AstraZeneca - Earnings Call - Q1 2025

Transcript

Operator (participant)

Good morning to those joining from the U.K. and the U.S., good afternoon to those in Central Europe, and good evening to those listening in Asia. Welcome, ladies and gentlemen, to AstraZeneca's Q1 2025 Results Conference Call for Investors and Analysts. Before I hand over to AstraZeneca, 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. This meeting may contain 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, 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 forward-looking statements. Please also carefully review the forward-looking statements disclaimer in the slide deck that accompanies this conference call. There will be an opportunity to ask questions after today's presentations. Please use the raise-a-hand feature to indicate you wish to ask a question at any time during the call. I must advise you this presentation is being recorded today. With that, I will now hand you over to Andy Barnett, Head of Investor Relations.

Andy Barnett (Head of Investor Relations)

A warm welcome to AstraZeneca's First Quarter 2025 Presentation Conference Call and Webcast for Investors and Analysts. I'm Andy Barnett, Head of Investor Relations, and before I hand over to Pascal and other members of our executive team, I'd like to cover some housekeeping items. Firstly, all of the materials presented today are available on AstraZeneca's Investor Relations website. This slide contains our Safe Harbor Statement, which I'd encourage you to take the time to read. We will be making comments on our performance using constant exchange rates or CER, core financial numbers, and other non-GAAP measures. A non-GAAP to GAAP reconciliation is contained within the results announcement. All numbers quoted are in millions of U.S. dollars unless otherwise stated. This slide shows our agenda for the call, and following our prepared remarks, we'll open the line for questions.

As usual, we'll try to address as many questions as we can during the call, although please limit the number of questions you ask to allow others a fair chance to participate in the Q&A. With that, I'll hand over to Pascal.

Pascal Soriot (CEO)

Thank you, Andy, and welcome, everybody. We've made a strong start in the first quarter of the year, building on the momentum through 2024. Total revenue growth was 10% in the quarter, reflecting increasing demand for our innovative medicines. Operating profit increased by 12%, and core EPS increased by 21%, reflecting our continued focus on operating leverage. Although core EPS in the first quarter did benefit from a lower tax rate due to settlements in certain jurisdictions. Since our full year results in February, we've secured 13 approvals in key regions across our diverse portfolio, a clear illustration of the value our medicines bring to patients globally. In addition, we continue to see strong delivery from our pipeline, and in the past few months, announced five positive phase III results, including two NMEs, camizestrant and eniboparatide, and multiple high-value indication expansion opportunities across gastric and breast cancers.

We're making excellent progress towards our ambition to deliver at least 20 NMEs by 2030, with the recent approval of Beyontra, formerly known as acoramidis, marking the ninth novel medicine approval towards our goal. We continue to benefit from our broad-based diverse business with a robust growth outlook for each of our therapy areas and across key geographies. We saw strong performances across key regions despite anticipated headwinds, including Medicare Part D redesign in the U.S. Importantly, we continue to deliver impressive growth in the emerging markets, with ex-China revenues up 17%, reflecting the benefit of our sustained presence in these markets. Our growth in China was also encouraging, up 5% or 9% when adjusting for the decline of PULMICORT sales. This growth is driven by increasing demand for innovative medicines, with additional launches in China achieved in the first quarter.

We are aiming to deliver sustained growth well beyond 2030, investing in transformative technologies. In the first quarter, we announced several business development transactions that strengthen our pipeline and our capabilities, which we believe have potential to support our long-term growth ambitions. Our proposed acquisition of EsoBiotec brings the potentially best-in-class in vivo cell therapy platform in-house, increasing accessibility of potentially curative cell therapies with applications across oncology and autoimmune diseases. Next, we announced our portfolio of novel modalities, accelerating the development of multispecific biologics and macrocyclic peptides across a wide range of diseases. We also announced an exclusive license for ALT-B4 with Alteogen to deliver subcutaneous formulations of multiple oncology assets, with the aim of making our treatments easier to administer and more convenient for patients. Finally, we announced a recent investment in Beijing, China, where we will establish our sixth strategic R&D center.

The pace of medical and scientific innovation in Beijing is impressive, and our new R&D center will enable us to foster and strengthen collaborations within the local ecosystem, as well as attract world-class talent in China to discover and develop new transformative medicines. To support our growth across the major geographies around the world, over the last few years, we have been building a broad manufacturing network covering the U.S., Europe, and China. Our global presence makes our business highly resilient to regional disruptions, effectively providing a natural hedge. We now have 31 manufacturing sites globally and dual-source supply for the vast majority of our medicines.

Our supply chains for China and the U.S. are largely segregated, and we have very limited commercialized finished medicines imported from the U.S. to China, meaning that our exposure to the current China tariffs on pharmaceuticals is not material in the context of the group. We have a substantial and growing manufacturing footprint in the U.S. We currently have 11 manufacturing sites in the country, and the vast majority of our medicines sold in the U.S. are made domestically. We do import a minority of medicines sold in the U.S. from Europe. However, mitigations are already underway. As a result, we believe that if tariffs were implemented in the range we've seen recently in other industries on medicines imported from Europe to the U.S., we would remain within the guidance range we indicated for 2025, in part due to our ongoing inventory management.

Beyond 2025, the impact on the minority of medicines imported from Europe would be time-limited, as we are shifting manufacturing of these medicines to sites in the U.S. We will, of course, provide updates as appropriate, and with that, I will hand over to Aradhana to take us through our financials. Please advance to the next slide.

Aradhana Sarin (Executive Director and CFO)

Thank you, Pascal, and good morning, everyone. As usual, I will start with our reported P&L. Next slide. As Pascal highlighted, total revenue grew by 10% in the first quarter. Product sales grew by 9%, with growth seen in all major regions. Alliance revenue, mainly consisting of ENHERTU and TEZSPIRE profit shares, increased by 42% to $639 million. Starting this quarter, we are presenting a new line in our P&L called Product Revenue. This is the sum of product sales and Alliance revenue, which better characterizes the performance of sustainable revenue, both from products sold by AstraZeneca and revenue share from partnered products. Product revenue grew by 10% in the first quarter. Next slide. Turning to our core P&L, we saw a total revenue gross margin of 84% in the first quarter, benefiting from product sales mix and some favorable FX movements.

Please note that we will report gross margin based on total revenue going forward rather than product sales. The gross margin percentage based on total revenue reflects the totality of the cost associated with creating it, including payaways to our Alliance partners of gross profit shares that are booked in the cost of sales relating to markets where AstraZeneca leads commercialization and books product sales. As previously stated in relation to product sales gross margin, we anticipate that total revenue gross margin will decline around 60 to 70 basis points in 2025. The decline is driven by the Part D redesign, anticipated VBP inclusions in China, Soliris biosimilar competition, and increased profit share relating to partnered products.

We anticipate a lower gross margin in the second half of the year, driven by some of these such as VBP, as well as the usual seasonal pattern for certain medicines such as FLUMIST. Total operating expenses increased by 9% in the first quarter, below top-line growth of 10%. Core R&D costs increased by 16% and represented 23% of total revenue, driven by new trial starts and investments in transformative technologies such as cell therapy. We continue to anticipate core R&D costs to be in the low 20% range for the full year. Core SG&A costs increased by 4% and, as anticipated, continue to grow at a slower rate than total revenue. The core operating profit margin was 35%, supported by favorable cost phasing and a higher gross margin this quarter.

Similar to prior years, we anticipate a lower margin in the following quarters, primarily relating to the gross margin effects I mentioned above. The core tax rate was 16%, benefiting from a favorable settlement in the quarter and is anticipated to remain 18%-22% for the full year. Core EPS of $2.49 represents a CER growth rate of 21%. Next slide. Our cash flow continues to improve. Cash inflows from operating activities increased to $3.7 billion in the quarter. We saw CapEx of approximately $500 million, which will increase in future quarters, and we continue to anticipate CapEx to increase by around 50% this year versus 2024. Deal payments of around $800 million included a $175 million milestone payable to Daiichi Sankyo for ENHERTU DESTINY Breast 06 U.S. approval.

Our net debt increased by $1.5 billion to $26.1 billion, with the increase driven by the dividend payment of $3.3 billion in the first quarter. We remain comfortable with our level of debt, and the current net debt to Adjusted EBITDA ratio stands at 1.5 times. Building on Pascal's comments earlier, we are reiterating our full year 2025 guidance, anticipating total revenue growth of high single-digit % and core EPS growth of low double-digit % at constant exchange rates. Based on the March average FX rates, we continue to anticipate a low single-digit % adverse impact on total revenue and have updated our FX guidance for core EPS to low single-digit adverse impact, previously mid-single digit. With that, please advance to the next slide, and I will hand over to Dave, who will take you through the performance of our oncology and hematology business.

Dave Fredrickson (EVP and Oncology Business Unit)

Thank you, Aradhana. Next slide, please. Oncology total revenues grew 13% in the first quarter to $5.6 billion, with strong double-digit growth across the U.S., Europe, and emerging markets. Turning now to quarterly performance for our key medicines, I'd like to talk first about our oral oncolytics performance in the U.S., which includes TAGRISSO, CALQUENCE, LYNPARZA, and TRUQAP. Across these medicines, we saw an increase in the proportion of Medicare Part D patients following implementation of the $2,000 copay cap, which led to fewer patients on free goods and increased adherence. These dynamics helped partially offset the gross-to-net impact following Part D redesign. TAGRISSO delivered 8% growth in the first quarter, reflecting strong demand across all indications, including accelerating demand for FLAURA2 in the U.S. and Europe and strong launch uptake for LAURA in the unresectable stage three setting.

Strong underlying demand in Europe was partially impacted by pricing pressure in certain major markets, and we anticipate continued growth over the balance of the year across all indications. CALQUENCE total revenues increased 8% in the first quarter. Starting with the U.S., volumes increased over 20%, reflecting sustained BTK inhibitor leadership in frontline chronic lymphocytic leukemia and accelerating launch momentum for ECHO in mantle cell lymphoma. Following recent Medicare affordability improvements, the proportion of Medicare Part D CALQUENCE patients has increased by 10 percentage points over the past year. In Europe, CALQUENCE continues to gain market share in an increasingly competitive environment. Looking ahead, we see potential for meaningful new growth opportunities, including the fixed-duration Amplify regimen in CLL and continued demand for ECHO in MCL. LYNPARZA remains the leading PARP inhibitor globally, with 5% growth in the first quarter.

We anticipate further volume growth globally, which will help offset pricing pressure in Europe and the potential impact of VBP inclusion in China, which we expect from the middle of the year. TRUQAP delivered $132 million in first-quarter revenues and is now approved in all major markets. In the U.S., continued market leadership in the second-line biomarker-altered population was offset by destocking of the blister pack following the inventory build-up in the fourth quarter. Impressively, one year post-launch, TRUQAP has achieved nearly 100% market share in the AKT P10 biomarker-altered population, with additional opportunity for growth in the PIK3CA population. Turning now to the rest of our portfolio, Imfinzi and Imjudo delivered 16% and 13% growth respectively, reflecting continued demand in lung and liver cancers across major markets.

We look forward to expanding Imfinzi adoption in bladder and lung cancers following recent approvals for NIAGARA, ADRIATIC, and AEGEAN in the U.S. and Europe. ENHERTU total revenues grew 34% in the first quarter, reflecting continued market leadership for DESTINY-Breast03 and 04, as well as impressive growth in China following NRDL enlistment in January. We continue to see encouraging launch momentum for DESTINY-Breast06 in the U.S. and are excited about the recent European approval, which will help move ENHERTU into chemo-naive and HER2 ultra-low settings. We're off to an encouraging start with the launch of Datopotamab deruxtecan in hormone receptor-positive, HER2 negative breast cancer. Feedback from the breast cancer community reinforces the improved convenience and favorable GI toxicity profile seen with Datopotamab deruxtecan in the TROPION-Breast01 trial.

We're excited about the outlook for our oncology portfolio over the balance of the year as we continue to expand the reach of our transformative medicines. With that, please advance to the next slide, and I'll hand over to Susan to cover key R&D highlights from the quarter.

Susan Galbraith (EVP and Oncology R&D)

Thank you, Dave. Over the past few months, we've had several key oncology data readouts that mark important steps towards achieving our 2030 ambition. In February, we were very excited to announce the positive high-level results for Camizestrant, the first next-generation oral SERD to have a positive readout in the first-line setting in hormone receptor-positive metastatic breast cancer with emerging ESR1 mutations. SERENA-6 demonstrated a highly statistically significant and clinically meaningful improvement in progression-free survival. Whilst time to second progression and overall survival remain immature, a trend to improvement in time to second progression was also observed. This trial also demonstrated the combinability of Camizestrant with three CDK4/6 inhibitors and showed that the combinations are well tolerated.

Serena 6 is the first step to establishing camizestrant as the endocrine backbone of choice across ER-positive breast cancer settings and has the potential to redefine treatment for patients with HR-positive metastatic breast cancer and emerging ESR1 mutations. Last month, we were delighted to share positive high-level results for MATTERHORN, a key indication expansion opportunity for Imfinzi. In MATTERHORN, perioperative Imfinzi in combination with FLOT chemotherapy demonstrated a statistically significant and clinically meaningful improvement in event-free survival, as well as a strong trend in overall survival versus perioperative chemotherapy alone in patients with resectable, early-stage, and locally advanced gastric and gastroesophageal junction cancers. MATTERHORN is the third successful perioperative trial for Imfinzi, following on from AEGEAN and NIAGARA, and it underscores the value of this approach to treatment. This trial represents another blockbuster opportunity, expanding our presence in GI cancers and unlocking further potential for Imfinzi.

The practice-changing data from SERENA-6 and MATTERHORN will both feature as ASCO plenaries this year, making this the seventh year in a row AstraZeneca data has been included in the plenary sessions at ASCO. Finally, just over a week ago, we were also excited to share the high-level results from the interim analysis of DESTINY-Breast09. This trial demonstrated the combination of ENHERTU and patritumab resulted in a highly statistically significant and clinically meaningful improvement in progression-free survival versus standard of care three-drug regimen, THP. There were no new safety signals for the combination, and whilst not mature, ENHERTU plus patritumab demonstrated an early trend to overall survival benefit.

DESTINY-Breast09 is the only ongoing first-line trial in a HER2-positive metastatic breast cancer population in which investigational therapy is initiated upfront at the onset of treatment and moves in HER2 aligned earlier in a broad HER2-positive population, with the opportunity to once again redefine management of this disease. We continue to follow up in both the combination and monotherapy arms. In addition, we're delighted to share that our Trop2 NTR companion diagnostic, co-developed with Roche Tissue Diagnostics, has now been granted breakthrough designation by the FDA for use in the TROPION-Lung17 trial, which will investigate Datopotamab deruxtecan in the second-line Trop2 NTR-positive patient population. This underscores the potential of this practice-changing technology both for Datopotamab deruxtecan and the broader AstraZeneca portfolio. Next slide, please. We continue to progress our transformative technologies with the potential to disrupt treatment paradigms and deliver sustainable growth beyond 2030.

At the Society of Gynecologic Oncology annual meeting this year, we shared phase I two data for Puxitotug samratikan, also known as PSAM, in endometrial cancer. These data demonstrated an encouraging, durable objective response rate of 35%-38% and a promising median progression-free survival of seven months in a B7H4 IHC-positive population, alongside a manageable safety profile. These data provide us with additional confidence in PSAM and support our decision to start a phase III trial in endometrial cancer later this year. PSAM is one of our six AstraZeneca ADCs, all of which continue to progress at pace in the clinic. Please advance to the next slide, and I'll pass over to Ruud to cover biopharmaceuticals performance.

Ruud Dobber (EVP and BioPharmaceuticals)

Thank you so much, Susan. Please move to the next slide. Our biopharmaceuticals medicines delivered a strong start to 2025, with total revenue reaching $5.6 billion in the first quarter, reflecting a growth of 12% compared to the first quarter of 2024. Farxiga revenues exceeded $2 billion for the first time, driven by continued demand across chronic kidney disease and heart failure. The strong foundation we've built with Farxiga will support the potential launch of three fixed-dose Depo-Cefalozin combinations already in phase III development. Total revenue in the U.S. was down 90% versus last year, when revenues benefited from the launch of an authorized generic and the stocking impact this brought with it. In China, we anticipate that Farxiga, along with roxadustat, will be included in the VBP program from the middle of the year.

We're also expecting to see generic competition for Brilinta enter the U.S. market in the coming months. Even so, we expect that the growth drivers in our biopharmaceuticals portfolio this year will clearly outpace the headwinds. Lokelma remains the market leader in an expanding potassium binder class, delivering $153 million in the first quarter and growth of over 35% for the fourth consecutive quarter. R&I delivered another strong quarter, up 13% to $2.1 billion in revenue. Fasenra, TEZSPIRE, Saphnelo, Breztri, and Airsupra now make up just over half of our R&I total revenue, and their combined revenue contribution grew by 40% in the first quarter. Fasenra and TEZSPIRE both benefited from their strong positions within the fast-growing market for respiratory biologics. Fasenra increased its IL-5 class leadership for severe eosinophilic asthma patients, supported by the recent launch in EGPA.

TEZSPIRE achieved leading neutral brand share in key markets with strong launches across Europe. Our older inhaled medicine, PULMICORT, saw a drop of 26%. The decline was driven by China due predominantly to a milder winter and continued generic competition. In VNI, Beyfortus revenues more than doubled, supported by the recent expansion of manufacturing capacity. This year, we are looking forward to several important readouts for biopharmaceutical medicines: Breast 3 and asthma, Fasenra in COPD, and Savnello's subcutaneous formulation. We have completed regulatory submissions in all major markets for TEZSPIRE in nasal polyps. We will also have our first phase III readout for Baxdrostat, a new molecular entity with the potential to deliver over $5 billion in peak year revenue. With that, I will now hand over to Sharon to share updates across our biopharmaceuticals pipeline in the quarter.

Sharon Barr (EVP and BioPharmaceuticals Development)

Thank you, Ruud. I would like to take a moment to highlight our progress this quarter within the biopharmaceuticals pipeline. At the American College of Cardiology, we were excited to present the positive phase 2B data for our novel oral small molecule PCSK9 inhibitor, AZD0780, demonstrating a significant LDL cholesterol reduction on top of standard of care and a potential best-in-class profile in patients with hypercholesterolemia. The data from Pursuit, which were also simultaneously published in the Journal of the American College of Cardiology, found AZD0780 resulted in a 50.7% reduction in LDL-C versus placebo when dosed once daily on top of standard of care statins. Similar efficacy was observed regardless of whether patients received moderate or high-intensity statin doses at baseline, and AZD0780 was well tolerated, with a similar frequency of adverse events compared to placebo, consistent with the phase I data we shared last year.

Importantly, as an oral small molecule, AZD0780 offers the advantage of favorable once-daily dosing with no food effect or need for fasting requirements. This convenient profile could enhance patient compliance and has the potential to expand access to this class of medicines beyond its reach today. Dyslipidemia remains a substantial public health concern, placing patients at risk of severe cardiovascular outcomes, including stroke and death, and results in approximately 4.4 million deaths per year. Based on the data from Pursuit, we are progressing AZD0780 into phase III at pace, and we will simultaneously initiate three pivotal phase III trials in the coming months. The first will investigate LDL-C reduction. The second will focus on heterozygous familial hypercholesterolemia, and the third is a cardiovascular outcomes trial.

The outcome study will target the prevention of cardiovascular events in patients with a history of atherosclerotic cardiovascular disease and those at high risk of experiencing an ASCVD event. We look forward to updating on future opportunities to use AZD0780 in combination with statins and other small molecules in our broad CVRM portfolio. We believe that AZD0780 has the potential to be a $5 billion-plus asset and an important option for patients who urgently need novel approaches to improve their outcomes. Please go to the next slide, and I'll pass over to Mark to cover rare disease.

Mark Mallon (President)

Thank you, Sharon. Can I have the next slide? Rare disease delivered total revenues of $2 billion in quarter one, reflecting stable performance year on year. While patient numbers continue to grow across medicine and indication year on year, there are several factors impacting revenue growth in the first quarter. ULTOMIRIS grew 25%, driven by patient demand across indications, partially offset by competition in generalized myasthenia gravis and paroxysmal nocturnal hemoglobinuria, and to a lesser extent from Part D redesign in neurology indications. We expect Soliris revenues to continue to decline due to a successful conversion to ULTOMIRIS, which has launched in all four shared indications, as well as biosimilar pressure in Europe and unfavorable order timing in certain tender markets. As a reminder, biosimilars for Soliris have now launched in the U.S. for PNH, atypical HUS, and myasthenia gravis.

Beyond complement, Strensiq grew 14%, driven by continued patient demand, moderately offset by some impact from Part D redesign. Koselugo grew 8%, driven by patient demand, partially offset by unfavorable order timing in tender markets. Despite the side winds, we continue to expect growth across the rare disease portfolio in 2025, but at a slower pace than was seen in 2024. During the quarter, Beyontra, formerly acoramidis, was approved in Japan for the treatment of adults with transthyretin-mediated amyloid cardiomyopathy. This is an exciting step forward in our progress to deliver an industry-leading amyloidosis portfolio. Please advance to the next slide. During the quarter, we received positive news from a single-arm pediatric study of ULTOMIRIS in HCT-TMA. HCT-TMA is a rare type of thrombotic microangiopathy, a severe complication of hematopoietic stem cell or bone marrow transplant, and is associated with significant morbidity and mortality.

In the phase III study in pediatric patients, ULTOMIRIS demonstrated improvements in the individual components of TMA response, such as platelets, LDH, urinary protein-creatinine ratio, as well as overall survival. We await high-level results from the placebo-controlled phase III trial in adults and adolescents in the second half of the year and look forward to sharing data with regulatory authorities. This is the first indication expansion opportunity for ULTOMIRIS beyond the Soliris label, representing a potential blockbuster opportunity on a risk-adjusted basis. As outlined on our investor day last year, we continue to build out our rare renal pipeline, expanding into post-transplant diseases. We are initiating the phase III AWAKE trial of ULTOMIRIS in delayed graft function, or DGF. With ULTOMIRIS' immediate sustained thermo-complement inhibition, we believe it is uniquely positioned to help reduce inflammation and renal injury, ultimately extending kidney transplant organ longevity.

In the quarter, we also announced our phase III calypsotriol sterling eniboparatide in chronic hypoparathyroidism patients, which met the composite endpoint, showing a statistically significant normalization of serum calcium whilst simultaneously reducing dependence on daily calcium and vitamin D supplements. We have made changes to the trial protocol to allow patients to receive a higher dose based on patient response, and additional efficacy analysis will be measured at 52 weeks. This will help to further characterize eniboparatide's risk-benefit profile. 2025 is a catalyst-rich year for rare disease portfolio, with four phase III trials due to readouts, three of which are NME opportunities. With that, please advance to the next slide, and I will hand back to Pascal.

Pascal Soriot (CEO)

Thank you, Mark. Next slide, please. We've made a strong start to the year with several important readouts already in hand, but this is only the beginning. As you can see on this slide, the number of high-value upcoming catalysts we have through the end of 2025 is quite remarkable. Together, they represent over $10 billion in potential peak risk-adjusted peak year revenue. Sorry. Next slide, please. In closing, already this year, we are tracking well towards our 2030 ambition. We expect continued growth from all of our therapy areas over the balance of the year and across key geographies. Importantly, global demand for our medicines is expected to offset the known headwinds. As evident from our results in this and prior quarters, we remain focused on delivering operating leverage while continuing to invest in our pipeline and in transformative technologies to support our growth to 2030 and beyond.

Lastly, we are on track to deliver at least 20 new medicines by 2030, with nine delivered already, and an accelerating pace of new approvals is anticipated across our portfolio. Please advance to the next slide, and we will move to the Q&A. As Andy mentioned at the start of the call, please limit the number of questions you ask to allow others a fair chance to participate. For those online, please use the raise hand function on Zoom. With that, let's move to the first question. Sarita Kapila at Morgan Stanley. Sarita, over to you.

Sarita Kapila (Co-Head European Pharmaceuticals Equity Research)

Hi. Thanks for taking my questions. It's Sarita at Morgan Stanley. Firstly, how should we think about the impact of the Medicare Part D redesign in the U.S. as we move through the year? Was it mostly Q1-weighted, or do you expect further impact from here? If you could help frame or quantify the overall impact for the full year and comment on the underlying outlook for 2025 in oncology, that would also be useful. Thank you. Just a quick one on Avanza. Perhaps you could talk about the confidence around the QCS biomarker and if there are any examples about a retrospective, sorry, biomarker translating to the prospective setting, and talk about the rationale for using Imfinzi as the backbone versus Keytruda, please, and does that increase the risk of the trial? Thank you.

Pascal Soriot (CEO)

Thanks, Sarita. Maybe Dave, you could take the first question and Susan, the second one.

Dave Fredrickson (EVP and Oncology Business Unit)

Absolutely. Sarita, thanks for the question. In terms of your specific question, I would think of Part D as a rebasing that happens at the beginning of this year, and then all volume growth that we're able to have from here is going to be against that rebased number. The reason for that is that catastrophic is triggered on the very first fill within our oral oncology products. It will not grow from here. It's a rebased number from here. Obviously, it grows as our volumes grow within Part D. I think to put this into some context, and maybe I'll just talk specifically about TAGRISSO because I think it's a good example. In the U.S., we saw a 20% increase in volumes from our ongoing launches of FLAURA2, ADAURA, LAURA, all going really, really well.

Together with reduced free good utilization and some price increases, that offset the gross-to-net impact from Part D redesign. We saw revenue growth of 9% in the U.S., volume growth of 20%. I think that importantly, the new patient start and TRX data show that we're also really managing competition well with FLAURA and FLAURA2. We expect continued revenue growth throughout 2025 within this. I think full year outlook on our oral oncolytics remains strong. We've got good growth drivers that we're able to operate against, and as long as we continue to navigate against those key performance indicators well, I'm confident that we will grow from this rebasing period.

Pascal Soriot (CEO)

Thanks, Evan. Maybe just to add, Sarita, is that Dave said it, 20% volume growth on TAGRISSO. We have more than 20% volume growth on CALQUENCE. The important piece is that this year we have this, of course, one-off Part D or price resetting, if you want, but the volume growth, further supported by new indications for both CALQUENCE and TAGRISSO, will really support well our growth into 2026 and beyond. I think for those products, we can have a fairly optimistic outlook in the U.S., but also beyond the U.S. Susan, you want to take the second question?

Susan Galbraith (EVP and Oncology R&D)

Yeah, sure. Thank you. Just as a reminder for Avanza, we have taken the learnings that we had from TROPION-Lung01 and made changes to Avanza, which include focusing on the clinically meaningful benefit that we saw in TLL1 in the non-squamous patient population and allowed us to enrich for that. What we also have done is embed the QCS biomarker. In terms of your question about that, the confidence that we have in QCS is based on our understanding of the mechanism that we have with Datopotamab deruxtecan, which is dependent not just on the surface expression of Trop2, but the amount that gets internalized. That is embedded into this NMR QCS positivity. I also have said that the data that we have seen from the TROPION-Lung01, we have seen similar trends in other data.

I'll point out that we have an update on the TROPION-Lung02 dataset that we presented at ASCO, which will include an analysis of the QCS data. Of course, that's important because in TROPION-Lung02, it's the combination also of Imfinzi with an IO agent and with the combination with platinum. I think the confidence is built on seeing the similar effects in multiple datasets and embedded on the mechanism that we understand for why Datopotamab deruxtecan is active and differentiated. In terms of Imfinzi activity, I think the number of positive Imfinzi trials in a number of different settings is further proof of the relevance of that mechanism of action. Again, we have data in TROPION-Lung04 and TROPION-Lung02, which are very consistent across different IO checkpoint inhibitors.

We remain confident in the combinability of Datopotamab deruxtecan with Imfinzi and the application of that into the important patient population in first-line non-small cell lung cancer.

Pascal Soriot (CEO)

Thank you, Susan. The next question is from James Gordon at JPMorgan. James, over to you.

James Gordon (VP and European Pharma Equity Research)

Hello, James Gordon, JPMorgan. Thanks for taking the questions. First question was on the oral PCSK9. You had strong phase II data, and you've announced the phase III program today and flagged the $5 billion plus peak sales. Competitor injectable PCSK9 uptake has been slower than originally anticipated. Can you talk about how you're now thinking in terms of how much orals will expand the market and how dominant a share you think your product would have of the oral opportunity to get to your $5 billion plus? What are you thinking there? When this could potentially launch? You said what the three programs would be, but when could you have the pivotal data? That's the first question, please. Second question, U.S. manufacturing. You source the majority of your U.S. product from the U.S.

Are you considering any incremental U.S. manufacturing investments, and could that be accommodated within the existing circa $3 billion of CapEx per year, or might you need to step up, or could it be about reallocation? If I could just find a clarification on IRA and Part D redesign. Should we assume you already had the full pricing mix hit in Q1, but we could see further volume expansion due to greater affordability through the year, so you could actually see revenues accelerate for some of these impacted products through the year, or is it more like the absolute Q1 performance is the new run rate? You have got the pricing mix set already, and you have had the volume uplift already. Do things accelerate further through the year, or is this just the new normal already at Q1?

Pascal Soriot (CEO)

Good, James. That's not two, but three questions. Thank you. The first one is oral, I guess. Oral PCSK9 and IRA, do you want to take this one? Aradhana, you could take the second, and Dave, back to you for the third one.

Ruud Dobber (EVP and BioPharmaceuticals)

Yeah. First of all, James, we need to realize that 70% of the patient population eligible for cholesterol-lowering drugs are not at goal. We firmly believe that a product like an oral PCSK9 will substantially unlock the opportunity in order to serve a very large population across the world. The second part is that we all know that the injectables were facing quite a bit of an issue from an access perspective. An oral PCSK9 probably will be priced at a lower level, and hence also in the emerging markets where we have a very strong footprint, I think the oral PCSK9 will fulfill a huge medical need. Last but not least, I think the uniqueness of our oral PCSK9 is it's a true small molecule, and I think Sharon articulated it very well.

We're also looking for, let's say, combinations of our oral PCSK9s, for example, with our own Crestor or Ezetimibe, and that makes, I think, the proposition a potentially very big one.

Aradhana Sarin (Executive Director and CFO)

James, in terms of your question on CapEx and tariff-related and what incremental investments there may be required, two different things. One is, as it relates to the minority of the products that we do import from Europe into the U.S., we're already starting to take action as it relates to tech transfers and building some of the capacity there. Also note that we do have always a dual-source supply and so forth, and also capacity within our existing facilities. The incremental investment required for that to happen will be manageable. In terms of the overall CapEx, last year, as you know, we also announced a $3.5 billion CapEx and investments in the U.S. We've said this year that our CapEx would be 50% higher than last year. Going forward, we need to look at how the portfolio develops.

For example, if the oral GLP-1 is successful in phase II as the PCSK9 progresses, as Cami progresses, as Baxdrostat reads out, we will then start to plan for success for these molecules and will build and manage supply accordingly. Dave?

Dave Fredrickson (EVP and Oncology Business Unit)

James, on your clarification question, let me break down into the components. The first part is that at the beginning of the plan year, as we moved from a copay cap of $3,300-$2,000, we saw an increase in the number of patients or a reduced number of patients in free drug program, an increase in the number of patients that came off of free drug and into the commercial program. I think that is a one-time effect that you will not see the volume grow over the course of the year.

However, the reduced abandonment rate I do think grows over the year, and very much the revenue growth and the volume growth that we're seeing from FLAURA2, ADAURA, LAURA on TAGRISSO is growth that we'll continue to see moving forward from this new rebased level that we're at in terms of where the Part D impact came from reform. I would also note that there is one other dimension on CALQUENCE, and we had spoken about this, or I spoke about it last quarter. There are some contracting decisions that we took to secure preferred formulary access. Those are one-time impacts in terms of to gross to net that we probably will see in the quarter and will grow volume against that as we pull through those contracts and get opportunity to really make sure that that preferred access is translating into continued leadership in CLL.

Pascal Soriot (CEO)

Thank you, Dave. James, maybe if I can come back very briefly to your first question, oral PCSK9. I think it's important to keep in mind you have 24 million patients in the U.S. who have cardiovascular disease. 70% of them are not at target. They have a cholesterol level above 70. It is a huge number of people who have established cardiovascular disease and are not at target. I am not even speaking about the population that has elevated cholesterol above 100 in the general population and are not treated. The potential for an oral agent that is priced at the right level, as Ruud explained, is really very, very large. If our studies deliver, of course, we have to have good results, but we have good reasons to believe the product will deliver.

The opportunity to help patients and grow the product is quite enormous in the U.S., but also beyond. Remember, injectable PCSK9 are great products, but in Europe, they're very limited in terms of access because, of course, mostly. If we bring a product that is more affordable, the potential there is quite enormoU.S. Should we move to Rajan Sharma at Goldman Sachs? Rajan, over to you.

Rajan Sharma (Executive Director and Pharma and Biotech Equity Research)

Hi, sorry. Hopefully, you can hear me now. I forgot to unmute. Thanks for taking my questions. Firstly, on DB09, could you just talk to the potential filing strategy there? Do you think you will file the combination on before the monotherapy data are available? Secondly, just on a follow-up actually to a comment that Susan made on ASCO data, just to clarify, will that be QCS biomarker analysis of OS from TROPION-Lung01 that's available at ASCO? Thank you.

Pascal Soriot (CEO)

Thanks, Rajan. For you, Susan?

Susan Galbraith (EVP and Oncology R&D)

Okay. Just for the second one, just to clarify, what I was talking about, we're going to present within the TROPION-Lung02 dataset biomarker data, looking at the QCS biomarker within that study, which I think will be helpful in addition to the data that we had from TROPION-Lung01. In terms of DESTINY-Breast09, obviously, we're in discussions with regulatory authorities. As we said, I think the data show a highly clinically meaningful result, and I think that will influence regulators, but those discussions are ongoing. I would just say we are optimistic in terms of the potential for presentation of DESTINY-Breast09 data at ASCO.

Pascal Soriot (CEO)

Thank you, Susan. Sachin Jain, Bank of America, over to you, Sachin.

Sachin Jain (VP)

Hi, there. Two questions, please. Firstly, Pascal, if you just high level on U.S. pricing, any high-level perspectives on Trump executive order and how you're thinking about U.S. pricing? There's been a lot from yourself and others in the media. If you could just touch on that. Secondly, for ONC, I guess this is more for Dave, but SERENA says, "Congrats on the plenary." I wonder if you could just reappraise us of how you're thinking about the commercial opportunity relative to the $5 billion you framed for the molecule as a whole, obviously assuming the majority is SERENA Ford, but if you could just comment to how you're thinking about SERENA's size and factors that we should be thinking around adoption in terms of testing, duration of therapy, etc. Thanks a lot.

Pascal Soriot (CEO)

Maybe let me quickly comment on the first question, Sachin. I mean, U.S. pricing, of course, lots of potential outcomes here, but it's not very easy to comment because nobody really knows. It is clear that this is an issue that will be on the radar screen of many people. The reality, I think, is that there has to be a rebalancing. In fact, the U.S. has been funding innovation for our industry for a long time, and we believe that Europe has to invest a greater share of their healthcare expenses, and that share has been declining steadily over the last number of years, down to 7% of healthcare budget being allocated to innovative medicines in the U.K. What can you do with 7% of your healthcare cost allocated to innovating medicines? Of course, not much.

The investment in innovation in pharmaceuticals in Europe has to go up. What that means is for some products, higher prices that are closer to or higher suddenly than they are today, maybe closer to the U.S., but importantly, also faster access and better access for patients. At the end of the day, what happens in the U.S., we'll have to see. Of course, there are ongoing discussions, as you can imagine, but I really think the key piece is that Europe, at least the richer countries in Europe, have to contribute more to pharmaceutical innovation, just like they have to contribute more to their own defense.

It's a real location of GDP, which actually, in terms of pharmaceutical innovation, would be relatively modest, but that would enable a lot of accelerated access and suddenly a pricing level that would enable to rebalance the funding of that innovation between the U.S. and Europe. Second question, Dave, do you want to cover that?

Dave Fredrickson (EVP and Oncology Business Unit)

Yeah. Cami broadly and really talking about the SERENA-6 opportunity. I mean, as we think about camizestrant, Sachin, obviously, the program comprises early adjuvant breast cancer trials as well as metastatic studies. I think that if we're able to unlock an opportunity within the adjuvant setting and within SERENA 4 to the point that you raised, that really is going to do the lion's share of the work to get us to that $5 billion plU.S. SERENA-6 is such an important study, and the reason it's important is that there's 85,000 patients with frontline drug-treated hormone receptor positive, HER2 negative metastatic breast cancer in the G7, and two-thirds of those patients are considered endocrine therapy sensitive, and they're treated today with a CDK4/6 and an ET in the frontline setting.

We know that 30% of those, so this is a pretty significant number, developed the ESR1 mutation during the course of their frontline treatment. That ESR1 mutation is something that can be today detected with NGS testing, and NGS, at least in the U.S., is fairly common among this population. There is going to be work that we're going to need to do to incorporate this testing as part of the regular blood work that's being done. The access to the test and the test itself is something that is already incorporated into the workflow and into the practice. It allows for us to, in addition to moving earlier than the other next generation SERDs, which gives us an opportunity for early experiences. I think the likelihood that those experiences are going to be good ones is high.

I also think that the fact that we can use this on a backbone of multiple CDK4/6s is also really important. Those are the elements of SERENA-6 that I think are most noteworthy.

Pascal Soriot (CEO)

Thank you. Maybe to add back again to your earlier question, Sachin, I want to make sure that everybody understands this price difference between the U.S. and Europe is not true for every product. I mean, there are lots of products that have similar net prices. I mean, in Europe, you have a single price. In the U.S., you have commercial, you have Medicare, you have VODOD, you have also Medicaid. In commercial and Part D, we provide a large amount of rebates, and those rebates can be very, very large for some products. If you look at things on a net basis, net of rebates, incorporating Medicaid, VODOD, and sort of calculate a net price for the United States that you could compare to the price in Europe, for many medicines, the difference is actually very small and sometimes zero, actually no difference or very little.

We're talking about a few products. As I said, Europe has to fund this innovation in a better way. Steve Scala at Cowen, over to you, Steve.

Steve Scala (Pharmaceutical Analyst)

Oh, thank you so much. I have two questions. Pascal, to sum up your tariff commentary in the prepared remarks, is it fair to say that under all contemplated scenarios and in light of AstraZeneca's actions over the next two to three years, tariffs are not material at the group level? Is that a fair conclusion? The second question is for Dave. On DB09, the press release stated that safety was consistent with the known profile of an HER2, but it could be argued that in first-line setting, it needs to be better, especially regarding ILD. What should be our expectations for the full dataset, and will DB09 contribute to sales in 2025? Thank you.

Pascal Soriot (CEO)

Thanks, Steve. Quick, the first question. I mean, I'm not able to forecast every potential scenario. In the world we live in, we have to assume any scenario is possible, even scenarios we can't even imagine today. It's hard to answer your question, but what I can say is that, yeah, I mean, within a period of time, which may be two years, any impact we have would actually be managed. As I said, first of all, the impact is limited, but importantly, the impact we have is time-limited because we are really deploying manufacturing. Instead of globalizing the manufacturing of one product in the U.S. for the world or in Europe for the world, we can actually share and sort of manufacture one product for the U.S. in the U.S. and the rest in Europe and vice versa.

Because of our network, we have the ability to shift manufacturing around. Yes, within a relatively short period of time, I mean, basically, these issues could be managed and are suddenly not material long-term, as we, based on what we can see today.

Dave Fredrickson (EVP and Oncology Business Unit)

Steve, on your DB09 question, I mean, you'll have to go to the presentation to get into the details on the specific data within it. I do think that what I would point to is that when we speak to the results being statistically significant and clinically meaningful, that is an overall assessment of the benefit-risk. I think that the trend in overall survival that we commented to is also something that underscores the entire benefit-risk within that population. This is a very important study, 25,000 G7 frontline drug-treated HER2-positive patients. This is a study in a broad population. On your question on use in 2025, obviously, we won't promote to anything before it's approved.

We certainly do know that guidelines and presentations can result in markets, particularly the U.S., where it's allowed for spontaneous use, but we'll have to see what the reaction is to the data after it's presented.

Pascal Soriot (CEO)

Thanks, Dave. Mattias Häggblom at Handelsbanken. Mattias, over to you.

Mattias Häggblom (Equity Research Analyst)

Thanks so much. Two questions, please. Firstly, for Pascal, on tariffs and drug pricing, but perhaps a different angle. Over the last couple of years, a handful of members, including AstraZeneca, have left different industry associations like pharma. In recent weeks, we've seen a number of individual pharma executives share their perspective on the best path forward. My question goes, to what extent do you anticipate the industry to come together more in the near future in order to perhaps better leverage its message to different stakeholders and up the odds of a favorable path forward for the industry? Secondly, for Aradhana, it's now almost a year since the company shared its $80 billion revenue target for 2030, an ambition sometimes described as conservative within the investment community.

From your perspective, any particular areas you'd like to point us to where the company's internal modeling still deviates materially from company-compiled consensus? Thanks so much.

Pascal Soriot (CEO)

It's interesting to hear the $80 billion as conservative. First time I hear it as they describe it as conservative, Mathias, but it's still nice to hear that you believe in our portfolio. I'll leave that answer to Aradhana. The tariffs, yeah, I think the industry is coming together. I mean, basically, we have a couple of issues to resolve as an industry. One is tariffs, and of course, there are ongoing discussions that are industry discussions. The other piece is, I think what is really important long-term, it's probably less relevant near-term, but it's mid to long-term relevant, is addressing this imbalance that exists between Europe and the U.S. as it relates to funding innovative medicines. Again, as I said, it's a question for Europe. It's a question of sovereignty and health sovereignty for their European citizens. It's not only a question of price.

People think it's a question of price sometimes. No, it's also a question of delay. I mean, in many countries in Europe, patients have to wait two years, three years to get access, or it's very restrictive. I think with a reasonably modest increase of the share of GDP allocated to innovative medicines, a lot of these things could be addressed and disappear. I think that's an issue the industry is addressing collectively, and I believe, I hope that we can continue working together to address those two issues. Aradhana.

Aradhana Sarin (Executive Director and CFO)

Yes, thank you so much for your confidence in our $80 billion number. We are working hard to achieve that. I think as we've mentioned both this time and when we announced our full-year results, 2025 will really be a very important year. This time next year, we should have a very good sense of where we stand on the trajectory to that $80 billion ambition. The $80 billion is a risk-adjusted number. This year, we will be reading out several studies, multiple in the rare disease portfolio, several in the biopharma portfolio, and of course, in oncology, as well as the oral GLP product, which is in phase II. Again, not everything will work, but on a risk-adjusted basis, by this time next year, we'll have a very good idea and confidence as to where we are on that $80 billion ambition.

To your question on where we see variances versus our own plan, I think there are multiple products, particularly in the biopharma portfolio. I think some of the respiratory products, some of the CVRM products, the oral PCSK9, I think now people are starting to appreciate that opportunity, the amyloidosis. I think there are several products in the biopharma and the rare disease portfolio, as well as in the oncology portfolio. I think we're not really getting any credit for the investments we're making in our own ADC pipeline that Susan highlighted, as well as other investments we're making in cell therapy. There are several areas of variances, but those are the major ones. Thank you.

Pascal Soriot (CEO)

Thank you, Aradhana. Matthew Weston, UBS. Matthew, over to you.

Matthew Weston (Pharmaceutical Research Analyst)

Thank you, Pascal. Two questions, please. The first for Susan on Avanza. Based on our feedback, a lot of investors are nervous and would like to basically see this one out of the way so they can concentrate on the rest of the rich catalyst path that you and Pascal laid out. Now, clearly, you might disagree, but I wonder if there's any color you can give us on how events are tracking and when we might see the data within the second half of the year. A second one for Aradhana, please. The 2024 annual report calls out $561 million of benefit of intellectual property incentive regimes in your tax paid. President Trump has called out low U.S. tax payment by pharma as a frustration alongside manufacturing locations.

Pascal obviously has made the reassuring comments around manufacturing and tariffs, but have you had any interaction with U.S. authorities on how you use IP licenses to take profit out of the U.S.?

Pascal Soriot (CEO)

Avanza, Susan, you could cover this. Of course, Aradhana, second one. I do not want to steal Aradhana's thunder, but I think it is important maybe to signal that of our distribution of taxes around the world, in the U.S., we have a fair amount of our proportion of taxes paid in the U.S. I do not think we are in a position where people could say we are optimizing tax to the extent we do not pay a fair share of taxes in the U.S. We do pay a fair share of taxes in the U.S. Sure, Aradhana does not want to give the details, but I can tell you we pay a fair share of taxes in the U.S. Avanza for Susan and the second question, Aradhana?

Susan Galbraith (EVP and Oncology R&D)

Yeah. Thank you, Mathew. In terms of Avanza, just a couple of things. Avanza accrued ahead of time, which shows the enthusiasm that the investigator population had for this study. We guide by half, and we do expect the results in the second half of this year. I see no reason why that's going to be delayed beyond the end of the year.

Aradhana Sarin (Executive Director and CFO)

On your second question, as Pascal mentioned, we do pay our fair share of taxes in proportion to our revenues in the U.S. We do take advantage, obviously, of transfer prices, but I think the numbers you are mentioning that are mentioned in the annual report relate much more to things like patent boxes and where governments do provide incentives for research and so forth and R&D funding. We are always trying to optimize how we manage and plan our taxes globally. That is all the detail we can provide at this time.

Pascal Soriot (CEO)

Mathew, I mean, I do not think I would disagree with you that Avanza is an important event for us this year, but we have many other events. Baxdrostat is another major event. We have quite a number of major events throughout the year in the pipeline. We have already de-risked a major one with GBO9, of course. It is an important event. I do not disagree, and we all are waiting for that readout, for sure, but we have many others. Next question is from Justin Smith at Bernstein.

Justin Smith (Director)

Thanks very much. Just a quick one for Mark. Just wondered if you could just provide a bit more color with regards to increased competition. Is that potentially due to price? Just asking because obviously one of your competitors, particularly in the MG space, is emphasizing that more innovation should be driving market expansion. Many thanks.

Mark Mallon (President)

First of all, thank you for the question. The competition that we have is obviously from Altamira is mostly from novel medicines. The category of Myrstenagravis, as an example, has grown dramatically over the last three or four years. The branded part of the market is growing very strongly every year. The Altamira has a key position in this market, but obviously other mechanisms have an attraction for people who are switching from the steroids or immunosuppressant as a first-line treatment. Ultimately, it is also competing in that segment, but it's not the only mechanism available. It is mostly a competition from novel medicine rather than biosimilars. Biosimilars, obviously, compete against Soliris, but as we have now converted mostly Soliris to ULTOMIRIS in the four indications, the competition in the future will be coming from the novel medicines.

Pascal Soriot (CEO)

Thank you, Mark. Seamus Fernandez at Guggenheim, over to you, Seamus.

Seamus Fernandez (Senior Managing Director)

Thanks for the question. Two quick questions. Pascal, you commented on the pricing dynamics and concerns that have been raised, but you have not commented on the opportunity for the HHS secretary to work with Congress to align the incentives for small molecules with large molecules. Just wondering your thoughts on that, as well as kind of a backward-looking dynamic with regard to already negotiated small molecules in the context, including CALQUENCE. Separately, just wanted to ask a little bit for directional predictions that you believe DBO9 may have as it relates to potential success of ENHERTU in the adjuvant setting. Thanks so much.

Pascal Soriot (CEO)

Thank you, Seamus. Yeah, I mean, the first point, thank you for reminding us of this. I mean, it is definitely, I mean, Congress still has to vote on this, of course, and confirm it, but it is definitely something that goes in the right direction for the industry in general and for us in particular. I mean, of course, our existing medicines, but I can think of Camizestrant, which will be a very major medicine, we believe, would certainly benefit from this. I think also we can take heart of what we could see as potential willingness to address these 340B issues. I mean, it is something that we, as an industry, but certainly we as a company have been pushing back on because we believe that a number of participants have been abusing this 340B regulation.

It was nice to see that there is a report now that has been provided to the Congress that confirms what we have been saying for a long time. There are a couple of things that actually are going in the right direction. You're absolutely right. I think the industry would benefit and we would benefit. GBO9, Susan, do you want to cover that?

Susan Galbraith (EVP and Oncology R&D)

Yeah, sure. Just as a reminder, in the DBO9 study, you're taking on a three-drug regimen there. I think the fact that we've seen highly statistically significant and clinically meaningful improvement with a combination of Patritumab and ENHERTU speaks to the power of ENHERTU to address that and builds on the data that we have with DBO3, DBO4, and DBO6. If you look at the other early trials, DB11 is in patients that are in the neoadjuvant setting and again, aims to improve on the current standard of care in that neoadjuvant setting, which has multiple drugs. It's actually five drugs is the current standard of care with AC, as well as the THP regimen. DBO5 is in patients who have residual disease after surgery, so post-neoadjuvant. Around half of those are considered high risk, which is the node-positive patients.

That's a subgroup where the KATHERINE trial with Trastuzumab DM1 demonstrated less benefit. Given the DB03 data, where we've already had a head-to-head comparison with that, we do believe that ENHERTU can make a difference in both of those settings. I hope that gives you context for the potential readouts for DB05 and DB11.

Pascal Soriot (CEO)

Thank you, Susan. Next question is from Simon Baker at Redburn. Over to you, Simon. You may be on mute.

Simon Baker (Partner, Head of Global Biopharma Research, and Financial Analyst)

Can you hear me now?

Pascal Soriot (CEO)

Yes. Go ahead. Thank you.

Simon Baker (Partner, Head of Global Biopharma Research, and Financial Analyst)

Apologies for pressure. I hit the wrong button. Two questions, if I may, please. Firstly, one for Dave. You talked about the gradual impact on discontinuation rates from Part D redesign. I appreciate it's a bit early to start talking about what the impact is, but could you talk about the point from which we start in terms of where we are now in terms of financially motivated discontinuation rates? Secondly, one for Sharon. I noticed from the trial appendix that MEDI1814 in Alzheimer's and MEDI0618 in migraine have both been removed from the pipeline. As far as I can see, that removes all neuroscience assets from the biopharma pipeline. Is that just coincidence, or does that mark a strategic shift in R&D priorities? Thanks so much.

Pascal Soriot (CEO)

Dave?

Dave Fredrickson (EVP and Oncology Business Unit)

Simon, we have seen in the past, and we have not given specific percentages on this, but we have seen, I would say, kind of an important minority of the total oral packs that we ship are historically free drug that we ship. Those are things that historically we have seen as abandonment. Now, whether or not that has been abandoned at the first script or that is at a refill because there is a discontinuation that happens down the road, that is much more difficult to parse out. We have absolutely seen, and we have put into place a number of measures as copay capping came down from uncapped to last year's $33 to this year's $2,000. We have absolutely seen a reduction in that free goods utilization. I do not have a big expectation of seeing a lot of further improvement in free goods because it has really come down pretty significantly.

I think that the best opportunities for us to grow coming from here is going to be, as always, new indications. TAGRISSO, continuing to drive FLAURA to LAURA, ADORA, AMPLIFY, and ECHO on CALQUENCE. That's our opportunities to really come from this rebaselines spot that we're at to now drive growth from here over the course of the period of the multiple quarters that sit in front of U.S.

Pascal Soriot (CEO)

Thank you, Dave. Just to repeat again so that you do not forget this, the message is TAGRISSO is growing by 20% in volume, CALQUENCE by more than 20% in volume. Take this and this momentum, add what Dave just said in terms of new indications. You can imagine that as we weather this Part D repricing, which is a one-off this year, that will take us into 2026, 2027 with a renewed momentum for these very important medicines. Sharon?

Sharon Barr (EVP and BioPharmaceuticals Development)

Sure. Thanks for the question, Simon. You know, in R&D, prioritization is always important. As you noticed, we have closed our neuro programs and identified partners for some of them. This represents a closure of our neuroscience group at AstraZeneca. Importantly, it allows us to focus on our core therapeutic areas and fund our high-value programs. You've heard our excitement about things like weight management, about dyslipidemia, about our very important respiratory portfolio and our growth in immunology. This prioritization helps us to reinvest in the programs that we think are important for AstraZeneca.

Pascal Soriot (CEO)

Thank you, Sharon. Yeah, we have things that you haven't seen yet because they're in early development, and we don't speak much about this, but things like Inhale Biologics, the immune portfolio that has been really progressing and is shaping up nicely. There is a lot of things we can fund, and we cannot be everywhere. CNS really is probably better managed by other companies that have a focus on that. Rajesh Kumar, HSBC, Rajesh, over to you.

Rajesh Kumar (Senior Global Healthcare Analyst)

Hi there. Thanks for taking the question. Just on PCSK9, if you could give us some idea on the timelines of when are we expecting the trials and updates in terms of the development timelines, similarly on SERENA-6 as well. Filing timelines, if we have any clarity on that one. A second slightly broader question. Appreciate there's a lot of interest on Avanzar, and we are all nervously waiting for the readout, but we can easily confuse the details for the bigger picture. Can you elucidate your broader strategy around data? Where do you think what is the total potential of the product across indications, and how do you see that develop? Would appreciate that. Thank you.

Pascal Soriot (CEO)

The first question may be, Sharon, you can take SERENA-6 for Susan, and the last one is for you, Dave, I guess.

Sharon Barr (EVP and BioPharmaceuticals Development)

Sure. Thank you for your interest in PCSK9. You hear our excitement about this molecule. As I mentioned today, we are launching three phase 3 studies and moving at pace. We expect to have our pivotal study in LDL lowering initiated by the end of this year. We will not comment broadly on the readout timelines for these pivotal studies, but you heard us tell you that we are moving forward with a sense of urgency, that we are running a combined primary and secondary outcome study, and that we think that we will be able to launch with our LDL lowering study while moving ahead in parallel with our outcome study that will help facilitate market uptake. Continue to watch this space.

So.

Dave Fredrickson (EVP and Oncology Business Unit)

Roger, on the bigger picture question on Datopotamab deruxtecan, and I appreciate you asking it. I mean, I think that understandably, because Avanzar is the first frontline lung cancer study to read out, there's a lot of interest within it. I do think it's important to not look at it just within isolation. There's multiple opportunities for data as a monotherapy, particularly as we take a look at studies like TL17 that now look at prospective definition of a biomarker population. Susan commented on this before, and we've quite a lot in the past. The work that we've done with the QCS biomarker, I think, is really evidence to how we're leveraging this convergence of science, data, and technology to be able to try to better and more precisely identify patients who can benefit potentially from Datopotamab deruxtecan. Also, though, in combination, and there's multiple combinations that we look at.

There's combinations with IO. There's also combinations with TAGRISSO and EGFR mutated. We are looking at combinations not just with PD1, PDL1, but also with our bispecific portfolio. I think that that's the context within which I'd put data. We are underway already in the U.S. in breast cancer. I would note that we are seeing that over half of the accounts that have placed their first order for Datopotamab deruxtecan have also had repeat utilization. That's a really encouraging sign. It also underscores the high unmet need and willingness to be able to bring a more precise chemotherapy with a profile like Datopotamab deruxtecan's to replace classical chemotherapy in settings where classical chemotherapy has long been relied upon. I guess Pascal made the last point, which is let's not look at it in isolation.

There's an entire portfolio of many readouts that we've got an opportunity also, and you've already seen whether it's MATTERHORN, SERENA-6, DBO9, AMPLIFY that also go alongside that.

Pascal Soriot (CEO)

Thanks, Dave. Luisa Hector, Berenberg. Luisa, over to you.

Susan Galbraith (EVP and Oncology R&D)

I'm going to second Pascal.

Pascal Soriot (CEO)

Oh, sorry. The SERENA-6, Susan. Go ahead. Yeah.

Susan Galbraith (EVP and Oncology R&D)

Thank you for the question about SERENA-6. Look, we're very excited to see the data come to the ASCO plenary. I think selection for the ASCO plenary just reflects what they're seeing about the overall benefit risk that's seen in that trial. Obviously, as we always do when we've got a readout, we'll be in discussions with regulatory authorities, and I can't comment on that specifically because that's ongoing. What I would say is that when you see compelling data, first of all, we will work very diligently to get the submission happening rapidly. We've had other examples of when we see compelling data, we get opportunities for things like priority review. Let's wait and see how that progresses. I'm very happy to talk about the SERENA-6 data once you've seen the data at ASCO.

If I could just take one more opportunity, I just want to say that as well, the overall enthusiasm from investigators about the chemosespheric program is substantial. The adjuvant studies are a really exciting opportunity, and I'm very pleased to share that we've actually achieved our target sample size in CAMBRIA-1 study just very recently, which is also ahead of plan. I think it just reflects the enthusiasm that we're seeing about this overall program. Thanks.

Pascal Soriot (CEO)

Thanks, Susan. I'm sure you've all heard that Susan loves chemosespheric. Luisa, over to you now.

Luisa Hector (Head of Global Pharmaceutical Equity Research)

Thank you, Pascal. I have two questions, please. On obesity, has your perspective on the market and AstraZeneca's potential role in that market evolved given recent competitor data? On China, thank you for the update there in the press release. Do you think we can draw a line here under all the investigations, or is there anything else we should have in mind as we go through the year? Perhaps just a quick comment on your market shares holding up in Q1 in China. Is that all intact? Your latest expectations on the timing of vaccine to VBP? Thank you.

Pascal Soriot (CEO)

Do you want to take the first one?

Ruud Dobber (EVP and BioPharmaceuticals)

Absolutely. Luisa, we are very excited about our weight management portfolio. Last time, Sharon explained in quite a bit of detail why we are so excited. I think we have, first of all, a broad portfolio. I think our oral GOP-1 potentially is fit for purpose in order to combine it with other products in our portfolio, clearly our SGLT-2. The market size in itself is very, very substantial, as you know yourself very well. Analysts are forecasting anything between $50 billion and $150 billion. I think our strategy is differentiated in such a way that, yes, we are looking in what we call the hardcore obesity market, so patients with a BMI of over 35, but equally, patients with a BMI between 27 and slightly above that are going to benefit substantially from losing a certain amount of weight.

If you combine that with other products in our portfolio, whether it is potentially an oral PCSK9, an SGLT-2, I think we have a very powerful combination, not only in order to reduce weight, but also to move to protection of different organs. Now, having said that, I think the other opportunity is clearly the footprint we are having in the emerging markets. The likelihood that an oral PCSK9 will be priced at a lower level versus the current available injectables is a reasonable assumption. Hence, we are also aiming for a very large population in the emerging markets. All in all, very exciting. Of course, the ongoing phase II trials are running as we speak, both in obesity and diabetes.

We need to wait for that, but we are ready in order to move with speed to start our phase III trials if the data is successful.

Pascal Soriot (CEO)

Thank you. Just maybe one additional point is that, as Ruud said, we have a big footprint. In our mission, it is always to try and bring our medicines to as many people as possible. If you look at the cholesterol market, the PCSK9 market, it's a good parallel. Injectable PCSK9 are great products, but outside the U.S., I mean, their penetration is more limited because of cost and injections. An oral agent will enable us to bring this type of medicines to a lot more patients around the world. The other benefit maybe to add is that an oral agent is probably a better option in terms of compliance long term. I think overweight, obesity, or chronic conditions, you have to take those medicines for a long, long time. Otherwise, you regain weight, and we've seen this over and over again.

An oral agent that you take in combination with your other medicines is more likely to enable patients to stay on treatment for a long period of time, especially if the price is affordable, of course.

Aradhana Sarin (Executive Director and CFO)

Yeah. Thanks, Luisa, for the question. Let me first start with a comment on the update on the investigation. As you recognize, we announced two important updates in our results announcement. From what we know, the Customs Office and the Public Security Bureau have really concluded their respective investigation, both related to the drug importation allegations as well as the personal information infringement allegation. These cases have now been referred to the prosecutor. An important update that we provided in our result announcement is that we have been informed that there was no illegal gain to the company from the personal information infringement allegations. On your second question about the market share, as you saw in our quarter one announcement, we saw the strong performance in China, strong quarter in China with 5% of the growth.

Our underlying business is basically performing even better because if you adjust for the PULMICORT, which is declining due to the low infection season and the market decline, our underlying business in China is growing 9%. That is driven primarily by the continuous strong performance of Forxiga and, I would argue, outstanding launch of it and HER2, followed by inclusion in NRDL in January, and our ability to basically achieve 800 hospital listings in the first quarter and clearly help a lot of patients with huge unmet needs in China in that space. On top of that, we are seeing continuous improvement of the market share. We are still leading in the respiratory field, both with Symbicort and Breztri. We see very encouraging data and market share increase from Breztri as well as the improvement in the usage of the triple therapy.

Given the huge unmet need in China related to COPD, we do see a huge unmet need going forward. When we look at other important growth drivers, as you all know, TAGRISSO is an important growth driver in China, and we do see continuous growth of TAGRISSO given by the new indication as well as improvement in the market share despite fierce competition and six third-generation TKIs from the local companies that are available in the market. All in all, we feel very comfortable and confident in the team performance in the first quarter. As we always talked about, we feel confident and comfortable with the opportunity going forward in China, given the unmet need and given our portfolio and pipeline that fits that need.

Pascal Soriot (CEO)

Thank you. Iskra, maybe just to add something that Iskra will not tell you because she's modest, but she's done an amazing job, and the team is very motivated. LoCorria was there not long ago. It is important because that's really what is going to sustain our growth moving forward. The team has gone through a period of trauma, as you can imagine. We've all been sort of traumatized by this event. People have quickly recovered, and they're very much focused on delivering on our goals, and everybody is very committed and very energized today. Maybe we'll take the last question, Peter Verwoerd at BNP. Peter, over to you.

Peter Verwoerd (VP Commercial Banking)

Yeah, thanks, Pascal. People at BNP, excellent. Two questions, just firstly for you. We've seen the first PDUFA delay from FDA this week that wasn't due to the need for further clinical or manufacturing data. Just in light of all the personnel changes, are you noticing any worrying disruptions or delays with respect to AstraZeneca's interaction with the agency? I know you already called it out, but we had the question lined up back just ahead of that upcoming phase III readout. Does the sort of recent Lerandostat data from Mineralis, is that the right way of thinking about setting the bar, or are you hoping to show something more? I just wanted to get a sense of your expectations going into that readout. Thank you.

Pascal Soriot (CEO)

Can I propose maybe, Susan, you cover the first question in general, and then Sharon, if you have anything to add to FDA, and you can also cover backstream stats.

Susan Galbraith (EVP and Oncology R&D)

Yeah, thank you. Obviously, we continue to monitor the situation, but just based on the facts, we haven't seen any delays in the interactions that we've had with the FDA across our programs to date. Just to remind you that Niagara was approved ahead of the PDUFA date. We have multiple interactions with the FDA across our extensive portfolio, and all of those meetings are happening in the timelines that we would expect and with the level of interaction that we would expect. Thank you.

Sharon Barr (EVP and BioPharmaceuticals Development)

With regards to the FDA, I will echo Susan's comments that to date, we have had on-time conversations with the regulatory authorities. To date, we haven't seen delays. That said, we continue to be very alert to this and continue to move forward with our programs with a sense of urgency. To address your question about Baxdrostat in light of the Mineralis data that was revealed earlier this month, we first think it's very encouraging to see momentum in aldosterone-targeted therapies. It validates the critical unmet medical need that we have been focused on for some time. We think that this is a valuable mechanism of action in which we are targeting aldosterone at its source, which we think is a very important mechanism for helping to control hypertension.

We continue to believe that our molecule, Baxdrostat, has the potential to be best in class and has a very competitive profile. We've shown data for this in Brighton, where we saw a placebo-corrected reduction of 11 millimeters of mercury in systolic blood pressure at the 2 milligram dose. With this molecule, we think we are seeing impressive mercury lowering at a low dose. This sets us up well for treatment with both monotherapy and combinations. Our molecule has a half-life that is at least double that of competitors, and we think that's really important for 24-hour control of hypertension. We don't see clinically relevant drug-drug interactions with Baxdrostat, which, again, we think highlights its potential to be a best-in-class molecule. We think we're in a very competitive position. We look forward to reading out the phase III pivotal data for BAX HTN later this year.

Pascal Soriot (CEO)

Thank you, Sharon. I'd like to maybe conclude that, first of all, thanking you for all your interest and your great questions. Maybe in closing, just like to say again, we have started very well the 2025. We have a growth momentum that continues. We're on track to achieve our expectations and our guidance. Importantly, we're entering a catalyst-rich period. As we said many times before, by the end of this year or early next year, we'll have a very good sense for the driving factors for our growth to 2030. So far, so good. We have five positive phase 3 studies, in particular, important ones like SERENA-6, MATTERHORN, and of course, more recently, DB09. We've had 13 regulatory approvals across the major regions in the quarter. Our revenue is up 10% and very much on track with what we expect.

Our expenses are well managed, and I know there's been a focus on SG&A, so I'd like to attract your attention that SG&A grew by 5%, even though we have many launches. Everybody is really working hard to manage those launches and control SG&A growth. As a result, our operating profit is up 12% and our EPS 21%. That really is a series of messages I wanted to leave you with because, again, we are very much on track. Thank you so much again, and I wish you a good rest of the day.