Well, thank you operator and good afternoon to everybody on the call. Let me start with a couple of things. Firstly, to tell you that all of you that I've contracted some sort of cold over the last of the day. I will take occasional pauses as we go through this call to take a glass of water. I hope you'll forgive me for that. As we move then into the call, let me just start by saying that we posted a set of slides on the investor page of our website. They'll follow along with my presentation. I'll try to do as we go through is cue the slide numbers as we go along so that you can follow.
Turning to the first content slide, which is slide number four in the pack. It's been a few short weeks since our investor day on the 21st of March. At that meeting, Pascal and the AZ management team laid out a clear articulation of our strategic priorities. Firstly, to achieve scientific leadership. Second, to return our company to growth. Third, and importantly, to be a great place to work for AZ people. I'd say that the energy of the entire organization is focused behind undertaking the important task of executing on these priorities. Over the last few months in the run-up to, and of course, following that meeting, we've made good progress.
Our drive towards scientific leadership has been enhanced by four important business development agreements. With Moderna Therapeutics, the Karolinska Institutet, AlphaCore Pharma, and BIND Therapeutics, all of which put us at the cutting edge of important new technologies that will bring important new medicines to patients. Our five growth platforms, so that's BRILINTA, the diabetes franchise, emerging markets, respiratory, and then Japan. All five contributed incremental growth in the first quarter. Although, clearly, they couldn't make up for the expected revenue loss from patent expirations in the quarter. We're also working at pace to simplify our business and to drive continued productivity as evidenced, as you'll have seen, by the quick start to phase IV of the restructuring program that we laid out at the investor day.
Good progress on implementing our three key strategic priorities. Our focus today, of course, is the first quarter results, and I'm gonna cover five topics. I'll first summarize the headline numbers, then I'll cover the revenue performance by region and for selected brands. I'll turn to the core operating performance and put an emphasis on the key drivers of operating profit and margin. I'll briefly touch on restructuring and cash flow. Finally, I'll close with our thoughts on guidance for the full year. Onto the headline results, and that's slide five in the deck. Total company revenue was $6.4 billion in the quarter. That's a 12% decline in constant currency terms.
Revenue declined by 13% on an actual basis as a result of the negative impact of exchange rate movements, chiefly the Japanese yen. Once again, the dominant feature of our revenue profile in the first quarter is the loss of exclusivity on several brands, Seroquel IR and Atacand in many markets, and CRESTOR in Canada. These three products alone were down more than $900 million compared to last year. I'll discuss the regional and brand performances shortly, but let's just continue with the headline numbers. Core operating profit in the quarter was down 21%. Core operating expenses were 4% lower than last year in constant currency terms, but revenue was down more. Together with the impact of lower core other income, this drove the core operating profit decline.
Core EPS in the quarter were $1.41 compared with $1.87 last year. The 21% decrease in constant currency terms is in line with the decline in core operating profit as the benefit from a lower number of shares broadly offset the higher tax rate in the quarter. Adjustments to core financial measures at $0.60 per share were the same for both periods, although with a different mix, with higher restructuring last year and higher amortization this year. When applied to the lower core EPS base in 2013, this resulted in a larger decline for reported EPS compared to core EPS. Overall, reported EPS was down 31% to $0.81. Those are the headlines for the first quarter. Let's move on to slide six and look at the first quarter revenue performance.
When I refer to growth rates here, it will be on a constant currency basis. The first thing to mention on revenue is that we've made a slight boundary change to our regional breakouts for revenue. What is reported in Europe is now revenue from Western Europe, combined with many markets that were previously reported under emerging markets. We've provided eight quarters of restated history to help you calibrate your models, and you can find these on the investor page of our website. With that bit of housekeeping out of the way, let's look at the revenues. Revenue in the U.S. was down 16% compared to the first quarter last year, driven by loss of exclusivity for Seroquel IR. If we exclude Seroquel IR, the rest of the portfolio increased by 3% in the quarter.
First quarter revenues include $78 million related to our share of sales of the Amylin diabetes portfolio, which wasn't in the prior period. There was growth contribution from SYMBICORT, BRILINTA, and the ONGLYZA franchise. Revenue in Europe was down 16% in the quarter, chiefly due to the loss of exclusivity for Seroquel IR. There was also generic erosion on Seroquel XR following some adverse patent judgments and at-risk launches, particularly in Germany. The continued impact from the loss of exclusivity for Atacand and NEXIUM also fueled the revenue decline. Revenue in established rest of world was down 17%, and that's largely a CRESTOR story. The loss of exclusivity for CRESTOR in Canada, and then on top of that, pricing pressure in Australia. Revenue in Japan was up 5%. We saw good growth for NEXIUM, good growth for CRESTOR, and indeed for SYMBICORT.
Revenue in emerging markets was up 9% in the quarter. That's an improvement from our exit rate in the fourth quarter of 2012. Although increases in Saudi Arabia, stable revenues in Brazil and Turkey played their part, it was really the 21% increase in China that was the primary driver of performance. China's sales were fueled by good growth of Seloken, NEXIUM, CRESTOR, and IRESSA. Looking towards the rest of the year, in addition to continued growth in China, we expect to see a broader set of markets contribute to the overall emerging markets performance. Slide seven provides a snapshot of revenue for our key brands. In addition to the regional growth platforms of emerging markets in Japan, as you can see here, our brand growth platforms, BRILINTA, Diabetes, and SYMBICORT, all contributed incremental revenue in the quarter.
CRESTOR was down 11%, but it would have been flat except for the generic erosion in Canada. At the bottom of the slide, you can also see the significant impact from loss of exclusivity for Seroquel IR and Atacand. Detailed commentaries on brand performance are in the press release, but I'd like to just provide some additional color on three growth platforms, BRILINTA, Diabetes and SYMBICORT, and I'll also touch on CRESTOR. Firstly, BRILINTA, and that's slide eight. Sales were $51 million in the quarter, with $30 million in Europe and $15 million in the U.S. We continue to implement our plans to build this important brand that we outlined in our Investor Day a few weeks ago.
On slide nine, we've rolled forward this graph of BRILINTA's new-to-brand performance in the U.S. for the most recent weekly data. It shows a continuation of the growth trend from January, with the usual dip for the Easter holiday week. We exit the first quarter with weekly new-to-brand volumes up 30% compared to the entry point in January. Performance outside the U.S. continues to build. We can increasingly use the regular IMS data to track progress instead of relying on survey data. You can see on slide 10, these graphs show steady progress in markets like Germany, Italy, the U.K., and Australia. Turning to the diabetes franchise, starting on page 11, slide 11, revenue for ONGLYZA was up 27% to $90 million in the quarter. Alliance revenue in the U.S. was $64 million. That was up 19%.
Total prescriptions for DPP-4s in the U.S. has slowed, but was still double digits in the quarter, up 10%. Total prescriptions for our franchise of ONGLYZA, plus KOMBIGLYZE XR, were up 9%. We did lose share during the quarter. Our market share of TRXs was 16.1% in March, and that is off by 170 basis points from December 2012. This is an increasingly competitive category. We've experienced some losses of preferred formulary positions in managed care plans, and have experienced a decreasing share of voice relative to competitors. We are focused on pulling through volume where we've got strong access, and we will continue to compete vigorously in this market. Outside the U.S., our share of alliance revenue for ONGLYZA was $26 million.
That's up 53%. There have been further European launches of KOMBIGLYZE during the quarter. Moving on to Slide 12, at first the GLP-1 franchise. The first quarter includes $69 million in revenue from our share of the alliances, BYETTA and BYDUREON sales in the quarter. The relaunch of BYDUREON by the alliance has driven weekly new-to-brand volumes to a 15% increase compared to their October baseline, with new-to-brand share up 1.5 percentage points in that time. Starting April the 1st, the alliance has now assumed responsibility for the exenatide products outside the U.S. FORXIGA revenue was $1 million in the quarter, reflecting the fact that the launch rollout is in its very early stages following approval in November of last year. The initial feedback we're getting from physicians is really quite positive towards this new treatment modality.
As seen on slide 13, SYMBICORT sales were up 14% to $826 million. Sales in the U.S. were up 32%. SYMBICORT's total prescriptions were up 15% compared to just 3% for the fixed combination market. Our share of total prescriptions and share of new patient starts were both up during the quarter. Sales in the rest of world were up 7% on growth in Europe and continued market share penetration in Japan on the back of the launches of Symbicort SMART and the COPD indication. Finally, turning to CRESTOR, that's on slide 14. Sales were down 11% in the quarter to $1.3 billion due to the loss of exclusivity in Canada, well, otherwise sales would have been flat.
Sales in the U.S. were down 4% to $652 million. Total prescriptions were down 7% compared to the first quarter last year. Realized prices were up, but that's attributable to the Medicare coverage gap adjustments that were put through in the first quarter last year. Otherwise, realized prices would have been slightly lower in the quarter, and we continue to expect lower pricing for the balance of the year. Sales in rest of world were $671 million, down 16%. Excluding Canada, rest of world sales were actually up 5% on some good growth in Japan and in China.
As you model CRESTOR revenues for the rest of the year, you should recall that a ruling from the court in Australia invalidated three patents. We would expect that generics will achieve listing for reimbursement around the mid-year. I'll now turn to the first quarter P&L, which is on slide 15. I'll focus here on core margins and profit. The press release does, of course, contain the statutory numbers and a detailed reconciliation to the core measures. As with sales, when I refer to growth rates, they'll all be on a constant currency basis. Core gross margin in the quarter was 82.2% of sales. That is up 90 basis points compared with the first quarter last year. Product mix was unfavorable.
However, core gross margin benefited from lower core Merck expense related to the second option amendments implemented in the middle of last year. Core SG&A expense was down 2% compared with the first quarter last year. Benefits from restructuring programs and overall lower selling and marketing expenses in developed markets more than offset selective investments in support of emerging markets in BRILINTA, as well as taking on our share of the selling costs for BYETTA, BYDUREON, and SYMLIN. Core other income was 36% lower than last year on lower ZOMIG royalties and the absence of some one-offs in the first quarter of 2012. That leads to a core pre-R&D operating margin of 51.5% of revenue.
That is 350 basis points lower than last year, as the slightly higher core gross margin as a percent of revenue is offset by the lower core other income and the higher SG&A expense as a percent of revenue. Core R&D investment in the quarter was $963 million. That's 7% lower than last year. We continue to realize savings from our restructuring programs. The phasing of clinical project costs also drives the favorable variance. The spending winds down on phase III trials for projects like fostamatinib and naloxegol. These savings provided more than enough headroom to accommodate the spending for new and licensed, acquired, or partnered projects.
Now, you'll recall that we've guided to core operating costs, so that's combined core SG&A and R&D costs being held to a slight increase in 2013 in constant currency terms, and that is indeed our expectation. I would view the 4% decrease in these costs in the first quarter as a matter of phasing. We will continue to make the investments behind the growth platforms and pipeline through the course of 2013. Core operating profit was $2.3 billion in the quarter. It's 21% lower than last year. Core operating margin was 36.4% of revenue, 4.4 percentage points lower than last year. Just a brief word on restructuring.
On slide 16, you can see the scope of what we are now referring to as phase IV of restructuring, and this combines the initiatives newly announced last month compared with the actions or together with the actions that remain to be implemented from the phase III program that we announced back in February of 2012. Total program costs are estimated to be $2.3 billion, and you can see here that we've charged $543 million to the P&L in the first quarter. Turning to slide 17. Cash generated from operating activities was $2.2 billion in the quarter compared with $1.5 billion in the first quarter of 2012. Lower tax and interest payments partially offset the lower operating profit in 2013, whilst a one-off pension fund contribution drove higher outflows in the first quarter last year.
We also paid the second interim dividend from 2012 in the quarter. That amounted to $2.3 billion. Finally turning to guidance, and that's slide 18 in your pack. We continue to expect a mid to high single-digit decline in revenue in constant currency terms for the full year. We will continue to face headwinds from loss of exclusivity. Indeed, since the start of the year, we've received an adverse ruling on CRESTOR patents in Australia. We'll see continued erosion of Seroquel IR, Atacand, and for CRESTOR in Canada. However, the prior comparisons will improve as the 12-month anniversaries are met. Despite the new challenges and the double-digit revenue decline in the first quarter, we maintain our revenue guidance for the full year. It's actually a similar story on costs.
Despite the 4% decline in combined core SG&A and R&D expense in the quarter, this is a matter of phasing, and we continue to expect a slight increase in core operating costs for the full year in constant currency terms. With a revenue and cost profile in line with guidance, we continue to expect core earnings per share to decline at a rate significantly higher than the decline in revenue this year. One final item. As you will recall, on the 1st of April, the U.S. District Court for the District of New Jersey ruled one of our patents protecting PULMICORT RESPULES invalid, and further ruled that the generic defendants do not infringe a second patent.
In that announcement, we disclosed that revenues for PULMICORT RESPULES in the U.S. were $135 million in 2012, royalties represented an annualized value of approximately $260 million under core other income. There is currently a temporary restraining order in place while the U.S. Court of Appeals for the Federal Circuit considers our pending motion for a longer injunction pending appeal. We have no further news to report at this time, just to remind you that should additional generics enter the market, both PULMICORT sales revenue and royalty income will come under significant pressure, I'm sure you'll want to adjust your models accordingly. As for currency, exchange rate movements created a 4% negative variance to core EPS compared to last year, it was neutral to core EPS versus our January 2013 guidance rates in the quarter.
I'd remind you, though, that our guidance takes no account of the likelihood that average exchange rates for the remainder of the year may differ materially from the January 2013 average. With that, we'll now move on to the Q&A session. I'll ask the operator to come on and try instructions then get into your questions.
As a reminder, that's star one if you wish to ask a question.
Thank you, operator. Now I see Tim Anderson of Sanford Bernstein. Tim, over to you, first question.
Thank you very much. A couple of questions, if I can. On CRESTOR, previously the company said that they expect the product to hold up pretty well through generic LIPITOR in the U.S. In Q1, as you pointed out, prescriptions were down 7% year-on-year. I'm wondering if you can talk about what you expect with this product in the U.S. going forward through its patent expiration in 2016. Do you think the decline in prescriptions in the U.S. specifically could continue to accelerate? Another question, which is, are you willing to say yet, is Astra willing to say when they think the trough year, where we'll be in terms of revenues or earnings?
Tim, thanks very much for those two questions. On CRESTOR, you know, we continue to believe that CRESTOR has a very clear positioning in the statin market for higher risk patients. We continue to see the brand perform well. The impact in terms of first quarter performance was particularly associated with changes in managed care and formulary position. As Ed Seage, would you like to pick up and talk a bit more about what we saw in the first quarter and how we see the brand moving forward? I'll pick up Tim's second question.
Sure. I mean, it's really not a function of actually losing positions in managed care. It's the function of plan years rolling over, patients enrolling in new coverage schemes. We typically see at the beginning of every year an uptick in the number of switches away from CRESTOR to generic products. That's exactly the same pattern we saw this quarter, where you see net switches from CRESTOR increase. We've already seen, as again, like we've typically seen, a recovery in that net switch rate as we exited the quarter. It's a fairly typical, what I would call almost a seasonal effect, where you see that when the rollover of plan years, we see an uptick in switches to generic, which then kinda unwinds over the course of the quarter.
I think, Tim, we have seen as we watch obviously the scripts pretty closely, and I think as Ed was saying, we've seen a trend back once we'd moved through those changes in formulary positions. I'd also say that when we look at the prescribing base of CRESTOR, it remains in some mid-nineties of people who are continuing on with their CRESTOR therapy. We see very clear positioning of the brand for high-risk patients. We see real resilience in the higher dosage. It's fair to say where we do see pressure on the script volumes, it tends to be in the lower dosages, which is exactly what we'd have expected.
I think, Tim, you're gonna see that story, you know, continue out over the coming years with some pressure in the first part of the year, but then, you know, continued resilience with CRESTOR patients going forward. Your second question. Sorry, Ed, did you have a comment to make?
One other thought is, if you recall, about around the mid-year last year, we started seeing a decline from our Medicaid segment business, and that won't annualize till mid-year as well. That's another factor in the early year performance to keep in mind.
Yeah. Thanks, Ed. To your second question, Tim, on the trough year. I mean, I think you all know it's a question that a number of people have asked us, and we've been rather sort of stubbornly resistant in giving a precise 12-month period. Our reason for that is, you know, we don't, we don't want the organization, we don't want us to be sort of focused on one particular 12-month slice. The shape of the revenue profile for the company is gonna be defined by the interplay of three factors. We see continued resilience and stability in the sort of established products within our portfolio, particularly aided by good growth in emerging markets for some of those established brands.
We know that loss of exclusivity will continue to impact the top line, with the most notable events still to come being NEXIUM in the U.S. and then CRESTOR in 2016 and 2017. When we return to growth is gonna be a function of our success in driving our growth platforms. They all grew in this first quarter. We're investing heavily behind them, but we don't want to concentrate down on one particular 12-month window. I know you'd love us to give that, Tim, but we just don't think it's right for us to be focused on that. We need to drive the business for success over the long term.
Thank you.
No, Tim Anderson, thanks a lot. I'm gonna move to the second question on the line here, which I think Peter Verdult from Morgan Stanley. Peter, your questions.
Simon, it's Peter Verdult, Morgan Stanley. Just a few. We've heard from a number of companies recently this week on reporting the inventory levels across retail pharmacies and the distributor channels in the U.S. running at uncharacteristically low levels. Just wondering whether that's been a factor for Astra, and if so, whether you can give some sort of a ballpark quantification. Secondly, can I just dig a bit more on the diabetes franchise? I mean, the landscape is well known, the formulary lost on Caremark is well known, it does seem that the franchise versus expectations quite soft. I just wanna know what explicitly you're gonna do to try and re-accelerate those trends and whether there's any update as to when the SAVOR data will be released.
Lastly, just a very quick one. If the phase III data for OSKIRA, the last few OSKIRA programs, fostamatinib, match the same sort of profile that we saw in OSKIRA 1, is it fair to say that Astra will not proceed to file that product for rheumatoid arthritis? Thanks.
Well, Peter, thanks for the questions. Sorry, let me perhaps deal with them in reverse order and perhaps ask Ed to comment on inventory levels. On OSKIRA, you know, we're gonna wait for the data from the remaining OSKIRA trials. I'm not gonna speculate on the outcome of those. And, you know, there's, you know, not that long before we'll see the results, and we can then assess the medicine and the prospects in the light of those. In terms of diabetes, I think, you know, our, this remains an absolutely critical growth platform for us. We, as an alliance, have got a strong portfolio.
We and BMS are clearly very committed to the long-term success of the business. On ONGLYZA and indeed exenatide, you know, they're going to continue to show decent year-on-year growth, and we've seen a pretty encouraging start for FORXIGA. As you picked up, Peter Verdult, and indeed we have, that we've seen some headwinds to that growth. I think you've all seen a slowing in DPP-4 growth. In part that's got to do with the annualization of the slowdown and substitution out of other categories last year. We've seen intensifying competition, and that's put share of voice under pressure in some markets, particularly the U.S.
As you yourself referred to, and I mentioned in my notes, we've seen a loss of some key formulary positions, particularly Caremark. Those have been some headwinds. You know, we're taking a whole series of actions in order to ensure the long-term success of that business. We're stepping up sales and marketing investment behind the brands, remain committed to that. We've obviously putting increased investment behind FORXIGA, where it's proved, and as I mentioned, encouraging start for that brand in markets like Germany. Of course, we're getting stuck into the launch and promotion of exenatide in the rest of the world markets from the first of April. SAVOR is gonna be an important catalyst.
I think, speaking of Karl here, Q2 is when we'd expect SAVOR. No new news on that for you, Q2. We got the FORXIGA filing in the U.S. around the mid-year. Of course, the dual-chamber pen for exenatide, the BYDUREON in Q3 for the U.S. and in Q4 for Europe. A lot of activity and investment, Peter, behind the portfolio. You know, we look forward to seeing that, you know, continue to grow over the remainder of this year. In terms of inventories in the U.S., I mean, we obviously have distribution service agreements with the majority of our customers, and that contains the amount of inventory within ranges, and there are penalties either side.
Ed, is there anything particular that you want to add that we've seen?
Yeah. There's nothing in aggregate that's worth calling out. If you'd say, you know, there's always tos and fros at the brand level. Again, nothing really material, but in terms of directionally, NEXIUM was probably slightly flattered by differences in inventory movements between this quarter and the quarter a year ago, and Seroquel was probably penalized a bit, but that's the only directional brand issues I would even point out.
Yeah.
Nothing of a real dollar value that you'd really worry about.
Yeah. Peter, I hope that helps you on that one.
Okay. Thanks.
Let me move to Sachin at Bank of America. Sachin, over to you.
The related to the U.S. managed care access versus Lilly. Firstly, just to follow on ONGLYZA. How do we think about net pricing from here, given your comments that you would that you intend to compete vigorously? Secondly, on BRILINTA. Lilly in their release yesterday mentioned lower effective selling prices for Effient. Are you seeing any impact on BRILINTA pricing or formula positioning that we should be aware of? Secondly, just to clarify a comment on BYDUREON, where you referred to new to brand volumes being up 15%. Does that include or exclude BYETTA switches and any commentary on the total franchise? Finally, on BRILINTA, on slide nine, where you point to an inflection in U.S. trends.
Any commentary whether you feel that is enough to get to consensus sales at roughly $300 million this year and $500 million next year? Thank you.
Right. Well, thanks very much indeed. Let me pick up, I mean, briefly on BRILINTA. Ed, you might wanna pick up the ONGLYZA one in terms of, you know, sort of pricing and just checking. On BRILINTA, no, we've seen good progress in terms of extending our managed care access with BRILINTA. That has come on the back of, you know, I think an increasing recognition of the progress we're making in getting the brand onto protocols onto formulary, the continued steady growth in prescriptions. That's enabling us to expand managed care coverage for the brand and that's coming with, you know, consistent pricing.
We're not seeing that growth in managed care access coming at the expense of pricing. ONGLYZA, any particular comments on the net pricing there that?
Well, certainly wouldn't make any forward-looking statements about our pricing strategy. I can tell you that price was net positive in the quarter.
Yeah. Thanks. So, you know, the investment there and, you know, is gonna be focused actually on ensuring that we've got the right level of sales and marketing investment behind the brand, clarity of message, clarity of positioning. Those are the levers that we'll be pulling. Of course, on ONGLYZA, we've got the SAVOR study also to look forward to as we discussed earlier. In terms of the exenatide franchise, yes, new to brand volumes for our BYDUREON, I mentioned are up 15%, and growth 0.5 share points in NBRx. Of course, you know, a fair chunk of that is coming, at the Well, BYETTA at the same time has been losing ground.
Overall, though, the net exenatide franchise has grown year on year. In total prescription terms, I think from memory about 7%. Again, the focus looking forward is to sustain that. We continue to put a significant effort behind BYDUREON as we think that the, you know, the weekly dosing has a genuine point of differentiation. We think there's more we can do with BYETTA. The alliance is gonna put renewed focus on BYETTA to ensure its unique positioning as the once daily is also appreciated by physicians. We've made pretty good growth in the number of prescribers for the franchise as well.
Clearly, more work to do as we go through the rest of the year. Finally, you had a question, I think, on slide nine, and around the BRILINTA trajectory. I think Sachin reframed the comments that we made at our investors today, which is, as we've now built formulary access, I think it's about 62% on our, on our target hospitals protocol up to almost 50. We've expanded managed care access. You know, we think it's now the right time to further step up our promotional and scientific investment. We probably put about a 50% increase there, and we laid out many of the levers a few weeks ago, and you'll recall those.
More investment in the field, more investment in medical programs, getting nurse practitioners out there. We continue to think that the sort of step change in terms of acceleration of share, while we've seen some of that in the quarter, we're really looking to the back end of the year to see those investments which are ramping up in this quarter to start to pay off. Let's come back to that, I think, in the sort of end of third quarter, fourth quarter. Sachin, thanks for the questions. We've got Matthew Weston from Credit Suisse also waiting on the line. Matthew, over to you.
Thank you very much. three questions, if I can. The first on bringing the phase IV restructuring timing forward. Could you explain your reasoning for doing that, given that you only ran us through it in detail a couple of weeks ago at the New York event? Is that because a number of headwinds have accelerated, or fundamentally, why are you bringing that forward? Secondly, with respect to PULMICORT RESPULES generics in the U.S., can you just tell us whether or not generics were actually able to ship in the 24-hour period between the verdict and your injunction, and whether we will actually see a financial impact in 2Q or whether or not you were able to get your injunction in place before any generic product was shipped?
Finally, on net financials, the $93 million that was booked in Q1, you mention FX gains, but you don't break them out. Is $93 million a good run rate for us to take for quarterly for the rest of the year, or should we assume some differences going forward?
Matthew, thanks for the questions. Firstly, on the restructuring, as you recall, when we laid out the phase IV restructuring program, we indicated that it comprised really four elements. The first element, if you take the 5,000 positions, the first element of about 1,000 were positions associated with the final stages of phase III, but we brought them into phase IV board just so that we had one program that we could communicate against. Matthew, some of those actions, those were already underway, so it wasn't really an acceleration. It was just that they, you know, were already in train. The second aspect was about 2,500 positions were again further SG&A savings. . Firstly, on the restructuring, as you recall, when we laid out the phase IV restructuring program, we indicated that it comprised really four elements. The first element, if you take the 5,000 positions, the first ele
A reasonable proportion markets like Germany and France, we've already initiated some of those actions. Not really an acceleration, just a program moving at pace. The third area was the R&D footprint changes. That is a slightly longer burn type program that takes place over the course of the next two to three years. That's running very much to our schedule. The scale of the charge taken this quarter reflects the residual of the phase III program, plus the sales and SG&A changes that were underway.
Where we have got known changes with identified movements, we will take a provision against where there's very clear and known changes and where we've announced them, we will take the provision. There will be a provision taken which won't translate into cash for some time. Those are all the factors which meant that a half of the 1.3, well, slightly under half the 1.3 we expect for this year being taken in the first quarter. In terms of your second question, which was the Pulmicort injunction TRO we can place, I think we're not aware of generics being shipped into channels. That being said, if there had been, it would've been at low volumes.
We haven't seen a discernible impact, but clearly it's a space that we'll need to watch over the course of the next few weeks. Your final question, I think was the net financing cost, which you had indicated was running, I think you said at $93, and you were asking for whether that was likely to be a sort of a rate for the remainder of the year. It's a reasonable guide. The movement in FX gains is a pretty small part of the total. I mean, you know, I think it's in high single digits from memory. I would expect you'll see the first quarter as being a reasonable guide for the full year. With that, move to Sorry. Matthew, hopefully we dealt with your questions.
Now move to-
Thanks.
Steve Scala at Cowen. Steve.
Thank you. Would you give us a rough sense of how the economics to AstraZeneca of a unit of generic CRESTOR sold by Watson will compare to a unit sold by AstraZeneca when it launches in 2016, given your very sizable 39% fee? Secondly, should we expect emerging market growth to continue at a similar rate in 2013 as we saw in the first quarter of the year? Thank you very much.
Thanks. Let me deal with the emerging market growth. We saw good growth in the first quarter, 9% or so. As I mentioned in my remarks, a lot of that growth was driven by China, where we saw strong growth at 21%. Our business in China is now back growing faster than the market. I also mentioned that while we've seen some growth in the first quarter from one or two markets such as Saudi, we'd, you know, the growth, a lot of it, when you do your arithmetic, you'll see came net from China.
As we look forward for the remainder of the year, we expect to see continued strong growth in China. We'd expect to see a slightly more diverse contribution, although a contribution from a broader set of markets. You know, I think we feel pretty good about the emerging market prospects for the full year, and expect to see a broader contribution. As you know, we guided to a high single-digit growth in emerging markets, and that's where we are in the first quarter, and that way we sort of remains our outlook.
I think your first question, which is around CRESTOR, and the settlement with Watson, which permits them to enter the market earlier than the expiration date. And of course, we get a royalty from Watson, as we disclosed. I'm not able to work through the maths for you because it depends on Watson's price, and I'm not gonna speculate on that at this stage. I think you can make an assumption on that, and the rest of the pieces are there for you in terms of calculating what that would look like. I think the royalty is clearly an important net back for us. Steve, thanks for those questions.
Brian, over to you at Barclays.
Thanks very much. It's Brian Bourdot from Barclays. It sounds like the two-question rule has gone, so I have four, please. First question on ONGLYZA. Second on naloxegol. Third on SYMBICORT. Fourthly on the geographic definition changes. Firstly, on ONGLYZA, just wondering if you can give us the new to brand share that you captured it in the first quarter, please. Second question on naloxegol. I see you're still in talks with the FDA. I was just wondering if there's any update on the petition for scheduling that you submitted to the DEA. Thirdly, on SYMBICORT, I was wondering if you could update us on the status of any generics being sold in any markets and your expectations for generic entry in Europe and the U.S.
Lastly, thank you very much for the 14 pages of restatements on geographic sales. I was just wondering, does that reflect changes to the way that you operate as well, or is this just simply an accounting thing? Thank you very much indeed, and I hope your cold improves soon.
Brian, thank you very much for that. Given your last comments, I won't chastise you for the fact you promised you'd only give two questions. In terms of dealing with your final question, the geographic change, we have moved essentially what we used to frame as emerging Europe and group that into Europe, and that reflects a couple of things. Firstly, as the way that those markets have evolved over the last few years, they increasingly resemble and have characteristics of some of the other European markets, rather than the emerging markets such as the Chinas and the Middle Easts and the Latin Americas of this world.
The nature of competition, the nature of demand and prospects starts to look more like the Western European markets. Secondly, as I think you will recall, from our investor day, indeed before, we now have one senior commercial leader responsible for the European region looking after both Western and the former Eastern Europe. That's Ruud Dobber. That's that there's a couple of reasons. You know, we hope that'd be helpful for you in laying out the restatement historically, so you can track it going forward.
Coming back to naloxegol, the discussions with the FDA are ongoing, and I'm not able to update you on the status of the with the DEA on the controlled substance component. Typically, that follows decisions from the FDA. I wouldn't have expected enough to be able to give you an update at this time. We'll keep you posted on that. In terms of SYMBICORT, we have not seen any new generic or analog activity in Europe or indeed in the U.S. As you know, we have patent protection on our devices running out to 18-19.
We know that there are some generic analogs that have sought approval, but we haven't had any new developments on that score in the last quarter. Indeed, sorry, in the U.S. device, I should have, may have misled you there. I think U.S. device from memory, Karl, 2025, 2026. Europe, 2018, 2019, and then U.S., 2025, 2026. No update in terms of developments in approval and certainly not market entry of analog. You know, we continue to see those as markets well-protected. You had another question on, sorry, on ONGLYZA, new to brand share Ed. Do you have that available?
Yeah. Not with the precise numbers. It's not a table. I'm actually just running a ruler across to an axis on a graph, and it's broadly, if you look at KOMBIGLYZE and ONGLYZA together, our new to brand share is running around 16%, give or take.
Okay. Thanks, Ed.
Thank you.
Brian, thanks for your questions. I'll move to Mattias Häggblom in Danske. Mattias, over to you.
Thanks. Mattias Häggblom, Danske Bank Markets. I'd be interested to hear what you have seen in terms of the price component in developed Europe during the start of 2013 and how it compares with the same period last year. Is it same, worse, or is it easing? Secondly, in light of the strong gross margin for the quarter, historically, you guided for gross margin is in excess of 80%. In conjunction with the capital markets day in New York, while you reconfirmed your previous pre-R&D margin range, you did no longer explicitly say anything about future gross margins. Was there some thought behind that as you moved more towards specialty care and large brands continue to lose exclusivity or an 80% is longer term, no longer realistic?
Is the previous guidance of excess of 80% on gross margin still a valid comment for the longer term?
Well, thanks very much for the two quick questions. Firstly, in terms of European pricing action, what we have seen and anticipate for this year, is very consistent really with what we saw last year. You'll remember that historically we had seen government price interventions in the low to mid-single digits in Europe. We guided really over the last 18 months or so, that we'd seen that rising up to comfortably mid-single digits. Rather than being in the, you know, 3%-5% range, more sort in the 5%-6% range. That's pretty much what we have seen and expect to see this year.
Not a, not a change relative to last year, and a continuing level, you know, somewhat above historic levels reflecting the difficult economic circumstances in many of those markets. On your question around margins, we've guided to a core pre-R&D margin in the 48%-52% range. As our business evolves over the next few years and moves more towards a higher proportion of specialty care, there will be some movement between gross margin and SG&A. You know, I'm not gonna sort of guide beyond this year in terms of how those two different components will stack up. What we've guided to is the pre-R&D margin level, which is the level to which we'll be to which we'll be managing.
Thanks for your two questions. We've got another one from Nicolas Guyon-Gellin at Exane.
Yes, good afternoon. Thanks for taking my questions. Actually, I have two. The first one relates to the diabetes unit. What do you expect from the increased FDA scrutiny regarding incretin mimetics? The second one is a follow-up on DPP-4 again. We've seen that recent script slow down recently for the entire class. You mentioned formulary changes for ONGLYZA specifically, do you have any idea, any sense as to why the entire class is down? Second question and last one is a pipeline question regarding naloxegol. The recent abstracts just released at the DDW showed an efficacy of 10% to 15% placebo adjusted. That is at the very low end of what competitors have achieved. Are you comfortable with those data? Thank you.
Sorry. Thanks for the questions. Just let me deal with the DPP-4 class first of all. We have seen a reduction in the class growth. I mean, it's still a fast-growing market. I think from recollection, the class TRx growth was around about 11%, I think, in the first quarter. That does compare to about 26% in the prior period. We think that's due to a couple of factors. We have seen additional TZD generics in the second half of 2012.
The TZD market decline has stabilized, and that slowed down that as a source of growth for DPP-4. It's also fair to say that we've seen continued strong growth in GLP-1 class, and that's also taken some edge out of the DPP-4 market rate of growth. Those are probably the two main drivers. You know, as I say, we continue to think it'll remain a growing attractive market, perhaps not at the same rate we had seen. I think, in terms of the first question, I think, this related to the recent review for the DPP-4 and GLP-1 class. I don't know, Karl, if you've got anything, any comments to add on that.
I mean, well, pick that one up, and then I'll come back to the naloxegol question.
No, I mean, we are continuing, you know, to work with the FDA and the EMA in this area. I mean, there are no new findings here. I mean, the labels in this class have already contained, if you refer to the pancreatitis issue, that's a known effect. The FDA has just said that they are looking into this, and I know, and we would continue to provide all the information there.
Yeah.
It's nothing specific, of course, to our products. It's for all the classes.
All the classes, yeah. No, no new news on that. You know, it's a known issue. We don't see any new information, but we will await to see how that review unfolds. Ed, a question on the naloxegol. I think in particular, you know, our views on the results from the various KODIAC programs. Please, I guess it's too early to call. I mean, we're in discussions with the FDA on that, so I don't wanna sort of prejudge the outcome of regulatory discussions. But anything, Ed, you'd want to add on the specific number, I guess?
Yeah, I think the question was looking at the response rates and comparing them cross-trial to other competitors. I think I haven't done an exhaustive side-by-side analysis, but my understanding is this category 1 has to be pretty cautious about making cross-trial comparisons.
Yeah.
You've got different durations of therapy in a lot of these trials, and most importantly, you've got different primary endpoint definitions in a lot of them. It's hard to make cross-trial comparisons the way one might be facile with making a blood pressure trial comparison, where blood pressure lowering is blood pressure lowering.
No, I think, Ed, thanks. I think that is the key point, very difficult in this class to make those, you know, the cross-trial comparisons. Now it's one minute past 1:00, and we have our annual general meeting today, which I'm expected to attend. We've got a couple more questions here. What I'd probably like to do, I mean, Seamus, if you've each of you, Seamus at Leerink Swann and Mark have got at Deutsche Bank, if you've each got one question, we'll try and handle that and then close up. I'll need to move very swiftly through your questions. If you've got more, I'm sure you can come back to James and the IR team, and they'll pick them up for you.
Seamus, any one question, if you've got one, I'll try and deal with it on the call.
Sure. Perfect. Thanks so much for taking the question. Maybe just quickly, you mentioned the SAVOR study multiple times. I know I'm not asking for kind of the scientific views on SAVOR, but really in the market research that you've done around SAVOR, what are the key questions that SAVOR will answer to really drive or that can drive improved DPP-4 class growth or specifically growth of ONGLYZA, KOMBIGLYZE? Thanks.
Well, thanks for that. I think we're not in a position to sort of prejudge the outcome of SAVOR, which is a cardiovascular study and I mean, in some I mean, it was essentially set up for a no-harm test. James, do you wanna pick up on any sort of work we've done around potential outcomes?
I think first and foremost, Seamus, it's addressing the, I think the previous question in terms of safety. Design is a non-inferiority, can remove a number of the questions which are still lurking around there and being asked at the moment. That'll be a tick, hopefully, for the class as a whole, and I think that can contribute to class growth. Secondly, clearly the mortality benefit, if that is seen, that can be a major driver, both again for the class and re-accelerating the growth for the class. Obviously, we believe we would be able to benefit particularly in terms of having that data first and the advantage of that data for ONGLYZA specifically.
Probably don't really in a position to prejudge that. Clearly something to come.
That's hypothetical. If that, if that data is positive, I mean, those would be the two most important things from a research point.
Yeah. Seamus Fernandez, sorry, but if you've got further questions, if you come back to James Gordon and team afterwards. Finally, if I can, I'm sorry, I know that there's some further people waiting to put questions, Johan and Christopher, I'm gonna take one last question from Mark at Deutsche Bank, with apologies, ask if the rest of you could direct your questions to James and the team after the call. Thank you very much indeed. Mark, over to you.
Thanks, Simon. It's just a quick question about business development. Pascal said at the Investor Day that this was gonna be a focus in the coming months. So far, we've seen what I would term sort of relatively early to mid-stage R&D deals. Is it likely that that is what we will continue to see in the coming months? How much of that business development strategy is still to be determined by Marc Dunoyer, who I know has still not joined the company just yet?
Okay. Well, thank you. I mean, I think the broad sort of parameters shape of our business development strategy we laid out at our Investor Day and the first, the focus is on strengthening the science base, the pipeline, and where we can, the on-market portfolio for our core, three core therapeutic areas, so cardiovascular, metabolic disease, respiratory and inflammation, and oncology. That will be, those will be the therapy area areas of focus. We will, you know, continue to look across the discovery development commercialization chain for good opportunities. You're absolutely right.
The four deals that we've done in the first part of this year have been earlier stage deals, in, particularly actually in cardiovascular oncology, I guess, is sort of concentration of that activity. As we go forward, you know, we will continue to look for good opportunities in those three areas. I think, as we all know, later stage opportunities and on-market opportunities, there are relatively few of them. They tend to be highly priced, and therefore, you know, we need to be very selective about what we do there.
But I do think there will continue to be good earlier stage opportunities and, you know, we're as active at the moment in terms of reviewing and discussing potential opportunities as we've been for some considerable length of time. With Marc's arrival, when he joins us, you know, I'm very confident that the overall parameters of strategy won't change, but I'm sure he'll be able to bring a lot in terms of even more crisply defining the specific opportunities and priorities within each of the therapeutic areas, and he'll be working with his team to do that.
I don't imagine a significant change in direction, but even more, I'm sure, momentum and focus behind that activity, which is a key part of our strategy.
Thank you.
With that, thank you to all of you for joining and for your questions. My apologies, I know there were two callers who weren't able to put their questions to us. Again, I'm sorry for that. I'd urge you to reach out to James and team to make sure your questions are indeed answered. For that, thanks to all of you for joining. I mean, just a concluding remark, really. I think as expected, the 1st quarter results do reflect the continued impact from loss of exclusivity on a number of products. Our outlook for the year is unchanged.
We are working to a very clear set of priorities, in particular, returning to growth and achieving scientific leadership, particularly in our core TAs. I think in the quarter, we are encouraged to see that all five of our growth platforms contributed incremental growth. As I just touched on in my last in that last sort of Q&A, the recent business development activities have reinforced our commitment, strengthened our position in our core therapy areas, and over time, we'll bring distinctive science to new medicines and hence to the patients we serve. With that, I bid you all a very good day. Thank you.