Earnings Call: Q3 2012

Oct 25, 2012

Slides

Good afternoon, and welcome to AstraZeneca's 3rd Quarter and 9 Month Results. Delighted to welcome you to the analyst call for the business today, where I'll hand over in a moment to Pascal Soriot, our new Chief Executive Officer, who will then hand on to Simon Louth, our CFO, after which there will be time for Q and A. So without further ado, I'll hand over to Pascal over to you. Welcome. Thank you, James, and good afternoon, everyone. As I just joined AstraZeneca on October 1, it should come as no surprise to you that I'm going to leave the presentation of our Q3 results in the capable hands of Simon, but I did want to join the call and introduce myself to those of you who follow AstraZeneca. In addition to the well known challenges that come from the pharmaceutical sector as a whole, The loss of exclusivity of several of our brands in major markets has largely defined our financial performance in the 1st 9 months of 20 12. We will continue to meet these challenges with determination and focus on delivering against our targets. So in my 1st few months, I'm working on 3 priorities. 1st of all, getting out and visiting with as many people as I can, particularly in R and commercial, and I have done a fair amount of this already in the last 3 weeks. 2nd, meet with shareholders and other stakeholders to clarify their expectations of the company and importantly of me in my new role and finally, to immerse myself in the ongoing annual strategy update. On this last point, I want to be clear. I will take as much time as necessary to engage with the organization and work with the Board to see this strategy update to its conclusion and not work to some arbitrary timetable. So what should you expect in terms of communications? I think it would be reasonable to expect that in addition to the 2012 financials and our normal outlook for the coming year, I will be in a position to share with you my initial high level thinking regarding strategic priorities and general direction at our annual results conference at the end of January, with an aim to flesh that out with more granularity and detail over the following months. As I said when I joined the company, I'm excited and honored to have been asked to lead AstraZeneca, and I'm really looking forward to playing my part in restoring the company to growth and to scientific leadership. Now let's turn to the Q3 results. And for that, I will hand over to our Chief Financial Officer, Simon Lowes. Simon, over to you. Well, thank you, Pascal, and good morning afternoon, everyone on the call. I'll focus on 5 topics. First, I'm going to summarize the headline numbers. I'll then go in and cover the revenue performance by region and for some selected brands. I'll then turn to the core operating performance and I'll with an emphasis on the key drivers of operating profit and margin. I'll briefly touch on cash distributions to shareholders. And then finally, I'll close with our thoughts on guidance for full year. So on to the headline results. Total company revenue was $6,700,000,000 in the quarter. That's a 15% decline in constant currency terms. Revenue declined by 19% on an actual basis as a result of the negative impact of exchange rate movements. The dominant feature of our revenue profile in the 3rd quarter, as indeed it has been for the year to date, is the loss of exclusivity on several brands. Seroquel IR alone was down more than $850,000,000 and the disposals of Astrotech and Aptium accounted for 1.8 percentage points of the revenue decline. I'll discuss the regional and brand revenue performances shortly, but let's just now continue with the headline numbers. Core operating profit in the quarter was down 14% in constant currency to $2,600,000,000 The decline broadly in line with revenue. But to be fair, core operating profit did benefit from the $250,000,000 proceeds from the sale of Nexium OTC rights. Benefits from restructuring and disciplined management of operating costs are also playing their part in helping to mitigate the impact of revenue declines on earnings. Core earnings per share in the quarter were $1.51 compared with $1.71 last year. That's an 8% decrease in constant currency terms with the benefit from net share repurchases providing the uplift compared to the core operating profit trend. Reported EPS were $1.22 that's down 50% at constant currency compared with $2.56 last year, which of course included the $1.08 per share from the sale of Astrotech. So those are the headlines for the Q3. It's a broadly similar picture for the 9 months in constant currency terms with revenue down 15%, core EPS down 11% and and reported EPS down 36% versus last year. Now returning to the 3rd quarter revenue performance, and when I refer to growth rates, they'll all be on a constant currency basis. Revenue in the U. S. Was down 19% compared with of the portfolio increased by 6% in the quarter. 3rd quarter revenue includes $44,000,000 related to our share of sales of the Amylin diabetes portfolio following completion of the alliance expansion in August. Revenue in Western Europe was down 20% in the quarter. Loss of exclusivity on 4 products, Seroquel IR, Atacand, Nexium and Merum accounted for 70% of the revenue decline. And in addition, we faced continued headwinds from government Revenue in established rest of world was down 18%, largely due to a 43% decline in Canada as a result of generic competition for Crestor and Atacand. Revenue in emerging at account. Revenue in emerging markets was up 6% in the quarter. Revenue increased by 23% in both China and Russia. Brazil returned to modest growth as the impact from the loss of exclusivity for Crestor and Seroquel IR is now behind us. A weak performance in Mexico in the face of challenging market conditions continues to negatively impact our performance, reducing revenue growth in emerging markets by more of the at risk launch of generics for Crestor. This slide provides a snapshot of revenue for our key brands. You see, we grew revenues for the key brands that retain market exclusivity in most of our major markets, except the Crestor, where we had generic competition in Canada since April. Excluding Canada, worldwide sales of Crestor were up 7%. Cymbicort had a good quarter on strong growth in the U. S. Seroquel XR was up 8%. We had another strong quarter for our oncology products, Aretha and Fazadex. So a good performance for Onglyza and slow but steady progress on Brilinta. But as you can see at the bottom of the slide, loss of exclusivity continues to take its toll on Seroquel IR, atacand and Merum. Nexium has competition in Western Europe, but we also had a decline this quarter in Japan, where sales in the Q3 last year was launch stocking, whereas demand so far this year has been significantly constrained by the riyotanki. Riyotanki, recall, is the regulation that restricts prescriptions for products in their 1st year on the market into Japan to just a 2 week supply, that has hindered the launch uptake. Rietanki was lifted at the beginning of October, and we are now seeing a significant ramp up in daily sales, we look forward to a solid performance for Nexium in Japan going forward. There are detailed commentaries on brand performance in the press release, and I'd like to provide some additional color on 3 products, Crestor, an update on the Brilinta launch and the performance of the diabetes franchise. So first, Crestor. Crestor sales were $1,500,000,000 in the quarter, that's down 3% due to generic competition in Canada. As I mentioned earlier, if you exclude Canada, global sales were up 7%. Crestor sales in the U. S. Were up 11% to $833,000,000 Total prescriptions for Crestor in the Q3 were down a bit more than 3% compared to just under 1% growth in the statin market. Now I'm going to turn to a slide that we've used in the past to look below the surface of total prescriptions and look at the dynamic components to illustrate the trends. If we look at the yellow hashed line, which is net dynamic volume, you'll note the strong uplift beginning in June of last year year period. Now Lipitor first went generic at the end of November 2011 and then multisource generics arrived at the end of May. And you can see that the dynamic trend is quite resilient before and after May 2012. I'd like to now take this same data and look at it by payer channel in order to illustrate the second driver to the quarter's TRx performance. On the left is the same dynamic data we showed earlier, but isolating the majority of retail business. That's commercial managed care and Medicare Part D. And it shows the same trend as before, get a bump from the simvastatin label change last year and then relative stability spanning the 2 Lipitor loss of exclusivity dates. On the right is the same data for Medicaid fee for service channel. The half year results, you may recall Tony Zook mentioned that we were no longer pursuing this low margin business going forward, and you can see the volume erosion beginning in July. So I hope that gives you some greater insight into the volume trends of Crestor, relative stability in the face of multisource generic atorvastatin, bit of weakness against the strong Q3 a year ago that was driven by the simvastatin label change and a small decline in the current quarter as a result of our decision to not chase low margin Medicaid business. So, against the low single digit decline in total prescriptions, how did we generate 11% revenue growth in the quarter? Well, there was a little bit of inventory movement year on year, but mostly this growth is driven by price. So far this year, we've been able to achieve an increase in net realized prices for Crestor. But we also said that this would come under pressure once we had to contend with multiple generic autostatins. And this is proving to be the case as we complete the contracting cycle for 2013. We look to be in a good position for pulmonary axis in 2013 and broadly similar to the high axis we currently enjoy, but this is coming at the expense of price. I don't want to get too far ahead of our financial guidance for next year, but I think it's prudent to be thinking of net price declines for Crestor in the U. S. Next year. In the rest of world, I already mentioned the big driver, and that is lots of exclusivity for Crestor in Canada. Now turning to Brilinta. Sales were $24,000,000 in the quarter with $15,000,000 from Western Europe and $7,000,000 in the U. S. In the U. S, we continue to make progress on the key launch metrics. In particular, I would note the increase in trial rates amongst interventional cardiologists as well as the nice uptick in unrestricted access in Medicare Part D. We have recently prioritized driving trial and utilization where we're already on formarian protocol and that is helping drive prescriptions. You can see here from the latest data that total prescriptions in the 3rd quarter are 55% higher than in quarter 2. So, progress to be sure, but much, much more to do. In Europe, the picture is a continuation of the growth trends that we saw in the Q2, as you can see here in Germany. Bear with us. So, in Germany and in the Nordics, so there's Germany, let's move on to the next slide, in the Nordic region and in Italy. We launched in France in July, so it is still very early days, but initial indications are that we're having a launch trajectory on par with other successful launches in Europe. Finally, the diabetes franchise. Revenue from Glizer was up 40 2% to $84,000,000 in the quarter. Much of this is still in the U. S. Where Alliance revenue was $62,000,000 Total prescriptions for DPP-4s in the US are still growing strongly, up 21% in the quarter. Our franchise share was 17.7% in September that's up 1.2 percentage points since December with OnGlizer holding steady while COMBIGlyze XR market share is up. We're now in a position to begin launching COMBOGlyze. That's the combination of OnGlyze and metformin immediate release in Europe over the next several months. So, I'll now turn to the Q3 P and L. I'll focus here on core margins and profits. The press release does, of course, contain the strategy numbers and a detailed reconciliation to the core measures. As with sales, when I refer to growth rates, they will be on a constant currency basis. Core gross margin in the quarter was 81.1 percent of sales, that's down 10 basis points compared with the Q3 last year. Now there are some moving parts below this broadly flat surface. At an unfavorable product mix and higher royalties as a percentage of revenue were broadly offset by benefits from the absence of Astrotech and a lower net expense related to Restructuring benefits, the absence of Astrotech costs and continued discipline in managing costs were partially offset by new sales and marketing spend associated with the Amelind diabetes portfolio as well as amortization of the related intangible assets. I expect the run rate for SGA in the 4th quarter to be higher than this quarter. Core other income more than doubled in the quarter based on the proceeds from the sale of OTC rights for Nexium to Pfizer. And for the year to date, the movement of the U. S. Commercial contribution for ZOMIG from of 55.7 percent of revenue, that's above the top of our 48% to 54% planning range and 2.2 percentage points higher than last year. That's largely on the next MOCE benefit to core other income. As I said earlier, restructuring and spending discipline is doing its part on mitigating the revenue decline, but of itself would be insufficient. Core R and D investment in the quarter was $1,100,000,000 that's a 3% decrease versus last year. Benefits from the restructuring program in R and D has enabled us to show a decrease in R and D spend, while absorbing the partial year effect of bringing on board the new projects from business such as Amgen or DARE and Amelim, which otherwise would have exerted an upward pressure on R and D spend. Core operating profit was $2,600,000,000 in the quarter, that's 14% lower than last year. Core operating margin was 39.4% of revenue, 30 basis points higher than last year. Turning to our productivity program. For the 9 months, we've incurred $1,200,000,000 of costs associated with the 3rd phase, and that was combined with the $300,000,000 charged in the Q4 of 2011. So we're on pace to take most of the $2,100,000,000 in program costs by the end of this year. And we remain on track for delivering the estimated 1 point $6,000,000,000 in annual benefits by the end of 20 14. Cash generated from activities was $4,100,000,000 for the 9 months compared with $4,800,000,000 in the same period last year. Lower tax payments and net improvements in working capital only partially offset the lower operating profit. For the 9 months, cash outflows on externalization activities reached $4,800,000,000 driven by the acquisition of AdeA and intangible assets associated with our collaboration with Bristol Myers Squibb and Amelim. Net cash distribution for shareholders in 9 months was $5,900,000,000 through net share repurchases of $2,300,000,000 and dividends of $3,700,000,000 being 2011 and the 1st interim in 2012. We announced the suspension of 1st share repurchases on the 1st October. So finally, turning to guidance. As we expected, our financial performance for the 1st 9 months largely reflects the ongoing impact from the loss of exclusivity for several brands in key markets, particularly Seroquel IR, but also to Atecan, Merum, Crestor in Canada and Nexium in Europe. And the disposals of Astrotech and Aptium obviously also weigh on the year on year comparisons. In addition, we continue to face the same challenges that the whole sector is facing, government interventions, payer pressures and the headwinds of a sluggish recovery in the global economy. Benefits from our restructuring programs and continued discipline in operating expenses have provided headroom for reinvestment in the business, while also partially mitigating the impact of declining revenue on core operating profit and margin. As I mentioned in our Q1 results call, despite continued pressures on revenues and margins, the company will continue to invest to drive future growth and value in sales and marketing to support our new products and growth markets and in research and development to progress value creating assets within our portfolio and from further business development. To anticipate that the revenue for the full year will decline in the range of the low to mid teens in constant currency terms. The company's core EPS target for the full year also remains unchanged in the range of $6 to $6.30 For the 9 months of 2012, we call that core operating profit and EPS includes one off items totaling $0.35 per share, that's $0.19 from the tax settlement in the 2nd quarter and then $0.16 from the sale of OTC rights to Nexium in this quarter. Currency was neutral to core EPS versus our guidance rates for the 1st 9 months, but I would remind you that the forward look is based on the January 2012 average exchange rates upon which our guidance was based. It takes no account exchange rates for the remainder of the year may differ materially from the January 2012 average. So let's now move on to the Q and A session. In your question. We'll try and answer as many questions as possible. So with that, can we have the first question please, operator? The line of Sachin Jain is now open. Hi. It's Sachin Jain from Bank of America. A couple of questions. Pascal, I appreciate it's early days, but I just had a couple of high level questions for you. Firstly, on capital allocation, is there a time frame at which you will review the buyback? Clearly, you've stopped it for the time being to retain flexibility or are you fundamentally against buybacks as a use of cash? Related on M and A, prior management has commented that they weren't interested in large scale M and A the size of MedImmune or above. Do you retain that view or do you want to keep a more flexible stance? Secondly, there are quotes on the wires from the media call this morning that a pipeline review outcome is expected in the Q1. Could you just provide Thirdly, in small group meetings we've invested, I think in recent weeks you've been focusing on Brilinta and Plaidurion trajectory as something that you would focus on. Just a brief overview of your assessment of more trajectory to date and what you think it needed from here. And then finally, a very quick question for Simon. I wonder if you could frame the crest or price declines into next year. Is something around the mid single digits reasonable to think about? Thank you very much. I counted to 5 on that. I think we said in the Q2 call, we'll try and limit it to 2 going forward. I know I might disappoint Peter Verdult, but it gives you a bit of prep for that. But Pascal, if you want to start. Yes. Thanks, James. Thanks, Sachin. Great questions. I'll try to be fast, so we'll give everybody else's time to ask questions as well. Capital allocation, I'm definitely not fundamentally against buybacks. The decision we made together with Simon and the Board was really to give us flexibility. And of course, we might revisit that if we don't find better use of our cash. I have no fundamental objection to buybacks per se. Acquisitions, I would like to retain flexibility. Essentially, we are doing a review of what we could do, and I want to be open minded and basically look at the options that are open to us. So I don't have much more that I can say at this point. The pipeline the context in that is that we and when I say we, it means the executive team here at AstraZeneca and I, we identified a series of critical questions, which I want to engage the organization around to find to develop plans, to find solutions to address, one of which is the mid to late stage pipeline. And what I want to do here is look at whether there are assets that could be accelerated and others that could be deprioritized. We have got a number of assets in the pipeline, and I think there are further choices we can make. I am totally aware of the fact that some reviews have taken place in the past, and this is all good work. And I don't expect massive changes, but I believe we can make some changes. And I can't comment more on those changes at this point. As you can imagine, there's a team looking at this, and we have reviews planned end of November, early December. And in the meantime, I'm visiting R and D sites and talking to people. So we will have some outcome of those discussions by Q1. Relinta, you probably remember that I was involved in the commercialization collaboration with BMS at the time, and it was before joining Roche. And so I've looked at this and the market, of course, has changed and things are no longer what they were 7 years ago, of course. I accept all of that. But I've looked at the products and I think Brilintar, quite frankly, has a lot going for it. It is a better product in the class. And I think we can do better with this product. We can do well. I also think AstraZeneca is a good commercial. It's a great commercial organization. To be frank, we didn't show our best game with Brilinta, but we are actually taking corrective measures. And my hope is that my belief actually is not only my hope, my belief is we can do quite well and this product has potential. And there is also that's also one of the questions that we are working on right now. There's an entire work stream looking Brilinta and looking at how do we accelerate the growth of this product, which is really a company transforming product, quite frankly, if we succeed with it. I think I've covered all your questions. Hi, Jiren. Diabetes and diabetes. Yes. So, I mean, diabetes, I think they are 3 let me back up a little bit. We at AstraZeneca, we are facing a number of challenges. And of course, the bigger challenges are the patent expiries. But I also believe we have a number of growth platforms. And the 3 biggest ones, in my opinion, are Brilinta, diabetes and the emerging markets. And clearly, what I want to do here is how look at how do we actually turbo boost the growth of those 3 platforms. There are others. I would say respiratory as a franchise is something we can strengthen and has potential. I think Japan also is good. And I think in the meantime, the biologics platform is really a good growth potentially. So we have quite a few cards in our hands, short and midterm. And diabetes of course, a critical one. So we have to work with our partners, BMS, to see how do we build this franchise to establish ourselves as a leader in diabetes. And Bazirayan, of course, is one of those. Now I'm sorry if I can't be very specific. You know that I like to talk about products and data, but it's these are early days, and I'm engaging in this review process, and I don't want to comment too much at this point. And Sachin, just your final question on Crestor. I don't it's really much too premature to go beyond just some initial thoughts I shared in my opening remarks. I suggested it'd be prudent to think of net price declines for Crestor. Exactly what the price outcome will be is going to be a function of concluding process of discussions and negotiations with our customers, but also mix effects and so forth into next year. So I think that's probably such and something we should come back to Q1 you'll have some evidence from the run rate in the 1st part of the year. Thank you for taking all those questions. Thank you. We've got, I think, number 2, Peter. Your number 2 on the call with 2 questions, we hope. Two questions, Jeff. Peabody, Morgan Stanley, one for Pascal, one Simon. Apologies if some of this has already been addressed, but I'll have to deal with another set of results when the call started. But Pascal, just coming back to capital allocation, I realize it's too early to talk about your new strategy, but I would like to get a sense of how you're thinking about the progressive dividend policy that's in place going forward? Are you considering all options? Or when it comes to planning, do you envisage this remaining intact? And then on for Simon, just on the cost trends. The ability to manage the cost base has surprised the market positively. It seems to point or suggest to me upside risks to current EPS guidance for this year. So I'm just trying to get a sense as to what swing factors you're considering in Q4 that prevented guidance from being raised? And whether there are any phasing issues that we need to consider, be it on R and D or SG and A that helped in Q3? So maybe let me quickly address the first one, Peter. Thanks for that question. I know it's in everybody's mind, so it's an important one to address. Let me just confirm reconfirm, I would say that our dividend policy is very stable. And we'd just like to restate what we've said before. We'll stick to our stable to grow to improving dividend payout, dividend policy. So there's I wouldn't want to say here our return flexibility. I think we are committed to this dividend policy. And Peter, I see your questions about cost trends. Good question. Probably sort of looking at the SG and A run rate, which I think did come in a little bit lower than I think the consensus week or late had come up with. Actually, if you look at our run rate over the 1st 3 quarters, Peter, it's been pretty steady. It does reflect the combination of actions we took at the end of last year and the beginning of this year around our above market sales and marketing, our channel mix, but also our G and A cost base. So we have seen a reduction, pretty steady reduction in the course of this year quarter on quarter. I mentioned in my remarks, the Q4 is typically quite a busy year for us as quite a lot of investment activity does tend to take place and this year is no exception. We are pleased actually with some signs of strong recovery in a number of emerging markets. You saw China, Russia with strong growth. We continue to look hard. I think Pascal mentioned this at our growth platforms. We want to ensure that we're investing fully behind those. So we do expect to see the SG and A rate up in the Q4 relative to the 3rd. And that I think is one of the factors that weighed on our decision to retain our guidance range for this year. Perhaps just if I may take the opportunity just to elaborate upon that because investments in the 4th quarter is one factor that will drive the outcome in the Q4. And the second is, it's been a dynamic, some would say, volatile year. We've had government pricing interventions, generic activity. And there does remain perhaps more uncertainty on those fronts than we've seen in prior years. And that's also weighed on our decision to keep the range. And then obviously, Peter, you'll recall, last year, we had a number of intangible impairments in the final quarter. And with that portfolio, which is more externalized, we do, therefore, run with more potential for intangible impairment decisions. And it's those factors which have led us to leave our earnings in the range of $6,000,000 to $6,30,000 We can see scenarios where we might be the upper end of that, but equally, we see scenarios that we could be at the lower end of that. Peter, hope that helps you. Yes, very helpful. Thanks. Good. Next question, Tim Anderson at Sanford Bernstein. Tim? Thank you. If I could just go back to one of the earlier questions, just so I understand, Pascal, your view on M and A, are you kind of suggesting that all options are on the table at this point? And within that same line of questioning, your preliminary views on drug company diversification, Roche was pretty much a pure play, Astra is too. And I'm wondering if you think pure play is the right way to go. And then second question, you talked about restoring Astra's scientific leadership. To me, that means rebuilding R and D, which suggests that you could see R and D costs increase. So I'm wondering if you can talk about whether it's possible to rebuild R and D without increasing investment and kind of what, in absolute terms, R and D investment at Astra might look like going forward? Yes. Thanks, Tim. The first question regarding M and A, yes, I mean, at this point, we really want to be completely open minded and look at all the options that we have. So I can't be more specific than this, quite frankly, but I don't have any restrictive view. And we've discussed it here and everybody is on the same page. We will look at all options that make sense to create value for this company. In terms of diversification and pure versus pure play, I'm a believer that the core of this company is innovation. I'm a believer that we are here to actually discover and develop medicines that are differentiated and help patients. And so I'm a supporter of the previous choices that were made to not be in pure generics or in OTC and diversifying those fields. And we reconfirm that and I'm completely aligned with this. I think we can diversify within our core focus of innovation. And if we do this, we would do it around businesses that would be innovation driven and will have synergies together with our core pharmaceutical innovative business. So essentially, we are really focused on innovation. And finally, R and D, we build when I talk about scientific leadership, it doesn't mean spending more money. Scientific leadership is, I think you could call it productivity. You're not going to be a scientific leader because you spend lots of money. You're going to be a scientific leader because you're productive, because you have the best scientists in the world and you have the best science in the world and you come up with products that everybody else would like to have. So my priority would be to make sure that we actually build an R and D organization or continue building an R and D organization that is one of the best in the industry. So I really have productivity in mind. Now it may well be that over time, we have to increase R and D. I mean, course, you have to be open to all possibilities, but I will not do this. I will only do that when I'm sure that our productivity is good. And I think base camp 1 is productivity focused. There's no doubt about that. Yes. I guess if I just look at who are commonly viewed as the scientific leaders in pharma, they tend to outspend their peers on R and D as a percent of sales, which that's why I asked the question. But thank you for the answer. Yes. No, and it's a good point. But I mean, outspending your peers is a good thing if you produce a lot of value out of what you spend. So in the end, the debate is not how much do you spend, it's how much do you produce out of what you spend. And if you are able to produce a lot out of what you spend and create value in the long run, that everybody should be happy, starting with our shareholders and suddenly our customers should be happy. But I don't think we are here yet. I mean, I think, really, our focus over the next in the near term is really about productivity. Thank you. Alexandra. Alex, next up. You. Alexander Helper from JPMorgan. A lot of questions have already been asked. I have just a couple of small questions on pricing actually. In the U. S, a lot of products are running significantly ahead of the prescription run rate and you've already explained Crestor. I assume there is a similar effect with Nexeum, so average realized net prices have increased, but we do not have a change such as multi source generics, which you already have had for some time. So are these average net price increases for Nexa a bit more sustainable? And then also on similar question that basically if you look at Celloquel XR, the price increase which you have taken which is quite a massive one seems to just stick. Same thing for Symbicort and Symbicort actually shows to grow even stronger than pricing and prescriptions combined. So is there some stocking in there? And then in Europe, the decline was the same as in the Q2 despite the fact you didn't have a supply issue. So does that mean pricing has gone worse? Or is it just the incremental effect from ad account, which we're seeing this quarter also impacting the European performance? Okay. That's great. We're going to count those as all pricing questions and therefore one question. And but let me deal firstly with Europe. I think you just answered your own question. We've had essentially a greater cumulative effect from patent expiration. The pricing dynamic through the year has not been intensified in the Q3. We faced a very demanding pricing environment all year. It's not abated, but it's not a 10% intensified. And for those on the call, you know, we've talked in the past about European pricing facing sort of low to mid single digit, where we're comfortably in the mid digit zone this year. Coming back to your U. S. Questions, let me just cancel through them very quickly. Start with Symbicort. We did see, as you'll have seen, good growth in the quarter and indeed year to date on Symbicort in the U. S. The majority of that is actually coming from volume growth, not price. And the slightly confounding factor, Alex, is that the script trends, which we cited of 12% excludes some quite healthy growth amongst the veterans administration part of our business. So we've had good growth in that part of our business, which has given us an underlying volume growth in excess of the retail TRx growth. So I hope that helps you on SYMBICORD. It's essentially a market share volume benefit. And I think reflects the strength of that brand and the commercial performance behind it. If you go to Seroquel XR, that indeed is a brand that has benefited from strong net pricing power, both in the quarter and year to date and reflects the fact that it brings a strong differentiated proposition to certain patient segments. And as you've seen, the share of Seroquel XL, we saw a little bit of a dip in switches to IR right at the time of generalization. But actually since then, we haven't experienced that. And I think that's further testament to the fact that it's well positioned separately to Seroquel IR in the marketplace and can sustain that price premium as a consequence. On Nxivm, actually, this is mainly a mix effect and it just had a business moving towards a higher price realization segment. So it's predominantly a mix effect. Hope that gives you what you needed. And thanks for the question. We'll return now to Matthijs Haggloom at Danske Market. Matthias? Matthias Haglund, Danske Markets. Two questions, please, both for Pascal, I'm afraid. Firstly, you've known AstraZeneca as a competitor for many years, but now you have come to know it as your company for less than 1 month though. What year in this very brief period of time have surprised you the most? And secondly, one is obviously too early for detailed strategy thoughts. I'd be interested hearing your general thoughts on true acquisitions versus in licensing an asset, how to best balance those what drives the preference for each of those decisions if you as a buyer can choose? Yes. Thanks, Matthijs. Actually AstraZeneca was never a big competitor of Roche. We the 2 companies operated in different fields. In oncology, of course, there is a clear competition with CRSI and Tarsiva. But in the great scheme of things, there was limited competition. But never mind, this was not your question. Your question was about what surprised me the most. And I must say what really excited me and it was also a little bit of a surprise when you consider the change that this organization has gone through and the challenges that it has gone through over the last couple of years and the fact that we all know there are still challenges ahead of us, what was really or what is really impressive is the incredible level of commitment and enthusiasm that exists here. It's really, truly a great company with a great culture. I knew that before I thought I knew that before coming here because I had been told by a number of people, but I saw it with my own eyes, the level of commitment and willingness of people to do well and do the right thing is really incredible. So there's a strong base to work from. But there are also quite a number of challenges and suddenly a lot of things we will have to address and change over the next few months if we want to turn ourselves around. In terms of acquisitions versus pure product business development opportunities, quite frankly, I don't have any religion here. Of course, the simpler and approach and where there is a lot more opportunities in the products area, and that's certainly where the bulk of our efforts go. But sometimes, products are companies. If you look at Amylin, it suddenly was a productcompany opportunity. So I don't have any specific origin. Our effort is very much on products, of course. But as I said earlier, we'll look at all the opportunities there. Since I talk about Amelim, by way, I was trying to be a bit fast a bit earlier answering Sachin's question. But in diabetes, we just got approval for CIGA in Europe. We're waiting for approval, sorry, for CIGA in Europe, and we should hopefully get that very soon. In the U. S, we are we just started promoting sorry, amylin Badureon with both sales forces, BMS and AstraZeneca, since about, I think, 2 weeks now. And so, there's a lot of growth potential ahead of us in the diabetes franchise. Great. Well, thanks. And move on then to Nicolas Guillaume at Exane. Yes. Thanks very much for taking my question. Actually, I have 3 quick ones, please. 2, first one on emerging markets. So first, talking about China, another strong quarter with sales up 23%. This led China to now represent more than onefour of your total emerging market sales. Don't you think there is a risk of being overly exposed to one country? Secondly, talking about your strategy in emerging market, you have no mainstream healthcare offer, such as commodity generics or OTC, nor a premium cancer portfolio like the one you enjoyed at Roche. So therefore, do you think that the strategy that you had about flexible pricing or dual branding could be also applicable at Essra? And my last question is just, I mean, what is life like for a French citizen running a British large cap? Thank you very much. I think those are probably the last one I pass, Alan, is probably for you. Why don't you start with Hetten and I'll Okay. Well, yes, it's a good question, Nicolas. But the thing is that I'm still working on the accent, but I see myself as an adopted Australian citizen. So I don't know that I can answer that French question. Life in London is great. It's one of the great cities in the world because it's a very diverse city and it's a great city and everybody here has been extremely welcoming. So it's very good. But again, I don't see myself as a French or anything else for that matter. I've worked around the world in many different geographies and my family lives in Australia. So that's how I see myself. And that's important because that's how I would like to see the company develop a truly international global company, which we are today, but we definitely need to build on that. Let me just say a few words about your questions regarding the emerging markets. And I think that, for sure, China is big and it is often when we talk about emerging markets, really China has an enormous impact for those markets for any company. But I don't think we can say we are unbalanced. We have a strong presence in China. We have a strong presence in many other countries. And our portfolio, I think the important point is that our portfolio, quite frankly, is the ideal portfolio for those countries because if you really think about those markets, in many ways, they are where Europe was 20, 25 years ago and many of the unmet needs are in the area of infection, cardiovascular medicine, hypertension, diabetes, lipid disorders, etcetera, etcetera. Respiratory medicine, respiratory disorders are growing and important. And that's exactly the portfolio of products that AstraZeneca has. And I think there is enormous potential there. The challenge for us is in some parts of China, for instance, like in some countries in those emerging market regions, the challenge is really to ensure that patients can access our products because sometimes they are a bit too expensive. Even a product like Crestor is sometimes too expensive for some parts of China. So the challenge for us is really to look at how do we get access and how do we find strategies that will enable access. And in fact, that's one of the work streams that I have launched looking at this, how do we leverage our full pipeline. And quite frankly, this will be my first priority before we explore any other options looking at additional products because I really believe we have the best portfolio for those markets. Great. Nicolas, thanks for the questions. About some of the emerging markets outside of China and just your perception on whether the recovery that we've seen reflects strength of AstraZeneca's products or strength of the market and just your perception on growth rates for emerging markets and a specific one of how you're going to be positioning sales forces both DPP-4s and GLPs. Do you find that that's going to be a difficult message to sell with both products? Do you want to? I mean shall I start Pascal on and then hand over to you. I mean Joe I think we missed the first part of your question. But I think it was sort of an overall perspective on forward growth in emerging markets. That is correct, yes. And I think we've always felt that the fundamentals, while emerging markets are pretty heterogeneous group, they're tied together with some strong underlying fundamentals of demographics, economic growth, more people living longer, higher aspirations for healthcare and with more money publicly or privately. So, we do believe those fundamentals remain very firmly in place. We recognize that the flip side of continuing strong demand is increasingly payers, whether they're public or private, needing to manage pricing in order to contain the revenue growth associated or the cost growth associated with that. And we've seen an impact of pricing and access interventions in emerging markets, similar to those that we've seen in other parts of the world. But overall, we think the fundamentals remain very strong. And I think, as just said, we have long believed that our portfolio is very well aligned to emerging market needs. This year, our growth rates have been depressed by a couple of factors. Firstly, loss of exclusivity on some brands, particularly actually Brazil and Mexico in the final part of last year. And secondly, the supply chain issues. And we like to feel that as we move into Q3 and Q4, we're starting to get those effects behind us. But clearly, there's a lot of work to do to realize the potential of those markets and that's going to be about making sure we've got the right product portfolio at the right level investment. And the final other questions quickly and then perhaps hand over to Pascal for further comments. On the diabetes portfolio, we see this as obviously a very large disease area growing strongly. It's a progressive disease. It's a disease of stratified patient populations and therefore, a role for different medications to play over time and indeed multiple medications for individual patients. And there's a role for DPP-four as we believe, There's a role for SGLT2s and certainly a role and a growing role for GLPs. And exactly how they're positioned will depend to an extent on the practices in individual markets. And that's obviously the sorts of issues we're working through as we progressively launch the products. Pascal, that's sort of, to some extent, where we've come from and be interested to answer that. Yes. Thanks, Simon. Yes, Joe, I mean, I think, first of all, in the emerging markets, we have strong growth in not only China, in Russia, we do well in a number of Latin American markets and the Middle East. It is clear that with the kind of products we have, some of the issues we have to deal with are price reductions. But the volume upside is extremely large. When you consider China, I think always people forget the scale of China and the fact that the economy is developing so rapidly that a lot of patients who historically could not have access to medicines are now getting access to medicines. So the volume uplift is enormous, and just have to keep managing, of course, this price the price pressures. In terms of diabetes, this is, as I said, one of the growth platform for in my mind, and it's sort of obvious. But it is clear we have to manage 3 products, and that's one of the things we are discussing with our partners at BMS. To be honest, in the short term, we are in a relatively simple situation. We have in the U. S. On Glaiza and Badurian. And quite frankly, different physicians will see different use of those products. Up with combination therapy. And today, we only have 2 products. So you could argue you could start with Belluran as a first line, but most physicians will start with a neural agent. So you use Onlyza. And then as you progress, you might use Beduran in combination or alone and before insulin or in combination with insulin. So here, the situation is relatively simple. It will become more complicated as we prepare to launch for CIGA because then you have 2 oral agents and one injectable, the GLP-one. But again, there is a place for all those products because of the multiplicity of combination therapies. It may be that we have to allocate products to different sales forces to make sure we maximize them. We're just we are looking into this, and we'll do what it takes to get to the full potential of every single of those products. Thank you. Thanks, Joe. Moving on now to Mark Dainty at Citi. Mark? Thank you. Just one very quick question, just a top down one on R and D. Do you think the company is positioned appropriately from a geographic perspective to capture as much innovation as possible? Thank you. Yes, Lars, thanks for the question. Yes, I get that question often. And to be honest, I think today, the science is spread around the world, and so you have to be connected to scientists in many different places. A reputable scientific center that you do better necessarily. It's more a question of mindset. But having said that, your question is a very relevant one. I can't answer that one today. To me, what is important and what I'm going to try and do what I will do over the next 3 months is get a good understanding of where do we have distinctive science, where do we have a chance to be differentiated from a scientific viewpoint, where do we have products that we could accelerate, so both the discovery and the development part. And then as a result, we'll have to conclude what does this mean from a footprint group viewpoint. And it is clear that if you are in Boston or if you are in Boston or if you are in Gaithersburg, for our 1,000,000 colleagues close to NIH, close to John Hopkins, if you're in Boston, if you're in Cambridge, you're suddenly very connected to science, and this is a dimension to consider. So but it's not the only one. So I can't answer your question at this point. I've started visiting those sites, and we have a number of processes in place to review the pipeline, review the science. And by Q1 next year, I'll be in a better place to comment. Okay. Thanks for the question. I think just looking at EJ's, we've got probably time for one more question. And Lars Havering from SEB, it's you have the final slot. Lars, over to you. Okay. Thank you. Could you just please update on the development program for the pre fill panel, the weaker version of Badurian? And then if you could make a big comment on the expectations on full year cash flow, how that would realign with your core EPS guidance? Well, on the yes, on the question of the pen, I think, the time savers, I think from memory, mid-twenty 13 filing is the current plan. Lars, in terms of cash flow, I mean, I think not quite sure what the question is. Is there any further guidance you're expecting or looking to really give on cash flow for the full year? Yes. I mean, we've seen the 15% decrease in cash flow for the 1st 9 months over the same period last year. And if we could expect the same year over year performance for the full year operating cash flow? Okay. So the cash flow from operations, I think you'll need to consider that in the context of the guidance we provided in our core EPS and therefore the implications for Q4 in operating profit terms and the range around it. And as I stressed, we've retained that wide range around it. There's no other discontinuities that I would call out on the other elements of the cash flow at this stage. I think so I believe probably the only other possible thing to bear in mind is that we have benefited from some one offs. I mean, I mentioned the Nexium OTC. So there's been a little bit of lumpiness in the cash flow, but I would broadly follow what you're looking at in an earnings line. Okay. Thank you. That's it. Thanks, Simon, in terms of Q and A. Don't know if you want to just wrap up the call. Well, indeed. Thank you very much indeed. So thank you to all of you for joining the call today. And let me just quickly sort of few final closing remarks. I mean, I think we expected this year would be a challenging year for AstraZeneca. And so it has proven. We've had lots of exclusivity on some key products, particularly Seroquel IR and that really has driven that 15% decline in revenues for the year to date. We kept our focus on management of our cost base through restructuring and disciplined management of cost through the business. And that, combined with the proceeds realized on the sale of OTC rights for Nexium, those have helped us mitigate the impact on core operating profit and also allowed us to step up investments in a number of areas, for example, the externalization efforts. But we do have exclusivity. The brands have performed well. We pulled out a few of those examples on the call, Symbic order, Essa on Glizer and good resilience in Crestor as well. And overall, we're able to confirm our core EPS guidance range for this year. And with that, what I'd like to do is conclude our call. Thank Pascal and welcome to his 1st analyst call. And thank all of you for joining and look forward to the next call. Thank you so much. That does conclude our conference for today. Thank you all for participating. You may now disconnect.