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All right. Good morning. Good afternoon, everybody. Thank you so much for joining us today. I'm Pascal Soriot, I'm the CEO of AstraZeneca. Welcome to the full year and the Q4 2015 results presentation for investors and analysts. We are here live in London. I know there's quite a number of you on the telephone on the webcast. There's a webcast on astrazeneca.com. The presentation is actually posted online for those who want to download it. I'm joined today by Luke Miels, who is here, our Executive Vice President for Global Portfolio and Product Strategy, Global Medical Affairs, and Corporate Affairs. Sean Bohen is our EVP for Global Medicine Development and he's our Chief Medical Officer. Here also is Marc Dunoyer, our CFO.
In addition, we have Mondher Mahjoubi in the room, Head of Oncology in Global Portfolio and Strategy, who can also help us answer some of the questions that Oncology may have. We also have a number of key members of the AstraZeneca team here from IR and some others as well. It's really great to see so many of you here today, despite the very busy reporting season. I'm sure that you've been extremely busy in the last few days. We look forward to taking you through the results and our achievements in 2015. If I may ask you, if you could turn to slide two, please. This is our forward-looking statement. Please turn to slide three.
The plan today is for me to provide a short introduction. Then I'll hand over to Luke, who will give you an update on our growth platforms and the launch of New Oncology as the new growth platform, the number 6. He will define what we call New Oncology for you. Marc will cover the financials and the guidance. I'm sure we'll have a lot of questions around 2016 overall. Sean will provide a pipeline and an update on our news flows for this year. We'll end with concluding remarks before we take your questions. We plan to have about 40 to 45 minutes for the presentation and a similar amount of time for the Q&A. Up to about an hour and a half in total. Please turn to slide four. Those are the highlights. Total revenue were up 1% to $24.7 billion in the year.
We're pleased that we were able to achieve this steady performance and deliver on our upgraded guidance, marginally above our upgraded guidance. The achievement was first and foremost based on our growth platforms. They now represent about 57% of our total revenue, and they grew by 11% last year. The performance of the growth platforms was supplemented by the external revenue, externalization revenue, as you know, that arise from the increasing R&D productivity and our decision to partner some of the projects that are not part of our focus. Essentially what it enables us to do is to increase our focus on our main therapy areas. Core EPS was up 7%, and this is underpinned by the decline in SG&A costs. As we guided you we would achieve, we delivered a 2% reduction in full year SG&A and 11% reduction for the quarter four.
Importantly, the pipeline continues to progress and we had positive news flow for the year with two approvals and two regulatory submission acceptances in Q4. If I stay on the pipeline, 2016 will be a very busy year, as you know, with lots of news flow that we're expecting really news every month, in fact, on average, almost every couple of weeks. On the financial side for 2016, at constant rates, our total revenue is forecasted to decline by low to single-digit percentage. As you know, we're still dealing with this massive patent expiry issue that we have to manage. Core EPS is expected to decline by low to single-digit percentage as well. This guidance incorporates the dilution coming from the Acerta and the ZS Pharma transactions that we announced late last year. As always, again, these measures are at constant rates.
Marc will give you more details later. If we turn to slide five, this is the pipeline news flow, and we delivered a strong news flow in Q4 with first and foremost approval for TAGRISSO in lung cancer in the U.S. As you know, we just got approval in the EU a couple of days ago. TAGRISSO is really a cornerstone in our oncology pipeline and our lung cancer strategy, and we're really proud to bring this new medicine in a record time. I never stop mentioning internally that it took us 32 months from first-in-human to approval. This is a record development time for us as a company, and we believe actually a record in the industry as well. On top of it, we also got approval for Imfinzi in the U.S. We got a positive opinion for this product in the European community.
We got a positive opinion also for Brilique based on the PEGASUS study that supports an indication in patients with a pharmacologic infarction. Finally, we obtained regulatory submission acceptance for brodalumab in psoriasis in the U.S. and EU, and we are preparing to launch this product in the U.S. together with our partner. We actually submitted ZS-9 in the U.S. for hyperkalemia. These developments really conclude a successful year for our pipeline with a couple of setbacks, which we have to recognize, including selumetinib in uveal melanoma. That doesn't have an impact on our core program in lung cancer, but certainly is a setback for this indication, and also a setback that Sean will cover in more details a little bit later relating to Saxdapa. It's only a timing issue, really. We think we have a way forward. In 2016, we expect four further regulatory submissions for new products.
Please turn to Slide 6. From a financial viewpoint, as I said, revenue was up 1%, gross platform 11%, and the total revenue was up 2% for the quarter, again, 11% for the gross platform. We had a benefit from externalization revenue, as I mentioned before. Core EPS in Q4 was up 22%, which really reflects our ability to deliver on our core SG&A cost reduction as we committed we would do minus 11% in the quarter. R&D investment and in the year are at a point that will allow us to keep it at a similar level going forward in 2016. We leveraged our revenue down the P&L, and you see here, as I said, the core EPS results. To sum up, we've been able to continue the core R&D investment, reduce SG&A costs, and we'll continue doing this in 2016.
Our cross-discipline will be essential as we enter a year that is certainly challenging as we lose the patent protection on Crestor in the U.S. That, I would like to remind you, will start in May. The first generic introduction we expect in this guidance will take place in May. Over the medium term, the performance of our growth platforms and upcoming launches should, together with the increasing cost reduction, should help us offset the short-term headwinds that come from those patent expiries. With this, I'll hand over to Luke.
Thanks, Pascal. It's a pleasure to present our product sales results today. Please turn to Slide 8. I'm going to spend a few minutes just talking through the growth platforms which grew across all areas. This is encouraging, naturally, because it's on the back of strong performance across these platforms, and these platforms are critical to our long-term goals. I'll review each of them individually and in more depth later, but broadly, respiratory was driven by strength in emerging markets and by products in the U.S. and EU. Brilinta continued to enjoy a steady uptake following the positive PEGASUS data, and the strong diabetes performance was driven by the well-executed product launches and the benefit of the global AstraZeneca footprint. Our emerging markets business showed notable strength in China and also in key markets outside China.
Finally, Japan, you'll see at the bottom there, maintained growth in market share and product sales in what was a competitive environment. If you could just turn to the next slide, we've got an addition. You can see from our announcement that we issued this morning, new oncology has been added as our sixth growth platform to ensure clarity. New oncology is defined as worldwide sales of Lynparza, worldwide product sales of Tagrisso, and also U.S. product sales of Iressa. Of course, naturally, as we launch products such as durvalumab and tremelimumab, these naturally will be incorporated into this measure. These medicines are instrumental in driving the next phase of the growth in the years to come. Next slide, thanks.
If we start on respiratory, the franchise grew by 7% in 2015, and this was driven largely by a combination of emerging markets and also new products in the U.S. and EU. Symbicort itself declined by 3% in the full year, and in the U.S., product sales were up 1%, with volume growth being offset by access and co-pay assistance. In Europe, the business was impacted by analogs. We have three analogs in the EU right now, and these did place some pressure on price, as you would expect. In total, despite a highly competitive environment, Symbicort increased global market share, with emerging markets now accounting for nearly 12% of total product sales and representing the biggest element of absolute growth.
Emerging markets continue to, you can see this in the middle of the chart, we've put here the asthma cases, they continue to represent an opportunity for AstraZeneca with many untreated patients in both asthma and COPD. If we look at the new medicines, Duaklir and Eklira, these both delivered encouraging progress in the U.S. and also Europe, and they're also the fastest growing LAMA bronchodilators in some of the EU markets where it's launched. If we look at that, Eklira is now available in 35 countries, and Duaklir, a LAMA bronchodilator, is now available in 21 countries, with planned rollouts in an additional 20 markets in 2016. We're at the start of a journey with these products. Where launched, we've had good success. This medicine has achieved around 15% market share in the LAMA market.
In the fourth quarter, we also entered into an agreement to acquire Takeda's respiratory business. This was a very good, elegant deal. A transaction included the U.S. rights, the non-U.S. rights called Daliresp, called Daxas outside of the U.S. This provided a number of synergies in a number of markets and, of course, was immediately accretive. Next slide. Thanks. For Brilinta, we're pleased to report that sales are up 44% in the full year, with particular strength in the U.S. and emerging markets led by China in the case of emerging markets. In the U.S., the continued growth was supported by the launch of the 60 milligram. If we look at new-to-brand prescription, you can see we started out at 8% and ended the year at around 12 or close to 12, which is a great result and one we're pleased with.
Looking forward, we anticipate that as physicians are educated on the new label and they also see the progression of guidelines in the U.S. and ultimately Europe, that should support the product. In the EU, the CHMP's positive opinion on the 60-milligram dose is expected to deliver a label claim, which we're confident will support the ongoing usage of the product in a wide range of high-risk patients. In the coming weeks, we're also on track to launch in a number of other markets with the PEGASUS indication and the 60 milligrams. If we look at the international region, just the international region is emerging markets combined with countries such as Canada and Australia. Our share gains have been reflected in volumes, and if we look at that numerically, the growth has been seven times the market growth rate for Brilinta.
Sean will take you through what promises to be a very busy and exciting year for Brilinta in terms of outcome studies in particular populations. Next slide. Thanks. If we take some time to look at diabetes, I think it's very fair to say that the franchise delivered an impressive performance at 26% for the year. This was really driven by Forxiga and the BYDUREON pen. In emerging markets, diabetes sales were up 76%. You can see that's the block second to top. The growth of the portfolio is encouraging as we face what was an increasingly competitive marketplace, but we had new product launches and ongoing pricing pressures. In the EU and international markets, Forxiga and its family led the SGLT2 class share by volume. We also led with dynamic market share in Japan. The U.S.
did experience some competitive pressure and market share pressure. As we look into 2016, and for those of you that have seen the recent figures, we're off to a good start. We expect that improved formulary access and favorable changes in patient assistance programs will support the product. BYDUREON, overall, we had growth of 35%, and this is actually growing, when you look at globally, faster than the global GLP-1 market and actually reflects a lot of faith in the pen. This is a pen which is now available in 18 countries. Again, it's a relatively narrow base that we're talking about here that will expand. If we look at the revenue in those countries, the growth is actually driven by switches from other GLP-1s rather than being dominated by erosion of the tray.
All in all, I think this was a strong performance across the regions in what remains a very attractive but competitive market. Next slide. Thanks. For emerging markets, the title says Continued High Growth, it was another good year, double-digit growth throughout last year. You can see China at the bottom of the chart there, maintained growth at a slightly lower rate. The underlying dynamics are positive, and our expectations are that we'll continue to deliver strong growth, we remain deeply committed to furthering innovation in China. Interestingly, we now have 3 fast-tracked or Class 1 programs in China. You know roxadustat. We've also announced a partnership in biologics with Wuxi. Also we have an EGFR inhibitor, which was discovered in China, in Shanghai, which is progressing nicely in lung.
As you may recall, we recently announced a major long-term investment program in China, which will cover the full biopharmaceutical value chain. This ranges from research right through to manufacturing, which supports this commitment. Also, there was notable growth outside of China. You can see on the chart, Brazil 16%, Russia 21%, with many other markets, we were able to maintain single high-digit rates. The emerging markets growth was also, if you look at products, split across all therapeutic areas. Respiratory was up 25%, Brilinta was up 91% in emerging markets, diabetes up 76%, finally, oncology up 18%. I think that's fair to say that's a very strong, balanced performance across the board in emerging markets. We're actually tracking above our long-term target as listed on the right-hand corner of this slide. Next slide, thanks.
If we pivot to Japan, our business in Japan maintained solid growth. We had 8% in the quarter, 4% for full year. This growth in medicines in Japan was driven by Symbicort, Crestor, and NEXIUM. You can see in the middle of this slide, they all made very good progress in 2015, and they actually maintained leading market share positions in what was, in each one of these categories, a very competitive segment. There were some fluctuations during the fourth quarter, we detailed these in our press release, and these actually have no impact on the good underlying trend, which is favoring our business in Japan. On top of a solid and established portfolio in Japan, we are now actually in the process of preparing for the next wave of launches. During the first half of 2016, we hope to achieve approval of Brilinta.
Also in the same time frame, we are very excited to target an approval of TAGRISSO, which is, I'm sure you realize, is just a few months after the FDA and EU approvals. We actually expect that TAGRISSO will benefit from our existing presence and infrastructure. Naturally, it represents quite an opportunity because of the prevalence of EGFR mutations in Japanese patients. Next slide, thanks. I think that's a good segue to the final part of my presentation, which is new oncology. If we go through the products, LYNPARZA continued its strong trajectory one year after approval. Globally, we've been able to treat around 2,550 patients through commercial supply. The medicine has actually been approved in 24 countries. We've launched in 15, and we've got reviews ongoing in 13 countries. Again, that's a cascade of numbers.
I think the key thing to take out of this is we've actually started our regulatory journey with LYNPARZA, there's a lot of activity to come with this product. Another thing that we follow very closely is actually BRCA testing rates. It's a good barometer in terms of enthusiasm around the product and intention to prescribe. If you look at the U.S., around two-thirds of patients in 3rd and 4th line are aware of their BRCA status. If we look at Europe, in 2nd line, it's around 50% of patients already are aware of their BRCA status. Now, just to put that in context, if we went back one year in Europe, it was only 10% of patients who are aware of their status with LYNPARZA. Also, things are not standing still.
As Sean will explain later, 2016 will actually be a very exciting year for news both for LYNPARZA. If we turn to TAGRISSO, it was launched on the 13th of November in the U.S. We actually shipped and launched six months after that. As you know, and as Pascal has referred to, we brought TAGRISSO to patients in record time, and now we're in a position to offer a very effective treatment for 2nd-line lung cancer patients. We're also encouraged by the inclusion, and it was rapid inclusion, in the NCCN guidelines for TAGRISSO within one week of launch on the market. We're going to be very excited and look forward to giving you an update on a regular basis on the progress we're making with LYNPARZA and TAGRISSO.
These naturally will form the initial backbone of our new oncology portfolio, these launches, along with the growth drivers I've just taken you through, ultimately underpin our performance, our positive performance in 2015. With that, I'll thank you, I will now hand over to Marc, who's going to take you through the financial highlights.
Thanks, Luke. Hello, everyone. I'm going to spend the next few minutes taking you through our performance in 2015 as well as our guidance for 2016. If you could please turn to Slide 17. Total revenue grew by 1% in the year, not only ahead of our revised guidance. Our investment in R&D was supported not only by the growth in the top line, but also by one percentage point improvement in the growth margin and a 2% reduction in core SG&A costs. As you may remember, in 2015, we committed to a reduction in core SG&A costs by absolute value and also as a proportion of total revenue. Our improved R&D productivity and the increased focus on the main therapy areas meant we could also deliver over $1 billion of external revenue and $1.5 billion of other operating income.
Further down the P&L, core EPS was $4.26, up 7% on the year, which included a growth of 22% for the fourth quarter. The board remains committed to a progressive dividend policy and has declared a second interim dividend of $1.90 per share, bringing the dividend per share to $2.80 for the full year, in line with the previous year. As you know, we guide at constant exchange rates, we anticipate a decline in total revenue in 2016 by low- to mid-single-digit percentage. We also anticipate a decline in core EPS by a low- to mid-single-digit percentage. The above guidance incorporates the dilutive effect arising from the Acerta Pharma and the ZS Pharma transaction announced late in 2015. Further, it's important to note that we may see greater fluctuations in the quarterly earnings performance this year as a result of the anticipated loss of Crestor's exclusivity from May.
I'll take you through more details on our guidance as well as our future capital allocation priorities in a moment. If you could now turn to Slide 18. Looking at other highlights in the P&L, encouraging progress was made in the year in the cost of sales. Our mix of sales is changing, we're also making inroads into delivering manufacturing efficiency. The increase in core R&D investment in the fourth quarter was outweighed by an 11% reduction in core SG&A costs. We plan to further reduce core SG&A in 2016, we have further opportunities to take out material levels of core SG&A costs. Our core tax rate was 16% in the year, in line with the comments I made a year ago, essentially a 16%-20% range. I anticipate a similar 16%-20% range for 2016, depending on the eventual geographical mix of profits.
This is to help you with the modeling. If you can now turn to Slide 19. I'm encouraged by the progress in improving both the core gross profit and the core gross margin. The data on the chart excludes any impact from external revenue and illustrates the strength of the underlying business. Our gross margin increased by one percentage point in 2015. Despite the increased investment in core R&D, the operating margin also increased by one percentage point to 28%. We are approaching high level of core R&D investments, and as you can see in the lower chart, oncology is now attracting the largest share of our R&D budget. In fact, we have doubled our absolute investment in oncology since 2013, in parallel with our focus on the other main therapy area.
At this high level of investment we have reached, which lead us to anticipate a similar level of core R&D spend in 2016. Please turn to slide 20. Core SG&A cost reduction continues to be a key focus for the business. We have made good progress in 2015, and I'm pleased that we delivered on our commitment in 2015. Core SG&A cost declined by 2% as an absolute value and by one percentage point relative to total revenue. It's worth noting that core SG&A declined by 11% in the fourth quarter. In 2016, we are committed to materially reduce core SG&A cost even further, based on constant exchange rates. We'll do this by continuing to focus on areas such as reducing third-party spend, optimizing various function and processes, and focusing on sales and marketing effectiveness. Please turn to slide 21.
I'd now like to turn to 2016, a year of challenges, but also real opportunities. We know there are two clear pressures on the business when we think about guidance, namely the loss of exclusivity for Crestor in the U.S. from May, plus the dilutive effect arising from the transaction we announced before the end of the year. This dilution will not only impact the financial expenses line. We will also incorporate 100% of the R&D cost of Acerta, with only a minority of those costs falling back out through non-controlling interests. We have, however, four very clear positive that we have baked into our guidance. Firstly, Luke has just talked to you about the strong and consistent impact of the growth platforms. In a moment, Sean will take you through what will be a very busy year for the pipeline and our launch program.
Thirdly, it's worth bearing in mind not only the milestone from our program of standardization, there will also be an increasing level of recurring milestone and royalty income arising from agreements signed in the past. This is in line with our long-term business model. Lastly, a key message to take away today is the opportunity to take material level of core SG&A cost out of the business in 2016. All of these factors are within our control. This is why the adverse currency movements that we expect are not included within guidance as per our usual practice. Please turn to slide 22. Looking at the specific guidance for 2016, which is at constant exchange rates, we expect a low to mid single-digit percentage decline in both total revenue and core EPS.
Outside of guidance and using average January currency rates, the adverse impact on total revenue and core EPS from currency would be about 3% in 2016. We will update this number as the year progresses through our Q models. I want to be clear about our capital allocation priorities this year. We'll continue to strike a balance between the interest of the business, our financial creditors, and our shareholders. After providing for investment in the business, supporting the progressive dividend policy, and maintaining our strong investment-grade credit ratings, we'll keep under review any potential investment in non-accretive opportunities. Thank you for listening. I will now hand over to Sean.
All right, great. Thank you, Marc. Hello, everyone. Please turn to slide 24. 2015 was a good year for AstraZeneca. This slide highlights the key milestones, including phase III readouts, regulatory submissions, and regulatory approvals. The favorable outcomes are colored in green. The unfavorable ones are in gray. The favorable events far outweigh the unfavorable ones. I will speak specifically to one of the gray boxes, which is Saxdapa, the complete response letter. In the first half of 2016, we now expect to make a new U.S. NDA regulatory submission for the fixed dose combination of saxagliptin and dapagliflozin. This decision is based on recent positive interactions with the FDA. In essence, we plan to submit additional clinical data for Saxdapa from a trial that is now completed. The key highlights were the six approvals, including two new medicines, Tagrisso and Zurampic.
We look forward to continuing this momentum in 2016 to deliver on the pipeline, keep you updated on our progress. Please turn to slide 25. I would like to review some of the late-stage pipeline highlights in the main therapy areas during the fourth quarter of 2015 and early into this year. Starting with RIA, the Symbicort LABA safety post-marketing trial was positive. Zurampic received approval in the United States and a positive CHMP opinion in the EU. anifrolumab received regulatory submission acceptances in the U.S. and EU. Exciting anifrolumab phase II results in lupus were presented at the ACR conference in November. In CVMD, BRILIQUE received a positive CHMP opinion in the EU for the post-MI indication. ZS-9 received regulatory submission acceptance in the EU. For oncology, we received breakthrough therapy designation for LYNPARZA in particular forms of prostate cancer.
TAGRISSO was approved in the U.S., just a couple of days ago, also approved in the EU. The ADAURA adjuvant trial was also started. As for durvalumab, we do not plan any regulatory submission for monotherapy use in PD-L1 positive third line non-small cell lung cancer, which is in line with our previous comments in December. During the quarter, we achieved first patient dosed in several durva plus tremi combination trials: NEPTUNE in first-line non-small cell lung cancer, EAGLE in second line head and neck cancer, KESTREL in first line head and neck cancer, DANUBE in first line bladder cancer, and ALPS in second line pancreatic cancer. These trials are key programs for the successful development of our IO combination strategy. On to slide 26. For 2016, we expect continued strong news flow from our advancing pipeline, including regulatory decisions, regulatory submissions, key data readouts.
If we only focus on events through the first half of 2016, for regulatory approvals, we expect to hear back on ZURAMPIC for gout in the EU, PT003 for COPD in the U.S., ZS-9 for hyperkalemia in the U.S., and TAGRISSO for lung cancer in Japan. As for key regulatory submissions, we expect to submit Brilinta in stroke and resubmit saxagliptin and dapagliflozin for type 2 diabetes in the U.S. As for key data readouts, we expect benralizumab data for severe asthma, Brilinta for stroke, LYNPARZA for gastric cancer, and tremelimumab for mesothelioma. As you can see, there are many key news points expected in the coming months, and we look forward to updating you on our progress. Please turn to slide 27. Finally, I would like to walk you through a few measures of R&D productivity.
Starting with the number of publications as an indication of early science recognition, we had 397 publications in 2010, growing to 552 in 2015. As the number of publications has grown, so has the percentage of those considered to be medium and high impact. Next, looking at the number of programs either in phase II or under registration, we had seven in 2010, growing to 15 in 2015. Our late-stage portfolio mix is shifting from primary care to specialty care and from small molecules to a balance of small and large molecules. Finally, the chart on the right shows the expected number of new molecular entities and major lifecycle management submissions through 2018. As you can see, there will be a strong flow of anticipated submissions that will expedite unlocking the value of the pipeline.
The goal for 2016 is to advance the pipeline, to bring more differentiated medicines to patients, and to live up to our promise of what science can do. And with that, I would like to hand back to Pascal for his closing comments.
Thank you, Sean. Please turn to slide 20. I will quickly summarize the results today very quickly so we move to the Q&A. Revenue was up 1%. Growth platforms importantly were up 11%. Our core EPS was up 7%, which reflects that we delivered on our commitment to reduce SG&A costs, and we were able to maintain the momentum in the R&D investment. Our guidance is low to mid-single digit percent decline for both revenue and core EPS, and the dilution is of the acquisitions we made late last year included in this guidance as covered by Marc a minute ago. Sorry about this. This microphone is falling. I think really what this reflects is that we are on track with what we told you we would do.
In fact, by and large, we believe that we are ahead of what we thought we would do two, three years ago from a pipeline viewpoint. The only new development that we certainly didn't expect, I don't think anybody would have expected quite frankly, is the negative development in the last 15, 16 months on the currency front. This really represents a massive headwind for us like for many other companies that report in U.S. dollars compared to what the exchange rates were in 2013, for instance. We're losing more than $1.5 billion of profit in 2016. The fact that we are able to still deliver the $4.20 at actual exchange rate in 2015 is a reflection of the strengths of our business. If we turn to slide 30 before we end, just wanted to reflect on our journey.
We just finished the first phase of this journey we started early 2013, rebuilding our pipeline, and we believe now that we are done with this. We have a very strong pipeline. We're focusing on building three very strong businesses in oncology. Three years ago, we had almost nothing in oncology. Today, we believe we have one of the best oncology portfolios in the industry. We're also trying to build a very strong business in cardiovascular diabetes, complemented with the acquisition of ZS Pharma in kidney disease. Finally, respiratory. Also, three years ago, we only had SYMBICORT that was facing patent expiry. Now we believe we have a pipeline that certainly will take us forward over the next two to three years and position us well in this respiratory disease area. We believe we have three very strong businesses and a strong pipeline.
Now, the consequence of this, though, is that it is certainly requiring us to focus very much on these three core businesses. We have brought this laser-like focus on those three businesses, which is accelerating, if you will, our process of partnering or divesting some of these non-core businesses. We've done that in 2015. In fact, each time we have been able to find very good partners that will turn some of those products into great successes. We believe certainly better than we could have done it ourselves. Also saves us having to build infrastructure. After this, the next two years, where we're going to have to face very substantial headwinds coming from those patent expiries, Crestor, NEXIUM, SEROQUEL, we still expect a very strong, very rapid period of growth in 2018 and beyond.
I think I wanted to leave you with this message here that we're still committed to our long-term goals. We still believe we can achieve 2017 sales broadly in line with 2013, and our $45 billion goal is still very much part of everything we are targeting. Very good progress made across the pipeline. Of course, as I said, currency is a moving target. Very much who knows where they will be. We know that using January's currency rate, we have a -3% negative impact on our guidance. We don't know where those currency effects will go. They may improve. They may further decline. We certainly will do our best to mitigate the currency impact and still very committed to achieving our EPS goals very much so.
The point is we can't totally predict where these currencies will end at the end of the year. Thank you very much for your attention, and I'll now open for questions both here in London and on the phone. For those who ask a question, please, if you don't mind, ask one question at a time and not a question with three or four parts, but one question with maybe one part or two parts maximum. Please go ahead, Sachin, go.
Maybe I'll kick off with where you left off. The full-year EPS floor is being sacrificed within reported guidance. Just wanted to understand what you felt that signals. Is it greater investment? Is it less certainty in one-offs? Is it just FX? And given the lack of earnings floor potentially for the market now, when do you see proper earnings?
Yeah, it's a great question, actually, Sachin. I don't think we've said there's no earnings floor. I think we've guided to the range of outcomes that we see are possible. We're still very much committed to delivering on this core EPS goal that we have. I think really we should completely separate guidance from what our goals might be from a compensation structure viewpoint. Those are separate issues. The guidance actually reflects what we see moving forward and includes the dilution from the acquisitions. As I said earlier, we still very much are committed to this EPS goal. The biggest issue for us is actually the currency. That's really the biggest thing we cannot predict. At constant rate, we believe we are around the GBP 4.20, and we certainly very much believe we are going to work hard to achieve it.
The question for us is really currency. Hopefully that answers your question. If not, you can come back to it and ask a different question.
I guess I'll ask it slightly differently or a similar theme. James Gordon from J.P. Morgan, which was just going below the $4.20 and below the 1.5 times cover, should we think of it as a one-off factor for this year because of either the deal dilution? Or is it something that could be quite sustained because it looks like 2017 is probably a tougher year than 2016. I don't think the new launch is going to make that much difference by then. So you've got a full year of no Crestor, the full year of no NEXIUM. Is it something where you hope just to get a one-off dispensation for this year, or could it be the new normal that we are below that level?
We have not talked about dispensation. We've given you a guidance at constant rates, and certainly our goal is still to bottom out this EPS. 2017 is clearly still a challenging year. Having said that, we believe that some of those launches will rapidly generate additional profit. We also believe that as we move forward and as the sort of launches, if you will, of products like Brilinta, diabetes, and others mature, then the need for SG&A is going to be less as a percentage of sales. So we believe we can still manage the SG&A down. We think there is substantial reduction in SG&A for us to achieve. The question is at what speed do we achieve this? And to achieve it too fast may actually threaten the top-line goals. But we believe over a two-year, two-and-a-half-year period, we certainly can achieve substantial reduction in our SG&A.
That's really what we're going to manage to try and protect the EPS. The way we product EPS will be, as we've said before, a mixture of SG&A reduction and delivering on this externalization also.
Vincent Meunier from Morgan Stanley. Another question on the guidance, I'm afraid. The credit rating, does that assume that you have reached the limit in terms of potential dilutive deals? And so now if you want to do something, it has to be accretive and no more dilutive? And just back to the SG&A comments, you reduced by $1 billion SG&A spending in 2015. Is that ballpark level of $1 billion achievable again in 2016?
Marc, maybe you want to cover the credit rating. I mean, the SG&A, as we've told you before, we're not going to give specific numbers. You can see the SG&A as a percentage of sales. We do recognize it is relatively high and relative to our peers. The question is not so much can we reduce it, because the answer to that is yes, we can reduce it. The question is, at what speed do we achieve that without impacting the top line in the near term? That's really what we are on a gliding path in terms of managing this SG&A, but we suddenly will reduce it over the next 2 years at a substantial rate. Marc, do you want to cover the-
Let me position the credit rating and the dilutive impact of the acquisition announced at the end of last year. First of all, as you know very well, the credit rating agencies tend to have an horizon of planning, which is more short-term than maybe equity investors. We need to understand the rationale behind those 2 acquisitions. When I mention the 2 acquisitions, I mean Acerta and Acerta Pharma. In the short term, we have indicated there would be a moderate short-term dilution, but we have also emphasized the very strong impact on the operating leverage in the longer term. That's obviously the rationale and the reason why we made this acquisition. If you are looking at the credit rating, you would probably look more short term, but we need to look at the long-term perspective for equity investors.
Then the more exact question on the rating, you know that the credit rating agency downgraded us by 1 notch for both the 2 main credit rating agencies. This does not mean the reason why we look at accretive opportunities is not because of the rating. It's more because we also need to protect our cash flow and protect the other balance of the company.
Also because we believe we're finished with Well, we're finished. We have rebuilt our pipeline to a great extent, really the focus has to be on execution, progressing it, delivering it, and also launching those new products. This is really where our efforts are. Thomas Kudsk Larsen reminds me that I should ask questions on the phone as well. If you allow me, I'll ask 1 question on the phone and return to the room in a minute. Andrew Baum at Citi. Andrew, do you want to ask your question?
Yeah. Good morning. Question for Mark on your tax rate outlook for next year. Obviously, the contribution from U.S.-based products will be diminishing function of Crestor, and I assume the products impacted by the patent box is probably increasing. Should we expect there's any downside to that current 21% core tax rate for 2016?
Andrew, I don't know if it's at your end or our end, but it's hard to hear. I don't know, Mark, did you get the question? We didn't get it, Andrew.
Can you hear me now?
Yeah, it's a bit better. Yeah.
Okay, let me try again. The question was the core tax rate for 2016. Given you're losing the Crestor revenue in the U.S., we're assuming a higher tax rate. Given the product impacted by the patent box should be larger for next year, should we expect there's further downward pressure on the 21% core tax rate that you posted for 2015?
I'm not absolutely certain I understood the totality of the question, I think you're asking the guidance or the indication I provided on the range of tax rate, corporate tax rate for 2016. I think you're asking whether the 16%-20%, which we provided in 2015, is the same for 2016. I just repeat what I said in my talk, that we expect the rate, the core tax rate, to be between 16%-20% in the same manner as it is for 2015.
Andrew, it is correct that our new products, many of them are in the patent box, we derive a benefit from this from a tax viewpoint. They are relatively small in the great scheme of things for the time being. Certainly over the next few years, maybe a little bit this year, mostly the years after, we'll derive a benefit. It's probably a little bit ambitious to expect the tax rate to drop in 2016 because of the patent box. I think 16%-20% is probably the range that you should expect.
I think I mentioned a caveat in my presentation that obviously the core tax rate depends on the geographic mix of where the profit is realized, as we need to pay taxation in all the countries where we generate profit. Within that range.
Alex, from , do you want to-
A completely different question. On slide 15, you did show some relatively steady uptake of TAGRISSO. When I look at the IMS data, it looks a bit different. It looks like a very fast uptake in the first three weeks and a bit more steady then. Independent whether this data shows the right thing or not, the question I have is, what do you find in the marketplace in terms of the challenge of having to rebiopsy those patients? How widely is that done? Is there a long way to go? You mentioned the BRCA status, how much there was to go, and can you tell us roughly where you think we are here in all the three key territories?
Yeah, sure. First, there's a high degree of understanding the product. I think particularly in the U.S. because of the dynamics there. Around 10% is the testing rate for T790M mutations in the U.S. right now. You're right, the key challenge is that second biopsy. There is actually the feedback that we're getting, and again, it's early days, there's a high enthusiasm and interest in doing that and that physicians can explain it to patients and make the case to do that because they themselves are convinced. Of course, if we look in the midterm, the promise of the ctDNA test is attractive because, of course, then you're really focused on resolving the false negatives, and you just lower the barrier to initiating the treatment. Ultimately, of course, if we can have data at first line, then it's a simpler discussion.
Net, very positive support for it. I think the reality is, in the U.S., we have a much cleaner area to operate than we were expecting, and we really have the market to ourselves for some time. Yes. The thing to keep in mind, of course, is that BRCA testing in the U.S. was at a relatively high rate because there was a broader consequence of the test, in terms of family members, so there's a higher expectation and demand for the test. Historically, with the T790M test, there was no clinical strategy that can be derived from that. Now we've supplied that. We have three labs in the U.S., which are centers of excellence, so that infrastructure is in place. Historically, we've had experience with EGFR testing. We'll now do that for Europe and also emerging markets.
We're very actively involved in that infrastructure in Hong Kong and Macau. Sorry? Japan as well. We've got a team in place right now, which is a very good team, targeting lung physicians. Of course, remember, we had a team in place, which is really why we bought back Iressa in the U.S., which essentially have a running start for the product.
Any more questions? Just trying to follow some order, hopefully, I get it right.
Thank you. It's Matthew Weston from Credit Suisse. Hopefully, the last guidance question. You were very kind in setting out expectations for externalization, thank you for that. In 2015, you generated about $1.3 billion from product divestitures included in other operating income. If you could set out what's your expectation for product divestitures in 2016 that feeds into guidance. Within that, have you identified the products for sale? Have you started discussions, or it's just an aspirational goal that that will help you modulate the P&L this year?
I would like to bring you back to 2015. I believe that in a different place but at the same time. Last year, we were having the same level of discussion on how you're going to deliver your guidance for 2015. I think I answered then that it would be a conjunction of two factors, the reduction of SG&A expenses. I think you now see that we have delivered on this reduction, both in absolute terms but also in percentage. I also said at that time that we would generate revenues through external revenues, and the question was raised then that, what percentage of both? My answer then that it would be relatively two similar factors, it may be a 10, 90%. I think we can use the elements of 2015 to project, to some extent, for 2016.
One indication I can provide is that in 2016, there will be more of it. If you take the external revenue, the total of external revenues and other income. It's going to be a more pronounced effect for this impact.
Okay, just to clarify, if I take the $1 billion of externalization income in 2015, add the $1.3 billion of one-time other operating income, it will be greater than that $2.3 billion, however, it's made up of the two buckets.
Absolutely.
Thank you very much.
Maybe the one thing I would add is that we're pursuing two strategies that are really all driven by focusing ourselves. The big one is, of course, externalizing, partnering some of our products. I think the other one, of course, is divesting assets that are small. If you actually look at it, we have generated a lot of income out of products that were selling $40 million-$50 million, and we're sort of not doing much in our hands because we're focusing elsewhere. The one important point is people see this externalization revenue sometimes as one-off. Essentially, what we're doing here is sort of priming the pump, if I may. Maybe it's not the right expression, but it's actually we're starting a process of introducing a new business model, at some point, this will turn into recurring revenues.
If the BRAF inhibitor delivers, if it gets approved and is launched, the externalization revenue line will be enormous. There's quite a number of products that will actually be like this, that will continue to deliver revenue on an ongoing basis. Essentially, what we do is we say, those are products we don't want or cannot develop ourselves because we don't have the capabilities, we don't have the financial resources. We want to focus. We want to retain some economic interest. We partner with someone who's going to do a good job operationally for us and then leave us with some of the economic value. They should not really be seen as one-offs. They are, of course, one-offs, there's also long-term recurring revenues that we're developing.
Thank you. It's Mark Purcell, Barclays. Can we just follow up on that and then Mark something totally different? If you take externalization revenues, about $1.1 billion for 2016, can you help us understand the mix between recurring, which you'll say is going up, the milestones we know of one, obviously $117 of durvalumab, and then the new stuff that we don't know anything about? Something totally different on durvalumab and the updates on the pipeline. Can you help us understand why you chose on the triple to do durva plus chemo plus or minus tremie, why you didn't do durva plus tremie plus or minus chemo? Secondly, you changed the primary endpoint for MYSTIC as well. Was that done because you're concerned about patient crossover and that study for second-line or be there?
Sean, do you want to cover the last two questions, and Mark, you cover the first one?
Yeah. The first question, I'm going to do the second one first, and then I want some clarification on the first one, okay? The second one was change of endpoint on MYSTIC. The change, just so everyone knows, is making a co-primary progression-free survival, the previous sole primary, and combining it with overall survival. This really came from two things. One is as data emerges with immuno-oncology, I think we are wondering about progression-free survival as the best indication of the benefit that patients derive from this particular mechanism of action. Because we have seen it's a mixed bag right now, in its early days, but we've seen some places where the progression-free survival seems not to really predict very well an overall survival benefit that comes through. That led us to think we should move the overall survival up in the hierarchy.
The first analysis will be progression-free survival. The second aspect of it really is a pragmatic one, and it has to do with how quickly the trial is enrolling. One concern when you do this is you have to add some patients to the trial because you want to power both your primaries. We did that in the amendment. The thing is that what we had forecast, how long it would delay us, turns out to be a fraction because it's enrolling so quickly. We were able to do this change without really impacting the timeline. Those were the two of the major factors that went into it. Now, the first question. Can you clarify for me for a second?
Yeah, sure. Sorry. Obviously, there's a big focus on durvalumab plus tremelimumab.
That's right.
The triple trial is durvalumab plus chemo plus or minus tremelimumab.
That's right.
I would have thought it would have been durvalumab plus tremelimumab ± chemo to put the sort of onus on the chemo to change.
Let me talk about two things about our fundamental strategy. You could do it either way, you're right. It depends on what your fundamental strategy is. Our emphasis is combination. Combination immunotherapy, I should say rather. There's a little bit of a pragmatic aspect of this, some pragmatic in practice patterns, doctors treating lung cancer, some is actually kind of pragmatic in the world, availability of therapies. We've heard very loud and clear from some fraction of physicians that, "Hey, I'm going to give my patients doublet chemotherapy. It's shown a survival benefit. It's well-established. If I can combine in, great.
I don't feel I can deprive them of the chemotherapy." What we're doing is we're trying to provide, one, for the combination strategy, and two, a data set for that not insignificant group of physicians to be able to understand what's going to happen.
We should say that study's focused on the combo with chemo with the other dimension to test whether adding tremie on top would add something, but we really want to establish the other chemo, the benefits of that combination. Should we move— oh, sorry, Marc. I think I'm going to answer the previous question on do we have a list or do we have a concrete plan for these external revenues or divestment? The answer is yes. I'm not going to give you the list, so please do not ask. I'm just going to explain why we have a list so we know which product, which activities, and also which parties could be interested. What we don't know yet, although we have already ongoing discussions, what we don't know yet is what structure the deal will be like, because obviously it depends on the counterparty.
This is why it is not easy for us to tell you what part will be recurring, what part will be sort of one-off, one part will be in external revenues, or what part could be in other income. It obviously depends on the structure of the transaction. I think if you look at the totality of external revenues and other income, and you see an expansion versus the level of 2015, I think you are in the right place. Should we move to the online questions again? Tim Anderson at Bernstein. Tim, go ahead.
Thank you. Your first-line lung development program with durvalumab, it's pretty apparent you're putting almost all of your eggs in the basket of combination therapy with tremelimumab. I'm wondering what happens if the combo data ends up looking lackluster. Your frontline monotherapy trials are an all-comer lung patients, but your competitors seem to feel that in frontline lung, it's risky to look at unselected patients, so they're only looking at monotherapy frontline in biomarker-positive patients. Can you clarify for us what happened to the durvalumab franchise in frontline lung if the tremie combo ends up not working?
Sorry, Sean, do you want me to-
You added franchise in the end there, so I might ask Luke at the end for With regard to the outcome, let's go with the outcome of MYSTIC, which is really the lead frontline trial. As you're alluding to, Tim, that has durva tremie, it has durva as a single agent, and then it's versus standard of care. Three arms, one-to-one-to-one randomization, and now PFS and OS's endpoint. We are taking all comers. Obviously, the data will be analyzed by biomarker positive versus biomarker negative. Our hope is, we've presented some data that we feel supports this, that durva tremie will be truly differentiating in the PD-L1 negative patient population, which I will add is the majority of patients. Okay? Two-thirds to three-quarters patients, depending upon what data set you look at.
With regard to the PD-L1 positive population, it is possible that durva and tremie and durva are both active and active in a way that can't be differentiated. In which case, it is possible for us to file based on that data, a single agent durva for that PD-L1 positive subset. I guess what I'm saying in part is it depends upon the data, as you point out, there are multiple opportunities or permutations that could arise depending upon what it shows.
Jim, does this cover your question or?
I guess the question was whether there's enough powering that monotherapy arm of MYSTIC, just in PD-L1 positive patients to use that as a registration subset. You're saying that it is adequately powered to kind of carve that data out. If I could just clarify, your view also, I think you've said this before, on the percent of patients in frontline that are PD-L1 positive versus negative, that's a figure that differs from what Bristol Myers has said, I guess I've always tried to figure out why that difference exists.
Yeah. I'll tell you one challenge we have, and hopefully this will be resolved. I think some of what you're looking at is assay and assay cutoff effects. Now that the Bristol Myers and the Merck assays are out there and can be used for comparison, that presents an opportunity to really look at the same samples with the different assays and help to resolve this a little bit. You're right, there is a range of variability. A PD-L1 negative is the majority, but you're right, the exact numbers do vary. I think it's probably dependent upon the assay and the assay cutoff mostly.
Thank you.
Thanks, Sean. Seamus Fernandez, maybe we could ask the other question online here. Okay, thanks, Seamus, go ahead, and then we will come to the room in a second.
Great. Thanks. Can you hear me okay?
Yep.
Great. Just wanted to ask, specifically Pascal, as we take into context the opportunity that you're looking at, potential accretive acquisition, would you be willing to kind of put some brackets around the type of acquisition that you would consider? There's an awful lot out there. How long do you think it will take for some of those acquisitions that you might be considering for the owners of those businesses, do you think to kind of come together with you given the rapid pace of decline that we've seen? I assume that you would be more looking at biotech-type entities that are strategic. Maybe if you can just give us some brackets around the types of acquisitions that you would consider, and maybe a relative size as well would be really helpful. Thanks.
Okay. Thanks for the question. The first thing is that, as we said, they have to be accretive, because again, we believe our pipeline is full now. They have to be accretive, they have to be the right price. Importantly, they have to be strategically aligned with what we're trying to do. They have to be in autoimmune, respiratory, in cancer, in cardiovascular, diabetes, so that we keep building our presence in those key therapy areas. Finally, the size really depends very much on how big is the cash flow that is added for the direct acquisition and for the synergies. It depends on our ability to how much we can raise money as a result of all of this.
As I said before many times, we are agnostic as far as size provided it's strategically aligned, the price is right, we can add value, and we think we can execute. Executing on this acquisition, this critical, so that we don't distract the organization to an extent that what we gain through the acquisition, we lose through distraction on the pipeline. That's really as specific as I can be. In terms of getting together, it again, depends on the size. Some of these acquisitions, we integrate very quickly, we can integrate quickly, and the bigger they are, the more complicated it is. Again, size is only one consideration. It's the geographical complexity, et cetera. Every case is different, really.
May I ask just one quick follow-up on a clarifying piece of information on one of your pipeline products, roxadustat in China. Do you anticipate that we'll actually see data in a public forum based on the data in China or in 2016, or would you anticipate that sometime in 2017 because that trial will wrap up very late in the year? Thanks a lot.
Please stand by. Please continue to hold and please stand by. Please continue to hold and please stand by. Please continue to hold and please stand by.
We have no-
Please continue to stand by. Please continue to hold and please stand by.
That's something that ironically is probably something that's more sensitive for everyone in that group. Again, yeah, a good start. Also the flip side of that, of course, is that we lost some access with BYDUREON, and we took a defensive posture, and I think we'll come out of that quite well.
Yeah, I think it's an important point that Luke is making. If you look at the prescription share, the increase is very impressive, actually, it's kind of nice, but you should be careful to not extrapolate this too rapidly because you never know how things settle down. Certainly, it's very encouraging start of the year, there's no doubt about this. The bigger issue is really the class. If you look at the total class, it's relatively flat, essentially, out of this ketoacidosis issue. It's starting to pick up. Now we have good hope that the class will pick up. In fact, if you look at Japan, the class was negatively impacted also initially for different reasons. It was really dehydration issues in Japan. The class is starting to pick up quite nicely.
This is a good class, and many new agents face issues at the beginning. Just if you remember Crestor, some of you may not remember Crestor, but Crestor faced a very challenging start, again, for safety questions. The company at the time was able to resolve those issues, and then the product did extremely well. This is a good class. It's going to do well. There's no question. You just need to work through the issues in Japan and the U.S. For us in the short term, that's really the biggest question is how quickly will the class pick up? Then we'll come back to Matt in a second.
Simon, [inaudible] exam. I'm afraid I am going to bore Matthew with a quick two parts on the guidance. Firstly, you've included within the guidance the dilutive effect of Acerta and ZS Pharma. I was wondering if you could quantify that in aggregate. Secondly, to what extent is the Q4 SG&A performance a guide to 2016? Thank you.
We are not going to quantify the dilution. When we did the acquisition, the separate acquisition, we indicated the type of dilution. I think we said short-term and minimal for ZS, and we said moderate for Acerta, and we also said short-term. I think with this sort of a compilation of adverbs and adjectives. I think you can probably derive the impact of the dilution. I'm sorry that I'm not going to give you the exact number. The only thing I would add is the range of guidance at constant rate gives you a sense of where we think we could land and also of how do we manage that dilution overall. We can't give you a specific number for sure.
I think I mentioned in my talk, just to complement my answer, that we will be taking 100% of the R&D of Acerta, but as we only own 55% of the equity of this company, there is a loss because the product is not yet sold, 45% would flow back. 45% of the loss would flow back through the minorities. At SG&A, minus 11% Q4 gave an indication for 2016. What I said, the trend of 2015 on the whole year would increase, but probably not reach 11%. If I try to guide you, we've given you this guidance at constant rate for 2016. I'm personally very committed to delivering what we said we would do before. Essentially what we would do before, in sort of a roundabout way, is that we were going to bottom out in 2016, 2017, and grow from there. We're committed to this.
I'm committed to this. The only thing I can't absolutely forecast is the currency. That's the one thing that is really out of our hands. That currency impact, we will do our very best to compensate some or all of it. In fact, we are hoping that the currency impact will go the other way and help us. If it doesn't help us, we'll do our best to try and compensate this. We can't be sure we will be able to totally compensate for it. We are very committed to delivering, I'm committed to delivering what we said we would do before, which is sort of bottom out over the next, not two years, this year or next year. It's no longer the next two years, it's this year or next year, and then grow from there. Matt?
Thank you. Luke, can I ask a roxadustat question? Clearly, we get the Chinese data this year, and it could prove to be a very exciting start for the whole class. Can you just remind us on timing of the current approval time in China in terms of how long it's actually taking, on average, for a drug to get filed to approval? Because we think of it as 12 months in Europe and the U.S., I recall it's potentially significantly longer than that. When should we think of the commercial opportunity for roxa?
Sure. Just in terms of tracking approval time frames in China, I've seen so many reports on this and have tracked it myself. It's almost impossible to do the analysis because the key thing for roxadustat is it's actually treated as a local product. It's produced, the material is in China. It's actually a different formulation than the global supply. We said the correct terminology for the Chinese submission for roxa is-
Rolling submission.
Rolling submission.
Yeah.
To that end, what we said is that the submission would initiate this year. We did not say there would be clinical data available this year.
The thing to take home, it's very difficult to plan on Chinese regulatory time frames. Clearly it's a product which, because we constructed the file there's a dedicated program there in China. I think you could expect that, obviously the profile of the product has to hold up, but it should move relatively quickly versus a program which is coming in from the outside. The opportunity in China is enormous, both in terms of just the straight-out dialysis population, also peritoneal dialysis is quite common in China as well. Again, there's an attraction there. If you look at the pre-dialysis population, that's directly correlated with the disease burden overall with such things like diabetes, and that population in China is unfortunately quite large. It remains an attractive product.
The process is not as codified as say a rolling submission in the U.S., but the product is still part of the new process called the Green Path. Clearly the authorities have put it in this process because it is a local product, as Luke was explaining. It's really addressing an enormous need in China. Diabetes is exploding. Kidney disease is rapidly growing. They don't have enough dialysis centers. They need new medicines to help those patients. Clearly they have a lot of reasons to fast-track this project, but it's not very codified. It's hard to predict how long it will take.
Just a very quick follow-up to Sean. When will we see clinical data if it's not this year?
I don't recall what we've committed. Yeah, I think it was half one next year was what we committed to. Let me look that up for you. The China-
While you do that, maybe we can move to another question and return to that.
Okay.
Sorry. A little bit from this side.
Thank you. It's Simon Baker from Exane. I have some questions on respiratory, please. Firstly on SYMBICORT. Clearly the pressure stepping up in Europe, your thoughts on how that will evolve from here, but also your expectation in the U.S. market, potentially generic. I know we can debate, but how you think about that and what you put into your guidance for expectations there for SYMBICORT. Secondly, on PT003
Is there anything that you can learn from GSK's experience with Anoro? Clearly now they've struggled to take share from Spiriva, and they appear to be reverting back to pushing their single agent LAMA in combination with Breo to offer the open triple, which you won't have the opportunity to do until you have your closed triple. What can you do with PT003 in the meantime? Thank you.
Good. Yep. I'll break that into chunks. With Europe, we've got three analogs there, but we've kept 90% of the volume. It depends on the market. Some of these markets, you have an automatic mechanical drop in the price. You're out of that control. Really then you're arguing over volume, and we've maintained that volume effectively. We don't guide by product levels, but there's been some figures floating around out there. I think it's fair to say that we're quite confident about that market. There will be pressure on SYMBICORT in Europe. Again, we're quite comfortable where it's going as a trajectory and where it's holding and our ability to hold that. Remember, we've been able to grow share with SYMBICORT globally. We've actually grown share in the U.S. too. If we look at the U.S., there's price pressure.
Again, volume does compensate for that. Again, we've picked up MBRX, we've picked up TRX. In a sort of a marketing battle, I think we can keep share and hold it. There will be price pressure, but not catastrophic price pressure. In terms of generics in the U.S., what's been disclosed publicly is exactly in line with what we had in our own internal forecast and what we built the long-range plan on. That's filing, of course. We have to see if they get approved. We know there's quite a complex history with inhaled molecules in the U.S. In terms of changes in the dynamics of the market, I think in some levels, there's a timeframe there for the payers. They've got this on the horizon. It actually changes the dynamics in terms of the trade-offs the companies are prepared to make.
Again, we look at each negotiation in terms of that balance between supporting value and not destroying value, and then also market share and try and make an intelligent decision out of each one of those events. In terms of PT003, I've said this before with Saxdapa, it was a little bit longer than I was hoping for, but there is an advantage in coming second. Sometimes you can learn. I think there's broader dynamics, which now that BI has entered the marketplace with their LAMA/LABA, that's starting to change things. Before with Stiolto, that may shake things up a bit more and dislodge some of these patients who are on a LABA and quite sticky. There's lots of things that we can learn in terms of preparing the market, doing some work there.
We've shown in Europe with our other LAMA/LABA that we can take share and compete. With 003, I think we're quite confident. Ultimately, it depends on the label you get, but we're optimistic, and we think there'll be a high demand for this product in that formulation.
It's one of those classes that takes time to develop, it's a very dynamic market, and the problem is that the share of dynamic patients is actually limited in the total prescription volume. If you look at the dynamic market itself, there is in a certain number of countries, 40%-50% of new scripts, new initiations are for LABA/LAMA away from Spiriva. It's actually starting to pick up in quite a number of markets. The problem is that it really takes time for those new initiations to turn into a large volume of total prescriptions.
Yeah. We can go back to Rox.
Katrin and maybe John.
You did the lady, the vaccine.
Oh, I'm sorry.
You said you had.
Oh, okay. Good. Yeah. I'm sorry. My
Do you want me to answer the roxadustat question?
Yeah. Okay. Sorry. Yes, if you have the answer.
Let me go back to the roxadustat. It's 2017. Again, the submission is rolling. It's ongoing, and as Luke said, we're not 100% sure what the review time is. It's not codified. 2017, there will be data from other trials outside of China as well.
I'm Marietta Miemietz , Primavenue. Just wanted to make sure I understand your SG&A comments correctly. Presumably most of the costs that you're looking to take out over the next couple of years, that's actually primary care infrastructure, which you can basically take out as soon as the loss of exclusivity occurs and not a minute earlier. Then you just have, let's say, a three-to-six-month lag effect before it actually comes out of your core P&L because it just takes some time to get down to brass tacks with the employee representative. Is that the right way of looking at it in terms of modeling, or do you actually think that you can make any significant improvements to marketing effectiveness in emerging markets or specialty care? If so, how would that come about?
Just a very quick question on the TAGRISSO Japanese label you're expecting, given that the Japanese are really known for granting quite broad labels in oncology and not so much dissecting between different segments. Thank you very much.
Sean, maybe you can go the second question. Let me just follow the first one very quickly. The SG&A savings, they're coming, and they will come from a wide range of sources. We work a lot on admin costs, our IT costs. Our goal was to reduce by 30% from 2014 to 2016. We've gone quite a long way. We still have more to go this year. We're working on site costs. We're working on a variety of journey costs. When it comes to pure commercial costs, you're right that there is quite a bit of cost reductions that can come out of reducing our effort in primary care over time. We also have a program to improve productivity and efficiency in our commercial teams in all the emerging markets. We have an entire program that is focused on that.
We've increased a lot the size of our teams in China and a number of countries through the acquisition of the diabetes business, but also through expansion of our teams. We're now focusing really hard on improving the productivity of those teams. There's a whole range of sources of cost savings and productivity improvement. We'll come back. Can we have one or two more questions? Okay. Sachin?
Do you want me to answer the TAGRISSO?
Sorry, the TAGRISSO or Japanese Enbrel.
It's a little hard to speculate on the label, but regulators do what they want based on what they see in the data. The observation I will make is that the EU label is different than the United States label. In the United States, we have the T790M, but then you have to have failed first-generation EGFR molecule. In the EU, the T790M is in there, but this first generation having previously been treated is not in there. Japan does tend not to make little cutouts in its label, so we'll see what happens, but can't really be sure.
Sachin, maybe that would be the last question. Thomas, can I.
Sorry. Thanks for taking my follow on. Just one on cash flow. Given the vagaries of the P&L, I wonder if you just comment on cash flow. Operating free cash flow was roughly $2.5 billion and didn't cover the dividend this year, and that included $1 billion of externalization. Just any color on whether free cash flow will cover dividend in 2016, and how we should think about it on a 2-3-year view given the progressive dividend policy. One for Luke on Brilinta. You mentioned in your intro comments that an inflection might be seen post-guideline updates. Just any color on when we could expect that.
On the Brilinta side, we have actually seen already an inflection in the DDDs in hospitals, and that reflects a pickup in initiation. Luke, do you want to cover this, and Mark, you cover the second one?
Right now, if we look at the volumes on the 60, it's still relatively early days, but the DDD really did jump. If we look at the data in terms of who's being put on 60, we're pleased to say that 70% of those patients are actually beyond 12 months or around 12 months for Brilinta. In terms of guidelines, it's difficult to speculate. We hear certain things. We have asked questions. You've got the ACC, of course, and the AHA coming up. It's around key congresses like that where alignment seems to be there. I would just direct you back to the label in the U.S. with the statements around clopidogrel and just the broad nature of the label, which again gave us some confidence. We'll see what we get. We asked lots of questions about it.
Turning to the cash flow, basically the level of net cash flow would be similar in 2016 as they are in 2015. You need to understand the contributory nature of the externalization revenues, but also on the other income. It does contribute obviously to our cash flows, and it helps us sustain a relatively high level of R&D. One needs to understand that the external revenues is not only to sustain the cash flow, but the cash flow can be reinvested in R&D. I think this whole cycle needs to be understood.
The cash flow will be the same in 2016.
More or less.
More or less the same as in 2015. I think Mark is raising another point, which is an important one, is externalization revenue is helping us to create long-term value by partnering with someone who will turn a product that we probably would not do so well ourselves with because it's not part of our core strengths. Long-term value, but also short-term value because some of that money we are investing immediately in building a strong pipeline. We could save money and still deliver the same EPS with less externalization, less cost. Would we create a better business long term? Probably not.
I think your remark is true for the year 2016. It would be very similar to 2015. We also need to see that, and we have provided already 2014, the same post for 2017, where we said that basically the revenues would be more or less are broadly in line with 2013 at constant exchange rate. I think you can just extrapolate from this in many positions in the P&L. What we are doing is increasing our pressure, our cost discipline and our pressure on the P&L. We have conversely also increased the R&D spend.
Maybe with that one, I could call this meeting to a close and then thank you for joining us. In parting, just let me wrap up leaving you with a few messages. First of all, we're very much committed to the dividend. Nobody should ever doubt our commitment to a dividend. Two is we're very committed, I'm committed, as I said, to delivering what we told you we'd deliver on bottom half in 2016, 2017, go after this. Our guidance is in the range of this. Hopefully the question is not whether we deliver plus or minus 3% or 5% on this core EPS in 2016, 2017, but what kind of long-term value creating for the pipeline. We are very committed to this bottoming out. Again, the thing that we don't totally control is currencies, currency movement.
We'll do our best to compensate some of those movements if they are negative. If they are positive, we'll just welcome them, of course, we cannot guarantee that we'll be able to manage those. Certainly, very committed again to managing the 2016, 2017 period of time. Again, I think we're making great progress through the pipeline. We're launching our new products. TAGRISSO is doing very well. Really, hopefully we can focus ourselves on the post-2017 period of time. In the meantime, through this externalization and cost savings, we really are defending our EPS and hopefully at some point everybody would agree that externalization did work and we created long-term value. With this, thank you so much for joining us today.
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