AstraZeneca - Q2 2023

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 half year and Q2 results 2023 webinar 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. 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, 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 presentation and webinar. There will be an opportunity to ask questions after today's presentations. Please use the Raise a Hand feature at any time to indicate you wish to ask a question, and please remember to unmute your line when invited to speak. With that, I'll now hand you over to the company.

Andy Barnett (Head of Investor Relations)

Thank you, operator, welcome, everybody. I'm Andy Barnett, Head of Investor Relations at AstraZeneca, and I'm very pleased to welcome you to AstraZeneca's first half and second quarter of 2023 conference call. As usual, all materials presented are on our website. This slide contains our usual safe harbor statement. 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. Numbers used are in millions of U.S. dollars unless otherwise stated. This slide shows our agenda for today's call. Following our prepared remarks, we will open the line for questions.

We will try and address as many questions as we can during the allotted time, although I'd ask participants to limit the number of questions you ask to allow others a fair chance to participate in the Q&A. As a reminder, to ask a question, please use the Raise a Hand function in Zoom, or alternatively, you can click the Q&A button and write your questions. With that, Pascal, I will hand the call over to you.

Pascal Soriot (CEO)

Thank you. Hello, everyone, welcome. Please move on to the next slide. Total revenue in the first half of the year increased 4% to $22.3 billion, with 16% growth in our non-COVID medicines, offsetting a $2.2 billion decline in our COVID-19 medicines revenue. Core earnings per share increased 21% to $4.04. This increase reflects both our robust business performance as well as a gain following an update to our contractual relationships for Beyfortus in the U.S. We continue to benefit from our diverse commercial portfolio and our global footprint. Given our strong execution in the first half, we remain confident in our outlook for the remainder of the year, and we have reiterated our 2023 guidance. Next slide, please.

Taking a closer look at the performance of our non-COVID business across our regions and disease areas, growth in the emerging markets continued to be strong, in particular, outside of China. Emerging markets outside of China collectively grew by 38% in the first half. This growth underscores our confidence that these markets will become increasingly important to our business. We also saw double-digit growth across the EU and Europe in the period. On the right-hand side, you will see that we delivered a robust double-digit growth across Oncology, CVRM, RNI, and Rare Disease, and as expected, we saw declines in VNI. This growth reflects strong medicines performance across these areas. Please advance to the next slide. When we look at performance across our portfolio, in the first half, we had eight medicines deliver over $1 billion each in product sales.

A broad range of these products are driving our growth, as you can see from this slide. Through effective lifecycle management, we've seen an acceleration in the rate of growth for several medicines, such as Imfinzi and Farxiga, with new indications making important contributions to revenues. Ultomiris grows to that once again and is the result of both successful conversion from Soliris as well as growth in patient numbers. We've also seen promising global growth from some of our more recently launched medicines, including Enhertu, Calquence, Breztri, Tezspire, and Saphnelo, all of which are helping to change the course of their respective diseases. Next slide, please. Confidence in our long-term outlook is supported by our robust late-stage pipeline, which now has well over 120 active projects.

Importantly, we maintain a rigorous approach to R&D development, setting a high bar for late-stage trial initiations and advancing only the most promising projects. We strive to stay at the front of the innovation curve, and we have already progressed 14 unique new molecular entities into a late-stage development. We're making good progress towards initiating 30 new pivotal trials this year, having those nine in the year to date, with recent additions, including the LITHOS trial for Breztri and asthma and two next-generation propellant trials, which will support expansion of our PMDI portfolio. As we indicated last quarter, most of the new pivotal trials are expected to dose in the second half of this year. Our pipeline continues to make exciting progress with eight positive pivotal oncology trials already this year. These are shown on the right-hand side of this slide.

In particular, we are encouraged by the positive results from the TROPION-Lung01 trial of Dato-DXd, and are excited to unlock the full potential of this promising medicine. On the next slide, Aradhana can take you through our financial highlights in the first half, as well as provide some further insights into how we are embracing the power of artificial intelligence across our manufacturing and supply chain. Over to you, Aradhana.

Aradhana Sarin (CFO)

Thank you, Pascal, and good afternoon, everyone. As usual, I will start with our reported P&L. Please advance to the next slide. As Pascal mentioned, total revenue increased by 4% to $22.3 billion in the first half. Total revenue, excluding COVID-19 medicines, increased 16%. Alliance revenue of $627 million includes $475 million of Enhertu profit sharing from geographies where Daiichi Sankyo books product sales. Collaboration revenue of $220 million includes a $180 million license fee from the Serum Institute of India, booked in the second quarter, relating to our COVID-19 antibodies license agreement. Please advance to the next slide, which shows our core P&L.

The core product sales gross margin in the first half was 82.9%, benefiting from lower production costs in prior quarters and certain non-recurring items in the first quarter. As previously communicated, we expect the product sales gross margin in the second half to be negatively impacted, similar to in prior years, by seasonality for FluMist and certain other medicines, the manDatory price reduction for Tagrisso in Japan, as well as the full impact of inflation. We still expect the product sales growth margin on a full year basis to be slightly higher than pre-COVID-19 levels. Looking ahead, beyond 2023, we expect product sales growth margin percentage will be negatively impacted by profit-sharing arrangements.

While we already see this dynamic with Lynparza, we anticipate the impact to increase as we start seeing higher sales from medicines such as Enhertu and Tezspire in regions where we book product sales, and then pay out a portion of profits to our partners through cost of sales. Over the long term, we're focusing on driving productivity improvements to counter the impact on our gross margins from inflation, continued growth in emerging markets, and more complex and expensive manufacturing of new modalities we're investing in. Core operating expenses in the half increased by 8%. R&D costs increased by 9%, driven by continued investments in our pipeline.

The increase in SG&A costs partly reflects spend behind new launches, such as TOPAZ and HIMALAYA, which are driving the strong growth of Imfinzi and Imjudo, for example, as well as existing brands like Farxiga and Breztri, and geographic expansion of the rare disease medicines portfolio. We previously guided for total core operating expenses to increase by low to mid-single-digit % in 2023, we now expect to finish the year towards the upper end of this range. Similar to the phasing we observed in 2022, we expect R&D and SG&A spend to be weighted towards the second half. Other operating income of $1.1 billion includes $712 million related to the previously announced updated agreements on Beyfortus, which was booked in the second quarter.

The increase in other operating income is in line with the guidance set out at the start of the year, where we said that other operating income would be higher versus last year. The tax rate in the second quarter was lower than our full year guidance due to certain tax incentives and mix of profits and lower tax legal entities. For the full year, we continue to expect the core tax rate will be between 8% and 22%. Core EPS of $4.07 in the first half represents an increase of 21% at constant exchange rates. Next slide, please. Our net cash inflow from operating activities increased by $400 million to $4.9 billion, and we continue to see improvement in our cash conversion.

Net debt increased by $1 billion-$24 billion, driven by the payment of the second interim dividend in March and $2.4 billion in deal payments, which include the second payment to Acerta made in the first quarter. As a reminder, we will pay the third and final payment in 2024. For the full year, we continue to anticipate deal payments related to prior business transactions to be in line with last year, around $2 billion, excluding Acerta. We have paid just under $1 billion in the first half. Our net debt to EBITDA ratio continues to decrease and is now at 1.9x, or 1.7x, if excluding the non-cash adjustment for the Alexion inventory fair value uplift, which will soon disappear, as we have now minimal inventory remaining from the time of the acquisition.

Today, we are reiterating our 2023 total revenue and core EPS guidance. Total revenues are expected to increase by low to mid-single digit percentage. Excluding COVID-19, total revenue are expected to increase by low double-digit percentage. Growth in the second half will be hampered by patent expiries, including Symbicort in the U.S. and Nexium in Japan, where we saw first generics end of last year. We now anticipate revenue in China to increase by low to mid-single digit percentage, and as I mentioned earlier, we now anticipate total operating expenses on the upper end of the range with phasing of SG&A costs towards the second half of the year, similar to prior years. In addition, given that we anticipate starting several new Phase III trials in the second half of the year, R&D and associated clinical and new product costs will be higher in the second half.

Based on June average FX rates, we now anticipate a low single-digit adverse FX impact on total revenue and a low to mid-single digit adverse impact on core EPS. Please advance to the next slide. Continuing with the artificial intelligence theme, today, I want to highlight global operations and how we are leveraging AI to accelerate drug development, manufacturing processes, and drive supply chain efficiencies. To share three specific examples here. First, in drug development, with our in-house AI-enabled tool, Route Manager, we have reduced in-route synthesis lead times from 9-12 months to 5-6 months, and we're striving to further reduce lead times to less than three months. Additionally, with this tool, we've been able to reduce the number of experimental trials, cutting lead times and driving efficiencies in costs, while also providing sustainability benefits through fewer synthetic steps.

Next, with AI-powered visualization of data, our operators are able to improve process performance for synthetic and biologic medicine by identifying critical variables that will affect yield and make real-time optimization adjustments. In the future, advanced continuous process verification will drive further robustness and yield increases. Third example, we've implemented AI-enabled enhancements across our supply chain. For example, Sweden is one of our largest global sites, manufacturing over 12 billion tablets and capsules every year. Here, we use AI-powered digital twins that can leverage multiple data sources simultaneously, such as production orders, dispensing stations, and cleaning status to optimize production schedules. This technology has already delivered a 90% improvement in scheduling time, meaning we can now develop a dispensing plan in only 4-5 minutes, where it used to take eight hours.

Our ambition is to leverage many of these tools and roll them throughout our manufacturing and supply network. This is, of course, a journey. The work is already underway to use technology to drive efficiencies, while our operations team continues to deliver on seamless supply and new product launch delivery. With that, please advance to the next slide. I will hand over to Dave to walk through our oncology business performance.

Dave Fredrickson (EVP of Oncology Business)

Thank you, Aradhana. Next slide, please. We're pleased to report our Oncology medicines delivered total revenues in the first half of $8.8 billion, an increase of 22% versus the prior year. We delivered double-digit product sales growth across all regions. Turning to individual medicine performance in the second quarter, Tagrisso global revenues grew 10%, reflecting strong underlying demand for ADAURA and FLAURA across all regions. As expected, affected this June, we realized a manDatory price reduction in Japan, and in China, second quarter revenues reflect the first full quarter of an RDL renewal pricing following re-enlistment this March. Following the ASCO Plenary presentation of ADAURA overall survival data last month, we expect expanded use of Tagrisso in the adjuvant setting, as well as potential for new reimbursements in certain geographies.

Lastly, as we consider the future impact from IRA, our current interpretation of CMS final guidance supports the potential exclusion for Tagrisso under orphan drug protections. Lynparza remains the leading PARP inhibitor globally delivered second quarter product sales growth of 9%. In the U.S., we saw sequential demand decline across the PARP inhibitor class, following competitor label restrictions in second-line ovarian cancer. We continue to work on opportunities for U.S. demand expansion in ovarian and HR-positive breast cancer, but still expect this to be more challenging. Outside of the U.S., we saw double-digit product sales growth across the EU, established rest of world and emerging markets. In Q2, Imfinzi total revenues, inclusive of Imjudo, surpassed $1 billion in a quarter for the first time, up 58% and largely driven by new launches of TOPAZ, HIMALAYA, and POSEIDON.

I'll touch on specific Imfinzi growth drivers a bit later, but needless to say, we're excited by what the team has accomplished within a competitive IO class. Calquence total revenues increased 34% year-on-year, supported by ex-U.S. demand growth, particularly in Europe. In the U.S., Calquence continues to maintain leadership in frontline CLL, with the majority of new patient starts in this setting. However, we continue to see some new patient share loss in the relapsed-refractory setting. In HER2, total revenues of $322 million in the second quarter increased 176% year-on-year. In the U.S., in HER2, new patient share in the HER2-positive metastatic breast cancer setting remains at 50%, and in the hormone receptor-positive, HER2-low post-chemo metastatic breast cancer share is now grown to above 50%.

Importantly, we're seeing strong continued demand across the globe, particularly in European markets. Following the exciting approval for DESTINY-Breast03 in China last quarter, we received approval for in HER2 and HER2-low metastatic breast cancer. During the period, we received approval for PROPEL in the U.S. and anticipate a potential regulatory milestone to be paid in the second half of the year. Finally, we were granted priority review in the U.S. for CAPItello-291. Next slide, please. We've seen remarkable Imfinzi and Imjudo growth, driven by the recent launches of TOPAZ, HIMALAYA, and POSEIDON. We're excited about the current trajectory of these launches and the broader potential of Imfinzi, as supported by the suite of ongoing lifecycle management programs. First, HIMALAYA and unresectable hepatocellular carcinoma has established a clear foothold for Imfinzi and GI cancers.

Last month, at ESMO World GI, we presented unprecedented 4-year overall survival data, the longest follow-up to date in unresectable HCC. This sustained benefit, coupled with strong safety, will continue to support rapid adoption and the establishment of a new standard of care. The launch of TOPAZ represents a step-change innovation in biliary tract cancer, and the strength of this data demonstrates the transformative benefit of IO in this setting. In the U.S., TOPAZ has become the undisputed standard of care within months, and the EU and Japan launches are already outpacing the U.S. trajectory. We're making progress with POSEIDON in the U.S. and in Europe, with a crowded and competitive setting. This launch, together with our efforts with PACIFIC and CASPIAN, continue to solidify a strong leadership position within lung cancer.

In the first half of this year, we delivered four positive Phase III trials of novel Imfinzi combinations across lung, GI, and GYN settings. MATTERHORN in gastric and gastroesophageal junction cancer was the first global Phase III trial of IO plus FLOT to demonstrate statistically significant pathologic complete response. In Endometrial cancer, we are excited to report that DUO-E showed Imfinzi plus Lynparza and Imfinzi alone, significantly improved progression-free survival, and Susan will cover these trials in more detail shortly. Over the balance of the year, we look forward to additional Phase III readouts with PACIFIC-2 in lung cancer and EMERALD-1 in GI. Building on HIMALAYA, EMERALD-1 and EMERALD-2 will enable our leadership in HCC. Finally, we'll continue to advance our next wave of IO with our novel bispecifics, volrustomig, rilvegostomig, and sabestomig.

With that, please advance to the next slide, and I'll hand over to Susan to cover key R&D highlights in the quarter.

Susan Galbraith (EVP of Oncology R&D)

Thank you, Dave. Next slide, please. It's been an exciting first half of the year, with eight positive pivotal trial readouts. We had a large presence at ASCO, with more than 130 abstracts featuring 22 approved and potential medicines, highlighting the momentum of our pipeline. ASCO highlights included the final overall survival data from the Tagrisso ADAURA trial, demonstrating unprecedented survival in early-stage EGFR mutated lung cancer, as well as the first data from the DUO-O trial, highlighting the potential of PARP inhibition plus immunotherapy in advanced ovarian cancer. Additionally, interim data from the DESTINY-PanTumor02 trial found Enhertu to be the first therapy to show broad activity across a range of HER2-expressing advanced solid tumors.

Since ASCO, updated data showed Enhertu resulted in clinically meaningful progression-free survival and overall survival, and I'm pleased to share that our initial interactions with the FDA have been encouraging. As mentioned previously, we reported high-level results for 8 pivotal trials this quarter. I'll touch on 3 of those readouts now. First, FLAURA2 demonstrated a strong, clinically meaningful improvement in progression-free survival for patients with EGFR mutated non-small cell lung cancer. Considering the EGFR mutated lung cancer landscape as a whole, we believe Tagrisso monotherapy will remain standard of care in first line, but see the opportunity for FLAURA2 to become a valuable regimen for patients with higher tumor burden. We're delighted that these data have been selected for a presidential plenary pre-presentation at the World Conference on Lung Cancer in September.

DUO-E is the first Phase III trial of immunotherapy plus PARP inhibition to demonstrate clinical benefit in advanced endometrial cancer. More than 400,000 patients are diagnosed with endometrial cancer each year, and in advanced disease, survival remains poor, with only one in five patients living beyond five years. In DUO-E, both Imfinzi plus Lynparza and Imfinzi alone significantly improved progression-free survival when added to chemotherapy, with the greatest clinically meaningful benefit observed with the combination of Imfinzi and Lynparza as maintenance treatment. Finally, over 1 million patients are diagnosed with gastric cancer each year, 45% of whom are eligible for perioperative chemotherapy. An early read from MATTERHORN demonstrated a statistically significant and clinically meaningful improvement with Imfinzi plus FALT versus FALT chemotherapy alone in the key secondary endpoint of pathologic complete response, which we hope to see translate into an improvement in event-free survival over time.

Please advance to the next slide. We recently announced positive high-level results from the first Phase III trial for Dato-DXd, the TROPION-Lung01 trial. This trial investigated Dato-DXd versus docetaxel in second and third-line non-small cell lung cancer, demonstrated a statistically significant improvement in progression-free survival and an early trend in overall survival. The adverse event profile of Dato-DXd was overall consistent with previous trials, including great rates of all grade ILD. Whilst there were some cases of grade five ILD observed in the trial, we are confident in the positive benefit risk profile for Dato-DXd. These data reinforce our view that Dato-DXd will be an important potential medicine in multiple cancers, including lung cancer. Initial interactions with the FDA have been encouraging, and we are proceeding to file TROPION-Lung01.

In addition to TROPION-Lung01, we have three active Phase III trials in the front-line setting, investigating Dato-DXd in combination with immune checkpoint inhibitors: TROPION-Lung07, 08, and AVANZAR. Outcomes in this setting remain poor. Less than half of patients treated with initial IO plus chemotherapy living past two years. Combination Dato-DXd plus IO has already demonstrated encouraging clinical efficacy in the TROPION-Lung02 trial, with durable objective response rates of 50% for Dato-DXd plus pembrolizumab, and 57% for the Dato-DXd plus pembrolizumab and platinum-based chemotherapy across first-line patients. We will have further data to support the combination in lung cancer from TROPION-Lung04, which is a late-breaking abstract at the World Conference on Lung Cancer. The combination has also shown benefit in breast cancer with Begonia, where we saw a 91% disease control rate with durable responses in first-line triple-negative breast cancer.

These results support stronger benefit of the combination of Dato-DXd and immune checkpoint inhibition. Moving now on to breast cancer. Our first Phase III trial is due to read out later this year. TROPION-Breast01 investigates Dato-DXd versus chemotherapy in patients with hormone receptor-positive, HER2-negative metastatic breast cancer, that have received at least one prior line of chemotherapy. Our confidence in this trial is twofold. First, we saw encouraging signals from the HR-positive cohort of TROPION-PanTumor01, with a disease control rate of 85% and a median PFS of 8.3 months in a more heavily pretreated population compared with TB01. Second, we already have proof of concept for TROPION-directed treatment in this space, with Phase III data for another compound demonstrating efficacy in a late-line HR-positive population. We also have two Phase IIIs focused on triple-negative breast cancer.

TROPION-Breast02 investigates whether Dato-DXd can replace chemotherapy in first-line patients not eligible for PD1 or PDL1 inhibition. TROPION-Breast03 investigates the role of adjuvant Dato-DXd, with or without Imfinzi, in early triple-negative disease. We are on track to deliver on the promise of Dato-DXd in lung and breast cancer, and TROPION-PanTumor01 and TROPION-PanTumor03 are generating the data needed to support further investments in the future. With that, please advance to the next slide, and I'll pass over to Ruud to cover biopharmaceuticals performance.

Ruud Dobber (EVP of BioPharmaceuticals Business)

Thank you, Susan. Next slide, please. Biopharmaceuticals delivered total revenue of $9.1 billion in the first half, with both CRRM and RNI posting double-digit growth. Within global CRRM, Farxiga total revenue grew 41% to $1.5 billion in the quarter, driven by continued uptake in CKD and heart failure. Farxiga is now approved in 62 countries for patients with heart failure, which preserved ejection fraction. This quarter, we were pleased to gain approval in the United States for DELIVER, which means heart failure patients can now benefit from Farxiga, regardless of the left ventricular ejection fraction status. Fasenra, Breztri, Tezspire, and Saphnelo continued their strong momentum, delivering combined growth of 48% in the first half. These brands are becoming a larger driver of our overall performance.

In the second quarter, these brands made up 46% of our RNI total revenue, up from 36% in the first quarter. Next year, we will add another innovative medicine to our portfolio with the launch of Airsupra in 2024. In the second quarter, Fasenra grew 16% to $406 million, driven by strong demand in the U.S. and Europe, as well as some favorable inventory movements in the quarter. We recently filed Fasenra for its first approval in China, following positive high-level results from the Miracle trial. Tezspire delivered $81 million in total revenue in the second quarter, up from just $13 million last year. When we look at the combined global sales by AstraZeneca and our partner Amgen, Tezspire reached $257 million in the half, an impressive achievement in only one year since launch.

Tezspire is now available in 11 markets and has enjoyed notable early success in the U.S., Japan, and Germany, with more European launches to come later this year. Symbicort total revenue in the second quarter remains stable. We still anticipate the entry of generic competition in the United States in the back half of the year. In VNI, we saw the first product sales for Beyfortus, which is now approved in the United States, following a unanimous vote by the FDA Antimicrobial Drugs Advisory Committee, supporting Beyfortus benefit risk profile. AstraZeneca manufactures Beyfortus and then supplies product to Sanofi for distribution, and we record our sales to Sanofi as product sales. We've also booked alliance revenue earned on Sanofi's Beyfortus sales outside the U.S., where we share profits with Sanofi.

We're looking to make Beyfortus available to protect infants in the U.S. and Europe ahead of the 2023 RSV season. Next slide, please. The continued growth of Farxiga is the result of a decade-long development plan to broaden its use from diabetes to chronic kidney disease and heart failure patients. Our pioneering research has led to Farxiga becoming the leading medicine in its class, bringing its mortality benefits to millions of patients globally. We see further opportunities to come for the DAPA molecule and other combination therapies, giving us the potential to address additional unmet needs among cardiorenal patients and other indications. Our Farxiga combinations remain on track, with plans for Phase III decisions later this year. With that, please advance to the next slide, and I will hand over to Mene.

Mene Pangalos (EVP of BioPharmaceuticals R&D)

Thanks, Ruud. This slide and, yeah, we're on the right slide. This slide outlines our participation at recent medical congresses, where we've showcased data for tozorakimab, our anti-R33 monoclonal antibody. We also highlighted the importance of real world data and patient outcomes across RNI and CVRM. Firstly, at the American Thoracic Society Congress, lung tissue samples taken from patients with COVID-19 were stained and analyzed. The images I'm showing you here show localization of higher levels of R 33 in the airway tissues, providing further scientific rationale for targeting R 33 in severe viral infections in our Phase III Tilia trial. Also at ATS, real world data highlighted the importance of prompt intervention with Breztri.

Initiating treatment within 30 days following a moderate or severe COPD exacerbation decreased the risk of future exacerbations by 24%, versus delaying treatment by 6 months, and by 34% versus delaying treatment six months to one year. At the European Renal Association, we presented real world evidence underscoring the importance of early diagnosis of CKD. Multinational study reveal CKD demonstrated that 85%-95% of Stage 3 CKD remains undiagnosed. Data also showed that delaying diagnosis by just one year resulted in increased risk of deterioration, kidney transplant, or long-term dialysis treatment. The ZORA study supported continued concomitant use of potassium binders in RAS patients who experience hyperkalemia. In response, we've already seen updates to a number of CKD and heart failure treatment guidelines. Please advance to the next slide.

I wanted to also take the opportunity to highlight the broad modalities and technologies we now have in our armory. Over the past decade, we have built these capabilities to provide our scientists with access to the most relevant biological pathways and targets. As you can see, these are starting to mature and gain momentum. We have a portfolio of antisense oligonucleotides across amyloidosis, NASH, and CKD in clinical development. These are precision medicine approaches that target the underlying biology of the disease in specific patient subpopulations. For example, our PNPLA3, AZD2693, dosed in Phase IIb in NASH this quarter, following promising Phase I data, which showed a steatosis reduction and positive gene knockdown at 12 weeks. In advanced biologics, AZD8630 is a human anti-TSLP fragment antibody formulated for inhaled dry powder delivery.

AZD836, 8630 is currently in Phase I in patients with poorly controlled asthma, with data expected later this year. Later this year, we're expecting data from our NGF-TNA bispecific monoclonal antibody, currently in Phase II for the treatment of OA pain and neuropathic pain. In autoimmune disease, we recently announced a collaboration with Quell Therapeutics to develop engineered TREG-based cell therapies for autoimmune. Combined with our own expertise in this space, we can accelerate the development of this novel therapeutic approach with the potential to be curative in type 1 diabetes and in inflammatory bowel disease. With the acquisition of Alexion, our gene therapy ambitions have also accelerated significantly. Utilizing our proprietary CRISPR gene editing platform to address challenging rare diseases, we're together building an approach we hope will offer better safety margins.

We're also working with Alexion teams to optimize the therapeutic window through the use of novel tissue-directed capsids and tissue-specific promoters. The possibility of curative treatment for rare genetic disease becomes achievable when combined with the Alexion rare disease expertise. With that, I will now hand over to Marc, who will cover the rare disease genomic strategy in more detail, along with rare disease highlights in the period. Please advance to the next slide.

Marc Dunoyer (CEO)

Thank you, Mene. Can I see the next slide? In the first half, rare disease total revenue grew 12%, contributing $3.8 billion. Growth in the period was driven by increased demand and benefited from timing of tender market orders, slightly offset by the one-time pricing adjustment in the international region, recognized in the second quarter of last year. Across the portfolio, our global patient numbers continue to grow. Notably, this is the first quarter Ultomiris patients exceeded those of Soliris. Ultomiris grew 60% in the second quarter, driven by continued naive patient growth in generalized myasthenia gravis, new market launches, and successful conversion from Soliris across the shared indications. As a consequence of this dynamic, Soliris declined 19%. Though I'm excited by our performance, as I mentioned in the first quarter, we expect some headwinds in the second half of the year.

These include pricing pressure related to renegotiation as Ultomiris launches in larger neurological indications and potential for Soliris biosimilar entry in Europe. As a reminder, we benefited from tender market order timing in the second half of last year. Timing of these orders are variable throughout the course of the year, impacting growth versus prior periods. Beyond C5, both Strensiq and Koselugo grew 25% and 30%, respectively, reflecting underlying patient demand and expansion into new markets. Please advance to the next slide. During the quarter, Alexion 2220 Phase I data were presented at the European Society of Cardiology in patients with transthyretin amyloid cardiomyopathy. As a reminder, ATTR-CM is a progressive and fatal disease caused by misfolding transthyretin depositing in heart tissue. The safety and pharmacokinetic profiles of Alexion 2220 were assessed, and cardiac imaging studies were performed.

As shown, the images detail a remarkable reduction in cardiac amyloid deposition over 4 and 12 months. These observations were supported by change in level of cardiac biomarkers as well as functional measures. Alexion 2220 is the first and only medicine to clear amyloid deposition, and it has the potential to reverse the course of disease, both as a complementary therapy with other modalities, but also as a monotherapy. We are excited by this Phase Ib data, and as previously shared, we plan to initiate a Phase III trial later this year. Across AstraZeneca and Alexion, we are looking to transform the care of transthyretin amyloidosis through multiple therapeutic modalities. Our broader amyloids portfolio includes silencer, eplontersen, and stabilizer acoramidis, for which we have rights in Japan.

Recently, positive 30 months Phase III data for Akoramidis, which demonstrated a 50% relative risk reduction in cardiovascular-related hospitalization, building confidence in the medicine ability to stabilize disease progression. We have ongoing Phase III trials in the CM. We believe this portfolio of medicine with differentiating mechanism of action, will address the full spectrum of disease severity. Next slide, please. As you may have seen, we have done a series of small to medium-sized business development deals, expanding our technologies and platform in research. I wanted to take the opportunity to highlight some of these and affirm our long-term ambition to be an industry leader in genomic medicines. Approximately 80% of rare diseases are genetic, driven by inherited or acquired gene mutations.

By leveraging AstraZeneca technologies in nonviral delivery systems and nucleases, such as CRISPR, LogicBio, GeneRide, and Savvy platforms, GCR, G-brand cargo for delivery to the central system or CNS, as well as our own proprietary platforms, we aim to address a number of genetic diseases across liver, kidney, heart and muscle, and CNS. The agreement announced this morning to acquire a portfolio of gene therapy program for rare disease from Pfizer accelerates our time frame to bring this potentially transformative and curative treatment to patients. We look forward to welcoming Pfizer employees, who have been driving this program forward, increasing our gene therapy team to over 80 specialists. Together with all my colleagues at Alexion, we are excited to continue our work developing enhanced platform and technologies, leveraging the expertise across a larger group to deliver life-changing medicines to patients, where they are limited or no long-term treatment option.

With that, please advance to next slide, and then we'll hand over the call to Pascal for closing remarks.

Pascal Soriot (CEO)

Thank you, Marc. Next slide, please. Before I make my concluding remarks, I would like to take a minute to recognize the important steps we're taking to tackle the climate crisis. In particular, our Ambition Zero Carbon program is on track, and we have made significant steps toward achieving our science-based targets. Firstly, we announced our partnership with Vanguard Renewables, allowing us to deliver renewable natural gas, a source of clean heat, to all our U.S. sites, manufacturing and R&D sites, by the end of 2026. We also significantly expanded our EASi-PROTKT program with a commitment of $100 million to plant and maintain 200 million trees across 6 continents by 2030. The expanded program will sequester carbon, support biodiversity, and deliver benefits to local communities, positively impacting an estimated 80,000 livelihoods.

Lastly, our transition plan is verified by the Science-Based Targets Initiative, which focuses on deep decarbonization, allowing for only 10% residual emissions removals by 2045. Scope three remains to be our largest challenge. We are committed to partnering with our suppliers. Last week, private sector members of the SMI's Health System Task Force, which I convene, sent an open letter calling on suppliers to commit to joint minimal climate and sustainability targets that contribute to decarbonizing the healthcare value chain. We're playing a leading role in this space, doing our part to limit the impacts on climate change, while unlocking opportunities to deliver a more sustainable healthcare system. Please move to next slide.

We have an exciting second half of the year ahead with a number of important pivotal trial readouts, including two trials in breast cancer, TROPION-Breast01 and CAPItello-291. We also have two trials of Imfinzi in non-small cell lung cancer, HCC. We have a trial with Fasenra in EGPA, as well as the first results of our next generation COVID-19 antibody, AZD3152. We also have a rich catalyst path in 2024, which, given current event prediction rates, will now include DESTINY-Breast06 and lower results, from both of which are now expected in the first half of 2024.

The progress that we are making in our pipeline overall is inspiring, and I'm excited for when we have the opportunity to share data, to share the full data from the many studies we have showcased during this call at upcoming medical congresses. Please advance to the next slide. Finally, before we turn to Q&A, earlier today, we announced that Mene Pangalos will retire after almost 14 years with the company and a great 35-year career. Mene will be succeeded by Sharon Barr, currently Head of Research and Product Development at Alexion. When Alexion joined AstraZeneca two years ago, our key priority was ensuring that our shared organization would benefit from the world-class talent that Alexion brings. From day one, Sharon stood out as an exceptional scientific leader.

Sharon brings tremendous experience that will prove essential to advancing our biopharmaceutical pipeline, along with a strong track record for driving productivity and fostering innovation. This experience, coupled with her leadership style and passion for developing people, places her perfectly to take over the reins from Mene and help us to write the next chapter of success. Over the coming months, Mene and Sharon will complete an extensive handover, supporting a smooth transition of responsibility and ensuring there are no delays to the advancements of projects. Brings me to Mene, someone who's always quick to praise others, but must take credit himself for all he has done to transform how we approach R&D, delivering a greater than fivefold improvement in productivity, driving deeper collaborations with academic, biotech, and peer organizations, pioneering programs to promote open innovation, and championing the use of new technologies and modality.

Last but not least, leading up, contribution to the U.K. life sciences sector, and in particular, building our very important presence in Cambridge in the U.K. Mene, thank you for your contribution to our company, and I wish you only the best in your retirement. Personally, I will miss your wonderful sense of humor and your intellectual wit, but the quality of the medicines you brought to patients and the pipeline and capabilities you built will be your legacy for many years to come. With that, I will hand the call back to Andy for our Q&A session.

Andy Barnett (Head of Investor Relations)

We will now go to the Q&A with, with all of our executive members participating shown here. As a reminder, you can raise your hand on Zoom or type your questions in via the Q&A button. We'll try and answer as many questions as we can during the call, but please do limit the number of questions you ask to allow others a fair chance to participate in the Q&A. With that, we'll move to the first question.

Pascal Soriot (CEO)

Okay. Sachin Jain, Bank of America. Over to you, Sachin.

Sachin Jain (Senior Analyst)

Thanks for taking the questions. Sachin Jain of Bank of America. Two topics. Firstly, Dato in first-line lung, if I may. Part of the reaction to TROPION-Lung01 was investor fading confidence in first-line on both efficacy and safety. I wonder if you could touch on that. Could you remind us how you interpret the eight months of PFS we saw from TROPION-Lung02 at ASCO, just with the comparator Keynote One in nine months? If, Susan, you could frame expectations of what our focus should be into TROPION-Lung04, that you flagged at World Lung. The second question is on breast cancer. A lot of need for lung breast cancer in the next 12 months. We've been particularly vocal, but I wonder if you could just touch on two reads.

Firstly, TBO 1, which you talked about, but the potential for that to be better than TROPION-Breast02. You noted the 8-month PFS. Are you confident that can repeat and better the Trodelvy 5.5 months? Secondly, you didn't mention DB 9, but you've pulled that forward into 2024. Again, just talk to the confidence you've got there. Prior data suggests potential for double the PFS, comparator of [Foreign Language]. Thank you.

Pascal Soriot (CEO)

Thanks, Sachin. These are questions for you, Susan.

Susan Galbraith (EVP of Oncology R&D)

Okay. Thanks for the questions, Sachin. Let's start with Dato in first-line lung. First of all, I would just say that, you know, given that TLO 1 is a positive study, there are things that we can learn from that. The first-line lung studies are ongoing, and obviously got TROPION-Lung07, 08, and Avanzar, which are complementary trials in first line, predominantly in patients without genomic alterations versus the respective standard of care. Avanzar is investigating patients regardless of PDL-1 status or tumor histology. They are complementary segments of first-line lung.

What I would say is that we've, we've now treated across all of these studies, together with TROPION-Lung02 and TROPION-Lung04, for over 200 patients on the Dato-DXd plus immune checkpoint inhibitor combination, and we're comfortable with the safety profile that we've seen across that patient population. I think it's important to, to just remember that from an ILD perspective, we know that some tumor types have a higher risk of ILD than others, and that later-line patients who've had multiple prior lines of chemotherapy are at higher risk of ILD. I think it's important that that ongoing safety profile in first-line lung is underpinning our confidence there.

When you look at TROPION-Lung02 data that you highlighted, we're encouraged both by the response rate and the durability of response that we've seen from TROPION-Lung02 for both the combination with the doublet of Dato-DXd plus pembro, and also the triplet when platinum-based chemotherapy is added. What you'll see in TROPION-Lung04 is that's a Phase Ib study that also looks at the combination of Dato plus immune checkpoint inhibition in lung cancer. It's, it's an additional data set to TROPION-Lung02. Again, we're happy to talk to you after the data presented at, at World Conference on Lung Cancer. For breast cancer, you asked two questions. One is about TROPION-Breast01.

Again, the confidence in TROPION-Breast01 is based on the data that we've seen, that you've, you've already highlighted and that you've already mentioned. I mean, you know, I'll just say that for the design of Dato-DXd, we think is a best-in-class ADC. It's got a, a excellent stable linker and a proven warhead already. So when we look across cross-trial comparisons with all the caveats that those have, we've seen numerically higher response rates across a number of different settings, and that really underpins our potential to have better efficacy, you know, and have a best-in-class profile in that setting. Obviously, we have to wait for the actual readout of the, of, of the trial.

For DESTINY-Breast09, I think, actually the, the readout time is not hugely shifted here. Obviously, all of the Enhertu trials are recruiting rapidly, and that helps with the, the timelines, these are also event-driven trials that we look for the, for the outcome. I don't think there's anything more than that to interpret in the shift in the timelines. I hope that addresses all your questions.

Pascal Soriot (CEO)

Thanks, Susan. Tim Anderson, go ahead, Tim.

Tim Anderson (Equity Research Analyst)

Great. Thank you. Just staying on the topic of Dato-DXd, in the, in the light of what TROPION-Lung01 has shown, I, I know you guys say you're enthusiastic about the program. Is your enthusiasm, you know, less or tempered at all by how TLO1 read out? Because the benefit, I mean, you guys pretty much said is modest, so I'm wondering if that does kind of temper your expectations for that program overall and what that can deliver in other tumor types or even in, you know, other settings for lung cancer. A second question: where are you with the retrospective biomarker analysis of TLO1? Is there anything you can say yet, looking at results by TROP2 expression levels?

Susan Galbraith (EVP of Oncology R&D)

Okay. Thank you, Tim. Let me just reiterate that we're confident in the data that we've seen for TROPION-Lung-01. As we've shared already, we've had initial conversations with the FDA, which have been encouraging, and we're moving to file. We're looking forward to sharing the full data, which I think will be helpful for everybody, at an upcoming conference, that will obviously provide a more complete picture. We're, we're confident that the data that we've seen really, really enforces that Dato-DXd is going to be an important potential medicine in multiple cancer types, but also including in lung cancer. In terms of the biomarker analysis, work is, as you say, ongoing, and obviously, you know, one important source of data is gonna be the TROPION-Lung-01 dataset.

I look forward to updating you with data once we've had the chance to complete that analysis.

Pascal Soriot (CEO)

Excellent. The next question is from Andrew Baum at Citi.

Andrew Baum (Head of Global Healthcare and Managing Director Equity Research)

Thank you. Two questions. One for Susan and one for Marc. You've filed, or you plan to file the TROPION-Lung01 data with the FDA. Can I ask which population? Presumably, given you've got modest PFS, the OS isn't mature, one would imagine there's a subgroup in the 2nd line that is persuasive or 3rd line for the FDA. Could you just comment on which indication you are thinking, which population, is it 3rd line, 2nd line, histology? I ask knowing the likely response, but I'm interested anyway.

Second, to Marc, in relation to your amyloid monoclonal, where we share your enthusiasm, when we think about the outcome trial, are you gonna mirror that conducted by BridgeBio with a sort of embedded six-minute walk as well as an outcome for mortality, for morbid mortality? Or do you think you can get it approved solely on six-minute walk in order to expedite the time to market?

Pascal Soriot (CEO)

Susan, you want to start?

Susan Galbraith (EVP of Oncology R&D)

Yeah, sure. Thanks for the question, Andrew. You know, obviously in the, in the top line results, we've not specified performance by patient subset. That's, that's entirely in line with our normal practice. TLO1 was stratified by the most immediate prior therapy, including anti-PDL1 or PD-1 immunotherapy, geographical region, and histology, squamous versus non-squamous. It did include patients with actionable genomic alterations, but that was a later protocol amendment, and it's a minority of the patients that are included. I can't really comment on ongoing dialogue with the FDA at this point.

Pascal Soriot (CEO)

Maybe the, the one thing that we could add here is that Andrew, from what we've seen, we think this agent is gonna be useful in a large population of lung cancer patients. Marc, you want to cover the second question?

Marc Dunoyer (CEO)

Yes. Thank you, Andrew, for your interest in 20:20. We are planning this Phase III, and we are in ongoing discussion with the FDA to confirm the protocol. You ask a very precise question on whether we were going to include the six-minute walking test in our endpoints, and the answer is no. We are probably going to go to finalize the endpoints on mortality and cardiovascular morbidity, possibly with the addition of a third-tier endpoint, but it won't include six-minute walking distance.

Pascal Soriot (CEO)

Thank you, Marc.

Andrew Baum (Head of Global Healthcare and Managing Director Equity Research)

Thanks.

Pascal Soriot (CEO)

Marc Purcell, Morgan Stanley. Marc, go ahead.

Marc Purcell (Managing Director and Head of European Pharmaceuticals Equity Research)

Thanks very much, Pascal. A couple of questions. Firstly, on Calquence and one for Dave. Dave, could you help us understand the cell split for Calquence and for the BTK market in CLL between first line and second line straight refractory patients? If you can help us on the second line side to understand the sort of share dynamics there, that could be really useful. Secondly, on the TROPION-Breast01 market opportunity, obviously a large number of patients, I guess, in the just the third line setting, around 85,000 patients in the G8. Could you help us understand how this fits with within HER2 and the HER2-low setting as well? Trying to think about the market opportunity before we get the data themselves.

Lastly, for Susan, just to follow on to all the TROP2 testing questions, could you help us understand, going forward, the importance of TROP2 testing for TROP2 ADCs? From a regulatory standpoint, the acceptance of retrospective data on TROP2 expression and the, and the potential to incorporate TROP2 testing into trials which have recently started, such as TL07 and TL08. Thank you very much.

Pascal Soriot (CEO)

Dave, you're on.

Dave Fredrickson (EVP of Oncology Business)

Yeah. Thank you, Marc, for the question. Starting first with your Calquence question. In terms of just the overall new patient starts within the BTKI class, we see about half of new patient starts of total BTKI starts are happening in CLL in the front line, and then you have about half of those starts that are happening in the relapse refractory setting. Then you can split that half in the relapse refractory setting into about half of those, so 25% are in patients who are naive, and the other balance of that is in patients that have been pretreated with BTKI. That gives you a general sense for how the class splits out. In terms of our share of those classes, I've been very pleased with the U.S. performance in the second quarter.

As we've seen in the front line setting, our share position has held strong as we've seen the entrance of new competition within the class. In the second line setting, as I mentioned in my prepared remarks, we have seen erosion of our share in that relapse refractory setting, particularly within the naive. We remain, as we see it, still the leaders within this space. That said, it is a pretty tight share split among the three players as we see it within that space. In terms of now switching to the commercial opportunity for TROPION-Breast01, I think that maybe the primary thing that I'd lay out here is that I think what we're really seeking on this is category leadership within breast cancer.

I think that, as you quite rightly point out, across the G7 countries, there are a large number, you know, over 35,000 fourth line and beyond patients treated across the G7 in hormone receptor-positive and HER2-negative disease. I think that what we'll really be looking to do is understanding how patient selection and sequencing can create opportunities both for in HER2 as well as for Dato DX. I think that an important part of the approach that we're taking is to try to have an AstraZeneca medicine that is appropriate for patients with various different subtypes and also in various different sequence over time. I think that I would look at the opportunity to replace chemotherapy across late-line breast cancer as a category, is how we're thinking about the portfolio of medicines.

Susan Galbraith (EVP of Oncology R&D)

To answer the question about biomarker development for, for Dato-DXd. In principle, antibody drug conjugates are targeted medicines. I think as a general principle, we want biomarkers to identify the right patients for targeted medicines, you know, across that, that, across that class. As we've indicated, we are in working on a biomarker for the TROP2 program. We will use the data that we've got from TL01 to help with that effort, and we can update you on that once, once those analyses are completed.

I think, you know, your comment about retrospective versus prospective, you know, obviously, in an ideal world, you want prospective selection in order to make sure that you've, you've got a balance and, and you often stratify for, for that presence in, in, in such trials. There are multiple examples of where retrospective analysis, based on a prospective definition of that, have enabled an approval in that setting.

Pascal Soriot (CEO)

Thank you, Susan. The next question is from, Gonzalo Artiach at ABG. Go ahead, Gonzalo.

Gonzalo Artiach (Analyst)

Is that okay?

Pascal Soriot (CEO)

Yeah, we can hear you. Go ahead. We can't hear you. let's move to the next-

Gonzalo Artiach (Analyst)

Yes. Now can you hear me?

Pascal Soriot (CEO)

Oh, yeah, Gonzalo, go ahead. We can hear you now.

Gonzalo Artiach (Analyst)

Oh, great, great. First one, it's regarding your yesterday, yesterday's news on DESTINY-PanTumor02. With the data presented yesterday on improved PFS and OS, in line with what, what you showed at ASCO, how much does this help for a potential tumor agnostic approval? Here, what is your view on, on this debate of the use of HER2 grades or, or different expression levels as a biomarker for potential treatment approach? Specifically in PiGRAS, where did you – you didn't see any major improvements in terms of, of ORR, but could you share anything on how does these new parameters, PFS and OS, look like? Thank you.

Susan Galbraith (EVP of Oncology R&D)

Okay, thank you for the question. As we shared at ASCO, what we've seen with Enhertu in the PanTumor02 study is impressive response rate and durability of response across multiple tumor types, particularly impressive in the gynecologic cancers, endometrial cancer, ovarian, and cervical, but also encouraging data across multiple other tumors. Of course, what we saw in that study was an enhanced response rate in the IHC 3+, compared with the IHC 2+ populations. It's important just to remember that there's a mixed nature in this trial. You've got multiple different tumor types with different lines of therapy, but generally, heavily pre-treated patient population.

What you saw there was a response rate, durability response, which is beyond what you would reasonably expect, and certainly in the IHC 3+ population for a standard of care chemotherapy in that, in that setting. I think it's encouraging now that we've got the progression-free survival and overall survival to back up that response rate and durability of response. I do think there are differences in this setting between IHC 3+ and 2+, which is something that we've also seen in, in, in other settings as well. That, if, if you like, establishes the differentiation from the, from the standard of care. I also think it's true to say, though, that there are patients beyond the IHC 3+ that are clearly benefiting beyond what you might expect from that standard of care chemotherapy.

What I would say is that, you know, conversations with regulatory authorities, including the FDA, are ongoing. As I said, initial discussions are encouraging. You know, as those develop, we can provide more details.

Pascal Soriot (CEO)

Thanks, Susan. Next question is from, Richard Parks at Exane. Richard, over to you.

Richard Parkes (Equity Research Analyst)

Hi. Thanks, Pascal. Yeah, just a couple of questions. Firstly, just to push a little bit more on TLO1. Just to help me understand the difference in the level of optimism at the time of the press release and, and what you're communicating now. 'Cause as you'll know, the, the, the, your omission of the words clinically meaningful is what, what's caused nervousness. Clearly, given the decision to file and your optimism today, you do see the overall benefit as meaningful. Can you just help us understand a little better the context for that contradiction, somewhat, in the communication? Is it additional analysis you've done since the readout, or was there some other reason why you felt you couldn't include that wording in the press release? Second question, bit simpler.

Just could you update us on progress for volrustomig, to Phase III? I know we're waiting for the durability of response data, at the lower dose to be presented. I just wonder, will that be at ESMO or worldwide? Thank you.

Pascal Soriot (CEO)

Susan?

Susan Galbraith (EVP of Oncology R&D)

The definition of clinically meaningful, you know, in terms of what clinicians are looking for, will take into account, not only the difference in medians, but shape of the KM curves, obviously the hazard ratio, which is what the trial is often designed to power, together with the response rate, durability response, and the safety profile, as well as the patient population that's included. You know, I think what I would, I, I would just reiterate, really, is that when we look at the data and we find data in there that is encouraging, and we've had discussions with the FDA, and on the basis of encouraging response, we are proceeding to file.

I can't go into more details today, but we'd be happy to have more conversations when we've actually been, had the opportunity to present the data at an upcoming medical congress. With regards to your question on volrustomig, you know, that, the program is advancing at pace, and we have indicated that we've got a number of Phase III trials in planning. We're proceeding again, you know, at pace with those. As we initiate those and as we have more mature data, we will share those data, but not necessarily, you know, on the timelines that that, that you're asking for. You know, at the appropriate time, we will share the data in a public congress.

Pascal Soriot (CEO)

Thank you, Susan.

Richard Parkes (Equity Research Analyst)

Thank you.

Pascal Soriot (CEO)

I mean, Richard, just to add, I mean, our partner, Daiichi Sankyo, and us, actually, we have a policy of only disclosing the high-level results, as you know, and not the details. What you saw is the announcement relative to the high-level results. What we have seen is the detailed results, and that's probably also explained some of the discrepancies. You know, you'll understand better when you see the results at, at the, at a future congress.

Richard Parkes (Equity Research Analyst)

Thank you.

Pascal Soriot (CEO)

The next question is from Christopher Uhde at SEB.

Christopher Uhde (Senior Pharma & Biotech Equity Analyst)

Hi there, Christopher Uhde, SEB. I have a question on Supernova and the Covid antibody update in general. I, I saw that the timeline seems to be reiterated. You know, we're, we're moving toward the latter part of the half, not so much time to get it to patients before the end of the year. Perhaps, could you just remind us a little bit about the factors determining the time from top line to EUA? Can you also talk a little bit about how you're planning to brand it? It seems that it won't be Evusheld, but I guess that has advantages and disadvantages. Perhaps you could talk about that.

In terms of Fasenra, the growth levers going forward, and also thinking about, I saw GSK has an ultra extended half-life IL-five. What are your thoughts around competition? Thank you.

Pascal Soriot (CEO)

Thank you, Christopher. [Foreign Language], do you want to take the first one, and Ruud, do you take the next one?

Speaker 27

Thanks, Christopher. Thanks for the question, also thanks for your continuous interest in this area. We continue to rapidly advance AZD3152, which is a new long-acting monoclonal antibody for prevention and treatment of COVID-19 for immunocompromised patients. I'm pleased to say that SUPERNOVA trial is on track. As you are mentioning, we did update the trial, and that was as a result of the trial design, and that was a result of the consultations and agreement with the FDA, because we believe that is the fastest way how to achieve emergency approval for the patients in U.S. Currently, the trial is updated with the sub-study or immunobridging data.

As a reminder, this is a precedent study design and will allow us to have the data late later this year. Obviously, as we are moving from the beginning with at pace, we will do our best to deliver AZD3152 to the immunocompromised patients in U.S. by end of this year. Equally, we are continuing the SUPERNOVA trial with the efficacy endpoint, and we believe that efficacy data read out will happen in the first quarter of next year. That will allow us to have the approval globally outside of U.S. On your branding question, thanks, thanks for that. I do agree that not having Evusheld, a brand name for our new next generation monoclonal antibody, has its good and bad sides.

We are currently into the – in discussion, both with FDA and EMA. We will provide the update on the brand name, as soon as we get agreement from those agencies.

Ruud Dobber (EVP of BioPharmaceuticals Business)

Okay, thank you so much, Chris. Quickly, the growth drivers for Fasenra in the foreseeable future, there are three big ones. First of all, the by far the biggest one is still biopenetration, is at the low side for biologics in severe uncontrolled asthma. Depending on where you are, it's everything between 15% and 25%, so there's still a huge room to maneuver in a positive way. The second one, what I said in my remarks, is that China is an important growth driver. We have filed the – in China, based on the outstanding Miracle trial. Hopefully, next year, we will see the results.

Last but not least, later this year, we will see the outcome of Fasenra and eGPA, which is another very important growth driver for the brand. All in all, we truly believe that there's still a very bright future for Fasenra. Quickly, your remark about long-acting. Of course, we have our own Fasenra, with every two months, so we don't foresee a major impact of our molecules. The class is very competitive, but once again, biopenetration across the board is still at a very low level, so more competitors will also make, they'll grow the market in an acceptable and good way.

Pascal Soriot (CEO)

Thank you, Ruud. James Gordon, JPMorgan. James, over to you.

James Gordon (Executive Director and Senior Equity Analyst)

Hello, James Gordon, JPMorgan. Thanks for taking the questions. Firstly, a question on Dato, which would be: Is the plan to change anything on the back of the recent Dato update, what might you change? For instance, could you tweak any of the trials to involve patients which you think are going to show stronger efficacy in some sort of subpopulation? Is it TROP2, or is it something more sophisticated that you're actually looking at? I saw TROP2 expression was like a pillar on the slide, laying out the Dato program. Is it something else where you might end up stratifying?

Will you kick off any more Dato Phase III trials from now, or are you going to wait until you've got a bit more data from other trials to work out where the strongest efficacy is going to be generated? Just one other question, which is Imfinzi, it's a very strong growth today, is there anything one-off here that, that helped performance? Actually, if we put Dato aside, is Imfinzi and HER2 really going to be the two key growth drivers from now until the end of the decade? Can we really extrapolate the strong growth forward from Imfinzi today?

Pascal Soriot (CEO)

Susan.

Susan Galbraith (EVP of Oncology R&D)

In terms of Dato-DXd new trials, let me start with that one. Yes, we are continuing to plan new Phase III trials with Dato-DXd, you know, as we had indicated at the end of last year. We continue to be excited about the potential for this molecule in multiple different settings. In terms of the biomarker, TROP2 is highly expressed across many different tumor types, including lung cancer. I think in general, about ADCs and prediction of outcome, receptor expression is one element, receptor internalization is another element, and sensitivity to warhead is a third element. There are multiple elements to consider about predicting the patients that are most likely to respond.

Of course, we're looking at those different elements, in what we're working on from a biomarker perspective.

Dave Fredrickson (EVP of Oncology Business)

Thanks, Susan. James, on Imfinzi, I mean, I think the first thing I'd note is that we, we double-clicked into it, into the prepared remarks, because we think that the opportunity for Imfinzi going forward is an important one. We've made a series of investments into the life cycle plan and the clinical development plan for Imfinzi, and those now are paying off in terms of positive readouts, and we're commercially taking advantage of that. I think that to go a little bit more specifically, somewhere between 20% and 30% of the Imfinzi growth that we're seeing is coming from the established portfolio, so the PACIFIC and CASPIAN indications, where we're seeing strength in PACIFIC across the globe, as we kind of get further away from some of the COVID-19 challenges.

We're continuing to progress against CASPIAN and in parts of the globe where we have opportunities, but really, it's the new launches of TOPAZ, HIMALAYA and POSEIDON that are making up the balance of that. TOPAZ has rapidly gotten to a place in the markets where we've launched, where we have market share-

That's well north of 50%. I'd say HIMALAYA has had a nice uptake, but still quite a bit of opportunity to continue to move with HIMALAYA. It is a competitive context, it's one where we are certainly coming up against therapeutic alternatives, but we like the uptake that we've had. Maybe the last proof point just to offer on this, while with TOPAZ and HIMALAYA, we have regulatory approvals in over 50+ markets across the globe, we only now today have reimbursement in just around 10. They're 10 of the largest, so it's the U.S. and Japan, and we have early access that exists within France.

We still have a number of countries within Europe and a lot of countries within international, which yet to come on board, so we think the outlook for Imfinzi forward is strong.

Pascal Soriot (CEO)

Thank you, Dave. Emily Field, Barclays. Emily, go, go ahead.

Emily Field (Equity Research Analyst)

Hi. Thanks for taking my questions. I just have two. The first one, on Lynparza and maybe digging in a little bit more to the dynamics going on in ovarian. How much of sales is second-line ovarian? Just, you know, kind of we're aware of the registration being pulled for the competitor asset, but sort of why is this impact bleeding over into Lynparza? Do you expect to return to growth in the U.S. for this asset? Then just a question on the raised guidance for China. You know, I was just wondering, is this truly based on sort of improving demand in the region? You know, is this impacted in any way by some of the price adjustments that are happening with the product on the NRDL?

Just any incremental color you can give there. Thank you.

Pascal Soriot (CEO)

Dave, do you want to cover the first one, and Leon could cover the second one?

Dave Fredrickson (EVP of Oncology Business)

Yes. Emily, thanks for the question. First part of this is that if we take a look at PARP class starts across lines in ovarian cancer, over the course of the year, the starts are declining, and that is predominantly a phenomena of lower desire on the part of medical oncologists to treat in the second line setting in ovarian cancer, as there's been, as you know, I think, quite a lot of changes that have been happening there with respect to competitor labels and discussion and dialogue with the FDA. Within the context of that, we've been doing a good job to continue to drive our Paola and solo indications. Solo, we really have probably fully penetrated, though there is opportunity to continue to drive HRD testing rates in the front line.

Unfortunately, a bit of what's happening is, is that those gains are being offset by some of the second-line declines. Today, in terms of where we stand, the second line represents a significant minority of our ovarian cancer business, and so I'm hopeful that even with a narrower PROPEL label, that we have an opportunity to continue to drive growth in Lynparza with PROPEL and in some of the other populations that I've mentioned. It is going to be slower progress that we're making there. I will say outside of the United States and Europe, we're making nice progress with PROPEL within Germany. We're continuing to drive growth opportunities that we have in breast cancer, and also within ovarian cancer, ex-U.S.

I think that the growth rates that we'll see on Lynparza, while still in front of us, will be a bit slower. I do, though, look forward with optimism to hopefully having regulatory path forward with DUO-E. We'll see how things net with DUO-O, and those would certainly be enthusiastic areas for us to launch into.

Leon Wang (EVP and President)

Yeah. Regarding China guidance, I think China is this year we have some headwinds on Oncology price cuts because of NRDL renewal last year. Major Oncology products get a cut. Also Symbicort getting to VBP, which is a large product. Actually, we should also focus on a lot of opportunities because we're launching rare disease and also Enhertu in China, Calquence in China. Lots of new products are being launching. A little bit lagging behind the global speed pace, but I think we are looking forward to a lot of new launches. We haven't yet launching Imfinzi, TOPAZ, and also HIMALAYA.

We also have a launching strongly into ADAURA indication and FLAURA2. For inhalation business, Symbicort is a very strong growth, Breztri, after getting to NRDL 2nd year now, is also embracing very strong growth. Pulmicort, after last year's VBP, we digested, and this year we back to growth now. Farxiga is also one of our very major important growth driver, and together with Roxa and also all the other CVRM portfolio doing extremely well. I think in the next one or two years, three years, we are launching a lot of new indication and new products. A little bit behind the global, but also we also need digest the VBP impact and some price cut of NRDL.

Government in China is treating innovation better than before. I think this is also a very good sign for NRDL policy, some, some of the transparency and also bring quite a good policy.

Pascal Soriot (CEO)

Thank you, Leon. Viktor Sundberg, Nordea. Victor, over to you. Victor, we cannot hear you.

Viktor Sundberg (Associate Director and Healthcare Equity Research Analyst)

Yes, hope you can hear me now?

Pascal Soriot (CEO)

Yes, go ahead.

Viktor Sundberg (Associate Director and Healthcare Equity Research Analyst)

Yeah, sorry. I have two questions, if I may, and thank you for taking my questions. On the outlook for 2023, I just wanted to get a bit more details on the headwinds that keeps you from raising or refining the guidance. In China, you seem to be more optimistic, but the parameters going against you, that you mentioned here, seem to be quite well anticipated, perhaps in the beginning of the year. The Symbicort generic situation in the U.S. and the NRDL impact from China in the second half. Are there other things here as well, that keep you on the sideline here for a guidance update or refinement, that have surprised you a bit during the year? You mentioned inflation, so maybe a quick comment on that would be helpful.

A second question I have is on Imfinzi. Very strong growth across all geographies, as you said, but especially in your rest of the world category. Can you just elaborate a bit more what is driving that and how we should extrapolate in that geography, and why the uptake has been so quick here? Thanks.

Pascal Soriot (CEO)

Thanks, Viktor. Aradhana, do you want to take the first one and Dave, the second one?

Aradhana Sarin (CFO)

Yeah, sure. Thank you, Pascal. Thank you, Viktor, for the question. We are reiterating guidance for the year. And I think it's a bit of phasing and dynamics between first half and second half. In the second half, we are going to experience, as you just mentioned, and I mentioned before, the Symbicort generic in the U.S. Nexium, which went generic end of last year, we started to see the impact, and again, it's a progressive impact, so again, more in the later part of the year. And decline in, you know, various other legacy brands, Daroless. If you look at some of the other, you know, the brands that are in the other, the legacy category.

The trend that was mentioned by Dave around second line in PARP, and then the pricing impact that Leon mentioned on NRDL for Tagrisso, you know, a lot of that went into effect sort of in the second quarter. Again, we'll see the full impact of that in the second half. I made some comments around gross margins. FluMist is again, a product that does impact our gross margin, and that's again, more weighted towards the second half.

Really, you know, when, when you look at, both from a revenue and cost standpoint, in both SG&A as well as R&D, primarily driven by all the study starts, as well as the material that we'll need to produce from a clinical supply standpoint, a lot of that is weighted towards the second half in R&D costs. Again, it's more phasing than anything else, and we are reiterating our guidance for the full year. Then Dave, on Imfinzi, rest of word.

Dave Fredrickson (EVP of Oncology Business)

Yeah. Viktor, it stems back to the answer to the question that I gave previously to James. Established rest of world is made up predominantly of sales from Japan. I think that if you take a look at a lot of the other international markets, they sit within emerging markets. The success that you see in the quarter for Imfinzi and Imjudo is really driven by very rapid uptake that's been happening over the course of the half with TOPAZ-1, and then also within the last quarter, we've had reimbursement for Imjudo that's allowed us to be able to move forward with HIMALAYA.

Pascal Soriot (CEO)

Thank you, Dave. Steve Scala, do you want to go ahead, Steve?

Steve Scala (Pharmaceutical Analyst)

Thank you so much. two questions. First for Dave: In the third quarter of 2022, you said that Enhertu could be one of the largest medicines in Oncology. Are you willing to say the same for Dato-DXd, based on what you now know? Second, for Susan, does AstraZeneca plan to alter the study design of TROPION-Lung07 and08 based on the results of TLL, TROPION-Lung01? Thank you.

Dave Fredrickson (EVP of Oncology Business)

Thanks, Steve. I continue to believe that Enhertu has the opportunity to be one of the largest medicines, and certainly one of the most transformative, medicines in the treatment of, cancer. I will just come back to – we've talked a lot on Enhertu about three important pillars, and the PanTumor02 data, and Susan talked about that in greater depth earlier, really does begin to open up the opportunity to take Enhertu into, areas outside of breast, gastric, and lung cancer, and I think is really promising for that. With Dato, I would say, similarly, that, I confirm my enthusiasm for Dato's opportunity to be, potentially, as big, as Enhertu, and I think that it's going to be a important medicine.

Certainly also, relative to last quarter, having a positive Phase III readout reinforces confidence in the ability to be able to take a program forward, and I think that that's a big driver of it. I think that last thing, when we did the deal on Dato, we knew that there was a big opportunity to replace systemic chemotherapy in lung cancer and also in breast cancer. The real opportunity for Dato to be bigger than Enhertu, would be if we can take it into tumor types outside of those two areas. That's really what we look forward to seeing if we're able to effectively do.

Pascal Soriot (CEO)

Thank you, Dave. Just also will state the obvious, which is we have a lot more data points for Enhertu than we have for Dato. We need to keep this in mind, of course, the potential is indeed very large. Simon Baker. Simon, you-

Susan Galbraith (EVP of Oncology R&D)

There's a second question.

Pascal Soriot (CEO)

Oh, sorry, there was a second question. Sorry.

Susan Galbraith (EVP of Oncology R&D)

That, that didn't have me. Thanks for the question again. I think I said before, TROPION-Lung01, that expected that we were going to learn some things from the, from, from that trial, and indeed, there are learnings from TLO1, as you expect from any clinical trial, particularly the first pivotal trial. It's normal practice for drug development that as you go along and you learn, there are, there may be adaptations to, to trials, you know? I think that's just a normal, normal part of drug development. Look, we remain confident the data of the extremely important medicine in, in lung cancer, including in the first-line settings of the trials that are already ongoing.

Viktor Sundberg (Associate Director and Healthcare Equity Research Analyst)

Thank you.

Pascal Soriot (CEO)

Thanks, Susan. Simon, do you want to go ahead?

Simon Baker (Research Analyst)

Thank you, Pascal. Yeah, two questions, if I may, please. Firstly, on the Pfizer deal. You did allude to it on the slide a little bit, but I wonder if you could give us a bit more color on what you're buying. Is this more technology rather than specific products? You highlighted some of the capsids on there, and specific to those, are there any characteristics that Pfizer brings that are differentiated in terms of selectivity and payload capacity? Secondly, a question on Risdicimab and inflammatory bowel disease. Now that you've written off and terminated that project, I just wonder what your level of interest in that space still was.

I see you've done some work with NLRP 3 inflammasome inhibitors, but is this still an area, that, that is on under active development? Thanks so much.

Pascal Soriot (CEO)

Thank you, Simon. To take us away a little bit from, Dato, but Marc, you can go ahead, and then Mene.

Marc Dunoyer (CEO)

Yeah. Happy to, Simon, thank you for the question, and happy to talk a little bit about gene therapy. Basically, the agreement with Pfizer concerns about 12 preclinical construct and assets, and also a large number of capsid that have been developed over the years, and that can be probably further refined to get the best possible capsid for both CNS or cardio cardiotropic asset. It's a, it's a combination of 12 projects. We could start a clinical probably from next year, over the next one, two, or three years, plus other technologies, including capsids, which could be further refined, but we need to work on those to get the ultimate tropic for the right tissue. Tropism for the right tissue, sorry.

Pascal Soriot (CEO)

Thank you, Marc. I think, I think I look forward to the day when we can actually show you the progress we're making in the Alexion portfolio. The pipeline is very exciting, but it's also true for the cardiovascular respiratory immunology portfolio, and at some point, hopefully in the future, we can spend more time on those products, because many of those are exciting. We're also making progress in VNI, even though it's much more at an early stage. With that, Mene, you want to cover the question.

Mene Pangalos (EVP of BioPharmaceuticals R&D)

Yes.

Pascal Soriot (CEO)

[crosstalk] That Simon had?

Mene Pangalos (EVP of BioPharmaceuticals R&D)

It's a great question, and the answer is, we have an interest both in terms of building our immunology capability and autoimmune disease, and specifically in diseases like IBD. I'll give you two examples. Again, this is. I'm sure it's something that Sharon will be talking about over the coming year. The first program is an anti-CC9 antibody that's in Phase I, which has demonstrated really dramatic lowering of T-regulatory cells in the gut. Looks like a very interesting mechanism and antibody, and we're looking to see how we can accelerate that. You may also have read about a deal we did with a small company called Quell, in the T-reg space, and I talked about it today in my presentation.

They have a really interesting way of, of locking T-reg cells to maintain their anti-inflammatory state, and one of the indications that we were pursuing with them is IBD.

Pascal Soriot (CEO)

Thank you, Mene. We have a few more questions, so we maybe extend by five minutes, but if you don't mind, if you could ask one question each time. Seamus Fernandez, go ahead.

Seamus Fernandez (Global Biopharmaceutical and Biotechnology Equity Research Analyst)

Yeah, thanks. Just a quick question on the change in leadership and Mene's retirement. It's interesting to see that Sharon is coming in from Alexion. Is this a directional move away from, you know, sort of more primary care-type opportunities? I know this is something, Pascal, you have talked about before, but there's a lot of interest in opportunities to treat metabolic disease. Just interested if there's, this is a strategic shift away from diabetes and metabolic disease, perhaps obesity opportunities, or if we're going to see AstraZeneca continue its efforts along those lines, or perhaps even accelerate those efforts through business development going forward. Thanks.

Pascal Soriot (CEO)

That's a great question. Actually, what it is, is very simply, the appointment of a very talented scientist and a talent, very, an exceptional leader. It's not reflecting a change in strategy, certainly not reflecting that we want to consolidate rare disease and the biopharm business, because Sharon, he is being replaced in a role as head of research and product development at Alexion. It's also not reflecting a move away from or dis- disengagement from primary care. I mean, I'm sure you've noticed that, looking at ourselves, but also our portfolio, you've noticed that suddenly, over the last few years, naturally, our portfolio has moved to more specialty care.

Primary care remains important, and that's why a few minutes ago, I was saying we look forward to the day when we can talk about what we have in eye and eye, but also in cardiovascular medicines. We have quite a few, quite a few projects, and Mene, maybe you want to also to comment there on, on the, the, the portfolio we have, in fact.

Mene Pangalos (EVP of BioPharmaceuticals R&D)

Yeah, I mean, I, I think, you know, when we have a chance, hopefully in the next 6-12 months, to talk about all of the assets, both early, mid, and late-stage assets across CVRM, across respiratory immunology, VNI. I mean, it's, it's a very rich and deep portfolio with many, many opportunities, many of them significant. You know, we are moving more to specialty, but there's still a place for primary care. Sharon, I can just second what you're going to say. She's gonna be a fantastic leader for us. It doesn't reflect any change in strategy, more a continuity with hopefully, you know, going from strength to strength and building on what we have already built.

Pascal Soriot (CEO)

One thing that suddenly, Sharon can help us do is continue building this focus in immunology, sorry, that Mene started, and that will be an important chapter of our future. Matt Weston at Credit Suisse.

Matt Weston (Managing Director of Pharmaceutical Research)

Thank you, Pascal. Can I ask a question about IRA Part D reform? At face value, Astra's oral oncology business is gonna face significant headwinds over the coming years as pharma's contribution to catastrophic cover in Part D steps up significantly. Offsetting that, there's also the potential for volume uplift on lower co-pays and reduced foundation support. I wonder if Dave could walk us through the pushes and pulls for the oncology business, and whether he sees it as a meaningful net negative, something that washes its face, or maybe even a net positive. If I am allowed, Pascal, I know you said one, can I cheat? Susan, on TLO1, when do you expect the OS data to be mature, and will you present the PFS data before the OS data is available?

Pascal Soriot (CEO)

Thank you. So, thanks, Matt. On the IRA, it is in term of co-pays, et cetera. I think it's probably a small positive for primary care products and a big positive for, bigger positive for, for oncology. Not only oncology, but more expensive, oral medicines. With this, I'll hand over to Dave, who can comment more specifically on oncology.

Dave Fredrickson (EVP of Oncology Business)

Yeah. If we take a look at the first part, Matt, of the question, we haven't shared now for quite some time, specific product-level breakdown of percent of business that's within Medicare Part D. What we have shared that across the AstraZeneca complete portfolio, that 25%-30% of it is Part D. You're right, that the oral oncolytics are above that average relative to kind of understanding the magnitude of the exposure here. Certainly, you can model out what the impact of having to pick up catastrophic looks like. I will say, though, that it is an important offset that comes with the ability to be able to have co-pay capped and also smoothed over the course of the year.

With these expensive oncologics, really, the co-pay exposure that patients in Medicare plans face on the affordability is quite significant. There's no mechanism for industry to be able to help in the way that we do, with programs, in the commercial side of things. While $2,000 of co-pay may be a barrier for a number of patients still within the United States, particularly within some of the elderly populations, we do think that there's an important reduction that's gonna happen here. Overall, we'll have to see how much we're able to actually get patients off of free goods programs as a result of this, and, and we'll, we'll, we'll keep that.

We'll keep you updated on that as it unfolds, and we'll start to find out next year, actually, as copay moves down to a $3,500 cap on January of 2024.

Pascal Soriot (CEO)

Yeah.

Susan Galbraith (EVP of Oncology R&D)

Thanks for the question, Matt. As you're aware, we've not indicated when the final OS analysis are gonna be conducted for TLO1. When we've got it's an event rate, driven as, as, as expected, and when we've got the projected event rate, we can update that. Just for you, in the meantime, when considering the outcome and the maturity, just bear in mind that this is the second/third line, non-small cell lung cancer patient population, and unfortunately, for those patients, median OS is still not long. With docetaxel, it's in a 10-12 month range, is, is typically what you would expect. It's not hugely prolonged versus progression free survival.

Pascal Soriot (CEO)

Thanks, Susan. Eric Le Berrigaud, can I ask everybody to stick to one and not cheat, please, Eric?

Eric Le Berrigaud (Managing Director and Senior Equity Research Analyst)

I would like to. I, first, first was on HER3, actually, as a target in ADC, still continuing to see good data coming from your partner's product. Some physicians would like you to embark into this partnership as well. Is there any option? Are you still discussing to get access to it? If not, are you nonetheless interested by this target, and are you then considering doing one proprietary product with any kind of construct? Maybe if I can try a very, very short one in rare disease, putting together Soliris and Ultomiris until the R&D delivers, will represent probably 80% of sales for the next two or three years, with some biosimilars coming in Europe first and competition growing.

Can you maybe give a little bit of confidence into the ability to maintain or slightly grow sales for the two together for the next two or three years? Thank you.

Susan Galbraith (EVP of Oncology R&D)

Back to the question about the HER3, you're talking about patritumab deruxtecan. Obviously, there's going to be some data presented at the upcoming World Conference on Lung Cancer. Obviously, we've got an ongoing clinical collaboration with Daiichi Sankyo on this as part of the ORCHARD study in patients with EGFR mutated non-small cell lung cancer, looking in combination with osimertinib in that setting. When we're looking at ADCs in general, making some of the choices that we've made in recent business development in that space, we're looking at the overall benefit-risk ratio versus what we've already got with our internal assets and already partnered assets.

We'll look forward to seeing the updated clinical data, both as monotherapy and in combination with osimertinib, which we get access to. You know, I'd also just say, look, we're excited about our internal portfolio that's progressing. We have a B7H4 ADC. We now have the EGFR bispecific ADC and a folate receptor alpha targeted ADC, all with our proprietary linker warhead, with the topoisomerase warhead. These decisions are made in the context of that internal portfolio that we've got as well.

Mene Pangalos (EVP of BioPharmaceuticals R&D)

Eric, thank you for your question on the future of the C5 franchise. If you refer only to Soliris and Ultomiris, there will be a continued growth, and it will be supported by both regional expansion, but also by extension of indications. I want to take the opportunity to also signal or remind you of the seventeen-twenty, the minibody, which is our C5 third generation, which is presently undergoing Phase III trials, which could also provide some further options to physicians and patients.

Pascal Soriot (CEO)

Thank you, Mene. We'll take two more questions, and then we'll have to close for the day. Peter Welford, over to you, Peter.

Peter Welford (Senior Research Analyst)

Thank you. I will just stick to one question that asked. We'll start with each China. I wonder, given the changes that you mentioned with regards to the NRDL and some of the recent sort of reforms we've heard, just wondered, as AstraZeneca's attitude towards China and investment there has changed at all. I mean, recently, you've sort of cooled a little bit with the expansion of spend and investment in the country, and even perhaps pulled back on some resources. Just wondering your current thoughts on investment and further investment in China from here, and whether there's any change at all in how you see the longer-term market there with the changes. Thank you.

Pascal Soriot (CEO)

Let me call this one, if I may, Leon, because, of course, it's going to be positive, right? Yes. I mean, actually, we are very committed, Peter, and China is and will remain a very important country for, I think, for the industry, but certainly for AstraZeneca. We are very committed. We are building our presence in rare diseases. We've just approved the build of a very important factory in China, in Qingdao, to make inhalers for China and potentially export out of China to some emerging markets. We are definitely committed. We have a strong R&D team. We're also, as I've said before, leveraging our connections to partner with local biotech companies and help them develop and commercialize their products globally.

It will remain a very important country for us, not only because we have products to sell to help patients there, and as you know, there are lots of patients, but also because it's a source of innovation, and it is, for us, becoming a – or has become some time ago already, actually, a strategic center. Anything you want to add there, Leon?

Leon Wang (EVP and President)

Yeah. Yeah. I think Pascal mentioned quite completely. I think I really hope you can pay also more attention to outside China, because outside China, emerging market is larger than China now and are growing much faster. I think there will be a lot of opportunity and untreated and diagnosed patients opportunities there. Within China, we still have a lot of products like biologics for Saphnelo and all these important new launches. We're still very excited and look forward, and it's a source of innovation, and it's a manufacturing center, and it's also a big market.

Pascal Soriot (CEO)

That's a good point. I mean, outside of China, the growth was 38%, first half, so I'm sure you noticed that. Every region of the emerging markets, regions is growing very strongly. We've been accelerating the, the catching up on the upload of new products and launching them. A lot of growth today and also to come. Maybe the last question, Luisa Hector at Berenberg. Luisa, go ahead.

Luisa Hector (Equity Research Analyst)

Thank you, Pascal, and maybe a chance to say thank you to Mene for sharing his insights over the years and for your discussions around the productivity. Mene, maybe a question for you on that. Your slide on the breadth of platforms in place in biopharma, my question there would be that actually, much of Astra's success has come from the simplicity of small molecules and antibodies. With these novel platforms there, does it change anything in the R&D decision-making processes? I think you're at six R's, maybe more now, but-

Pascal Soriot (CEO)

Yeah.

Luisa Hector (Equity Research Analyst)

You know, how, how does anything change in that decision-making, given the complexities of these exciting platforms, and, and do they carry more risk?

Mene Pangalos (EVP of BioPharmaceuticals R&D)

Yeah, thanks, Luisa. First of all, thank you. The reason why I wanted to show the platform is because we have been building them for a long time, and of course, monoclonal antibodies and small molecules remain a very important part of the pipeline, and you know, many of the molecules that we have across the pipeline, across both oncology and biopharm. These next-generation platforms are important because the reason why we failed today predominantly is because our scientific hypothesis is wrong. As we go into more genetically validated targets, quite often, you can't target them with a monoclonal antibody or a small molecule. Having access to gene editing, oligonucleotides, advanced biologics, gives you a chance to attack more complicated pharmacology and disease and hopefully improve your probability of success, and that's what we've been trying to do.

It's not that we're not interested in small molecules or biologics. I don't think our decision-making changes. It just opens up more opportunities in terms of the biology that we can attack.

Pascal Soriot (CEO)

Thank you, Mene. Such a beautiful question to finish, Luisa. Thank you for this. We'll end the Q&A here. Thank you again for all your great interest in our company, and I wish you all a great weekend.