AstraZeneca Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 8, 2024

There are 20 speakers on the call.

Operator

a warm welcome everybody to AstraZeneca's 4th Quarter and Full Year 'twenty three Results Presentation Conference Call and Webcast for Investors and Analysts. I'm Andy Barnett, Head of Investor Relations. And before I hand over to Pascal and members of the executive team, I'd like to cover some important housekeeping points. Firstly, as I'm probably sure you realize all the materials are already on our website for your review. Here is our forward looking statement, which I'd encourage you to take the time to read.

Operator

We'll be making comments on our performance using constant exchange rates or CER, core financial numbers and other non GAAP measures. A non GAAP to GAAP reconciliation is contained within the results announcement that you'll have seen. All numbers quoted are in 1,000,000 of U. S. Dollars unless otherwise stated.

Operator

This slide shows the agenda for today's call. Following our prepared remarks, we'll open the line for questions. If you want to raise it, ask a question in the room, you raise your hands. There'll be roving mics for those online. Please use the Zoom function to raise your hand.

Operator

As usual, we'll try and get to as many questions as we can through the course of the call. But if you limit the number of questions you ask at once, it'll give others a fair chance to participate. And with that, Pascal, I'm going to hand over to you.

Speaker 1

Thank you, Andy. Good morning, everybody, and welcome to this London Stock Exchange where we are celebrating our 25th anniversary as a company, merging Astra from Sweden and Zeneca from the U. K. Quite a number of years ago. But I want to start my talk with this slide.

Speaker 1

And this slide is important because I want to recognize or celebrate the fact that not only it's our 25th anniversary, but importantly, we actually did achieve the goal we set ourselves 10 years ago to reach $45,000,000,000 sales in 2023. And in fact, I could add you, we overachieved it because at the current exchange rates are JPY 20,000,000,000, 45,000,000,000 probably is closer to JPY 40,000,000,000. And I don't want to say just to kind of pat ourselves in the back, even though I'd like to do this and celebrate our team's but I want to mention it because we always did this with our eyes on the long term and growth. And we are embarking on another 10 year cycle. And we have announced an R and D Day because we want to refresh our strategy and show you what we are planning to do over the next 10 years.

Speaker 1

But we got this $45,000,000,000 screw ups and downs, And I have to say often a lot of skepticism, but always on our with our eye on the long term growth rate. And that's what we're going to do. We believe we can grow, and we believe over the next 10 years, we will deliver superior growth. And that's, of course, going to drive our profitability as a result of it. But our growth and sustainable strong growth is really what we are after.

Speaker 1

And we've done this role following the science, and again, we are embarking on a new cycle, and we are investing in a new science that will shape the future of medicine and shape the future of this company, and we can talk more about this. We have achieved this whole disciplined investment, even though we often have extensive debates inside the company and now is challenging everybody to be even more disciplined in terms of our investment, but we've constantly focused our investment on where we can deliver the most growth. And also continuously focusing on oncology, cardiovascular disease, respiratory is more recently increasing our investment and keeping our eye on immune diseases and finally, rare diseases. And the company we have today and the team we have today is very different from what it was 10 years ago. And it's really rewarding to see the progress we've made and the strengths we have developed in our portfolio, but also in the strengths of the talent in the company, the way we operate in oncology today and the same in the other TAs is very, very different.

Speaker 1

And it gives me confidence we can actually deliver another cycle of very strong growth over the next 10 years. So importantly, we delivered our upgraded guidance for the year, 15% growth excluding COVID. We had guided to increasing to low teens, so 15% is slightly better. On the EPS front, we grew by 15%, which is also slightly better than our upgraded guidance for the year. And in the quarter 4, we saw an opportunity because we had a tax benefit.

Speaker 1

We saw an opportunity to invest to drive further growth and stronger growth next year and the years after as we are launching new products and expanding footprint, you saw that the emerging markets out of China grew by 35%. China itself is rebounding and growing again. So China is back again on the growth trajectory, and this year should be another good year. We've been improving our operating margin, you see a drop in 2021, but that was it's a bit of an artifact because it's driven by the very large COVID sales we experienced and of course, those were at no profit, so it dilutes our operating margin. But essentially, you can see our continuous progress.

Speaker 1

And I wanted to say today that we are committed to our goals of mid-30s by in the midterm. And of course, long term will be depending on our growth opportunities and our pipeline in particular. So we are doing 3 things. As I've said before, we're driving we are focusing on today, we're driving growth, top line growth and operating margin. So we deliver our financial goals, and that now is 2024 really.

Speaker 1

We're building the pipeline continuously by building the pipeline so that we drive growth tomorrow, which is 25 to 2,030. And we are investing in new technologies and new products to shape the future of medicine and drive long term growth and what I call long term growth is what I often refer to as being the day after tomorrow and it's 20 8, 20 9 and beyond. Ultimately, our goal is to remain a high growth company for the next period of time, 10 years and beyond. You can see here that our revenue is spread across a variety of therapy areas, but oncology, as you know very well, biopharma, as you know very well in rare disease. And we had growth across all therapy areas.

Speaker 1

Oncology, 21%, CVRM 18%, RNI 10%, of course, VNI declined because we had a massive decline in COVID sales and rare disease grew by 12%, which is more than most people expected and actually more than we ourselves expected. If you remember, we guided that we could grow by half single digit this Rare Disease business, but in fact, we're delivering low double digit growth, right? And we Mark will talk more about this. All geographies did very well, 14% in the U. S, 20% in the emerging market, which is 35% ex China and 8% in China.

Speaker 1

And you can see here the growing importance of the emerging markets outside of China. In Europe, we grew by 17% and established rest of the world 8%. Japan is starting to be impacted by the loss of exclusivity on Nxiom, of course. But still, 8% growth is a pretty nice number there. So again, well diversified growth across geographies and across our disease areas.

Speaker 1

So tomorrow, so this is the today and tomorrow is really the pipeline, really in the pipeline. We guided earlier this year that we had a goal of 30 new Phase III. We've achieved 27, which showed by 3 that a little bit delayed and starting in the early 2024 instead of 23, but 27 is a very large number of Phase III starts. Importantly, 10 of those have a potential to be blockbusters, either new products or new indications, blockbuster, of course, being more than €1,000,000,000 So we have 10 of these Phase III trials that if they are successful, we'll deliver $1,000,000,000 sales or more each. We also achieved 24 regulatory market regulatory approval across major markets.

Speaker 1

And finally, We got approval for 4 new medicines and we are on track to deliver 15 new molecular entities launches by 2,030. And as you can see on this slide, those approvals, those new medicines range from biopharma with Resupra to oncology with TruCap. Again, back to biopharm with WENUI, Plontersen and also rare diseases, Alexion with Danicopan's VOYIDEA approval in PNH. So across the whole pipeline, we are launching new medicines. And finally, what I call the day after tomorrow is really, this new technologies, those new platforms.

Speaker 1

And what are we trying to do here? First of all, we have, we believe, a tremendous opportunity to leverage our growing pipeline of antibody drug conjugates with our IO bispecifics. So in the ADCC space, we started with this collaboration with Daiichi Sankyo that you know very well. We've now built our own internal portfolio of ADCs. We have 6 ADCs that are totally owned by AstraZeneca with unique targets and unique warheads.

Speaker 1

And there's more to come. We can talk about it later, but we're working on multiple targets and wide. And finally, importantly, we can combine those with are bispecifics. And we have 3 of those, 2 that are more advanced and are very exciting products. And We believe in oncology, this ADC combination with IO can totally transform the way cancer is treated and position us as one of the few companies that has the potential to leverage these combinations.

Speaker 1

We work on cell therapy because we believe cell therapy will be an important technology for the future. Today, those are mostly CAR Ts in hematology. We want to take this into solid tumors. We want to take this into allogeneic of the shelf cell therapy. And we also want to take this into immune diseases, and we started working on this.

Speaker 1

So what we have been doing is leveraging our own internal effort and our own internal technologies and combining this with putting together deliver what I was just talking about, which is moving into solid tumors, moving into allogeneic cell therapy and moving into immune diseases, and we now have a complete set of what we need. Now it's a question integration and execution, but we have the technology that are required to achieve what our long term goal is in cell therapy. And you've got listed here Neogen, Quell, Selective, Greycell and all of those together will enable us to build we want to do in oncology and biopharm. Another technology that we believe will shape the long term is T cell engagers. And again, we've done that with our own internal effort and complemented with BD.

Speaker 1

The BD we do is not a random BD. It's always with a view to build a strong presence in some of the technologies we've identified. And we've done this with ADC, we're doing it with cell therapy, we're doing it with T cell engagers. And finally, we do it in gene therapy with a focus on rare diseases. If you are in rare diseases, you really have to have a gene therapy approach complementing your portfolio.

Speaker 1

And of course, here you know well the Pfizer Gene Therapy portfolio acquisition and complemented with the Cellectis collaboration. So this is really what we believe is going to drive a little bit of mid term growth with Daiichi Sankyo's collaboration in some of the AGCs, but mostly looking at driving growth 2018, 29 and beyond, so we can deliver growth today to more in the day after. So with this, I'll hand over to, Arad now who's going to take you for the financials. Over to you, Ope, sorry, here.

Speaker 2

Thank you. Thank you, Pascal. As usual, I will start with our reported P and L. As Pascal mentioned in his opening comments, total revenue increased 6% in 2023, which was at the top end of our updated guidance range. Product sales increased by 4% despite a decline of 3,800,000,000 in COVID-nineteen product sales in the year.

Speaker 2

Alliance revenue increased by 89%, driven by higher and HER2 sales in regions where Daiichi Sankyo books product sales. Our core product sales gross margins increased by 2 percentage points to 81.7%. This step up in gross margin was driven by lower COVID-nineteen revenues in 2023. In 2024, we anticipate a slightly lower product sales gross margin percentage driven by higher sales in emerging markets, increased before this product supply, higher production costs in certain facilities, as well as higher product sales for partnered products and regions where we book sales and then pay out a profit share to our partners through cost of sales. Core operating costs increased by 9% in 2020 3.

Speaker 2

R and D costs increased by 9%, driven by 27 new phase 3 starts in last year, including multiple trials of our PD-one CTLA-four bispecific mirostimic and our oral SERD camizestrant. R and D cost as a percentage of total revenue was 22% in line with our ambition. As expected, poor SG and A stepped up in the Q4 relative to the Q3 in 2023. We increased our investment in new launches behind Waynua, TrueCap, and Air Supra and continue to invest behind indications expansions such as Farxiga and CKD and heart failure and Imfinzi across tumor types. Our full year core tax rate of 17% came in slightly below our guidance.

Speaker 2

The 4th quarter tax rate benefited from an adjustment to deferred taxes following an intra group purchase of certain intellectual property, offset by unfavorable tax ruling in certain jurisdictions. Overall, our P and L allowed us to increase investments in both R and D and SG and A in the 4th quarter. Core EPS for the full year 2023 was $7.26 a growth of 15% versus the prior year. As Pascal stated earlier, we have made good progress on both top and bottom line delivery in recent and we remain on track to deliver both industry leading growth and improve operating margin to the mid-30s in the midterm, balanced by the need for continued investment to drive top line growth in both the near term and mid term and long term. Today, we are pleased to announce our 2024 full year guidance.

Speaker 2

We anticipate We anticipate our total revenue of low double digit to low teens percentage increase and our core EPS of low double digits to low teen percentage increase as well. Collaboration revenue is expected to increase substantially, driven by success based milestones and certain anticipated transactions. Other operating income, on the other hand, is anticipated to decrease substantially. Recall that in 2023, It included a one off gain of around $700,000,000 related to the renegotiated Bifortis agreement and another $240,000,000 related to the sale of Pulmicort in the US. If FX rates for February to December were to remain at average rates seen in 2024 January, we anticipate a low single digit adverse FX impact on both revenue and core EPS in 2024.

Speaker 2

Cash flow from operating activities increased by $37,000,000 in 2023. We continue to focus on improving our cash conversion and have already made significant progress in this area. Deal payments amounted to approximately 4,000,000,000 of which Nearly half related to past business development payments, including milestone payments to Daiichi Sankyo. For this year, we again anticipate about $2,000,000,000 in deal payments relating to historical transactions. CapEx in 2023 was around $1,400,000,000 In 2024, we anticipate a significant step up in CapEx, potentially in the 50% range, driven by investments in new manufacturing capabilities such as API, inhaled products and cell therapy.

Speaker 2

Our net debt at the end of 2023 was $22,500,000,000 and given very recent BD transactions totaling about 2,000,000,000 we anticipate this to remain at about the same level in 2024. With this in mind, our finance expense is expected to increase given the current interest rate environment. Our net debt to adjusted EBITDA ratio is 1.6 times on the last 12 month basis. Our capital allocation priorities remain unchanged with our number one priority to reinvest in the business both in the pipeline and behind new launches. We remain committed to keeping a strong investment grade rating and will continue to pursue value enhancing business development transactions.

Speaker 2

Towards the end of last year, we announced a license agreement with Echogene and the proposed acquisitions of Icosavax and Greycell. Finally, we maintain our progressive dividend policy defined as either a stable or increasing dividend. With that, I will hand over to Dave.

Speaker 3

Thanks, Aradhana, really appreciate that. So oncology total revenues of $18,400,000,000 in the full year period, grew 21% versus the prior year and that was driven by strong global demand of our key medicines. Tagrisso Global Revenues grew 6% in the 4th quarter, reflecting strong double digit growth for the U. S. And Europe.

Speaker 3

Performance in the quarter was partially offset by continued impact from the June 2023 mandatory price reduction in Japan, as well as expected impact from hospital ordering dynamics in China and a rebate reclassification in Australia. In the Q4, Lynparza delivered 8% product sales growth and remains the leading PARP inhibitor globally despite ongoing class challenges. In the period, we recognized $245,000,000 regulatory milestones from Merck following the U. S. PROPEL approval in BRCA mutated prostate cancer.

Speaker 3

Imfinzi, inclusive of Imjudo grew 52% in the 4th quarter fueled by further global demand growth in gastrointestinal tumors. In 2024, we expect continued progress with TOPAZ-one in Himalaya, although TOPAZ-one demand in the U. S. Will moderate as the regimen is now established as the clear standard of care. In Japan, a 25% price reduction based on sales took effect in February of this year, an additional mandatory price reduction is anticipated later this year based on recent fixed dosing approvals.

Speaker 3

Calquins total revenues increased 14% in the 4th quarter driven by continued new patient share gains across both frontline and relapsedrefractory CLL. And HER2 total revenues $364,000,000 in the 4th quarter increased 68% year on year. In the U. S. And Germany, We're very encouraged by new patient share gains in the HER2 positive setting, firmly establishing in HER2 as the undisputed standard of care across HER2 positive and HER2 low metastatic breast cancer.

Speaker 3

In November of last year, we received approval for TRUCEAP, our novel AKT inhibitor in the U. S. And for Imfinzi Topaz 1 in China. Importantly, we received a priority review designation for an HER2 and HER2 expressing tumors and adjuvant use of Tagrisso was added for the first time to the NRDL in China at no discount. With the exciting approval of TRUcap, we have the opportunity to further extend our leadership in breast cancer including in the hormone receptor positive landscape.

Speaker 3

And HER2 is the established standard of care in late line HER2 low, and we look forward to the results of the DESTINY Breast 6 trial in the first half of this year, the opportunity to bring in HER2 one line earlier and expand into HER2 ultra low tumors. Data from the Tropion Breast 1 trial of Datto DX and hormone receptor positive HER2 low breast cancer was presented at ESMO last during the Presidential Symposium. Discussions with health authorities and pre launch planning activities are already well underway. Finally, aligned with our ambition to establish a new endocrine therapy backbone, we now have several pivotal trials ongoing in the frontline our next generation oral SERD camazestrin, including in combination with CDK4six inhibitors and TRUCEAP. TRUCEAP is being very well received by the clinical community in the United States and we are already seeing rapid adoption.

Speaker 3

With the majority of new starts in patients with biomarker altered tumors who have previously received a CDK4six inhibitor, which is consistent with our views of the addressable population. We see potential for TRUCAAP to become the new standard of care and second line for endocrine treated patients with PIK3CA, AKT1 or PTEN altered tumors. And with that, We'll advance to the next slide and I'll hand over to Susan to cover R and D highlights in the quarter.

Speaker 4

Thank you, Dave. In December, we entered into a definitive agreement to acquire GreyCell Technologies, which furthers our cell therapy ambition across oncology and autoimmune diseases. Greycell has a proprietary cell therapy manufacturing platform called FASCAR. The FASCAR platform has several key benefits. 1st, It significantly reduces the manufacturing time from between 1 3 weeks to 22 to 36 hours, with the opportunity to improve median turnaround time and also enable increased manufacturing capacity, as well as predictability of CAR T delivery.

Speaker 4

2nd, a lower dose of cells needs to be manufactured for each patient, which reduces the risk of cytokine release syndrome, and that can improve the safety profile. And third, the shorter manufacturing time delivers fitter T cells, and this potentially improves the efficacy of this CAR T. This proposed acquisition also enriches our growing pipeline of cell therapies, with GcO12F, a novel clinical stage, dual BCMA and CD19 targeting autologous CAR T. Phase 1 data were presented at the ASH meeting in December. In 22 patients with newly diagnosed high risk multiple myeloma, the objective response rate was 100%, And we saw a minimal residual disease negativity rate between 95% 100%, 6 to 12 months after infusion.

Speaker 4

This demonstrates the promise of this potential therapy when you move it into an earlier line setting. Safety was also favorable, with only 27% of patients experiencing either grade 1 or 2 cytokine release syndrome, and no grade 3 or above events. Additionally, we did not see any neurological toxicity which can be associated with this type of therapy. With a median follow-up time of 18.8 months, median PFS and median duration of response had not been reached, also highlighting the durability of the response. We believe that GCO12F has potential applications across hematologic malignancies, including multiple myeloma, and will further bolster our hematology pipeline, adding to Calquence AZD-four eighty six, our CD19, CD3 next generation bispecific T cell engager, and AZD-three zero five, our GPRC5D targeting antibody drug conjugate.

Speaker 4

We also have 2 further homegrown hematology molecules, which have just entered the clinic. A CD123 antibody drug conjugate AZD9829 and a PRM25 inhibitor AZD3470. We look forward to updating you on our exciting hematology pipeline over the course of this year. And with that, can you please advance to the next slide, and I'll pass over to Ruud cover biopharmaceuticals performance.

Speaker 5

Thank you so much, Susan. Biopharmaceuticals delivered total revenue of $18,400,000,000 in 2023, driven by growth of 18% in CVRM and 10% in R and I. Key highlights for the year included Farxiga nearing $6,000,000,000 in total revenue and R and I returning to double digit growth. Turning now to the 4th quarter, Where within RNI, nearly half of the total revenue came from Fasenra, TESPYER, Savnella and BRUSTRY. These medicines grew by a combined 40%, more than offsetting the impact of Symbicort's generic entry.

Speaker 5

And in VNI, BayFortis continued to see strong demand in its first RSV season, generating $95,000,000 of product sales and alliance revenue for AstraZeneca in the quarter. Lastly, we received our 1st sales related NALSO payment from Sanofi, totaling $27,000,000 We have recently launched 3 innovative new medicines within biopharmaceuticals. Launches in new areas of science and medicine requires to raise awareness among patients and practitioners and often to build additional sales forces. Maximizing early momentum for these launch brands is critical to delivering on their full potential. Iplontisin is an amyloidosis treatment that we're developing in partnership with Ionis.

Speaker 5

In January, it launched with the brand new WENUA for patients with ATTR polyneuropathy, a debilitating ultra rare disease, which is generally fatal within a decade if left untreated. AirSupra is the 1st rescue medicine to reduce exacerbation and treat the underlying inflammation. And we have shown with the Mandela trial a 28% reduction in the risk of severe asthma exacerbations in adult patients compared to albuterol. We formally launched Air Supra last month for adult patients. And over time, we hope to see primary care physicians in the United States change 50 years of prescribing habits.

Speaker 5

As mentioned, we are off to a strong start and are only halfway through the first RSV season that Bay Fortis has been available for infants. Following continued strong demand and the recent approval in China, We are planning for a substantial increase in capacity in 2024. We continue to invest behind the Farxiga brand with growth being driven across the globe by recent launches in heart failure and chronic kidney disease. In the coming years, we aim to continue to build on this franchise with new combination medicines in development that address unmet needs in hypertension, heart failure and CKD. And with additional enemies in our late stage and early stage pipeline, our CVRM portfolio is set to expand and evolve over the mid to long term.

Speaker 5

We recently commenced a Phase III trials for baxevstat in uncontrolled and resistant hypertension as well as for zebatantin combined with dapagliflozin addressing patients with CKD and high proteinuria. Iplovacin is also being evaluated for the treatment of ATTR cardiomyopathy, which is estimated to affect up to half a 1000000 patients worldwide. Our Phase 3 cardio transform trial is the largest of its kind and is powered to show a cardiovascular mortality benefit and we are very pleased to share today that we have obtained fast track designation from the FDA for our cardiomyopathy regulatory file.

Speaker 2

Will now

Speaker 5

hand over to Sharon to present the latest developments from the biopharma pipeline.

Speaker 6

Thank you so much, Ruud. I wanted to take this opportunity to highlight our current portfolio in immunology, as well as provide more color on our recent business development deals focused on immune mediated diseases. In saphenelo's pivotal Phase III TULIP trials in systemic lupus erythematosus, We saw positive changes in cutaneous lupus. We are building on this and expanding into new indications. We have started enrolling patients in our phase III DAISY trial of saphenelo in patients with systemic sclerosis, a chronic disease characterized by diffuse fibrosis and vascular abnormalities in the skin, joints and internal organs, which can be fatal.

Speaker 6

We also have plans to initiate 2 other saffnelo Phase III trials this year in cutaneous lupus and myositis. Our recent business development deals have accelerated our ambitions in immune mediated diseases. Emerging data from Doctor. Shett's academic group has shown the potential for long term remission with CAR Ts in systemic lupus erythematosus. Part of our definitive agreement to acquire GreyCell includes autologous CAR Ts with an ongoing phase 1 investigator initiated trial with GCO12F, A CD19 and BCMA CAR T in 15 Chinese patients with SLE.

Speaker 6

We look forward to sharing the Phase I data at an upcoming conference. Our collaboration with Quell is designed to develop multiple engineered T regulatory cell therapies, which have the potential to be transformative in type 1 diabetes and inflammatory bowel diseases. Treg cell therapies have a unique approach of modulating the immune system to reduce inflammation and prevent immune mediated damage to tissues. Quell's innovative platform of RMERGE Tregs could enable sustained clinical benefit. And finally, our collaboration with Selectus allows us to explore the potential of an allogeneic CAR T platform.

Speaker 6

Off the shelf availability from allogeneic CAR T cells is expected to reduce the time and cost associated with manufacturing. With these innovative transformational cell therapies as well as our internal capabilities, we are building a platform for a pipeline in immune mediated diseases with transformative potential. I will now hand over to Mark, who will cover our rare disease portfolio.

Speaker 7

So thank you, Sharon. And for rare disease, The total revenue achieved $7,800,000,000 in 2023, up 12% year over year, driven by growth in neurology indications, increased patient demand and launches in new markets. In the quarter, ULTOMIRIS grew 38% and plus 52% for the full year, driven by neurology indication with the vast majority of growth Coming from generalized mastina gravis patients, we're naive to branded treatments. As previously indicated, ILUtomulis revenues were broadly in line with SOLIRIS for the year. But if you look at the Q4, ILTAURIS revenues exceeded SOLIRIS.

Speaker 7

Our conversion strategy is progressing well with the majority of patients already converted across PHN, atypical immunoTic QA mix syndrome and gMG in our major markets. We continue to launch both medicines globally and expect the C5 franchise SOLIRIS and ULTOMIRIS revenues to remain sustainable and durable. Beyond complement, both Strensiq and Cosilugo grew 13% 48%, respectively, driven by continued patient demand. I'm also delighted to announce that we have started enrolling patients in our Phase 3 trials for trastyratin amyloid cardiomyopathy as well as for hypophosphatasia. ALXION-two thousand two hundred and twenty is a monoclonal antibody designed to deplete toxic amyloid fibrils in the heart with the potential to treat TTR cardiomyopathy in combination with standard of care, stabilizers or silences.

Speaker 7

Our Phase III trial is recruiting a broad range of patients with moderate and severe disease. It has been designed with hard cardiovascular endpoints all cause mortality and cardiovascular events, which are extremely important for patients and clinicians as well as for regulators and payers. We have begun enrollment in our Phase III program, oestrogen 4thase alfa in epophosphatasia, including 2 trials in the pediatric setting, investing both naive and switch patient as well as a larger trial in naive adults and adolescents. These trials represent a broad set of hypophosphatasia patients, including those with both skeletal and functional improvements. We believe that this product with every 2 week dosing and lower volume injections, coupled with improved manufacturing, creates a significant opportunity to increase the addressable population by 3x as compared to Strensiq.

Speaker 7

We have made great progress in our late stage pipeline with 9 Phase III programs underway and our TENS program, ULTOMIRIS in IGAN, is initiating soon. With that, Peter announced, we'll get to Pascal.

Speaker 1

Thank you, Marc. If I move to the last slide, this is really to show you that over the Next few months, we have a quite a number of catalysts that are going to drive us across oncology, biopharm but also rare diseases. And you have a few here that are listed. Of course, a number are missing. We also have FLORA 2 that will deliver updated OS data the course of 2024.

Speaker 1

But some of the most important ones here are going to drive the growth of several of our important products, LoRa for Tagrisso. Destiny Breast 6 driving an R2, Tropion Breast 2 with DAT ODXD. The Wave 1 study studying test bio in chronic sinusitis with nasal polyps and finally, Amol to Imfinzi. But there is, of course, a lot more than this. The other point I wanted to make in conclusion is that The midterm pipeline is actually emerging very rapidly.

Speaker 1

We have some very good data coming up out of our bispecifics portfolio. And there will be more data points communicated in the course of this year. Our ADCs, we'll have more data also to share about our ADCs and how this pipeline is shaping up. We have an emerging metabolism portfolio that we Don't talk much yet, but it is actually progressing very nicely. We have a very exciting oral PCSK9 that is making good progress.

Speaker 1

Baxrostat is for hypertension is in Phase III. And finally, we have, of course, the all GLP-one agent we licensed in. And the beauty about those agents is that they can be combined. Can be combined with ADC. They can be combined between themselves.

Speaker 1

And so we have here a metabolism portfolio that is really starting to take good shape. And beyond the products I mentioned, there's more to come, of course, in obesity, but also in cardiovascular in heart disease and renal disease. Cell therapy, we will this year communicate some of the results of our mid stage studies progression. And finally, we will also be communicating information about our new DDR pipeline and in particular, the PAP one selective. So as you can see here, quite a lot of new data coming up both from the Phase III pipeline but also from mid stage pipeline that will give you a sense for what is coming up and why we believe why we're so excited, why we believe we can continue to drive top line growth over the next 10 years and drive improvement in profitability as a result of Finally, I want to invite you all to our R and D Day.

Speaker 1

This will be in Cambridge at the DISC, our new R and D center. You will see as you for those of you join us on the 21st May, you will see this is a fantastic site and our teams are very excited to be there and I'm sure it will drive further momentum in our R and D productivity. And the reason we do this R and D Day is, as I said before, we've just completed our 10 year journey that we started in 2014. We're engaging in the next phase of our in the next 10 years. And we thought it's a good time to sit back and update our strategy and show you why we are so confident that the future is bright for AstraZeneca.

Speaker 1

So with this, I'll stop here and then open the floor for questions.

Speaker 8

Thank you. James Gordon from JPMorgan. I'll do just two questions, please. The first one was on revenues for this year. So the guidance low double digit or or low teens is a is a revenue target, but I think bears are worried that lots of that is collaboration revenues growing and product sales slowing.

Speaker 8

So can you just say, is that fair? Do you also think that you can sustain the same sort of pace of product sales growth? Or is it really about collaboration revenues taking over from product sales? That's the first question, please. And then I think the second question, the other thing that some bears have said today is that the top line guidance is about the same pace as the bottom line guidance.

Speaker 8

So that would imply then that margins might be about flat. And then I've seen, I think it was Slide 6, you said that the in the medium term margins will get to the mid-30s. But does that mean margins will be flat this year and then have to have a big inflection in 2025 and 2026 to get there? So Thoughts on that and whether there is going to be lots more OpEx and how that's going to work, please?

Speaker 1

Thank you, James. Great questions. And Rodnab, you will open the floor, I'm sure. But let me just be very categorical here. Our product sales are going to grow very strongly.

Speaker 1

So the collaboration revenue, of course, are adding to that growth. But certainly, product sales are very much on track to deliver the kind of growth that is included in the guidance range that we are communicating.

Speaker 2

Yes. I mean, if you look at just, For example, the growth in 2023 across the franchises, right, with oncology growing 21%, you know, rare disease 12% to 18 percent in CBRM. So we, you know, and all of that is from current products. So we expect that that momentum to continue into the coming year. Obviously, different products have different sort of dynamics and so forth.

Speaker 2

So the growth will come in product sales from both current products as well as some of the new launches that we have though, you know, again, they're they're early in their in their launch trajectory. I think on your second question, so when we have given obviously a range on both top line and bottom line, but of the other elements that I mentioned in my prepared remarks, one was, for example, the finance expense that we expect slightly to go up given the transactions that we did towards the end of last year and so forth and refinancing for some of the debt that we have. The second element is we obviously benefited a little bit from the tax rate last year. So that tax rate benefit will also not be there. So if you look at the the totality of the P and L, those will also be elements and we get to the range that we have on EPS, you know, and and when you take that into account, obviously, we expect the, you know, the revenue growth to, you know, we be pretty strong, but the operating expense growth to be lagging the revenue growth.

Speaker 2

And that's that's what's operating leverage.

Speaker 8

Thank you.

Speaker 9

Hi, Emily Field from Barclays. I have a couple of questions on oncology. The first on DAT by DXD, the AVANZAR study must have enrolled pretty quickly to be having a readout in 2025. If that study were to be positive, would you file based on that study? I know it's designed somewhat differently to TL07 expand the addressable patient set?

Speaker 9

I think you said before that HER2 low is about 50% of breast cancers. How much bigger does that get with HER2 ultra low?

Speaker 5

Suzanne?

Speaker 4

Yes. So for Avanzar, my mic on, can you hear me? Yes, Accrual has gone very well, which is I think demonstrates the interest in the potential not just of DAT ODXD, but the combination in particular of DAT ODXD plus immune checkpoint inhibition. As you know we've seen exciting data in a couple of different settings from the tropion lungo2 and 4 datasets as well as the Begonia study in triple negative breast cancer. I think investigators are very interested in that and the potential that this has to further improve the outcomes for patients with first line non small cell lung cancer.

Speaker 1

Your study is progressing very quickly in recruitment, as you pointed out. The second one is Db06 and the law maybe for you, Diwa.

Speaker 3

Yes. So, thanks, Emily, for the question on that. So I think as we Two things that I think are important about Db06. The first one is that it expands the opportunity if it's positive, like you highlighted, to move into the ultra low specifically on that question, just to lay this out. So if we look at hormone receptor positive metastatic breast cancer within the 60% are the IHC 1 +2 plus.

Speaker 3

So that's the HER2 low that's covered by DVO4. Then we've got 25% that we estimate that's in this 0 to 1 category. So that's how much it adds within this. And then you've got about 15% that are the true zeros. So first is that expansion outside of the one pluses into the ultra lows.

Speaker 3

And then also it's moving a line earlier. And so by moving a line earlier, there's 2 opportunities to growth and it'll be data dependent, but one of those is, of course, a longer duration of therapy you'd hope to get as you move earlier. The other is, is that if the data are really compelling, you could see that, that puts some pressure on what we see as a lot of endocrine recycling that takes place within these patients. So again, that'll be data dependent. We'll have what the magnitude of benefit is.

Speaker 3

But there's 3 different opportunities for 6 to contribute to growth moving forward.

Speaker 1

Yes.

Speaker 10

Thank you. It's Matthew Weston from UBS. Two questions and if the first one I can stick with and heard too as well. I think 4Q US sales probably were a little bit light in terms of growth of what people were expecting when Daiichi reported them, so total end user sales. And at the time, I think Daichi commented that penetration was reaching plateau in some of the U.

Speaker 10

S. Markets, but with the data expansion coming, there was going to be much more opportunity. I think a lot of investors felt that HER2 Low was significantly bigger than suggesting it had already So I'd love to understand what's happening there. But also Dave, if you can touch on HER2 PAN tumor, it seems to fly under the radar, may well actually be quite a significant indication. And then if I wrap there on the second question, you added into guidance that there's essentially pointing to a one time asset sale being something to take into account for 2024.

Speaker 10

I don't remember you doing that for quite some time suggesting it might be of a significant size. Is there any way you can help frame it?

Speaker 1

Want me

Speaker 3

to start? So Matthew, on and HER2, and I made this comment in my prepared remarks, and I think that it's an important piece, which is I had been commenting in quarters past that we had found that we had hit a 50% really kind of threshold that we were running into in both HER2 positive and HER2 low, but that we knew that there was opportunity to drive continued growth beyond that. And I was really pleased to see and we've been really pleased to see that we've been putting more effort against our promotional efforts within the U. S. And large markets within Europe.

Speaker 3

We've done that in conjunction with the TrueCap launch to really make sure that we've got the promotional muscle that we need out there and we're seeing movement in the HER2 positive new patient starts. And so that's moving in the right direction and going the right level. If you think about where we were, basically, Matthew, what I think happened was we had replaced a lot, if not almost all of the Kadcyla use. And now we're moving into some harder yards, but we're getting traction against it. We turn to HER2 Low.

Speaker 3

HER2 Low is again an opportunity for continued growth beyond where we've gotten to. It is in many respects a more complicated discussion to be able to have because we're talking about multiple therapeutic alternatives that exist within the hormone receptor positive space. We're obviously working on testing efforts. All of this though I think that again, I've got optimism that we've got an opportunity to continue to grow. I think that in HER2 has a lot of growth in front of it with 3 and 4 still in the U.

Speaker 3

S, still in Europe, and I think that 6, which Emily just asked about, would be further tailwinds to add to that.

Speaker 1

Pan tumor.

Speaker 3

Pan tumor is a spot where right now we've got therapy designation in later lines in the highest of overexpressors. And so I think that when you take a look at that population, you've got several thousands of patients across multiple tumor types that could be addressable for this. And while our Early label might be relatively modest compared to, for example, the 03 and 04 opportunities. I think that the more evidence generation that takes place the more that we continue to do work in this space and if we can demonstrate in the lower levels of expression I think pan tumor is exactly that 3rd leg of the stool that Susan and I were talking about to add to HER2 positive breast and HER2 low to be a good growth driver in the midterm for NR2.

Speaker 1

So before I hand over to Arnaud, do you want to cover it?

Speaker 2

Yes. Matthew, We talked about the other income, which we expect to decline substantially. And again, last year, remember, there were 2 particular transactions that contributed a large amount. So we've not signaled any any asset sales. We do expect collaboration revenue to increase substantially.

Speaker 2

And we've talked about milestones and, you know, potential transactions we're contemplating, but we're not in a position to give more details today and we'll see how the year unfolds.

Speaker 3

Doctor. Pazil, super briefly one thing, Matthew, that I forgot to mention on this. NCCN guidelines have included Now endometrial cervical and ovarian for and HER2 within the population that we got the priority review for. So I do think that that's an acknowledgment that the clinical community is seeing the benefit of that study.

Speaker 11

Thank you. It's Andrew Baum with Citi. Staying with in HER2 and PANTEMET trial. So You have HER2 low as part of that trial and there's been very clear signals and many malignancies that HER2 is active. And obviously, you have the manufacturing, it's been derisked.

Speaker 11

So my question is, are you leaving money on the table by not seeking to expedite development for individual HER2 low indications? Because it looks like you're not going to get approval for pan tumor in HER2 low. So you're going to need to set the trials. There are competitors with HER2 assets who have initiated trials in those settings. So have you just left white space for a competitor to come in when you've got an asset that you could be monetizing in that setting?

Speaker 11

And then the second question is in relation to TRUCEAP. I'm curious what you think of the Inovalosib data and how that's going to impact the use of TRUCEAP given you're hitting the same PI3KAKT pathway. Many thanks.

Speaker 1

Suzanne?

Speaker 4

Yes. So for the white space question, When you got a brand like Inherto, which has really exceptional activity across, I think the philosophy is to make sure that we see other trials. So I do think that we can build on what we've actually seen with pan tumor and I think it creates lot of opportunity there. So we intend to leave as little white space as possible.

Speaker 3

Antrook? And in terms of the

Speaker 4

Can you address the market size for the

Speaker 3

Yeah, sure. I mean, look, I think that what I would comment On most Andrew is that we're seeing very positive receptivity to TRUCEAP. We've seen strong uptake in terms of number of new patients that are being started on therapy. We're actually hearing an awful lot of of desire among the community to have seen a broader label based upon the data sets that were presented than what we've seen. And obviously within the context of the competitive landscape, the TRUcap data will ultimately be looked at within that context, but I think it really is showing favorably within that context.

Speaker 3

And we anticipate that we'll continue to have a strong launch for the medicine through the year and look forward to the additional life cycle readouts that we're going to have on the heels of obviously the 2 91 or COVID?

Speaker 4

So again, there are Other opportunities I would just say with, with kpivosertib, for combination, but also remember that, it treats a broader group of patients than just the prfukanase alpha mutant group. You've got the PTEN and you've got the AKT activation as well. So there's multiple ways in which it is different. But I think the first line space is also something that is of interest.

Speaker 3

Yeah. Andrew, I mean, I think that the pace on this and maybe I I skipped over it because I thought it was kind of without saying, but, TrueCap is post CDK 46 and the invo isn't is not. So we're we are looking at different populations in different spots.

Speaker 4

It is a different population. So they're taking into that first line setting fast progresses. So it's not, Even if you take the same population that went into 291 and look at them in the first line, they don't completely overlap with the inovilisa

Speaker 12

Peter Welford, Jefferies. Two questions sticking to the norm. So first question is on the investor event on the 21st May, or I think it was Afterwards, an R and D event. I guess curious, can you outline, is this going to be an event very much focused on the midterm pipeline? Or will you also be giving that 10 year vision?

Speaker 12

And on that, is this going to be a 10 year vision setting another 10 year revenue aim? And I guess what sort of granularity should we anticipate when we look forward to how you're going to set the aims for the next period? And then the second one is on Air Suppra. So you mentioned obviously that the 2023 was pretty much a year of building access, building awareness, building this. Guess curious now in 2024, you've got the comment made, I think, was over time we expected it to USPCPs to change 50 years of habit.

Speaker 12

I mean, that sounds as though there's still a lot of slog to go. So you just talk about how to payer discussions gone? Was that successful? Is the barrier now the doctors? Or should 2024 be a year where we put anything in the model?

Speaker 12

Or is this another year where we should be really thinking about the inflection shift to come?

Speaker 1

So two great questions, Peter. Let me just cover the first one and Ruud, you could cover Supra. So the R and D day, really what we want to do, as I explained earlier is explain what our strategy is and why we think we can grow strongly over the next 10 years. So we are, of course, going to look at our mid top pipeline, but also we want to look at the investments we're making in new technologies, new platforms that will actually deliver growth from 'twenty eight, 'twenty nine and beyond. So we actually give you a good understanding of not only the near term, but also the midterm and the long term.

Speaker 1

As it relates to whether we're going to set up a long term Revenue ambition, we may, but we haven't decided this. But I can tell you that we are very, very confident that We can actually grow very strongly over the next few years and work through some of the issues that have been mentioned by some, for instance, Medicare Party Reform, we can work through that. In the end, the impact of this is there, but it's relatively limited, I hesitate to use the word marginal, but it's quite limited in the context of our global sales. So we can work through this. We can work through the patent that we have that are limited and continue to deliver very strong growth.

Speaker 1

And of course, it's not going to be the same growth number every year. But if you look at it over the next 5 years and then 10 years, we suddenly can grow. And that's what we actually want to hopefully convince you as we share our strategy, and we'll see whether we come up with a number or not.

Speaker 5

Yes. Let me first re articulate, let's say, the excitement we have regarding Airshipra. First of all, this is a very substantial markets. In the United States alone, there are roughly 15,000,000 to 18,000,000 scripts only for subbuterol in the asthma 18 plus indication. Having said that, we started our journey in order to gain access last year.

Speaker 5

So the good news is we have now formulary listings in 3 of the largest commercial PBMs. Based on the registration, we were just too late in order to get Part D. So we are bidding for Part D in the course of 2024. So hopefully, that will create more access moving forward. Many patients anyway are in commercial, are younger patients.

Speaker 5

What we have seen in the 1st few weeks, it's still very early days, is a very nice number of trialists, already thousands of GPs, but also specialists are prescribing as Supra. Having said that, access is still, let's say, an issue we are working through. So we need to buy down The course per script quite substantially. So my clear state is we are of a very strong start in the United States, but equally of course it will take time to get enough access in order to switch off the NOW conversion and hence then the sales will follow. And it's more or less the pattern we have seen with Breast 3.

Speaker 5

You have seen in the announcement, breastfeed is growing over 70%. It's on its way to become a blockbuster, hopefully very soon. And I think we are expecting the same pattern also for Srupa moving forward.

Speaker 1

I think really the important point, as Rud said, is really to expect that this is not an oncology new indication that really addresses a big met need with a very fast sales ramp up. It's more progressive. But the beauty of this kind of inhaled products is that when you are established, You have a very durable asset. I mean, look at Symbicort. It's been around for a long, long time and it's still out there and it's still very good product, good sales, very good profitability.

Speaker 1

So we have to have the resilience to get it to the right level and then it will stay at a good level a long time to come because there's not a huge amount of competition and there is a clear unmet need there. Emmanuel?

Speaker 13

It's Mark Purcell from Morgan Stanley. Thank you. Two questions. The first one for Aratana, I guess what some people have been concerned by this morning is that there's certain anticipated transactions part of your CR guidance, which you expect to increase substantially in 2024. I guess that triangulated that with a PARP 1 selected moving forward.

Speaker 13

And the last time you move forward with a a PARP inhibitor, you had a 1,600,000,000 upfront milestone from a partner. So can you confirm that R and D as a percentage of revenues is still in the low 20s? I presume it is. But more importantly, could you give us some qualitative guidance on SG and A, which obviously stepped up a lot in Q4 and just where that will land for the full year 'twenty And then the second question is on your CKM syndrome pipeline. I guess, this is all about going after symptomatic diseases like obesity and preserved reduction heart failure to capture asymptomatic diseases like CKD.

Speaker 13

So could you help us understand the opportunity here and the level of investment you're going to put behind this combination of assets, this franchise? And then specifically on the ecogene drug, we're getting a lot of questions around manufacturing. If you can help us understand how many CMC steps this product has given that with Orphan Group 1, it's estimated to be over 30 and therefore incredibly difficult to scale. Thank you.

Speaker 2

Sure. So on the SG and A front, if you look at Q4 last year, which I you mentioned is a is a concern in terms of the the step up. If you look at last several years, the 4th quarter is always one of our largest quarter in terms of of SG and A. That does not mean that's the run rate, sort of obviously going forward. And then, when we look at 2023 and our updated guidance and some of these, you know, some of the tax transactions and and net tax changes that we were we we had in mind, and we manage the whole P and L.

Speaker 2

So we, you know, chose to invest in certain areas, including some of the launches that you heard about from Ruth and and so forth. So, so that sort of explains, you know, the Q4 of of 2023. I think on looking on 2024, we've obviously given guidance on top line and bottom line. I've talked about, some of the increase you'll have in in finance expenses, I've talked a little bit about the gross margin expectations. And so, you can sort of consider that and see where the SG and A growth will be.

Speaker 2

We are obviously committed to operating leverage and we do expect that given those puts and takes that the SG and A growth will be lower than the total revenue growth.

Speaker 1

So maybe Emmanuel, just to add to this, I understand now the question also the concern that you mentioned and connecting to James' earlier questions. I think it's important to keep in mind that We believe the product sales are in our guidance, product sales will grow strongly. I mean, the guidance is low double digit to low teens, right? So that's a range. And product sales will be in that range.

Speaker 1

So messages are top line revenue growth is not driven. I mean, it's not dependent on this one offs as you said.

Speaker 5

Yes. So let me first phrase the opportunity in CKD, Mark. There are more than 800,000,000 patients around the world suffering from CKD. And despite the progress we have seen in the last few years, especially the SGLT2 class, including our own Farxiga, there's still a huge unmet medical needs and hence our, let's say, excitement also the products we have in development. Clearly, one is The combination of dapagliflozinplacebo, TENTIN, and of course, Sharon can talk about that as well, makes us quite bullish about this opportunity.

Speaker 5

Now equally, Mark is developing an axion potential eigen A molecule, this is a space where many companies have left the field, the kidney space. While we believe that there are huge opportunities based on our pipeline in order to really build a very strong pipeline. So I don't know whether you want to talk a little bit about One of the combinations, Sharon.

Speaker 6

Sure. So you asked us about the scope of our investment and then I'll also address your question about our space, our focus on metabolism. So to reframe what Rood said, there are 20,000,000 people living with CKD and hypertension in the US alone. So clearly this is a very large market and it speaks to the interrelatedness of cardiorenal and cardiometabolic disease. So thinking about how we can address the different flavors of CKD With our portfolio, we are advancing the Backstro DAPA combination.

Speaker 6

It's in phase 3 for CKD. We have ballcimronone combined with dapagliflozin, the MIRACLE Phase 2 study in CKD with heart failure achieved high level results at the end of last year, and we really look forward sharing those at an upcoming conference, and we are in the thick of phase 3 planning at this point. And then the combination of zebotentin with dapagliflozin allows us to address CKD with high proteinuria, and we have initiated the ZENITH Phase 3 trial. So clearly, we're heavily invested in this space, and we view this as an opportunity to manage the complexity of cardio renal disease and to help people manage their overall health. With that in mind, we do think that Our metabolism portfolio dovetails very nicely with these efforts to achieve organ protection while managing health, because we understand that these diseases are highly interconnected.

Speaker 6

So if we think that there are 64,000,000 people with heart failure worldwide, 15,000,000 alone in Europe, in Europe alone. And we know that 50% of those patients have renal impairment and 42% have some interrelated metabolic disease. It makes sense that we want to continue to expand our portfolio in the metabolism space. We have been, I think, very open about the acquisition and our interest in the 5,004 program. Also, this is not our only program.

Speaker 6

This is one piece of our overall focus on metabolic disease. Moving along at pace, we also have a long acting amylin as well as a GLP-one Gluticon dual agonist. Speaking briefly to 5,004, we are excited about this asset. We are encouraged to see it move forward into 2 Phase IIb trials this year.

Speaker 1

You want to say a few words about the manufacturing steps?

Speaker 6

Actually, I'll say 2 things. The first is that one key focus for 5004 is being able simplify our manufacturing process, and come up with a simpler synthetic route. And together with our collaborators at EcoGene, I think we're making substantial progress on that front. The second thing that I will say continues to speak to the interconnectedness of disease, which is that 5,004 as an orally bioavailable molecule is very well suited to potential combinations with other oral molecules in our portfolio. And so I would include in that list Farxiga as well as our oral PCSK9 inhibitor.

Speaker 6

And so we look forward to sharing results of our phase 1 trial, which only recently wrapped up. This was a highly controlled 4 week inpatient trial that was piloted by Echogene. We achieved database lock at the end of December, we look forward to sharing the data at an upcoming medical conference.

Speaker 1

Maybe one quick point is that everybody focuses on obesity. There is this big segment of people are not obese, they're overweight, so they only need to lose 25% weight. They need to lose a bit of weight and they have metabolic disease, sometimes with organ damage as well. And in that segment, which is extremely large and where the payers are more likely to pay, Managing the various dimensions of the metabolic syndrome with a PCSK9, with DAPA, with baxrostat and being able to combine is going to be a substantial advantage if you have this portfolio that we have in.

Speaker 14

Thanks, Pascal. Simon Baker from Redburn Atlantic. 2 if I may please. Firstly on Tesbira and Safnelo, now they've both been on the market for a while, I wonder if you Question on Greycell and FastCar. If you could just give us an idea of how easily scalable that manufacturing technology is And also a bit more color on the comment that Grace will have made in the past that there was a substantial manufacturing cost advantage here, which It sounds like it could be quite significant as you move into autoimmune areas.

Speaker 14

Any color on that would be very much appreciated.

Speaker 5

Yes. Let me first Start with your question about the TESPAYRE. The product is doing very well, not only in the United States, but also equally in the markets. We have just launched, we have leading NBRx or new to brands market shares in countries like Spain and Germany. The patient population is a very interesting one.

Speaker 5

It's primarily the patients who have, let's say, a moderate or normal using the fill counts but are allergic, so the low T2 patient population is highly dominant in what we see so far. But equally, we also know from our clinical studies that the SPIRE is also very well established in the high also in the United States. So the broad utility of the product and no need for a biomarker, no need for phenotyping makes it a highly attractive choice for especially allergists and more and more pulmonologists as well. So we have high expectations. And together with our partner, Amgen, I think it's fair to say that the product is on its way to become a blockbuster anytime soon.

Speaker 5

So that's one. Savnela is another very nice story. It's the only interfering receptor antagonist. As we all know, lupus is a disease with multiple manifestations and multiple organ manifestations. It's particularly very impactful on skin disease.

Speaker 5

And we have seen very, very strong feedback from rheumatologists that patients primarily with skin manifestations are reacting very well on, on softnalo. Equally, We are only operating in the intravenous markets as we speak. So we are doing for the last one and a half, two years relatively large study for subcutaneous formulation, and I truly believe hopefully next year that study will read out. And if we have positive readouts as well provide another clear opportunity. And as Cher mentioned in her remarks, we are very keen to move Savinel also in multiple other indications in order to further grow the brand to also equally a blockbuster brand in the next few

Speaker 1

years. So

Speaker 14

as

Speaker 4

I mentioned in my prepared remarks, the Actual time that you need to manufacture the fast car is substantially shorter than for some other currently commercially available CAR T therapies. That's one component of the turnaround time, obviously. So it's one component also of the manufacturing cost. I think it does help with scalability because the amount of time then you need to process each individual patient's batch is also shorter within the manufacturing facility. So what that means is that you do get increased capacity for a given size of the manufacturing building that you created.

Speaker 4

So that's important. But also it means that you can be more predictable about the delivery. And because you are actually generating a smaller total number of the cells that have to be delivered to the patient, The likelihood of success of each of those is higher. So all of these things I think contributes to the overall benefit that we see from the FASCAR process.

Speaker 1

Thanks, Susan. Maybe we could take one online question. Tim Anderson, Wolfe Research. Tim, over to you.

Speaker 15

Thank you. Any headwinds to revenue growth for individual key brands in 2024 that you'd like to call out, you know, relative to where you see consensus. So in rare diseases, you're facing some new competition. In oncology, you talked about in HER2, but what about Tagrisso or Calquence? Calquence in the U.

Speaker 15

S. Seems to be stalling out, for example. And then second question on datto, any risk to approval in the U. S. In lung and non squamous based on what you have today?

Speaker 15

To me, the regulatory precedent says it should be low risk and you should get approved, but that's not necessarily the consensus view. So, what's your confidence here And what happens if OS misses and non squamous remains supportive but doesn't formally hit? Thank you.

Speaker 1

Thanks, Tim. What I propose, Marc, you cover, bultomiris and the general competitive environment. Dave, you could cover Calquence and Tagrisso. And Tagrisso maybe also talk about not only the headwinds, but also the potential upsides. And then Susan, you covered that too?

Speaker 7

So let me start with ULTOMIRIS. So Basically, the headwind that we can anticipate is the introduction of biosimilars in the PNH indication. 2 competitors have started to gain approval in 2023. The impact on 23 is still very limited, but obviously, this could increase over time. The way we counteract this headwind is by Converting as fast as possible from SOLIRIS to ULTOMIRIS and in the main indications, both neurology indication as well as PNH, The conversion is very high, it's in the magnitude of 80%.

Speaker 7

That's the first thing. The way we're also sustaining the growth of the complements franchise is by expanding our regional presence. And we have augmented significantly in 2023. We still have more work to do in 'twenty four. We are increasing the number of approval and reimbursement for SOLIRIS as well as for Ultomiris.

Speaker 7

And lastly, this is a long term work that we have been doing to make this franchise C5 franchise sustainable. We are continuing to develop new indications. We have NMO that has been approved recently in Europe and Japan with very rapid uptake. We are soon to get the U. S.

Speaker 7

Approval, but we will also continue with other indication which are presently in Phase 3. So not only on the C5, and then we have also if we want to talk about C5, we have the nanobody bispecific 17/20 gefirulimab that is well advanced in Phase 3 and should be coming to the market in myasthenagravis very soon. So there is a future, a very bright future for the C5 franchise and the complement franchise overall.

Speaker 3

Thanks, Mark. Turning to oncology and Tim on your question. So very directly on your first question, which is are there any places where there's headwinds Relative to consensus. I I commented in my prepared remarks on the only one that I would call out, but I think it's important, which is that in Japan, In February, we had repricing on Infinzi, that I'm not sure is built into all of the models moving ahead. And we do anticipate because of some changes from weight based to fixed dosing that we will see another, in Japan, Infinzi price adjustment.

Speaker 3

With that said, on the specific question about Tagrisso. I'm enthusiastic about where Tagrisso ends the year and where it comes into next year. As I mentioned, we're seeing good underlying demand growth sequentially within the U. S. And within Europe.

Speaker 3

We've got an opportunity in China despite the competition that we're seeing there to move out of this anti corruption, Shadow that I think has affected the ability to be able to really take advantage of a leadership position that we have all doing the right thing. But just in terms of, you know, access in general to oncologists has been more limited. We've got, FLORA 2, which knock on wood, we'll see an approval on here, sometime within the year, we've got LoRa, which I think is a really important catalyst, that we'll read out again, here within the first half. So I look at the outset on this and I think also on a competitive landscape basis, Florida 2 positions us pretty nicely. On Calquence, No question that we've got a competitive environment and we've got direct competition.

Speaker 3

But I also like what our US and European teams have been able to do in the face that competition. I think that within that we've got a leadership position within frontline CLL that we've been able to maintain. I think if you take some of the month or the quarterly phasing out of the situation, we've seen really good strong underlying demand growth on Calquence throughout the entirety of year. I'm hopeful and optimistic that as copay within the U. S.

Speaker 3

Is lowered. Pascal talked about this in his remarks we see affordability go from patients having to pay 5% of the catastrophic to 0 and therefore a copay cap that is $2,000 that this is going to give patients the ability to be able to stay on and have greater adherence to continuous treatment to progression on BTK therapy. So again, we have to see that play out. We have to see how that works through. But I think that these are elements that Give me enthusiasm about the oncology portfolio and the opportunities in front of us.

Speaker 1

I think this copy cap, It should really not be underestimated because if you look at the U. S. System on the Medicare side now, it is going to be a very, very good system. I mean, many countries have co pays. I mean, Australia has co pays, Switzerland has co pays, many countries have co pays.

Speaker 1

And here in the United States, people or patients are going to be able to say, I'm not going to pay more than $2,000 a year, regardless of how many drugs I receive, regardless of how much they cost, dollars 2,000 Now you might say $2,000 is a fair amount of money, but if you have a car insurance, a house insurance, that's going to cost you at least that. And many people can't afford this. And it's a great level of reassurance in term of taking your medicines and being adherent to them. And for us, it will mean a reduction of free goods we have to give, which has been increasing substantially in the last few years as people more and more people cannot afford to cover the co pays.

Speaker 16

Thank you. It's Louisa Hector from Berenberg.

Speaker 2

Just a question on data. Sorry. Sorry. Sorry.

Speaker 4

It's alright. So can I answer? Okay. First of all, thanks for the question. You know, we're confident that DAT today is gonna be important medicine in the, in the treatment of non small cell lung cancer.

Speaker 4

Obviously, we've been having ongoing discussions with the regulatory authorities. TL01 is a trial with a dual primary endpoint. And obviously we met PFS is one of those primaries, but OS is going to be important in the second to third line setting. When you think Historically, other than checkpoint inhibitors, no medicines have demonstrated OS benefit and docetaxel currently remains the standard of care. I'll remind you that in the non squamous population, the data that we presented At ASCO, we showed that the hazard ratio and the non squamous for OS was 0.77 with a confidence interval that only just, overlapped, one.

Speaker 4

So it's 1.01 at the upper end. So I think that shows that we're not just seeing a progression free survival benefit, but there's a, there's a strong trend to OS within that patient population. So quite often, as is normal as the OS events mature, we'll often have an update of the of the OS during a period of review, and we'd anticipate that during the period of review for TL01, we can update the OS.

Speaker 16

Thank you, Luisa at Berenberg. I would like to ask Iskra to comment on the icosavax deal and just the attractions of the assets there and the opportunity to enter the RSV market. And then also maybe to pivot from that Slightly bigger picture question, but essentially a margin question, sorry. You've shown us the fabulous pipeline progress, the breadth and depth, we see the entry into new therapeutic areas, the modalities, vaccines, obesity, cell therapies, etcetera. So it's really bubbling.

Speaker 16

So really it's about how you can be so confident in some margin expansion midterm. How, you know, how can that happen? Is there a point where selling costs, the infrastructure stabilizes? How do these fabulous products compete for R and D budget. Is it about strict, almost attrition, making sure absolutely the best products moving forward.

Speaker 16

So just any color on that so that you can give us confidence in the ability to raise margins given all the excitement within the pipeline? Thank you.

Speaker 17

Thanks, Lisa, for the question and for interest. So the proposed acquisition of icosovax really strengthen our late stage pipeline in in vaccine and immune therapies because, the icossox lead asset is the combination RSVH and PV vaccine that is phase 3 ready. And the import that is important asset for 2 different perspective. On one side, this is a next generation vaccine technology within the respiratory vaccines because it's a protein virus like particle vaccine. And importance of that vaccine is that They have a potential to be better, more effective, and more safe than the, than a non VLP vaccine.

Speaker 17

So basically, what you can expect to see from, from those vaccines is to have a higher efficacy and a longer durability of the effect and in the same time better safety profile. The second important aspect of this is that this is a combination of RSV and hMPV vaccine. And and although there are number you can argue that there are number of RSV vaccines for the adult population available in the market, There are no neither preventative or therapeutic options for hMPV. And maybe that's the virus that, many of you even never heard about, But I can tell you that the RSV and hMPV are basically among leading causes of the severe respiratory infections. And if you look at the numbers of the hospitalization and infections basically in the similar rate between hMPV, RSV, and flu.

Speaker 17

And therefore, we feel We feel excited to to to, use this vaccine on one side, you know, accelerate and and bring it to patient as soon as possible. On the other side, it's a great strategic fit because it really builds an AstraZeneca experience in RSV as well as, builds on our therapeutic leveraging you know serving the patients that are at risk of respiratory diseases. And just at the end, I need to mention that a deal is still subject to closing. Thank you.

Speaker 1

So Rizal, your second question, the R and D spend, as we've said before, we expect to keep in the low 20s percentage as a percentage of revenue. And our improvement will come from SG and A. And so we are very committed to achieving this margin expansion in the midterm as we've communicated for now quite some time. We're on track and we're committed to this and really is about leveraging the critical mass and some of these products that have required, sorry, a lot of promotion at scale in terms of promotional effort. If look at the breast rate, look at I mean Farxiga will be even potentially declining in promotion.

Speaker 1

So we can manage with this large SG and A spend, we have to manage, I should say, so that we can actually deliver this mid term ambition. Now the long term ambition in operating margin is something we will define over the next couple of years as we see the progression the pipeline because quite honestly, what we've seen in the last 2 to 3 years is an expansion of our pipeline. We have a number of products now in the pipeline, the PCSK9, the GLP-one, of course, Baxdorfat that we believe can drive a lot more top line growth than could have been anticipated, say, a couple of years ago. So depending on how the pipeline shapes up, We'll have to decide what percentage margin ambition is, but I've said many times before, and I want to be clear, What we focus on is the absolute dollar value and the cash flow we deliver. So if we had, and I'm not saying we would, but if we had to compromise on the future progression of operating margin beyond the mid-30s.

Speaker 1

If we had to compromise on the percentage, it will be because we deliver more top line and the same or more absolute dollar value in operating profit and cash flow. Because ultimately, as I keep saying, we deliver value to shareholders with dollars, not percentage, right? And so really, if we can deliver even more growth than we had anticipated 2 years ago, it will drive more profit. And so we'll have to adjust this over the next couple of years based on our pipeline. But with the firm commitment that in absolute value, we will deliver a substantial growth in top line, but also in bottom line growth.

Speaker 1

Do we have a microphone there?

Speaker 18

Eric, Marie, Gustavo. Two questions first for Aratana coming back on one of your comment before on CapEx. So CapEx anticipated grow by maybe as much as 50%. How should we think about this going forward? Is it a 1 year sharp increase?

Speaker 18

Or should we think about CapEx staying around €2,000,000,000 for the next few years or thinking percentage of revenues or how should we model this? And maybe the second question for you, Rod and IL-five, we see more interest for the TSLP targeting in also with long acting, but also combining with all the targets. How what is AstraZeneca doing for the next wave and to build on the existing franchise? Thank you.

Speaker 2

Sure. Thank you for the question. On CapEx, if you look over the last several years and you benchmark us against our peers, we've actually underinvested in CapEx substantially. And, you know, that's also because we had other opportunities to invest and so forth. But when you look forward and especially this year, we've given guidance on specifically, We're investing behind a number of products that we're bringing forward.

Speaker 2

Right? So we just announced the the cell therapy in Rockwell. So again, Susan talked about the whole cell therapy ambition, that requires upfront investment in CapEx. And again, some of that is at risk, obviously. You know, we're investing in our own API plant in, in in in Dublin.

Speaker 2

And that's also because, you know, we're trying to become more self sufficient, as it relates to API. We announced Inhaled facility in Qingdao and that's to fulfill the demand that we expect for breast for example, to come out of China. And in addition, we are investing in our ERP systems, which you know, has, has I would say for many, many years been under invested in. So, you know, there are a number of these investments that we're making behind our pipeline. And, you know, you've seen from recent transactions and other investments that some of our peers are doing and have done That it has become increasingly important to have more and more self reliant supply chains.

Speaker 2

And oftentimes, you see companies, you know, not being able to fulfill their growth ambition because of underinvestment in, in supply. So we're we're sort of getting ahead of this curve for the pipeline and the new opportunities.

Speaker 1

One of the things that this plant in Jingdao will support is Our goals, ambition in the respiratory market in China. If you look at COPD in China, it's totally underdeveloped. I mean, the treatment is The disease is extremely prevalent, pollution, smoking, aging. So there's a lot of COPD, but The market is totally underdeveloped. Today, we have 65 or more percent market share with Brightree in the triple segment in China.

Speaker 1

And as the market develops, we're working very hard and expanding it. As we market develop and we have local manufacturing, there's enormous potential for products like Bystrain That is really why we decided to make this investment.

Speaker 5

I want to quickly regarding, let's say, the future of the biobiotics, and Sharon will comment On the science in the moment, so despite the progress we have seen in the last few years with products like TESPAI and Fasenra, it's also a fact of life that there's still a high unmet medical need that remains. So still patients are suffering from multiple exacerbations in the severe asthma segment as well in COPD. So we're going to bet on new modes of actions. The NTAL33 is clearly one of the examples. I'm sure Sharon will say a little bit more about that, but also We have an anti T slip in development and it would be quite spectacular to have an inhaled biologic in order to help those patients suffering from a very severe disease.

Speaker 5

So new mode of actions hopefully will unlock the power of those medicines and this indication. And you will see, I think, a lot of studies in the next few years, both in asthma and COPD in order to generate evidence that it can work.

Speaker 6

So I'll build on that, and really continue forward with Ruth's message in which we are proud of both following the science and thinking about patient needs as we create our next wave of therapeutics. So we're aware that patients with respiratory disease with asthma and COPD are first treated in the community and then progressed to specialty care. And so we're creating a range of therapeutics that are able to meet the needs of their care providers, but also building on the science that we increasingly understand about these diseases. So in asthma, building on our success with Fasenra and Tezbire, We're moving forward to thinking about how tozirakumab can be effective there. Tzirakumab is a differentiated therapeutic in that this anti IL 33 is hitting both the ST 2 and the RAGE EGFR pathways.

Speaker 6

So it's able to address the inflammatory piece the disease as well as mucus production and tissue remodeling, which we think is going to be very powerful for patients. And then thinking about how patients are accessing their care, Moving into the pre biologic space with an inhaled t slip, which we think is a very novel, mode of delivery and will allow us to broadened this modality to a larger number of patients as well as an inhaled JAK inhibitor and an oral flap inhibitor. So really expanding our science in the pre biologic space. Thinking about COPD, which is still a major unmet medical need worldwide, building on our success with breast tree. And again, thinking about how we're delivering an inhaled T slip in the pre biologic space, offering patients those options, as well as an IRAQ4 inhibitor and again evaluating mitaparastat in that space.

Speaker 6

So we are offering patients a number of different opportunities to address their disease with their general practitioners and then also to access biologics and different mechanisms as they're moving into specialty care. I hope that answers your question.

Speaker 18

So I can just add on the IL-thirty three. It looks like even physicians have seen less data than from Sanofi and from Roche On the Phase II, you're already into Phase III. Should we think about getting more Phase II this year? Or when are you planning to give more?

Speaker 6

Yeah, as you know, we were so encouraged by our data, we moved right to Phase 3 in that program. And we'll look forward to sharing our Phase 2 data as it becomes available at

Speaker 5

So there are 2 big ones ongoing. 1 is the NTR-thirty three. It's also in acute respiratory failure. And hopefully, we will see data after the next season, so somewhere next year. And if positive, fingers crossed, It will be the first then anti IL-thirty three in a complete new segment where there's a very big unmet medical needs.

Speaker 5

Second one clearly, our Phase III trial in the COPD space. We've added an additional arm, a higher dose and that trial is ongoing and will read out in the next 2 years.

Speaker 1

Maybe we take the last question. Is that okay, Andy? So Gonzalo Question online, Gonzalo at ABG, over to you.

Speaker 19

Hi, can you hear me? Yes. Great. Hi, hi. Gonzalo from ABG Sundal Collier.

Speaker 19

I have a couple of questions. The first one is on AirSupra. It follows the previous question from the audience. And how big is the expected sales force and commercial team for Supra? And what is the current level of awareness of this drug from doctors today.

Speaker 19

Also in 23, you have been preparing for the launch of the drug. So what is the biggest challenge based on your experience through the year to penetrate the market that one could expect it to be quite conservative? And the second question, it's on Tagrisso. It seems from your report today that the demand in China had some issues with the hospital ordering dynamics. So could you give us some color on that?

Speaker 19

And how much is expected to affect 2024? And the same for the Australian government rebates looking also into 'twenty four and beyond? Thank you.

Speaker 5

Let me try to answer all the questions in a concise way. First of all, the field force, I'm not going to, let's say, give you complete numbers, but it's a very substantial field force. It's substantial for two reasons. We're detailing on the allergists as well as pulmonologists, as well as we are detailing on a very large number of primary care physicians. Now the good news is that field force is a shared field force with BreastScreen.

Speaker 5

So we try to be very economically savvy in order to make sure that we're not going over the top. The awareness, we have used 2023 to create a very substantial amount of awareness. The awareness is over 80% at the level of both the allergists and pulmonologists, and especially allergists are the first prescribers. We started in the soft way in the last quarter, and last quarter we had already 5,000 trialists, The biggest challenge is we are very happy that the 3 large commercial PBMs have now listed as Supra, But there are multiple downstream PBMs and we still need to gain access there. It's nothing specific to Air Supra, It's just a fact of life of the U.

Speaker 5

S. Environment. So we're working very diligently with our market access teams to in order to create that access and equally we're going to bid for Part D in the course of this year as well.

Speaker 1

Dave Tagrisso, thanks for So

Speaker 3

on Tagrisso, within China, the 4th quarter hospital ordering dynamics we've seen for the last several years. And it just really has to do with hospitals managing their budgets as they come to the end of the calendar year, which is also the fiscal year. So it doesn't for me carry any weight into outlook for 2024. In fact, as I think about how we enter into 2024, Certainly, we continue to face competition but where we don't face nearly as much competition is in the adjuvant setting. I think it's to remind that there's a sizable eGFR population within China, 30% to 40%.

Speaker 3

Also, thoracic surgeons do have the ability to prescribe systemic therapies. So therefore there's a relatively high adjuvant treatment rate and we had Adora added into the NRDL with no discount. So I think that we come into the year with an opportunity to see growth in these really real demand side side of things. And there are many fewer competitors that are playing within that adjuvant space. And our data, I think, stand out as being the most impressive there.

Speaker 3

The Australia rebate reclassification is almost a direct offset between what you see on the Zoladex established rest of world beat and the Tagrisso rest of world beat. It's a mostly a one time event. And I say mostly just because there's some carry on through the year, but I don't anticipate talking about it ever again.

Speaker 1

Thank you, Dave. So thank you so much for your interest and your great questions. Maybe a few messages to close this meeting. The first one is just kind of taking into account all the questions asked today. First one is product sales in 2024.

Speaker 1

We will still have very strong product sales and the product sales will grow. I mean the growth of product sales in is coherent with the guidance we gave for top line revenue. So a clear message is we are not dependent on collaboration revenue to grow in 2024. Our portfolio is doing very well and all our geographies are doing very, very well. The second message is We are committed to this midterm operating margin, and it is, of course, challenging because as you've said, we have a very big portfolio and we have to invest in this growth, but we will get there.

Speaker 1

We are committed to this and we're working towards this, making good You saw the margin expansion in one of the slides, and we'll continue in that direction. The third message maybe is, we believe we can manage through the Part D reform. And I mentioned it because I know Some people have speculated this is going to be a big problem. It is a small headwinds. I mean, headwinds, we have headwinds constantly in one market to another, one product to another.

Speaker 1

The beauty of our pipeline and our footprint geographically is when one product face a headwind, another product picks up. Remember, we have 13 products that are blockbuster status today. And one geography is struggling a bit, another one is doing better. And that's really the model as we have it. But overall, the Part D and we spent a lot of time our teams have spent a lot of time working on modeling this.

Speaker 1

The incremental rebates that we will have to deal with is, 1st of all, in part compensated by the reduction of free goods, which is substantial for some of our oncology medicines. And overall, the net effect is Celanio negative, but it's really totally manageable in the context of our total global sales and the growth rate we're experiencing. And finally, but importantly, We are absolutely confident we can deliver a very strong long term growth, and that's really what we want to show you and hopefully convince you at this R and D Day. And I hope many of you will join us in the beautiful DISC, where we have Tremendously talented teams are doing a great job. We have today a huge number of collaborations in the Cambridge area, and

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Earnings Conference Call
AstraZeneca Q4 2023
00:00 / 00:00