AstraZeneca - Q4 2023

Transcript

Andy Barnett (Head of Investor Relations)

Well, a warm welcome, everybody, to AstraZeneca's Q4 and full year 2023 results, presentation conference call and webcast for investors and analysts. I'm Andy Barnett, Head of Investor Relations. And before I hand over to Pascal and members of the executive team, I'd like to cover some important housekeeping points. Firstly, as I'm probably sure you realize, all the material's already on our website for your review. Here is our forward-looking statement, which I'd encourage you to take the time to read. We'll be making comments on our performance using constant exchange rates or CER, core financial numbers, and other non-GAAP measures, and non-GAAP to GAAP reconciliation is contained within the results announcement that you'll have seen. All numbers quoted are in millions of U.S. dollars, unless otherwise stated. This slide shows the agenda for today's call.

Following our prepared remarks, we'll open the line for questions. Of course, if you want to ask a question in the room, you raise your hands. There'll be roving mics. For those online, please use the Zoom function to raise your hand. As usual, we'll try and get to as many questions as we can through the course of the call, but if you limit the number of questions you ask at once, it'll give others a fair chance to participate. And with that, Pascal, I'm going to hand over to you.

Pascal Soriot (CEO)

Thank you, Andy. Good morning, everybody, and welcome to this London Stock Exchange, where we are celebrating our 25th anniversary as a company, merging Astra from Sweden and Zeneca from the UK quite a number of years ago. But I want to start my talk with this slide, and this slide is important because I want to recognize or celebrate the fact that not only it's our 25th anniversary, but importantly, we actually did achieve the goal we set ourselves 10 years ago to reach $45 billion sales in 2023. And in fact, I could argue we overachieved it because at the current exchange rates, our $45 billion goal probably is closer to $40 billion.

And I don't want it to say just to kind of pat ourselves on the back, even though I'd like to do this and celebrate our team's effort, but I want to mention it because we always did this with our eyes on the long-term and growth. And we are embarking on another ten-year cycle, and you know, we have announced an R&D day because we want to refresh our strategy and show you what we are planning to do over the next ten years. But we got this $45 billion through ups and downs, and I have to say often a lot of skepticism, but always with our eye on the long-term growth rate, and that's what we're going to do.

We believe we can grow, and we believe over the next 10 years, we will deliver superior growth. That's, of course, going to drive our profitability as a result of it, but our growth and sustainable strong growth is really what we are after. We've done this through following the science, and again, we're embarking on a new cycle, and we're investing in new science that will shape the future of medicine and shape the future of this company, and we can talk more about this. We have achieved this through disciplined investment, even though we often have extensive debates inside the company, and Arad now is challenging everybody to be even more disciplined in terms of our investment.

But, you know, we've constantly focused our investment on where we can deliver the most growth, and also continuously focusing on oncology, cardiovascular disease, respiratory disease, more recently, increasing our investment and keeping our eye on immune diseases, and finally, rare diseases. And the company we have today, and the team we have today is very different from what it was 10 years ago. And it's really rewarding to see the progress we've made and the strengths we have developed in our portfolio, but also in the strengths of the talent in the company. The way we operate in oncology today, and the same in the other TAs, is very, very different, and it gives me confidence we can actually deliver another cycle of very strong growth over the next 10 years. So, importantly, we delivered our upgraded guidance for the year.

15% growth, excluding COVID. We had guided to increasing to low teens, so 15% is slightly better. On the EPS front, we grow by 15%, which is also slightly better than our upgraded guidance for the year. In quarter four, we saw an opportunity because we had a tax benefit. We saw an opportunity to invest to drive further growth and stronger growth next year and the years after, as we are launching new products and expanding our footprint. You saw that the emerging markets out of China grow by 35%. China itself is rebounding and growing again, so China is back again on the growth trajectory, and this year should be another good year. We've been improving our operating margin. You see a drop in 2021, but that was.

It's a bit of an artifact because it's driven by the very large COVID sales we experienced, and of course, those were at no profit, so it dilutes our operating margin. But essentially, you can see our continuous progress, and I wanted to say today that we are committed to our goals of mid-thirties by in the midterm, and of course, long term, will be depending on our growth opportunities and our pipeline in particular. So we are doing three things. As I've said before, we're driving, we are focusing on the, on today, we're driving growth, top-line growth, and operating margin, so we deliver our financial goals, and that now is 2024 really. We're building the pipeline, continuously building the pipeline so that we drive growth-...

Tomorrow, which is 2025-2030, and we are investing in new technologies and new products to shape the future of medicine and drive long-term growth. What I call long-term growth is what I often refer to as being the day after tomorrow, and it's 2028, 2029, and beyond. Ultimately, our goal is to remain a high growth company for the next period of time, 10 years and beyond. You can see here that our revenue is spread across a variety of therapy areas, but you know, oncology, as you know very well, biopharma, as you know very well, and rare disease. We had growth across all therapy areas. Oncology, 21%, CVRM, 18%, RNI, 10%. Of course, VNI declined because we had a massive decline in COVID sales.

And rare disease grew by 12%, which is more than most people expected, and actually more than we ourselves expected. If you remember, we guided that we could grow by half single digit, this rare disease business, but in fact, we're delivering low double-digit growth rate, and Mark will talk more about this. All geographies did very well, 14% in the US, 20% in the emerging market, which is 35% ex-China and 8% in China. And you can see here the growing importance of the emerging markets outside of China. In Europe, we grew by 17% and established rest of the world, 8%. Japan is starting to be impacted by the loss of exclusivity on Nexium, of course, but still, 8% growth is a pretty nice number there.

So again, well-diversified growth across geographies and across our disease areas. So, this is today and tomorrow is really the pipeline, really in the pipeline. We guided earlier this year that we had a goal of 30 new phase 3. We've achieved 27. We're short by 3, that are a little bit delayed and starting in early 2024 instead of 2023, but 27 is a very large number of phase 3 starts. Importantly, 10 of those have a potential to be blockbusters, either new products or new indications, and blockbuster, of course, being more than $1 billion. So we have 10 of these phase 3 trials that, if they are successful, will deliver $1 billion in sales or more each. We also achieved 24 regulatory approvals across major markets.

And finally, we got approval for four new medicines, and we are on track to deliver 15 new molecular entities launches by 2030. And as you can see, you can see on this slide, those approvals, those new medicines range from biopharma with our WAINUA to oncology with Truqap. Again, back to biopharm with WAINUA eplontersen and also rare diseases, Alexion with Danicopan FDA approval in PNH. So across the whole pipeline, we are launching new medicines. And finally, what I call the day after tomorrow is really this new technologies, those new platforms. And so what are we trying to do here? First of all, we have, we believe, a tremendous opportunity to leverage our growing pipeline of antibody drug conjugates with our IO bispecifics.

So in the ADC space, we started with this collaboration with Daiichi Sankyo, that you know very well. We've now built our own internal portfolio of ADCs. We have six ADCs that are totally owned by AstraZeneca, with unique targets and unique warheads, and there's more to come. We can talk about it later, but we are working on multiple targets and warheads. And finally, importantly, we can combine those with our bispecifics, and we have three of those, two that are more advanced and are very exciting products. And we believe in oncology, this ADC combination with IO can totally transform the way cancer is treated and position us as one of the few companies that has the potential to leverage these combinations.

We work on cell therapy because we believe, you know, cell therapy will be an important technology for the future. Today, those are mostly CAR-Ts in hematology. We want to take this into solid tumors. We want to take this into allogeneic off-the-shelf cell therapy, and we also want to take this into immune diseases, and we started working on this. So what we have been doing is leveraging our own internal effort and our own internal technologies, and combining this with putting together a series of technologies and platforms that has really the potential for us now to deliver what I was just talking about, which is moving into solid tumors, moving into allogeneic cell therapy, and moving into immune diseases. And we now have a complete set of what we need.

Now, it's a question of integration and execution, but we have the technology that are required to achieve what our long-term goal is in cell therapy. And you've got listed here, Neogene, Quell, Cellectis, Gracell, and all of those together will enable us to build what we want to do in oncology and biopharm. Another technology that we believe will shape the long term is T-cell engagers, and again, we've done that with our own internal effort and complemented with BD. The BD we do is not a random BD, it's always with a view to build a strong presence in some of the technologies we've identified, and we've done this with ADC, we're doing it with cell therapy, we're doing it with T-cell engagers, and finally, we do it in gene therapy with a focus on rare diseases.

If you are in rare diseases, you really have to have a gene therapy approach complementing your portfolio, and of course, here you know well the Pfizer gene therapy portfolio acquisition and complemented with the Cellectis collaboration. So this is really what we believe is going to drive a little bit our midterm growth with Daiichi Sankyo's collaboration in some of the ADCs, but mostly looking at driving growth 2028, 2029, and beyond, so we can deliver growth today, tomorrow, and the day after. So with this, I'll hand- I'll hand over to Aradhana is going to take you for the financials. Over to you. Oops, sorry.

Aradhana Sarin (CFO)

Thank you. Thank you, Pascal. As usual, I will start with our reported P&L. As Pascal mentioned in his opening comments, total revenue increased 6% in 2023, which was at the top end of our updated guidance range. Product sales increased by 4%, despite a decline of $3.8 billion in COVID-19 product sales in the year. Alliance revenue increased by 89%, driven by higher Enhertu sales in regions where Daiichi Sankyo books product sales. Turning to the core P&L, our core product sales. Sorry. Our core product sales growth margins increased by two percentage points to 81.7%. This step-up in gross margin was driven by lower COVID-19 revenues in 2023.

In 2024, we anticipate a slightly lower product sales growth margin percentage, driven by higher sales in emerging markets, increased before test product supply, higher production costs in certain facilities, as well as higher product sales for partnered products in regions where we book sales and then pay out a profit share to our partners through cost of sales. Core operating costs increased by 9% in 2023. R&D costs increased by 9%, driven by 27 new phase III starts in last year, including multiple trials of our PD-1 CTLA-4 bispecific volrustomig, and our oral SERD, camizestrant. R&D cost as a percentage of total revenue was 22%, in line with our ambition. As expected, core SG&A stepped up in the Q4 relative to the Q3 in 2023.

We increased our investment in new launches behind WAINUA, Truqap, and AIRSUPRA, and continue to invest behind indications expansions such as Farxiga in CKD and heart failure, and Imfinzi across tumor types. Our full-year core tax rate of 17% came in slightly below our guidance. The Q4 tax rate benefited from an adjustment to deferred taxes following an intra-group purchase of certain intellectual property, offset by unfavorable tax ruling in certain jurisdictions. Overall, our P&L allowed us to increase investments in both R&D and SG&A in the Q4. Core EPS for the full year 2023 was $7.26, a growth of 15% versus the prior year.

As Pascal stated earlier, we have made good progress on both top and bottom-line delivery in recent years, and we remain on track to deliver both industry-leading growth and improve operating margin to the mid-thirties in the midterm, balanced by the need for continued investment to drive top-line growth in both the near term and midterm and long term. Today, we're pleased to announce our 2024 full-year guidance. We anticipate our total revenue of low double digits to low teens % increase, and our core EPS of low double digits to low teen % increase as well. Collaboration revenue is expected to increase substantially, driven by success-based milestones and certain anticipated transactions. Other operating income, on the other hand, is anticipated to decrease substantially.

Recall that in 2023, it included a one-off gain of around $700 million, related to the renegotiated before this agreement, and another $240 million related to the sale of Pulmicort in the US. If FX rates for February to December were to remain at average rates seen in January 2024, we anticipate a low single-digit adverse FX impact on both revenue and core EPS in 2024. Cash flow from operating activities increased by $537 million in 2023. We continue to focus on improving our cash conversion and have already made significant progress in this area. Deal payments amounted to approximately $4 billion, of which nearly half related to past business development payments, including milestone payments to Daiichi Sankyo.... For this year, we again anticipate about $2 billion in deal payments relating to historical transactions.

CapEx in 2023 was around $1.4 billion. In 2024, we anticipate a significant step-up in CapEx, potentially in the 50% range, driven by investments in new manufacturing capabilities, such as API, inhaled products, and cell therapy. Our net debt at the end of 2023 was $22.5 billion, and given very recent BD transactions totaling about $2 billion, we anticipate this to remain at about the same level in 2024. With this in mind, our finance expense is expected to increase given the current interest rate environment. Our net debt to adjusted EBITDA ratio is 1.6 times on the last twelve-month basis. Our capital allocation priorities remain unchanged, with our number one priority to reinvest in the business, both in the pipeline and behind new launches.

We remain committed to keeping a strong investment-grade rating, and we'll continue to pursue value-enhancing business development transactions. Towards the end of last year, we announced a license agreement with Echosens and the proposed acquisitions of Icosavax and Gracell. Finally, we maintain our progressive dividend policy, defined as either a stable or increasing dividend. With that, I will hand over to Dave.

Dave Fredrickson (EVP, Oncology Business Unit)

Thanks, Aradhana. Really appreciate that. So Oncology total revenues of $18.4 billion in the full year period grew 21% versus the prior year, and that was driven by strong global demand of our key medicines. Tagrisso global revenues grew 6% in the Q4, reflecting strong double-digit growth for the U.S. and Europe. Performance in the quarter was partially offset by continued impact from the June 2023 mandatory price reduction in Japan, as well as expected impact from hospital ordering dynamics in China and a rebate reclassification in Australia. In the Q4, Lynparza delivered 8% product sales growth and remains the leading PARP inhibitor globally, despite ongoing class challenges. In the period, we recognized $245 million in regulatory milestones from Merck, following the U.S. PROpel approval in BRCA-mutated prostate cancer.

Imfinzi, inclusive of Imjudo, grew 52% in the Q4, fueled by further global demand growth in gastrointestinal tumors. In 2024, we expect continued progress with Topaz-1 and Himalaya, although Topaz-1 demand in the U.S. will moderate, as the regimen is now established as the clear standard of care. In Japan, a 25% price reduction based on sales took effect in February of this year. An additional mandatory price reduction is anticipated later this year based on recent fixed-dosing approvals. Calquence total revenues increased 14% in the Q4, driven by continued new patient share gains across both frontline and relapsed refractory CLL. In HER2, total revenues of $364 million in the Q4 increased 68% year-over-year.

In the US and Germany, we're very encouraged by new patient share gains in the HER2 positive setting, firmly establishing Enhertu as the undisputed standard of care across HER2 positive and HER2-low metastatic breast cancer. In November of last year, we received approval for Truqap, our novel AKT inhibitor in the US, and for Imfinzi Topaz-1 in China. Importantly, we received a priority review designation for Enhertu, and HER2-expressing tumors, and adjuvant use of Tagrisso was added for the first time to the NRDL in China at no discount. With the exciting approval of Truqap, we have the opportunity to further extend our leadership in breast cancer, including in the hormone receptor-positive landscape.

Enhertu is the established standard of care in late-line HER2-low, and we look forward to the results of the Destiny Breast 06 trial in the first half of this year, and the opportunity to bring Enhertu one line earlier and expand into HER2 ultra-low tumors. Data from the TROPION Breast 01 trial of dato-DXd in hormone receptor-positive, HER2-low breast cancer was presented at ESMO last year during the presidential symposium. Discussions with health authorities and pre-launch planning activities are already well underway. Finally, aligned with our ambition to establish a new endocrine therapy backbone, we now have several pivotal trials ongoing in the frontline for our next-generation oral SERD, camizestrant, including in combination with CDK 4/6 inhibitors and Truqap.

Truqap is being very well received by the clinical community in the United States, and we are already seeing rapid adoption, with the majority of new starts in patients with biomarker-altered tumors who have previously received a CDK 4/6 inhibitor, which is consistent with our views of the addressable population. We see potential for Truqap to become the new standard of care in second line for endocrine-treated patients with PIK3CA, AKT1, or PTEN altered tumors. And with that, we'll advance to the next slide, and I'll hand over to Susan to cover R&D highlights in the quarter.

Susan Galbraith (EVP, Oncology R&D)

Thank you, Dave. In December, we entered into a definitive agreement to acquire Gracell Biotechnologies, which furthers our cell therapy ambition across oncology and autoimmune diseases. Gracell Biotechnologies has a proprietary cell therapy manufacturing platform called FASTcar. The FASTcar platform has several key benefits. First, it significantly reduces the manufacturing time from between 1 and 3 weeks to 22-36 hours, with the opportunity to improve median turnaround time.

And also enable increased manufacturing capacity, as well as predictability of CAR T delivery. Second, a lower dose of cells needs to be manufactured for each patient, which reduces the risk of cytokine release syndrome, and that can improve the safety profile. Third, the shorter manufacturing time delivers fitter T-cells, and this potentially improves the efficacy of this CAR T. This proposed acquisition also enriches our growing pipeline of cell therapies with GC012F, a novel clinical-stage dual BCMA and CD19-targeting autologous CAR T. Phase I data were presented at the ASH Meeting in December. In 22 patients with newly diagnosed high-risk multiple myeloma, the objective response rate was 100%, and we saw a minimal residual disease negativity rate between 95% and 100%, 6-12 months after infusion.

This demonstrates the promise of this potential therapy when you move it into an earlier line setting. Safety was also favorable, with only 27% of patients experiencing either Grade I or II cytokine release syndrome, and no Grade III or above events. Additionally, we did not see any neurological toxicity, which can be associated with this type of therapy. With a median follow-up time of 18.8 months, median PFS and median duration of response had not been reached, also highlighting the durability of the response. We believe that GC012F has potential applications across hematologic malignancies, including multiple myeloma, and will further bolster our hematology pipeline, adding to Calquence, AZD0486, our CD19/CD3 next-generation bispecific T-cell engager, and AZD0305, our GPRC5D-targeting antibody drug conjugate.

We also have two further homegrown hematology molecules, which have just entered the clinic: a CD123 antibody-drug conjugate, AZD9829, and a PRMT5 inhibitor, AZD3470. We look forward to updating you on our exciting hematology pipeline over the course of this year. With that, can you please advance to the next slide, and I'll pass over to Ruud to cover BioPharmaceuticals performance.

Ruud Dobber (EVP and President, BioPharmaceuticals Business Unit)

Thank you so much, Susan. Biopharmaceuticals delivered total revenue of $18.4 billion in 2023, driven by growth of 18% in CVRM and 10% in RNI. Key highlights for the year included Farxiga nearing $6 billion in total revenue, and RNI returning to double-digit growth. Turning now to the Q4, where within RNI, nearly half of the total revenue came from Vascepa, Tezspire, Saphnelo, and Breztri. These medicines grew by a combined 40%, more than offsetting the impact of Symbicort generic entry. In VNI, Beyfortus continued to see strong demand in its first RSV season, generating $95 million of product sales and alliance revenue for AstraZeneca in the quarter. Lastly, we received our first sales-related milestone payment from Sanofi, totaling $27 million. We have recently launched three innovative new medicines within Biopharmaceuticals.

Launches in new areas of science and medicine require us to raise awareness among patients and practitioners, and often to build additional sales forces. Maximizing early momentum for these new launch brands is critical to delivering on their full potential. Eplontersen is an amyloidosis treatment that we're developing in partnership with Ionis. In January, it launched with the brand new WAINUA for patients with ATTR polyneuropathy, a debilitating ultra-rare disease, which is generally fatal within a decade if left untreated. AIRSUPRA is the first rescue medicine to reduce exacerbation and treat the underlying inflammation, and we have shown with the MANDELA trial, a 28% reduction in the risk of severe asthma exacerbations in adult patients compared to Albuterol.

We formally launched AIRSUPRA last month for adult patients, and over time, we hope to see primary care physicians in the United States change 50 years of prescribing habits. As mentioned, we are off to a strong start and are only halfway through the first RSV season that Beyfortus has been available for infants. Following continued strong demand and the recent approval in China, we are planning for a substantial increase in capacity in 2024. We continue to invest behind the Farxiga brand, with growth being driven across the globe by recent launches in heart failure and chronic kidney disease. In the coming years, we aim to continue to build on this franchise with new combination medicines in development that address unmet needs in hypertension, heart failure, and CKD.

With additional NMEs in our late-stage and early-stage pipeline, our CVRM portfolio is set to expand and evolve over the mid to long term. We recently commenced Phase III trials for baxdrostat in uncontrolled and resistant hypertension, as well as for zibotentan combined with dapagliflozin, addressing patients with CKD and proteinuria. Eplontersen is also being evaluated for the treatment of ATTR cardiomyopathy, which is estimated to affect up to 500,000 patients worldwide. Our Phase III CARDIO TRANSFORM trial is the largest of its kind and is powered to show a cardiovascular mortality benefit, and we are very pleased to share today that we have obtained Fast Track designation from the FDA for our cardiomyopathy regulatory file. I will now hand over to Sharon to present the latest developments from the Biopharma pipeline.

Sharon Barr (EVP, BioPharmaceuticals R&D)

Thank you so much, Ruud. I wanted to take this opportunity to highlight our current portfolio in immunology, as well as provide more color on our recent business development deals focused on immune-mediated diseases.

In Saphnelo's pivotal phase III TULIP trials in systemic lupus erythematosus, we saw positive changes in cutaneous lupus. We are building on this and expanding into new indications. We have started enrolling patients in our phase III DAISY trial of Saphnelo in patients with systemic sclerosis, a chronic disease characterized by diffuse fibrosis and vascular abnormalities in the skin, joints, and internal organs, which can be fatal. We also have plans to initiate two other Saphnelo phase III trials this year in cutaneous lupus and myositis. Our recent business development deals have accelerated our ambitions in immune-mediated diseases. Emerging data from Dr. Chet's academic group have shown the potential for long-term remission with CAR-Ts in systemic lupus erythematosus. Part of our definitive agreement to acquire Gracell includes autologous CAR-Ts, with an ongoing phase I investigator-initiated trial with GC012F, a CD-19 and BCMA CAR-T in 15 Chinese patients with SLE.

We look forward to sharing the phase I data at an upcoming conference. Our collaboration with Quell is designed to develop multiple engineered T-regulatory cell therapies, which have the potential to be transformative in Type I diabetes and inflammatory bowel diseases. T-reg cell therapies have a unique approach of modulating the immune system to reduce inflammation and prevent immune-mediated damage to tissues. Quell's innovative platform of armored T-regs could enable sustained clinical benefit. Finally, our collaboration with Cellectis allows us to explore the potential of an allogeneic CAR-T platform. Off-the-shelf availability from allogeneic CAR-T cells is expected to reduce the time and cost associated with manufacturing. With these innovative transformational cell therapies, as well as our internal capabilities, we are building a platform for a pipeline in immune-mediated diseases with transformative potential. I will now hand over to Marc, who will cover our rare disease portfolio.

Marc Dunoyer (CEO, Alexion, AstraZeneca Rare Disease and Chief Strategy Officer)

Thank you, Sharon, and for rare disease, the total revenue achieved $7.8 billion in 2023, up 12% year-over-year, driven by growth in neurology indications, increased patient demand, and launches in new markets. In the quarter, Ultomiris grew 38% and +52% for the full year, driven by neurology indication, with the vast majority of growth coming from generalized myasthenia gravis patients who are naive to branded treatments. As previously indicated, Ultomiris revenues were broadly in line with Soliris for the year, but if you look at the Q4, Ultomiris revenues exceeded Soliris. Our conversion strategy is progressing well, with the majority of patients already converted across PNH, atypical hemolytic uremic syndrome, and GMG in our major markets.

We continue to launch both medicines globally and expect the C5 franchise, Soliris and Ultomiris, revenues to remain sustainable and durable. Beyond complement, both Strensiq and Cosuligo grew 13% and 48%, respectively, driven by continued patient demand. I'm also delighted to announce that we have started enrolling patients in our phase III trials for transthyretin amyloid cardiomyopathy, as well as for hypophosphatasia. Alexion 2220 is a monoclonal antibody designed to deplete toxic amyloid fibrils in the heart, with the potential to treat TTR cardiomyopathy in combination with standard of care, stabilizers, or silencers. Our phase III trial is recruiting a broad range of patients with moderate and severe disease. It has been designed with hard cardiovascular endpoints, all-cause mortality, and cardiovascular events, which are extremely important for patients and clinicians, as well as for regulators and payers.

We have begun enrollment in our phase III program, for Tofacitinib in hypophosphatasia, including two trials in the pediatric setting, involving both naive and switch patients, as well as a larger trial in naive adults and adolescents. These trials represent a broad set of hypophosphatasia patients, including those with both skeletal and functional improvements. We believe that this product, with every two-week dosing and lower volume injections, coupled with improved manufacturing, creates a significant opportunity to increase the addressable population by three times as compared to Strensiq. We have made great progress in our late-stage pipeline, with nine phase III programs underway, and our tenth program, Ultomiris in IgAN, is initiating soon. With that, please announce. We'll get to Pascal.

Pascal Soriot (CEO)

Thank you, Marc. If I move to the last slide, this is really to show you that, over the next few months, we have quite a number of catalysts that are going to drive us across, oncology, biopharm, but also rare diseases. And you have a few here, that are listed. Of course, a number are missing. We also have FLAURA2, that will deliver updated OS data in the course of 2024. But some of the most important ones here are going to drive the growth of several of our important products. LAURA for Tagrisso, Destiny Breast 06, driving on HER2, TROPION-Breast02 with Dato-DXd. The WAYPOINT study, studying Tezspire in chronic sinusitis with nasal polyps, and finally, MOR2 Imfinzi. But there's, of course, a lot more than this.

The other point I wanted to make in conclusion is that, the midterm pipeline is actually emerging very rapidly. We have some very good data coming up out of our bispecifics portfolio, and there will be more data points communicated in the course of this year. Our ADCs, we'll have more data also to share about our ADCs and how this pipeline is shaping up. We have an emerging metabolism portfolio that, you know, we don't talk much yet, but it is actually progressing very nicely. We have a very exciting oral PCSK9 that is making good progress. Baxdrostat is for hypertension, is in now in phase III.

And finally, we have, of course, the GLP-1 agent we licensed in, and the beauty about those agents is that they can be combined. They can be combined with ADC, they can be combined between themselves. And so we have here a metabolism portfolio that is really starting to take good shape, and beyond the products I've mentioned, there's more to come, of course, in obesity, but also in cardiovascular, in heart disease and in renal disease. Cell therapy, we will this year communicate some of the results of our mid-stage studies progression. And finally, we will also be communicating information about our new DDR pipeline and in particular, the PARP-1 selective.

So as you can see here, quite a lot of new data coming up, both from the phase III pipeline, but also from our mid-stage pipeline, that will give you a sense for what is coming up and why we're so excited, why we believe we can continue to drive top-line growth over the next 10 years, and drive improvement in profitability as a result of this. Finally, I want to invite you all to our R&D Day. This will be in Cambridge at the DISC, our new R&D center. You will see as you...

For those of you join us on the twenty-first of May, you will see this is a fantastic site, and our teams are very excited to be there, and I'm sure it will drive further momentum in our R&D productivity. The reason we do this R&D Day is, as I said before, we've just completed our ten-year journey that we started in 2014. We're engaging in the next phase of our journey, the next ten years, and we thought it's a good time to sit back and update our strategy and show you why we are so confident that the future is bright for AstraZeneca. So with this, I'll stop here and then open the floor for questions. James?

James Gordon (Executive Director, European Pharmaceuticals Equity Research)

Thank you. James Gordon from JP Morgan. I'll do just two questions, please. The first one was on revenues for this year. So the guidance low double digit or low teens is a revenue target, but I think bears are worried that lots of that is collaboration revenues growing and product sales slowing. So can you just say, is that fair? Do you also think that you can sustain the same sort of pace of product sales growth, or is it really about collaboration revenues taking over from product sales? That's the first question, please. And then I think the second question, the other thing that some bears have said today is that the top-line guidance is about the same pace as the bottom line guidance, so that would imply then that margins might be about flat.

Then I've seen, I think it was slide 6, you said that the, in the medium term, margins will get to the mid-30s. But does that mean margins will be flat this year and then have to have a big inflection in, in 2025 and 2026 to get there? So thoughts on that and whether there is going to be lots more OpEx and how that's going to work, please.

Pascal Soriot (CEO)

Thank you, James. Great questions, and, Rudnab, you will open the floor, I'm sure. But let me just be very categorical here. Our product sales are going to grow very strongly. So the collaboration revenue, of course, are adding to that growth. But certainly, product sales are very much on track to deliver the kind of growth that is included in the guidance range that we are communicating.

Aradhana Sarin (CFO)

Yeah, I mean, if you look at just, for example, the growth in 2023 across the franchises, right, with Oncology growing 21%, you know, Rare Disease, 12%, 18% in CVRM. So we, you know, and all of that is from current products. So we expect that, that momentum to continue into the coming year. Obviously, you know, different products have different, sort of dynamics and, and so forth. So the growth will come in product sales from both current products, as well as some of the new launches that we have, though, you know, again, they're, they're early in their, in their launch trajectory.

I think on your second question, so when we have given, obviously, a range on both top line and bottom line, but some of the other elements that I mentioned in my prepared remarks, one was, for example, the finance expense that we expect slightly to go up, given the transactions that we did towards the end of last year and so forth, and refinancing for some of the debt that we have. The second element is, we obviously benefited a little bit from the tax rate last year, so that tax rate benefit will also not be there. So if you look at the totality of the P&L, those will also be elements, and we get to the range that we have on EPS.

You know, when you take that into account, obviously, we expect the revenue growth to be pretty strong, but the operating expense growth to be lagging the revenue growth, and that's what's operating leverage.

James Gordon (Executive Director, European Pharmaceuticals Equity Research)

Thank you. Yeah. Okay.

Emily Field (Managing Director, Head of European Pharmaceutical Equity Research)

Hi, Emily Field from Barclays. I have a couple of questions on oncology. The first on Dato-DXd, the AVANZAR study must have enrolled pretty quickly to be having a readout in 2025. If that study were to be positive, would you file based on that study? I know it's designed somewhat differently to T-L07 and 08. And then on Enhertu for DESTINY-Breast06, how much does the inclusion of the ultra-low population expand the addressable patient set? I think you said before that HER2-low is about 50% of breast cancers. How much bigger does that get with HER2 ultra-low?

James Gordon (Executive Director, European Pharmaceuticals Equity Research)

Susan?

Susan Galbraith (EVP, Oncology R&D)

Yes. So for AVANZAR, is my mic on? Can you hear me?

James Gordon (Executive Director, European Pharmaceuticals Equity Research)

Yeah.

Susan Galbraith (EVP, Oncology R&D)

Yes, ACRO has gone very well, which just, I think, demonstrates the interest and the potential, not just of Dato-DXd, but the combination in particular of Dato-DXd plus immune checkpoint inhibition. As you know, we've seen exciting data in a couple of different settings from the TROPION-Lung02 and 04 datasets, as well as the BEGONIA study in triple-negative breast cancer. I think investigators are very interested in that, the potential that this has to further improve the outcomes for patients with first-line non-small cell lung cancer.

James Gordon (Executive Director, European Pharmaceuticals Equity Research)

The study is progressing very quickly in recruitment, as you pointed out. The second one is DB-06, and the low may be for you, Dave?

Dave Fredrickson (EVP, Oncology Business Unit)

Yeah. So, thanks, Emily, for the question on that. So I think as we. Two things that I think are important about DB-06. The first one is that it expands the opportunity, if it's positive, like you highlighted, to move into the ultra-low. Specifically on that question, just to lay this out, so if we look at hormone receptor-positive metastatic breast cancer, within the 60% are the IHC 1+ and 2+, so that's the HER2-low that's covered by DB-04. Then we've got 25% that we estimate that's in this 0-1 category. So that's how much it adds within this. And then you've got about 15% that are the true 0s. So first is that expansion outside of the 1+es into the ultra-lows, and then also it's moving a line earlier.

And so by moving a line earlier, there's two opportunities to see growth, and it'll be data dependent, but one of those is, of course, a longer duration of therapy you'd hope to get as you move earlier. The other is, is that if the data are really compelling, you could see that that puts some pressure on what we see as a lot of endocrine recycling that takes place within these patients. So again, that'll be data dependent, and we'll have to see what the magnitude of benefit is. But there's three different opportunities for 06 to contribute to growth moving forward.

James Gordon (Executive Director, European Pharmaceuticals Equity Research)

Then, yep.

Matthew Weston (Managing Director, Pharmaceutical Research)

Thank you. It's Matthew Weston from UBS. Two questions, and if the first one I can stick with Enhertu, as well. I think 4Q US sales probably were a little bit light in terms of growth of what people were expecting when Daiichi reported them, so total end-user sales. And at the time, I think Daiichi commented that, penetration was reaching plateau in some of the US markets, but with the data expansion coming, there was going to be much more opportunity. I think a lot of investors felt that HER2 low was significantly bigger than suggesting it had already plateaued, so I'd love to understand what's happening there. But also, Dave, if you can touch on HER2 pan-tumor, it seems to fly under the radar, may well actually be quite a significant indication.

Then if I wrap it on the second question, you've added into guidance that there's essentially pointing to a one-time asset sale being something to take into account for 2024. I don't remember you doing that for quite some time, suggesting it might be of a significant size. Is there any way you can help frame it?

Dave Fredrickson (EVP, Oncology Business Unit)

Want me to start? So Matthew, on Enhertu, and I made this comment in my prepared remarks, and I think that it's an important piece, which is I had been commenting in quarters past that we had found that we had hit a 50% really kind of threshold that we were running into in both HER2 positive and HER2 low, but that we knew that there was opportunity to drive continued growth beyond that. And I was really pleased to see, and we've been really pleased to see, that we've been putting more effort against our promotional efforts within the U.S. and large markets within Europe. We've done that in conjunction with the Truqap launch to really make sure that we've got the promotional muscle that we need out there, and we're seeing movement in the HER2 positive new patient starts.

And so that's moving in the right direction and going the right level. Now, if you think about where we were, basically, Matthew, what I think happened was we had replaced a lot, if not almost all of the Kadcyla use, and now we're moving into some harder yards, but we're getting traction against it. We turn to HER2-low. HER2-low is, again, an opportunity for continued growth beyond where we've gotten to. It is, in many respects, a more complicated discussion to be able to have because we're talking about multiple therapeutic alternatives that exist within the hormone receptor-positive space. We're obviously working on testing efforts. All of this, though, I think that, again, I've got optimism that we've got an opportunity to continue to grow.

I think that Enhertu has a lot of growth in front of it, with 03 and 04 still in the U.S., still in Europe, and I think that 06, which Emily just asked about, would be further tailwinds to add to that.

James Gordon (Executive Director, European Pharmaceuticals Equity Research)

Pan-tumor, Dave?

Dave Fredrickson (EVP, Oncology Business Unit)

Pan-tumor. Pan-tumor is a spot where right now we've got breakthrough therapy designation in later lines in the highest of overexpressers. And so I think that when you take a look at that population, you've got several thousands of patients across multiple tumor types that could be addressable for this. And while our early label might be relatively modest compared to, for example, the 03 and 04 opportunities, I think that the more evidence generation that takes place, the more that we continue to do work in this space, and if we can demonstrate in the lower levels of expression, I think pan-tumor is exactly that third leg of the stool that Susan and I were talking about to add to HER2 positive breast and HER2 low to be a good growth driver in the midterm for Enhertu.

Pascal Soriot (CEO)

.Yeah, so if, if Andrew or Aradhana, do you want to cover that?

Aradhana Sarin (CFO)

Yeah, thank you. So, you know, we talked about the other income, which we expect to decline substantially. And again, last year, remember there were two particular transactions that contributed a large amount, so we've not signaled any asset sales. We do expect collaboration revenue to increase substantially. And we've talked about milestones and, you know, potential transactions we're contemplating, but we're not in a position to give more details today, and we'll see how the year unfolds.

Dave Fredrickson (EVP, Oncology Business Unit)

Pascal, super briefly, one thing.

Pascal Soriot (CEO)

Yeah

Dave Fredrickson (EVP, Oncology Business Unit)

I think that I forgot to mention on this. NCCN guidelines have included now endometrial, cervical, and ovarian for Enhertu within the population that we got the priority review for. So I do think that that's an acknowledgement that the clinical community is seeing the benefit of that study. Thank you.

Pascal Soriot (CEO)

Andrew?

Andrew Baum (Managing Director, Head of Global Healthcare Research)

Thank you. It's Andrew Baum, Citi. Staying with Enhertu and pan-tumor trial. So you have HER2-low as part of that trial, and there's been very clear signals in many malignancies that Enhertu is active. And obviously, you have the manufacturing, it's been de-risked. So my question is, are you leaving money on the table by not seeking to expedite development for individual HER2-low indications? Because it looks like you're not going to get approval for pan-tumor in HER2-low, so you're going to need to set trials. There are competitors with HER2 assets who have initiated trials in those HER2-low settings. So have you just left white space for a competitor to come in when you've got an asset that you could be monetizing in that setting? And then the second question is in relation to Truqap.

I'm curious what you think of the inavolisib data, and how that's going to impact the use of Truqap, given you're hitting the same PI3K/AKT pathway. Many thanks.

Pascal Soriot (CEO)

Suzanne?

Susan Galbraith (EVP, Oncology R&D)

Yeah, so for the white space question, when you've got a brand like Enhertu, which has really, you know, exceptional activity across, I think the philosophy is to make sure that we develop it to the maximum of its potential. So again, not everything that we're planning to do is currently visible, but you'd expect to see, you know, other trials. So, you know, I do think that we can build on what we've actually seen with pan-tumor, and I think it creates a lot of opportunity there. So we intend to leave as little white space as possible.

Pascal Soriot (CEO)

And talk.

Dave Fredrickson (EVP, Oncology Business Unit)

In terms of the.

Susan Galbraith (EVP, Oncology R&D)

You want just the market size for the.

Dave Fredrickson (EVP, Oncology Business Unit)

Yeah, sure. I mean, look, I think that what I would comment on most, Andrew, is that we're seeing very positive receptivity to Truqap. We've seen strong uptake in terms of number of new patients that are being started on therapy. We're actually hearing an awful lot of desire among the community to have seen a broader label based upon the datasets that were presented than what we'd seen.

Obviously, within the context of the competitive landscape, the Truqap data will ultimately be looked at within that context, but I think it really is showing favorably within that context, and we anticipate that we'll continue to have a strong launch for the medicine through the year and look forward to the additional life cycle readouts that we're going to have on the heels of, obviously, the 291 approval.

Susan Galbraith (EVP, Oncology R&D)

So, yeah, you know, again, there are, other opportunities, I would just say, with capivasertib, for combination. But also remember that, treats a broader group of patients, than just the PI3K alpha mutant group. You've got the P-ten, and you've got the, AKT activation as well. So there's multiple ways in which it is, different. But I think the first line space is also something that is of interest.

Dave Fredrickson (EVP, Oncology Business Unit)

Yeah, Andrew, I mean, I think that the piece on this, and maybe I skipped over it 'cause I thought it was kind of without saying, but Truqap is post-CDK 4/6, and the Imfinzi is not. So we're looking at different populations and different spots.

Susan Galbraith (EVP, Oncology R&D)

It is a different population, so they're taking into that first line setting fast progressors. So it's not. You know, even if you take the same population that went into 291 and look at them in the first line, they don't completely overlap with the inavolizumab patient population. I hope that's clear.

Dave Fredrickson (EVP, Oncology Business Unit)

Yeah, there's a lot

Susan Galbraith (EVP, Oncology R&D)

Okay.

Andrew Baum (Managing Director, Head of Global Healthcare Research)

Peter Welford at Jefferies. Two questions sticking to the norm. So first question is on the investor event on the 21st of May, or I think it was called afterwards an R&D event. I guess, curious, can you outline... Is this going to be an event very much focused on the midterm pipeline, or will you also be giving that 10-year vision? And if on that, is this going to be a 10-year vision setting another 10-year revenue aim? And I guess, what sort of granularity should we anticipate when we look forward to, you know, how you're going to set the aims for the next period? And then the second one is on Esupra.

So you mentioned obviously that 2023 was pretty much a year of building access, building awareness, building this. I guess curious now, in 2024, you, the comment made, I think, was: "Over time, we expected it US PCPs to change 50 years of habit." I mean, that sounds as though there's still a lot of slog to go. So you just talk about, you know, how have the payer discussions gone? Was that successful? Is the barrier now the doctors, or you know, should 2024 be a year where we put anything in the model, or is this another year where we should be really thinking about the inflection yet to come?

Pascal Soriot (CEO)

So two great questions, Peter. Let me just cover the first one, and Ruud, you could cover Esupra. So the R&D day, really what we want to do, as I explained earlier, is explain what our strategy is and why we think we can grow strongly over the next 10 years. So we are, of course, going to look at our mid-term pipeline, but also we want to look at the investments we're making in new technologies, new platforms, that will actually deliver growth from 2028, 2029, and beyond. So we actually give you a good understanding of not only the near term, but also the midterm and the long term. As it relates to whether we're going to set up a long-term revenue ambition, we may, but we haven't decided this.

But I can tell you that we are very, very confident that we can actually grow very strongly over the next few years and work through some of the issues that have been mentioned by some, for instance, Medicare Part D or reform; we can work through that. In the end, the impact of this is there, but it's relatively limited. I hesitate to use the word marginal, but it's quite limited in the context of our global sales. So we can work through this, we can work through the patent expiries that we have that are limited, and continue to deliver very strong growth.

Of course, it's not going to be the same growth number every year, but if you look at it over the next five years and in ten years, we, we suddenly can grow, and that's what we actually want to hopefully convince you as we share our strategy, and we'll see whether we come up with a number on that. Ruud?

Ruud Dobber (EVP and President, BioPharmaceuticals Business Unit)

Yeah, let me first re-articulate, let's say, the excitement we have regarding AIRSUPRA. First of all, this is a very substantial market. In the United States alone, there are roughly 15-18 million scripts only for albuterol in the asthma 18-plus indication. Having said that, we started our journey in order to gain access last year. So the good news is, we have now formulary listings in 3 of the largest commercial PBMs. Based on the registration, we were just too late in order to get Part D, so we are bidding for Part D in the course of 2024. So hopefully, that will create more access moving forward. Many patients, anyway, are in commercial, are younger patients.

What we have seen in the first few weeks, it's still very early days, is a very nice number of prescribers. Already thousands of GPs, but also specialists, are prescribing Tezspire. Having said that, access is still, let's say, an issue we are working through, so we need to buy down the cost per script quite substantially. So my clear steer is, we are off to a very strong start in the United States, but equally, of course, it will take time to get enough access in order to switch on the volume conversion, and hence, then the sales will follow. And it's more or less the pattern we have seen with Breztri.

You have seen in the announcement, Breztri is growing over 70%. It's on its way to become a blockbuster, hopefully very soon, and I think we are expecting the same pattern also for Tezspire moving forward.

Pascal Soriot (CEO)

I think really the important point, as Ruud said, is really to expect that this, this is not, an oncology new indication that, that really addresses a big unmet need with a very fast sales ramp-up. It's more progressive. But the beauty of this, kind of inhaled, products is that when you are established, you have a very durable asset. I mean, look at Symbicort. It's been around for a long, long time, and it's still out there, and it's still a very good product, with good sales, very good profitability. So we have to have the resilience to get it to the right level, and then it will stay at a good level for a long time to come, because there's not a huge amount of competition, and there is a clear unmet need there. Emmanuel?

Mark Purcell (Head of European Pharmaceuticals Research)

It's Mark Purcell from Morgan Stanley. Thank you. 2 questions. The first one for Aradhana. I guess what some people are being concerned by this morning is the certain anticipated transactions part of your CER guidance, which you expect to increase substantially in 2024. I guess they've triangulated that with a PARP-1 selected moving forward, and the last time you moved forward with a PARP inhibitor, you had a $1.6 billion upfront milestone from a partner. So can you confirm that R&D's potential revenues is still in the low twenties? I presume it is. But more importantly, can you give us some qualitative guidance on SG&A, which obviously stepped up a lot in Q4, and just where that will land for the full year 2024.

Then the second question is on your CVRM syndrome pipeline. I guess, you know, this is all about going after symptomatic diseases like obesity and preserved ejection heart failure to capture asymptomatic diseases like CKD. So could you help us understand the opportunity here, and the level of investment you're going to put behind this combination of assets, this franchise? And then specifically on the Echosens drug, we're getting a lot of questions around manufacturing. If you can help us understand how many CMC steps this product has, given that with orforglipron, it's estimated to be over 30, and therefore incredibly difficult to scale. Thank you.

Pascal Soriot (CEO)

Aradhna?

Aradhana Sarin (CFO)

Sure. So, on the SG&A front, you know, if you look at Q4 last year, which I think you mentioned is a, is a concern in terms of the, the step up, if you look at last several years, the Q4 is always one of our largest quarter in terms of, of SG&A. That does not mean that's the run rate, sort of obviously going forward. And then, when you look at 2023 and our updated guidance and some of these, you know, some of the, the tax transactions and, and net tax changes that we were, we, we had in mind, and we managed the whole P&L.

So we, you know, chose to invest in certain areas, including some of the launches that you heard about from Ruud and so forth. So that sort of explains, you know, the Q4 of 2023. I think on looking on 2024, we've obviously given guidance on top line and bottom line. I've talked about some of the increase you'll have in finance expenses. I've talked a little bit about the growth margin expectations. And so, you know, you can- you can sort of consider that and see where, you know, the SG&A growth will be.

We are obviously committed to operating leverage, and we do expect that, you know, given those puts and takes, that the SG&A growth will be, you know, lower than the total revenue growth.

Pascal Soriot (CEO)

So maybe, Emmanuel, just to add to this, I understand now the question, also the concern that you mentioned, and connecting to James, all your questions. I think it's important to keep in mind that we believe the product sales are... In our guidance, product sales will grow strongly. I mean, the guidance is low double-digit to low teens, right? So that's a range, and product sales will be in that range. So message is, our top line revenue growth is not driven, I mean, it's not dependent on this on this one-off, as you said, yeah. Ruud?

Ruud Dobber (EVP and President, BioPharmaceuticals Business Unit)

Yeah, so let me first phrase a little bit the opportunity in CKD, Mark. There are more than 800 million patients around the world suffering from CKD. And despite the progress we have seen in the last few years, especially the SGLT-2 class, including our own Farxiga, there's still a huge unmet medical needs, and hence our, let's say, excitement. Also, the products we have in development, clearly one is the combination of dapagliflozin plus Zibotentan. And, and of course, Sharon can, can talk about that as, as well, makes us quite bullish about, this opportunity. Now, equally, Mark is developing an Alexion, a potential Neogen, a molecule.

This is a space where many companies have left the field, so the kidney space, while we believe that there are huge opportunities, based on our pipeline, in order to really build a very strong pipeline. So I don't know whether you want to talk a little bit about one of the combinations, Sharon?

Sharon Barr (EVP, BioPharmaceuticals R&D)

Sure, I'd love to. So you asked us about the scope of our investment, and then I'll also address your question about our space, our focus on metabolism. So to reframe what Ruud said, there are 20 million people living with CKD and hypertension in the U.S. alone. So clearly, this is a very large market, and it speaks to the interrelatedness of cardiorenal and cardiometabolic disease. So thinking about how we can address the different flavors of CKD with our portfolio, we are advancing the Baxdrostat/dapa combination. It's in phase III for CKD. We have balsartanone combined with dapagliflozin. The Miracle phase II study in CKD with heart failure achieved high-level results at the end of last year, and we really look forward to sharing those at an upcoming conference, and we are in the thick of phase III planning at this point.

And then the combination of zibotentan with dapagliflozin allows us to address CKD with high proteinuria, and we have initiated the Zenith Phase III trial. So clearly, we're heavily invested in this space, and we view this as an opportunity to manage the complexity of cardiorenal disease and to help people manage their overall health. With that in mind, we do think that our metabolism portfolio dovetails very nicely with these efforts to achieve organ protection while managing health, because we understand that these diseases are highly interconnected. So if we think that there are 64 million people with heart failure worldwide, 15 million alone in Europe, in Europe alone, and we know that, 50% of those patients have renal impairment, and 42% have some interrelated metabolic disease, it makes sense that we want to continue to expand our portfolio in the metabolism space.

We have been, I think, very open about the acquisition and, and our interest in the five zero zero four program. Although this is not our only program, this is one piece of our overall focus on metabolic disease. Moving along at pace, we also have a long-acting amylin, as well as a GLP one glucagon dual agonist. Speaking briefly to five zero zero four, we are excited about this asset. We are encouraged to see it move forward into 2 phase IIb trials this year.

Pascal Soriot (CEO)

You want to say a few words about the manufacturing steps?

Sharon Barr (EVP, BioPharmaceuticals R&D)

Actually, I'll say two things. The first is that one key focus for AZD5004 is being able to simplify our manufacturing process, and come up with a simpler synthetic route. Together with our collaborators at Echosens, I think we're making substantial progress on that front. The second thing that I will say continues to speak to the interconnectedness of disease, which is that AZD5004, as an orally bioavailable molecule, is very well suited to potential combinations with other oral molecules in our portfolio. And so I would include in that list, Farxiga, as well as our oral PCSK9 inhibitor. So we look forward to sharing results of our phase I trial, which only recently wrapped up. This was a highly controlled 4-week inpatient trial that was piloted by Echosens.

We achieved database lock at the end of December, and we look forward to sharing the data at an upcoming medical conference.

Pascal Soriot (CEO)

Yeah, maybe one quick point is that everybody focuses on obesity, but there is this big segment of people who are not obese, they're overweight, so they don't need to lose 25% weight. They need to lose a bit of weight, and they have metabolic disease, sometimes with organ damage as well. And in that segment, which is extremely large, and where the payers are more likely to pay, managing the various dimensions of the metabolic syndrome with a PCSK9, with DAPA, with Baxdrostat, and being able to combine is going to be a substantial advantage if you have this portfolio that we have then.

Simon Baker (Partner, Head of Global Biopharma Research)

Thanks, Pascal. Simon Baker from Redburn Atlantic. Two if I may, please. Firstly, on Tezspire and Saphnelo, now they've both been on the market for a while. I wonder if you could give us an update on the characteristics of the prescribers and patients so far for both drugs. Question on Gracell and FASTcar. If you could just give us an idea of how easily scalable that manufacturing technology is, and also a bit more color on the comment that Gracell have made in the past, that there was a substantial manufacturing cost advantage here, which sounds like it could be quite significant as you move into autoimmune areas. Any color on that would be very much appreciated. Thank you.

Ruud Dobber (EVP and President, BioPharmaceuticals Business Unit)

Yeah. Let me first start with your question about Tezspire. The product is doing very well, not only in the United States, but also equally in the markets we have just launched. We have leading NBRX, so new to brands, market shares in countries like Spain and Germany. The patient population is a very interesting one. It's primarily the patients who have, let's say, a moderate or normal eosinophil count, but are allergic. So the low T2 patient population is highly dominant in what we see so far. But equally, we also know from our clinical studies that Tezspire is also very well established in the high eosinophils in the United States.

So the broad utility of the product, and no need for a biomarker, no need for phenotyping, makes it a highly attractive choice for especially allergists and more and more pulmonologists, as well. So, we have high expectations, and together with our partner, Amgen, I think it's fair to say that the product is on its way to become a blockbuster anytime soon. So that's, that's one. Saphnelo is another very nice story. It's the only interferon receptor antagonist. As we all know, lupus is a disease with multiple manifestations and multiple organ manifestations. It's particularly very impactful on skin disease. And we have seen very, very strong feedback from rheumatologists that patients primarily with skin manifestations are reacting very well on Saphnelo.

Equally, we are only operating in the intravenous market as we speak, so we are doing for the last 1.5-2 years a relatively large study for a subcutaneous formulation. And I truly believe hopefully next year that study will read out, and if we have a positive readout, it will provide another clear opportunity. And as Sharon mentioned in her remarks, we are very keen to move Saphnelo also in multiple other indications in order to further grow the brand, to also equally a blockbuster brand in the next few years.

Pascal Soriot (CEO)

Thanks, Ruud. Suzanne, do you want to comment on Gracell?

Susan Galbraith (EVP, Oncology R&D)

So, as I mentioned in my prepared remarks, the actual time that you need to manufacture the FASTcar is substantially shorter than for some other currently commercially available CAR-T therapies. That's one component of the turnaround time, obviously. So it's one component also of the manufacturing cost. I think it does help with scalability because the amount of time that you need to process each individual patient's batch is also shorter within the manufacturing facility. So what that means is that you do get increased capacity for a given size of the manufacturing, you know, building that you've created. So that's important. But also, it means that you can be more predictable about the delivery.

Because you're actually generating a smaller total number of the cells that have to be delivered to the patient, the likelihood of success of each of those is higher. So all of these things, I think, contribute to the overall benefit that we see from the FASTcar process.

Pascal Soriot (CEO)

Thanks, Susan. Maybe we could take one online question. Tim Anderson, Wolfe Research. Tim, over to you.

Simon Baker (Partner, Head of Global Biopharma Research)

Thank you. Any headwinds to revenue growth for individual key brands in 2024 that you'd like to call out, you know, relative to where you see consensus? So in rare diseases, you're facing some new competition. In oncology, you talked about Enhertu, but what about, you know, Tagrisso or Calquence? Calquence in the U.S. seems to be stalling out, for example. And then second question on Dato-DXd, any risk to approval in the U.S. in lung and non-squamous, based on what you have today? To me, the regulatory precedent says it should be low risk, and you should get approved, but that's not necessarily the consensus view. So what's your confidence here, and what happens if OS misses and non-squamous remains supportive, but doesn't formally hit? Thank you.

Pascal Soriot (CEO)

Thanks, Tim. What I propose, Marc, you cover Ultomiris and the general competitive environment. Dave, you could cover Calquence and Tagrisso. And Tagrisso, maybe also talk about, you know, not only the headwinds, but also the potential upsides. And then Susan, you cover dato?

Susan Galbraith (EVP, Oncology R&D)

Yes.

Marc Dunoyer (CEO, Alexion, AstraZeneca Rare Disease and Chief Strategy Officer)

So let me start with Ultomiris. So basically, the headwind that we can anticipate is the introduction of biosimilars in the PNH indication. Two competitors have started to gain approval in 2023. The impact on 2023 is still very limited, but obviously, this could increase over time. The way we counteract this headwind is by converting as fast as possible from Soliris to Ultomiris. And in the main indications, both neurology indication as well as PNH, the conversion is very high. It's in the magnitude of 80%. That's the first thing. The way we're also sustaining the growth of the complement franchise is by expanding our regional presence, and we have augmented significantly in 2023. We still have more work to do in 2024.

We are increasing the number of approval and reimbursement for Soliris as well as for Ultomiris. Lastly, this is a long-term work that we have been doing to make this franchise, C5 franchise sustainable. We are continuing to develop new indications. We have NMO that has been approved recently in Europe and Japan with very rapid uptake. We are soon to get the US approval, but we will also continue with other indications which are presently in phase three. So not only on the C5, and then we have also, if we want to, but C5, we have the nanobody bispecific 1720 Geflimumab that is, you know, well advanced in phase three and should, you know, be coming to the market in myasthenia gravis very soon.

There is a very bright future for the C5 franchise and the complement franchise overall.

Pascal Soriot (CEO)

Thanks, Marc.

Dave Fredrickson (EVP, Oncology Business Unit)

Turning to oncology, and Tim, on your question, so very directly on your first question, which is: Are there any places where there's headwinds relative to consensus? I commented in my prepared remarks on the only one that I would call out, but I think it's important, which is that in Japan, in February, we had repricing on Imfinzi that I'm not sure is built into all of the models moving ahead. And we do anticipate, because of some changes from weight-based to fixed dosing, that we will see another in Japan, Imfinzi price adjustment. With that said, on the specific question about Tagrisso, I'm enthusiastic about where Tagrisso ends the year and where it comes into next year.

As I mentioned, we're seeing good underlying demand growth sequentially within the U.S. and within Europe, and I think that is coming on the heels of ADAURA and FLAURA performing well. We've got an opportunity in China, despite the competition that we're seeing there, to move out of this anti-corruption shadow that I think has affected the ability to be able to really take advantage of a leadership position that we have, all doing the right thing. But just in terms of, you know, access in general to oncologists has been more limited. We've got FLAURA2, which, knock on wood, we'll see an approval on here sometime within the year. We've got LAURA, which I think is a really important catalyst that will read out again here within the first half.

So I look at the outset on this, and I think also on a competitive landscape basis, Farxiga positions us pretty nicely. On Calquence, no question that we've got a competitive environment, and we've got a direct competition. But I also like what our US and European teams have been able to do in the face of that competition. I think that within that, we've got a leadership position within frontline CLL that we've been able to maintain. I think if you take some of the month or the quarterly phasing out of the situation, we've seen really good, strong underlying demand growth on Calquence throughout the entirety of the year.

I'm hopeful and optimistic that as co-pay within the U.S. is lowered, Pascal talked about this in his remarks, and we see affordability go from patients having to pay 5% of the catastrophic to zero, and therefore, a co-pay cap that is $2,000, that this is going to give patients the ability to be able to stay on and have greater adherence to continuous treatment to progression on BTK therapies. So again, we have to see that play out. We have to see how that works through, but I think that these are elements that give me enthusiasm about the oncology portfolio and the opportunities in front of us.

Pascal Soriot (CEO)

I think this co-pay cap, it should really not be underestimated, because if you look at the U.S. system on the Medicare side now, it is going to be a very, very good system. I mean, many countries have co-pays. I mean, Australia has co-pays, Switzerland has co-pays, many countries have co-pays. And here in the United States, people, patients are going to be able to say, "I'm not going to pay more than $2,000 a year, regardless of how many drugs I receive, regardless of how much they cost, $2,000." Now, you might say $2,000 is a fair amount of money, but you know, if you have a car insurance, a house insurance, that's going to cost you at least that, and many people can afford this.

It's a great level of reassurance in terms of taking your medicines and being adherent to them. And for us, it will mean a reduction of free goods we have to give, which has been increasing substantially in the last few years as more and more people cannot afford to cover the co-pays.

Luisa Hector (Head of Global Pharmaceutical Equity Research)

Thank you. It's Luisa Hector from Berenberg.

Simon Baker (Partner, Head of Global Biopharma Research)

There was a question on data.

Pascal Soriot (CEO)

Oh, I'm sorry.

Simon Baker (Partner, Head of Global Biopharma Research)

Sorry.

Susan Galbraith (EVP, Oncology R&D)

That's all right. So can I answer? Yeah, okay, so first of all, thanks for the question. You know, we're confident that Dato-DXd is going to be important medicine in the, in the treatment of non-small cell lung cancer. Obviously, we've been having ongoing discussions with the regulatory authorities. TROPION-Lung01 is a trial with a dual primary endpoint, and obviously we met PFS as one of those primaries. But OS is going to be important in the second to third line setting. When you think historically, other than checkpoint inhibitors, no medicines have demonstrated OS benefit, and docetaxel currently remains the standard of care.

I'll remind you that in the non-squamous population, the data that we presented at ASCO, we showed that the hazard ratio in the non-squamous for OS was 0.77, with a confidence interval that only just overlapped 1. So it was 1.01 at the upper end. So I think that shows that we're not just seeing a progression-free survival benefit, but there's a strong trend to OS within that patient population. So you know, quite often... As is normal, as the OS events mature, we'll often have an update of the OS during a period of review, and we'd anticipate that during the period of review for TLO1, we can update the OS.

Pascal Soriot (CEO)

Sorry.

Luisa Hector (Head of Global Pharmaceutical Equity Research)

All right. Thank you, Louisa at Berenberg. I would like to ask Iskra to comment on the Icosavax deal, and just the attractions of the assets there, and the opportunity to enter the RSV market. And then also maybe to pivot from that, slightly bigger picture question, but essentially a margin question, sorry. You know, you've shown us the fabulous pipeline progress, the breadth and depth. We see the entry into new therapeutic areas, the modalities, vaccines, obesity, cell therapies, et cetera. So it's really bubbling. So really, it's about how you can be so confident in some margin expansion midterm. How, you know, how can that happen? Is there a point where selling costs, the infrastructure stabilizes? How do these fabulous products compete for R&D budget?

Is it about strict, almost attrition, making sure absolutely the best products are moving forward? So just any color on that so that you can give us confidence in the ability to raise margins, given all the excitement within the pipeline. Thank you.

Iskra Reic (EVP, Vaccines and Immune Therapies)

Should I start? Thanks, Luisa, for the question and for interest. So, the proposed acquisition of Icosavax really strengthen our late-stage pipeline in vaccine and immune therapies, because the Icosavax lead asset is the combination RSV hMPV vaccine that is phase III ready. And that is important asset for two different perspective. On one side, this is a next-generation vaccine technology within the respiratory vaccines, because it's a protein virus, like particle vaccine. And importance of that vaccines is that they have a potential to be better, more effective, and more safe than a non-VLP vaccine. So basically, what you can expect to see from those vaccine is to have a higher efficacy and a longer durability of the effect, and in the same time, better safety profile.

The second important aspect of this is that this is a combination of RSV and hMPV vaccine. Although you can argue that there are a number of RSV vaccines for the adult population available in the market, there are neither preventive or therapeutic options for hMPV. And maybe that's the virus that many of you even never heard about, but I can tell you that the RSV and hMPV are basically among leading causes of the severe respiratory infections. And if you look at the numbers of the hospitalization and infections, basically in the similar rate between hMPV, RSV, and flu. And therefore, we feel excited to use this vaccine to, on one side, you know, accelerate and bring it to patient as soon as possible.

On the other side, it's a great strategic fit because it really builds on AstraZeneca experience in RSV, as well as, builds on our therapeutic leverage in, you know, serving the patients that are at risk of respiratory diseases. And just at the end, I need to mention that the deal is still subject to closing. Thank you.

Pascal Soriot (CEO)

So Louisa, your second question, the R&D spend, as we've said before, we expect to keep in the low 20s, 20s% as a percentage of revenue, and our improvement will come from SG&A. So we are very committed to achieving this margin expansion in the midterm, as we've communicated for now quite some time. We are on track, and we're committed to this, and really is about leveraging the critical mass and some of these products that have required, sorry, a lot of promotion at scale in terms of promotional effort. If you look at Breztri, look at, I mean, Farxiga will be even potentially declining in promotion. So we can manage with this large SG&A spend. We have to manage, I should say, so that we can actually deliver this midterm ambition.

Now, the long-term ambition in operating margin is something we will define over the next couple of years as we see the progression of the pipeline, because quite honestly, what we've seen in the last two to three years is an expansion of our pipeline. We have a number of products now in the pipeline, the PCSK9, the GLP-1, of course, Baxdrostat, that we believe can drive a lot more top-line growth than could have been anticipated, say, a couple of years ago. So depending on how the pipeline shapes up, you know, we'll have to decide what our percentage margin ambition is. But I've said many times before, and I want to be clear, what we focus on is the absolute dollar value and the cash flow we deliver.

So if we had, and I'm not saying we would, but if we had to compromise on the the future progression of operating margin beyond the mid, beyond the mid-thirties, if we had to compromise on the percentage, it would be because we deliver more top line and the same or more, absolute dollar value in, in operating profit and cash flow. 'Cause ultimately, as I keep saying, we deliver value to, to, to shareholders with dollars, not percentage, right? And so really, if we can deliver even more growth than we had anticipated two years ago, it will drive more, more profit.

So we'll have to adjust this over the next couple of years based on our pipeline, but with the firm commitment that in absolute value, we will deliver, you know, a substantial growth in top line, but also in bottom line growth. Do we have a microphone there? Eric.

Eric Le Berrigaud (Managing Director, Healthcare Europe)

Yeah. Two questions. First, for Aradhana. Coming back on one of your comment before on CapEx. So CapEx anticipated to grow by maybe as much as 50%. How should we think about this going forward? Is it a one-year sharp increase, or should we think about CapEx staying around $2 billion for the next few years, or thinking in percentage of revenues? Or how should we model this? And maybe the second question for you, Ruud and Sharon, about maybe the next wave of innovation into the biologics in respiratory. We see one competition coming with long-acting IL-5. We see more interest for the TSLP targeting in also with long-acting, but also combining with other targets. What is AstraZeneca doing for the next wave and to build on the existing franchise? Thank you.

Pascal Soriot (CEO)

Aradna?

Aradhana Sarin (CFO)

Sure. Thank you for the question. On CapEx, you know, if you look over the last several years and you benchmark us against our peers, we've actually under-invested in CapEx substantially. And, you know, that's also because we had other opportunities to invest and so forth. But when you look forward, and especially this year, we've given guidance on specifically, we're investing behind a number of products that we're bringing forward, right? So we just announced the cell therapy facility in Rockville. So again, Susan talked about the whole cell therapy ambition. You know, that requires upfront investment in CapEx. And again, some of that is at risk, obviously.

You know, we're investing in our own API plant in Dublin, and that's also because, you know, we're trying to become more self-sufficient as it relates to API. We announced an inhaled facility in Qingdao, and that's to, you know, fulfill the demand that we expect for Breztri, for example, to come out of China. And in addition, you know, we are investing in our ERP systems, which, you know, has, as I would say, for many, many years, been under-invested in. So, you know, there are a number of these investments that we're making behind our pipeline, and, you know, you've seen from recent transactions and other investments that some of our peers have...

are doing and have done, that it is become increasingly important to have more and more self-reliant supply chains. And oftentimes, you see companies, you know, not being able to fulfill their growth ambition because of under-investment in supply. So we're sort of getting ahead of this curve for the pipeline and the new opportunities.

Pascal Soriot (CEO)

One of the things that, you know, that the, this plant in Qingdao will support is our growth ambition in the respiratory market in, China. If you look at COPD in China, it's totally underdeveloped. I mean, the treatment is. The disease is extremely prevalent, pollution, smoking, aging, so there's a lot of COPD, but, the market is totally underdeveloped. Today, we have 65% or more market share with Breztri in the triple segment in China. And, you know, as the market develops, we're working very hard on expanding it. As the market develop, and we have local manufacturing, there's enormous potential for products like, Breztri, and that, that is really why we decided to make this investment.

Ruud Dobber (EVP and President, BioPharmaceuticals Business Unit)

Quickly regarding, let's say, the future of the biologics, and Sharon will comment on the science in a moment. So despite the progress we have seen in the last few years with products like Duspy and Fasenra, it's also a fact of life that there's still a high medical need that remains. So still patients are suffering from multiple exacerbations in the severe asthma, asthma segment, as well in COPD. So we're going to bet on new mode of actions. The anti-IL thirty-three is clearly one of the examples. I'm sure Sharon will say a little bit more about that. But also, we have an anti-TSLP in development, and it would be quite spectacular to have a inhaled biologic in order to help those patients suffering from a very severe disease.

So new mode of actions hopefully will unlock the power of those medicines and this indication. And you will see, I think, a lot of studies in the next few years both in asthma and COPD in order to generate the evidence that it can work.

Sharon Barr (EVP, BioPharmaceuticals R&D)

So I'll build on that, and really continue forward with Ruud's message, in which we are proud of both following the science and thinking about patient needs as we create our next wave of therapeutics. So we're aware that patients with respiratory disease, both asthma and COPD, are first treated in the community, and then progress to specialty care. And so we're creating a range of therapeutics that are able to meet the needs of their care providers, but also building on the science that we increasingly understand about these diseases. So in asthma, building on our success with Fasenra and Tezspire, we're moving forward to thinking about how Toseracimab can be effective there. Toseracimab is a differentiated therapeutic in that this anti-IL-33 is hitting both the ST2 and the RAGE EGFR pathways.

So it's able to address the inflammatory piece of the disease, as well as mucus production and tissue remodeling, which we think is going to be very powerful for patients. And then thinking about how patients are accessing their care, moving into the pre-biologic space with an inhaled TSLP, which we think is a very novel, mode of delivery, and will allow us to broaden this modality to a larger number of patients, as well as an inhaled JAK inhibitor and an oral FLAP inhibitor. So really expanding our science in the pre-biologic space. Thinking about COPD, which is still a major unmet medical need worldwide, building on our success with Breztri, and again, thinking about how we're delivering an inhaled TSLP in the pre-biologic space, offering patients those options, as well as an IRAK4 inhibitor, and again, evaluating Midapirstat in that space.

We are offering patients a number of different opportunities to address their disease with their general practitioners, and then also to access biologics and different mechanisms as they're moving into specialty care. I hope that answers your question.

Eric Le Berrigaud (Managing Director, Healthcare Europe)

If I can just add on the IL-33, it looks like even physicians have seen less data than from Sanofi and from Roche on the phase 2. You're already into phase 3. Should we think about getting more phase 2 this year, or when are you planning to give more?

Sharon Barr (EVP, BioPharmaceuticals R&D)

Yeah, as you know, we, we're so encouraged by our data, we moved right to phase 3 in that program, and we'll look forward to sharing our phase 2 data as it becomes available at an upcoming medical conference.

Ruud Dobber (EVP and President, BioPharmaceuticals Business Unit)

So there are two big ones ongoing. One is the anti-IL-33. It's also in acute respiratory failure. And hopefully we will see data after the next season, so somewhat next year, and if positive, fingers crossed, it will be the first then anti-IL-33 in a complete new segment, where there's a very big unmet medical need. The second one, clearly, our phase 3 trial in the COPD space. We've added an additional arm, a higher dose, and that trial's ongoing, and will read out in the next two years.

Pascal Soriot (CEO)

Maybe we take the last question. Is that okay, Andy? So Gonzalo, the question online, Gonzalo at ABG, over, over to you.

Gonzalo Artiach Castañón (Equity Research Analyst, Pharma and Biotech)

Hi, can you hear me?

Pascal Soriot (CEO)

Yep.

Gonzalo Artiach Castañón (Equity Research Analyst, Pharma and Biotech)

Great. Hi, Gonzalo from ABG Sundal Collier. I have a couple questions, and the first one is on AIRSUPRA. It follows the previous question from the audience. How big is the expected sales force and commercial team for AIRSUPRA, and what is the current level of awareness of this drug from doctors today? Also, in 2023, you have been preparing for the launch of the drug, so what is the biggest challenge, based on your experience through the year, to penetrate the market that one could expect it to be quite conservative? And the second question, it's on Tagrisso. It seems from your report today that the demand in China had some issues due to hospital ordering dynamics. Could you give us some color on that, and how much is expected to affect 2024? The same for the Australian government rebates looking also into 2024 and beyond. Thank you.

Ruud Dobber (EVP and President, BioPharmaceuticals Business Unit)

So let me try to answer all the questions in a concise way. First of all, the field force, I'm not going to, let's say, ex- give you complete numbers, but it's a very substantial field force. It's substantial for two reasons: we're detailing on the allergists, as well as pulmonologists, as well as we are detailing on the very large number of primary care physicians. Now, the good news is, that field force is a shared field force with Breztri, so we try to be very economically savvy in order to make sure that, that we're not going over the top. The awareness, we have used 2023 to create a very substantial amount of awareness.

The awareness is over 80% at the level of both the allergists and pulmonologists, and especially allergists are the first prescribers. We started in a soft way in the last quarter, and the last quarter we had already 5,000 trialists, especially at the specialist level, for AIRSUPRA. Once again, the biggest challenge, and that's the last question you were asking, what is the. not the headwind, but what is the biggest challenge? The biggest challenge is we are very happy that the three large commercial PBMs have now listed AIRSUPRA, but there are multiple downstream PBMs, and we still need to gain access there. Now, it's nothing specific to AIRSUPRA.

It's just a fact of life of the U.S. environment, so we're working very diligently with our market access teams to, or in order to create that access, and equally, we're going to bid for Part D in the course of this year as well.

Pascal Soriot (CEO)

If Tagrisso. Thanks, Ruud.

Dave Fredrickson (EVP, Oncology Business Unit)

Yeah, so on Tagrisso, within China, the Q4 hospital ordering dynamics we've seen for the last several years, and it just really has to do with hospitals managing their budgets as they come to the end of the calendar year, which is also the fiscal year. So it doesn't carry any weight into outlook for 2024. In fact, as I think about how we enter into 2024, certainly we continue to face competition, but where we don't face nearly as much competition is in the adjuvant setting. I think it's important to remind that there's a sizable EGFR population within China, 30%-40%. Also, thoracic surgeons do have the ability to prescribe systemic therapies, so therefore, there's a relatively high adjuvant treatment rate, and we had Tagrisso added into the NRDL with no discount.

So I think that we come into the year with an opportunity to see growth in these really real demand side, side of things, and there are many fewer competitors that are playing within that adjuvant space. And our data, I think, stand out as being the most impressive there. The Australia rebate reclassification is almost a direct offset between what you see on the Zoladex, established rest of world beat, and the Tagrisso rest of world beat. It's a mostly a one-time event. And I say mostly just because there's some carry on through the year, but I don't anticipate talking about it ever again.

Pascal Soriot (CEO)

Thank you, Dave. So thank you so much for your interest and your great questions. Maybe a few messages to close this meeting. The first one is just kind of taking into account all the questions asked today. First one is product sales in 2024. We will still have very strong product sales, and the product sales will grow. I mean, the growth of product sales in is coherent with the guidance we gave for top-line revenue. So the clear message is we are not dependent on collaboration revenue to grow in 2024. Our portfolio is doing very well, and all our geographies are doing very, very well.

The second message is we are committed to this mid-term operating margin, and it is, of course, challenging because, as you've said, we have a very big portfolio, and we have to invest in this growth, but we will get there. We are committed to this, and we're working towards this, making good progress. You saw the margin expansion in one of the slides, and we'll continue in that direction. The third message maybe is we believe we can manage through the Part D reform, and I mention it because I know some people have speculated this is going to be a big problem. It is a small headwinds. I mean, headwinds, we have headwinds all constantly in one market to another, one product to another.

The beauty of our pipeline and our footprint geographically is when one product faces a headwind, another product picks up. Remember, we have 13 products that are blockbuster status today, and one geography is struggling a bit, another one is doing better, and that's really the model as we have it. But overall, the Part D, and we spent a lot of time, our teams have spent a lot of time working on modeling this. The incremental rebates that we will have to deal with, you know, is, first of all, in part compensated by the reduction of free goods, which is substantial for some of our oncology medicines, and overall, the net effect is certainly a negative, but it's really totally manageable in the context of our total global sales and the growth rate we're experiencing.

And finally, but importantly, you know, we are absolutely confident we can deliver a very strong long-term growth, and that's really what we want to show you, and hopefully convince you at this, R&D Day, and I hope many of you will join us in the beautiful Gothenburg, where we have a tremendous, tremendously talented teams that are doing a great job. We have today a huge number of collaborations in the Cambridge area, and this is really leading to very good productivity from our R&D, efforts. With this, thank you very much and again, thanks for your great questions.