AstraZeneca PLC (AZN) Earnings Call Transcript & Summary

Good afternoon. I'm James Gordon, JPMorgan European pharma and biotech analyst. And today, I've got the pleasure of introducing the AstraZeneca presentation. So you're going to hear from AstraZeneca CFO, Aradhana Sarin. Thank you very much for joining us today, Aradhana. Really looking forward to the presentation.

Thank you, James, and JPMorgan for hosting us this year. Good afternoon, everyone. It's a pleasure to be here with all of you to share the remarkable progress that AstraZeneca has made over the course of 2023 and explain some of the factors that underpin our confidence in delivering industry-leading growth through 2030 and beyond. On this slide, you'll see some of our forward-looking statements, which I urge you to take a moment to review when you have a chance. This is an exciting time to be at AstraZeneca. In the first 9 months of 2023, we delivered $34 billion in revenue with ex-COVID medicines up 15% versus 2022, and we look forward to sharing our full year results early next month. In the 3 years since we announced the Alexion acquisition, we have transformed our R&D and commercial business to focus on 5 key disease areas: oncology, cardiovascular renal medicines, respiratory and immunology, vaccines and immune therapies and rare diseases. Our ambition is to be leaders in these disease areas meaning achieving, at least, the top 3 position in each one by 2030. We also have an ambition to launch 15 new molecular entities by 2030 and are very much on track to achieving that goal. Our total revenue growth is relatively derisked versus our peers, given our strong performance across all disease areas and our broad geographic footprint. We are one of the most global pharma companies. And we see strong momentum ahead, including in emerging markets where we deliver 20% growth in the first 9 months of 2023 with 37% growth outside of China. As I mentioned, our portfolio is focused in 5 core disease areas, and we see strong growth potential from each one out to 2030. Within oncology, we expect continued strong growth supported by our differentiated commercial portfolio, innovative life cycle management and high potential NME launches, including our AKT inhibitor, Truqap; our TROP2 targeted ADC Dato-DXd; and our novel next-generation oral SERD, camizestrant, which is currently in Phase III development. Within CVRM, we expect Farxiga to continue to grow this year. And for CVRM overall, we anticipate broadly stable revenue through 2027 with renewed growth thereafter, driven by DAPA fixed-dose combinations, baxdrostat monotherapy in hypertension and Wainua in ATTR amyloidosis. We expect strong growth from our R&I business driven by recently launched medicines, including Fasenra, Breztri, Tezspire, Saphnelo and Airsupra, which will more than offset any impact from loss of exclusivity from older medicines such as Symbicort. V&I represents an emerging growth area with the approval of Beyfortus last summer and the recent acquisition of Icosavax, which brought a Phase III-ready novel RSV hMPV vaccine into our portfolio. We also see upside potential with our next-generation prophylactic COVID-19 antibodies. We've made significant progress in our rare disease business, accelerating the conversion from Soliris to Ultomiris, and building a diversified pipeline within and beyond complement. Through 2030, C5 growth will come from continued adoption in neurology indications coupled with new indication expansion. We've previously stated that we expect to deliver industry leading growth through 2030 and beyond. And as you can see, our confidence is underpinned by growth expectations across all our business areas. Our late-stage pipeline has continued to grow with over 120 trials in Phase III or proceeding to registration, which represents 65% of our total pipeline volume. On the right-hand side, you will see our breast cancer map, which outlines our launched medicines and those in development. As you can see, we are attempting to address the entire spectrum of breast cancer and in doing so, transform how the disease is managed. We are applying the same approach across many other tumor types in oncology as well as in cardiovascular, renal and respiratory diseases. Addressing diseases holistically leads to more meaningful engagement with prescribers and makes AstraZeneca the partner of choice for study sites. Over the course of 2023, we have invested around $4 billion in value-enhancing business development transactions. This is quite a step-up compared to 2022. Here, you'll see select BD transactions spanning collaboration agreements, asset and full company acquisitions. What is important here is to emphasize our approach to business development. We focus on novel technologies and molecules that have the potential to contribute the next wave of growth in the latter part of the decade and beyond. We always seek opportunities where we can add exponential value, capitalizing on our development and commercial expertise in our disease areas of focus. Next, I want to spend a few moments on each of our focused disease areas to cover key commercial opportunities for growth as well as just a few of our high-value emerging pipeline assets. In oncology, our growth outlook is clear as we work to reinforce our leadership position in focused tumor areas and win in competitive markets. Within lung cancer, we remain confident that Tagrisso monotherapy will remain frontline standard of care in EGFR-mutated lung cancer with opportunity to enhance efficacy through chemotherapy and ADC combinations. We're looking forward to the LAURA trial readout in the first half of the year, which should unlock the opportunity to move this medicine into Stage III unresectable disease. With the remarkable clinical data and HER2 has set a new bar for ADCs and is the undisputed HER2-targeted ADC of choice in breast, gastric and lung cancers. We're continuing to move in HER2 earlier in treatment and the DESTINY-PanTumor02 study has given us an exciting tumor-agnostic opportunity. The FDA granted this study breakthrough designation, and the NCCN guidelines have already been updated for endometrial and cervical cancers. Imfinzi, inclusive of Imjudo, has seen a renewed growth in lung, liver and GI tumors. We also further see opportunities for growth in perioperative lung cancer and in combination with PARP inhibitors and ADCs across a number of new tumor types. Lynparza remains by far the leading PARP inhibitor globally across 4 tumor types. From here, we have the opportunity to drive additional value in both the prostate and endometrial cancer settings. We will also share clinical data for saruparib, our PARP1 selective currently in Phase III for hormone-sensitive prostate cancer, and we expect to initiate several new Phase III studies for this compound later this year. We continue to see market-leading new patient adoption for Calquence in CLL, and we're looking forward to the outcomes of several ongoing Phase III studies in diffuse large B-cell lymphoma and mantle cell lymphoma. Lastly, our most recent approval -- oncology approval, Truqap, is a clear example of AstraZeneca succeeding where others have failed. This medicine is delivering on the potential of AKT inhibition in breast cancer with a differentiated molecule and innovative dosing schedule. We are only just getting started with Truqap and are looking forward to the results of several Phase III studies already in progress in triple negative breast and prostate cancers. We're focused on achieving scale across 5 key tumor types with a clear ambition to drive deeper, more durable responses and improved survival. Key to achieving this ambition is harnessing the power of combinations in order to attack cancer from multiple angles. We've made exciting advances across a broad range of scientific platforms, and we are far from complacent, investing now to lead the next generation of transformative medicines. We're building a leading portfolio of cell therapies, radio conjugates, immune engagers and epigenetic targeted medicines that we hope will drive revenue growth well beyond 2030. On the right-hand side of the slide, I want to highlight just 2 examples of how we are aiming to lead in high-value markets. Firstly, the global IO market has exploded in value since 2015 and is projected to reach over $90 billion by the second half of the decade. We have developed a portfolio of next-generation IO bispecifics that have the potential to replace currently approved checkpoint inhibitors, offering the promise of better efficacy and tolerability. Secondly, the ADC revolution is still ramping with a projected market value of close to $40 billion by 2028. Currently, in addition to HER2 in Dato-DXd, we have 5 wholly owned novel ADCs already in the clinic. We're also making good progress in developing predictive diagnostics to better select patients that will benefit most from these medicines. This year, you will also see new data from our ongoing IO and ADC combination studies. We hope these data will further increase confidence in the potential for these medicines to comprehensively replace first-generation checkpoint inhibitors and systemic chemotherapy. Our biopharmaceutical business is focused on CVRM, R&I and V&I. Each of these growth pillars holds high-value opportunities, many of which are underappreciated by the market. CVRM continues to deliver strong double-digit growth with 16% in the third quarter of 2023 and 18% in the first 9 months. Looking ahead, we are building a robust portfolio of late-stage programs with high potential new medicines. Recent R&I launch medicines continue to drive momentum, reinforcing our presence in key disease areas like asthma, COPD and SLE. This year, we also launched Airsupra, a potential blockbuster to treat asthma. Airsupra is the first rescue medicine to address both obstruction and underlying inflammation. V&I represents an emerging growth opportunity and our recently announced acquisition of Icosavax will help accelerate our plans. Taking a closer look at our maturing CVRM pipeline, we have a number of high-potential late-stage molecules. Wainua received its first approval in ATTR polyneuropathy at the end of last year. This is our first launch in amyloidosis, and the Phase III study in ATTR cardiomyopathy is ongoing, which represents a substantial market opportunity with up to 500,000 patients across the G7 countries. Baxdrostat, a novel aldosterone synthase inhibitor, has significant potential to help over 7 million patients with treatment-resistant hypertension. We are rapidly advancing baxdrostat into Phase III, both as monotherapy and in combination with DAPA. We have initial Phase I results in-house for oral PCSK9, which has highlighted its potential differentiation versus other agents in development, with competitive lipid lowering and limited food interaction. We look forward to sharing this data at an upcoming conference. Lastly, we announced an in-licensing agreement with Eccogene for AZD5004, a potentially differentiated oral GLP-1 receptor agonist. What makes AZD5004 attractive is its encouraging efficacy at low doses, its 70% bioavailability, which we hope will lead to differentiated tolerability profile with limited need for dose titration. In addition to all these novel medicines that each have blockbuster potential, we're also advancing DAPA fixed-dose combinations at pace. Within R&I, we are rapidly advancing novel medicines and mechanisms within asthma and COPD. We see significant opportunity to increase biologics penetration with Tezspire, particularly for those patients with more severe disease and are making good progress. With almost 400 million patients diagnosed with COPD, there remains substantial runway for Breztri, which is already the fastest-growing triple fixed dose combination. We're also advancing late-stage COPD trials of tozorakimab, a novel IL-33, Breztri, Fasenra and Tezspire with several late-stage readouts expected this year. Airsupra is an exciting new growth driver, and we've been encouraged by its reception from the clinical community thus far. Early data for cell therapies has indicated the potential for remission or even cure across immune-mediated diseases. As a result, we are increasing our focus on cell therapy substantially as a company, including in immunology. This is clear from several of our recent deals where we have further strengthened our portfolio and capabilities. In V&I, we are sharpening our strategy, focusing on serious respiratory illness and building a portfolio of novel vaccines and monoclonal antibodies. We're focused on key respiratory pathogens. And with the recent Icosavax transaction have added virus-like particles to our portfolio. IVX-A12, a novel combination vaccine against both RSV and HMPV, leverages innovative virus-like particles to boost the immune response and forego the need for adjuvants. RSV and HMPV are two of the most concerning respiratory viruses, and the RSV vaccine market alone is a $10 billion market. IVX-A12 is the first vaccine aiming to protect against both viruses simultaneously and has potential for better tolerability than currently approved RSV vaccine. This vaccine has already received fast track designation from the FDA. Since launch, the demand for Beyfortus has also been very strong, and we are working hard to make sure it reaches its full potential globally. Shifting to our final disease areas of focus, rare diseases. Our C5 franchise continues to see durable growth driven by neurology and geographic expansion. Growth in the latter half of the decade will be driven by additional indications. We've also initiated the first Phase III trial for ALXN1850, a novel next-generation enzyme replacement therapy, which is being investigated in HPP. We see the opportunity to more than double the addressable population compared to Strensiq with 1850 Our portfolio outside of complement continues to build, and we are excited about our leading portfolio of potential medicines to address amyloidosis, including depleters. [indiscernible], a first-in-class light chain fiber depleter, is the only medicine in development for the most severe form of light chain amyloidosis, and we expect the first Phase III data later this year. ALXN-2220 is another novel depleter, and the Phase III trial has been initiated for the treatment of severe ATTR cardiomyopathy. ALXN-2220 also has the potential to be used in combination with TTR stabilizers or silencers to more comprehensively address the disease. We're also continuing to build our next wave of rare disease pipeline following several genomic medicine transactions in the past year. In closing, AstraZeneca is a leading global pharmaceutical company with clear focus on 5 disease areas. We have set strong ambition to achieve industry-leading growth while improving profitability without sacrificing investment in new high-value pipeline programs. Importantly, we're a leader in sustainability and are on track to achieve our high bar of ESG goals across access to health care and ambition zero carbon. We're a global organization driven to follow the science and improve outcomes for patients. As part of that mission, we need to continuously build our pipeline with high-value differentiated assets and technologies in order to secure our long-term growth ambition, which is key to delivering our value for our shareholders. With that, I would like to thank all of you for your interest in AstraZeneca and the future that we're building for all of you, for ourselves, for the patients and for the planet. And with that, I'd like to invite my colleagues, Sharon, Dave and Iskra onto the stage for Q&A.

Great. Thank you for the presentation. And as is the usual format, we've got about 20 minutes for questions. I've got a few questions, but if anyone from the audience would like to ask a question first, please raise your hand. In that case, you might get a question from me to start with. Maybe the first question, a broader question, which should be Astra's top line growth and top line growth out to 2030. I think last year, you commented that Astra can achieve above-industry growth. But what's your latest thinking about how quickly industry growth actually is? And how -- by what extent do you think you can beat the industry? Are you going to be slightly above the industry? Or could you be way above the industry?

So we talked about our ambition in the second half of the decade to sort of 2025 to 2030 to have an industry-leading growth. Industry growth generally in pharma is about 3%. Our growth rate in sort of 2021 through 2025, we've set a target for double-digit growth. And I think we're very much on track to achieve that target. So while we've not given an exact number, we do aim high. So I think somewhere in between that range. But more importantly than the exact number is actually the confidence that we have in delivering that growth ambition. And as I shared just now, the confidence is underpinned by the existing medicines with their existing indications, the existing medicines with new indications and the life cycle management. And then the opportunity for 15 new medicines on top of that. And during that time frame, we don't have -- we have only a few LOEs. So it's really all about driving growth, and those are the 3 key elements of driving that growth.

Maybe one follow-up question, which would be, if I look at what at least sell-side consensus model is faster at the moment, it doesn't really have above-industry growth in the second half of the decade. There's quite a slowdown modeled. So where do you think there's a disconnect? What is the market missing versus what the company is seeing?

I think most of the consensus or analyst models obviously do not model the 15 new NMEs, right? Until they're approved, maybe they're not modeled. I also think that probably they do not model many of the new indications that we've planned. And really when you think of the portfolio of bispecifics or the ADCs and the bispecifics could leapfrog kind of directly into Phase III, which is sort of what we're doing, a lot of that is not really modeled into consensus. And so I think it's not just one element where there's a disconnect. I think it's the -- it's multiple elements, and I think it's also the confidence in those elements. We have this growth ambition, and that is on sort of a risk-adjusted basis because we know not everything is going to work. But I think there are multiple elements where I don't think we still get credit.

Maybe one other question, effectively a financial question, which business development. You've been quite busy, and you've highlighted quite a few of the deals you've done in the last year. Was that an exceptional year? And are you sort of done on BD for a while, and you now got to do a lot of integration? Or is this the new normal that Astra is going to keep on being able to do these many acquisitions, you've got room to do with this integration?

So I don't think we define a target at the beginning of the year. We always start with strategy and say, "Okay, what is really our vision and what is our strategy." And if you look at a number of the acquisitions or BD transactions that I highlighted, each one of them is on point on strategy. The strategy being leaders in the TAs that we want to be in, right? Oncology, cardiovascular, metabolic disease, et cetera. It is where we can add a lot of value, whether it's because of our clinical expertise, our commercial expertise, our ability to do combination studies. So where can we add a lot of value? So that's another element. And then looking at what gaps are there, where when we look at like the tumor maps, we're looking at all diseases holistically, whether it's renal disease or cardio metabolic disease or various tumors and where do we need to -- where are things we're developing on our own and where are things we may need to complement. And so those are sort of the elements through which -- the lens through which we look at transactions. And we don't need to do anything, but as that strategy evolves, things happen.

And it looks like there's quite a lot going on in the pipeline, both organic and also some inorganic recently as well. Is that going to require a big step-up in investment in terms of profitability as well? Is R&D going to need to go up to fund all this activity?

So we do have a lot of exciting stuff in the pipeline. And in some ways, there's always this tension between -- we've given sort of guardrails that we would have our R&D as a percentage of revenue, sort of in the low 20s percentage. And that guardrail sort of forces in some ways prioritization. That being said, we do want to fund high-value opportunities. We just did the licensing deal on the GLP-1. We -- hopefully, we'll close the Icosavax transaction recently, and again that's a big opportunity. So we're constantly prioritizing and getting efficient and more productive in order to drive and invest in that growth.

Maybe talking about one of the pipeline assets. I know we've got David as well, so oncology commercial. Dato-DXd and lung cancer, where are we on the filing for that in the U.S.? And also, can you talk about where are we on both overall survival data and the biomarker that you may be looking at as well?

So we certainly hope that Dato will be the next new oncology medicine that we're able to launch at AstraZeneca. In terms of where we are in filing, would be our hope and expectation to be able to communicate a filing acceptance this quarter. We also aim to have a nonsquamous label in terms of what our goal and our objective coming in to the work is. And I think that, that's the right way to approach this given the data sets and what we saw out of the data that we shared with ESMO. And then in terms of overall survival. We've seen already and we shared the data, a trend in overall survival not only in the ITT population, which was a 0.9 hazard ratio, but also in the nonsquamous population where we saw a hazard ratio of 0.77. And I think importantly, we'll get final analysis that will be event-driven but is likely to read out during the FDA review period. And I think we have good expectations that OS should, at least, be the same, if not improve. And the reason for that is that we know that patients with actionable genomic alterations represent more of the patients without events yet. And we know that those patients tend to do better on data from what we've seen so far.

And in terms of the TROP2 biomarker and the approach you're taking there. Is that something that you're filing for the TLO1 approval? Or is that more something that might be incorporated into future trials for the product?

It's really the latter. So the biomarker is very exciting, and the biomarker work that we're doing with the ADCs is core to the medium- and long-term strategy of being able to more precisely target these really, really important agents. The biomarker work is, right now, work that we've done to retrospectively look at the TROPION-Lung01 data and be able to see in that, that there is, in fact, a prediction of efficacy for Dato-DX based upon the biomarker. We'll need to now incorporate that prospectively into future studies moving forward. And we've got the ability to be able to do that in a handful of studies that are ongoing but also in new studies that we would start. But I also think that the data will be useful as a part of the discussions that we'll have with agencies to potentially begin to explain some of the biology that sits behind histology and what we've seen in the data so far.