO in the new indications, are they going to still stop this year or this quarter? Or is this coming at some point in the future? Thank you. Pascal Soriot - Chief Executive Officer & Executive Director: Thanks, Alexandra. A lot of great questions. By the way the medi is called durvalumab now, and like dura, like durable. Durable and valuable. So the first question is about Japan. We'll ask our Japanese expert resident Marc to address that question. Marc Dunoyer - Chief Financial Officer & Executive Director: Thank you. So it's not exactly an accelerated approval. The Japanese call it a priority review. But at the end of the day it's a reduction of the time of the review, and it can come down to about 9 months. The Japanese have regularly reduced their review times. And with a priority review one can estimate that the product would be approved 9 months later. Pascal Soriot - Chief Executive Officer & Executive Director: Thanks, Marc. Mondher, the other three questions I guess are for you really. Mondher Mahjoubi - Head of Oncology, Global Product & Portfolio Strategy: Yeah. Pascal Soriot - Chief Executive Officer & Executive Director: Second line Lynparza – sorry, second line... Mondher Mahjoubi - Head of Oncology, Global Product & Portfolio Strategy: 9291. Pascal Soriot - Chief Executive Officer & Executive Director: 9291, then the Lynparza label expansion, and the other question. Mondher Mahjoubi - Head of Oncology, Global Product & Portfolio Strategy: Yeah, yeah. So thank you, Alexandra. Let's start with the 9291. First of all we have today a body of evidence showing that the response rate and the disease control, actually, in the T790M mutation positive, extremely high. So from I would say a clinical viewpoint, if you have a patient who progress on a first-generation TKI, I think it's extremely important to better understand where we – whether we have this mutation or not. Because the body of evidence in this so-called T790M negative is still very limited and very controversial to say the least. We have question about the testing itself. There are question about whether the free interval between the end of the first administration of the first-generation TKI and the second treatment could be maybe biased. And again I think we have an opportunity with the launch of AZD9291 to reshape this market and to establish the mutation of T790M as one of the predictive factor for the use of this extremely powerful selective EGFR inhibitors. I think when it comes to Lynparza, as you know Lynparza has a very wide lifecycle plan. We have 10 label extension in five different tumor types. Of course a number of them are in ovarian cancer, both in the platinum sensitive second line relapses, whereas in the platinum – as well as in the first line. The SOLO2, it's as you know an event driven. Today the filing is expected for the first half of 2016. The – we expect to have the database lock by the end of the quarter this year. But there are a number of other readouts that I expected next year, in particular in breast cancer and in gastric cancer and in pancreatic cancer. So we will have a number of readouts for the SOLO – for the Lynparza that can help expand the indication. For the durva trial I'm not sure I completely understood the question. Were you asking about the other tumor type where we could develop the combination of durva and treme? And...

Exactly, yeah. Mondher Mahjoubi - Head of Oncology, Global Product & Portfolio Strategy: Yeah. Yeah.

Yeah. The other combination. And just I think you said database lock on SOLO2 before year end. According to ClinicalTrials that's still recruiting. So I shouldn't worry about that, it's really going to finish, complete this year. Mondher Mahjoubi - Head of Oncology, Global Product & Portfolio Strategy: Yeah. So we have a very, very concrete example. The head and neck trial for instance, there were two trial, the Hoke and the CONDOR-1 is the PD-L1-positive and the other one is in the PD-L1-negative. The Hoke trial clearly benefit from the fact that now we are opening the CONDOR trial, because patient in – at one point in time when they are organizing the site they have more than one option, whereas still now they didn't have the option but to be PD-L1 positive. So we are accelerating the activation of the sites in the head and neck trial in order to have – do the recruitment finished on time. So there is no change in the timeline when it comes to the accrual for the PD-L1 treme combo in head and neck but also in the other tumor type that we already announced, which are pancreatic cancer, gastric cancer, and bladder cancer, in addition to the lung cancer program. Pascal Soriot - Chief Executive Officer & Executive Director: Thanks, Mondher. So shall we move on to Kerry Holford? Kerry at Exane. Kerry, go ahead.

Thank you. Three questions please. Firstly on respiratory. Sorry. Given the difficulties that are being faced by one of your peers in moving from LAMA monotherapy to LAMA/LABA combinations. I'd be interested in your experience, your early experience with Duaklir. And also just your general thought on the treatment paradigms in COPD. Secondly, on 9291 can you just remind me how you believe that product is differentiated versus the competitor from Clovis, which I think is running along at a very similar regulatory timeline? And then thirdly, just to clarify in your guidance being raised for the year in terms of total revenues, does that purely reflect the additional externalization revenues? Or is there also an uplift to the underlying basic tenets? Thank you. Pascal Soriot - Chief Executive Officer & Executive Director: Thank you so much, Kerry. So three questions here. One, 9291 for Mondher. The revenue guidance, Marc, maybe you want to cover this one? And LABA/LAMA, in a nut shell really the experience we have was directly on Europe so far, because we've only launched it in Europe in some market, both in the U.K. and Germany, so far is a very good experience. Now it's very clear that it is a market that we need indication to grow and develop. And there's no doubt about it. But so far with Duaklir we are very satisfied with the progress we are making. Luke, anything you want to add there? Luke Miels - Executive Vice President Global Product and Portfolio Strategy (GPPS) & Corporate Affairs: Yeah, I think it's a promising start. We've got $24 million in revenue. Around 3.5% market share. And if you add in our partner of course it's around 8%. We've had some good results in Germany. Days of treatment, if you look at Ultibro, 74%. Inora is 9%. And the combined aquidinimum molecules is 17%. So I think it has probably taken longer than people expected. We've discussed this on past calls in terms of LAMA/LABA. But we remain very confident about the combination, and in Europe we have a very clear strategy. I mean we're – for symptomatic patients is really where we're positioning Duaklir. And for Symbicort it's in patients who experience exacerbations. And then ultimately in the long term if you look at this cohort with exacerbations, there's the opportunity for the free combination, three – free triple, with Eklira, which again can further improve that patient's quality of life, both in terms of symptoms and exacerbation. So the short answer is it's an encouraging start, and we're very focused on it. If you go right back to the rationale that we had for the Almirall deal at the time, which was a year ago, for the European component of the transaction, we clearly said that as we have a very effective commercial machine in Europe with Respiratory. And what we were looking for is new products that we could drive growth with in Europe. And I think so far the signs are encouraging with those products. Pascal Soriot - Chief Executive Officer & Executive Director: And, Mondher, 9291. Mondher Mahjoubi - Head of Oncology, Global Product & Portfolio Strategy: Yeah. So they have no studies to compare our 9291 to other TKI, so it's definitely inappropriate to speculate on how they differ. But let me say that this is a – AZD9291 is a highly-selective once daily oral EGFR inhibitors, that it was specifically designed to inhibit T790M mutation, while avoiding the off-target toxicities, including those derived from the inhibition of HNF1R such as hypoglycemia. We are also very excited with the preliminary activity shown by AZD9291 on CNS diseases. And finally our combination strategy with other small molecule from our pipeline and with the durva as I said is another way to differentiate and to position AZD9291 as the best in class. Pascal Soriot - Chief Executive Officer & Executive Director: Thanks, Mondher. With the revenue I mean you saw that at the end of June for the first half, essentially our total revenue is doing well. But our product sales are doing well. And so the revenue guidance is of course influenced by the fact that the product sales are doing well. I mean the externalization revenue is more-or-less in line with what we would have expected. So that's – Marc, I don't know if you want to add anything to that? But... Marc Dunoyer - Chief Financial Officer & Executive Director: Well absolutely the case. I think the – to answer your question, is it due to externalization or sales? It goes to sales performance. And the three main products or franchises that are causing this is Nexium, the generic is doing less impact, it's taking less impact on our sales. The good progression of Respiratory but also the good progression of Forxiga in particular in the United States but also in other markets. So they are – it's basically our sales, our organic sales are a story rather than an externalization story. Pascal Soriot - Chief Executive Officer & Executive Director: Thanks, Marc. So let's move to Jeff Holford at Jefferies. Jeff, go ahead.

Hi. Thanks for taking my questions. I wonder if you could just give us your updated thoughts on business development? Are you still hopeful at all of a bridging deal for AstraZeneca? Or is time marching on, the progress in your pipeline? Or perhaps are you seeing little value out there at current market prices, inhibiting any potential of that happening prior to 2017? And then secondly to really appreciate if there's any early color on the Celgene collaboration? And when we'll get to hear more updates on the trials coming up for that partnership? Thank you. Pascal Soriot - Chief Executive Officer & Executive Director: So, Mondher, I'll ask you to comment on the Celgene collaboration. What I'm hearing from our teams and from Celgene themselves is that it's going extremely well. And the teams are working very, very well together. Everyone is rather enthusiastic, and we're moving very expeditiously. Mondher, maybe in a minute you can comment. On the deal actually question, Jeff, the – we're constantly looking at options of course, as you would imagine, like everybody else is doing. We do realize that certainly acquisition that would be accretive would help us bridge to 2017 faster. There's no doubt we are well aware of this. But at the end of the day our core focus is implementing our strategy and delivering our pipeline. And if we were to find a deal, it would have to be a deal at the right price. And you highlighted yourself that prices these days are pretty hefty. And you can be accretive with many things. The issue is also do you have an appropriate rate of return on your investment? That's really also what we are looking at. So we continue looking. But I can't say that it is really something that we'll be able to do. Suddenly we'll do it, if we find assets that we believe we are better owners of, going back to the other question, we have – it has to make strategic sense for us. We have to be better owners of the assets, meaning we have to be able to generate the synergies and the price has to be right. Celgene, Mondher, do you want to add any color to that collaboration? Mondher Mahjoubi - Head of Oncology, Global Product & Portfolio Strategy: Yeah, to say that we are progressing extremely well with the collaboration. There has been a number of studies that were approved by the joint steering committee in order to form both a product line, the LBCL in multiple myeloma front line and relapse into refractory as well as in MDS or refractory and relapse as well as in first line. It's difficult to speculate on the time line, because many of these studies are a combination study, combining durva with the standard of care. And it will be data driven. If we have significant results from the Phase I/II, we could probably think of an accelerated approval. Otherwise we will have plans to go into a Phase III. So we will be very pleased to share with you the data as soon as they come – become available. Pascal Soriot - Chief Executive Officer & Executive Director: Thanks, Mondher. Nicolas Guyon at Morgan Stanley. Nicolas, go ahead. Nicolas Guyon-Gellin - Morgan Stanley & Co. International Plc: Hi. Thank you very much for taking my question. I have two actually. The first one is about the PD-L1/CTLA-4 combo. So BMS will start a very similar trial to the MYSTIC one for the CheckMate-227. Design and timing look quite similar. But they seem to have overpowered their trial. So any comment on that? And whether you have the ability to potentially recruit more patients would be great. And the second question is about the long-term target. You made several optimistic comments about your ability to hit those 2023 targets of $45 billion revenues. Please correct me if I'm wrong, but this seems to contradict your December, 2014 interview in the Times where you said you would be lucky to hit those targets. So has anything changed since December last year? Thank you very much. Pascal Soriot - Chief Executive Officer & Executive Director: Thank you, Nicolas. So you give me a great chance to correct an inaccuracy. People tend to report all sorts of things. And all sorts of rumors by the way, as you probably noticed recently about the rumor about us acquiring two companies that we actually didn't intend to acquire and didn't acquire. So this statement about the long-term target being difficult to achieve is completely incorrect. I never made such a statement. And quite frankly I still – our plans, which we update on a regular basis, and once a year in November we present this to the Board, and we'll do that again this year. Our plans are still very much delivering – showing that we can deliver the same. Now the only comment I would make here is as you would expect, when you do a plan, you do a risk-adjusted plan. You have a variety of projects and products in the plan. And then some will do better and others will do less well. And it's always the way it is when you do a plan, especially over such a long period of time. So the only general comment I would make is suddenly we see a bit of downward pressure on some aspects of our forecast like in Diabetes and upward pressure in Oncology. I have to say our Oncology by plan is developing very, very well, and we are very pleased with that. And we have great hope with 9291 for instance in first line. A year ago we might not have been as hopeful as we are today that in first line we could get a pretty big opportunity for 9291 there, because of course you have generic Iressa and Tarceva to consider over the next few years. The data – I mean the product's looking good. And so overall Oncology is up, and Diabetes we can still deliver, but clearly we have to acknowledge there's a bit of pressure there. But overall we're still on track. The durva/treme question and the BMS study being overpowered, Rob, do you want to address that question? Robert Iannone - SVP & Head-Immuno-Oncology, Global Medicines: Yeah, I would just say that as we're rolling out MYSTIC and discussing with investigators, it's being met with a great deal of enthusiasm, both because of the data we generated around our combination and the confidence in our dose selection, but also in the overall design. And so we're poised to execute that very swiftly in a global study. Pascal Soriot - Chief Executive Officer & Executive Director: Okay. We'll take the last question from Richard Parkes at Deutsche Bank. Richard, go ahead.

Hi, yeah. Thanks for taking my questions, they focus on Diabetes actually. Just on Farxiga I've noticed that the new NRx in the U.S., the growth there has been slowing. And also in the context that if you look at your prescriptions, sales per prescription, and compare it to what J&J reports, it looks like you are already heavily rebating there. I think you're at around two-thirds of the level for Invokana. So wondered if you've got any room there to react to that pressure on your NRx? Then secondly Onglyza is clearly suffering from the lack of promotional support and whether – I'm wondering whether there's any thoughts around adjusting how the two products are marketed together? Whether there's any second thoughts about having the same sales force selling those two products? And then finally on Bydureon, the suspension product is obviously key to continuing to drive growth there. I wondered if you could give us any more detail around that device? And what it brings? And whether you've been able to improve the needle gauge? Thanks. Pascal Soriot - Chief Executive Officer & Executive Director: So thank you very much, Richard, for those questions. Luke, most of those are for you. Maybe quickly on the sales per script, let me just say that the difference is not only a rebate, it's also payers – not payers, patients assistance, sorry. When we pay – when we help with copays and we have free coupons for copays. And rebates, typically when you give rebates, it's hard to take them back. But certainly patients assistance coupons to support copays you can flex that up or down of course. And that's certainly something that we have the ability to flex a little bit. But we also – we'll consider this in the overall framework of access we get. Do we get back onto Caremark or not? And so it's not a decision we make in isolation from the general environment. Luke, do you want to cover the other questions? Luke Miels - Executive Vice President Global Product and Portfolio Strategy (GPPS) & Corporate Affairs: Sure. Yeah. So with Farxiga there was a slight distortion in quarter one, because our WAC was below Invokana. I think it's a very fair statement in terms of Invokana clearly being first to market, has stronger access than us. But that's something we're very focused on. We've been very mindful of our net price. So there is focus there. And hopefully we'll have some more news on that in the future. That being said again it's a very competitive product. If you look at price for the half year, there was no change in price. But we had a 340% increase in volume in the U.S. So again it remains competitive. On your point about Onglyza it's – I mean ultimately unless we're going to build a huge amount of infrastructure in the U.S., we did have to make a choice. And our view was, and our view still is, that Farxiga is – has a lot more differentiation than Onglyza. And so we had to make a choice where we placed our bets. And I think so far that's working out. That's in the U.S. However if you pull back from that and look overall globally, I mean we've got good growth in other markets in Onglyza in Emerging Markets, in Europe. In Europe for example we had 35% volume growth, translating to around 23% growth. So again that business is building in the U.S. Again provides a lot of opportunity for growth. But Europe and Emerging Markets are still very attractive. In terms of the auto injector and the formulation there, we continue to focus on that. We think there is a place for that. And we'll have more update on that in the future. Pascal Soriot - Chief Executive Officer & Executive Director: Onglyza in the U.S. is really a product that would be relaunched, if I may say so, through the saxa/dapa combination. But it can't be a priority for us. Maybe one last quick comment on the NRx Farxiga question you asked. We are stable. In fact there are three weeks we've seen some increase in our market share. And in fact there are four elements that could help us drive this up over the next few months. First, we have an increased DTC. We are on par not competing in trial in DTC. So that will have an upward impact. Two, we've redeployed our sales force, so we are hoping to have a share of voice impact there. Three, hopefully we get a better access. We are constantly working on access with Farxiga. So there's a number of things we are doing there that give us hope. And also we've changed our marketing campaign. So there's a few things that give us hope to – for this new prescription share, which as I said over the last three weeks has been going up a little bit. Pascal Soriot - Chief Executive Officer & Executive Director: So with this I would like to conclude and thank you all for your attention. Just in conclusion I'd like to remind you our first half year really showed very strong growth. We've experienced now six quarters of top line growth. We are delivering enough core SG&A cost reduction. Q2 was the first step. And we expect to see more reduction over the next few quarters. We've made importantly really strong progress with our pipeline. And we are starting to launch those new products, and those launches are going well. Well with Lynparza, well with Movantik, and there's more to come with Iressa and others over the next few months. We're on track to deliver our goals, our short-term goals, and deliver our guidance with a slight improvement of our guidance on revenue for this year. And we're very much on track to deliver our mid- to long-term revenue growth. With that thank you so much.