AstraZeneca PLC

Good morning to those joining from the UK and the US. Good afternoon to those in Central Europe. Welcome, ladies and gentlemen, to AstraZeneca's year-to-date presentation, conference call, and webcast for investors and analysts. Before I hand over to AstraZeneca, I would 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. An opportunity to ask questions after today's presentations. If joining on the telephone, please press star 1 to indicate you wish to ask a question at any time during the call. For those on the webcast, you will find an on-screen text box in which to type your question. And with that, I will now hand you over to the company.

Hello everyone, it's Pascal Soriot, CEO of AstraZeneca. Welcome to the year to date and the third quarter 2020 conference call and our webcast for investors and analysts. As usual, the presentation was posted to AstraZeneca.com earlier today and we have also sent it to people on our distribution list. So if you can please turn to slide two. This is the usual self-harbor statement. We'll be making comments on our performance using constant exchange rates, or CER, core financial numbers and other non-GAAP measures. A reconciliation between non-GAAP and non-GAAP data is contained in the results announcement. All numbers used are in million US dollars and refer to year-to-date September 2020, unless we state otherwise. So turning to slide three, we plan to review the presentation first and then do the Q&A until 1.15 PM UK time. If you keep questions short, we will try to keep answers short too. For those on the phone, please join in the queue for questions by pressing star one. There's also an option to ask questions as part of the webcast. We ask you to please ask one question only. Thanks for the help here. And in speaking order, I'm joined by Dave Fredrickson, EVP of the Oncology Business Unit, Ruud Dobber, EVP of the Biopharmaceutical Business Unit, Marc Dunoyer, Executive Director and Chief Financial Officer, Mene Pangalos, who is EVP of the Biopharmaceuticals R&D Group, and José Bastelga, who is the EVP of Oncology R&D. For the questions later, we also have Pam Cheng, EVP of operations and IT, and Leon Wang, who is the EVP for the China and emerging markets. Please turn to slide four. This is the agenda where we plan to cover all key aspects of our results today. So if we now start with slide five. In the first nine months of 2020, our performance remained strong and resilient despite some impact from the COVID-19 pandemic. and our business performed in line with our expectations. Our total revenue advanced 10% in the year to date despite some headwinds from the pandemic. New medicines were up 36% and we saw continued performance across all therapy areas and in emerging markets. We had a substantial negative impact from Pumilco that affected respiratory immunology cells in particular in China. and in China it was negative by around 15% in each case. But one can see strong growth excluding this. Co-operating profit grew by 13% despite 15% lower other operating income. With a tax rate of 21%, core APS ended at $2.95 and it is up by 16% more than revenue delivering operating leverage. As a result, guidance remains unchanged today. We continue to see strong progress in the pipeline, mostly on approvals, supporting cells today and tomorrow. Next year, we're back with many phase three trials redoubts after the regulatory focus this year, following extensive data redoubts in 2019. The efforts against the COVID-19 pandemic include advancing the vaccine candidates, and now importantly, initiating phase three trials for long-acting antibody combination. She's incredibly promising and it's a potential new medicine called AZD7442. And please turn to slide six. Looking at the pipeline news flow Since the results announcement in July, a few new highlights. There were a number of approvals for the key cancer medicines across users and geographies. We made regulatory submissions for a number of new users for leading medicines and we obtained several priority reviews. As I mentioned earlier, 2020 has seen a lot of regulatory news flow. Well, we anticipate more new phase three data readouts in 2021. We'll detail this news flow a little later. All in all, another great period for the pipeline and only this week and including this morning, we received additional approvals for some of our new indications. So very exciting pipeline progression. We start to turn to slide seven. After the financial headline in the pipeline, we now take a deeper dive into our revenue. Total revenue advanced by 3% in the third quarter, with growth reduced by Limparda milestones in the comparative period. In the quarter, if you exclude the milestones, our sales growth was 7%, and in fact, as I mentioned earlier, Pulmicort was the most affected product by this. Especially in China, that affected the number of asthma exacerbations, sorry, and therefore the cells were substantially impacted. If you exclude the effect of pulmic heart, our cell growth was about 10%. So the message is the underlying cell growth is still very, very strong across the portfolio, and it actually reflects The strengths of our model, the diversified portfolio and the diversified geographical footprint, we have ups and downs, and we'll cover across this presentation. Some products are up, some others are down, but we have a very resilient portfolio across. As I mentioned earlier, there was some impact from COVID-19, in particular Pulmicor China, of course, but also Berlin, Taino regions. We've seen an impact of COVID on the number of hospitalizations for heart attacks, and Bravinta is initiated in hospitals, so we see an impact there. And it has also affected infusion of injectable medicines like Infinzi and Facenram. Despite this, new medicines added $2.6 billion of additional revenue. Year-to-date, with Stagrisol, Infinzi and Limparza as the biggest contributors, followed by Farciga, Calquence, and Facenra. In particular, Calquence is making very rapid progress. We now have 13 new medicines contributing growth and adding further diversification to the revenue as we look ahead. If we turn to slide eight, if we aggregate the medicines into therapy areas, we had solid double-digit growth for oncology and new CVRM with respiratory immunology seeing the impact from Pulmicort Excluding the Pulmicard, there was, as I said earlier, an absolute double-digit growth there of about 10%, so very strong. From a regional viewpoint, there was everywhere, with Europe impacted by the timing of Limparda milestones, which I mentioned earlier, a strong sales growth excluding the milestone, which we expect to come in Q4. In summary, the results here today support the guidance and also a future of sustainable growth across medicines and geographical markets. With our global revenue base and our diversified portfolio of new medicines, AstraZeneca is well strategically positioned in the current environment and we are ready to be entrepreneurial when needed, as we have shown with the effort against COVID-19. We want to remain a trusted collaborator for global healthcare system. Before I hand over to Dave to go into details on the oncology business, I would like to say how grateful I am for the support and hard work from the more than 75,000 colleagues around the world. And I would like to thank everyone for their efforts in the current situation fighting the virus. As I said earlier, we've had some impact from COVID on some of our medicines. The biggest impact is Pulmicort. But we see strong resilience across the portfolio. And importantly, as you will hear during the call, we see a return to normality for Permicorps in China. It's a slow but steady return to normality. So for Q4, we still expect Thank you, Pascal.

We are pleased to report a strong growth in total revenue of 24% for oncology to $8.2 billion year to date. While we did see continued impact in the quarter from fewer patients diagnosed due to COVID, we are seeing nice robustness of our business as sales grew across all of our oncology new brands. And this came from regional expansions and new launches. Please turn to slide 10. Starting with our lung cancer franchise, we're pleased to report that both Tegriso and Infinsi showed strong growth in the quarter year-to-date at 39% and 43% respectively, with revenue of $3.2 billion and $1.5 billion respectively. Tegriso continues its global rollout and is now approved in 87 countries in the first-line setting, and we saw continued expansion in countries with national reimbursement, which now totals 32%. U.S. Tegrisa revenue was up 26% where we saw continued single-digit demand growth and also benefited from a one-off gross to net adjustment in the quarter. The majority of Infinzi revenue continued to come from the U.S. as the launch of the Caspian indication, an extensive stage small cell lung cancer, has really begun to take effect despite henwoods from COVID-19 on patient diagnoses. Outside of the U.S., we're starting to see the revenue of Infinzi pickup, particularly in Europe and the emerging markets as we continue the rollout with more approvals granted. We await the Caspian indication to drive further growth outside of the U.S. where the ability to combine with both cisplatin and carboplatin represents further benefit for patients. For both medicines, we anticipate that if the China NRDL negotiations are reached, we could have the usual sales impact towards the end of the year, as we would then look to provide access to a greater proportion of patients. But right now, we can't say what that outcome will be. Please turn now to slide 11. On Limparza, Limparza showed continued progress with product sales up by 53% with about half of sales coming from outside the U.S. This reflected growth across all regions as we continued to roll out the breast and ovarian cancer indications in the major markets of the U.S. in Europe and Japan. Total revenue was impacted by the phasing of milestone payments from Merck with further milestones anticipated in quarter four of this year. U.S. sales continue to grow by 46% with continued increase in demand as Lymparza maintained its leadership in the PARP inhibitor market in both ovarian and breast cancer as we launched the PALO1 indication in first-line HRD-positive ovarian cancer and the profound prostate cancer indication. Europe sales were up by 51%, driven primarily by first-line ovarian cancer launches, as we now look forward to the ovarian PAULA and prostate launches in Europe following the approvals that we announced earlier this morning. Emerging market sales were up by 105%, driven by the China launch and the recent inclusion on the NRDL. Japan sales amounted to $119 million with growth of 30% driven by uptake in ovarian and breast cancers. Please turn to slide 12. Turning now to our more recent launches, CalQuence in chronic lymphocytic leukemia and in HER2 and third line HER2 positive metastatic breast cancer. I'm very pleased to report CalQuint's revenue of $340 million in the year to date predominantly coming from the U.S. where the new approval and CLL took effect at the end of 2019. The launch feedback is very encouraging as the very impressive phase three data are resonating well with physicians. were encouraged to see expansion in our prescriber base with CalQuint's now achieving over 35% of new patient starts across all lines in CLL. We await the regulatory decision imminently following the positive CHMP recommendation earlier this year. Following the Inher2 launch at the beginning of the year, we're pleased to have reported $63 million in collaboration revenue based on $136 million of U.S. sales booked by Daiichi Sankyo in the year to date. Inher2 is now the most prescribed medicine in the third-line and fourth-line settings of HER2-positive metastatic breast cancer. Before I end, I want to thank all of our oncology colleagues for what they do every day to the benefit of patients and to our company, especially during the ongoing global pandemic. I'll now turn it over to Ruud for an update on our biopharmaceuticals business and emerging markets. Please turn to slide 13.

Many thanks, Dave. Today I'm very pleased to talk to you about the biopharmaceutical business. Total revenue of biopharma comprising new cardiovascular, renal, metabolism and respiratory and immunology was $7.3 billion in the year to date, growing at 5% despite the COVID pandemic. Starting with new CVRM, revenue was up by 10% despite intense competition in diabetes, with total revenue at $3.5 billion. Growth for both Farciga and Berlinta continued. Farsiga maintains volume market share globally with strong volume growth across all regions, while benefiting from the SDLT2 class growth. In the United States, Farsiga saw a reduction of 3% as price declines took effect, though volumes continued to grow due to the hard failure launch, and in the quarter, sales were up by 18%. Outside the US, which accounts for 72% of revenue, We saw strong performance with volume driven growth increasing and China benefiting from the NRDL listing. Berlinda delivered revenue of 1.2 billion dollars with 9% growth driven by a resilient performance in emerging markets up by 18% while China volume based procurement impacts took effect. We also had continuous growth in the US, up by 7%, but Europe experiencing COVID headwinds, down by 1%. The majority of use is still in the acute setting and Berlinda continues to outgrow the market in all regions. Please turn to slide 14. Turning to respiratory and immunology, we reported revenue of $3.8 billion, with a 1% growth in the year to date, mainly due to the negative impact from permacort, notably in China. The impact of permacort on our overall respiratory and immunology revenue was 15% in the quarter and the year to date. Simicort sales were strong at $2 billion, with a growth of 16% in the year to date. The United States saw particularly strong growth up 29% to $755 million due to the demand growth following the launch of the off-site generic and a resilient ICS LABA market. Globally, Symbicord remained the leader in value and volume market share in the ICS LABA class. PromiCord was down 39% in the year to date with revenue of $628 million which continues to be impacted by COVID in China, especially the pediatrics nebulizing segment. We continue to focus on growing revenue of Simbicort as the maintenance therapy. Please turn to slide 15. Now I will focus on our new launch medicines. Facenra contributed $660 million of revenue in the year to date with good growth despite COVID-19 who is the majority continue to come from the US, Germany and Japan. In the US, Facenra is performing very well against new competitors, up by 23% with $423 million in revenue. Europe and Japan revenue were $140 and $72 million respectively, as Facenra continued to be the leading novel biological medicine for severe uncontrolled asthma. The launch of BreastTree for COPD is progressing well with revenue of 21 million dollars in the year to date with launches taking place in Japan, China and more recently the US as we await for the EU regulatory review with an anticipated decision before the year end following the positive CSMP recommendation. As we look to kidney disease, we plan to further build our franchise on top of the FASIGA data, with Localma and Roxadustat. Localma has revenue of $48 million in the year to date, mostly from the US at $37 million, as we maintain leadership in the new-to-brand prescriptions. China and Japan launches are progressing well. On Roxodustat, we reported collaboration revenue of $90 million in the year to date, coming from China. However, the quarter declined versus the previous quarter, reflecting an accounting adjustment. Demand remains very strong with more than 90,000 patients being treated for anemia in CKD with Roxodustat. We continue to anticipate the US regulatory decision by late December. Please turn to slide 16. Now let's take a closer look to the positive momentum we are seeing with Fasenra. Across the world, Fasenra continues to be the leading novel biological medicine for severe uncontrolled asthma in new-to-brand prescriptions, as you can see on the left side of the slide. Equally from a total prescription perspective we have made very positive progress from 2019 to 2020 as shown on the right slide. We are confident that Facenra is on track to blockbuster status and more importantly helping millions of severe asthmatics around the world. Please turn to slide 17. Emerging markets where total revenue grew by 11% in the year to date continue to track ahead of our long-term performance ambition which is to grow sales on average by a mid to high single digit percentage despite a slight negative effect from divestments.

Outside China, total revenue was up by 10% with growth spread across the regions.

China delivered a resilient growth of 11% and continued to see some impact from the COVID-19 pandemic. Notably with Pulmicort as previously mentioned and continued volume-based procurement impact. We anticipate the typical quarter four impact in China as we approach the NRDL negotiations. New medicines grew by 68%, now contributing just over a third of total revenue in the region, with the 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 year to date, as well as a reminder to our guidance for the full year. Please turn to slide 19. As always, I will start with the reported P&L before commenting on the core results. As Pascal mentioned earlier, revenue grew by 10% in the first nine months of the year, despite the impact of the COVID-19 pandemic. Within total revenue, product sales were up by 11%, driven by the success of the new medicine, while the fall in collaboration revenue in the third quarter primarily reflected the phasing impact of substantial milestone receipts booked in the third quarter of last year in respect to Limpaza. I do expect significant Limpaza milestone receipts in the final quarter of 2020. Please turn to slide 20. Turning now to the core P&L, this slide shows the progression in our operating leverage, and how we are performing in line with our full year guidance. Our gross margin ratio was 80.5% in the first nine months, and I continue to expect A ratio of around 80 to 81% over the full year versus 80% in 2019. Core R&D expenses increased by 9%, partly a result of the focused investment in the pipeline, including the development of Honor 2 and now DS 1062. Nox upfront contribution in 2017 to the development of Limpaza recorded at that time in our balance sheet was gradually released to the P&L until last year. This impacted the comparative performance. The R&D line also includes the development of Brasicumab, though we have refunded those costs through the other income line. Core SG&A expenses increased by 3% in the year to date, driven by additional investment in the China expansion and further support for global launches of the new medicine. There was, however, a decline of 1% in core SG&A expenses in the third quarter, held by savings in travel and expense costs. Core operating income declined by 15% in the first nine months, to $889 million and anticipate a slightly lower combined level of collaboration revenue and other operating income over the full year versus 2019. Our core tax rate so far this year in the first nine months was 21%, in line with the indicated range of 18% to 22% for the full year. Finally, our core earnings per share ended at $2.95, up by 16%, demonstrating the sustained progress we are making. Please turn to slide 21. Before we look at net debt and cash generation, I want to take a moment to highlight the changing shape of our P&L. While we expect collaboration revenue to increase over time and anticipate that income from divestment, will remain a material part of our P&L. The left of this slide highlights the change in sources of profit and the growing contribution from product sales that are being made from our new medicine. And I expect this long-term trend to continue. Turning now to net debt, it increased by $1.9 billion in the year to date. The generation of $6 billion of EBITDA was upset by a number of factors, including dividend payments totaling $3.6 billion, while we also made the second of two $675 million upfront payments to Daishi Sankyo in respect to 102. Finally, we also paid the first non-contingent payment of $350 million in the third quarter as part of the agreement on DS-1062. It is worth noting that net debt remains stable since the end of June, a date after which the second interim payment was paid. I was pleased to see that our constantly evolving underlying business performance drove a year-on-year increase of $1.4 billion in net cash flows for mobility activities. These results bodes well for ambition to cover dividend payment next year through cash flows before financing activities. Please turn to slide 22. This familiar slide continues to demonstrate the progress we are making. As I mentioned, the 10% growth in total revenue so far this year was converted into a 16% increase in core earnings per share. Our core operating margin rose by 1 percentage point to 28%, even with a significant reduction in collaboration revenue and other operating income. The progress of our operating leverage was also demonstrated by the fact that cooperating expenses represented 57% of total revenue versus 59% a year ago. This increasing level of profitability will convert into more cash that will help us leverage our balance sheet and help us to remain focused on the capital allocation priorities of reinvestment, the progressive dividend policy, and our strong investment grade credit rating. 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 rates. I am confident in the retention of our guidance for the year, despite the uncertainties arising from the pandemic. A high single-digit to low double-digit percentage increase in total revenue is anticipated to drive growth in core EPS of a mid to 18 percentage. With that, I now hand you over to Mene.

Thank you, Mark. If we can go to the next slide, please. Hello, everyone. I'll provide an update on our COVID-19 efforts and our biopharmaceuticals medicine since last quarter. And I'm also joined by Jose Baselga, who will discuss oncology movements and upcoming news flow across the company. Please turn to slide 25. We continue to lead across multiple fronts in the global response to the COVID-19 pandemic. Progress has been made with our vaccine AZD1222 and we have now resumed dosing in all our trials globally alongside entering a rolling regulatory review in Europe. We are fully recruited in the UK, Brazilian and South Africa trials with around 23,000 patients now enrolled and we continue to anticipate data readouts for these studies from our vaccine program within the next two months. Our long-acting antibody combination, MEDI-7442, is starting several Phase III trials to evaluate its potential role in the inpatient, in the outpatient, and in the prophylaxis treatment setting. The trials will look at a range of doses from 300 milligrams to 900 milligrams across both intramuscular and intravenous routes of administration. And we're optimistic, based on the data we've seen so far from our early clinical studies, that we can deliver protection for between six and 12 months. Finally, we continue to look across our pipeline for medicines that may address different symptoms of COVID-19 disease, such as acute respiratory distress syndrome and organ damage. Please turn to slide 26. We recently showcased two key pillars of our growing renal portfolio at medical congresses as we start to focus on specialty care in CVRM. At the ESC, we presented a DAPA CKD trial where results showed a 39% reduction in the composite measure of worsening of renal function or risk of cardiovascular or renal death. Talsiga truly has the opportunity to redefine a new standard of care for kidney protection as the first medicine to significantly prolong survival in patients with CKD, either with or without type 2 diabetes. With our partner Fibrigen, we presented over 40 Roxodustat abstracts at ASN. Two late-breaking posters examined the association between hemoglobin levels and cardiovascular outcomes. Roxodustat also showed a reduced risk of hospitalization for heart failure and the risk of red blood cell transfusions while not being associated with an increased risk of cancer. These abstracts all highlight the potential of Roxodustat to transform the standard of care in patients with anemia of CKD, and we anticipate a US regulatory decision before the end of this year. Please turn to slide 27. As we prepare for the readout of tezopelimab in severe asthma this quarter, I'll now focus on new data in respiratory in our expanding immunology pipeline. On the left-hand side, I wanted to highlight another practice-changing data set, this time in COPD with BreastTree from our Ethos Phase 3 program. In addition to meeting the primary endpoint in exacerbation reduction, BreastTree with a 320 milligram dose saw a 46% reduction in the risk of all-cause mortality, a key secondary endpoint when compared with LAMA-LARBA therapy, really transformative data for COPD patients. Switching to immunology, for Senra's extensive lifecycle program in immune-driven diseases continue to expand, and this month we announced positive data from the phase three nasal polyps trial, OSTRO, and Nisivimab in collaboration with Sanofi is the first potential passive immunization for infants to demonstrate a sustained protection across the entire respiratory syncytial virus season with just one dose, using the same technology as it happens with monoclonal antibodies for SARS-CoV-2, YTE technology. For Crohn's disease and ulcerative colitis, Aral23 antibody Brasicumab seeks to address the large unmet need. Anafrolumab, our interferon 1 therapy, has demonstrated consistent clinical benefits across all measured SLE patient subgroups, as presented at this year's EULA conference, with additional analyses presented at ACR 2020. Regulatory submissions for Anafrolumab have been accepted, both in the US and the EU, with regulatory decisions expected in the second half of next year. Please turn to slide 28. To end, I'll quickly update you on the progress made in biopharmaceuticals and what's next in our pipeline. Our GLP-1 glucagon dual peptide catadatide has started phase two trials now also in diabetic kidney disease. Building upon the success with farcega in CKD and heart failure, we have two farcega combinations moving into phase two across heart failure and chronic kidney disease indications. The first is our mineral corticoid receptor modulator, AZD9977, and the second is a selective endothelin A antagonist, Dibutantan, otherwise known as AZD4054. These are the first of several farcega combinations moving into mid-stage development across CVRM indications with the aim of extending the life cycle and life of farcega. Finally, having demonstrated robust proof of mechanism for our subcutaneous PCSK9 antisense oligonucleotide, we'll be starting phase 2b trials in the next few weeks with the ambition of rapidly moving into pivotal studies in the coming year. We look forward to updating you on the progress of all our medicines in our biopharmaceuticals pipeline. Now, I'll now hand over to Jose and please turn to slide 29. Thank you, Mene.

Hello, everyone. We had a strong presence at this year's virtual ESMOD 2020 meeting that was held this quarter. If you look at the left, exporter analysis from Tagriso's ADORA phase 3 trial showed that Tagriso reduced the risk of central nervous system disease recurrence by 82%. In stage 1b to stage 3a, EGFR mutated non-small cell lung cancer patients. This data underlies the capability of Tegriso to reshape clinical practice in the months and years ahead in this patient population. If we now focus on the middle panel, we presented overall survival data from LIMPARSA's profound trial in biomarker-selected men with metastatic castration-resistant prostate cancer. The study demonstrated the potential that this drug has to transform the therapy landscape. In addition to the main data, in a pre-specified adjustment for crossover, we saw a hazard ratio of 0.42. for the supporting the transformational potential of this medicine. We are happy to let you know that today we announced that we have received regulatory approval for both Profound and Paola One in the EU. Additionally, if you look at the right, we showcase data from our pipeline, including an HER2, an HER2 subgroup analysis in patients with HER2-low gastric cancer. This was the DESTINY GASTRIC-01 study. Of note, we were recently granted a priority review in the U.S. alongside with regulatory submission acceptance. We also presented four-year overall survival data for INFINITI in stage 3 and resectable lung cancer and a five-year follow-up data from Lynn Parsa's SOLAR-1 trial illustrating our vision to transform the cancer treatment landscape and advance clinical practice. Please turn to slide 30. Next, I would like to update you on our progress on what's next for oncology. New this quarter, we now have included Datoportimab Darustecan, our TROP2 ADC, licensed from Daichi Sankyo, as a potential new medicine. Based on very strong phase one clinical data in lung cancer, it is now advancing straight to phase three trials in this indication. Additionally, in multiple cell lung cancer, our bispecific PD1 CTL4 MERI5752 antibody will commence phase two trials. In multiple myeloma, we've started phase two trials with MERI2228, our BCMA ADC. In addition, we continue to move forward aggressively to launch our initial phase three study for the oral SIRT. If you look at the right now, for progress on what's now, we are launching a number of exciting phase three trials, including Capybara's Hair Tip in prostate cancer, and HER2's Destiny Breast O6 Trial in HER2-Low Breast Cancer, and Calcuens in Diffuse Large B-Cell Lymphoma. I look forward to updating you on the progress of these medicines and others in the near future. If you could please turn to slide 31. As Pascal highlighted earlier, 2020 hasn't it been a great year for regulatory news flow with some key submissions and regulatory decisions still to come in the last quarter. In terms of data, we still have our anti-TSLP TESILIPO map due to readout in severe asthma this quarter. Now, as we look into 2021, there is a lot to look forward to. We will see phase three data readouts from LIMPARSA's Olympia trial in adjuvant breast cancer and the PROPEL trial in the first-line metastatic prostate cancer. For infancy, we will report on the PACIFIC-II trial in stage three intersectable normal cell lung cancer and in early bladder cancer in the NIARA trial. We'll also have the highly anticipated head-to-head data for unhurt to person one in second-line breast cancer, as well as for SIGA data in heart failure with preserved ejection fraction and PT27 in asthma. As you can see, these pipeline events provide further evidence of our diversified portfolio, both in biopharma and in oncology. And with that, I'll now hand back to Pascal for comments. Please turn to slide 32.

Thank you, José. So if you want to turn to slide 33, before the Q&A session, I will leave this slide for a few moments as a summary of the strategic achievements and summarize today's results as follows. First of all, revenue advanced by 10% with our expectations, and despite the impact from COVID-19. The global business continues to deliver with strong performance in the emerging markets, excluding the performance also supported by the US, Europe, and Japan that are helping to further diversify the revenue base. In addition, there are eight medicines with annual sales in excess of a billion dollars. We've also made solid progress on operating leverage, profit, and profit contribution from sales, as well as cash flow. I would like just to highlight that these results, financial results, fund results, are actually achieved in the context of two challenges, or two headwinds. The first one is we have lower operating income and collaboration revenue, as Mark highlighted, in great part due to the timing of a milestone. and the second is we are operating in a relatively hostile environment with COVID headwinds and the impact is mostly on Pumicort of course with a most more modest impact on some other products and despite those challenges the business is able to develop to deliver this kind of growth rate and profit improvements and cultural improvement so it really bodes well for the future as the world hopefully will return to more normality as we find solutions to this terrible pandemic. Our pipeline continues to advance in 2020, mostly in the form of approvals and other regulatory milestones, and that is supporting our aspirations for continued strong revenue growth. We now have 20 medicines in the late-stage pipeline across new medicines and lifecycle opportunities. and with that there is optionality in the fight against COVID-19 with the vaccine and most importantly the long-acting antibody combination which as you heard from many is looking quite exciting and promising early days of course but they're quite exciting in 2021 we anticipate more new phase 3 data which if positive will help sustain the current momentum as we continue to transform and transition our business increase our profitability and our cash flow We will now go to Q&A. For those on the phone, please remember to press star one to ask a question. We will also take written questions from the webcast. And can I please remind everyone to limit questions to one to be fair to all of our callers. Thank you in advance. And perhaps now we can take the first question from the conference call. And the first question is from Andrew Bohm at Citi. Andrew, go ahead.

Thank you, Pascal. It would be remiss for me to ask not on COVID, given where the world is at. I see you have Pam Cheng on the call. Perhaps, Pam and Mene, you could comment on the exact nature of the roadblocks in the supply chain that have led to some downscaling of the volumes that you intend to supply the UK government, just so we can think through the ramifications for volumes to the US and other markets in the next year. And one question on mayonnaise, could you add to that for your antibody cocktail 7442, the volumes that you could hope to attain given the potency that you seem to be able to generate through the engineering with this biologic?

Thank you, Andrew. And let me make a couple of comments before I hand over to Pam for your first question. The first thing is that we are a little bit delayed in our initial timing because of the drop in infection rate during the summer period in the UK. If you remember back in April, May when we started the infection rate was very high and it dropped in the summer which of course was good news for the community but impacted the timing of the trial. It has picked up now quite a bit and of course we have also accumulated events in Brazil We are blinded to the event, the number of infections that have been accumulating. As you know, in a study like this, only a couple of statisticians know. But we expect now with this pickup and based on what we're told, we expect, as many said earlier, to have results before the end of the year. As it relates to supply, again, I'll hand over in a minute to Pam to give you more details. But what we have done is we have aligned the timing of delivery of vials to the the timing of the clinical trial with that because remember when we keep the drug in drug substance in vaccine bulk format this is kept frozen in a frozen state and therefore delivers a very long shelf life as soon as you turn this vaccine into a vials the shelf life starts ticking and of course the vaccine being New and recent we have limited shelf life data so far. It looks good but you know it will improve over time hopefully but so far we have limited data. So we've kept this vaccine in bulk formats and we will turn this into vials as soon as we feel confident, as soon as we get clinical data. We also know in the UK that what the timing of the vaccination schedule looks like and of course you can't vaccinate 20-30 million people in a week so we will be able to deliver our vaccine if we get approval before the end of the year we will be able to time the delivery of our vaccine in viral form to the UK government to align these deliveries to the vaccination schedule they have put in place with population priorities and weekly targets per week And NetNet is on a global basis. We will be ready to supply hundreds of millions of doses of vaccine around the world by January. And hopefully by January, if the vaccine works, fingers crossed, we would hopefully have approval and start vaccinations. Pam, do you want to give a little bit more detail as to the supply chain process we follow?

Absolutely. So thank you. Thank you, Andrew, for the question. This is Pam Cheng speaking here. You know, I have to say, you know, given the enormity of what we are undertaking here, challenge is normal. And I'm happy to report that we've been able to deal with the challenges. And since, you know, we've last reported on it, there has not been any meaningful changes in the target capacity on the supply chains that we have set up. So as Pascal spoke about, what's really important is really to make sure that our supply chains are ready across our supply chain nodes, including drug substance, which is the active formulation, filling, and packaging, as well as analytical testing and release steps. Many of our sites, really important to note that many of our sites in a global network have begun process validation and commercial manufacturing. So in other words, we are ready, as we speak, to produce finished products. However, as Pascal mentioned, we must be thoughtful in terms of how much and when we convert what we call the drop substance, which is the active, into formulated vials, for example, because of shelf life issues. So our aim is upon regulatory approval, and when we get the regulatory approval, we will be able to release product on a rolling basis and begin supplying hundreds of millions of doses upon approval. So with that in mind, we are placing significant amount of effort into planning in terms of when we convert the drug substance. And we are holding majority of our inventory in drug substance form. which is in frozen state, which is obviously more stable.

Thank you, Pam. And Nenad, do you want to cover the second question?

So as you know, Andrew, we've got a commitment already from the US and UK governments which are in the public domain for 2 million doses, which we'll be able to supply next year. And we have additional capacity beyond that. I think we're aiming to be between 2 and 4 million doses next year, obviously depending on the ultimate dose. and then obviously going into 2022, we want to increase that as much as we can. So we're in several million doses next year and then growing into 2022. Very thanks.

Thank you, Mene. Louise Hector at Beringberg has the next question. Will you go ahead?

Oh, hello. Thank you. So I have a couple of follow-ups still on the vaccine and the antibody. So in terms of the vaccine, should we be expecting early data from the two dose and to what extent is there likely to be data on elderly patients? I'm just wondering if they were recruited slightly later into the study and the early data might just be in slightly younger cohorts. And on the antibody, I'm just interested to understand with the phase 3 in terms of the prophylaxis, how long you expect to have follow-up treatment to really demonstrate that six-month longevity. So will those studies take longer to read out or can you take the cut at two months and then keep the follow-up going? Thank you.

Thank you, Larissa. Two important questions, Manny, if you want to cover those two. And the antibody, we like to call it the long-acting antibody, Larissa, because we hope to deliver six to 12 months protection, depending on the dose use. But with that, Manny, go ahead.

So in terms of the readout, as Pascal said, we're expecting to get a readout before the end of the year. And Andy Pollard has just presented a few weeks ago, you may have missed it, at an infection conference, actually data from... So we showed that the immune response in the 56 to 69 year olds and 69 and 70 and above looks very similar to the response of the 18 to 55 year olds. In that regard, we're feeling good about the immunogenicity in all the age groups that we're testing and we think we will have data from those age groups for the readout. With regards to the antibody studies, it's a great question. We'll be following patients out for 12 months who will obviously be having interim looks that will enable us to understand the efficacy of the antibodies. Sooner than that, we'll continue to complete the studies to the final analysis.

Thanks, Mende. Do you want to say an additional couple of words on the antibody studies?

So there's a number of different studies that we're taking. So we have a prophylaxis study that's hopefully starting next week called Proven. This is going to be using a relatively low dose, 300 milligrams intramuscular. So obviously intramuscular is a very easy route of administration for for the general population. And the population we're going after here is immune compromised patients, vulnerable patients that maybe will not respond well to a vaccine. Just to give you an indication, there's about 500,000 patients just in the UK that are immune compromised that would be available for such a therapy. We have another study called Storm Chaser, which is looking at post-exposure prophylaxis. That's also going to be using 300 milligrams IM. And in that particular study, we're going to have 300 milligrams or 600 milligrams, sorry, as well. In that study, what we're doing is going into a site that's had an infection and immunizing everybody with the antibodies so whether you're positive or negative it doesn't matter everyone gets infected so you can imagine a care home having an infection you go and immunize everyone in the care home and give them immediate protection and then we have our tackle study which is our in outpatient treatment study that's looking at 600 milligrams IM And then we have two studies that are going to be sponsored by the NIH. One is the ACTIV-2, which is also an outpatient study. They're looking at both an IV and IM dose through the administration. And ACTIV-3 study is the inpatient treatment study where they're going to be looking at a, we haven't decided what the dose is, but they'll be looking at an IV infusion as well. So, as I said, the YTE extension gives us, you know, what we feel pretty confident about will give us six to 12 months of protection with a single dose. The FC inactivation that we've done we think potentially could be important in those severe patients. As you know, the Lillian Regeneron antibodies are both stopped because of a poor risk-benefit in the more severe population. The fact that we've inactivated the FC domain in terms of FC receptor binding and the fact that we're going with much lower doses I think means that we may have a better chance of seeing some activity or some efficacy in that more severe patient population as well. But we think overall the half-life, the route of administration, the dose give us a real competitive advantage relative to the other antibodies.

Thank you. The next question is from Richard Box at Exxon. Go ahead, Richard.

Hi, thanks for taking my question. Hopefully you can hear me OK. Yeah. So, yeah, I just wanted to ask a big picture one maybe for you, Pascal, on U.S. drug pricing reform. It looks like it's likely we'll have a Democrat president and a Republican controlled Senate. And I just wonder if Do you think the outlook is for further stalemate on this issue, or does that really provide the ideal backdrop for maybe the industry to support a compromise solution that might finally remove the industry from the political crosshairs? So just your thoughts on bigger picture for US drug pricing. Thank you.

Thanks, Prashant. I could ask maybe a word. To answer, Ruud leads Arbao Pharma Business, but also is the head of the US organization. So, Ruud, do you want to go ahead?

Yeah, absolutely, Pascal. First of all, it's clear that it's still unknown, of course, who's going to win. But regardless of who's going to win, we are a little bit neutral, to be very honest. We have a clear statement that we try to work with every government, irrespective The political background. We are very committed to be a very constructive partner. And we also hope that some of, let's say, the policies we are supporting will get traction. Policies like value-based agreement, lower co-pays for patients, better affordability for medicines, innovative medicines are crucial elements. And whether the current president will remain in office or If we have President Biden, once again, we are a little bit ambivalent, and we will do our best. Having said that, linking it also to the vaccine and antibody, we are working in a very constructive way with the US government. They are highly supportive, as you know, of our vaccine efforts, as well as our long-acting antibodies, and hopefully that will continue if there is a change.

Thank you, Ruud. I mean, the only thing I would add is that, Richard, I'm sure you've seen that the The balance of the Senate tends to favor Republicans, and Speaker McDonnell has been re-elected, as you know, and they've always been very vocal in terms of their opposition to any form of price control. So, of course, that will have an impact on on the ability of any administration to implement changes. And we hope to see constructive discussion around value-based pricing, as Ruud said, and not so much discussion about government-driven price controls. So the next question is from Steve Cohen. Steve, go ahead.

Thank you. I have two product-related questions. On Infinsi and neoadjuvant non-small cell lung cancer, When should we expect to see the MPR and PCR readouts and would you file on them? And what led to the decision to make MPR rather than PCR the co-primary endpoint? So that's the first question. Second question is regarding the collaboration with Arcus for the TIGIT. Have you seen data and why did you pick the Arcus agent as opposed to that of competitors? Thank you very much.

Thanks, Steve. Rossi, do you want to cover both questions? And maybe on the Arcus collaboration, Dev could add anything he wants. Rossi, go ahead.

Yeah, so on the Arcus collaboration, you know, we studied very well the antibody properties, and we feel that it's a fantastic antibody. So that's why We were so happy to seek a collaboration with them. And to be honest, most important at all was the enthusiasm that was shared with Arcus and ourselves in developing this in what we think is the best indication, which is in the Pacific Indication. And I think that for us was very, very important because we feel that there we can make a true difference. As for the first question, would you mind repeating this briefly to me?

The endpoints modification.

So we have been following the endpoints and we just changed them because we think that we're trying to find an endpoint that is more robust and that's quite We just did it. We have kept the old endpoint as our co-primary endpoint.

Thank you. Next question is Sachin Jain, Bank of America. Sachin, over to you.

Hi, thanks for my questions. Two, please. Firstly, on China outlook into 21, you've highlighted lots of moving parts, so VBP pressure, Polar Corp base effect. NRDL additions which will have price and volume. So I wonder if you could try and put all of that together for us and give us some idea of how growth will look into next year versus the 26% growth ex-Palmer Court in the third quarter. And then the second question is just big picture capital allocation. You've mentioned unchanged priorities, but each of the last two years has seen product deals, even though they're officially low on your capital allocation list. So how do we think about exceptions to the rule into 2021? Thank you Sachin. So Leon, do you want to cover the first question about China?

Yeah, I think VVP definitely will be coming, the fourth batch, fifth batch, sometime next year. And some of our AstraZeneca products will definitely get in. But right now, we actually have been trying very hard on Crestor and now on Belinta. So by channeling patients, loyal users, to the outside hospital channel, like retail pharmacy, online pharmacy, in order to maintain a loyal user as much as possible for branded off-patent products. So I think we definitely have a way and by expanding to more outlets, hospital and pharmacy and clinics, and we will be able to slow down the decline or erosion for VBP. And the public court, I think this year, like Pascal said, in September we already see a good sign of rebounding of public court because of schooling and the people are less wearing masks in China. So we want to also see the same trend happening in quarter four. and also next year, 2021, POMICODE will be comparing very low POMICODE this year as a very low base. We believe next year POMICODE will be a better year. And at this time we are applying for six to seven new products and also some new indication. So definitely there will be also quite price cuts because of the budget pressure in China. But AstraZeneca has very good coverage and a solid number one position in China. So we will definitely be able to scale up volume much faster than the other companies in China. We will definitely benefit from NRDL one after another, like Corsica, Roxa, and Tabriso and Impala you saw in the past. So with all these three moving pieces, we expect China will not grow like 30-40% like what we did last year, but I think China will still continue to grow low double-digit or low mid-teen digit, I think, so in that range.

Thank you Leon. Let me just add two things that Leon has said that I'd like to re-emphasize. I think our number one position in China and the strength of our organization are really bringing two specific benefits that we can leverage. One is Leon talked about Crestor. Because the prices of those products is declining after VBP, and the drug themselves in the end are affordable. There is this market that is developing that you can supply for retail pharmacies, online pharmacies and we've been very active in that segment. And essentially the story is people can decide to pay out of pocket the cost of Cresta of their loyal supporters And instead of going to the hospital and queuing there to get their medicines for free, they just have to pay a limited amount out of pocket. And they can even get the drug delivered to their home. And in Shanghai, the big cities, you get things delivered to your home for $1 or $2. So there is this special market that exists and has enabled us to maintain Crestor through enormous volume growth despite the price drop. And the second phenomenon that is really important is an RDL drives access to many patients, but it also drives price decreases. To gain advantage of the volume growth, you have to have a broad coverage of the entire country. And we are one of the few companies that have this broad coverage, reaching out to the small county hospitals, et cetera. And so we are very, very well positioned. We have a strategic advantage leveraging this existing network to grow volume across the country and take advantage of an RDL listing. Otherwise, you get the price cut, but you cannot benefit from the volume growth. So with this, the second question is capital allocation. I'll ask Mark to answer this, but I will not say, Sachin, that you should see the deals we've done as exceptions. We've always said that we will remain open to doing deals that are strategically making sense for us and products we can add value to. We start over to you, Mark.

Thank you Pascal and thank you Sachin for the question. So capital allocation priorities are not changed. I think what you refer to is probably the immediately accretive condition that we have. And if we look at the two ADCs that we have partnered with Daichi Sankyo, They were in a way not meeting that criteria and therefore one could term them as exception to our general rule. But apart from the accretion of these two deals is not very long, not very deep and not very long. So there are exceptions, but they are not major exceptions. So basically there is no change in our capital allocation priorities.

Thank you, Omar. The next question is from K.U. Parekh at Goldman's. K.U., over to you.

Good afternoon, and thank you, Pascal, for your questions. Two, if I may, please, on the vaccines. The first one is, I think on the media call this morning, Astra was quoted as saying that we should expect the data from the vaccines in November. So just wondering if you can clarify, is that timeline based on an interim analysis of the ongoing Brazilian, South African, and the UK studies? and if so, what is the number of events that would be needed to trigger this interim analysis? And then secondly, continuing with vaccines, I was wondering if you can just help us think through the powering you need on the first interim analysis versus kind of the second and the final interim analysis there. Thank you.

Thank you, Carol. So I'll ask Mene to cover this. Let me just correct one thing quickly. We didn't say November. We said before the end of the year, which, of course, you could read November or December. The truth is we don't know because we are blinded. And the projections are such that we know it should happen before the end of the year. But with this, Mene, over to you.

Yeah, so thanks, Karen. Unfortunately, I'm not going to be able to shed a lot of light on this because, as you know, we don't talk about interims and aren't giving details about this. This is an Oxford-sponsored study. I think what I can say is that we're confident we'll get results before the end of the year, but we're not disclosing whether that's interim or final. But we do hope we'll get results by the end of the year that will tell us one way or the other whether this vaccine is effective.

and that is based of course on the non-U.S. studies. U.S. study has restarted and is recruiting fast but of course initial results will be based on the non-U.S. program. With this, Tim Anderson at Worf Research. Tim, over to you. Tim, are you on mute? We can't hear you.

Pascal, maybe you want to go to the webcast question and then back to Tim.

So we'll give Tim a few minutes to connect. So the next question online is a question from Marietta Mimic at Prima Venue. And the question from Marietta is, in China, for Brilinta, Does the in-class price cut after VBP round affect the hospital market only or also the market? Is there a spillover into retail and is the price cut always 30% or does it vary? Leon, it's for you, this one.

Yeah, actually in China is a universal price. There's no public or private or hospital retail difference on pricing. So it's a universal cut if you lose tender or if you win the tender. It's all the same cut. So the spillover definitely, the percentage of businesses Thank you Leon.

So Tim, are you back? Are you connected? Can you speak?

Yeah, can you guys hear me? Tim? Are you connected?

Can you speak?

Can you guys hear me?

We seem to have some echo playing back into this call. So what we could do is move to the next question. Mark Purcell at Morgan Stanley. Mark, over to you.

For both Ruud and Mene, you know, clearly tremendous growth in Q3. The heart failure indication hasn't really kicked in and obviously CKD is yet to come. So could you talk to, you know, sort of maximize the opportunity over the medium to long term? Obviously, the composition matter pattern going in about five years' time, but will you get additional IP, you believe, which can stand the test of time in half failure in CKD? And when it comes to the combination approaches you talked to there, Mene, with the MCR and the ERA, is there any evidence to suggest that the fixed combination could generate some synergism which may be sort of more elusive to find in a free combination. And then Pascal, can I just ask one clarification question on the vaccine questions? Maybe it's for Pam, but you were due to deliver 700 million doses of the vaccine through the government and regional agreements by the end of the year. So should we just assume that you've reached that level or you will reach that level in terms of the API frozen product? And can you just help us understand how quickly you can go from API to product in a vial that's being distributed? So will you be 700 by the end of the year? And then will it take, for example, four to six weeks to then deliver that to the final customers?

Thanks, Marc. So a few questions here. The first one is heart failure, CKD, farciga, and the comments on the IP and the potential, importantly, of heart failure, CKD. I could ask Ruud to cover this one. The combination is many, and maybe the vaccine supply question could go to Pam. Just on this last one, the 700 million doses will start in January. Essentially, we are accumulating the The drug substance, and we'll turn this into vials and start delivering really substantial quantities January forward to to enable mass vaccinations. We start delivering in December if we get approval, of course, but I guess really the big ramp up would be early January. So with that, Ruud, over to you for the Farsiga questions.

Yeah, yeah, and thank you so much, Mark. So first of all, we remain extremely bullish on the potential for Farsiga. We had a very strong quarter across all geographies. The heart failure opportunity is very substantial in the U.S. We have now the indication for a couple of months and we are very pleased to see that in this specific segment already Fasiga is becoming the market leader in the SDOT2 class. So clearly there is traction and there's no reason to believe that that will not continue. Equally, we just saw the approval in In Europe for heart failure. So all geographies are well poised in order to capitalize on this huge opportunity. CKD, I will not dwell on the phenomenal results, but I can tell you that the opportunity is very substantial. There are roughly 700 million chronic kidney disease patients in the world. And if you zoom in for the US, There are an enormous amount, roughly 34 million patients in CKD3. The big ticket item is that diagnosis rates are still limited, roughly 12% is diagnosed. So we will do a huge effort in order to increase that. So that will continue and we are very bullish that FASEGA will show double-digit growth in the next five, six years. Your IP question specifically? The public domain, we have protection until 2025, 2026, depending on the geography you are in. And of course, MANE and the research and development groups are doing everything in order to come up with sensible combinations. So perhaps, MANE, you can give a little bit of flavor of what we're doing there.

Before you comment, let me just add one quick one on the CKD. Ruud just gave you the large, very large number of patients around the world, 700 million who suffer from CKD. The one thing that is important to remember with CKD is, you know, heart failure is a sophisticated diagnosis. But CKD is very simple, as you know. You measure GFR as part of your blood checkup, or you look at protein in the urine. So very simple diagnosis that can be conducted by primary care physicians. So the hope here is that we can really drive diagnosis and initiation of treatment in those patients who will benefit from Farciga. Mene, sorry, over to you.

Thanks Pascal. So first of all, just say that the combinations, and I'm only showing you two, we have several combination programs in the works, but I wanted to highlight those two. We're aiming to launch them and to get data in time for the loss of exclusivity of the monotherapy. In answer to the synergy question, the hope is that there'll be synergy, and it's actually the combination of mechanisms that make sense. So for example, endothelial antagonists traditionally have suffered from edema, because of the but highly effective because of the low dose that we think we can use with our particular endothelial antagonist but also combining with SGLT2 we minimize the risk of any edema but maximize the efficacy or the addition of the endothelial antagonist in the patient population and with the mineral cortical receptor modulator our chemists have done a remarkable job of finding a set of molecules that are being profiled against all the other MR antagonists. We have very little evidence of any impact on electrolytes and potassium, which is one of the major reasons why MR antagonists aren't used, particularly in heart failure patients with impaired EGFR function or kidney function. And so again, combining Pulsiga with an MRM, we think is going to be a really valuable tool across heart failure and CKD.

Thank you. And then, Pam, the last question.

Yes, thank you, Pascal. So as mentioned, we are in commercial manufacturing for the drug substance as we speak, which is the active material. So you can assume that drug substance will be available upon approval as planned. The time to convert drug substance to package vial is only a few days, followed by a sterility test. So as Pascal mentioned, upon approval, We will have the capability and readiness to convert into vials in a very short amount of time and release the material on a rolling basis in terms of the number of doses that we've been planning on.

Thank you so much. As a quick reminder, we all get excited about deliveries, but we have to remember we have to first show the vaccine works. and we all hope it does, but we still have to show that. Thank you. Next question is Seamus Fernandez of Guggenheim. Seamus, go ahead. Okay, so maybe Tim Anderson, if Tim, you're back online, if it works.

Hi, this is Tim. Can you hear me?

Cool, cool. Go ahead, Tim.

Can you hear me? Yeah, hi. A high-level question, what can we expect for revenue and earnings growth in 2021, even if only directionally ahead of official guidance? Just what are the tailwinds, what are the headwinds, and the greatest sources of uncertainty? And you can ignore any of the impact of COVID in that question. I'm really thinking about individual brand and geography performance. And then, Paul McCourt, Just a simple question. When will that likely go under volume-based procurement in China?

So maybe, Leon, you can cover the second question, but the first one As you'd expect, Tim, we don't give guidance at this stage in the year. I can sort of give you the ups and downs. I mean, first of all, we have strong momentum across our pipeline, and we have more news flow coming that will further fuel growth across oncology. But I think also farciga is going to be a pretty strong driver. You know, in respiratory, we expect breast three Trixio in Europe and also farciga to continue growing. So we have new launches. Roxa is doing very well in China. So we have quite a number of launches that will support this growth. The headwinds, it depends how COVID continues to impact the Pyramid Court. You had Leon said a bit earlier that we see demand slowly recover in China. So if things continue to improve that way, we should have a better Pyramid Court next year. And in terms of the headwinds, I would say really, what is COVID going to impact? Pulmicort again, and also we have EBP and NRDL price listings. So the NRDL price listing, they drive price reductions, but again, with our strong coverage The second question, Leon, go ahead.

Yeah, I think POMICODE right now we have one or two generic already approved with different SKU dosage. And I think sometime next year there will be more completed with minimum another two generic POMICODE. So POMICODE will be included in the VBP. Our assumption is sometime next year. But we will not impact demand sales next year. We will definitely have impact on sales of Permacol in 2022. But we believe Pulmicor with half of the business still will be coming from normalized and will come from pediatric. And pediatric usually self-pay. So we have a good chance to direct patients to outside hospital pharmacy and purchase online. And it's for acute short-term usage. So it's very convenient to do it, to buy Nebulizer and Pulmicor in the pharmacy. And just to be aware, the business impact is quite obvious, but the underlying business of China, if you exclude the public order, the business in China is doing actually very well, and it's very much on track on the 20th century. Thank you. And Tim, I was thinking in terms of the ups and downs of the trend in 2021. I should have mentioned the optionality coming from the long-acting antibody.

If this works we are going to be ready to say to supply a few million doses and that definitely would be an upside also. So next question is from Seamus Fernandez at Guggenheim. Go ahead Seamus.

Okay thanks for the question. So just I wanted to ask one question specific to the Your building presence in the nephrology space and hematology, you had a big presence at ASN, but right now your commercial presence there seems a little bit under-resourced. Just wondering, in terms of your commitment to that space and growing that space, You know, really where you see sort of your vision for that area and growing, you know, there. How committed are you to that? And how core is Rox seduced at to that presence? Or do you see opportunities to move beyond that? And then just a very follow-up question on Rox. Mene, you seem extremely confident in your commentary in that regard. heading into the FDA's decision on December 20th. Can you just give us a little bit of incremental color in terms of what you think are the key questions that would be an area of focus for the label in particular? Thanks so much.

Thanks, Sima. So let me ask Ruud to comment on the first one, maybe on the second one. Second one, I don't think you heard us being very confident. I mean, the outcomes of these FDA discussions, as far as the label could, you know, there's still several potential outcomes that many can explain. And on the nephrology side, I don't know where you get this impression we are not very strong commercially. You know, we started this focus on nephrology many years ago. We acquired Loquelma knowing that we had Roxa. The positive surprise was Farciga and kidney disease and we've had a nephrology team for quite some time and it's a very good nephrology team so we have a presence in nephrologist offices and of course we have the diabetes team and all these teams will complement each other. But Ruud, over to you.

Yeah, no, no, exactly, Pascal. We are extremely bullish about the renal opportunity. There's an incredible high medical need. And the fact that we have now, hopefully very soon, dapagliflozin in the CKD indication, localma is doing very well in the United States, and the next stage will be to expand the market. and assuming that we will get a positive readout from the FDA regarding the approval, Roxadustat is a major, major opportunity for so many patients facing anemia. China, I think, is doing an outstanding job so far with Roxadustat. Roughly 90,000 patients are already on Roxadustat both in dialysis dependent situation as well as in the non-dialysis. So all the lights are green to be very honest and we are very committed to this space because we really believe that we have a portfolio which is making a huge impact on so many of those patients.

And then with regard to, I mean, obviously the big question is black box or no black box. And obviously the regulators are going to make their decision on that. I think the important thing for us is to make sure we get the data across the various subtypes for the Vroxa, whether it's in the non-dialysis dependent population, the insulin dialysis population, or the DD population. We think we have a very competitive profile. We'll be aware of the Akibia data, where I think it's really opened up the space for us in The non-dialysis dependent population given their CV data. And so we think we're in a very good position, I know, hopefully with a positive outcome from the regulators in terms of the label.

Thanks many and thank you we're also referring to hematology I mean in nephrology we are very well equipped including people treat anemia of kidney disease and as it relates to the more hematology driven conditions we have an hematology sales force and we're looking at how the calcone sales force could potentially help where appropriate could potentially help Roxadustat so we have synergies across our various sales forces So we move to Matt Weston at Credit Suisse.

Thank you very much. Can I ask a finance question for Mark, please? You flagged operating leverage as a key driver on slide 22 with the two percentage point improvement in cost ratio over 2019, but that includes a significant SG&A benefit from COVID. So are you confident that we can still see margin leverage next year as SG&A presumably bounce back and you also have a significant launch commitment. And then if I can, a second one for Mene on COVID vaccines. We saw some delays in the U.S. with extended requirements from FDA on median safety follow-up. Can you just remind us what the requirement is for safety follow-up from EMA in terms of time on the product? Thank you.

Thanks, Matt. Mark, do you want to start? And then Mene can cover the other question.

Yes, thank you, Matt, for the question. So first of all, operating leverage, which we simplistically define as growth of product sales minus growth of operating expenses. We need to also remember that in the operating expenses, a large part is occupied by the R&D, and the R&D ratio has increased, is increasing in 2020. It is, year to date, about 22%. So there will be an improvement and we will continue to work on the improvement of the operating leverage. And this year it is at the end of September of about 5%. It's a sort of rate of improvement that we are satisfied with. It will continue in the year 2021 and following the following 21. So yes, we will continue to work. on the operating leverage, but plus remember that the operating leverage also includes the large investment we do on R&D.

And then Matt, in terms of the question around vaccine safety, I mean, bear in mind again that we started dosing with this vaccine in April of this year, so we've actually got now over 20,000 patients dosed and there's nothing from the interactions that we've had with either the MA or the MHRA that has given this pause that if we demonstrate efficacy and safety in the data set that we have in the studies that are ongoing across Brazil, UK and Africa that we won't be able to get an approval.

Thanks, many. Two quick ads, if I may. Remember that operating leverage is also after other income, and R&D is influenced by the Brasicum, of course, which Marc mentioned earlier, and we get refunded in the other income line. So, you know, I know it's not always easy. There are many moving parts with all these collaborations, but you always need to remember this when you look at all the costs. And as far as the safety I know you know that, but it's important to remember there is an independent safety committee that regularly reviews the data, of course, as you would imagine, and monitors the safety in the two arms. It's important to remember this as we consider the overall safety profile. And so far, of course, we know that they have been satisfied with the safety as well as the regulators. Next question is James Gordon at JP Morgan. James, over to you.

Hello, thanks for taking the questions. James Gordon at JP Morgan. Questions on the pipeline. The first question is on the AKT inhibitor. So I saw today you've announced a phase three initiation of prostate, and you've got phase three to get, I think, a hormonal breast cancer and triple negative. but using the same AKT mechanism, ROSH, we can have negative data in their breast cancer studies and limited benefit in prostate. I don't know if it's the therapeutic window or tolerability, but the question is, can you remind us or update us why you think CAPI is going to look different to IPA? Should we now be a bit more cautious on this class or reasons that this is going to be a lot more successful? And then also a clarification on calculates, please. So the head-to-head study versus Imbruvica, that's come forward about a year over the last two quarters. I think it was 2022, and then it was H221, and now it's H121. So what's made that move around? Is it just more events occurring, and is that good or bad for the chances of it actually being successful? And what's given the confidence also to move this product forward into a phase three for DLBCL as well, please?

Thank you, James. Two questions for Rosé.

Yes, so thank you very much. So let me address first the question on Capiva. So, you know, we are gathering, you know, different data. You know, when it comes to triple negative breast cancer, we have positive data in our randomized phase two study. which is basically affirming that we believe that our T-pollinative breast cancer study, Capitolo 290, is likely to do well. We have different, as you know, populations, right? At Roche, on the recently failed phase three study, they had chosen a biomarker group, predefined, and basically we are not doing that. on overall population. In prostate also, the difference is that we are going into an aerial line. So we are not going in post-failure of hormonal therapy, but rather we are going early. We think that has, you know, a major advantage. And also in ear positive, we're going at full speed. So we'll see. The data will read out, but be very confident that what we have is the best in class.

Thanks José. We are out of time but we'll keep going for another eight minutes or ten minutes max. So we'll take the last three questions and then please stick to one question per person. So over to you Naresh at Infant Health.

Hi, thanks for taking my question. Just one on Can you give the sense of how you're doing in terms of market share across all biologics and not just against the other IL-5s and how is pricing evolving in that space? Thanks.

So I can take it to Pascal. So, of course, that's a good question but also difficult to answer because some of the competing products have multiple indications. Of course, Dupixent has the atopic dermatitis indication which is very, very large. Equally, Nucala has a couple of other indications, eGPA and others. So all in all, I think if you look at the total volume perspective, if you include all the indications, it's clear that we are not the market leader because we're not competing in that. Equally, it's very important that if you assess the performance of the different biologics that you adjust the market shares for the number of injections. I think Fasenra is very unique that it is only dosed every second month, while some of the competitors are either dosed every month or every two weeks. So I think that for yourself, for your own background, it's very important to make that distinction.

Thank you Ruud. The next question is Peter Wilford at Jefferies. Go ahead Peter.

Thanks. I'll be brief. Just quickly on to Jose. I wonder if you could comment on Destiny Breast 05 versus Catecyla in the adjuvant setting and just give us some idea perhaps of how it can be done to expedite that study given obviously the length of time it took for Catherine to read out. And just quickly a clarification if I can to Mark on SG&A. Is it possible to give us at all any idea of the savings you think that COVID-19 has had for SG&A this year to perhaps give us some sort of feeling going into next year? Thank you.

Thanks, Peter. We'll cover the first question with Rosé, and then the SG&A question, we'll come back to it at the end if we still have a few minutes. Go ahead, Rosé.

Thank you very much. I think we're in a very different situation than Katherine in the past because at that time the concept that was being explored was very interesting but was not proven. I think that we're going now into a situation in which everybody accepts that is perhaps the last opportunity that you have in breast cancer to rescue these patients with early disease. So the field has moved into embrace the concept. Now, having said this, I mean, Daichi Sankyo and ourselves, you know, we're putting everything we can to expedite enrollment. The advantage of Daichi Sankyo and ourselves by being together, I mean, together we have a phenomenal machinery. So I, you know, will be vigilant, but I am positive.

Thanks Jose. The last question is from Simon Baker at Redburn.

Thank you for taking my question. It's on respiratory and I wonder if you could give us an update on the various trends you're seeing. There are a lot of pushes and pulls within the category, the disruption New Patient Starts for Zenra on one hand and the weaker seasonal flu that we've seen this year in the southern hemisphere and it appears to be the case in the northern hemisphere. So pulling all that together, I wonder if you could update us on the trends that you're seeing in terms of demand across the respiratory portfolio. Thanks so much.

Thanks, Simon. Ruud, it's for you, this one.

Yeah, again, a very good question, and thanks, Simon. So first of all, for Fasenra, in the current COVID-19 environment, we see roughly across geographies a drop of 20 to 30% of new patients. Let's not forget that those patients are getting treatment of severe asthmatics with inhaled corticosteroids, but of course, we firmly believe there are better treatment options. but in some cases clinics are closed or getting closed again like in Europe and in some states in the United States. Of course in the post-COVID period we firmly believe that those new patients will come back very quickly. Then regarding your other questions about other dynamics regarding a low flu season, you are correct. Flu is a very important Thank you very much. Thank you very much. get infected with COVID-19. Their lung function is already relatively bad and the COVID-19 infection is certainly not helping it. So we see that overall the persistency of our therapies has increased during the COVID period.

Thank you, Ruud. And we have a couple of minutes left so we can return to Peter's question about his GNA, Mark.

Yes, thank you for the question. It's not an easy question to answer. If you look at the progression of our SG&E growth rate over the first quarter, it was 5% to 6%, 3% on the second quarter, minus 1% on the third quarter. So I would say an approximation would probably be a low single-digit impact of the reduction of activities due to COVID marketing activities and sales activities and so on. I think it's hard to pinpoint a precise number and obviously it depends where the COVID pandemic is more or less intense, at what speed you are recovering and so on. But I would say a low single-digit impact over the course of the year would probably be a good approximation.

Thank you very much. Just as a reminder, Our focus is on continuing improving operating margin, getting to 30% next year and then carrying on improving over time. And so with this, I think it's probably time to close. Just want to remind you as a closing few closing comments is our revenue advanced by 10% despite the impact of COVID and it's in line with our expectations. We have gross strong performance in the US, Europe, Japan. and also growth and strong performance in emerging markets, especially if you exclude Pulmicor, 25% growth in China, excluding Pulmicor, so very strong underlying business growth. In addition, we have eight medicines with annual sales in excess of a billion dollars now, so we continue improving. And we improved our operating leverage, our profit, our cash flow, despite this challenging environment with COVID, of course, creating headwinds and we finally I would say that we continue to improve the pipeline and we've had pretty good news so far and there's more news to come later this year but importantly also next year and this will continue to fuel our growth as the Let's Touch pipeline continues to deliver. We now have 20 medicines in Let's Touch pipeline and life cycle opportunities so we We are very hopeful that our growth momentum can continue over the years to come. So with this, I would like to thank you very much for your interest and your attention and I wish you a good rest of the day.