AstraZeneca - Q3 2023

Transcript

Operator (participant)

Good morning to those joining from the US Good afternoon to those in the UK and Central Europe, and good evening to those listening in Asia. Welcome, ladies and gentlemen, to AstraZeneca's Nine-Months and Q3 results 2023 Conference Call and 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 to indicate you wish to ask a question, and remember to unmute your line when invited to speak. With that, I will now hand you over to the company.

Andy Barnett (Head of Investor Relations)

Thank you, operator. I'm Andy Barnett, Head of Investor Relations at AstraZeneca, and I'm very pleased to welcome you to AstraZeneca's Nine-Months and Q3 of 2023 Conference Call. As usual, all materials presented are available 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 today are in $ millions unless otherwise stated. This slide shows our agenda for today's call. Following our prepared remarks, we will open the line for questions.

As usual, 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, use the Raise a Hand function in Zoom. Alternatively, you can use the Q&A button and write your answers. With that, Pascal, I will hand it over to you.

Pascal Soriot (CEO)

Thank you, Andy. Hello, everyone. Please advance to the next slide. Total revenue in the first nine months of the year increased 5% to $33.8 billion, with 15% growth from our non-COVID-19 medicines, offsetting a $2.9 billion decline in revenue from our COVID-19 medicines. Core earnings per share increased 17% to $5.80. This increase is reflective of our robust company performance, our financial discipline, as well as a gain in other operating income that we announced with our half-year results. We continue to benefit from our diverse commercial portfolio and our broad global footprint. Given our confidence in the remainder of the year, we have upgraded our 2023 guidance.

We now anticipate total revenue ex-COVID to increase by low teens % and core EPS to increase by low double-digit to low teens %. Aradhana will provide more details on our financials shortly. Next slide, please. Taking a closer look at the performance of our non-COVID revenue across our regions and disease areas, we saw double-digit growth in the US and Europe in the period, reflecting strong demand for our medicines and continued commercial execution. Our growth in the emerging markets continued, continues to impress, particularly outside of China, which was up 37% in the year to date. This sustained growth underscores our confidence that these markets will become increasingly important for our company. On the right-hand side of this slide, you will see that we delivered robust double-digit growth across oncology, CVRM, and rare disease, and as expected, we saw declines in V&I.

RNA medicines growth more than compensated for the impact of generic competition to Symbicort, launched in the US during the Q3. We saw a reduction in promotional activities in China in Q3, which created some demand softness for certain medicines in the quarter, but have already seen recovery beginning in October. We remain confident in delivering our total revenue guidance for China for the full year, which we upgraded with our half-year results. Please move to the next slide. Like many of our peers, we have relatively low exposure to patent expiries. We have a broad, diverse portfolio of commercialized medicines, and we have an industry-leading late-stage pipeline, which includes several high-potential assets. However, our vision is not short term. We are also striving to deliver sustainable, industry-leading growth for many years to come.

While we are maintaining a focus on discovering new small and large molecules, we have taken the strategic decision to increase investment behind new modalities that we believe have the potential to revolutionize outcomes for patients. With our ADC portfolio, we are aiming to replace the use of traditional chemotherapy across the board. Combinations of our ADCs with our next-generation IO bispecific portfolio offers the promise of more durable benefits for patients with improved tolerability. We are pioneering new modalities such as epigenetic, oligonucleotides, and RNA therapies to unlock entirely new treatment approaches, and we're excited by the curative potential of cell and gene therapies. I'm pleased with the progress we are making in each of these areas, and I look forward to sharing updates with you over the coming years.

With that, please advance to the next slide, and I will hand over to Aradhna, who will take you through our financials and also provide a closer look at how we are leveraging AI in the commercial parts of our company.

Aradhana Sarin (CFO)

Thank you, Pascal. Please advance to the next slide. As usual, I will start with our reported P&L. As Pascal highlighted, total revenue increased by 5% in the first nine months, and product sales increased by 4% at constant exchange rates. Excluding COVID-19 medicines, total revenue and product sales increased by 15%. Alliance revenue of $1 billion was driven by increased Enhertu profit sharing from geographies where Daiichi Sankyo books product sales. As a reminder, Daiichi will book product sales in the US and main European countries. Please advance to the next slide. Looking at our core P&L, we saw the product sales gross margin increase by two percentage points to 82.4%, driven by lower COVID sales compared to the prior year.

We anticipate a lower gross margin in the Q4, driven by higher FluMist sales, which has a very low gross margin. Beyfortus, which we supply to Sanofi, also has a dilutive impact on our product sales gross margins. Over time, the gross margin percentage will be diluted by both increased profit sharing for partnered products, such as Tezspire and Enhertu, in territories where we book revenue and higher emerging market revenue, partly offset by favorable product sales mix. Our core operating expenses increased 7% over the period. Similar to previous years, we expect a step-up in absolute costs in the Q4, driven by SG&A spend phasing and the number of new Phase III starts.

For the full year, we anticipate operating expenses around the upper end of our previous indication of low- to mid-single-digit % increase, driven by continued investment in our business to support the strong top-line growth seen into year-end. Core EPS of $5.80 represents a year-over-year growth of 17%. Next slide, please. Our cash flow continues to improve, and net debt increased, decreased in the quarter to $23.4 billion, despite an interim dividend payment of $1.5 billion. Our net debt to EBITDA now stands at 1.7 times, with the Alexion fair value inventory adjustment now behind us. Turning to our full-year guidance, we now anticipate total revenue to increase by a mid-single-digit %, up from previously low- to mid-single-digit %. Excluding COVID-19 medicines, we now anticipate a growth in the low teens % range.

For core EPS, we now anticipate to grow by low double-digit to low teens %, which is an upgrade versus prior guidance of a high single-digit to low double-digit % increase. Based on current FX rates, we anticipate a low single-digit adverse FX impact on total revenue. For core EPS, we now anticipate a mid-single-digit adverse impact on core EPS, which is a change versus last quarter, reflecting current FX rates. Please advance to the next slide. Our capital allocation priorities remain unchanged. The number one priority is to reinvest in the business. By the end of the year, we will have started more Phase III trials than in prior years.

Our high R&D productivity will also impact SG&A costs, as we will have a number of new products to launch in the coming year, including Airsupra in the US and eplontersen, and also preparation for potential new launches of Dato-DXd, following the positive data presented at ESMO just a couple of weeks ago. We're continuing to expand Alexion rare disease products into more international markets, now present in 64 countries. Many of the new modalities we're investing in, as well as the growth in our portfolio, will require further investment in CapEx. In addition, we're investing in our manufacturing network, optimizing our global footprint, and investing in upgrading our systems. We also remain focused on value-enhancing business development, where we believe we can best leverage our R&D and commercial capabilities.

We have done a number of deals this year, including CinCor and Neogene, and today with Eccogene, and we will continue to do so where and when we see attractive opportunities. We have also a number of successful partnerships, including with Daiichi on Enhertu and Dato-DXd, and Merck on Lynparza, and Ionis on eplontersen. Overall, we will continue to invest to support growth, drive innovation, and bring innovative medicines to patients quicker. Please advance to the next slide. Continuing our commitment to showcase the use of AI across our business, in prior calls, I've covered some examples of the use in R&D and manufacturing operations. Today, I'll highlight the use of AI and advanced analytics to drive faster decision-making within our commercial organization.

Starting first with data and analytics, our in-house proprietary platform, called AZ Brain, analyzes multiple large data sets, enriching the data to correct for inaccuracies, duplication, and data gaps to generate actionable insights. Next, we leverage AI to improve patient diagnosis and personalized treatment approaches. Even today, roughly 6% of EMR data is still unstructured. Application of novel technology to lung cancer screening enabled analysis of over 6 million handwritten documents in just one day and led to over 25,000 high-risk patients being reassessed. We plan to scale this technology to additional health systems and tumor types, including breast cancer. We also apply large multimodal data sets to our clinical trials to help identify the right patient population for trials and to deliver more personalized precision medicines and improve the success rate of our studies.

Finally, we're using AI and predictive analytics to inform more precise, tailored engagement with physicians using the preferred communication channel at a time when they're most likely to engage with potentially eligible patients. Our investments in AI have yielded important, actionable insights into how we can continue to best serve our patients globally. And with that, please advance to the next slide, and I will hand over to Dave.

Dave Fredrickson (EVP of Oncology Business)

Thank you, Aradhana. Next slide, please. Oncology delivered solid performance in the year-to-date period, with total revenues of over $13.5 billion, an increase of 20% versus the prior year, driven by strong global demand, reinforcing both the value of our portfolio as well as the continued execution by our global teams. Turning now to our key medicines. In the Q3, Tagrisso global revenues grew 6%, fueled by continued demand for ADAURA and FLAURA. In China, we saw some market impact from the anti-corruption campaign, but we have already observed recovery into the Q4. Lynparza delivered 8% product sales growth in the Q3, driven by double-digit growth in established rest of world and emerging markets. Lynparza extended its leadership position in the PARP inhibitor class globally, despite decreasing class use and the second-line label restriction in ovarian cancer in the United States.

We continue to accelerate our IO portfolio with a competitive class in the Q3. Imfinzi total revenues, inclusive of Imjudo, delivered 54% growth, driven by new launches. Calquence total revenues increased 15%, driven both by expanded access in Europe and demand growth globally. Enhertu total revenues of $339 million in the Q3 increased 86% year-on-year, and in the US, Enhertu new patient share in HER2-positive metastatic breast cancer and HER2-low post-chemo metastatic breast cancer remain above 50%. We continue to see strong demand growth globally, particularly in European markets, driven by recent launches of Destiny Breast 03 and Destiny Breast 04. In the quarter, Enhertu became the first antibody drug conjugate approved for lung cancer in Europe and Japan, and we received approval for Calquence in China.

At ESMO, we presented updatedFLAURA2 data, which Susan will cover shortly, and we are excited to have been granted priority review for FLAURA2 in the United States. We also received FDA acceptance for AEGEAN. These two important potential treatment regimens advance our ambitions in lung cancer. Next slide, please. Looking ahead, we're well-positioned within our oncology portfolio, focusing on two medicines in increasingly competitive markets, Tagrisso and Calquence. We are confident in sustained leadership and future growth. We're well on our way to establishing Tagrisso at every stage for patients with EGFR mutated non-small cell lung cancer, supported by its best-in-class, once daily oral regimen and leading benefit risk profile. With ADAURA, we have the opportunity to further accelerate testing, referral, and treatment rates in the resectable setting and to expand access through global reimbursements.

The LAURA trial, anticipated to read out in the H1 of next year, presents the opportunity to leverage our existing presence in unresectable stage three with PACIFIC and offer a targeted therapy for EGFR mutated patients. Next, in the frontline metastatic setting, we continue to see increased real-world duration of treatment driven by patients gaining sustained benefit on Tagrisso monotherapy. FLAURA-2 represents the opportunity to build on FLAURA, further extending duration of treatment and offering a best-in-class option for the subset of patients that may require more intensive treatment upfront. Novel life cycle management and combination opportunities allow for continued reinforcement of Tagrisso as the backbone TKI of choice in non-small cell lung cancer. Calquence remains the leading BTK inhibitor across all indications in the face of increasing class competition, and we've seen clear recovery in the relapsed refractory setting.

Going forward, we're confident Calquence will continue to maintain leadership globally despite increased competitive pressures, reinforced by strong efficacy and differentiated safety. 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 and Oncology R&D)

Thank you, Dave. Over the past quarter, we've had a significant presence at key oncology congresses, including the World Conference on Lung Cancer and ESMO. We continued to consolidate our leadership position in lung cancer with data from FLAURA2 unveiled at World Congress on Lung Cancer. These data demonstrated that Tagrisso plus chemotherapy extended the median progression-free survival by nine months compared to Tagrisso alone in patients with first-line EGFR mutated non-small cell lung cancer. This is the longest median PFS that's been seen to date in this setting. Further data at ESMO underscored the critical importance this regimen has for patients with the greatest unmet need, including those with CNS metastases at diagnosis. In these patients, Tagrisso plus chemotherapy resulted in more than 50% complete responses.

FLAURA2 reinforces Tagrisso as the backbone therapy in EGFR-mutated lung cancer, and the data have now been published in the New England Journal of Medicine. At ESMO, we expanded on our footprint in gynecological cancers with presentation of the DUO-E data. This trial is the first to show increased benefit of combining both an immune checkpoint inhibitor and PARP inhibitor in the first-line advanced endometrial cancer setting, and demonstrated a deeper benefit with Lynparza in the proficient MMR and PD-L1-positive populations. We're in discussions with regulatory agencies around planned submission. We also had the first two positive Phase III presentations for Dato-DXd, with data from both TROPION-Lung01 and TROPION-Breast01 presented at ESMO. These underscore its potential to replace backbone chemotherapy in these settings, with both trials demonstrating the clear efficacy improvement of Dato-DXd versus conventional chemotherapy, together with an improved safety profile.

Dato-DXd best-in-class profile opens up future opportunities for combination with both IO and platinum chemotherapy and builds confidence for its potential in earlier lines and other tumor types. We're moving to filing in both lung and breast cancer. Next slide, please. Our bispecific portfolio is designed to displace current standard of care immune checkpoint inhibition. These molecules are engineered to simultaneously inhibit two immune checkpoints, eliciting different biological effects compared with existing concurrent combinations. Early data suggests potential both as monotherapy and in combination with existing treatments such as chemotherapy. We are also combining our bispecifics with our ADC portfolio in Phase II trials. We're encouraged by the early data for Volrustomig, our PD-1/CTLA-4 bispecific. In first-line advanced lung cancer, Volrustomig at 750 milligrams plus chemotherapy resulted in similar objective response rate as the higher 1,500 milligram dose, with improved tolerability.

In treatment-naive advanced renal cell carcinoma, data at ESMO demonstrated deep and durable responses at a 750-milligram dose, with a response rate of 48%, a complete response rate of 10%, and a 12-month progression-free survival rate of 52%. Again, we saw improved tolerability compared to the higher 1,500-milligram dose. Patients with PD-L1 low lung cancer remain a group of high unmet need, and we continue to see that current PD-1 and PD-L1 agents have more limited benefit, even when combined with chemotherapy within this patient population. Previous data, such as those from our our Phase III POSEIDON trial of Imfinzi plus Imjudo, demonstrate that CTLA-4 inhibition can improve the benefit in this group. This is the basis for our Phase III trial, EVOLVE-Lung02, which investigates whether Volrustomig plus chemotherapy can improve outcomes versus standard of care pembrolizumab plus chemotherapy.

EVOLVE-Lung02 is just one of the 4 bispecific trials we've announced this year, with 2 others for Volrustomig and 1 for rilvegostomig. Next slide, please. Our industry-leading ADC development program continues to move at pace, with 5 wholly-owned antibody drug conjugates now in the clinic and many more in preclinical development. Recent data shared at the ASCO Virtual Plenary illustrates the potential of our claudin 18.2-directed antibody drug conjugate. Patients with claudin 18.2-positive gastric or gastroesophageal cancer treated with AZD0901 showed an encouraging 33% confirmed response rate and a median progression-free survival of around 5 months.

Claudin 18.2 is highly expressed in 50%-60% of gastric cancers, and AZD0901 has potential to build on the important data we've already delivered within HER2, in HER2-positive gastric cancer and the emerging data from Matterhorn for Imfinzi in resectable gastric cancer, thus accelerating our leadership in GI cancers. Next slide, please. Finally, I want to touch on our expanding presence in cell therapy. We now have three CAR-Ts in development, all of which include our transforming growth factor beta receptor armoring. This armoring is designed to resist the immune-suppressive tumor microenvironment and enhance the potential effectiveness in solid tumors. We've seen encouraging, data in humans with our GPC3 CAR-T, AZD7003, which demonstrates that this armoring is likely important for CAR-T persistence when compared to other CAR-Ts targeting GPC3 without armoring.

We're also exploring the potential of our T-cell receptor therapies following the acquisition of Neogene Therapeutics. TCR-Ts are an emerging modality that enable the identification of intracellular targets, unlocking biology that was previously inaccessible by cell therapy. Neogene already have three open INDs, two of which have moved into clinical development. Finally, we recently announced our collaboration and investment agreement with Cellectis. This collaboration leverages the Cellectis talent technology, which has been successfully used in the clinic to solve key challenges with allogeneic CAR-Ts and can precisely edit the genome in vivo to target the source of the genetically defined disease or tumor. We believe this collaboration will accelerate our development pipeline and unlock new ways to precisely target a broader range of cancers, as well as other types of disease.

With that, please advance to the next slide, and I'll pass over to Ruud to cover Biopharmaceuticals performance.

Ruud Dobber (EVP and President of BioPharmaceuticals Business Unit)

Thank you, Susan. Next slide, please. Biopharmaceuticals delivered total revenue of $13.6 billion in the first nine months of 2023, driven by growth of 19% in CVRM and 9% in R&I. Key highlights from the quarter included another record-breaking performance of Farxiga, now annualizing at more than $6 billion per year. Farxiga is truly a global brand, with double-digit growth across all our main regions and the fastest expansion coming from emerging markets outside of China. In R&I, revenue growth from launches has more than offset the impact of generic competition for Symbicort in the United States. Emerging markets continues to generate strong growth, particularly for inhaled products such as Breztri, which grew by 69% in the quarter. And in VNI, the first commercial sales of Beyfortus generated $67 million of product sales and alliance revenue for AstraZeneca.

We also received our final regulatory milestone from our partner, Sanofi, following approval by the FDA. Next slide, please. We continue to invest in long-term research that can change clinical practices and differentiate our medicines. This is a particularly important part of our growth strategy for R&I, with its portfolio of relatively young and fast-growing medicines, with many years of exclusivity remaining. Combined, the key medicines that will drive R&I revenues grew by 42% year on year in quarter three. This is being driven by a combination of class expansion for modern biological medicines and inhaled therapies and our share gains within those growing markets. On the slide here, we have one example. Tezspire has quickly established a leading share in the first year of its launch in countries such as Germany and Japan.

In other examples, Breztri is now the fastest-growing medicine within the triple therapy class, and Fasenra remains the leading biologic for severe eosinophilic asthma. We anticipate continued growth for Fasenra following recent positive readouts from MANDARA trial in EGPA and the MIRACLE trial for severe eosinophilic asthma in China. The growth in our four key R&I medicines has more than offset the impact of generics on all the medicines, and they now make up nearly half of the therapy area's total revenue. Of course, we look forward to adding a fifth new medicine to this list when Airsupra launches in 2024. In CVRM, Farxiga maintain its position as the fundamental treatment in heart failure and CKD, and it continues to broaden its use among physicians. One of the drivers behind its recent growth has been the increase in diagnosis rates for CKD.

Early diagnosis is an important factor for improving outcomes for patients, and we hope to see this trend continue, with more patients being identified at an earlier stage of their disease. Like R&I, our CVRM portfolio is evolving in a way that can generate long-term sustainable growth, and after today's blockbuster products inevitably reach the end of their exclusivity periods. Our cohort of development medicines includes eplontersen for ATTR, and the PDUFA date for our ATTR PN submission is in quarter four. Assuming approval, we expect to launch that indication in early 2024. We're also developing novel molecules that target hyperkalemia, proteinuria, and hypertension. These are areas of high unmet medical need in patients with heart failure and CKD. For further details on the progress of those programs, I will now hand over to Sharon.

Sharon Barr (EVP and Head of Biopharmaceuticals R&D)

Thanks, Ruud. Next slide, please. I'm delighted to be joining my Q1ly call in my new role and would first like to thank Mene and the teams for your continued support and for helping me settle in. In the Q3, we made significant progress on our fixed-dose combinations with Farxiga or dapagliflozin, which address pockets of high unmet medical need and where we aim to show significant benefit versus standard of care. Balcinrenone is our selective mineralocorticoid receptor modulator, and in combination with dapagliflozin, we see opportunity to see lower rates of hyperkalemia in heart failure patients with chronic kidney disease. Preclinical data has shown a separation of organ protective effects from acute effects on electrolytes, which predicts a reduced hyperkalemia risk. The Phase IIB MIRACLE trial aims to confirm the additive benefits of valsinrenone combined with dapagliflozin, and we will have data later this year.

We have shown significant benefits of zibotentan, our selective endothelin receptor antagonist, in combination with dapagliflozin in improving fluid dynamics and reducing the risk of adverse kidney events. We presented data from our Phase IIB ZENITH-CKD trial at the American Society of Nephrology, which I will cover in the next slide. And finally, we are in advanced stages of planning Phase III trials for baxdrostat monotherapy in patients with treatment-resistant uncontrolled hypertension and in combination with dapagliflozin for patients with CKD and hypertension. Baxdrostat has been shown to be effective at reducing systolic blood pressure without off-target inhibition of cortisol synthesis. This treatment paradigm would offer a much-needed option for patients with CKD and hypertension. We have already initiated a Phase III trial for zibotentan and dapagliflozin, with plans to initiate baxdrostat monotherapy by the end of the year.

We are also in advanced stages of planning Phase III trials for the other two combinations. Our ambition is to develop these four potential new medicines to extend cardiorenal protection while addressing specific symptoms of disease. Next slide, please. Data from the Phase II Zenith CKD trial investigating zibotentan and dapagliflozin in patients with CKD and residual proteinuria showed clear benefit in reducing the urine albumin-creatinine ratio, a key indicator for kidney function. Zibotentan improves fluid dynamics and reduces the risk of adverse kidney events. When combined with dapagliflozin's ability to re-reduce extravascular volume, these two medicines have been shown to provide significant benefit over endothelin receptor antagonists alone, where fluid retention has been a barrier to uptake. The complementary mechanisms deliver superior efficacy and acceptable tolerability. Both doses were well-tolerated and offer benefits across glomerular filtration rates, supporting our path to Phase III.

On the right-hand side, our IL-33 inhibitor, Tozorakimab, has proven ability to inhibit dual pathways, ST2 and RAGE/EGFR. This is important, as these independent pathways are involved in different inflammatory cascades. Dysregulation of ST2 pathway drives airway inflammation, while dysregulation of RAGE/EGFR pathway is linked to epithelial remodeling and mucus overproduction, hallmarks of chronic lung diseases. This September data was presented from the ACCORD-2 trial for patients hospitalized with COVID-19. Patients receiving Tozorakimab had a substantially lower risk of respiratory failure or death at day 29 versus standard of care alone. These data build confidence in Tozorakimab and its mechanism of action in inflammatory lung diseases. The recently dosed MIRANDA trial updates the range of doses being investigated across our COPD program, which includes the ongoing OBERON and TITANIA Phase III trials.

We will have data from our Phase II FRONTIER-3 trial in asthma, as well as FRONTIER-4 in COPD, which we hope to present in due course. Please advance to the next slide. As announced this morning, we have licensed an oral glucagon-like peptide one receptor agonist for the treatment of obesity, type 2 diabetes, and other cardiovascular, renal, and metabolic diseases. ECC5004 is a once-daily oral small molecule, and preliminary results have shown a potentially differentiated clinical profile. Obesity is a significant and growing market, with over 1 billion patients living with obesity today. The majority of these patients are suffering with comorbidities such as type 2 diabetes, heart failure, hypertension, and renal disease. We are well-placed to address the spectrum of disease associated with obesity, with potential oral combinations in our existing and pipeline medicines.

For example, we have recently seen data on our oral PCSK9, where the product profile is in line with our expectations and is differentiated with limited food interactions. We are excited about the opportunity for a monotherapy and dyslipidemia, as well as in combination with ECC5004. We are building a robust portfolio of novel medicines to address a broad range of cardiovascular, renal, and metabolic diseases. Please move to the next slide, and I will now hand over to Marc, who will cover our rare disease portfolio.

Marc Dunoyer (CEO of Alexion and AstraZeneca Rare Disease)

Thank you, Sharon. Can we go to next slide, please? Rare disease delivered total revenue of $5.8 billion in the first 9 months of 2023, up 12% year-over-year, driven by increased patient demand and new launches globally. Ultomiris grew 49% in the Q3, driven by patient demand, particularly patient naïve to C5 treatment in generalized myasthenia gravis, as well as successful conversion from Soliris across all indications. As a consequence of this conversion dynamic, Soliris declined 12%. Beyond C5, both Strensiq and Koselugo grew 21% and 81%, respectively, reflecting strong underlying patient demand. Looking at the regional breakdown in the middle, I want to highlight the performance of emerging markets, which grew 70% in the quarter. Global expansion is an important part of our strategy, and we continue to benefit significantly from the AstraZeneca footprint.

We have now launched in 64 countries globally and on track to delivering on our ambition to reach 100 countries by 2030. Lastly, I wanted to provide some context regarding our C5 franchise across neurological diseases, myasthenia gravis, as well as NMOSD, as well as on ultra-rare disease, aHUS, and PNH. We continue to see neurology indication grow as launches continue globally, and in the case of MG, the patient population is significantly larger than our ultra-rare diseases. The pie chart on the right panel represents revenues in the US, whereas the two other panels show global sales. Please advance to the next slide. Last week, we presented Phase II data at the American Society of Nephrology, demonstrating the clinically meaningful efficacy of Ultomiris in IgA nephropathy.

Ultomiris demonstrated rapid, complete, and sustained complement inhibition, characterized by a significant and potentially disease-modifying reduction in proteinuria from week 4, as well as a stable mean glomerular filtration rate over 26 weeks. IgA Nephropathy is characterized by the deposition of immune complexes in the kidney that activate the complement system, which then triggers inflammation and causes glomerular damage. At the most prevalent primary glomerular disease relative to other rare disease in the renal area, IgA Nephropathy is associated with substantial morbidity and mortality, with approximately half of patients in experiencing end-stage kidney disease or death.

We see the opportunity for Ultomiris as an add-on on therapy to patients optimized on standard of care, renin-angiotensin-aldosterone system inhibitors, and SGLT2s. This data not only affirms the role of complement in IgA nephropathy, it provides confidence for Phase III, but also accelerates our ambition to expand Ultomiris into additional indication and broader patient population. With that, please advance to the next slide, and I will hand over the call to, back to Pascal for his closing remarks.

Pascal Soriot (CEO)

Thank you, Marc. Next time, please. I spoke at the heart of this call, at the start of this call about how we are building a pipeline for the future and our aim to deliver sustainable industry-leading growth for the long term. Our recent acquisition and partnership with Echosens is a good example of this, where we hope to deliver differentiated treatments for patients, not only addressing obesity, but developing combinations with other small molecule for a broad range of cardiovascular, renal, metabolic diseases. In the near term, we have a rich catalyst path, with more than 20 Phase III studies due to read out before the end of 2024. On this slide, I have called out just a few.

This includes LAURA, which, which Dave spoke to earlier, and DESTINY-Breast06, which has the potential to bring an HER2 one line earlier for the treatment of hormone receptor-positive breast cancer, as well as answer the question about how low HER2 expression can be for patients still to have meaningful benefit from this important medicine. We should also, we should also see the first Phase III results of anselimab in light chain amyloidosis and a WAYPOINT trial investigating Tezspire for the treatment of chronic rhinosinusitis with nasal polyps. Dato-DXd will be an important medicine in our portfolio, and we are investing heavily behind this medicine. TROPION-Breast02 will be the next Phase III study for Dato-DXd in TNBC. A disease thought to be highly responsive to TROP-2-directed therapies.

Before concluding, I would like to welcome Sharon to this call and say how happy I have, I am to have Sharon on board in our senior executive team, and I also want to thank Mene for his contributions over many, many years. With that, I will hand back to Andy, and we'll move to the Q&A.

Andy Barnett (Head of Investor Relations)

Thank you, Pascal. We will now go to the Q&A with all of our executive participants 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 allotted time, but please do limit the number of questions you ask to allow others a fair chance to participate. With that, we'll move to the Q&A and the first question.

Pascal Soriot (CEO)

Okay, thanks, Andy. The first question is from Steve Scala at Cowen. Steve, over to you.

Steve Scala (Pharmaceutical Analyst)

Oh, thank you so much. Two questions: To the extent that the oral GLP-1 will be developed as a monotherapy for obesity, should that suggest to us that AstraZeneca believes obesity is a therapeutic opportunity that is here to stay, and we are in the early innings despite access and other challenges that it may present? And secondly, apologies if I missed it, but longer-term financial targets, both total revenue growth and margin guidance, is that still intact? Thank you.

Pascal Soriot (CEO)

Thanks, Steve. So maybe Ruud could take the first question, and Sharon, if you want to add anything, step in. And then the next one will be Aradhana, her favorite question.

Ruud Dobber (EVP and President of BioPharmaceuticals Business Unit)

Yes, of course, and thank you so much, Steve, for the question. Yes, it's obvious that we believe that obesity is here to stay. I think in the prepared remarks of Sharon, she was alluding to the very substantial number of 1 billion people around the world suffering from overweight. More importantly, we truly believe that there's a unique opportunity not only to help patients to lose weight, but also to help the cardiometabolic disorders associated with overweight. And I think we are in a unique position based on our broad portfolio of products.

Of course, a lot of focus on Farxiga, but there are other, many other products in our portfolio, which makes it relatively easy to combine this in-licensing of the GLP-1 with other products, like an oral PCSK9. We are very pleased to see the first results coming out of our R&D pipeline, and hopefully in the near future, you will see those results. So it makes it very attractive for combination products, as well.

Aradhana Sarin (CFO)

Steve, on your second question, I think the long-term investment thesis remains very much intact. So we've talked about the growth ambition that we have, sort of in that 21-25 timeframe, and you've seen us deliver on a double-digit CAGR, so that remains intact. And then post-2025, 2025-2030, we've said we would be, we would have industry-leading top-line growth. And, you know, what you see today in the pipeline, whether it's the proprietary ADCs or the bispecifics or some of the new readouts on studies, I think all of that points to our confidence in that growth rate in the 2025-30 timeframe. As it relates to operating margins, that continues to be a focus for the company.

You know, again, we've, we have not given guidance on that. That, that is our ambition, and we continue to improve on our, operating margins, as we continue to invest in, in new product launches and, new Phase III studies.

Pascal Soriot (CEO)

Thank you, Aradhana. The next question is Gonzalo Artiach at ABG. Over to you, Gonzalo.

Gonzalo Artiach Castañón (Pharma and Biotech Equity Analyst)

Thank you very much for taking my questions. Gonzalo Artiach from ABG Sundal Collier. And the first one is regarding the new drug candidate for diabetes and obesity licensed from Echosens. And this licensing has been announced with quite excitement today. So could you give us some color on what are the key points on the drug candidate that you consider more interesting to potentially position the small molecule as best-in-class, specifically given the fact that you have already an amylin analog in development? And my second question is on the results from, also announced today, on the EMERALD-1 study. I don't know if you could give us some color here on the plans going forward for this indication. Are you planning to file on PFS results, or will you wait for OS?

And also, if I'm not wrong, the study had a third arm of Imfinzi combined with TACE only, without bevacizumab, which is not reported in the press release today. So I don't know if you could comment on that, too. Thank you so much.

Pascal Soriot (CEO)

Thanks, Gonzalo. So maybe, Sharon, you could take the first one, and, Susan, the, EMERALD question.

Sharon Barr (EVP and Head of Biopharmaceuticals R&D)

Sure, I'd love to, and thank you for the question. I think you heard the excitement in my voice as we talked about the in-licensing of ECC5004, which we think is a best-in-class, orally bioavailable GLP-1 receptor agonist. And we are excited about what we view as a differentiated clinical profile for this molecule. It demonstrates greater tolerability than other molecules in the class, with a lower reported rate of GI adverse events. We also believe that it has a simplified CMC path with a relative lower COGS relative to the competitors. And we have seen efficacy on par with competitors in this class, which we think will allow us to to deliver an ideal target product profile to patients.

Pascal Soriot (CEO)

Amylin, do you want to say?

Sharon Barr (EVP and Head of Biopharmaceuticals R&D)

Sure. So as you mentioned, also in our portfolio, we have a long-acting amylin, as well as a GLP-1 R glucagon dual agonist. So we are targeting both incretin and non-incretin pathways as we identify a robust cardiometabolic profile that we think will serve the complexity of disease.

Pascal Soriot (CEO)

Thank you. Susan?

Susan Galbraith (EVP and Oncology R&D)

Yeah, sure. So EMERALD-1 is a, as you say, a three-arm study. Six hundred patients that were randomized to TACE alone, plus placebo, TACE plus Imfinzi, and then TACE plus Imfinzi plus bevacizumab. So it's in local regional hepatocellular carcinoma, and and it's exciting that this is the first positive Phase III study in this setting. I would say to your question about the Imfinzi plus TACE arm, of course, it's important for us to show the potential for contribution of components. And in terms of your question on filing on PFS, so we're excited that what we've got is a clinically meaningful improvement in progression-free survival. But given this, that this is a local regional setting, it's always important to have data on overall survival.

So, you know, as is typical, what we will do is we'll discuss with regulatory authorities. It may well be possible to file on PFS and then wait for OS to be supplemented during the follow-up period and during the review period.

Pascal Soriot (CEO)

Thank you, Susan. The next question is from Andrew Baum at Citi. Andrew, over to you.

Andrew Baum (EVP and Chief Strategy and Innovation Officer)

Thank you. Couple of questions, first to Sharon. Could you quantify and characterize any liver enzyme elevations you saw in the Phase I with ECC 5004? And then second, for Ruud, with the removal of the AMP Cap from Medicaid in 2024, could you quantify for us the net impact on your revenues associated once you've taken out mitigating defensive measures? Many thanks.

Sharon Barr (EVP and Head of Biopharmaceuticals R&D)

Sure. So I'll jump in with the answer regarding liver toxicity in ECC5004. In preclinical studies, we saw no evidence of liver toxicity, and in the clinical Phase I study to date, we have seen no evidence of elevated ALT or AST, which we think is an additional feature that helps us differentiate this molecule from other competitors in the class.

Ruud Dobber (EVP and President of BioPharmaceuticals Business Unit)

Shall I take the second one, Pascal, yeah?

So regarding your question, Andrew, about the impact of AMPCAP, you have seen in the presentation of Pascal that we are very pleased with the very strong US growth, and that's primarily driven by volume growth, including for Farxiga. Yes, we are expecting an impact of AMP Cap in 2024, but we have very specific brand strategies in place. Overall, we think the impact is manageable, and it will be factored in the guidance we're going to give for 2024.

Pascal Soriot (CEO)

Thank you, Ruud. Next question is from Sachin Jain at Bank of America.

Sachin Jain (Managing Director and Head of Biopharma Research)

Hi there. Thanks for taking my questions. Can I have a couple for Ruud. Sorry, for Dave, and then one for Arna? So Dave, capivasertib, launch due from the end of this year. It's not an asset you talk about much. So I wonder if you could just comment on your optimism for the asset and size of the initial indication. Secondly, on Enhertu, I wonder if you'd just flesh out the comments on the slowdown in the US on the DB-04 bolus and implications for growth of the asset into 2024. And then just one for Arna. I know you're not going to like the question, but any early thoughts for 2024 growth outlook? Consensus has 2024 EPS faster than 2023.

I'm not asking for guidance, but just pushes and pulls and the ability to accelerate growth in 2024 relative to 2023. Thank you.

Pascal Soriot (CEO)

All right. Dave?

Dave Fredrickson (EVP of Oncology Business)

Great. Sachin, I'm going to take the questions that you asked me just in reverse order. So if I start first with Enhertu, when we take a look at both DB-03 and DB-04, we are seeing continued opportunity for growth across the globe on both of those. On DB-04 specifically, we had seen an increase or a bolus effect at launch where patients in multiple lines of therapy, so, you know, multiple lines of post-chemo coming on to Enhertu, just really due to a lack of options for patients in these later line advanced stages. What I'm pleased to say, and I think this is actually a really important aspect of Enhertu, the duration of therapy that those patients were able to stay on Enhertu was actually longer than we had even thought.

So the bolus actually has been around, if you will, as part of the TRXs for a longer period of time than we had originally anticipated it might be. We continue to see nice growth in now the incident share, so I think the DB-04 continues to grow and will be moving based upon growth in two factors. One will be, incident, new patient share growth, but then also DOT, which I expect will continue to grow. That DOT comment, if I could just for a second, I think also holds for DB-03, where you may recall that in '03, we had 18 months of, duration of therapy, within the study itself, but we know that more than a third of patients were staying on therapy for greater than 24 months.

So we're continuing to see the 2023 DOTs extend, and I think that that's a positive piece within that. As we take a look at Capy, I share enthusiasm that capivasertib could be a very important part of our breast cancer portfolio. And then, you know, perhaps Susan can talk a little bit about some of the thoughts around the CDP that goes beyond that. I do think that it's most likely that we will see biomarker labels across the globe, though we do believe that the benefit in the ITT population was an important one. But there's a pretty significant number of people with breast cancer who can continue to benefit from endocrine-based therapies, in that advanced setting, and biomarker is still 40%-50% of that marketplace.

It's a sizable opportunity, and we are looking forward, hopefully any day now, to an FDA announcement and approval.

Pascal Soriot (CEO)

Before we move to thanks, Dave. Before we move to 2024, maybe, Susan, you could comment on other indications that we are considering for CAPI?

Susan Galbraith (EVP and Oncology R&D)

Yeah, sure. So I do think this is a, an, an opportunity in a number of settings where the AKT pathway is important in limiting a benefit, either in combination with endocrine therapy in both breast and prostate cancer, but also in combination with chemotherapy as well. So as well as the 291 study, we have CAPITELLO-290 in triple-negative breast cancer. CAPITELLO-292 is in combination with palbociclib and other CDK4/6 inhibitor potential as well as hormonal therapy backbone in the first line. So it's got Faslodex as the hormone therapy backbone in the first line in the CAPITELLO-292. And then in prostate cancer, we have CAPITELLO-281, where capivasertib is combined with abiraterone.

And again, that's focused in PTEN-deficient, hormone-sensitive prostate cancer based on the Phase II study there. But we also have a combination with docetaxel. And again, the AKT pathway limits the response to chemotherapy and limits the apoptotic response to chemotherapy, so that's also an important study. And based on the ProCAID dataset, there's activity again across the spectrum of patients, both with or without PTEN deficiency in that setting.

Pascal Soriot (CEO)

Aradhana?

Aradhana Sarin (CFO)

So, thanks for the question. Obviously, we won't give guidance for 2024 on this call. We'll have to wait for early next year for that. We're actually going through our budget process right now, and as that concludes towards the year-end, and we present that to the board, and then we'll give our guidance next year. Some of the things that obviously you need to take into account, some of the pushes and pulls in the 2024 and midterm, including currency movements. As you know, we've had very strong growth momentum with our underlying brands, but then we also have launches for Airsupra and eplontersen that Ruud mentioned that we'll be investing behind.

And then the Phase III opportunities, as well as some of these new BD opportunities, including the current product that we talked about on Echosens. So, lots of moving parts, and we look forward to talking to you about that in early 2024.

Pascal Soriot (CEO)

Maybe some quick addition to the 2024. Actually, going back to the question Andrew asked about, Cap. You know, since the announcement of this, new regulation, we've really come up with, very modest price increases, always below, inflation. So of course, the calculation goes back many years, but, we still believe that, we will have an impact that is substantially lower than many other companies. And as Ruud said, it can be certainly managed in the overall, forecasting, budget forecasting for the company. So the next, question is, Tim Anderson at Wolfe?

Tim Anderson (Managing Director and Senior Equity Research Analyst of Pharmaceuticals and Biotechnology)

Thank you. A couple questions. On Tagrisso, FLAURA2 was in the New England Journal last night. Editorial, fairly positive based on PFS benefit, but really said it kinda comes down to how survival plays out. So the question for you is, your view on whether it hits on survival in a clinically meaningful way? And then the second question is on obesity. Just further business development from here, it seems like if you're gonna push into this space with external assets like today's announcement, maybe you go all in, and do more external deals. There are other assets out there where you take a much broader portfolio approach, or conversely, is this kind of one and done, this is gonna be your main asset from the outside world? Thank you.

Pascal Soriot (CEO)

Thanks, Tim. So the first question, maybe, we could start with Susan, and then, Dave, I think you could also comment on the commercial relevance of FLORA2, which we believe is important for many patients. And then the second question, Sharon, you could take, and anything you want to add, Ruud, also please, jump in.

Susan Galbraith (EVP and Oncology R&D)

So, progression-free survival benefit that we've seen is very clinically meaningful with FLAURA2. And of course, the comparator is something that's already proven overall survival benefit in the first-line setting of lung cancer, which is monotherapy Tagrisso. So I think what we're hoping to see is, you know, maintenance of that improvement in PFS being carried through to the PFS2, and a trend in OS, I think, is very reasonable to expect. But, you know, obviously, as the data mature, we'll continue to look at the OS endpoint.

Dave Fredrickson (EVP of Oncology Business)

And, thanks, Susan. And Tim, I think maybe just to build off of this, I think there's also a, an important tangential question just in general around the importance of overall survival, as there's consideration for choices. And I think that you referenced the editorial, I think you hear this, in the editorial, but also we hear this from the community as well, that in selecting a treatment, the benefit-risk profile, inclusive, of course, of efficacy, the side effect profile, as well as the administration, are all important factors that will come into this. So within that context, FLORA2 is certainly something that we have heard, very much, as an option for those patients who would benefit from intensification, brain mets, L858R.

And on top of that, clinicians are pretty well-versed in the side effects that are associated with chemo, and there's the ability to discontinue the chemo in FLAURA2, if approved, and continue on with the monotherapy. But we also hear and know that the monotherapy is an option that we anticipate will continue to be a really important option for the majority of patients, all oral, greater than three years overall survival, demonstrated, proven, and understood, and a tolerability profile that's well managed.

Pascal Soriot (CEO)

Thanks very much, Dave. Sharon?

Sharon Barr (EVP and Head of Biopharmaceuticals R&D)

Sure. And thank you for the question about continuing to build our portfolio. You know, I hope that this morning I'm conveying a story that we continue to build a strong cardiovascular, renal, and metabolic portfolio with multiple medicines to treat obesity, type 2 diabetes, dyslipidemia, hypertension, chronic kidney disease, and heart failure. So where we see opportunities to further strengthen that portfolio, we will move forward with a sense of urgency. We never comment on business development deals that are in progress or are future opportunities, but we continue to scan the landscape and understand what might fit best into this growing portfolio.

Pascal Soriot (CEO)

Thanks, Sharon. Maybe let me add that BioPharma, cardiovascular in particular, remains very important to this company. And for the little internal friendly competition, we have Ruud beat Dave by $100 million in the first nine months of the year, so a very important part of the company. Anything you want to add on.

Ruud Dobber (EVP and President of BioPharmaceuticals Business Unit)

No, no, just to reinforce that, of course, we are excited about our internal pipeline, also in obesity, with the long-acting amylin, the GLP-1 glucagon dual agonist. But as Sharon said, we are always looking around for something what can add value, is making strategically sense. But all in all, I think, we're very pleased with the progress we are making in our pipeline.

Pascal Soriot (CEO)

All right. Next question is Emmy, Emily Field at Barclays. Emily, over to you.

Emily Field (Director and Head of European Pharmaceuticals Equity Research)

Hi, thanks for taking my question. I wanted to ask about Volrustomig, actually. I saw you started the Phase III in cervical and lung, and you also had renal data at ESMO. Just, you know, how broad of a Phase III program are you intending on running? How many tumor types? Secondly, when could we see the combination arm from the TLO4 study that combines Volrustomig with Dato-DXd? And then my last one, just, you know, how much broader in terms of addressable patients would LORA add to the Tagrisso patient pool? Thank you.

Pascal Soriot (CEO)

Thank you, Emily. Susan, could you go over the first two Volrustomig questions, and Dave, you could address the Lynparza question?

Susan Galbraith (EVP and Oncology R&D)

Yeah. So again, I would say that we see the positioning of both Volrustomig and rilvegostomig as, you know, being appropriate in different segments of the patient population that are currently treated with checkpoint inhibitors. So I think Volrustomig has a place where CTLA-4 inhibition particularly adds value, and those are the areas that we will concentrate on. I also think that there's emerging data from rilvegostomig, which we'll probably share at Congress next year. And again, please note that we have actually started our first Phase III trial with rilvegostomig, building on the great data that we saw with TOPAZ in the biliary tract setting. So I think there's great potential for this.

We are examining both rilvegostomig and Volrustomig combinations with our ADCs in different tumor types, and we will, again, probably share updates on those in the next 12-24 months.

Dave Fredrickson (EVP of Oncology Business)

Great. On Laura, Emily, just in terms of the opportunity here, let me start with the headline, which is I think this is a sizable opportunity and an important chance for us to, if positive and approved, be able to, you know, gonna meaningfully catalyze the growth within the area. We know from the PACIFIC work that we've done that there's a significant number of patients that are diagnosed that are stage three unresectable. We also know that many of these patients are not getting, for very understandable reasons, treatment with who are EGFR mutated with IO.

And so there's a very good opportunity that's there, and I think that this will be probably the most significant Tagrisso growth driver that I would see as incremental coming into the near term, and we look forward to next year's readout.

Pascal Soriot (CEO)

Yeah, important growth driver across the world. Very much, of course, in Japan, where this, EGFR mutations are common. And I think in China also, beyond the growth potential, also a very nice differentiation in a market, as you know, is very, very competitive. You know, the EGFR market is very competitive. So clearly, an important addition from a differentiation viewpoint and promotional opportunity for the Chinese team. Next question is James Gordon, JPMorgan.

James Gordon (Executive Director and European Pharma Equity Research)

Hello, James Gordon, JPMorgan. Thanks for taking the questions. First question was on the oral GLP-1, and then the question was: Do you think the product's gonna be competitive on weight loss versus other orals that are well ahead in terms of development? Or is the differentiation gonna be much more about the combinability with other oral agents? And if so, which of the combos is it that you're most excited about? That's the first question, please. Second question was the IL-33. I think you've started a new high-dose Phase III, the MIRANDA trial. So with this new higher-dose trial, we've now seen Phase II that says that the first two studies, Oberon and TITANIUM, at lower doses are perhaps underdosed. So should we be less confident in them, and think we've got to wait for this third trial?

If I could just squeeze in a clarification on Dato-DXd, I think you mentioned potential launch next year. So is the expectation that would be a launch in both lung and breast cancer, so that you, you file both of those by the end of this year and then can launch both of those simultaneously next year?

Pascal Soriot (CEO)

Thanks, James. I'm really so happy that I've delegated the task to Andy to ask people to ask only one question at a time. So maybe, Sharon, you could take the first one, and again, Aradhna, if you have anything-

Ruud Dobber (EVP and President of BioPharmaceuticals Business Unit)

Yeah

Pascal Soriot (CEO)

-you want to add. Then the second one also, actually, and then, Susan will take the Dato question.

Sharon Barr (EVP and Head of Biopharmaceuticals R&D)

Yeah. Thank you for the questions. So your first was: Do we believe that this ECC5004 is competitive on weight loss? And yes, we do. Based on the Phase I data that we saw, it lines up very favorably with competitors in this class, which was very encouraging data that gave us confidence in our ability to drive forward this molecule and see a differentiated target product profile in the clinic. You also asked about which of the combinations we are most excited about, and that's a little bit like asking me to choose a favorite child because we have such a broad portfolio that has the potential to combine with this molecule. That said, thinking about Farxiga and our ability to manage hypertension driven by obesity is a very appealing combination.

Thinking about our emerging oral PCSK9 with very encouraging data in Phase I, we see an opportunity to limit dyslipidemia while managing obesity in overweight patients. Also thinking about how we're managing diabetes and the associated comorbidities, gives us opportunities to also consider other mechanisms for managing heart failure and renal disease in combination with ECC5004. We will be testing out this molecule both in preclinical and clinical studies moving forward and identifying the most favorable combinations for patients.

Ruud Dobber (EVP and President of BioPharmaceuticals Business Unit)

So nothing to add. Are you also going to take the question about TOZO, or do I, do I need to comment on it?

Sharon Barr (EVP and Head of Biopharmaceuticals R&D)

Maybe you.

Ruud Dobber (EVP and President of BioPharmaceuticals Business Unit)

James, a good question. I think, of course, as always, time will tell, and the data will tell which dose is the most effective one. But we truly believe that we have a drug which is effective. The 600 is now tested in the MIRANDA trial. Let me remind you that also the competition is testing different dosing regimens. And see it also a little bit as an insurance premium. We think that the 300 will be effective, but of course, we try to push the effectiveness to the highest level, so hopefully both doses will work. But time will tell when the data will be out.

Pascal Soriot (CEO)

Maybe going back to the oral GLP-1, James, first of all, one of the two oral agents that maybe you have in mind is a twice-a-day agent. This one will be once a day. And as Sharon explained earlier, we believe that the tolerability profile would be good. But the important thing to keep in mind is obesity by itself is one thing, but I think the more sustainable part of that market is really obesity patients with complicating factors, people who have cardiometabolic risk factors. And so in that scenario, really, combinations are critical. I mean, if you look at kidney disease, the Farxiga results are really exciting. They are great, but patients still see their kidney function decline over time.

So we talk a lot about combinations in cancer, but I also think that in many of those cardiovascular, metabolic conditions, combination treatment will be the future. So a combination for kidney disease, combination for the control of hypertension, possibly combination for. Well, actually, combination for the management of hyperlipidemia. So that's where we believe that our pipeline also can is best positioned and can play a role. So with that, maybe Dave, do you want to or Susan, maybe cover the Dato question?

Susan Galbraith (EVP and Oncology R&D)

Yeah, sure. So, in the United States, we don't have to wait for bundling the two trials together, so we'll file, you know, those, those two separately. In Europe, it's better to bundle the two applications together. But yeah, I think there's you know, a good opportunity for, depending on the review timelines, for the review to be completed during the course of next year.

Pascal Soriot (CEO)

Thanks, Susan. So the next one is, Mattias Häggblom at, Handelsbanken. Matthias, over to you.

Mattias Häggblom (Co Head Equity Research and Sector Head Healthcare)

Thanks, Mattias. So first, with regard to the oral GLP-1, when can we expect to get a sense for its weight reduction potential, as well as the adverse clinical profile in obese patients? I guess I'm asking how long into 2024 or perhaps even 2025, depending on the duration of that trial, will the outside world have to wait before we can judge today's comments around the differentiated profile? And then secondly, in the ADAURA trial, it referenced a patient survey made in China where lung cancer patients and physicians were asked for their preference of a monotherapy or combination therapy. Survey which showed a close to 80% preference for the monotherapy regimen, despite the combination was set in the survey to prolong the time to recurrence.

I would be curious to hear if the company has any similar patient preference and decision surveys based on other geographies, again, trying to think of the mono versus combination trials in this setting. Thanks so much.

Pascal Soriot (CEO)

So thanks, thanks, Mattias. You were breaking up a little bit. The first question, did you get fully, Sharon? Otherwise, maybe-

Sharon Barr (EVP and Head of Biopharmaceuticals R&D)

It sounds like it was around the timelines for the ECC-five-zero-zero-four clinical studies, but maybe if you could repeat the question one more time.

Pascal Soriot (CEO)

Can you repeat the question, the first one, actually? The second one was Flora2, China, and 80% preference for monotherapy. Is it true also in other geographies? But the first one, if you could repeat.

Mattias Häggblom (Co Head Equity Research and Sector Head Healthcare)

Sure, sure. I just asked how long these two trials in obesity is reasonable to expect before the market could judge today's comments that you have a differentiated profile. We see Phase II trials in obesity, short as five weeks, up to 16+. So I'm just trying to frame the expectations for when we can get data in obese patients, which we have yet to see.

Pascal Soriot (CEO)

Okay. Thanks. So, Dave, do you want to take the Flora2 question?

Dave Fredrickson (EVP of Oncology Business)

Yeah, I'd be happy to. So, guys, I've spoken to the discussions that we've had with physicians, both in the academic, but also now, especially within the community setting, post both WCLC and ESMO. And I think that what you see in the editorial is very consistent with what we are hearing across the globe. And I think that just maybe if I put into context within this, I mean, if you look at the US, you've got 70%+ of non-small cell lung cancer patients who are with advanced disease being treated in the community. And I think that within that community context, the benefit risk that I'd spoken to before of efficacy, oral convenience, tolerability profile, that's really well understood and considered to be one that's well able to be managed.

This is something that really does result in the monotherapy being, I think, really kind of the first port of call, that first, you know, real opportunity to look at. We do also know, and I think that this is something that comes through as well in the commentary, that there are patients who can benefit from a more intensified approach to it. And within that context, I think that the editorial and others comment on that within this context, we expect Flora2, if approved, to be an option for certain patients that is going to be put on the table. But it's going to be put on the table in the context of multiple criteria for making the decision, not just based upon a single efficacy endpoint.

Pascal Soriot (CEO)

Thanks, Dave. Sharon?

Sharon Barr (EVP and Head of Biopharmaceuticals R&D)

Sure. So your question regarding timelines for clinical development for ECC5004, obviously front of mind for all of us. Thank you for the question. So, as I mentioned earlier, we are in Phase I now, and we expect to have Phase I data in hand by the end of this year. And so we'll be moving rapidly towards Phase II. We expect to initiate two Phase II studies, one in obesity and one in type 2 diabetes, by the end of 2024. Now, you are correct that these studies can vary in length, but we really want to be able to generate the outcome data that we think will add value to this program.

We are planning for studies that will span in the neighborhood of 18 months with an interim analysis that will give us an early look at the data and will give us some confidence in our differentiation strategy.

Pascal Soriot (CEO)

Thanks, Sharon. Next one is Mark Purcell of Morgan Stanley. Mark, over to you.

Speaker 26

Yeah. Thank you, Pascal. Two questions. The first one is on your bispecific T-cell engagers, drugs like Volrustomig. You talked in the press release around the potential to replace first-generation checkpoint inhibitors. So how should we think about the magnitude of benefit you expect to see versus Keytruda, for example, in the EVOLUTION Lung-02 trial? So what level of superiority are you seeking? And the second one is on your smart chemotherapy platform, your organic platform, AZD-0133. We should get some data sets, I guess, for assets such as B7-H4, maybe GFAR CIMA in 2024. So could you give an update in terms of when we should see these data and when you expect to potentially move into pivotal trials with these assets? Thank you very much.

Pascal Soriot (CEO)

Thanks, Mark. So I think the first question was the bispecific immune checkpoint inhibitor, Volrustomig. Susan, you could take this one, and the second one is also for you in terms of the B7-H4.

Susan Galbraith (EVP and Oncology R&D)

Yeah. So just to be clear, the bispecifics are bispecifics PD-1, CTLA-4, that you said T-cell engagers. We do have T-cell engagers in our portfolio, but I think we're talking about Volrustomig and rilvegostomig. So for Volrustomig, in terms of the Evolvo Two study, you can imagine in the context of first-line, non-small cell lung cancer, that a clinically meaningful benefit, it, you know, is, is, is something where you're, you know, you're, you're looking for some, for some months of improvement on medium PFS and often an improvement over the hazard ratio with that tail.

And of course, CTLA-4 inhibition is particularly potent at producing that, that tail inhibition. So I can't tell you, what the design criteria for the study are, but you'll see the size of the study, and I'm sure you can work that out. So, but we're we're confident based on the data that we've seen, we've got the potential to improve on it.

In the patient population where checkpoint inhibitors don't currently work as well, which is clearly that lower end of the PD-L1 expression level. And then for B7-H4, our lead ADC, this is an important molecule for us because first of all, it's the first molecule that's come out of our proprietary ADC discovery platform. So we've got a proprietary linker and topo warhead on that compound. You saw some data presented for other B7-H4-targeted ADCs at ESMO. So I think this is going to be an important target. It's overexpressed in parts of ovarian cancer, endometrial cancer, breast cancer, and some biliary tract cancer. We're exploring cohorts in multiple of those cancers, and we look forward to sharing some data next year on this.

But we're excited by what we've seen so far, and we will obviously, because there's a competitive landscape over there, we're going to move at pace. Thank you.

Speaker 26

Thank you.

Pascal Soriot (CEO)

Thank you. The next one is Eric Le Berrigaud at Stifel. Eric, over to you.

Eric Le Berrigaud (Managin Director and Research Analyst)

Thank you, Pascal. Two questions, please. First, you're presenting the catalyst flow for 2024, and probably you pick just a few of those. So just because SERENA-6 is not on it, just to confirm that it's still on schedule. We're hearing from physicians that it may come quite early and maybe as early as the turn of the year. So just to get your level of excitement and see that there is no decrease here. The second question is about VNI. We're hearing a lot about the significant investment to come in CVRM, adding to oncology. And so you made a quick and pragmatic investment here around COVID vaccine and antibody.

How much do AstraZeneca need VNI, and how much is it distraction now to oncology, CVRM, and rare disease in terms of resource allocation? Thank you.

Pascal Soriot (CEO)

Thank you, Eric. So, maybe, Susan, you could take the first one.

Susan Galbraith (EVP and Oncology R&D)

So again, we don't guide on interims. The SERENA-6 outcome is currently guided for beyond 2024. You know, I would just say that our camizestrant trials overall are going really well, and we're pleased with the investigator feedback we've had from the investigators who are participating in these trials.

Pascal Soriot (CEO)

Thank you, Susan. So maybe the VNI, let me just make a couple of comments, and I could ask Iskra also to jump in. It is not a distraction. I mean, our focus really has been and continues to be on antibodies, in particular, antibodies for patients who are immunocompromised. And we work on AZD3152, and we do believe that there is an unmet need out there that is not addressed and needs to be addressed. The mortality in patients who are hematology patients, transplant patients, patients who are immunocompromised, is very high, actually. 30%-40% chance of dying if you have a blood cancer and you are infected with COVID. I'm not even talking about being hospitalized, the risk of dying if you're hospitalized.

I'm talking about the risk of dying if you are infected. So this is very high, and there is a need for those patients. In fact, we know many countries are ready to order if 3152, if it works. So of course, as always, we cannot guarantee success in anything we do, but we believe there is an opportunity for 3152 if it does work. And we're working on other antibodies, and for vaccines, we have a very focused strategy on new technologies that for now we really haven't disclosed because we need more data. And the last thing I would say is that there is actually a synergy with our other activities.

If you think of hematology cancer, again, doctors, hematologists, they need, they want to protect their patients against COVID, especially during periods of increasing COVID infections. So for us, it's really a nice a door opener if we have an antibody to offer, a door opener for the team that is promoting Calquence. And the same is true for immuno, for immune diseases. So there is a clear commercial strategy, and from a resource viewpoint, you know, overall, it's a limited investment, certainly not a distraction. Ishka, if you want to comment a little bit more on where we are and what we do?

Iskra Reic (EVP of Vaccines and Immune Therapies)

Thanks, Pascal, for the comments. So just to add, I think, you know, looking beyond the immunocompromise, and I think you described the unmet need very clearly. I mean, you can also see an unprecedented demand we see with the Beyfortus that we are commercializing together with our partner, Sanofi. And there is a clear unmet need with the RSV in the infant population.

So I really believe that we can build and leverage on our in-house know-how of how the building long-acting monoclonal antibodies, it definitely has a need across the different, different populations. And then also, I think, Pascal, as you mentioned, looking at the kind of what is next generation platform and how we can potentially contribute to bringing the new and differentiated vaccine, is something that we are constantly focused on, and obviously, I will be very pleased to share more information with you in the due course.

Pascal Soriot (CEO)

Yeah, maybe the last point is Vaxzevria was really a different story. It was really to help the world deal with this terrible pandemic. But outside of this, what we focus on is products where we can actually be differentiated and address unmet needs. And of course, it's very true for these antibodies. And on the vaccine side, we would actually only go into large investments if we believe we have something that is totally differentiated. The next one is Richard Parkes at BNP.

Richard Parkes (Pharmaceuticals and Biotechnology Equity Analyst)

Hi, thanks for taking my questions. Hopefully, you can hear me okay. I've got one for Aradhana and one for Susan. Firstly, for Aradhana, just on R&D spend pressures as you go into that budgeting, negotiation later this year. You've had an incredible number of new Phase III starts this year. You're also investing in new technology platforms, yet you managed to keep R&D spend growth to mid-single digits, I think, in the Q3. So I'm just wondering if you could talk about the moving parts of how that growing pipeline can be funded, how much of it can be funded through reinvestment as you end kind of previous Phase III trials versus need for a step-up in that R&D spend growth trajectory into next year?

I ask the question partly 'cause we've seen other companies with, surprising investors negatively with a step-up in R&D spend. That's the first one. Secondly, for Susan, I can see you're starting a Phase III of the PARP1 selective inhibitor in prostate cancer. Obviously, there's a huge potential for that drug if you can unlock potential for synergy with an ADC, with a DNA-damaging payload. I just wondered if you could talk about your enthusiasm and optimism over that program and potential more broadly, and when we might see get some insight into that your plans. Thank you.

Aradhana Sarin (CFO)

So thanks for the question. In terms of R&D, you know, we obviously go through a very detailed process that is both bottoms up and top-down. And I think we've obviously said in the past that we expect R&D to be somewhere in the low 20s% of revenue. And what that helps us with is actually provide some discipline in terms of which projects to prioritize and so forth. Also, I would say as we have started a number of Phase III studies, but when you look at Phase III studies, there's also been a number of studies that we have, you know, we're tapering down or we've read out and so forth.

So it's a, you know, it's a constant phase, and all the Phase III expense doesn't come necessarily in one year, right? It's faced over the entire study period. We start a number of Phase III studies, for example, this year, but some of that expense, you know, a lot of that expense also goes in study start, in the site recruitment, in the clinical study supply, et cetera. So, I think we manage that, and we provide that, you know, the top-down discipline. But it is you know, it's a tough situation.

I think if you asked Mark or Su, you know, Susan, or Sharon, they'll always tell me, "We don't have enough money for all the exciting projects that we have." So, so we try to maintain that balance.

Pascal Soriot (CEO)

Thanks, Aradhana. Maybe a couple of additional points. First of all, beyond the prioritization that Aradhana covered very well and the use of technology to make ourselves more productive, we also have launched and are implementing a redeployment of our footprint. And so we are, for instance, leveraging Canada, Toronto in North America, Barcelona in Europe. So we are going through a process by which we locate in the strategic centers jobs that should be located there. And then we have a nearshore and a far shore strategy, so we are leveraging our sites in Guadalajara and also in India for some roles. So we're doing all sorts of things that help us manage the cost of R&D. We've been internalizing the conduct of our clinical trials.

First of all, we believe it will deliver better execution of our trials if we do it with our own clinical teams, but also it reduces our cost when we internalize. So ultimately, we stick to what we said before, which is low 20s R&D on revenues. I know some people have said: "What does it mean if low 20s is low 20s?" If we meant more than this, we probably would say mid-20s or something like this. So it's low 20s, and I just want to reconfirm this is our ongoing target. Part I, Susan?

Susan Galbraith (EVP and Oncology R&D)

Yeah. Yeah, so thanks for the question about saruparib. This is another program that I'm really excited about. I think we've learned a lot about the right patient populations to treat with PARP inhibitors during the development of Lynparza. But saruparib has this improved profile, which enables clear improvement on and tolerability, enables you to hit the target even harder, and I think that has the potential to lead to actually better efficacy than we see with olaparib. So, it's great to see the first Phase III trial starting. You'll see more coming. And I think one interesting area is the potential for this to have combinations.

So, saruparib in combination with ADCs is absolutely something that we're exploring, and we're, you know, we're encouraged by the early data that we've got, but it's a little early to be sharing those externally at the moment. Probably, it'll be another 12 months before we share those, I'd expect.

Pascal Soriot (CEO)

Thanks, Susan. Next, next question is from Christopher Uhde at SEB. Christopher, over to you. Christopher, we can't hear you.

Christopher Uhde (Senior Pharma and Biotech Equity Analyst)

Can you hear me now?

Pascal Soriot (CEO)

Yes. Perfect. Go ahead.

Christopher Uhde (Senior Pharma and Biotech Equity Analyst)

All right, great. So my first question is for Sharon. Now that you've taken over, I think we have a pretty good idea of what the strategy is for CVRM, but perhaps you could talk a little bit about what the R&I sort of big picture strategy is overall and in terms of, you know, R&D strategy and integrating that with commercial strategy and how to execute on it. And then my second question is on Farxiga, and maybe here I'd like to start by congratulating Mene and his team, even though he's not here today, on a successful readout for the DELIVER and I guess it's his brainchild and arguably the zenith of his achievements at AZ.

But so small percentage of patients that are eligible for SGLT2 actually get it across each approved indication. Is the NRX split still even across the indicated patient groups, and how much gas is left in the tank in the US and EU across those indications? We've got DAPA-MI top-lining positively, so how much impact can that have? And beyond it, are there any remaining steps you can take to convince prescribers or payers that a larger proportion of patients should be adding on SGLT2 on top of metformin or statin or BP meds or whatever, before you start to bring Farxiga combos into the picture? So, like, are there specific patient subgroups, for example? And as a logical follow-through, when the SGLT2s lose exclusivity, do you anticipate any substantial step-up in breadth of use?

What might that look like, and does that impact how you view the opportunity for the novel Farxiga combo regimens like zibotentan? Thank you.

Pascal Soriot (CEO)

Thank you. So, Sharon, R&I?

Sharon Barr (EVP and Head of Biopharmaceuticals R&D)

Yeah. So, you know, I'm in, in a very lucky position of stepping into a very strong biopharma organization with a foundation that was built over many years by Mene, and I'm grateful for both the incredible portfolio that was established, as well as the extraordinary team of scientific leaders that I have the privilege of working with. So as we look forward to how we're going to continue to grow and invest in RNI, let's think a little bit about the successes that are already beginning to drive value for the portfolio. So looking towards Sefnelo, we have three Phase III studies ready to initiate. In fact, the DAISY study in sclerosis just dosed, so that's a Phase III study already initiated with two more, which we expect to launch early next year.

So we're very proud of the potential of sefnelo, which was put in place through internal discovery and development programs, and we're beginning to see delivery of that promise. Also, a strong contender in our portfolio is Tozorakimab, which, as we mentioned earlier, is differentiated for the competitors because it is able to inhibit both the ST2 and the RAGE EGFR pathways. And so we really see a wonderful opportunity there to target the breadth of respiratory disease and to be able to offer a better outcome for patients. So as we think about how we continue to build on our success and move forward, as we've mentioned, we're very interested in growing our footprint in treatments for immune-mediated diseases.

This is a continued build within the group as we expand both our capabilities as well as our capacity, and we think about the new modalities that will best serve patients moving forward. So we continue to expand our pipeline and to think about what the treatments of the future may be, and for a hint of the way we are thinking, Susan told you earlier about investments in cell therapy and the promise that those have demonstrated in oncology. We have seen early clinical data published by academic experts who have demonstrated the promise for cell therapy in patients with autoimmune disease. So we'll continue to explore these capabilities and evaluate the potential for that within our portfolio. I hope that gives you some color that will also help us share our excitement in growth in respiratory and immunology.

Ruud Dobber (EVP and President of BioPharmaceuticals Business Unit)

Let's not forget, before I come to the Farxiga question, that there's still a high medical need in our core indications in asthma and COPD, despite all the progress we have made in the last few decades. But many patients are still suffering from severe exacerbation, lung damage, so there's still a very a big untapped opportunity in those diseases. Coming back to your question regarding the growth potential in of Farxiga, it's still very substantial, Christopher. Just to give you some numbers. Currently, almost one-third of the new prescriptions are going to type two diabetes, but more than two-thirds are going to CKD and heart failure.

The penetration in those two diseases is, at the moment, despite all our efforts and also from the competition, only 15%-20%. Hence, there's still a very substantial upside moving forward. Very pleasing to see that most of the guidelines around the world have now adjusted their guidelines, and the SGLT2 are now one of the fundamental pillars of the treatment of heart failure patient, and the same is true for chronic kidney disease. So in that sense, the volume opportunity is very substantial. Your question about LOE, and let me reiterate again, we have a very, let's say, fragmented period of LOE for Farxiga, 2026 in the United States, but only in 2028 in Europe.

And beyond that, we see a very strong growth in the emerging markets, where in some of those markets, roughly ten markets, we have already lost LOE, but still the brand is still growing very fast. So I'm not going to say that there's no impact of LOE. Of course, there will be an impact of LOE, but clearly, the combination products-hopefully will compensate for that loss in the second part of the decade. We remain very bullish about the growth potential of the products in the, let's say, in the next few years.

Pascal Soriot (CEO)

Thank you, Ruud. And Melanie is not with us in the room, but is keeping an eye on us, so reminded us that, we still have a number of readouts, last cycle management opportunities in, RNA with Tezspire, with Fasenra, with TOZO. So still quite a lot to come in, in RNA, in particular, respiratory. So we move to the next question, Simon Baker at Redburn. Can I ask, we only have a few minutes left, so can I ask everybody to ask one question, if you don't mind? Over to you, Simon.

Simon Baker (Head of Global Biopharma Research)

Thanks, Pascal, and I'll behave myself. On returning to Emily's questions for you, Susan. The current use of CTLA-4 is really defined by acceptable levels of toxicity, and if your bispecific is better tolerated, that broadens the scope. And I was specifically thinking about lung cancer and PD-L1 greater than 50%. Evolve Lung-2 is focusing on less than 50%. Are you planning to look at PD-L1 high as well? Thanks so much.

Susan Galbraith (EVP and Oncology R&D)

Yeah. Thanks for the question. So I think in the PD-L1 high group, this is the place where, at the moment, with based on the current data that we have, that the addition of TIGIT seems to make a particular difference in that setting. So, you know, we'll obviously look at the emerging data across our bispecific portfolio, but, you know, what we're doing in terms of the initial Phase III trials that you're seeing is focusing on the area where we think get that added benefit from CTLA-4 and inhibition. It is better tolerated than the just co-administration of the two antibodies separately rather than in one drug, where you've only binding CTLA-4 in the presence of PD-1.

However, if you compare, you are still getting some increase in toxicity. So I think we've got a much, much lower rate of the diarrhea and colitis that you see with CTLA-4 inhibition, but we have still seen some increases in liver enzyme elevation, and that's really what we've tried to optimize for when we're optimizing for the dose at 750. So we have an acceptable rate of drug discontinuation and holidays, based on that. So you know, I think we still need to make sure that we're optimizing the patient population that we're choosing for the relevant checkpoint inhibition profile. And that's what we're aiming to do across our bispecific portfolio.

Pascal Soriot (CEO)

This is the beauty of this portfolio. Rilvegostomig is a more logical option for PD-L1 high, Simon, and the CTLA-4 combination for Volrustomig is a better option for PD-L1 low in lung cancer. So we move to the next one, Rajesh Kumar at HSBC. Rajesh, over to you.

Rajesh Kumar (Head of Life Sciences and Healthcare Equity Research)

Hi there. Just one question on the long-term financial target. You know, you indicated that you want to achieve, you know, faster than the industry growth. Can you run us through how you're thinking about capital allocation today in terms of, for example, you highlighted, you know, the GLP-1 acquisition, or you've just started, trials on bispecific, that will position you to be there. So what is the capital allocation algorithm you're following today that gets you to an answer? Whether there is, you know, you won't get success in everything, but what gives you the confidence that you can deliver that industry-leading growth?

Pascal Soriot (CEO)

Thanks, Rajesh. Aradhana had to step out for a minute, so let me address your question. First of all, we don't give long-term guidance. The only thing I will say about the long term is what we've said before remains our goal, so there's not much change there. And in terms of a specific question about capital allocation, as Aradhana said a bit earlier during her comments, the priorities for us are to invest in our pipeline, reduce debt, and pay our dividends. So there's no change there. And certainly, we want to continue building our pipeline. But, you know, each time we build a pipeline for bigger deals like we've just announced this morning, it's additional growth.

We believe that we can deliver industry-leading growth from 25 to 30 and beyond, based on what we have today. So anything we add actually will help us grow even more during that period and, and beyond. So we're always looking at today, tomorrow, and the day after, the day after being, you know, new technologies like cell therapy that we want to apply to oncology, but also immune diseases, as Sharon mentioned, T-cell engagers, gene therapy for rare diseases. And the midterm, of course, which, which is what I call tomorrow, is actually our large Phase III pipeline. So that's really what we try to do. The next question is Emmanuel Papadakis. Sorry, I'm rushing a little bit from Deutsche Bank, but we only have a few minutes, and I'd like to give everybody a chance to ask their question.

Emmanuel, over to you.

Luisa Hector (Head of Global Pharmaceutical Equity Research)

Hi, Pascal-

Pascal Soriot (CEO)

Ah, go ahead.

Luisa Hector (Head of Global Pharmaceutical Equity Research)

It's Luisa Hector from Berenberg, actually.

Pascal Soriot (CEO)

Oh, okay.

Luisa Hector (Head of Global Pharmaceutical Equity Research)

I've just hit unmute.

Pascal Soriot (CEO)

All right. I'll go back to Luisa then. It's not what the screen that I have in front of me says, but it's great to hear you, Louise. Go ahead.

Richard Parkes (Pharmaceuticals and Biotechnology Equity Analyst)

Be quiet.

Pascal Soriot (CEO)

Go ahead, Luisa, and then we'll yeah, well, go ahead, Luisa, and then we'll look back to Emmanuel, if that's okay.

Luisa Hector (Head of Global Pharmaceutical Equity Research)

Okay. So on data at ESMO, it became clear that this drug is absolutely delivering on the promise of ADCs in the EGFR subgroup of lung cancer. I just wondered why you think this is and whether you need to see any more data before you could consider starting a Phase III in frontline EGFR in combination with Tagrisso. Thank you.

Pascal Soriot (CEO)

Thanks. So it's a good question for Susan.

Susan Galbraith (EVP and Oncology R&D)

Yeah, sure.

Peter Welford (Senior Healthcare Analyst)

Yeah, sure.

Susan Galbraith (EVP and Oncology R&D)

Thanks for the question. So yes, in the EGFR subgroup, we did see really good activity with a hazard ratio of 0.38 in that group in the randomized study of TL01. So we've also got data from the Orchard platform study looking at the combinability of Dato-DXd with Tagrisso. So I think that's an important piece to also put in place. So I think it is encouraging. Obviously, as we've already said, we're gonna be expanding the portfolio of Phase III trials that we have for Dato-DXd, and you'll see more of those trials in the coming months.

But, this is a place that, you know, obviously we can build on the great data that we've just seen with FLAURA-2, you know, by looking at the combination of Tagrisso with chemo, and you have the potential then to improve on the chemo piece. So I think it's an interesting area, and, you know, obviously, we'll be posting more trials in the coming months.

Pascal Soriot (CEO)

Thanks, Susan. Emmanuel, over to you.

Emmanuel Papadakis (Managing Director and Pan-Euro Pharmaceuticals Equity Analyst)

Thank you. So, yeah, a quick question on Vemircopan, the discontinuation for lack of efficacy in PNH. What cross read does that have to the ongoing myasthenia gravis and renal studies, and where does that leave your oral strategy and ability to defend against potentially newcomers like Iptacopan etc. And then if I could have a very quick follow-up for Ruud. You didn't mention China VBP for Forxiga next year. You're no longer expecting that to be a headwind for revenues. Thank you.

Pascal Soriot (CEO)

Okay, Mark, do you wanna cover the first one?

Marc Dunoyer (CEO of Alexion and AstraZeneca Rare Disease)

Yes. Yes. So, to answer your first question on Vemircopan in PNH. I mean, PNH, it's absolutely essential to have a very high control of the disease, and we, you know, we recommend in PNH the dual therapy between Danicopan and Ravulizumab. Ravulizumab has a very sustained and strong efficacy over time, so we believe it's going to remain the standard of care. Vemircopan has shown efficacy, but not as high as we want it to be. Regarding the read-across other indication, we are still continuing Phase II studies in MG, as you mentioned, but also in several renal indication, and we are hopeful that this indication will be successful.

Pascal Soriot (CEO)

Okay, before you do. Oh, sorry. Maybe just one quick addition to what Mark said. I mean, at the ASH, you probably saw Tacopen showed some sign of potential breakthrough aHUS. So that's why we believe C5, potentially combined with danicopan, is really the best option here. Over to you, Mark.

Ruud Dobber (EVP and President of BioPharmaceuticals Business Unit)

Yes.

Pascal Soriot (CEO)

Ruud, sorry.

Ruud Dobber (EVP and President of BioPharmaceuticals Business Unit)

Yeah, no. So Emmanuel, so it's clearly Farxiga is not listed in so-called Batch 9. It could go into the VBP Batch 10, but that impact will be only seen then in mid-late 2024. So we simply need to wait till the Batch 10 is announced.

Pascal Soriot (CEO)

Last thing with China and Farxiga is we will, as we've said before, we will, what we call consumerize it, just like we did with Crestor. These are really I mean, the, the volume potential is still gigantic in China. The price is relatively low, so we can, we can definitely, consumerize it and, on, operate in the private market and deliver it to patients at home for a very low cost. So we believe we should be able to transition. There'll be, when we go VBP, and we don't know exactly when, because as we said, it could be further delayed, but when we go to VBP, we should have an initial drop, and like we saw with Crestor, and our hope and, belief is that it can, after that, grow in volume.

We'll take the last one question from, Peter Welford at Jefferies. Over to you, Peter.

Peter Welford (Senior Healthcare Analyst)

Hi, thanks. Just coming back to the oral GLP-1, I just wonder if, firstly, Ruud could perhaps comment on how important is it that this could potentially get to market, at a time when you do have a successful life cycle management or other strategies for Farxiga in the US market, and overall, a sort of presence, I guess, a significant presence in your CVRM portfolio in the US? And how does it leave the weekly amylin? Perhaps a question for Sharon. You know, is it actually possible to potentially reformulate the oral as well as an injectable for an amylin combination, or is the amylin destined to remain a monotherapy at this point within your portfolio?

Apologies, I know I'm last, but I don't know if I've done it to step back again. Could you just quickly comment? Can you reiterate the mid- to high 30% longer-term margin target? 'Cause that wasn't actually mentioned, but it's come up for a lot of people as a question. Thank you.

Ruud Dobber (EVP and President of BioPharmaceuticals Business Unit)

Okay, Peter, let me do my best in order to answer your first question regarding the importance of this new asset and the combination with Farxiga. It's fair to say that we are getting more excited about the other combinations in our portfolio as well. Sharon mentioned the combination with zibotentan. We hope to show results with the Belci combination with Farxiga, and last but not least, of course, we have the baxdrostat combination. The Phase III trial has already started for the mono component, and hopefully, early next year, we will also start the Phase III in the combination of Farxiga. Those three will enter the market earlier than the combination with the obesity.

But of course, we will do everything in order to accelerate the development also of the combination of the Echosens compound with Farxiga, if that makes sense. So that's what I can say at the moment. It's high speed. There's a lot ongoing in order to make sure that we will mitigate the potential effect of an LOE in the United States as much as possible.

Pascal Soriot (CEO)

And the last, your second question, which—sorry, go ahead, Sharon. Yes?

Sharon Barr (EVP and Head of Biopharmaceuticals R&D)

Yeah, I think we'll follow up. There was a question in there about how this fits into our portfolio, in which we already have a long-acting amylin agonist. I think it's an excellent question, but let's just say that nobody thinks that the unmet medical need for diabetes has been fully met at this point. And so we have multiple opportunities to address both type 2 diabetes and obesity with the molecules in our portfolio, as well as with this acquisition of ECC5004. So there is still a place for our long-acting amylin molecule, and it is a small molecule, so we anticipate that it would be combinable with a molecule like ECC5004. We continue to build on our portfolio, not subtract from.

Pascal Soriot (CEO)

Thank you. Yeah, and with Amylin, the idea is really to combine, not replace GLP-1, but combine and provide a product that is better tolerated, add further either further weight loss or enable reduction of GLP-1 and better better tolerability of the combination, and also more durable effect. But of course, you know, only time will tell whether we can deliver this, and that's why we do the clinical development. So the last question, operating margin remains certainly our key focus. But of course, you know, we will always consider the opportunities we have. As I said before, with what we have in our hands, we can deliver industry-leading growth post-2025, which we've said before. And if we find other additional opportunities to grow even faster, certainly we may consider adjusting operating margin target.

But the one thing we will not do is compromise the profitability and the cash flow in absolute value. So we would only trade an adjustment in operating margin if we thought we can deliver faster, even faster growth and more profit and more cash flow. So that's sort of the bottom line, and we want to deliver for shareholders at the end of the day. So with this, maybe we want to call it a day. And thank you very much for all your great questions, and have a good day, everybody. Thank you!