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AstraZeneca PLC (AZN)

Q3 2015 Earnings Call· Thu, Nov 5, 2015

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Transcript

Operator

Operator

Good afternoon. Welcome, ladies and gentlemen, to AstraZeneca's Q3 Results Analyst Conference. Before I hand over to Pascal Soriot, I'd like to read the Safe Harbor statement. The company intends to utilize the Safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Participants on this call may make forward-looking statements with respect to the operations and financial performance of AstraZeneca. Although we believe our expectations are based on reasonable assumptions, by their very nature of forward-looking statements involve risks and uncertainties and may be influenced by factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Any forward-looking statements made on this call reflect the knowledge and information available at the time of this call. The company undertakes no obligation to update these forward-looking statements. I will now hand you over to Pascal Soriot. Pascal Soriot - Chief Executive Officer & Executive Director: Hello, everyone. This is Pascal Soriot, I'm the CEO of AstraZeneca. Welcome to the Q3 results conference call for investors and analysts. Our slides are posted online for you to download and follow. I'm joined today by: Marc Dunoyer, our CFO; Luke Miels, our EVP for Global Product and Portfolio Strategy; and Sean Bohen, our new Executive Vice President for Global Medicines Development and our CMO. In addition we have other key members of the AstraZeneca team ready for your questions. We have: Paul Hudson, EVP, head of North America; Elisabeth Björk, our Clinical Development Head for CV/Metabolism; and Mondher Mahjoubi, the Head of our strategic business unit Oncology. It's great to have so many of you present today despite competing events, and we look forward to taking you through the results and achievements so far in 2015. And importantly, we look forward to…

Operator

Operator

Thank you. Pascal Soriot - Chief Executive Officer & Executive Director: So, maybe we can start with James Gordon at JPMorgan. Go ahead, James.

James D. Gordon - JPMorgan Securities Plc

Management

Hello. Thanks for taking the questions. Two questions, please. The first one was about diabetes. And the question was that last year, you'd given a target for 2023, I think of $8 billion for diabetes. And there's been a lot going on in diabetes in terms of side effect issues and regulatory. My question is do you still see that as potentially achievable, that would mean that the business has to triple between now and then or could that now be challenging? And the second question which is on 2016, so, obviously, the U.S. Crestor genericization to navigate, there's a few different levers to get there – SG&A cost, divestment income, but also, potentially, a buyback or doing a bolt-on. Just how do you think about the weighting of those different drivers and could we see you actually deploying the balance sheet to help you get there? Pascal Soriot - Chief Executive Officer & Executive Director: Yeah. Thanks, James. Let me cover, first of all, the diabetes question. I think what I would like to say first is that we remain committed to our long-term goals. And in fact, we just finished our long range planning process and we presented it to the board this week as we do every year. And I can tell you that our plan reflects – is very much in line with previous planning and reflects that our 2023 goals are achievable from our perspective. Having said that, as you would imagine, in every plan, you have ups and downs. So, what our planning reflects now is lower diabetes sales but higher oncology sales. So, if I talk about diabetes, in fact, we are doing better outside the U.S. than we had expected originally. And in every emerging market I go to, I can tell…

Unknown Speaker

Management

KESTREL. Pascal Soriot - Chief Executive Officer & Executive Director: Oh, KESTREL. Okay. Got it. Got it. Sorry. I missed that. So, maybe I could quickly cover the saxa/dapa question. And maybe, Sean, if you have anything you want to add, please add. I'll ask you to cover the second – the other question. But the saxa/dapa, Nicolas, there's no real, serious constant attached to the questions, they're more to do with producing clinical data supporting the combination of the various dosage regimens. We can't be a lot more specific than this because we haven't met the FDA and we need to understand exactly what they expect of us. But it has nothing to do with any safety, adverse events like DK or heart failure and it has nothing to do with CMC. It's really purely producing the clinical data that they need to see to uphold the fixed dose combination across dosage regimens. So, we need to talk to them before we can answer specifically because the important part is to understand how long it will going to – it's going to take to produce those data. Elisabeth, anything? Since you are here, Elisabeth is our Head of Development for Diabetes. Anything you want to add, Elisabeth? Margareta Elisabeth Björk - Vice President-Global Medicines Development: No. I think you described it very, very clearly, Pascal. And we will hopefully meet with the FDA very soon and get a clearer picture around the amount of clinical data we need to produce and how long time that will take. And then we will get back and update everybody around that. Pascal Soriot - Chief Executive Officer & Executive Director: Okay. So, Sean, the durval question, for you? Sean Bohen - Chief Medical Officer & Executive Vice President: Yes. So the KESTREL – I'm going to call it the durva-treme combo question – the KESTREL trial is a squamous cell carcinoma of the head and neck in the front line. And the trial, the Phase III trial, randomized; it's got three arms. The arms are MEDI4736 durvalumab as a single agent. Second arm is the durva-treme combo; and then the third arm of that trial is standard of care as the control. And I must admit, I am not – I don't recall any exclusion of HPV-carrier patients on that trial, so we might have to get back to you with the specific information on that. My recollection is that it's all comers and they will both be HPV positive and negative, but we can follow up with you on that specific criterion. Pascal Soriot - Chief Executive Officer & Executive Director: Mondher, anything you want to add or should we follow up later on? Good. Okay. Thank you very much, Sean. So, we'll move to Richard Parkes at Deutsche Bank. Richard, go ahead.

Richard J. Parkes - Deutsche Bank AG

Broker UK

Yes. Thanks for taking my questions. I just got a couple. Pascal, your statement in the release seems to focus a little bit more clearly on cost savings and cash generation than maybe it has in the past. Maybe it's just my perception. But you've given us a bit of a steer on what to expect in terms of R&D costs for 2016. Maybe in terms of SG&A, you could give us some kind of where the pushes and pulls there that might drive SG&A cost in 2016. What we could think about there? Then the second one is just on PD-L1, durvalumab, your feasibility through via the accelerated pathway with the FDA, which you said you think is now a lower probability. I just wondered if you could kind of talk around the drivers there in terms of how quickly you can get that package together. And maybe do you think the FDA would still be willing to approve a PD-L1 therapy if there was a PD-1 targeting therapy with a full approval? Thanks. Pascal Soriot - Chief Executive Officer & Executive Director: Thanks, Richard. So, the cost question first, then maybe Marc can jump in if you want to add anything. But for 2016, we can't be very specific until we give you guidance for 2016. As usual, we do that at the beginning of the year. So, we do that next year, early next year. But what we've said so far is that we will continue to support our pipeline. But having said that, R&D budget is expected to be broadly in line next year to what it is this year. And what that means is because the research engine is very productive, there will be some more products for us to partner and so more externalization…

Simon Baker - Exane Ltd.

Management

Thank you so much for taking my question. I've also got two. Firstly on Nexium, yet again this quarter we've seen a slightly slower erosion rate in the U.S. than expected. And I was wondering your thoughts as to why that's been the case. Is this a question of attractive levels of rebate that you're already offering, meaning that the price differential between you and even multi-source generics is not as high as perhaps we thought? And I was wondering what that meant for the CRESTOR erosion next year. If I look at the discounts, the maximum discount if you like using the VA as a proxy for Nexium and then look at CRESTOR, the discounts on CRESTOR are even higher than the fairly significant discounts on Nexium. So, any thoughts on how we should think about the CRESTOR erosion in light of the Nexium expense? That would be great. And then a quick question for Sean. Now that you've decided on the human over the murine, OX40, if you could just give us an expected timeline for development there. Thank you so much. Pascal Soriot - Chief Executive Officer & Executive Director: Thanks, Simon. So, we have Paul Hudson, our Head of North America in the room. He was smiling when you were talking about Nexium because he felt probably you are telling him he's doing a good job. But then he stopped smiling when you talked about CRESTOR because we are in budget mode. So, maybe he thought we might expect more from him as a result of your intervention. Should I – actually Luke – ask Luke to comment both on those questions. Luke Miels - Executive Vice President Global Product and Portfolio Strategy (GPPS) & Corporate Affairs: Yeah. Sure. So, Simon, I mean, naturally, we know when these events are going to occur, so we have some time to prepare. And the U.S. team did do a very good job defending Nexium. And we've kept, actually, comfortably more than half of the volume. But we are entering a multi-source (59:20) period, of course. So, the relative stability that we've seen so far, I certainly wouldn't expect that that would continue because there's going to be more competition between these parties. For CRESTOR, I mean, our current assumption is that a more competitive dynamic. The key thing to remember, of course, is that we expect these first to enter in the 2nd of May, and we do expect a more rapid erosion. However, between then, of course, we're continuing to grow CRESTOR and take share. Pascal Soriot - Chief Executive Officer & Executive Director: Really, remember this. The CRESTOR environment is going to be very different with many different products and a much more rapid erosion of price and market share for CRESTOR next year. Having said that, I think the U.S. team has done a tremendous job with Nexium this year. So, Mark Purcell of Barclays. Mark, go ahead.

Mark D. Purcell - Barclays Capital Securities Ltd.

Management

I think there's a question said on OX40, but for me, there are two. The first is on AZD9291. I hoped you could help us understand the opportunity initially in second-line and then in the first-line setting. And then also, there's some emerging data that the upfront use of EGFR inhibitors reduces the effectiveness of PD-1 and PD-L1's further down the line. And given that you included – there are a number of trials recruiting PD-L1 and PD-1 first-line in patients with EGFR mutations – you can see how quickly in the second-line, this causative agent has been taken up and has put pressure on other classes. I just wondered, putting all these together, whether you can help us understand the medium and long-term opportunity for AZD9291 and the class. And the second question is on the lesinurad for gout. I wondered if you'd just comment on the commercial opportunity and launch-readiness ahead of the PDUFA from the FDA on the 29th of December? Pascal Soriot - Chief Executive Officer & Executive Director: So, apologies to Simon about OX40. Shaun, you can cover also AZD9291. Let me just quickly give Mark, a comment on lesinurad so we can deal with this one. I think we wait to see whether we get approval to start with and also to look for what that approval looks like and then we'll make a decision as far as lesinurad. We're very encouraged with what we've seen so far, in particular, the advisory committee. But we really would like to wait a bit longer before making any comment on lesinurad and certainly, one of the options for us, for the gout franchise is to potentially partner that. So we have to wait a bit to decide whether we do it ourselves, launch it when and…