AstraZeneca PLC

Good morning to those joining from the UK and US. Good afternoon to those in Central Europe. Welcome, ladies and gentlemen, to AstraZeneca's full year 2020 results conference call and webcast for investors and analysts. Before I hand over to AstraZeneca, I'd like to read the safe harbour statement. The company intends to utilise the safe harbour 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. There will be 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 full year 2020 conference call and our webcast for investors and analysts. As usual, the presentation was posted to AstraZeneca.com, and we have also sent it to people on our distribution list. Please turn to slide two. These are the usual self-harbor statements, including an election-related bonus on slide three. We will be making comments on our performance using constant exchange rates, or CER, core financial numbers, and non-GAAP measures, A reconciliation between non-GAAP and GAAP data is contained in the results announcement. All numbers are in million US dollars and refer to full year 2020, unless we state otherwise. And finally, compared to past quarters, we need to be a little bit more hamstrung with financial guidance this time due to the ongoing work with elections. Thank you for your understanding here. as we are limited in our potential comments in particular on 2021. Please turn to slide four. We plan to review the presentation first and then do a Q&A until 1.15 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 your help on this one. In speaking order, I'm joined by Dave Fredrickson, who is our EVP of the Oncology Business Unit, Ruud Dobber, the EVP of the Biopharmaceuticals Business Unit, Marvin Royer, our CFO, Mene Pangalos, our EVP of the Biopharmaceutical R&D Group, and then again, Dave, to cover for Rosse Baselga today, on oncology R&D before handing back. For the questions later, we also have Pam Cheng, EVP for operations and also IT. And we also have Leon Wang, who is the EVP responsible for China and the emerging markets. We also have online with us Susan Galbraith, who many of you know, and Christian Massassetti, who are both senior vice presidents in oncology R&D. Suzanne for the early part and Christian is in charge of the late stage pipeline in Oncology R&D. We plan to first take questions on the ongoing business and then we save any questions on the vaccine for the last part of the conference call in the webcast. We hope that works for everyone. Please turn to slide five. This is the agenda where we plan to cover all key aspects of our results today. Moving on to slide six. In 2020, performance was strong and resilient, and we delivered the guidance as promised. The 10% increase in revenue was underpinned by the focused R&D and our SG&A investment, and despite the headwinds from the pandemic in many parts of the global business. New medicines were up 33%, and we saw continued performance from oncology and new CVRM. Respiratory and immunology were stable, but it improved a lot in the last quarter and the emerging markets were up by 10% with growth impacted by COVID-19 on Fumicor. Co-operating profit grew by 17% despite 2% lower co-operating income. With a tax rate of 20%, core EPS ended at $4.02, up by 18% and more than revenue, delivering operating leverage. As a result, guidance was achieved as we promised for the year. Our cash flow improved, including net cash inflow from operating activities, now $4.8 billion, supporting the Progressive Dividend Policy. We continue to see strong progress in the pipeline, mostly on approvals, supporting sales today and, of course, tomorrow. This year, we are back with more phase three trial results, like Kalkwans recently. The efforts against the COVID-19 pandemic continued with the first authorization for the vaccine. Let me assure everyone today that we are doing our very best to deliver it to governments as promised. During this first half, we anticipate phase three data for the long-acting antibody combination, the potential new medicine AZD7442. Our production of the vaccine is very substantial, and in the months of February, we expect to manufacture 100 million doses globally. across our supply chain consortium, and 200 million doses per month starting in April. In 2021, we anticipate another year of double-digit revenue growth in the low teens, with that revenue growth accompanied by even faster growth in core EPS between $4.75 and $5, all of this at constant exchange rates. Mark will provide more details later. Please turn to slide seven. If we look at the pipeline news flow since the results announcement in November, a few highlights. There were a high number of approvals for the key cancer medicines across users and geographies. We met regulatory submissions for a number of new users of our leading medicines in all CRP areas, and we've obtained several priority reviews as well. Our clinical trial readouts also picked up. and we anticipate more of this as we move further into 2021. We will detail this news flow a little later. All in all, an increase in activity levels and more progress to the future benefit of patients. We're not slowing down. If anything, we are actually speeding up. Please turn to slide eight. After the financial headlines in our pipeline, we now take a deeper dive into revenue. Total revenue advanced by 10% in the last quarter. with growth benefiting from the Limparza Cells milestone that we have discussed at the last conference call. Looking only at product sales, the growth was 11%. There was some negative impact from COVID-19 on some of our new medicines, in particular Brilinta and some on Mfinzi and Facenra. Despite this, new medicines added $3.5 billion of additional revenue, with Tagrisso, Mfinzi, Farciga, Limparza, Calcoens, and Facenra as the biggest contributor. This is the strength of our company, the broad geographical coverage and the broad pipeline. We are powered by several products. And of course, if one or two are impacted by COVID, some others can do well. And overall, you can see the progress is very strong. We now have eight Blockbuster medicines overall and 13 new medicines. contributing growth and adding further diversification to revenue as we look ahead. So if we turn to slide nine, aggregating medicines into therapy areas, we have solid double-digit growth for oncology and high single-digit growth for new CVRM with respiratory and immunology stable and improving their last quarter despite the COVID-19 impact on Pumicor. Excluding Pumicor, there was 12% If we look at things from a regional viewpoint, there was growth everywhere with Europe improving growth markedly and the emerging markets continuing to grow with the U.S. back as the largest region now. In summary, the results for 2020 confirm the strategic direction of our company and our confidence in our business and the future of sustainable and durable growth. across medicines and across geographical markets. With a global revenue base and the diversified portfolio of new medicines and with more to come, AstraZeneca remains well positioned in the current pandemic environment. We want to remain agile and ready to act entrepreneurially when opportunities arise, as evidenced in our efforts against COVID-19, as well as the proposed acquisition of Alexion. So please turn to slide 10. On Alexion, we've made good progress ahead of the anticipated closing in the third quarter. Alexion continues to offer a compelling scientific and business complementarity and will allow us to build out in immunology long term, helping Alexion build better rare medicines using some of our platforms and help us expand into new and broader indications in immunology. So a very strong scientific complementarity that will strengthen the portfolio of our existing business, but also the portfolio of Alexion. In the short and medium term, the combined company will offer faster growth, improved profitability, and cash flow, and that will sustain the positive strategic developments achieved since 2013. Before closing, I would like to say how grateful I am for the support and the hard work from our more than 70,000 colleagues in AstraZeneca, and also the potential new colleagues in Alexion. and I would like to thank everyone for their efforts in the current situation fighting the virus but always putting patients and their own medical needs first across all of these areas and the geographical regions. I will now hand over to Dave. He will go into detail about oncology business. Please go ahead, Dave, and please turn to slide 11.

Thank you, Pascal. We're pleased to report a strong growth in total revenue of 24% for the oncology business to $11.5 billion in the year. COVID did continue to have impact with fewer cancer patients diagnosed and treated, but we saw resilience in our business as sales grew across all of our new oncology medicines from regional expansions and new launches. Please turn to slide 12. Starting with our lung cancer franchise, we're pleased to report that both Tegriso and Infinzi showed strong growth in the year at 36% and 39% respectively, with revenue of $4.3 billion and $2 billion. 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 $40 billion. U.S. Tegrisa revenue was up 24% where we saw continued single-digit demand growth, and we're now focused on bringing Tegrisa to patients with the earlier stage lung cancer setting in the U.S. following the approval based upon the ADORA Phase III trial as we await regulatory decisions outside of the U.S. In China, we are pleased to be able to successfully negotiate reimbursement to enable even more patients to access to Grisso as a first-line treatment in the metastatic setting. The majority of Infinzi revenue continued to come from the United States as the launch of the Caspian indication and extensive stage small cell lung cancer continued to take effect, although we did see impacts here from COVID on patient diagnoses. Outside of the U.S., we continue to see revenue of Infinzi pick up, particularly in Europe and emerging markets as we are now able to provide Infinzi to a more small cell cancer patients globally. The unique ability to combine with both cisplatin and carboplatin chemotherapy will further benefit patients. Please turn to slide 13. Lymparza continued to demonstrate progress with sales up by 49% with just over half of sales coming from outside of the United States. This is a result of growth across all regions as more breast and ovarian cancer patients gained access to Lymparza in the major regions of the U.S., in Europe, and in Japan. U.S. sales continued to grow by 40% with increased demand as Lymparza maintained its leadership in the part market in both ovarian and prostate cancer as we launched the PALO1 indication and first-line HRD-positive ovarian cancer and the profound prostate cancer indication. Europe sales were up by 51% as more first-line ovarian cancer patients received Lymparza as we now look forward to the ovarian Pala-1 and prostate launches in Europe following the recent approvals towards the end of last year. Emerging market sales grew by 108% driven by the China launch and the recent inclusion on the NRDL. This should be further aided by an additional successful reimbursement decision awarded this year. Japan sales amounted to $167 million with growth of 27% driven by uptake in ovarian and breast cancers. Please turn to slide 14. Turning now to the newer launches, CalQuence in chronic lymphocytic leukemia and in HER2 and third line HER2 positive metastatic breast cancer. I'm pleased to report that CalQuence revenue of $522 million in the year, almost exclusively in the United States, as the 2019 CLL launch really took effect. The launch feedback continues to be very encouraging as the very impressive Phase III data are resonating well with physicians, including the recently announced head-to-head data versus the incumbent BTK inhibitor, reinforcing our belief in Calquence as a potential best-in-class medicine. We are encouraged to see that Calquence is now one-third share of frontline CLL new patient starts in the BTK inhibitor class in the U.S. We look forward to bringing Calquence to CLL patients in Europe and Japan following the recent approvals at the beginning of 2021. Following the Inher2 launch at the beginning of the year, we're pleased to have reported $96 million in collaboration revenue based on $200 million of U.S. sales booked by Daiichi Sankyo in the year. and Hertu is the most prescribed medicine in the third line setting of Hertu positive metastatic breast cancer. I'll now turn over to Ruud for an update on our biopharmaceuticals business and emerging markets. Please turn to slide 15.

Many thanks, Dave. Today I'm pleased to talk to you about the biopharmaceuticals business. Total revenue of biopharma comprising new cardiovascular, renal metabolism, and Respiratory and Immunology was $10 billion in the year, growing at 4% despite the COVID pandemic. Starting with new CVRM, revenue was up by 9% with total revenue at $4.7 billion with very strong growth from Farciga. Farciga maintained volume market share globally with high double-digit volume growth across all regions as the fastest growing SGLT2 inhibitor. In the United States, Fasiga grew 6%, driven by the additional indication in heart failure. Outside the US, which accounted for 71% of revenue, we saw strong performances with volume-driven growth increasing and China benefiting from the NRDR listing. Berlinda delivered revenue of $1.6 billion, with 2% growth, as the impact from COVID resulted in fewer hospital patients, and China experienced the impact on VBP driven price reductions. Sales in the US were up by 3% as an increase in treatment duration offset the negative COVID-19 impact. The majority of use is still in the acute setting and Berlinda continues to outgrow the market in the majority of regions. Please turn to slide 16. Turning to respiratory immunology, we reported revenue of $5.4 billion. Stable in the year, but excluding Pomichord, respiratory and immunology grew 12%. Simichord's sales were strong at $2.7 billion, with a growth of 10% in the year. The U.S. saw particularly strong growth, up 23% to $1 billion due to demand growth following the launch of the authorized generic and the resilient ICS-Lava market. Globally, Simbicort remained the leader in value and volume market share in the ICS LABA class. Pulmicort was down 32% in the year with revenue of $996 million, which continues to be impacted by COVID, particularly in China. However, we continue to focus on growing revenue of Simbicort as well as Breast 3 following the successful addition to the NRDL. Please turn to slide 17. Now I will focus on the new launch medicines. Facenra contributed $949 million of revenue in the year, with strong growth despite COVID-19, with the majority continued to come from the US, Germany, and Japan. In the United States, Facenra is now the leading novel biologic, up by 25%, with $603 million in revenue. Facenra also overtook the leading IL-5 blocking medicine in total asthma prescriptions, for the first time. Europe and Japan revenues were $203 and $100 million, respectively, as Fasenra continued to be the leading novel biologic medicine for severe uncontrolled asthma. The launch of Breast-3 for COPD is progressing well, with revenue of $28 million in the year, with launches taking place in Japan, China, and the US, and more recently in the EU. As we look to kidney disease for LoCalma, we continue our leadership in the new-to-brand prescriptions, with revenue of $76 million in the year, predominantly from the U.S. at $57 million. We have seen early sales in China, and the Japan launch is progressing well. On Roxadustat, we reported collaboration revenue of $30 million in the year, coming from China. continue to remain strong as tens of thousands of patients are being treated for anemia and CKD with Roxodustat. We now anticipate the US regulatory decision in quarter one following the submission of the additional clarifying analysis data with the US FDA. Please turn to slide 18. Emerging markets where revenue grew by 10% in a year continue 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 despite a slight negative effect from divestments. Outside China, total revenue was up by 9% with growth spread across the regions. China delivered resilient growth at 11% and continued to see some impact from the COVID-19 pandemic, notably with Spomikot, as previously mentioned, and continued volume-based procurement impact. We were very encouraged to successfully negotiate several medicines onto the China NRDL program for this coming year. New medicines grew by 59%, now contributed a third of total revenue 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 19.

Thank you, Ruud, and hello everyone. I want to take you through our financial performance in the year, as well as the guidance for 2021. Please turn to slide 20. As always, I will start with the reported P&L before commenting on our core results. As Pascal mentioned earlier, total revenue grew by 10% in the year, in line with the guidance I provided 12 months ago. In February last year, we did not know how much and how long the adverse net impact of COVID-19 was going to be. Within total revenue, product sales were up by 11%, driven by the success of the new medicines, with the majority of collaboration revenue reflected milestone receipts in respect of Limpaza. Please turn to slide 21. Turning now to the core P&L, this slide demonstrates the progression of our operating leverage. Our gross margin ratio was unchanged in the year at 80%, in line with the expectation outlined last year. Our mix of sales is continually improving, but this was offset in the year by increasing pricing pressures in China related to the impact of the NRDL and the VBP program to which Ruud alluded earlier. Core R&D expenses increased by 10%, partly a result of more investment in the pipeline, including phase three trial starts for a number of medicine, including the oral third, and the advancement of Datopotomab, Derukstetan, also known as 1062. Merck upfront contribution in 2017 for the development of Limpaza recorded at that time on our balance sheet was gradually released to the P&L until 2019. This impacted the comparative performance in 2020. There was also a material investment in the development of Brasicumab Although we are refunded for those costs through other operating income. Core SDN expenses increased by 4%, driven by more investment in the China expansion and the launches of new medicines. Core other operating income declined by 2%, while the core tax rate was 20%. Finally, our core earnings per share ended at $4.02, up by 18%, demonstrating the sustained progress we are making. Please turn to slide 22. Before we look at net debt and cash generation, I want to take a moment to reconfirm the changing shape of our P&L. While we expect collaboration revenue to increase over time, and also anticipate that income from divestment will remain a material part of our P&L. This slide highlights the change in the sources of profit over the long term and the growing contribution from product sales that is being made from our new medicine. And I expect this trend to continue. Now turning to net debt, it was broadly unchanged in the year. A 27% improvement in EBITDA to $8.3 billion meant we took our net debt to EBITDA ratio from 1.8 times to 1.5. The strong growth of EBITDA was offset by a number of factors, including dividend payments totaling $3.6 billion, and we also made the second of our two $675 million up from payment to Daiichi Sankyo in respect of 1.2. Finally, we also paid the first non-contingent payment of $350 million, also to Daichi Sankyo, as part of the agreement of Datto Potomab de Rukstekan. I was pleased to see that our constantly improving business performance drove a significant year-on-year increase in net cash flow from operating activities. Even excluding the benefit of net cash inflows from vaccine activity, our cash from operating activities increased by around $800 million. The $1.1 billion of vaccine net cash flow are expected to reverse out in the near term. Our progress bodes well for ongoing ambition of converting improvement in operating leverage into increasing levels of cash. Please turn to slide 23. This familiar slide summarizes the continued progress we are making with our financial priorities. As I mentioned, the 10% growth in total revenue in the year was converted into an 18% increase in core earnings per share. Our core operating margin rose by two more percentage points to 28%, despite the reductions in collaboration revenue and other income. The progress on operating leverage was also demonstrated by the fact that cooperating expenses represented 59% of total revenue versus 60% a year ago. As I said, this increasing level of profitability will convert into more cash that will help us deliver a balance sheet and help us to remain focused on the capital allocation priorities of reinvestment, the progressive dividend policy, and a strong investment-grade credit rating. Please turn to slide 24. Finally, I will turn to guidance for 2021, which, as I mentioned a moment ago, is on total revenue and co-earnings per share at constant exchange rates. It does not reflect any revenue or profit impact from sales of the COVID-19 vaccine AstraZeneca or any impact from the proposed acquisition of Alexion. I am confident in our guidance despite the uncertainties arising from the pandemic of a low teens percentage increase in total revenue with even faster growth in core EPS to between $4.75 and $5. The confidence is based on the success of our patient centric strategy, the focus on innovation, and our track record of commercial execution. Please turn to slide 25. And finally, I want to echo Pascal's comment on the proposed acquisition of Alexion. This transition is intended to drive both the strategic and financial development of our business. The case for scientific and business complementarity is clear, with the acquisition enabling us to develop our immunology business further, utilize our emerging market presence further, and help Alexion develop better rare disease medicine using our platforms. We are very excited about the prospect of combining two science and patient centric organization deliver further sustained industry leading revenue growth. As you will have seen from our track record and from our guidance, we are making good progress on revenue growth and operating leverage, which is driving greater level of cash generation. This strategy compelling acquisition is intending to build on this prospect based as they are on the focus on science and innovation. Thank you for listening. And with that, I will now hand over to Mene. Please turn to slide 26.

Thank you, Marc. And hello, everyone. I'll now provide an update on our COVID-19 efforts and our biopharmaceuticals medicines since the last quarter. I'm also joined by Dave Fredrickson covering for Jose Baselga who will discuss oncology movements and upcoming news flow across the company. Please turn to slide 27. In December of 2020, our vaccine received its first authorization for emergency supply from the UK MHRA. With recent conditional marketing authorization from the EMA, We're now authorized with this vaccine in over 50 countries. Yesterday, we also received a positive recommendation for the vaccine from the WHO's SAGE group. It's a really important milestone ahead of an emergency use listing by the WHO, which, should it be granted, would provide an accelerated pathway to significantly broaden availability of the vaccine around the world. And I think it's important to not forget, but from When the agreement was signed with Oxford University to the first approval, only eight months have elapsed. Now, just over nine months away, we have the vaccine approved in more than a quarter of all countries around the world. We've recently also published data on the impact of the emerging UK, Kent and South African variants. The vaccine is as effective against the new UK variant as it is against the original strain. The South African strain resulted in a loss of efficacy against mild disease, but may still offer protection against severe disease, which is key to reliving the burden on healthcare resources around the world. We've also begun work on adapting the vaccine for these new variants of concern, leveraging our existing clinical trial data and an established supply chain to potentially reduce the time needed to reach production at scale. Finally, we also presented our primary pooled analysis of the pooled Oxford trials, and it was recently published in a Lancet preprint. The analysis showed good efficacy after the first dose, with over 70%, confirmed increased efficacy with a longer dosing interval rising to 82% at 12 weeks and up, and confirmed 100% protection against severe disease and hospitalization. Data readout from the U.S. trial is anticipated before the end of this quarter. Turning to our long-acting antibody, AZD7442, we feel this has a differentiated profile due to its high potency, its extended half-life, and its capacity to be used either as an intramuscular administration or intravenous. It is now running in five Phase III trials. Early in vitro data from a couple of independent laboratories have suggested good neutralizing activity against UK and South African strains. with potentially class-leading activity for this combination against these strains. Please return to slide 28. We have several medicines that have the potential to establish a new standard of care for patients in need. In CVRM, Farcega has moved beyond type 2 diabetes and into two new disease areas with high mortality and a large unmet medical need. Falsiga is now approved for patients with heart failure with reduced ejection fraction in the United States, the EU, China, and Japan. And its CKD indication recently received priority review in the US and Japan. Falsiga truly has the opportunity to redefine treatment as the first medicine to significantly prolong survival in patients with heart failure with reduced ejection fraction, and also now in CKD with or without type 2 diabetes. In terms of upcoming news for Farcega, we've just started a new trial in the post-MI setting called DAPR-MI, where we will explore whether providing Farcega within seven days post-MI, we will be able to reduce hospitalization for heart failure or CV death in non-diabetic patients with reduced left ventricular ejection fraction. We also have trial starts this quarter for our Fosfiga combination programs, both with AZD9977 and Elizabeth Tentan. Lastly, in the second half of the year, we will have data from the DELIVER trial in patients with heart failure with preserved ejection fraction. Please turn to slide 29. Anifrolimab is our first in-class interferon-1 medicine for the treatment of patients with moderate to severe Systemic Lupus Erythematosus. It has potential to bring hope to a set of patients who have been chronically underserved for over a decade. Anafrolimab has demonstrated consistent clinical benefits across all measured SLE patient subgroups, showing early and sustained reduction in skin disease activity, improvements across a number of organs, and enabling, importantly, sustained steroid use reduction. Regulatory submissions have been completed in the US, the EU, and Japan, and we anticipate the first regulatory decisions in the second half of this year. We also have a number of lifecycle management indications planned to include lupus nephritis, cutaneous lupus erythematosus, and myositis, which illustrate our excitement about the future of efforts in the immunology space. Please turn to slide 30. I'll now update you on progress in our pipeline. In respiratory, I'd like to mention that the exciting Navigator Phase 3 trial data for tetrapellamab in severe asthma will be presented at the AAAAI at the end of the month. Our IL-33 antibody, MEDI-3506, has now started Phase 2 trials in asthma and also in diabetic kidney disease. Continue on the renal space, our flap inhibitor, AZD5718, has also made progress, having solid phase 2 trials in CKD. And as I mentioned earlier, the first of our Farsiga lifecycle expanding combination programs with our MR modulator, AZD9977, is initiating phase 2 trials in heart failure with CKD. Our subcutaneous PCSK9 program, AZD8233, started its phase 2B trials in dyslipidemia, and the trial continues at pace. We look forward to updating you on the progress of all of our medicines in the biopharmaceuticals pipeline over the coming year. I'll now hand over to Dave, and please turn to slide 31.

Thank you, Mene, and hello again. I'm happy to take you through oncology R&D news this quarter, and I'll start with Tegriso to continue on the theme of establishing a new standard of care for patients. The groundbreaking ADORA Phase III data has further confirmed Tegriso's capability to reshape future clinical practice. We recently received regulatory approval in the U.S., as well as approvals in four other countries as a result of Project Orbis, a new review process by FDA and other agencies and now have further submissions underway in this potentially curative setting. Starting with its approval in 2015 from the Phase III ORA III trial and second line T790M, we've since brought Tigris out to first line in a broader setting with the FLORA trial by demonstrating an overall survival benefit. Now, with the ADORA data exhibiting around an 80% reduction in the risk of disease recurrence or death, Tegresso is the only medicine to show meaningful benefit in adjuvant EGFR mutated non-small cell lung cancer. Tegresso's trajectory is an excellent example of the efforts we're making across our portfolio in oncology. Our aim is to establish new standards of care for patients with a concerted effort in earlier stages of disease. Please turn to slide 32. Moving on to Calquins. a selective BTKI that has shown impressive effectiveness in chronic lymphocytic leukemia. CalQuintz has delivered unprecedentedly low hazard ratios in both the relapsed refractory and in the frontline settings, within the latter showing efficacy as both a monotherapy and in combination with immunochemotherapy. We recently announced high-level results from the Elevate RR trial, which showed that CalQuintz met the primary endpoint of non-inferior progression-free survival for adults with previously treated high-risk CLL versus ibrutinib. In addition, with over 40 months of follow-up, Calquence demonstrated superior safety in atrial fibrillation without compromising efficacy. We look forward to discussing the totality of the data, which confirm our confidence in Calquence's favorable benefit-risk profile with global health authorities. Please turn to slide 33. Now I'll provide a short pipeline update with a focus on the key movements in the quarter. Our TROP2-ADC Datapodimab Dirextakin that we develop and will commercialize in combination with Daiichi Senkyo has started phase 3 trials in non-small cell lung cancer, building on the efficacy seen in the Tropion Pantumar 1 trial that was recently presented at the World Conference on Lung Cancer in January. In addition, we've initiated phase three trials for AZD9833, our next generation CERD, now known as camazestrin. We look forward to updating you on the progress of these medicines and others in the near future. Please turn to slide 34. I'll end by taking you through some key items of anticipated news flow in 2021 across our entire pipeline. In oncology, we will see Phase III data readouts for LIMPARSA's OLYMPIA trial in adjuvant breast cancer and the PROPEL trial in prostate cancer, as well as in PHNC's Pacific II trial in non-small cell lung cancer and overall survival data from the Poseidon trial. For INHER2, we will have data from DESTINY Breast O3, which is a head-to-head trial in the second line versus trastuzumab, and Tenestine, as well as data from Destiny Breast 04 and HER2 low breast cancer. In biopharmaceuticals, we'll have regulatory submissions for tezopalimab in severe asthma, as well as regulatory decisions for anafrolimab and for roxidustat. Finally, as mentioned earlier by Mene, We'll have data readouts for both the AstraZeneca COVID-19 vaccine U.S. Phase 3 trial as well as the first data readouts from the long-acting antibody AZD7442. With that said, I'll now hand it back to Pascal for closing comments. Please turn to slide 35.

Thank you, Dave. Please turn to slide 36. In 2020, performance was strong and resilient, and we delivered the guidance as promised. The 10% increase in revenue was underpinned by the focus R&D and SG&A investment, and despite headwind from the pandemic in many parts of our global business. New medicines were up by 33%, and we saw continued performance from oncology and new CVRM. SP and immunology were stable, but improved a lot in the quarter. and emerging markets were up by 10% with growth impacted by COVID-19 on Pulmicor. I think we told you, but respiratory immunology would have grown by 12% due to neutralize the effect on Pulmicor. Co-operating profit grew by 17% despite 2% lower co-operating income. With a tax rate of 20%, Core EPS ended at $4.02, up by 18%. and More Than Revenue, delivering operating leverage. As a result, guidance was achieved as we promised. Our cash flow is improving, including net cash inflow from operating activities that are now $4.8 billion and support the progressive dividend policy. We continue to see strong progress in the pipeline, mostly on approvals, supporting sales today and, of course, tomorrow. This year, we are back with more phase three trial readouts like CalCOINS recently. The effort against the COVID-19 pandemic continued with the first authorization for the vaccine. Let me assure everyone today that we are doing our very best to deliver it to governments as promised. During this first half, we anticipate phase three data also for the long-acting antibody combination, the potential new medicine AZD7442, which you heard through this presentation is a very exciting product. In 2021, we anticipate another year of double-digit revenue growth in the low teens, with that revenue growth accompanied by even faster growth in core EPS to between $4.75 and $5. All of this at constant exchange rates. So let's now go to the Q&A. For those on the phone, please remember to press star 1 if you want 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 for this and perhaps now we can take the first question from the conference call. The first question I believe is from Mark.

Hello, can you hear me, Pascal?

Yes, can hear you, yes.

Great, thank you so much for taking my question. The subject is investing for growth, Pascal. Could you sort of help us understand and sort of frame the arguments here? For example, on R&D, how are you going to prioritize the various pipeline assets that you have after the election acquisition closes and you have a sort of wall of what's next opportunities but with more financial flexibility? I sort of counted 10 in oncology, 12 in biopharma, and you mentioned 11 in election as well. And in terms of investing for growth also, and how we should think about the SG&A component of that. And that leads into specifically onto Ariflomab, if I may. You know, 250,000 diagnosed lupus patients in the U.S. every year, only 25,000 on Benlysta. So can you sort of help us understand how physicians will choose to use anaphronumab relative to, say, immunosuppressants or Benlysta or Rituxan and the progress there with the subcutaneous formulation, which you're also investing in as well? Thank you very much.

Thanks, Marc. So on the Anifolumab question, maybe a little bit later you can cover the sub-Q formulation and all you could cover the positioning and basically the commercial opportunity. So let me first cover the first question, Marc. You know, you've said it. We have a pretty strong pipeline and large portfolio, and that's why we believe we need to continue investing in RMD in particular. Also a little bit in SG&A, but much less, of course, because we have a strong infrastructure globally already. But certainly in R&D, we continue to invest. We want to drive top line. I mean, basically, we have two goals. One is to drive the top line as fast as possible. And the second is to continue delivering operating leverage over a period of time. So, you know, we'll continue to invest. In terms of prioritization, essentially, We have a regular portfolio meeting that looks at all these projects. We have twice a year we review our overall pipeline. We have a strategy meeting typically in June, July, where we look at all our projects and we compare them and we compare and contract and we try to prioritize and the teams come and then they present their projects and we prioritize What they present to us. I mean, there's nothing really special here. We look at the metrics that any other company would look at. I think what we try to do is have good discussions beyond the metrics and get to the bottom of the data and understand the data and challenge ourselves. And that's how we actually prioritize and then build our plan according to this. Really, there's nothing Thank you for the question. So first of all, we truly believe that the interferon

The interferon mechanism is central to ASLE, and therefore we believe we can help a broad patient population. We have seen in our clinical trials that we clearly have a broad efficacy across multiple organs, but also multiple patient groups, as well as a very impressive OCS reduction. I think one of the most important parts is that, and physicians are giving that back, physicians who have experience with anafrolumab, about an early response. The current therapies are lacking in an early response, and both for physicians and patients, it's very important to see a positive impact. So all in all, of course, we are doing an enormous amount of work as we speak so that we are ready to launch the product in the United States and in other geographies in the second half of the year, but it is a truly very attractive opportunity. and too many patients are still not getting well served as we speak. Clearly, you were referring to Belenista. Overall, the penetration is still relatively limited, so we clearly see a huge opportunity moving forward here. Mene, are you going to cover the subcutaneous formulation?

Yes, thanks, Ruud. So with regards to sub-Q, we presented some data in 2019 on the sub-Q formulation, which was a PKPD study, which was very consistent with previous studies using our IV formulation. We haven't shared timelines for when we'll be pursuing sub-Q, but I can say that we are pursuing sub-Q formulations for Ranafro, and we'll give you more concrete plans in terms of timing of launches as we have them.

Thank you very much.

Thanks, Mene. Richard Park, ExenBNP. Go ahead, Richard.

Hi. Hopefully you can hear me okay. So broadly financial focused, your revenue guidance for the year is a little bit more optimistic than consensus so I wondered if you could give us a steer as to what you think maybe consensus was too conservative in terms of revenues but on the flip side it seems like your margin assumptions are a little bit lower. I'm assuming that's you simply taking a conscious opportunity to reinvest back in the business. So maybe you could just clarify that and where you expect to invest a little bit more aggressively than consensus is assumed. And if you don't mind me just taking a second one on operating cash flow for 2020, if I exclude the benefit from the COVID vaccine funding, the improvement in operating cash flow is relatively modest, I think $800 million. despite a significant improvement in reported operating profit, which is $2 billion plus, I think, incremental. So can you help us clarify some of the moving parts there that's maybe continued to drag and maybe give us a steer on the magnitude of free cash flow improvement in 2021 pre to the DHU payments? Thank you.

Thanks, Richard. So maybe I'll try to cover the First couple of questions, and Marc can then add to this and also cover the cash flow question. So if we look at revenue, as you know, we don't guide or don't comment on the product by product basis, but I think you can see it. We have a very broad portfolio. We have a broad geographical coverage, and we've talked about it for quite a number of years now, but it's starting to have an impact, and So we have a very, very strong portfolio of products driving our top line. I can't really tell you, comment on one or the other product because we don't guide by product. But actually, as it relates to your second question, we do continue to invest in R&D. We do continue to build a company that is fast growing in the near term, but also has a long runway. Quite often we are asked questions about succession as if some of us are getting quite old and ready to go. But I can tell you, despite our advanced age, it doesn't stop us from thinking long term. And so we will continue to invest in R&D. That's the core, that's the heart of our company. And that, you know, that will continue driving this company in the future. Marc, do you want to add anything and follow the cultural question as well?

Thank you, Richard, for the question on the cash flow. So if you look at the – so we can look at the net cash flow at the bottom of the cash flow statement, or we can look at other intermediary levels. But I would recommend that you look at the cash flow – at two things. First of all, the cash flow from operations, which has grown in 2020 by $1.8 billion. You have signal, because we have commented upon it, the power that is – linked to the COVID vaccine. So the growth of the cash flow from operations was 62%, including the vaccine, but was also 26% excluding the vaccine. So the underlying business cash flow is growing, cash flow from operation is growing faster than sales and faster than operating profit. So I think that's a very good sign. I would also I recommend that you look at the progression of the EBITDA. We had an EBITDA in 2020 of $8.3 billion versus $6.7 in the comparative prior year, so an increase of $1.6 billion. So I think these two, in my view, point to an improvement of profitability and an improvement in cash conversions.

Thank you.

Thank you, Marc.

So remember, you can ask questions by dialing star 1 or going into the website. Any other questions? We have a question from Michael Lichten at UBS. Michael, over to you.

Thanks very much. I'm going to stick to one on to Grisso in the adjuvant setting now that you have the compendia listing and the approval. I was wondering if Dave could talk to the operational challenges that there may be in the setting moving patients from surgeons to oncologists. What is he doing to ease that and the time frame around that? And the reason I'm asking is obviously the prescription trends haven't seen I haven't shown too much of an inflection yet, and I do understand that the approval only came late last year, but it does suggest that off-label use was maybe a little bit restricted, which I'm assuming is related to those practical challenges, so any color on that would be very helpful. Thank you.

If you want to cover this, and you have to remember, Michael, also that every day, The pandemic is clearly limiting our ability to interact with physicians, and this has a bigger impact on launchers than existing established products. Dave, over to you.

Thanks, Pascal. I think, Michael, maybe I'll start with the second part of your question first, which is about the uptake that we might have seen spontaneously prior to approval. I think it's also important to remember we had high-level results just in May of last year, we got to approval in December in the United States. And within that timeframe, we also had a publication take place, but NCCN guidelines weren't updated to reflect the ADORA data until late last year. And so I think that that's different than perhaps what you might be expecting to see in other places where we're working on a longer timeline from high-level results and the presentation of those data. in between that and approval. So I think that actually together with the pandemic as Pascal raises was part of the aspect of it. I'm really happy to say that the response from physicians in just the one month that we have been promoting ADORA has been very positive. We already have nearly two-thirds of physicians with unaided awareness of the 80% reduction We are getting very good traction both from surgeons as well as from pathology as well as from medical oncologists. And I think the experiences that we had with Pacific of working with the multidisciplinary team have really served us well here in terms of engaging with all of the different specialties that are involved in treating in the early stage. And I think surgeons are very open and interested to learning more about Tegresso and Adora because it's obviously coming after surgery and not as a substitute or a replacement for it. And we really also are quite pleased that while it's qualitative, what we're hearing back from physicians is there an intention to use across stages. And so, you know, whether it's 1B or 2 or 3A, we're hearing an intent to use that's consistent across, which is what we saw in the data. So we do need to continue working on referrals. We need to continue working on driving testing rates, which are only at about 50% in the adjuvant setting. We need to drive use of adjuvant therapy, which is only about 25% today. So the educational barriers are there, but I'm quite pleased with the first month and look forward to continued progress into the year. So that's kind of my outlook.

Thank you. Thanks, Deb. Louisa Hector at Berenberg. Go ahead, Louisa.

Hello. Thank you. And I'd also like to take the opportunity just to extend our thanks to all your employees for the hard work on the COVID vaccine. So my question is on the 2021 guidance and some of the moving parts. I just want to understand a little bit the range and whether you could contribute, sorry, specifically comment on XUS Synergis and how that may impact in the year because I think the rights return to you part way and do you expect more disposal gains this year or are you pretty much done because you have a high number coming in Q1 and to Grisso China what proportion of your EM sales are in China and can you talk a little bit about the impact of the price cut as we go through the quarters because I think the price cut hits sooner than you see the volume uplift from the Thank you.

Thanks, Louisa. Marc, do you want to cover the guidance questions? And maybe Dave will address the China question. And again, Louisa, just to remind you, unfortunately, this year we are more limited than usual in terms of how much we can comment for the reasons we've described before. Over to you, Marc.

Yes. So I think I will take the question of the I can't comment specifically on the year 2021. You're already aware of what we have announced, obviously. There will be some more, but I can't comment specifically on it. But over the medium term, the order income will continue, but play a lesser role.

And synergist, Marc, or do you want to?

Synergist, I mean, yes, synergist is going to be, we're willing to recover synergist, and we are preparing ourselves to transition from AbbVie in many countries. It will not have a major impact in terms of profitability in the year 2021 because this will be sort of a part of the year. But over time, of course, it's an important area for us. Thanks, Matt. David?

So, Luis, on the first question, China – represents an important part of emerging market sales. We haven't provided the split between China and the rest of emerging markets, but I will also say that emerging markets without China are also an important part of that number, and we saw within that area really nice demand growth driven by Taiwan, Hong Kong, Russia, Brazil, Korea. On the specific question about China moving forward, within China, we did see in the fourth quarter Impact from the NRDL stock compensation that we needed to realize as we accrue for stock compensation that we're going to need to make as a result of the NRDL and the lowering of price. That'll take effect in March. As we saw with the second line, as we've also seen in other indications, it does take several quarters to or excuse me, several months, maybe as many as two quarters for the volume uptake to start to compensate for the pricing. And it really is a function of how quickly we can get up the curve in terms of adoption within frontline. I will say that I'm pleased that we have the opportunity to expand access to frontline patients in China. You saw the speed with which we were able to grow the business when we got second line NRDL listing. And I have every confidence that the team in China is going to be able to do the same with frontline and that the inclusion in the front line on the NRDL along with the renewal in second line puts us in a strong spot with TIGRISO where in the front line and in the second line there's an opportunity to make sure that if a patient hasn't received TIGRISO that they will get the opportunity to do so. So I think we're well positioned in a competitive environment there.

Thank you, Dave. Keir Farraik at Goldman. Keir, over to you.

You guys can hear me, okay? Two quick questions, please. The first one on N-HER2, Dave, from your perspective, as we look at kind of the upcoming data sets in the second line and kind of the low HER2, kind of what is the clinical profile that you would like to go to the market with, especially given how established kind of Cat Scylla is in that setting? And then separately on the third, kind of quite a competitive space from what we can see, So just wondering kind of where you see the potential for differentiation on your CERD versus some of the others that are probably slightly ahead of your CERD. Thank you.

Thanks, Kaya. So, Dev, maybe you could cover both questions, and Christian could add anything that he thinks is relevant to add to what you were saying. Go ahead, David.

Great. Thank you so much. I appreciate that. I mean, I think in terms of the profile that we're looking for in the head-to-head study, you know, what we know from Katsila's second-line study and the Amelia study was that they were able to demonstrate a median PFS of 9.6 months, an overall response rate of 43%, and that was in patients that had median lines of therapy of one. We also know that That study was run at a time before adjuvant perjeta was really something that was standard of care. And I think that's important to keep in mind that we're running now in a context of all the INHER2 studies are running in a context of patients who've all been previously treated with standard of care, which is now trastuzumab and pertuzumab. So we certainly think that the control arm, which is Consila, should probably in the real world today be performing at or maybe even a little bit slightly below what you saw in Amelia. And the results that we saw in third line that are what our breakthrough therapy designation and approval were based upon actually are getting into the, you know, 14 months of PFS range and overall response rates of 60%. And so we have every expectation as we bring that into earlier settings that that should improve. So that's kind of how we're taking a look at the outlook on INHER2, and I think that'll be a very compelling profile. Susan, I mean, Christian, in terms of the oral CERD and Next Generation, do you want to comment on some of the aspects of how we think about differentiation?

Sure, sure, Dave. Thank you. Thank you for the question. We presented the data from Serena 1, our Phase 1 trial, with Camisestrant, our oral CERD. And we believe that this drug has a best-in-class potential in terms of providing superior clinical benefit at well-tolerated dose. You have seen that the 75 mg QD, that is the dose that we are moving in registrational trials, the results show the median PFS of more than 11 months and a clinical benefit rate exceeding 50%. With no dose reduction or discontinuation, no GI toxicity. This drug is already in two phase two trials, Serena 2 that is comparing Camisestrans versus Fulvestrans in patients with metastatic breast cancer, and Serena 3, that is a window of opportunity trial. There are several exciting combinations that we are entering now in phase 3 pivotal trials. We just started the first line combination trial with papocyclic. So we have a very strong and robust clinical development plan with these drugs.

Thanks, Christian. Maybe we could stay on the third. There's a question from Steve Scala at Cohen. Steve's question is, Sanofi says it has the best-in-class molecule. What data would you point to that might argue otherwise? So we typically don't comment on competitors' products, but maybe you could, again, sort of comment on what makes our products so different.

I think that... What I just mentioned in terms of level of efficacy as a monotherapy in a very heavily pretreated patient population, pretreated with CDK416 inhibitor, pretreated with chemotherapy, showing this level of progression-free survival, especially disease control rate, is quite compelling with our molecule. In addition, our safety profile, especially at the dose that we selected to move into pivotal trials, show a very benign tolerability. We almost, we do not have dose reduction, we do not have discontinuations for adverse events, 75 mg, and compare maybe other molecule, the GI toxicities, the hot flashes, So those adverse events that sometimes represent a bursum for patients seem to be quite good. So we have a good molecule, and we are developing it in a very accelerated way.

Thanks, Christian. So still in oncology, another question from Steve about Mfinzi. And it's a question for you, Leon, I think, and Dave maybe can also comment. So, Leon, the question is, are you seeing off-label use of competitors in China for the Pacific regimen?

Yeah, I think we are seeing quite a lot of off-label usage of competitors in China using off-label. But the Pacific regimen, stage 3 lung cancer in China, the market is at the moment quite underdeveloped. We see some, but still we are able to defend a large share for this Pacific regimen within Dindy. and our Infinsi also have some spontaneous usage of small cell lung cancer. So I think ultimately we, Infinsi with the good data, we should be owning the space of stage three, even at a self-pay situation. Thank you, Leon.

The next question is from Pascal.

Sorry, Dave. Pascal. No, just to add on to what Leon was saying, I think that for clarity on this, so the Off-label use of checkpoint inhibitors is something that, as Leon pointed out, you know, he's seeing, we're seeing within China. The reason that the Stage 3 is less well-developed is because, obviously, that requires chemoradiotherapy, multidisciplinary teams, and I think that the work that Leon and his team are doing to develop that marketplace really is putting us in the right position to be able to defend the on-label use of for Pacific. And so there's certainly a lot of off-label competition throughout checkpoint inhibitors. But I think that Leon is clued in on a key piece, which is that we're playing a role in the development of that way of treating patients, which doesn't exist. And that's something that we've really developed a skill set on in China. Thanks.

Thanks, David. Next question is from Andro Broman City. Andro, over to you.

Thank you. Question for Ruud and then one for Manny. So for Ruud, It appears to me that the anticipated timing of generic entry into the U.S. seems to be pushed out into the second half of 28. I just noted the patent term extension you got. I just wanted to confirm that's correct or whether it's still the 25 that you've previously outlined. And then also any comments on how long COVID may result in fast-seeker demand due to either increased renal or heart failure. And then for Mene, On the subject, assuming we will require novel vaccines to address some of these variants or merging variants, how relaxed should we be about the challenges of developing novel vaccines, be it multivalent or otherwise? I'm thinking both from an efficacy point of view, things like antigenic sin, anti-vector antibodies, as well as from a safety point of view. So many thanks in advance for those two questions.

Okay, Andrew. Would you take the first questions and Mene will cover the vaccines?

Yeah, absolutely, Pascal. So on your first question, Andrew, based on my latest information, it's still 2025. The only piece is that we're also going to apply for pediatric extension, so that will give potentially a six-month extension of our patent, so moving in the United States into 2026. Regarding COVID, COVID-19 impact on Farsiga and the outlook on heart failure and kidney disease patients. We're very bullish, Andrew. Yes, there is an issue. Our field forces are doing their best to reach out to nephrologists as well as to cardiologists, and it's going well, if you see the data. But equally, of course, there is a COVID-19 impact. I'm not going to Play it down. But overall, if you look at the performance of Fasica also in the last quarter, across all regions of 40% growth, it clearly shows the enormous potential of this product for our portfolio. And we're very excited, as Pascal already mentioned in his opening statement, that we were granted priority review for CKD in the United States as well as in Japan. So yes, there's a little bit of headwind regarding COVID. but equally the teams are doing a phenomenal job in order to drive this product where it needs to be. Mene.

Thanks. There's a lot of questions there, Andrew, so I'm going to try and answer as many as I can. So first of all, your first point is, you know, if we need new vaccines, I think the jury is to that. I think with regards to protecting even with these new variants against severe disease hospitalizations, it may well be that the current crop of vaccines we have are going to be good enough but if we do end up needing new variants then I think we're all going to be able to move reasonably quickly. We've started work on new variant vaccines based on the new sequences some time ago and we're hoping to be in the clinic in the springtime ready for being able to put it into people's arms in the autumn time frame. So a few weeks behind the mRNAs but not that far behind. In terms of Antigenic Sin, whether you're going to have multivariant vaccines, you know, in a single dose or those sequences, those are all questions we don't understand. So I think, you know, right now people are assuming that if you dose with an X-gen variant as a boost, that you will drive the immune response to be able to give you protection against the new variants. That's not necessarily true because you may have already biased the immune response to The original variants. So we're going to have to do those experiments, Andrew, and actually work that out using immunogenicity and neutralization assays. But I think those are all the things that we will be working out over the coming weeks and months.

Thanks, Manny. The next question is from Sachin at Bank of America. Go ahead, Sachin.

Thanks for taking my question. Sachin Jain here, Bank of America. Two topics, if I may. Firstly, on tezopelamab. I wonder if you could just discuss the relevance of the source data which didn't show the benefit on steroid reduction. I'm a bit confused that powering seems to be cited as a reason given the study size isn't that different to the Dipixen or Fresenra studies and if you could just touch on commercial relevance of having missed that study. And the second one is just back to cash flow from Mark. I wonder if you could comment to what sort of free cash flow improvement we should see in 21 relative to consensus at around six and a half, seven billion in operating cash flow. And then related, you've been fairly vocal on dividend increases as part of the election acquisition. When do you expect you can get more concrete on that in terms of payout ratios of combined free cash flow and your intent to specifically target income investors given the dynamics elsewhere in the sector? Thank you.

Thanks, Sachin. Can I suggest that maybe you cover first the source data and the interpretation, and then Ruud can cover the commercial relevance and mark the financial questions?

Yeah. Thanks. Thanks, Sachin. So, first of all, it's not a powering of the study that led to the negative study. I think it's the design of the study and some of the nuances within that. And I think when we present it, you know, it will become clearer. I don't think it impacts the filing for TESI in any way. and actually the data were very consistent with what we saw with tezopalimab. It's really the placebo arms didn't perform as we wished when you see the data. We still feel confident that Tezi will indeed provide steroid sparing or reduction over time and we'll need to run another study to prove that. But there's nothing about the powering of the study that's led to this result. Ruud?

Yeah, thank you, Mané. From a commercial perspective, Sargine, we are, I think, together with our colleagues of Amgen, very excited about this product, irrespective of the source data. I think it's the first time that biologic is clearly showing a very strong effect in low eosinophils. None of the other biologicals have been able to show that. So the potential is very substantial, roughly 60% are in what is called the moderate to low eosinophil situation. So in that sense, I think it will be an extremely good product in order to serve those patients. But equally, I agree with Mena. We will do more analysis, and we will look whether it makes sense in order to do another study. But in the short term, I don't expect any major impact based on the source data.

So on the cash flow, I'm not going to be able to give you a guidance on the cash flow for 2021. But I think I would like to explain that the sort of benefit that we got on the cash flow in 2020 due to the vaccine will obviously reverse itself in part in 2021. So this needs to be considered. If we just look at the sort of underlying cash flow, I think you will have a similar trend as the one we saw over 2020 versus 19, which is a faster growth of the underlying cash flow if we exclude the vaccine. So I think you need to take these two elements in consideration. If we talk about the dividend, so what we have said If we do acquire elections, we'll have a stronger capacity for dividend expansion. We haven't provided any specific timing, but we have answered the question in the past of whether this would take place in 2021, and we have answered that 2021 will be a very busy year for us. and therefore, you know, post-2021 seems to be a better time to increase the dividend. But we haven't provided a sort of a fixed payout ratio going forward, but clearly a stronger capacity to expand the dividend from 2022. Thanks, Matt.

Thank you. Tim Anderson at Dwarf Research. Tim, over to you.

Thank you. I have a question on HER2 and specifically on Destiny Breast 04 in the HER2 low segment. To me, of the various readouts occurring in 2021, that's perhaps the most exciting. It's a large segment of the market. It's one that's untapped with current HER2 therapies, so it's quite novel. I'm hoping you can characterize the riskiness of this particular trial and also the commercial meaningful on us of that particular trial relative to the other readouts. And then on Farciga and the deliver results in the HFPAF heart failure segment, it could be quite meaningful, but it's hard for me to handicap the risk of that. So what's your confidence in a positive readout on that trial later in the year? Thank you.

Thanks, Tim. So Christian, can you cover the first one? And that could add to this. Mene, if you could cover the second question, but right here really quickly, because we still have a lot of questions, and we would like to give everybody a chance.

Sure. Thank you. Thank you for the question. The DbO4 trial, I am very much in agreement with you, is a very exciting trial. One of the most important readouts that we will have the second half of this year. and is a study that is currently comparing in 540 patients, NR2 versus chemo standard of care. Chemo standard of care is a choice between different cytotoxic, capsaicin, benzocytabine, paclitaxel, nanpaclitaxel, and eriduline. This is a trial that we are running in 50 patients. It is a trial that is based on the preliminary data that we have been reported in ER2 low breast cancer in a later line of treatment in probably every more heterogeneous patient population. I think the data that we have presented give us confidence that an ER2 in this segment can be definitely superior to monotherapy, the monotherapy that I just mentioned. And you know, this is a very important trial because based on the results of this trial, we will decide what's next in this specific segment F2-Low. And of course, this can give us opportunity to expand further this segment with combinations or even going earlier in terms of linotherapy.

Do you have anything you want to say very quickly? Yep. So very quickly, Tim, what I would say is that commercially it could be very attractive. It will obviously depend upon the data. HER2 low could be as big as three times the size of HER2 positive, but remember HER2 low is a continuous variable. It's not a binary one, and so we'll have to see kind of what the data show when the data come out. But in terms of opportunity, we're certainly excited about it.

Thanks.

Mene, HEF-PEF?

Yeah, I mean, I'm not going to give a probability of success. I would say, you know, HEF-PEF is, you know, definitely more challenging, but I think with what we've seen so far across our studies, we feel confident that we should get a, you know, hopefully a positive readout, but ultimately the trial will read out and we'll see the results when we get them this year. So, HEF-PEF.

Okay.

Thank you.

Thanks, Mene. Since we're on Fasiga, there's a question from Sam Fazelli at Bloomberg about Fasiga consensus estimates. Do you think they are sufficiently reflecting the potential for the drug? And can you update on the potential for patent protection in the long term, Ruud?

Yeah, so Pascal, thanks for the question. We're not commenting too much about the absolute numbers. The only thing I can say is that we are very pleased with the very strong performance across all the geographies. that the potential, of course, of CKD is very, very substantial. It requires a lot of market development, but we are working hard on that. And equally, of course, in many geographies, we have just launched heart failure, and the attractiveness of heart failure is evident and is also now seen by international guidelines and local guidelines. So once again, I'm not going to answer your question, but you can hopefully hear My enthusiasm about the potential of Farciga in the next six, seven years. The potential for patent protection, I think, once again, I think there's a potential in order to extend our patent based on the pediatric indication, if that will be granted. So we are working hard on that piece. And then on top of that, we are doing, and Manna was mentioning that, a quite extensive combination studies with a couple of other assets. which we will need to wait and to see the results in the next few years.

Thanks, Paul. And Sam had a question about the vaccine. At what point would we consider making a profit? And we still have to define this. And we can in almost all geographies. Either we book the sales and keep the profit to ourselves or tentatively we share with our partners in the various geographies. The next question is Jo Walton at Credit Suisse. Jo, over to you. Thank you.

I'll respect the one question rule to allow as many people as possible on the call. If we look at the consensus for 2021, it's just over $5, and that's at the top end of your range. However, there only appears to be about $975 million of other operating income within that. You've got some base business of other operating income. You've got the AbbVie income. You've announced the Crestor deal, and you've got the stake, the Viola stake. Presumably, as people put all of those numbers in, that other operating income comes up quite significantly. That would normally drive profit, so you would perhaps expect more than $5 of earnings. So I think what people will have to do is increase their level of investment if they're going to keep their earnings still in that $5 range. So my question is, which is the area where we should consider more investment? Is it all discretionary, fantastic R&D, and you can spend more on R&D? Or is some of the incremental investment that collectively we haven't got in our numbers, an SG&A investment, it's actually going to take more boots on the ground in order to sell these products. The reason that I ask is partly because the one area that did increase in expense in 4Q was SG&A up 6% in constant currency, which is, you know, a quarter which presumably had some COVID disruption in it. So I'm really trying to get some idea of how that SG&A is going to move going forwards. Thank you.

Thanks, Joanne.

Yeah, so thank you, Joe, for the question. So I think your basically triangulation of the other income looks plausible and possible to me. As far as you're trying to find one cause of potential differences between us and consensus, first of all, I think we are very close to consensus. But I think you need to look at probably the integrality of the P&L and starting from gross margin as well as R&D, including SG&A. I don't think it's only on one line that there's a difference. There's obviously the possible difference that you mentioned on other income. I would look at the totality of the lines. And I do apologize, but I can't give you much more information Thank you. I'm sorry we are speaking in riddles today, Joe, but again, as we said, our ability to comment on 2021 is more limited than usual. James Gordon, J.P. Morgan, James, over to you.

Gordon, J.P. Morgan, thanks for taking the questions. One following up on tesopelomab, so we saw the navigator data at AAAI, and the efficacy looked pretty competitive in the high and the low acinophil patients. So is the plan just to go for the lows, that's where you're going to be differentiated, or are you going to be competing against the senra in the highs as well? Because assume you get approved in both. And is dose frequency important in this category? GSK were talking about doing long-acting Eucala. Are you going to look to do a long-acting version of either of these products, or is that not really something that matters in this space? Secondly, Fazeghat, so your comments about the genericization in the mid-20s, and I can see a few different combo approaches that you're doing for kidney disease, which would be a way of extending the IP. I can't do anything listed at the moment for the combo approach for heart failure. So is there a plan to do combo approaches for heart failure, or is that bit going to genericize? And then finally, just a clarification. On the COVID antibody, I think Mene made some comments about efficacy for COVID-19 variants. Was that talking about the UK strain or also talking about being confident in efficacy for the South African strain as well?

So you're pushing your luck, James. Three questions in one. Maybe the first two, Ruud, you could cover, and then Mene, you could say a couple of words on the long-acting antibody.

Yeah, of course, Pascal, and thanks, James. Regarding Tazepalimab and the positioning, clearly we see this potentially as a best-in-class molecule, and therefore we will not make a distinction between high-ease endophils and low-ease endophils. We are working here with our partner, Amgen, so we are not going to niche ourselves. We will position the product based on in-depth market research, and if that means that we also are going to penetrate in the high-ease endophils, We will certainly do that. Regarding your question about how important is dosing, I think it's important. The less frequent patient needs to go to a hospital or a clinic or ideally can inject themselves is a win. But equally, of course, this is a class heavily directed by efficacy. and therefore we have seen multiple times that for the patients most importantly is a strong efficacy and less dosing but equally of course if you have a dosing advantage you will use it. Farsiga, questions about heart failure in a combination. Yes, there are multiple combinations in kidney disease but equally we are also looking at combinations in In Hartford, they are a little bit earlier, but where it is possible, we will certainly do that. And when the time is there, we will clearly disclose that.

And just to add, we already have a dosing advantage because Senra exists every two months, but it is something we're looking at to see if there's any additional benefit of increasing the dosing schedule. With regards to the antibodies, it's against all variants, actually, and it's two independent laboratories now that have shown Our cocktail, both antibodies in our cocktail actually are still very potent in neutralizing all of the new variants that we're talking about, South Africa or Kent. And that's in contrast to many of our competitor antibodies where either one or both of the antibodies are actually quite severely impacted. So we're in good shape with our antibody cocktail, both the South Africa and Kent variants.

Thanks, Mene. This is an exciting compound for sure. So we have a question from Simon Becker at Redburn. Simon, over to you.

Thanks very much. And this is just the one question for Dave on Calquence and Elevate RR. A couple of years ago, a lot of people thought that Thank you very much, Simon. I think I've

Pretty consistently, I've been talking about the fact that our mindset in the U.S. and indeed across the globe has been that we need to be successful with calculations irrespective of the outcome of the head-to-head study. I think the results that we talked through today and the progress that we've made certainly shows that we're doing that in the frontline setting. We did, though, take, I think, both a smart and a courageous risk in the head-to-head. I'm looking forward very much to sharing those results We obviously won't have discussions about those results until they're presented so we continue focusing in on the data that we've got in front of us and I think that we have the belief that we've got a best-in-class agent and we've achieved parity in the US in terms of new patients here in MCL and I see no reason why we shouldn't continue to move on that trajectory and we have launches underway across the globe and I'm pleased that in Germany and in the UK we're already starting to see Thank you very much.

Next question is Peter Warford and Jeffrey. Just one question if you don't mind, Peter. Peter, are you on mute?

Sorry, can you hear me now?

Maybe we can go to the Sorry, can you hear me now?

Sorry, apologies for that. Just really a point of clarity, please, on the cash flow. And I don't know whether Mark can comment on this or not, but just with regards to the payouts that we should potentially be thinking about in 2021, I think you've already made two payments milestones that you've disclosed to Daiichi. I wonder if you can give us in broad terms and other collaborations and potentially sort of amounts we should be thinking about in terms of the potential outflows to partners during the course of 2021. Thank you.

Thanks, Mark.

We don't provide this sort of a schedule of payments for the coming years, but when we have concluded the deals, We have usually indicated the various types of payment we make for each of the project. So the question then comes, when is this triggering point if we pay for a development milestone, an approval milestone, or something else? The question becomes then, when is this triggering point taking place? So I'm not going to be able to comment in detail about that. Apologies.

Thanks, Marc. Emmanuel Papadakis, Deutsche Bank. Emmanuel, go ahead.

Thanks for taking the question. Maybe I'll take a quick one on Infinzi. I mean, it seems to have flattened pretty hard in the US. Timelines have slipped on several trials, including adjuvants. We've had some interesting competitive studies started, including digit combination, and I don't think we've seen anything equivalent yet started in terms of physical trials from Astro. So perhaps you could just comment on the outlook. Where and when will any further peak growth be coming from from the Infinsi side and your perspective on competitive risks over the next few years. Thank you.

David? Thanks, Emmanuel, for the question. So on Infinsi, we have, with the Pacific indication, certainly in the major early markets that we've launched, gotten to a place of standard of care And as a result, we've seen more modest sequential growth, particularly on the latter half. With that said, the Caspian study is an area that we are really looking forward to making continued inroads into. We have a very nice profile. It's been well received by physicians and oncologists across the globe. The pandemic has affected probably Infinzi as an infused therapy more than it has some of the other products within the portfolio. In terms of the pipeline question that you ask, you know, I think we highlighted some of the studies that I'm looking forward to readouts on later this year, Pacific 2, Himalaya. Both of those are important opportunities to continue growth. We also are doing our own work on TGIC combinations in collaboration with ARCIS, which is something that we've spoken to in the past, or ARCIS has spoken to. And so we look forward to continued news flow out of Infinsi in the rest of the year. Thanks, Dan.

Thank you.

Naresh Chauhan at Intron Health. Hi there. Thanks for taking my question. Just one on Simbacor, please. In the U.S., we've clearly seen the benefit of in 2020 from higher adherence. Should we expect to be expecting a similar level for this year based on pricing and what you've seen today in volumes? It's quite a big number, just trying to get a sense of where that's heading. Thank you.

That's for you, Ruud, I think.

Yeah, so it's another good question. Once again, we are not going to comment on on individual product forecasts. But Sympicort is well-placed. It's the leader in the United States in the ICS LABA class. It has a huge heritage, so we're bullish regarding the outlook. But equally, I also need to mention that we are focusing our efforts more and more in breast three as well in the COPD. We really believe that there's a high medical need. The triple class is growing very fast. So a lot of the efforts of our field, as far as marketing and medical teams, more and more on Breast 3 and less on Simicoid moving forward. Thanks.

Thanks, Paul. Christopher Oudé, sorry, at SEB.

Yeah, hi there. So, my question is about, so, COVID therapies. So, the AZD7442, I guess it's the same underlying technology as NIRSEVIMAB, but the As I understand it, the COGS on the Sebumav are prohibitive for use in adult prophylaxis in RSV. So what can you say about this in COGS with 7442 and why, if any, is there a discrepancy? And then I guess related to COVID therapies, can you comment on, I guess there was a recent study with Simbacort. Can you comment on how you see that opportunity?

Thanks, Christopher. Very quickly, the first one, cost of goods is quite reasonable, we see, in relation to the selling price of this cocktail of antibodies. Of course, it's more expensive because you have to put two antibodies in the same vial, but we don't see this as a limitation in terms of the potential of the product. Simbicort, Ruth, do you want to cover this? and the COVID patients and the study, the early study with a smaller number of patients, but still quite intriguing, showing a 90% reduction of progression of disease.

Yeah, I presume it's not simbicort, it's pulmicort. It's pulmicort, yeah. But it's without any doubt, it's a very interesting finding. The study was stopped earlier than expected because of the overwhelming efficacy. And we know, of course, that corticosteroids have a very damping effect on the cytokine storm in COVID-19 patients. Now, the implications for what it means, we're still trying to figure it out. But equally, of course, we have seen that simbicort adherence has increased quite substantially in asthmatics. And there are more and more reports that asthmatics, because of the fact that they are using a corticosteroid, an inhaled corticosteroid, are ending up less in hospitals and are showing less severe disease than other patients.

So we're following it. We are looking into it.

But I think it's a little bit too early in order to get overly excited that this will be a massive sales opportunity.

Ruud, I would just say one thing. We do have several studies that are ongoing with Palmicor and Simbacort that are being run externally just to continue to follow that efficacy.

Very good. So we'll take the last question. Martin Hall at Altman & Co. Go ahead, Martin.

Thank you. For a number of years, your SG&A has been more than 10 percentage points above the weighted industry average. You made some good progress in 2020 with the increase in sales being achieved with flat underlying SG&A. But apart from increasing sales, how do you intend to get your SG&A costs more in line with the industry average? Or an alternative way of looking at it, with your current sales force, to bring your SG&A in line with the industry average, you need to have product sales of $39 billion. Do you think that's achievable?

Mark, do you want to cover this one?

I think I can only point you to the three past years, 2018, 19, and 20, and see the progress that we have made on the SG&A ratio. We have also said that we will always put enough resources behind the launching of our new products and our new indications so that we put them on the right trajectory. So this we will continue to do. But since we are promoting products within the focus areas where we are present. Over time, when the sales grow, you have this phenomenon of operating leverage at different levels, but in particular on the LG&A line. So we are going to continue our effort on the operating leverage, and over time, the LG&A ratio will decline.

Thanks, Marc. Maybe one last question. Seamus Fernandez at Guggenheim. Seamus, go ahead.

Oh, great. Thanks for the question. So mine was just on Roxadustat. I know we're in kind of the final days of FDA discussions. Just wanted to get a sense of your confidence in getting the non-dialysis portion approved and if really the only source of debate is whether or not you have an ESA-like warning on CV risk. Thanks so much.

Manish, this one is for you.

Yeah, confidence is high, I would say. All right, thank you. You've kind of sent me on to the question and the short answer, confidence is high. Okay.

Very good. Okay. So thank you so much, everybody. And I know we took you over time, but there were so many questions. So I'd like to thank you very much for your interest. And we look forward to meeting you during the Global Roadshows that starts tomorrow. It's really going to be a very exciting year, lots of opportunities for us. And I look forward to the discussions. And, again, once again, thank you so much for your interest. And goodbye. Thank you.