AstraZeneca PLC

Good afternoon, Europe, and good morning to the US. Welcome, ladies and gentlemen, to AstraZeneca's Half Year Results 2021 presentation, conference call, and webcast for investors and analysts. Before I hand over to AstraZeneca, I'd like to read the safe harbor statement. The company intends to utilize the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Participants on this call may make forward-looking statements with respect to the operations and financial performance of AstraZeneca. Although we believe our expectations are based on reasonable assumptions, by their very nature, forward-looking statements involve risks and uncertainties and may be influenced by factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Any forward-looking statements made on this call reflect the knowledge and information available at the time of this call. The company undertakes no obligation to update forward-looking statements. Please also carefully review the forward-looking statements disclaimer in the slide deck that accompanies this presentation and webcast. 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'll find an on-screen text box in which you can type your question. With that, I will now hand you over to AstraZeneca.

Hello, everyone. It's Pascal Soriot here, CEO of AstraZeneca. Welcome to the first half 2021 conference call and webcast for investors and analysts. As always, the presentation was posted to AstraZeneca.com earlier today, and it was also sent out by email. Please turn to slide two. This is our usual safe harbor statement. We will be making comments on our performance using constant exchange rates, or CER, core financial numbers and other non-GAAP measures, including total revenue, excluding the COVID-19 vaccine for pandemic use, as well as the impact of the pandemic vaccine on EPS. A reconciliation between non-GAAP and GAAP data is contained in the results announcement. Numbers used are in million US dollars and for the first half of 2021, unless we state otherwise. So if we move to slide three, we plan to review the presentation first and then do Q&A until 1.15 PM UK time. We're also looking forward to seeing many of you on the roadshow and other meeting activities next week. If you keep your questions short, we'll try to keep answers short too. For those on the phone, I'm smiling because each time I say that and we are never very successful about this, but we'll try again. 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, and we propose you ask only one question. Many thanks. In speaking order, I'm joined by Dave Fredrickson, who is our EVP of the Oncology Business Unit, Ruud Dobber, the EVP of the Biopharma Business Unit, Mark Dunawaye, our EVP and CFO, and the incoming CEO of Alexion. Manny Pangalos, our EVP for Biopharma R&D. Susan Galbraith, our EVP for Oncology R&D. Warm welcome to Susan. For the questions later, we also have Leon Wang, our EVP for China and the emerging market.

And also Aradhana Sarin, our incoming CFO, who joins us from Alexion. A warm welcome to Aradhana as well.

Let's turn to slide four. This is the agenda where we plan to cover all the aspects of our results today. So if you move to slide five, we saw the growth profile increase in Q2, and as a result, 2021 has seen accelerating growth at the end of the first half. The 18% increase in revenue was boosted by sales of the COVID-19 vaccine for pandemic use. The revenue used for guidance Excluding the COVID-19 vaccine for pandemic use was at 9%. In the second quarter, it was at 12% excluding vaccine. Oncology increased by 15% and new CVRM by 16% boosted by Farsiga. Respiratory and immunology increased 6% and the emerging markets grew by 21%. Cooperating profit grew by 20% supported by other operating income. With a tax rate of 14% reduced by the 8% realized in the first quarter, core EPS ended at $2.53, which is up 27%, including 4 cents for pandemic vaccine offset. As anticipated, the pipeline news accelerated into Q2, supporting sales today and tomorrow with news flows anticipated to stay busy in the second half of 2021 and On the COVID-19 vaccine for pandemic use we saw a significant jump in shipments in the second quarter. As of today about 1 billion doses have been released for supply by the network of collaborators around the world. I would like to thank all our colleagues at AstraZeneca and our partners who made this possible with their dedicated work to help fight the pandemic One billion doses of vaccine is a huge milestone, and we are also very proud of this achievement. Most of those doses, more than 60%, go to the low- and middle-income countries. We closed the Alexion acquisition last week, and I would like to welcome all our new Alexion colleagues to the company. With Alexion now part of AstraZeneca, we updated the guidance. So all in all, the performance accelerated in the second quarter, and we are on track with everything. Please turn to slide six. Looking at the pipeline news since late April, a few highlights from a schedule getting busier. First of all, the approval of Tagrisso for adjuvant lung cancer, and Koselugo for NF1 in the EU, Infinzi for small cell lung cancer, and Limpaza for prostate cancer in China, and a new family member in oncology or pathies, approved for a small group of lung cancer patients in China. Susan will go into the details on this later. In biopharmaceuticals, we got the very important approval for Farsiga in chronic kidney disease in the U.S., and we earned a positive recommendation in the EU. We had an important phase three trial readout with Infinzi and Tremelimumab in the first land use in non-small cell lung cancer where overall survival was reached. On the other hand, we are disappointed by the outcome of the FDA Advisory Committee for Roxadustat in the U.S. and the use in treatment of anemia associated with chronic kidney disease. Nirsevimab prophylaxis against the RS virus made further progress and met the safety objective in the Medley trial. So if you could turn to slide seven. After financial and pipeline headlines, we now take a deeper dive into revenue. Total revenue advanced by 18% in the first half. The COVID-19 vaccine for pandemic use contributed 9% to growth in the half. In the second quarter, revenue increased 25% with 13% coming from the pandemic vaccine and 12% from the rest of the business. We had some negative impact from COVID-19 and also from China, with a repricing of Brevinta. But the new medicines added over $1.7 billion in new revenue with farcica and oncology leading this growth. We now have 10 blockbuster medicines overall when we count sales over the past four quarters and 12 new medicines contributing growth and adding further diversification to revenue as we look ahead. Next quarter, we will add two blockbusters, Soliris and Ultomiris. Moving to slide eight. So if we move from individual medicines to these areas and geographies, we have solid double-digit growth for oncology and new CVRM with respiratory and immunology improving greatly in the second quarter as inventory was normalizing in the comparative period. Other medicines continue to decline as we become less dependent on legacy medicines. Full details are provided here on the COVID-19 vaccine for pandemic use with the jump in shipments. From a regional viewpoint, there was growth everywhere with Europe seeing the biggest vaccine impact. Emerging markets continue as the largest region also boosted by the vaccine. In summary, continued progress and accelerating growth in 2021 and performance in support of the updated full year guidance. We continued making progress with all these areas and our key medicines, emphasizing our strategic decisions and the focus over the past years, as well as our commitment to continued durable double-digit top-line growth. With a global revenue-based primary and specialty care, new medicines and now Alexion, we are fully on track with this ambition for the next few years. We turn to slide nine. On Alexion, we closed the acquisition last week. The focus now turns to integration and synergies, and we are off to a very rapid start. While Alexion was not part of our first half and our second quarter numbers, Marc will cover the sales performance before the final shows today. In conclusion, Alexion continues to offer a compelling scientific and business complementarity and will allow us to build out in rare immunology. In the short term and medium term, the combined company will offer faster growth. We have also improved profitability and a stronger cash flow that certainly would support the positive strategic developments that we've achieved since 2013 for AstraZeneca. I will now hand over to Dave to go into details on oncology. Thank you very much. And Dave, over to you. Thank you.

Thank you, Pascal. I plan to update on the performance of our oncology business before handing it over to Ruud, who'll give an update on the biopharmaceuticals and emerging markets. We're pleased to report strong total revenue growth of 15% for the oncology business to $6.4 billion for the half. And despite continued pandemic headwinds, which albeit they're easing over the quarter, our new oncology medicines grew at 24%. We continue to see a compression in our mature oncology brands of 23%. We'll go on to highlight some of the drivers over the next few slides. Please turn to slide 11. Starting with our lung cancer franchise, we're pleased to report that both Tigrisso and Infinsi showed strong growth for the first half of the year at 17 and 18% respectively, with revenue of $2.5 and $1.2 billion respectively. Tegresso continues its global rollout. Over the quarter, Tegresso was approved in both the EU and China for the adjuvant treatment of patients with early-stage EGFR-mutated lung cancer. In Europe, Tegresso is now the standard of care in the frontline setting in Germany, France, Italy, Spain, and the UK, which is reflected in the total revenue for the quarter, which was up 34%. In China, the approval of Tegresso in the adjuvant setting marks the third approved indication for Tegresso in China. Total revenue in China saw an 11% increase in the quarter, where product sales recovered to pre-NRDL price cut levels, and in the U.S., the growth rate has increased in the half to 18% as diagnosis rates have started to recover. Infanzia grew by 18% in the half, despite lung cancer diagnoses remaining below pre-COVID levels. Predominantly, we see this in the U.S. Europe increased by 23% to $227 million, reflecting a growth in the number of reimbursements. Infinsi sales footprint in the emerging markets continued to grow by 99% to $133 million as diagnosis rates for lung cancer improved further. During the quarter, we announced the Poseidon phase three trial results, which showed a combination of Infinsi and Tremolumab with chemotherapy at statistically significant overall survival benefit for first-line stage four non-small cell lung cancer. We continue to evaluate Infinsi combinations and its possible applications. More on that in our clinical trials appendix. Please turn to slide 12. On Lymparza. Lymparza sales have continued their upward trajectory, increasing by 34% to $1.1 billion for the first half of the year. Lymparza remains the class leading PARP inhibitor within all key tumor types. U.S. sales were up 29% driven by use in ovarian and prostate cancer treatments. Europe was up 38% with growth in first line ovarian cancer and in prostate cancer. and emerging markets increased by 50% due to the expanded indications on the NRDL list as well as ovarian cancer. There's been significant momentum in homologous for combination deficiency testing. This test can provide crucial diagnostic information, including BRCA mutation status, which can be used to personalize the treatment options for patients with newly diagnosed advanced ovarian cancer. HRD testing has increased in the US, Europe, and Japan, which has meant more patients have benefited from personalized treatment with Limparsa. Please turn to slide 13. On to some of our newer medicines. Calquence and chronic lymphocytic leukemia, and in HER2 and third line, HER2 positive metastatic breast cancer. Calquence continues to make strong progress with total revenue of $490 million for the first half of the year. Sales in the US continue to grow, making up 91% of total sales and Calquence is now making good headway in Europe, particularly in Germany, the UK and France with sales of $32 million for the half driven by CLL. Calquence has received regulatory approvals for this indication in 61 countries and 28 countries for the treatment of patients with relapsed refractory mantle cell lymphoma. Now moving on to INHER2, which is the number one medicine prescribed for the third line HER2-positive breast cancer in the United States, we are pleased to report $89 million total revenue in the half. U.S. in-market sales recorded by Daiichi Sankyo amounted to $161 million. earlier in the year and HER2 was approved in the U.S. for the treatment of adult patients with locally advanced or metastatic HER2-positive gastric or GEJ adenocarcinoma who've received a prior trastuzumab-based regimen. The approval by the Food and Drug Administration was based on the positive results from the randomized Destiny Gastric 01 Phase 2 trial, and this has meant a small uptake in the U.S. patients with gastric cancer, which currently has a high unmet need in the second line setting. I'll now turn it over to Ruud for an update on our biopharmaceuticals business and emerging markets. Please turn to slide 14.

Many thanks, Dave. Today I'm pleased to talk to you about the biopharmaceutical business. Total revenue of biopharma comprising new cardiovascular renal metabolism, or CVRM, and respiratory immunology, or RNI, was $5.7 billion in the first half of the year, growing at 11%. Total revenue was 2.7 billion for new CVRM and 3 billion dollars for RNA. Highlights include strong performance from Fasiga which is outpacing the market in most countries and it is the fastest growing SDLT2 inhibitor globally. This growth is part due to the research that has evolved Fasiga from a diabetes therapy into an important highly effective treatment against heart failure and chronic kidney disease. Our respiratory medicines also saw continuous sales revenue growth in the period, with Fasenra growing by 32%, helped by the MELTEMI data showing long-term safety among patients with severe asthma. Antecipelumab, a potential first-in-class human monoclonal antibody that blocks the action of TSLP, received priority review in the United States. In respiratory, syncytional virus, which is a common contagious virus that infects the respiratory tract, causing millions of hospitalizations globally while working to maximize preventative measures. This starts with the ex-US commercial rides to Synergis, which were returned to AstraZeneca following the expiration of our distribution agreement with AbbVie. Over the period, we announced the Medli Phase 2, Phase 3 trial, which demonstrated near Zevimab's similar safety and tolerability profile when compared to Synergis. We hope this exciting trial data will change the prevention landscape, not only by providing protection to a broad population of infants across the full respiratory syncytial virus season, but also by achieving this with a single dose. And finally, during the period, we presented post-hoc analyses from the TULIP Phase III clinical trials at the annual European Congress of Rheumatologists, which showed a nephronomab was consistently associated with improvements in both skin rash and arthritis across three different disease measures, each compared to placebo in patients with moderate to severe SLE. SLE has over 300,000 patients across the top eight countries in the world, of which 42% are in the United States. We are really excited about anaphylumab's potential in this difficult to treat disease where there remains a high medical need for patients living with SLE. Launch preparedness is underway in anticipation of an FDA regulatory decision in the coming months. Please turn to slide 15. Starting with new CVRM, revenue was up by 16%, with total revenue at $2.7 billion for the first half. Worth highlighting, Farcega's continuous growth across all regions. The biggest growth region was emerging markets where Fasiga increased by 77%, primarily driven by the medicines inclusion on the NRDL in China. European growth was 51% in the first half of the year, led by Germany. This acceleration can be attributed to use in heart failure with reduced ejection fraction and recent approvals for Fasiga in chronic kidney disease. from the US in May and a recommendation for approval in the EU by CHMP in June. Moving on to Berlinda, total revenue was $749 million for the half, representing a decrease of 15%. Emerging market sales declined by 40%, which can be attributed to the global pandemic as market growth has stagnated, as well as the impact from volume-based procurement in China. We have seen signs of Recovery in the United States, with revenue growth of 2%. The diabetes medicines on Glycerin and Bidurin continue to see compressions within the market. Please turn to slide 16. Moving on to R&I, which delivered revenue of $3 billion over the half. Total revenue was up by 6% year-on-year, driven by strong growth performance from Fresenra, which I will go into more detail on the next slide. Symbicord product sales amounted to $1.4 billion in the half, which represented a decrease of 9%. Symbicord remains the global market volume and value leader within the ICS LABA class. The global brand growth, which while slowed, including the US, due to less contribution from COVID-related volume and increased utilization of the fixed-dose triple combination products, outperformed the class and maintained branded market leadership. Pulmicord product sales amounted to $497 million in the half, which represented a slight decrease of 2%. The biggest challenge was in emerging markets, where competition in China from generics continued to erode sales. Please turn to slide 17. Following now on our newer medicines. Fasenra product sales increased by 32% in the half to $580 million. The impressive performance reflected increased demand and the start of a recovery, particularly in the United States. Facenra remained the leading novel biologic in most European markets and Japan in patients with severe uncontrolled asthma. We see a significant opportunity to grow biopenetration in severe asthma. While Facenra remains the choice for eosinophilic patients, only 50% of patients who are eligible for a biologic are prescribed one. Our close triple for COPD breast-free has gained significant momentum and doubled sales in the second quarter, driven primarily by the continued launch progress in the United States and China. Over the quarter, the U.S. saw a strong acceleration in market share, resulting in product sales of $31 million. In addition, following breast-free's inclusion on the NRDL, China's sales were $17 million. As we look to kidney disease, Loquelma's total revenue amounted to $72 million in the half. Sales in the United States increased to $49 million, reflecting the growth in the potassium binder class. Loquelma continues to have a leading market share of prescriptions in new patients. Sales in Japan increased to $15 million and a half despite re-ethankey, a regulation that restricts prescriptions to two weeks' supply in the first year of launch. The restriction, however, lifted in June 2021 and no longer applies. During the period, expansion in Europe continued with several reimbursement decisions secured and launches in both Spain and Germany. Sales amounted to $5 million. Clearly a mixed quarter for Roxy Duestad. The medicine achieved strong global total revenue in emerging markets over the first half of the year with product sales of $90 million. Conversely, the advisory committee on the 15th of July was disappointed and we are awaiting the regulatory decision in the second half of 2021. Please turn to slide 18. In emerging markets where revenue grew by 21% for the first half of the year, We are continuing to track ahead of our long-term performance ambition, which is to grow sales on average by mid to a high single-digit percentage. Outside China, total revenue was up by 36%, with growth spread across the regions, notably Middle East, Africa, and Latam, which grew 73% and 48% respectively. This reflected increased sales of Decreaser and Limpars in Oncology, Farsiga in CVRM, and the benefit from the sales of the COVID-19 vaccine for pandemic use. China delivered resilient growth at 11%, as mentioned by Dave. This was driven by Tecriso's inclusion on the NRDR in March, as well as Limpaza's sales. Puma Quartz saw a recovery in year-on-year growth when compared with 2020, which saw a decline in nebulization room visitations. The performance was, however, partly offset by the decline of Berlinta, which was adversely impacted by the implementation of Chinese VVP program. New medicines represent now 35% of total revenue for the region. With this, I will hand over to Mark.

Thank you, Ruud, and hello, everyone. I'm pleased to start my presentation by doing a short recap of Alexion's first half and second quarter sales performance. Please note that this performance relates to the period before the transaction closed on July 21st and therefore does not form part of AstraZeneca's first half performance. We are very pleased that the transaction closed within the timeframe set out back in December last year and we're looking forward to expanding the AstraZeneca family to now also include our new colleagues at Alexion. Alexion revenues increased by 15% in the first half with a sales growth of 18% in the second quarter, showing good performance across the portfolio. Alexion C5 franchise grew by 13% in the first half of 21, and Alexion recently also announced positive phase three headline results for Ultomeris in adults with myasthenia gravis, opening new opportunities outside of the already approved indication of PNH, and Atypical HUS. From a financial perspective, we will consolidate election financial statements from July 21st. Going forward, in addition to our previous disease area, we will have a new one called rare disease, where we will report the election sales. Please turn to slide 20. I will now take you through our AstraZeneca financial performance in the first half of 2021. As a reminder, this would exclude any contribution from elections as elections are only consolidated from the time of closing. Please turn to slide 21. As usual, I will start with the reported P&L. Total revenues grew by 18% at constant exchange rates This number includes $1.2 billion of revenue from the COVID-19 vaccine for pandemic use. Excluding this impact, total revenue grew by 9% in the first half. Please turn to slide 22. Turning now to the core P&L, the core gross margin ratio was 73.8% in the first half, negatively impacted by sales of the not-for-profit COVID-19 vaccine for pandemic use. Excluding the vaccine, the core gross margin ratio was somewhat lower in the first half of 2021 compared to the same period last year. This was in line with our expectation and something we highlighted at quarter one results earlier this year, with pressure coming both from the recent NRDL and VBP updates in China and a higher profit share for more medicine under collaboration, including Limpaza and Roxadustat. Core R&D costs increased by 21% in the first half. This number includes costs for the COVID-19 vaccine for pandemic use, which is anticipated to be neutral to earnings over time. R&D costs, excluding costs for Our COVID-19 initiative increased by a low teens percentage in the first half of 2021 as we continue to invest for future growth. Co-raised GNA costs increased by 7% in the half. This included costs for the COVID-19 vaccine for pandemic use, but also new product launches across our portfolio. We continue to see operating leverage, and if you exclude the COVID-19 vaccine for pandemic use, our core profit margin increased in line with our commitment to further increase profitability. Core EPS of $2.53 include negative 4 cents from the COVID-19 vaccine for pandemic use. Although we expect a neutral impact on EPS over time from the pandemic vaccine, There will be some quarterly fluctuations. Please turn to slide 23. The graph on the left hand side show the mix of our cooperating profit with contribution from collaboration revenue and other operating income split out. We only saw a small contribution from other operating income this quarter, and most of the cooperating profit came from the underlying sustainable business. We continue to expect that collaboration revenue will increase over time and that we will see some divestment also in the future as we will still have some peripheral medicine that could be attractive to other companies. However, as a percentage of total revenue, divestments are expected to decline over time. Net debt remained largely unchanged in the first half. Reported EBITDA grew by 14% in the first half to $4.6 billion, driven by a higher reported operating profit. Working capital continues to benefit from a COVID-19 initiative, but this benefit will reverse in due course. After the closure of the transaction on July 21st, we have paid former Alexion shareholders the cash component of the transaction consideration totaling $13.3 billion, with most funds raised via a bond offering earlier this year. As mentioned previously, Alexion will now not only provide an important in-road in the attractive rare disease area, but will also further strengthen our cash flow profile. Please turn to slide 24. This slide summarizes Our financial journey with good top line growth, which is anticipated to accelerate in the second half of the year. The ratio of cooperating expenses to total revenue declined by three percentage points in the first half compared to the same period last year. If excluding the vaccine, we also saw an improvement in our cooperating profit margin in line with our commitment to show operating leverage. As I just mentioned, our cash flow profile has also improved and will be further strengthened by Alexion. Our capital allocation priorities remain unchanged and we will continue to invest in the business, including new technologies, to push science further and continue our growth trajectory. Our commitments to raise the dividend remain unchanged. Please turn to slide 25. Today we have issued new guidance for 2021 following the closure of the election transaction. As usual, our guidance is at constant exchange rates. Total revenue is now anticipated to grow by a low 20s percentage. Core EPS is expected to grow faster, with core EPS between $5.05 and $5.40 anticipated. EPS guidance is based on the weighted number of shares across the full year 2021, including new shares issued post the election acquisition. Thank you for listening. And with that, I will now hand over to Mene.

Please turn to slide 26. Thank you very much, Marc. And hello, everyone. I'll be providing an update on our vaccine efforts and our biopharmaceuticals medicines since the last results call. But first of all, I want to happily recognize our new head of oncology research and development, Susan Galbraith, who I know many of you know very well, who joined us on the senior executive team. I've been lucky enough to work with Susan for over a decade in the IMED. She's a fantastic scientist, a fantastic physician, and I really look forward to working alongside her to advance AstraZeneca's ambition across R&D, both in oncology and biopharm. Please turn to slide 27. We continue in our efforts to make a meaningful difference regarding the ongoing global pandemic. Recent real-world data from the UK and Canada demonstrate that VaxSphere's ability to provide protection against the Delta, Beta, and Gamma variants, and we've now demonstrated protection against severe disease in all currently circulating variants of concern, and the data has recently been published also showing a long lasting immune response out to one year. Finally, real world data has shown that the thrombotic risk remains very rare indeed and the most recent analysis of thrombosis to the thrombocytopenia syndrome after the second dose of our vaccine indicates the rates were observed at background levels and similar to those seen in unvaccinated individuals. Over 300 million doses of the COVID-19 vaccine For pandemic use have been delivered to over 125 countries from our supply chain. As of the end of June, including supply from the Serum Institute of India and other sublicensees in our extended supply chain, more than 700 million doses of the vaccine have now released, saving an enormous number of lives, tens of thousands of lives. Our vaccine has provided the majority of the COVAX volume so far, and we remain committed to support the equitable provision of vaccines worldwide. And more than half of the vaccines supplied through our extended supply network have been released to low and middle income countries. We've also begun work on the next generation of vaccine, which is based on the mutation seen in the beta variant, which has mutated the furthest away from the original strain. With the first patient dosed in our new phase two trial, and we anticipate data from this trial later this year. Please turn to slide 28. Now I'd like to remind you of the incredible journey that Farsega has made since its approval in 2014 for the treatment of type 2 diabetes. As a result of the groundbreaking data in DAPA-HF and DAPA-CKD trials, Farsega has transcended type 2 diabetes to help address both heart failure with reduced ejection fraction and chronic kidney disease, delivering overwhelming benefits to both these patient groups. We're excited for the next phase of development for Fosfiga, and we've had the first patients dosed in our phase two Fosfiga combination trials. The first is looking at Fosfiga in combination with Ibitentan, an endothelin receptor antagonist for the treatment of chronic kidney disease. We believe farcegal will reduce any safety concerns regarding fluid retention and reduced albuminuria, typically seen with endothelial receptor antagonists, whilst enabling zibatantan to provide complementary efficacy on kidney function. The second is a combination with AZD9977, our novel mineral corticoid receptor modulator for the treatment of heart failure in patients with reduced renal function. AZD9977's reduced effect on urinary electrolyte excretion when compared to other MR antagonists should result in a lower risk of hyperkalemia, so you don't have to minimize dose while still providing the benefits on cardiac function. And finally, with the recent positive news in the SGLT2 class, we have increased confidence in the liver trial, which is evaluating the use of Farcega for the treatment of heart failure with preserved ejection fraction. We expect the liver readout to come out early in 2022, a month or so later than originally anticipated, reflecting some of the challenges of experiences with COVID as we look to ensure the safety of all of our trial participants. Please turn to slide 29. In respiratory and immunology, we're looking forward to the pending regulatory decision for anifrolimab in the US ahead of decisions in the EU and Japan. If approved, anafromab will be the first-in-class type 1 interferon antibody and an important step in our journey into the immunology space. Systemic lupus erythematosus erythellae is a painful, devastating disease which affects many organ domains, causing debilitating symptoms. Anafromab works by blocking the activity of interferon type 1 and suppressing the activation of B and T cells that cause the destruction of types of tissues and inflammation that is characteristic in lupus patients. And recent data has shown that this year's EULA Congress illustrates anaphylumab's compelling clinical efficacy in resolving skin rash and arthritis in joints, which are two of the most common manifestations seen in lupus. We believe that anaphylumab could have an important role in the treatment of various interferon-driven diseases. And we have trials planned in cutaneous lupus erythematosus where the symptoms of lupus are localized to the skin, in myositis, the condition that can result in muscle pain and inflammation, and in lupus nephritis, a type of kidney disease caused by systemic lupus erythematosus. Please turn to slide 30. I'll now update you on the progress made in our early to mid-stage pipelines in biopharmaceuticals. Since the last update, as mentioned, we have started the combination trials for Farthiga. During the period, we've also had positive outcome, a positive outcome data in the Medli safety trial for the next generation monoclonal antibody methevimab, which along with the Melody trial and phase two data will form the basis of our regulatory submissions next year. Our T-slip antibody for the treatment of asthma, tezopelimab, received priority review in the US, as well as regulatory submission acceptances from the EU and Japan. and we've also dosed the first patient for our inhaled interleukin-4 receptor alpha antagonist AZD1402 for the treatment of asthma that we presented to you at our biopharmaceuticals event in the first quarter and other important programs that were presented such as our PCSK9 and syncytologonucleotide for the treatment of hyperchlorosidemia and catarotide, our GLP-1 lip dual agonist for the treatment of NASH and diabetic kidney disease are also progressing well. and I look forward to informing you about their progress in due course. Let me now please hand over to Susan and please turn to slide 31.

Thank you so much Manny and hello everyone. I'm very proud and excited to be joining you all today as the new Head of Oncology Research and Development and I'm happy to provide an update on the progress we've made in our oncology pipeline. We demonstrated our scientific leadership at this year's American Society for Clinical Oncology meeting with 21 medicines featured in almost 100 abstracts. We also showcase some of the emerging science in our pipeline. Limpaza became the first targeted medicine to show patient benefit for BRCA mutated high risk early breast cancer with the presentation of the Olympia data in the plenary session. The results themselves bring new hope to patients and they add credence to our strategy of treating cancer earlier where we can aim to cure. We look forward to starting regulatory submissions of the Olympia data shortly. Limpaza is a step closer to providing a chemotherapy-free oral treatment option personalized to patients with a BRCA mutation who are often diagnosed with breast cancer at a relatively early age. We also presented the head-to-head data from Calquence's Elevate RR trial as well as four-year follow-up data from the Elevate TN trial. Both of these trials reinforce our belief in the safety profile and favorable efficacy of Calquence across a broad spectrum of patients with chronic lymphocytic leukemia. and they help position Calquence as a preferred treatment option. Please turn to slide 32. As mentioned earlier by Mark, the recent acquisition of Alexion opens a new strategic chapter for AstraZeneca, the start of rare diseases. It seems appropriate to be showcasing other areas of the business where we're meeting the needs of patients who have uncommon diseases and where we've seen positive developments in the second quarter. Casellago recently received approval in the European Union for the treatment of symptomatic inoperable plexiform neurofibromas in pediatric patients with neurofibromatosis type 1 or NF1. NF1 is a genetic condition caused by spontaneous or inherited mutation in the NF1 gene affecting one in every 3,000 people globally. Plexiform neurofibromas are tumors situated on peripheral nerve sheaths and they can result in motor airway and gastrointestinal dysfunction. as well as pain and visual impairment. Casellago has been shown to reduce the size of these inoperable tumors in children resulting in a reduction of pain and an improvement in quality of life. Orpathis is our first in class highly selective MET inhibitor that was recently approved in China for patients with non-small cell lung cancer with MET exon 14 skipping alterations who progressed after initial treatment. With this approval, Orpathis becomes the only targeted medicine approved for these biomarker selected patients. We have a phase 2 combination program with Orpathis and Tigriso which is due to readout after 2022. Please turn to slide 33. And now for updates and movement across some of the more interesting projects we have in the early to mid-stage pipeline. Our selected PARP inhibitor has now begun phase 1 trials in combination with chemotherapy and we've started a new phase 3 trial in hormone receptor positive metastatic breast cancer with our oral third camisestrant called Serena 6. This innovative trial will use circulating tumor DNA to identify patients who have detectable ESR1 mutations being treated with a combination of aromatase inhibitors and CDK4-6 inhibitors who may benefit from a switch to chemisestrin plus CDK4-6 inhibitors. We believe that we will identify the right patient population in this trial where an all SIRD can make the biggest difference. Progress has been made with our AZD2811, our aurora kinase B inhibitor, now in phase two in solid tumors, as well as AZD0466, our BCL2XL, now in phase one for the treatment of acute leukemia. At ASCO, we also had exciting data in metastatic triple negative breast cancer with NHER2 and infimsi, with the results of the Begonia trial showing the combination's ability to generate a greater duration of response when replacing standard chemotherapy with NHER2. We continue to make progress within HER2 outside of breast cancer with first patient dosed in the destiny gastric O4 phase 3 trial which we expect data beyond 2022. I look forward to updating you on these trials and other movements as we advance our development plans. Please turn to slide 34. I'll end on this slide illustrating upcoming news flow across the company in the next 18 months and I'll focus on news due in the remainder of this year. In oncology, we're expecting early data readout in the first-line prostate cancer setting from Limpaza's PROPEL Phase 3 trial, as well as readout from an HER2 Destiny Breast O3 trial in second-line HER2-positive breast cancer. Other key readouts include Pacific II lung cancer trial and Himalaya liver cancer trial, both for our immuno-oncology medicine in PHMSI. We also plan to start regulatory submissions for Calquence in relapsed refractory chronic lymphocytic leukemia, and as I mentioned earlier for LIMPASA's Olympia data in early breast cancer. In biopharmaceuticals, we will have results from the Phase 3 program for PT27 in asthma and for the PROVENT trial looking at the long-acting antibody combination in pre-exposure prophylaxis setting for COVID-19. As many mentioned earlier, we're also anticipating regulatory decisions for anifrolimab in lupus starting in the US as well as with European and Japanese regulatory decisions for the use of Forsiga in chronic kidney disease. And with that, I'll pass back to Pascal for close for today. Please turn to slide 35.

Thank you, Suzanne. So let me quickly conclude so we can move to your questions. So as you heard today, we saw an accelerating growth in Q2, 18% increase in revenue, 12% if you exclude the vaccine. We had strong growth across all therapy areas and the emerging markets were up 21%. Our operating profit grew by 20% and our EPS grew by 27%. As anticipated, the pipeline news accelerated into the second quarter. And we have a news flow that is anticipated to stay busy in the second half of 2021 and into 2022. On the COVID-19 vaccine for pandemic use, we saw a significant jump in shipments in the second quarter. And as of today, end of July, we have released for supply one billion doses across our network of collaborators around the world. And again, I would like to thank AstraZeneca colleagues and our partners for the hard work making this possible. We closed the election acquisition last week, and we'd like to welcome all our new election colleagues to our company. With election now part of AstraZeneca, we updated the guidance with Hello20's top land growth for the year. So all in all, our performance is strong and it accelerated in the second quarter. We're all on track for a good year this year. Before we move to the Q&A, I'd like to thank Marc Denoyer because it is today his last investors meeting as CFO of AstraZeneca and next time he will be joining us as CEO of Alexion. I've welcomed Aradhana as the new CFO and I would like to thank Mark for his enormous contribution since he joined AstraZeneca several years ago. Without Mark, none of what we've achieved would have been possible. So thank you, Mark. And I look forward to working with you as CEO of Alexion. I'm sure you're going to do great things together with the Alexion team. So with this, we'll move to the question and answer. And the first question is from Louisa Hector at Berenberg. Over to you, Louisa.

Hello, everyone. Thank you for taking my questions. I wanted to start on your capital allocation policy now the deal has closed. Any update on your confidence in a dividend increase and what pace of growth we might expect once that dividend starts growing again? And then on business development, we've seen a lot of activity from you despite the constrained balance sheet, but should we expect any meaningful change in the medium term? or more of the same, you know, and you've just had that collaboration with Regeneron on obesity, more activity along those lines. And second question would be on to Grisso, a strong quarter. So just wanted to check with Dave, no stocking in the US, no loss of patients to patient assistance programs weighing down on sales at all. And then just specifically in Europe, as that reimbursement comes online for the adjuvant, Should we be expecting a little bit of price erosion there? Thank you.

Thank you, Louisa. So maybe, Marc, you want to take the first one about dividend capital allocation, and, Dave, you could take the second one.

Yes. Okay. Thank you, Louisa, for the question. So our capital allocation priorities are not going to change, and basically we are going to continue investing behind our business, as we have done in the past years. We have also a continuing or progressive dividend policy, which means we will maintain the dividend and increase it when we can. And I think the opportunity of renewed profitability at AstraZeneca, but also the integration of Alexion will clearly increase our capacity to increase the dividend in years to come. Regarding your other question on business development, we have done several business development along the years, and I think it's the same answer as for the dividend. We have renewed the financial capability to perform business development deals.

Thanks, Mark. David? Thanks for the question. If I start just first with the US, the US sequential growth and growth over the previous year is almost exclusively demand driven. There are some gross to net adjustments and we have those quarter to quarter, but I would say that what we're seeing is growth that's being driven off of demand both from adjuvant as well as seeing some recovery in diagnosis rates. Although we're not back to pre-COVID levels, we have seen that improve within lung cancer. In Europe, on your specific question related to Adora, I mean, the outstanding aspect about ADORA, in addition to the patient benefit, is that the economic value proposition associated with moving into the earlier settings actually improves. And so while there is obviously some need for marginal negotiation on price, our stance on ADORA is really one that we believe that the value is confirmed, if not emboldened. And that's really the approach that we'll take. And depending upon the market that we're in, we'll have to manage the negotiations. But we don't expect value to be eroded too dramatically based upon that. I think the last thing, you didn't ask specifically about it, but I would just say within Tigris, obviously China's important as well. We alluded to it in the comments. I'm quite pleased that volume growth following NRDL on the front line has been Pretty robust. Obviously, we took a healthy price reduction, so we've got a lot to compensate. There is some inventory that factors into some of the China numbers, and you sort of see that as you transition out of NRDL. But again, I think we're seeing, in general, good demand numbers across the brand.

Thanks. Thanks, Dave. On the dividend question, Lisa, you understand we can't be very specific because it's a bold decision, and our focus has been on closing this transaction and focusing on execution of our plans for this year. But at some point, the board will suddenly look at dividend, as Mark said, and make a decision. But it's too early to be too specific. The next question is from Tim Anderson. Tim, over to you.

Thank you. A couple of questions, please. On CalQuids, in the U.S., it's doing very, very well. At this point, pretty much all the sales seem to be coming from the U.S. So what can we expect the uptake will look like in ex-US major geographies. Can we expect the same robust level of market share gains over time? And then if you could touch on China as well for that product. And then a second question about China, kind of a higher level question. It's been viewed as an asset for AstraZeneca because your presence is so high there and it's been a nice growth geography. But, you know, it's quite palpable the advancement of lots of local biopharma companies crowding into lots of different therapeutic areas. So the question is, how confident is Astra that it can stay ahead of competitors in China and that this market won't go from being an asset to a liability where the bottom could start to fall out in terms of growth because of local competition?

Thank you, Tim. Maybe, Dave, you could take the Qalqan's question, XUS. I'll ask Leon to cover the China question. Let me just make a general comment on this one. Every country in a way is an opportunity and also a problem. Being strong in the US is a great opportunity, but it's also a potential downside if you have massive price degradation in the US. So every country has ups and downs. So China will remain a strength, and Leon will tell you a little bit more about the changes there. But of course, there are challenges. The market in China is not going to be in the future what it was in the past, but we are well served by the strengths and the presence we have there. Over to you, Iskra.

Thanks. So, I mean, Tim, to your point, yes, the first half product sales of nearly half a billion are almost, you know, entirely driven out of the United States. The epidemiology and the incidence of CLL is different than it is for some of the solid tumors that we're playing in. And so it is really more of a Western world or Western-like populations where the opportunity resides. And so that means that Europe, Canada, Australia, these are some actually very important markets as we take a look at where the growth is going to come from. We have already gotten under good, strong watch trajectories underway in Germany, the UK, and France, and we're seeing good reception to Calquence. In terms of our ambition and our goal, we certainly would like to see parity, new patient starts relative to ibrutinib in those various markets. The speed with which we might get there, I think we've gotten there pretty quickly in the U.S. I would acknowledge that we had the opportunity to launch into the relapse refractory mantle cell lymphoma space with Calquence in the U.S. I do think that that gave us opportunity for early use, early experience. with the medicine, which has helped us in CLL. We don't have that same situation, XUS, but this is the reason why I think studies like Elevate RR are so important. It's certainly relevant within the U.S., but it's even more relevant in markets that haven't had experience already with previous indications, and they can see those data sets as reasons to believe in Calquence as the best BTKI.

Thank you, Dave. Leon, do you want to address the China question?

Sure. I think, thank you, Tim, for your question. I think China, AstraZeneca is number one company ahead of all local and multinational competition. And we will try best to stay ahead of local competition. I mean, it's quite a severe competition from local companies, especially on all the different targets. But I think AstraZeneca has already 40 products in the market selling for 30 years. And now we are speeding up our next 10 new assets into the market. And at the same time, we are maximizing Fosica, which is doing quite well, and Roxa, doing also very well. And the whole oncology portfolio, even though hit by price reduction in quarter two, but the volume ramping up is very rapid with our wider coverage. We are also launching C-MAT drug from Hutchison in order to supplement our oncology portfolio. I think along the way, we are also doing some in-licensing deals, BD deals locally, leveraging our commercial presence in China. So, and some deals are maybe not reflecting on the top line, but definitely booking quite a significant service fee in order to sustain our commercial presence within China. So I think within these two, three years, maybe we are getting to VVP, which is quite a challenge. But I think AstraZeneca has the capability of multiple channel selling. and bypassing hospital channel in the retail pharmacy and we are able to slow down the decline on the VVP tender loss and at the same time ramping up NRDL new entry and launching new indication like Infinsi, Caspian we get approval in quarter two and also Aduro we also get from Tegreso so we are getting and also Profound from Limpaza. We're getting quite a lot of recent exciting approval in order to speed up our penetration of oncology. I think we have some fast horse to ride and having some declining horses as well. So I think it's a balance. But I think with our commercial capability, we will definitely make sure that we can stabilize and continue growing.

Thank you.

Thanks Leon. So just Tim, the growth rate in China for sure in the future will not be what we have experienced in the past, but we still believe we can maintain our position and continue to grow at a slower pace, of course. And Jo, Jo Walton, do you want to ask the next question?

Thank you. One's a follow-on on China and then a second one on vaccines. So I wonder if you could just help us on the timing for the implementation of VBP5 and whether you think that this is going to be you know even more aggressive in the sense of everyone now knows how to implement these will we see implementation both in terms of lowering sales and the recovery in terms of additional sales that you can get from a lower price from that VBP and on the same theme with Roxa in China Your profit share is still very minimal. It's way, way lower than the sales that you're talking about. Wondered whether that Roxxor in China will ever be an important product. My second question would be on vaccines. You're doing a lot of work on the variants. I wonder if you could update us on the timing of when the relationship could move to for-profit from not-for-profit and your appetite for getting vaccines Thank you, Jo.

So on the vaccine front, let me just cover the price question or the post-pandemic question, and maybe you could cover the work done on the variants. And then we could return to Leon for the VBP5 question in China. On the post-pandemic question, Jo, the We're still very focused on delivering our pandemic orders. And so the conditions, the pricing of these orders will remain the same because those orders were taken some time ago and still have quite a bit of orders to deliver. But of course, we can't remain at no profit forever. We will have made a huge contribution to global health by delivering so far 1 billion doses. And by the end of the year, we believe more than 2 billion. But we are going to move to an affordable pricing structure with some profit, never a huge profit, but affordable pricing. And that will be for future orders. But for now, we are actually focused on delivering the orders we took in the pandemic period. So with that, Mene, do you want to cover the work we do on the variants and then hand over to Leon for the VBP questions?

Sure, very quickly, just the studies, we're running some phase two, three studies, which will be appropriate for updates of our next-gen variant vaccine, which will cover all variants of concern and just give hopefully a broader immune response. And we're doing that both in people that have already been vaccinated as well as in people that are naive. Data readouts will happen during the course of the rest of the year. with filings also hopefully starting sometime towards the end of the year across the regions that we want to file.

Thanks, Danny. Leon? Yeah. The timing of VBP batch 5, I think also have some products included. And I think we lost the tenders.

So we will get a 30% price cut.

And I think when we look at the volume, it's a volume-based procurement, right? So when we look at the volume, most of the volume is actually 50% to 60% of our current sales. So means 70% of that 50, 60% will be on a volume-based procurement. And then leaving only 30% of that 50, 60% for us to compete in the last several months of the tender. But leading a wider space of 30, 40, even 50% of different volumes that we can freely compete. So I think it is winning or not winning, it doesn't matter too much. But I think losing tender, we also need to really maximize our loyal user and slowing down the decline of sales. So, of course, we can no longer grow, but I think we're definitely able to manage the curve. So I think that the VBP6 hasn't been announced yet, but I think it will also be coming sometime late this year or early next year. And the Roxy in China is going to remain a very important brand because it is being promoted in the same team with Lokelma and is a Class I new drug. So government is very proud of having this Class 1 new drug approved in Beijing and developed in Beijing and formulated in Beijing. And also first launched in China and then afterwards Japan and Korea and all the other countries. So I think it will remain an important brand and growing quite nicely in the NDD, both NDD and DD indication, quarter by quarter. So I think it will remain an important brand. And of course, we will make a good profit in the long run.

Thank you, Leon. Richard? Richard Park?

Hi, thanks for taking the questions. Hopefully you can hear me okay. Just two questions. Firstly, on 2022, and I'm not asking you to give guidance because I know you won't, but obviously you face headwinds from China VBP, which is more than a billion dollars exposed that may be A bit more difficult to defend than historically our experience with Crestor. So do you think you can still deliver double digit overall group pro forma growth in 2022 despite that headwind? Obviously that's got guidance out to 2025. I think consensus is looking for 12% pro forma revenue growth in sales of 42 billion. So just broadly, are you comfortable with that? Then, secondly, on Roxodustat, following the FDA advisory panel, I just wondered if you could talk about what opportunities you see to convince the FDA that those safety issues can be addressed with your lower starting dose and post-marketing data and how you might be adapting that based on the panel's feedback on what delay might result in a worse case. Thanks very much.

Thanks, Richard. So in 2022, you rightly said that we can't give a guidance even though you asked for one. We cannot give a guidance for 2022. We'll do that at the beginning of next year like we always do. And, you know, there's always ups and downs in any plan. So we have, of course, downward pressures, but we also have products doing quite well. and overall, yeah, it's hard to comment today. We have to wait for the early next year guidance. We'll give Roxa a minute. Do you want to cover this one?

Yeah, sure. I'll just say I think obviously we're very disappointed in the way the outcome went. I think it's a little bit too soon to tell what the implications are. We need to have our interactions with the FDA, look at what they're thinking versus what we're thinking, and then once we have those meetings, we can give you I think more clarity on direction of tabloid right now. It's still a bit too soon and we haven't had those meetings yet.

Thanks, my name. Okay. Go ahead.

Good afternoon and thank you, Pascal, for taking my questions. Do please, if I may, The first one is on your vaccines business. And I think Ruud's been quoted on the press this morning as saying that you are exploring options for the future of this business and will come to a decision by the end of the year. And I was wondering if you might want to add more color to that comment. Is this about Astra continuing to be a vaccines player or is this about Astra potentially separating the COVID-19 vaccines business. So just any color there would be helpful. And then separately, your revenue guidance for the full year now, low 20s percentage points growth from kind of low teens. If you assume that's an incremental 10 percentage points of growth, that translates to about $2.6 billion of revenue attributable to the Alexion businesses. for the 21 weeks that you're going to own it for. That $2.6 billion compares to consensus at around $3 billion or so kind of pre the quarter. So just wondering if you might be able to help us kind of bridge that gap between $2.5 and $3 billion on consensus. Thank you.

Thanks, Keo. So the vaccine, I think maybe Ruud was misquoted. We, of course, are going to look at the way forward, but we haven't got any specific timeline for this. We've been so busy working on delivering the orders we've got and working on the new variant options that Manny described a minute ago that suddenly Our priority hasn't been to look at what we're going to do moving forward. Of course, we also wanted to make sure that a successful integration of the Alexion colleagues and all of this has gone very well. And suddenly we'll have to look over the next few months as the direction of travel for immunization business, whether it's vaccine or passive immunization with antibodies. But it's too early to tell you of any timeframe on this. Mark, do you want to cover the guidance question?

Yes, so thank you for this question. So if we look at the AstraZeneca business prior to the election acquisition, you have seen an acceleration from first quarter to second quarter. We see still some acceleration in the second half. Obviously, it depends a lot on the recovery from the COVID crisis, and therefore there are still some uncertainty, but We see further acceleration in the second half of 2021. If we look at the election I've presented earlier on, the numbers, we saw growth rate of 15% for the first half. But I may need to add that this growth rate may have been flattered by the absence of Andexa in the reference period of 2020. because the acquisition of Portola was done I believe in July of 2020. And then also on the C5 franchise which was impacted by COVID in the first half of 2020, I think we need to take this sort of a lower base I would say of comparison in the first half of 2020. All this to say that although Alexio is going to continue growing in the second half, they are not going to grow at the 15% rate. And therefore, there will be a slower growth in the second half. If I put this in a larger perspective, I think when we made the announcement, we said that We knew the new company would grow by low double digits through 2025, and this obviously is also valid for 2021. So on a pro forma basis, AstraZeneca PLC will grow low double digits through 2025, including 2021.

Thanks, Mark. So, Kay, I don't think your math with the election business are correct. I mean, it will grow in the second half at a lower rate as it grew for the first half for the reasons Mark explained. But suddenly it will experience a good growth. And I think your calculation for the election business second half is not actually correct. Next question is from Sachin, Bank of America. Go ahead, Sachin.

Hi there. Thanks for my questions. One product pipeline and one on margins for Mark. So first on Limpaza prostate and the upcoming first line data. On the first quarter call, I think it was called out as the biggest single indication, which I guess puts it north of 2 billion. I wonder if you could just comment beyond obviously headline data success, which remains pending, but variables we should focus on within the data that will gate commercial success. and some of our physician feedback points to need for all comers versus the HRR subgroup and then a benefit in prior ADT therapy. So I guess that may be a commercial question for Dave. Second question is on margins in two parts. Firstly, Mark, can you give us any indication for full year gross margin, including the vaccine impact? Full year consensus is at around 76, 77%. So any comments you can make there? And then secondly, I'm going to try and follow on from Richard's question, just big picture, however, on margin improvement into next year. Not looking for a guide, but there's clearly a mantra to invest for growth, and SG&A and R&D growth has been faster than consensus in 1H, both 1Q and 2Q. There is some very high-level investor concern that election accretion may be used to mask underlying operating leverage. So I wanted to just comment as to how you balance investing for growth versus delivering leverage, noting that consensus has about 500 base points of operating margin expansion next year. Thanks.

Thanks Sachin. So the first question, Susan do you want to take this and then maybe Mark could take the second one?

Sure, thanks. So obviously the PROPEL study I think has potential based on the phase two data that we saw in both patients with homologous recombination mutations in the panel of genes that we've already seen for profound all those in the all comers and we saw that in both groups in the phase two study that led into this. Obviously that is an element that we'll be looking at in the results as they come out from Propel. In terms of benefit in prior ADT, obviously the data we've already got shows that we do have activity with this mechanism of action with PARP inhibition in patients that have had prior ADT. So you would expect that to continue and in fact the combination of PARP inhibition plus androgen receptor inhibition is something that helps to overcome the emergence of resistance to androgen receptor inhibition. So again, we look forward to seeing the results. We'll obviously have to look at that profile in the different populations. It's a stratification factor in the trial, but we're well powered within that trial and we're looking forward to the results.

Thank you, Suzanne Mark. Yes, so Sachin, thank you for the question. Let me start first of all with the gross margin. So on the gross margin, we have three negative impacts. The first one, as you mentioned, is clearly the largest. This is the dilution from the vaccine. Gross margin, this is clearly the biggest negative contributor. The other negative impacts are the and Oxalustat. And the third negative impact is on the pricing situation in China, both from the VBP and the NRDL perspective. So these are clearly the negative factors. On the other side, the positive, there is a gradual Thank you very much. The margin expansion, I think you have seen for the results of the second quarter that we have good operating leverage. The intention of the company is to continue working on that operating leverage as we have been doing for the last three years. To the question whether Alexion is going to mask, The margin expansion, I don't think it's going to mask. I think it's going to be a potentiator of a greater margin expansion in the following years to come.

I think, thanks Marc. I think Sachin was also, I suspect, suggesting that our margin expansion will be driven by Alexion and not so much our underlying business. And the answer is that we certainly expect expansion of margin from the AZ business. And as Mark said, Alexion will add to this. But we will definitely continue to be an investor in R&D. There's no question about this. Andrew Bohm at Citi. Andrew, do you want to ask your question? Thank you.

A couple. So first one to Dave. Historically, we're unaccustomed to rebating for oncology in the U.S. It's somewhat of a novelty. I know ESI has contracted with Imbruvica, which has adversely affected Calquence. EQRX is coming with Alminersnid, then numerous other fast followers in various categories with oncology. More broadly, how do you think about the future of oncology rebating in the current environment going forward? That's the first question. And then the second question is to Mark in his new role at Rare Diseases. When Pascal spoke to the transaction earlier on, he highlighted the opportunities for the Alexion business in China where Soliris is approved. I think it's also on the MDRL. It looks like the Chinese authorities have followed similar patterns of legislation as they did with oncology to open up the market. But obviously, this is a complex disease given patients don't see that many patients and they're scattered. So how real and how quickly do you think you can take advantage of some of the openings that the Chinese government has put into place to allow this market to build? Thank you.

Pascal, would you like me to take the first question? Yes, please.

If you want to go, Dave, and then Marc could take the second one. And maybe also Leon could add to the Chinese view. Go ahead, Dave.

So, Andrew, you're right that historically rebating has not been the same magnitude of lever in oncology that it is perhaps in other therapeutic areas. That's particularly true in areas where you're first and best and indeed perhaps only in class as competition increases. We are seeing that rebating is beginning to play more of a role, though again, certainly much less than what we see in other therapeutic areas. The clinical value and recognizing that oncology does remain very much a evidence-based and clinical efficacy set of decisions. With that said, I think one of the things that we've talked about in the past is that certainly if you take a look at the US, we have already said quite a long time ago that we don't expect price increases to generate any growth within the US. I would also say that we also expect that gross to net will probably need to increase relative to where it is today over time just in response to U.S. pricing pressures. And so I think that the macro observation that you're making is an accurate one, and I think that the reason that having innovative and really advanced clinical development plans and lifecycle management strategies is to do the best that we can to stay ahead of that.

Thanks, Dave. Mark? Let's give me a stab at the rare disease in China. So for sure, I think there are three elements. First of all, the legislation and the condition for reimbursement in China is not as advanced as it has been in many other developed economies. So the market itself of rare disease in China is still very small, but there is a growing recognition of the authorities to the rare disease. And they have drafted some years ago a list of 121 specific rare disease on which they are focusing their attention. So I think the question is at what speed will this take place? We were all surprised by the speed at which the oncology market grew in China. And even if we don't expect the rare disease to grow at the same speed, it is The speed at which the rare disease grows in China is going to be faster than any other market of the world. So we want to be well positioned to prepare our new products, our innovation for the rare disease. for the time when it really kicks up in China. So we want to be prepared. It may take a bit longer than it has taken in oncology, but it will certainly one day or the other become an important market due to the size of the population. Thanks, Marc.

Leon, anything you want to add? Yeah, sure, sure. I think the first priority for us in China for the Alexane portfolio is doing regulatory approval. I think speed up regulatory approval and waiving studies and including the disease into the list of disease, rare disease, is the first priority. And I think secondly, I think we also will spend efforts on Hainan Island and the Great Bay Area. So whatever rare disease products in Hong Kong can be soon listed and sold in the Guangdong province, which is the largest selling province in China. So I think this might be the second one. Third one is whenever we have a chance to launch a rare disease portfolio in China. So I think in the first place, without NIDL, we will focus on the patient support program and also commercial insurance. So it was still at the beginning largely dependent on the coastal rich province to include a rare disease in their commercial insurance scheme like what we are doing today with Infinzi. And I think and also providing patient support program for those province that do not have a patient support program, do not have a commercial insurance coverage. But ultimately, I think we will be working on market shaping, helping the China authority to stipulate a guidance on how these rare diseases can be included into an idea at a reasonably good price.

Thanks. Thanks, Leon. Mark Bursell at Morgan Stanley. Mark, do you want to ask your question?

Thank you, Pascal. I have two as well. Firstly, going back to the Limpaza and the Propel question. David, I wondered if you could help us understand the kind of commercial potential of the two scenarios, a positive result in the HR mutation population versus all comers. And then on the R&D side, Susan, if you could help us understand, you know, given the LOE of lymphoma around 2027, what the R&D implications are for your type 1 selective PARP based on those two different outcomes, a sort of bigger all comer opportunity perhaps in combination with chemo. and then secondly for Camazestrin, the Serena 2 trial, it looks like on clindriles.gov that has moved forward in terms of primary completion from March next year to November this year. So I wondered if you could confirm that and when we look at the trial design, 236 patients, three different doses versus Fasadex, it's down as a Phase 2 trial but is this trial filable and what would you have to show versus Fasadex to be able to file?

Do you want to start and then Susan? Happy to. So I think this builds off of some of the commentary that Susan gave earlier on a similar line of questioning. So Propel does represent a multi-blockbuster opportunity. In order for that to be realized, we really do need to see benefit outside of the HRM and even HRD populations in order to get to that full realization. It is a significant patient population, obviously, that would get opened up if we're able to do that. And I do think one of the things that's also an important factor that I think we need to think about and kind of gets a bit to the question that was posed by Sachin is that to also remember that Urologists play an important role in treating these patients. And so that's going to be something that if we're successful in an all commerce population, we're going to need to really make sure that we work with that group of treaters in order to be able to drive education and difference there. There is benefit if it's just in a limited subset population by obviously moving into an earlier setting than what we have with the profound study. That would also likely lead to longer durations of therapy, but it will be a much less of an opportunity than if we have the all comers in hand.

Okay, thanks. And on the question on the part one selective, I do agree that in general, the tolerability profile that we've seen preclinically with this compound gives us optimism that we can combine with chemotherapy, which is something that other potent PARP trappers, which this is, have not been able to do at full doses. And so that could open up potentially broader patient populations than you see with the currently available potent PARP trapping compounds. In particular, I think, There's rationale to think that you could combine this with some of the ADCs, for example, as well as other standard of care chemotherapies. In terms of the question about camisestrant, you're referring to the Serena 2 study, which is a randomized phase 2 study looking at different doses of camisestrant versus fulvestrant. I just reflect that the accrual on all of the Serena studies is going very well, which just demonstrates the interest that there is in this class of agents and in this molecule and in the profile. Obviously, readout dates are dependent on event rates, and those are constantly updated depending on what we see.

I think the question, Suzanne, was about the potential for filing the Phase II data. Yeah, yeah.

It's a randomized phase two study. It's not designed for registration or filing, but I do think it's important in terms of understanding the safety and efficacy profile at the different doses and the confidence for moving into early phase studies.

Thank you. Thanks, Suzanne. Simon Becker, Simon, over to you.

Thanks, Pascal. Two questions, if I may, please. Firstly, on to Griso. Dave, I noticed that as well as adding seven countries for reimbursement in adjuvant, you've also added three in first line. I just want you to give us a bit of colour on the countries in both buckets which have been added and where that stands in terms of the addressable patient population versus the 67 in second line. and then a question on China, Fablia I suspect. What are your thoughts on the impact to AstraZeneca of the implementation of the fourth patent law in early June? It imports a few of the hatch waxman type characteristics of the US system in terms of stays of approval and exclusivity. So I'd just be interested to see how you think that's going to change the market from your perspective. Thanks so much.

Thank you, Simon. Dave, do you want to take the first one?

Sure. So, Simon, in terms of the expansions that we're seeing in the adjuvant setting, the most significant of those are coming from Europe and also from Europe. and also from obviously the China approval that came through. Frontline, it's Russia, Luxembourg in the UK is where we saw those come through. So I think in the frontline, we're pretty well established as standard of care. You're starting to see that we're picking off some of the last markets, but I am quite pleased that we were really able through lots of hard work and great work by the UK team to really make good progress with DeGrisso. I think it's quite important as we think about competition on the horizon to be able to have a foothold there.

Okay, thanks very much, Dave. Leon, do you want to address the second question?

Yeah, I think the impact of the China recently published patent law I think the impact is long-term positive, but I don't think a short mid-term will bring too many impacts. I think the direction of China patent intellectual property protection is, of course, to protect innovation, but there's a clear cut-off. There's a timeline, right? So when, after which date that certain products are protected. So most of our products actually, are not really covered under this patent law protection. So the positive impact is quite limited for now. But for the future, I think it is always improving.

Great. Thank you. I think that the deadline, not the deadline, but the threshold is June 21. So any patent, it's not retroactive. So as Leon said, it will have no impact on our existing products. But For the future, it will be a substantial improvement. So it shows that China is moving forward and supporting IP and modernizing its IP structure. You have patent term extensions that will be introduced that will add up to five years of protection. So all of those are very positive changes. But as Leon said, they are more for the long term. The next question is James Gordon. James, do you want to go ahead?

Hello, James Gordon, Jason Morgan. Thanks for taking the questions. The first question was about China and EM. We've had quite a lot of questions about China, but one that's maybe a bit more quantitative, as in there's been flags from the BBP headwinds for the second half. But if I look at, I think it's slide 18, there's a comment about growing faster than the mid to high in the medium term or continuing to grow faster than that. So putting it all together, is Astra saying that even though there are some of these headwinds coming up, China can still grow double digit in the second half of this year and into next year and by implication that EM, despite all these concerns, that EM can continue to grow double digits for the rest of this year and into next year. So that's the first question, please. And the second question, Aradhana, very nice to meet you on the call. But can I ask, I know it's early days, but initial priorities and medium term, what are the opportunities and challenges at Astra once you do become CFO?

Thank you, James. Two great questions. Maybe, Aradhana, you can take the second question, which is for you, and then we'll ask Leon to comment on China. We don't give specific guidance by country, but certainly Leon can give you a flavor of what's to come. But to slow our growth in China is no question. We believe we can continue growing and maintain our position of leadership, but it's going to be much more difficult moving forward. Aradhana, over to you.

Sure. Thank you, Pascal, and thank you for the question. You know, I think the priorities remain very much the same. We're definitely committed to, you know, double digit growth for the next several years through 2025. I think also focusing on, you know, productive innovation that can grow us beyond 2025. As you know, we're investing in A lot of different programs and the late and mid-stage pipeline remains very rich. I think also looking at continuing to improve the operating margin and the operating performance as well as sort of managing and evolving our business models and we've seen a lot of questions in China and we need to evolve our models with the times and with the region. So continuing to look at that. But overall, I'm really excited. It's a very exciting time to join the company. I think there's a lot of great stuff happening in the R&D side and now with Alexion and look forward to being a part of the story going forward. Leon.

Thanks. Regarding the growth rate in China, I think it is getting more and more difficult and more and more challenging in China. But I think it is not the first day that we are tackling this challenge. I think we are learning also along the way. And like Pascal put it, I think we will not grow faster than before. But I think we still remain number one solid position in China. And I think the second half of the year, we still have a lot of opportunities. Not only in China, I think we should also pay attention to outside China, even though it shows only growing 7% in Q2, but actually this 7%, if you remove divestment, is actually a growth of 11%. So I think outside China, we are launching also synergies and some developed, more developed countries are launching Calquins and also new oncology portfolios. So we have also Thank you very much. I think we will still be quite confident we can have a good growth, not as good as before, but still can be considered a good low double-digit growth in the second half in China. I don't think we can give guidance on next year, but next year will be batch 6 VBP. We need to bear that in mind. And of course, AstraZeneca is also continuing in licensing new drug, but mainly not booking sales, but booking service fee to support our current team to continue promoting our products, even though in the background of VBP. So we are quite resilient team and quite a good team and quite a large team in China as well. So actually we have enough confidence to cope with this current short and mid-term challenge.

Thank you, Leon. So do we have any more questions, actually? I think we've covered Simon and James' questions. I can't see any more questions. Maybe Nick or Thomas, you could help me if I've missed any question that came separately. Thomas? Can't hear you. We have a question from Emmanuel Papadakis. Emmanuel, do you want to go ahead?

Thank you for squeezing me in. Emmanuel from DB. Maybe I'll take a follow-up since we have Aradhana on the line, and it's been a while since Alexian's held a conference call. There's been a lot of competitive news in the last six months with So just your thoughts on the validity of that $9 to $10 billion 2025 sales target. You've reiterated the pro forma group doing double digit 25 and by implication Alexion, but presumably it should need some adjusting given the developments we've seen in molecules like tex-tacopan and tacopan. So just your thoughts there would be welcome. And then maybe I could just take a follow-up on chlamyzestrin. You haven't Have you announced the initiation of your adjuvant trial yet? Susan, maybe you could just give us your thoughts on whether we should be contemplating you going broadly into an all-commeradjuvant setting as one of your peers has done or taking a more nuanced approach as another has done. And if you could just confirm you do not have any of that CDK4-6 drug-drug interaction we've seen for some of the other molecules in the space, that would also be very helpful. Thank you.

Thanks, Danielle. So the line breaks up a bit. I hope that Mark or Aradhana heard the first question well. I think it was to do with the growth of elections moving forward due to competition. So maybe Mark and Aradhana, both of you could comment. And then the second question is for you, Susan, of course.

Yeah. So let me take a stab at this. So first of all, regarding the growth of the C5 franchise, we see this franchise as durable, but it's not a franchise that is going to stay as it is today. As you indicate, there will be more challenges into this franchise, but what needs to be seen is basically the opportunity for Alexion AstraZeneca to grow into new indications. with the complement biology. And you will have seen recently the positive phase three that Alexion has obtained on Myasthenia gravis for Eltomiris. This is one of the few phase three that are being done to grow the market of Eltomiris and other products and formulation in the complement biology. So there will be competition, but there will be also competition Thank you Marc. Aradhana, anything you want to add? Yeah, the only thing I would add is

The only thing I would add is competition. Again, we always knew that competition would be on the horizon. And I think the strategy had always been around converting to Altamira's and converting and expanding, which is exactly what Mark alluded to. and we haven't given exact conversion numbers since we haven't had a call for a long time but the conversion was very well along on PNH and atypical HUS and the next opportunity will be in GMG and hopefully in NMO but with the study results that we just announced on MG that'll not only help conversion, but also expanding the patient population. So that's on the existing indications. And then we have several phase three trials ongoing with new indications that further expand the market opportunity for the complement franchise.

Thank you. Suzanne, do you want to cover the ? Do you have a question?

Yeah, sure. So thanks for the question, first of all. Of course, there is great potential for this class of molecules to enhance the benefit that is seen from having a really good endocrine backbone treatment in the treatment of early disease. So for sure, we have the ambition to go into early stage. And once we've got those trials that are posted, be happy to share the trial design with you. I can confirm your question about the CDK4-6 interaction that we don't have a PK interaction with CDK4-6 inhibitors.

Thank you, Suzanne. Next question is from Simas Fernandez. Simas, go ahead.

Great. Thanks for the question. So just a couple quick ones for Susan. Susan, can you just give us a little bit of an update on the timing of Destiny 03? Are we still anticipating the outcome sometime in the third quarter? I think it says second half, but I think Daiichi Sankyo had anticipated this as a third quarter result. And can you just confirm that that is an interim look at that study? Previously, Communication had been very enthusiastic heading into this event. Just wanted to see where conviction lies at this point for that study. I think there are high expectations across the street for the prospects of beating Quetzala in that study. So just wanted to get a quick update there. And then separately, as we think about the HFPAF opportunity, I don't know if this question was asked earlier, but We know that the Emperor data are going to be presented at ESC. Just wondering what thoughts are on the opportunity in HEPPAP for the SGLT2 class of agents and how that could further accelerate, you know, use of Farziga, you know, assuming that there's an overall class benefit assumed to that part of the market. Thanks.

Thanks, Seamus. So, Susan, the first one is for you, and then the HFPEF opportunity, Ruud, I think if you want to cover that one, that would be great.

Okay. Thanks, Seamus, for the question. So, of course, the optimism about Destiny Breast 03 is based off the data that we've already shared for Destiny Breast 01. The latest data that was shared was at San Antonio in December 2019. We had a 61% response rate with a duration of response of nearly 15 months and medium PFS of 16 months. And if you look at the data for the Amelia data with trastuzumab DM1, the medium PFS there was around nine months, hence the confidence in the probability of technical success. You are correct that it's an interim look. and the, you know, the exact readout of course is going to be event driven.

Thanks Suzanne. Paul?

Yeah, first of all let me reiterate that we are very pleased of course with the very strong sales progress we are making across all the regions. Clearly we are in the midst of rolling out the current FPEF, preserved ejection fraction, as well as the CKD indication. We are expecting the outcome of our Preserve Ejection Fraction in the course of 2022, in the beginning of 2022. And we are quite optimistic about, based on the fact that a competitive molecule has already shown positive results. Of course, you will never know until you have seen the results. The opportunity is substantial. In this specific HFPAF population, there are not too many approved drugs, and Traster has a as an approval and potentially very soon also a competitive product. But I think we are well placed. And the opportunity in the United States is substantial. There are roughly 6 million heart failure patients. Half of them are in the reduced ejection fraction, but 3 million patients are in the preserved ejection fraction. So in that sense, it's a very substantial opportunity for us in order to treat those patients with a very good drug.

Thank you, Ruud. So we want to be respectful of your time, but there are so many great questions, and I know there's a few more. So we'll take a couple more, and then we'll try to close in about 10 minutes or so. So the next question is Steve Scala. Steve, go ahead. Thank you.

I have three short questions. First, Mark, you mentioned divestments as a percent of revenue to decline over time. The company has said this previously, so are you just repeating what the company has said previously, or is there going to be some new trajectory, particularly given the larger revenue base? Secondly, can you help us create an expectation for the anafrolumab launch post-approval? Is this going to be slow and steady, or could it be quick? The Ben Lista rollout was very protracted. So should we look for something like that or better? And then lastly, Dave, what percentage were oncology visits and or diagnoses down in Q2? Thank you.

Thanks, Dave. So that's the diagnosis. And then Mark, you could take the first question.

So on diagnosis, why don't I baseline this and we'll talk U.S. here to pre-COVID levels. So we talked in the past how on a first quarter, end of fourth quarter, we were 30 to 40 percent below pre-COVID in terms of diagnoses. We have seen a positive trajectory of improvement, but we are still below pre-COVID levels. I would say that we're maybe halfway there. But again, that's pretty dynamic and something we'll need to continue to watch.

Thank you. Regarding the disposal, it is basically a continuation of the policy that we have explained for quite some time. So we said that the disposal, the order income will reduce over time. I think 2021 was a little bit of an unusual year as we had to consider the disposal of Viela. But the trend, the longer trend, the medium-term trend is clearly for a reduction of order income.

Thanks, Marc.

The next question is Naresh. Naresh, go ahead. So, sorry, Pascal. There was one question still about Anafrolimab, if you allow me to. Oh, okay. Sorry. Go ahead. Absolutely. Sorry. So, very quickly, first of all, of course, we need to see the final verdict of the FDA. But the only thing I can tell you about what we are expecting is to do a very good job. We are preparing ourselves for this crucial launch for quite some time. I think we have a very competitive profile, and I'm inclined to say it's a best-in-class profile, and hence we are clearly hoping that the trajectory will be steeper than we have seen 10 years ago with Spanlista. That's clearly the ambition. Thanks, Claude. Marek?

Hi, thanks for taking my question. Just one on election sales synergies, please. Obviously, Lexion doesn't have the geographic reach that AZN does, and you've talked about the Chinese opportunity. But some quantification of the potential sales synergies now the deal is closed would be incredibly helpful in trying to understand the outlook for a Lexion. Thank you.

Mark, do you want to cover this one? Yes. So I think we have provided a quantification of of the growth rate for the new AstraZeneca. And we are confirming it today. We said, you know, we'd continue to grow low double digits through 2025. And when we talked about 2021, including election early on, we confirmed that this low double digit will also apply to 2021. You know, I can only confirm that both companies will grow more or less at the same rate, and that this combination will be, with synergies, a low double digit through 2025.

Thanks, Mark. So we'll take one last question, and the IR team will follow on the remaining questions. So Victor Sundberg. Victor, go ahead.

Yeah, hi, and thank you for taking my question, just one. For your newly acquired business, Alexion, should we expect that you will expand the rare disease business area outside of Alexion's key areas as well, and that you will be building a broader rare disease franchise, either via acquisitions or internal R&D going forward?

Thank you. Marc? So we will obviously try to make Alexion as successful as possible. You know that the rare disease is a very Thank you very much.

Sorry about the remaining questions, but we'll make sure we follow up and address the points you wanted to raise. Just wanted to thank you again for your interest. And in closing comments, just say that you saw we had a very strong Q2. The integration of Alexion is now completed. We're moving forward, and we will be investing in this disease business very much to continue building it. It's going to be our force. The year looks good. We had some questions about guidance. Hopefully we realize that we still are unsure really as to how the pandemic will develop and the second half. I mean, remember last year everybody thought midway through the year that the second half would be much better and then the pandemic came back. I hope it's not going to be the case this time and I don't believe it will be the case because vaccines are making a big impact. But we have to remain cautious for the second half and certainly our guidance reflects this for sure. But overall, you know, you can see that we are delivering a very strong growth and will continue to do so. So again, thank you so much for your interest. And we'll close here. Thank you very much.