Hello, everybody. It's Pascal Soriot here from AstraZeneca. It's really a pleasure to welcome you to our Q3 and nine months conference. It's my pleasure to introduce some of our team members here present with me in the room. We have Simon Lowth, of course, our CFO. We also have Briggs Morrison, our CMO and our EVP for Global Medicines Development. Finally, Marc Dunoyer, who's been our EVP for Product Strategy, M&A, and Business Development, and is our newly appointed CFO. We also are here in the room together with some of our finance and investor relation team members. Right. Let me just move on to the first slide. Our plan today is to provide a business performance update focused on the third quarter financial results, while also providing a progress report on the strategic priorities that we are working towards.
On business performance, third quarter revenue was down 4%. Again, as in the previous quarter, largely due to the loss of exclusivity on some of our products. We estimate around $350 million in impact this quarter. Our five growth platforms grew collectively by about 8%. As you can see here, the emerging markets grew by 5%, and so did Japan. We experienced growth in all five of these growth platforms. We made a lot of good progress this year with our pipeline. Sorry about this. We started phase III development on three NMEs. We filed three regulatory applications in the quarter, and we also announced four business development transactions, all to support our ever-deepening oncology portfolio. I will now turn to the headline financial results for the quarter. For the most part, I will be focusing on performance on a constant currency basis.
Simon will, of course, make more detailed remarks on the P&L in his presentation. I'd also like to attract your attention that we are reconfirming our financial guidance for the full year. Results, revenue in the third quarter was down 4% in constant currency terms to $6.25 billion. That is an improvement from the 7% decline for the year to date, reflecting the moderating trend on the revenue impact from losses of exclusivity. We said at the half year that we expected to see an uptick in Core operating costs in the quarter, as we continue to invest behind our growth platforms and our pipeline. Cooperating costs, that is R&D and SG&A combined, were up 9%. That is higher than the nine-month figure, and as Simon will show later, some of that is phasing of last year's spend. As a result, Core operating profit and core EPS declined more than revenue.
Core EPS was $1.21, which is down 26%. Of course, you will remember that the third quarter last year, we had the proceeds from the sale of NEXIUM OTC rights, which flattered results by $0.16 per share. This accounted for nine percentage points of the decline in core EPS for the quarter. After the usual core adjusting items, reported EPS was $0.99, a 16% decrease. That is better than the core EPS performance due to the intangible asset impairment related to olaparib, which was reversed following the resumption of phase III development earlier in the quarter. I will now look at revenue on a regional basis. Moving to the next slide. As I said earlier, we tend to focus our business performance discussions on a constant currency basis so as to have a true picture of underlying performance.
It is important not to lose sight of the impact that currency movements also have on our business, particularly when they are concentrated in one market, Japan, where we have lost $150 million to the yen's weakness in Q3 alone and more than $360 million year-to-date. Looking at revenue on a constant currency basis, the U.S. was down 8%. Loss of exclusivity accounted for around half of the decline. NEXIUM and CRESTOR were also down in the quarter, although both products were somewhat affected by destocking in the quarter. The declines were partially offset by growth for Symbicort, the diabetes franchise, Flomax, and Brilinta. Revenue in Europe was down 4% on exclusivity losses, partially offset by revenue increases for Brilique and the diabetes products.
In the established rest of the world, revenue was down 8%, largely due to generic competition for NEXIUM in Canada and for CRESTOR in Canada and Australia, where generics entered the market at midyear. In Japan, revenue increased by 5%. There's always a bit of noise in the reported numbers, as several of our key products have partners, where the timing of our shipments to them can markedly influence the quarterly trend. In terms of in-market demand, as you can see on this slide, we continue to drive strong volume market share in Japan with increases for NEXIUM, CRESTOR, and Symbicort, irrespective of the shipping patterns. Revenue in the emerging markets was up 5% in the third quarter, including a 13% increase in China, which was impacted by some inventory destocking in the quarter. As far as China, we are the second-largest multinational pharmaceutical firm in that country.
Our year-to-date growth was 18.5%, which ranks as fourth. Monthly data is pretty volatile, and as you can see here, the August data shows a slowdown in the market, but we still outperformed most of our peers. September looks to be back on track. Another factor to keep in mind when looking at our emerging markets business is that the quarterly sales evolution in 2012 was impacted by the supply chain issues we encountered last year, with sales depressed in the first half and with recovery in the second half. For the full year, we expect a high single-digit growth rate in the emerging markets. I will now turn to the three product franchises amongst our five growth platforms, and let me start first with Brilinta. Brilinta revenue in the quarter was $75 million, up from $24 million last year.
In the U.S., we are driving the execution of our performance acceleration plan, while we make steady progress in our rest-of-the-world markets, in particular in Europe. In the U.S., the performance plan includes new promotional campaigns with sharper differentiation and a strong competitive focus. The addition of the primary care sales support to implement the in-hospital selling activities so that we manage the continuity of care from patient initiation in the cath lab through to discharge and the full course of chronic outpatient treatment. We also have the transition of care specialists, the 200-person force of former cardiac nurses that are now fully deployed since the beginning of the third quarter. We finished this in July. We've improved our formulary access in managed care, and we're also launching retail stocking programs to make sure that there is Brilinta on the pharmacy shelf when the patients get their first prescription filled.
As I said, when we launch these programs, we expect them to drive performance toward the back end of this year. At the full-year results in the early part of next year, we'll make an assessment of the Q4 performance and make any adjustments to our plan in the light of that review. Let me move to the next slide and show you that our NBRx, as far as the new to brand prescription share, we continue to see steady growth with Brilinta in the U.S. We've been adding somewhere between 70 and 100 basis points in share each quarter, which is now up to 6.3%. That is our share of the total of new starts for all indications, not just the ACS indication. That is our label and which we are currently limited to.
Total prescriptions, of course, lag the new brand to share but are also steadily growing. It's important to see the lag between the 6.3% you see here and the 1.6% total script. Takes some time for total scripts to catch up with new scripts, of course. In Europe, as you see here, the market share trends in the larger markets are also continuing in the right direction. We're now among the three global overall antiplatelet agents, and we are number two in Germany, in Italy, and in the U.K., and we continue to gain ground in France. It's not only in Europe. We are also number two in Canada and in Australia behind clopidogrel. As you can see, good progress in a variety of markets around the world, in particular in Europe. If I move now to the diabetes franchise.
Revenue from our share of the alliance reached $206 million in the quarter. Of course, some of the growth is compared to only a partial quarter of revenue in 2012 for Byetta and Bydureon in the U.S., and we only started reporting revenue in the rest of the world in April when we took over from Lilly. If I look at the Onglyza performance, you can see the yellow line on the chart is the new to brand share for the franchise. You can clearly see the decline in new to brand prescription share in the fourth quarter of last year and the first quarter of this year. An important driver of this was the changes in our formulary status in some managed care plans, as well as the increased competitive intensity for the DPP4 class.
We've maintained a relatively stable new to brand prescription share, hovering around 16% despite the launch of new entrants. You can see here we have stability over the last few months in our prescription share for Onglyza. If I now move to the exenatide family share, you can see that after many weeks of declining new to brand share in the U.S., we started to see some improvement in the quarter based on growth for Bydureon and some stabilization of the Byetta declines as we fully integrated our combined sales force and sharpened our brand positioning. Some good news for this exenatide family. Let me now move to Forxiga. For Forxiga, it's very early days, of course. We're seeing good physician acceptance in Europe, but it is also a very challenging reimbursement environment, especially in Germany.
In the U.S., we're looking forward to an advisory committee in December ahead of the January 11 PDUFA date for review of the NDA. There's no doubt that with growing prevalence of type 2 diabetes across the globe, it will continue to be a long-term driver of growth. Because it does consume an increasing share of valuable healthcare resources, governments and payers are ratcheting up the price pressure on the industry. Combined with increasing competitive intensity, this is affecting performance in the short term. We are in diabetes for the long haul, and we are determined to be a competitor in that market. Let me move to Symbicort. Symbicort continues its strong performance across the globe, with sales up 7% to nearly $840 million. If we look at the U.S. share trend, it is still very strong.
Share of new starts for combination [CRP] are up almost 3.5 points this year. Total prescriptions are up 18% compared with just 2% for the market. Very good results in the U.S. for Symbicort. Let me now move to our scientific leadership agenda. We've made a lot of progress since our last pipeline update of the half year. We had three regulatory filings accepted for review. The U.S. NDA for Epanova, for the treatment of patients with severe hypertriglyceridemia, was accepted for review by the FDA. The European EMA for naloxegol for the treatment of opioid-induced constipation was filed, and we are awaiting acceptance by the FDA. The European EMA for olaparib was accepted for review. Here we filed based upon the results of phase II studies in BRCA-mutated platinum-sensitive relapse serious ovarian cancer. We've also had three new phase restarts for NMEs.
We started the SOLO1 and the SOLO2 phase III pivotal trials for olaparib, and we started a phase III program in gastric cancer in Asian patients called the GOAL study. We initiated a phase III program for selumetinib in second-line therapy in patients with advanced or metastatic non-small cell lung cancer, whose tumors are KRAS mutation positive. Just this week, we began a phase III program for benralizumab, a potent inhibitor of IL-5. The first study in the program is designed to determine whether benralizumab reduces the number of exacerbations in patients with severe asthma that remains uncontrolled despite receiving high doses of inhaled corticosteroids in combination with a second controller, such as long-acting beta-agonist. We started the year with six new molecular entities in our late-stage pipeline.
Since then, unfortunately, we lost fostamatinib, we added two more through business development, we progressed four more NMEs into phase III clinical trials so that our late-stage pipeline has grown to 11 NMEs in either phase III or in registration. We remain active on the business development front, we've recently entered into four transactions that will significantly complement our in-house efforts in oncology. The acquisition of Amplimmune adds another immunotherapy mechanism of PD-1 monoclonal antibody to our increasingly comprehensive MedImmune portfolio. We entered into a worldwide licensing agreement with Merck to develop and market MK-1775, a small molecule inhibitor of WEE1 kinase, which is currently in phase II-A clinical studies in combination with standard of care for the treatment of patients with certain types of ovarian cancer. Our acquisition of Spirogen will deepen our own in-house technology platform in the area of antibody-drug conjugates.
In parallel, we are collaborating with an affiliate of Spirogen, ADC Therapeutics, where we can select two preclinical ADC programs for development and commercialization. Finally, our oncology portfolio in Japan will be strengthened by a collaboration with Janssen to co-promote abiraterone acetate, their innovative treatment for prostate cancer. This is a close-to-market opportunity as the regulatory application for abiraterone was submitted in July of this year. All in all, it has been a very productive quarter as we strive to achieve scientific leadership and advance our pipeline. I'm actually going to stop here and turn over to Simon, who will take you through the third quarter financial performance, after which we'll hold a Q&A session. Simon, over to you.
Well, thank you, Pascal, good morning and good afternoon to everyone on the call. I'm going to cover the third quarter P&L. I'll briefly touch on restructuring and on our cash performance, finally, I will close with our thoughts on guidance for the full year. Turning first to the third quarter P&L, I'm going to focus here on the core margins and profit. Of course, the press release does contain the statutory numbers and indeed a detailed reconciliation of those to the core measures. When I refer to growth rates, they're all going to be on a constant currency basis. Core gross margin in the quarter was 82.4% of sales. That is down 120 basis points compared with the third quarter last year, with an unfavorable product mix contributing to the decline.
Over the last several quarters, core gross margin has benefited from lower core Merck expense that's related to the second option amendments implemented in the middle of last year, that effect has now annualized. Expenditures on core SG&A were $2.2 billion, in line with the stepped-up levels of investment behind Brilinta, behind the diabetes franchise in emerging markets that commenced in the second quarter this year. If we look at the quarterly SG&A expenditures for the last seven quarters, you can see that spend in absolute terms is pretty level in both Q2 and Q3 this year. Part of the explanation for the pop up to a double-digit increase lies in the quarterly patterns in 2012. You can see that Q3 last year was the lowest quarter of SG&A spend last year. That provides you with some context for the 11% growth rate in this quarter.
You will also note that the fourth quarter in 2012 shows the customary seasonal move up in spend, which is a fairly well-established pattern for us. I'd also expect to see this pattern repeat itself in the fourth quarter this year. Core other income of $176 million was 60% lower than last year, as Pascal already noted in his review of the headline results, that's due to the $250 million proceeds from the sale of NEXIUM OTC rights in the third quarter last year. I'll come back to core other income when I review our guidance for the full year. Moving down the P&L, that leads to a core pre-R&D operating margin of 49.4% of revenue. That's 960 basis points lower than last year's level.
The decline was largely driven by the higher core SG&A expense and, of course, the significantly lower core other income, with lower core gross margin also a contributing factor. Our core R&D investment was up 7% in the quarter, as increased spending on in-licensed, acquired, or partnered projects was partially offset by productivity savings from our ongoing restructuring programs. In fact, productivity and restructuring programs are providing some of the headroom to invest, not just in the pipeline, but also in the sales and marketing support behind our growth platforms. Given the opportunities that we see to drive growth and value, we have guided to an increase in core operating costs.
That's the combination of core SG&A and core R&D expenses, and we expect that the increase in core operating costs for the full year on a constant currency basis will be towards the upper end of our low to mid-single-digit guidance range. Core operating profit was slightly more than GBP 2 billion in the quarter, 29% lower than last year. As I've already mentioned, around nine percentage points of this was related to the NEXIUM OTC proceeds in the prior year. Core operating margin was 32.4% of revenue, 11.4 percentage points lower than last year, the result of the decline in core pre-R&D operating margin, combined with the higher core R&D expense as a % of revenue. Just a brief word on restructuring.
Here, we've simply refreshed this slide from the last time to include the charges for the phase IV restructuring program that we took in the third quarter. You'll see that the year-to-date total is just over GBP 1 billion of the GBP 1.3 billion that we expect to charge this year. The program remains on track to deliver the GBP 800 million per annum in benefits by the end of 2016. Turning to cash. Cash generated from operating activities was GBP 4.9 billion for the nine months, compared with GBP 4.1 billion in the prior period last year. Lower tax and interest payments and improvements in timing benefits in working capital partially offset the lower operating profit in the nine months of 2013, which included some higher non-cash costs, whilst the lump sum pension contribution drove higher outflows in the prior year.
Our cash generation supports our commitment to our progressive dividend policy, whilst also providing the resources to invest in the business. Cash outlays on acquisitions were GBP 825 million, and net intangible investments of GBP 913 million includes the various upfronts for licensing investments in IT, as well as for the Merck arrangements. Let me conclude my remarks with our thoughts for guidance for the full year. As expected, the revenue impact from the loss of exclusivity has continued to moderate sequentially through the first three quarters of the year, with revenue for the nine months down 7% in constant currency terms. Based on the performance to date and the outlook for the remainder of the year, we continue to anticipate a mid to high single-digit decline in revenue on a constant currency basis for the full year.
On core operating costs, the slide here simply reiterates what I said earlier, an increase for the full year towards the upper end of our low to mid-single digit guidance range. Core other income is a change. We had previously guided for something under $600 million. Based on performance to date and the outlook for the remainder of the year, core other income is now expected to be around $700 million, providing some mitigation to the core operating costs. With a revenue and a cost profile in line with guidance, the company continues to expect core earnings per share to decline at a rate that is significantly higher than the decline in revenue in 2013. Financial guidance for 2013 has been based on January 2013 average exchange rates for our principal currencies.
Movements versus guidance rates have lowered revenue by around 2% and core earnings per share by around 3% for the nine months. I'll now hand back to Pascal, who will chair the Q&A session.
Thank you, Simon, for this very comprehensive review of our third quarter performance, which was very much in line with what we expected, given the impact of loss of exclusivity on the top line. Before we open to your questions, I would like to say a few words of thanks to Simon for the last day it is with AstraZeneca today. Simon has made a very significant and lasting contribution to AZ, helping put the company on a stronger footing for the future. I know that I speak on behalf of everyone at AstraZeneca in wishing him well in the next chapter of his career, and I can say that on a personal level, I will miss him very much. I'm, of course, delighted to welcome Marc Dunoyer into his new role as CFO starting tomorrow.
Marc brings a rare blend of financial, business, and science experience that will be critical in his role as we focus on delivering against our strategy. Now let me take your questions. If I may call for the first question, please. The first question is from James Gordon at JPMorgan. James, do you want to go ahead?
Hello. Thanks for taking my questions. I had two legal questions and one pipeline question. One legal question was about Pulmicort Respules . I saw that you announced last night that you'd won your appeal. The release refers to the case being remanded for further proceedings. The question there is, what's next in this case, or what could happen next? How confident are you now that we won't see the other operating income line disappear, that actually could continue out to mid-2018? The other legal question was on Brilinta. In the release, you mentioned the investigation from the DOJ into the PLATO study. Is that the investigation to do with events in Eastern Europe, and Poland, and Hungary? What exactly are the DOJ investigating? Just one pipeline question, which was benralizumab, so your IL-5 that's gone to phase III.
You're about two years behind GSK and Teva's IL-5. I think your product targets the cytokine rather than the receptor. Are there reasons to think this will be a differentiated product versus those other two products? Are you going for a different population or anything like that?
Okay. Thank you, James. Simon, do you want to take the first question, the Pulmicort question, and maybe, Briggs, you could take the pipeline question and the Brilinta study question?
Yes, certainly. Thanks, James, for the question. On Pulmicort, you'll have seen from our release that the Court of Appeals reversed, and as you said, remanded for further proceedings, a trial court decision that the generics didn't infringe the 834 patent. The Court of Appeal upheld, as you saw, the '603. In terms of next steps in the legal matter, we're obviously reviewing the decision, and we will be working through exactly what the next steps in the litigation process are. In addition, we are not therefore able to give further information on that at this point. The other aspect is that, as you'll recall, the Court of Appeals had enjoined the generics from entering the market during the pendency of appeal, and a mandate hasn't yet been issued from that court.
Upon remand, we'll just seek to extend the injunction during the pendency of further proceedings before any trial court. That's an update on Pulmicort. Briggs, over to you.
Sure. James, thanks for your questions. Let me first take the benralizumab question. I think if I heard the way you phrased it, I think you had it backwards. Our antibody targets the receptor, and through ADCC, enables depletion of peripheral eosinophils, and the other molecules target the ligand. What the differentiation will be, the clinical program will define. Obviously, we're hopeful that because of the more profound depletion pharmacodynamically, that we will see improvements in exacerbations and potentially also in FEV1, asthma symptoms, nighttime awakening, things like that. The program is set up in a way that hopefully, if that differentiation is there, it'll be revealed through careful experimentation. The question about Brilinta, I think all we can really say is that on October 21st, we did get a civil investigative demand from the U.S. Department of Justice.
It is regarding PLATO, the clinical trial that was the pivotal trial for the approval of Brilinta. We'll, of course, cooperate with this inquiry, and we really can't give any details on that ongoing investigation. I think it's important that we reemphasize that we have full confidence in the PLATO trial. It was, we believe, well conducted in collaboration with a number of strong academic groups. We had an independent data safety monitoring board. The FDA obviously rigorously reviewed that before they approved the product, and that's about all I can say about the DOJ request.
Thanks, Briggs. The next question is from Tim Anderson at Sanford Bernstein. Tim, do you want to ask your question?
Thank you very much. It's a pipeline question, the first one is, can you map out important news flow from here with your immuno-oncology assets, specifically your PD-L1 and tremelimumab? Importantly on those two products, can you talk about potential filing timelines? In their first indication. When would that possibly occur, roughly? Second question is, when you give earnings guidance for 2014, presumably in January, is that likely going to be qualitative like it was this year, where all you'll talk about is earnings growth relative to revenue growth? Are you yet willing to identify for investors what you think will be the trough year in terms of revenues or earnings?
Okay. Thanks, Tim. Great questions. The second one seems to be a question we've heard a few times before. Briggs, could you address the first one, the immunotherapy question?
Sure. Tim, thanks very much for the question. It's exciting to have someone ask us a question about the filing dates for PD-L1 when we've reported at this point a small number of patients in phase I. Obviously you see the same potential that we do. I would just comment that we are in the early stages of our PD-L1 program, and I don't think at this point we can forecast when we might be able to file. That program is still evolving. As you know from, I'm sure, your search of clinicaltrials.gov, tremelimumab is in a phase II trial for mesothelioma. There was a recent publication showing some interesting early signs for tremi in mesothelioma. Again, I think it's a little early for us to tell you what the filing dates might be for that.
Of course, we're also just starting up combination programs with those two molecules. As I said, I think it's a little early to tell you what the filing dates might be. In terms of news flow, obviously we would hope that there would be some additional information at ASCO in 2014 at the end of May, beginning of June as usual.
Thanks, Briggs. We'll share some additional clinical data at the ASCO. The only thing I would add as far as our filing strategy is we're looking at all the options. Of course, as you can imagine, would help us bring this product to patients as quickly as possible. As Briggs said, it's a bit early and essentially our clinical data will guide our strategy. Simon, do you want to take the other question?
Certainly, Tim. These are questions, obviously, that you and I have debated and others over the last year or so. Indeed, I think we addressed these questions at our investor day. Certainly, I think our thinking hasn't really changed since that time. The answer to your two questions, one about annual earnings guidance and secondly about trough year, to some extent they're closely linked in the same core thinking. The success of our company is going to be driven by our ability to grow and drive the growth in our great growth platforms, the five key growth platforms, and to accelerate the development of our pipeline. You've seen, I think, good progress on that. That will drive the revenue growth. We will invest hard behind securing that growth.
That will get layered on top of the remainder of the portfolio, which comprises a pretty well-established, stable revenue of mature products. Then obviously the key expiring brands of NEXIUM, CRESTOR, and Seroquel XR. Exactly where that growth sort of overtakes the decline on expiration is going to be a function of our success in driving the top line. We don't measure the success of the company by a particular 12-month window in which a trough might occur and we'll grow from. We're not going to declare a specific particular date in time. We're building a company for success for the long term. Really the same thinking flows back to our annual earnings guidance. The earnings in a particular year are going to be driven by our success in growing the revenue line, protecting the mature portfolio.
The costs, we're driving efficiencies in every area of our business. We've demonstrated we can do that. We've sustained high margins through a challenging period. We're also committed to invest, and we want to ensure that we invest behind the opportunities as we see them. That applies within the year. The earnings in the year are going to be a function of the performance in driving the top line and the investment decisions that confront us as we go through the year. The resulting EPS, therefore, is going to be a function of revenue and the investment. That's why we guided this year on our revenue and why we guided to movement in cost independently.
I imagine that the same thinking will continue and be shared with the market at the beginning of January, but obviously Pascal and indeed Marc will have a chance to share with you our updated thinking at that time.
Thanks, Simon. As you can see, Simon is as passionate about AZ as he was several months ago. It's really good to see. The next question is from Amy Walker at Morgan Stanley. Amy, go ahead please.
I have three questions, if I may please. The first one is that I think you mentioned in the second quarter that diabetes was the lion's share of the incremental operating cost spend in your revised guidance. Diabetes sales in the third quarter still came in some way below consensus expectations, and I think one of your competitors in Europe seems to have had a surprisingly weak quarter as well. Can you just talk about how your overall revenue share within the market is developing and what you expect to be able to achieve with the higher spend than you'd originally budgeted for? Do you see any risk that there could be even more investment in absolute terms on a quarter-by-quarter basis required in diabetes beyond the end of this year? That's the first question.
The second question, in view of the FDA's recent decision regarding the sNDA from Amarin and the need for a CV outcome study, do you expect to have the outcomes trial data available ahead of your filing for the CRESTOR/Epanova combination? Do you see any risk to your recent Epanova filing and the high triglycerides around the potential need for an outcome study in that indication? The last question, I'm sorry to come back to the Department of Justice investigation. I wondered if you could tell us, is it having any impact on your activities in Brilinta at all from a sales perspective in the near term? Are there any restrictions that have been enforced on you as a result of that investigation? Thanks very much.
Thanks, Amy. Actually, Briggs, maybe I'll ask you in a minute to address the Amarin question. In fact, we had a similar question received by email from Mattias Häggblom, probably can address both at the same time, if you don't mind. Amy, let me just quickly cover the DOJ question. We haven't got any restriction on sale or promotion of Brilinta as a result of this investigation. As you can imagine, we support the investigation and cooperate as much as necessary. There's no impact we can see on our sales, no restriction to our promotional activities. As far as diabetes, we are in a launch phase with diabetes. We have several products that require promotion. There's a very competitive marketplace, some of those products are in launch phase or relaunch phase. Forxiga in Europe, for instance, is being launched.
That explains why the investment is very substantial, combination of this launching period and the competitive intensity. I would say overall, as you saw a minute ago, our market share with Onglyza has stabilized in the U.S., we can see that the share of the exenatide family is slowly picking up. It's stabilizing, it's picking up. Byetta is stabilized, Bydureon is growing. With that franchise, we've got some good news, encouraging news. As you probably remember, we mentioned it at the second quarter call, we increased our share of voice very substantially, in the second quarter. In fact, with a full impact in the third quarter. We're also addressing our presence in the endocrinology market segment, the endocrinologist office. We're hoping that all these actions will have an impact over the next few months in the U.S.
Briggs, maybe you want to cover the Amarin question?
For Amy and Mattias, the email question. First, let me be clear that what we have filed for in the U.S. is for the high triglycerides patients with triglycerides above 500, we don't think that the Amarin ad com in any way affects that particular indication. That application is in. Our PDUFA date is May of next year. The second question is there a utility for physicians to have a fixed-dose combination of Epanova with CRESTOR? We believe that there is, we're continuing to work on that from a technical and development point of view. The third part of that really is your question around the claim for the population who has triglycerides between 200 and 500. There, we're in discussions with the FDA to get better clarity on their view of that and what implications that would have.
We're, of course, in the planning phases of setting up our cardiovascular outcomes trial. We think that what we heard at the advisory committee will help us further refine the design of that trial and be able to answer that question definitively.
Thanks, Briggs. Let me just maybe quickly add that, as you can imagine, when we licensed this product, we looked at a variety of scenarios. The scenario where we would not get approval based on the 50% recruitment was one of the scenario we considered. We probability-weighted all the scenarios in the valuation of this opportunity. Now, whether we will still be able to launch based on the, in the mixed dyslipidemia, based on the 50% recruitment, we don't know. We still have to go through the discussions with the FDA. At the end of the day, our belief, our fundamental assumption here is that reducing triglycerides will actually deliver a positive cardiovascular benefit, in particular in those patients with high triglycerides level above 200 and low HDL.
Even that population, which is very large, actually, in that subpopulation, we should be able to show a cardiovascular benefit and bring to the market the first product, having demonstrated cardiovascular reduction in this population. I'll move to Andrew Baum at Citi. Andrew, do you want to go ahead?
Thank you. Good afternoon. Three questions. First, Marc's background perhaps does not make him the immediate obvious choice for CFO of a company committed to maintaining its dividend through a significant period of LOEs. How comfortable should investors feel about continued high levels of commitment about keeping that progressive dividend policy in place, certainly over the next few years? Second, how much additional productivity improvements remain, net productivity improvement, after the very significant headcount, I think it's about 15,000 jobs net taken out of the organization over the last six years?
Particularly in relation to the CRESTOR LOEs, which Marc will be looking to handle. Thirdly, leading on from that, would you like to comment on how comfortable you are with consensus earnings forecasts over the next three years? Thank you.
Thank you, Andrew. Let me just quickly address the dividend question. Maybe Simon, you want to chip in in terms of productivity. Basically, we are still very committed to the dividend policy. There is no change. We are committed to what we said earlier this year. We will support the dividend policy we've got in place. I see no reason to change that. As to Marc's appointment, the role of a CFO is changing in companies, what I'm looking for is someone who really can play the role that Simon played. Actually, someone who is able to understand the business and be a strategic thinker, not only a financial expert. I'm looking to the same strategic partnership with Marc that I've had with Simon over the last 12 months.
Marc brings this unique blend of financial experience, also business experience in a variety of markets around the world. I look forward to working with him. His appointment doesn't change anything to the dividend policy that we communicated earlier. As far as the additional productivity improvements, Simon, do you want to cover this?
Yeah, certainly, Andrew. Thanks for the question. Dealing with the four key elements of cost. We see in cost of goods, we see continued opportunity to drive productivity improvement, efficiency improvements, indeed, you can see our gross margin staying up in a very robust level despite both pricing pressures in a number of markets also a business mix that's shifting towards markets that have historically been rather lower priced. We continue to find opportunities to drive efficiencies in our supply chain and our factories through continuous improvement in individual facilities through restructuring of our supply chain and moving more production to lower cost locations. For example, we are committed to a pretty significant investment program in our China facilities, which give us very low cost of production for that region.
If you move to G&A, we're on a journey to continue to improve the infrastructure cost in the business. The footprint changes that we announced earlier this year, we're in the process of indeed accelerating the pace with which we are able to implement those changes which will allow us to bring down the facilities and infrastructure cost in G&A by moving people to a smaller number of locations, designing those locations effectively. We see opportunity to bring down the facilities infrastructure cost. IT is another area that's been, and indeed, you and I have talked about this in the past, Andrew, a very substantial area of spend for the company. With the introduction of new technologies, particularly cloud-based technologies, our new CIO is seeing very significant opportunity to help us deliver better IT, but actually at lower cost.
I think G&A, there's the scope for continued efficiency improvements to allow us to more than offset inflation in that area. In sales and marketing, we've worked very hard to optimize the above-market structure in our commercial organization. That's pretty thin at this point in terms of the overall organization. As you know, we've also worked very hard on the targeting and the efficiency of our sales and promotional activities. I think what will drive the sales and marketing spend, of course, there are continuing efficiencies, but this is going to be about where we choose to invest and the level of investment we choose to make, and we're going to invest where we can see an opportunity to get a return.
Going to your specific question around CRESTOR and other LOEs, I think we've shown that when products go off patent, we either remove the resource behind them or we redeploy it, where there are good value creating opportunities to do so. We apply exactly the same principles with the forthcoming LOEs. Finally, on the R&D cost, you'll recall Briggs at our Investor Day talked about the growth in our late-stage pipeline. Talked about, I think Briggs from memory, 12 in late stage by 2016. We're considerably ahead of that schedule, which is clearly putting considerable pressure on our late-stage spend. We're finding ways through addressing productivity and infrastructure cost in earlier stages of R&D to absorb that and live to our commitment of keeping R&D costs at a broadly flat.
That's a bit of a cook's tour through the cost base, Andrew, but important question. I hope it gives you a sense of where we are.
Thanks, Simon. Let me just add on that. As I said, for the dividend policy, we remain committed to it, and we also remain committed to all the financial guidance we gave earlier this year. I could quickly address another question that is related to yours from Christopher Lyrhem, which we received by email regarding costs and how should we think about those in 2014. It's a bit early for us, of course, to give any guidance as to next year. The one thing I can say is that we have lots of productivity improvement programs in place, as Simon was saying, and we will stay committed to what we said earlier. We will keep our R&D budget stable with the moving parts that Simon was describing a minute ago.
Our SG&A will adjust according to the development of our sales so that we can stay true to our margin commitments that we presented to you earlier this year. Certainly, Marc is very committed to supporting this and driving cost efficiencies next year so we deliver on those goals. Let me move to Kerry Holford at Credit Suisse. Kerry, do you want to go ahead?
Thank you. Yes, three questions please, if I can. Firstly, on CRESTOR, can you just detail what proportion of the incremental decline we saw in the U.S., so the difference between the decline in demand and sales, was due to the lower price realization you talked about in the statement versus inventory destocking, and whether you expect either to ease into Q4 and beyond? On Pulmicort, we saw a weaker than anticipated ex-U.S. performance, and that was despite the strong growth in China. To me, that looks like it's an increasing decline happening in Europe. I'm wondering whether this is a Pulmicort-specific issue, or is this an example of a broader trend where continued price pressure in Europe is essentially wiping out any growth from emerging markets?
Lastly, on diabetes, you talked about promotional spends having increased already year-to-date, and this is now reflected in your new guidance for the full year. Today we've also heard that Novo will add an additional 400 reps in the U.S. in the fourth quarter. I wonder if we should expect AstraZeneca to follow suit here. Thank you.
Okay, thanks, Kerry. Quite a number of questions here. Let me start with CRESTOR. In Q3 with CRESTOR in the U.S., we had a slight volume decline and a slight price increase. Essentially, the movement you see is quite a stock movement. The important piece for you is to look at the market share, and our market share is stable month-over-month. We have a very stable market share with CRESTOR in the U.S. If you think of CRESTOR over the next few months for the U.S., just keep this in mind. Our market share is stable. As it relates to diabetes, I don't see any substantial increase in promotion over the next few quarters. The only driver of incremental promotion will be the launch of Forxiga in the U.S. if we get approval early next year.
I just would like to make a quick comment on your remark regarding guidance. You said our new guidance. We're not giving a new guidance. It's the same guidance. We're reconfirming our guidance. We're just, I think, giving an additional precision that costs should be seen as closer to the top end of the range of increase we described in our guidance, but it's not a new guidance. Finally, as far as Pulmicort, I don't see any specific change in trend here. In the U.S., we are still on the same track. In China, Pulmicort continues to do well. We've had some inventory movements in China across a range of products, but I haven't got any new. I don't know, Simon or Marc, if you want to add anything. Personally, I haven't got any additional comment to make. I don't see a massive change in trend here.
For China, there was a slight slowdown in the third quarter. The last month seems to be bringing it back to normal trend. There was a small reduction in the stock level in China for many brands, including ours. I think it's not to be lasting very long. There's nothing very unusual in the quarter-over-quarter pattern.
Good. Let me move to Lars Hevreng at SEB. Lars, do you want to ask your question?
Yes, thank you for that. Symbicort U.S., could you say anything about the pricing environment? We saw similar comments from GlaxoSmithKline, this seems to have some negative effects in the Q3 sales. The other question is regarding your recent comment about NEXIUM and the revenue recognitions in the quarters ahead in the U.S. How should we think about the current level of inventories that will not be filled in the coming quarters?
Thanks, Lars. Simon, do you want to cover the NEXIUM guidance question?
Yeah, sure. In the press release, we simply set out as a reminder the accounting treatment as you go into a period of loss of exclusivity and just calling your attention really to a number of factors. The first is as the market anticipates an LOE, you can get a process of destocking as the pipeline sort of slowly lowers down. We then, at the point at which we go LOE, we essentially reflect a provision against the pipeline inventory because obviously that inventory, if not sold, can then be returned. We also move to demand-based accounting. We then record the revenue at the underlying demand. I think the best way of guiding you on this one is to go back and look at what happened with Seroquel back in early 2012.
If you apply sort of similar thinking to the revenues that you saw and the movement when that went LOE, that's probably the best way of thinking about the same impact for NEXIUM. I'm not going to give you a guide on a specific inventory at this point, because it will very much depend how things pan out in the first quarter of next year. My encouragement to you would be to look at the pattern on Seroquel and use that to guide your thinking for NEXIUM. On your question on Symbicort, in the quarter for this year in the U.S., we had a little bit of a net price move against us more around a mix of business in the Symbicort business in the U.S.
Indeed, you'll have seen we've had one or two quarters over the last year where we've had quite a favorable trend on pricing. In this particular quarter, there was a small net down on price level. I wouldn't say there's a new trend that I would call out in that market.
Nothing very material, really. No new trend there. Let me move to the next question. The next question is from Seamus Fernandez at Leerink. Seamus, do you want to go ahead?
Sure. Thank you very much. Can you hear me?
Yep.
Okay, great. Just a couple of quick questions. Can you just maybe give us a little bit more color on the SG&A spend? Should we be thinking about this as a surge, again, or should we be thinking about this as kind of sustainably higher rates of primary care spending? The second question, if I may, and respectfully, I really struggle to see the science around triglyceride lowering and outcomes and any correlation there in the 200-500 range outside of subset analyses. I think in the context of the really impressive scientific and science-driven improvements on the R&D side, I'd just love to know if you would consider actually not pursuing an outcome study for this, should there be challenges with the FDA with regard to the 200-500 range, and just pursue the north of 500 indication.
Lastly, can you just update us on your timeframe for expectations for Symbicort generics risk? How many patents are covering it, and when would you anticipate Symbicort generic entry? Thanks a lot.
Thank you so much. Great questions. Maybe, Simon, if you want to cover G&A. Let me just quickly address the triglycerides question. Please, Briggs, jump in as you see fit. First of all, thank you so much for the great comment about the great science in our pipeline. As it relates to Epanova, I would argue that this is science. In fact, science is about looking at data, of course, different people have different opinions. Until you've proven something, you don't know whether it's true or not. That's why you do clinical trials in the first place. If you look at the report of the FDA, they certainly pointed out a potential benefit in that subpopulation. Of course, it's a subpopulation. Of course, nothing is proven.
There is a meta-analysis that was just published, I think, yesterday, that looked at a great number of clinical trials. I must say I've not even had time to look at it in details, but the top line of that meta-analysis is that there is, from the conclusion of the authors, there is a potential benefit in that high TG, low HDL patient population. I can tell you that from personal discussions I've had myself with some of the top experts in dyslipidemia in the world, many of them will argue that there is a good chance to show a cardiovascular risk reduction in that subpopulation. Maybe it doesn't work. Of course, we never know. That's why we run the clinical trials. That's what I would say about Epanova and lower TGs. Briggs, do you want to add anything to that question?
We'll ask Simon to address the SG&A.
Yes. Seamus, I think it's a good question. I would also echo Pascal's comments of thank you for the recognition of the great science we have throughout the portfolio. I think what is probably reasonably clear, I think people would agree, is that patients who have high triglycerides, despite optimal current therapies, still have residual cardiovascular risk. I don't think there's a debate about there's a risk population here. The question is, will lowering those triglycerides actually lead to cardiovascular benefit? Again, I think as Pascal outlined, there are many physician scientists, experts in this field, who believe it will, and there are probably some who believe that it won't. That's why we do the experiment, and I think, as you know, I think we're
quite good at doing these. I should not use my words, very good at doing these kinds of trials. We're going to test it. We'll find out.
Thanks, Briggs. Simon, do you want to cover the SG&A question?
Sure. Yeah, thanks for the question. You'll recall in my presentation, I gave you a sort of bar chart which showed the movement in our SG&A spend over the last 7 quarters. The movement up from Q1 this year up to Q2, and then we've held that level in Q2 and Q3. That movement up is concentrated very firmly in 3 areas. It's behind Brilinta, and the acceleration initiatives that we've put behind Brilinta, particularly in the U.S. You recall Pascal showed a slide outlining that array of initiatives. The second area has been in diabetes around the world, again, particularly in the U.S., and in a variety of different areas in marketing and medical, in additional sales force into the specialist channel.
The third area has been investment in our emerging markets where you've seen we feel good about the continued strong growth during a reasonably challenging quarter generally for the sector. Those are the three sort of main areas. When we look beyond, I then also indicated we'd expect to get the same sort of seasonal bump up in the fourth quarter relative to the run rate in the prior three quarters, and that really reflects the fact that quite a lot of events, conferences, do tend to take place during the fourth quarter of the year. It's a completion of a series of marketing programs for the year.
As we look forward, I think I'd go back to a comment that's been a pretty consistent theme on the call, which is, we're going to continue to invest where we see good opportunities to drive the growth of our growth platforms, and we'll continue to do that. Of course, conversely, if we're not satisfied with the progress we're making in any particular brand or market, we will remove that investment if it's not providing a return. Because most of this investment is of a variable nature, we can do that really very swiftly. I'm sure that Pascal and Marc will give further thoughts on what the profile for 2014 will look like at the beginning of February in 2014.
Thanks, Simon. Yes. Let me just say again, we're going through a period of redeployment. We are redeploying ourselves to our future growth platforms. We're committed to investing in our pipeline, even though we also committed to keeping our R&D budget stable, we are committed to investing in our growth platforms. Having said that, again, we're also committed to the financial framework we defined for you earlier this year, and we'll adjust our SG&A investment to whatever the sales look like so we can deliver on our financial commitments. Let me ask Marc, if you don't mind, if you want to cover the Symbicort patent question.
Okay. The situation for Symbicort, we still have some valid patent on the combination itself as well as patents on the device. Although the FDA has had some evolution on the hurdles for analogs or generics in the respiratory field, although this hurdle seems to have been lowered somewhat, they still remain pretty high for a generic to overcome. Obviously, it's difficult to predict, but we don't see a clear and present danger with generics in the United States for Symbicort.
Thank you, Marc. Let me ask Mark Clark for Deutsche Bank. Mark, do you want to ask your question?
Yes. Good afternoon, gentlemen. I had a question about emerging markets. On the first quarter call, there was sort of some commentary about the non-China business being a bit lackluster, and you suggested that there'd be a pickup outside of that, and we saw that in Q2. By my rudimentary maths, it looks like growth outside of China dropped away to a little better than flat in the third quarter. I'm just wondering, is this just the usual tender timing and phasing, or is there any tougher trading conditions in some of the other key markets, something like Mexico or LATAM or whatever? I wonder if you could give some color there, please.
Thanks, Mark. Simon, do you want to cover this question? There's been some movements around the world in tenders and inventory, Simon, do you want to cover this?
Certainly. I think if we look at our quarterly rates through the year for emerging markets at nine, then 12, and then five, I think we covered in our press release, one of the drivers of the slower growth in a 5% in Q3 was obviously the pattern of demand and to some extent inventory in China, and that's addressed in the release. The second driver of the sort of slower growth rate in the third quarter relative particularly to the second quarter is we did have, really, I think to some extent, Mark, you answered your own question. It was principally driven by pattern of tender timing and tender business in our MEA region. To some extent, the sort of wider social-political climate there is also impacting business a bit.
In addition to that, we did get some generic entry on NEXIUM in Turkey during this quarter. That was the main pull down. The rest of our Asia business, I think performed quite strongly. Russia performed quite strongly in the third quarter. I'd also say that LATAM was a bit slow also in the third quarter. I think there was generic entry in Brazil on a product. That was also on NEXIUM. That probably gives it to you. Tenders in Middle East, Africa, NEXIUM in Turkey, NEXIUM in Brazil, that probably gives you the seasonal pattern. We do get that volatility in these markets, Mark. Thanks.
Thank you, Simon. Damian Conover at Morningstar is the next question. Damian, go ahead.
Great. Thanks for taking the questions. Just a question on the challenges with reimbursement on Forxiga in Europe. Just wanted to see if you could characterize those a little bit and hear a little bit about your strategies to overcome those. Second, just a question on R&D spending and the philosophy there. As you go through some major patent losses over the next few years, whether or not you might employ a strategy, kind of like in Eli Lilly, where you're comfortable moving into an R&D spend that kind of pushes into the low 20% of total sales, or if you would want to cap that, obviously depending on the opportunities that come up through the pipeline. Thank you.
Thank you, Damian. The R&D spend question. We have said we will keep our R&D budget stable. As Simon was explaining a few minutes ago, we're essentially shifting our investment to late-stage pipeline to support our pipeline but also maintain our R&D spend overall stable. Of course, if we demonstrate that the productivity of this investment is improving, if we demonstrate this by progressing some of our projects and showing proof points of our ability to deliver there, we may have at some point in the future, we may have to revisit our R&D spend. For the time being, I don't see any reason why we would do this. We can still manage the pipeline as it is with the budget as we've defined it. The other question you had, Damian, related to Forxiga and the reimbursement.
Essentially, we are in discussion with all the payers in the various countries in Europe and trying to establish with them the cost effectiveness of this agent and highlighting the benefits that Forxiga brings to patients, in particular weight loss. It has been difficult, I must say, in Germany, but we're now going back with our fixed combination product, metformin dapa, and we have good hope that we will gain support for that fixed combination. That's the other way for us to gain access in the German marketplace. Let me move now to Naresh Chouhan at Liberum. Naresh, you want to go ahead?
Hi. Thanks for taking my question. Just one question, please, on acquisitions and use of cash. This year to date, there's been GBP 1.7 billion of in-licensing and acquisitions. The question, I suppose is, are these just filling gaps in portfolio where as you've come in, you've seen things that where technologies you need or opportunities you found? Is this something that where we should expect ongoing levels of spend as and when the opportunities arise? Just to give us a sense of use of cash over the next few years. Thanks.
Great question. Thank you for that question, Naresh. The first comment I would make is that if you look at our acquisitions, our business development activities, they've really been focused in three core TAs, oncology, cardiometabolism, and respiratory, as we said we would do. They span across early to late stage opportunities, but certainly focused in these three core TAs. Essentially, we've really tried to rebuild our pipeline, but we've also found more opportunities than we thought. Certainly, our teams have done a very good job identifying those opportunities and moving them forward. I think we have built, in particular in oncology, a very strong platform with assets that are more advanced in development and technologies that will support our oncology presence.
For instance, the ADCs, they're certainly a little bit more long-term, but they put us in a very strong position in that segment of the oncology market. We have been able to strengthen our immuno-oncology platforms. Clearly, I would say a lot more progress than I would even have imagined at the beginning of the year. Moving forward, we certainly will invest in opportunities if we find the right opportunities. It's just that this year we've found a lot, and we had to rebuild our portfolio, so we've taken advantage of the opportunities we identified. We'll allocate funding as we go, depending on what we find, but always focusing on our core strategic platforms. I'm conscious that we have overrun the timing, so let me wrap up this session. Certainly appreciate all your questions and your interest in our business.
Thank you for joining us, and thank you for all those questions. In closing, our Q3 financial performance and indeed throughout 2013 has reflected the impact on revenue from the loss of exclusivity on several key products. As we said throughout this discussion, we continue to execute on our strategy, which means we are making the necessary investment in our growth platforms and our pipeline. Our growth platforms are performing well with growth in a quarter that was 8%. We're also making very significant progress on our pipeline. We have three regulatory filings that were accepted. We started three new phase III programs since our last update, which brings our total late-stage pipeline to now 11 NMEs that are either in phase III or in the registration. We've also entered into four new business development transactions that have really strengthened our oncology portfolio in particular.
Finally, we reconfirm our financial guidance for the full year. With that, I would like to wish you all a good day, and again, thank you.