Hello, everyone. I'm Pascal Soriot, CEO of AstraZeneca. Welcome to this full year and fourth quarter 2016 results presentation for our investors and analysts. We are here live in London, and we also have a number of people on the phone and following us on the webcast. For those of you online, the presentation can be downloaded from our website. We plan to spend about 45 minutes on the presentation, and we'd like to leave plenty of time for question and answers, as I'm sure you have a number of questions. We have about an hour and a half together. If you want to ask questions on the phone, you can get in the queue already now by pressing star one. There's also an option to ask questions online as part of the webcast. Please turn to slide six. Slide two, sorry.
This is our usual forward-looking statement that you have here. If we move to slide three, I'm very pleased today to be joined by Marc Dunoyer, CFO, Mark Mallon, our Executive Vice President of Global Product and Portfolio Strategy, and Sean Bohen, our EVP of Global Medicines Development and our Chief Medical Officer. If we move to slide four, this is the agenda. I'll give you an overview. Marc will cover the growth platforms. The other Marc will cover the financials. Sean, the pipeline, and then we'll close and open for Q&A. Moving to slide five. This is the highlights of the year. The performance in the quarter on the year was in line with our expectations.
Total revenue decline in the year reflected as expected, the loss of exclusivity for CRESTOR, but also the lack of U.S. FluMist sales this season, and finally, the tail end of the NEXIUM loss of exclusivity in the United States. What we call the new AstraZeneca, which we define as the three main CRP areas, of course, cancer, cardiovascular, diabetes and respiratory disease, together with the emerging markets, grow by 6% in the year and by 6% in the quarter. We look at this AstraZeneca because it reflects really our strategy of focusing on those core CRP areas and of course, the emerging markets. The emerging markets, in particular, performed well overall, and we delivered an improved performance in the last quarter. China, in particular, continues to do very well.
FARXIGA and SYMBICORT are global leaders in their markets in volume market share and doing very well. There was a modest sequential improvement in respiratory quarter to quarter. We're very pleased with the launch of BEVESPI in the U.S. Marc will talk a little bit more about it, but so far it is going very well. FARXIGA is now our largest diabetes medicine, and it continued to grow very rapidly. Marc will talk more about it. It is globally in volume, again, still the number one SGLT2 medicine, and we believe this class has enormous potential as more data become available, and certainly 2017 should continue supporting the class and FARXIGA. Our new start, TAGRISSO, reached $423 million in its first 12 months. It's quite a successful launch for an oncology drug in a third line setting in lung cancer, EGFR mutated.
We haven't yet launched in China. This product is being fast-tracked from a regulatory approval viewpoint in China, and we hope to be able to launch pretty soon. Very pleased with the difference it's actually making to patients who have EGFR mutated lung cancer around the world, and very much in particular in Asia. As you know, 40%-45% in Asia. In Asia, 40%-45% of patients with lung cancer have an EGFR mutation. Our earnings per share were supported by our continued effort on managing SG&A costs, those declined as we had indicated they would. We'll continue to invest in R&D to support the pipeline, of course. In 2017, essentially, we'll be starting to annualize the loss of CRESTOR and finally start seeing the end of this patent cliff that has created enormous headwind for us over the last four years.
Just as a quick reminder, 2011, out of close to GBP 30 billion in sales, we had GBP 19 billion in sales coming from products about to lose patent protection. They have indeed lost patent protection, they have declined rapidly. By 2018, the great majority of those sales will be gone, that's what we have had to replace and we'll continue to work to replace. Turning to page six, we continue making good progress with the pipeline, as you can see here. Firstly, importantly, we received acceptance of our regulatory submission in the U.S. for durvalumab for bladder cancer. This was our first BLA submission, and we had, of course, the second one with benralizumab. Importantly, the FDA granted priority review designation to durvalumab in bladder cancer, and we look forward to hearing from the FDA over the next period of time.
For TAGRISSO, we also got priority review designation for AURA3 when we submitted the data. This was our first randomized phase III trial for TAGRISSO against chemotherapy. We also received acceptance in Europe. Finally, still in oncology, FASLODEX, which as we all know, is not a new product but has received the support of new data. FASLODEX achieved two regulatory submissions, acceptances for first-line use in the U.S. and in the U.K. Moving to cardiovascular and metabolic disease, you can see here that the DURATION-7 study combining BYDUREON with basal insulin met its primary endpoint. This is good news, it comes in the wake of the DURATION-8 data, which we believe will give us a chance to relaunch FARXIGA and BYDUREON as we introduce the new pen and should have a substantial impact hopefully in 2018 in particular.
In the respiratory franchise, we filed benralizumab, the filing was accepted both by the FDA and the EU. This was our second BLA after durva, we expect benralizumab to make a big difference to the treatment of asthma, but also over time, COPD. Finally, outside our three core TAs, together with our partner Lilly, we progressed another shared molecule, MEDI1814, which is a more selective amyloid beta antibody. Another good example of the way we actually manage our pipeline and the way we create value out of our pipelines for partnerships in areas that are not core to the company. Moving to slide seven. You see here that staying on the topic of turning points, you can see that we are approaching the time where the loss of CRESTOR exclusivity will ease the comparison, that will happen in the second half of 2017.
In 2016, we saw a large impact from losing CRESTOR in the U.S. and we still saw some remnant impact of NEXIUM, of course, and SEROQUEL. On top of it, we had the impact of FluMist sales that we didn't achieve in the season because of the CDC recommendation not to use FluMist in the U.S. during the season. As we annualize the negative impacts of some of this patent expiry, the focus really becomes even stronger on our three main therapy areas, as you can see here, Oncology, Cardiovascular, diabetes, Respiratory disease, and they are growing quite nicely together. Oncology in particular are growing rapidly because of the success of LYNPARZA, but more importantly, the success of TAGRISSO. Soon enough, this will be hopefully complemented with the launch of durvalumab and also the rollout of the new indications for FASLODEX.
In CVMD, BRILINTA continues to grow, and in fact, we believe that it should be a blockbuster, a $1 billion-plus next year. In the meantime, we have continued to do a fantastic job from a cost of goods viewpoint and this product profitability is starting to look pretty good. In 2017, both BRILINTA and FARXIGA, actually not only BRILINTA but also FARXIGA should be more than $1 billion and FARXIGA experienced very strong growth in 2016. The Respiratory business in 2016 had to face price pressure in the U.S. in particular, but also a little bit in Europe that affected SYMBICORT, as you all know. As we move into 2017, we should see the impact of the launch of Bevespi and later in the year, the launch of benralizumab.
When we add this together with the emerging markets, we had a growth of about 6% for the year. If you turn to slide eight. If you look at the opportunities we have and we focus on the future, we have seen a steady increase in the number of launches from our three main therapy areas. Of course, FARXIGA, TAGRISSO, LYNPARZA, Duaklir. For the coming year, we expect to launch, as you can see here, durvalumab, QTERN, Bevespi, which is already launched, and benralizumab in the second part of 2017. On top of this exciting launch schedule, we have quite a rich news flow in 2017, as you see on the right-hand side of this chart here. We'll have new clinical data coming out for LYNPARZA, TAGRISSO. We'll of course have the much-debated MYSTIC study results, but also we have additional study results beyond MYSTIC.
We'll have data supporting TAGRISSO and in lung cancer, we have a really great opportunity to build a leadership position in lung cancer with TAGRISSO and with our IO platform. As far as MYSTIC, Sean will talk more about it, but we do remain confident about the potential of this study and there's nothing new that we've been exposed to that would change our view of the study here and the potential outcomes. If we move to the next slide nine, you can see here that this is why we spend what we spend in R&D. You can see here we have a very strong pipeline and a lot of assets, a lot of opportunities to support our growth from 2018 onwards. The question is not whether we will return to growth in 2018 or not.
What is going to be the slope of the curve, how fast we will grow. Of course, the answer to this is how many of those projects make it and how strong the clinical data are. On top, of course, we have to deliver a good commercial success. Very much we will know over the next 12 to 18 months how many of those projects turn out to be positive, and therefore we'll have a good sense for the slope of the curve as far as the return to growth is concerned. Post 2018, there's clearly no doubt we should be growing. You can see lots of assets and you can see also a couple of assets outside our core TAs.
One is partnered, I've talked about it earlier, in Alzheimer's disease with Lilly and another one in anifrolumab we are developing ourselves for lupus. Before I hand over to Mark Mallon for the growth platform, I'd like to spend one moment to thank all my colleagues around the world, and I know many of them are listening to us. I'd like to thank you all for the great work you've done. The progress we've achieved here would not have been possible without your great effort and your commitment to this pipeline and making a difference to patients. I was last night in Cambridge celebrating some of our best scientists, and I can tell you we have an incredibly talented and motivated group of scientists in Cambridge, but also in other parts of the world. With this, I'll stop here and hand over to Mark. Thank you.
Thanks, Pascal. Good afternoon all of you. I'm really pleased to have an opportunity to spend a few moments talking to you about our growth platforms. If we turn to slide 11, we can get started. Our growth platforms have really continued to demonstrate overall growth and success in 2017, and that's despite challenges we faced with respiratory and the biannual price cuts in Japan. The combined revenue of our six growth platforms represent now two-thirds of total revenue, which is an important milestone. You can see that from the chart that we've got great momentum with BRILINTA, with emerging markets, and actually in 2016, emerging markets surpassed Europe in sales for the first time. Of course with new oncology. Very exciting milestone for us as we're now approaching GBP 1 billion on an annualized basis on sales from our new oncology products.
If we move to slide 12, what I want to say is I will just touch on briefly emerging markets and BRILINTA. What I want to do is spend most of the time together focusing on respiratory, diabetes, Japan, and new oncology, where I think maybe most of the questions would be. Slide 13. Starting first quickly on emerging markets. The key message here is we remain on track for our long-term growth objective of mid to high single digits. In fact, you can see from the chart here, we achieved that both in the fourth quarter and for the year in emerging markets. This strong performance in the fourth quarter was driven by our growth platforms, by BRILINTA, by FARXIGA, and by respiratory. We're also excited as we move into 2017 that in China we're looking at potential approvals for both TAGRISSO and FARXIGA.
If we could move to slide 14. Moving from emerging markets to respiratory, as Pascal alluded to, 2016 was a significantly challenging year for respiratory. Respiratory product sales declined 3% with the main driver of this being SYMBICORT. SYMBICORT, importantly to remember, continued to maintain volume share leadership in the ICS/LABA class. Product sales were down 10%, and this reflected challenges in both the U.S. and Europe, which I'll touch on in a moment. Outside of the U.S. and Europe, we saw strong growth in emerging markets and the established rest of the world. Let's talk about the U.S. for a minute. In the U.S., SYMBICORT product sales declined 18%, but we continued to drive volume growth. We saw significant pricing pressure on the ICS/LABA class from managed care, and there was also competition from outside the class, especially in COPD.
In regards to 2017, we expect the competitive pressure to moderate only slightly this year with pricing pressure being the strongest in the first half of the year. Moving to Europe, SYMBICORT product sales in Europe were down by 12% and we saw continued pressure from both analog competitors and branded competitors. Our business stabilized in Europe during the course of the year, and actually if you look at the overall EU respiratory business, in the fourth quarter we grew that business, which is very encouraging as we head into 2017. Wrapping up on emerging markets, delivered 10% growth in respiratory for SYMBICORT with China product sales up 32% in China.
In summary, despite the challenges, SYMBICORT continues to be the leader in the ICS/LABA class in terms of volume share, and we believe that this ability to continue to maintain leadership really bodes well for our new products, Bevespi and benralizumab, which will be our first biologics launch in respiratory. I'd also like to point out that we're really pleased that Pulmicort has returned to blockbuster status, and achieved $1 billion in sales for the second time in the life of this product. Obviously, this being driven by sales largely coming from emerging markets and in particular China. We also wanted to highlight that actually AstraZeneca is the number one company in respiratory in emerging markets based on our numbers. Slide 15. I just want to introduce to you Bevespi Aerosphere.
We're very excited that as of the first week in January, we have now launched Bevespi Aerosphere in the U.S., and the initial feedback from physicians is really encouraging, and happy to discuss that in the Q&A period. Importantly, we have really good market access for a newly launched product. This is the first and only LABA/LAMA in a pressurized metered dose inhaler, and it's the first medicine that's been approved with AstraZeneca and Pearl Therapeutics' unique co-suspension delivery technology, Aerosphere. There's no question the LAMA class is gaining momentum, supported by a growing body of evidence and evolving guidelines. Bevespi Aerosphere will differentiate on strong lung function improvement data, and we're going to be building familiarity with this device and technology as we prepare for future products, and in particular, our triple, the PT010, which could be here in 2019. Moving to slide 16.
In the year, diabetes sales grew by 11%, shifting to diabetes, despite the intense competition that I think you're all aware of. Importantly for us is that we've seen positive growth from all of our regions globally. We continue to focus on the fastest-growing classes, which is the SGLT2s and GLP-1s, as I think you all know. Let me just walk you through some of the key points in our success. Our diabetes product sales in the U.S. grew by 5%, despite the intense competition, and Europe showed strong growth of 15% in the year, driven by FARXIGA. Finally, emerging markets really impressed with a 25% growth across the franchise, again, driven by FARXIGA.
FARXIGA continued to lead the SGLT2 class with a 42% share globally in volume terms and is now the number one diabetes medicine at AstraZeneca with product sales of $835 million and 72% growth. I think the middle chart is an important one to look at, where you see the stability of FARXIGA's volume share even in the face of growing competition. Certainly having an $800 million product growing 72% in a year is very exciting. Importantly, we are starting to see some further strengthening of the SGLT2 class taking share from the DPP4, which is something we'll be heavily focusing on in 2017. In the U.S., FARXIGA outgrew the SGLT2 class. Product sales increased 75% in the year in the U.S., driven by improved market access. FARXIGA also delivered strong growth in Europe and emerging markets.
In summary on FARXIGA, we've got a brand that is rapidly moving towards the $1 billion mark, and along with BRILINTA, which I'll come to in a moment, will be two new blockbuster medicines for us in 2017. A word on BYDUREON. BYDUREON delivered a stable product sales performance in 2016, where modest volume growth was offset by price headwinds. We're really excited that we're going to be improving our offering for BYDUREON with a new device that is currently approaching submission to the regulatory authorities. We look forward to launching QTERN, or our saxa/dapa combination, fixed dose combination product, in Europe and the U.S. Actually, it's now available in the U.K., and as soon as we get approval in the rest of Europe and the U.S., we'll be launching that. Slide 17, please. Just a few words on Japan.
Japan product sales declined by 3%, driven by the mandated biannual price cuts. We had steady volume growth of about 2%. Our three biggest medicines, CRESTOR, NEXIUM, and SYMBICORT, continue to perform well. We did have on CRESTOR sales impacted by some inventory reductions at our local marketing partner. Those products continue to lead the way in their drug classes. The result of this is that AstraZeneca, if you look at the middle panel there, grew faster than the market again in 2016. We moved up in the rankings in Japan to sixth-largest company, up from eighth in 2015, and actually moved up from 12th in 2012. I think you can see the competitiveness and the capabilities and the impact that our Japan team is having.
This reflects the impact of obviously our lead primary care products, but importantly, the very successful launch of TAGRISSO in Japan. We launched TAGRISSO in May in Japan, and we now have over 3,000 patients in Japan treated with TAGRISSO. Product sales are growing rapidly, as you can see on the chart, totaling $82 million of sales in 2016. Importantly, a couple of other developments that really will help us in 2017, the treatment guidelines for non-small cell lung cancer in Japan were updated to support TAGRISSO use. In December, we had approval for the T790 blood-based test, which will help us drive further identification. Japan team has already done a fantastic job with the biopsy-based testing, as they have a 70% testing rate for patients that should be getting the test.
Getting the blood-based test will obviously further enhance the success we are having in Japan in getting this important medicine to the right patients. Slide 18, please. BRILINTA. BRILINTA delivered product sales of $839 million in the year and has also shown really great growth across all three regions as we head into 2017. We had 45% growth in the U.S. and 15% growth in Europe. Driving that success was changes in competitive labeling in the U.S., a significant increase in hospital discharge in Europe, and discharge share. Then we have been rolling out and launching the 60 milligram, and that will continue throughout 2017 as we get reimbursed for that new dose, reimbursement for the new dose. We are very optimistic about the future for BRILINTA for several reasons.
First of all, we do have strong clinical data in coronary artery disease that is getting more and more well appreciated by the cardiovascular community. The clinical guidelines have been changing steadily towards recognizing the value that BRILINTA offers CAD patients. Often now we're seeing that BRILINTA is in a preferred position. There is a growing body, and we will be adding to that, of real-world evidence that is reinforcing the results that we saw in our pivotal trials and the benefits that BRILINTA offers to patients with coronary artery disease. Reimbursement and access for BRILINTA is good and largely available across the world. Moving to slide number 19. Now turning, not last, but let's say in an excited way to new oncology. 2016 really has been an exciting year for us.
We saw that the new oncology global product sales, which are for us, we're talking about LYNPARZA and TAGRISSO globally, and also sales of IRESSA in the U.S. because IRESSA was just recently launched in 2015. Together, they were $664 million in the year. All of these products are based on companion diagnostic tests. This means that we're really going to be able to focus on getting the medicine to the right patient, where the most benefit will be gained. Focusing specifically on TAGRISSO, really had a strong uptake in the U.S., Europe, and Japan that I already referenced. Global product sales for TAGRISSO were $423 million, and we've got 46 regulatory approvals. The rollout of this product globally has been very rapid. Underlying U.S. growth slowed in the fourth quarter relative to the first few quarters in the U.S. for TAGRISSO.
This is because there was an existing pool of T790 patients that was waiting for this treatment. As those, we are now 12 months into that, some of those people will unfortunately be progressing, and obviously, we had that built-up demand as we launched the product. Testing rates in the U.S. are going to continue to grow. We are at about the 50% mark, and we are expecting approval. We will be leveraging the blood-based test to drive that further and the same in Europe. Globally, regarding the blood-based test, our partner is rolling this test out across the globe. That is going to support the higher testing rates everywhere.
Very exciting as the last point for TAGRISSO, Sean will cover this in a moment, we are looking forward to the approval in the U.S. of the AURA3 study, which has some very exciting data further demonstrating and confirming the huge patient benefit that TAGRISSO offers people with non-small cell lung cancer and have the T790 mutation. A couple of words on LYNPARZA, which has also had an exciting year. Full product sales were $218 million. Again, we saw growth throughout the year driven by higher testing rates and strong market penetration. In fact, in some markets, including the U.S., we are actually now close to or getting closer to really capturing all the patients that are part of the first indication for LYNPARZA, the later line ovarian cancer. I think we need to remember that LYNPARZA is the pioneer in PARP technology, in PARP inhibitors.
We are very committed to expanding and continuing to grow LYNPARZA. First, we have got the strong ovarian SOLO2 trial data that we will be leveraging going forward, and then we have got further label expansion trials outside of ovarian cancer. To conclude, overall, we feel we had solid performance across our growth platforms, and achieving the milestone of 63% of our total business coming from the growth platforms is really encouraging as we head forward. I think it is important to remember is that we are driving this growth, and we will be driving this growth and then adding on top of that, really an exciting pipeline that Pascal referenced and that now Sean will come up and give you a little bit more detail on. Thanks. Oh, sorry. Marc first, then Sean.
Thanks, Mark, and hello, everyone. I am going to spend the next few minutes to review the performance of 2016, and I will then move on to the guidance for 2017. If you want to turn to slide 21. In this first slide, we have the reported P&L performance for the year end and for the fourth quarter. While core EPS declined in the year, the 9% increase in reported EPS was mainly driven by a credit with respect to the Diabetes Alliance acquisition, reflecting a revaluation of the contingent consideration. Please turn to slide 22. Before we get to the core P&L, we have four core adjustments that I would like you to consider. About half of our restructuring costs in the year related to the streamlining of operations and reduction in cost announced in April last year.
We anticipate a full-year annualized net saving from this program of $1.1 billion in 2018, mostly within SG&A. The majority of the $1.3 billion of intangible assets amortization was related to the acquisition of MedImmune 10 years ago, as well as the legacy agreement with Merck regarding part of our U.S. business. As I mentioned a moment ago, you see a credit in the year with respect to the Diabetes Alliance acquisition, reflecting the revaluation of the contingent consideration. The $0.17 that you can see here is in fact the net amount between the intangible amortization and the adjustment of the contingent consideration. To remind you, the payment stream of royalties to BMS will expire in 2025. Finally, the $350 million of other adjustment partly reflects various legal provision as well as a discount unwind on the Acerta Pharma option liability.
We provide this information because we want to be as transparent as we can, by showing you the detail of this core adjustment, you can see the value in providing the core as well as the reported performance. If you can now turn to slide 23. If you look now closely at the core P&L, the total revenue decline of 5% in the year reflected an 8% fall in product sales, with the effect of losing exclusivity on CRESTOR in the United States, particularly impacting the performance in the second half of the year. External revenue increased by 59% to $1.7 billion, in line with the commitment I gave at the start of the year. Core gross profit declined by 6% in the year, excluding the impact of externalization. The core gross profit declined by 110 basis points to 82%.
In the fourth quarter, the core gross profit margin declined by 260 basis points to 79%, as we felt the full effect of the loss of CRESTOR. Core R&D cost grew by 5% in the year and was limited to a 2% increase for the fourth quarter. Core SG&A cost fell by 9% in the year and by a full 14% in the quarter. I will take you through the details in a moment. The majority of other operating income came through in the quarter as we continue to sharpen our focus on our key therapy areas. The core EPS performance was flattered by a non-recurring benefit of $0.36, resulting from agreement on transfer pricing between various tax authorities. This benefit help us deliver the core tax rate of 11%. For 2017, I expect a return to a tax rate between 16%-20%.
Please turn to Slide 24. As I've said many times, cost discipline is a key focus for the business, and we delivered some real achievement in the year. We did what we said we'd do, and we delivered our commitment and produced the results in line with guidance. This chart illustrates the good progress we have made in the R&D cost on the top of the slide, with a 5% increase in the year, reflecting the absorption of cost at ZS Pharma, as well as Acerta Pharma. This compared to a 21% increase in the previous year. Without ZS Pharma and Acerta Pharma, the core R&D cost would have been declining by 1% in the year.
I look now at the core SG&A cost, the 9% decline reflecting the new AstraZeneca, was driven by efficiency savings in sales and marketing operations, also further reduction in all general administration areas. These actions included a major reduction in the sales and head office structure in the U.S. marketing business. Core SG&A cost as a percentage of total revenue fell to 35.5%, a decline of one percentage point at CER and two points at actual rates. If we turn now to slide 25. This covers the R&D costs, you can see that our investment is stabilizing. In line with our commitment to sharpen our focus on our main therapy areas and increase our investment in oncology, we continue to fund the great science in our pipeline. In fact, we have doubled our absolute investment in oncology since 2013, reflecting the exciting opportunity that we have.
We anticipate maintaining the overall level of R&D investment, which leads us to anticipate a similar level of core R&D spend for 2017. Please turn to slide 26. To conclude, I want to confirm my guidance for 2017, which is at constant exchange rates. I expect a low to mid-single-digit percentage decline in total revenue, core EPS is anticipated to decline by low to mid-teens percentage. All of this is subject to our base case assumptions of the progression of the pipeline and the news flow that Sean will take you through in a moment. Variation in performance between quarters can be expected to continue, with year-on-year comparison expected to ease in the second half as we begin to annualize the impact from CRESTOR. Outside of guidance, the total of external revenue and other operating income is expected to be ahead of that in 2016.
Sustainable and ongoing income is expected to increase as a proportion of external revenue in 2017 and beyond. As I mentioned a moment ago, we anticipate core R&D costs to be broadly in line with 2016, we plan to make further reduction in the core SG&A cost. Finally, I want to reconfirm our capital allocation priorities. These are unchanged. We will continue to strike a balance between the interests of 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, we'll keep under review any potential investment in value-enhancing and immediately earning accretive opportunities. Thank you for listening, I will now hand over to Sean.
Thank you, Marc, thank you all for joining us both here and online. It's a great pleasure to be able to share with you our encouraging progress since our last update. I would like to emphasize that we're very confident in the molecules, and the medicines, and the trials underlying our pipeline, and very enthusiastic about what this year has to bring, as was evidenced by the fact that Mark Mallon wanted to forgo Marc Dunoyer's time to do the financial results presentation of the year-end results and give that to me. I appreciate that. If we could go on to slide 28, please. This slide shows you, looking back at Q4 in 2016, our main pipeline highlights from the therapy areas that we focus on. I would like to start with oncology.
Obviously, we're very proud of the U.S. regulatory submission acceptance of durvalumab in bladder cancer. This is the first ever BLA application for AstraZeneca. FDA, as we had announced, did award it a priority review designation, so we expect a regulatory decision on durvalumab in bladder cancer in Q2 of this year. As Pascal alluded to, the work that people are doing within the company, the time from data availability to filing was absolutely heroic in this case. I too would like to thank all of the people who dedicate themselves to bringing our medicines to patients. We also have U.S. and EU regulatory submission acceptances for TAGRISSO on AURA3. I'll spend a moment on AURA3. We showed that data in December. I'll spend a moment on that data coming up. That also received a priority review designation from the U.S. FDA.
We had regulatory submission acceptances for FASLODEX in the U.S. and EU. That in first-line breast cancer. In CVMD, we had the DURATION-7 trial that Pascal met. It met its primary endpoint, showing glucose lowering. In this case, that is BYDUREON plus basal insulin versus basal insulin alone and showing a reduction in hemoglobin A1c. That follows on to the positive DURATION-8 data that we shared earlier in the year. The publication of that came out in "The Lancet" in December. That showed the effects of BYDUREON plus FARXIGA similarly on hemoglobin A1c lowering, and also if you look at that publication, some interesting impact on body weight and decreased body weight. FibroGen initiated the rolling regulatory submission for our anemia medicine, roxadustat, in China. In the respiratory portfolio, SYMBICORT was approved in younger patients, those between 12 and 18 years of age.
As has been mentioned, benralizumab, our second BLA, the submission was accepted in the United States and in the EU for severe uncontrolled asthma. The alliance with Lilly in Alzheimer's disease was expanded beyond our current phase III collaboration of the BACE inhibitor to include an amyloid beta monoclonal antibody. If we can go on to slide 29, please. We have also, in recent times with all of this data, been highly visible at conferences and congresses, and we're highlighting some of those here at the American Society of Hematology. acalabrutinib data was shared from ASH in two interesting patient populations, patients with CLL who are ibrutinib intolerant and also those who have a Richter's transformation, whose CLL turns into aggressive lymphoma. At the San Antonio Breast Cancer Symposium, we shared the data from the FALCON trial of FASLODEX in the first line setting in breast cancer.
This is what enabled the filings that I mentioned. At the World Conference on Lung Cancer, we shared the durvalumab data from the ATLANTIC trial also highlighted TAGRISSO's AURA3 data in second-line EGFR-mutated lung cancer with the T790M resistance mutation after having received the first generation EGFR inhibitors. Let's go to slide 30, please. This is that data. It's, I think, very exciting and quite extraordinary. What we have here is a Kaplan-Meier curve of progression-free survival. You'll see here that the median progression-free survival here was 10.1 months with TAGRISSO versus 4.4 months with chemotherapy, which is the current standard of care for EGFR-mutated patients who progress after an EGFR inhibitor. The hazard ratio here is quite remarkable at 0.3 and obviously statistically significant as well.
The other thing I think that's fascinating about TAGRISSO and was shared there is we did not exclude CNS patients from this trial. Mid-30s, about 34% of patients had CNS disease brain metastases on entry to the trial. Interestingly, that's usually a poor prognostic factor, I should add. Their progression-free survival hazard ratio was 0.32, very comparable to the patient population as a whole. This property of TAGRISSO to be able to penetrate the blood-brain barrier, which, by the way, the first-generation EGFR inhibitors are not able to do, is continuing to be studied in the ongoing BLOOM trial. Let's go on to slide 31, please. Moving on to a topic that I think is probably near and dear to all your hearts, which is the immuno-oncology portfolio. This is an overview of our lung cancer program.
Both ongoing program you will know quite a bit about and some recent changes and additions we've made. Obviously, we have multiple trials in earlier line lung cancer. This remains an unmet need, a terrible disease, and a reasonably common cancer. The PACIFIC and the MYSTIC trials are fully recruited. As we've communicated, we expect top-line results for progression-free survival this year. We've also communicated that the MYSTIC trial analysis plan was updated. Many of you will know, when initially started, MYSTIC was designed with progression-free survival as the only primary endpoint. Last year, around this time, we changed the trial to elevate overall survival to a co-primary endpoint, that was done because emerging evidence indicates that overall survival better captures the benefit given patients by immunotherapy for cancer.
In order to do that and maintain the power of the trial, we increased the size of the trial from 700 to about 1,100 patients, and were able to nonetheless, with that increase, enroll quite quickly. That allows us to be confident in the power of the trial to detect clinically meaningful differences in these different endpoints. MYSTIC will now assess progression-free survival and overall survival in patients with PD-L1-expressing tumors with the opportunity to then look at both durvalumab monotherapy and durvalumab, tremelimumab combination therapy. Then it will also look as well in all comers for the combination of durva plus tremi, recognizing that in the low expressers of PD-L1, the monotherapy has limited activity. This is, of course, versus the standard of care chemotherapy, so that this trial can stand on its own as a registrational trial for full approval in the first line.
The progression-free survival, as many will know, will be available in mid-2017 with the final overall survival data coming at the latest next year. We have been asked about interim analyses. We do have interim analyses in the trial. We don't disclose the detail of those, but those are for overall survival. Another change we made was to NEPTUNE. NEPTUNE is durva plus tremi versus standard of care chemotherapy. We expanded with local patients in China to get more experience in China with the durva/tremi combo. That expansion will not delay the availability of the survival data in 2018 at the latest for the global portion of the trial. Then we started an additional trial in Asia, a phase III trial called PEARL. PEARL is a durvalumab monotherapy trial versus, again, standard of care chemotherapy, and this in PD-L1 expressing non-small cell lung cancer.
What we've done with this is we've really enhanced our options and followed the scientific data, both for our primary strategy, which was the durva/tremi combination and the durva/tremi combination, particularly in lower non-expressers of PD-L1. Also enhanced options in the more established therapeutic hypothesis, which is durvalumab or PD-1/PD-L1 monotherapy in PD-L1-expressing tumors. Can we then go on to slide 32? Okay. This again is the data readout slide for the IO program. Not just in lung cancer, lung cancer is at the bottom, but across bladder cancer and head and neck cancer as well. Clearly we have a busy year, 18 months going on here. We expect ARCTIC data in the first half of 2017. MYSTIC PFS data, as I mentioned, mid-year. PACIFIC in the second half of this year. Head and neck results from KESTREL in the second half of the year.
KESTREL, again, is the first-line head and neck cancer. First-line bladder cancer, DANUBE, and second-line head and neck cancer, EAGLE, to come later in 2018. As I mentioned just a moment ago, NEPTUNE in first-line lung cancer with the durva/tremi combo in 2018. Next slide, please. All right. This lists across the portfolio the late-stage pipeline news flow we expect this year and going into next year. Obviously, we have quite an abundance of regulatory decisions, regulatory submissions, and key data readouts that we are expecting in this time. To highlight some of them, as I said, we expect the regulatory decision for durvalumab in bladder cancer by end of Q2 this year. For TAGRISSO, we expect data readout based on FLAURA in the second half of 2017.
FLAURA would move TAGRISSO into the first-line EGFR mutated population, and that's versus IRESSA, the existing standard of care. The number of regulatory submissions here is extraordinary, there is a lot of excitement around this and a lot of work to be done. In 2017, we anticipate data permitting immuno-oncology submissions in lung cancer and, again, as I said, the first-line data for TAGRISSO based on FLAURA. Submissions for LYNPARZA in ovarian cancer based on the SOLO2 data and as well, depending upon the readout from OlympiAD in breast cancer. We have the potential for a fast market submission in a blood cancer for acalabrutinib. With regard to LYNPARZA and that SOLO2 data, we've done a top-line announcement that the trial was positive.
We are going to present that data for everyone to look at the details at the Society of Gynecologic Oncology, which is an annual meeting on women's cancers, and that will be in March of this year. We are really looking forward to being able to share that with you because I know you have questions about PARP inhibition and about where does LYNPARZA fit in, and I think that being able to talk about the data in detail is going to help clarify that. In the other key therapeutic areas in CVMD, we expect the BYDUREON auto-injector submission in the first half of this year. With benralizumab, we expect the U.S. regulatory decision based on the submission that we already talked about in the second half of this year for severe uncontrolled asthma. It's busy, and it's an exciting time for us.
We are confident that we have the right trials, the right trial designs, and excellent drugs to make a difference to patients and to continue to grow the new AstraZeneca. With that, I will hand back to Pascal for closing remarks.
Thank you, Sean. Let me just say a few words of conclusion before we open for Q&A. If I can have the last slide, please. The messages I want to leave you with today are, number 1, our financials are on track, and we met our guidance for the year. Number 2, we have 12 new potential medicines in phase III and under registration. A very strong pipeline that is starting to deliver. Importantly, beyond the pipeline, we also have tremendous commercial organization around the world and, in particular, in the emerging markets, we have a business that has been steadily growing. We have delivered consistent mid to high single-digit growth rate, in fact, sometimes double-digit growth rate overall. In China, in particular, we have consistently delivered double-digit growth rate and outpaced the market growth rate. We've made faster progress in oncology for obvious reasons.
We have, of course, great medicines, but also, as you all know, you can develop products in oncology faster than in some other therapy areas. TAGRISSO has been a great launch so far and is continuing to do very well, and we have great data to support further growth this year. The immuno-oncology programs, of course, are making progress, and this year is going to be an important year for immuno-oncology portfolio. Over the next 12 months, we have a very busy news flow. At the end of the day, net is we're really getting to an inflection point here as we end this patent cliff, which often has been a little bit exhausting for our teams around the world. We're getting to the end of the patent cliff. The pipeline is starting to deliver, and we see the new AstraZeneca emerge.
We have another year or year and a half of managing the end of this patent cliff and launching these new products. In many ways, the R&D organization, as I said a minute ago, has done a fantastic job, and now they are passing the baton to the commercial organization around the world who have been playing defense in many respects over the last few years, defending very successfully our old products, retooling, building capabilities in diabetes, in respiratory disease. We're building that. Importantly, building capabilities in oncology, refocusing ourselves, relaunching BRILINTA, trying to grow our diabetes business, and doing this in the context of a declining SG&A as we are managing our declining top line. Now they are redeploying themselves to preparing the new launches. I have no doubt they're going to do a great job.
They've started doing a great job already with TAGRISSO and other products. There's a lot more coming for them. The next 12-18 months suddenly are going to become suddenly quite exciting for the commercial organization. As you can imagine, launching new products is suddenly more energizing than playing defense as we have been doing for a period of time. With this, I'll stop here and open the floor for questions. Bear with me. Sorry, go ahead. Just stay on then, Sachin. We're just going order on this row. Is that okay?
Thank you. It's Matthew Weston from Credit Suisse. Can I ask three, please? The first on durva, tremi, and MYSTIC, Sean, it is fitting that we start there. There's been a lot of debate since you changed the endpoints as to whether or not the combination arm needs to show superiority to durva mono in order for the trial to be fileable. I think we'd all just love your views on that in terms of how you see the filing strategy and absolutely what's necessary. Secondly, Mark, on the numbers. You gave us a trend for what we should expect for R&D over the course of 2017, you didn't really give us clarity on SG&A. If you could give us some indication as to where those levels are going to settle down, the incremental savings possible in 2017, I think that would be very helpful.
Pascal, a big picture question. I think you set out the pipeline, all the extremely exciting opportunities of the company. Clearly what we have seen in recent months is that a number of members of the executive team have been attracted away from the company. I would very much welcome your views as to why that is and whether that impacts your ability to deliver commercially and on the pipeline going into 2017 and in the midterm.
Shall we start with the d+t question, Sean? Go ahead.
Sure. Thank you for the question. For the trial to be positive, durva mono or durva tremi combo has to be standard of care chemotherapy. Okay? That will enable filing. The question of durva mono versus the combo is a little more nuanced in that it will be a benefit risk assessment. We are quite confident based on data that there will be more toxicity of the combination, in particular autoimmune toxicities common with IO. It will have to have a benefit above durva mono in order for the combo to be fileable, and that benefit would have to offset in our assessment, the assessment of regulators any toxicity that's seen. It'll be data dependent in that way. It does not have to beat durva mono for durva mono to be fileable. I talked a little bit about it before.
Our original hypothesis was that what durva tremi combo would bring us is an opportunity to bring IO therapy to patients who weren't benefiting it, that being PD-L1 low and non-expressers. I think as data has emerged in the field, the question of whether durva tremi combo might also bring benefit to PD-L1 high expressers is a question that is out there. We've enabled the trial to look at those populations, and we'll have to wait and see what the data says. Does that answer your question? Good.
Just a comment on the question on SG&A for 2017. When we were one year ago in early 2016, we indicated a material reduction on the SG&A line and we in fact delivered 9%. I would say we delivered probably a bit more than what we had expected. We are continuing our effort on SG&A cost reduction, and you can anticipate another reduction in 2017. I'm not going to quantify the reduction, but it's going to be another reduction for the year. Okay, Matt, thanks for the last question. Let me just cover this question about talent movement. First of all, I don't know how far you go when you say over the last few months. In the recent few months, two of our senior leaders have moved on, and I have to say they've moved to fantastic jobs, both of them.
It makes me very proud that they actually could get such great jobs. It's a reflection that many ways that we have a very deep talent bench at AstraZeneca, and we have people who are able to take those jobs. I know that some people have said, "Well, do they know something that we don't know? Does it mean the pipeline is not working out?" I know some of you will be at the breakfast meeting tomorrow that we've organized, and Mondher, in particular, will be there, so it's kind of a farewell party for him. Mondher has been a great friend of mine for the last 15 years. Actually, he's recruited by the person who recommended him to me 15 years ago. It's kind of almost a family affair. You can ask him questions about what he believes of the pipeline.
Net is they've really been able to grow. That's one thing I would say. The second is, we have a very deep talent pool at AstraZeneca, and we have other people who will grow and take advantage of these opportunities. Jamie Freedman, who is replacing Mondher, and you will meet him tomorrow, was at MedImmune for the last four or five years. Before that, at Merck and GSK. He's an incredibly talented oncologist who has already started making a big impact on our oncology business. This is a good example of someone who emerges out of our organization. Maybe the last point I would make is that you really have to look at the people who leave and the people who come.
If you look at the people who've left over the last few months, you also have to look at the people who've joined us over the last few months. The first one is sitting there, our CMO, and he's made a tremendous impact on our oncology business and our pipeline overall. It's really been great to have Sean join us. Some of you have met David Berman at MedImmune, a fantastic scientist leading our oncology business at MedImmune and many others at MedImmune and AstraZeneca across the board. For me, it is actually part of the industry. It's part of the business we are in. People come, they go. Hopefully, you can offer them opportunities within AstraZeneca or within your company. Sometimes someone else comes around and offer them a job that we're not able to offer them because that's structurally an option we don't have.
It's really certainly very pleasing to see some of our peers in the industry feel the need to come and recruit some of our talent for jobs they have to fill. That's all I would say about this. Ask Mondher tomorrow what he thinks of the pipeline and whether he's lost confidence in it or not. Sachin.
Sachin Jain, Bank of America. Sorry about that. Sachin Jain, Bank of America. A few questions, please. Firstly, for Marc. You haven't given product sales guidance, but I guess it's implied lower than consensus given the higher one-off expectations versus consensus. Just two related questions. Any color on how you're thinking about product sales growth for 2017? I guess more importantly, how much of the delta versus consensus is a weaker base business versus lost sales that you're externalizing? Second question, still on the one-offs. You've commented on one-offs for this year being in a similar level to 2016, which was GBP 3.5 billion. That's GBP 3.5 and GBP 3.5, getting it to seven. If I remember rightly, the discussion at this time last year was roughly GBP 2 billion for both years, which are obviously substantially higher.
Is that front loading of what you'd planned over the midterm, or do we expect this high level to continue? The final question is for Sean, on MYSTIC. I'm sure you're expecting this. You saw, I think Pascal referenced in his introductory comments, confidence in the combination despite external factors. I wonder if you could address what we've seen from BMS more directly and your perspectives on the delay to filing and their less than effusive commentary on the combination in first line. I guess the background to this is you have a lot more data phase I than we've seen from Study 006. Is there any chance of us seeing Study 006 prior to MYSTIC? Thanks.
Thanks, Sachin. Let me, before Marc and Sean address your questions, let me just say a bit earlier when I said we are confident. We run the studies because we don't know the answer. Of course, we run MYSTIC to have the answer to whether a combination works better than monotherapy. I'm not confident to the extent I know what the results of MYSTIC will be. What I meant to say is that there's nothing new that we have seen that would change our level of confidence. In fact, our data are not really changing any of our previous views. Sean will cover this, but the BMS development is to a great extent, something we were expecting for reasons Sean will be explaining in a minute. Maybe we should start with the financial questions, Marc.
First of all, on the guidance for product sales, we do not provide guidance for product sales, but we do provide a guidance on the total revenues, and I have explained this to you earlier on. Regarding your second question, which is part of the total revenue because it contains externalization revenue. The guidance I gave one year ago was that it would be an increase of externalized revenue and other income versus the level of 2015. The total of external revenue and other income in 2015 was GBP 2.5 billion. I do not remember giving you a guidance for 2 years in a row at GBP 2 billion. If I did, I will have misspoken, but if you could look at it.
What I can confirm today that we have given you a trend for an increase of external revenue and other income for 2016, and you have now quoted the number GBP 3.4 billion, GBP 3.5 billion. We are going to have a greater amount in the year 2017. Greater than GBP 3.4 billion, GBP 3.5 billion.
Thanks, Marc. Sean, do you want to cover the other question?
Yeah. Sachin, thanks. Thanks for the questions. I'm going to start with the BMS combo question, if we read through to MYSTIC and durvalumab combo. We were asked, and I talked to some of you around Q3, about BMS's announcement around this approach. At that time, prior to hearing anything else, we said we thought it was a very low probability of regulatory success. The reasons that we felt that was, when you file on a single arm trial, you really have to demonstrate an extraordinary treatment effect over the standard of care. If the standard of care is really ineffective, then not much data can actually indicate you have more activity than it. When you move into the first line of non-small cell lung cancer, the standard of care is doublet chemotherapy, which has a demonstrated PFS and OS benefit.
Doesn't cure the disease. It's still an unmet need. To get single arm data that gives regulators confidence that they should put your medicine out there is a big bar. That's why we thought that. The other reason we thought that is we've discussed many, many times is we believe that overall response rate, which is primarily the data you will have, underestimates the treatment benefit of IO therapy and of course IOIO. Again, that's primarily what you'd be relying on. That combination of things made us at that time believe it was unlikely. We've heard it's not happening. It doesn't change anything for us, in terms of that. I want to reiterate what Pascal said. If we knew the outcome of MYSTIC, we wouldn't have to do it.
What we're confident in is the power, the design, the analysis plan, and that as the field has moved, we've incorporated what is known as well as we possibly can into that plan. 006. Prior to MYSTIC, we did expand 006. We expanded 006 with second-line patients. We added some first-line patients. 006 enrollment of that expansion was completed late last year. We do what all companies do, which is as a deadline for a submission for an abstract comes up. Since a non-blinded study, we take a look at it and we ask, is it mature enough to be a meaningful presentation? Our conclusion for 006 for ASCO was no. It's not mature enough to be a meaningful presentation. We will look again and aim for meetings later in the year to see if we're ready to present.
Sachin, I'm sure you'll remember very well that if you're looking for accelerated approval on the basis of a single-arm study, you have to be the standard of care, not only with the median, but also the lower end of your confidence interval has to be higher than the upper bound of the confidence interval of the standard of care. That brings the bar very, very high. That's why we always doubted that a single-arm combination study would be able to deliver an accelerated approval. It seems to have borne out as we expected, but that's all we can say at this stage, yeah.
Hi, Richard Parkes from Deutsche Bank. I've just got three questions as well, and one just to be more sort of specific on MYSTIC. I think people's sort of nervousness around BMS' decisions, not just on their decision not to file early, but also just their overall confidence in the approach seems to have reduced from where it was a few months ago. I just wondered if you could reassure investors that the response rate you're seeing from the Study 006 coming through is consistent with the 35% response rate you saw from that initial cohort. That's the first question. A couple of financial ones. The gross margin. I remember in the third quarter you were highlighting that you had a broadly stable gross margin despite impact from CRESTOR, and I think you'd pretty much absorbed the full impact there.
I think the reason given was the shift towards more sort of specialty care. Now in the fourth quarter, you've had a 200 basis point negative impact. I'm just wondering what changed there. The final question, looking out to 2018. Given that the base in 2017 the sort of externalization of their income is now a pretty big proportion, which I'm assuming won't be sustainable at that level. Should we be thinking about a return to top-line growth in 2018, but the earnings growth not materializing until 2019?
Should we start with the gross margin finance questions, Marc, and then Sean can cover MYSTIC and Study 006.
Okay. I think the impact of CRESTOR is real. Over time it's going to disappear, and the transition to a more specialty care type of portfolio is going to compensate for it. On the last quarter of the year 2016 and for the year 2017, the reduction of gross margin will be felt. The gross margin in 2017 will be lower than what we see for the year 2016. That's clear. Maybe in the third quarter, the impact of CRESTOR was not that high if you total the three quarters, as we see the fourth quarter, there was a difference in the percentage of gross margin, and we have reported on the report. There was on the fourth quarter, 260 basis points on the fourth quarter alone at CER and 130 basis points at actual rates.
We are in a way helped a little bit by the depreciation of the sterling pound and other similar currencies.
2018, Marc?
For 2018?
2018, yeah.
I think the gross margin is going to be lower in 2017 than in 2016. For 2018, I think we should have a very similar gross margin.
The question, sorry to interrupt. The question was external revenue and overall.
We're not going to provide guidance today for 2018.
Wait till you read.
We gave you as much as we could. I mean, a lot of details about 17 different lines of our P&L, an indication on the total of external revenue and other income. I think I'm going to stop there. I think I can't provide you any more detail for 2018.
Yeah.
I can certainly say that the return to growth is imminent and it could happen in the course of the end of 2017 or early 2018.
You would also, Richard, you also, I'm sure, appreciate the fact that this will be very much influenced by the mix in the portfolio, right? As a result, be influenced by the clinical news flow and what comes out. You got so many new clinical data coming out over the next 12 months that will influence the product mix of 2018, and therefore the speed at which we grow, but also the gross margin and our profitability. I really think that to be able to be more specific on 2018, we need to have a better understanding of what the portfolio will look like, actually. Sean?
With regard to update on Study 006 data, it's really the same as the answer to Sachin's question, which is when the data is at a place where it's a meaningful publication, we will submit it and we'll update, but we don't do it at an analyst meeting. As I said, our confidence in MYSTIC is unchanged. It's a good point. The durva/tremi therapeutic hypothesis is not yet proven in first-line or second-line non-small cell lung cancer. It is an experiment, but we believe we're doing the right experiment, and the trial is well-designed. You also asked about, I would say, I think Pascal said it, our enthusiasm for the trial just really hasn't changed. The BMS announcement, part of what you're asking is what did BMS see?
I don't know any more than you do about what BMS saw, I can't say whether their change in tone is reflecting something in the data that if we knew it would reflect our bias. I'm sorry, I just can't answer that question. I will say that, as I said, it was our assumption that that accelerated approval path wouldn't work. To now have confirmation that it's not working, again, doesn't change our confidence because that's what we thought was going to happen anyway.
One of the things that we also learned, not us as a company, but as an industry, I believe is over the last maybe 12, 18 months, is that overall survival is really the end game in immuno-oncology. The other thing that we have more recently reconfirmed that what happened to BMS is really it's not necessarily the best thing to do to kind of look at your data every week or month or something, and then publish things because then you have a lot of volatility in what you publish. Our approach is we want to get to a stage where we have a sufficient number of patients, maturity in the data, overall survival data, and then publish that. That would be probably second half of this year at the earliest congress, we can actually publish that.
We really want to get a mature data set and then share that at that point, as opposed to kind of sharing data and doing that too often. The basis of the adjustment of the plans around MYSTIC was our own internal data, but also the external data. As we always said, we would look at pembro, nivo data presented at ESMO. We would look at our own data, and then based on that, inform the final statistical analysis of MYSTIC, essentially looking at OS as a critical endpoint, but also looking at a cutoff point. That's basically what we've done. Another question in the room, and maybe we'll go online for one or two questions.
Nicolas Guyon=Gellin, Morgan Stanley. Three MYSTIC-related questions, I'm afraid. All for Sean. The first one is around the recent changes. I noted a slight change in the wording of the press release, where you now refer to PD-L1 expressing tumors rather than positive or high expressers. Does that influence your thinking about PD-L1 expression and/or your cutoff in any way? Second, with regards to the readouts and the timelines, the first patient dosed in MYSTIC was in Q3 2015, and the last patient commenced dosing in early Q3 2016, which means that you have a minimum of follow-up of at least 12 months, up to 24. Basic average, assuming straight line recruitment, 18 months. This is much more than what Merck had in KEYNOTE-024, in which they demonstrated overall survival.
Are we missing something, or basically what precludes you from showing OS data as early as mid 2017? The final one is with regards to the dosing regimen of the CTLA-4. Just conceptually, I would like to hear your thoughts on the two different approaches, the one of BMS and your approach. As far as I understand, you will dose tremi only for four cycles, whereas BMS may dose until progression. What are the pros and cons? Thank you.
It's a great question. Sean?
Yeah. Somebody I'm sure has a non-MYSTIC question, but maybe we'll get to that.
I've noted them for you. The first one, PD-L1 expression.
Let me try and take them backwards, and then I'll make you remind me of the first one. The question about the overall survival endpoint and maturity, these are event-driven analyses and what we share with you is when the final analysis will be done, we think. Because if the event rate is slower or faster than we forecast, then the trial matures at a different rate and overall survival will be mature in 2018. As we get closer, we'll be able to narrow it down to a quarter. As always with these trials, there are IDMCs, there are interim analyses, and we just don't share timing for that. PFS is mid-year. We're getting close enough that we can say that. And for overall survival, we're still giving a big range.
Can I just add to that actually-
Yeah
Sean, if I may? Is that in terms of the level of maturity that you're referring to, just keep in mind that, or maybe we didn't communicate that clear enough before, is that we increased the size of MYSTIC, as Sean explained.
Yeah.
We had a team that did a fantastic job, accelerated the recruitment. The end result of this was that the recruitment accelerated toward the end of the trial, and the last proportion of the patients were recruited in the last two, three months of the trial. I can't exactly remember the percentages. You may have them, or maybe we don't want to communicate them. I don't know, Sean, it's up to you, really. A lot of those patients were recruited in sort of June, July, August, and therefore, we don't have as much follow-up as you may think we have. Certainly, there will be quite a number of patients who will have a reasonable follow-up by mid-June this year, for sure.
Yeah. It's well more than half are in the shorter follow-up period just because of the shape of the recruitment curve. Cutoffs. Yes. You definitely caught a change in the wording, and it does have to do with how we've informed our definition of PD-L1 positive in the trial and enabled the analysis plan to look at that population. Again, both for durva monotherapy and for durva plus tremi combination. We aren't communicating more details around that. Obviously, very competitive landscape. For us, it's important that we keep some of these things to ourselves until we're ready to share information with you from the trial. What was the first one?
Dosing of CTLA-4.
Oh, yeah.
Four cycles versus two.
If you look at the biology of CTLA-4 versus PD-1, PD-L1 as a checkpoint inhibitor, it's a little bit of the PD-1, PD-L1 pressing on the gas and CTLA-4 being a brake. It is our belief from preclinical data and the mechanism of action of CTLA-4 that once you have removed that suppressive signal, that you should, over the months that you would have CTLA-4 inhibition, you should allow the stimulation of the immune system as necessary to fight the cancer if it's going to be able to. Once they're activated, they aren't subject to CTLA-4 suppression anymore. That's the basis for that. It's a small data set, but if you look at what's probably the best pharmacodynamic marker of immunotherapy activity is actually autoimmune toxicity. If you look at the two regimens, they actually look quite similar.
The one that BMS finished with, not the one they started with, because they started with a much higher dose of CTLA-4 with much more toxicity. If you go to the interval and dose they finished with, the autoimmune AEs look quite similar.
Good. Maybe before we come back to the room, we'll take one question online. Seamus Fernandez at Leerink. Seamus, go ahead. Yes, go ahead. Thank you so much. The first two questions, Sean, they're for you, and I'm sure you'll enjoy the first one because you love TAGRISSO, and there's so much focus on MYSTIC these days that this little child called TAGRISSO, which has a very promising future, tends to be overlooked a little bit. Go ahead.
Well, thank you for the question. I love the introduction to it because I am very enthusiastic about FLAURA. I'm going to get Mark Mallon's help with this too, because there was a question about what's the threshold with regard to payers and access to the market. First of all, I'll just talk about the trial a little bit. As I mentioned, frontline EGFR mutated IRESSA versus TAGRISSO. The things I'll mention, there are a few things we're going to look at there that can really distinguish. Obviously, progression-free survival, we need to show that TAGRISSO is better and that it has greater activity. We have a couple things that lead us to think that that's a possibility. One, as I mentioned, is the CNS penetration, the ability to cross the blood-brain barrier.
We know that in the range of 40% of patients when they progress on a first generation TKI for EGFR progress in the central nervous system, and those first generation medicines just don't penetrate, so they're not being treated there. That's one opportunity. Second one is the obvious thing. It was designed to suppress a T790M mutation, which is the most common mutation that leads to resistance of the first generation EGFR inhibitors, and this suppresses that. Those are the opportunities. In terms of difference in how it relates to the market and payer.
Yeah, I would just say a couple of comments. I think, you probably won't be satisfied with this, it's variable, right? Because the actual first-line treatment of lung cancer is quite variable across the world, right? You're going to have, if you're in a health technology assessment market, there will be high expectations about the progression-free survival. They're going to be really challenging in getting out into the details of what the economic implications of that are. That will be probably a higher bar than, say, something in the U.S. where they're really primarily focused on is this really extending progression a reasonable amount for patients. Therefore, that will be a driver. Then, of course, outside of the U.S. and Europe, where you have a lot of this is in out-of-pocket markets.
Some cases you're talking, there are markets where chemo is still the primary first-line treatment. It's not even the TKIs. I wouldn't rule those out as good opportunities for FLAURA because people may say, "Why to go to this interim step? Let me jump to the better therapy if I'm going to be paying out of pocket." We're going to have to work on this in a case, let's say a healthcare system by healthcare system model, assuming once we see the data. That's the mindset or the framework we're going to have to think about this.
The only thing I would add is that, as Mark said, it will be variable, and as Sean said, it will depend on the strengths of the data. There's one place, one type of patients who where I really do believe it would be hard to not prescribe TAGRISSO in an EGFR mutation situation, even without the T790M mutation, and that's the first-line patient who has brain metastasis. Think about that patient. You have an EGFR mutated lung cancer, and you have brain metastasis. What are you going to do? A first-generation EGFR do not penetrate the blood-brain barrier. I just had recently the example, a friend of my wife had this, and then her lung disease was controlled, and she progressed in the brain very rapidly. This is a type of patient who actually will need TAGRISSO.
Beyond this group of patients, the question is, of course, will be what is the strength of the clinical data coming out of FLAURA. ARCTIC, Sean, do you want to cover that?
Sure. The question was ARCTIC results being material, I believe. Unfortunately, the materiality assessment is made in the context of looking at the result of the trial and what would its implications be for the company, do we think that that would move the share price, a variety of things that we talk about. We can't talk about it except in the context of the data, that's a determination that's really a question I think that we can't answer at this point.
SG&A, Mark, you want to cover that?
I think in 2016, I gave you the percentage of the SG&A ratio of 35.5%, and I also mentioned that we were going to continue our effort to reduce the SG&A cost. I think one can surmise that the ratio will continue to go down. Maybe not at the same speed as it has gone down in 2016, where in actual terms, the percentage decrease was about 2%. I think there will be a further reduction, but maybe not as fast as what we saw in 2016. I think on a medium and long term, I think this percentage is going to reduce over time.
The only thing I would add to this is that I would not use the industry as a benchmark because in the industry you have all sorts of companies with different portfolios. The benchmark we tend to use is made of companies that have a more similar portfolio to ours, and those are companies like Lilly and some others. It still is that we have potential for decrease of our SG&A ratio. There's no question about it. You got to keep in mind that we have quite a unique position in the emerging markets, and we have been driving this pretty hard, in particular in China. In China, we are now getting to a stage where we have a totally unique position. We have representation across the entire value chain. We are number 2. We have 12,000 people. We had 6,000 people three, four years ago.
We have established ourselves in a place that is quite unique for the future. Of course, it's required investment. Keep all of these points in mind, and we'll continue reducing SG&A, both in value and as a percentage of revenue. Again, maybe that's not a satisfactory response, but the speed at which we can evolve that will very much depend on the portfolio mix we have by next year, essentially. Again, it takes us back to the clinical news flow this year. What are the projects that work? I would love to believe everything's going to work, but some things will work better than others, as always. Depending on what we have in our hands, we'll be able to allocate our resources and shift, and move the SG&A ratio at a different speed. Should we go back to the room?
Yeah, there was a question here, and then we'll go to Kaya.
Okay. Jack Scannell, UBS. I've got two questions. One is around the diabetes market in the U.S. You implied that the GLP-1 market is having modest negative pricing. In some ways, it looks like a pretty competitive market, right? There's aggressive contracting already, formulary management, a number of players. Other insulin segments would love to have mildly negative pricing, which implies, in some ways, the pricing power that you've been able to maintain in the GLP-1 segment is better than, for example, the insulin players see. Is there something structural about the GLP-1 segment that makes it different, and do you expect that to continue? That's the first question. The second question is around Alzheimer's. Our view is that U.S. payers have got, in the last few years, very good at stamping on drugs with high budget impact, even if they might save money in the long run.
That is because in the long run, generally someone else insures the patient, right? It's hard for them to take a long-term view. Do you think that matters for assessing the commercial prospects of Alzheimer's projects? If so, how do you handicap that in your thinking when you're thinking about whether to engage in Alzheimer's or not?
Mark, do you want to cover those two questions, starting with diabetes versus GLP-1?
Yes. In terms of the class, I think there's a number of differences between the injectable business and GLP-1 and oral business, right? You can think about, obviously, the severity of the patients. As physicians thinking about how readily they are willing to switch therapies. Certainly even just the mix of the business, it can be a bit different between, say, the Medicare Part D versus commercial, there are different pricing pressures there. Also really there's some overlap with competitors, but there's some different ones, and they have different approaches. I think overall in diabetes, we're going to have to deal with pricing pressure. It's going to continue to increase. Right now, this is part of the reason we're staying interested and focused in both, because we want to see how this continues to evolve.
Right now, we feel very confident with what we've got with FARXIGA, we're able to drive very significant growth and continue to lead that class. We've got some exciting things coming for BYDUREON, which we think will be a differentiator and allow us to compete in the future in that as well. I don't have a silver bullet or one particular thing that causes the difference, at least in my view.
Keep in mind that the insulin prices have been going up very substantially over the last 10 years, payers knew that. They were quite high, and then they had a long way, potentially, to go down. The potential to go down was larger to start with. Secondly, you have the additional dimension of the introduction of analogs. Lilly have been aggressive in launching their analog of basal insulin. The dynamics are a little bit different from what you can see in GLP-1. With your question about Alzheimer's, I think you're right that to some extent, not completely right, but to some extent it is true that sometimes payer worry less about things that will prevent events in the future. In the case of Alzheimer's, again, it will depend on the strength of the clinical data.
I think if you can actually influence the course of the disease and keep patients stable and at home as opposed to being hospitalized, then essentially payers will be able to see the savings quickly. In fact, the payer, in that instance, is going to be the government because most of these patients are going to be on Medicare Part D. I suspect if we as an industry, those companies developing products for Alzheimer, if we get good clinical data, we should be able to gain access for those treatments. Kaya? By the way, Thomas proposed that we extend to 15, because we saw there were so many questions. Kaya, go ahead.
I've got two questions. I'll ask the first one in two parts, one's for you, Sean, one's for you, Pascal. Let's assume we all are cognizant of how confident and comfortable you are in the durva/tremi hypothesis. In the unfortunate event that we end up sometime middle of this year, you open up the data box, and at least at PFS, neither of the two arms are successful. Sean, the question for you is, what does that mean in terms of the trial mechanics? What happens the day after to patients on the study? Pascal, the question for you is, assuming that the hypothesis fails at OS, what's plan B for returning Astra to growth?
You mean.
So if-
OS doesn't read out a mistake.
Yeah, if durva tremi or durva mono is not positive at OS as well, what's plan B for returning Astra to growth?
Okay. First question for Sean.
Sure. A couple things. When we do the PFS analysis, we're doing it when PFS is mature, right? At that point, there will have been many progressions. That's how the maturity of that occurs. The patients who have progressed
If they're eligible, will have already gone on to another therapy. It will be a relatively, I think, modest problem. What happens to the remainder of the patients, now you've set it up as negative a scenario, I personally would not.
No, the positive scenario as well.
Oh, yeah. In the positive scenario, I think it depends upon what you're looking at, you may, depending upon how positive, end up in the situation of having to cross patients over, right? Give the chemo patients the IO. In the negative scenario, it will be a physician and patient assessment at that point in time, what they feel that they should do. Should patients go to chemotherapy who were randomized to the IO. I think it really will depend upon the details of the data, but again, it's not a large subset of patients because PFS will already be mature at that point in time. Does that answer your question?
Did he answer your question?
Yeah.
Okay.
The second one is that your question about if TC25 doesn't read out in MYSTIC, right? What you mean by that is the combination
Either one.
Yeah. The first point is really, we believe AstraZeneca will grow, and the question is at what speed will we grow, as I said earlier. Many people are mesmerized by this MYSTIC study and to a great extent, rightly so, of course. You got to look at everything we have. We have TAGRISSO, we have benralizumab to launch. We are launching many products. Also importantly, the massive drag we've had to deal with, this sort of headwinds called patent expiry is slowly but surely getting behind us now. Price pressures on SYMBICORT are stabilizing in Europe. We still have some of that in the U.S. CRESTOR is gone soon enough. We're not going to have to deal with that to the same extent, right? I think we will grow.
The question is, again, it depends on how many of those projects read that. I mean, FLAURA, we don't talk about FLAURA is a really fundamental growth driver for us. The new indications for LYNPARZA, they are also very important. The launch of benralizumab, as I said. We will grow, the question is at what speed. If you come to MYSTIC, my comment here is that, again, we tend to look at MYSTIC in sort of a binary fashion, it's not binary. It's not black or white. There is all shades of gray there. The total negative scenario, meaning nothing works, including monotherapy, hopefully you agree with me, is possible of course, it's sort of low probability, right? If we have a monotherapy indication, what it means is we have durvalumab, it becomes a marketing battle.
Of course, as we've known all along the way, we are not leading. We are coming later. Remember, in lung cancer, which is the biggest indication, we have a very strong presence, historic presence with DSR, more recently with TAGRISSO. We know those physicians. By the way, just a little piece of information, there's 80% overlap between the treatment of bladder cancer and lung cancer, though the physicians who treat bladder cancer are more or less the same as those who treat lung cancer. From a sales force effectiveness viewpoint, there's a very strong synergy. In lung cancer, we are very well positioned. We know those physicians. It's a marketing battle, we have a history there. From there, the question is, what do we get out of the combination?
Do we get benefit versus monotherapy in one subgroup, positive, negative, or do we get a benefit in all comers, of course? My answer to you would be, we will grow. The question is at what speed. Yeah.
The second question, Mark, I'm going to try my luck a slightly different way. Assuming the pipeline pans out the way you expect it to pan out, what contribution do you need from externalization and OI for 2018 EPS to grow?
I think I'm not going as hard enough to answer your questions on externalization in 2017. I'm not going to venture on 2018. We believe that externalization is part of our business model. The part of externalization should continue, and the recurring part of externalization is going to grow over time. I don't think externalization is going to go away whether MYSTIC is positive or negative. The part of other income, after a while, may dwindle a little bit. This part of product that we divest may be impacted by MYSTIC and also because we have completely finished the management of our portfolio. I think the externalization, which attracts more attention, is going to stay. This is part of our business model. We will always have products that we discover that we are not best placed to market or market on our own.
This will continue.
Remember, as we have always said, that there will be a recurring dimension to those, then the one-offs will over time decline. We've also said there will be a time point when the sum of the one-off and the recurring actually reduces a bit before, hopefully, it starts growing again based on the recurring revenue. Some of this externalization relates to pipeline projects, as you know. Some of it is Pure divestments, but it's relatively limited. Those are small products, $40 million, $50 million in sales that would be doing better in the hands of someone else, and we divest them and crystallize the value we invested. A big chunk is also about commercial partnerships. Plendil is a good example, the anesthetics deal. Here with Plendil, what we've done, for instance, is we felt this is a product that has potential in China.
We can't focus on it, first of all, because we have too many things to do. You have to cover too many physicians. We have 7,000 medical representatives in China. A Chinese company has 25,000 to cover the entire country. We've partnered this product with a Chinese company. We've given them a margin, and they will cover the whole country. We're doing this with a number of products. What that means is we have a one-off reset. We drop, of course, because we give them, or not give them, we sell them a share of this margin. They promote the product, so over time it will grow again. That's sort of the model. We'll keep doing this.
Essentially, what we try to do is find value everywhere we can in a portfolio, focusing our investment in our own R&D and our own pipeline, and unlocking value outside everywhere we can and sort of reinvest it. We'll continue doing it. Maybe we'll take one question from Luca Issi at Cowen online. Luca, go ahead.
Thank you so much for taking my question. Luca Issi, Cowen and Company on behalf of Steve Scala. Three non-MYSTIC questions, I guess. The first is, I think at ASH, we've seen the first two cases of atrial fibrillation for acalabrutinib in patients who were actually previously on IMBRUVICA. How confident are you that these cases are driven by prior IMBRUVICA's treatment and not by actually acalabrutinib? Maybe more broadly, how does this impact your ability to differentiate the asset? Second question is on FARXIGA. Can you just provide your high-level thoughts on how competitive dynamics will change going forward in the U.S. given that now JARDIANCE has a proper CV indication on their label? Third question is on BYDUREON. Can you just remind us if there is any interim look at the cardiovascular outcome study for BYDUREON? Thank you.
Thanks very much, Luca. Sean, do you want to cover the acalabrutinib ASH question, atrial fibrillation, and maybe also the BYDUREON cardiovascular data? Mark, if you could cover the FARXIGA potential.
I'll start with the BYDUREON one. These large cardiovascular outcomes trials have, again, independent data monitoring committees and interim analyses. We don't give detail about those things when they're happening. Obviously, it's hard because they're also event-driven. IDMCs don't communicate anything to us if they don't feel they need to. It's got all the normal structures that a large CV outcomes trial would have. With regard to acalabrutinib and I would say its tolerability profile in general. We remain committed that acalabrutinib has a superior tolerability profile to ibrutinib if only because there are patients who are not progressing on ibrutinib who discontinue it because they have toxicity. Some of that is atrial fibrillation. Some of that is a variety of other things. We outlined them in a slide deck, actually, when we did the deal.
When you go into an older patient population, such as those that have CLL, you are going to have some atrial fibrillation occur. The dataset we presented at ASH is very small. What is really going to be important is the longer-term chronic therapy dataset that we get. We are doing a head-to-head trial of ibrutinib versus acalabrutinib, which is really going to be the gold standard for looking at tolerability, also potentially efficacy in that trial. That's what's going to tell us what happens. The idea that in CLL patients you were never going to see an atrial fibrillation is probably not very realistic given their comorbidities and the age of onset of the disease. That's it.
Mark?
Yeah.
Thanks, Sean.
That's a great question, one we've certainly spending a lot of time thinking about. The first thing I would say is we think about sort of the data that our competitor has. There could be more data from all of the products in SGLT2 is that it's important data. Obviously, in the limited patient group that that was focused on, which is a minority of the diabetes patients, it had an important benefit. I guess the question we've been asking ourselves is why hasn't that had a bigger impact on the overall SGLT2 class growth rate? Also actually even it's been uneven with the share impact that we've seen on the brand. I think we have to remember that first and foremost, we're talking about diabetes patients, right?
For many of these physicians, their first question is: what do I need to do to get the glucose under control? How well tolerated, how safe is this going to be versus the products I've been using, which in this case is the DPP4s. The DPP4s are really good products, right? Physicians have become incredibly comfortable with them because they get good glucose reduction, and they're very well tolerated. They don't have to worry about them.
I think the thing that we feel like is going to be the key dynamic that we need to look at and see how that is going to happen is what is going to get physicians to really understand that actually the SGLT2 is a better choice after metformin because of the really good glucose control, because of the weight loss, and then because of also the potential this class has around cardiovascular benefits. I think what we'll see evolving over the next couple of years is we will get more CV data, both in clinical trials, but also importantly in real world evidence. I think we believe that will support the CV benefits of this class.
I think the company or as a group of companies, when we can get that combined with the core benefits that this class offers us on diabetes control in a way that physicians can really see that it is worth taking something that's very easy for them to do, which is keep using the DPP4s and use this new class. That's when we will see a really, I think, a significant change in the SGLT2 class growth. I would guess I don't think CV outcomes is a silver bullet. It's an important additional piece of information, and for certain patients, it's going to be important.
Ultimately, the company that can win by or the class can win is really helping physicians understand why this is a better choice as used after metformin. In that case, and why we're continuing to be the leader and why we feel confident about our successes, we think we've got a great set of messages and story about why FARXIGA is a better choice after metformin before DPP4s. Great glucose control, great blood pressure and weight loss benefits. The overall safety and tolerability profile of the product and the confidence we have at being the most prescribed is a great starting point to have a discussion with physician. Then we'll see where DECLARE comes in.
You'll be seeing in the course of this year some really important, we think, exciting real-world evidence that we'll be publishing and we'll see going forward. I think that's the key point is we can't forget that these are diabetes patients, and we have to treat the whole diabetes patient. Cardiovascular risk is one part of it. It's an important one, and it will grow. We've got to solve to help physicians understand in the diabetes patient why this is a better choice than DPP4s.
Thanks, Mark. Should we take one last question or yeah. Thomas allowed me to take one last question. David, I'll take this one here, and then we'll have to close.
Marietta Miemietz. It's Prime avenue. Just a few very quick financial questions. On the U.S. pricing pressure, based on your comments and some of your competitors' comments, is it fair to assume that for SYMBICORT and maybe some other large drugs, Q1 pricing will be materially below Q4 2016? What gives you confidence that pricing pressure is going to moderate in the second half, given that we've always heard that contracts can be reopened at any point in time? Quick question on Pulmicort growth in the emerging markets going forward. If you could just give us sort of a rough steer, because I believe that the China growth has very much been driven by the rollout of nebulization centers, and it'd just be good to understand where you're at in terms of that. My final question is to Pascal on your guidance and your comp.
If you literally deliver on your guidance, you don't over-deliver, and there's no massive devaluation of the U.S. dollar, is it fair to assume that that would have some negative implications for your deferred comp? If you just could give us a rough feel, that'd be great. Thank you so much.
Thank you. I thought it was going to be one question. It is three. Let me deal with the last one quickly so we can move on to more interesting questions. We have always said we are committed to the dividend. We have always said that if something has to go because of price pressure from currencies, that is really what we are experiencing. The dollar is gaining strength day after day, it is putting pressure on our ability to deliver the cover at actual rate. It is clear that our comp will be negatively impacted. It is pretty clear. Beyond that I cannot comment more. We will continue doing the right thing by the company, we will do what we believe is right to do to make sure we maximize the value of this company because in the long run we all win.
The patients to start with, us management, the shareholders win if we do the right thing. We will continue trying to achieve our short-term goals, in the end, if we have to prioritize, we will prioritize, of course, the dividend and the long term. Pulmicort, Mark, maybe you want to cover this one, let me just quickly cover the SYMBICORT. We have said that in 2017, we will see similar price pressure as we have seen in 2016 in the U.S. with some moderation. We have said that this will be worse in the first half than the second half, I guess maybe we will leave it at that for today. Pulmicort, Mark, since you are the expert in the emerging markets.
The short answer is that we still have a tremendous amount of work to do to get to all the patients that need, that could benefit from, particularly the kids with asthma, a nebulized solution. I will say two points on that. Three points. First of all, in China, I think we actually have some sort of sales on Pulmicort Respules in over 10,000 health institutions. I am not sure we are reaching half of them yet, right? It is so massive, the number of hospitals. We are just beginning to start to communicate about Pulmicort Respules with community health centers. There are 24,000 community health centers. These are the primary care clinics. They are just starting to actually initiate therapy. There is still a huge amount of work to do. Many places in China still kids do not have access to a good option on asthma treatment.
The second thing is they should not even be going to the hospital for this treatment. The real place they should be doing is at in-home nebulization. We started working on that the last two years. That is going to be a multi-year process to educate on that. The last point in terms of the rest of emerging markets, we have been spending the last two years basically educating them on what we have done in China. That sort of uplift is just still ahead of us. We are now seeing nebulization centers come up in Indonesia, in Russia, and other places in the Middle East and Africa. Asthma is a terrible situation. There is a huge number of kids and people, both asthma and COPD around the world. This is one solution. Ultimately, we would like to think the fixed-dose combination inhalers is the way to go.
For the emerging markets where acute care is still the standard, this is a great solution. A lot more work to do.
Thanks, Mark. With that, we'll end it here, and thank you so much for your attention.
Thank you