Earnings Call: Q2 2013

Aug 1, 2013

Hello, everybody. It's Pascal Soriot here from AstraZeneca. It's really a pleasure to welcome you to our Q2 and half year conference. It is my pleasure to introduce some of our team members here: Simon Loth, of course, our CFO but also Briggs Morrison, our EVP for Global Medical Development and Marc Dunoyer, who is our EVP for Product Strategy, M and A and Business Development. And we're also here in the room together with some of our Finance and Investor Relations team members. So I would like to start by first giving you a high level summary of the highlights for the quarter as I see them. 2nd quarter revenue was down by 4% on a CR basis, dollars 500,000,000 decline coming from loss of exclusivity, which is very much in line with our expectations. Despite this, we saw a good double digit increase from our 4 key growth platforms our 5 growth platforms, sorry, which provided in aggregate more than $400,000,000 of incremental revenue in CER terms. I would also highlight our growing late stage pipeline with 2 NDA submissions, 1 Phase 3 start and more to come later this year and importantly, 3 late stage projects that have been added to our pipeline via business development. The headlines from a sales and profit viewpoint as you can see here, our revenue was down for the quarter by 4% in constant currency terms to $6,200,000,000 Our core operating profit was down 10% as we continue to invest behind our growth platforms and our pipeline. Our core EPS was down 21% at CER with the main driver beyond the profit line, a higher tax rate in the quarter compared to last year where we had a $0.19 per share benefit from tax settlements. And after the usual core adjusting items, reported EPS was 0 point $0.66 per share. Importantly, we see that if we look at the evolution of our revenue profile, we have a steady moderation in the rate of revenue loss from products recently experiencing loss of exclusivity from nearly $1,400,000,000 in the Q4 of 2012 to now just under $500,000,000 this quarter. The rest of the portfolio has been showing some growth, but obviously it has been swallowed up by the generic erosion. Still overall, we grew the rest of the portfolio by $232,000,000 or around 4%. And as I mentioned in my introduction, this has been fueled by double digit increase for our 5 growth platforms, which combined for more than $400,000,000 in incremental revenue in the quarter. Next slide. If I look at the 5 growth platforms in turn: relinta, diabetes, the emerging markets, respiratory in Japan. And if I start, first of all, with the revenue, the revenue performance by region. The U. S. Was down 4%, essentially on Cerrocoel IR and also further erosion of our Topol XL franchise. If you exclude this, the rest of the portfolio was up 4%. Revenue in Europe was down 13% as the exclusivity losses continued to take their toll. In the established rest of the world, in particular Japan, which is one of our 5 growth platforms, we had a revenue increase of 10%, so very nice result in Japan. Now of course some of this increase is the result of a very soft comparator for Nxiom, where the Q2 last year only had $1,000,000 in sales, and we were still working our launch stock. Japan is a market where we have a number of partner products. So there is some revenue volatility based on ordering patterns by our partners. But we're also seeing strong underlying end market demand for Nexium, for Crestor and for Symbicort. If we look at the emerging importantly, we saw China grow by 21%, which is very nice to see because we're now back in solid growth in China and actually growing faster than the market. For the rest of the emerging markets, as you can see here, we have a pretty healthy 9% growth rate. So we are certainly on track with our expectations for the year, which is a high single digit growth rate. Now if you look at this on a quarterly basis, you can see here that China again grew by 21% and represents almost half of the additional growth that was generated by the emerging markets. Of course, we are a little bit advantaged here by the comparison to Q2 2012 where we had some supply chain issues. And that suddenly has an impact on the quarter to quarter comparison in the Q2. But as I said, we are overall on track with our goal to keep growing the emerging market by high single digit growth rate. If I now turn to Brilinta. The revenue in the quarter was $65,000,000 up from $18,000,000 last year. We are executing on all of the new programs and increased investment according to the plans we laid out in March including the July start for the transition of care nurses. And it's important to note because a number the parts of the plans we outlined in March have been put in place over the last few months, some of them earlier this year, some of them more recently. And it's only the combination of all the elements of this plan that will, we believe, drive acceleration toward the end of this year as we communicated earlier. We've seen some nice progression, nice progress in terms of our access. As you can see on this chart, we gained 9 points of preferred reimbursement and good access in Medicare Part D. Now we are above 70%. The sales in the rest of the world were $49,000,000 for the quarter. In Europe, we are now closing in on number 2 position in volume share of the total OAP market in Germany and in the U. K, but also in Italy. And we continue to make steady progress in France. If we look at the U. S. More specifically, the chart here shows you the steady progress we're making in growing our new to brand share in the U. S. Market, which is closing in on that 6%. That is of all OAP usage, not just the ACS indication. And this is accompanied with by a steadily increasing total prescription trend, which you see on the right hand side of this chart, where total prescriptions in the Q2 are up 33% versus the Q1 of this year. Now I think what is important to keep in mind as far as Brilinta is that we grow this product through new prescriptions. And the number of opportunities for new prescriptions is of course limited in relation to the total pool of prescriptions. And therefore, the impact that we can make on the total pool of prescriptions is only progressive and it takes time. This is why once again we've said a few times that we need to be patient and wait until the 2nd part of this year to see a fuller impact on our total sales. If I look at the rest of the world, you can see here that we have good progress across a variety of markets in Europe, a steady increase in our market share across several markets in Europe and more to come throughout the year as we implement our additional plans in those various countries. If I move to diabetes, revenue from our share of the Diabetes Alliance reached $200,000,000 in the quarter. Of course, the growth rate compared to last year is flattered by the absence of Baeta, Badurant and Simulene revenues in the prior year. On Glizer revenues were up 29% in the U. S, although some of this was due to an adjustment related to return reserves. The market itself looks to settling into a high single digit growth trend in prescription term as the filler of switches from the TDD products has run its course. Our ONGlysa franchise market share stabilized following the formulary changes that affected our first quarter performance. Outside the U. S, OnGlaza revenue increased by 23%. Of course, the OnGlaza news in the quarter was the announcement of the headline result for the SAVR trial where we met the primary endpoint and satisfied the FDA requirement to show no harm. But unfortunately, we didn't meet the secondary endpoint of showing superiority. For the GLP-one franchise, U. S. Revenue for the both beta and Baduran was $63,000,000 in the quarter and we recorded $22,000,000 in the rest of the world following the assumption of this product's $1,000,000 in April of 2013. So the market share for Badurant prescriptions in the U. S. Market continues to grow to grow, sorry, although with the Baeta, total market share for the franchise is actually down as I will show you in a few minutes. And as far as for Siga, we recorded a good start in Europe as I will show you in a few minutes with revenue paying $4,000,000 for the first half, we are facing a challenging reimbursement environment. We filed or refiled in the U. S. Our NDA and the PDUFA date now is January 11, 2014 for this submission. So if I look at Onguiza, as I told you a minute ago, we have stabilized the market share. We're not satisfied with this market share and we want to see it grow. But suddenly, it is re ensuring to see we've been able to stabilize it after the loss of the Karma account of course earlier this year. If we look at Badureon, as I told you a minute ago, the share the market share of Badureon is still growing, but it is not growing sufficiently to compensate for the decline in BAYETA. The BAYETA market share, so the total exantin market share, family share is actually declining. And certainly, we are intending to address this and looking forward to the launch of the new device next year to reenergize this family. And finally looking at Foresiga, as you can see on this graph, very good launch in Germany and the U. K. Suddenly very in Germany in particular very successful launch. Of course, we're now going to have to address the reimbursement challenges that we are facing in particular in Germany. If I move on to Symbicort, the critical product in our respiratory franchise. Sales in the 2nd quarter were up 8% to $842,000,000 This performance is actually fueled by the 16% revenue increase in the U. S. Market where prescriptions were also up 16% compared to just 2% for the fixed combination market. So really an outstanding result for Symbicort in the U. S. Marketplace. In the rest of the world, our sales were up 4%. They were up 2% in Europe. We continue to drive a good in market performance in Japan on the back of the approvals of FOSmart and COPD, although this is not reflected in reported sales in the quarter due to partner ordering patterns. If we look at the U. S. Market share trend, as I told you a few minutes ago, very nice progress. And you can see here that our share of total prescriptions has grown to 24.1 percent and we've reached an all time high of 30.7% in share of patients new to combination CRP. So it's really an excellent performance. Now if I move to 1 of our to our second critical priority, which is to achieve scientific leadership. I'll spend the next few minutes outlining the progress we're making on this critical priority. And as a reminder, to achieve this, we decided to focus on distinctive science in 3 core therapy areas: cardiovascular metabolic disease, oncology and respiratory autoimmune diseases. We are prioritizing and we are accelerating our pipeline both in our internally sourced projects, but also with business development. And we are driving to transform our innovation culture and our model. And so we have accelerated the projects which translates into movements into Phase 3 which we are announcing for the first half, but there's more to come in the second half. So if I look at the recent pipeline news, first of all, as I mentioned earlier, we've resubmitted the NDA for Forciga in the U. S. Just before the ASCO, we announced that the first patient has been enrolled in the Phase III clinical trial for moxetumumab in the treatment of adult patients with hairy cell leukemia who have not responded to or relapsed after a start therapy. In June, together with our alliance partner BMS, we announced the top line results for the SAVR trial. As you know, as Anoj just said a minute ago, we met the primary safety objective, which is really critical because this was an FDA requirement. And therefore, we showed no harm. But we didn't meet this efficacy objective of superiority, which was a lower probability. We always mention that. But of course, it certainly was disappointing to not be able to show superiority in that instance. And the results will be presented at the ESC in September. The Metreliptine NDA has been accepted in the U. S. This drug is a treatment for metabolic disorders associated with inherited or acquired lipodystrophy, a rare disease estimated to affect a few 1000 people around the world. The disappointment in the quarter was actually the completion of the fostamatiniboskiara program. And at the end of the day, based on the totality of the results we saw, we made the decision not to proceed with regulatory filings and we returned the asset to our partner Rigel. Finally, I'd like to make a note of our growing portfolio of late stage assets with the acquisitions of Oncira and Pearl, but also the collaboration we just announced yesterday with FibroGen. Now if I look at our total pipeline, as I said, we have a growing light touch pipeline. We have now 81 projects in clinical development. In Phase 3 or in registration. This is a result of moxetumumab Phase 3 start combined with the additions of EPANOVA for high triglycerides and the per labalama combination for COPD. There are 5 others that still await regulatory approval in one of our some other major markets and those are documented on the bottom right of this chart. During the period, there were 5 additions to the clinical development pipeline from Discovery Research, 6 projects successfully progressed to their next phase of development alongside the 2 external additions and 10 projects were discontinued. And we now turn to business development. And what I'd like to say here is that we made good progress on the BD front. These are some of the key transactions we've completed in the last few months, mapped across all three core therapy areas. And it's really a key message is all these activities have been focused on the core therapy areas that we announced in March. The other message to you is that there's a good spread between investments discovery research just like Moderna or NGM and others, but also investment in later stage or closer to market assets, which may which came by the way of the acquisition of Omsera Pearl Therapeutics. And again, yesterday, announcement that we will collaborate with FibroGen for the development of FG-four thousand five hundred and ninety two for anemia associated with chronic kidney disease and stage renal disease. We made some progress with our Cambridge site. You know that the biggest piece of news in the quarter for us was in term of long term applications for transforming our innovation culture is our decision to locate our new U. K.-based global R and D center on the Cambridge Biomedical Campus. This is really a very exciting development for us all at AstraZeneca. It's a very vibrant hub for biomedical innovation. It's home to some of the leading institution, academic institution, research units in the world. And you can see here on this map the University of Cambridge, of course, with the School of Clinical Medicine, but also the Edinburgh Hospitals, the future Papworth Hospital that will be built just next door to where we will build our head office the MRC Laboratory of Molecular Biology, the LMB the MRC Institute of Metabolic Science and also the Cancer Research UK Cambridge Institute. So we're really very excited to be at the heart of science and be close to such a number of prestigious institutions. In July, we announced a 2 year collaboration on 3 preclinical and clinical oncology projects with of Cambridge and Cancer Research U. K. This is the first of what we envision will be numerous opportunities for collaborations with all of these world class centers that will be our new neighbors. So I'm going to stop here and I'm going to turn over to Simon, who will take you through the 2nd quarter financial performance, after which we will hold a Q and A session and Saloni Briggs and Mark will join us to address your questions. Thank you. Well, thank you, Pascal, and good afternoon or good morning to everyone on the call. So I'm going to cover the Q2 P and L. I'll briefly touch on our restructuring program. I'll then cover the cash performance and the 1st interim dividend. And then finally, I'm going to close with our thoughts on guidance for the full year. So let me now turn to the Q2 P and L. I'm going to focus here on core margins and profit. The press release does, of course, contain all the statutory numbers and a detailed reconciliation to our core measures. And then as with sales, when I refer to growth rates, they will all be on a constant currency basis. Now Pascal has already covered the revenue performance, which as you saw, was down 4% to $6,200,000,000 Core gross margin in the quarter was 82.3 percent of sales. Now that's up 110 basis points compared with the option amendments that we implemented in the middle of last year. With the full year results, I mentioned that we would expect core gross margin this year to be below the level achieved in 2012. And that, as you recall, was 82.4%, and that remains our view going forward. Core SG and A expense was up 6% in the quarter. That was down 2% in the Q1, which I flagged then as largely due to phasing. Core SG and A expense for the first half is up 2%. Now investments in support of our growth platforms, particularly in emerging markets, Brilinta and the diabetes franchise, were only partially offset by benefits from restructuring and tight spending discipline in support of mature brands and in developed markets. Core other income of $218,000,000 was 19% higher than last year and that included an increase in our Polymercord Respirals royalty income. So that leads to a core pre R and D operating margin of 49.7 percent of revenue, 160 basis points lower than last year as the benefit from the higher core gross margin and core other income was offset by the higher core SG and A expense as a percentage of revenue. Core R and D investment in the quarter was $1,000,000,000 That's 1% higher than last year and also a step up from the Q1 2013. Now the 2nd quarter was impacted by incurring some close down costs related to the fostamatinib program. We continue to realize savings from our restructuring programs, but the step up in business development activity is starting to exert an upward tension on core R and D expenses as we look into the second half. You'll recall that we previously guided to core operating costs, that's combined core SG and A and core R and D costs, being held to a slight increase in 2013 in constant currency terms. Research and development, we anticipate for the full year a low to mid single digit increase in core operating costs compared with 2012 currency basis. Core operating profit was just under $2,100,000,000 in the quarter, 10% lower than last year. Core operating margin was 33% of revenue, 2.3 percentage points lower than last year. Now just a brief word on restructuring. On this slide, you can see the scope of what we're now referring to as Phase 4 of our restructuring program. And this combines the initiatives newly announced in March of this year, together with the actions that remained to be implemented from the Phase 3 program that we announced back in February of 2012. The total program costs are estimated to be $2,300,000,000 And as you can see here, we have charged $308,000,000 to the P and L in the second quarter. Turning to cash. Cash generated from operating activities was $3,800,000,000 for the first half compared with 2.8 $1,000,000,000 last year. Lower tax and lower interest payments partially offset the lower operating profit in the first half of twenty thirteen, which included some higher noncash costs, whilst a lump sum pension contribution drove higher cash outflows in the prior year. Cash outlay on acquisitions of business operations was $565,000,000 with other net investments of $762,000,000 and that includes investments in our IT and in the Merck arrangements. Now the board has recommended a 1st interim dividend of 0 point 9 zero dollars This amount is a reflection of the board's aim of setting the 1st interim dividend at around onethree of the prior year was $2.80 We remain committed to our progressive dividend policy by which we aim to maintain or grow the dividend each year. Our target for dividend cover is 2x core earnings over the entirety of company transitions through as the company transitions through this period of exclusivity losses and new product launches. Board's view is that the annual dividend will not just reflect the financial performance of a single year taken in isolation, but reflect its view of the earnings prospects for the group the entirety of the investment cycle. And likewise, it recognizes that dividend cover in any year is likely to vary from the 2 times cover target. Moving to guidance. As we expected, the impact from the loss of exclusivity for several brands affected performance in the Q1. And while this impact will be felt throughout comparison with prior year periods did moderate in the Q2, a reflection that the 12 month anniversaries for generic competition for Seroquel IR in many markets and for Crestor in Canada have been reached. While the revenue increase seen in Japan and in emerging markets in the quarter is a reflection of good growth in underlying demand, it is also somewhat flattered by soft comparisons with the Q2 last year, in particular, the destocking of ium in Japan and the impact of supply chain constraints in emerging markets. So our revenue outlook for the full year is unchanged. We continue to anticipate a mid to high single digit decline in revenue on a constant currency basis. Productivity and efficiency will continue to deliver their target level of savings, providing us with the headroom to invest behind our key growth platforms and progress the pipeline. Core operating costs, combining core R and D and SG and A expense in the Q1, you'll recall, were 4% lower than last year. But as I said at the time, this was largely a matter of phasing. Core operating costs were up 5% in the 2nd quarter, resulting in core operating costs broadly flat for the half year. As I mentioned earlier, we continue to drive investments behind our growth platforms. And the influx of projects acquired through business development is exerting an upward tension on core R and D expenses in the second half. So for the full year, we now anticipate a low to mid single digit increase in core operating compared with 2012 on a constant currency basis. And with the revenue and cost profile in line with this guidance, the company continues to expect core EPS to decline at a rate that is significantly higher than the revenue decline in 2013. Now financial guidance for 2013 has been based on January 2013 average exchange rates for our principal currencies, While our Q1 results were broadly in line with this currency assumption, movements versus guidance rates lowered core earnings per share in the 2nd quarter by around 2% and may continue to impact core EPS for the second half of the year if rates remain where they are. So with that, let me now hand back to Pascal, who will chair the Q and A session. Thank you very much, Simon. So I'll now invite you to ask your questions. And maybe I could ask Tim Anderson from Sanford Bernstein to ask his question. Tim, over to you. Thank you very much. I have a few questions, a modeling question to start with. In our forecast at least as your company moves into 2014, we have SG and A and R and D declining year on year, but your new guidance for 2013 raises the possibility that operational spending could actually increase in 2014. And I know you probably won't want to comment on 2014, but directionally maybe you can say whether this line of thinking is correct. Our second question is on M and A. I know you kind of talked about this subject back in March, but can you refresh us on the upper limit of deal sizes you're considering? I've been under the impression that they're mostly bolt on types of arrangements. Is that still the plan going forward? And then last question is, I'm wondering if you would be willing to say what the trough year for earnings for AstraZeneca is like. Could it be some analyst models show it happening in 2017? Some show it happening in 2019? I'm wondering if it could really be that far away. Okay, Tim. Thank you for those three questions. I'll ask Simon to address the first one and maybe you could also address the trough year question. Simon, if you don't mind? Yes. No, certainly, Tim. Thanks very much for the question. And I mean, I think, firstly, in terms of operating costs, as I mentioned, we have a significant restructuring program underway. I sort of dimensioned that for you earlier. That program continues. It's very much on track and it's going to deliver reductions in our cost base and improvements in the flexibility of our cost base. In addition to that, we have a wide ranging series of productivity improvement programs underway across the business again will improve our efficiency and give us the headroom to invest. We do see significant opportunities for continued growth behind our growth platforms. And I indicated that we're going to sustain that investment where we can see that it drives long term value and growth. So that's behind particularly sales and marketing costs. But predominantly, Tim, I mean, there's some increase in field sales and some selling resources, but there's also a significant investment in variable promotional and KOL support medical spend as well. So there's a high degree of flexibility behind that investment and we're putting in a targeted way during the course of this year. And then in addition to that, we've obviously brought in a number of late stage and later stage assets this year, which as I said, do bring some upward tension on our late stage development budget. And of course, we've also, as Pascal described, had 1 or 2 progressions into late stage developments. And we hope to see that some further late stage progressions during the course of this year. So we do see increased investment opportunity this year, which is why we've moved our guidance in 2013. As we look into 2014, as you'd expect, we'll update you with our full year results as we've shaped up our plans for 2014. What I would say, I think, is to reiterate the guidance we provided back in at our Investor Day, which is we will continue to maintain our pre R and D margins in the 48% to 52% range. And we very much see our R and D investment level as remaining broadly flat through this period. And you recall Briggs sort of laid that out back at the Investor Day. So that's a view on costs for you, Tim. And moving to your second question, which was on the I think the year in which we expect sort of earnings to reach a trough. Tim, I'm going to sort of reiterate the sort of remarks I made, again, when we were all together in New York, which is where we got a strong stable base of revenue from established products from our respiratory franchise and from biologics products. We've got known and certain expirations of products coming off patent of which Nexium in the U. S. In 2014 and then Crestor in 2016 and 2017 are clearly the most significant. So what happens on the top line is all about what we do in terms of driving the growth platforms and exactly where the earnings trough out is going to be a function of the success in driving those growth platforms and the market opportunity it presents with. And I think you can see from our actions this half, we are intent on investing behind those opportunities where we see them. Exactly which 12 month window that sort of trough appears, I don't we're not going to specify. I'm not sure that's helpful to specify. And certainly, that's not the key metrics management as we drive forward. Pascal over to you for the Thanks, Simon. That's very clear. And Tim, just to repeat again what Simon said is that our guidance for 2014 will precise it early next year, but what we said in March remains correct. We will keep targeting the free R and D margin that Simon described for you and we will keep targeting an R and D budget that is broadly flat. And so that's what we said in March and it remains valid. As far as M and A, what we said before is also still valid. And I think what we said was that we don't see the need for a large acquisition for us to succeed. I mean, it's we believe we can actually succeed through acceleration of some of our pipeline, reshaping of our internal pipeline, accelerated business development, what you called this bolt on acquisitions or collaborations. Some of those you've seen in the last few months and we'll keep doing this. So this is really our base plan is get the best out of our own portfolio, complement this with business development activities And we believe we can actually succeed with that approach. Now that doesn't mean we'll not consider a larger acquisition. If we but we'll only consider this if we think we can add value. And if you look at all the business development initiatives we've launched in the last few months, those are projects where we think we can add value. We can add value because they are in our core therapy areas where we believe we know the market. We can add the values in the way we develop those products, in the way we commercialize them and we will keep doing this. So if we find an acquisition of a larger size where we believe we cannot value one way or another, whether it's geographically driven or because of our capabilities, we'll do that. But it is not our best plan. The best plan is really our internal pipeline and business development activities. Okay. So maybe I could ask Andrew Baum from Citi. Andrew, if you want to ask your question. Good morning. Couple of questions. First, you've clearly got a very large 60,000 odd patient trial population ongoing for Brilinta. Could you remind us how many years patent term extension you think Brilinta is eligible for just thinking about a period of economic returns for that drug given the investment taking place. 2nd on SAVR, are there any circumstances that you feel the disclosure from that trial could be used to actually constrain class and on the growth given the pressure particularly in Europe from payers? Finally on tremolimumab, actually on tremolimumab, could you comment whether you would consider licensing the compound to be co developed with another PD-one aside from your own? And then finally, just on the outlook for Symbicort in the U. S. And in Europe given the impending launch of BREO, to what extent can you anticipate the impact on volumes and pricing as GSK increase their efforts and there's a new differentiated compound? How will that impact Symbicort over the near term? Thank you. Thanks, Andrew. So maybe what I could do is ask Briggs. Do you want to comment on SAVR and say if you want on tralimelumab, I mean the one thing I could do as far as Tremi is tell you that we certainly always open to collaborations with other companies in terms of combinations. We believe Trami has potential for combinations with a variety of products in particular for sure PD L1 or PD-one. But we certainly would not license this product that would combine it. But so if you want to say a few words on Tremay, Briggs and Saver as well. Yes. So Andrew, let me just finish off Pascal's comments on Tremay. We think Tremay is a very important part of our portfolio, and we were not interested in licensing it out. We were quite interested in licensing it in actually. And so, in combination with other things in our portfolio, we think it's quite important. And as Pascal said, we have entertained and we continue to entertain overtures from others who want to partner with us. In terms of Savor, as Pascal said, the full results will be presented at ESC at the end of August, beginning of September. You can imagine from a 16,000 patient trial, we've generated, we think, the largest data set now on DPP-four inhibitors and are able to answer many of the questions that have been raised around this class. So we think that the ESC presentation will quite a bit of information. I think that your question was do we believe there's anything in there that would in any way dampen the enthusiasm for the class as a whole. Again, until you see all of the data, I don't know it's fair to have that conversation. We talk about that once we've all had a chance to review the totality of the information. Thank you, Briggs. Let me just cover the other two questions. I think one was Brilinta. And the patents, the expiries, they range from 28 to 2019 in Europe and up to 2021 in the U. S. We have filed for extensions. We don't have a time yet in terms of the approval of those extensions, but the extensions would extend the patent life patent protection to 2023 beyond in the various geographies. So we still have quite a number of years in front of us for to gain a return out of this product. As far as Breo, we certainly expect some impact of this class on Symbicort. But we in the short term, we don't expect that there would be a very substantial impact because SYMBICORT is used for different type of patients who have a more advanced say form of their disease. So we our assumption at this point is that Breo and other similar products will sorry, actually, Andre, I thought you were talking about La Balama. You're talking about Breo, the new combination products. I've got to start again. So Breo, essentially the expectation is that we will have an impact there for that one. The pricing, I would imagine, will be in the same range as Brilinta would be as Symbicort would be, but the and it will be competing with Symbicort, but it will also be competing with Adverde. And we have to see what they actually are able to do for instance in United States. The launch has been delayed as you know And the access we'll have to see what kind of access this product can achieve. There'll be pricing competition. We don't believe that it will impact Symbicort so much, but there will be, of course, volume competition there. As far as the La Balama competition, that's more distant. And as we've talked about before, the believe that the impact on Symbicort will be progressive. But over time, it certainly will impact it, which is why we decided to proceed with this Pearl acquisition so that we could actually be present in this market. So I might actually ask Peter Verdult from Morgan Stanley to ask your question. Peter? Yes. Thanks, Pascal. Good afternoon, everyone. Just a few for you actually. 2 product, 1 strategic. It's been reported that you are considering exploring some sort of biosimilar strategy. So the simple question for me is, how does that jive with your views on biosimilars when you're at Roche and the overall commitment at Astra to be focused on innovation? And then the 2 product questions. If we take the Brilinta run rate now, it's less than €300,000,000 I'm assuming the investment you're making behind the product is multiples above this. Are you willing to sustain this level of investment until we see the data from PEGASIS, which I believe is end of 14? Or is there a plan B for Brilinta? And then on diabetes, competitive landscape heating up, can you shed some light on what you're doing or any incremental investment you're having to make on the sales force to maintain your share of voice? Thanks. Thanks, Peter. As far as Brilinta, our investment is indeed substantial. And I will basically repeat what we said earlier, which is we are going to invest very substantially this year to drive the penetration of this product. And we will actually look at how we're progressing early next year. So we always said we have to wait till the last quarter of this year. And therefore, we look at it at the end of the year or early next year and we decide what we do. Now if we were not on track with our plan, we suddenly would revisit we'll have to revisit what we do. We can't wait until 2015 to adjust our investment if sales don't come through. But so far, I have to say, we are on a good track. I think the problem is that everybody has to realize that there's a big pool of prescriptions, of course, for OAPs. First of all, that big pool covers a variety of indications. Is filled by new prescriptions. And the only access we have is to these new prescriptions, new patients. We get those new patients and then of course there is we lose prescriptions when patients are discharged. So many of the things we do are targeted at, of course, increasing our share of new prescriptions, but also retaining patients when they leave the hospital, which the last part of our plan, as you know, was to put in place 200 critical care nurses in the United States. So but I think it's important to remember when you look at the progression of the product to remember that we only gain access to new prescriptions in one indication. But so far we what we see is we're on track. Of course, you always would want to progress faster. But personally, I think we are on track. But we'll look at it at the end of the year. And if we can't justify the investment, we will have to adjust it, of course. As far as biosimilars, I can only repeat also there what we've said before. What we've said is our strategy is focused on innovation. I will not comment on the market rumors as you can imagine. We've also said in March that we would look at whether some of the capabilities we have in polycrystalline, MedImmune could be leveraged in the leveraged in the biologic field. And that means biosimilar could also mean biosuperior products that differentiated and that's what we are looking at. And we haven't really concluded yet what we will do. But certainly, our focus remains innovation. But you have various degrees of innovation. You have the breakthrough innovation of a new molecular entity that really transform a disease treatment and you have the innovation of an incremental benefit that you bring to an existing product. So that's really what we are looking at. But we remain true to our focus on innovation. And as far as biosimilars themselves, I can only tell you what I've said in the past, which I would add has actually come through really, which was that the biosimilars will make it one day, but it is proving more challenging than many people thought 3 years ago. But it doesn't mean the biosimilars will never make it to the market. At some point, they will. It's just taking more time than many people thought. Now the last question you asked, Peter, was about diabetes. I have to say, certainly our performance as far as diabetes is concerned is not what we would like to see. So we have to address some of the challenges we're facing in the U. S. In particular and we are doing this. We're planning to increase our diabetes investment in the U. S. In fact, we've already done that in discussion with our partner BMS. I think you heard the same message from Lamberto from BMS last week during their call. We're very committed. Is a very competitive market. You know very well that we have we're competing with big companies that have large resources, strong presence and they're investing heavily. But we certainly committed to compete at the right level in the U. S. In particular, everywhere, but very much in the U. S. And I'd just like to repeat that starting early July, we have the level of investment that is actually required to be competitive. We lost share of voice for a period of time. That's for sure. And we've corrected this. And in the end, you have to look at this as a from a long term viewpoint, diabetes remains a great long term opportunity, even though we have to accept it will be challenged here and there from a pricing viewpoint, possibly in Europe, from a competitive viewpoint. There are lots of patients, a growing market and we remain committed. Thanks. So let me now move to James Gordon at JPMorgan. Hello. Thanks for taking my question. I just had a question on the pipeline on the FibroGen deal. So I'm aware that FG-four thousand five hundred and ninety two, there's been a previous clinical hold for hepatitis. And I know Takeda's Montes also ends up getting withdrawn from the market. And in that case, it was due to a worse adverse event profile than EPO. So in the 2 different indications you're going for, so the pre dialysis and post dialysis, how competitive does this look in terms of the pre dialysis? Could safety be an issue? And for patients who are on dialysis, what's the real advantage of having an oral product if patients are already getting dialysis? Thanks, Cem. Great question. Can I ask, Briks, do you want to address this? Yes. Let me talk specifically the molecule that we're partnering with FibroGen on. There was an earlier molecule they had that had an LFT issue. But this molecule, in our review of the safety data and the trials they've done today, it actually looks quite clean to us so far. Just going into Phase 3, so more data will come out. But from what we've seen so far, we think the molecule is clean. The question about the use in both dialysis and pre dialysis, clearly, in the chronic kidney disease patients having something that's not parenterally administered, we think, provides an important advantage to physicians. In the dialysis segment, I think the safety questions around ESAs opens up an issue for an opportunity for new mechanisms. Again, this mechanism keeps your EPO levels almost to physiologic ranges, which we think potentially could provide a safety advantage. So it is I'll let Tascaro just comment on the market. But from a medical and scientific point of view, I think there are theoretic advantages to this mechanism over parenterally administered heathis. Mark, do you want to add a few comments on this and the market circumstances as well? Yes. Basically the pre dialysis market will if we succeed in our development program be about 2 thirds and the dialysis market would be about 1 third. So this is basically a different territory from the retroproateins. You have a large number of patients in pre dialysis who have anemia and should be treated but are not treated because EPO is not necessarily the best response for this. And there's a substantial opportunity there. In dialysis, of course, a bit different and EPO will still play a big role in the future even though you could also make an argument that if a patient has started on an oral agent when they get to dialysis they might stay on it. But really the core of this program would be pre dialysis. Should I now move to Keyyo Oparek at Goldman Sachs. Keyur, do you want to ask your question? I have 3, if I may. 1, just a quick R and D question. I believe my understanding is when you bought tamilimumab from Pfizer, they did retain the rights to combination therapies. I was just wondering if you would be able to confirm rights to all combination therapies or only combination therapies that are in rights to all combination therapies or only combination therapies that are in with other Pfizer compounds? 2nd, again, on the immunotherapy side, recent updates on clinicaltrials dot gov seem to suggest that all of your trials for the AMOX40 are either suspended or on hold. I was wondering if you might be able to confirm that and confirm that you haven't seen any new safety signals there. 3rd question on the SG and A level, I realize that you're guiding to a 48% to 52% pre R and D margin for next year. But if you were to think about it in absolute dollar senses, can you help us think about cost that you are incurring this year that you may be able to roll off next year? But if I'm understanding you if I'm hearing you correctly, Pascal, you're kind of investing more behind Brilinta, you're investing more behind diabetes starting July, kind of should absolute levels of cost be same or higher than this year? Thank you. Thanks, Keir. Can I start maybe with the SG and A level question? Simon, do you want to address that one? Yes, certainly. I mean, Keir, the as I mentioned, it through a combination of restructuring, productivity improvements, efficiency, care, we are continuing to reduce the fixed cost base. So deploying numbers, physical infrastructure, the fixed cost base across SG and A particularly in the Established Markets and also in R and D. And that's a trend that will continue on beyond 2013 and into 2014 and 2015 as our productivity restructuring programs progress. The and therefore, an increasing proportion of our cost base is pretty variable. What do I mean by that? I mean, promotional spend. I mean, external clinical project spend. And also in fact, we can move up and down field sales resource in a pretty flexible variable way. So the increase this year relative to our expectations at the beginning of the year is coming, as I said, from field selling activity, promotional spend and external clinical project spend. As we roll into 2014, in the same way that we have the flexibility to lift up our investment where we see good opportunity, in that same way, we've got the ability to dial it down where we see opportunity diminish or indeed maintain if we see opportunity there. So it's a very flexible cost base. I'm not going to on this call look into 2014 and tell you exactly what the run rates are going to be. We'll be doing that at the full year results in January. But I think what I can leave you with is that the cost base is flexible and variable and we can dial it down or dial it up depending upon the opportunity within that overall frame of goals for our pre R and D margin. Pascal, back to you. Thanks, Simon. In terms of your other two questions, Keyur, the combination therapy rights we have to ourselves basically this was a full acquisition. Having said that, indeed, if Pfizer or any other company had a good combination proposal for us to propose and we've been in discussion with other companies. We would certainly consider it, but it's a full acquisition full rights for Tremi. And the other one is, I hope I understood your question, But if I understood it correctly, it relates to moxetumumab and it's actually not on hold. It's in Phase 3. Unless your question was about OX40. Was it OX40? Pascal, it was about the OX40. Okay. So essentially what we're doing here with OX40 is we're bringing a humanized version of OX40. Yes. The current OX40 is not on clinical to my knowledge, K OAR. We have some drug supply issues that are delaying the progression of the program, not safety hold. And because we're developing this humanized product, we've had delayed in supply and therefore the clinical trials are not started yet. But there's no clinical hold. We'll double check this. Briggs, maybe we could double check this and get back to you if what we tell is not correct. But to my understanding, there's no clinical hold. Okay. There's an e mail question from Marillane at Remini. The question is what is your target for Brilinta in the U. S. In terms of the total market share? I don't know how to answer this one because as you know, we don't give specific guidance. I can only tell you as high as possible, but I don't know that that would satisfy you. So we typically don't give targets. If we gave you a target for our share in prescription, it will be given giving you a target in for Brilinta sales. So I'm really sorry, I can't really be specific for that one. The only thing I can remind you is that we only compete at this point, as you know, in the ACS segment. And the ACS segment represents 20% of the total volume. So we only have access to 20% of the total volume. But that's as much as I can tell you. Maybe I can move on to Keri Alford at Credit Suisse. Keri, do you want to go ahead? Thank you. Yes, three questions, please. Firstly, just quickly going back to operating costs. You talked a lot about SG and A. And clearly, it was higher than we had anticipated in Q2 and you've talked about that being part of the reason for higher cost guidance for the full year. But I guess I'm just interested to understand which of your franchises now require more promotional effort than you thought they would do say 3 to 6 months ago? Sorry, you've touched briefly on diabetes, but I wonder where does the price has come for you? Secondly, on Symbicort in the U. S, the sales were up in line with prescription growth suggesting no benefit from price and mix. And I know that you've got a at least a benefit from a list price perspective year on year. Does that reflect increased rebate pressure or are there stocking issues that we should be aware of there? And finally on the Pearl acquisition, just interested hearing your thoughts on the competitive positioning of the lead product there, the twice daily Lava Llama, which looks set at least currently to be forced to market? And also whether you can confirm whether the Mavo compound has started Phase 2 with you yet and when we might expect to see that data? Thank you. [SPEAKER JEAN FRANCOIS PRUNEAU:] So quite a number of questions, Kerry. So let me maybe start with a couple of comments on operating costs and Simon will also add a few comments in a minute and then also comment on per operating costs. I would say the only place where we really can say surprised, I mean, it'll be the right word, but where, let's say, the landscape has changed compared to what we had in mind late last year when we designed our plans It's really diabetes. I mean, Brilinta is on track with what we had in mind. But diabetes, suddenly the promotional pressure has increased and the market growth is a little bit slower than most people, I guess our peers and us we expected and the promotional spend has increased. Essentially, the delay in the approval of Degludec led clearly Novo to reallocate those promotional resources to their product and therefore increase the competition, increase the promotional pressure there. And the same increase in promotion behind Januvia was applied by Merck. So we've seen increased promotion coming from Merck and also from Novo. And therefore, this is probably the place where we could say we have seen a little bit of a difference and Simon will add more on that in a minute. Pearl, the biggest differentiation here for us will be that in the U. S. Marketplace, this will be the only PMDI available. And in every country where you go, you see that patients in fact, some patients prefer MDIs, other prefer DPI. And ideally, you'd have both. And in the U. S. Marketplace, essentially having the only MDI launch the PMDI launch would be critical differentiation. Now we also accept the fact that this is going to be very competitive. And the reason we went forward with this product is to maintain our presence in the field simply because it's a critical franchise for us. We believed we needed to be present in that La Balama market segment and that's why we acquired Pearl. And but as I said, we have realized it's going to be very competitive. Briggs, do you want to add anything on Namaba, but first maybe Simon on the increased costs? Yes. No, I think the Kerry, the question you raised on crop costs around where are the differences versus our expectations at the an increased an increased promotional cost across diabetes. And we're intending to respond to that and match in order to realize the full potential of our brands. But I would say that we have a continual process of looking at the momentum in our different markets, developments in our markets and making decisions about where we lift investment, where there's a good opportunity. So we've put more resources into some of our emerging markets. You saw China performing very strongly. We're ensure that we adequately resource that market and 1 or 2 other emerging markets. We've seen some positive developments in Japan, for example, strong growth in Nexium, but also our other 2 primary care brands, Symbicort and Crestor. And at the same time, an opportunity to launch for CIGA, if we're successful with our filing there alongside the Exanatide product. So we're wanting to put a bit more resource behind those opportunities in Japan. Symbicort is performing well. And so we dialed up a bit of promotional effort in certain markets with Symbicort. So I think those are all areas that we've shown taken some increase. It's fair to say there also are there is where we've taken some cost away because we've seen markets being less promotionally responsive. As I stressed throughout, these are investments we're making that we will dial up or dial down as the opportunities move. The other area, perhaps we've not focused on as much SG and A is R and D. We spent a bit of time talking about SG and A. Of course, you've seen and this is another important factor behind the our views on cost. We've taken on board a series of late stage projects. Briggs is bringing those into his development programs and the team there. And we need to and as we look into 2014, we'll seek to really prioritize our portfolio and spend. But clearly in the 6 month time frame that's going to give us some upward tension. So that's on the costs. May I just pass I'll just do it very quickly. It was a question on Symbicort. I think a question around the underlying drivers of the Symbicort U. S. Revenue, which was up 16% in the quarter. Prescriptions overall were up 16%. There was a very small destocking effect, but really not material for the quarter. In terms of pricing, we did have the benefit of some mix effects from some good volume growth in some non retail channels. But essentially, the story for Symbicort is strong underlying growth in market share in a market that continues to show a little bit of growth as well. Thanks, Simon. So again, we dialed up and down the investment behind various products throughout the year, but China was a big one. But the biggest one really at the end of the day is nobody expected Degludec to not be approved, and I'm Novo expected it to be approved and launched it. And when it didn't get approved and Victoza ended up being promoted by the sales force that was ready to launch degludec, It created a substantial increase in promotion, which we ended up having to match and we are now matching, but certainly that was not in the plan. Do want to cover the MABA question? MABA is in Phase 2. You can't say exactly when we'll be presenting data at scientific meetings. I would anticipate it probably wouldn't be till at least the beginning of next year. Should I ask Jayesh at Desjardins? Jaesh, do you want to ask your question? Jaish, Meepa? You can't solve this question, so we may have addressed it. Sachin, Sajin at Bank of America. Sachin, do you want to go ahead? Hi, thanks very much. Three product questions, if I could. Firstly, on Brilinta, the new to brand chart for the U. S. That you have is now a share chart, not absolute scripts. So firstly, could you comment on absolute trends recently, which I think have been flat? And then secondly, with the new trend market in the U. S, I think the overall market has been declining. So any particular reasons for that? And would you expect that to continue? Secondly, on Glaser, as you look to increase SG and A, could you comment where your focus is there? And the reason for the question is I think Merck is flagging market growth and chasing the SUs. I think Lilly's commentary was more focused on share gains as their commercial access improves. So just where is your focus? And then the final pipeline question, benralizumab, I think you'd flagged at the March Investor Day potential for Phase 2b data in asthma in the first half. Just wondering whether that data was in house and whether we could see that at ERS. Thanks, Sachin. Briggs, do you want to take the benchmark question? The Phase 2b data for Benra is in house, and I'm pretty sure that it will be presented at TRS. I don't know for certain, but I think no. But what I can say is I've seen it and we're just as bullish on the molecule as we were when we talked to you guys in March. We'll get back to you as to when it's going to be presented if we as soon as we know to be honest, but I can't remember. But we've seen the data and we as Greg said, we are very confident in the data we saw in asthma. We're at ATS. Okay. So we have the answer. Next year at ATS. The second question you asked Sachin relates to Brilinta and the share is increasing. You're right to say that in the last few weeks the volume has been flattish because the market is actually impacted. The market the total market is down. But and of course, the total market, I think you've got to look at it on a long term trend basis, not week to week basis. Had a few weeks of flattish volume growth. I look at I focus on the market share and influencing that because that's really where we have the biggest progression we can make. We have no we've looked at it. We have no specific reason why the market would be flattish to down in the United States. But it is true that the total APE volume has been relatively flat. But the market share again keeps going still is going up. As far as Onggyzia, our focus is the primary focus is really access, making sure that we restore good access for this product and we'll regain some of the access that has been challenged, has been difficult for us. And of course, growing our market share, those are the 2 focus areas. And to grow our share, we have basically increased our promotional effort. In particular, our sales force deployment has gone to Anglaiza on the one hand and Badiourian on the other hand. And we have now new sales force deployment from late July late June, early July in place. So we should see the impact of these changes in the next few months. In fact, in July, we already had a slight impact on the market share of Gliese as we could see. It's not only stabilized, but we saw a slight pickup, very early days to say. But certainly, sales force investment and access are the two priorities. And a quick follow on, sorry, just on Brilinta. When you say your focus is share, when we think about your reflection comments and assessing the product at the end of this year, early next year, it's fair to think that you'd be looking for an inflection of volume, not just share relative to whatever the market's doing? Well, it's actually both. The thing is that the market the total market is really not something we can influence a lot. First of all, we just to repeat, we only access 20% of the total volume. So there's not much we can do to influence the entire class, the entire OAP market. There are so many other indications that we don't have yet that we cannot say a word about. So we can't influence the whole market. So our real focus is growing our share in ACS and suddenly growing that ACS segment from a volume viewpoint. But the priority is the market share. Now, of course, if we had good share progression at the end of the year and the market was completely declining and our sales wouldn't as a result, we're flattish or certainly not growing, we would have to revisit the level of investment. But I would not try to conclude anything out of 3 weeks of flattish volume in the market. I've been around long enough and worked in the U. S. Long enough to learn to not overreact to 3 weeks of data points. So as long as your market share goes in the right direction, I think for a new product like this one, you stick to what you're doing. Now of course, we'll have to monitor this over the next few months. That's the best I can tell you at this point. Okay. Thank you very much. Let me just move on to Matthias Graum at Danske Bank. Matias, do you want to ask your question? Thanks so much. Given that there are a number of omega-three assets out there in various stages of development, I'd be interested to hear why Onterra as some would argue that there are other compositions once daily fixed dose combination of Crestor and Epanova beyond the U. S. Market? And lastly, you've done a number of deals in cardiovascular and respiratory, but no late to mid stage such for oncology, an area you've emphasized repeatedly that you want to rejuvenate. So is it fair to assume that upcoming business development teams should have a higher proportion of oncology deals going forward or has something changed? Thanks, Matthias. It's a great question. The your first question is sort of answered by your second question, in fact, is that the combination of Crestor with Epanova is a very attractive aspect of this acquisition. And Ipanova is a once daily omega-three that is therefore easy to combine with a once daily cluster. So clearly, our focus is on developing a fixed combination of Epanova and Cresta. I don't think we have communicated a date or have we a date for a fixed combination. So I think at some point in time we'll communicate this. But I can tell you this was, of course, a critical part of this acquisition to have a fixed combo on the market as quickly as possible. It's actually part of the deal construct. And our goal as you can imagine is to get that fixed combo in the marketplace before the patent expiry of Crestor in the United States. So with that, I guess you can get a sense for when we'd expect to introduce it. The second question as far as deal, I think just a couple of points here. One is we said we would focus on oncology, respiratory and cardiovascular metabolism and that's what we're doing. Then having said that, basically, you have to I mean, we focus on acquisitions where we believe we can add value, as I said before. So you have to find those opportunities and you have to convince yourself you can add value. So certainly we are looking at oncology, but we'll only do acquisitions or business development if we can add value to those. The second part the second comment I would like to make is that we don't the way we will build our pipeline is not only through business development, it's also through our internal pipeline. And we've moved or we are moving Olaparib in Phase 3. We've moved moxetumumab in Phase 3. Admittedly, it's a smaller opportunity, but olaparib, we believe, is a large opportunity. We're moving selimatinib in Phase III. We have immunotherapies which we have presented to you in March, which we believe have the potential to move into Phase 3 relatively rapidly. So over the next say year or so you should see a very different late stage oncology pipeline of AstraZeneca very much through the progression of our internal pipeline. But again, we'll keep looking for acquisitions. We just have to find acquisitions that make sense and we think we can add value. The internal pipeline is certainly in oncology stronger than it is in cardiovascular metabolism. And I think we will see a very strong pipeline just based on what we have in our hands. Thanks so much. Anything, Briggs, you want to add or Thank you entirely. And again, we did emphasize in March that when you look at our pipeline, what was missing was cardiovascular metabolic. And so we've put a lot of emphasis on trying to fill that hole. But the Phase 1 and Phase 2 with our own products in oncology is actually a much stronger part of our portfolio. Thanks. So let me move on to Lars Evring at ACB. Lars, you want to go ahead? Yes. Thanks. Can you say anything about the size of the Phase III programs that you're now targeting both for the omega-three tablet, but maybe also for the Pearl development? And I guess it's not only the double acting product, but also the triple acting. And if you could shed some wise there or the magnitude of trials that you will now undertake? Yes. Great question, Lars. Briggs, do you want to take that? On the Pearl program, really the focus would have to be on La Balama because the triple combination is a little bit further away. And before it impacts us from a cost viewpoint, it will be a little bit of time. But certainly in the short term, it's the dual combination and the omega-three programs. Yes. So the dual combination LAMALABA, I would say, is sort of ballpark comparable to what a big Phase III program would be on the order of 2,000 or 3,000 patients. The triple therapy is a little further behind, so we don't really have the sizing of that yet. UmThera, as you know, they've already they've done both the Crestor fixed dose combination and of course the outcomes trial. So the outcomes trial for Umthera, given what they've told us and the work you've been doing with them, looks like that will get underway this year. So over the next period, that's another cardiovascular outcomes trial type expense that is similar to what we've seen in many of the other cardiovascular outcomes trials we've done over the past couple of years and we have ongoing. Thanks, Briggs. We have an e mail question from Christopher Lieberk from Carnegie. And the question is, given the projection of a higher operating cost for this year, how should we think about costs going forward? Can you compensate an underlying expansion by the savings from restructuring in the past year from restructuring in the past year, sorry? Or are you entering a period of forced increased operating costs? Simon, do you want to take this one? Certainly. Christopher, thanks for the question. I mean, this is we've responded to a number of questions along this theme on the call. But I think the 2 or 3 points. I mean, the firstly, we have a restructuring and productivity improvement program underway and that will deliver significant benefits. And we're always looking to identify opportunities to find further sort of underlying efficiencies in our business. That will continue. And I think we drive that, Christopher, somewhat independent of where we see short term investment opportunities. That's about creating a very efficient and flexible cost base for the long term. I mean, secondly, as we look at opportunities and imperatives to invest behind our growth platforms and in late stage development, of course, there's another side of that, which is we're also looking at where can we deprioritize investment of resource, which has not delivered a sufficient return or where we can sustain the same level of sales activity with a lower level of resource. And we will continue to seek out those opportunities. And yes, that provides an opportunity over a period to, if you like, recycle or reallocate resource from one area into another. And we will actively and always are looking at those opportunities. And just the third thing, as I've again stressed on the call, the investment we're making, the step up in cost is predominantly of a variable nature. We will invest where we see the opportunity and equally we've got the ability to dial it up or dial it down. I confess I took a slight objection to the word a period of forced operating cost increase. These are investments in cost to drive future growth and value. And what we're absolutely doing is making that investment to drive long term growth and value. And if that puts some pressure on the operating cost base and margin in a short term narrow time window such as this year, that's something we're prepared to do because we believe it's right for the long term of the business. So, Chris, I hope that helps you with your question. We've got another question from Mark Clark from Deutsche Bank on margins, which I'm we would probably I think Pascal need to make the last question. Should I deal with this one? Yes, Julien, I'm dealing with it. Okay. So Mark, you've asked, will the core pre R and D EBIT margin still be above 48% threshold even with higher operating expense growth? And as I said, we provided that view back at our Investor Day between 48% 52% and that remains our view as we look forward. And so that is unchanged, Mark. And I think that this probably brings our Q and A to a close. Pascal, if you Yes, it does. Let me thank you very much for your participation and your active questioning. We always appreciate it. And we'll close it close this session for today. Thank you so much. Goodbye.