Earnings Call: Q3 2015

Nov 5, 2015

Hello, everyone. This is Pascal Soriot. I'm the CEO of AstraZeneca. Welcome to the Q3 results conference call for investors and analysts. Our slides are posted online for you to download and follow. I'm joined today by Marc Dunoyer, our CFO Luke Miles, our EVP for Global Product and Portfolio Strategy and Sean Boren, our new Executive Vice President for Global Medicines Development and our CMO. In addition, we have other key members of the AstraZeneca team ready for your questions. We have Paul Hudson, EVP Head of North America Elizabeth Bjorg, Clinical Development Head for CV Metabolism and Mondher Majoubi, the Head of Strategic Business Unit Oncology. It's great to have so many of you present today despite competing events and we look forward to taking you through the results and achievements so far in 2015 and importantly, we look forward to the Q and A session. Before we get started, this is the usual Safe Harbor statement, but please turn now to Slide 3. The plan today is for me to provide a short introduction and a summary. I will then hand over to Luc for an update on our growth platforms and our products. Marc will cover the financials and the guidance. Sean will provide a pipeline update and I will end with concluding remarks before we take your questions. We plan to have about 30 minutes for the presentation and a similar amount of time for Q and A, so 1 hour in total. For the Q and A, I kindly remind participants to limit questions to 1 or 2 per person, so we have time for everyone. We can do a second round too as necessary. Turning to Slide 4. Within the results today, total revenue was stable at $18,300,000,000 year to date. We're pleased with this performance and the resilience of our top line despite ongoing patent expiries and competition from generic products that are creating substantial headwinds for us. The growth platforms grew double digit at 10% in the year to date and now represents 57% of our total revenue. Core EPS was up 2% in the year to date, but more importantly we were up 8% in the quarter this year, reflecting an increasing gross margin, but also the management of our SG and A expenses. We delivered strong news flows from the pipeline in the Q3, including 1 new approval and several regulatory submission acceptances. The importance of our new medicines was highlighted by the granting of priority reviews, accelerated assessment and number of FDA Fast Track designations. Further based on our performance so far this year, we've upgraded today the full year CER guidance as we see total revenue now being much more in line with last year and core EPS increasing by mid to high single digit percent. Marc will provide more details later on. So turning to Slide 5. And looking at the Q3, there was continuous strong pipeline news flow. Brilinta was approved in the U. S. For the treatment beyond 1 year based on data from the PEGASI study. As you would expect, in our industry, some projects go well and others suddenly can face setback. We did receive a complete response letter from the FDA for Saxadapa and we are currently assessing exactly what needs to be covered before we can bring this medicine to patients in the U. S. It's important to remember that in the meantime, we are pursuing approvals in Europe and elsewhere And we'll hear more about that in 2016. Sean will provide more details later, but it was reassuring that this complete response later didn't refer to heart failure for Saxxadapar or diabetes ketoacidosis for the SGLT2 class. And more to come during Sean's presentation. PTZ Audio 3, Brilinta and AZD-nine thousand two hundred and ninety one all received Japan and accelerated assessment in the EU. Further, we received FDA Fast Track designation for anifrolumab, tramilimumab and durvalumab. So quite a rich news flow for the quarter. Please turn to Slide 6. Total revenue was stable year to date, down 2% in Q3, reflecting the ongoing patent expiries and the generic competition as well as a lower level of externalization revenue compared to previous this year. Our growth platforms continued to perform well, growing by 10% in the year to date and they now represent 57% of total revenue. We continued to manage SG and A cost while investing in R and D expenses that grew by 22% year to date as we started new trials in oncology and elsewhere including COPD and LUPOS. We continue to have a very rich late stage pipeline with 15 new molecular entities in Phase 3 or under our registration and we support those through this R and D budget increase. We expect however R and D cost for the full year to remain in growth mode, but moderate next year and we would see 2016 R and D cost to be broadly in line with 2015. We expect this year SG and A cost will decline versus last year as we told you earlier this year we would deliver. More to come during Mark's presentation. We leveraged our stable revenues down the P and L with the core gross margin up by 1 percentage point so far this year. Core EPS for the year to date grew 2%. Importantly, we grew 8% in the quarter, which supports our upgraded guidance. So to sum up, given the top line resilience and the SG and A management, we've been able to continue investing in R and D, but still deliver on our core EPS goals. The results today provide reassurance about our ability to fund R and D investment without negatively impacting earnings. And this will be important as we move into 2016. Over the medium term, the continued performance of our platforms and our launches, upcoming launches will combine with our increasing focus on cost and cash generation to help offset short term headwinds and return our company to sustainable growth. With this, I'll hand over to Lux. Thanks, Pascal. And if we could just go to Slide 8, please. So starting with the growth platforms, we had the headline progress across all market, and that's exactly what we saw in Q3, which is encouraging. These main therapeutic areas and fast growing geographies are the key contributors to returning the company to steady growth and to achieving our medium- and long term revenue targets. Over the course of the next few slides, I'll review each of these in more detail. But overall, respiratory was driven by strength in emerging markets plus the new products. Brilinta made an important regulatory stride in the quarter on the heels of the PEGASUS study results. Diabetes was driven by the progression of strong launches and our global footprint, and it may be the fastest growing global diabetes franchise at the moment. Emerging markets showed notable strength, particularly in China. And finally, Japan maintained solid growth in the 3rd quarter. If we go to respiratory on the next slide. So respiratory grew by 8% year to date, driven by the strong performance of our emerging markets business and also the availability of new products in the U. S. And the EU. We believe this is comfortably ahead of global market growth of around 5%. We look specifically at Symbicort, it declined by 2% year to date. And in the U. S, sales were down 1% with volume growth offset by additional access and co pay assistance after formulary changes at the beginning of the year. This is what we discussed in Q1 and Q2. Symbicort achieved share growth every month since February and in September achieved an all time high for total prescription share. The maintenance of positive volume and growth of the share in the U. S. Speaks to the strength and resilience of this medicine in the eyes of doctors and patients and device loyalty. For Europe, a different set of dynamics and the business remains impacted by the 3 analogs now in the market, but we have a pretty good picture of what is at play there. Symbicort and Pulmicort both have notable growth in emerging markets, particularly in China. And China specifically represents an opportunity with a large unmet need in terms of untreated patient populations, both in asthma but also COPD. Pulmicort was up 47% and remains our leading product in China by sales. Substantial growth potential continues to exist in the market with trends to shifting from acute treatment to chronic maintenance treatment. The treatment expansion from large tier cities to more rural and community based treatment centers. As for the new products, JUDOZA and NAKLIRIS saw nice progress in the U. S. And Europe and are also the fastest growing llama bronchodilators in some dual clear, the dual llama lava, the launch is progressing well in about 15 markets where it's launched and continues to gain share up to 15% to 20% depending on the market. Next slide please, Slide 10. Brilinta, it was a good quarter. Brilinta grew by 44% year to date with particular strength in emerging markets and also the U. S. In the U. S, approval was granted for the post MI indication during the Q3, and that's an important milestone that underscores the role Brilinta can play in reducing the risk of subsequent cardiovascular events for patients both in the acute setting now in the longer term. The expanded FDA label for Brilinta to post MI patients also reinforced critically Brilinta superiority over Plavix. The launch took place in October and there was some inventory benefit realized already in Q3 as we prepared for that launch. The halo effect of the U. S. Label will increase market share, currently at 10.1%, as you can see from the chart, and should also increase the duration of treatment with more patients now staying on therapy for longer. And we're also encouraged by the increasing awareness and confidence shown by prescribing physicians and the feedback given to us following the label change. In the EU, Brilinta reinforced its position as a standard of care in the ACS market. And in Japan, regulatory submissions were completed both to the ACS and also to post MI indications. We move next to Diabetes. If we look at the total portfolio, it was encouraging growth, 26% year to date and it was driven by Forxiga and also the Bydorian Pan. Geographically, emerging markets were up 73% year to date. Bonglyzer sales were up 2% globally, driven by Europe and emerging markets and also Japan. U. S. Sales were down 15% as the medicine continued to experience challenges from a competitive market and also a very deliberate focus on Farxiga and the bidurian dual chamber pen. And finally, we still await the label update from GLISA following the April 2015 Advisory Committee meeting on the SAVA trial. For Forxiga, continued strong growth across all geographies, including the U. S, Europe and emerging markets. And as we look into next year, we expect the U. S. To soon benefit from improving pulmonary access and improvements around the patient access programs. Bydurean sales growth was 38%, ahead of a growing market of GLP-1s and reflected the successful launch of the dual chamber pen. U. S. Conversion from the single dose trait to the pen is around 60% of TRxs, up from 50% that we guided we explained in the first half. Next slide, thanks. For emerging markets, balanced performance, double digit growth continued in Q3. China maintained double digit growth, though at a slightly lower rate with strong underlying market dynamics. Our expectation is to continue delivering strong growth in China. There was also notable growth outside of China. Russia and Brazil are both growing ahead of the market and at double digit rates with many other countries following at high single digit rates. Emerging market growth overall was spread across all the main therapeutic areas, which I think is encouraging. Year to date, respiratory is up 32%, Brilinta up 93% and Diabetes up 73%. And finally, as we start to focus more on it in preparation for the pipeline, oncology was up 19%. Next slide, please. For Japan, we maintained growth in Q3 with an increase in sales of 6% and 3% year to date. Key growth medicines were Symbicort, Nexium and Crestor and these all saw continued progress in Q3 and maintained leading market share positions. Q3, Symbicort was negatively impacted by the comparative years, 2014 year's strong performance as shipments in the first half of twenty fourteen shifted into Q3. Nexium maintained its leading market position despite increased competition, and Crestor benefited from increased usage of the 5 milligram dose. We also progressed the pipeline in Q3, and we expect several regulatory milestones in Japan in 20 16, including for Brilinta, we submitted for ACS in the post MI indications and we anticipate being able to launch in Japan in 2016. Also, as planned, we submitted AZD9291 for regulatory approval and obtained priority review. This regulatory submission immediately followed the ones in the U. S. And the EU by only 1 quarter. And just to place this in context, if we look at Crestor and Symbicort, the time lag between the U. S. And EU was between 10 12 years. So again, the focus on accelerated R and D in Japan is paying off. I'd also like to thank the scientists and clinicians and product teams involved for their important contributions. We all look forward to bringing this important oncology medicine to patients as soon as possible and potentially ahead of the half first half of twenty sixteen. All in all, with the progress made, AstraZeneca's presence in Japan is expanding, and the company now ranks 7th in the country, as you can see on the right hand of the slide. On the next slide, new launches for an update on our most recent launches starting with Lynparza. So I think it's very fair to say there's a strong uptake in the U. S. Approximately 75% of the estimated 1200 prevalent BRCA tested fourth line patients are already treated with Lynparza. BRCA testing rates have reached approximately 75% in the U. S. And they have now doubled in the EU to about onethree of patients. Sales in Europe are growing, and they now represent around 20% of total Lynparza sales. The product is now launched in around 10 countries, including emerging markets with more than 1 in 5 sorry, with more than 5 more countries expected to launch in the final quarter. We look forward to upcoming data on LYNPARZA and the program potentially to expand the use of this important product. Turning to ARESSA. It was approved in the U. S. In July for first line use of metastatic EGFR mutated lung cancer with the first commercial sales recorded just a few days later. Critically, the launch of ARESSA has enabled us to accelerate the construction of our medical and commercial capability, which we expect to actively deploy prior to the launch of 9,291. Finally, Movantik continues a good Importantly, the patient experience has been Importantly, the patient experience has been very positive and the abandonment rate is very low. Finally, the product has been made available to patients in Nordic countries with recent additional launches in the U. K, Ireland, Germany and Canada. Overall, year to date and in Q3, our main therapeutic areas and geographic areas have focused delivered steady growth. With this, I'll now hand over to Marc for the financials. Thanks, Luc, and hello, everyone. I'm going spend the next few minutes taking you through our financial headlines and the upgraded guidance for 2015. Please turn to Slide 16. Looking at the year to date, we delivered another robust performance. As Pascal said, total revenues were stable over the year to date. External revenue represented about 5% of the top line. As we continue to experience high R and D productivity and focus on 3 main therapeutic areas, extension revenue will remain important in 2016. Our gross margin improved further, this time to over 83% of year to date product sales, reflecting the mix as well as manufacturing Core SG and A declined by 3% in quarter 3, but increased by 2% in the year to date. You may remember, however, the phasing of spend last year that was weighted toward the final quarter. We therefore remain fully confident of lowering core SG and A cost over the full year, both in value and in percentage of total revenue. The combination of top line stability, a stronger gross margin and a favorable outlook for core SG and A enabled us to continue significant growth in core R and D investment in the period. The increase of 18% in the 3rd quarter reflected the recent start of a number of clinical trials, in particular in oncology. The results today provide reassurance about AstraZeneca's ability to fund R and D investment without negatively impacting earnings. In a moment, I will take you through our full year guidance. And please turn to Slide 17. Turning to the P and L in more detail. The total revenue was stable year to date, but down 2% in quarter 3, reflecting the ongoing patent experience and generic competition as well as the low level of VCSEL revenue in the Q3. Encouraging progress this year in the cost of sales and our gross margin was accompanied by a 3% reduction in core SG and A cost in the Q3. This came on the back of a 1% decline in core SG and A cost in quarter 2. The core tax rate fell to 16% in the year to date after one off benefit in the first half. Anticipate the full year tax rate to be in the lower half of the 16% to 20% range outlined earlier in the year. The 8% increase in core EPS in the 3rd quarter supports today's upgrade to guidance. Please turn to Slide 18. Core SG and A cost reduction has been a focus for the business this year, and we have seen good progress. I'm pleased that we delivered a decline in the ratio of core SG and A to total revenue year to date versus full year 2014. Core SG and A cost also fell by 3% in the quarter following the decline in quarter 2. As example of the actions we are taking, we continue to improve our sales, marketing and medical effectiveness, which includes leveraging programs globally rather than a country by country basis. We are also focused on centralizing select functions and processes to deliver standardization and economies of scale. Please turn to slide 19. Turning to our upgraded guidance for 2015. Total revenue is now expected to be in line with last year, given our performance over the last 9 months. While maintaining good level of investment in R and D as more of our projects enter late stage, expect core EPS to increase by mid to high single digit percent this year. These upgrades reflect the cumulative effect of, among other things, revenue stability, a strengthening gross margin and successive reduction in core SG and A cost. Although not guidance, we also try to help you to understand the impact of exchange rate movements in the year. Based on current exchange rates, total revenue is still expected to decline by high single digit percent. We continue to expect full year core EPS at current rates to be broadly in line with 2014. Given the increase in guidance at CER, this reflects a continued tough drag from global currencies versus the U. S. Dollar. Thank you for listening, and I will now hand over to Sean. Thank you, Mark. It is a pleasure to be here speaking with you all today. I am both proud and excited to have taken over this role in September. By way of introduction, I trained as an MD PhD at the University of California, San Francisco and the National Cancer Institute, then as an oncologist at Stanford. I was previously at Genentech for 12 years where I gained experience across the various phases development in a broad spectrum of therapeutic areas. In the short few weeks since I joined, I've been extremely impressed with the breadth and depth of the pipeline and the high caliber of the individuals in the organization. I would like to assure you that together with the GMV team, we are committed to advancing the pipeline by pursuing a clearly defined science led strategy to translate scientific knowledge to good clinical experiments to new medicines to benefit patients. I welcome the challenge of executing our pipeline and look forward to meeting many of you over the coming months. Please turn to Slide 22. Next, I would like to review some late stage pipeline highlights in our 3 main therapy areas for the Starting with Rhea, we received acceptance for the PT-three regulatory submission in the United States for COPD and the detailed results for the Phase 3 trials were presented at the ERS Congress in Amsterdam in September. In CVMD, Brilinta received approval in the U. S. For the post MI indication and regulatory submission acceptance for both the ACS and post MI indications in Japan. As for Saxodepa, we were disappointed to receive the complete response letter, which stated more clinical data are required to support the application. No concerns were raised related to hospitalization for heart failure or diabetic ketoacidosis. We will work closely with the FDA to determine the appropriate next steps and remain committed to the program. As for DECLARE, our SGLT2 outcome study, the trial is fully enrolled. Finally, for oncology, we received priority review designation in both the U. S. And Japan and accelerated assessment in the EU for AZD9291. We also received FDA fast track designation for duvelumab for head and neck cancer and tremolimumab for mesothelioma. Q3 was a busy quarter for us and illustrates the steady progression as well as our commitment to the pipeline. Please turn to Slide 23. Given a fast evolving treatment landscape in immuno oncology, I wanted to provide some perspective over the 2015 to 2017 timeframe for the AstraZeneca portfolio and key ongoing trials. By the end of the year, we expect data from the durvalumab ATLANTIC trial in third line PD L1 positive non small cell lung cancer. The ATLANTIC study as well as the HAWK study and second line PD L1 positive head and neck cancer are both single arm Phase II trials designed as potential fast to market trials. Assuming positive trials and unmet need in their intended indications, they could potentially lead to regulatory submissions in their respective settings. However, given the evolving treatment landscape in lung cancer, there is now a lower likelihood that Atlantic can be used for regulatory submission. But we're still awaiting the data to make that determination. HAWK in head and neck cancer is expected to have data in the second half of twenty sixteen. Further in monotherapy, PACIFIC and earlier stage lung cancer as well as the sub study A of the ARCTIC trial and third line PD L1 positive lung cancer are both scheduled to report in 2017. The DETERMINE trial of tremilimumab in second line mesothelioma is now expected to report in the first half of twenty sixteen. As with so many clinical trials, the final analysis of DETERMINE is event driven and events have been coming in slower than anticipated. DETERMIN is a randomized Phase 2 with more than 500 patients in total. Outside monotherapy, AstraZeneca is continuing to lead the efforts in combining IO medicines. In particular, our anti PD L1 and anti CTLA-four, durvalumab and tremulimumab, it's evident from many data sets that patients whose tumor does not express PD L1 do not derive much benefit from monotherapy, but need a combination approach. PD L1 negative patients represent about 2 thirds of all patients and thus a very large opportunity to make a real difference in the treatment of their cancers. We have started several registrational studies of the durva plus tremie combo and are rapidly moving forward and consolidating our leading position in IO combinations. The first studies will read out 2017, including sub study B of the ARCTIC trial as well as MISTIC, our first line trial in non small cell lung cancer. Similarly, in head and neck cancer, CONDOR is expected in 2017 as well. Please also watch out for updated derva plus tremie data at the upcoming SITC meeting. Just a few words on CORAL and tatin. As you know, there is a partial clinical hold on recruitment for these combination trials, but patients already enrolled can continue treatment after re consent. There was an increased incidence of lung disease with the combination therapy as compared to each drug as a single agent, and we are working with regulatory authorities on how to monitor these events. There is no impact to ongoing discussions with regulatory authorities on AZD9291 approval. In summary, as a newcomer to AstraZeneca, I am very impressed by the IO program and in particular, the combination work where we are in a leading position with DURVA and Tremi as well as many earlier stage programs. And I'm looking forward to keeping you updated on our continued progress here. Please turn to Slide 24. Between now and the end of 2016, we expect steady news flow from our advancing pipeline, including regulatory approvals, regulatory submissions and Phase 3 readouts. Focusing on events through the first half of next year, for regulatory approvals, we expect to hear on lisinurad in the U. S. In late December. And in the first half of twenty sixteen, AZD9291 has its official PDUFA date and EU anticipated approval for lung cancer and PT-three, its PDUFA date for COPD in the U. S. As for key regulatory submissions, we expect to submit bardalumab for psoriasis by the end of this year. And in the first half of twenty sixteen, berlinta and stroke and durvalumab for lung cancer and tremelimimab for mesothelioma, our first potential entrants in the immuno oncology market. As for key Phase III III readouts, we expect durvalumab for lung cancer in the current quarter and in the first half of twenty sixteen, trimilimumab for benralizumab for severe asthma and Lynparza for metastatic breast cancer. As you can see, there are many key data points expected in the coming months. To highlight our key late stage pipeline programs, we will be hosting a late stage pipeline conference call on December 2. We look forward to exploring these important programs in more depth at that time. And with that, I would like to hand back over to Pascal for closing comments. Thank you, Sean, and again, a warm welcome to the AstraZeneca team. It's great to have you here with us today. Please turn to Page 26. I would like to summarize the year to date and the Q3 results. Total revenue was stable despite the ongoing generic competition and they are strongly supported by our growth platforms. The core EPS was up 2%, up 8% in the quarter as we managed SG and A costs, but R and D investments increased to support our very rich pipeline. We saw very good news flow from the pipeline and we are able to upgrade full year 2015 guidance. We remain on track to deliver on our medium and long term goals. With this, I would like to thank you for your attention and I will now hand back over to the operator for Q and A. For the Q and A, I kindly remind participants to limit questions to 1 or 2 questions per person, so we have time for everyone. Thank you so much for your cooperation. Operator, over to you. So maybe we can start with James Gordon at JPMorgan. Go ahead, James. Hello. Thanks for taking the questions. Two questions, please. The first one was about diabetes. And the question was that last year you've given a target for 2023 of $58,000,000,000 for diabetes. And there's been a lot going on in diabetes in terms of side effect issues and regulatory. So my question is, do you still see that as achievable? That would mean that the business had to triple between now and then? Or could that now be challenging? And the second question was just on 2016. So obviously, the U. S. Quest or generalization to navigate, there's a few different levers to get there, SG and A cuts, the divestment income, but also potentially a buyback or doing a bolt on. Just how do you think about the weighting of those different drivers? And could we see you actually deploying the balance sheet to help you get there? Yes. Thanks, James. Let me cover, first of all, the diabetes question. I think what I would like to say first is that we remain committed to our long term goals. And in fact, we just finished our long range planning process, and we presented it to the Board this week as we do every year. And I can tell you that our plan reflects is very much in line with previous planning and reflects that our 2023 goals are achievable from our perspective. Having said that, as you would imagine, in every plan, you have ups and downs. So what our planning reflects now is lower diabetes sales, but higher oncology sales. So if I talk about diabetes, in fact, we are doing better outside the U. S. Than we had expected originally. And in every emerging market I go to, I can tell you that when I ask people about their growth story, their growth story is very much about diabetes. So we're very delighted to have diabetes as part of our portfolio. We are a global company. And even though every geography behaves a bit differently and it's clear that diabetes a bit of a competitive field today in the U. S. Outside the U. S, there's enormous opportunities. We do very well in Europe and in the emerging markets in particular we do well. Got to realize in those countries, cancer of course is an issue, but the big issues that they are dealing with today are cancer, hypertension, diabetes, COPD, asthma, enormous opportunities in all of those diseases to help patients. So we do very well outside the U. S. In the U. S, we are, I would say, doing okay, but certainly not as well as we were we we have more clinical data. We have launched Olaparib. So now we it's not a rescheduled forecast for Olaparib. It's a full Alaparib forecast. And then we have more data for 9,200 and 9,100, so we become more confident with our oncology business. Was before. So that's kind of a if you want the net net of our forecasting a long range plan. As far as U. S. Cresta and the pressures that are applied to our business, well, I mean, the way we deal with this is continued focus on managing our SG and A expenses. So we have reduced them in absolute value and as a percentage of revenue. As we said before, we'll continue to deliver externalization revenue. And I think it's important to keep in mind those are here because our research engine is very productive. And in fact, we cannot develop and commercialize everything that comes out of this research engine. And we have said we're going to be disciplined and only pursue projects where we where they are in our core, these areas oncology, CVMD RIA. And even so anything that is outside our core, these are where we partner and we retain some long term value. We also do it in core areas where we believe we don't have the capabilities today and hematology is a good example. So externalization. And finally, the last thing is bolt on. So then you will pursue M and A and potential bolt on. And if we cannot do those, suddenly we'll have to consider or we will consider share buyback. But in terms of how we deploy capital, our priority will be to pursue bolt ons and M and A before so we can build long term value before we consider share buybacks. Marc, anything you want to add? No, I think you're absolutely right. We constantly look at the share buybacks, but we also benchmark them to potential opportunities we see outside. And until now, our eyes have always been toward the bolt ons. Thanks, Mark. Jo Walton, Jo, do you want to go ahead? Thank you. Jo Walton from Credit Suisse. Two questions, please. One going back to diabetes in the U. S, the Farxiga sales were actually lower in the Q3 than they were in the Q2. So I'm wondering if there is some element of competitive aspect that is important there. Perhaps you could address whether there's any shift in patients away from commercial plans towards government plans or whether this is just settling in of new promotional programs and we should start to see a strong acceleration? The second question is one for Mark, please. I believe most of our most of the sell side earnings per share numbers are fairly similar, but they may be made up in different ways. And one of the areas where our forecasts really are quite different is looking at the level of net debt at the end of this year and at the end of next year. So I wonder if you could just help us with some sense of actually how much cash is going out in restructuring both in 2015, perhaps how much you've done this year to date, how much you expect for the whole year? And again, so that we get things right for 2016, how much more cash is going out in 2016? Many thanks. Okay. Thanks, Joe. So maybe Luc, you could cover the diabetes Farxiga question and then Mark, of course, the next one is for you. Yes. So Joe, I think I mean there was an overall impact on the class with the signal that we're seeing with DKA in May June and the subsequent letter from regulators and you can really see that effect on the overall class. So we obviously were impacted by that with Farxiga. If you look at the share trends, that volume was picked up by GLP-1s, which clearly we benefit from and also by DPP-4s, which we didn't. I think as we look further out, clearly there's some positive trends to SGLT2s in terms of the AMPA REG data. Also in October, we tightened up some of our access programs and affordability programs, particularly in terms of cash. In terms of movement between government and other programs, no, not a huge amount of movement. And again, just in terms of actual sales, it was around $9,000,000 So again, we remain confident about the class. It's important to keep in mind, Joe, of course, GLT2 class is a new class and it's an innovative new class. And of course, you as with many new classes, you expect a few bumps in the road as you get started. I mean, if you go back to the statins, if you go back to Creston, it was launched, we certainly experienced quite a number of eventful developments as we launched it many years ago. So if you look at the SGLT2 class in Japan, we've had we being the whole class has had this issue of dehydration of patients that has really slowed down the class, but we see a pickup now. It's a good class and we believe it helps patients and it will grow and we see a pickup in Japan. In the U. S, DKA suddenly slowed it down. Our belief is that going to pick up again, especially this cardiovascular risk reduction is really the first time that you see it in the anti diabetic class. So Marc? Yes. So your first question on the net debt, I believe that for the end of September, net debt will be about EUR 5,800,000,000 Then your next question on the estimation of cash restructuring for 2015, it will be slightly inferior to EUR 1,000,000,000 and what we can say as of today for 2016 that the number should be slightly lower for 2016. Thanks, Mark. There's an online question from Sachin Jain at BOM. Sachin is asking whether we have met with FDA regarding Saxxadapa, FDC and whether we have a better idea of what the delay might be shown the question is for you. Yes. Thank you, Sachin for the question. The complete response letter, as I said, stated that we would need more clinical data to support the application. We are committed to the Saxxadapa combo approval and we have not yet met with the FDA. And as a result of that, we don't know exactly what more clinical data will be required and that leads us to not being able to provide any clearer guidance with regard to how long the delay might be, but we're hopeful to meet with them soon and then we will have clarity around that. I think it's important to recognize that we do not believe that this particular complete response letter will affect filing outside the United States. Good. Thanks, Sean. Tim Anderson, Tim, do you want to ask your question? Yes. A couple of pipeline questions, if I can. You mentioned daratumumab and tremelimab and the potential in lung, and I think you referenced in PD L1 negative patients. I think the most recent data set from Bristol on nivolumab and ipilimumab showed the greatest efficacy surprisingly in PD L1 positive patients, patients, which kind of came as a surprise and it goes against what's been seen in the melanoma setting with a combination of those two discrepant data between Bristol's combo in PL-one positive lung and your combo in PL-one negative lung? And then second question on your OX 40 program, it looks like you terminated the murine version of that antibody that's been in development for a long time. It was kind of odd to have a murine antibody in development, but you said you would pursue it as a tool to learn about the class. So I'm wondering what you did learn and why the sudden termination of the program? Yes. So two questions for Sean. I mean maybe quickly the your autonomy just a reminder of the SITC meeting this week look at this data. Tim, Sean go Yes. I think, Tim, the question will probably be a little easier for me to get into after tomorrow in Maryland, the SITC meeting, we will present some early data, I think intriguing on the PD L1 negative non small cell lung cancer and the Durvatremi combo. How to think about the difference between the different molecules, I'd say they're dosed quite differently. I think one of the things the world is dealing with is trying to figure out the way PD L1 negative and PD L1 positive are defined. I think we're going to have to work with that as well. So there are a number of variables there, but I think the conversation will be richer after we've made the data public. The murine OX40 antibody, that it is terminated. It's really terminated and replaced by the molecule that is human. So that provides, I think, some pretty obvious advantages as we move that forward in development. We've shared most of the data that we have on that mirroring molecule already. I think it has given us some idea of what we might look for as we move forward with the molecule that's currently in development. But it's terminated. I think it's really switched to what we believe is a superior molecule for that particular target. Thanks, Sean. And it was always the plan, as you highlighted, Tim, we are never going to take 3 molecules in the clinic. We always said we are going to take only 1, and it was unlikely to be the murine 1, of course, for obvious reasons. Nicolas Guillaume at Morgan Stanley. Nicolas, do you want to ask your question? Yes. Good afternoon and thanks for taking my questions. I have 2, please. The first one is on Saxa data. Obviously, you've been pretty clear as to which concerns FDA did not raise in the complete response letter, I. E. Increased risk of hospitalization for heart failure and diabetes, ketoacidosis. So any chance you could be a bit more specific about which concerns it did raise? I mean, is it a problem related to manufacturing, efficacy, safety or dosing? And my second question is on durvalumab. I've seen that a Phase 3 in first line head and neck in preparation called the Kestrel trial. Could you please elaborate on the design of the trial and notably whether you will include both HPV positive and negative patients and whether other criteria could be important? Thank you. Sorry, Nicolas, can you the second question, the first line, the study name you I just touched on. Castral. Okay, got it. Sorry, I missed it. So maybe I could quickly cover the Saxa DAPA question. Maybe, Sean, if you have anything you want to add, please add and I'll ask you to cover the second DAPA question. But the Saxxadapa, Nicola, it's there's no real serious concern attached to the questions. They're more to do with producing clinical data supporting the combination of the various dosage regimens. We can't be a lot more specific than this because we haven't met the FDA and we need to understand exactly what they expect of us. But it has nothing to do with any safety adverse events like decay or heart failure and has nothing to do with CMC. It's really purely producing the clinical data that they need to see to approve the fixed dose across those regimens. So we need to talk to them before we can answer specifically because the important part is to understand how long it's going to take to produce those data. Elizabeth, anything since you are here, Elizabeth is our Head of Development for diabetes. Anything you want to add, Elizabeth? No. I think you described it very, very clearly, Pascal. And we will hopefully meet with the FDA very soon and get a very clear picture around the amount of clinical data we need to produce and how long time that will take, and then we will get back and update everybody around that. Okay. So Sean, did you have a question for you? Yes. So the Kestrel, I'm going to call it a dervatremic combo question. The Kestrel trial is squamous cell carcinoma of the head and neck in the front line. And the trial is a Phase 3 trial randomized. It's got 3 arms. The arms are MEDI-four thousand seven hundred and thirty six trevalumab as a single agent. 2nd arm is the durvatremi combo. And then the 3rd arm of that trial is standard of care as the control. And I must admit, I am not I don't recall any exclusion of HPV carrier patients on that trial. So we might have to get back you with the specific information on that. My recollection is that it's all comers and they will both be HPV positive HPV positive and negative. But we can follow-up with you on that specific criterion. Mondher, anything you want to add or should we follow-up later on? Okay. Thanks very much, Sean. So we'll move to Richard Parkes at Deutsche Bank. Richard, go ahead. Yes. Thanks for I've just got a couple. Pasco, your statement in the release seems to focus a little bit more clearly on cost savings and cash generation than maybe it has in the past, maybe it's just my perception. But you've given us a bit of a stare on what to expect in terms of R and D costs for 2016. Maybe in terms of SG and A, you could give us some kind of where the pushes and pulls there that will be might drive SG and A cost in 2016, what we could think about there? Then the second one is just on PD L1, divalumab, the applicability through by the accelerated pathway with the FDA, which said you think is now a lower probability. I just wondered if you could kind of talk around the drivers there in terms of how quickly you can get that package together? And maybe do you think the FDA would still be willing to approve PD L1 therapy if there was a PD-one targeting therapy with a full approval? Thanks. Thanks, Richard. So the cost question first and maybe Mark jump in if you want to add anything. But for 2016, we can't be very specific until we give you guidance for 20 16. As usual, we do that at the beginning of the year. So we'll do that next year, early next year. But what we've said so far is that we will continue to support our pipeline. But having said that, R and D budget is expected to be broadly in line next year to what it is this year. And what that means is because their research engine is very productive, there would be more products for us to partner and so more externalization opportunities next year as we continue focusing on our core TAs and partner anything that is outside of those. As far as SG and A, I can't say more than what we've said before, which is that SG and A will decline in absolute value and as a percentage of revenue next year. That's our expectation. And we'll deliver our core EPS goal through a mixture of SG and A, cost management, growth of our core platforms and also externalization revenue. That's really the those are the levers for us to achieve our EPS. So, Marc, I don't know if you No, just to emphasize that we will continue our effort in 2016, the effort we have showed the progress on in 20 15, we will continue the effort for SG and A into next year. So nothing can change. I think it's really important to really say something maybe here that maybe we haven't really talked about as much as we should. But we have been working hard on productivity improvements over the last 2 years. And for next year, we'll do even more of that. These productivity improvements have driven a lot of savings and those savings have been reinvested. So essentially, if R and D is growing, it's not because we're not improving productivity. We are tremendously improving productivity, but we reinvest all our savings into more projects. If you look at the volume of projects, it's grown enormously. We've reduced many, many costs in many areas of the company. So with and the same in SG and A. With DURVAR, Sean, maybe you want to cover this one, but just to remind everybody, the accelerated approval, as you know, I'm sure is only valid until someone else, another product has received full approval in the indication you're targeting. So when a full approval has been achieved, you need to demonstrate that there is an unmet need and you address it with your product. So it's not in that instance, we're not delayed against our own plan. It's actually other compounds of the class have been able to file earlier than expected because many of them had earlier readout of their study and the FDA has been reviewing their submissions extremely quickly. So timelines have changed not because we are slower than we planned, but because the competing agents are moving much faster. There are still opportunities left for us, and we are exploring those, but the probability has dropped a bit. Sean, do you want to add more? Yes. Thank you, Pascal. I'll take a minute for this. I want to do one some clean up really quickly and get back to Nicolas' question about HPV and Kestrel. And that is all comers with regards to HPV. There is no exclusion of HPV positive patients or selection for HPV positive patients. Now, yes, back to Atlantic, I think and accelerated approval. This is indeed not a delay. We expect the data from Atlantic in third line PD L1 positive non small cell lung cancer patients in by end of year this year. And I guess the question is, is there an opportunity? I think if we look at the data, we look at the line of therapy, we look at the difference in the target, if the data is compelling, it's certainly the kind of thing that we can approach the FDA with. I just as Pascal said, when we look at how crowded the field has become and quickly so, we do believe the probability of success for that approach may be less than it was a while ago. I just want to remind everybody, by the way, I should have said it earlier is that our long range plan of last year was based on our base case scenario for the IO platform and that relied on that was based on the full approval of the monosubstance, not the accelerated approval. So the accelerated approval, we always pursue as an upside to our base plan and our LRP of last year. So there's from that viewpoint, we continue building our LRP with the full approval as opposed to the earlier accelerated approval from another substance. That's maybe a point to remind everybody. And the second is, you can go back to our first presentation to investors early 2013. Our strategy has always been combination. And in that area, we are certainly leading. We believe we are leading and we have early data, admittedly early data, but very encouraging data, which again we invite you to look at tomorrow. So moving to Sachin's question, online question, it's again for you Sean. AZD-nine thousand two hundred and ninety one regulatory discussions, are you still hopeful of ahead of PDUFA? And also if you could give Sachin and everybody an update on whether the recent safety update impacts our view on commercial partnering with PD L1 combo. So let me go with AZD-nine thousand two hundred and ninety one. Am I hopeful of approval? I'm always hopeful. You have to be hopeful in the drug development business. Our PDUFA date is in February, but there is a possibility that FDA will act on the molecule before the PDUFA date. And I think I mentioned that in reviewing the slides. The other thing that I did mention with regard to corilantatin is the partial hold from those trials does not impact the AZD9291 filing. And then the recent updates on safety, I'm guessing that you mean the PDL-nineteen-two ninety one combo. And in terms of a commercial partner, we really think that, that ILD signal is confined to that particular combination of agents and really doesn't affect our ability to combine PD L1 with other agents. What we're seeing was an increase in the frequency of ILD and not the severity as such. And I think what we need to do is have a management plan that allows us to collect more data on that combination in lung cancer patients and understand better to what extent is this manageable and to what extent can we see if there really is activity. Maybe one thing too maybe that I could add actually Sean here is that the population of patients who received this combination was a great majority were Asian patients. So we need more data, as Sean said, just to kind of understand. One of the things we need to understand is, is that issue limited to Asian patients? Is it a broader issue? And today, basically, the patients we were that were enrolled were mostly Asian patients. So that we clearly need more data and more time. Should I move to the next question by Simon Becker at Exane? Simon, go ahead. Thanks. Thanks for taking my question. I've also got 2. Firstly, on Nexium. Yet again, this quarter, we've seen a slightly slower erosion rate in the U. S. Than expected. And I was wondering your thoughts as to why that's been the case. Is this a question of the attractive levels of rebate that you're already offering, meaning that the price differential between you and even Multisource Generics is not as high as perhaps we thought. And I was wondering what that meant for the Crestor erosion next year. If I look at the discounts that the maximum discount, if you like, using the VA as a proxy for Nexium and then look at Crestor, the discounts on Crestor are even higher than the fairly significant discounts on Nexium. So any thoughts on how we should think about the Crestor erosion in light of the Nexium experience would be great. And then a quick question for Sean. Just now that you've decided on the human over the Muirine, OX40, I wonder if could just give us an expected timeline for development there? Thanks so much. Thanks, Simon. So we have Paul Hudson, our Head of North America. And Romy was smiling when you are talking about Nexium because he felt probably doing a good job, but then he stopped smiling when you talked about Crestor because we are in budget mode. So, maybe he thought we might expect more from him as a result of your intervention. Should I ask Luke to cover both of those questions? Yes, sure. So Simon, I mean, naturally, we know when these events are going to occur, so we have some time to prepare. And the U. S. Team did do a very good job defending Nexium. And we've kept actually comfortably more than half of the volume. But we are entering a multi source period, of course. So the stability relative stability that we've seen so far, I certainly wouldn't expect that, that would continue because there's going to be more competition between these parties. For Crestor, I mean, our current assumption is it's a more competitive dynamic. The key thing to remember, of course, is that we expect these 1st intrant and the 2nd May, and we do expect a more rapid erosion. However, between then, of course, we're continuing to grow Crestor and take share. Yes. Really remember this, the Crestor environment is going to be very different with many different products and a much more rapid erosion of price and market share for Crestor next year. Having said that, I think the U. S. Team has done a tremendous job with Nxiom this year. So, Marc Purcell at Barclays. Marc, go ahead. I think there was a question set on ONX40, but for me there are 2. The first is on AZD-nine thousand and ninety one. I hope you could help us understand the opportunity initially in second line and then in the first line setting? And then also there's some emerging data that the upfront use of EGFR inhibitors reduces the effect in versus PD-one and PD L1s further down the line. And given that you included there are a number of trials recruiting PD-one and PD-one's first line in patients with EGFR mutations, you can see how quickly in the second line this class of agents has been taken up and has put pressure on other classes. I just wanted to put all this lisinarad for gout. And the second question is on Lisinorad for gout. I wondered if you could just comment on the commercial opportunity and the launch readiness ahead of the PDUFA from the FDA 29th December. Good. So apologies to Simon about OX40. Sean, you can cover OX40 and 921. Let me just quickly give a make a comment on lisinohad so we can deal with this one. I think we'll wait to see whether we get approval to start with and also to look for what that approval looks like and then we'll make a decision as far as Lisinorad. We're very encouraged with what we've seen so far, in particular the advisory committee. But we really would like to wait a bit longer before making any comment on this. You know, I had and certainly one of the options for us for the Guard franchise is to potentially partner that. So we have to wait a bit to decide whether we do it ourselves, launch it when and whether or whether we partner. Sean, you want to cover the 2? Yes. Yes. I'm sorry. So first of all, again, apologies on the OX40, but let me go ahead and answer that with regard to the human molecule, that molecule is in Phase I, it's actually in 2 Phase I trials. So one is a single agent and then the other is again in combination with durvalumab. And obviously, you start out those trials with dose escalation to establish safety and then there are plans to expand in patients once we've established a dose as well. And both of those trials are ongoing. They're running. We expect top line results in 2017 in both cases. And I think that's really all we have on those. Back to 9,291 and there were a couple of questions in there. One was in lines of therapy. And I think that it is true that particularly in patients with a mutation, the drug is probably likely to be active in many different lines of therapy. So the question will be where is it best used? And I think that that's a question that we are studying. Separately is the 9,291 with regard to non mutants. And again, these we have a bunch of trials, the AURA trial series. And I think that that's those are being shared with you. And you might want to take a look at that trial list, to see where we're studying it. The other question you asked was about EGFR mutant and the there were 2 things in there. 1 was a class of was using EGFR inhibitors and then PD L1 inhibitors or PD-one subsequently. One of the things that's been noticed is that if your EGFR mutant, it looks like you're less likely to respond to the single agent anti PD-one or anti PD L1. So I think there's a confounded situation there, which is this people who have received and stayed on anti EGFR compounds for some time, is that a selection for another attribute which makes you resistant to immuno oncology? Or is there truly resistance having been previously treated? And I don't think you can sort those two things out based on the data we have right now. I think, Mandehr, do you want to talk about the lines of therapy question? Yes. Thank you, Sean. I completely agree with you. Just to add 3 points. First of all, in second line, you know that almost 60% of the patient who progress on first line TKIEGFR inhibitor are progressing through the T79M0 mutation. So clearly, the 2nd line opportunity is an important one. But we are not stopping there. We are, of course, exploring the benefit of this molecule in first line. You may remember the data we presented at WCLC in Denver with a significant of course, it's a single arm Phase II trial for now, but a 75% response. And more important, we did a landscape analysis with PFS at 12 months, which is 72%. As a matter of reference, first line TKI HFR inhibitors median PFS is 50%. So clearly, there is a signal and there is a much better tolerability, of course, of 9,291 compared to first line TK. So there is an opportunity in the first line, and we are doing the FLORA trial comparing AZD-nine thousand two hundred and ninety one to either IRESSA or Tarsiva in order to demonstrate a significant PFS benefit. And finally, we are not stopping in first line in advanced disease. We are developing 9,291 in adjuvant. And as you may know, we have our first adjuvant trial active and hopefully recruiting soon. And that's, of course, is paramount because we are there targeting disease free survival benefit and cure. So there is clearly a potential and opportunity to maximize the value of 9,291. Thanks, Mande and Sean. We'll take the last question, Jo Walton. Jo, go ahead. I'm sorry, it was a clarification. One clarification, one question. Did you say that there would be a delay to the Faxadapa filing outside of the U. S? The line clicked off and I couldn't hear the answer to that. And secondly, could you just tell us again, and I may have missed it, I think you said that you were already addressing 70% of the addressable population for Lynparza in the U. S. Could you just go through again what proportion of Lynparza eligible patients are already being reached in the U. S? Yes. Thanks, Joe. So the first one, for full clarity, we're proceeding outside the U. S. As per the plan. There is no we didn't refer to any delay, any issue outside the U. S. We are fully on track. As far as Lynparza, I'll ask Luke, but remember that the indication in the U. S. Is more restrictive than the indication in Europe. As you probably remember, we had approval in Europe with the indication we requested up front. In the U. S, we had a negative advisory committee, if you remember, mid-fourteen and then we refiled with a more restricted indication. So, Luc, go ahead. Yes. And I'd also add you've got the G Braca dimension there as well. So it's 5%, not 70%. And I think the uptake has been very positive. And also people are staying on the product slightly longer than we would expect, which again is encouraging in terms of the tolerability. And the testing rate continues to trend upwards in all markets. The other thing to remember when you look at the sales is that we have a sequential launch process across the globe. So it should provide more color as we look into 2016. And then finally, we have quite a dense program with Lynparza and we'll get more color around that next year. Very good. So let me thank everybody for your active participation. So I'd like to just maybe close by reminding you that we believe we had a good solid Q3 and our year to date results allow us to upgrade our guidance. So we'll continue to manage our SG and A cost and we'll deliver on our commitments to you. We continue doing what we told you we would do, progress our pipeline, invest in our science, but we also look for productivity improvements and certainly manage our cost to deliver EPS goals this year and next year and more importantly, deliver our long term sales goals in 20172023. Thank you for your attention.