AstraZeneca PLC

Hello everyone, Pascal Soriot here, CEO of AstraZeneca. Welcome to the first quarter of 2021 conference call in our webcast for investors and analysts. As always, the presentation was posted to AstraZeneca.com earlier today and we also sent it out by email. So please turn to slide 2. For slide 2 and slide 3, those are the usual self-harvest statements. including one on election, on election being slide three, will be making comments on our performance using constant exchange rates or CER, core financial numbers and other non-GAAP measures including total revenue and core APS excluding any revenue or profit impact from the COVID-19 vaccine for pandemic use. A reconciliation between non-GAAP and GAAP data is contained in the results announcement. All numbers used are in million U.S. dollars and they refer to the first quarter of 2021, unless stated otherwise. And finally, similar to the first quarter, we need to be a little bit more limited with financial guidance due to the ongoing work with Alexia. I hope you understand, so thanks for your understanding with this. Please turn to slide four. We plan to resume the presentations first and then do Q&A until 1.15pm UK time. We need to end on time due to a shareholder engagement delay starting after this meeting in lieu of a physical meeting which is not allowed due to the current COVID-19 restrictions. 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 1. There's also an option to ask questions as part of the webcast. We ask you to please ask one question only, and thank you for your help with this. In speaking of, I'm joined by David Fredrickson, EVP for the Oncology Business Unit, Ruud Dobber, EVP for the Biopharmaceuticals Business Unit, Marvin Reye, our Chief Financial Officer. Many thank you for EVP for Biopharma R&D. and then again Dave to call Oncology R&D before handing back. For the questions, we also have Pam Cheng, sorry, our EVP for operations and IT, Leon Wang, who is our EVP responsible for China in the emerging market, and we also have Susan Galbraith and Christian Massachetti, who are both EVPs in charge of Oncology R&D. We plan to first take questions on the ongoing business, and then save any questions on the vaccine for ASPA or the conference call in the webcast. We hope that it works for everyone. Please turn to slide five. This is the agenda where we plan to cover all key aspects of our results today. If we move to slide six. 2021 started well. The increase in revenue was boosted by for the COVID-19 vaccine for pandemic use. The revenue used for guidance excluding the COVID-19 vaccines for pandemic use was at 7% per CR and it was held back by stocking last year of a low to mid-single digit percentage with a very strong first quarter last year, if you remember, with very strong growth. And therefore, we estimate that the normalized revenue growth has been double digits, low double digits in the first quarter in support of our four-year guidance. Oncology increased by 16% and new CVRM by 15%. Respiratory immunology was down by 4%. Impacted by last year's stocking of medicine by the federal Simbicorp, but also the launch of the authorized generic of Simbicorp in the United States. Emerging markets were up by 10%. Co-operating profit grew by 24%, supported by other operating income. With a tax rate of only 8% due to the divestment of the ownership of Yela, Core EPS ended at $1.63 and rose up by 53%. There was a negative impact of $0.03 per share from the pandemic vaccine. We continue to move forward with our pipeline, and they support itself today, but importantly tomorrow as well. And the new flow is anticipated to pick up in the second half of the year. On the COVID-19 vaccine for pandemic use, we shipped and invoiced 68 million doses in the first quarter, with supply increasing. An effort that is supported by a very dedicated team here, but also with our collaborators around the world. A very quick note, what you see here is what we at Sardinica invoice, ship and invoice, 68 million doses. Our total production was much higher than this for our global network of partners. As you know, we've established a global network and we have many sites manufacturing and partners invoicing the vaccines. The good start of this year supports a reconfirmation of our four-year guidelines. Looking at the pipeline news flow since February, just a few highlights. First of all, the approval for the Gristo for Adjuvant Lung Cancer in China and the CHN people's opinion in the EU. There were a couple of regulatory clean-ups within Finzeal, Limpaza, and Bredik. Importantly, Phase III trial readouts were positive with adjuvant data for Limpaza, Embry-Cabotet and Breast Cancer, but also for Nersedimib immunization against the RSV, the Esperanto-Russian Seizure Virus. We will detail this news a little later. Also later, we'll detail upcoming use flow with a pickup in activity in the second half of the year. Turning to slide eight, after financial and public headlines, we now take a deeper dive into revenue. Total revenue increased by 11% in the first quarter. The COVID-19 vaccine for pandemic use contributed 4% to growth. Clearly, marked here is revenue growth excluding the COVID-19 vaccine for pandemic use at 7% and double digits were adjusting for stocking in the comparable period last year. There was a negative impact from COVID-19 on Brilinta, but the new medicines added over $800 million in new cells with Farciga and the key oncology medicines leading the way. So COVID created a negative headwind on a number of products across the pipeline. And of course, we have this negative effect here, as you see on the top. Overall, we have accumulated sales over the past four quarters from those medicines. And we have 13 new medicines now that contribute to growth and our further diversification to revenue as we look ahead. Please turn to slide nine. Aggregating medicines into these areas, we have solid double digit growth for oncology and UCBI with respiratory immunology down by 4%, mainly, as I said before, due to stocking last year. Other medicines continue to decline slightly as we become less dependent on hotel medicine. I have to say that there was an effect of stocking, but on respiratory, we also had a negative headwind in the first quarter this year on products like Fimicort and Simicort due to COVID. So a double effect here that suddenly is impacting those products in the first quarter. As promised last quarter, full details are provided here on the COVID-19 vaccines for pandemic use. From a regional viewpoint, there was growth everywhere, with Europe seeing the biggest vaccine impact. The emerging markets are back at the largest region, as you can see on the slide. And so in summary, a good start in 2021, despite some headwinds due to COVID and a tough comparison to Q1 last year. And our performance supports our full-year guidance. We continue making progress in all disease areas and key medicines. And that really reinforced our strategic decisions and our focus over the past years, as well as our commitment to continue the strong durable top-line goals. With the global revenue made and our diversified portfolio of new medicines with more to come, AstraZeneca remains really well positioned in the current situation. If we turn to slide 10, a few words on elections. We've made very good progress here, and we are moving towards a closing in the third quarter. Since February, we received important USFCC clearance as well as other regulatory clearances with a full list that is available on our website. Alexion continues to offer a compelling scientific and business complementarity and will allow us to build up in rare diseases and in immunology. In the short and medium term, the combat company will offer faster growth, improved profitability and cash flow, And that will sustain our positive strategy development achieved since 2013. I will now hand over to Dave to go into details in oncology. Thank you very much. And Dave, please go ahead. Please turn to slide 8.

Thank you, Pascal. We're pleased to report a strong growth in total revenue of 16% for the oncology business, now to $3 billion in the quarter. COVID did continue to have an impact as we still see fewer cancer patients diagnosed and treated. But despite this, 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 Infinsi showed strong growth in the year at 13 and 17% respectively, with revenue of $1.2 billion and $556 million. We saw a notable impact to non-small cell lung cancer diagnosis rates due to COVID. Tegriso continues its global rollout and is now approved in 89 countries in the first line setting and 17 countries in the adjuvant EGFR mutated setting. U.S. Tegrisa revenue was up 12% where we saw continued single-digit demand growth as we start to focus now on bringing Tegrisa to patients with earlier stage lung cancer. In China, sales were impacted with the usual stocking impacts following the first line NRDL inclusion, which took effect on the 1st of March this year. The majority of Infinzi revenue continued to come from the U.S., where we saw a prominent impact from COVID, despite the launch of Caspian indication and extensive stage small cell lung cancer. Outside of the U.S., we continue to see the revenue of Infinzi pick up, particularly in Europe and the emerging markets, as we're now able to provide Infinzi to 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. Lemparsa continued to demonstrate progress with sales up by 33% with over half of sales coming from outside the United States. This is a result of growth across all regions as more breast and ovarian cancer patients gained access to Lemparsa in the major regions of the US, Europe, and Japan. U.S. sales continued to grow by 28% with increases in demand as Limparsa maintained its leadership in the PARP inhibitor market in both ovarian and prostate cancers as we launched the PALO1 indication and frontline HRD-positive ovarian cancer and the profound prostate cancer indication. Europe's sales were up by 33% as more first-line ovarian cancer patients received Limparsa as we now look forward to the ovarian PALO1 and prostate launches in Europe. Emerging market sales grew by 54% driven by the China launch and the recent inclusion in the NRDL. Japan sales amounted to $42 million with growth of 17% driven again by uptake in ovarian and breast cancers. Please turn to slide 14. I'll turn 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 $209 million in a year almost exclusively in the U.S. as the CLL launch continues to take effect. We're pleased to announce that Calquence is now used in four in 10 new patient starts in the frontline CLL BTK setting in the U.S. The launch feedback continues to be very encouraging and as the impressive head-to-head data versus the incumbent BTK inhibitor reinforce our beliefs in a potential best-in-class medicine. We look forward to bringing CalQuence to CLL patients in Europe and Japan following the recent approvals that happened at the beginning of 2021. Following the InHER2 launch at the beginning of the year, we're pleased to have reported $40 million in total revenue based on $81 million of global sales ex-Japan booked by Daiichi Sankyo and AstraZeneca in the quarter. InHER2 is the most prescribed medicine in the third-line setting of HER2-positive metastatic breast cancer. I'll now turn you 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 biopharmaceuticals comprising new cardiovascular, renal, metabolism, and respiratory immunology was $2.9 billion in the quarter, growing at 4% despite the COVID pandemic. Starting with needle CVM, revenue was up by 15%, with total revenue at $1.3 billion, with continued strength from Fasiga. Farsiga maintained volume market share globally with high double-digit volume growth across all regions as the fastest growing SDLT2 inhibitor outgrowing the SDLT2 class globally in the US, Europe, and Japan. In the US, Farsiga grew 60% driven by the additional indication in heart failure. Outside the US, we saw strong performances, particularly in Europe, with growth of 36% is volume-driven growth increasing, and China benefiting from the NRDL listing. Please turn to slide 16. Turning to respiratory and immunology, we reported revenue of $1.5 billion, decreasing at 4% in the quarter, mainly due to one-off Symbicort Altrai generic in the United States, COVID impact for Pomicort in China, and COVID stocking in quarter one 2020. Symbicort sales were $691 million, with a decline of 15%, mainly due to the stocking and inventory build last year. The U.S. saw a decline of 14%, however, underlying demand growth continues. Globally, Simicorp remained the leader in value and volume market share in the ICS Lava class. Europe and Japan continued to see headwinds due to generic competition, whereas emerging markets were up 3% to $165 million. Simbicort was down 18% in the quarter, with revenue of $330 million, which continues to be impacted by COVID, particularly in the hospital-treated patients in China. 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 $260 million of revenue in the quarter, with strong growth despite COVID-19, with the majority continuing to come from the US, Germany, and Japan. In the United States, Fasenra continued as the leading novel biologic, up by 30%, with $165 million in revenue. Fasenra maintained its position as the dominant IL-5 blocking medicine in total asthma prescriptions in the top seven countries. Europe and Japan revenues were $63 and $26 million, respectively, as Fasenra continues to be the leading novel biologic medicine for severe uncontrolled asthma. The launch of Brev3 for COPD is progressing well, with revenue of $27 million in the quarter. Brev3 is now approved in 34 countries, including in the EU, US, China, and Japan, for the treatment of patients with COPD. As we look to kidney disease, Locama achieved potassium-binding market leadership in the U.S. Revenue in the quarter was $33 million, predominantly from the U.S. On Roxodustat, we reported revenue of $41 million in the quarter, coming from China. As of January 2021, AstraZeneca started recognizing the overwhelming majority of Chinese revenue as product sales, following an amendment to the existing license agreement. We will continue to work closely with our collaborator on the next step for Ruxudustep in the US following the additional analyses sent to the FDA and with the anticipated advisory committee in July. We now expect a regulatory decision in the second half of 2021. Please turn to slide 18. Emerging markets, where revenue grew by 10% in the quarter, 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. Outside China, total revenue was up by 11%, with growth spread across the regions. China delivered resilient growth at 10% and continued to see some impact from pomichord, as well as some stocking due to the recent NRDL inclusions. We look forward to the new NRDL inclusions taking effect throughout the year. New medicines grew by 30%, contributing over a third of total revenue in the region. with a strong performance driven by home quality and new CVRM. With this, I will hand over to Marc. Please turn to slide 19.

Thank you, Ruud, and hello, everyone. I want to take you through our financial performance in the first quarter of 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 and product sales grew by 11% in the quarter. This included $275 million of COVID-19 pandemic vaccine sales. Excluding the vaccine, total revenue grew by 7% and product sales grew by the same number. Please turn to slide 21. Turning to the core P&L, the gross margin ratio was 74.6% in the quarter impacted by the dilutive effect from the COVID-19 pandemic vaccine sales. Similar to Q4 2020, we saw a favorable mixed effect, including more oncology sales being offset by the higher profit share from our collaborations. We also saw an impact in China related to recent NRDL and VBP updates on pricing. We anticipate these dynamics on the gross margin percentage to continue over the course of 2021 with some variability between quarters. The gross margin percentage in total will continue to be heavily impacted by the ongoing pandemic vaccine sales as a result of a not-for-profit commitment. Core R&D expenses increased by 18% Partly driven by a higher number of phase three programs and increased investment in the pipeline, including Camus Estran or Oral CERT. In addition to our ADC collaborations with DITI Sankyo, we also continue to invest in new platforms such as cell therapy and epigenetics. Expenses related to Brasicumab are booked in R&D, but get reimbursed via other operating income. Part of the increased R&D costs were related to the development of the vaccine, and we also incurred costs for various measures in order to keep our employees safe. Co-OSG&A expenses increased by 7%, an increase of about $200 million versus same quarter last year, partly driven by continued investment in China. At the percentage of total revenue, SDNA costs were down from 34.3% to 32.8%, and we continue to anticipate SDNA costs to decrease over time at the percentage of total revenue. Core auto operating income more than doubled, driven by the divestment of our shareholding in Viola Bio to Horizon Therapeutics. We also recorded the divestment of Crestor European Rites to Green & Tile in the quarter. The core operating margin increased from 29.2% a year ago to 34.5% held by these divestments. The divestment of holdings in Villa Bio represented a non-taxable gain and we also had some settlements Relating to prior period liabilities that were settled with tax authorities, resulting in a core tax rate of 8.1% in the quarter. Excluding these benefits, the underlying core tax rate would have been around 20%. We continue to expect the full year tax rate between 18 and 22%. Our core APS was $1.63 in the quarter. There was a small negative impact of $0.03 per share from the pandemic COVID-19 vaccine. Small impacts from the pandemic vaccine commitment are expected quarter to quarter in both directions over the cycle of delivery and monitoring of the safety of the vaccine over time. Please turn to slide 22. Our core operating profit surpassed the $2.5 billion mark this quarter, helped by the Viola divestment. Collaboration revenue will increase over time, and income from this divestment will remain a material part of our P&L, as some of our peripheral medicine could be better suited in the hands of other companies. However, as a percentage of total revenue, divestments are expected to decline over time. Net debt remains stable in the quarter despite the dividend payment of $2.5 billion, which reflects our improving cash flow profile. Reported EBITDA grew by 29% compared to same period last year. Similar to quarter four, 2020, we saw working capital benefits in Q1 related to the COVID-19 vaccine which was reversed in due course. The rolling 12 months net debt to EBITDA ratio is now under 1.4. Please turn to slide 23. This is a familiar slide by now showing the progress we are doing converting revenue growth into profit and cash flow growth. The ratio of co-operating expenses to revenue remained stable at 57%, and co-operating profit increased by 34%, helped by the strategic divestment mentioned previously. Cash flow from operating activities increased by $1.8 billion compared to the same period last year, and we also saw a sequential improvement versus Quarter Four 2020. The continued profitability will help us deliver aging, and we have previously communicated that we also have the ambition to raise our dividends. Please turn to slide 24. Our assumptions for the full year have not changed, and our 2021 guidance remains unchanged. I would like to remind you that our guidance is based on constant exchange rate and does not include any revenue or profit impact from the sale of the COVID-19 pandemic vaccine or any impact from the proposed acquisition of Alexion. Please turn to slide 25. We remain very excited about the proposed Alexion acquisition. As we have highlighted previously, the case for both scientific and business complementarity is clear, and it allows us to expand into new and broader indications in immunology and to bring Alexion life-changing medicines to new markets where Alexion is not present today. On top of a strong C5 franchise, Alexion has an exciting pipeline including potential new medicine for the treatment of Wilson disease, geographic atrophy, and several important renal diseases. We passed an important milestone earlier this month when we received clearance from the US Federal Trade Commission. We are still awaiting clearances from a number of other jurisdictions, but we remain on track for an anticipated closure of the transaction in the third quarter and we are looking forward to welcoming our new colleagues at Alexion on board. 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 be discussing our COVID-19 efforts and updates on our biopharmaceuticals medicines since the last quarter. I'm also joined by Dave Fredrickson, who will discuss oncology movements and upcoming news flow across the company. Please turn to slide 27. We're now over a year into the ongoing COVID-19 pandemic, and while medical science continues to change the course of disease, the global pandemic is clearly far from over. As you know, tragically, 3 million people have died around the world, and the number of infections globally continues to rise. From the beginning of the pandemic, AstraZeneca has been committed to having an impact on this global health emergency. This includes setting up diagnostic testing, repositioning our existing therapies where possible, and delivering two new programs, our long-acting antibody combination, AZD7442, and our COVID-19 vaccine, AZD1222, developed in collaboration with the University of Oxford. Our phase three trial has confirmed the vaccine's robust efficacy, including its ability to protect recipients against severe disease. This is also reconfirmed in the real world setting across millions of patients, showing that our vaccine is playing a crucial role in preventing illness, keeping people out of hospital, and saving tens of thousands of lives. We've delivered 68 million doses of the vaccine in Q1 from our direct supply network, and as of today, almost 300 million doses through our extended supply chain, including production from sub-licensees such as the Serum Institute of India. Patient safety is of the utmost importance to AstraZeneca, and we continue to evaluate all available data to better understand any rare adverse events, including the very rare thrombotic thrombocytopenia events being reported with our vaccine, as well as other COVID-19 vaccines. We remain confident that the benefits of our vaccine outweigh the risks. We're excited to have the first data from our long-acting antibody programs, AZD7442, very soon. And it's increasingly important to have different options for patients when considering protection against COVID-19. And we're confident that AZD7442 will have a critical part to play in the fight against the pandemic. Passive immunization with AZD7442 will offer immediate protection against the virus, potentially for up to 12 months, and is therefore suitably placed as both the prevention and treatment option against COVID-19 disease. Please turn to slide 28. Now to briefly show some of the potential new medicines that will drive transformations in cardiovascular, renal, and metabolic diseases that our scientists discussed as part of our well-received biopharmaceuticals event that we held on 25th of March. The event was an opportunity for us to showcase the breadth and depth of our clinical programs and to illustrate the variety of modalities that we're working on in order to provide meaningful benefits to patients across the CVRM space. For a deeper dive into any of these programs across both CVRM and respiratory immunology, I encourage you to watch the replays of the event at astrazeneca.com forward slash investors. Please turn to slide 29. Now turning to nacebamab, our long-acting antibody with the potential to provide immunity directly to infants and offer immediate protection against respiratory-sensitive virus, or RSV, across an entire season with a single dose. RSV is an incredibly common and contagious pathogen, causing seasonal epidemics of lower respiratory tract infection, including bronchiolitis and pneumonia. It is the leading cause of hospitalization in infants worldwide. With these highly impactful positive results from Melody, Nesivimab becomes the first potential immunization to show long-lasting protection in the general infant population a population which has been chronically underserved. And we look forward to bringing this important immunization to patients very soon. Please turn to slide 30. I'll now update you on progress made in our early to mid-stage pipelines. Since the last update, our IL-33 monoclonal antibody, MEDI-3506, has now started phase 2B trials in diabetic kidney disease. Our flap inhibitor AZD5718 has completed phase 2a trials in coronary arterial disease and as a reminder AZD5718 is also in phase 2 trials in chronic kidney disease. We also recently announced a new phase 3 trial called DAPR-MI which will evaluate farcega in the treatment of myocardial infarction. In respiratory and immunology, AZD1402 has now started phase 2 trials in asthma, that's our inhaled anti-ARL4, and AZD4604 becomes the second of our inhaled JAK inhibitors to enter the clinic in phase 1 trials, also for the treatment of asthma. Our bispecific fusion protein, MELI7352, has started phase 2 trials in osteoarthritic pain, and finally, Fasenra has commenced phase 3 trials in bolus Pentagoid, a rare autoimmune disorder that results in blisters, hives, and itching. And I look forward to updating you on the progress of all of our medicines in the biopharmaceuticals pipelines in months to come. I'll now hand over to Dave, and please turn to slide 31.

Thanks, Monet. So as I kick off this section, which is normally a section that Jose would have done, I'd be remiss not to acknowledge how shocked and sad we all are by Jose's passing. I think that we could very much argue that Jose Baselga was cancer's fiercest competitor. And I speak on behalf of an organization that says that he gives us all the inspiration to help take his place in the battle against this disease that affects so many. Please turn to slide 32. We're dedicated to continuing Jose's legacy and being a champion for the treatment of breast cancer using innovative science. Lymparza continues to deliver unprecedented outcomes across multiple tumor types and now most recently in breast where Olympia was recommended to move to early analysis and reporting have crossed the superiority boundary for invasive disease survival. With this, Lymparza has the potential to transform the management of early breast cancer for patients whose disease possess a BRCA mutation. We eagerly look forward to ASCO where the data will be presented for what we think is likely the new standard of care for patients. Discussed extensively at this year's AACR, AZD5305 is pioneering a new frontier of PARP inhibition. It's selective for PARP1, whereas the first generation of medicines are dual PARP1 and PARP2 inhibitors. This selectivity has the potential to address some of the hematological adverse effects seen with existing PARP inhibitors, meaning it's well-placed to deliver clinical benefits not only as a monotherapy, but importantly in combination. And within HER2, we continue to expand its clinical trial program across a range of breast cancer tumor segments, including HER2 low and earlier disease. The next anticipated data readout will be Destiny Breast 03 in the second half of this year. Please turn to slide 33. This slide's an illustration of our bold ambition to redefine the treatment of breast cancer with our portfolio of innovative medicines that have first-in-class or best-in-class potential. Our aim is to, again, become a leading player in breast cancer with five foundational medicines, Lymparza and HER2, Capacertive, our AKT inhibitor, Camazestrin, our next-generation CERB, and Dapipotamab-Durextacan, our TROP2-directed antibody drug conjugate. A late-breaking oral presentation for TROP2 and triple-negative breast cancer has been accepted at this year's ESMO Breast Medical Congress. As you can see, our medicines have the capability to address the largest segments of breast cancer, and some medicines, such as in HER2, also have the potential to define completely new segments, such as the HER2 low population. To support this vision, an industry-leading clinical trial program is planned to test these medicines across multiple breast cancer subtypes and stages, both as monotherapies and novel combinations. Please turn to slide 34. Looking now to movements and updates across our mid-stage oncology pipeline, AZD5305, our new PARP1 selective inhibitor mentioned earlier, will now enter phase one. This quarter, we also announced Destiny Breast 09, the first phase three trial for an HER2 in first-line HER2-positive breast cancer patients, and these trials join the new phase three trials for camozestrin and datapodimab durextacan announced last quarter. I look forward to updating you on these and other movements and progressing throughout the year. Please turn to slide 35. I'll end by taking you through the news flow still to come in 2021 across our entire pipeline. In oncology, we anticipate regulatory decisions for Tegristo and adjuvant non-small cell lung cancer in the EU, as well as Lymparza and second-line prostate cancer in China. Key data readouts include the PROPEL trial for Lymparza, Pacific 2 for Infinzi, and Destiny Breast O3 for Inher2 in the second half of the year. Key submissions will include the aforementioned Olympia data for Lymparza in breast cancer. And biopharmaceuticals will soon complete regulatory submissions for tesopelimab and severe asthma and expect regulatory decisions for anafrolimab and lupus and for roxidustat and forcega and renal indications. In terms of data readouts, we'll have results from PT027's Denali and Mandala trials in asthma, and for SIGA's deliver and heart failure with preserved injection fraction. I'll now hand it to Pascal for closing comments. Please turn to slide 36.

Thank you, Dave. Can you move to slide 37? This is the summary, and then we'll try to be fast so we can move to the questions. As you can see, as you heard, our sales increased by 11%. If you exclude the impact of our vaccine, the sales grew by 7%. However, as I said before, the quarter one last year was a very strong quarter due to stock accumulation. And if we correct for this event, our sales growth in Q1 will have been low WBG, so very strong performance. and it was seen across oncology growing 16%, CVRM 15%, respiratory neurology was impacted by COVID and as a result was down by 4% and the emerging markets were up by 10%. Our core operating profits, as you heard Mark say, grew by 34% and our IPS, hence the investment of our VR shares was $1.63 at 53%. There was a negative impact of 3 cents per share from the pandemic vaccine. And as Mark said, this way, there will be ups and downs, small ones, quarter to quarter with this vaccine. Speaking of the vaccine, we shipped and employed 68 million doses in the first quarter. But importantly, for our extended network of partnerships, we actually produced and shipped 300 million doses so far until the fourth week of March. So, very strong production that is gaining steam around the world. So, with this very strong, very good start of the year, we can reconfirm our guidance for the full year. And with this, I will now open to the Q&A. As a reminder, please press star one if you're on the telephone. There will also be a recent question from the webcast. Can I please remind you? I don't believe you will listen to me, but if you could just ask one question at a time, that would be much appreciated. So perhaps we can take the first question from the conference call, and it's Peter, we're for the Jeffrey's. Peter, go ahead.

Hi, thanks for taking my question. I'll start with the pipeline. If you could ask Mene, please. I guess Mene, maybe it's Dave on Kami Vesper. Sorry, is that all right? Sorry, it's a pipeline question, I guess for Mene or perhaps Dave. On camisestrin please, I'm wondering if you could talk a little bit about your phase two trial that you're running versus fulvestrin. Is that designed as a superiority study or are you just trying to show none inferiority? I think there's a number of doses being tested. Or is this regulatory pathway likely to be the phase three first line or is it possible that another trial could potentially be a regulatory enabling and what are the gating factors that could potentially trigger you to consider starting early breast cancer adjuvant setting trials and chemisestrins? When could you get data in-house to make that decision? Thank you.

Thanks, Peter. Maybe we could ask Suzanne to cover this one. Is that okay? Suzanne, I think you're online, so could you cover this question?

I can start, maybe Christian can carry on. So the phase 2 trial, the dose-ranging phase 2 trial, the Serena 2 trial, is designed to, as you say, test different doses and has a PFS endpoint. It's not designed to be a registrational study, and I'll let Christian talk about the registrational program that we have. And in terms of what we're looking for in order to trigger a move into early breast cancer, I point to a couple of other things in the program. We have an ongoing window of opportunity study in the early stages of breast cancer, which is looking for the pharmacodynamic endpoints across a range of doses and helps confirm the Thank you, Susan.

Thank you, Peter, for the question. We have shown, Peter, the data with camisesterans and the efficacy, the reliability profile that we have with these drugs, specifically at the dose of 75 milligrams that we are bringing in Phase III. show that this has the potential to be a best-in-class asset. PFS 11 months, clinical benefit rate more than 50%, no dose reduction, no discontinuation for adverse events. And our investigators are telling us that they are really pleased for completely absence of GI toxicity and not flashes with these drugs. We announced that we started the first phase three trials, Serena 4, in front line in combination with papocyclic versus papocyclic baromatase inhibitors. And we will announce soon additional trials, additional registration of trials for the moment in metastatic setting. And then, as Susan was mentioning, we are assessing the opportunity to move the drug early in an adequate patient population in the right setting.

Thank you, Suzanne and Christian. And the next question is from Tim Anderson at Warp Research. Tim, over to you.

Oh, thank you very much. I have a question on Tegriso and just the cadence of sales by geography. In the U.S., penetration is high. We see a leveling off of sales. And I'm wondering when that might start to happen in other geographies that you break out, such as Europe or emerging markets. There's some big consensus numbers out there, but sometimes products like this kind of come to a halt more quickly than expected just because they ramp up so fast. And then digging into China a bit more as you look forward, can you talk about what you expect to see with the Hansel Pharma competitor EGFR product? We're going to get that data at ASCO. They're on the market in second line in China, and they're going to be pursuing frontline in China as well. My guess is that creates kind of a 2023 NRDL issue for you. So what do you expect from that program and from other competitors in China more broadly?

Thanks, Tim. Maybe you could cover those and including the Chinese institution and possibly Leon could add also because it's an important question, of course, for China. Over to you, Dave.

Thanks, Pascal. So, Tim, in terms of the cadence that we're seeing, I think it's important to note that we saw good growth in the quarter over the same period last year across all of the regions, China being actually the lowest of those, but that is a direct result of the NRDL I'll come back to China a bit more specifically in a second. Maybe I'll just use this as an opportunity to talk very briefly about the US performance on Tegriso. Tegriso in the US has certainly been affected by the We think it's about 30% lower today in this quarter than it was at the pre-COVID baseline and that's certainly been a substantial headwind. With that said, the duration of therapy that we're seeing in the metastatic setting has been strong. and the fundamentals in the adjuvant setting that we're seeing are also strong. We're seeing good growth and awareness, good growth and message recall. We're seeing patients getting referred from physicians to medical oncologists. We're seeing testing rates go up. And I think that we should expect to see that continuing in Europe where we just got positive CHMP opinion in ADORA. And I also think that we will have an opportunity to continue to get frontline growth across the globe. In China specifically, we had a really nice uptick in demand following the NRDL inclusion. That uptick in demand only for one quarter, for the quarter of March. It's offset by the pricing impacts, not only the lower price in March, but the stock compensation that we needed to take for two of the months. But I'm quite confident that we're going to see top line growth in China since you've got over two times the number of patients in front line. And then lastly, on your question about Hanso, I mean, obviously we're as interested in seeing the data as you are. It does sound, based on high level results, that PFS will be shared. It'll be important to see what data they share on overall survival. It'll also be important to see what sort of CNS insights we can get. That's an important part of the clinical rationale on Tagrisso. I agree with you that I think that most likely scenario would be if approvable based on a PFS endpoint, that that would be approval in the second half of this year, which would be NRDL inclusion in the back, you know, December of 22 or coming in in 2023. And we're working really hard to stay in front and use our first mover advantage, not only in frontline, but also now with China getting approval with the DORA to have an opportunity to further drive where we are in China with that indication.

Thank you. Leon, anything you want to add, Josef? Yes.

I think in China, we always stay ahead of this competition. And right now, Hensel's product is only second line. And now, last year, NIDL, we're already getting to first line. So now the penetration is directed into the first line patients. So patients would rather take a better treatment compared with the first generation TKI. I think we will be always staying ahead of this competition. We will try our best to maintain a big market share. And also with our commercial coverage, because AstraZeneca in China has the largest oncology sales team, so we are almost everywhere in China, county, city, province, so we leave no patient behind with very strong operational access.

Thank you. Thank you, Leon. Simon Baker at Red Belt. Simon, over to you. If I can ask my colleagues, and that applies to me as well, let's try to be short in our responses.

Great. Thanks so much for taking my question. Sticking with oncology, Dave, I wonder if in light of recent IQVIA data that shows there was a pickup at the end of March, in oncologist visits and new diagnosis claimed. If you could give us a bit more color on what you're seeing yourselves more recently in terms of the rates of new diagnosis, both in the US and ex-US, and also sticking in the US. I wonder if you could give us your thoughts on the broader implications of this week's ODAC panel, which has looked at accelerated approvals. Thanks so much.

Thanks, Simon. Dave, do you want to take this one?

Yes, please. So, Simon, if we take a look longitudinally over the course of the last year on diagnoses, what we saw was that, you know, if we set the pre-COVID baseline in March, across lung, ovarian, breast, CLL, which we're tracking the most closely, in late Q2 to Early Q3, we saw the most significant dip dropping by 30 plus, 40 percent relative to pre-COVID baselines. We saw that grow back again as we approached towards October. And in fact, come October, I think that we were optimistic that we were going to see ourselves in the U.S. come back to pre-COVID levels. November, December, January, we begin to see the impact of the third wave. And as you point out, that's kind of taken us into seeing us return back towards that 70% of pre-COVID baseline or minus 30% in lung, CLL, and ovarian. It does seem that there's been an uptick in March, but a lot of these are lagging. So I'm cautiously optimistic that it's moving back in the right direction, but I'd like to see another couple of months. Obviously, vaccinations and In terms of the second question on ODAC, I think that the most important thing that we take away from this is that obviously the ODAC panels are voting positively where there's clear unmet need. And I think that the positive votes that we saw in frontline bladder cancer were in cis or platinum ineligible patients where there's a general sentiment that there's a high level of unmet need in those niche populations. And I think that it'll also be quite interesting to see what Thanks so much.

Thanks, Dave. So next question is Sachin Jain at Bank of America. Over to you, Sachin.

Hi, thanks for my questions. Firstly, on TROP2, Dave, you flagged the TMDC data at ESMO next weekend. I think that's going to be the first data that allows a detailed comparison versus Tredelvi data on labels. So are you comfortable the data we will see will confirm a best-in-class profile versus a mid-30s response rate on their label, or is the data simply just too early at this stage? If I could just one quick one for Mark on gross margin. You've discussed the drivers. Any color you can give on the magnitude of full year impact is the one Q year on year, roughly 300 basis point negative, a fair proxy for the full year. Thank you.

Thank you, Sachin. Maybe Christian could actually cover the top two questions. Mark, if you want to jump on the gross margin question.

Thank you, Sachin, for the question. Let me start by saying why we believe that we have a best-in-class TROC to ADC. The payload, TOPO-1 versus SN38, is ten times more potent. We have a very high stable link. The half-life of 1062 is five days, so we can have a very convenient three-weekly schedule. We have clinical data that we share in non-small cell lung cancer. with a response rate between 20-25% and the median PFS of 8 months. That compares very well in the same setting with the competitors. Then the data, of course I will not disclose the data that will be presented at ESMO in a few days, but I think that would be another piece of evidence is another presentation of preliminary data, triple negative breast cancer, But I think this would be another piece of evidence. We believe that this drug has high potential across indication. Of course, the initial focus is non-small cell lung cancer, where we launched our first registration of study. And we are developing the combinations with checkpoint inhibitors, K2 and . And we have, of course, a focus in breast cancer. But of course, it will be a drug that can play a role across indications.

Okay, so on the gross margin full year impact, I cannot give you a view on the percentage of gross margin for the end of the year, but I can certainly, you know, reiterate that the largest factor will be the pandemic vaccine dilution. And then the other factors which are negative is basically the profit share that is increasing over time, and that's strongly correlated with the progression of Limpalva. The third factor is the China pricing. We have talked about it. This is both the impact of NRDL pricing as well as the value-based procurement. On the positive side, I mentioned earlier on the mix of if we have more oncology product, this has a beneficial impact. and obviously there are also gains of productivity over the course of 2021, but they are not very large. So these are all the factors that contribute to the gross margin. But basically what you see in the first quarter, as I said in my remarks, these dynamics are going to continue over the course of 2021. Thank you.

Thank you, Marc and Christian. James, go ahead.

Hello, James Gordon, JP Morgan. Thanks for taking the question. A question on Roxodustat. So post the recently updated phase three data, can you give your latest thoughts on the product's US potential in dialysis and where you now see the differentiation potentially versus ESA? Because I think you're now non-inferior on safety in the incident and overall dialysis population. And you might even maybe look worse than ESA in the prevalent dialysis population. So thoughts on Roxo and commercial potential now ahead of the July ad comp? And if I could squeeze in a clarification just on the gross margin point, because your guidance, I believe, is excluding the vaccine. So if we're going to try and model it, should we just assume that the gross margin is effectively nothing on the vaccine? So we put in whatever we want on the sales, we do no gross margin, and then we'll be able to understand what's going on on an underlying basis for gross margin for the group?

Mark, you could cover the gross margin question. You have to remember, James, that there are more costs than cost of goods to this vaccine. There's also pharmacovigins costs that we include in the price we charge. But maybe we could start with Ruud covering the Roxazustat question in the US, the differentiation and the potential decisions as we see today.

Yeah, absolutely. And thank you, James, for the question. So I think the product is still highly differentiated for a variety of reasons. Of course, the most easy one is that this is an oral medication versus the infusion with EPAL. The second clear differentiation is that Roxadustat is working very well in inflamed patients. The data has clearly shown that. The third piece of differentiation is that if we're working with EPO non-responders, roughly 15, 20% of the patients are not responding well to EPO, and those patients get higher doses of EPO, leading to higher costs of dialysis organizations. And finally, there's also less of a need for blood transfusions with roxidustab. So I think overall we have a very compelling offering. I think that's also reflected in the very strong sales we have seen in China. 41 million in the quarter and is driven by clearly dialysis dependent CKDs as well as non-dialysis. So of course we need to wait for the advisory committee meeting but overall I think if we will get it through it and we are confident for that that we still have a very differentiated product.

Just a quick comment again just to reinforce what Ruud was saying. The big potential for this asset was always predialysis, and this suddenly remains. So we still believe there's a very substantial potential for this product. Marc, do you want to cover the margin?

Yes, thank you, James. So very briefly, there are obviously manufacturing costs, but above those manufacturing costs, we have development costs, distribution costs, and pharmacovigilance costs. But overall, all these costs represent a small percentage of the revenue. And therefore, the gross margin itself is covering, is basically covering this limited cost in percentage.

Thank you. Thanks, Marc. Richard, go ahead.

Hi, thanks for taking my questions.

Firstly, a follow-up on Tim's question, because there's been a lot of discussion with investors about competitive risk to degree. So it looks like Hanso's data has only been selected as a poster, so maybe that tells us something. But if you could help us understand your thoughts on the longer-term competitive threats to degree, so in markets outside of China, and whether being reimbursed through Medicare Part D represents a possible route to hands-on EQRX competing on price.

Then secondly, very interesting data on the selective path.

I just wondered if you could give us a sense of what the development programme going forward could look like and whether you would consider head-to-head trials versus Limpaza in order to fully test that profile and whether your agreement with Merck allows you to do that. Thank you.

Thanks, Richard. Doug, do you want to cover this?

Yeah. So, Richard, maybe I'll focus in, as you highlighted, on the competitive pressure, indeed, that we see potentially outside of China. I mean, I think that Tegriso's current position has been established based first on its clinical profile, second on the CDP and corresponding regulatory standards. labels that we've obtained, and then thirdly, the commercial delivery. And I think all three of those elements are going to need to be in place in order for us to see competitors make a meaningful set of inroads. I think that, again, on clinical profile, and you alluded to the possibility of this in terms of the poster discussion, we'll have to wait and see, but I think that it's critical to remind that our flora Approvals and the data set is based upon statistically significant PFS and overall survival. I think that while there are certainly potentially paths to market in the United States and in other areas based upon only PFS, I think that that bar is going to be high, and I think that it's going to really depend upon also the generalizability of a data set that is predominantly Chinese patients outside of China. So I don't think that the regulatory hurdles are insignificant there. I would also then secondly say on the clinical profile, we talk a lot about blood-brain barrier and CNS, and so far from a preclinical standpoint, I think that we've got quite a bit of confidence in the Tegrisa profile and don't have as much insight into some of the other medicines. And then lastly, I do think that your point about Medicare Part D, I mean, Medicare Part D, yes, is an important part of treating lung cancer, given the number of patients that are on Medicare. I think that it's important to note that as we get to Adora, The value to society, to patients, and to the healthcare system, even with an HTA assessment, is quite impressive. So I think the value proposition for Tegriso and the value being generated is turning into a positive story, and I think that that's something that becomes a core component of the conversations that we're going to be having with payers.

Thank you, Dave. The next question is, Mark Goldstein at Morgan Stanley. Mark, go ahead.

Thank you, Pascal. So a question on in HER2, please, in HER2 low breast cancer. Please could you sort of help us understand the scientific and commercial opportunity here? I know, Susan, you've been talking about sort of HER2 receptor and sterilization, and that's clearly important in terms of thinking about your confidence as you go down into IHC2 and then 1 plus patients as well. but obviously on slide 33, there's some combinations that you sort of look tantalizing in terms of AKT and TROG2 as well. And then Dave, on the commercial side, could you frame the patient population side of the debate? And there's seemingly a lack of competition here. So if you could frame the commercial potential, that would be fantastic. Thank you very much.

So can I suggest that maybe, thanks Mark, sorry, Can I suggest that Christian covers the scientific view of this, and then Dave, you could cover the commercial potential?

Thank you, Pascal. Thank you, Mark, for the question. So, Mark, as Dave presented, you have seen that R2 low is 50, 55% of all breast cancer. And, you know, this is... Actually, the reason why we believe an HER2 can be a transformational drug, this is a setting in which we are breaking the swim lanes from HER2 positive, ER positive. Actually, we capture some triple negative patients because in a subgroup of patients, triple negative, HER2 low is present. We have a redoubt that now has been announced In 2022, DBO4, Destiny Breast 04, in which we are comparing NR2 to standard of care, that is chemotherapy, single agent chemotherapy, different agents, capsaicin, lingen, citerib, inoverbin, and so on. And I think we have confidence that NRTO can play a major role in this setting because we released data from the preliminary studies in which we observed a response rate that is 30% or higher with a very impressive duration of the response, more than 10 months, and the PFS that is ranging between 8 and 10 months. When with any standard treatment, you expect no more than 20% response rate at PSS around four months. So this is an incredible opportunity for breast cancer patients and to fundamentally reshape how breast cancer is treated in independent of the subgroups.

Great. Thanks, Christian. So then just turning to the, sorry, Pascal. So just turning to the commercial portion of this. Mark, I think that the two things that are at this stage I'd say worth highlighting as we think through this, and it's probably something that's worth already even getting into greater depth at ASCO or some of the other sessions, but obviously you've got one dimension, which is we'll see sort of, if you will, the degree of HER2 lowness, you know, IHC 2+, 1+, and we'll see the data in terms of the benefits as we define this new patient segment. Thank you so much for joining us. who are going immediately to chemo, whether they're relapsed or de novo. I think that this is going to be a very, very compelling data set if we've got an opportunity, obviously, to see that it's positive. In the hormone receptor population, I think that the question will be how early post-AI and CDK4-6 does it make sense to begin to initiate? So these are some of the questions that we'll have to work on. Pascal, back to you.

Thank you, Dave. So what I suggest we do, we take a And that actually will help me also go back to Richard's question, because I realize we forgot to address Richard's question about the path. So, Andrew's question is, you highlighted your next generation path inhibitor, and I think it's for you, Susan, and you indicated that this path has greater path trapping. Based on the first generation path inhibitors, I thought trapping had been found not to be clinically relevant. Do you think that this would be more important with a selective path? So that would be part one of the question, Suzanne, and part two would be Richard's question, which is can you give us a sense of the development program for the path one, and would you consider going head-to-head against Limparza and clinical trials? Go ahead, Suzanne.

Thank you. Thanks for the question. So first of all, I would just say that PARP trapping is important. What we've said in the context of the clinically available PARP inhibitors, that when you adjust for the clinical dose and the relative potency of PARP trapping, you end up across the potent PARP trappers, which include talazoparib as well as alacarib, you end up a reasonable level of efficacy when adjusted for dose. If you compare the PARP chappers with valiparib, which doesn't trap PARP effectively, then you see that the efficacy with the PARP chappers is indeed different. And that remains important. what we're trying to emphasize with the part one selective molecule AZD5305 is that we have a good part chopping capability but the differential in both safety and efficacy is seen because it's combined with a lack of activity on part two which is responsible for some of the hematologic toxicity and so we got a greater therapeutic window even than Olaparib has with AZD5305 and that was described well at the ACR presentations And that leads on to the second question, which is, OK, so how might you develop a selective PARP inhibitor? And one of the key things is, first of all, with an even safer profile than we have with Olaparib, I think there's open opportunity to go into early stage settings. building up what we already know is efficacious with the current PARP inhibitors. And we know from those, if you look across lines of therapy, that you have greater effects when you go into earlier lines. So that's one part of the program that I think we're interested in. And secondly, I think you can develop in combination with other cytotoxic-based therapies, which is something that the potent PARP trappers have not been able to do without compromising on dose. and so that's what we've seen pre-clinically and that's what we'll be testing in the early clinical setting and indeed one of the cytotoxic agents we'd like to be able to combine with includes topoisomerase inhibitors which of course are a part of the warheads of the ADC portfolio that we have and we have pre-clinical efforts in that space as well. So I think it provides a potentially quite broad development program. I would remind you that we started phase one in the fourth quarter of last year, so we're still in the early development of a part one selective. It remains very exciting, and I look forward to sharing clinical data with you in the coming months.

Thank you, Susan. Next question is from Emmanuel Tabadakis at Deutsche Bank. Emmanuel, over to you.

Thanks for taking the question. I'd just like to extend my condolences on behalf of the analyst community for that tragic news, Jose. perhaps I could take a couple of follow-ups on HER2 you talked about the potential in the HER2 low breast setting commercially we will of course have a second asset in a very similar setting later this year so if you could just help us understand how you think those two might be positioned in the event they both produce positive data in that setting hormone receptor positive setting and then on lung and HER2 in lung you had Great ORR and now PFS data from Destiny Lung 01. You had a breakthrough designation a long time ago. We haven't had anything further in terms of registration timelines. Could you just give us an update? Thank you.

Thank you, Emmanuel. I think maybe Christian, if you could take those questions.

Yes. I have to say that the first one, the line was a little bit disturbed. I'm not sure. Let me start, Emmanuel, with the lung. With the lung cancer, We have the opportunity fundamentally to create a new segment in lung cancer. This is the vision and ultimately the reality today. You have seen the data. There are two specific segments, R2 mutant, and you have seen the data. We got a breakthrough designation based on DL1 and with 60% response rate. This is a setting where an ER2 will play a role. It represents about 2% of the lung cancer overall. This is a very active area of development. And then recently in one-line conference, we released the data in ER2 positive in osmotic lung cancer, where we have an activity that is lower in terms of response rate and a very good durability of the responses and media BFS. in a setting that fundamentally is completely naive of any targeted therapy. Here, we are developing combinatorial strategies in our destiny triangle three in combination with checkpoint inhibitors, in combination with cytotoxic, additional cytotoxic to bring these regimens further. So we believe this is an important medicine that will help to shape even further the treatment of nosomal cell lung cancer in these two segments that I just mentioned. And I would really ask you kindly to repeat the first part of your question because the line was a little bit disturbed, sorry.

Certainly, yeah. And also, if you could just add, when you expect a file with the FDA in HER2 mutant, and the first part of the question was just in terms of the positioning for N HER2 and HER2 low breast relative to Tredelvi, which of course has the tropics O2 study due to readout later this year. Thank you. Sure.

So the FDA interaction started, and so we will update accordingly based on the evolution of the conversation. I think the HER2 low and the potential role of another ADC like TROC2 ADC in breast cancer can have a different value proposition. We discussed about HER2 law. We discussed the data that HER2 produces in HER2 law versus the standard of care. And you know, I personally believe that HER2 law can become a targeted segment while The current TROP2 development, TROP2 ADC development is focusing on the non-comer population. So we need to see the level of activity, but we believe always that precision medicine ultimately what does matter. In ER2-Low, we have a target and we will have the possibility to position this medicine probably even earlier line. I was mentioning before DbO4 we read out in 2022 is the first study where we are investigating an ER2-Low care as a second, third line treatment. Now we started and we announced also a frontline study as a first chemotherapy for metastatic setting with Destiny Breast-6 with an air-to-vest standard of care capcitabine taxanes. So we believe that this offers a different value proposition compared to TROC2. You know very well we have a TROC2 ADC in development as well. And TROC2 ADC will have a place in breast cancer. I believe that F2 load probably is not the place completely.

Thank you, Emmanuel. Sorry. No, I was just going to say, just to very quickly build on what Christian said, I mean, I think that, remember, it's a broad HER2, I'm sorry, a broad hormone receptor positive population in the Trudelvy study. Ours is HER2 low specific within the DESPY BREST-04. And so I think that within that context, You know, patient selection, I think, is an important aspect of what we've got in DBO4. I think we could have longer durations of therapy that come out as a result of that. And so, I do think that these are some important elements where there could be some good differentiation. And we'll, you know, I tend to like the approach that we've taken, which is select the patients and do that based upon a strong biologic hypothesis. So, I think that's the key thing that we'll look for.

Thank you.

Next question is .

Yeah, a couple of questions on the competitive dynamics of the Tigriso, please. So first, one might imagine that EQRX might pursue a price-based advanced supply strategy, a little bit like Novartis did with Inclisiran in the UK. So assuming that this is what pans out and the data is sufficient to win approval, firstly, how much risk do you think there is to your current Tigriso franchises in European territories? as well as those areas that represent future potential demand that may not currently be contracting with you given the entry of a deeply discounted competitive new entrant. And then second, perhaps you could update us on the timing of the interim analysis and confidence around your Flora 2 trial in combination with chemo. I ask because I'm thinking obviously about the J&J combination with the Phase 3 on running. J&J's It seems like they've borrowed a page from your mantle cell calibrutinib copybook to get familiarity with amivantinib before they seek to get the full indication. Many thanks for that.

Do you want to take notes?

Yep. So on the first question, I think, Andrew, the best thing that I've got to be able to draw as an analogy is I think that if we take a look at Some of the first generation TKIs that are on the market, or if we take a look at Dacomitinib, I think that the strategies that have been pursued on those, which have been, I would describe as payer strategies, have not resulted in share change. And I think that, again, it goes back to that the clinical profile and efficacy, safety, tolerability, I'm sorry, and CNS are going to be the core areas where the decision making is made. And so I think that within that context, we have to see I think the same, frankly, applies In many respects within Europe, I think it's important to remember that within Europe, again, I think the movement with the DORA is critically important because that will be highly valued within even the HTA markets. I think that we're moving quickly to get approvals on the heels of Orbis. and I think that that advantage allows us to be able to solidify a very good value story within Europe. Lastly on Flora, readout timing for that is post 2022 on Flora 2. So I think that's the only thing I'd update there. Thank you.

Thank you Dave. Next question is from .

Thank you, Pascal. A couple of questions, please.

The first one on Nirvesimab, if you can just help us understand your level of confidence on the MELDI kind of medley study coming up, kind of given what you have data in-house from the MELDI study, are you kind of feeling more or less confident about the medley study coming up? That's one. And then separately, as we see kind of earlier this week, BG reported data for denobrutinib on a head-to-head versus abrutinib I just would love your thoughts on the alpine study data. Thank you. Thank you, Dave. Can I ask you to cover maybe the second one? Yeah. Maybe Manny could then cover the near city map question.

I think the main thing that I would just highlight and maybe in the spirit of being kind of brief on this and I think that the ZANU data do two things. The first is that it reinforces that selective inhibition may very well matter and so that's something certainly that has been an important part of the I think the second thing that I would say is that the Alpine data are showing response rate data. Response rate allows you to get to results fast. and there's certainly something that's beneficial about that, but those data have a medium follow-up of about a year compared to the Elevate RR, which has a medium follow-up closer to 40 months. So I do think that it's important to take a look at the maturity. I think that'll affect approvability as well as the way in which it's received. So I think those are important things to understand when you take a look at Alpine and compare to 006.

Thanks, Seth. Mendes?

Yes, I think, I mean, our confidence increased because, you know, the current study just read out was obviously highly positive and, you know, consistent with what we've seen in phase two. So overall, you know, we clearly have a very active antibody. So I would say we have confidence in Melody as well. Thank you.

Next question is from Luisa Hector of Berenberg. Over to you, Luisa.

Thank you very much. My question is on Limpaza. So from Dave's comments on diagnosis rates, it feels like Limpaza will be impacted by this. Could you confirm that and make a comment on how the uptake of testing is going? And also, just to prepare us for the Orkham's prostate first-line Propel study, your expectations here, I think the Phase 2 data was pretty compelling. But how do you see the competitive landscape as others are working in this area? And I think you have twice a day dosing.

Thank you. Thanks, Michelle. Luke, what about you?

Yeah, maybe I'll take the first question and then, Christian, if you want to speak to the Propel component on that might work. So, Louisa, We do see that ovarian cancer has been affected by COVID-19 in terms of diagnoses. Interestingly, we haven't seen quite that same effect within breast cancer and not necessarily the same degree with prostate cancer. So I think that given the fact that we've got as robust of a label as we do with labels in ovarian, prostate, pancreatic, and Breast Cancers, on top of that with the Olympia data, which obviously we don't promote to, but we look forward to having presented. I do think that that mix allows us to continue to be able to have, you know, the growth rates that we've gone through. But, yes, I think that there's no question that ovarian cancer is experiencing some of the same diagnosis challenges that we've seen, and hopefully that alleviates in the second half. Christian, on Propel? Thank you, Dave. Thank you, Louisa.

So the Propel Luisa can be actually the biggest indication of the potential to become the single largest indication for Limpardia. You know, after Profound, that already is picking up and is establishing Limpardia as a treatment in metastatic prostate cancer, I think with Propel, that is an approach in first-line maintenance in combination with an NHA, abiraterone acetate, give LIMPARSA in a selected patient population the possibility to become a standard of care as in this large segment. Propel is the first study that we read out. There are other trials ongoing. But I think we are, the preliminary phase two data are very supportive on these potential readouts that will happen anytime soon. And this is, of course, as you can imagine, we are waiting these results eagerly. The population is incredibly Thank you, Christian. Should we move to the next question? Matt Weston at Credit Suisse. Over to you, Matt.

Thank you very much. My question is for Leon on China. Leon, you've still got a number of large revenue drivers in China from legacy Astra drugs. Can you map out where you see the key risks from future VBP?

And if you can get your crystal ball out, any idea on timing? But also, I'd be very interested, given your strong position in China, how you're managing VBP. Are there areas of growth that your findings that previously were unexpected? How easy is it to sustain incremental revenue in the face of competition?

Very good question, Matt. I think we have Arcinico in China is a very successful company and we have quite some legacy brand of patents and branded products. Thank you very much. and the next wave could be insulin VBP and about similar VBP and then will be batch six will be sometime late this year or early next year. So nobody can tell when but it's really largely up to the government agenda but I think it ultimately will come. And how AstraZeneca manage VBP is AstraZeneca brand in China is a very strong brand especially for chronic disease we have a very strong We also have very large low-tier hospital sales team covering everywhere and also retail pharmacy and we recently established an online pharmacy team and department and also we launched our own internet hospital in online pharmacy in China. Basically, in the future, if it's a strong brand, so doctor to patient education and repeat purchase and outside hospital channel, online channel will be quite important for all the VBP brands. Of course, our future do not rely on the success of VBP brands anymore, or legacy brands. So in China, we are very successful with Forsica, and Roxa, and the new oncology portfolio, Tabriso, Impinzi, and Kaza, and even Sodex have a relatively very low risk of VBP. We have an inclination as well for SimbiCorp, BreastTree, Bovespe, just launching into NRDL and starting to show impact on volume. So I think we have also a long list of new future brands. I think this is really the focus, which are doing really well. So we have been very successful in new programs in the past several years.

Thank you, Ariel. Naresh Shoa, let's turn it over to Naresh Shoa.

Kyle Quince, please. It's been obviously performing very strongly. You've gone from one-third to 40% first-line new patient share in one quarter in the U.S., I think. And so the question really is, is there any reason to believe we won't see a similar level of uptake outside of the U.S.? and if and if not then are you how much upside or do you see upside to consensus numbers of around three billion in in 2025 and obviously that's particularly relevant given the the margin impact that Capcom would have given the Dutch pad and box benefits. Thank you.

Thanks Naresh. Leon always wants to do better than the US. I'm sure he's going to aim to do better again here. This is Dave, do you want to cover this question?

Yeah, and I guess, fortunately, China doesn't have a lot of CLL patients. So that's good. That's a good thing for China on that particular dimension. But I think that in terms of the expectations within Europe, I think an important The place to start is that, yes, we absolutely have good expectations and ambition for CalQuants within Europe. It is important to note that in the United States, because we had the relapsed refractory mantle cell indication, that we were able to drive on-label use within that niche setting. which gave a number of the key centers an opportunity to get experience with CalQuence and to develop those patient experiences, particularly with the benefit-risk profile. And that empirical data that they generated has actually been quite beneficial in terms of not only driving us to parity share within that relapsed refractory mantle cell, but also within CLL. I highlight that because in Europe we obviously don't have that same situation of the mantle cell label coming in before that. So there is more work that we're going to need to do in order to be able to drive CalQuint's experience. and Calquence Utilization and move up that curve. With that said, I am pleased to say that we are already starting to see good progress within the UK, where we were able to capitalize on some opportunities that were created through COVID to be able to introduce Calquence through an EAP there. And in Germany, we've launched with pricing and reimbursement as of the 21st of December and in France, We've got an ATU. I do think the head-to-head data will be quite relevant within Europe because those data, I think, will be helpful to European oncologists, hematologists, and hemox who may not have their own data sets within that. Thanks.

The next question is Michael Houston at UBS. Michael?

Thanks very much. One question for Mark, please. You knew at the beginning of the year that you were not going to have to pay tax on the VALA disposal. So your full year guidance, the $475 to $5 on EPS, there's obviously a healthy chunk in there from that benefit. So when I try to then triangulate that with your margin progression, I can sort of see how you get a little bit of margin improvement on that basis, but it isn't really all that much. So As we think about the rest of the year, what's going to hold your margin back that we should be aware of? And again, I appreciate this is without the vaccine. And then a quick question for Leon. On the SGLT2s in China, there's sort of a weird scenario now where for SIGA is on the NRDL and it's doing well, but you do have some other SGLT2s subject to VBP. Does that matter? And if so, how?

Thank you, Michael. Can I suggest that maybe we start with the SGLT2 China question? Alain, do you want to cover this? And then Marc can cover the first question.

For SGLT2, we realize that there are other SGLT2 already going generically in China, already getting VVP. But they are relatively small volume. So VVP is a volume-based procurement, right? So relatively small volume. We are 90% plus in SGLT2 class, right? I think we will still be good for the next three, four years until we patent expire in China. So I think beyond patent expire, I think Portugal will gradually become a consumer brand, more repeat purchase by the long-term users because its long-term benefits were established among patients and doctors as well. I don't worry too much about the other escalator too, going VBP. I don't think there's any major impact in that perspective.

Mark, the first question. So, rapidly on the VLA tax rate. So, yes, we knew that the capital gains tax would not be levied. What we did not know earlier in the year, was at what price a transaction could be concluded. So therefore, we didn't know the quantum. We knew that it would be tax free. We also take into account events that we are anticipating from different jurisdictions on increase in several jurisdictions of the corporate tax rate. to be announced and decided over the course of 2021. And we reconfirm that we expect the tax rate, the corporate tax rate, to be between 18 and 20%, 22%, sorry.

Thank you, Marc. The next question is Sam Fazali at Bloomberg. Sam, over to you.

Thank you very much Pascal for taking my questions.

Just very quickly on the Limpardo Olympia, do you expect the data to be strong enough for regulatory approval and use or take up in the market without an OS data point yet? And then on the DDR programs, obviously you had some V1 data and just would love to hear your view of the competitive Thank you. Susan, do you want to quote on those? Yeah, I'm happy to. Thank you. Thanks for the question. So in terms of the Olympia data,

Obviously, with the press release that we've met the primary endpoint, we do anticipate that this endpoint, which is accepted in the adjuvant setting in breast cancer, can potentially lead to regulatory approval in this setting. In terms of WE-1, obviously, you've seen the data from the ACR about the Ventalis WE-1 inhibitor that's now entering, and there are others that are starting to come in. We haven't already shared ASCO last year, the data that was done in collaboration with Joyce Liu from the NCI, looking in uterine serous carcinoma, and we have initiated a study in that setting. There are other potential opportunities for WE1, and we'll look forward to sharing those in the coming months. I think there will be more data coming out from that. Obviously, inhibition is also associated with GI toxicity, and that's some of the challenges in terms of combinations. In terms of the ATR inhibitor, again, there are several different places where we're looking at the combination of ATR with other drugs in the portfolio, not just with alaphora, but also with infirmity. And we have shared some data that came out of the Hudson study in patients with non-small cell lung cancer who have progressed despite our checkpoint inhibition with a PD-1 or PD-L1 agent. and we'll be updating those data later in the year but there's also a drawing attention to an abstract at ASCO which has a posted discussion in post-IO melanoma as well and so I think there's interesting data emerging from a couple of settings for the ACI.

Yeah, it's Christian here Sam, just to let you know ASCO released the The plenary list, Olympia is in plenary, RASCO. So this speaks on the data that will be presented and the potential regulatory submission and discussion that can happen based on this data. Thank you, Christian. Very important point there.

So you have lots of very good questions. So we'll take two more, and then we'll have to close. So Timas, Amanda, is that you've been hired.

Great. Thanks so much for the question. So, Pascal, for you, one of the questions that we're starting to get is with the incremental cash flow that the company is going to be able to capitalize on with the Alexion acquisition, should we anticipate AstraZeneca being more active in the BD landscape? Obviously, the need to distribute equity related to Daiichi Sankyo was a question, but it seems like AstraZeneca has a very good track record for early deals and just wondering how we should be thinking about deal activity in the wake of a successful close of the Alexion transaction, perhaps in 2022 and going forward. And then the second question is for Susan. Susan, can you just give us your thoughts on CDK9, MCL, and the BCL2XL in the context of the ability to combine with Calquence or other products? Of the three, which are you most excited about? Thanks.

Thank you, Stuart. So the first question, Alexion acquisition definitely helps us from a cultural viewpoint. We should remember that the main driver of this acquisition is the science that exists at Alexion, especially in the complement cascade, which complements our focus in immunology, but also the entry into a very important segment, rare diseases. Incidentally, our friends at Ixion released their results today and they had a very good first quarter with a 13% increase in sales. So they continue to do well. As far as the cash flow, it's of course also a very important consequence of this potential acquisition. How to answer your question, you know, it's a little bit difficult. We, of course, will consider increasing the dividend, and that's a decision the board will have to make. And we will also deliver and reduce that. But it is true that it also enables us to consider additional business development. Now, you know, we'll continue looking at BD like we've done in the past, but you also need to keep in mind when you're licensing products or byproducts, you then have to develop them. We have a very rich portfolio and we really try to focus our resources on making products like Amherst II or many others, 1062 and many others, really big blockbusters. So we always consider BD, but in the context of maximizing the assets we have in our existing portfolio. So Susan, second question is for you.

Yeah. Thanks, Seamus, for the question. First of all, just to sort of categorize them, both MCL1 and CDK9 are essentially trying two different ways to target a really important target at MCL1. MCR-1 inhibitor is a direct inhibitor given intravenously. And actually, the data, if you look at the preclinical data for this target, it was particularly interesting in combination with a BCR-2 inhibitor, which is another mechanism in the apoptotic family. So when you address both together, you have particularly strong activity preclinically. The challenge is always the, you know, is that combination going to have a good safety profile? So we are testing that combination in early phase clinical trials. It's too early to say at the moment whether the safety profile is going to allow for the efficacy that we want them to see. CDK9 is a different way of targeting MCL1 to inhibition of RNA polymerase 2, which basically stops transcription because MCL1 is a short active transcript. It shuts that down in particular. It also has a broader effect. And again, that means that the safety profile is going to be key. Clearly see activity in some hematologic malignancies. And we're excited about the potential for that. But again, we have to understand that balance of safety and efficacy. The BCL-XL is not just a BCL-XL inhibitor, it's BCL-XL and BCL-2, which of course is a nanovalidant. And it's been formulated as a nano-medicine in order to provide an optimized PKPD profile. So I think, you know, again, this is in early phase dose escalation studies. We're excited about that. I think it's hard to pick between them because ultimately it's going to be that benefit-risk profile, and we haven't pushed them to the limit of the dose escalation yet to really understand that. So you have to be a bit patient for another few months before we can answer that question properly.

Thank you, Suzanne. So we'll take one last question. One question, please.

Okay, yes, I have one question on and her too with a couple parts. I'm curious if there are interim looks at Destiny Breast 04 and if so, have any occurred yet? What does the fact that the delay just was announced tell us about the cadence of the accumulation of events? Is it a cruel event, event a cruel slowing and what does that tell us? And why was Destiny 03 so far been spared of delays? Thank you.

Thank you, Steve. So maybe, Christian, you could take those questions.

Yes, thank you, Pascal. Thank you, Steve. I mean, Steve, in general, when events are coming, the lower pace is most of the time a good thing. We don't know. It's a blind study. We are waiting the right number of events to run the analysis as predefined by the protocol. As Daichi Sankyo announced, we are confirming here today, it is moving a few months later than expected. That is really simply driven by a number of events that we are accruing. Destiny-Best of Three is also, actually is still on track for the analysis that was planned. Here we are accruing the event I cannot tell you more than this. What I can tell you is that you know the assumption where both studies are based on. I spoke before about the level of activity we have seen with NERTO in a later line is superior than the expected level of activity of TDM1 in this specific setting. either in terms of the response rate and specifically in terms of BFS. So we are still incredibly confident that O3 will have a positive readout. Thank you.

Thank you, Christian. So we'll close here. Let me thank you very much for your interest in our company and your great questions. Just a couple of points in closing. We had a very good first quarter with 7% increase excluding the vaccine at CER. Despite a very tough comparison to Q1 last year and also a headwind from COVID like all our peers or most of our peers are experiencing for the first half, we think we will continue to experience those headwinds and we believe that the second half of the year should see an acceleration of growth. But definitely 7% is a very robust result and As a reminder, if we correct for the inventory build-up last year, our growth rate would have been low, double digits, so very strong. Oncology for 16%, UCVRM 15. Respiratory immunology would have grown, but is impacted by COVID, and the effect it has on the pre-COVID and pre-COVID in particular, and the emerging markets continue to do quite well. Our profit is up 34%, and we are doing quite well, so we are on track. We reconfirm the guidance for the year. And with this, I will thank you again for your interest and wish you a good day. Goodbye.