AstraZeneca PLC (NASDAQ:AZN) Q4 2023 Earnings Call Transcript

AstraZeneca PLC (NASDAQ:AZN) Q4 2023 Earnings Call Transcript February 8, 2024

AstraZeneca PLC misses on earnings expectations. Reported EPS is $0.73 EPS, expectations were $0.75. AstraZeneca PLC isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Andy Barnett: Well, a warm welcome everybody to AstraZeneca’s Fourth Quarter and Full Year ’23 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’s our forward-looking statement, which I’d encourage you to take the time to read. We’ll be making comments on our performance using constant exchange rates, or CER, core financial numbers and other non-GAAP measures. And non-GAAP to GAAP reconciliation is contained within the results announcement that you all have seen.

All numbers quoted are in millions of U.S dollars unless otherwise stated. This slide shows the agenda for today’s call, following up our prepared remarks, we’ll open the line for questions. Of course, if you want to raise — ask a question in the room, raise your hands, there’ll be roving mics for those online, please use the zoom function to raise your hand. 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.

Pascal Soriot: 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 UK, quite a number of years ago. But I want to start my talk with this slide. 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 billion sales in 2023. And in fact, I could argue we over achieved it, because at the current exchange rates are $45 billion probably is closer to $40 billion. And I don’t want to say that just to kind of pat ourselves on the back, even though I’d like to do this and celebrate our team’s effort.

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&D Day, because we want to refresh our strategy and show you what we are planning to do over the next 10 years. But we got this $45 billion throw ups and downs. And I have to say often a lot of skepticism, but always on with our eye on the long term growth rate. And that’s what we’re going 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. And we’ve done this whole following the science and, again, we’re embarking on a new cycle and we’re investing in 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 discipline investment, even though we often have extensive debates inside the company and are 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 disease, more recently increasing our investment and keeping our eye on immune diseases and finally a rare disease. 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 a rewarding to see the progress we’ve made and the strengths we have developed in our portfolio, but also in the strength of the talent in the company.

See also 25 Best States for Job Seekers Right Now and 15 States with the Cheapest Car Insurance In The US.

Q&A Session

The way we operate in oncology today and in the same in the other is very, very different. 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 grow by 15%, which is also slightly better than upgraded guidance for the year. And in the quarter four, we saw an opportunity because we had a tax benefit, 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 our 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 ’21. But that was a bit of an artifact because it’s driven by the very large COVID sales we experienced and of course those who are no profits, so it dilutes operating margin. But essentially, you can see our continuous progress. 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 on our pipeline in particular. So we are doing three 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.

We are building the pipeline, continuously by building the pipeline, so that we drive growth to more which is ’25 to 2030. 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 ’28, ’29 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 CRP areas. Oncology 21%, CVRM 18%, R&I 10%, of course, V&I 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 high single digit, this well, this is business but in fact, we’re delivering low double digit goals, right. And Marc, 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. And you can see here the growing importance of the emerging markets outside of China. In Europe we grow by 17% and established rest of the world 8%, Japan is starting to be impacted by the loss of exclusivity of Nexium of course, but still 8% growth is pretty nice number there. So again, well diversified growth across geographies, and across our disease areas. So, two more. So this is the today and tomorrow is really the pipeline during the pipeline.

We guided earlier this year that we had a goal of 30 new Phase 3, we’ve achieved 27, we’re shot by three that little bit delayed and starting in the early ’24 instead of ’23, but 27 is a very large number of we start. Importantly 10 of those have a potential to be blockbusters, is our new products, so new indications, blockbuster of course being more than $1 billion. So we have 10 of these Phase 3 trials, that if they are successful, we’ll deliver a $1 billion sales or more each. We also achieve 24 regulatory market — regulatory approval across major markets. And finally, we got approval for four new medicines and we are on track to deliver 15 new molecular entities, launches by 2030. And as you can see, you can see on this slide, those approvals — those new medicines range from biopharma with Airsupra to oncology with Truqap.

Again, back to BioPharm with Wainua eplontersen, and also rare diseases, Alexion or is danicopan Voydeya 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. And so 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 ADC space, we started with this collaboration with Daiichi Sankyo, that you know very well, we’ve now built our own internal portfolio of ADCs, where 6 ADCs, that are totally owned by AstraZeneca, with unique targets and unique warheads. And there’s more to come. We can talk about it later.

But we’re working on multiple targets and warheads. And finally, importantly, we can combine those with our bispecifics. And we have three of those two 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. We’ve — we work on cell therapy, because we believe you know, 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 allergenic of the shelf cell therapy. And we also want to take this into immune diseases, and we started working on this.

So what we have been doing is leveraging our own internal effort and our own internal technologies and combining these ways, putting together a series of technologies and platforms, that has really the potential for us not to deliver what I was just talking about, which is moving into solid tumors, moving into allergenic, cell therapy and moving into immune diseases. And we now have a complete set of what we need. Now, it’s a question of 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 it listed here, Neogen, Quell Cellectis, Gracell. And all of those together will enable us to build what 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. 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 DC 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 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 our mid-term growth with Daiichi Sankyo’s collaboration in some of the ADCs but mostly looking at driving growth ’28 ’29 and beyond.

So we can deliver growth today, tomorrow and the day after. So with this, I’ll hand over to Aradhana, who’s going to take you for the financials, Over to you.

Aradhana Sarin: Thank you. Thank you, Pascal. As usual, I will start with our reported P&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 $3.8 billion in COVID-19, product sales in the year, Alliance revenue increased by 89%, driven by higher and HER2 sales in regions where Daiichi Sankyo books product sales. Turning to the core P&L, 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-19 revenues in 2023. In 2024, we anticipate a slightly lower product sales gross margin percentage, driven by higher sales in emerging markets increased Beyfortus 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 payout a profit share to our partners through cost of sales.

Core operating costs increased by 9% in 2023. R&D costs increased by 9% driven by 27 new Phase 3 starts in last year, including multiple trials of our PD-1 CTLA-4 bispecific volrustomig and our oral SERD camizestrant. R&D costs as a percentage of total revenue was 22%, in line with our ambition. As expected, core SG&A stepped up in the fourth quarter, relative to the third quarter in 2023. We increased our investment in new launches, behind Wainua, Truqap, Airsupra and continue to invest behind indications expansions such as Farxiga and CKD in heart failure and Imfinzi across tumor types. Our full year your core tax rate of 17% came in slightly below our guidance. The fourth 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&L allowed us to increase investments in both R&D and SG&A in the fourth quarter. Core EPS for the full year 2023 was $7.26, a growth of 15% versus the prior year. As Pascal stated earlier, we’ve made good progress on both top and bottom line delivery in recent years, 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 midterm and long term. Today, we’re pleased to announce our 2024 full year guidance. We anticipate our total revenue of low double digit to low teens percentage increase, and our core EPS of low double digits too 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 million related to the renegotiated Beyfortus agreement and another $240 million related to the sale of [indiscernible 0:17:45] in the U.S. 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. Cash flow from operating activities increased by $537 million 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 billion of which nearly half related to past business development payments including milestone payments to Daiichi Sankyo. For this year, we again anticipate about $2 billion in deal payments relating to historical transactions. CapEx in 2023 was around $1.4 billion, 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 product and cell therapy. Our net debt at the end of 2023 was $22.5 billion, and given very recent BD transactions, totaling about $2 billion, 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 1 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 we’ll continue to pursue value-enhancing business development transactions. Towards the end of last year, we announced a license agreement with EcoGen and the proposed acquisitions of icosavax and Gracell. Finally, we maintain our progressive dividend policy defined as either a stable or increasing dividend. With that, I will hand over to Dave.

David Fredrickson: Thanks, Aradhana. Really appreciate that. So oncology total revenues of $18.4 billion 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 fourth quarter, reflecting strong double-digit growth for the U.S. and Europe. 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 fourth quarter, Lynparza delivered 8% product sales growth and remains the leading PARP inhibitor globally despite ongoing class challenges. In the period, we recognized $245 million in regulatory milestones from Merck, following the U.S. PROPEL approval and BRCA-mutated prostate cancer.

Imfinzi, inclusive of IMJUDO grew 52% in the fourth quarter, fueled by further global demand growth in gastrointestinal tumors. In 2024, we expect continued progress with TOPAZ-1 and HIMALAYA, although TOPAZ-1 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. Calquence total revenues increased 14% in the fourth quarter, driven by continued new patient share gains across both frontline and relapsed/refractory CLL. In HER2 total revenues of $364 million in the fourth 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 is the undisputed standard of care across HER2-positive and HER2 low metastatic breast cancer.

In November of last year, we received approval for Truqap, our novel AKT inhibitor in the U.S. and for Imfinzi Topaz-1 in China. Importantly, we received a priority review designation for HER2 and HER2-expressing tumors an adjuvant use of Tagrisso was added for the first time to the NRDL in China at no discount. With the exciting approval of Truqap, we have the opportunity to further extend our leadership in breast cancer, including in the hormone receptor positive landscape. And HER2 is the established standard of care in late-line HER2 low, and we look forward to the results of the Destiny Breast 06 trial in the first half of this year and the opportunity to bring in HER2 1 line earlier and expand into HER2 ultra-low tumors. Data from the Tropion-BREST-01 trial of DATADx in hormone receptor positive HER2 low breast cancer was presented at ESMO last year during the presidential symposium.

Discussions with health authorities and prelaunch planning activities are already well underway. Finally, align with our ambition to establish a new endocrine therapy backbone, we now have several pivotal trials ongoing in the frontline for our next-generation oral SERD camizestrant, including in combination with CDK4/6 inhibitors and Truqap. Truqap is being very well received by the clinical community in the United States, and we are already seeing rapid adoption with the majority of new starts in patients with biomarker altered tumors, who have previously received a CDK4/6 inhibitor, which is consistent with our views of the addressable population. We see potential for Truqap to become the new standard of care in second line for endocrine treated patients with PIK3CA, AKT1 or P10 altered tumors.

And with that, we’ll advance to the next slide, and I’ll hand over to Susan to cover R&D highlights in the quarter.

Susan Galbraith: Thank you, Dave. In December, we entered into a definitive agreement to acquire Gracell technologies, which furthers our cell therapy ambition across oncology and autoimmune diseases. Gracell has a proprietary cell therapy manufacturing platform called FasTCAR. The FasTCAR platform has several key benefits. First, it significantly reduces the manufacturing time from between 1 and 3 weeks to 22 to 36 hours, with the opportunity to improve medium turnaround time and also enable increased manufacturing capacity as well as predictability of CAR-T delivery. Second, a lower dose of cells need 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 GC012F, 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% and 100%, 6 to 12 months after infusion. 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 GC012F has potential applications across hematologic malignancies, including multiple myeloma and will further bolster our hematology pipeline, adding to Calquence AZD-0486, our CD19 CD3 next-generation bispecific T cell engager and AZD0305, our GPRC5D targeting antibody drug conjugate. We also have 2 further homegrown hematology molecules, which have just entered the clinic. A CD123 antibody drug conjugate, ASD-9829 and a PRMT5 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 to cover biopharmaceuticals performance.

Ruud Dobber: Thank you so much, Susan. Biopharmaceuticals delivered total revenue of $18.4 billion in 2023 and driven by growth of 18% in CRM and 10% in RNI. Key highlights for the year included Farxiga nearing $6 billion in total revenue and R&I returning to double-digit growth. Turning now to the fourth quarter, where within R&I, nearly half of the total revenue came from Fasenra, Despres, Sanalla and Breztri. These medicines grew by a combined 40% and more than offsetting the impact of Symbicort generic entry. And in V&I, Beyfortus continued to see strong demand in its first RSV season, generating $95 million of product sales and alliance revenue for AstraZeneca in the quarter. Lastly, we received our first sales related milestone payments from Sanofi totaling $27 million.

We have recently launched 3 innovative new medicines within biopharmaceuticals. Launches in new areas of science and medicine require us 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. Eplontersen is an amyloidosis treatment that we are developing in partnership with Ionis. In January, it launched with the brand-new Wainua for patients with ATTR polyneuropathy, a debilitating ultra-rare disease, which is generally fatal within a decade if left untreated. AirSupra is the first 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 exacerbation in adult patients compared to albuterol.

We formally launched Airsupra last month for adult patients. And over time, we hope to see primary care physicians in the United States changed 50 years of prescribing habits. As mentioned, we are off to a strong start and are only halfway through the first RSV season that Beyfortus 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 brands with growth being driven across the global — 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. We recently commenced a Phase III trials for baxdrostat in uncontrolled and resistant hypertension as well as for zibotentan, combined with dapagliflozin, addressing patients with CKD and high proteinuria. Eplontersen is also being evaluated for the treatment of ATTR cardiomyopathy, which is estimated to affect up to 0.5 million patients worldwide. Our Phase III 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. I will now hand over to Sharon to present the latest development from the biopharma pipeline.

Sharon Barr: 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 disease. In Safnello’s, pivotal Phase III litcells in systemic lucerathermatosis, 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 Safnelo 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. We also have plans to initiate 2 other Safnelo 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 Dr. SETH [ph] Academic Group has shown the potential for long-term remission with CAR-Ts in systemic lupus erythematosus. Part of our definitive agreement to acquire Gracell includes autologous CAR-Ts with an ongoing Phase I investigator-initiated trial with GC012S, the CD19 and BCMA CAR-T in 15 Chinese patients with SLA. 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. T-reg 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 armored T-regs could enable sustained clinical benefit. And finally, our collaboration with Cellectis allows us to explore the potential of an allogeneic CAR-T platform. 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 Marc, who will cover our rare disease portfolio.

Marc Dunoyer: So thank you, Sharon, and for rare disease, the total revenue achieved $7.8 billion 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 knowledge indication with the vast majority of growth coming from generalized mastenagravis patients were naive to branded treatments. As previously indicated, Ultomiris revenues were broadly in line with Soliris for the year. But if you look at the fourth quarter, Ultomiris revenues exceeded Soliris. Our conversion strategy is progressing well with the majority of patients already converted across PHN, Atypical haemolytic uraemic syndrome and gMG in our major markets.

We continue to launch both medicines globally and expect the CFI franchise, Soliris and Ultomiris revenues to remain sustainable and durable. Beyond complement, both Strensiq and Koselugo grew 13% and 48%, respectively, driven by continued patient demand. I’m also delighted to announce that we have started enrolling patients in our Phase III trials for translating amyloid cardiomyopathy as well as for hypophosphatasia. Alexion 2220 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 stabilizes or silences. 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, on Fortis ALPHA in hypophosphatasia, including 2 trials in the pediatric setting, investing both naive and switch patients 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. We have made great progress in our late-stage pipeline with 9 Phase III programs underway and our tenth program, Ultomiris in IgAN is initiating soon. With that, I’m please announce — will get to Pascal.

Pascal Soriot : Thank you, Marc. I move to the last slide. This is really to show you that over the next few months, we have 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 that will deliver updated OS data in the course of 2024. But some of the most important once they are going to drive the growth of several of our important products, LoRa Tagrisso Destine6 driving an HER2, TROPION Breast02 with that of the exit [ph], the Waypoint study, studying Tezepelumab in chronic cynositis with nasolpolyps, and finally, [indiscernible] 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. 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 will 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 is actually progressing very nicely. We have a very exciting PCSK9 that is making good progress. Baxostat is for hypertension is in Phase III. And finally, we have, of course, the oral GLP-1 agent, we license sale and the beauty about those agents is that they can be combined. They can be combined with ADC, they come in combine between themselves.

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 in renal disease. Cell therapy, we will this year, communicate some of our mid stage studies progression. And finally, we were also be communicating information about our new DDA pipeline, and in particular, the PARP 1 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 are so excited where we believe we can continue to drive top line growth over the next 10 years. And drive improvement in profitability as a result of this.

Finally, I want to invite you all to our R&D Day. This will be in Cambridge at the DISC, our new R&D center. You will see, as you — for those of you who join us on the 21st of 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&D productivity. The reason we do this R&D day, as I said before, we’ve just completed our 10-year journey that we started in 2014 were 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. So with this, I’ll stop here and then open the floor for questions.

Q – James Gordon : Thank you. James Gordon from JPMorgan. Two questions, please. The first one was on revenues for this year. So the guidance, low double-digit or low teens as a revenue target, but I think bears are worried that lots of that is collaboration revenues growing and product sales slowing. 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 somebody have said today is that the top line guidance is about the same pace as the bottom line guidance. So that would imply then that margins might be about flat.

And then I’ve seen, I think on 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 ’25 and ’26 to get there? So thoughts on that and whether there is going to be a lot more OpEx and how that’s going to work, please?

Pascal Soriot: Thank you, James. Great questions. And on 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. 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.

Aradhana Sarin: Yes. I mean if you look at just, for example, the growth in 2023 across the franchises, right, with oncology growing 21%, rare disease, 12%, 18% in CVRM. So we — and all of that is from current products. So we expect that momentum to continue into the coming year. Obviously, different products have different sort of dynamics and so forth. So the growth will come in product sales from both current products as well as some of the new launches that we have, though, again, they’re early 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 some 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 totality of the P&L, those will also be elements and we get to the range that we have on EPS. And when you take that into account, obviously, we expect the revenue growth to be pretty strong, but the operating expense growth to be lagging the revenue growth. And that’s what’s operating leverage.

Emily Field : Emily Field from Barclays. I have a couple of questions on oncology. The first on DAX or DXC, the AVANZAR study must have enrolled pretty quickly to be having a readout in 2025. Is that what you were to be positive, would you file based on that study? I know it’s designed somewhat differently to TL ’07 and ’08? And then on HER2 for DESTINY Brest06, how much does the inclusion of the ultra-low population expand the addressable patient set? I think you’ve said before that HER2 low is about 50% of breast cancers. How much bigger does that get with HER2 ultra-low?

Pascal Soriot: Susan?

Susan Galbraith: Yes. So for AVANZAR. Yes, accrual has gone very well, which just I think demonstrates the interest and the potential, not just of data, but the combination in particular data DXD plus immune checkpoint inhibition. As you know, we’ve seen exciting data in a couple of different settings from the TROPION Lung02 and 04 data sets as well as the BEGONIA study in triple-negative breast cancer. I think investigators are very interested in that the potential that this has to further improve the outcomes for patients with first-line non-small cell lung cancer.

Pascal Soriot: The study is progressing very quickly in recruitment, as you pointed out. The second 1 is DBO6 and the low maybe for you, Dave?

David Fredrickson: Yes. So Thanks, Emily, for the question on that. So I think as we — 2 things that I think are important about DBO06. The first 1 is, 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+ and 2+ so that’s the HER2 low that’s covered by DB04. 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 1+ into the ultra-lows, and then also it’s moving a line earlier. And so by moving the line earlier, there’s two opportunities to see growth, and it will be data dependent, but 1 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 will be data dependent. We’ll have to see what the magnitude of benefit is. But there’s 3 different opportunities for 06 to contribute to growth moving forward.

Matthew Weston: It’s Matthew Weston from UBS. Two Questions. And if the first 1 I can stick with in HER2 as well. I think 4Q U.S. 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 Daiichi commented that penetration was reaching plateau in some of the U.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 already plateaued. 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 will actually be quite a significant indication.

And then if I rather on the second question, you added into guidance that there’s essentially pointing to a onetime asset sale being something to take into account for 2024. I don’t remember you’re doing that for quite some time, suggesting it might be of a significant size. Is there any way you can help frame it?

David Fredrickson: You want me to start. Matthew, on in 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. We’ve done that in conjunction with the Truqap 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. Now 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, 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 03 and 04 still in the U.S., still in Europe, and I think that 06, which Emily just asked about, would be further tailwinds to add to that.

Matthew Weston: PAM tumor?

David Fredrickson: PAM tumor. Pam tumor is a spot where right now, we’ve got breakthrough therapy designation in later lines in the highest of over expressors. 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 third 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 and HER2.

Pascal Soriot: So before Aradhana, do you want to take up…?

Aradhana Sarin: So 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 asset sales. We do expect collaboration revenue to increase substantially. And we’ve talked about milestones and 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.

David Fredrickson: Pascal, super briefly, 1 thing 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.

Andrew Baum: Thank you, it’s Andrew Baum with Citi. Staying with in HER2. And PAM tumor 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. 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 per pan-tumor in HER2 low? So you’re going to need to set trials — there are competitors with HER2 assets, we’ve initiated trials in those HER2-low 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? And then the second question is in relation to Truqap. I’m curious what you think of the enabolosib data? And how that’s going to impact the use of Truqap, given you’re hitting the same PI3K-AKT pathway?

Susan Galbraith : Yes. So for the white space question, when you got a brand like in HER2, which has really exceptional activity across. I think the philosophy is to make sure that we develop it to the maximum of its potential. So again, not everything that we’re planning to do is currently visible, but you’d expect to 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 a lot of opportunity there. So we intend to leave this little white space as possible.

Pascal Soriot: And in terms of the…

Susan Galbraith : You want to address the market size for this.

David Fredrickson: Yes, sure. I mean look, I think that what I would comment on most, Andrew, is that we’re seeing very positive receptivity to Truqap. 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 desire among the community to have seen a broader label based upon the data sets that were presented and what we’ve seen and obviously, within the context of the competitive landscape, the Truqap data will ultimately be looked at within that context, but I think it really is showing favorably within that context. 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 291.

Susan Galbraith : So again, there are other opportunities, I would just say with capivasertib for combination, but also remember that treats a broader group of patients than just look at an alpha mutant group. You’ve got Pan you’ve got the AKT activation as well. There’s multiple ways in which it is different. But I think the first-line space is also something that is of interest.

David Fredrickson : Andrew, I mean, I think that the pace on this and maybe I skipped over because I thought it was kind of without saying, but Truqap is post CDK4/6 and the Invotas is not. So we are looking at different populations and different spots.

Susan Galbraith: 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 lack with the invoice patient population that’s clear.

Peter Welford: It’s Peter Welford with Jefferies. Two questions sticking to the norm. So first question is on the investor event on the 21st of May. I think it was called after it’s an R&D event. I guess curious, can you outline, is this going to be a de very much focused on the midterm pipeline? Or will you also be giving that 10-year vision? And if 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 aim for the next period? And then the second 1 is on Airsupra. So you mentioned obviously that the 2023 was very much a year of building access, building awareness, building this. I guess curious now in 2024, the comment made, I think, was over time, we expect U.S. PCPs to change 50 years of habit.

I mean that sounds there’s still a lot of slog to go. So you just talk about how debate and discussions gone? Was that successful? Is the barrier now the doctors? Or should 2024 be a year where we got anything in the model? Or is this another year where we should be really thinking about the action set to come?

Pascal Soriot: So 2 great questions, Peter. Let me just cover the first 1 and Ruud, you could cover Airsupra. So the R&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 midterm pipeline, but also we want to look at the investments we’re making in new technologies, new platforms, that will actually deliver growth from ’28, ’29 and beyond. So we actually give you a good understanding of not only the near term but also the midterm and the long term. 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 Part 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 margin, but it’s quite limited in the context of our global sales. So we can walk through this. We can work through the patent expiries that we have that are limited and continue to deliver very strong growth. And of course, it’s not going to be the same gross 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.

Ruud Dobber : Yes. Let me first rearticulate, let’s say, the excitement we have regarding Airsupra. First of all, this is a very substantial market. In the United States alone, there are roughly 15 million to 18 million scripts only for cobiterol in the asthma 18s indication. Having said that, we started our journey in order to gain access last year. 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. What we have seen in the first few weeks, it’s still very early days, is a very nice number of trialists already thousands of GPs, but also specialists are prescribing Airsupra.

Having said that, Axis is still, let’s say, an issue we are working through. So we need to buy down the scripts, the course per script quite substantially. So my clear star is we are off 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. You’ve seen in the announcement, Braceras 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 Airsupra moving forward.

Pascal Soriot : I think really the important point, as Ruud said, is really to expect that this is not an oncology new indication that really addresses a big unmet 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 a very good product with good sales, very good profitability. So we have to have the resilience to get it to the right level, and then it will stay at a good level for a long time to come because there’s not a huge amount of competition, and there is a clear unmet need there.

Mark Purcell : Is Mark Purcell from Morgan Stanley. Two questions. The first 1 for Aradhana. I guess what some people have been concerned by this morning is the certain anticipated transactions part of your CR guidance, which you expect to increase substantially in 2024. I guess they’re triangulate that with a Part 1 selected moving forward. And the last time you move forward with a PARP inhibitor, you had a 1.6 billion up from milestone from a partner. So can you confirm that R&D as a potential revenue is still in the low 20s, I presume it is. But more importantly, could you give us some qualitative guidance on SG&A, which obviously stepped up a lot in Q4 and just where that will land for full year 2024. And then the second question is on your CKM [ph] syndrome pipeline.

I guess this is all about going after symptomatic diseases like obesity and reserved election heart failure to capture asthmatic diseases like CKD. 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 Ecogen 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 Orphagen is estimated to be over 30% and therefore, incredibly difficult to scale. Thank you.

Aradhana Sarin : Sure. So on the SG&A front, if you look at fourth quarter last year, which I think you mentioned is a concern in terms of the step-up. If you look at the last several years, the fourth quarter is always 1 of our largest quarter in terms of SG&A. That does not mean that’s the run rate sort of obviously going forward. And then when you look at 2023 and our updated guidance and some of these — some of the tax transactions and net tax changes that we were — we had in mind — and we manage the whole P&L. So we chose to invest in certain areas, including some of the launches that you heard about from Rod and so forth. So — that sort of explained the fourth quarter 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 finance expenses. We’ve talked a little bit about the gross margin expectations. And so you can sort of consider that and see where the SG&A growth will be. We are obviously committed to operating leverage, and we do expect that given those puts and takes that the SG&A growth will be lower than the total revenue growth.

Pascal Soriot: Maybe I am just to add to this. I understand 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 in our guidance, potash 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. So message is our top line revenue growth is not driven. I mean it’s not dependent on this one-off, as you said.

Ruud Dobber: Yes. So let me first phase, the opportunity in CKD market. There are more than 800 million 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 on Farxiga, there’s still a huge unmet medical need. And hence, our let’s say, excitement also the products we have in development. Clearly, 1 is the combination of dapagliflozin placebo tenant. And of course, Sharon can talk about that as well makes us quite bullish about this opportunity. Now equally, Mark is developing a legion potential Egan 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 1 of the combinations, Sharon.

Sharon Barr : 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 Ruud said, there are million people living with CKD and hypertension in the U.S. alone. So clearly, this is a very large market, and it speaks to the interrelatedness of cardio renal and cardiometabolic disease. So thinking about how we can address the different flavors of CKD with our portfolio — we are advancing the BaxtroDAPA combination. It’s in Phase III for CKD. We have Boston Renan combined with dapagliflozin, the miracle Phase II study in CKD with heart failure achieved high-level results at the end of last year. We really look forward to sharing those at an upcoming conference, and we are in the deck of Phase III planning at this point.

And then the combination of zibotentan, with dapagliflozin allows us to address CKD with high proteinuria, and we have initiated the ZENITH Phase III trial. So clearly, we’re heavily invested in this space, and we view this as an opportunity to manage the complexity of cardiorenal 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 dive organ protection while managing health because we understand that these diseases are highly interconnected. So if we think that there are 64 million people with heart failure worldwide, 15 million 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 5004 program. Also this is not our only program. This is 1 piece of our overall focus on metabolic disease. Moving along at pace. We also have a long-acting amylin as well as a GLP-1 glucagon dual agonist. Speaking briefly to 5004, we are excited about this asset. We are encouraged to see it move forward into 2 Phase IIb trials this year.

Pascal Soriot : You want to say a few words about the manufacturing steps.

Susan Galbraith : Actually, I’ll say 2 things. The first is that 1 key focus for 5004 is being able to simplify our manufacturing process and come up with a simpler synthetic route. And together with our collaborators at Epogen, 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 5004 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. And so we look forward to sharing results of our Phase I trial, which only recently wrapped up. This was a highly controlled 4-week inpatient trial that was piloted by Ecogen. We achieved database lock at the end of December, and we look forward to sharing the data at an upcoming medical conference.

Pascal Soriot : Maybe 1 quick point is that every focuses on obesity, but there is this big segment of people are not abused their overweight. So they don’t 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 the PCSK9 with APA, with bacostat and being able to combine is going to be a substantial advantage if you have this portfolio that we have in.

Simon Baker: Simon Baker from Redfin Atlantic. Two for me, please. Firstly, on [indiscernible] and Safnelo. Now they’ve both been on the market for a while. I wonder if you could give us an update on the characteristics of the prescribers and patients so far for both drugs. Question on Gracell 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 Gracell have made in the past that there was a substantial manufacturing cost advantage here, which sounds like it could be quite significant as you move into autoimmune areas. Any color on that would be much appreciated. Thank you.

Ruud Dobber : Yes. Let me first start with your question about Test. 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, new-to-brand market shares in countries like Spain and Germany. The patient population is a very interesting one. It’s primarily the patients who have, let’s say, a moderate or normal is in the full count 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 [indiscernible] is also very well established in the high ease in the fills 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 Alges and more and more pulmonologists as well.

So we have high expectations and together with our partner, I think it’s fair to say that the product is on its way to become a blockbuster anytime soon. So that’s one. Safanella is another very nice story. It’s the only interferon 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, and we have seen very, very strong feedback from rheumatologists that patients primarily with skin manifestations are reacting very well on Safanella. Equally, only operating in the intra market as we speak. So we are doing for the last 1.5, 2 years, relatively large study for subcutaneous formulation. And I truly believe, hopefully next year, that study will read out, and we have a positive readout as we’ll provide another clear opportunity.

And as Sharon mentioned in her remarks, we are very keen to move Safanella also in multiple other indications in order to further grow the brand to also equally a blockbuster brands in the next few years.

Pascal Soriot: Thanks, Rudd. Do you want to comment on Gracell?

Susan Galbraith : As I mentioned in my prepared remarks. The actual time that you need to manufacture the Fasco is substantially shorter than for some other currently commercially available CAR T therapies. That’s 1 component of the turnaround time, obviously. So it’s 1 component also of the manufacturing cost I think it does help with scalability because the amount of time that 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 of the manufacturing building that you’ve created. 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, contribute to the overall benefit that we see from the Fasco process.

Pascal Soriot : Thanks, Susan. Maybe we could take 1 online question, Tim Anderson of Wolfe Research. Tim, over to you.

Tim Anderson: Thank you, any headwinds to revenue growth for individual key brands in 2024 that you’d like to call out 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 all Calquence in the U.S. seems to be stalling out, for example? And then second question on Dato. Any risk to approval in the U.S. in lung and non-squamous based on what you have today? To me, the regulatory precedent as 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 bond squamous remain supportive, but doesn’t formally hit?

Pascal Soriot : Thanks Tim. Proposed Marc, you cover 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 upside. And then Susan, you cover that, too?

Marc Dunoyer : So let me start with. So basically, the headwind that we can anticipate is the introduction of biosimilars in the PNH indication. Two 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 PH the conversion is very high. It’s in the magnitude of 80%. That’s the first thing. The — where we’re also sustaining the growth of the complement franchise is buying — expanding our regional presence. And we have augmented significantly in 2023. We still have more work to do in ’24.

We are increasing the number of approval and reimbursement for Soliris as well as for Ultomiris. And lastly, this is a long-term work that we have been doing to make this franchise sustainable, we are continuing to develop new indications. We have no that has been approved recently in Europe and Japan with very rapid uptake. We are soon to get the U.S. approval, but we will also continue with other indications, which are presently in Phase III. So not only on the C5. And then we have also — and if we want to but we have the nanobody bispecific 1720 givilimab that is well advanced in Phase III and should be coming to the market in very soon. So there is a future, a very bright future for the C5 franchise and the complement franchise overall.

David Fredrickson : 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 commented in my prepared remarks on the only 1 that I would call out, but I think it’s important, which is that in Japan, in February, we had repricing on Imfinzi 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 Imfinzi price adjustment. 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.

And I think that is coming on the heels of ADAURA and FLAURA performing well. We’ve got an opportunity in China despite the competition that we’re seeing there to move out of this anticorruption 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 access in general to oncologists has been more limited. We’ve got FLAURA 2, which, knock on wood, we’ll see an approval on here sometime within the year, we’ve got Laura, which I think is a really important catalyst that will 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, FLAURA 2 positions us pretty nicely.

On Calquence, no question that we’ve got a competitive environment, and we’ve got a direct competition. But I also like what our U.S. and European teams have been able to do in the face stack 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 the year. I’m hopeful and optimistic that as co-pay within the U.S. is lowered. Pascal talked about this in his remarks, and we see affordability go from patients having to pay 5% of the catastrophic to 0, and therefore, a co-pay 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.

Pascal Soriot : I think this co-pays, it should really not be underestimated because if you look at the U.S. system on the Medicare side, it is going to be a very, very good system. I mean, many countries have co-pays. I mean Australia has co-pay many countries of co-pays. And here in the United States, people, 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 are received, regardless of how much they cost $2,000”. Now I might say $2,000 is a fair amount of money. But if you have a car insurance, house insurance, that’s going to cost you at least that and many people can afford this. And it’s a great level of reassurance in terms 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.

Luisa Hector : Thank you. It’s Luisa Hector from Berenberg. Question on Dato…

Susan Galbraith : First of all, thanks for the question. We’re confident that Dato is going to be important medicine in the treatment of non-small cell lung cancer. Obviously, we’ve been having ongoing discussions with the regulatory authorities. TL-1 is a trial with a dual primary end point. Obviously, we met PFS as 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 tax 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 in the non-squamous for OS was 0.77 with a confidence interval that only just overlapped on.

So it was 1.01 at the upper end. I think that shows that we’re not just seeing a progression-free survival benefit, but 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 OS during a period of review, and we’d anticipate that during the period of review for TLL1, we can update the OS.

Iskra Reic : Thank you. Luisa at Berenberg. I would like to ask Iskra Reic to comment on the Icosavax deal and just the attractions of the assets there and the opportunity to enter the RV market? And then also maybe to pillar 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, T cell therapies, et cetera. So it’s really bubbling. So really, it’s about how you can be so confident in some margin expansion midterm. How can that happen? Is there a point where selling costs, the infrastructure stabilizes? How do these fabulous products compete for R&D budget?

Is it about strict almost attrition, making sure absolutely the best projects are moving forward? 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.

Ruud Dobber : Thanks, Luisa, the question for interest. So really strengthened vaccine and a costs lead asset is the combination RSV and PV vaccine that is Phase III ready. And that is important to us for 2 different perspective 1 side. This is a next-generation vaccine technology within the respiratory boxes 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 a non-VLP vaccine. So basically, what you can expect to see from those vaccine is to have a higher efficacy and a longer durability of the fact and, at the same time, better safety profile. The second important aspect of this is that this is a combination of RSV and HMPV vaccine.

And although there are a number — you can argue there are a number of RSV vaccines for the other potation 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 are basically in the similar rate between HMPV, RSV and flu. And therefore, we feel we feel excited to use this vaccine on 1 side, accelerate and bring it to patients as soon as possible. On the other side, it’s a great strategic fit because it really builds experience in RS3 as well as build on our therapeutic leverage and serving the patients that are at risk of respiratory diseases.

And just at the end, I need to mention that DL still is the subject to closing.

Pascal Soriot : So Luisa, your second question, the R&D spend, as we’ve said before, we expect to keep in the low 20 percentage as a percentage of revenue. And our improvement will come from his name. And so we are very committed to achieving this margin expansion in the midterm, as we’ve communicated for quite some time. We are on track and remitted 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 efforts. If you look at the base, look at — I mean, Farxiga will be even potentially declining in promotion. So we can manage with this large SG&A spend we have to manage, I should say, so that we can actually deliver this midterm 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 of 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 of course, 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 our 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 will, but if we had to compromise on the future progression of operating margin beyond the mid-30s, we had to comprise 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. Ultimate 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. Do you have microphone there?

Eric Le Berrigaud : Eric Berg Stifel. Two questions. First for Aradhana, coming back on 1 of your comments before on CapEx. So CapEx anticipated to grow by maybe as much as 50%. How should we think about this going forward? Is it a 1-year sharp increase? Or should we think about CapEx staying around $2 billion for the next few years or then percentage of revenues? Or how should we model this? And maybe the second question for you, Ruud and Sharon, about maybe the next wave of innovation into the biologics in respiratory. We see 1 competition coming with long-acting IL-5. We see more interest for the TSLP targeting in — also with long acting, but also combining with other targets. How — what is AstraZeneca doing for the next wave and to build on the existing franchise?

Aradhana Sarin : 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 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, right? So we just announced the cell therapy facility 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. We’re investing in our own API plant in Dublin. And that’s also because we’re trying to become more self-sufficient as it relates to API.

We announced an inhaled facility in Qingdao, and that’s to fulfill the demand that we expect for Breast03 for example, to come out of China. And in addition, we are investing in our ERP systems, which as I would say, for many, many years being under invested in. So there are a number of these investments that we’re making behind our pipeline. And 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. And oftentimes, you see companies not being able to fulfill their growth ambition because of underinvestment in supply. So we’re sort of getting ahead of this curve for the pipeline and the new opportunities.

Pascal Soriot : One of the things this plant in Qingdo will support this our growth ambition in the respiratory market in China. If you look at COPD in China is totally underdeveloped. I mean the treatment is the disease is extremely prevalent production, 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 Breast03 in the triple segment in China. 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 Breast03 and that is really why we decided to make this investment.

Ruud Dobber : Quickly regarding, let’s say, the future of the biologics, and Sharon will comment on the science in the moment. So despite the progress we have seen in the last few years with drugs like [indiscernible]. It’s also a fact of life that there’s still a high unmet medical need and that remains. So still patients are suffering from multiple executions in the severe asthma segment as well as COPD. So we’re going to bet on new mode of actions, the CNs 33 clearly 1 of the examples I’m sure Sharon will say a little bit more about that. But also, we have an anti-tSip in development. And it will be quite spectacular to have an inhaled biologic in order to help those patients suffering from a very severe disease. 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 order to generate the evidence that it can work.

Sharon Barr: So I’ll build on that and really continue forward with Ruud’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 aspire moving forward to thinking about how Tozorakimab can be effective there. Tozorakimab is a differentiated therapeutic in that this anti-IL-33 is hitting both the ST2 and the RAGE/EGFR pathways.

So it’s able to address the inflammatory piece of the disease as well as mucus production in 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 broaden 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 the major unmet metal 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 IRAK4 inhibitor, and again, evaluating midiparstat in that space.

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

Eric Le Berrigaud: On the IL-33, even physicians has seen less data than from Sanofi and from [indiscernible 1:34:27] on the Phase II you’re already into Phase II issue. Can we think about getting more Phase II this year or any planning to give more?

Aradhana Sarin: As you know we’re so encourage that data we’d like to Phase III in that program and we’ll look forward sharing our Phase II date as it becomes available at our coming medical conference.

Ruud Dobber : So there are two big ones ongoing one is the NTR 33. It’s also in acute respiratory failure. And hopefully we will see data after the next season. So someone next year and if positive, fingers crossed we’ll be the first then NTR 33 in a complete new segments where there’s very big unmet medical needs. The second one clearly, our phase three trial in the in the COPD space, we’ve added an additional arm, a high dose and that trial is ongoing. And we’ll read out in the next two years.

Pascal Soriot : Maybe we take the last question. Is that okay, Andy? So Gonzalo, question on Gonzalo, over to you.

Gonzalo Artiach: Hi, could you hear me?

Pascal Soriot : Yes.

Gonzalo Artiach : Hi, Gonzalo from ABG [indiscernible 1:35:35]. I have a couple of questions. The first 1 is on Airsupra. It follows the previous question from the audience. And how big is the expected sales force and commercial team for Airsupra? And what is the current level of awareness of this drug from doctors today? Also in ’23, you have been preparing for the launch of it. So what is the biggest challenge based on your experience through the year to penetrate the market that 1 could expect it to be quite conservative? And the second question is on Tagrisso. It seemed from your report today that the demand in China had some hospital ordering dynamics. So could you give us some color on that? And how much is expected to affect 2024? And the same for the Australian government rebates looking also into ’24 and beyond? Thank you.

Ruud Dobber: 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 for us. It’s substantial for 2 reasons. We’re detailing on the allergy as well as pulmonologist 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 Breast03. 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 over 80% at the level of both the allergists and pulmonologists and especially allergists are the first prescribers.

We started in a soft way in the last quarter. And the last quarter, we had already 5,000 trialists, especially at the specialist level for Airsupra. Once again, the biggest change and that’s the last question you were asking, what is not the headwind, but what is the biggest challenge? The biggest challenge is we are very happy the 3 large commercial PBMs have now listed as Airsupra but there are multiple downstream PBMs, and we still need to gain access there. There’s nothing specific to Airsupra. It’s just a fact of life of the U.S. environment. So we are working very diligently with our market access teams to — or in order to create that access. And equally, we’re going to bid for Part D in the course of this year as well.

David Fredrickson : Yes. So on Tagrisso within China, fourth 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 important to remind that there’s a sizable EGFR population within China. 30% to 40%. Also thoracic surgeons do have the ability to prescribe systemic therapies. So therefore, there’s a relatively high adjuvant treatment rate, and we had ADAURA 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 of things. And there are many fewer competitors that are playing within that adjuvant space. And our data, I think, stands out as being the most impressive there. 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’s, mostly a onetime event. And I’d say mostly just because there’s some carry on through the year, but I don’t anticipate talking about it ever again.

Pascal Soriot : 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 1 is just kind of taking into account all the questions last today. First 1 is product sales in 2024. We will still have very strong product sales and the product sets will grow. I mean the growth of product sales in is coherent with the guidance we gave for top line revenue. So the 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.

We have to invest in this growth, but we will get there. We are committed to this, and we are working towards this, making good progress. You saw the margin expansion in 1 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 headwind. I mean, headwinds, we have headwinds constantly in 1 market or another, 1 product or another. The beauty of our pipeline and our footprint geographically is when 1 product face a headwind and other product picks up, remember, we have 13 products that are blockbuster status today. And 1 geography is struggling a bit another 1 is doing better, and that’s really the model as we have it.

But overall, partly and we spent a lot of time, our teams have spent a lot of time working on modeling this. The incremental rebates that we will have to deal with is, first 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 certainly a negative, but it really totally manageable in the context of our total global sales and the growth rate we are 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&D day, and I hope many of you will join us in the beautiful disk, where we have tremendously talented teams that are doing a great job.

We have today a huge number of collaborations in the Cambridge area, and this is really leading to very good productivity from our R&D efforts. With this, thank you very much. And again, thanks for your great questions.