Earnings Call: Q2 2017

Jul 27, 2017

Afternoon. Welcome, ladies and gentlemen, to the AstraZeneca's Half Year twenty 17 Results Analyst Conference Call. Before I hand over the call to Pascal Sorio, AstraZeneca, I'd like to read the Safe Harbor statement. The company intends to utilize the Safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Participants on this call may make forward looking statements with respect to the operations and We will now hand you over to the Chief Executive Officer, Pascal Sorio, where the call is about to start. Good afternoon, everyone. Pascal Soria here. Welcome to the first half results conference call and webcast for investors and analysts. We are in Cambridge in the U. K. In our global headquarters, And we have people on the phone and the webcast. As always, the presentation is available on astrazeneca.com for you to download. Please turn to slide 2. This is our usual Safe Harbor statement. Please turn to slide 3. Today, we plan to spend about half an hour on the presentation and then leave almost 1 hour for Q and A. We have lots to talk about today and it's very important for us to put all of today's news into context. If you want to ask questions from the phone, you can get in the line already now by pressing star 1. There's also an option to ask questions online as part of the webcast. As we would like to provide everyone with an opportunity to ask questions, please limit to 1 question per person. This will make it fair for everyone. Thank you for your help here. Today, I'm joined by Marc Dunoyer, our CFO Marc Malan, our EVP for Global Products and Portfolio Strategy, Global Medical Affairs and Corporate Affairs Jamie Friedman, EVP for Oncology the Oncology Business Unit and Sean Boren, our EVP for Global Medicines Development and our Chief Medical Officer. Please turn to slide 4. This is our agenda for today, and I would like to ask you to move to slide 5. These are the highlights for the first half. On our conference call today, we'll be making comments on our financial performance using core reporting metrics and at CER at constant exchange rates, which are both non GAAP measures. So with the formalities behind me, I will now kick off. In summary, the business performance for the first half of twenty seventeen was in line with expectations. Total revenue declined as anticipated and reflected the tail impact of Crestos and Cerro QuadExars' U. S. Loss of exclusivity and some phasing of externalization revenue. On the other hand, sales from growth platforms increased overall. They now account for 70% of total revenue. Emerging markets were up 6%. Within these regions, China continued to perform well and we saw the launch and the first sales of Tagrisso. Outside China, there were impacts from the economic and geopolitical situation in some countries. Our respiratory business continued to be impacted by U. S. Symbicort, while the medicine remained a global leader in its class. And for new CVMD, Brilinta continued with its high growth. And in diabetes, Farxiga continued to be the world leader in its class despite subdued U. S. Performance due to price pressure on managed care access. But overall, Farxiga delivered very good results. Japan was up 6% and actually accelerated in Q2. Tagrisso expanded on its impressive global launch and recorded the first sales in China, as I mentioned a minute ago. Finally, earnings per share were underpinned by continued cost management and other operating income. So please turn to slide 6. The pipeline news flow continued since the last results announcement. We were, of course, disappointed by today's MYSTIC progression free survival readout and we now have to wait for overall survival data in the first half of twenty eighteen. But we were pleased by a number of successes including the PACIFIC trial. Let me cover a handful of news items. First of all, Imfinzi the Imfinzi news include the strategic and early U. S. Launch in bladder cancer as well as the early positive PFS results obtained from the PACIFIC trial. Earlier today, we provided an update on progression free survival from MYSTIC where there is no PFS benefit and we need to wait until first half of twenty eighteen when we expect to get the full picture of the clinical profile with the overall survival final analysis. On the other hand, we met the single primary endpoint of progression free survival in the FLAURA trial for Tagrisso, which we are very pleased by when you see the growth coming from Tagrisso in the first half. We think we now got clinical data to unlock more value for patients and AstraZeneca and to help our ambitions in lung cancer. Next news is Faslodex. It obtained approval in first line breast cancer in the EU and in Japan. And Lynparza was accepted for review in the EU and in Japan in second line ovarian cancer based on the SOLO-two trial. Unfortunately, Badyorian for type 2 diabetes didn't show statistically significant reduction in cardiovascular events in the XL outcomes trial, but the safety profile of this medicine was reconfirmed. In respiratory, Bevespi was accepted for review in the EU for the treatment of COPD. We need to wait for the STRATORS II trial for trilokinumab to fully characterize the clinical profile for severe uncontrolled asthma. Outside our main CRP areas, our externalization efforts were boosted by the approval of Kinseram for psoriasis. Through partnerships with focused dermatology companies like Valeant in the U. S. And Leopharm in Europe, we've been able to bring this medicine to patients in need of better therapies. Given our strategic focus on the 3 main CAs, AstraZeneca is not able to provide the same support to a dermatology medicine as our partners are underpinning the strategic rationale for the decision to externalize. There are more pipeline milestones that Sean will speak to later. He will also cover today's news in details. Please turn to slide 7. When we look at New AstraZeneca, we continue to see growth. Product sales grew by 4% and more underlying. Mark Mallon will get back to this later. As we move forward and very soon exit the patent cliff for Crestor in the U. S, we will start to see this growth become more visible and we look forward to keeping you updated on this journey. I will now move to slide 8. As we begin returning to growth, our focus on commercial execution will increase. There are good examples today, for instance, Brilinta and also Tagrisso. We've now also launched Q10 in Europe and of course in FINZY in the U. S. At the end of the year, we anticipate the launch of benralizumab, our first biologic medicine in disease to treat severe uncontrolled asthma. On the news flow side, we were able to add more tick marks for Imfinzi approval and the exciting data from the PACIFIC trial in Stage 3 unresectable lung cancer. I believe this is an indication that is still underestimated. It has a lot of potential and we will be by ourselves in that indication. We also recognize, however, that the Mystic PFS results are disappointing and that we now wait we need to wait until the first half of twenty eighteen before we get the final OS data and therefore the full picture of the clinical profile of Imfinzi in lung cancer and the combination. On the other hand, today's news from the FLAU trial for Tagrisso is very encouraging and it supports our focus on lung cancer and the benefit we can bring to patients. There's a lot more pipeline news flow expected over the remainder of the year. In summary and despite some disappointments and some successes, together with management team, we are very committed to delivering on our return to growth and to deliver the value and the benefits of the pipeline to patients in need around the world. I have to say that I'm very impressed by the progress we've made and I would like to thank every colleague in the global AstraZeneca network for their contribution. I'm very proud to be the CEO of this company. I look forward to continuing on our journey and I would like to say that I'm very, very committed to seeing this implementation of this strategy through. Speaking of our journey, please turn to slide 9. I'd like to touch on the collaboration that we have announced earlier today with our partner Merck. The primary purpose of the collaboration is to accelerate and to expand the potential for Lynparza and essentially make Lynparza the PARP inhibitor of choice. This collaboration affirms Lynparza as the leading PARP inhibitor for IO combinations and also with the leading PD-one in terms of clinical trials ongoing. Jamie will elaborate on this further in his section, but essentially the collaboration will also enable further studies to be initiated faster than we could have done ourselves and in broader patient population. In a nutshell, we actually partner products where we believe we can create more value with our partner. And here, there's a clear benefit in partnering with Merck who is a very strong company, a company that shares our focus on science and has a strong IO presence. And in combining Lynparza with KEYTRUDA on the one hand and biorvalumab on the other hand, we believe we can make LYNPARZA a much bigger product. The total deal value is worth up to $8,500,000,000 which we consider very attractive for Lynparza. And just as a short reminder, dollars 8,500,000,000 for half of this asset, which 4 years ago was written off in the books of the company, we believe is actually a reflection of the valuation that a very respectable company is actually able to see in Lynparza. And we believe together with our partner at Merck, we can make Lynparza a big product. With this, I will now hand over to Marc Malon. Marc, over to you. Thanks, Pascal. And I'm pleased to be here again to update you on the performance of our growth platforms. So let's jump right in. Next slide, please. So I will cover our non growth non oncology growth platforms and then hand over to Jamie to cover new oncology. The growth platforms, as Pascal mentioned, demonstrated overall growth in the quarter despite the continued headwinds in respiratory, and the combined revenue of our growth platforms represented an impressive 70% of total revenue in the first half. Momentum was seen in emerging markets, in Japan and in new oncology. Next slide, please. Starting with emerging markets. We continue to deliver in line with our long term performance target of mid- to high single digit growth in product sales. In fact, when you take out the revenue from divestments, growth in the half was more than 10% across emerging markets. And growth in China of 8% in the half was mainly driven by new products, new launches of Forxiga and Trogiso and on the strong performance of Brilinta. Importantly, for our long term business, we have seen 5 of our medicines added newly to the Chinese national reimbursement drug listings, one of the best performances of any company in China and including, most importantly, berlinta. Outside of China, we continue to see headwinds in Saudi Arabia and Venezuela due to challenging economic environment in those countries. But other parts of the emerging markets performed well, and notably Middle East and Africa with growth of 28% in the first half of the year. Next slide, please. The respiratory franchise sales continue to see challenges in the half with downward pressure in the U. S. Being slightly offset by emerging markets and established rest of world performance. As expected, with Symbicort, we continue to see challenges with global product sales down 10%. This is reflecting price headwinds in the U. S. And competitive dynamics in Europe. We do not see a lessening of competitive pricing pressure going forward. However, SYMBOKORT continues to lead volume share in the ICSLABA class globally. In the U. S. And Europe, Symbicort product sales declined by 19% 10%, respectively. Symbicort Emerging Markets delivered growth of 4% with Symbicort China sales up by 18% in the half. We've launched an extensive Symbicort campaign to highlight its strong differentiation versus competitors. The campaign focuses on the 39% greater reduction in exacerbations versus Seritide and Saba, the 7 times improvement in asthma control days versus baseline standard of care. In fact, this was achieved with a 25% lower ICS dose than ceratide and salvo. Next slide, please. Touching briefly on bevespi and the U. S. Launch is going well, with new to brand prescriptions almost at 15% after only 6 months. The performance is ahead of what you would expect to see of a 4th to market launch. And actually, right now, we're the only LAMALABA growing market share in the U. S. While the growth of the LAMALABA class continues to be below expectations, we still believe it has an important role to play with COPD patients, and we continue to believe that VIVESP offers a unique proposition with the ARISTURE technology supported by a differentiated clinical profile. As a reminder, VIVESP is the first of our portfolio of new products launching on our new PMDI platform utilizing the co suspension technology that enables a consistent delivery of 1 or more medicines from a single PMDI. Next slide, please. In new CVMD, sales were up 4% despite intense competition with a strong performance in emerging markets offsetting slower U. S. Performance. Brilinta delivered product sales of almost $500,000,000 in the half with 28% growth, notable performance seen in the U. S. And emerging markets, including China. The overall diabetes franchise exhibited a softer half with sales down 4%. U. S. Sales declined by 9% as a result of intense pricing pressure in competition for market share. Farxiga maintained a 40% volume market share globally and continues to be the leader in volume market share with product sales of $457,000,000 in the half and 22% growth as Pascal highlighted. Farxiga continued to deliver strong growth in Europe and Emerging Markets with sales up 24% 83%, respectively. In the U. S, our Zika product sales were down 1% due to managed care access and affordability programs in a competitive market. Moving forward, we're working to optimize our affordability programs in the U. S. As we wait for CV outcomes data from the DECLARE trial, the CBD real study has already demonstrated the CV benefits for the SGLT2 class and Farxiga in a real world setting. These data have been well shared and accepted by the medical community. We continued our efforts highlighting the overall benefits of Farxiga, which include excellent glucose control, weight loss, blood pressure and a proven tolerability profile. Next slide, please. And finally, touching on Japan, we continue to grow with product sales up 6% in the half driven by Turgrisso and Farxiga. Farxiga is the leading SGLT is leading the SGLT2 class in terms of value sales, and the class itself is exhibiting strong growth in Japan. Our diabetes business in Japan was up 21% in the first half. And as I mentioned, we continue to have great success with Trogresso in Japan, But I'll at this point turn it over to Jamie and he'll tell you more about that and the rest of our new oncology portfolio. Thank you, Mark. Hello, everyone. I'm going to cover the oncology franchise. This quarter is the Q1 since 2010 that we've achieved $1,000,000,000 in product sales. This is a 20 percent growth since the previous year. For the first half, we've achieved $1,900,000,000 in sales, which is 19% improvement since the previous year. This is primarily driven by 4 products, Faslodex, which is an older product, has seen renewed growth due to expansions into first line. We just found out yesterday actually that we got approval in Europe for the FALCON trial, which is a first line metastatic breast cancer. We hope to hear soon about the U. S. And we've also seen combination use in second line with CDK4six inhibitors. This is 16% growth and about $250,000,000 in sales for the quarter. For new oncology products, we're halfway to achieving our goal of 6 new medicines by 2020, 3 have already been delivered. Tagrisso has shown very strong growth globally, particularly in Asia. Imfinzi, we initiated our strategic launch in May 2017 and I'll cover that in more detail. And with Lynparza, there's been continued strong news flow. We announced SOLO-two results, which is the 2nd line maintenance setting for ovarian cancer that was very impressive and more recently for metastatic breast cancer with BRCA mutation. Next slide please. So Tagrisso has shown strong growth quarter on quarter. This is primarily due to emerging markets and established rest of world. In Japan, we've had the highest testing rates of all at about 96%. In China, we had the fastest launch in the history of AstraZeneca in May with sales starting to pick up. In Europe, we've seen more reimbursements, most recently in Italy for a total of 14 markets in Europe with partial or full reimbursement. And in the U. S, we're starting to see testing rates for T790M mutations in second line increased due to education around ctDNA plasma retesting. We previously reported the first line results in Phase 1 that had an impressive progression free survival of 19.3 months. We just announced today the results of FLAURA, which is the pivotal trial in first line EGFR mutant non small cell lung cancer that were positive and you'll hear more about that from Sean. Next slide please. For Imfinzi, we received accelerated approval in second line bladder cancer and launched in May. We've only been on the market for a couple of months and we've already seen 35% share of voice, which is second to the other competitors. This is really a strategic launch to set us up for Stage 3 unresectable non small cell lung cancer based on the positive PACIFIC trial where we met the primary the progression free survival endpoint, which is the primary endpoint of the trial. We anticipate regulatory submission in the second half of this year. This is a tremendous opportunity for us with about 100,000 Stage 3 lung cancer patients where there's no other PD-one or PD L1 inhibitor. This has the potential to be a blockbuster and we're 2 to 3 years ahead of the competition. Next slide please. With Lynparza, we remain a global leader. We are the first on the market with ovarian cancer, now there's competitors and we are the first to announce positive results in a second indication for PARP inhibitor, which is metastatic breast cancer. We've seen steady growth, particularly in Europe. In the U. S, we've seen some headwinds as a result of still having the 4th line indication in ovarian cancer, and we have a very high pill burden. SOLO-two results in the second line maintenance setting were submitted for regulatory submission and we hope to hear back in the Q3. And as a result of that, when we can launch, we will be able to reduce the pill burden from 16 capsules a day to 4 tablets a day and also be in a second line maintenance setting, which would make us very competitive. We have a very favorable safety profile. Our development program with Lynparza is extremely robust. The goals are to move to earlier line settings with the SOLO-one trial reading out at the beginning of 2018 and will position us in first line maintenance ovarian cancer. Eventually, we're going to have the OLYMPIA results that will put us in the adjuvant breast cancer setting and then we have additional indications with pancreatic cancer and prostate cancer. We have several combination trials underway with VEGF inhibitors including bevacizumab and cediranib that will expand the activity of Lynparza beyond BRCA mutations. And then beyond that, we have an extensive DDR portfolio to combine with LYNPARZA that will put us in different segments of different diseases as well as the immuno oncology combination. Next slide please. Pascal mentioned earlier that we entered a strategic collaboration with Merck and this is a critical partnership that we believe maximize the value of LYNPARZA, but by combining 2 immuno oncology agents, 1 a PD-one inhibitor, KEYTRUDA, which is one of the leading immuno oncology agents, as well as Imfinzi. And the goal behind it is to enhance activity in the BRCA mutant subpopulation, but also to expand beyond BRCA mutations into the wild type population. We're pursuing this not only with IO, but DDR and VEGF inhibitors and this is something that Merck will participate in with us as well. Next slide please. The most number of clinical trials in immuno oncology with about 39% in multiple indications. That's shown in the light green segment and the darker green segment is Imfinzi, also very active in clinical trials. The 2 of us together would have by far the most clinical trials with immuno oncology and by partnering with each other and combining with Lynparza, we should maximize the value of Lynparza. Next slide please. So in summary, around the Merck collaboration, we combined the capabilities of 2 main oncology players. We established Lynparza as preferred PARP inhibitor backbone of PD L1 and PD L1 inhibitors. It accelerates Lynparza development with KEYTRUDA. We maximize the potential number of treatment options. And as Pascal mentioned, the total value of the deal is $8,500,000,000 And with that, I'll hand it over to Marc De Noire to cover finance. Thank you, Jamie, and hello, everyone. I'm going to spend the next few minutes taking you through our financial performance in the first half. If you could please turn to Slide 25. As usual, I will begin by showing you the reported P and L numbers before turning to the core performance. Total revenue declined by 9% in the half with product sales impacted by the residual effect of the Crestor and Cerro Quadixstar losses of exclusivity in the United States. Exane revenue declined by 1%. As previously highlighted, we expect the sustainable and ongoing proportion of exchange revenue at a high of 34% in the first half to increase over time. Please turn to Slide 26. If we now turn to the core performance, we can look further down the P and L and see that our gross margin in the half was stable at constant exchange rate at 83%. This reflected the mix of sales and the growing influence of Specialty Care Medicine together with the impact of the losses of exclusivity and the resilience of some legacy medicine in established markets. It's important to note that we do not anticipate such a high gross margin over the full year, given the phasing of supply costs and some non repetitive benefits that will not be seen in the second half. Core R and D costs declined by 4% in the half and core SG and A costs declined by 9 cost broadly stable and reducing core SG and A cost. Again, we do not anticipate such a reduction in core SG and A cost over the full year as we saw in the first half. Core other operating income and expense more than doubled in the half, partly reflecting the level of disposal activity as well as the milestone received from Pfizer. The core tax rate in the half was 19%, in line with the 16% to 20% range we continue to anticipate for the full year. As Pascal mentioned a moment ago, the increase in core EPS in the half was primarily driven by a continuing focus on cost as well as the increase in other expense and income. If you could please turn to Slide 20 7. This familiar slide illustrates the important progress in reducing our operating cost base. As I've just mentioned, core R and D cost declined by 4% in the half, whereas core SG and A decreased by 9%. One example of what we are doing is prioritization, making sure that we have the right people and resources focused on the best medicine and opportunities. We also recently launched a global business service organization, which over time will increase the level of integration and allow us to focus on cost further. We remain committed to continue reducing our operating cost vest this year. Please turn to Slide 28. Turning to our operating profit margin. You may have noticed that we have achieved a 30% plus margin for a number of consecutive quarters. This has even been before the overall pipeline delivers in a way we anticipate. We also know that our gross margin is being supported by the growing influence of Specialty Care Medicine sales. Core R and D investment is not targeted as a ratio to product sales and core SG and A cost has the capacity to reduce further. So we recognize the long term operating leverage opportunity. However, depending upon the success of the pipeline, we will also want to retain some flexibility to invest in high return pipeline and launch opportunities. In short, as a big patent cliff cycle ends this year as the pipeline delivers, new AstraZeneca has the potential to deliver a growing margin while keeping some flexibility on pipeline opportunities. Please turn to Slide 29. To conclude, I want to reiterate the 2017 guidance, which is at constant exchange rate. I expect a low to mid single digit percentage decline in total revenue. Core EPS is anticipated to decline by lowtomidteens percentage. Outside of guidance, the total of external revenue and other operating income is still expected to be ahead of that in 20 16. As I mentioned, sustainable and ongoing income is expected to increase as a proportion of external revenue in 2017 and beyond. We anticipate that core R and D will be broadly in line with 20 16. And as I just mentioned now, we plan to reduce core SG and A costs this year. As highlighted before, variation in our performance between quarters can be expected to continue with year on year comparison beginning to ease in the second half, particularly as we begin to lap the impact from the loss of Crestor in the United States. Finally, you have seen our capital allocation priorities before and they remain unchanged. We will continue to strike a balance between the interest of the business, our financial creditors and our shareholders. After providing for investment in the business, supporting the progressive dividend policy and maintaining our strong investment grade credit ratings will keep under review any potential investments in value enhancing and immediately earning accretive opportunities. With this, I will now hand over to Sean. Thank you, Mark. I will run through the late stage pipeline events occurring since the last results announcement, today's important news and highlights of recent data presentation. Then I'll wrap up with a look at our upcoming news flow. Please turn now to Slide 31. As in Q1, it was an equally busy 3 months, where we mostly saw progress in each therapy area. Imfinzi got U. S. Approval in bladder cancer, our first biologic and our first immunotherapy. The PACIFIC trial met its progression free survival primary endpoint during a planned interim analysis and we are now very excited to be working with regulators to bring Imfinzi to patients with Stage 3 unresectable non small cell lung cancer. As you saw, Mystic did not show benefit on PFS, and we now will await the final overall survival in the first half of twenty eighteen. This is a disappointment for us, but as we've said on several occasions, we need overall survival to fully qualify the clinical profile of the IO medicines, which is why we refined the MISTIC trial design. Further in lung cancer, Tagrisso met its primary endpoint in the first line FLAURA trial. Lynparza had regulatory submission acceptance in the EU and Japan for second line ovarian cancer. In Type 2 diabetes, Bydurean met the primary safety objective in the cardiovascular outcomes trial, but did not reach statistical significance in showing superior CV benefit over placebo. These data will be shared at EASD later this year. Further on data readouts, we had some mixed news with trilikinumab not meeting its primary endpoint in severe uncontrolled asthma, although the study did provide valuable information regarding potential in a subpopulation of patients expressing a specific biomarker. These learnings have been incorporated into the 2nd Phase III study of trilikinumab, STRATOS-two. Staying on respiratory, we had regulatory submission acceptances of the VIVESP for COPD acceptance of VIVESP for COPD in the EU. Last week, we learned that our partner, LEO Pharma, received a slide. In June, we took our science to ASCO and shared 100 abstracts, including updates on Lynparza, Tagrisso and Imfinzi. We shared the Olympiad data from Lynparza and BRCA mutated metastatic breast cancer, which made the plenary session. We also shared health related quality of life data in ovarian cancer from SOLO-two. For Tagrisso, we shared encouraging data from AUTO-three for patients with EGFR T790M mutation positive non small cell lung cancer and CNS metastases, strengthening the case for Tagrisso's move to first line EGFR mutated lung cancer and its ability to cross the blood brain barrier. And for Imfinzi, we highlighted the data included in our recent approval for bladder cancer and further non small cell lung cancer data from Study 1108. Please turn to Slide 33. As you all know, a large unmet medical need remains in non small cell lung cancer. This slide illustrates the depth and breadth of AstraZeneca's commercialized and late stage potential medicines in this disease area. Spanning the EGFR mutated tumors with small molecules like ARISA and Tagrisso and addressing the non EGFR and non ALK mutated tumors with possible. Over the past 3 months, we have received 3 major data points PFS for PACIFIC and Mystic and we are waiting for the overall survival for both trials. Then we received the positive results from Tagrisso in the FLAURA trial with only one primary endpoint progression free survival. We are working on regulatory submissions for PACIFIC and FLAURA at the moment, and we hope to bring these two opportunities to patients as soon as possible. Please turn to Slide 34. This slide highlights the status of the 3 recent news items and the progress that we have made in non small cell lung cancer today. First, with the positive progression free survival readout from the PACIFIC trial with Imfinzi in Stage III unresectable non small cell lung cancer, we will make regulatory submissions as soon as possible this half. We believe this is a very meaningful opportunity. 2nd, we have announced the MYSTIC PFS data. We are disappointed that the combo of Imfinzi and trimilimumab and Imfinzi alone monotherapy did not show a benefit on progression free survival. I will come back to this in a moment. 3rd, we have the good news from Tagrisso that met its single primary endpoint in the first line FLAURA trial, not only with trial statistically significant, but also clinically relevant. The two positive news items will increase our presence in lung cancer across stages and key segments of the market. This is good news for patients and for the company as well. Please turn to Slide 35. As just discussed, Mystic did not meet its progression free survival endpoint, both for the combo and monotherapy and both at the 25% PD L1 expression cut point. We are continuing the trial to assess overall survival for both monotherapy and combination therapy, which are the remaining primary endpoints. We expect these readouts to come in the first half of twenty eighteen. And as we have previously mentioned, all trials of this nature have interim exact timing of those interims. We remain confident that overall survival is the best measure of efficacy in immuno oncology and look forward to keeping you updated with our progress. Turn now to Slide 36. As a reminder, there is more to come beyond progression free survival for Mystic. We recently saw positive REopt for Pacific, and we are currently studying either Imfinzi or Imfinzi plus, Tremi and 6 other randomized controlled trials. Studies include adjuvant with a disease free survival endpoint to PERL, first line trial in the Asian patient population as well as POSEIDON with chemo combination with I O therapy. AstraZeneca's commitment to immuno oncology remains strong and non small cell lung cancer is at the forefront of our overall strategy in oncology. Please turn to Slide 37. Concluding on immuno oncology, here is a familiar slide including our trials in head and neck and bladder Kestrel has been moved into the first half of twenty eighteen due to a slower than expected event rate causing a slight timeline movement from the end of 2017. Next year, we will have final overall survival data from both Mystic and NEPTUNE as well as results from Danube in bladder cancer. Next slide, please. Looking now beyond immuno oncology, I wanted to highlight the additional news items in our overall oncology portfolio that we expect to share between now and the end of 2018. Acalabrutinib, where we are looking to update you on next steps. As a reminder, we generally communicate regulatory submission acceptance once we have heard back from the regulatory agency. Faslodex continues to make strides in first line breast cancer and regulatory approvals for Lynparza in second line ovarian cancer and regulatory submission in first line breast cancer are forthcoming. Similarly, opportunities for moxetumumab in leukemia and salumetinib and thyroid cancer round out the broad range of news items that you can expect to see from AstraZeneca in the few quarters. Next slide, please. Moving away from oncology for a moment, I wanted to highlight some of the important science happening in our CVMD therapy area. At ADA, we recently shared additional CVD real findings, supporting the benefit of SGLT2 inhibitors over other oral anti diabetic medicines in both all cause mortality and hospitalizations due to heart failure. Also, data on duration 7 and duration 8 showing added benefit when combining duderian with either forsyga or basal insulin. At ESC in August, with our partners, the Timmy Group, we will share new data from the PEGASUS trial in high risk PMI patient. And at EASD in September, AstraZeneca will participate in an EASD sponsored discussion panel on SGLT2 inhibitors as a novel treatment for Type 1 diabetes, as well as present exciting 24 week data from the DPICT-one trial of Forxiga in type 1 diabetes. Further, we announced today that the DECLARE trial timeline is being moved forward to the second half of twenty eighteen from 2019 previously. With that, I'd like to end with a snapshot of upcoming news flow from our late stage pipeline. Next slide, please. As you can see from this slide, 2017 will continue to be a busy year and activity will continue into 2018. We've now broken 2018 into first and second half. Before the end of 2017, we expect to receive U. S. Regulatory decisions on Faslodex in the first line setting, Lynparza in second line ovarian cancer, the BYDURION auto injector and benralizumab for severe uncontrolled asthma. We will also be submitting Lynparza in breast cancer, Tagrisso in first line EGFR mutated non small cell lung cancer based on today's news and of course, Imfinzi based on the PACIFIC trial and Stage 3 unresectable lung cancer. There is certainly still the potential for a fast to market opportunity with calabrutinib. Please note my previous comments on when we generally announce potential regulatory submission acceptance. In 2018, we expect the final MysticOS data plus a number of other news items, including Lynparza in first line ovarian cancer based on SOLO-one and first data readouts for the IO trials, and we'll begin to see readouts for lupus and bladder cancer and have the potential for quite a few regulatory submissions before the end of 2018. Thank you all for your continued support, and thanks to all the hardworking people who come to work at AstraZeneca every day to make this happen. Now I'll hand back to Pascal for closing comments. Thank you, Sean. So let me summarize. First of all, the first half was in line with expectations. New AstraZeneca grew product sales by 4%. 2nd, the pipeline is advancing 2nd, the pipeline is advancing at pace with 12 new potential medicines in Phase III under registration. The oncology pipeline in particular is progressing. Tagrisso and Lynparza are ahead of expectation. We recognize, of course, that domestic news are a disappointment, but we also need to see the positive surprise with the PACIFIC trial, which is a very large opportunity that will belong to us for a period of time. We are looking forward to sharing further news flow that we think has the potential to mark a meaningful step change for AstraZeneca, in particular the details of the PACIFIC and the FLORA Phase III trials in lung cancer, which we hope to present very soon. We will now go to the Q and A. And perhaps we can now take the first question from the conference call. And I think the first question will go to Tim Anderson at Bernstein. Tim, go ahead. Thank you. Over the last many weeks, you had suggested that you'd provide a fair bit more in your top line release for Mystic than a normal top line release. But to me, it seems pretty scant on details given the materiality of it. And I'm hoping you can say at least whether there was a trend on PFS and whether it might have been a powering issue. And kind of related to this, is there a working hypothesis for why the monotherapy with derva didn't hit on PFS 25% above? Are you confident that that's not an indictment of the PD L1 approach versus the PD-one approach? Okay, Tim. Thank you so much. Sean, I think it's for you this one. Yes. Okay, Tim, thank you for the question. With regard to what's being disclosed here, we actually have disclosed more than we usually do. Usually, we in high level results, we disclose just the outcome positive or negative of the primary endpoint that's being evaluated at the time. And we did that. That primary endpoint was the Imfinzi, tremi combination for PFS in tumors expressing tumor cells greater than 25% PD L1. We also then went on we didn't formally test the secondary endpoint because obviously once you fail with the primary, you aren't recycling that power. And we did however because we know it's relevant to everyone to get a sense of what happened with the monotherapy in that same patient population, we went on to say that we did not meet the criteria had we been able to go on to monotherapy that would have made that positive. So that we think is quite a full and transparent disclosure. With regard to the design of the trial, we are very confident that the trial was adequately powered to show a clinically meaningful PFS benefit. With regard to confidence, going forward, the PFS endpoint has not been a very reliable endpoint for predicting benefit in immuno oncology. There are certainly cases where it has been positive and in line with overall survival. But there have been multiple cases, particularly in second line 9 small cell lung cancer, where progression free survival has not shown a benefit, but when you continue to overall survival, the benefit is shown. That is, in fact, in part, why we changed the clinical trial design of Mystic to elevate overall survival to a primary endpoint to allocate the majority of the power to overall survival and also increase the size of the trial to enable that. And then on PD L1 as a general approach? Well, PD L1 is at this point in our minds a validated therapeutic approach in non small cell lung cancer. We talk about specific data unfortunately without yet having a venue at which to actually share it with you, but we have conveyed our confidence that it's a clinically meaningful benefit and it will mean Imfinzi is brought to patients with non small cell lung cancer. I would only add actually, Tim, that you cannot really we cannot actually say PDU-one are different. I mean nivolumab in first line lung also didn't show PFS benefit. So the I think there is variability from studies to study. That's probably the best we can say, but I don't think we have evidence that there is difference between PD-one and PDL-one. Thank you. We'll move to Richard Parkes at Deutsche Bank. Richard, go ahead. Thank you for taking my question. I've got a bunch on Mystic, but I'm going to skip those and ask something about FLAURA. I just wondered if you could talk about the context in which you've gauged clinical meaningfulness of the FLAURA data. I wondered if you've taken into consideration, obviously, the option physicians have to sequence to agree so in the second line setting. And obviously, that sets a high bar as to what needs to be demonstrated to make this maybe clinical practice changing data. So I suppose my question is, is this data likely to be practice changing as well as clinically meaningful? And just could add as well when would we expect survival data from FLORA to mature? Thanks, Richard. So maybe, Sean, if you want to comment and then also later on, Jamie, if you have anything you want to add from a sort of payers and clinical practice viewpoint, Sean? Yes. So obviously, what we're reporting with high level results is, again, a bit scant for us to give you details. We found a highly statistically significant, and we believe, clinically quite meaningful difference in progression free survival. It is an endpoint that is in a first line setting is a robust regulatory endpoint. And we do have an interesting design to the trial in that patients who got the standard of care first generation, if they have a T790M mutation on their progression, they within the trial, have the option of crossing over to Tagrisso. So as time goes on, we're going to be able to really characterize this better, but we are quite confident in the results we have now. With regard to timing of overall survival, overall survival is a key secondary endpoint. The primary endpoint was PFS that has been met. We will continue to follow for a couple of key secondary endpoints. The second progression, PFS2, as well as overall survival. We can't give you a timing on that now because the trial, it's event driven and it's quite immature. It takes a while for that endpoint to actually mature because there are not only the option of going to Tagrisso if you have a T790M mutation, but for all patients who progress on the trial, there's the option of chemotherapy in a second line setting. And I'll let Jamie comment as well. Yes. In terms of the sequencing and why we believe it will be used in first line as opposed to second line in patients who develop the T790M mutation, You recall that about half the patients do not develop T790M mutation. And so they wouldn't be eligible for Tagrisso if they waited until second line. So that's one point. 2nd point is some patients actually don't make it to second line because of death. So we believe the clinically meaningful result will play into why it should be prescribed. And the third is that it crosses the blood brain barrier and treats and we believe prevents brain metastases, which is another reason to use it upfront because a significant number of patients will present brain metastases in the beginning. So we feel confident that it will be used in first line and it will be a great option for oncologists. Perfect. Thank you. Thank you, Jeremy. Next question is from Andrew Baum at Citi. Go ahead, Andrew. Yes. Good afternoon. Could you confirm that there was an interim overall survival analysis at the time of the PFS and that did not meet the statistical hurdle and therefore the trial is ongoing until the next interim. Am I correct in my understanding of that? And second, perhaps you could comment, given the change in outlook potentially today in relation to Mystic and how it impacts your cash flows, how that impacts both dividend strategy as well as the anticipated run rate for R and D for the company? Let me just quickly address the second one and you can address the first one. The second one, Andre, is when we do our plan, as you know, we do our risk adjusted plan. And then what has just happened in the last recent past is we have adjusted the Pacific in our forecast to close to 100%. Of course, it's not approved yet. So until it's approved not 100%, but it's close to and when you see the data, I'm sure you will agree with us that the chance of approval is pretty good and the impact of this data set will be large. So So we've gone from a relatively low probability of success in our plan because Pacific was not guaranteed of course to close to 100%. So this is going to be a substantial opportunity. Same for Flora. On the other hand, of course, we'll have to adjust Of course, we would have preferred to have everything positive, but ups and downs of course, we would have preferred to have everything been positive, but ups and downs overall, we believe we can continue to secure the dividend. If Marc later on wants to add anything, he will. But I think we at this stage, we see no reason to find to feel that the dividend is not secure. Sean, do you want to cover the first question? Sure. I think as you know, Andrew, we don't comment on interim analyses when they would occur, weather and what the outcome is. So I can't really comment on it other than to say, yes, there are interim analyses and yes, there's an independent data monitoring committee that looks at interims and as well as the safety and conduct of the trial as it's ongoing. Thank you. So we should move to a question online maybe. I think that's going to be for you, Sean. Can you please walk us through all the hypothetical reasons why an IO drug that didn't show a PFS benefit could show an OS benefit, especially as you don't seem to believe in pseudo progression with the checkpoint inhibitors? And the question is from Steve Scala at Cowen. How are you, Sean. Yes. Okay. So all of the hypothetical reasons probably not, but I can probably get through some of the major ones. So pseudo progression is one of them. It's not to say that we don't believe in it, but we do think it's uncommon. It could contribute inflammation around the tumor that is marked as progression, but actually represents an immune response to the tumor and may in fact be beneficial. I think perhaps the thing that we've wondered about most is the speed of onset of IO therapies such that you may find that the tumor has some time to grow before the full effect has taken. And then you will get a progression score. But when that immune response comes, you get a benefit, down the road that shows up in overall survival. I think it is important to recognize these are post hoc explanations for very real data that we have seen repeatedly in second line head and neck cancer and at least and also in I'm sorry, second line non small cell lung cancer and also in head and neck cancer where trials have shown overall survival benefits that were not indicated earlier with progression free survival. There were 2 other questions, I think, in Steve's email. One was, what percent of patients one was about the interim look, I already answered that. The other one was what percent of patients in Mystic had greater than 25% tumor cell PD L1 expression. So the MYSTIC percentage was consistent with what we had said before, which was 40% to 45% first line patients have that level of PD L1 expression, and that's what we saw. One thing I would add, maybe Steve, to what Sean said in terms of why you can get an OS benefit when you show see a PFS benefit is it's not only theoretical reasons. There is evidence of the fact that it happens. There's about 7 studies in fact where an OS benefit was shown when there was no PFS benefit. And out of these studies, 5 are sorry, 4 are in lung cancer. So there's quite a lot of evidence where that not meeting a PFS endpoint doesn't necessarily I mean, not meeting it doesn't mean that you may not hit the EBITDORF endpoint. So we'll have to be patient and see and wait for this overall survival result. So we go to Sachin Gen of Bank of America. Sachin, go ahead. Hi. Thanks for taking the question. I'll take a question on the Lynparza deal, if I may. You've referenced access KEYTRUDA on multiple times. Can you just talk about the need to access KEYTRUDA relative to any changed confidence in Imfinzi, Dovalumab? And related to that, I wonder if you could just frame sort of the various aspects of this deal. Was it what was the main driving factor? Is it the financial attractiveness of the $8,500,000,000 in securing externalization revenue for a period of time versus an NPV increase in Lynparza, just to frame that debate for us? Thank you. Thanks, Sachin. The question is the answer is very simple. It's that, as I said before, we partner assets when we believe that we can create more value with whether the partner, I. E, we increase the NPV of the asset. So of course, you can imagine it's much more obvious to see that we can achieve this when it relates to an asset that is non core, because we have no capability, no presence, and therefore, a partner that has expertise in the field will do better than we would. It is less obvious to see when it relates to core assets, but I believe we are going to show this with doratumumab in hematology with Celgene. Of course, we have to deliver positive clinical results, but that's sort of the obvious part. But if the combination works, I have absolutely no doubt when I look at how fast we're progressing with this program and how well we're doing with our partner Celgene, I have no doubt that we'll create more value with them than we would have ever been able to do on our own. As it relates to Lynparza, same story. And then here, that brings me to your first question. Here, the value creation essentially comes from the increased effort that will be brought to combining Lynparza with PD-one and PD L1. We have total confidence in durvalumab, but we're also realistic. I mean durvalumab will not get 100% share of the immuno oncology market. Pembro is a great product. Merck is a great company. They're going to get a share of this market. And therefore, combining our efforts, the DiorVa efforts, if you will, with the Pembro efforts to combine with Lynparza, clearly, will make Lynparza bigger than if we were trying to do that by ourselves simply with DiorVa. So that's really the logic behind it, ultimately a bigger NPV. So I'll move to Simon Baker, Alexan. Simon, go ahead. Thank you. Thank you for taking the question. And just continuing on from where Sachin was asking on the deal with Merck. There are 2 schools of thought in the market this morning, one suggesting that the size of the potential payments would indicate that the consensus assumptions for Lynparza have been significantly underestimated and others believing that you are giving away long term value for short term cash. Now the difference between those two is the nature of the contingency on these payments. So I wonder if you could give us a little bit more color on how and when the $6,200,000,000 or so of contingent payments are triggered. Thank you. Yes. It's a great question. Thank you for attracting everybody's attention to the fact that I personally think half of the value that well, sorry, the value we receive for half of the asset is actually even the secure value is more than what is in the consensus for the totality of the asset. So essentially, we have created value beyond what is in the consensus today. But Simon, to answer your question specifically, I'll hand over to Marc Dunoyer. Simon, thank you very much. So you have seen the upfront of 1.6 percent. You have seen the options, short term options for EUR 0.75 percent. So that's EUR 2 $35,000,000 And then you have the $615,000,000 of contingent. Approximately 1 third is linked to regulatory milestone and 2 third is linked to sales milestones. Of course, they come over time. And just one quick question. We actually disclose the so the more detailed schedule and also some guidance as to how we will be accounting for these various payments over time. Could we move to a question online? And I think Marc, Malen this time, this is more going to be for you. It's an e mail from joeWalton@cosiduis and it relates to U. S. Primary care, follicular diabetes, Farxiga and respiratory and the impact of price pressures. And so the question here is that this price pressure and this reduction, is it a result of a deliberate policy to save promotional dollars? I assume Joe is implying that we are sacrificing the price to save promotion. Or is it impacted by patent expiries and competition, patent expiries that are set to annualize that? So when and then and so when might the decline is for you, Mark? So our focus wherever we're trying to get medicines is to get them to as many patients as we can. So first thing I would say is we're not trying to minimize or reduce promotional efforts in exchange for lower prices or vice versa. We're trying to have the right combination to get this to as many patients as we can. In terms of the dynamics in the marketplace, I think, as we've seen in many places in the world, we've seen this in Europe, I mean, I think realistically, we're going to continue to see pricing pressure as countries and the U. S. Is no different, try to find ways to balance the cost that they're facing. I think certainly things like generics or analogs add pricing pressure. And so when those come in, you have an increase in pricing pressure. And over time, it will stabilize. I think it's hard for us to say, but there's so many different factors in each market when that will happen. Right now, what we're focusing on is making sure we're getting the medicine to as many people as we can, being able to lead when we have great medicines like Percega and Symbicort, which we are, and making the case where the value of the medicines and bringing most importantly new medicines that are going to make a difference and have a higher value. So we've launched PIVESTI, we've got penerolizumab launching soon in respiratory. We were waiting for the DECLARE study coming that will also demonstrate the value of Forxiga. We've got new products like Lokelma and roxadustat coming. All of these will have, I think, a high value to payers and to patients because of the value they can provide. Thanks, Mark. So we should go back to Jeff Alford. Jeffrey, Jeff, go ahead. Hi. Thanks for taking my question. So I wonder if you can comment first on the relative level of crossover that you think you're going to see or are seeing in the MISTIC study and then just how that impacts your confidence and ability to hit on overall survival following not hitting on progression free survival? And then I don't know if you could just make a very quick comment on why it does seem to be taking a bit longer than expected to get acceptance of the filing on acalabrutinib? I thought we would have had an update on that by now. Thanks very much. Thank you, Jeff. I mean, I'll ask Sean to cover both of those questions. We can't comment we can't give you the details on the crossover, but we can be confident that it doesn't impact so much the OS. But go ahead, actually. Yes. We can't give what we're reporting today is high level results, and there's a lot more detail for us to look at We remain confident that overall survival is a more meaningful endpoint and more adequately powered in order to see a clinically meaningful benefit with monotherapy or with combination, but we can't comment on the rest of those details. Of course, crossover goes both ways in these trials. One is that if you get chemotherapy and you progress on it, you could crossover to PD-onePD L1 agent. The other is that if you get, one of the IO arms and you progress, you can get treated with chemotherapy because you'll be chemotherapy naive. So that will benefit the overall survival on those arms. Moving on to the acalabrutinib acceptance. We're on target for what we had hoped in terms of acknowledgement of of acceptance and timing of submission. So I'm not quite sure what to say about the expectations. It may just be that your expectations are different than ours. Yes. I mean, on this one, we're totally inside the normal range of 60 days between submission and acceptance of filing. And we, of course, do not confirm when we have filed. I can only tell you we are within the normal range that you would expect. I'm sorry, that's cool. Thanks. Vincent Meunier at Morgan Stanley. Thank you for taking my questions. I mean, one question back to the America collaboration. I mean, how would you intend to allocate the EUR 1,000,000,000 or EUR 1,600,000,000 upfront payments? Do you want to return that to the shoulders, maybe doing a bit of buyback? Or would you prefer to make bolt on acquisitions or just invest that in the business? And related to that question, I mean, do you consider potentially acquiring more IO candidates to derisk the IO portfolio? Because when they say that if you just have one PD L1 drug, which is the core of your IO portfolio and if you have a program like Mystic, the entire portfolio then is at risk and maybe it's better to have different assets. So would you consider buying more assets in IO? Thanks for the question Vincent. I mean, first of all, I think it's good to start with reminding everybody that durvalumab works and it works very well. I mean we have approval in beta, but importantly we have the PACIFIC study and it's unfortunate well, it's unfortunate just the timing. It's just the norm. We haven't shown you the results yet in detail, but when you see the results, you will agree with that that it certainly works well. So there's no issue with diorvelumab per se. In terms of having more targets, quite frankly, we have lots of those. So I have to say, 1st of all, we have to wait for OS as far as lung cancer and the mono endo combo. Then we have additional studies in combination in other indications bladder, head and neck. So that's for the Durabat Remy combination and then we have quite a number of new targets. So net net is we're not planning to acquire any other targets, at least that's not the intent at this point. I mean, if something came up that was very attractive, we might do it, but we don't feel the need for that. In terms of what we're going to do for the with the cash, there's no intent to do any share buyback at point. We will use that to reduce our debt and continue to sustain the dividend and also of course take some of this and invest it in our business. So we'll basically continue to do what we've been doing. Essentially, the financial aspect of this collaboration is discussed that enables us continue doing what we're doing and then certainly should give everybody confidence that the dividend is not at risk at all. In terms of the pipeline of new targets, Sean, anything you wanted to add? Yes. I just it's a very rich pipeline. I'm not exactly sure what we would acquire from the outside. I mean, obviously, the deal that we did with Merck gives Merck access to one potential combination partner, Lynparza. In addition, a second partner, selumetinib, but MEK inhibition, we also in the pipeline have the GITR agonist, the ox40 monoclonal antibodies from MedImmune CD73, a variety of potential combination partners. It's a very rich pipeline. So of course, it's a very attractive financial construct. But the most important piece is going back to Sachin question. The most important aspect of this collaboration is the creation of additional value, the increase in NPV of Lynparza NPV and the collaboration with a company Merck that our values, shares of focus on science and certainly a company we've collaborated with very successfully in the past and that we look forward to working with again in the next few weeks months. So moving to Simas Hernandez and Lyric. Simas, go ahead. Thanks very much for the question. So my question is just one. Can you guys characterize the percentage of profits that the externalization strategy will contribute to your earnings this year? And then separately, as we look at the externalization strategy, how sustainable is that over the next, call it, 3 to 4 years? Because I think, again, the sustainability of the dividend with a 50% cover is one question. But the sustainability of the dividend relative to your current cash flow dynamics given the core EPS dynamics, I think is a key question for investors right now. Thanks. Good. Thanks, Thomas. I'll ask Marc to answer that question. But we I don't think we want to answer percentages, give you percentages. What we can do is reconfirm the guidance and the elements that we put in the guidance that relate to externalization. Marc, do you want to cover this and the cash focus? Yes. I want to repeat the 2 indications that we have provided that for 2017, the sum of external revenue and other income will be greater than the equivalent in 2016. And the other indication we have provided is that the part that is sustainable and repeatable is going to grow over time. These are the two indications we have provided. And where we stand today, we are reconfirming these two guidance. Thanks, Marc. So moving to Care at Government Sachs. Care, go ahead. Thank you for taking my questions. I just want to try and understand the source of your comfort around the ability to pay the dividend. If I understand your numbers correctly, you generated $338,000,000 in cash flow from operations in the first half of this year. Your dividend payment is $3,600,000,000 a year and you owe $1,500,000,000 to Asserta at 2018, if not before that. What drives your confidence in generating enough cash flow to cover the dividend given your debt is already 50% higher than where it was December last year? Thank you. Let me just make a couple of quick comments and then Marc can be more specific. I think you have to consider the growth that will come out of Tagrisso for instance and very, very profitable growth. This is a product that has very strong clinical data now including in first line and will generate very strong growth over the next 2 to 3 years. And as I said very profitable growth because there's no competition in that segment at this stage. 2nd is, should not underestimate the growth that will come from Pacific not as big as Tagris overall, but certainly opportunity. And again, no competition for the next couple of years in that specific Stage 3 nonresectable lung cancer. And then China is growing rapidly. I mean, we reported an 8% growth rate, but the underlying growth rate, if you adjust for divestments is in fact 17% in China. So as soon as we get out of this divestment part, we'll return to this very high growth rate in China. So we have a business that is starting to make a difference in China. It's very big. So those are all and the platforms the growth platforms are overall growing. We believe that this is suddenly going to drive sales, but also profit improvement. We've had massive headwinds in the last 2, 3 years with parent expiries. Those very soon will be behind us. Marc, do you want to be Maybe 2 additional information. First of all, this is we have a pattern of cash flows, which is different between the first half of the year and the second half of the year. So we have projection for second half 2017, which are going to be much better than the first half of the year. And then on the table that you were quoting, which is Page 44 of our press release, there is top of the table and goes to the investing activities. So in fact, you have you should count also the 728 together in a way with the 338. This being said, we have just announced today a deal that is going to bring in a substantial amount of cash. So that should help us with all the cash needs of the company. Thank you, Marc. Should we move to question from James Gordon at JPMorgan? James, go ahead. Hello. Thanks a lot for taking the question. The question was about confidence in PARP combos versus CTLA combos. So how does the MYSTIC PFS result impact your confidence in showing a significant OS result in MYSTIC and also to the DANIEL and Kestrel studies and just your relative confidence in CTLA-four versus PARP as a combo approach? Did you say the relative confidence of CTLA 4 versus what? Parf. Sorry, okay. Well, Sean, maybe you want to comment on this. I mean the confidence for Mystic, we have clearly to wait until we see the final OS analysis. But as I said before, there are quite a number of studies that have shown an overall survival benefit without showing a PFS benefit and very strong overall survival benefit ultimately in lung cancer. We also have our own internal data and then some of those data we will present in Q4. We are looking at what is the best way to present this data. We have internal data showing in separate study looking at some of the suspects that gives us confidence. But in the end, until we have the final OS analysis, we really cannot say much. Do you want to comment further, Sean? Yes. I guess, so two things I would say. Starting with CTLA-four, which is the much more mature hypothesis being tested, we're really awaiting the outcome in Mystic. Again, I'll add, these are things we've been saying for over a year, but we do believe overall survival is more and it's obviously clinically meaningful, but also the one that better shows benefit from IO therapies. MYSTIC is designed to show, Imfinzi plus trami versus standard of care chemotherapy or Imfinzi monotherapy versus standard of care chemo therapy. So that's how we get a positive trial. I think then it's a more complex equation about level of additional benefit if seen for the CTLA-four combo and then benefit risk when we figure out whether there's a possibility of moving forward and changing practice and getting registration. That's a matter of waiting. The 2 don't the PARP combo and the CTLA-four combo with PD-one, PD L1 really don't inform each other. They're very different therapeutic hypotheses with CTLA-four basically removing an immunosuppressive signal and hopefully intensifying the activation of the immune system against the tumor. PARP is very different, derived from the observation that high mutational burden in the tumor seems to correlate with greater sensitivity to immunotherapy agents and as well, homologous recombination repair defects and other DNA repair defects correlating with the high mutational burden and then how in part do you enhance that effect in the context of IO. So they're very, very different, I would say, really unrelated mechanisms. And so their probability of success is very much not informative of each other. Thanks, Sean. John Scanlon, UBS. Jack, go ahead. I guess, you set out your capital allocation principles and you've also said you have a risk adjusted plan. Does that effectively mean that thoughts about capital allocation in practice change when the risk adjustments in the plan change? So investors shouldn't expect to see any change in dividend policy or externalization revenue or so forth unless or until we saw more data on the various lung programs, for example. Hopefully, I get your question, Jack, but maybe I don't in which case please come back and ask again. What I think I said what I said was that our plan is a risk adjusted plan. So we take all our projects, we risk adjust them and that's what we use to long range forecast and look at our long range sales profit and cash flow forecast. So what we are going to do now with those results is we're going to put, let's say, 100% soon enough hopefully of Pacific into the plan, the same for Tagrisso including first line. And then we'll adjust Mystic. The PFS endpoint in our long range plan had a low probability in our plan, because we've always believed as we told you, we always believed that it is an OS game more than a PFS game. And that's why we put the majority of the statistical power in the OS analysis. So in our long range plan, we have lower probability for the PFS endpoint to read out. And so now we're moving to OS. So what I was saying earlier is, we'll redo our long range plan with all these elements. From what we can see today, there's no reason for us to change our long range forecast, including our cash flow forecast and therefore to have a different approach to our dividend policy. Of course, the next 6 to 8 months will be very informative because the competitive landscape will clarify. As you know, there's a number of other studies that we read out. Depending on the outcome of these competitive studies and also the outcome of our own ongoing studies and other indications and into next year the OS analysis. Until then, it will be difficult to be clear on the total potential for durvalumab. But based on what we know today, I think what I said earlier is that we have no reason to have a different view of our future. Does it answer your question? Or did you have anything else in mind? No. Thanks very much. I've got a terrible echo on my line, which may have made my question less coherent even than usual. But actually, you answered it precisely. Thank you very much. Jo Walton at Credit Suisse. Jo, go ahead. Thank you. The my question is about the turning point for AstraZeneca and longer term margins. Mark showed us a slide showing really very stable 30 odd percent margins. Of course, some of that's been helped by disposal gains within that. So it isn't all truly operational from an underlying perspective. I wonder if you could confirm whether you think that 2018 still will be the turning point year. And what sort of operating margins do you think would be a sustainable level given the mix of business that you would expect to have in the next few years, some really fancy new drugs, but also a growing emerging market presence. So I wonder if you could just help us on that longer term margin objective. Thank you, Joao, for this question. Regarding the operating margin, I think we have said and we said this I think several years ago that the profit will grow slightly faster than our sales. And we also said that from 2018 onwards, we would return to growth. So I think these two elements stay the same. What level at what level the operating margin will stabilize? I think it's maybe a bit early to comment. But I think over time, as we move towards Specialty Care and Oncology taking greater share in our business, the operating margin is definitely going to increase. Thank you, Marc. You should not conclude by the way that the emerging markets business is a low profitability business. It is a business with quite a reasonable profitability actually and it's growing. What has really been a burden for us in the last 3 years is patent expiries and losing products that were incredibly profitable like Crestor, Nexium that were at the end of their last cycle with limited promotion and big scale and therefore very profitable. At the same time, as we had to invest in rebuilding our pipeline and rebuilding our future. So that's really what has been a burden more than the emerging markets that are actually growing and delivering reasonable profitability. But as Marc said, as we move forward and certainly our Specialty Care business grows, we're launching Benarizumab at the end of the year or early next year and then we launch future products, the margin should over time improve. But it's too early yet to give you a target as to what that margin could be. We need still more understanding of what the pipeline looks like. Should we move to Emmanuel Pavallakis at Barclays? Emmanuel, go ahead. Sorry, I was on mute. Thanks for taking the question. There was can you hear me? Yes. Yes. Apologies. A couple of follow ups. One if for Mark, if we could perhaps pin you down a touch further on cash flow. I think when I asked the question with the Q4 results, you'd indicated 2017 would be in line with 2016 on cash flow from operations, and it's clearly running significantly below that rate. I know you said H2 will be better, but perhaps you could confirm that comment you made earlier. And then the second was for Pascal. It was just a follow on from your comment that I don't know whether it was intentional. I think you just remarked that the Pacific opportunity would not be as large as Tagrisso. And if I recall correctly, your 2014 unrisked guidance for what was in 9,291 was around $3,000,000,000 So perhaps you'd just like to clarify that or quantify that? Thank you very much. Let me try this one and Marc maybe you can cover the cash flow question. Hopefully, I will address your question and then you otherwise let me know. But what I meant to say is that Pacific is a large opportunity, but Tagrisso as a whole is a bigger opportunity. We see Tagrisso being now with the kind of data we have a 4 $1,000,000,000 plus opportunity including first line and it could go even beyond that if we have a successful adjuvant outcome. So Pacific is large. The Stage 3 nonresectable lung cancer is not as large as the Stage 4 lung cancer. But in the near term, there will be no competitor because we are the only product with data in that setting. So it's a large opportunity for us, but still smaller than the sort of €4,000,000,000 we see in Pacific. That's what I said. Hopefully, that addresses your question. And Marc, do you want to cover the cash flow? Yes. I can only say that, as I indicated earlier on, the pattern of our cash flows between the first half and the second half is very similar between 2016 2017. And as far as the overall for the year, we estimate today, as I indicated earlier, that it would be of a similar quantum for 2017 as for 2016. So similar pattern, similar numbers. Yes. So, Emmanuel, did that cover your question regarding the potential of Tagrisso? Maybe one thing I could also add is that 2, 3 years ago, we gave an indication of the potential of Tagrisso and then we had a forecast in our plans for Tagrisso, but the forecast we had in our plan was a risk adjusted forecast. And as we have progressed, 2 things happened. First of all, the risk has been removed and the probability of success is now close to 100% for all those indications. And 2 is the product profile has improved. We now have very good data in first line. We have data in brand metastasis. The product penetrates the blood brain barrier. We didn't expect that 3 years ago. We hoped it might be the case, but we didn't have the data. So we didn't have that in our product profile. So and finally, the competitors have left the scene. So essentially, as we progress, the product has looked better, the competitors have disappeared and the probability the risk has been removed. So all of that has driven Tagrisso up and up and up. So now it is very large. So we move to Mark Purcell at Redburn who is asking us an email question. Please could you explain your confidence in Mystic overall survival data reading out first half twenty eighteen as opposed to full year twenty eighteen? Is this based on even rates alone or on the pitadores curve separation, which was relatively late with Quechterodar in keynote 21 gs? Sean, for you. Sure. So the anticipated readout is based on event rates with a level of maturity that triggers the final overall survival analysis. And the reason that we're refining it is because we're getting closer and we're better able to estimate when we will to narrow it down from a 12 month period to a 6 month period. It doesn't it's not an inference from another trial. It's just standard clinical trial design and execution. Thank you, Sean. So we'll now actually end the Q and A. And I would like to thank you very much for your great questions and conclude again and just kind of summarize where we are again for you. First of all, first half financials are in line with expectations. Our new AstraZeneca sales grew by 4%. Our financials are on track. We already confirmed our guidance. Pipeline, very importantly, the pipeline is advancing at pace, 12 new potential medicines in Phase 3 and under registration. In particular, our pipeline in oncology is progressing with Tagrisso and Imparza looking really good. In particular, this recent Tagrisso news make us very confident that it is going to be the big product we are hoping it would become. On the IO front, MYSTIC of course is a disappointment, but please consider the number of studies that have had a PFS endpoint not met, but still delivered OS benefit. So let's wait a little bit longer. But we do recognize Mystic is certainly a disappointment, but we also have to recognize that Pacific was certainly not expected. It's positive surprise and it has a lot of potential and a very profitable potential. I would like to underline this and considering the limited competition in that segment. We're looking forward to sharing further news flows over the next few weeks months. And we think that we have the potential to hit to reach a meaningful step change for AstraZeneca in the next few months, in particular when we present the details of the PACIFIC and FLORA Phase III trials in lung cancer. So thank you again for all your support and your interest. Have a good rest of the day.