AstraZeneca PLC (LON:AZN)

Earnings Call: Q3 2019

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Oct 24, 2019

Good afternoon, Europe, and good morning to the U. S. Welcome, ladies and gentlemen, to AstraZeneca's year to date and Q3 results 2019. Before I hand over to AstraZeneca, I'd like to read the Safe Harbor statement. The company intends to utilize the Safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Participants on this call may make forward looking statements with respect to the operations and financial performance of AstraZeneca. Although we believe our expectations are based on reasonable assumptions, by their very nature, forward looking statements involve risks and uncertainties and may be influenced by factors that could cause actual results to differ materially from those expressed or implied by these forward looking statements. Any forward looking statements made on this call reflect the knowledge and information available at the time of this call. The company undertakes no obligation to update forward looking statements. Please also carefully review the forward looking statements disclaimer in the slide deck that accompanies this presentation and webcast. I'll now hand you over to AstraZeneca's Chief Executive Officer, Pascal Sorio. Hey, everyone. It's Pascal Sorio. Welcome to the year to date and our Q3 2019 conference call and our webcast for investors and analysts. The presentation is available on astrazeneca.com as always, and we've also sent it to those on our distribution list. So if you want to turn to Slide 2, this is the usual Safe Harbor statement. We will be making comments on our financial performance using core reported numbers and at constant exchange rates, CER, which are both non GAAP measures. We will also discuss other non GAAP measures deemed helpful for investors and analysts. All numbers will refer to $1,000,000 and growth rates will be at CER and for the year to date period of 2019, unless we state otherwise. Thank you to turn to Slide 3. We're going to spend half an hour on the presentation and then we'll move to the Q and A. Questions, we ask you to please limit yourselves to one question in the first round. Thank you in advance for helping us with this. Today, I'm joined by Dave Fredericksen, our Executive Vice President for the Oncology Business Unit Roeth Dobber, our EVP for the Biopharmaceuticals Business Unit Marc Dunoyer, our Chief Financial Officer Jose Baselgar, our EVP for Oncology R and D and Mene Pangalos, our EVP for Biopharmaceuticals R and D. For the Q and A later, we also have Leon Wang, who are EVP responsible for the emerging markets, including China and other we also have other members of our team here. Please turn to Slide 4. This is the agenda. We plan to cover all key aspects of our results today. Please turn to Slide 5. Okay. Following our return to growth in the Q3 of last year, sales have continued on a high note in the Q3 this year. Sales were up 18% in the quarter 17% year to date. We saw strong performance across the whole company. Newbillicines grew by 72% and added $3,000,000,000 in incremental sales in the year to date period. This strong performance was driven by both oncology, up by 54%, sorry, and by the emerging markets, up by 26%. In the emerging markets, we've seen countries outside China starting to contribute more, further diversifying our growth and our sales performance. Total revenue increased by 17% with collaboration revenue being broadly stable. Our core operating costs increased by 6% as we continue to invest in launches and the sustainable growth of our business while continuing to monitor costs. As a result, we continue to realize operating leverage with core operating profit up by 42%. Core EPS came in at $2.61 including a higher 22% tax rate. We increased the guidance for sales today from low double digit percentage growth to now low to mid teens percentage growth. As we continue to focus on return to sustainable business growth, we now anticipate a further decline of collaboration revenue and other operating income when compared to 2018. As a result, core EPS guidance for 2019 remains the same. As we look ahead on time, we anticipate continuing to invest in value creating R and D. SG and A is in a transition phase, supporting a number of ongoing launches and the expansion in hematology and renal diseases, for example, where we have limited presence today. After 2020, we anticipate fewer launches overall, a steadier state and we remain fully committed to a core operating margin in excess of 30 percent, reflecting the particular business mix. We also continue to anticipate covering our dividend in 2021 and in 2020 excluding the Daiichi Sankyo milestone payment. In short, all the financials are tracking in line with the previous communications given. Finally, the pipeline delivered an unprecedented level of positive news during the Q3 and into the Q4. Today is also the first time we share anticipated pipeline news for 2021. And as you see, we will remain busy in bringing new and better medicines to patients. Turning to Slide 6. Looking at the pipeline news flow, I will only pick a few highlights. There's so much I could not cover everything unfortunately. Tagrisso received approval in China for first line use and the medicine showed an overall survival benefit in the same setting from the FLORA trial. Along with our partner Daiichi Sankyo, we received regulatory submission acceptance by the U. S. FDA for trastuzumabderuxtecan in HER2 positive metastatic breast cancer with a priority review granted. We hope soon to bring potential new medicines to patients. Similarly, we also soon hope to bring Calquence to more patients with blood cancer, given that a potential new indication of chronic lymphocytic leukemia is now under review in the U. S. Too. Farxiga met the primary endpoint in its heart failure trial, which will provide access to many new patients who will benefit from CIGA in an area of medicine impacting many people around the world, alone or has a late complication of type 2 diabetes. Our respiratory area made solid regulatory and clinical trials progress across the board with the inhaled medicine and Fasenra. These positive developments will help support the momentum the respiratory is now enjoying. And finally, we are very pleased to have remained focused on anifolumab after the initial setback with the 1st Phase 3 trial. We did not give up on patients with this devastating disease. With the 2nd Phase III trial being positive, we will now engage with regulatory authorities to find a path to patients by leveraging the totality of the Phase II and the Phase III program. A special thanks to nifolumab team for not leaving patients behind. Please turn to Slide 7. As you can see on these graphs, we continue to deliver on our promise of sustained sales growth and we are pleased with the current trajectory. We now have 5 consecutive quarters of strong sales growth. As in all companies, there's some variation from 1 quarter to another and we estimate that there is a positive boost from inventory and gross to net adjustments of perhaps 1% to 2% in the 3rd quarter, Some seem to remember for the remainder of the year where comparisons are indeed getting tougher. Despite this, we increased the guidance for sales growth this year to a low to mid teens percentage increase. Our new medicines continued to make the biggest contribution to growth, increasing by 70 2% in the year to date and adding $3,000,000,000 in incremental sales. We are also pleased to report for all of our new medicines further geographical expansion beyond the U. S. Market and in emerging markets beyond China. Turning to Slide 18, you can see the geographical diversification that I just mentioned is a very important component of the new AstraZeneca. Oncology, cardiovascular, renal metabolic diseases and respiratory diseases are all areas where we can make a positive and lasting impact to public health and support patients in need. Within each of these areas, we are expanding from the U. S. And Japan into Europe and the emerging markets. Dave will cover later on an example of this encouraging progress with what Imfinzi has achieved in Europe. Specifically in the emerging markets, we have seen an encouraging return to growth in markets outside China, which Frode will expand on in a few minutes. This comes following a dedicated effort and an investment that is similar to that made in China over the past years. And these emerging markets outside China are now showing sustained growth, helping balance and diversify our company not only across ERP areas, but also geographies. As we look ahead, we anticipate the current high growth to moderate, but it will remain at high levels, probably around low double digit growth for the emerging markets overall and ahead of the long term trend we have talked about at many occasions in the past. In short, we are becoming more diversified than previously and in comparison with our peers. This will create a more sustainable performance in the future compared to the past. Please turn to Slide 9. Before ending my introduction, I would like to talk about sustainability in the very broad definition. It is very important to AstraZeneca. As a sustainable company, our commitment to society, people and the planet lies at the heart of everything we do. I'm tremendously proud of the progress that we continue to make. As you can see from our results announcement, there are several important updates on our journey to embed sustainability in our company. This past month, we celebrated the 5th anniversary of LC in response to an employee crowdsourcing initiative. Healthy Heart Africa has helped us establish a long term commitment in Africa with tangible outcomes that demonstrate a commitment to reducing the burden of noncommunicable diseases. In collaboration with our partners, we have conducted more than 12,000,000 blood pressure screenings, identified over 2,000,000 elevated blood pressure readings. We've trained over 6,300 healthcare workers and we have activated over 700 healthcare facilities in Africa to provide hypertension services. In September, we also received the good news that we've been included in the 2019 Dow Jones Sustainability Indices. This is the 18th time the company has been a dud has been added, sorry. We achieved a perfect score of 100 in the areas of environmental reporting, labor practice indicators and social reporting and health outcome contribution. We are again named as a member of the FTSE for Good Index series. AstraZeneca ranked in the 94th percentile of the healthcare industry with perfect scores in climate change, anti corruption, corporate governance and customer responsibility. Companies cannot solve issues of health and the environment by themselves. There has to be a joint effort between governments, companies and non governmental organization to get to a healthier planet and healthier people. We are committed to playing our part. Thanks for your continued support of our company and the progress we're making. With this important summary, I'll hand over to Dave to cover our oncology business. So please turn to Slide 10. Thank you so much, Pascal, and it's really a pleasure to be here to update on the performance of our oncology portfolio before as usual handing it over to Ruud for an update on biopharmaceuticals and emerging markets. Please turn to Slide 11. As we report on the year to date for oncology, we have reached sales of $6,400,000,000 with continued strong growth at 54% with our 4 new medicines now contributing $2,300,000,000 of incremental sales. We do expect some headwind as we move into the final quarter of the year in our mature portfolio with generic fulvestrant entrance taking effect in the U. S. And further ERISA declines as we focus our efforts on Tagrisso. In the lung cancer franchise, the Tagrisso and Imfinzi launches in the indications of first line EGFR mutated non small cell lung cancer and resectable Stage 3 non small cell lung cancer are progressing quite nicely as more countries outside of the U. S. Are now granting access to patients. Lynparza continues to cement itself as the leading PARP inhibitor as we see more women with first line ovarian cancer being treated across the globe. Fasladex is holding ground with sales of $726,000,000 in the year to date, a decline of 1%, but the impact of generics is accelerating in the United States. We still see encouraging uptake of Calquence with sales of $108,000,000 in the year to date and equal proportion of prescriptions are now seen in the non promoted CLL use as they are in the mantle cell lymphoma indication. This follows the NCCN guideline changes with the elevation from level 2a to 1 for relapsedrefractory CLL earlier in the year. Please turn to Slide 12. The company's number one selling medicine, Tagrisso, demonstrated continued growth, up by 86% in the year to date with $2,300,000,000 in sales as the global first line label launches continue to take effect. The current annualized run rate is now over $3,500,000,000 The U. S. Showed strong growth with sales of $909,000,000 with also strong sequential growth as we reach a high level of penetration in the first line setting, though we were helped by positive gross to net adjustments in inventory movements during the quarter. Europe reported $337,000,000 with a growth of 61% as more first line reimbursement decisions continue to take effect. Japan had sales of 4 $68,000,000 as very high levels of penetration were reached in the first line setting ahead of the anticipated November price cuts that we will have in Japan. Emerging markets saw $553,000,000 in sales with a good level of penetration being reached in the second line indication as a result of the NRDL inclusion within China. Please turn to Slide 13. Continuing in lung cancer, Imfinzi saw strong quarterly growth as the global approvals and reimbursements for the PACIFIC indication of unresectable Stage 3 non small cell lung cancer start to take effect. Imfinzi reported sales of $1,045,000,000 with the majority coming from the U. S. And the lung indication. The U. S. Showed strong sales of $759,000,000 where we continue to see all metrics for post chemoradiation and finsi usage increase as evidenced by the increasing patient infusions that are illustrated on the right hand side of the graph. We see that most of the immediately available patients are now benefiting from Imfinzi. Sales outside continuing to ramp up as we look to launch and gain reimbursement in the relevant countries. Japan delivered $149,000,000 and Europe $115,000,000 where similar to the U. S, the metrics on usage post chemoradiation are increasing, but of course started at much lower levels. Please turn to Slide 14. Finally, for Lynparza, we demonstrated continued progress with sales of $847,000,000 with growth across all regions as we continue to roll out the broader second line maintenance label in ovarian cancer and the breast and first line ovarian indications in the major markets of the U. S, EU and Japan. U. S. Sales were $432,000,000 where Lynparza maintained its position as the leading PARP inhibitor at over 60% share as measured by total prescription volumes. Increase in demand came from the all comers label in the second line ovarian cancer setting and the subsequent first line label as well as some use within the breast cancer indication. Europe sales were $208,000,000 up by 61% versus last year as we continue to execute additional launches and secure reimbursement across several markets for ovarian cancer patients in the first line and the second line all commerce setting. Japan delivered $91,000,000 in sales following the launches in ovarian and breast cancer last year. We saw the impact of the 2nd quarter slightly impacting sequential growth, though underlying demand was quite strong. Lynparza was the 1st PARP inhibitor launched in China, contributed to the $101,000,000 in the emerging markets for the quarter. I will now hand it over to Ruud to cover CDRM, respiratory and emerging markets in more detail. But before doing so, I would really like to thank all of my oncology colleagues around the globe for making a difference every single day to the benefits of patients and our company. Please turn to Slide 15 and I turn it over to Ruud. Many thanks, Dave. Today, I will talk to you about the biopharmaceuticals business. Total sales of the 2 therapy areas were $7,000,000,000 in the year to date, growing at 13%. We are very pleased with the continued growth of Farxiga and Brilinta, the ongoing successful launch of Fasenra and the recent launch of Prestri in Japan. Although Symbicort faced some headwinds, Pulmicort continued to provide robust sales. We look to build on this overall growth including through further launches for Lokelma throughout the remainder part of the year. Please turn to slide 16. Moving to NIO CVRM. Sales were up by 14% despite intense competition in diabetes with total sales at $3,200,000,000 Growth for both Farxiga and Brilinta continued with double digit increases globally. Farxiga delivered sales of $1,100,000,000 with 17% growth and maintaining volume market share leadership globally benefiting from SDLT2 class growth. In the U. S, Farxiga saw a decline of 6% impacted by adverse gross to net adjustments and formulary changes. Underlying volume growth was up. Outside the U. S. Where we have 65% of sales, we have seen encouraging performances with volume driven growth increasing. Europe sales were up by 26% and Emerging Markets sales were up by 50%. Bydureon including the auto injected Bydureon B size sales were down by 7%. Sales were partly driven by the impact of production constraints in the first half of the new Baidherin B sized device and declining volumes for the dual chamber pen. Brilinta delivered sales of 1 point $2,000,000,000 with 26% growth driven by a strong performance in the emerging markets, up by 59%. We also have continuous growth in the U. S. And Europe, up by 22% and 9% respectively. Brilinta continues to outgrow the market in all regions. Finally, the Lokelma launch is progressing well with strong initial trends following the recent launches in the U. S. And Europe as we look to provide an innovative treatment option for hypokalemic patients. Please turn to Slide 17. Turning to respiratory, we saw 30% growth in the year to date driven by Fasenra and Pulmicort. Symbicort was down by 4% in the year to date at $1,800,000,000 Growth in the quarter was up by 1% as U. S. Pricing pressures eases and growth continues in Japan and the emerging markets. Overall volume growth continues and we remain the global volume market share leader in the ICSLAVA class. Pulmicort was up 23% with sales of $1,100,000,000 with emerging markets as a driver of this growth, up by 29%. Fasenra is now $500,000,000 of sales in the year to date with the bulk of the sales continuing to come from the U. S, Germany and Japan. In the U. S, Fasenra is performing very well against new competitors with $343,000,000 in sales. Europe and Japan sales were $81,000,000 $62,000,000 respectively as Fasenra continues to be the leading novel biologic in many countries. We now have Fasenra available for salt administration with the Fasenra pen auto injector device approved in the U. S. After the early approval in the EU. We are also currently launching PTO-ten known as Prestri AeroSve in Japan for COPD where the initial launch is going well. Now I will move to the emerging markets. Please turn to Slide 18. Emerging markets continue to track ahead of our long term performance ambition, which is to grow sales on average by a mid to high single digit percentage with 26 percent sales growth overall in the year to date. Outside China, overall sales were up by 12% with growth spread across the region. China delivered a very strong performance again this quarter with now 37% growth in the year to date with the new launches continuing to take effect. The preliminary NRDL update added COMBI GLIZE to the list as well as removing reimbursement restrictions for some of our respiratory medicines including SYMDEKOID. New medicines grew by 86%, contributing 22% of the total sales in the region with a strong performance spread across our main therapy areas. Overall on quality was up by 51% driven by Tagrisso. NuCVRM was up by 46% with key contributors Farxiga and Belinta. And respiratory sales were up by 31 percent with Pulmicort and Symbicort as the key drivers. With this, I will hand over now to Marc. Please turn to Slide 19. Thank you, Ruud, and hello, everyone. I want to take you through our financial performance in the 1st 9 months of the year and the Q3 as well as our financial priorities and our updated guidance. Please turn to Slide 20. As usual, I will start with the reported P and L before reviewing our core performance. As Pascal mentioned earlier, product sales grew by 17% in the year to date, partly benefiting from favorable inventory and gross to net movements in the 3rd quarter, are not expected in the final quarter of the year. Of the $405,000,000 of collaboration revenue received in the 1st 9 months of the year, dollars 260,000,000 were in respect of Lynparza milestones as part of a collaboration with Merck. It is worth noting that when trastuzumab deruxtecan comes to market, most income flows to AstraZeneca will also be recorded within collaboration revenue. Please turn to Slide 21. Moving now to the core P and L, our gross margin ratio improved by 1 percentage point in the year to date to 81% as we continue to drive an improving mix of sales. We continue to prioritize reinvestment in our business when allocating our capital. In the quarter, core R and D expenses increased by 9%, although around half of this reflected first time development cost relating to trastuzumab deruxtecan. Looking at core SG and A expenses, which are a function of our sales growth, they also increased by 9% in the quarter, resulting from an ROE expansion in China and the support for new medicines. We do, however, continue to maintain our core discipline. While operating cost increased by 6% in the year to date, they represented only 59% of total revenue. This was a 6% point reduction year on year and this milestone is another clear indication of our operating leverage progress. Other operating income of over $1,000,000,000 primarily reflected the sales earlier in the year of the U. S. Rights to Synagis as well as the recent sales of the right to Lozec. It did however reduce by 6% in the year to date as we divest fewer medicines. With product sales continuing to grow ahead of operating cost, we delivered a 5 percentage point improvement in our core operating profit margin in the year to date to 28%. We remain on track to move to a 30% plus operating profit margin after next year. The core tax rate in the year to date was 22%, which was impacted by the geographic mix of profit and the impact of collaboration and divestment activity. I now expect a full year core tax rate of between 20% and 22%. Even with the higher than average core tax rate and reduced transaction income in the year to date, our core earnings per share increased by 38% to $2.61 Please turn to Slide 22. Turning to debt and cash generation, our net debt was broadly unchanged in the year to date at $13,300,000,000 The share issuance of $3,500,000,000 and EBITDA of $4,500,000,000 were directed to a higher than average level of purchase of intangible assets such as the 1st upfront payment in respect of Tratuzumab derux taken to Daiichi Sankyo. We also had a final true up payment of around $400,000,000 to Merck. We also noted the payment for the dividend of $3,600,000,000 Looking at cash from operations, we made encouraging progress in the year to date. We delivered an inflow of about $1,600,000,000 in the year to date versus an inflow of around $400,000,000 in the prior period. The improvement in the movement of working capital and short term provision versus last year stems primarily from the stability of our receivables. Cash tax was higher this year. However, it was reflecting the phasing of tax payment on past deals in particular and the impact of tax refund in 2018. Below cash from operations, higher cash flow from the disposal of intangible assets were more than offset by a higher cash flow from the purchase of intangible assets that I mentioned a moment ago. Please turn to Slide 23. This is a slide I will continue to use each quarter as it demonstrates how we are delivering what we said we would do. We are making good progress in driving strong and sustainable sales growth, and we are fully committed to growing operating leverage and profitability. I'm encouraged by what we have already achieved this year. As I mentioned a moment ago, these improvements are intended to generate more cash, which will help us deleverage our balance sheet further and increase the dividend at the earliest appropriate opportunity. Looking at this year, our cash from operation plus divestment income will be broadly in line with 2018. The majority of this year's outflow from legacy business development transaction took place in the first half. Looking ahead, our unchanged ambition is to fully cover the dividend with cash flows before financing activities in 20 21. Please turn to Slide 24. Finally, I will turn to guidance for the year, which is on product sales and core EPS at constant exchange rates. As you know, we have upgraded our sales guidance for the 2nd successive quarter and I now expect product sales to grow by low to mid teen percentage this year, even accounting for an anticipated lower level of growth in the final quarter, as mentioned by Pascal and Dave earlier. I expect a reduction in the sum of collaboration revenue and other operating income this year as we become less reliant on divestment income over time. I am expecting I'm now expecting a core rate of 20% to 22% this year and anticipate growth in core earnings per share to $3.5 to $3.7 at constant exchange rates. Lastly, capital expenditure is still expected to be broadly stable this year and we continue to target a reduction in restructuring charges. With that, I will now hand over to Jose. Thank you, Mark. Let's turn to Slide 25, and good afternoon, everyone. I am happy to provide an update of the progress made in our oncology pipeline since last quarter. As usual, I am joined by my counterpart, Mene Pangalos, who will discuss our biopharmaceuticals pipeline and accompanying new flows across the business. Mene will also provide an update on progress we have made in our mid stage pipeline. Please turn to Slide 26. I will start by recapping some of the key data readouts we had this quarter during the World Congress and ESMO for our lung cancer franchise. At ESMO in September, we presented overall survival data from Tagrisso's Phase III FLAURA trial, where Tagrisso showed a statistically significant and clinically meaningful production of 52% in risk of central nervous system disease progression or death. Oral survival was a key secondary endpoint in the FLORA Phase III trial compared with previous standard of care treatment in this setting. This is in addition to FLORA meeting its primary endpoint in July 2017, showing a statistically significant and clinically meaningful improvement in progression free survival, increasing the time patients lived without disease progression or death from any cause. At the World Congress in Lung Cancer, we presented the results from the Phase 3 trial Caspian, which show Imfinzi become the 1st immunotherapy medicine to show both significant survival benefit and improved durable responses in extensive stage small cell lung cancer. As a reminder, the CASTIAN data has received organ drug designation status in the U. S, and we look forward to bringing the benefits of this regimen to patients in the near future. Upcoming news flow for the Imfinzi franchise will include the POSEIDON data in Stage 4 first line non small cell lung cancer. For your information, Cresto in head and neck and the new in bladder readouts will now be in the first half of the next year. We will also have neo adjuvant non small cell lung data from Aegean and concurrent Imfinzi treatment with platinum based chemo radiation therapy in the PACIFIC II study in the second half of 2020. Please turn to Slide 27. Now to update you on recent news from our PAP inhibitor, Lynparza. At this year's ESMO conference, we presented the all comers of variant cancer data from the PAOLLA Phase 3 trial. Lynparza has demonstrated an unprecedented median progression free survival in first line maintenance of ovarian cancer in excess of 22 months in a representative ovarian cancer population that is not restricted by surgical outcome with additional benefit in HRD positive patients. The BRC mutant and HRD positive patients in PAOLA-one achieved a remarkable length of time with our disease progression in excess of 37 months. Through this data, through this trial, Lynparza becomes the only PARP inhibitor with Phase III ovarian cancer data, both as a monotherapy in BRCA mutant patients or when combined with avaricizumab in all comers patients. The supanalysis of PAOLA data in PRIMA like patients will be presented at the ESMO 2019 meeting in Athens next month. We also presented at ESMO the Phase III PROPHOUND data from Lynparza, looking at Lynparza use in second line metastatic castration resistant prostate cancer. PROfound becomes the 1st positive Phase 3 trial in biomarker selected patients showing a statistically significant and clinically meaningful improvement in the primary endpoint of radiographic progression free survival with Lynparstam versus ensalutamide or adenafirone in men selected for BRCA1, 2 or ATM gene mutations. The results of these trials are the latest successes in our pursuit to provide continued improvement to the standard of care for cancer patients. With this, I will now hand over to Meny. Thank you. Can we move to Slide 28, please? And hello, everyone, joining us on the call today. We've had another really great quarter in biopharmaceuticals. And starting with new CVRM, positive declared data Farxiga is now approved in both the U. S. And in the EU. Farxiga also attained Fast Track designation status for both heart failure and chronic kidney disease from the U. S. FDA. At the European Society For Cardiology meeting in September, we presented the breakthrough Farxiga DAPR HF data where it met the primary composite endpoint with a statistically significant and clinically meaningful reduction of both CV death or worsening of heart failure versus placebo in diabetic and importantly non diabetic patients with a reduced ejection fraction on standard of care treatment. Also at the SC, we presented full THEMIS data for Brilinta, which showed a reduction of the risk of CV events in patients with coronary arterial disease and Type 2 diabetes. In this trial, Brilinta plus aspirin reduced the relative risk for the composite of CV death, heart attack or stroke by 10%. And for a subgroup of patients who had undergone percutaneous coronary intervention or PCI, we saw a 15% relative risk reduction observed for Brilinta plus aspirin compared to aspirin alone. Lastly, we now have approval of roxadustat in China, a first in class treatment of anemia of CKD for both non dialysis dependent and dialysis dependent patients and we are awaiting reimbursement. Full data from the Phase 3 ROCEYS and OLYMPUS trials and the pooled CV safety data will be presented at the American Society For Nephrology next month. Please turn to Slide 29. Moving on to respiratory and immunology. Our triple combination therapy, PT10, saw a positive Phase 3 data in the ETHOS trial in patients with moderate to severe COPD. PT10 met its primary endpoint of 2 different budesonide doses, demonstrating a statistically significant reduction in the rate of moderate or severe exacerbations compared with dual combination therapies. From the U. S. FDA, we received a complete response letter for PT010, and I'll point out that the application included data from only the Phase 3 CONOS trial. We'll now aim to submit aTHOS data for review now the trial is completed and timelines for approval remain unchanged. PT010 has also been approved in Japan under the brand name Breasttree AeroSphere and is under regulatory review in the EU and China, where it's been granted priority review status by the China NMPA. Moving on to Fasenra, we received orphan drug designation from the U. S. FDA for the treatment of eosinophilic esophagitis, a rare chronic and family disease which affects fewer than 200,000 patients in the U. S. Recent activities include the approval in the U. S. For self administration of the Fasenra Pen, a prefilled single use auto injector. Fasenra self administration and the Fasenra pen have also been approved in the EU. Lastly, we were significantly encouraged by the positive Phase 3 TULIP-two trial for anofrolumab, a potential new medicine for the treatment of lupus. TULIP-two met its primary endpoint, achieving a statistically significant and clinically meaningful reduction in disease activity as measured by the Bikler assessment versus placebo with both arms receiving standard of care. TULIP-two was the 2nd Phase 3 trial designed to assess the efficacy and safety of anofrolumab as a treatment for adults with moderate to severe SLE. The positive Bikla response in TULIP-two was consistent with a positive pre specified analysis of the previous Phase 3 TULIP-one trial, which did not meet its primary endpoint of SLE responder index 4 at SIRI4. Data from TULIP-one and TULIP-two will be presented at the American College of Rheumatology Annual Meeting next month. Please turn to Slide 30. Now for a quick update on progress on some of our exciting new medicines in mid stage development, showcasing the level of breadth and depth we're able to achieve throughout our pipeline and across our therapy areas. Concerning updates this quarter in oncology, we made a decision to progress to Phase 3 for monaluzumab, our NKG2A monoclonal antibody, where it's being evaluated in head and neck and colorectal cancers. In CVRM, cotatatatide, our new GLP-one glucone co agonist has now started Phase II trials in NASH. Our other ongoing Phase III programs for capivasertib, our AKT inhibitor, trastuzumabderutuxan, I can never say that in oncology, and PT27 in respiratory are all progressing well and to plan. And we look forward to giving you updates in due course. Please turn to Slide 31. Now I'd like to summarize some of the key news flow items still to come across the company pipeline. The Q4 of the year is another busy period at AstraZeneca and is a testament to our ongoing growth trajectory. For oncology, as previously mentioned by Jose, we will have POSEIDON data and we'll submit Caspian data before the end of the year. We also expect regulatory decisions for ImfinziPacific data and for Lynparza SOLO-one data in China. In the U. S, we expect a decision for Lynparza for use in first line BRCA mutated pancreatic cancer. For biopharmaceuticals, we're due to have a regulatory submission of roxadustat for anemia of CKD in the U. S. And then respiratory, a regulatory decision for COPD for PT10 in China all before year end. As always, I would like to say a special thank you to all our colleagues here at AstraZeneca whose expertise and dedication help bring these new medicines to patients. And with that, I will now hand back to Pascal for closing comments. Thank you, Mene. In the interest of time, if you don't mind, we'll go straight to the Q and A. And thank you so much for your attention and we'll open to the we'll open the Q and A with Andrew Baum at Citi. Andrew, go ahead. Thank you. Question for Dave on access to Calquence in the U. S. Post anticipated approval in the CLL. I assume that you've shared in advance the Elevate TN dataset with them. Could you just confirm that is the case thinking about inclusion within Medicare formularies? And then second, AbbVie historically in other disease areas has shown itself adept in using rebates to secure preferred formulary status for its drugs. How are you thinking about that given Astra is a new player entering a competitive market in hematology where historically you have not had a presence? Thanks, Andrew, for the questions. I think that maybe the first part to answer on that is that one of the key strategic reasons that we launched in the U. S. In particular into the mantle cell lymphoma indication was to really build up not only our field based expertise, but also to be able to have conversations with with payers to help really pave the way for when the CLL data arrived. And so I think that what's important to note is that we today are on many formularies also on guidelines for MCL and that certainly creates, I think, a positive path for us as we engage in those same discussions within CLL. In terms of some of your more specific questions, we have every expectation is that in CLL that it will be managed through prior authorization to label or to guidelines, which is the same as every other oncology indication. I think I mentioned in my prepared remarks that already NCCN has upgraded the guideline from 2a to 1 for the relapsedrefractory based upon the ASCEND data. We certainly would be submitting the ELEVATE TN data for guidelines once it's presented at an upcoming meeting. And all of that we would expect to flow through both the private as well as the public arena. On your last question about rebates, certainly BTKIs, we've seen just with MCL, are a class that is increasingly looked to be managed because of the fact that we're coming in with competition. And so I would say that we certainly do expect that we will need to make some concessions as it relates to rebates, as you allude to the specific amounts of those we don't share. But that certainly will be a part of discussions that we'll need to be having given the fact that we've got competition within the space. Did I address your questions, Andrew? Yes, that's fine. Thank you, David. Thanks, Dave. And so the next question is from Sachin Jain at Bank of America. Sachin, go ahead. Thanks for taking my questions. One part and one financial. On financial, I wonder if you could just give us some color on OpEx growth into next year at a very high level. I know guide is officially next year, but year to date cost growth in mid single digits. Consensus models are slow down in OpEx growth roughly 2% to 3% next year. So just wondering whether you see enough investment opportunities to keep that mid single digit rate ongoing, which would still obviously still allow leverage versus a faster top line with consensus roughly at 10% to 11% for next year? And second question from Mene on roxa. So a lot of debate regarding data at ASN, particularly the NDD setting. At our conference, you referenced data is complicated and requiring interpretations. I wonder if you could clarify that comment. And do you think ASN resolves the debate in NDD on CV data? Or would you expect the debate to continue thereafter? Thank you. Thank you, Sachin. So maybe I could ask Marc to cover the first one and Mene, you'll address the OXXAR question. My life is easy today. Thank you, Sachin. So for the operating expense, first of all, before I comment on next year, let me say for this year, at the end of September, we are at a growth of 6.5%, so slightly higher than what we had guided. We do expect that this growth will slow down in the Q4 and should come back somewhere around the mid single digit. And I believe for next year, this is probably a good indication. However, I want to point out that the important metric for us is operating leverage. And in a very rudimentary manner, we look at operating leverage as product sales minus growth of operating expenses. And this is an important metric that we have looked at in 2019 and we will continue to look at it in 2020 2021. So we do look at operating expense as a sort of a corollary or of the product growth. That's the 2 very important variable we we look at. And we don't want to sort of miss any opportunities of growth either product wise or or geography wise to just to reach a sort of a preordained expense growth. So we look at the operating leverage more than anything. Thank you, Marc. Mene? Yes. So with regards to my statement around being complex. First of all, let me just say, we're still very confident about the molecule and data that we have. The reason I talk about it being a complex program is because we're studying different patient populations, comparing to different comparators, with different statistical endpoints and working with 3 partners at the same time. So in all, it is no doubt a complicated program. Is the debate going to stop around NDD? Well, I think you'll have to wait and look for the data in a couple of weeks' time. It's not too long to wait, Sachin. We'll also have an analyst call following the meeting. So hopefully, we'll be able to go into more detail there. But as you can imagine, a 15 minute presentation covering the topic, we're not going to be able to get through everything. And ultimately, again, I think the best statement is we still remain confident in the data package we have overall both for the NDD population and the DD population. Thank you, Manny. As Manny said, the one thing that has complicated the discussion with Roxas is the fact that there hasn't been any new product in this field approved or reviewed for many, many years. So maybe some people lost the view that the understanding that there are many different endpoints in this field. So in that sense, a bit complicated, but suddenly, you'll see the data very soon. Richard Parks at Deutsche Bank has the next question. Richard? Hi, thanks for taking my questions. Firstly, on emerging markets in China, which obviously keeps beating people's expectations, And I'm happy you've given a short term growth target. Maybe I don't know if you can commit to how long you think that double digit growth will be sustainable for. But more importantly, in terms of your China business, I often come across investors that see that as much of a risk as an opportunity, given the China government's determination to provide best health care at the lowest possible cost. So could you talk about possible headwinds, whether it's from expansion of the 4 plus 7 tender process? And maybe talk about how protected you think some of your large franchises like Symbicore and Pulmicore are from those kinds of tender process? My second question is just on Brilinta. Very quickly, given the ISAR REACT-five trial showing superior outcomes for generic afientin patients with ACS. That seems to have negatively impacted prescription growth. So trying to understand what your expectations are for Brilinta and how you're helping physicians to put that data in context. Thanks very much. Thanks, Richard. So let me just make a quick comment and then I'll hand over to Rod. And Rod, if you could cover China and Brilinta and impact on prescriptions. And maybe Leon could chip in a little bit after you on additional thoughts on China. The general comment I would make, Richard, is that life is always a mixture of risks and opportunities. I mean, China is full of opportunities, there are risks. The U. S. Is full of opportunities and there are risks. Innovation and pipeline is full of opportunities and there are risks. So for me, I'd rather call it exciting because what's happening in China, just like what's happening in our pipeline or in the U. S. Is suddenly full of exciting aspects. So with this, more specifically, Rod, if you want to cover the question on China? Yes, of course. First of all, Richard, we are not going to give specific guidance per quarter for China. First of all, I think we are very pleased with the current performance. Equally, we have been transparent that the value based procurement is already kicking in, but will move further also in 2020. But I think we are in a unique position in China with a very, very broad portfolio of products, mature products, clearly, but also with new innovative products. We are mentioning Tagrisso. We're mentioning Brilinta, Farxiga, fantastic growth. And it's our task in order to deliver new innovative medicines in order to counteract potential impact of value based procurement. I cannot, let's say, suppress my excitement regarding roxadustat in China. It will be the first new chemical entity to be launched in China. And I think it's a testimony for the people on the ground as well as our global teams in order to make that happen. So although it will no longer be 40%, we still believe that it will be in the mid teens or slightly higher than that moving forward. Regarding your question regarding Belinta, first of all, I think it's fair to say that we were a little bit surprised to see the results knowing the overwhelming amount of evidence we have shown in the last few years with the PLATO trial, recently the THEMIS trial, the PEGASIST trial. It's a trial where there are a couple of, let's say, hiccups, if I may say. It's an open label trial conducted mainly in one country. And once again, it's inconsistent with the body of evidence that Blinta and Prasugao clearly have shown. We have seen a bit of an impact. Equally, I think the market, especially in the U. S, is coming to terms. And we expect that moving forward that the overall impact will be very limited. The Brilinta growth, the prescription growth is still very healthy in the United States and we firmly believe that that will continue moving forward. Thanks, Gerald. Leon, do you want to give a little bit more color on what's happening in China and make sure people understand the process of this 4+7 that is fully rolled out and how this will happen over the next period of time? Yes. I think the 4+7, AstraZeneca has 2 products, ERISA and CRESTO and ERISA win the tender and CRESTOL lose the tender because of pricing. And I think now it's expanding outside of 4+7 in quarter 3quarter4 already. And in 2020, it will be fully implemented almost in all And then if you lose tender, you can only compete in the 30% of the hospital reimbursable market and also self pay market. And ERISA wind tender competing fully in 70% of 1 third of the province and in the 2 third of the province can only compete 30% of the reimbursable hospital market and also self pay markets. So I don't think that these two product sales will go down, but I don't think it will disappear. I think it will be gradually going down in the whole year next year. But this is not important. I think now in China, we have we are also getting to NRDL negotiation. We're negotiating in the coming months, Luxa, 4thiga, Lynparza. And in the Neuron NRDL, the government also removing second line limitation of SYMBIKOORT, which is very important maintenance treatment, so to succeed our largest product, Promigore. And also we have 10 products getting to last year in EDL, which this year will be implemented, which is notably Verinta, 4SIGA, Promicort, Symbicort are uniquely listed in the in EDL, will be occupied a good volume in many level of hospitals, which being implemented more and more strictly when government rationalizes the usage of drug. And also in China, we are unavoidable to harder to remember all the new launches coming. Infinzi is being launched in 2020, Tagrisso first line already launched and next year will be fully launched in the first line. And the Lynparza, SOLO-one, Lokelma and the triple PT010 and the Provesby. So we have many, many new launches and we are a very good launch commercial launch mechanism and AstraZeneca is very good in launching new products. So I think with all these good news on top of under diagnosed and undertreated and not really compliant patient follow-up market, I think we have huge room to improve our business in China. So Richard, as you hopefully are convinced now, it's very exciting to be in China. But of course, there are headwinds there just like we will also face headwinds in different geographies. That's part of the industry we are in. Let's move to a question online. Louisa Hector at Exane sent us a question about Calquence. I think Mark, it's probably for you. And the question is, why was the Acerta payment renegotiated with regard to timing and will Acerta shareholders contribute to the settlement payment to AbbVie? Okay. Thank you, Luisa, for the question. So let me take the second part of the question first. This was obviously same product. Calquence is the product of concern. But there were 2 separate resolutions. So AstraZeneca was, I mean, obtained a settlement with AbbVie and Janssen on the one hand and another settlement or another renegotiation with the Acerta ex shareholders. So these are 2 separate resolutions. To try to address the first part of your question, why were the Acerta payment renegotiated with regard to timing? As we are moving closer to the CNL, I think both parties, the ex Acer shareholders and ourselves wanted to increase the certainty for the resolution of the put option. And basically in these discussions AstraZeneca also wanted to have a deferral of the payment, which was agreed by the other party. So our interest in this was to delay the payments and we have now 3 regular payments between 2022 2024 and both parties, I believe, benefit from the certainty of that resolution. Thank you, Marc. Let's move to Michael Leuchten at UBS. Michael, over to you. Thanks very much. So a question on Tagrisso please. If I strip out the inventory and gross to net in the U. S. That you helpfully outlined, it looks like sequentially the product went backwards in Q3 over Q2. I just wondered if you could give some color on that. And then a question for Jose as we go into the DESTINY four data at TAVRX. What is your thinking now in running a potential adjuvant HER2 breast cancer trial in terms of size and also duration? Is that statistically statistically possible? Can you do a head to head trial against standard of care? And do you think statistically it's feasible to do that in terms of number of patients and the duration of the study would have to take? Thank you. Thank you, Michael. So Dave, maybe if you Thank you, Michael. So Dave, maybe if you can cover the first question relating to Tagrisso quarter quarter and then Jose will take the next question. Yes, absolutely. So in terms of the question on Tagrisso, so Tagrisso absolutely had sequential demand growth in the United States. So it did not in any way go backwards. We did comment on the fact that in the sequential sales of the U. S, which were $350,000,000 from the $300,000,000 in Q2, that half of that came from positive gross to net adjustments as well as some inventory movement, the other half obviously being made up of demand. Thanks, Dave. Jose? Thank you, Michael. So on the early CRISPR strategy with DSA-two zero one, these are still early days for us. So we still don't have a clear idea on what are we going to be doing in that space other than we are going to be in that space and that we are going to find the best way to bring this drug early in the disease. This drug has a number of advantages and could down the line, potentially replace chemotherapy. But we are not there yet. I think we need to wait for some of the ongoing studies before we have some Okay. So we'll move to the next question. Thank you, Jose. Keyur, Parag, Keyur, go ahead. Thank you. Two questions, please. First one, just continuing with 8,201. Seattle Genetics recently kind of press released the Phase 3 data for tigatinib. Just wondering if you guys could share your perspective on the data. How do you think that compound positions versus 8,201 in the later line settings? That would be first. And then secondly, as we think about 2020, and I realize you won't give guidance here today, but just can you help us think about as you transition into a more operationally geared kind of P and L, how comfortable are you with where consensus sits on the EPS line for next year? Thank you. Thank you, Kjell. I'll address your second question directly, which you have answered yourself, which is we indeed do not give guidance now for next year. And I'll ask Jose to cover your first question. Is that okay? The Seattle Unity data? Yes, absolutely. So DSA-two thousand and one is a very differentiated drug in the space of HER2 therapy. And we are dealing with a drug that has an unprecedented benefit in patients with advanced disease. So we are very confident in our own efficacy, and we are looking forward to sharing with you the data in San Antonio. I would like to recall that we are very pleased that the U. S. FDA has acknowledged the potentials of the drug by the acceptance of priority review, which is to us and to our patients very important. Thank you very much, Jose. I mean, in fact, since you have the microphone, there is a question online from Stephen Scala. And then the question is about immunotherapy. The crossover has made hitting overall survival in frontline lung trials more and more difficult. Is this a concern in PROCEDON? We will have the PROCEDON data as we have said all along in this quarter. So basically at this point, the only thing we need to do is frankly to wait for the data. The data will speak for itself. Thank you. There is another two questions coming from Stephen. I think many are both for you. In fact, the first question relates to roxadustat. Has AZ decided with FDA on the statistical plan in the dialysis study versus placebo? That's one question. So the answer? Yes. Okay. So the answer is yes. And then the second question is, Brilinta filing in type 2 diabetes and CAD, the same is filing. Are we still planning to file? It's actually filed again. So yes, it's been filed. So that's why actually, Stephen, it's not no longer on the list. It has been submitted. So let's move to Emmanuel Pavadakis, Barclay. Emmanuel? Thanks for taking the question. Maybe I'll take a follow-up on Tagrisso. Just your degrees of optimism in terms of getting first line NRDL reimbursement. I think the earliest that could be would be late next year. And particularly, top of that, of course, in light of some discussion around the Asian subgroup with the Erste data we saw at Esmer. The second question will be on the SGLT2 cost. It seems to continue to struggle somewhat given the results we've seen this week. So just your degree of confidence that we will see the class resume growth within diabetes with the launch of new oral competitors? And indeed, if you could do something to quantify your internal expectations on the heart failure opportunity as well? That would be helpful. And then maybe just sorry, could I just take a very quick follow-up for Mark? You helpfully clarified the staggering in terms of time for the assessed payment, the magnitude. Should we still assume that it's going to be about SEK 3,000,000,000 evenly staggered over those years? Thank you. Thanks, Emmanuel. So, Marc, do you want to cover that comment? Yes. Maybe I should take the the sort of the payments taking place from 2022 to 2024. We have indicated in our financial statements the net present value of these 3 payments and that's €2,072,000,000 So they are roughly 3 regular and similar payments of about $900,000,000 So they are not if you make the total of those in nominal terms, they do not reach $3,000,000,000 Thank you, Marc. So, Oud, maybe the other question about, I mean, two questions for you, in fact. The trend in the SGLT2 class and in particular for SIGA, I guess, to focus probably more the U. S. In the question and also the heart failure opportunity. Of course, of course. First of all, Emmanuel, I think we see a clear step up at least in the new to brand prescriptions in the United States is now trending over 20% and that's a healthy growth. It's still at the level of the GLP-one class. From a TRx perspective, we see now roughly a monthly growth moving to between 15% 18%, and it came from roughly 12%. So I think I'm hopeful that there's a clear revival of the overall class of the SGLT2 based of course on the very great data and especially for Farxiga in DCLAIR and also DAPA HF. We have very substantial expectations for dapagliflozin, Farxiga and Farxiga in the United States and outside of the United States because, first of all, I think DECLARE is showing the impact on hospitalization for heart failure. In some European markets, we were able to promote Farxiga already with the declared label for quite some time. We clearly see a positive impact in those markets. We are hoping and we are expecting the same in the United States. So that's one. The second aspect specifically is towards your heart failure question. Hopefully, you agree with me that the data we presented at the European Society For Cardiology was incredibly impressive. There are roughly 6,000,000 patients in the United States suffering from heart failure. And I think the strength of the data is clearly that it was added on top of standard of care showing a 27% reduction hospitalization for heart failure. So there's an enormous amount of interest from the physician base from cardiologists, endocrinologists, but equally also payers are very interested in this new finding because heart failure is a very big cost burden in many healthcare institutes and hospitals in the United States. So overall, we are very bullish about the prospects for CIGA. It's a competitive space, but equally the room to further grow in the diabetes and non diabetes market is very substantial. Thanks, Rod. Do you want to cover the NRDL Tagrisso question? Yes. So just in terms of the NRDL on Tagrisso, we expect the same processes that we've gone through thus far, which would have NRDL Tagrisso frontline decision coming in the second half of next year, if the process continues on in the way that it has been. Obviously, we recently received the frontline approval. And I think that kind of building on some of the comments that Leon had made before, I think what's particularly noteworthy is that we know with the frontline, FLORA data that twice the number of patients are available to benefit from Tagrisso that are in the relapse setting with durations of therapy that are 80% longer. So I think also, we recognize that for NRDL, there's likely some price concessions that we would need to make, but at the same time, there are some very real upsides associated with being able to bring this to the frontline market. Thanks, Dave. So the next question is by James Gordon at JPMorgan. James, go ahead. Hello. Thanks for taking the questions. First question would be on Imfinzi and the POSEIDON study. The study has got 3 arms and you've got an angle which is Imfinzi plus chemo and you also got the triple therapy. What is the thinking about what the primary question you're going to ask is? Because I think the thinking had trended towards doing more like Merck-one hundred and eighty nine as in you do chemo combo, a doublet versus chemo. And then we recently saw Bristol's 9LA study that actually said chemo reduction following JUUL IO actually did look good. So what is the first question you're going to ask? Or are you going to ask both questions in parallel? 2nd question is a financial Gross margin, if I back out the impact of the Lynparza profit payaway and the positive mix benefit for Tagrisso, the COGS margin in terms of COGS as a proportion of product sales went back by 3 percentage points this quarter as in it got worse. Is there something one off there? Or is that the clean run rate going forward? And if so, why is the gross margin on an underlying basis deteriorated? And then also, if I could just squeeze in one more clarification on assertive Calquence. So if Calquence's commercial potential now definitively established, hence the €2,000,000,000 outstanding payment, or is it still subject to some change depending what happens with the ELEVATE RR study in 2021, so the head to head versus IMBRUVICA? If that study works, as you did show you better, would the EUR 2,000,000,000 go back up again? And what does the EUR 2,000,000,000 assume for that study? Thank you, James. So maybe we can start with the last two questions for Mark. I mean, just a quick comment here on Calquence. I mean, basically, what we have announced is settled. I mean, it's the final settlement. And also maybe just to add something here, because I read some questions about the settlement and potential for Calquence and whether they were linked. They are not linked and we really truly believe Calquence has enormous potential. The data we presented and will present soon at ASHA, we believe very strong and we still believe in the tremendous potential Calquence will deliver. So Mark, do you want to cover the questions? Yes, that's right. And then Jose, in Finzi, Poseidon. Yes. So, James, first of all, the 2,072 is basically the NPV of the payment that we have agreed to make to the Acerta ex shareholders. It doesn't take into consideration the potential value or projection of the product. This would be used to confirm the value of the assets on our balance sheet. So what we were described what I was describing was the $2,072,000,000 which is on the liability side of our balance sheet. To try and answer your question on cost of goods, the cost of goods as you will have seen is above 80% year to date and this is a progress versus what we had expected, so a slight progress. Usually, the 2nd part of the year has a lower so has a higher cost of goods than the 1st part of the year due to the release of revolution of inventories in the first half when we introduce our new standards. So this is, I would say, usual pattern. And I wouldn't I would look at the year to date cost of goods year to date as a better indicator than the quarter 3 cost of goods as an indicator. Thanks, Mark. Let me just add again that we are very pleased with the resolution of all the questions surrounding Qualcans, whether they relate to IP or whether they relate to the acquisition itself, very pleased with putting a full and final end or settlement to this, number 1. Number 2, very pleased with the spread out cash outlays that suddenly are very welcome from cash flow viewpoint as you would imagine. Jose, do you want to cover the Poseidon question? Absolutely. So the POSEIDAN question, the study has 3 arms, as you had suggested. And basically, it's INFINSI plus chemo in one arm, Imfinzi plus feme plus chemo versus standard of care, which is chemo. And both experimental arms are being compared to the standard of care. Thank you. So we move to the next question, Tim Anderson. Tim, go ahead. Thank you. The Calquence data coming up at ASH, the buzz in the academic community and frontline CLL is that data is striking. And I think the trial that probably matters most to investors is the head to head trial that reports out later. So my question is this upcoming date in December, even though it doesn't have IMBRUVICA as a comparator, in your opinion, do you think it will be enough to really kind of convince investors that you may in fact have a better product in IMBRUVICA? And can you remind us of your current thinking in terms of whether it is better? Is that on both efficacy and safety or just safety? Consensus, I think, struggles to believe that this product could do damage to IMBRUVICA just given the lead time that AbbVie has with the product. And then a quick question on anofrolumab. You've got your data in hand now from the second trial. Your guidance is that you're not going to file it until second half of twenty twenty. So that's a year out. That suggests you're needing to gather some sort of additional information before you file. Can you just clarify what that might be? Thank you, Tim. So I mean the first question, I would usually give it to Jose, but Susan Galbrais is here with us and I'll ask Susan to answer it because it gives me a chance to thank and recognize Susan for her leadership of this licensing effort a few years back. Of course, as always, there were a number of issues that we had to address and questions around the data, but we now have the data. We have resolved all the issues and I think it will prove to be one of our best acquisitions. So Susan, do you want to cover the question? Thank you, Pascal. You're very kind. It's obviously a team effort as ever. So I do think the data that's going to be presented at ASH are exciting. And I think from the beginning, what we've seen with Calcrantz is because of the cleaner profile that it's got and because of the receptor occupancy that you can drive, you're hitting the target harder. We believe both of these things are underpinning a differentiated profile. You've seen that already with the data that was presented earlier this year. And I do think the data that will be presented at ASH will help to reinforce the activity of the molecule and the tolerability profile both as monotherapy and in combination. So I look forward to sort of discussing the data in December. I mean, I think just to build on the question on do we need the head to head study in order to be able to have a best in class profile. We believe that the two studies that we are filing give us an opportunity to absolutely establish Galquence as a best in class BTKI. And we look forward to the head to head results, but we are, I think, playing with a strong hand moving forward. Thanks. Meny, do you want to cover the So the second half finding is not a reflection of our excitement of the data or the molecule. I think, obviously, with the original FAIL study and now the positive study, we've had to regear ourselves into prioritizing the asset, building the team. Obviously, we also have to have the conversation with the regulators. So the team are working as fast as they can. We're going to try and bring those timelines forward as fast as we can as well. But I think it's prudent to have it down in the second half because ultimately we're working through how fast we can do this right now. Very good. Thank you. Marc Purcell, Morgan Stanley. Marc, go ahead. Yes. Thank you, Pascal. I've got a question. With the call on cash from the Calquence acquisition pushed out and staggered and where the continued strong performance in emerging markets oncology and on the innovation delivery, how should we think about your capacity to make targeted acquisitions financed by raising debt and cash generating collaborative activities from your pipeline, which you mentioned in the press release? I mean, how am I seemingly more scrutinizing FTC influence your strategy, for example, in initiatives that seek to strengthen an already strong position in areas such as lung cancer and breast cancer? That's my question. But as Leon is on, I just wanted to ask a clarifier. Does removing reimbursement restrictions on Nexium in Respiratory Products act as a prelude to mandated price cuts or tensor initiatives? I guess we're all trying to guess what could be included next in procurement's greater themes, which could be announced in November, but certainly should come through in early part of 2020. So before maybe Leon, you could cover this question and Marc will cover the funding question. And maybe, Leon, before you answer the specific question, I'd like to make a quick comment and then you could also comment on this. I mean, Mark, you are talking about the emerging markets and of course, the focus is very much on China. But I really would like also to recognize that our growth in the emerging market is very broad based. We have growth in almost every single market outside of China. I mean, I was personally in Russia early this week and we have tremendous growth there. We have tremendous growth in Latin America in every region of the emerging markets. So China is, of course, very important, but I also like to recognize the great work our colleagues in the emerging markets overall are doing around the world. Leon, do you want to take the first question and then the sorry, the China question and then Mark will cover the funding one. Yes. I would just like to echo Scott's comments. I think emerging market outside China has a huge potential and we already started a strong double digit growth in the Q3. So I think it's also very hopeful. And China NRDL actually removing limitation is actually quite other subprogresses that we haven't mentioned is Brilinta 60 milligram also included in this round of reimbursement and Promicore, Symbicore removal of second line usage drug limitation and because they are already included into EDL, other categories that the government would like to encourage. And also even Netcam has been removing limitations. So these are the progress detail of NRDL announced already. And regarding 4 plus 7, the first round is a solid product. I think the first announced batch is ERISA for us is ERISA and Crestor and the second solid product batch could be other out of patent solid products like GI products or Brilinta or I mean these are all potential VBP products. And injectable government are more cautious and nebulized products also more cautious because a lot of nebulized products are used by pediatric usage. And device products like Symbicort also very more difficult to be studied and they are more protective we foresee. So I think there will be batches, but in China, the policy is not really fixed when to announce what and in what kind of regulation and how to implement. So we definitely will keep you updated on a quarterly basis. Thank you, Leon. Matt? So, thank you for the question. So regarding the issue of cash management, when we structure a deal whether we sell or buy, we always try to defer payments and maybe anticipate receipt. So basically, this was done in many of our recent product right acquisition. So as we were trying to find a resolution on Calquence, we saw an opportunity to defer the payments to the excess Certa shareholders. And this and we finalized these 3 payments covering 2022 to 2024. But we tend to do it regularly. It doesn't work every time, but at least it present in our mind at every deal. Talking about the whether this deferral of payment will have an impact on our capital allocation priorities, I just want to stress that our immediate priorities for 2020 2021 are operating leverage and the restoration of a good operating profit. So that's what we are going to work very hard on. And for the time being, our capital allocation priorities are unchanged. And we do consider bolt on acquisition, but they have to be immediately accretive and obviously they have to be strategically aligned with what we do. Thank you, Marc. So we'll try to go a little longer. We definitely appreciate all the interest you have in our company. So we'll go a little longer to try and cover the questions that are still coming through. So the next one is Simon Baker at Redburn. Simon, do you want to go ahead? Two quick ones. Firstly, turning to Poseidon, one for Jose. I wonder if you could give us your perspectives on the CheckMate 9LA results and its relevance to and differences from the POSEIDON study. And then a one for Mark. I wonder if you could just give us a little bit more clarity on the higher than expected tax rate in Q3 and thoughts for the tax rate in period beyond 2019 into 2020? Thanks so much. Thanks, Simon. Jose, do you want to Absolutely. So Simon, we are pleased by the data that we have seen because it does show that there is activity with a combination of PD-one, CTLA-four inhibitors. However, as you know, to do cross study comparisons is incredibly challenging. So at this point, we just need to wait for our data. I would not be able to make any kind of speculation. Yes, Marc? Yes. So on the tax rate, what I can say that and we have noticed this several times, we need to avoid looking at the quarter to quarter variation because this is where it becomes relatively volatile. So I recommend that you look at the year to date numbers to form a view on the tax rate for the year or for coming years. You obviously know that the big impact for our tax rate is the geographic mix as well as the product mix, the type of deal when we enter into a structured deal, but also the evolution of various tax legislations that can take place. So when you look at the tax rate, we need to take it out the one off part from the recurrent part. And if we look at the numbers for the quarter 3 at 23%, this is I would say, on the high side. It's outside of the range we had guided for, which was 18% to 22%. The year to date rate is 21.7%. So I believe this rate is probably more aligned with what you will see at the end of the year. So and this is why we are narrowing the range to for the full year at 20% to 22%. Going forward, I mean, I would prefer to wait a little bit for some clarification on legislations, which are moving in the next few months from some countries. And then we will be able to give you a more precise number or range maybe next year or in February. Thank you, Matt. So there's a question online from Marietta Mehmetz at Trim Avenues. I'll read the question. Can you please share some high level thoughts on the design of monalizumab Phase III trials with TumorCiting's line combination partners. And also particular interest in colorectal cancer, which seems to be turning into a competitive area again. I believe you said during your ASCO call, you had developed a molecule to potential responses in sensitive tumors. Is that also the plan for Phase III and in which tumor settings? Jose, do you want to cover this one? Yes. So, Mieto, thank you very much. So in monolizumab, what we have launched is a Phase III registration study following our very strong head and neck data. We are a little bit ahead in head and neck and in colorectal. So that's going to be a study in combination with cetuximab in patients that have been exposed privately to immune to IO. In colorectal, we have very nice data, but we have not yet been at the decision point to launch a Phase III. We're just waiting for some additional data before we commit. Thank you, Jose. So the next question is from Eric Lobergos at Bryan Garnier. Eric, go ahead. Yes. Hello. Thank you. Two finance related questions. First of all, on the one offs included in the quarter on some of the products, including Tagrisso. Could you maybe quantify how much that represented either in growth or in sales for the overall portfolio and the performance in the quarter? And maybe mention beyond Tagrisso, which products were mainly impacted? And the second question relates to the, let's say, other operating income line. As we get into well into the Q4. So I guess you have a precise idea well into the Q4. So I guess you have a precise idea when where those two lines may land for the year. So maybe you can narrow a little bit this guidance. How much, for instance, do you need for other operating income to get into the core EPS guidance? Or otherwise set? Are you comfortable with the consensus that says that EUR 400,000,000 to EUR 500,000,000 more in Q4 may be needed? Thank you. Thank you, Eric. I think the first question we already answered, right? You saw our sales in the quarter grow 18%. And I think we said that the one off effects movements of inventory was about 1% to 2%. So without those, the growth rate would have been 16% to 17%, so still sort of similar range of growth rate. Marc, do you want to cover the second one? Yes, I will try. Thank you very much for the question. So first of all, you have to differentiate collaboration revenues from disposal or other income. For the line collaboration revenues, you are we are at we're in the course of the year. This is still going to increase substantially because we have still have we hope to get receive milestones from Merck and others in the remaining part of the year. As far as other income, you have seen most of it. There are still some deals which are being discussed and negotiated, but I think most of it has already been made visible. So there may be a little bit more on other income, but there will be a substantial increase on the collaboration revenue. Thanks, Matt. Overall, as we have said sorry, Vascon. Overall, it will as we have said many times, it will reduce versus 2018. Thank you. Next one is from Dominique Vernon, Credit Suisse. Dominique, go ahead. It's actually Jo Walton. And I'd like to go back, Pascal, to the business outside of China and the growth rate there. We talk a lot about China. We talk a lot about the U. S. You've already highlighted ex China, local currency growth was 15% in the quarter, established rest of the world 19%. I wonder if you could tell us a little bit about how sustainable that is going forward. And we noticed old really old cancer drugs like Zoladex, which for years were declining and are now growing strongly again. Is this something that you can sustain over more than 1 year or so? And a second question for Mark, if I could. You said that you're going to have over 30% margin beyond 2020. Given the business mix that you have today in terms of your emerging markets business, your primary care business, your specialty business, could you tell us what would be a reasonable objective for an operating margin, let's say, out in 2023, 2024 that we should be looking at? Many thanks. Thank you, Joe. So I'll just say a quick couple of comments again and I'll ask Leon to give more specifics on the emerging markets as a whole. But as I said a minute ago, the growth rate outside China is very strong. And in fact, the growth rate in the 1st two quarters was probably a little bit misleading because we had the negative effect of divestments. The divestments that we did last year impacted the emerging markets in the first half. And Q3 is a better reflection of the ongoing growth rate in those emerging markets because the effect of the divestments is disappearing in Q3. So very strong base, as I said, I mean, I was in Russia early this week. I was privileged enough to meet Prime Minister Melziot for the 3rd time. And we are very committed to Russia. We're very well appreciated there. I could say the same of many other countries around the world, in Brazil, in many countries we are investing and then committed to growth in those countries. So Leon, do you want to give more specifics about Zoladex and how we see growth moving forward in those countries? Yes. Like Pascal already outlined, actually if you removing divestment, the organic growth outside China Emerging Markets already start double digit since late last year And first half of this year because of divestment of based products, we are also double digit in the first half of this year and the third quarter actually is even higher. So I think it's sustainable because we see growth not only from one country, from Russia, from Asia, from Korea, Singapore, Vietnam, from many emerging markets, Egypt, Turkey, Argentina, Brazil. So we have 2 thirds of the emerging market growing double digit and most of the markets growing single high digits. So I think this is quite phenomenal and I think it will not grow as fast as current growth rate in China, but I think the current speed can be maintained and can even grow faster in the quarters to come. Thanks, Leon. Marc, do you want to? Yes. So, Joe, thank you for the question. You have seen earlier in the presentation that we are presently promoting 14 blockbusters, some of them already well advanced, some of them are at the launching phase, some still need to be launched. So we have in front of us still an enormous task of promoting these products. Regarding the operating margin, so our primary objective is to go above the 30% threshold and we are doing all we can while promoting our products to get on to above this 30% margin. We have also said many times that we want to remain a globally present company balance on Specialty Care as well as Primary Care. So we have also said that we will not probably not reach a 40% level margin. So it will be somewhere between 30% 40%. It's not a very precise target, but I don't want to you to forget that it will also depend on the number of products that we have to launch to remain on the growth trajectory that we ambition for ourselves. So it's very dependent on the product that we have to launch. Next question is from Sam Fazeli at Bloomberg. Sam, go ahead. Thank you very much for taking my questions and for the longer duration of the call. Just on a kind of route to the Calcurrence, obviously, this is talking to investors as we're speaking here, it's very butch view that you're putting forward of the data that we're expecting at ASH. There's obviously, there's another complication that's coming into the competitive environment and that's the combination with venetoclax in with IMBRUVICA. So how do you see your Calcutta being positioned in the market as that part of the as that combination evolves? And then if I may, a separate question on FOXEGIA. You've addressed quite a lot of aspects of this, but when should we actually expect to see prescription volumes turning in the U. S. With the label that you've got now and just even putting aside the non diabetic heart failure potential current label, should we expect to see some change in that in the next quarter, 2024 or Q1, Q2, did you hit that to when we should expect some revival there, please? Thanks. Thanks, Saum. So maybe, Rod, you could answer the first question, Farfir question. Just as a reminder, Sam, we in the U. S. Just got the so called declare label approved. So we have not even started promoting. Maybe Rod will give you some insight of what is happening in Europe as a guide to what could happen in the U. S. Yes. So very quickly and thanks for the question. So we are expecting, let's say, a first positive uptick in Q1 next year. We just got the label. We are going to train our field force as we speak. And normally, it takes a couple of weeks in order see the first impact, but the reactions of the physicians are very positive. So stay tuned and we will see how we will navigate through it. Yes. As far as Europe, maybe you want to say a couple of words on Germany? Yes. So we have seen Germany was in fact the first country where we were able to launch the DECLARE study. And relatively soon, a couple of weeks after starting to promote, we saw a very clear uptick in the market share of Farxiga in Germany. So that's clearly a positive signal, we're using also towards the other countries, which are in the phase of launching this label. Thank you. And the Calquence question, the combination of venetoclax and the significance of those data, maybe, Suzanne, Dave, you want to comment? Yes, sure. So I think the first point to make is that CLL is a disease the elderly. And so a large proportion of patients are treated by community oncologists. And so the attraction of a well tolerated monotherapy is significant in that patient population for an oral drug. Obviously, for younger patients who are diagnosed below that well below that median age of diagnosis, a time limited regimen has some attractions. But it does have a significant different tolerability burden in that near term. So it needs to be managed more carefully in more specialist centers, and it requires regular attendance at clinics. So that's the balance that you'll have. We are, of course, looking at the combination with venetoclax as well ourselves. And what we see is an evolving marketplace that will enable patients to have different choices available to them. Dave, do you want to make another comment? Susan, the only thing that I would add to that is I think that what we've seen from an uptake perspective following the venetoclax data with the finite treatment is more uptake in the relapsed refractory setting than in the frontline setting. And so I think that that's a dynamic that we continue to watch, but bodes well for the opportunity for BTKI monotherapy, as Susan said, in the frontline. Thanks, Dave. So we wanted to give a bit more time to address your questions and your interest, but we also have to be respectful of your time and finish we want to finish by 145. So we'll take the last question, Peter Welford at Jefferies. Peter, go ahead. Hi. Thanks for squeezing me in. Just quick ones. Firstly, just on the priority review voucher, just wanted to confirm that hasn't been used yet. And also just with regards to the timings then with regards to roxadustat, just whether or not that filing is being controlled by FibroGen and whether or not therefore the voucher could be used for that? And then just regards to the pipeline. I mean, clearly, obviously, the pipeline is getting bigger and bigger every quarter, it seems. At what point in time do we need to think about Astra having to prioritize either therapeutic areas assets to a greater extent and perhaps out licensing to constrain the OpEx and reach the margin objectives you've outlined? Are we getting to that stage yet? Or are there significantly big trials that are winding down, leaving room for you within the R and D budget to continue developing the pipeline at the pace we've seen over the past few quarters? Thank you. Thank you, Peter. So I'll ask Mene to cover maybe the Roxas timing question. Let me just summarize your first question, PRV. It's a simple question answer, sorry, because the voucher hasn't been used. We will not comment on what we will use it for, but it hasn't been used. I'll just make a quick comment before Meny addresses the Oksa question and comment on the pipeline. We actually prioritize our pipeline across the totality of the company across all projects, not by TA, but across all projects. So we have a committee that prioritize and quite frankly, we are prioritizing almost every day. And of course, the challenge we have, which is a good challenge is we have lots of good projects. So it is not always easy, but we do prioritize every day. And the last point I will make is that as Mark explained a minute ago, our goal is really to drive operating leverage and get to higher levels of operating margins for top line growth. Of course, we're managing expenses and we have many, many productivity improvement programs in place. We use digital tools, etcetera, etcetera. But our number one focus is delivering the pipeline and growing the top line so we deliver operating leverage. Mene, do you want to cover the Oksut question? Yes, just to highlight that the U. S. Filing is very much a partnership with FibroGen. We're doing it collaboratively together. They're in the driving seat and the timing continues to be before the end of the year. Very good. So Thomas, yes, Thomas is giving me the signal. Just finishing. We're on time. So thank you so much for all your interest. And just in close, I would just repeat that we're very much on track with what we said we would do. We are driving top line growth right now. We are going to focus on operating leverage and generate additional cash flow to return to covering the dividend as quickly as we can, of course. But again, our focus is really driving growth. We want to be a growth company. We have a tremendous pipeline. We pride that for sure, but we'll continue investing where we have opportunities, whether it's on the pipeline or geographically. Thank you so much, and I wish you a good rest of the day.

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