AstraZeneca PLC (LON:AZN)

Earnings Call: Q4 2017

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Feb 2, 2018

Good afternoon, everybody. Good morning to those of you who are joining us by telephone. Welcome to our full year results presentation, a conference call and webcast to investor and analysts. We are here in London, and we have people with us here in the room, on the phone and on the webcast. As usual, the presentation is available for those of you who want to access it online at astrazeneca.com for you to download it. Please turn to Slide 2. This is our usual safe harbor statement. So if we want to move to Slide 3. We plan to spend about 45 minutes on the presentation and keep the rest of the time, the next 45 minutes for the Q and A. So for those of you on the phone and want to ask a question, please press star 1. There's also an option to ask questions online as part of the webcast. Please limit yourself to one question in the first round, if you don't mind, so everybody can get a chance to ask a question. Thank you so much. So today, I'm joined by Marc Dunoyer, our CFO Marc Malin, our EVP of Global Product and Portfolio Strategy, Global Medical Affairs and Corporate Affairs Deaf Frederiksen, who is EVP and Head of our Oncology Business Unit and Sean Boren, our EVP for Global Medicine Development and our Chief Medical Officer. Please turn to Slide 4. This is the agenda, very standard format. You've seen that many times before. If we turn to Slide 5, these are the highlights of the year. And I think we can say that 2017 was indeed a turning point for us, and we made pipeline viewpoint, but it's also starting to show as far as commercial delivery. We had accelerated growth in the last quarter, and it bodes well for 2018. Oncology was particularly encouraging with a growth rate of about 19% across all our medicines. And of course, we had the impact of the new launches only in the last quarter and those are slowly ramping up, in particular, Imfinzi. But Tagrisso also is starting to accelerate on the back of our first line data, which, of course, we don't promote. But some physicians, in particular in the U. S, are already starting to adopt in their daily practice. CVMD also progressed very nicely. We now have 2 blockbusters in our cardiovascular diabetes portfolio. Relynta, which grew by 29%, really pleases me to see this product finally get to where I always thought it should be and there's more to come. And Farxiga with a growth rate of 28% despite a very competitive marketplace. In respiratory, we experienced some quarterly Symbicort improvement, starting to bottom out a little bit in some region and suddenly grow very much in China. And the Fasenra launch is proceeding very well. Very early days, of course, we launched in November in the U. S, as you know, but so far so good. We're very satisfied with what we are seeing for this launch in the United States, including into January. The emerging markets are clearly a nice story, in particular for China. We experienced a growth rate of 8%, acceleration in Q4. Just like to remind you that throughout the year, we were impacted negatively by divestments. Example is the Anesthetics divestment. So the actual growth rate of those countries is higher than we report, if you're correct for this. China grew by 15%, also impacted negatively for 3 quarters by those divestments. In Q4, we experienced a growth rate of 30%. Just as a reminder, the market is growing by 7%, 8%. So the 30% growth rate is truly a very remarkable success. And there's more to come in 2018, sorry, and I'm not suggesting a minute that the growth rate will be higher Q4, but certainly more to come in terms of products. As you know, we got reimbursement on the national drug reimbursement list for 5 new products. So that certainly will fuel our growth. Tagrisso is doing very well. We are actually even seeing something in with Tagrisso in China that we would never have thought possible 5 years ago. We're saying the product being reimbursed by some regional formularies. We would not have seen that 5 years ago simply because the cost was a hurdle and things are changing. So really, we believe it has a great potential there. Core EPS is better than expected due essentially to product sales. There were some one offs, sales true ups and of course, any improvement in our tax rate. For 2018, we guided to a single digit percentage increase in product sales. Got to remember, in 2008, we have the last portion of patent expiries hitting Japan and Europe. This often has been forgotten. The patent expired in Europe for Crestor later than the U. S. And therefore, there's still an impact in that region as well as in Japan. So just as a reminder, make sure you consider this as you do your forecast for this year. By the end of this year, we will be done with patent expiries and we should really see the full swing, the full impact of those launches. They will kick in, in 2019 in Europe. They already started to kick in, in the U. S. In 2018. So by 2019, really, we are out of the woods as it relates to patent expiries. We guided core EPS of CHF3.30 to CHF3.50 This is to fully support the launch. Importantly, we actually achieved in 2017 really good success beyond our financial results and the progress of our pipeline. We are ranked 34 in the Corporate Nights, 14th Annual Global 100 Least of the Most Sustainable Companies in the World. And everybody at ASEAN is very proud of this achievement that was on the back of a lot of good work by many people across the company. And we were identified as a high as a biggest achiever for 300% increase in renewable electricity in a single year. So really very good result. If you turn to Slide 6, these are the highlights in terms of the news flow. We had very rich news flow in the last part of the year. As you can see here, in particular, Lynparza received the U. S. Approval in breast cancer, which is really a major milestone demonstrating the benefit of PARP inhibition outside of ovarian cancer. Within ovarian cancer, we received approval for IMPLAZA in Japan in the second line setting, and this is an all comer approval. So a very substantial opportunity for our Japanese organization. And also very pleased to announce that we've received 5 tier review in China. That's another thing that would not have so possible in China 5 years ago. The typical process was you have to wait for approval in another geography and then you start developing in China and you basically launch several years after everybody else. This is changing. We presented We presented, as you know, our Phase III data for FLORA at the ESMO. And as a result, received wax through therapy designation for first line use in the U. S. And this was followed by an acceptance of our submission in the U. S. With a prior year review and also submission acceptances in both the EU and Japan, and those are proceeded. In CVMD, we received some really, really good news for ZS9. The FDA accepted our regulatory resubmission. And you've probably seen that in Europe, the CHMP has now completed the inspection of the plant and through their satisfaction, and then they reinstated their positive opinion. So hopefully, we get a hold for those 2 medicines in the not so distant future for those medicines in those two regions, I should say. And finally, as I said a minute ago, we launched Fasenra. We got approval and launched Fasenra in the U. S. For severe and uncontrolled asthma. We also announced the positive top line results for the Phase III KRONOS trial recently, which looked at the triple combination PT10 for patients with COPD. And of course, as usual, Son will cover the pipeline in more detail later. If you wanted to turn to Slide 7, I just want to highlight here the top part actually of the graph. As you can see, we are in light gray. That shows you that we are kind of finished in terms of the patent expiries in the United States. The top part of the graph shows the patent loss the patent losses, the sales from products that have lost their patents in the U. S. The second part is the darker gray reflects Europe and Japan essentially. And you can see here that this we still have sales and that explains why in 2018, we will see a decline here. The rest of the portfolio is growing nicely. So if you move to Slide 8. As we said at the beginning of the year, 2017 was a defining year from a pipeline viewpoint because it's really a time when we started moving from pipeline delivery into commercial delivery. And in 2018, we're in full swing as far as commercial delivery. We now have several products in launch mode. And then essentially, we really have commercial products. Now we don't our story, if you will, is no longer purely a pipeline story, but it's a story of a commercial delivery. On the right side, you see that we achieved many positive results. ZS9 was a temporary setback, and hopefully, we should get approval soon, as I said. And there's, of course, the Mystic setback. We still have to PFS setback, I should say. We're still waiting for the overall survival results in the first half of this year, and I will let Dave and Sean cover the rest of the oncology news in more detail. Now this on this chart, you see essentially the sort of most important events. But if you look at the totality of the events that we experienced in 2017, there were 43 events, whether they were clinical readouts or regulatory approvals in various geographies. Out of 43, 40 were positive. We had 3 setbacks, thalukinumab, ZS-nine and Mystic. So it really gives you a sense of the sheer scale of the pipeline progression we've experienced in 2017 the great work, Jim, the organization and Jean's leadership has been doing to deliver all of this. And there's more to come in 2018. We expect more or less same volume of activity. And in fact, January was in itself a tremendous month in terms of what you might call GMV productivity with several great news there. So if we move to Slide 9, this shows you that we are definitely committed to returning the company to growth. As a not so exciting reminder, we've had no growth since 2010 as we went through all those patent expiries. And I don't need to tell you this, you know that, but it's certainly a reminder of the kind of transition we've gone through and the headwinds we've been experiencing for all these years. For the first time in Q4, we experienced growth, not a lot of growth, but certainly growth. And it's clearly a turning point for us. As we look ahead, we have many positive opportunities that will drive our growth. Some of us are listed here, as you can see. Fasenra, of course, Far Farxiga, Brilinta, the DECLARE trial for Farxiga will be a very substantial opportunity. There's more coming for Tagrisso first line. As soon as we get approval, we can start promoting the indication, lymphazimfinzi. So as you can see here, quite a lot. Still, as I said earlier, a negative, which is still a big negative for Crestor in Europe and Japan that is slowing us down. But overall, the expectation our expectation for 2018 is that the positive should offset more than offset the negative, and we expect low single digit growth rate in product sales. So with this, I'll now hand over to Marc, who is going to take you through our product sales and our growth platforms. Thanks, Pascal, and welcome, everybody. I'm pleased to be here again to give you an update on our performance of our growth platforms. So we'll start with our go to Slide 12. Great. Thank you. Today, I'll cover the growth platforms except new oncology, which will be covered by our Head of Oncology Business Unit, Dave Frederiksen. The growth platforms delivered overall growth in the year of 6%, with a strong acceleration during Q4, driven by continued volume growth and true ups favorable true ups in the U. S. For respiratory. Combined revenue from our growth platforms represented over 3 quarters of our business product sales. And also, we saw good momentum, as Pascal mentioned, in emerging markets, but also in new CVMD and in new oncology. Turn to Slide 12, please. Now as we're going forward this year and as we increase our focus on commercial execution, we're going to start to share growth from our main therapeutic areas in this new format. Basically, we will look at the whole of oncology as a growth platform in itself, along with new CVMD, respiratory and emerging markets. Next slide, please. So speaking of emerging markets. Emerging market continues to be in line with the long term performance target of mid- to high single digit growth in product sales with 8 percent sales growth for the year. And as Pascal highlighted, China had a particularly strong year with excellent results in the 4th quarter, 30% growth, and that contributed to an overall growth in the year of 15%. And also importantly in emerging markets, the growth was driven by our core growth platforms, our core therapeutic areas, which all delivered double digit growth across Emerging Markets. Please turn to Slide 14. In 2017, emerging markets performance was significantly impacted by divestments. So therefore, the underlying performance in China and Emerging Markets was actually even stronger than was reported. Excluding the effects of divestment, China demonstrated 18% 22% growth in 2016 2017 and ex China growth would be 7% 10%. It's also worth to note that the growth in China in the 4th quarter was absolutely driven by durable demand growth as sales were not impacted by inventory movements. And you can see that clearly on the China inventory chart at the right hand side or the left hand side of the page. So slide turn to Slide 15, please. Respiratory sales continued to see challenges in the year with an overall sales decline of 1%. SymbroCourt product sales were down by 6% in the year with a flat quarter, partly driven by favorable sales true up adjustment in the U. S, as I mentioned, but also certainly by overall continued increase in volume. In the U. S, in Europe, Symbicort sales declined by 12% 10%, respectively. Importantly, in the U. S, NBRx new to brand prescriptions has been growing actually for SYMBIRX since September, And this was driven by an increase in share of voice, by the expanded exacerbations labeled COPD exacerbations and the launch of a new campaign. So very encouraged by Symbicore performance in the Q4. Symbicore continued to grow in emerging markets and delivered 10% growth this year. And Palmicort also continued to demonstrate robust growth, up 12% in the year, driven by Emerging Markets with a 4th quarter performance of 26%. And this was driven by underlying growth and also some seasonality. Please turn to Slide 16. As Pascal mentioned, Sang and Respiratory, we're pleased to announce the approval of FASENRA in the U. S. And the launch in the Q4. And actually, we've now also announced approvals in Europe and Japan in January, and this is for patients with severe asthma, as you know. We launched Fasenra at the end of last year. And as Pascal also highlighted, the feedback initial feedback from the market from physicians, payers and patients has all been positive and consistent with Fasenra's highly competitive clinical profile. Next slide, please. And moving to new CAVMD. Sales were up 9% despite intense competition, with 4th quarter growth up 21%. Continued growth that was demonstrated across all regions, which was very exciting to see. And this is for Farxiga and Brilinta. And both, as Pascal mentioned, achieved blockbuster status with more than $1,000,000,000 in sales. Brilinta delivered 29% growth, which was particularly with particularly impressive performance in the U. S. Of 46% growth in 2017. And Farxiga delivered 28% growth in the year and maintained a 41% volume market share globally, continue to maintain leadership within the SGLT2 class. In the U. S, we're excited also to have our innovative auto injector by DURING B size launched. And again, we are seeing encouraging early uptake with the by DURING B size. Next slide, please. In Japan, we continue to grow with product sales up 4%. That's despite a declining Japanese market. Growth was mainly driven by Farxiga, new indication for Faslodex and Farxiga. We took, I should say, Tagrisso, a new indication for Faslodex and Forxiga. We look forward to launches of our recently approved products LYNPARZA and Fasenra in Japan, which will add to our opportunity there significantly. And actually, the performance of our team in Japan is really outstanding. Symbicort, Nexium, Farxiga and Trogiso are all 1 in terms of volume market share in Japan. It's great work by our local team there. Crestor did see their 1st generic competition in Q3 with multiple generics launching in the Q4. So we're now seeing an erosion rate comparable to other major products in Japan when they face generic competition. And we do anticipate this effect to continue throughout 2018. We've had continued great success with Trogreso, where we've fully saturated the addressable second line market with a 90% market share in the second line. It's a really outstanding performance by our team in Japan. And on that note, great pleasure to hand over to Dave to take you through the oncology growth platform. We can go ahead and move to Slide 19. Thanks, everyone. Thanks, Mark. Good afternoon, everyone. So now as we turn to on we are really pleased to announce $4,000,000,000 in total product sales in 2017. So this now represents 20% of total AstraZeneca product sales, and that's growth of 19% year over year, 2017 versus 2016. I think really importantly within this, we see now that 4 of the 6 new medicines that is part of our ambition to launch by 2020 have now been delivered. And we look across these, and I'll talk about it in greater detail, but we see truly global launches with both LYNPARZA and Tagrisso. With LYNPARZA, the growth is accelerating as we success within ovarian cancer also combined with the new launch, which will be a catalyst going forward within breast. In Tagrisso, we've seen success consistently across the second line as we prepare for first line. And then within the U. S, the success of Imfinzi and Calquence, we really look forward on building on to as we move into 2018 and those are catalysts for next year. New oncology within the $4,000,000,000 delivered 1 point $3,000,000,000 as Mark had mentioned previously, last year, and we look forward to that continuing strong growth into next year. If we could turn to the next slide, please. So now focusing on LYNPARZA, I want to go through and talk about what has really been strong performance there as well. For the quarter, globally, we saw $100,000,000 in sales, which results in full year sales of $297,000,000 with really very strong growth, as you can see on the slide, across all regions and it's underpinned by truly strong growth in the second half of the year within the U. S. What we saw from that is once the handicap of the pill burden and also the narrower label were lifted with the SOLO-two approval that we really began to increase our competitiveness within the ovarian cancer space and we see 74% growth within the quarter within the U. S. And sales of $141,000,000 I think it is important to also note that the majority and in fact, a significant majority of our sales in the Q4 in the U. S. Were in ovarian cancer versus in other tumor types. We saw strong progress throughout the year within Europe with sales up 58% and the full year European sales of $130,000,000 Bracket testing rates have been moving nicely and it's boosted by additional launches that we've seen across several markets. Again, as we mentioned before, Japan was just in January approved for the all comers label in platinum sensitive resistant. We're certainly very pleased with this progress. We look forward to that being a catalyst going forward in 2018. And finally, I'm really pleased to say that our collaboration with Merck is going very well. We see good integration, both on the development side, but also on the commercial side. Joint U. S. Field forces are now in the field operating together, partnering and collaborating together and that was in time for the breast cancer launch and that was on purpose. We continue to see the global Merck team come on board throughout 2018 across major regions. If we could turn to Slide 21, please. So, moving on to lung cancer and specifically to take a look at Tagrisso and Imfinzi. First, starting with Tagrisso, very pleased to see that Tagrisso demonstrated continued growth quarter on quarter and now is at $955,000,000 in sales for the year. This is predominantly driven by 2nd line and higher testing rates that we've seen across all of the markets that we're in. We have seen in the U. S. 59% growth over the year, testing rates now over 70% and we see continued growth as we prepare for first line. We also saw very strong growth in Europe, up 142% over the year. The testing rates in Europe are somewhat below what we see within the U. S. I think that that actually creates opportunity for a little bit of further growth within Europe, and that's something that we're working on. The France testing rates are certainly on par with what we see within the United States. In Japan, as Mark mentioned, testing rates are over 90%. We see market share among those that are T790M positive, also above 90%. So Japan has really probably hit about its theoretical max in terms of second line and we are getting ready for first line within Japan. And then lastly, Pascal spoke about China and what we've had in terms of really an outstanding early penetration into that market. Turning quickly to Imfinzi, we look forward to the regulatory decisions that are going to come on Pacific. In the meanwhile, we've been quite pleased to see that within bladder cancer, our labeled indication, we are now 3rd in the market in terms of market share with low double digit market share and I think that speaks to the competitiveness of our field force and we're in preparations and getting ready for launch for the Stage 3 unresectable launch that's coming up shortly. If you turn to Slide 22. So, in summary, if you put together what you've heard from both Mark Mahlin, Pascal and myself, we have now a pipeline transformation that is continuing to deliver and we're now focused on commercial execution on a global scale. The extensive portfolio across our 3 main therapy areas has the potential to deliver several blockbuster medicines and you see that we've got several global launches underway across each of the therapeutic areas, oncology, CV Metabolism and Respiratory. We remain committed to ensuring all eligible patients get access to our treatments as quickly as possible. And with this, it's my pleasure to turn over to Marc Denoyer to go through some of our financials. Thank you. Thank you, Dave, and hello, everyone. I'm going to spend the next few minutes to review the financial performance for 2017 and then move on to the guidance we provided this morning for the year 2018. If you could please turn to Slide 24. As usual, I'm going to start with the reported P and L before turning to the core numbers. As Pascal mentioned earlier, the total revenue declined by 2% in the year with product sales impacted by Crestor and CerroCore LxR losses of exclusivity in the United States. Product sales, however, grew by 3% in the quarter, which included favorable tour up adjustment related to the 1st 9 months of 2017. Encouraging progress, however, was made right across our therapy areas and in regions such as emerging markets. Exchange revenue grew by 38% in the year with income from the collaboration with Merck of $1,200,000,000 making just over half of the total. The reported tax rate of minus 29% in the year reflected a favorable net adjustment of 6.17 $1,000,000 to deferred taxes, driven by the recently reduced U. S. Federal income tax rate and non taxable fair value adjustment relating to contingent consideration on business combinations. Please turn to Slide 25. Turning now to the core P and L. Our gross margin ratio for the year fell by 1 percentage point to 81.2%, driven primarily by product mix effects, including the decline of sales of medicine where we have lost exclusivity as well as a ramp up of manufacturing capacity for new medicines. The core gross margin ratio is also increasingly impacted by agreements with both Merck and Circassia. To remind you, we book all Lynparza and Tudorza product sales and reflect the product profit share within cost of sales. It is useful to remember that when you are modeling your performance, our performance and anticipate a further decline in our gross margin ratio versus 2017 for 2018. Core R and D and SG and A cost each reduced by 3% in the year. This reduction reflected our focus on cost discipline. We did, however, see an uplift in core SG and A cost in the second half driven by some specific factors, which I'll talk about in a moment. Core operating other operating income increased by 14% in a year, a result of the level of disposal activity. The core tax rate in the year to date was 14%, slightly lower than the range I indicated previously. The rate was not impacted by U. S. Tax reform, the adjustment for which were reflected only in the reported tax rate. In the Q4, our core tax rate benefited from the impact of U. K. Patent Box profits, true up on tax returns and positive development in relation to a number of historic tax liabilities for which we had previously provided. This reflected the viability that can be expected now and again on tax matters. For 2018, envisaged a core tax rate of 16 percent to 20%. Please turn to Slide 26. Looking at external revenue in more detail, I want to turn to the contribution of ongoing external revenue, which includes royalties, option payments, milestone payments and profit sharing. In 2017, this amounted to EUR 821,000,000 and was 35% of the total external revenue. In 2016, the ratio was 21%. Over time, we expect to see this ratio possibly rising further. The collaboration with Merck is expected to provide a significant amount of income in the years to come. We recognized about EUR 1,200,000,000 in external revenue from Merck in the year and a further cash inflow of €600,000,000 deferred against future R and D investment. As mentioned previously, the agreement also included payments by Merck of 750,000,000 for certain license option over 2017 to 2019 and up to EUR 6,150,000,000 contingent upon successful achievement of approval and sales milestone for both monotherapy and combinations. We received the 1st option payment of €250,000,000 To conclude this slide, I want to reiterate that we remain committed to focusing on appropriate cash generating and value accretive deals given the productivity of our pipeline. We are also committed to the continued management of our portfolio disposal and to increasing the focus on our 3 main therapy areas over time. Please turn to Slide 27. It's important to illustrate the progress we have made last year in reducing our operating cost base in line with the commitments I gave 12 months ago. Core R and D cost declined by 3%, with oncology continuing to occupy the largest part of investment at 44% of the total. CVMD and Respiratory again enjoyed around a quarter of the R and D budget each, with only a nominal level of funding allocated outside the 3 main therapy areas. In 2018, core R and D costs aren't subject to be in the range of a low single digit percentage decline to stable, including the favorable impact on development cost from the collaboration with Merck. I did say back in July that you may see some rise in core SG and A cost that is exactly what you saw in the second half given investment in our loan programs. We continue to make encouraging progress in reducing our underlying SG and A cost base, particularly within our infrastructure and enabling functions. In 2018, core SG and A costs are expected to increase by low to mid single digit percentage. Please turn to Slide 28. Cash generation remains a focus for the entire management team. As you can see on either side of the chart, we improved our net cash inflows before financing activities by $1,100,000,000 in the year. The reduction in cash from operation reflected the impact on the movement in working capital that was driven by factoring levels in 2016. The lower level of purchase of intangible assets, however, reflected the acquisition of Takeda's respiratory portfolio in 2016, while upfront payment on business combinations were €1,100,000,000 lower in 2017 given the upfront Asserta investment in 2016. We know we have more work to do to drive our underlying cash flow. We do anticipate growth in product sales and expect a reduction in restructuring cost to accompany our focus on cost discipline. Please turn to Slide 29. I'd like to conclude with our 2018 guidance, which is on product sales and core EPS. We anticipate low single digit percentage growth in product sales in 2018 at constant exchange rate. This is weighted toward the second half, reflecting the impact of generic competition to Crestor that Pascal mentioned earlier. In 2018, anticipate the sum of external revenue and other income to be less than that of 2017. We also anticipate a core EPS of $3.30 to $3.50 at constant exchange rates. Within the financial performance, we are really starting to see as well as success of our pipeline and commercial execution, I'm confident in our ability to deliver against what are unchanged and consistent capital allocation priorities summarized on the right of this panel. With that, I will hand over to Sean. Thank you. Thank you, Mark, and thank you, everybody, for taking time to join us today. I'd like to now run through the late stage pipeline events since the last results announcement and the highlights of recent data presentations. Then I'll finish with a look at our upcoming news flow. Please turn to Slide 31. We delivered more good progress in the quarter in each therapy area. In oncology, Faslodex received approval in the U. S. And EU for the combination with CDK4six inhibitors in breast cancer. Lynparza was approved in 2nd line ovarian cancer in Japan, the 1st PARP inhibitor to be approved in Japan. And as Pascal mentioned, we were also granted priority review for Lynparza in China. In the U. S, we received Lynparza approval for the treatment of germline BRCA mutated metastatic breast cancer from the Olympiad data, making Lynparza the first PARP inhibitor to be approved beyond the treatment of ovarian cancer. Tagrisso received breakthrough therapy designation in the United States after meeting its PFS primary endpoint in the first line FLORA trial, and we're awaiting regulatory decisions for first line in the U. S, EU and Japan. In CVMD, we received EU approval for the combination of Fidurion and insulin in Type 2 diabetes based on the results of the DURATION 7 trial. As Pascal explained earlier, we also had encouraging news for ZS9 in both the U. S. And the EU. For roxadustat, our partner, FibroGen, received priority review status in China for the treatment of anemia. In respiratory, Symbicort received U. S. Approval for COPD exacerbations, while Fasenra gained approval in the U. S, EU and Japan. The Cronos trial met 8 of 9 primary endpoints. Lastly, based on strong Phase II trial results for tezepalumab, we initiated a new Phase 3 trial, NAVIGATOR, in patients with severe uncontrolled asthma. Turn now to slide 32. Turning to lung cancer specifically, we're rapidly moving forward with regulatory submissions around the world from strong FLORA and PACIFIC data. Tagrisso was submitted in the U. S, EU and Japan last year for first line EGFR mutated non small cell lung cancer. We anticipate a regulatory decision in the first half of this year in the U. S. Where it's under priority review. We anticipate decisions in the EU and Japan in the second half of the year. Turning to Imfinzi, we saw 8 regulatory submissions by the end of 2017 based on the PACIFIC data for the treatment of Stage 3 unresectable non small cell lung cancer. We anticipate very similar timelines to that of Tagrisso in the U. S, the EU and Japan. Next slide, please. Looking now at CVMD, we anticipate 2 key Phase 3 readouts in 2018. Farxiga's DECLARE trial remains on track to readout in the second half of the year. Roxadustat for roxadustat, we continue to anticipate regulatory submission in the second half of the year for this potentially first in class treatment for anemia. Now, turn to Slide 34. Starting with PT10, our ICS, LAMALABA combination therapy, in a fixed dose in our AeroSphere delivery technology in a pressurized metered dose inhaler. In the Cronos Phase III trial, PT010 demonstrated significant improvement in 6 out of 7 lung function primary endpoints compared with dual combination therapies in patients with moderate to severe COPD. In total, 8 of 9 primary endpoints in the KRONOS trial were met, including 2 non inferiority endpoints that were required to qualify PT009 as a viable comparator. We look forward to ETHOS exacerbation trial results in 2019, which will further characterize the role of this potential new treatment for patients with COPD. We believe our biologics portfolio for severe asthma is emerging as one of the strongest in the industry. Turning to tezepelumab, a first in class potential new medicine that blocks T SLIP. A recent Phase 2b clinical trial called PATHWAY evaluated tezepelumab in a broad population of severe asthma patients. The results were published in the New England Journal of Medicine and presented as a late breaking abstract at ERS. Finally, while Fasindra is already approved in severe uncontrolled asthma, our Voyager program is evaluating the efficacy and safety in severe COPD and we anticipate data in the second half of twenty eighteen. We believe Fasenra has the potential to be the best in class medicine because it's an anti eosinophil monoclonal antibody that targets the IL-five receptor, thereby inducing direct and near complete depletion of eosinophils via antibody dependent cell mediated cytotoxicity. Please turn now to Slide 35. I want to conclude by highlighting some of the news flow that you can see on this slide and expect for 2018 2019. For Lynparza, we anticipate a regulatory decision for second line ovarian cancer in the EU in the first half of the year. In first line, we expect a data readout for SOLO-one in the first half and a regulatory submission in the second half. Following the U. S. Approval in breast cancer, we expect regulatory submission in the EU for Lynparza in this half and a regulatory decision in Japan in the second half of twenty eighteen. For Tagrisso, as I mentioned earlier, we anticipate regulatory decision in the U. S. In the first half of the year and for the EU and Japan in the second half. Moving now to immuno oncology, We anticipate a U. S. Regulatory decision for PACIFIC and Stage 3 unresectable lung cancer in this half of the year and for the EU and Japan in the second half. Furthermore, with regard to lung cancer, we expect data readouts for Mystic and Arctic first half of the year with Neptune following in the second half. For head and neck cancer, we expect data for Kestrel and Eagle in the first half and our first line bladder cancer trial, Danube, will have a data readout in 2019. In CVMD, declared data will be available later this year. We anticipate a regulatory decision for our Bydurean auto injector in the EU in the second half of the year. As I mentioned earlier, we anticipate a regulatory submission for roxadustat in the second half of twenty eighteen. In respiratory, we have had a data readout for PT010 and COPD. And at the same time, we expect regulatory submissions of Bevespi in Japan and duiclure in the United States. Finally, we expect data from anofolumab, our lupus program, to read out in the second half of the year. And with that, I'll hand back to Pascal. Thank you, Sean. So I'll try to conclude quickly so we can actually dedicate the full 45 minutes to your questions. So if we move to next slide, Slide 37. Essentially, the message I'd like to leave with leave you with is this has been a hard long and arduous road over the last 4, 5 years dealing with these patent expiries. And I think what we can say is that our development team has done a fantastic job developing this pipeline and bringing these products to approval. And we have shown that we can execute on our pipeline and develop great products and implement really good clinical plans. And now, we are actually showing that our commercial teams can do a great job and are doing a great job. Farxiga, Brelynta, our blockbuster products. Tagrisso, we launched Tagrisso at the end of 2015. Within 2 years, we made this product we turned this product into a blockbuster, and it's growing extremely rapidly, and there's a lot more to come. We're in the process of launching Fasenra. And as we actually progress throughout 20 18, you will be able to see how good a job our team in the U. S. To start with and around the world is doing. And the same will happen with Imfinzi. So I think we are really in a good place. And getting to the end of this very difficult period we're experiencing, there's another year, 2018, to go, where we're still dealing with headwinds, the final Patent XP hours in Europe and Japan. And after this, 2019 and beyond, we really should experience a period of fast growth. So with that, I will conclude. And then we'll now move to the Q and Can I please remind everybody to limit questions to 1 to be fair to all of our callers? Thanks in advance. And I need to speak another 7 seconds. So we are just finished 45 minutes, and we have 45 minutes for questions. Where do we start? Sachin? Sachin Jain from Bank of America. I'll start off with a financial question, if I may, for Mark. On the one off income guidance of less than what was achieved in 'seventeen, it's fairly broad. So I wonder if you could just give some directional commentary on where you think it sits versus combined externalization NOI and consensus of SEK 2,400,000,000? And related, the guidance range, obviously, is SEK 0.20. Is that predominantly related to uncertainty on 1 off income? Or are there operational uncertainties in that? Marc, do you want to cover this question? So the first question on the sum of external revenue plus other income. As we said earlier and we repeated today, this sum is going to be lower than that of 20 17. It's a bit difficult to tell you exactly what it will need to be, but some reduction. What I can say is that we are going to continue with external revenues and we are going to continue also with other disposals. So this is part of our business model, and this will continue. I can't be more precise than that as of today. On your second question, the range of the guidance, 3.30 to 3.50, there's obviously some uncertainty on the deals we will be able to conclude. But more importantly, we need to see the success behind the launch of our many new products or new formulation and line extensions. So these are the 2 bigger factors behind the range of our guidance in terms of EPAs. Vincent Mendiet from Morgan Stanley. I have a question on China and the strong uptake. So two questions in one. I mean, can you talk about the penetration of Tagrisso? You said that it's already fairly high, but what should we expect going forward? And also, what's the profitability in China? And do you think that I mean, is it in line with the rest of the group? And do you think you can increase profitability in China? Or do you think that growing there implies investing also there? Yes. So I'll ask Marc Malon to maybe cover this one, but let me just correct if there is a misunderstanding. I didn't say that the Tagrisso penetration in Japan is very high. I mean, if it was very high, we would have already a multibillion dollar product as you know, almost 50% of patients with lung cancer in China have an EGFR mutation. What I said is that the launch is going very well and the sales are growing rapidly and we're getting even reimbursement in some regions or cities already. With that, Mark, do you want to cover the more general question? Yes. So our business in China is growing, but it is also profitable. Basically, not very different, I would say, than the rest of our business overall. Mark may even want to add a comment on that. In terms of additional investments, I would say China is a place where we have a very strong platform already. We will continue to invest, primarily focus in expanding our geographic reach in China because even as big as our organization is, there's still many more hospitals, community health centers that we want to get to, to get our medicine. So it's a fast growing, profitable business. We've got a great base. We'll invest to continue to expand our reach. Just give you a little example to highlight what Mark is saying about the potential for expansion. I was on this trip this week with the PM and a few other people and the first stop was in a city called Wuhan, and I'm sure nobody has heard about Wuhan. Wuhan is a city of 10,000,000 people. So I asked our team, is it an important city? They said, oh, not so much. It's medium priority, and it's growing. It will be a priority in the near future, but it's still a small place. And you get there, and this city is booming. It's completely booming. And it's not in the dark ages. It's actually rapidly catching up. And we are only starting to penetrate that place. So there's enormous potential in China. And I really think we are in a place, we have an organization, a fantastic team and an organization that is really equipped to leverage the full potential of China as it unfolds over the next few years. Do you have anything you want to add on Tagrisso and maybe Eressa in China? Because those are so I mean, it's such an important market for those EGFR inhibitors, of course. Yes. I mean, I think that the direct piece to offer on the question that you asked about the penetration rates is that maybe to put a fine point on PASCAL's is that they're relatively low for Tagrisso. So the sales and the speed with which we've been able to get sales and to get reimbursement from some regional players has been certainly faster than we've seen with other new products. But in terms of the opportunity that still exists in China, there's considerable. And I think that that's probably not really going to unlock until you start seeing reimbursement happening more broadly. And I think that there are other analogs and examples of that, that you can see how that affects the penetration. In terms of ORISSA, our more mature established brands continue to grow in China. So, whereas Arissa, Faslodex, Zolodex are not part of our growth drivers outside of China, within China. Those are all growing in the double digits. Can we take maybe one question online and then we'll come back to the room, Richard Mondele. Tim Anderson, Tim, do you want to go ahead? Thank you. A question on Mystic. Investors often seem to lose sight of the fact that you have a dervo mono arm in this trial and a positive that would give you a first line monotherapy indication alongside KEYTRUDA, possibly even in the current year. And that would seem quite relevant, especially if PACIFIC gets approved in Stage 3. So I'm wondering if I can just get your latest thinking on at least of this arm of Mystic being positive given how the trial is powered, given where you've set your cut points and that sort of thing, is it safe to assume you'd say that positive results are highly likely? And can I just look into one quick question on tax rate guidance? The bracket is so big, 16% to 20%. I'm wondering what explains that? Thanks, Tim. So I guess first question is for you, Sean, and the next is for Mark. Okay. I'll start, Tim, with your Mystic question. Yes, what you described in the design of MYSTIC is exactly right. It's got 3 arms. It's Imfinzi Monotherapy, Imfinzi Plus Fomolimumab combination IO and then obviously the doublet chemotherapy control arm. There is also enrolls all comers, but the data is analyzed by PD L1 expression levels so that you can look at higher expressing patients. With regard to probability of success for the trial, What we know is from KEYTRUDA and very high expressers to PD-one that is a validated therapeutic hypothesis with a PD-one in that select patient group versus chemotherapy. What's a little confusing about interpreting the data out in the world was that if you look at the BMS data, it didn't seem to show that same patterns. And it's not 100% clear why that difference between the 2. We do consider monotherapy and high expressers a validated therapeutic hypothesis, we also, as we've said many times, consider overall survival not only the more meaningful endpoint for patients, but actually the endpoint that better captures the benefit of IO treatments. And so that's the final readout and primary endpoint that we'll readout the first half of this year. So with that, we're cautiously optimistic about the mystic trial for monotherapy and high expressers and then also the hypotheses we may test with the combination. Thanks, Jean. Marc? Yes. Regarding the tax rate from 16% to 20%, This is the usual range we provide. We did the same in 2017. When we advance in the year, we narrowed down that range from 17% to 19%. But as you saw, due to variability on various movements and so on, we finished at 14%. So I tend to be relatively cautious, and this is why I would prefer to keep a range of 16% to 20% because this is a very variable the tax rate is a very variable matter depending on various negotiation with various geographies. Thanks, Marc. So Richard and then Andrew. Yes. I've just got Richard Parks from Deutsche Bank. I've got a financial one for Mark. I think your guidance on all the steer you've given on SG and A costs suggests that those costs will be about $500,000,000 higher than consensus was assuming before the results. And obviously, you're investing behind the launches, but that figure does seem a bit higher than I would have thought given that you're leveraging some of the your existing sales force or those launches need relatively modest investments. So I just wondered if you could walk through that. I'm just wondering whether consensus was overestimating the impact from the cost savings programs or have actually decided to reinvest back elsewhere in the business as well as those new launches? So you're asking me to define whether it's above or under EUR 500,000,000. I think EUR 500,000,000 would probably be the higher range of it. I mean, we are investing selectively behind our products being launched or launch preparation. We have several of them. We have 7 of them. So some of them are in existing fields where we're already operating. So the cost increase is minimal. In some others, we have some more. Pascal was mentioning China every year. We do invest further in China. And of course, this is also costing us money. The payback is extremely rapid. So we continue doing it. But there are mostly, it's on the specialized sales forces that we need to launch all our new products, our new formulation, online extension and some additional expenditures in China, I would say. This is probably the gist of the increase of the SG and A in 2018. And maybe, Marc, let me add that don't know how you computed EUR 500,000,000, Richard, I was double, triple checking our guidance to make sure I have the right numbers in mind. We guided for low to mid single digit increase. That doesn't translate into CHF 500,000,000 less than that. That implies versus where consensus was before the results for next year, but Okay. Thank you. Mark, your colleagues in oncology normally take the disproportionate amount of the questions on the therapeutic side. Could we talk about Farxiga, which is obviously a $1,000,000,000 product now? We happen to have taken a view that we think given the certain members of the class and the pending data in DECLARE, this could be a substantially undervalued asset. Could you humor us if DECLARE hits for both primary and secondary prevention and is further validated by heart failure trials and the ADA guidance on cardiovascular outcome. How large a product can this actually be prior to the patent expiry? And then just and a quick add on. The interim analysis for DAPA HF, we're expecting it this year. Would I be right in thinking that's a reasonable assumption? Should we maybe start with the heart failure or without question and then look back into the commercial question? Tom, do you want to color that? I think that was Q for me. So You can follow the commercial question and mark the development one, if you want. I'd be very happy to forecast what I think ForeSee it would be worth. But the so the hypothetical question is, we do incorporate interim analyses into these trials. I think maybe, Andrew, I'm going to expand a little bit for everyone. So the DAPA HF trial Andrew's referring to is a trial of FORCEA for the treatment of heart failure in both diabetics and non diabetics. So what it would do is it would enable the use of Orsiga, if positive, outside of diabetes as well. There are interim analyses. We don't get into the details of how they're powered or when they're done. So, we have them. And then if they're positive, we announce them otherwise. Our assumption is that we go ahead into the final analysis. So, I can't provide more detail than that. So, in terms of the potential, I know Mark would caution me to say that we don't provide guidance. But what I can say is we see substantial further opportunity for Sika and the class. So of course, it's a $1,000,000,000 plus brand already growing in mid-20s. We've just launched the product in Foresica. That's further upside. We've expanded access in the U. S. There's still a tremendous room in terms of changing practice. There's only a couple of countries in the world where SGLT2s are in guidelines ahead of DPP-4s, even though we have now outstanding evidence showing that this really has class as a great cardiovascular benefit. So we still have a lot of work to do on the education. DECLARE will have a very big impact on that if it's positive because of the breadth of the patient risk profiles of the patients in the study. And then, of course, that's just in the diabetes area. If we're successful in the cardiovascular program, that's all further upside. So can be a very substantial product. We're absolutely committed to it across the globe. And I haven't mentioned it to be excited. We actually now have the first major country in the world where Forxiga is the number one innovative oral anti diabetes product, and that's in Brazil, which is a very major market, bigger than Galvis, bigger than Januvia. That's where we're aiming to take this medicine. Unfortunately, the countries where SGLT2s are recommended as first after Metformin instead of DPP4 are small countries, one of them is Singapore. But hopefully, with a lot of good work, we'll be able to modify the guidelines. And if that class becomes first line after Metformin, the potential, as Mark said, is enormous, you could also have added CKD, kidney disease, because we also have a program in kidney disease. And that's really where actually our strategy takes its full potential because we're going to be in kidney disease, we're going to be in heart failure with a variety of products, Farxiga, of course, roxadustat in kidney disease, Lokelma in cardiology, we have Brilinta, we'll have hopefully Farxiga, we'll have Lokelma. And so we really will have a strong portfolio in each of those these areas. Simon Baker from Exane. If I can just go back to Richard's question on SG and A. Mark, you talked about essentially 2 moving parts within SG and A, continued efficiencies in the underlying SG and A versus investments in new projects and new launches. I wonder if you could give us a little bit more color on the trend there, particularly in 2018, what that underlying SG and A could do? And then if I can, I'll chance my arm on moving on to 2019. But I wonder if you could give us a feel for and I've asked this question many times before on the trajectory of SG and A beyond 2018. There is a general feeling within the market that at some point in the future, the SG and A burden of AstraZeneca will be somewhat lower than it is now. There's a lot of debate as to how low and when. So I wonder if you could sort of flesh out as much as you're prepared to do what we should think of in 2019? How much of the SG and A increase this year is transient versus permanent? To give us an idea for the long run SG and A requirements of the company. So it's a thank you very phenomenons. You have continued cost discipline of the company, which is obviously impacting SG and A, but also it's done all across the company. I would say the same. On the late stage development division, they're also doing great effort on cost discipline and productivity increases. So this goes up all across the company and obviously, this reduces the cost. I've also talked about the launches and I would say the accumulation of launches that we are confronted to now. We have 7 products in launch or in launch preparation. So obviously, this impacts negatively the SG and A. To your question on the longer term, as we are moving progressively towards a more balanced company between Primary Care and specialty care, including oncology. The cost of doing business is going to, over medium- and long term, reduce proportionally. So there is these three factors. We have greater efficiencies on the overall company. You have the nature or the number of the launches, where do we launch, how many products do we launch in a given year. And then you have the long term trend where we are moving from primary care predominantly to a mix of primary care and specialty care. So over time, one can expect that the SG and A ratio will diminish to some extent. I think it's important to keep in mind and remember that at the end of the day, we have a pipeline that is oversized relative to the total size of the company. I mean, we have all these launches Mark is talking about and with a base business that is small in relation to the pipeline. So the good news is we'll be able to experience a fast growth rate as soon as we get out of these panel expiries. But then the issue of course in the near term is we have to fund those launches. Some are more expensive than others of course, oncology, certainly, Entegrisso is less expensive, but products like Fasenra require a lot of investment to shape the market and get the potential of this product. But by 2019, 2020, there's no doubt our ratio will drop and we want to get to operating margins that are industry that are in line with the industry. So we definitely need to increase our operating margin, there's no question. But to minimize the investment at this point in time would actually not maximize the potential of our products. If you think about it, we are really not wasting money. In the U. S, I'll give an example. In the U. S, our Symbicort share of voice is lower than the competition. We're driving market share increase, as Mark showed you a bit earlier, in the U. S, with a lower share of voice. In Diabetes, we also do not have an overwhelming share of voice. So it's not like we are overspending relative to the competition. It's just the nature of the pipeline, the portfolio and the number of launches we have. But this will disappear as those products launch and they start generating sales. I mean, if you look at Tagrisso, it's already very profitable. I mean, as you can imagine, very profitable. And we just need to get all these launches to critical mass to become profitable. And maybe last point is China. China is actually a profitable market. We've been investing because we've been growing at fast pace and then we keep investing to keep pushing this growth. But actually, it's profitable. I mean, the profitability is similar to what we get in Europe. And as we gain critical mass and become even bigger, the profitability will go up mechanically. That's a narrow show hand position. So Joe, I'll get to you next. I missed you few times. You've given us, obviously, lots of information about lots of different parts of the businesses, but one of the biggest contributors is the externalization and 22% of your EBIT is from nonrecurring externalization. You've given us guidance for this year, but we need some color going forward as to how quickly the quality of the earnings will improve. So could you give us some sense as to what's left in the pipeline that you think will come up in the imminent future that you think you could continue to externalize and where we should expect that line to go? And then following on from that, we've had 1,000,000,000 of dollars worth of disposals over the last 2 or 3 years. So when do you how do you see that progressing over the next 2 or 3 years? Thank you. So Mark, this is a question for you, but let me just make a general sort of comment in terms of strategically what we're trying to achieve because there's all sorts of deciphering or reading of what we're trying to do with externalization. Essentially, what we're trying to do is build a portfolio that is completely aligned with our strategy. I was reading recently an interview by a CEO of a large mining company, and he was explaining that they are building the perfect portfolio for them. They're selling mines and buying other mines. And it's essentially what we are doing. It's very similar. Ultimately, what we want is almost the totality of our sales to come from those 3 core CRP areas. So we are investing in those 3 core TAs and we are partnering or divesting, partnering new products and sometimes even tail products, but and divesting other products that do not fit. And at some point, that will show up in our growth rate, of course, and leverage across the business. More specifically, Mark, do you want to comment on the financials? I'll cover the big principle behind it. I think externalization, as we have said many times, is part of our business model. We will we find alternative ways to generate revenues for the company in areas where we cannot do it or we wouldn't do it as well or we'll not do it as fast. We have several examples where we have done it. I think what you need to remember is in thinking about the sustainability of this. So first of all, it's part of our business model. We still have other opportunities. But you also need to remember that the company has progressively returning to growth. So what you see as 22% today, if you look at the percentage of EBIT, very soon will become much smaller. Yes. We've always said it, that we would peak and then continue doing it because it's part of the model, but suddenly the amount of upfront milestones would decline. And so this externalization income would decline progressively. And essentially, by around 2020, we want to have the sustainable business, if I call it this way, to basically generate sufficient profitability to cover the dividend and more. So that's really this interim period. I mean, tragically, we're building a portfolio which is totally aligned with our focus. And secondly, it's capital redeployment, it's capital allocation. We basically use this income to fuel the build of our 3 courtiers. Jo? Jo Walton from Credit Suisse. Three questions, please. I wonder if you could just give us the total aggregate amount of the true ups that benefited you in the Q4. I understand you don't want to give it to us product by product, but I assume it was also just a bit beyond respiratory because drugs like Questor in the U. S. Had a bounce up in the Q4 as well. And second question is whether you could help us with the level of depression of the gross margin that you're expecting. Would the 4th quarter gross margin of $79,400,000 be a reasonable guide to look at going forwards against the 81 or so that we saw for the full year in 'seventeen? And then finally, respiratory question. I'm intrigued that you're putting a lot of Just wondering what you think the impact on Symbicort will be, whether there'll be a generics first strategy that you will have to overcome in that market? And perhaps to chance my luck as well, you've put in a lot of effort behind BYJU'REON and the new pen there. How do you see that competing against the very high level of investment being put by Lilly and Novo into the GLP market? It's only on 3, it's 4 questions. So should I only pick 1? I mean, the first one, I suspect Mark is not going to give you much of a detailed response. So maybe I can give you this one. Do you want Mark to cover the true ups and the gross margin? And the other Mark will cover the respiratory question. Is that okay? So for the truck, my recommendation would be not to look too much at the Q4, which was impacted by more truck that are corresponding to the rest of the year. I think if you look at the overall year 2017, this gives you a good view of the progression of our portfolio. And you will see the progressive reduction of the headwinds, and therefore, it gives you a better view. So my advice is don't look at the Q4, think about this true up as applying to the full year 2017. Another indication, if you look at which type of product, we don't want to give a product by product detail, but what I can say that most of the true up are concerned the legacy product and less so for the newer product. And then your second question, maybe it was a third, I don't remember. The on the gross margin level, when we were in quarter 3 2017, I mentioned that we would not see large variations. So I think if you looked at the gross margin level in the second half of twenty seventeen, I think this would provide you a good indication for where the gross margin should be in 2018. But do not look at the first half because there were factors which were distorting it. Let me just repeat what Marc said, because it's important in terms of the swaps. It really affects the great majority is affecting the legacy products. To some extent, it's not so relevant because those products are going away anyway in the U. S. And the core products are not affected by those products. You can look at the growth rate of those products and be confident that this is not affected by those swaps. Marc Malon, I'll start with. Yes. So first of all, in terms of respiratory, and the question around Symbicort investment and Advair generics. I mean, our expectation is that the bulk of the effect of any analogs or generics for Advair will focus on Advair. That's not to say there won't be some impact. But we really expect in other places, the substitution is sort of within the molecule. And it because it's hard to change devices and molecules in the respiratory area in general. We plan for continued intense competition in that category. So I think we've got realistic expectations around pricing and the competition in the market, and we're confident we can be successful. It's really important because we've got a very exciting and have portfolio ahead of us. We've got we've just only launched Bevespi. We've got PT10 coming. And there's still a huge unmet need in this category. So we remain confident in our position there. In turn, I'm so glad you asked about thank you for asking BI DURING BSI because we're very excited about this. The GLP-one category is growing very fast in the U. S. This device has been really well appreciated by physicians and patients. The feedback in the research that we did before launch and in the early days of launch is that this is a very competitive device with the leader in the category. It's very early days. We only launched in the middle of December. So there's been a lot of holidays. So you're going to have to wait a few more weeks to start to see a clear position. But the feedback from, again, physicians and patients on BIJOR and B SIDES is very positive. And we have adjusted our resourcing. We've got a very significant sales and medical teams in the U. S. That are supporting both for CIGAT and Bydureon. And so we're very excited about the prospects for Bydureon B size in 2018. I think you can it's early days, you're right, Mark, but you can actually look at the NBRx share for BESIZE over the last 2 or 3 weeks, and you will see that there's a very nice progression already, even though we started promoting, in fact, in January, really. So the product itself has a potential and then the combination with Farxiga also has potential. As you know, we have very, very nice data for that combination. Should we move to Alex at BMO? Alex is on the line. I think maybe Dave is waiting for a question to tell him how good a job he's doing. Usually, we talk about oncology the whole time, so there's no early question. Alex, go ahead. Hi, this is Prakar Agarwal on behalf of AlexRFA. So two quick questions. First, what has been the early physician feedback on Calcans? And secondly, have you conducted an interim OS analysis on Mystic since you announced the PFS results? And lastly, when should we expect the Infinity Pacific results to be reflected in the sale of major markets, specifically U. S. And Europe? Thank you. Well, so here is the answer to my call for oncology question. So maybe Sean, you can cover the domestic and the Pacific question because really, it's a regulatory question in terms of when do we get approval and when can we start promoting and could add some more color from a commercial viewpoint and also cover Calquence? Yes. So the interim question is pretty easy. It's very similar to the answer that I gave on to Andrew's question about FERCIA. We have interims in the trials. We do not disclose things about those interims unless, of course, they're positive. That's how PACIFIC turned out being disclosed for PFS that you may recall. But the trials, it's important to recognize, are designed based on robust assumptions of clinically meaningful differences and designed to be the right size of the final analysis. So if they exceed our expectations, considerably, they can read out early. With regard to Pacific and the regulatory timing, I gave I pretty much gave that in the actually in the presentation. So, regulatory timing for the United States, we anticipate in the first half of the year to receive approval for Pacific based upon the priority review designation for, I'm calling, major markets, Japan and the EU, it will be by end of year 2018. Sean, maybe some additional color commercially on Pacific and then Alcuin? Sure. So, in terms of additional color on Pacific, in terms of from a commercial perspective, so we are very much getting ourselves ready for the Pacific launch, which we're anticipating, as we said, within the first half. The majority of the utilization that we saw in the Q4 for Imfinzi was within lung cancer. So obviously, we promote only within the bladder setting, but we see that there's enthusiasm within Pacifica. I think that if you take a look at the factors that lead into the speed with which you might think about the uptake for Pacific, obviously, the label is one element, and we await feedback from the FDA on where that will net out. We studied in Stage III concurrent unresectable patients. The second is access. We've certainly seen that access has been growing in terms of hospital access within the U. S. Formulary access. And I think that it speaks volumes to one of the reasons why getting onto the market with bladder was so important because it has allowed us to be able to have that formula access. And then I think the last piece is the speed with which you expect to see adoption. I think that here it's important to remember that the data for PACIFIC are certainly very exciting and unprecedented, but we also have a lot of education that we're going to need to do. And so I think that it's important to also recognize that today, there are no therapies that are used postchemoradiotherapy in Stage 3. And so, it's watch and wait is the competition. So, to educate physicians on that, this is different from you're using an agent today and we're going to replace with something better. This is an education on this. This is a new way, a new treatment paradigm with the PACIFIC regimen. So I think that needs to be factored in as we think about the uptake. On Calquence, we've been really pleased with the progress that we've made in mantle cell lymphoma. We have a lean and mean sales force on this, which we think is appropriately sized for the size of the market that's there. But what we've seen with that is that coming at the end of the year, we have aided awareness over 90% for the brand among our target audience, which is incredibly high considering we launched on the 31st October. That's a lot of progress and speaks to the work that we did there. The intent to prescribe is over 60% among the physicians that we're speaking to. And we estimate that right now, about 1 in 5 new starts is being started on Calquence and MCL at the end of the year. So again, when you think about that, that's an 8 week launch period that included some holidays within there, we're pretty pleased with that progress. Thank you. James Gordon from JPMorgan. Two questions, please. So one was on Tagrisso in China. There was a comment about some initial reimbursement in some places. What does that initial reimbursement look like? Is it very big price concessions to what we've seen in the West? And as you broaden reimbursement in China, do you think you'll have to make big price concessions? How is that playing out? Also in China, when do you think you might have a first line approval? And could that require another step up in price concessions? And if I could just squeeze another question in, which would be at roxadustat. So there's a pre dialysis and dialysis. Where do you think the bigger hurdle is? Which is tougher to get the mortality outcome you need? And which is the bigger commercial opportunity? So maybe Sean could cover the Roxar question and also the approval timing for first line Tagrisso in China. Let me just say that in first line, it's going to be hard in the near term, right, because the cost is substantial. In the second line, then you have a relatively good case to potentially get a reimbursement. First line, it's harder. And we have the ISA there that is really doing very well. So do you want to cover the first one and then Dave could cover the That's a pre dialysis versus dialysis. So, we don't have a timeline we communicate for 1st line approval in China. In part, that has to do with the fact that there isn't really a PDUFA like structure in the Chinese regulatory system. So, you don't submit, you get acceptance, you don't necessarily know what the review cycle is going to be. So, it's hard for us to communicate. I will say that the FDA is definitely moving more quickly in the way that they're reviewing things. And I think Tagrisso's second line T cell 90M IDM was a brilliant example of that. So we're hopeful that we can engage them, but I can't give more guidance. Loxa, right. So we have 2 main populations, which are pre dialysis and those already on dialysis. It feels like there are 2 questions there. Is there a reason to think that the profile would be different wise in one patient population versus another? There isn't actually. But what I can tell you is in a given period of time, it's easier to get a lot more events on the dialysis patients simply because they're at greater cardiovascular risk. So we don't see a difference between the 2 mechanistically for what we would expect. We do believe that we will have more information on the dialysis patients by virtue of their higher risk going into the trial. Will be the same. I was partly asking because if I understand correctly, they're different comparators. 1, you're trying to show non inferiority to placebo, another one superiority to ESA. So whether that makes it whether the different comparator is a different hurdle? Yes. Again, we don't mechanistically have any reason to believe that the comparators are a different hurdle. It's more along the lines of what's the appropriate thing, non inferiority for something that doesn't isn't a treatment versus a drug with a current black box warning around this exact endpoint and wanting to show that you don't convey that risk. So, that's really the only difference between the 2. So, think without getting into too much detail on the specifics of individual product pricing within China, what I would suggest that if you're looking for a good analog for how China prices move, I think Europe serves as a good one. So, yes, subsequent indications do typically come with an expectation or a need for price concession that typically comes in the way of free goods. I would use European analogs as you look forward. Thanks, Dev. Mark, do you want to add something on the log sarcoma? Yes. I'm so pleased you asked about roxadustat. I mean, I think Sean gave you a sense of both sort of how the clinical program is working out and how to think about the outcomes. I mean commercially, we see very substantial opportunities both in the dialysis and the non dialysis. It's a different type of opportunity. So dialysis, we think we're going to have immediately a very differentiated profile. Already, we know the ability to impact hemoglobin is very good from the data we've seen in China. If we can meet our expectations, we're going to have a cardiovascular product that has benefits there. And so then you add in moving from infusion to oral, really substantial benefits. In the pre dialysis, I mean, it's a huge opportunity, but there is a market shipping and building effort that's going to require, which we are planning for. A very small relatively small percentage of patients get treated for anemia today, right? They basically are at elevated cardiovascular risk. They're dealing with a lot of actually symptoms from it, But there's not been reasonable options for these patients. So really huge opportunity there as well. It's going to take time to build that market because we've got to generate the evidence and educate physicians almost like what we're talking about in the Pacific with the other than iron, most of these patients don't get any treatment. So really excited about the product. And again, synergies across the portfolio. I mean, if you look at the prescribers, nephrologists, we'll have Farxiga, we'll have Oxadustat. Then you look at diabetologists who will somehow have to play a role in this pre dialysis treatment, Of course, we have Farxiga, we have Oxadustat, so really a strong synergy across. Let's move to take an online question, Seamus at Leerink. Seamus? Simas, are you there? We can't hear you. So maybe we return to home. Jack Scannell, UBS. I've got 17 questions, of which I'll ask one. You, 4 or 5 years ago, published a really interesting paper that was a remarkably frank analysis of why R and D had been unsuccessful perhaps at AstraZeneca. And you published the framework to try and make it better. And then about a month ago, you published another paper declaring victory, saying the problem had been fixed. So my question is, how easy would it be for other drug companies to read those papers and try and replicate what you guys claim you've done? Yeah. Well, I'll ask Sean to cover this one, but I don't think we declared a victory. Certainly, if it felt like this, that was not the intent. I think Mene, who leads the I MED, was simply sharing some of the learnings and experience we've had. And of course, everybody is very proud of the progress we've made, but there was no intent to declare victory. Sean, do you want to cover this? Sure. I'm happy to. I think that's exactly right. So this is our 5 R's paper and two elements to it. One is the declaration of victory. I think from going to single digit, mid single digit percent success of a candidate through to getting a drug to what looks like 20% in our more recent experience, this is great progress. It's not exactly declaring victory, right, because then 80% of the time you still fail. So, we do but we do feel like we're doing a lot better and that that's playing out now in how our R and D investment is realizing into launches and market opportunities. The question was, I think are we enabling competition by publishing these kinds of things? Yeah, you know, it's interesting. I think the lessons are quite transferable to be perfectly honest and in some respects, there are things we as an industry have known for a long time. If you ask what's different about it, it's not knowing them that's quite so complicated as it is applying them objectively and consistently and not allowing hope to sway you in a place for one of those factors that means that you've moved away from being rigorous. That is not so easy to do, it turns out. I would only add that all of us can read the same cooking recipe, it doesn't make us a world class chef, right? So there's that. I mean, having a process and a structure of the approach is really useful, but then really need to make sure you have great people and then really people who and a culture that sustain this and an approach that really is really creative and innovative. So let's move back to online, Mark Purcell at Redburn. Mark, go ahead. Yes. Thank you, Pascal. Can you hear me? Yes. Great. Thank you. I just a couple of clarification points actually going back to what Joe was asking on gross margin. I was a little bit confused by the progression in Q4, and there may be some underlying impact. So if we assume product accruals of $250,000,000 $300,000,000 that would obviously at a very high gross margin contribution be very positive to the gross margin in Q4, which came in at 79.4%. So are there any offsetting factors in there such as your MSD payments, in this case, payments, which you mentioned? And can you help us understand sort of the moving parts there? I don't think FX had an impact, but the accruals impact the MSD payments, whether those are an accrual of the MSD payments, which had a dilutive effect? And then secondly, on FX, I was a little bit confused by the guidance that FX will have a minimal impact on earnings in 2018. If I followed your guidance just using the fine made currencies that you have in your press release, using a January average, the impact of currency on sales would be 2% earnings, 3%. So that impact is consistent with our guidance on sales and not on EPS. If I use spot again, just using the 5 main invoicing currencies and not the other component, the impact of currency was 3% on sales and 5% on earnings. So are there any other factors which are missing, which dilute the effect positive effect of the weakening dollar? Are there hedging losses or anything like that? Some clarification would be great. Thanks, Marc. Marc, can you try to cover them in So we'll try to mention some more on the gross margin. What I said earlier on that if you look at the second half of twenty seventeen, this should provide you a good guide for what the level of gross margin will be in 2018. It is also in our press release. We have we deduct from gross margin the profit sharing we provide Merck as well as we do for Circassia. So we have indicated what goes in or comes out of the gross margin. So this is going to be one factor also for 2018. There's another factor that you need to consider that explain that in comparison to the first half of 2017, the gross margin is lower. We have larger expenditures and depreciation in the biopharmaceutical capabilities. So this is where the level of gross margin has declined. You obviously have mix of products in various geographies. But if I put this aside, the two main factors are the profit margin given to the partners, this is 1, and the more expensive production capabilities for the biopharm product. These are the 2 main factors. Max, so I think we'll have to stop here because we are out of time, unfortunately. I'm sorry, if you have any more questions, please send them to our IR team. Let me just close by thanking you all for your interest and your great questions. And just kind of repeating what I said a bit earlier is, we are at a stage where the pipeline is delivered. We are now full commercial launch mode. We have 7 products that are either in launch mode or are growing very, very fast. So that explains we need to resource them, but that also drives very substantial growth rate. And on top of those 7 global products that are in full launch mode, we have China that is really material for us. For many companies, China is not material for us. It is material very material and growing very rapidly. And it's our 2nd largest market globally. So with that, I will again thank you and wish you a good weekend. Thank you very much.

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