AstraZeneca PLC

Thank you, Operator, and welcome, everyone. I'm Andy Barnett, Head of Investor Relations at AstraZeneca, and I'm pleased to welcome you to AstraZeneca's first half 2022 conference call. All materials presented today are available on our website. Slide two has our usual safe harvest statement. We will be making comments on our performance using constant exchange rates or CER, core financial numbers and other non-GAAP measures. A non-gap-to-gap reconciliation is contained within the results announcement. Numbers used are in millions of US dollars and for the first half, unless otherwise stated. Please advance to slide three. This slide shows our agenda for today's call, and in a moment, I'll hand over to our CEO, Pascal Sorio, to begin. Following our prepared remarks, we will open the line for questions. We ask that you limit yourself and limit the number of questions that you have to give everyone a fair opportunity to participate in the Q&A during the allotted time. As a reminder, for those on the phone, please join the queue for questions by pressing star 1 1. With that, please advance to slide 4, and I'll hand over to Pascal.

Thank you, Andy. Hello, everyone, and welcome to this half-year call. So if we move to slide 5, please. We continue to deliver through the first half of 2022, both in terms of commercial performance as well as moving our pipeline forward. Total revenue increased 48% versus prior year to $22.2 billion, and core EPS increased by 44% to $3.61. Given the strength of our underlying business as well as increased demand for COVID-19 medicines, which delivered $2.5 billion of revenue in the first half, we have updated our revenue guidance for the year. We now expect revenue growth for the full year to increase at the low 20s percentage. Guidance on EPS remained unchanged, and we continue to expect a mid to high 20 percentage increase as we continue to invest in our pipelines. We've also confirmed an interim dividend of $0.93, reflecting the Board's intention to increase the dividend to $2.90 for the full year of 2022. Looking across our business, we delivered revenue growth from all these areas, reflecting not only the breadth of our portfolio, but also the depth in each of our respective disease areas. In the first half of the year, we reported several important late-stage data readouts, including fast CIGAR and heart failure, Ultomeris in NMO, and Infinsi in non-small cell lung cancer. And we received significant approvals, enabling commercial launches. Please move to slide six. In order to maintain our ambition for long-term industry-leading growth, we will need to maximize our launches and continue to invest in our great pipeline and our research technologies. First, our pipeline successes have driven increased need to resource commercial launches. With competition increasing in many markets, investing smartly to optimize our launches has never been more important. Spend on market development for medicines like Evusheld is also important if we are to unlock the full potential of this medicine. Based on emerging data, we need to act fast and invest to win with high potential pipeline opportunities. And we have several medicines, as you see here on the second column in this chart, We have several medicines where recent data has pointed to the potential for major clinical advances and sizable commercial opportunities. So we've listed here, as you can see on this chart, the successes we've experienced in the last few months, but also in the middle, the priority assets that we are fully resources for maximum potential. There is a continued need to invest in early discovery research and new technologies to accelerate the rate of pipeline growth. And you can see here a number of those technologies. And in particular, in ADCs, we've made tremendous progress in the last two years. And Suzanne will highlight a little bit more examples of this. In addition to our goal of reducing SG&E spend as percentage of sales over time, in R&D, we have set bold internal targets to drive efficiencies for the use of digital solutions. For example, we have invested in remote data collection for many of our global trials, as well as the use of real-world evidence and data science to optimize trial design to improve the success rate. This improvement will make our trials more efficient, more accessible for patients, and reduce our indirect impact on the climate. We've also worked to internalize clinical operations to drive further efficiencies. A rigorous approach to portfolio prioritization is also being applied, which is enabling the directing of investment being the most promising medicine and the discontinuation of development for others, such as the three that are mentioned here. These decisions are difficult, but given the breadth of our portfolio, are increasingly important. So as you can see here, we are not only investing, but we're also driving productivity improvement very aggressively. Together, these investments will help us deliver our ambition for low double-digit CAGR through 2025 and industry-leading growth thereafter. We want to remain a fast-growing company beyond 2025, and we are confident we have in our hands what it takes to be a growing company until 2030 and hopefully even beyond 2030. At the same time, we remain committed to increasing operating leverage And so despite the need to invest in new launches, our pipeline and technologies will remain focused on improving operating margin. We're confident that this combination of industry-leading growth and operating leverage will drive shareholder value. So please move to slide seven. We look forward to a productive back half of the year, and we have several phase three redarts, including the Emerald One trial of mFINZE in local regional liver cancer. The first phase III readout for CAPIVA-30 in HR-positive HER2-negative breast cancer and the MESINA trial of Fasenra in EOE. And in 2023, we expect more than 20 phase III readouts. The next couple of years are going to be extremely rich in clinical readouts. We are well-positioned to deliver industry-leading growth through 2025 and beyond, as I said. and I look forward to sharing more exciting news as our pipeline progresses. Please advance to the next slide, and I will now hand over to Arana to walk you through our financials in the first half of the year.

Thank you, Pascal, and good afternoon, everyone. As usual, I will start with our reported P&L. Please turn to slide nine. As Pascal has already highlighted, total revenue grew by 48% in the first half benefiting from a full quarter of Alexion sales and higher revenues from COVID-19 medicines. Our collaboration revenue increased to $551 million in the half, partly driven by increased and HER2 sales. As a reminder, Daiichi Sankyo books and HER2 product sales in most Western markets, while we record our share of gross profits in those regions as collaboration revenue. We record our share of the R&D and sales and marketing cost in our P&L. We will, however, book product sales in China upon launch. Our reported gross margin continues to be adversely impacted by the Alexion fair value uplift, which we anticipate to continue for another six months or so until the inventory is sold. Please turn to slide 10. Turning to the core P&L, Our core growth margin increased by six percentage points in the first half to 81.1%, with the second quarter benefiting from the phasing of cost recognition associated with the fulfillment of Vexeveria contracts, as well as favorable currency movements. While quarterly fluctuations of the growth margin may continue, we still expect the ex-COVID-19 group core gross margins this year to be relatively stable compared to pre-COVID levels. Our core operating expenses increased by 33% in the first half, driven by the addition of Alexion, which given timing of the consolidation had no contribution in the first half of 2021. To echo Pascal's comments, the increase in cost also reflects continued investments in R&D, where several positive readouts in the last several months have ungated additional trials. We also recognized a one-off charge of $89 million in the second quarter relating to a discontinued project. The pace of approvals following our pipeline success necessitated investment in new launches, resulting in a 29% increase in SG&A costs in the first half. but again, compared to a 2021 number, which did not include Alexion. SG&A costs during the period also reflect increased investment behind the launch of Evushel, where we're focused on driving end market demand. We continue to work to expand capacity following the recent dosing update. Our core operating margin was 33.1% in the first half and 31.2% in the second quarter benefiting from higher growth margins. On the net income line, we benefited from a lower tax rate in the second quarter, which was driven by favorable adjustments when we filed our 2021 tax return in major jurisdictions. Variations in tax rate between the quarters are expected to continue, but we still anticipate a core tax rate of 18 to 22% for the full year. Second quarter core EPS of $1.72 in the second quarter represents an 89% growth. We saw some FX headwinds following the strengthening of the U.S. dollar in the period, which impacted our revenue by more than $500 million in Q2 alone versus on a CER basis. If rate remains at the level seen at the end of June, we anticipate a mid-single digit adverse FX impact on both total revenue and core EPS for the full year. Please turn to slide 11. Today we are updating our full year guidance. We now anticipate total revenue at constant exchange rates to grow by low to mid 20s percentage, which reflects the strength of the underlying business and an updated outlook for our COVID-19 medicines. We expect COVID-19 revenues broadly flat to 2021 with, of course, a different mix of Bexseveria and Evusheld. We're also updating our guidance for core operating expenses, which are now anticipated to grow by a mid to high teens percentage. This, as Pascal touched upon in his introduction, is mainly driven by additional investment in R&D as we continue to invest in long-term growth including promising medicines such as DataDXT, new launches across the globe, as well as a broader investment in digital and AI capabilities, to name a few. Looking ahead, we expect our R&D expenses in the second half of the year to be broadly consistent with the first half as trials progress. We have had very limited divestments so far this year, and we now anticipate other operating income in the second half to be at similar levels as in the first half of around 200 million. Our 2022 outlook for China and emerging markets remains unchanged. Our core EPS guidance for the full year also remains unchanged with an anticipated growth of mid to high 20s percentage. Beyond the specific guidance, like all other companies, we're also being impacted by the current macroenvironment And we have seen a number of countries reporting high inflation numbers recently, which may ultimately also impact our cost base. You saw that our distribution costs increased by about 32% in the half versus 2021, reflecting not only higher freight rates and inflation, but also higher volumes, including Alexion. Unlike some other industries, we're limited in our ability to pass on cost increases to our customers. Please turn to slide 12. We continue to see improvements in cash flow generation, and in the first half, our net cash inflow from operating activities increased by $1.7 billion to $4.5 billion. In the second quarter, we paid $775 million to Shugai following a legal settlement on Altamaris, and in the first quarter, we paid the first of three payments, $920 million to the former shareholders of Asserta. The two remaining payments of similar amounts will be paid in 2023 and 2024. As we've previously highlighted, that we also anticipate cash flows relating to prior business development transactions, including Daiichi, of just above $1 billion this year. Our current net debt to EBITDA ratio is three and a half times. If adjusting for Alexion fair value inventory adjustment, which does not affect our cash flow, the ratio is 2.1 times. Our capital allocation priorities remain unchanged, and we continue to invest in our business in order to deliver long-term sustainable growth. Consistent with our announcement in February, with an increase in dividend to an annualized $2.90 per share, the board has approved an interim dividend for 2022 of 93 cents to be paid in September. With that, I will hand over to Dave to take you through our oncology performance.

Thank you, Aradhana. Slide 14, please. We're pleased to report that our oncology total revenue grew 22% year-over-year during the first half, underpinned by 18% growth in product sales. We saw double-digit product sales growth for Tigrisso, Infinzi, and Limparsa versus the prior year, and also sequentially in the quarter. as well as very strong continuing momentum for both Calquins and in HER2. Across regions, performance was nicely balanced with the U.S., Europe, emerging markets, and established rest of world each also driving double-digit year-on-year growth. Importantly, we're seeing positive signs of recovery in cancer diagnosis, testing, and treatment rates as COVID-19 case and hospitalization rates improved over the last six months in many countries. For example, in the U.S., advanced breast cancer and ovarian cancer diagnosis rates have returned to pre-COVID baseline levels, and lung cancer has improved to 90% of baseline. Trends we're optimistic will continue. In China, lockdowns in key cities have had an adverse impact on our medicines in the second quarter. Now I'm going to turn to greater detail on each of our key oncology medicines. Tegriso global revenues grew by 14% in the first half. In the U.S., growth was 11%, with Q2 growing at 17%, reflecting increased underlying demand and the normalization of inventory and gross to net impact seen in Q1. In the adjuvant setting, our efforts continue to build momentum. EGFR testing is now standard of care with rates greater than 80%. And importantly, adjuvant drug treatment rates have eclipsed 60% for the first time. With that said, there's still much work to do in terms of market education and driving stage shift to early disease. In emerging markets, revenues grew 17% in the half driven by continued launch momentum especially in LATAM, and significant volume growth in the first-line demand in China. As highlighted last quarter, volume growth in China has fully compensated for the lower NRDL price. On a sequential basis, EM revenues were broadly flat due to the impact of COVID-19 lockdowns in major cities in China. Turning now to Infinsi, global revenues grew 16.5% and 20% in the second quarter, benefiting from recovery and diagnosis and chemoradiation rates in many regions. U.S. performance was robust, with sales growing 15% in the half and 22% in Q2, as we saw an encouraging rebound in the Pacific setting and early spontaneous non-promoted use in biliary tract cancer, where the Topaz-1 data has been added as Category 1 treatment in the NCCN guidelines this month. In Europe, Infinzi growth was up an impressive 29% for the half on strong uptake in small cell lung cancer based on Caspian and increasing use in stage 3 lung following COVID-19 recovery. Across the globe, our teams are busily preparing for anticipated launches of Topaz-1 in Himalaya in liver cancer. For Lymparza, we continue to solidify the brand as the leader in the global PARP inhibitor class, Product sales grew 18%, led by growth in adjuvant breast cancer following the U.S. approval based on the Olympia Phase III trial, and also supported by continued growth in HRD-positive, first-line ovarian cancer, and second-line castration-resistant prostate cancer. Performance was seen across regions, with U.S. sales up 11%, Europe up 20%, and established rest of the world up 27% in the half. Finally, emerging markets grew 32% on expanded patient access in ovarian cancer in China and other EM launches. Turning to hematology, Calquins continues to show excellent momentum with worldwide revenues of 87% versus the first half of 2021. In the U.S., Calquins has crossed 55% share of new BTKI class starts in first-line CLL, consolidating its position as the clear standard of care. In Europe, expansion continues, resulting in 26% sequential growth from Q1, as new patient share continues to rise as we rapidly establish leadership in several major markets. And finally, for in HER2, total revenue was up 129% to $204 million. In the U.S., in HER2 has already achieved a leading new patient share of 35% in second-line HER2-positive metastatic breast cancer. rapidly displacing the prior standard of care. This is just two months after approval and launch based on the Destiny Breast 03 phase 3 trial. Europe and emerging markets have contributed nicely to growth as well based on launches in the third line HER2 positive metastatic breast cancer. Following presentation in Q2 at ASCO and inclusion in the NCCN guidelines, we are preparing for anticipated launches in HER2 low metastatic breast cancer based on Destiny Breast 04. Given the timing of those events, we don't believe growth for the half reflects much utilization yet in this setting. Across the globe, we are once again in an intense period of launch activity. We're just getting started with Olympia and Destiny Breast 03, and we hope soon that that will be followed by Destiny Breast 04, Propel, Himalaya, Topaz 1, Poseidon, and Destiny Lung 01 in the months ahead. As we look to the second half, we're also looking forward to seeing data readouts from Emerald 1, phase 3 trial of Infinzi and local regional liver cancer, and Capitello 291, the first phase 3 readout for our AKT inhibitor, Kapivacertiv, and HR positive, HR negative, or HER2 negative breast cancer. Collectively, this list, many of which represent blockbuster opportunities, will be key drivers of oncology growth next year and beyond. I'll now hand over to Susan, who will cover the pipeline in greater detail.

Thank you, Dave. Please turn to slide 15. I was very happy to be back in Chicago in June, where we once again demonstrated our scientific leadership in cancer research at this year's ASCO. During a plenary presentation, we presented NHER2 data, outlining unprecedented benefit in HER2-low metastatic breast cancer patients. This success unlocks further opportunity to utilize HER2-targeted therapies in HER2-low patients in breast cancer and beyond. The strength of the data was corroborated by the U.S. submission of Destiny Breast 04 receiving a priority review. Also at ASCO, we presented results from the FACTION trial with capivacertib in metastatic ER-positive breast cancer. Using next-generation sequencing, PI3K-AKT-P10 pathway altered patients were identified. and expanded biomarker subgroup analyses were performed. Patients in this subgroup saw an impressive 38.9 months of overall survival benefit versus 20 months in the fulvestrant monotherapy arm. PI3K-AKTP10 is the most frequently mutated pathway in breast cancer and is very important as mutations can drive resistance to current endocrine therapies. Moving on to hematology with the acquisition of TMB486, a CD19, CD3-directed T-cell engager, we're advancing our ambition to deliver innovative new treatments across blood cancers. By generating new immune responses, T-cell engagers could potentially deliver benefit to cancer patients not currently responsive to immunotherapy. TMB486 is currently in phase one clinical trials as a monotherapy in relapsed or refractory B-cell non-Hodgkin lymphoma with plans to expand into other lymphomas. Moving forward, we plan to develop TMB486 as a monotherapy or in combination with other targeted and standard of care therapies in B-cell malignancies, including diffuse large B-cell lymphoma as well as follicular lymphoma. Please turn to slide 16. We look forward to this year's World Congress on Lung Cancer conference in August, presenting data addressing advanced and resistant disease with targeted medicines and novel combinations. We'll present results from the SAVANA trial, combining Tegresso and Orpathis, Results showed a trend toward improved response rates with increasing levels of resistance, with an overall response rate of 32% in all comers and 49% in high MET aberration patients. We look forward to data from trials such as FLORA2 and SAFRON, broadening and elongating the level of clinical benefit to GRISA can provide to patients. We will present data from the tropion lung O2 trial, datadxd plus checkpoint inhibitor pembrolizumab, with or without platinum chemotherapy. demonstrating promising efficacy and tolerable safety in advanced non-small cell lung cancer patients without actionable genomic alterations. The response rate seen in the DASA-DXD and checkpoint inhibitor arm is much more impressive than what was seen with either monotherapy. The results are in line with the Begonia trial for DASA-DXD plus Infimsi, where the 74% response rate gives us confidence, both from tolerability and efficacy standpoint, over and above what we've seen with IO plus chemo. Looking forward to next year, We have an exceptionally high level of news flow upcoming for oncology. Key trials to look out for in 2023 are the tropion lung O1 results for DASA-DXD in the first half, as well as AGEAN, EFS, and BR31 readouts to bring infimacy earlier in the treatment paradigm for non-small cell lung cancer, increasing the chance of cure. I'm now going to hand over to Ruud to cover biopharmaceuticals. Please advance to slide 17.

Thank you, Susan. Now turning to slide 18. Looking at our biopharmaceuticals business, CVRM total revenues were up 90% on a pro forma basis to $4.6 billion. RNI was up 3% to $3 billion, and VNI delivered total revenues of $2.8 billion. Farciga achieved an impressive 62% growth, driven by strong demand in type 2 diabetes, heart failure, and chronic kidney disease. Farciga is the fastest growing SBLT2 brand globally, and strong performance across all regions provides confidence in continued growth. We reported headline results in the delivered trial for Fasiga in heart failure, which preserved ejection fraction, which Mene will cover in more detail. But needless to say, we are excited about the potential opportunity to expand use in this underserved population. In respiratory and immunology, strong growth from Fasenra and new launch medicines, Restory, Sevnello, and Tespire, was partly offset by Pulmicor's continued decline in China following VBP inclusion last October. Facenra continued its market leadership position in severe eosinophilic asthma across major markets, delivering 18% growth in the half. We are excited about the launch of Tespire in severe asthma. In its first four quarters since launch, Tespire achieved 13% new-to-brand market share, and we are pleased to see over 60% of new-to-brand share coming from the non-IO5 class with minimal impact on Facenra. We continue to see demand growth for Savnello in systemic lupus erythematosus, and in the U.S., new-to-brand prescriptions reached 24% of the biological class in the second quarter. Within VNI, VaxAvria total revenues reached $1.6 billion in the half, fulfilling the majority of initial contracts. As Pascal mentioned, VaxAvria, our COVID-19 vaccine, is estimated to have saved over 6 million lives This analysis is based on data from Imperial College and published in The Lancet. Avusheld, our long-acting antibody, delivered $940 million, reflecting additional contracts signed globally. Please turn to slide 19. In emerging markets, total revenue was $6.2 billion in the half. Emerging markets' growth rate, including the impact of VaxAvria, was 16%, and this was split between ex-China emerging market sales which grew 46% in China, where sales declined 5%. Excluding the impact of VexAvria, ex-China emerging markets grew 48%. As mentioned previously, the delayed VBP 7 tender process completed in July, and we expect implementation in Q4 of this year, with full impact on Silicon Zoc in 2023. We reiterate our guidance and still expect total revenue for emerging markets to grow by mid-single digits in 2022 with mid-single-digit decline in China. I will now hand over to Mene to cover the R&D advancements in the period.

Thanks, Ruud. Please turn to slide 20. In May, we reported that the liver trial showed that Farsega achieved a clinically meaningful reduction in cardiovascular death or worsening heart failure in patients with preserved ejection fraction. Together with the successful DAPRHF trial, DELIVER demonstrates Farsega's efficacy across the full spectrum of heart failure, regardless of ejection fraction. And we look forward to presenting DELIVER's full results at the ESC in Barcelona in August. Also in the quarter, together with our partner, Ionis, we disclosed positive high-level results from the Neuro-TTR Transform trial in hereditary transthyretin-mediated amyloid polyneuropathy, a debilitating disease that can lead to impaired motor function. Implantacin delivered a clinically meaningful improvement in the patient's modified neuropathy impairment score plus 7. In our VNI portfolio, new data published in the New England Journal of Medicine showed that Evershield retains neutralizing activity against the Omicron variants BA5, BA4, and BA2, all of which are highly prevalent globally today. And while Evershield remains highly effective at preventing COVID-19, we're cognizant the virus will continue to evolve, and in the quarter, we licensed an early-stage portfolio of COVID-19 antibodies from RQ Biotechnologies. Looking ahead to the next 18 months, we have more data to come from Farsega with the DAPR-MI Phase III trial for non-diabetic patients with myocardial infarction, And we're excited about forthcoming Phase III readouts with Fasenra in three eosinophilic-driven diseases, EOE, HES, and EGPA. Later this year, we also anticipate seeing further Phase II data from our Salona study confirming that AZD8233 has the potential to be a best-in-class molecule in terms of its LDL-reducing activity in patients with dyslipidemia, and that's targeting PCSK9. We have over 10 mid-stage clinical trial readouts in the next 12 to 18 months that will fuel the next wave of significant investment decisions, including far-seeded combinations, our MPO inhibitor, and toziracumab, our anti-R33 monoclonal antibody. Please move to slide 21. We were also delighted with the New England Journal of Medicine publication and proud to have developed such a highly efficacious medicine with nesevumab. RSV, as you know, is a leading cause of lower respiratory tract infections, such as bronchiolitis or pneumonia, as well as hospitalization in infants. And these data show, for the first time, the potential to significantly protect all infants through their first RSV season with a single dose immunization. And we look forward to working with health authorities to bring nesevumab to infants as quickly as possible. Please now turn to slide 22, and I will now hand over to Marc to cover rare diseases.

Thank you, Mene. Please turn to slide 23. In the first half, rare disease contributed $3.5 billion in total revenues, representing year-on-year pro forma increase of 10%. In the second quarter, we recognized certain one-off pricing adjustments in the international region. Excluding these one-offs, Proforma growth in the first half was 8%. Emerging market sales were $206 million in the first half, impacted by all the timing in certain tender markets. In the second quarter, the C5 franchise delivered durable Proforma growth of 9%. The slowing growth of Soliris reflects successful conversion to Ultomiris. New market expansion and strong launch uptake in generalized myasthenia gravis in the U.S. drove ultimerase to 31% in the second quarter. While it is still early in the myasthenia gravis launch, at quarter end, approximately one-third of ultimerase initiation were for complement naive patients, which gives us confidence in the ability to expand our addressable population to approximately 30,000 patients in the United States. Beyond the CFI, Of Ultramiris initiation, we have complement naive patients, which gives us confidence in the ability to expand our addressable population to approximately 30,000 patients in the United States. Beyond the C5 franchise, Strancy grew 18% in the quarter, driven by strong underlying demand and initiation trends in the U.S. Lastly, Cosellugo demonstrated substantial growth in the quarter, benefiting from rare disease organizational realignments resulting in increased demand and market expansion. Please turn to slide 24. During the period, we reported remarkable Phase III data from the Ultomerase Champion Trial in neuromyelitis optica. As shown on the Kaplan-Magnon curve, there were zero adjugated relapses. On the slide that you can see, this is this horizontal blue line. Zero-adjugated relapses observed in patients receiving ultramiris, and importantly, this effect continued out to 73.5 weeks. This exceptional data not only represents the opportunity to bring an innovative new medicine to NMO patients, but also offers another example of the consistently strong data generated by OC5 franchise, Soliris and Ultramiris, in neurological indications. Looking ahead, we're excited to continue to deliver on a pipeline with anticipated readout for Soliris in Guillain-Barré syndrome, which is now expected in the second half of this year, and the headline results of a first-generation novel olfactory inhibitor, Danicopan, in PNH with EVH, expected in the first half of 2023. Lastly, before I turn the call back to Pascal for closing commentary, I would like to highlight two important milestones for Alexion. This year Alexion marks its 30th anniversary in rare disease and also the first anniversary of the deal closure. With immense gratitude, I would like to thank our Alexion colleagues for their continued commitment to pushing the boundaries of science and accelerating innovation to develop life-changing therapies for those living with rare disease around the world. With that, please turn to slide 25, and I will hand over the call to Pascal.

Thank you very much, Marc. Please move to the next slide. Together with the board, I'm pleased to announce Michel Desmarais will take over from Leif Johansson as chair following the 2023 AGM. I've worked closely with Michel since he joined our board in 2019, and I look forward to our continued partnership in his new role. I'd like to thank Leif for his commitment to AstraZeneca over the years and through the transition period. I've had an amazing 10-year period working with Leif, and we've gone through a lot together. And I would really like to thank him and the board for their continued support over the last 10 years that have taken us from where we were in 2013 to where we are today in a very, very different place. And it's been really a fantastic experience working with Lef. We've been a tremendous team. And I know, Lef, Michel and I will be working together and forming an excellent team for the many years to come. Now I would like to close with the slide 27. We continue to execute on our strategic priorities, which well position AstraZeneca to deliver long-term growth. A robust life cycle management continues to support our top-line growth. And in the half, we delivered on key phase three life cycle management trials, including Ultramiris in NMOSD and Fas-Siga in heart failure with preserved ejection fraction. We continue to invest in our pipeline in order to achieve our strategy growth ambition, and we remain open to strategic business development, such as our acquisition of 10A02 CD19, CD3, T-cell engager in hematology. Importantly, we have a long-run way for most of our medicines in terms of loss of exclusivity, which would provide confidence in our sustainable growth. Our company has grown stronger in 2022, both in terms of revenue and pipeline development. And as you have seen and heard today, We are investing thoughtfully to continue to grow our business as an industry leading right through 2025 and beyond. We want and we believe we can be a growth story for the many years to come. As you can see on this slide, we have everything we need to grow and we continue building on what we have. At the same time, we want to continue driving our focus on improving operating margin. And as you probably remember, we said our goal is to get to mid to high 30s in the mid to long term. We're very committed to this. We're making progress in that direction. And the success we're experiencing with our top line revenue allows us to stay focused on this goal of improving margin, but at the same time continue to invest strongly in our pipeline so that we can indeed deliver top line growth, strong growth post 2025. Thank you all for joining. We'll now take your question and we'll hand the call back to Andy.

turn to slide 28 we will now go to the Q&A for those on the phone please remember to press star 1 1 to ask a question we will take written questions from the web webcast please limit the number of your questions so that those others on the call have time to ask their questions in the allotted time thank you in advance now let's take the first question from the conference call

Thanks, Andy. So the first question is from Richard Parks at BNP Paribas. Richard, over to you.

Another chance later on this afternoon. And it's on U.S. drug pricing reform. It's looking increasingly likely that we see an enactment of that over the summer period. So I wondered if you could just help us Maybe some implications for your portfolio and two aspects to that. Medicare Part D restructuring could have some positive and some negative implications for your portfolio. So can you help us understand how that might balance out? And then in terms of direct negotiation, you've got a few drugs in. Tegrizo, Limpaza, Calquence at some point could come into that basket. So could you just help us understand maybe the probabilities any of those drugs at least gets included in the first couple of rounds of that negotiation process? Thank you.

Thanks, Richard. So maybe I could ask Dave to cover part of your question. And Rud, you've also been, of course, Following this very closely, you could add to this. Over to you, Dave.

Great. Thanks, Pascal. Richard, you have the two elements, Part D and negotiation. I guess there's a third element as well, which is inflation penalties, which just to address right at the back, we don't see that as having much impact. If any, we've been pretty responsible and blow inflation rates on price increases historically. I think that between now and when negotiation starts in 2026, based on the current writing, that the impact overall of Part D reform is quite manageable. As you point out, there are going to be some impacts in oncology that are negative over the period. That said, that's offset by some opportunities that come through patient affordability for greater adherence and compliance. across the portfolio, and I think in particular in our biopharmaceuticals unit. In terms of negotiation, we do see negotiation as a bad precedent for innovation, and we think that it's going to have an impact on the speed with which innovation, particularly in areas of small populations and high unmet needs, how companies and sponsors are thinking through that. In terms of AstraZeneca-specific impacts, I do think that starting in 2027 and beyond, as you point out, that Tegresso certainly becomes a possibility for being one of the medicines that could fall into this. The rules specifically for how that's being contemplated are not yet clear. There will be the top 50 drugs, and there will be some selection that's made by that period of time, but I think that we are looking at a 2027 and beyond time period, so it's certainly kind of post-medium term where I think we start to see the impact coming from the negotiation portion. Ruud, do you want to talk about some of the biopharma-specific elements?

Yeah, so very quickly, and you were mentioning it, Dave, great adherence is a potential upside for a few products in the biopharma We know that persistency rates in the U.S. are always somewhat lower than, for example, in Europe due to affordability. Our out-of-pocket costs are relatively high in the United States. So hopefully this Part D redesign will deliver an opportunity for patients to stay long on therapy. And, of course, that will benefit some of our products in the biopharma business unit.

Perfect. Thank you.

Thank you, Ruth. Thank you, Dave. Sachin, Sachin Jain, Bank of America. Over to you, Sachin.

Sachin.

Would you just give some color on how you think about cost lines? Hi, can you hear me?

Yes, yes. Go ahead. Sorry.

Sorry. How you're thinking about cost lines within that. So R&D spend clearly flexing up. Any color where you think that goes? versus the existing 21% to 22% of sales? Any additional color you can give on SG&A offset for that? And just what flex do you think exists in you getting to the top versus bottom end of that margin range? Second question is for Susan on amivantamab. Updated PFS data in the world lung abstracts. Looks like PFS trending towards 30 months. Obviously, impressive versus the 18 to 19 with DeGrisso accepting it's a very small N. Just wanted to get updates on your competitive thoughts to DeGrisso there. I think on the ASCO call, you'd noted IV discontinuation seem at 10% to 15% being low and therefore caution on that potentially hitting. Just wondering whether your thought process is shifting at all there. Thank you.

Thanks, Sachin. So, Arnaud, do you want to take the first one and Suzanne the second?

Sure. Thanks, Sachin, for your question. On R&D, as we noted, and given the number of positive readouts we've had, clearly that's ungated a number of additional studies. And so we continue to invest in R&D. I think we've been fairly consistent around how much we want to invest in R&D on an ongoing basis in the sort of low 20 range. And we're sort of consistent with that. As I also mentioned, we do expect the second half to be somewhat consistent with the first half for this year, and going forward, obviously, we'll give guidance when we do for 2023. On SG&A, we continue to drive improving operating margins. You've seen that our margin trajectory continues to improve and also specifically note that that margin achievement is with a much lower contribution of other income that we expect this year. So we're continuing to drive SG&A and we're continuing to drive efficiency and we remain committed to our operating margin ambition that we've communicated previously. Susan?

Sure. So we have a multi-pronged approach to combinations with Sigrisso. Firstly, we have the FLORA2 study, which is our combination with Sigrisso plus doublet platinum-based chemotherapy. I would point you to encouraging phase two data from the OPAL study, which was presented at ASCO, looking at this combination with platinum-based chemotherapy plus pemetrexed, which showed in an N of 67 patients, a 91% response rate, a two-year landmark progression-free survival of 70%, which compares very favorably with the data in an N of 20 that was presented from the chrysalis data. FLORA2 is fully recruited, and it reads out in the first half of 2023. In addition, of course, we've got the combination, as you mentioned, with savalitinib, which is ongoing in phase three in the SAFRON study. And again, we have data from the SAVANA study, which supported that phase three start. with encouraging response rates, particularly in the high MET-amplified subgroup. We've also got combinations that are ongoing with ADCs, including patritamab, the HER3-directed antibody drug conjugate, as well as with data DXD. And I'll note that data DXD in patients with actionable genomic alterations post-treatment with those targeted therapies showed a 35% response rate. So we're encouraged about the general potential for combinability for Tegristo.

I think in addition, Svachan, to what Susan laid out, maybe just two other components that I'd like to share. I mean, I think the first piece, when we take a look at Tegristo, and I mentioned this in some of the opening remarks, we are seeing from Flora that duration of therapy is increasing and frankly longer than what we saw in the study. And I think in part this owes to a pretty favorable side effect profile of monotherapy to Grisso. I think we see pretty low mid-teens level of grade three treatment-related adverse events, and I think that we're already seeing quite a bit longer than that from both of the sets of combinations. I think with that being said, I would expect to see some utilization in certain patients of the combination if both FLORA2 and the J&J combo are positive. And I still think that the majority of the utilization that you're going to see in the metastatic setting comes from the monotherapy at this stage. And I'd also add, we continue to grow with key catalysts of ADORA. Laura is on the horizon. Susan and I have both talked about FLORA2, and we've initiated the Adoratu study, which I think continues to build on a lifecycle plan into Grisso that I think remains vibrant.

Thanks, Dave. Thank you. Mark Purcell at Morgan Stanley. Mark, over to you.

A question on Eversheld and marketing. Could you help us understand the level of investment you're putting behind this asset and the durability you expect going forward? Many have mentioned the aka biotechnology, deal with early-stage antibodies. So just the level of ambition there would be great. Just to follow up to what Sachin just asked, do you expect to see combination use of Togriso with amifantinib as well? It would be useful to get your perspective there. And then the last one, just on data DXD, you're clearly a priority asset where you're looking to invest more. Could you help us understand the ambitions outside lung cancer at this point? Thank you.

Thanks, Max. So maybe we can start with Evichel. There are two questions here. One is the investment and the ambition for this product, and two is durability.

Thanks for the question. And first of all, we are pleased to see strong demand, increased demand for Evichel because it is clear that it is really important to protect the immunocompromised patient in the COVID-19 due to the fact that they are not able to develop their immune response after vaccination. We do believe that that demand will continue and therefore it is really important to make sure that we do our best to educate and increase the awareness for both patients and HCPs to be able to use Evershield to protect patients who are in need. Therefore, our investments are increasing and we want to resource that in the proper way to make sure that we drive demand and fulfill and satisfy the needs that exist to protect the immunocompromised patients. And then given on the durability, I think it's in our increased or updated guidance, it's clear that we do see increased demand this year. It's always difficult to predict and forecast COVID-19 medicine, given the evolving and dynamic environment. But I can say that we feel strong about the durable need for Evushel, specifically given the fact that Evushel is the only monoclonal antibody approved for prophylaxis and equally the only one that has retained neutralizing activity in that space versus all different Omicron variants. And the reason for that is that it was designed as a combination of the two monoclonal antibodies with a different but complementary activity against the Omicron variant. and therefore it was designed to evade the resistance on the future variants. So we stay positive and optimistic that it will retain in its activity versus new variants.

Thanks, Ishkha. Maybe just to add, if you look at COVID today, you could reasonably make the argument that the most important thing to do today is not necessarily to boost people who are healthy, it's actually to protect those who are immunocompromised and vulnerable. So those are the people who have cancer, people who have been transplanted, people who may have HIV or some other immune conditions, because these people need to be protected. Vaccines don't work at all or not very well. Two is they represent 30 to 40% of patients who are hospitalized with COVID. And three is because they're immunocompromised, they tend to keep the virus in their body longer, and they are a source of mutations and variants. So for all those reasons, it's important to protect these people and it should be number one priority. The issue is we need to make sure physicians and patients are well aware of the product if we want to make it sustainable. And as a result, the investment we are doing now is really important so we can make sure patients and physicians are educated and then they continue using it. And beyond that, the only question is, as Ishka said, Will a variant emerge that become resistant? So far, it hasn't been the case because the product is very, very cleverly developed with two antibodies. But beyond this, we still, and I think many mentioned it, we are working on the next generation just in case a variant would become resistant to every shell. So we've got good hope it's sustainable, durable. But of course, we don't know. It's hard to predict the future with COVID, as we all know. The other question was combination, again, in DATO-DXD. Susan, do you want to cover that?

Sure, thank you. So for DATO-DXD, as I mentioned at the ASCO-IR event, we're planning five new Phase III trials, which will start over the next 12 to 18 months, so by the end of 2023. So obviously investing in lung cancer and in breast cancer. We've recently had the start of the Tropium Breast O2 study, in local recurrence, inoperable or metastatic triple negative breast cancer. And we have ongoing the pan-tumor study, which is looking at the potential for this medicine across a range of other tumor types. And I remind you that TROP2 expression is actually highly expressed across a range of different tumor types. So I do think there is potential for this molecule beyond breast and lung cancer.

That would be it. Dave, anything you want to add?

On Datto, I think that Datto has the opportunity to be one of the most significant medicines within the portfolio. And I think that the Tropion Lung01 data is obviously going to be the first proof case of that. But I think that if we've got the ability to be able to just replace systemic chemotherapy and late-line lung cancer alone, that the opportunity is quite significant. And then as we think about how a biomarker might open it up to other places, I think the future is bright. I think also, Mark, you asked a question about expectations around Tegresso-Amovantinab utilization. I mean, obviously, that utilization would be spontaneous off-label and I think probably could only occur in the US and so just based on that while that may be something that I could envision taking place I don't think that it would affect demand in a material way in terms of what I'd be expecting for to Grisso thank you very much maybe just just to add to what was said and link it back to our investment in R&D if

I mean, you heard Dave say that ODXD has the potential to be a very, very large product, and we have all seen the HER2 results, and HER2 can also be a very, very large product. Now, the thing is, to achieve full potential, we have to develop those agents across a whole range of indications. And beyond those two products, we have a whole range of products in oncology. We have a plantarsal and cardiovascular medicines. We have tozorachimab. whole number of other products including in rare disease and so when you consider all of this you really have to think you know unless something really very unexpected happens we should be a gross company but we need to resource this product and and make them big big product like they deserve to be and get to their full potential and robot city and over to you

Firstly, on Evershell, could you update us on the anticipated timing for the FDA approval? And also some indication, I'm sure you've been busy trying to build capacity, where you think capacity could land by the end of next year. I'm just trying to work out how quickly you can leverage the enormous unmet medical need, as well as your hematology, oncology, and autoimmune field forces, which all feed into the at-risk patient population. and use the proceeds to sort of bridge the OPEX demands of the rest of your portfolio. So if you could talk to the limitations and how quickly you can overcome them and how much demand you think you can grow, assuming the efficacy remains intact. So that's the first question. The second question is on China. President Xi has warned President Biden that the US is playing with fire with Pelosi's visit. There's obviously a lot of geopolitical risk globally. I know that you have the largest Chinese business among the majors, and you have worked hard to build that, securing relationships and local manufacturing. But I'm just wondering, has the board considered other measures, such as a partial IPO of the Chinese business or the Chinese listing, akin to try and minimize the risk in case there's some escalation here? And then finally, perhaps you could update us how interactions between your lawyers and Merck's lawyers have gone in relation to the Part 1 asset that you have and Merck's belief they have some ownership or rights to that product. Thank you.

Let me just say a couple of things quickly. First of all, I'm very happy that Andy was not more successful than I was before, limiting you guys to one question at the time. And those are three great questions. And the second comment I will make is, We don't communicate with our friends at Merck through lawyers. We talk to them, and of course the lawyers get involved at some point, but I just want to say we've had a tremendously positive collaboration with the team at Merck. Maybe let me cover this PowerPoint question quickly. We certainly have had such a great collaboration. We are very much inclined to collaborate with Merck on the PowerPoint. The question is, you know, under what conditions and what timing and how do we do it. But it's, I can't say we will do it, but it's certainly a very strong consideration for us to do it and continue the fantastic collaboration. And Dave, if you have anything you want to add, you can add it a bit later if you want now. Yeah. So maybe let's start with David Schrader. He's got two questions for you, the approval and the capacity. Yeah.

So we are progressing with many regulatory bodies around the world, FDA included. As you probably know, we received approval for prophylaxis already in many countries, including Europe, UK, Canada, Australia, and many others. And we have the emergency approval in the U.S., and we are working closely with FDA for the final approval of the prophylaxis. Equally, you probably know that we recently announced the phase three trial of the treatment of the out-of-hospital patients, and we do progress with the submissions of the regulatory approvals for the treatment indication. We do expect approval in Europe in the second half of this year, as well as progressing in the US, Japan, and China with our submissions as previously. As you fairly noticed, there is a strong and important unmet need in this space, and therefore we are doing our best to increase the capacity and make sure we are able to supply as many patients as we can across the globe. from the previous discussions and announcements we made, we're continuing to increase the supply and we are confident that we will be able to supply all the contracts that we currently have. And going forward, we are continuously doing and increasing the supply and the capacity as much as we can.

And on the fields for deployment, Andrew, you raised an important question, and we have field forces across hematology, immunology etc so we can deploy the Salesforce but I think your question about approval which is an important one we need to get approval full approval not a new way to be able to fully promote and it's fundamental so we establish the product and the use with China let me just say quickly and hand over to Leon to comment more on the on the situation in on the ground in China Essentially, we don't comment on what consideration we would do, but we're always looking at various scenarios for the different parts of the business. In China, we are looking at what is the best way to continue operating in China. The approach we've always taken in China has been, we are in China, for China and then more in the last few years, our approach has been we are in China for the world. What that means is we are in China to bring our medicines to Chinese patients, but we are also in China to help the world. We export from China and we are now connecting to Chinese innovation and looking to partner. We've set up an investment fund that is investing in Biotech companies in China, and we're looking at how can we tap into Chinese innovation to benefit patients around the world. So our approach has really always been to be in China for China and for the world. And the way we operate is always within that framework. But beyond this, it's hard to comment on what consideration or what options we are actually looking at. Leon, do you want to comment a little bit on the situation on the ground in China?

Yeah, I think the China government is after COVID situation, zero COVID policy still continues. So maintaining, avoiding disruption on logistics and supply chain and also protecting foreign company investment are the two most important priority for the Chinese government. So our strategy in China is very clear, is to speed up our global pipeline into China because our global pipeline is still in China, we lag a little bit behind. So we are getting DINHER2 DBO3 and DBO4 approval next year. And the PTK Acala is a very important product. So we will also launch Acala next year to indication. And like Iskra put it, the EvoShield, we are also submitting this year and also hopefully we can get approval late this year. So launching ZigDuo next year and launching two most important rare disease products and the many new indications. So 2023 and 2024 and 2025, the next three years will be critical for our new innovative pipeline to succeed in China. But of course at the same time you can clearly see Pomeco get a hit. and our large product, the silicon and crystal brinta getting to a VBP one by one. But we are still able to maintain all multiple channel promotion to keep loyal user as much as possible. So I think at the same time, we are slowing down decline on the VBP portfolio and at the same time pushing new indications, life cycle indication of large products like Tagresa and Forsica. And also launching new pipeline on top of all these growth. So I think our strategy remains clear. Like Pascal said, on top of our global innovation, we also established a fund with CICC and tap into local innovation. Hopefully, we can work closely, I think, with FibreGene to do ROXA in China, work with Hutchison to do CMAT in China. So that's just the beginning. I think we will have, in the future, more new products for China and in China for globe.

Thanks Leon. So next question is Adam Carlson at ABG. Adam, over to you.

First, off the back of the Cipotentin for SIGA phase 2b study and CKD being pushed into H1 next year. Just your current level of confidence or thinking on the prospect of getting for SIGA combinations approved of SIGA coming off patent. And then secondly, on inflationary impact, and I guess particular personnel cost. How much, if any, of that impact have you seen already, and how should we be thinking about the timing of that impact in either the second half or next year? Thank you.

Thanks, Adam. Mene, do you want to take the first one, and I'll have now the second one about inflation?

Okay, so first I'll just remind you that the loss of exclusivity of Far Seager isn't a point in time. It's a range. across multiple markets, and our revenues are split pretty well across all the regions, so we have quite a broad timeframe in which to get the combinations launched. But irrespective of that, the two combinations that we have moving forward, the MR modulator and the independent antagonist, are both self-sufficient business cases in their own right. And as we've said, we're expecting to get data for both of those by the first half of next year. Now, in terms of the mechanisms, these are both well-precedented mechanisms. So as long as the molecules behave themselves, we're optimistic. But until we have data in hand, I won't be too optimistic. But I think once we get hopefully positive data, then I think we're full throttle to pivotal studies and trying to launch as soon as we can and hopefully within that timeframe.

I think maybe what I could add also, separate from the combinations, is that as many said, the patent expiry is spread over time. But on top of it, if you look at the sales that Ruth showed you a bit earlier, the U.S. in the global sales is not the usual 50, 60 percent of global sales. And you see here the potential of a drug that is addressing a being unmet need. And so a lot of sales are outside the U.S. What that means is even when we lose patent protection in the U.S., the products or elsewhere, the product is not going to collapse. We're going to have a slower decline and so more time to launch those combinations and maintain this product. Hanna?

Sure. I think on inflation, as I mentioned, we are obviously seeing some impacts of inflation, particularly in distribution costs. You know, we continue to monitor this. Our business is very resilient. We continue to innovate. So I think, you know, pricing of drugs and so forth has to be correlated with value. But this is something that we'll continue to monitor in terms of impact it has on our business.

Thanks, Aruna. Tim Anderson, Wolf Research. Tim, over to you.

Thank you. On Datapodimab, On Tropion Lung 01, what do you think good results would need to be for Astra and investors to say, you know, wow, this looks like a very promising new drug? So what's realistic to expect in terms of things like hazard ratio and tolerability and safety? And then on Tegresso and Amivantamab, again, Can ASTRA clarify its views on how often it thinks that CMET amplification is the driver of tergrisa resistance? Because that's really what J&J's and the Vantamab success is most dependent on in that Mariposa trial. And the literature suggests it's not that high. Maybe it's 20% or something. But I know that different estimates are out there.

So maybe the second question is for Susan. The first one, do you want to cover it, Doug? Sure.

I think that in terms of what we see in tropion lung O1, you've got to compare that to the background of what we see from second line plus docetaxel, which is the comparator arm utilization and the results that we see from that. Docetaxel in second, third line lung cancer has pretty poor response rates in that 5% to 20% range, depending on what you look at and progression-free survival that, again, is, I think, relatively short, kind of in the six months and below range. So certainly when we kind of think about the opportunities to see what investors should be enthusiastic about, I think that some of the early data that we're already beginning to see within the abstract, I think, compares quite favorably to that. I don't know, Susan, if you want to speak to any of those elements, but I think that the other piece that I would say, Tim, that's really important here is that for all of the advancements that have been made in advanced lung cancer through checkpoints and checkpoints plus chemotherapy, the overwhelming majority of patients progress on those regimens and they find themselves on systemic chemotherapies. And so it is a pretty enormous unmet need that this study seeks to address. Susan, you want to comment at all on what we're seeing so far?

Yeah, so, you know, as you're aware, the data we've already published shows a 28% response rate at the 6-meq dose and a median response duration of 10 and a half months. So, again, if you put that into the context of what Dave's just said about the expectation for current standard of care chemotherapy, I think you're seeing improvement. And then in terms of tolerability, a couple of things to note. First of all, the rate of interstitial lung disease is lower with datapostimab, druxacan than we've seen with NHER2. What we do see is stomatitis as a dose-limiting toxicity, and we are investing in patient and investigator education about the management of this side effect and also digital health tools to help manage how patients get through that. So I think there are ways in which we can manage those side effects to really represent an overall benefit-risk profile that's quite attractive in this setting. I think the second thing is that David alluded to is that across the program, you know, we'll continue to look for opportunities to further refine the patient population that's best to treat as we move beyond tropia and lung O1 into other settings. And then I think your question about the level of MET overexpression and amplification as a resistance mechanism to GRIS. So what we've seen it's in the range of 15% to 30% range. So 15% when you're looking at circulating tumor DNA, but you can underestimate the rate of metabolification using ctDNA alone. If you look in tissue, it can be at the higher end of that range. So something in that range is what we're expecting.

And I think, Kim, just maybe to add back to the question on data, the dose attack slide said it's less than six, which is true. It's probably, if we gave kind of accurately, it's three to four months is what we're seeing. So that's what we need to be beating within this.

Thanks. James Gordon. Go ahead, James.

Thanks for taking the two questions. First question on lung cancer. So if FLORA2 is positive, that presumably does read to the TIGRISO plus DS1062, the Orchard data. Could that be pivotal data? Or when might you be able to have pivotal data for TIGRISO plus and ADC for EGFR patients? And then given what we saw at World Lung for 1062 plus Keytruda, fair to assume then that you're going to do that in all comers who don't have EGFR mutations. So would it be plausible that within the next 12 months that effectively DS1062 would be going after everyone in frontline lung cancer, either with Tegressa if they've got the mutations or with Keytruda if they don't have EGFR mutations. Is that the big picture plan for lung cancer? And the second question was Altamiris. So you've now got the launch in MG and you've also got NMO coming. So can you remind us what your updated thinking is about how much you can convert over of the combined Solaris Ultramiris franchise over to Ultramiris by the time that Solaris faces loss of exclusivity in 2025? I think the conversion is about 30% now. But is the thinking that you can more than double this conversion in the next three years?

Thanks, Jim. So the first question would be, Suzanne, the second question, Mark, is about the rate of, not substitution, but switch from Solaris to Ultramiris by 2025. Suzanne, do you want to?

Yeah, so just the design of the ORCHARD study is a platform-based Phase 2 study. It's not designed to be a pivotal study. And, of course, in order to drive pivotal trial design, we want to look at safety and efficacy data. I'll just reiterate what I said. We're planning to initiate a number of Phase 3 trials over the next 18 months, and we'll continue to evolve that as data emerges from the proof-of-concept driving studies.

So, James, I think your question was on the rate of conversion on Myasthenia gravis, I assume. Let me provide just some reference on the rate of conversion in PNH is above 80%. The rate of conversion on atypical HUS is above 50%. So by 2025, this means three years after launch in Myasthenia gravis, we can expect somewhere closer to a typical HUS, I believe, in three years' time. And anymore, it's a bit hard to guess, but due to the excellent results that we have seen, we believe the conversion will also be relatively rapid.

Simon Baker. Go ahead, Simon.

Two part moments, if I may. Firstly, on Adavacertib, which you've terminated, I'm assuming that that was on tolerability grounds, but any column that would be useful. And is that the end of WE-1 as a target? Because I noticed that Merck disclosed another WE-1 inhibitor that appears to have a, shall I say, a slightly less aggressive structure than Adavacertib. And then secondly, on Phisenra, I see on clinicaltrials.gov last week that both Resolute and ORCID were moved back a year for primary completion. Is that just housekeeping or was there a genuine delay there? Thanks so much.

Thanks, Simon. Mene, do you want to take the first and last question?

I mean, again, that's really due to delays through COVID and the Ukraine-Russia war, nothing from a data perspective.

And Suzanne, Adalacertib?

So I think V1 remains an important target. The challenge with Adalacertib is the combination of GI, diarrhea-inducing side effects, as well as the combination of that with bone marrow toxicity. And the combination of those two together proves challenging. So there's clear activity seen with Adalacertib, including in some difficult-to-treat cancers like the uterine serous carcinoma. But when we look at the overall profile versus everything else that we've got in our portfolio, what we've made is a prioritization decision to make sure that we apply our resources on the products that we think have a greater transformative ability for the treatment of patients with cancer.

Great. Thanks so much.

Okay.

Michael Lichten at UBS. Michael, over to you.

I'm just going back to... the increase in OPEX for this year, just trying to understand the timing, a lot of the pivotal data that would have suggested you should invest more in ADCs and other compounds you had earlier in the year. So what's changed in July to decide to spend a billion dollars more this year in OPEX? And then just going back to Evershell, of the incremental revenues you now expect in the second half, how much of that is based on contracts that you have and how much of it depends on you successfully pushing the product more into, I guess, a commercial and non-government setting. Thank you.

So the second question is about... Hey, Richelle, Iskra, do you want to take this?

Let me start with that. So the revenues predicted now for the second half of the year... a combination of what you're saying. Many of that is coming from the contracts that are already agreed with many countries around the globe. But equally, as I mentioned, we are increasing the capacity as much as we can to be able to also supply and increase the supply for the patients that are not still covered with existing contracts.

Thanks, Ishkha. And maybe, Adna, you could take the other question. And also, there's a question online about the clarifying total revenue guidance. So you could take the whole thing together.

Sure. Yeah. So, Michael, just to answer your question around OPEX. So there are a number of elements, actually, in OPEX. There's obviously increase in R&D. And that's not just the ADC portfolio, which obviously is a big component of it. But it's really across the board, and that includes further investments in rare diseases, further investments in biopharma. As you know, we've done some licensing arrangements there as well, as well as continuing to invest behind in HER2 and DATO, as well as our internal pipeline on ADC. So it's actually quite a large portfolio that we're investing behind in R&D. In addition, there's also SG&A, which we talked a little bit about the ungating of some of the spend on Evusheld relating to demand creation that we're doing. But at the same time, we also have several other launches. As you know, Cefnello is still early. Tespire, Fisandra. as well as breast-free, and on the oncology side, multiple new indications that we'll need to continue to build the market on, you know, behind Himalaya and Topaz. So hopefully that addresses your question. I think the second question that Pascal referred to was, I think there's a clarification on total revenue guidance, and that is a low 20s increase in revenue. So just so that that's clear.

Thanks, Arana. So Luisa Ekster, Beringberg, Luisa, over to you.

Thank you very much. A couple of questions. On farcseger, I just wonder if you can give any more color on what we should be looking out for at ESC. Should we expect to benefit across all components of the composite endpoint? And how soon could this contribute to sales? And I wonder if you've actually stated when you expect generics in China. I heard all your comments about the phasing of LOE, but I just wondered specifically on China. And then the second question for you, Pascal, because it's clear your confidence in the growth profile beyond 2025. Are there any areas in particular you would highlight where your internal projections are different from consensus? And perhaps just a comment on what you do factor in for pricing in that longer term view. Thank you.

So maybe I can start with this one and also clarify the one billion that Michael was mentioning before. I'm not sure where that comes from, but I mean, our guidance with expenses has been low to mid and now it's mid to high. So you could potentially derive this, but you could also derive less than a billion. Remember also in the guidance we have reduced The other income so it's not only an expense issue. It's also reducing other income in our in our guidance And you know in terms of the increase of expenses. It's really linked to the products with the portfolio we've discussed Versus consensus result we typically do not comment I what I can say is what are the products that we see as being big big potential products and The first two will not surprise you, and HER2 and DATODXD, we believe those two have very, very large potential for the many reasons we've described. Beyond that, in oncology, maybe I should ask Dave to comment in terms of what he sees as potential, and in BioPharm Road, you also would want to say a few words about the products you see as having big potential, not necessarily versus consensus, but where we see the biggest potential.

I mean, I think Luis, your question is 2025 and beyond. I think that to Pascal's point, and I'd mentioned this before, the ADCs, certainly. I think secondly, we're beginning to get momentum and enthusiasm around the next wave of IO, which includes bispecifics. And I think that we'll see more on that to come. Additionally, I believe that the PARP1 selective is something that again here has an early profile that gives me a lot of enthusiasm as Lemparsa moves into exclusivity and it's the first and only in this decade within the portfolio of oncology that goes there. Those for me are the big highlights and it's the combinations between IO and ADCs where I really think that we've got the opportunity to do some important and differentiated clinical approaches.

Okay, I will quickly comment, Luisa, regarding the biopharma. I think in the short term, clearly the trajectory of FASIGA is very promising, and I will also answer your question regarding the expectation in China. The loss of exclusivity is in 2023, which we don't expect a lot of impact instantly. We are expecting VVP in the course of 2024, if it happens, but it still has a Substantial potential. Of course, the new portfolio of products like Tespire, Stavnella, and Breastree has a substantial potential. And then in the midterm, a product like Eplondison, where we already show good results in PN, and then hopefully in the future also in cardiomyopathy, are clear strong growth drivers for the business.

I can't comment on the results we'll present, but I don't think folks will be disappointed. And what I can maybe add is there'll be two high-impact publications coming out at the same time, which hopefully will emphasize the quality of the data we're presenting.

Thanks, guys. I mean, the last comment that we make, Louisa, is that one of the characteristics of our company is that we don't depend on two or three products where you can say this one has enormous potential. We have many blockbuster potential already. We have more than 10 today, and we expect to have many more over the next few years. So there are a number of products that can be very big, and then there are others that are going to be smaller but still blockbuster potential with more than a billion. So it's really adding up all these products that is going to drive the growth of AstraZeneca over the next 7, 8, 10 years. Next question is Emily Field at Barclays. Emily?

My question, one on tropion lung 01 timing. I know you targeted first half 23. I believe Daiichi Sanko this morning noted a potential for second half 22 with the caveat that it's event driven. Just your thoughts on the potential to see that top line data this year. A question on the myasthenia gravis launch for Altamiris. Thanks for the color that, you know, one-third of the sales are in complement naive. Just curious on, you know, if you think you're winning patient share in that population versus Vivgardt, which is off to a strong launch. And then, Dave, in the prepared remarks, I believe you mentioned that you weren't seeing much contribution from DBO4 in the first half. Do you expect that there will be significant sales contribution ahead of the PDUFA date, given the NCCN guidelines update? Thank you.

Thanks, Emily. So, Dave, do you want to take the Tropion question and mark the other question, and we try to be short?

Yeah, and maybe I can do the DBO4 and the Tropion both. So, when Daiichi guides to second half 22, they're on their fiscal year, and so that goes into first quarter of next year. And when we guide to first half of 23, it's on a calendar year. So you can triangulate the quarter that we're both consistently speaking about. I think that within DBO4, so Emily, I think that with the NCCN guidelines changing because of an overall survival benefit with the speed with which it did, and we already heard the discussant at ASCO, the discussant, not the presenter, talking about how HER2 low was something that she was considering for a patient that was in front of her. And then we know that there are many HER2 low patients that are already easy to identify. I do think that some level of non-promoted spontaneous use is likely to happen in advance of PDUFA. The exact amount of that, I think, is something that we'll just watch and see.

So, as expected, with the introduction of the new approved therapeutic option, the Myasthenia gravis market in the United States is expanding very rapidly. As has been communicated by Argenix, they seem to be taking many patients from IVIG and earlier line of therapies. We have launched Ultomeris at the end of April, and although it is early days, I think we are seeing that we are already gaining naive patients for about one-third of the initiations. We expect this to continue in the future. So you need to remember that until the introduction of this recent introduction, Ultomeris and Vivgard, Soliris was the only branded medicine in Myasthenia gravis and was treating more severe forms of Myasthenia gravis. So with Ultomeris, our mission will be to go down in severity and cover a larger group of patients. So early days, but good start.

Thanks, Marc. Matt Weston, Crisis Risk. Matt, over to you.

Two questions, if I can, please. The first, coming back to operating costs. The new guidance on R&D is essentially trending towards $10 billion. Aradna reiterated the low 20s percent of R&D as your target, but I'm mindful that consensus has $9 billion of spend and a 2.5 percentage point margin increase year over year for 2023. Now, I don't want to draw you into 2023 guidance, but can I just be clear that the message is pipeline success justifies increased investment, and that's what investors should be prepared for? And any color you can give us around that would be great. And then secondly, a question about mid-term margins. You commented about mid to high 30s, but obviously you've also highlighted how much the potential of the Daiichi Sankyo collaboration product could have to the future growth of Astra. And I just wonder how you see that impacting that margin number, given that you book only a very modest amount of sales, but 50% of earnings. So I would imagine it could easily push you over that high 30s

they were to achieve the peak sales that you seem to be hoping for thanks thanks the two questions so maybe another you can call the margin on the first the first point on the R&D span matter Anna said to you that the second half we expect to have R&D expenses being consistent with first half. So if you do that, you don't get to 10. I mean, you know, you're not that far, of course, but you're substantially below 10 if you do this math. And in terms of the question as to whether this is justified by the pipeline, the answer is an absolute yes. Otherwise, we would not spend it. We have, you know, really a rapidly growing pipeline and we need to support it. If you actually think about a product like on HER2 and a product like that with the XD, taking them to their full potential requires a pretty large program and a lot of investment. And this is something that we have become more and more convinced we need to do. And then beyond those two, we have quite a number of products. Southern Ecammus Estron also requires investment. And we really want to play to win. We want to make sure that every one of our products with potential is totally supported. So we expand them and maximize them. As far as the margin, maybe Aradna, you want to cover this, but we need to keep in mind that we also have to aspire. We have Limpaza, we have products that are not necessarily always helping with the margin near term.

Yeah, I think, again, you know, our ambition remains the same in terms of margin. But as you can imagine, it's always a balance between shorter term margin and longer term growth. And as Pascal said, you know, we're playing to win here and we continue to invest behind the product. The specific question you had was around the Daiichi products and the partnership with, you know, on Inher2 and Dato. And yes, we have high hopes and high ambitions for those. But also note that we, you know, we do pay, you know, our fair share of R&D and SG&A expenses. So while on the revenue line, we may not count it as product revenue, it's counted as collaboration revenue, our product you know, profit share, we are contributing, you know, our fair share of expenses. So we really need to look at sort of an operating profit line there rather than the sort of the margins that are implied. And again, we're focused on cash flow and improving our operating profit from a dollar standpoint and a margin standpoint.

I mean, all these two products that can be very large, these two ADCs, they will drive tremendous growth post-25. And until 25, they will drive growth, but they will also drive a substantial investment. These studies in oncology, they tend to take time, they're expensive, and they're quite large. So that's really what you have to keep in mind when you look at the margin. But having said that, I'd just like to repeat what I said before. We haven't actually changed our ambition to improve our margin to meet to a high 30s, mid to high 30s in the mid to long-term horizon. So nothing has changed there as far as our profitability ambition. It's just that we want to make sure that we do this, and at the same time, we don't improve margin at the expense of long-term sustainable growth. Emmanuel Pavadakis?

Thank you. Hello? Yeah, Emmanuel.

Oh, sorry. Okay. Perhaps I'll take a question ahead of the Capitella 291 data due in the second half of the year. So just your degree of optimism, excuse me, Susan, on probability of success in light of faction and given a pretty mixed history for the class. And then a couple of follow-ups. And Herto, perhaps you could just give us a bit of color on where you think you are in terms of second-line metastatic share conversion from the current standard of care, TDM1. And then Evershield, you've mentioned several times it's retained efficacy, but I think it's pretty clear from recent publications that Tix-Gevimab at least has almost completely lost efficacy against the BA sub-variants. So is there any contingency built into the contracts you're signing around returns or cancellations for potential complete loss of efficacy, which seems like a pretty high risk? Thank you.

So maybe what we could do is, Susan, you'll cover the other question in a minute, but do you want to cover the

every shell from sort of an efficacy viewpoint and what we are working on and then you could cover the question about contract yeah it's a great question around around the antibodies I think you know we were very specific in terms of always have having two antibodies in every shell specifically for the reason that you're asking so we have seen obviously some reduction activity or one or other antibodies brush when you put them together the efficacy remains intact and robust. And I think you also need to be careful not to be confusing a decrease in neutralization, you know, in vitro neutralization, pseudovirus assays with a decrease in efficacy, because that doesn't necessarily translate, because you don't know what the level of neutralizing activity in vitro is. Iskra said in the real world studies that we're seeing with current variants, the efficacy is remaining very robust across all the variants. And so because we have two antibodies, I think we're in reasonably good shape. Can we say we're never going to get resistance? But I think we're reasonably well protected. But, of course, now the next generation of antipodes that we've acquired are going to enable us to find additional binders that will further protect us from those resistant variants if they occur.

Mene, before I cover the Quantrak question, maybe something that's worth reminding everybody is when we talk about the efficacy of Evershield, the numbers you've heard I think it's here against one symptom. We're not talking about efficacy against severe disease or whatever. We're talking about efficacy against one symptom. So it's a tremendous level of efficacy that we have today. And then real world evidence is demonstrating it's still there. What that means is we protect people not against severe disease. We protect them against being symptomatic.

So it's a fantastic efficacy. That's like a runny nose, a cough. I mean, it's mild symptoms as well.

Yeah, one symptom being a runny nose or a cough. So, I mean, it's really a very, very impressive efficacy level.

And I think it's really worth highlighting again that, you know, we really believe that the activity will not be lost in the new variants. And I think that just to build on the manner point, we do see a different level of efficacy of different antibodies in the different variants. but it is true that one or the other are really keeping the strong efficacy. Therefore, we are working with the governments and the relevant healthcare stakeholders being transparent on that and I do believe that we will find a way even in case the resistance will happen to make sure that we deliver what will be needed to protect the patients and equally to find a way how to make sure that governments will be protected in a way, given the unpredictability of the COVID-19 environment. I think it's also fair to say that from the vaccine onwards, I think we are all working in the environment that is extremely volatile and dynamic. and that we are all taking a different level of risks moving forward, making sure that we deliver medicines, both vaccines and antibodies, that can continue to protect the patients and protect them from the COVID-19.

Suzanne, thanks, Ishwar.

So in terms of the development of KBV30, we were very careful to make sure that we developed the right dose and schedule. So the intermittent dose and schedule, four days on, three days off, is something that optimizes the tolerability and minimizes the discontinuation rate, which I think is an important feature of the design. And then the second thing that builds confidence is, of course, the data from FACTION, which are highlighted in the presentation. 55% of patients have the activated pathway PI3 kinase AKT or PTEN loss. And in that group, we saw really impressive improvement in not just PFS, but in overall survival with a hazard ratio of 0.46 for overall survival. So, you know, we do phase three trials in order to confirm the activity we've seen in phase two, but we have a good level of confidence in the importance of this pathway and in the ability of this molecule to inhibit the pathway well and to have that done in a tolerable way. I'm just going to hand over to Dave now to talk about the INHER2 question.

Yes, Emmanuel, on INHER2, we've seen really brisk conversion in second line just two months after approval. We now have 35% share of second line INHER2 positive. Just to put into perspective, we saw a consil at TDM1. a year ago, probably in 45 to 50% use. And so the majority of that 35% use that we're seeing right now in second line is coming at the expense of TDM1. We do see some reduction in some other areas. I'd also note that we also continue to see use in third line plus for patients who don't see, obviously, or who haven't had an opportunity to be able to yet get and HER2 in the second line. So I'm proud of the work that the AZ and DS teams are doing just in two months after the launch.

Thanks, Dave. So we are over time, but we appreciate that you're very interested, and we love your questions, and they're great questions. We also want to respect your time, so we'll take two or three more questions and then close the call. Victor Sundberg at Nordea. Victor, over to you.

One question on Medi-5752, your PD-1 CTL-4 bispecific that you presented at ASCO. I think it was clear that the 1,500 mg cohort was too toxic, but also on the 750 mg, the discussant commented that the toxicity looked fairly similar to ipinevo alone. So my question is if you agree with that assessment and if the 500 mg dose is the way to go forward for that program, and if you think efficacy will be enough at that lower dose. And perhaps a quick second question as well on HER2 low, just quickly. So we know that HER2 low expression is less common in HR negative patients, but any data you have seen, if it's also lower in early lines of treatment, irrespective of HR status compared to later lines of treatment, just for modeling purposes. Thank you.

Joanne, do you want to cover this?

Yeah, sure. So for Medi5752, First of all, at doses above 500 and 750 milligrams, if you look at the effect on T cell proliferation rate, you are in the range of increase you'd expect to get from around a 10 mg per kg dose of ipilimumab or tremolimumab. And we presented that with some of the data at AACR. In terms of the tolerability, we're obviously looking at the discontinuation rate, and we'll continue to evaluate that, both 750 and 500 milligrams. We will be presenting some more data in combination with chemotherapy in the non-small cell lung cancer setting at the World Congress on Lung Cancer, so look for that as well. But we look at the totality of the data. And overall, we're encouraged with the profile that we see that we can get a good tolerability profile with improved efficacy compared with what you'd expect with a PD1 agent alone. And in terms of HER2 low, I don't see a real shift in the HER2 low prevalence between early and late line.

Thanks, Suzanne. Peter, well for the Jefferies.

Just two quick ones. Firstly, just a comment on other operating income and the comment you made with regard to second half. I'm curious, does this mark the end now of the sort of serious portfolio optimization that we've seen from AstraZeneca and should we now envisage, therefore, an end to these profits? Or is it more just this particular year, given macroeconomic challenges, you know, management's current focus, that that hasn't been the same degree, but we should not necessarily assume that's going to be the case in future years? And then secondly, just coming back to the SG&A, just curious, you've talked in the past about the fact the years of investing more and more in China are now over. Just curious if you can update us on your thoughts there. Are you actually now taking cost out of China, or how should we think about investment in China when we think about the SG&A trend? Thank you.

Maybe I can cover quickly what I see, because I always describe what we've done as sort of pointing the tree, right? I mean, and... basically the divesting products that would be better managed by someone else than by us and someone else could create value so we've done a lot of this there's less less today of course and basically now we are trying to grow new branches to this tree to make it a beautiful tree with launching of new products but it doesn't mean that it's finished i mean we'll basically manage that as we go but there's definitely peter there's definitely less older products to divest and less other income moving forward. So our intent is really to focus on our products, our new products, grow them and develop the pipeline.

I think the second question was around China and whether we're investing more in SG&A in China. Clearly, it's been a tremendous growth journey in China over the last several years. As you know, the government and pricing policies have put the growth there under pressure. That being said, we continue to invest in new products and hopefully the new product launches will drive that growth. We are managing our cost base in China in proportion to the revenue decline that we see. And again, we'll continue to manage that while investing in innovation.

So we'll take the last question, Seamus Fernandez of Guggenheim. Seamus, over to you.

Thanks, Pascal. And maybe you can be knighted for horticultural comparisons as well. But the dynamics, I guess, around Datto, one quick question there. You know, maybe you guys can just help us understand, when you look at the data, Dave, you said you would hope that it would potentially replace late-line chemotherapy, but it's also being studied in combination with platinum-based chemotherapy. So is it your expectation that we will continue to see platinum-based chemotherapy as part of these regimens, or is it possible that that could be eliminated from the regimens going forward? And then secondly, just very quickly, on the COVID antibody approaches, Just hoping you guys could give us a little color on whether or not the regulatory environment is changing such that COVID antibodies can actually come to market almost in the way that flu vaccines are re-approved over time. Just hoping to understand that context a little bit better. Thanks so much.

Thanks very much. So, Dave, the first one, or Susan, or yeah.

So the data that we'll present with the tropion lung O2 at the World Congress on lung cancer looks at the combination both with the doubler of data DXD plus PEMBRO as well as the combination with platinum-based chemotherapy. So I do think that it's probably going to depend a little bit on, you know, how patients present and what physicians are wanting to achieve. So those patients with bulky disease that want to achieve, you know, rapid and durable responses, you know, there's a choice there. But you'll see the data at World Congress on Lung Cancer as it comes through.

Yeah, I mean, I think the only thing that I'd add, and, you know, Seamus, you're pointing out that I sort of talk about the first sequence. I think that the first step is replacing some of this late-line systemic chemotherapy. In terms of what's possible as we move into earlier lines, I think that, you know, obviously both platinum and PEM are utilized here. And so one of the important clinical questions is the one that you're asking, which is, would we be able to replace both or just one of those? And they've got very different on a tolerability and number of cycles considerations. So those are the kinds of things we'll be answering in the program as the phase threes and the frontline get underway. Okay.

It is relatively easy chemo to use, so it's tempting to continue using it. Mene, do you want to cover that? Or Ischard, do you want to cover it?

I think it's a good question, and I can say that we would be hopeful to see the regulators taking the approach of the COVID-19 medicines, both on vaccine and antibodies, in the same way as they are doing for the flu. That would definitely accelerate and ease the way of the new updated vaccines and monoclonal for the new variants coming to the patients. It's still not the case, but I'm sure you're aware that there are many discussions between the regulators and equally discussions between the regulators and the manufacturers and the industry, how to accelerate and optimize that process to be able to continue to be agile and flexible when it comes to bringing the medicines against COVID to the patients.

Thanks, Ishkha. So we'll close here. Thank you so much for your great interest, and I wish you all a good day and a good weekend. Thank you.