AstraZeneca PLC

Good day. Welcome, ladies and gentlemen, to AstraZeneca's year-to-date and Q3 results 2021 conference call and webcast for investors and analysts. Before I hand over to AstraZeneca, I'd like to read the safe harbor statement. The company intends to utilize the safe harbor revisions of the United States Private Securities Litigation Reform Act of 1995. Participants on this call may make forward-looking statements with respect to the operations and financial performance of AstraZeneca. Although we believe our expectations are based on reasonable assumptions, by their very nature, forward-looking statements involve risks and uncertainties and may be influenced by factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Any forward-looking statements made on this call reflect the knowledge and information available at the time of this call. The company undertakes no obligation to update forward-looking statements. Please also carefully review the forward-looking statements disclaimer in the slide deck that accompanies this conference call and webcast. There will be an opportunity to ask questions after today's presentations. If joining on the telephone, please press star 1 to indicate you wish to ask a question at any time during the call. And for those on the webcast, you'll find an on-screen text box in which to type your question. And with that, I will now hand you over to the company.

Thank you and good afternoon everyone. I'm Chris Sheldon, Head of Investor Relations at AstraZeneca. I'm pleased to welcome you to AstraZeneca's third quarter 2021 conference call. All materials presented today are available on our website. Slide two has the usual safe harbor statements. We will be making comments on our performance using constant exchange rates or CER, core financial numbers and other Thank you. Thank you. Thank you. Executive Team. In a moment, I'll hand over to our CEO, Pascal Soriot, to begin. Please turn to slide four. Following our prepared remarks, we'll open the line for questions. We'll ask that you limit yourself to one question and one follow-up question to give a fair opportunity to participate in Q&A during the allotted time. As a reminder for those on the phone, please join in the queue for questions by pressing star one. Please advance to slide five, and with that, Please, Pascal, over to you.

Thank you, Chris, and hello, everyone. The third quarter of 2021 was an important milestone for our company with the addition of our Alexan colleagues. Alexan has been a remarkable, diversified readiness portfolio with significant growth opportunity. And a great part of this success is due to the talented team globally, and I very much look forward to seeing all With the inclusion of Alexion from the 21st of July, we saw total revenue for the year to date of over $25 billion, an increase of 28%. If you move to slide six, if you don't mind. Yes, thank you. The revenues excluding the COVID-19 vaccine for pandemic use grew at 17%. The breadth of our now expanded portfolio allowed us to continue to deliver on our growth ambition in the face of ongoing industry-wide pressures related to effects of COVID-19, which is still having an impact on patients visiting doctors or going to hospital. Total revenue in the quarter came very close to $10 billion, $9.9 billion precisely. A remarkable milestone, which of course was aided by our COVID-19 vaccine sales. but still excluding the vaccine, we experienced tremendous growth. The core EPS of $3.59 is at 23% of our prior year and excluding the vaccine, the growth is 17% reflecting continued leverage in our business. As a reminder, our vaccine has been supplied at no profit and therefore the vaccine sales here today deliver no profit. Operating expenses growth in the quarter reflect in part the costs associated with the vaccine The integration of Alexion and most importantly our continued investment in our strategy to sustain an industry-leading pipeline and support our recent launches. We will now progressively transition our vaccine to a for-profit approach but our price will ensure the vaccine is affordable for low and middle income countries and therefore the profit will remain limited. We've updated our full year revenue guidance to reflect the contribution of our COVID-19 medicines in the fourth quarter. The great majority of our COVID-19 cells in Q4 will remain pandemic cells with no profit. Therefore, the Q4 profit arising from our vaccine cells will remain quite limited and will be offset by the limited investment in our long-acting antibody combination AZD7442. There is a limited investment that we need to do ourselves that is not covered by contracts we have with government. But essentially, the limited profit from the vaccine is offset by the limited cost of the AZD 7442 development. And overall, the COVID medicines will not contribute to profit in 2021. So it's important to remember that the EPS guidance that we give reflects the performance of the underlying business, being the so-called quote unquote old AZ plus Alexion. So it's a new AZ with Alexion, but excluding the COVID assets. Aradhana will provide additional details on this important update later in the presentation. All of our disease area franchises are doing well. We demonstrated broad-based, double-digit growth with oncology growing at 16%, and in biopharmaceuticals, CVRM growing at 10%, respiratory immunology at 12%. For rare diseases, the total revenue was $1.3 billion. with year-to-date growth not meaningful due to the limit of the reporting period, but in line with our expectations. And for Q3, it's important to remember we didn't have a full Q3 as far as election is concerned, so we didn't have the full extent of sales, but also not the full extent of R&D spend and other costs. We committed to following the science, and our pipeline news flow in the quarter has been extraordinary, really, with eight positive late-stage readouts across seven medicines. with the potential to change the standard of care in multiple diseases. So if you turn to slide seven, the performance in the field was strong across our diversified disease areas, as well as across geographies. If you look specifically at the emerging markets region, growth was 10% year to date, excluding the contribution of the COVID-19 vaccine. China grew by 2% in a quarter due to price and volume pressures, as well as stock compensations to distributors. related to VVP and NRDL negotiations. The volume of key medicines is growing very strongly in China, but it's not fully compensating for past pressures. It is clear that China is slowing down, but will remain a very important market for us. And over the next few years, we expect to continue growing with, of course, a valuable growth rate depending on the year. but still a very important market that will contribute greatly to our company. And the slower growth in China was compensated by the emerging markets that grew 30% in the quarter. So overall, the emerging markets, including China, grew by 12% in the quarter, again, excluding COVID-19 vaccine, which reflects the strength of our global footprint. We will provide additional commentary on China performance later in the presentation. So please move to slide eight. So if we look at the lead stage pipeline delivery, we'd like to highlight a few regulatory approvals for three medicines, Farciga for CKD in the EU and Japan, Safnelo for SLE in the US and Japan, and Ultramiris in the EU for children and adolescents with PNH. So we await regulatory decisions with great excitement for AZD7442, a long-acting antibody in COVID-19 prophylaxis, and also in oncology for HER2, in second line HER2-positive breast cancer. And we are, of course, in the process of discussing potential orders for Evusheld Lab with countries around the world. So if you move to slide nine, I will now hand over to Aradhana Sarin on UCF4. who joins us from Alexion where she was the CFO. For those of you who have not met Aradhana, I know you'll be as impressed as I am with her knowledge of the industry, her sense of the business, and her passion for our mission to help patients and follow the science. Again, a warm welcome to Aradhana and our Alexion colleagues. Over to you, Aradhana.