AstraZeneca PLC

Good day. Welcome, ladies and gentlemen, to AstraZeneca's Q1 2020 results presentation. Before I head over to AstraZeneca, I'd like to read the safe harbor statement. The company intends to utilize the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Participants on this call may make forward-looking statements with respect to the operations and financial performance of AstraZeneca. Although we believe our expectations are based on reasonable assumptions, by their very nature, forward-looking statements involve risks and uncertainties and may be influenced by factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Any forward-looking statements made on this call reflect the knowledge and information available at the time of this call. The company undertakes no obligation to update forward-looking statements. Please also carefully review the forward-looking statements disclaimer in the slide deck that accompanies this presentation and webcast. I will now hand you over to the company.

Hello, everyone. It's Pascal Soriot, CEO of AstraZeneca. Welcome to our first quarter 2020 conference call and webcast for investors and analysts. As always, the presentation can be downloaded from AstraZeneca.com, our website. and we've also sent it to people on our distribution list. So if you can turn to slide two, this is an updated Safe Harbor Statement. We will be making comments on our performance using constant exchange rates or TER, core financial numbers and other non-GAAP measures. A reconciliation between non-GAAP and GAAP data is contained in the results announcement and all numbers refer to million US dollars. and for the third quarter 2020, unless we state otherwise. Please turn to slide three. We plan to spend about half an hour on the presentation and then do Q&A for the rest of the time. For those on the phone, please join in the queue for questions and remember to press star one. There's also an option to ask questions as part of the webcast. I'd like to ask you please to ask one question only. Thank you in advance for this. Today I'm joined by David Fredrickson, our Executive Vice President of Oncology, Ruud Dobber, the EVP of Biopharmaceuticals, Marc Dunoyer, who is our CFO, José Baselga, our EVP of Oncology R&D, Manny Pangalos, our EVP of Biopharmaceuticals R&D, and also for the questions later on, we have Pam Cheng, who is our Executive Vice President for Operations and IT, and Leon Wang, who is our executive president, who is responsible for China in the emerging markets. Please turn to slide four. This is the agenda where we plan to cover all key aspects of our announcement today. Moving on to slide five. The first quarter of 2020 was a robust start to the year, despite the ongoing corona crisis. And it was supported by a strong business model and a good pipeline. Our total revenue advanced 17% and we estimate a low to meet single-digit revenue benefit from COVID-19. New medicines advanced by 49% and we saw continued strong progress across all the CRP areas and in emerging markets and across all regions of the world. The response to the COVID-19 pandemic has been strong and multifaceted and that included repurposing medicines, also the discovery of new antibodies and as well as supporting testing and providing aid around the world as we could. Our co-operating profit grew by 16% despite 19% lower operating income. With that, this decline in operating income, the underlying profit growth is about 30%, so very strong underlying business. With a tax rate of about 20%, our core EPS ended at $1.05 up 21% with leverage because it grew more than revenue. So with those very strong first quarter results, we are reconfirming our guidance, and we will be covering this in more detail later in Marc's presentation. Overall, we continue to see strong progress in the pipeline. in particular for the adjuvant use of Tagristo, which we will talk about and is definitely a practice-changing dataset. Moving to slide six, looking at the pipeline use flow since the results announcement in February, I will only pick a few highlights. There were new approvals for Mfinzi and HER2 and Loquelma. and a welcome to a brand new medicine, Koselugo, for treatment of children with neurofibromatosis type 1. There was regulatory submission progress for a couple of medicines, hopefully bringing new benefits to patients in the near future in prostate cancer but also in NF1. The highlights for phase 3 data readouts included the early trial unblinding for Tagrisso in the adjuvant setting and the early stop for Farsiga and chronic kidney disease. Turning to slide five, the first quarter of 2020 was the sixth quarter with strong total revenue growth following the return to growth in 2018. This was driven by the new medicines. Dagriso alone added more than $350 million in revenue, with Infinzi and Limpaza following suit. A number of medicines added significant amounts each including Fasenra, Partigas, Brilinta, and now Calcoins. The total new medicines added to $1 billion, and compared to past quarters, growth is now coming from a higher number of medicines that is further diversifying growth and sustainability over momentum. Jump to slide eight, please. The increased business diversification is clearly visible through oncology, which now makes up 40% of product sales. Across AstraZeneca, specialty care now makes up close to half of our business, bringing a balance to the company we intended to create with the new strategy. We now have achieved it. Another important balance is the one between established and emerging markets. Combined, China and the other emerging markets make up 36% of sales, with growth in ex-China markets of 16%, a new high point. The balanced business across types of benzines across CRP areas and geographies makes AstraZeneca WBD strategically well positioned in the current environment and well prepared to remain a very important partner for health care systems in all countries globally. Turning to slide nine, our partnerships around the world are exactly what is required in the common fight against COVID-19, the COVID-19 pandemic. Starting with the safety of our colleagues around the world, we have enabled working from home for thousands of co-workers for rapid redeployment of new technologies in January. There have been amendments made if required to ongoing clinical trials to ensure patient safety. We also work on humanitarian aid, which has helped keep frontline workers safe with donations of face masks and other protective equipment. And core to our purpose, There has been a relentless focus on the continuity of care for patients through the reliability of our medicines and the supplies. R&D efforts are focused on repurposing medicines like Calquence and Farciga, and new trials have started to test their benefits on patients. New antibodies are in development, and there have been impressive responses to governments when help was needed for testing and screening. I'm really very pleased by the effort undertaken by AstraZeneca and our more than 70,000 colleagues around the world. With this, I will hand over to Dave to cover oncology business. So please turn to slide 10. Over to you, Dave.

Thank you, Pascal. Now I'll plan an update on the performance of our oncology business before handing over to Ruud for an update on biopharmaceuticals and emerging markets. We're pleased to report strong growth of 34% for our oncology business, which is now annualizing at $10 billion. We're seeing regional expansion, particularly outside the United States, as our key lifecycle efforts start to take effect. The new launches are progressing very well with additional news flow every quarter. Please turn to slide 11. Starting with our new lung cancer franchise, we are pleased to report that both Tegriso and Infimbi demonstrated strong growth in the quarter at 58% and 57% respectively, with sales of $282 million and $462 million respectively. Tegriso is now approved in 81 countries in the first line setting. And in the quarter, we saw continued expansion in countries securing national reimbursement, which now totals 20. U.S. DeGrisso sales were up 43% as demand continued and as we see a good level of penetration in the frontline setting. We now see strong growth from Europe and emerging markets as these reimbursements and launches take effect. Japan was impacted by the previously mentioned price cut in November last year. On Infinsi, the majority of sales are still coming from the U.S. at $286 million. with a growth of 24% as we've reached high levels of penetration in the Pacific Stage 3 non-small cell lung cancer setting. We are now launching in the small cell lung cancer Caspian indication through the U.S. following early approval this month. Outside of the U.S., we are starting to see the sales of Infanzi pick up, particularly in Europe and emerging markets with sales of $75 million and $33 million. Japan delivered $56 million. The China launch of Pacific still happened in the first quarter despite the COVID-19 pandemic and we anticipate NRDL negotiations for this to commence next year. Please turn to slide 12. Lampardia demonstrated continued progress with sales of $397 million in the quarter, up by 69%, with half of sales now coming from outside of the United States. This reflected growth across all regions, as we continue to roll out the breast and ovarian cancer indications in the major markets of the US, Europe, and Japan. US sales were $197 million, up by 66%, with continued increase in demand as Lemparsa maintained its leadership in the PARP inhibitor market in both ovarian and breast cancer. Sales in Europe were $102 million, up by 61%, driven primarily by first-line ovarian cancer, and in emerging markets, sales were up by 120% to $56 million driven by the China launch and recent inclusion on the NRDL. Japan sales amounted to $34 million with growth of 53% driven by uptake in ovarian and breast cancers and we report a 14% price cut as of April this year. Please turn to slide 13. Now moving to the new launches, CalQuintz in chronic lymphocytic leukemia and in HER2 and third-line HER2-positive metastatic breast cancer, I'm very pleased to report that CalQuintz sales of $88 million in the quarter, predominantly in the U.S., with the new label in CLL taking effect at the end of 2019. Launch feedback is quite encouraging as the Phase III data are resonating very well with physicians. We're encouraged to see expansion in our prescriber base with around 60% of all new patient starts in CLL coming from new Calquence prescribers. And about a third of hematologists have now prescribed Calquence. Also, Calquence has achieved approximately 25% share of BTKI new patient starts in CLL. Following the Inher2 launch at the beginning of the year, we are pleased to have reported $14 million in collaboration revenue. based on $30 million of sales booked by Daiichi Sankyo in the first quarter of 2020. In the first quarter of launch and HER2 has achieved approximately a 30% share in the third line setting. Other launch metrics include about 800 accounts have been opened and about 1,000 patients have been treated so far. Initial feedback from physicians is strong as the safety monitoring program in place and the management of key safety aspects is well understood. Before ending, I would like to thank all of our oncology colleagues for what they do every day to the benefit of patients and our company, particularly during these challenging times. I'll now turn it over to Ruud for an update on our biopharmaceuticals business and emerging markets. Please turn to slide 14.

Thank you so much, Dave. Today I'm very pleased to talk to you about the biopharmaceuticals business. Total sales of biopharma comprising new cardiovascular, renal, and Metabolism and Respiratory and Immunology were $2.7 billion in the quarter, growing at 16%. Starting with new CVRM, sales were up by 8%, despite intense competition in diabetes, with total sales at $1.1 billion. Growth for both Fasiga and Berlinta continued, with double-digit increases. Fasiga reached $407 million in the quarter, with 90% growth, Maintaining volume market share leadership globally while benefiting from the SDLT2 class growth. In the United States, Frasiga saw a reduction of 14% as price declines took effect, though volumes continued to grow. Outside of the United States, which accounts for 72% of sales, we saw strong performances with volume-driven growth increasing. Europe's sales were up by 34%, with strong volume growth driven by the Declare cardiovascular outcomes data. Emerging markets sales were up by 55% benefiting from the China NRDL listing. Berlinda delivered sales of $408 million with 90% growth driven by a strong performance in emerging markets, up by 42%. We also had continuous growth in the US and Europe, up by 8% and 15% respectively. The majority of use is still in an acute setting and Berlinda continues to outgrow the market in all regions. Please turn to slide 15. Turning to respiratory and immunology, we reported sales of $1.6 billion with a 22% growth in the quarter, driven by Facenra and Symbicort, as well as some COVID-19 stocking. Symbicort growth was strong in the quarter at $790 million, with a growth of 36%. The U.S. saw particularly strong growth, up 76% to $310 million, due to demand growth and inventory increases at the partner following the launch of the authorized generic. Globally, Symbicort remained the leader in value and volume market share in the ICS LABA class. Symbicort was stable in the quarter with sales of $380 million due to an impact from the COVID-19 pandemic and subsequent restrictions disrupting hospital dispensations, particularly in China. The company continues to focus on growing sales of Symbicort and other at-home solutions ahead of Pomacort. Please turn to slide 16. Now I will focus on the new launch medicines. Facenra contributed $199 million of sales in the quarter, with the bulk continuing to come from the U.S., Germany, and Japan. In the United States, Facenra is performing very well against new competitors, up by 29%, with $120 million in sales. Europe and Japan sales were $46 and $21 million respectively, as Fasenwa continued to be the leading novel biological medicine for severe uncontrolled asthma in several countries. The launch of breast-free AeroSphere for COPD is progressing well with reported sales of $4 million in the quarter, with launches taking place in Japan and recently in China. Regulatory reviews in the US and in the EU are progressing, with anticipated decisions in the second half of 2020. Localma had sales of $11 million in the quarter, with sequential growth of 42% over the fourth quarter of 2019 as the US launch continues, and we maintain leadership in the new-to-brand prescriptions. Approvals have also been obtained in China and in the EU, which launches anticipated throughout the year. On Raksadustat, we reported collaboration revenue of $3 million coming from China sales following the initial launch and the recent NRDL inclusion. Now I will move to the emerging markets. Please turn to slide 17. Emerging markets, where sales grew by 16% in the quarter, continued to track ahead of our long-term performance ambition, which is to grow sales on average by a mid to a high single-digit percentage. Outside China, total revenue was up by 15%, with growth spread across the regions. China delivered stable growth at 70% as we saw some impact from the COVID-19 pandemic. The addition of Limpaza, Forsythia and Roxodustat to the NRDL, effective January 2020, contributed to the sales performance. New medicines grew by 87%, now contributing 29% of total sales in the region. with a strong performance driven by oncology and new CVRM. With this, I will hand over to Mark. Please turn to slide 18.

Thank you, Ruud, and hello, everyone. I want to take you through our financial performance in the first quarter, as well as our financial priorities and our guidance for 2020. Please turn to slide 19. I will start with the reported P&L. before reviewing our core results. As Pascal mentioned earlier, total revenues grew by 17% in the quarter, which included only a small element of collaboration revenue. Reported operating expenses increased by 10%. On top of the increase of core operating expenses that I will refer to in the following slides, part of the increase was due to an intangible asset impairment for Baduron. Please turn to slide 20. Moving to our core P&L, our gross margin ratio declined by two percentage points to 78%, primarily reflecting the impact of one-off adjustment related to group inventory and the growth in profit share from the collaboration with Merck in respect to Limpaza. Core R&D expenses increased by 9% as we invested in Onir2 and other oncology medicine, while core SDNA expenses increased by 7%, driven by additional investment in the China expansion and further support for global launches in oncology. Core operating income of $479 million primarily reflected the sale of legacy hypertension medicine, while our core tax rate was 20% in line with the indicated range for the full year. Finally, our core earnings per share ended at $1.05 for the quarter, up by 21%, despite a 4% increase in the weighted average number of shares. Please turn to slide 21. Turning to net debt and cash generation, our net debt has increased by $2.5 billion since the end of last year to $14.4 billion. This was in line with our expectation, given that our first half sees a payment of our final interim dividend. Encouragingly, there was a $526 million improvement in net cash from operations, reflecting on improved underlying business performance and a reduced increase in working capital. The smaller improvement in cash inflow before financing activities was driven by a decline in cash flows from the purchase of intangible assets. Please turn to slide 22. These familiar slides demonstrate our progress. The 17% growth in total revenue was converted into 21% growth in co-earnings per share, despite the increased number of shares. Our co-operating wage margin also held up well, up at 29%, even with a 19% reduction in other operating income. Part of this was reflected by the fact that co-operating expenses represented 57% of total revenue versus 61% a year ago. This all helped to demonstrate our early progress on operating leverage. Improvements in our P&L will be accompanied by an enhanced cash generation over time, which will then help us deliverage our balance sheet further and will also focus on our progressive dividend policy. Please turn to slide 23. Finally, I will turn to guidance for 2020, which, as I mentioned a moment ago, is on total revenue and co-earnings per share at constant exchange rate. Our guidance is subject to the global impact of the COVID-19 pandemic and is based on recent trends in the business. We will closely monitor developments and will provide you with an update at our interim results. In 2020, like in 2019, we are aiming to increase operating leverage, driven by a high single-digit to low double-digit percentage increase in total revenue. This is anticipated to drive growth in core EPS of a mid-to-high teens percentage increase. My confidence in our growth prospect is supported by our continuous geographic expansion, our pipeline, and our commercial execution. Our growth model is robust and the investment case is unchanged. This isn't the time for complacency, but we have the energy and momentum to consistently deliver for patients and our shareholders. With that, I will now hand over to José. Please turn to slide 24.

Thank you, Marc, and hello, everyone. I will provide an update on our oncology medicines since our last call. Today I am joined by Mene Pangolos who will discuss biopharmaceuticals and upcoming news flow. Please turn to slide 25. I'll now focus on our recent oncology achievements. I'll be moving from left to right. On the left, the Caspian trial final analysis confirmed that Infinsi, in combination with a choice of standard of care chemotherapy in the first line setting, so a substantial clinically meaningful overall survival benefit in extensive stage small cell lung cancer. The indication saw its first approval in Singapore, shortly followed by approval in the US. The potential for combination with the cisplatin or carboplatin and its favorable dosing regime provides more options for patients with this highly aggressive type of lung cancer. If we focus in the middle, our MEK1-2 inhibitor, COSILUGO, was approved in the U.S. for the treatment of pediatric neurofibromatosis type 1 patients who have symptomatic inoperable plexiform neurofibromas, following positive results from the phase 2 SPRINT STRATUM-1 trial. COSILUGO is the first ever approved medicine for children living in the US with plexiform neurofibromas to help them manage the incredibly complex and severe manifestations of their disease. And then if we move to the right, finally for Tegrizo, we had an unprecedented two year unblinding of the ADORA trial following IDMC recommendation based on overwhelming efficacy. ADORA is a phase three trial for Tegrizo in the adjuvant treatment of patients with stage 1B, 2, and 3A EGFR-mutated non-small cell lung cancer with complete tumor resection and optional standard postoperative chemotherapy. This is the first global trial for EGFR-mutated non-small cell lung cancer to show benefit in this setting, offering patients a potential for cure. We will now quickly pursue regulatory submissions in order to make and the greatest difference to patients' lives globally. We are also aiming to present the results of ADORA in an upcoming medical conference. Please turn to slide 26, please. Finally, I would like to take you through a quick update on our progress on a couple of our exciting new oncology medicines in earlier development. What you see here is the what's next and what's now. If we go to the what's next, I would like to focus today on our continuous commitment to breast cancer, highlighting our CERT inhibitor ACD9883. This compound has been presented at the ACR meeting earlier this week, and we will be sharing our plans for an extensive and ambitious program for the medicine in breast cancer at a later date. If we now move to the what's now for our antibody drug conjugate and HER2, we can confirm that we will be showcasing exciting data in non-small cell lung cancer, in gastric and in colorectal cancer, all at this year's ASCO. We look forward to update you on the progress of these medicines and others in the near future. I will hand over to Mene. Please turn to slide 27, please.

Thank you, Jose, and hello to everyone on today's call. This quarter, we announced the Farsiga Phase III Trial Dapper CKD will also be stopped early after demonstrating overwhelming efficacy in treating chronic kidney disease. With the success of this trial, there are an additional 2.7 million CKD patients in the U.S. without heart failure that could potentially be treated with Falsiga. It's important to note that currently only 12% of qualifying stage 3 CKD patients are formally diagnosed in the United States. Alongside our recently launched Roxadustat and the Kelmer, Our evolving renal franchise is now really well positioned to provide a variety of treatment options for patients with CKD worldwide. PERSIGA is now the first SGLT2 inhibitor to show clinically meaningful benefits in three distinct patient groups. Patients with diabetes, patients with heart failure, and now patients with chronic kidney disease. Please turn to slide 28. We're also taking the opportunity to expand and rename our respiratory therapy area to respiratory and immunology. This change reflects the increasing number of immunology indications we have in our pipeline and the acknowledgement of the shared pathways and disease drivers across therapy areas. For example, several of our multi-disease franchises, including Fisenra, Tezapelimab, and Medi3506, our anti-L33 monoclonal antibody, all have potential across both respiratory and immunology indications. The slide shows the extensive lifecycle management program we have launched for Fasenra across a variety of respiratory and immunology indications, most recently enhanced by trials in atopic dermatitis, chronic spontaneous urticaria, and bullous pentagoid. Please turn to slide 29. And now for an update for BioPharm and what's next in our pipeline, I'd like to highlight a couple of new programs. In CVRM, we have AZD2373, which is targeting apolipoprotein L1, or ApoL1 for short. This is a gene with variants that are related to an increased risk of early onset kidney disease and rapid progression thereof. And in respiratory immunology, We have 449. This is a select inhaled JAK inhibitor which targets a number of immunological drivers important in asthma. Throughout the year, we look forward to updating you on progress of these and other medicines and other exciting potential disease modifiers. Please turn to slide 30. I'll now take you through some key items of upcoming news flow in the next quarter across The Oncology and Biopharm Pipelines. In oncology, for Limpaza, we're anticipating regulatory decisions in the U.S. for both the PAULA-1 and profound data submissions for first-line ovarian cancer and second-line prostate cancer, respectively. We also expect to have a regulatory decision in China for Limpaza use in BRCA-mutated breast cancer. Also in the second quarter, we will commence regulatory submissions for an HER2 in gastric cancer. In biopharmaceuticals, we're expecting a regulatory decision for Forsega's Declare Label update in China, as well as a regulatory decision on the submission of DAPA-HF for Forsega in heart failure in the U.S. We're also expecting a regulatory decision for Vibespe in China for the treatment of COPD. And finally, for the second quarter of this year, Anticipating submitting a regulatory application in the EU to symbolical use of mild asthma. With that, I'll now hand back to Pascal for closing comments.

Thank you, Mene. Before the Q&A session, I will leave this slide for a few moments, slide 32, for a few moments as a summary of the strategic achievements. Our global presence Balance of Specialty and Primary Care, and a leading presence in the emerging market, also with significant R&D, one of the, I mean, defined our global presence. Secondly, we have a very strong pipeline with 17 phase three medicines and a significant number of lifecycle projects. And as you heard today, a lot more coming in the early and mid-stage pipeline. and finally, our third key message here is our financials are improving and we've delivered on our goals and we are very much on track with what we said we would achieve. With a number of new medicines and nine blockbuster products, we have returned to sustainable revenue and earnings growth and we are now focused on operating leverage and cash flow. So let's move now to Q&A. For those on the phone, please remember to press star one to ask a question. We also take written questions from the webcast Can I please remind everyone to limit questions to be fair to all. Limit yourself to one question. Thank you in advance for this. And perhaps now we can take the first question from the conference call. And I believe the first question is from Simon Baker. Simon, go ahead.

Thanks for taking my question. The question is on COVID and its impact. I think we're the only pharma company by virtue of your late reporting full year that actually included a negative impact from COVID. And so far in what's been a strong quarter, we've only seen a benefit, albeit one that may unwind later in the year. So I just wondered if you could If you could update us on how things are tracking against that guidance expectation. Are there underneath the net positive any negative areas, any factors which still lead you to leave the guidance at this stage intact? And also related to that, for you Pascal, I just wonder if If you could give us a flavor of the change in perception of Astra specifically, pharma in general, that you've seen from your discussions with governments around the world through this crisis. It seems that pharma is once again being seen more as part of the solution than the problem, and I just wanted to see how that's manifested itself in your discussions over this period. Thanks so much.

Simon, thank you for that. I assume you're referring to the full year and the guidance as opposed to the quarter one, right? Because in Q1, you do have an upset. Yeah, sure. So I'll ask Mark to add some color to this. But my first response to your question is there's a lot of unknowns about this crisis, of course. We see a lot of reduction of visits to doctors around the world, not only in China, but also now in Europe and in the U.S. and our expectation is that it will have, I mean, some of it will come back, of course, because some of it is only delayed, but some of it is not going to come back because patients, for instance, would miss their treatment for a chronic condition or would start their cancer treatment a bit later. So there is, we think, a potential, and we will give you more, a further update that they have here, but at this point we see a potential downside to this. On the other hand, we have upsides. And one of the main ones is Adora, of course, because we expected Tagrisso Adora in 2022, and it came very early. And I'm sure we will want to talk more about this later. But it is definitely an upside. And so all in all, we think all of this will balance itself out. And today, we believe it is prudent to reconfirm our guidance and, you know, also signal that the balance of risks and benefits and upsides and downsides is to the downside a little bit out of this crisis. I think we should be realistic with the impact it has on patients going to see their physician. So that's one part of the question. And I'll go back to Mark when he's taken to add some further call-ups, possibly. The second part is, yes, I think this crisis has definitely shown that pharma is part of the solution in many cases. I mean, in that instance, it really is very obvious to everybody that, you know, everybody's waiting for a vaccine or treatment. And clearly a strong pharma sector is important to be able to deliver those. And I think people are realizing this. But hopefully this is something that helps in the future also that people start looking at us a bit differently because quite frankly, we've always been part of the solution. When you give patients Farciga and you stop them from being hospitalized for heart failure, you save money. Not only do you improve lives, you save lives, but you save healthcare systems a lot of money because hospitalization costs are high. So I think this has been the storyline or the message the industry has been trying to get across, but not well heard, I have to say. Hopefully this crisis helps a little bit people see us in a different light. Back to your first question, Marc. Anything you want to add?

No, maybe just thank you, Simon, for the question. Maybe to just reiterate what we have presented today and also maybe explain how we do our scenario planning. So first of all, for the quarter results, we have a growth rate of 17%, and we have identified a stocking and an improved adherence and compliance of patients representing a low-to-meet single patient. Thank you very much. Thank you very much. We just anticipated in February the impact on the Chinese business, which I think wasn't too far off, but we had not anticipated then. The expansion to the rest of the world of the COVID-19 crisis. Thank you.

One quick point, Simon, on your question is, you know, we sell medicines that treat chronic conditions. And so chronic conditions are less affected, actually, because people, patients have their medicines at home. They keep taking them. And then we sell cancer medicines. And cancer is a severe disease, of course. You need to be treated. And in that, we sell oral medicines. Now, all in all, We tend to be less affected by the crisis, but still I think it is a responsible thing to acknowledge that there has to be some negative impact, limited hopefully, but some negative impact overall, which we of course cover with some of the upsides we have. And so that's all I will say. We'll move to the next question by Mark Purcell at Morgan Stanley.

Thank you. Good afternoon. It's Mark Purcell from Morgan Stanley. Just following up from Simon's question, actually, and specifically focusing on emerging markets, the performance is clearly very strong in the face of the COVID pandemic. Growth right in line with last year, China's 17% growth versus 35% last year. So specifically, could you help us understand the impact of COVID and in Q1 on China, where the new normal is emerging? It would be useful maybe to understand the Thank you very much. of drugs under NRDL. So it appears the objective here is to engage manufacturers on older medicines covered by NDRL on sort of centralized procurement and potential sort of price negotiations. So sort of framing that with the China question would be useful to get your thoughts on that.

Okay, thanks, Mark. I'll ask Leon to cover this one. Leon, can you address it?

Yeah, I think emerging markets in quarter one continue to show resilience, especially in China. I think in quarter one, China is impacted by this COVID-19, definitely. I think two major products, Nexium and IV injection, mainly for hospital usage, and also Pomacort for the pediatric asthma nebulization center, and these two part of business. There's no patient visit and no surgery happening in the hospital almost two months. And all these things are actually recovering now in the month of March, even though not fully, but it's very partially step-by-step gradually, So towards the end of April, we still see partial hospitalization and the patient needs to go through COVID-19 testing before they are even hospitalized. Unnecessary surgery are still postponing. Every day is but still not yet fully recovered. So we expect in late quarter two, early quarter three, there will be a fully rebound of surgery and outpatient department visit. So this is about China. China performance is actually really exciting and 16% emerging market performance is historical. So the emerging market is not just about China and Russia, Middle East Gulf and also Saudi and North Africa and Latin America, Brazil, Argentina and also Mexico, Korea. I think we have a lot of strong growing countries. So most of the markets in the emerging market are growing double digit. So we maintain quite optimistic on the low double digit growth in the emerging market. and also in China we are continuing investing for new launches. And last year we have three new drug inclusion, Roxadustat and Forsica and Limpaza, very important reimbursement inclusion. So we are now rolling out and getting hospital listing for all these three products. And we are launching three new products during the virus. Yingping Siding, and BreastG, also very, very major product for inhalation, which is the most important product to mitigate the long-term risk of pomegranate in China. And we will continue to invest in China. Thank you very much. Thank you, Leon. Just as an example, Russia was up 66% in Q1 at CER. So I'd like to here congratulate our Russian team. They're doing a beautiful job.

Next question is Louisa Ekster at Birnberg. Louisa, over to you.

Hello, thank you for taking my questions. I'd love to hear a bit more on Tigriso, Pascal. It sounds like you're thinking it may even contribute to 2020 sales, the ADORA study, so just to check on the Timing of filing and potential approval. How you see the market, especially with the labeling in the metastatic patients already. So do you see adjuvant and metastatic as two discrete patient groups, i.e. what proportion of metastatic patients have already had adjuvant therapy? And any comments on price as you move into a broader patient group? And if I can also just ask one more, because I noticed in the press release in terms of adapting to the COVID era, you talk about SG&A collaborating with e-pharmacies and also new platforms investing to communicate with healthcare professionals. So we'd love to hear a little bit more color on those. Thank you.

Right. So the first question, Tagrisso, I'll ask Dave to cover it. It's clear, actually, that we are not promoting off-label, but it's also clear that we're going to present this data at the medical conference this year, and we know very well in oncology physicians tend to follow the data, but it's, of course, very clear we cannot promote until we get the indication. Dave, can you cover the Tyriso question? And for SG&A, I'll ask Leon to talk about e-pharmacy. Any platforms and also Ruud could step in on that one. Go ahead, Deb.

Absolutely. Thank you, Pascal. So, Louisa, on your question, we're clearly thrilled about the data from ADORA. And as Pascal mentioned, we're really looking forward to sharing as soon as possible at an upcoming congress. Today, EGFR TKIs are only used in the metastatic setting. And one of the questions you asked was around what percent of the patients are metastatic that are de novo versus having been treated in the adjuvant setting. The overwhelming majority of patients are de novo, unfortunately, in lung cancer. It's one of the reasons that we see such abysmal survival rates, actually, within the disease. We don't see EGFR TKIs used in the resectable stage 1b through 3a setting, and about 30% of patients are diagnosed within the setting. So I think that in large part, we should see that this is a new additive patient population. It's not one that likely will lead to too much cannibalization. I do think it's important to keep in mind that a considerable amount of education and promotional work is going to need to take place, though. Testing is not a standard within this early setting. So EGFR testing today is not the norm. That's something certainly that we're going to have to be a part of driving. Active surveillance post-surgery is also something that today is happening as a therapeutic strategy, if you will, for a number of patients. So we're going to really need to ensure that there's an imperative to treat with Tegresso post-surgery or post-chemotherapy following surgery. And then finally, there's education on longer durations. We don't know yet what the duration of therapy median was within the ADORA study. We'll obviously see those data when we present them out, but we know that the study itself had longer duration, three years as part of the protocol, so the extent to which That's a longer duration than what we're seeing in the metastatic setting in terms within the study that will also require work on compliance and adherence to that longer timeframe.

Thanks, Dave. Leon, and then maybe Awud.

Yeah, I think during this COVID-19 pandemic, we see the trend of digital platform widely used. I don't think after this virus, and it will become a new norm that doctors are very used to digital platforms. So digital platforms are very good to do doctor education. So just to give an example, in China we have a disease but not product portal that attracts millions of doctors visiting the portal to get information. So it will become more and more popular that doctors get information instead of face-to-face meetings, switching to online resources Also, we are organizing COVID-19 cross-country physician experience sharing on how to treat diseases in the background of COVID-19 and how to manage COVID-19 patients. So every online webcasting, we are attracting 50,000 to 100,000 doctors across countries everywhere, Europe, US, and also emerging markets, and also China. And during the virus, we find very useful digital tools connecting doctors and patients. So some of the digital tool is using robots to help the doctors and nurses talking to patients, handling simple questions. And these are quite useful digital tools. We think that will continue even after the virus, very efficient. And online pharmacy, AstraZeneca is actually working with A lot of online pharmacy in order to help the patient to get their prescription refuel without visiting a doctor to create an unnecessary crowd of people in the hospital. So after this virus, I think all the governments are paying a lot of attention to not just for convenience purpose but also for within hospital infection, crossing infection purpose. So Amity will become also popular. And another thing is the internet hospital and the patients during the virus, actually more patients affected by, not by the virus, but by their normal disease that they are no longer going to do consulting and also to do surgery. So internet hospital will also become a very, very viable and also the government is also encouraging internet hospital making doctors consulting their patients and also having some second prescription and even first prescription are starting to be discussed in the policy. So I think all these three things will be quite prosperous after this COVID-19.

Okay, and thank you so much, Leon. Of course, based on the learnings in China, we have been able to quickly roll out remote detailing to most of our physicians around the world. It has been a phenomenal effort of our IT and digital teams in our company in order to help our field forces around the world in order to stay in contact with their physicians. And in some cases, it has been extremely successful. In other cases, Depending on the severity of the disease in a certain country, of course, it's less easy. On top of that, we are working on a number of areas to optimize care. For example, we are rolling out home-based treatments and medicine delivery solutions. We're working with other companies in order to do that. And just to give you a little bit of flavor about the impact and the importance of digital platforms, recently we hosted a meeting about COVID-19 with 45,000 HEPs from 90 countries on a conference call led by Pascal himself and that has been extremely well received by physicians around the world. So we are doing everything in order to stay in close contact with our prescribers and to help them to navigate through these very difficult times. Back to you Pascal.

Thank you Ruud. So the next question is It's about tesopilumab, James Gordon at Jeffy Morgan.

James, go ahead.

Sounds like we don't have James. Maybe we move to the next question, and we'll return to James a little bit later, probably again later. Tim Anderson at Wolf Research. Tim, go ahead.

Thank you. I'd like to go back to Grisso and get an update on where you are with getting first-line lung on NRDL, what your latest thinking is, and also the ADORA trial results. Does that help you secure NRDL and first-line lung just by creating even more of a halo effect around that brand? and then does Adora itself lend itself to NRDL listing in China eventually? Or do you think that's a long shot? And then on Calquins, if I could ask a couple questions. I think your Q4 slide deck noted you were capturing 60% of US CLL new patient starts. And then in this most recent slide deck, I think you said it's a quarter of new patient starts. It may have just been The way you phrase it, maybe there's no change, but it seemed like it's a different number. And then also on CalQuint, if you can just mention, is use as a therapeutic in COVID? The reason I ask is only because I heard the head of NIH actually call out acalabrutinib in a discussion that I participated in, and I was kind of surprised to hear it. But I know you're running a trial there, and I don't know if that was just an off-the-cuff mention or if there's actually some promising activity that you've seen as a treatment for COVID.

Thanks, Tim. We'll try to be fast, but let's start with the last question, actually, if Rossi could cover its consequences and its potential use in COVID immune responses, then we'll move up to the Thank you very much, Pascal. So on the CalQuen's question for COVID-19, Francis Collins, I was on that call, the NIH director,

was commenting on data that they have from the NIH that is very positive. So I guess what he was commenting was on his own data. And this data has made us really go so far forward. So we have this full program now that we're launching with clinical studies in the US, in the UK, in the rest of Europe. And basically, the data shows that Calquence BTK inhibition interferes with one of the main, main mechanisms of respiratory failure, which is the cytokine storm. It really prevents it. So we are very, very hopeful.

Thank you, José. Dave?

Sure. So, Tim, just in terms of further clarification on your question on the numbers, in Q4, What we had said was that 60% of the new patients starts in CLL are coming from new to Calquence prescribers, which is the same as when we say 60% of demand from prescribers are new to Calquence. The point that we're trying to make here is that when we take a look at all of the scripts that we're getting in CLL, that we see that we're actually getting new prescribers. to the brand. So it's not just the MCL physicians and prescribers, but we're getting new prescribers. And that's important because it means that we're making inroads into the community. And so the 60% from Q4 is the same as the 60% that we're sharing here. On the new patient start dimension, what I talked about in my remark is that we've achieved now where one in four new starts for BTKI in CLL, R-Calculus New Starts, and that's up slightly from where it was within the fourth quarter.

Thanks, Liam.

Yeah, I think definitely, Tim, definitely we will be applying for NRDL first line because we already have the indication in Florida and China, and we are already penetrating We have a patient affordability program in place on top of our already quite attractive reasonable pricing for second line reimbursable price. So I think both second line is doing well in the reimbursement situation and still penetrating. While the first line TKL market is continually expanding, replacing chemotherapy in the market, So with the VBP of all the major first TK line, first line TK are happening, so second line market is getting bigger and bigger. And also first line, I think, with PAP will be penetrating already self-pay patients before NIDL. and we definitely will talk with government about NRDL and we're waiting for the new negotiation policy for this round of NRDL. And the Adjuvant-Adura result, of course, that result is exciting and definitely will add weight to our application. But of course, it's largely dependent on when we will get approval for this new indication.

Thanks, Leon. So the next question Maybe we could return to actually James Gordon at JPM. James, I think you're online. Do you want to ask your question?

Hello, yes, James Gordon from JPMorgan, and thanks a lot for your patience. I wasn't there probably before. Two questions, please. The first was on Tezi. So we get the phase three results in Q4, and if it looks as good as phase two, it could be the best and broadest efficacy for all the aspirin biologics. But to what extent would this be cannibalizing for Senra? And there you've got the full rights rather than half the economics. Would that complicate things with Amgen and how that works for co-promotion? So that's the first question, please. And if I could just squeeze in the second question, which would be, do Grisso and Dora have been stopped for overwhelming efficacy in their resectable patients? That's great news. But can we extrapolate from that? If you've shown very strong efficacy there, can we read that through to the Laura study in the unresectable population? Could that be a similarly big opportunity as well? And how should we now think about that study, please?

Thank you, James. Could I ask Manny to cover the tisates question, and then Jose de Tagaritsoa question.

Sure, I can take Tessie. I guess Ruud will be able to cover cannibalization from a commercial perspective, Pascal, but ultimately we see Tessie as having a different profile in terms of the types of patients that can treat. As you know, for Senra is in highest nipple patients, and we'd see tesopelomab as being in a broader population, so we think scientifically we'll be able to separate the two. I don't know whether Ruud wants to talk about the complexity, how we will do that or not.

Yeah, first of all, as always, James, we need to see the data. What we know from Fasenra is that the data set in the eosinophilic asthma population is incredibly strong and we are showing that in real life as well. So the hurdle is high, but in the end of the day, What is best for patients will be embraced by physicians, but I think the huge opportunity clearly for tazepalimab is also to go to the low eosinophilic asthmatics, where there's a high medical need, or the allergic asthmatics. So we have high expectations, but of course it all depends on the outcome of the navigator trial, which we'll read out in the second half of 2020.

Thanks, Ruud. I mean, you should also remember, James, that... If necessary, we can have separate health forces promoting the two agents separately, and it's been done before. We've done it before in other CRPD classes, so it's no issue that we find a way to position the two, or we don't, and we maximize both agents, and then we'll be fully behind Tezapeluma to make it a success with our partners at Amgen. So the next question was about Tagriso. Rosé, it's for you, I think.

Yeah, absolutely. So the question is on LoRa. This is the study in locally advanced and respectable. So basically, you know, the data on Adora clearly gives us and the world and the patients higher confidence that LoRa will be positive. Just the way I think about that is that LoRa is sandwiched in between the first line metastatic, which is highly positive, and now the early disease that is highly positive. So, Laura somehow represents the completion of this puzzle of Tagrisso positivity. So, we're very hopeful.

Thank you, José. That was very quick. Thank you so much for that. So, the next question is Andrew Beaumatic. Andrew, over to you.

Thank you. So, just going back to the one in four new patients starting Calquins, which is perhaps a more impressive number than I may have expected. Could you just outline where these are coming from? Is it coming from community oncologists? Is it driven by heavy sampling? Is it driven by belief in a lower adverse event? Is there anything you could reflect in terms of the commercial incentives as well as the drivers of selection of this rather than a very well established agent for a naive patient? and then second, on EGFR, you referenced the challenges for testing and initiating therapy with Degreaser in the adjuvant setting. On duration, how are you thinking about managing, keeping patients on drugs? Because three years is a very long time, both from an adverse event perspective, but also from a reimbursement perspective. So perhaps you could help me understand whether the exposure to Medicare of the US patient population is identical for this earlier disease cohort compared to the metastatic setting. I'm assuming it is. I'm obviously asking from a Medicare reimbursement friction point of view.

Thanks, Andrew. So Dave, two important questions for you.

So let me start first, Andrew, with Calquin's question. In terms of where we're seeing the share coming from and some of the commercial efforts on CalQuint, I think that first and foremost, as I mentioned, we are seeing good expansion of CalQuint's utilization happening outside of the MCL utilization base. And so that means that we're getting increased penetration into the community. MCL treaters were more largely concentrated in your academic centers we are certainly seeing for sure that we are getting utilization within those centers but also in its expansion that's happening into the community and I think that you know there's a couple of reasons for that I think one of them is that we've expanded our promotional efforts to really make sure that we've got The ability to be able to reach those positions within the community in the way that we need to. I think secondly, in the community, finite treatments have had some greater challenges in being able to make inroads just given some of the challenges around administration. I think lastly, and most importantly, the profile. of Calquence is one that has really resonated well with physicians. I think that the efficacy is seen as absolutely uncompromised, and I think that the tolerability and safety profile is seen as one that's quite favorable. One of the things we hear a lot from physicians is if they try it in two patients, that that's more than enough to convince them that this is a great drug. Turning on to the question around to Grisso. We do see a similar composition of patients in terms of mix within Medicare in the adjuvant setting as we do in the metastatic setting, though of course obviously you get some earlier diagnosis within this that's going to be part of this as well. Jose, I think that you had thought that maybe there was something you wanted to add on the duration of therapy component.

Yes, thank you very much, Andy. So I think the question is a very good one, and I think you're coming from the point of view that classically in the adjuvant setting in breast cancer, compliance has been poor. But although we don't know what's going to happen here, I think that the stakes are so high, you know, the benefit is of such magnitude. that basically I think physicians and patients will be aware of the need to stay on. So this is a very different situation. You are facing an adjuvant setting that is totally unheard of in which you can have dramatic benefit. So I think, in my mind, we'll have to see how it plays off. But once you have such a good benefit-risk ratio, this will encourage patients to stay on. That's my take.

Thanks, Rosé. So the next question is Sam Fazelli at Bloomberg, who is asking, should we expect an uptick in U.S. farciga in second half given by the new data? And also, when will you have calcoins and farciga COVID-19 data? So maybe, Rosé, since you were talking, you could cover the calcoins timeline for the question, and then we'll ask Ruud to cover the U.S. farciga question.

Yeah, so the timeline is going to be short. As we mentioned, the studies in the US, in the UK, and in other European countries will start any time now. And there is, unfortunately, not a shortage of patients. So it ought to be very fast. Now, I don't know for sure what the unit of measure. I would say short. I would hope we're talking about a few months, two or three months, rather than and longer than that.

Thank you. And Ruud, you have FASIGA?

Yes, of course, Pascal. So first of all, we have seen very promising first results of FASIGA with the DECLARE indication, which is more the prevention part of heart failure. Of course, we are eagerly waiting for the end result of the registration or the approval for DEPA HF, and then on top of that, recently we were able to stop a study much earlier than expected of DAPA-cliflozin in CKD. So all in all, we are clearly expecting an uptick of Farciga from a volume perspective. Equally, the SGLT2 class is growing very healthy as we speak in the United States. And based on all those new indications, we have also been able to secure a better access. So we have... Quite strong expectations for Farsiga moving forward in the United States. And as soon as the COVID-19 pandemic is a little bit behind us, of course, we will go full force with our field force and other tools in order to convince doctors about the added value of Farsiga for their cardiovascular patients, clearly, and in the future also for their chronic kidney disease patients.

Thanks, Claude. The next question is Sachin at Bank of America.

Hi, Sachin Jain from Bank of America. A couple of questions, please. Firstly, just back to Tegresso and adjuvants. I think the last time you gave peak sales sort of framework for Tegresso was a couple of episodes ago at $4 billion. Consensus is currently ahead of that already at $6 billion, and that was pre-adjuvant with upside being taught from adjuvant. So I don't want to even just frame how we're thinking about your prior peak sales opportunity and whether Tegresso, across all indications, can now become in the high single-digit billion type asset. And if it is trending in that direction, how does having a high single-digit billion oral small molecule oncology product, which I would assume would be at a high margin, impact your prior margin expectations for the 30s? Second question, if I could go back to Jose on the CERD and the data at AECR. Obviously, there's a lot of CERDs out there. So from your perspective, how do you see yours as differentiated? Any high-level points? and then a quick clarification question from Mark on inventory in the quarter. Thank you for the color on inventory from COVID being low to mid-to-mid digits. I just wanted to check whether that included the Symbicort stocking or the Symbicort stocking is an addition to that and if you'd clarify what that Symbicort stock was. Thank you.

Thanks, Sachin. So maybe the first question goes to Dave about Tagri. I'll just say on the margin side that any product like Tigriso that is indeed profitable will help. That's all we can say on the margin side. In terms of pixels and how we see the potential of Adohar, Dave, do you want to give us some color on this one?

Yeah, just very quickly, Sachin, what I would say is that the size of the patient population is about 75% today of the size of the metastatic patient population and frontline. We know that the duration is longer, and we expect that we will certainly, outside of the United States, need to anticipate impact to price. So that's how I would think about the components. And so certainly, it becomes much larger than $4 to $5 billion. But we're doing the same work you are in figuring out how those three dimensions will factor into the total number.

Thank you, Dev. Before we get to the last question, which is really for Jose, could I ask actually the inventory question? Could I ask Pam to jump in and then comment on our inventory management? and also how we've been dealing with the upsurge in demand, especially in respiratory products. And then maybe Mark could add some color. Pam, go ahead.

Yes, absolutely. Thank you, Pascal. Thanks for the question. So we have clear order management processes in place across our key markets to manage these situations. Indeed, in first quarter we saw some increased demand in Q1, in particular our portfolio in respiratory. as well as for Calquins. We monitor closely of the order patterns and take the appropriate measures to make sure that we balance our supply across our customers here. Just quickly on a respiratory portfolio, as we see the increased demand, we are absolutely now taking steps to ramp up our capacity. So we stand really well prepared to ensure supply in terms of anticipated demand as well as any potential upside. Back to you, Pascal.

Thanks, Pam. Marc, can you comment on the financial aspect of this?

Yes, Sachin, just to answer your very precise question, is the Symbicort stocking included in the stocking of COVID-19? The answer is yes. There may be, I can bring another perspective. We also have launched an authorized generic in the United States, and there is obviously Deliveries to the General Company. This is not included in the COVID-19 stocking because this is a different channel. But the Symbicort stocking is included in the COVID-19 stocking that we have described in our press release.

Thanks, Marc. And the last question, Rote.

Thank you very much. So on the search, the question on how our search is differentiated, That's a difficult question because really the only way to do that would be by head-to-head comparisons. What we have presented at ACR this year is that our compound has superb inhibitory effects and drain effects on the estrogen receptor. We have also shown fantastic bioavailability and the capacity to be able to dose once a day. and also we have now finalized our phase one study and we are enrolling in our phase two. So our commitment and that's what I said and I'll be happy to provide updates in the future is that we are going at full speed with a very comprehensive program and we are very hopeful and I think time will tell how the whole area of search ships out.

Thanks, Jose. The next question is Michael at UBS. Go ahead.

Thank you. It's Michael from UBS. Just one left for me, please. Going back to Simbicord in China, I think it's Ruud and Leon. In the past, you've talked about how the product goes from the acute setting into the maintenance setting. So just going all the way back to the beginning of the Q&A session, when we think about the pressure that you saw with Palmicord in China, How much of the Q1 performance with Simbicord is actually replacing that pressure and how much of it is actually moving into the maintenance setting, which may be more sustainable in the longer run? Thank you.

Leon, your response?

Yeah, actually, Promicord business in China is actually focusing on pediatric asthma patient exacerbation age below six. So Simbicord is more focusing on age above six. So Simbicord has huge untapped potential on the COPD adult market and also in the asthma maintenance market because people still use it as a reliever, as using as needed kind of usage rather than the kind of maintenance. But of course, the Simbicord performance is also a good double-digit growth in the first quarter. I think it will continue to do so because we are now having more and more patients using Simbicord Thank you very much. really on the uptake of inhaled Simbicort and BreastTree and Bovespe franchise to mitigate the long-term risk for Pomicort.

And if I may add, Pascal, very quickly, Pascal, if you now look at the overall emerging markets, you already can see that Simbicort is already half of the Pomicort sales growing very fast. So it's a very clear signal that the maintenance market is more embraced by physicians in the emerging markets.

Thanks for the very important point. And we are really here to answer all if we can, but at least most of your questions. So if you don't mind, we'll extend to 10 parts to give more time to more people. So the next question is Matt Weston at Credit Suisse. Go ahead, Matt.

Thank you very much. Two for me, please. The one feature of Q1 was the impressive growth in EMX China. You've highlighted that. But given the reliance on oil income in countries like Russia and the Middle East and the severe economic slowdown that LATAM looks like it's seeing, how should we think about the outlook for growth in those markets in the midterm? Can we rely on it being a continued driver of growth? And then a second specific question for Mark The gross margin saw a significant step down in the quarter. There's a reference to one-off adjustments to group inventory. Can you just walk us through those, give us some idea of how much that contributed to the two percentage point step down and how we should think about gross margin for the rest of the year?

Thanks, Matt. The first question, you know, it's always hard to address some of these questions. There'll be lots of and what's going to happen, of course, downward economic pressure due to these economic changes, oil pressure, etc. On the other hand, governments will want to support economies and inject cash, as we know, and also I suspect healthcare will be a priority coming out of this crisis. So what wins overall is hard to predict. But suddenly this will have an impact. Mark, do you want to add anything and cover the other question?

Yes, so very rapidly. So out of this 2% decline in gross margin, about half or 1% is caused by this one-time, one-off adjustment in the inventory calculation. The other factor that we have seen The three most important factors are this one time off, and then the Limpaza gross margin, and the third is Forex. And this represents about the 2%. To come back to your conclusion for the gross margin on 2020, it will be broadly in line with what we saw in 2019, despite the additional cost that we incur due to the increased safety that we need to provide to the manufacturing employees, but also to the increased logistic cost. Of course, they don't represent an enormous amount of our value chain, but we have increased logistic cost due to COVID-19. But despite this, we will be in line with 19.

Let's move to the next question if we could. Simas Fernandez at Google 9. Simas, go ahead.

Great. Thanks so much for the question. So first off, I just want to applaud the team for saving us from too much time wasted listening to elevator music by going off cycle on the hour. I only have one question though. The key question for me is on HER2. It looks like the early uptake has been really impressive in the US in terms of the number of patients on treatment. Can you just give us a general sense on two things? Number one, how is the on-market tolerability of the product? I know it's early stages, but I believe that the risk of ILD can emerge relatively early. Just wanted to see how the on-market experience has been. And then maybe just Jose could update us a little bit on the upcoming ASCO abstracts and what we really should be watching for. Thanks so much.

Jose, maybe you can cover both the unheard to and the second question.

Absolutely. So thank you for the question. So when it comes to the ILD in the market, As I think Dave mentioned, we have treated about in the market already 1,000 patients. It's still early days. I'll say the same as I said last time. We have indications that since we have the awareness campaign and the management campaign, we are getting less of the ILB data numbers. However, I think we need to be careful, and we are going to be presenting in the near future a follow-up We have a detailed update on the effects of this awareness campaign and the effect of this management on ILD, but we are positive. When it comes to the and HER2 datasets that are going to be at ASCO, we did mention that we're going to have data in non-small cell lung cancer. We're going to have data in gastric. We're going to have data in colorectal data, in colorectal. Thank you.

Thank you. Thank you, Jose. The last question may be Steve Scala at Cohen. Steve, go ahead.

Oh, thank you. As opposed to COVID-19 uncertainty, what gives AstraZeneca the confidence to maintain 2021 Outlooks for Late-Stage Readouts. AstraZeneca is the only company so far to have mentioned 2021, and does the call-out of late-stage readouts imply that early-stage readouts are at greater risk? Thank you very much.

Who wants to take this one? Mene Orose, do you want to cover this? I don't think you should conclude that, Steve, but anybody who wants to comment on that?

I'll be happy to take the question on Mene Canat if he wants to. I think basically we have looked very seriously at our late portfolio, sorry, at our late clinical trials portfolio, and what we state is that we do not believe, as we have announced, that in 2020 and 2021 it will have an impact. In early, you're right, in early the effects are going to be greater because these are These are trials that are more complex. These are trials in which you look at safety. So we're going to have more delays. But yet, I think that we're going to be able to recover because it is easier to recover on a delay on an early clinical trial than on a late. So I think in overall, we stay pretty confident in what we have mentioned.

Thanks, Jose. So let's take, if I may, two last questions, but please one question at a time. Andrew Etlerink, go ahead.

As you guys prepare to launch Limparsa in prostate cancer, I was wondering if you could give us some color on how we should look at the opportunity. I guess specifically, I was wondering if you think the OS benefit in Profound could likely make it to the label given the proximity to the PDUFA, and what type of competition do you see in regards to the other PARP agents?

Thanks. Thanks, Dave. It's over to you.

So in terms of the opportunity, we look at the marketplace. We see that HRRM represents, based on tissue, about 25% of patients in that metastatic prostate cancer space. So that gives a sense for the size of the marketplace that's there. and I think that as we take a look at the competitive field, we are the only PARP inhibitor with a phase 3 that is read out. I think also to the point that you're raising about about OS were the only part with overall survival as a result. Also, we know that that overall survival benefit is going to be incredibly meaningful. It's been incredibly elusive endpoint in the prostate cancer setting. And so, the ability to be able to have that something that we can speak to will be important. Whether we get that included in the label, obviously, that's something that we've immediately taken to FDA and we'll see how those discussions go with them.

Thanks, Steve. Eric, Brian Garnier, maybe the last question.

Thank you, Pascal. Across this crisis, for my companies, I've seen less travel costs, less face-to-face interactions with physicians, et cetera, and raise in use of digital tools. In the context of still very high SG&A costs at AZ compared to peers, do you identify extra savings or change in practice that could Thank you.

Mark, do you want to comment on this? You know, Eric, we always, we allocate resources as appropriate as the business develops. We still believe Fasiga in the U.S. and elsewhere has a lot of potential in heart failure and kidney disease, and we want to support this because it's a very big and met need and big upside there. In terms of the digital piece, et cetera, Mark, do you want to cover that?

Yeah, so just briefly, For sure, we have allocated more of our expenses, HGN expenses in particular, to oncology and to the expansion in China, and therefore less to diabetes, as you note. We obviously try to pivot to digital and to augment our digital presence in many countries, and we are getting more efficient at it every month. So, This is certainly a trend that we will continue in the future, and this should give us an opportunity to further redeploy and allocate the resources efficiently.

Thank you, Marc. Just, Eric, on closing, I'd just like to remind everybody of our progress in Q1 as far as earnings and cash flow. So we definitely are improving our profitability and showing leverage. So let me conclude by first of all apologizing for pushing people along a little bit, but we were really trying to give everybody a chance to ask a question because we really do appreciate your interest in our company and your great support over time. So I'd like to conclude by thanking everybody again for your interest and your time, and I wish you a good day. Thank you. Bye-bye.