AstraZeneca PLC (AZN) Earnings Call Transcript & Summary

Good morning. I'm James Gordon, JPMorgan European pharma and biotech analyst. And today, it's my pleasure to introduce the AstraZeneca presentation. You're going to hear from AstraZeneca's CFO, Aradhana Sarin. Thanks a lot for joining us today and look forward to the presentation, Aradhana.

Thank you, James, and welcome, everyone. I'm pleased to represent AstraZeneca this morning to share our remarkable progress in 2024 and our continued momentum in 2025. Here is our forward-looking statement that I would encourage you to take time to read. We saw strong growth in the first 9 months of 2024 with momentum to continue into 2025. Total revenue grew by 19% and core EPS was up 11% versus the prior year. Importantly, we saw improving cash generation with $9 billion in cash flow from operations. We saw double-digit growth from all of our focused therapy areas with oncology up 22%, biopharmaceuticals up 20% and rare diseases up 14% in the first 9 months of 2024. This underlying momentum allowed us to upgrade guidance twice in 2024. We now expect total revenue and core EPS to increase by high-teens percentage. We will report our full year results on 6th of February and encourage all of you to participate. We benefit from broad-based global growth, and we saw double-digit growth in the U.S., Europe and emerging markets in the first 9 months of 2024. In November, we announced $3.5 billion of CapEx investment in the U.S., which will help deliver continued growth, and we expect the U.S. will comprise roughly half of total revenues by 2030. In the wake of the ongoing investigations in China, we anticipate some revenue impact on our commercial business in China, both in the fourth quarter of 2024 and into 2025. Despite this, we continue to anticipate durable growth across the emerging markets and all other regions. I'm not sure why the slides are not working. Maybe you can help me on advancing slides.

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Religiously.

No problem. Actually, I don't think it's advancing on the. Okay. All right. Thank you. We have delivered 7 NMEs towards our ambition to launch 20 medicines by 2030, including most recently Kavigale. In addition, we have 21 NMEs in active late-stage clinical trials. In 2024, we read out 9 positive Phase III trials shown here. Many of these trials were underappreciated by the Street. And cumulatively, these opportunities represent more than $5 billion in incremental peak sales revenue. At our Investor Day in May last year, we announced our ambition to deliver $80 billion in risk-adjusted total revenue by 2030, reflecting continued growth of our commercial portfolio and new medicines launches. In parallel, we continue to invest behind disruptive technologies shown here to unlock sustained growth beyond 2030. 2025 marks the beginning of a truly unprecedented catalyst-rich year and a period for our company. On the left, you'll see key Phase III indication expansion opportunities. New opportunities for Datroway, Enhertu and Imfinzi have potential to unlock further waves of growth. We will also see Phase III data for Fasenra in COPD. And lastly, 2 Breztri Phase III trials in severe asthma. On the right-hand side, you see first Phase III data readouts expected for 7 potential NMEs in 2025, all of which carry meaningful revenue opportunities. Accelerating recruitment rates mean that we now expect Phase III readouts for gefurulimba and efzimfotase alfa in 2025. I plan to use the balance of the presentation time to cover some of these key upcoming opportunities. Enhertu has proven to be a truly transformative medicine. We shared results of DESTINY-Breast06 during the ASCO Plenary Session last year, and we anticipate FDA regulatory decision in the first half of this year. The DESTINY-Breast06 trial has potential to once again redefine hormone receptor-positive breast cancer, moving Enhertu earlier into the chemotherapy naive setting and the HER2-ultra-low segment. This year, we hope to further expand Enhertu's reach in HER2-positive early-stage breast cancer with DESTINY-Breast11 and DESTINY-Breast05. DESTINY-Breast09 has potential to replace trastuzumab plus -- trastuzumab as standard of care in frontline metastatic HER2-positive breast cancer, a significant opportunity with over 65,000 patients globally. Imfinzi experienced significant growth following approval in biliary tract cancer and liver cancer last year, broadening our IO foundation into GI cancers. This year marks a new wave of growth, expanding our leadership in lung cancer with the launches of AEGEAN and ADRIATIC and in bladder cancer with NIAGARA. Additionally, we are expecting further Phase III trial readouts across lung, GI and bladder. Looking ahead, we are advancing Imfinzi-based combination regimens and accelerating our next-generation IO bispecific programs, which will support continued long-term growth across our immuno-oncology portfolio. Respiratory and immunology was our fastest-growing therapy area last year, growing 39% in the fourth quarter of 2024. What is underappreciated is that this is still a very young portfolio with substantial growth in the years to come. In 2025, we anticipate meaningful readouts for Fasenra in COPD and Breztri in severe asthma. We're also developing an inhaled TSLP now in Phase II, which would represent a major breakthrough in respiratory medicine as the first inhaled biologic. Finally, our anti-IL-33 tozorakimab has a unique dual mechanism of action and is recruiting rapidly across 4 Phase III trials. Beyond indication expansion opportunities, over the course of this year, we will read out Phase III data for 7 NMEs that are listed here. We will also share additional Phase I and II data for other key NME opportunities. I will now take a few moments to walk through some of these upcoming NME Phase III readouts. Starting first with -- in oncology with Datroway, formerly known as Dato-DXd, which received its first regulatory approval in Japan at the end of December. Just yesterday, we announced filing acceptance of late line EGFR-mutated non-small cell lung cancer and granted priority review, a significant recognition of the potential value of Datroway in this setting. Shortly, we expect to announce the results of the TROPION-Breast02 in the first Phase III trial for Datroway in triple-negative breast cancer. We've been highly encouraged by the benefit we see when combining Datroway with IO agents in the metastatic setting, both in breast cancer as seen in the BEGONIA study shown here as well as in lung cancer with TROPION-Lung02 and TROPION-Lung-04. The Phase III AVANZAR study represents a number of important firsts, including the first Phase III IO combination trial, the first of 5 frontline lung cancer trials for Datroway as well as the first Phase III study to prospectively validate the QCS biomarker. We look forward to announcing the results of AVANZAR in the second half of this year. Our oral SERD, camizestrant, is now being investigated in 4 Phase III trials across both early stage and metastatic breast cancer. In the Phase II SERENA-2 trial, camizestrant showed a clear PFS benefit compared to Faslodex, irrespective of ESR1 mutation status. Importantly, we saw low rates of GI toxicity, meaning patients can remain on treatment for longer. These data enhance our confidence in camizestrant as the potential best-in-class oral SERD. SERENA-6 is the frontline HR-positive setting. The first Phase III trial of camizestrant will read out in 2025 and will mark the first step towards establishing camizestrant as a new backbone endocrine therapy. Turning now to our biopharmaceuticals portfolio. Our novel aldosterone synthase inhibitor, baxdrostat, carries multi-blockbuster potential with Phase III trials underway as monotherapy and in fixed-dose combinations with Farxiga. This year, we will read out BaxHTN Phase III in uncontrolled, including resistant hypertension. We have seen encouraging blood pressure reduction in Phase II and see important advantages compared to other ASIs, including a longer half-life, which may offer better 24-hour systolic blood pressure control. A Phase III study of baxdrostat in combination with Farxiga for patients with kidney disease and high blood pressure was also initiated last year. One of several combination CVRM studies we have now initiated, reflecting the unique portfolio strength we have built in this area. We have 2 important readouts in our rare disease portfolio. First is the Phase III CALYPSO trial for eneboparatide in hypoparathyroidism, which represents a blockbuster opportunity with over 200,000 patients across U.S., Europe and Japan. Eneboparatide aims to address 3 clinical priorities for patients, including normalizing serum calcium, decreasing urinary calcium excretion and preserving bone mineral density. We believe eneboparatide has the potential to be differentiated across all 3 clinical priorities, and we look forward to the readout in the coming months. The second rare disease opportunity is efzimfotase alfa, our next-generation hypophosphatasia medicine developed in-house based on learnings from Strensiq. Efzimfotase alfa represents a significant advance in the treatment of HPP and is a great example of patient-centered innovation with lower injection volume, less frequent injections and an improved manufacturing process compared to Strensiq. These important innovations mean that we have the potential to broaden the addressable population by as much as 6x that of Strensiq, making this a blockbuster opportunity. The fundamentals of our business are extremely strong. And as you've seen, 2025 proves -- will prove to be a very exciting year for our business. Our capital allocation priorities remain unchanged and reinvestment in our business remains our top priority. Importantly, the growth in our revenue has enabled us to continuously invest significant amounts in R&D and keep R&D as a percentage of total revenue in the low 20s band. As you can see here, the number of late-stage trials in our pipeline has increased over the past several years. And in parallel, the average non-risk-adjusted peak year potential for these drugs in late-stage trials is now over $1 billion. As we work towards our ambition to deliver 20 new NMEs by 2030, on top of the 7 NMEs that I've mentioned today and are already approved, we have an additional 21 NMEs in active late-stage development. Fundamentally, a rigorous approach to R&D has led to the creation of an industry-leading high-value pipeline that will further unlock long-term growth and continue to deliver value for shareholders. Our ambition is to deliver growth well beyond 2030. And to that end, we're making significant progress across our several disruptive technologies. We now have Phase III trials underway in 3 of these high-value areas. Most importantly, we initiated or have planned Phase III trials for AZD0120 or BCMA/CD19 CAR-T. AZD0486 or CD19/CD3 T-cell engager in hematological malignancies. We will continue to report progress across each of these technologies. In closing, I'd like to come back to our strategic ambitions. We have set our sights on $80 billion in total revenue by 2030. And over the course of this year, with multiple high-value Phase III readouts, we expect to demonstrate clear progress towards meeting that ambition. We remain highly focused on generating operating leverage across our business and are on track to deliver a mid-30s operating margin by 2026. The key driver being SG&A growing at a slower pace than total revenue. Importantly, we are seeking an accelerating pace of NME launches and are well on track to deliver at least 20 new medicines by 2030. With that, I would like to thank our host at JPMorgan and James and invite Dave over to the stage, who leads our oncology business for the fireside chat.

Great. So we've now got about 20 minutes for questions. I've got a couple of questions. But if you, the audience, have any questions as well, given how well this app works, the best maybe if you raise your hand, and we'll get a microphone directed to you. I think I can see through the lights there is someone with the hand over there.

Thank you so much. This was a very comprehensive presentation [indiscernible] from Houston. AstraZeneca acquired Fusion Pharma early last year for more than $2 billion. The main asset of this acquisition was Actinium-PSMA INT, which is for treatment of castration-resistant prostate cancer. I didn't see even any mention of this drug to be in the radar screen for development. Can you elaborate on this to see what's your plan for development of this highly innovative and [ unique ] medication?

Yes, absolutely. So it was on one of the slides. It was in the radioimmunoconjugates and ADCs portion that sits within there, certainly within the PSMA-directed therapies against metastatic castrate-resistant prostate cancer, as you say, we think that there's a great opportunity to be best-in-class here. We think that the alpha emitter approach is one that's differentiated, and we are moving that program forward at full pace, also at the same time, looking for opportunities to be able to move into other areas where we think that RICs can make a meaningful difference in terms of improving on this modality. Also, I think it's worth noting that looking at combinations is an important aspect of the program, and I think you see that across all of the oncology and indeed, even in the weight management work that we're doing to look at opportunities not only through combinations, but also in sequences to be able to lay out full approaches to being able to treat patients along their entire journey from early disease into late disease. And I think this is an important part of our prostate strategy and approach.

I think we -- I can see someone the hand raised here.

[indiscernible] from Squarepoint. I want to ask for the SERENA-4 readout that we're anticipating later this year, whether there'll be any data given about endocrine-sensitive populations with that trial readout?

So on that, just to be clear, what we've commented on is that SERENA-6 is the study that is reading out this year. And just for everybody else within the audience, SERENA-6 is a study that is looking at postemergence of the ESR1 mutation. If we move from an AI and a CDK4/6 to a camizestrant-based approach, is there efficacy within that population. I think there's a lot of really good science to support that ESR1 mutations and in particular, camizestrant is going to work particularly well within this population. Of course, that would give a good read-through into the SERENA-4 population. I think it's also worth noting -- remember that when we look at data like SERENA-2, which showed that both in the mutants and in the wild types that there was good activity for camizestrant, that was against fulvestrant, a SERD. When we move with SERENA-4 into the frontline setting, that's going to compare against AI. And so that's one of the reasons that we think that there's a good opportunity for camizestrant to do well in that SERENA-4 study because AI historically doesn't do well against the mutated population, but it also may not perform as well as next-generation SERDs do in the wild-type population as well. And I think that's a really important aspect of the program.

Take this question here.

Yes. Also wondering your -- the status of your internally developed ADC portfolio, particularly like the EGFR-cMET ADC. Recently, I believe there are already 5, 6 new INDs, but we haven't heard anything so far from your...

Well, we actually have 7 of our own internally developed ADCs that we have put into the clinic. But as you can imagine, including the EGFR cMET bispecific ADC, the folate receptor alpha, the B7-H4. So all of those are progressing, but they're still in early trials. So we will report early-stage data as it happens. And some of them, we may advance pretty quickly into late-stage trials as well. What we highlighted today was only sort of the Phase IIIs that are reading out this year. But obviously, there's a lot more under the pipeline. And if we covered all of that, we'll be here till afternoon. So...

Yes. And I think the important piece within this is that as we take a look, again, back to the same theme of combinations and sequences, we're looking for opportunities to accelerate as quickly as possible combinations with our bispecific portfolio together with the antibody drug conjugates. And I think that the idea is that we can beat PD-1, PD-L1 with the next wave of IO and then also displace classic chemotherapy with a more precise approach. And if we can combine that together with biomarkers, we really do think that we've got a differentiated leapfrog effort. There's work that we obviously have to do in order to make sure that we get those 3 pieces to come together. But that's fundamentally the thesis that sits behind a lot of the work that we're doing with the antibody drug conjugates.

And the people with a microphone, I can see a hand raised in the front here. Maybe just while the microphone is getting them, one question I might ask, which would be, so you talked about the $80 billion target, which was set in May last year, which seems quite a long time ago now. There's a lot going on. So there's been lots of developments in the pipeline, things going in China. Given all the moving parts, I'm more or less confident on that $80 billion. And what was assumed for products like Dato at that time or what was going on in different geographies when you set that long-term target?

So the $80 billion ambition we had set was based on a risk-adjusted -- on a pipeline risk-adjusted basis and obviously, it was also based on a constant currency basis at the time. I think today, we -- with some of the approvals we've seen, with some of the data readouts, we have more confidence. But I think by end of this year, given all the derisking that we'll see in the Phase III, we covered a number of them. By end of this year, we'll have even more confidence because we'll know exactly where that derisking will happen from. We are seeing strong growth against in all geographies. You mentioned China. So China is about 13% of our total revenue, but is actually growing slower. And this year is also expected to decline given the Farxiga VBP and some impact from the ongoing investigations. But as part of the $80 billion, it's a smaller portion than it's today because emerging markets and other markets are growing much faster.

Can I use, James, the opportunity just to comment on Datroway since you asked within that? So I mean, first and foremost, really great news. Aradhana mentioned this, Datroway is now a medicine. It's been approved in Japan, and that's the first global approval within breast cancer. We are close to the PDUFA date in the U.S. with TROPION-Breast01. And certainly, we will only know once we know, but I have good reason to believe that, that process is moving in the way that we would like it to. Aradhana also mentioned that we've got now a priority review acceptance in lung cancer and EGFR patients in the second and the third line, so post TKI and chemo. That with the priority review means that a U.S. lung cancer approval certainly is possible in the second half of this year. And so while that wasn't the exact original plan with TL01 more broadly, I think to be able to enter in 2025 into breast cancer, lung cancer in the U.S. together then with the opportunity potentially for TROPION-Breast02 in triple-negative breast cancer to read out and AVANZAR to read out, we could have at the end of 2025, approvals in breast and lung for Datroway in the U.S. and across the globe and line extension opportunities into 2026, which is why as part of that $80 billion, Dato remains one of the $5 billion-plus peak year sales opportunities, and we think that we remain on track to be able to have that be one of the medicines that contributes to that ambition.

Maybe I'll just ask one follow-up question while we're on Datroway, which I believe is the new name. Yes. So AVANZAR and the confidence there because I think on the slides that you put up, Aradhana, it looked like it was maybe because AVANZAR is well powered, you could actually answer 2 questions. So you could look at how well the drug performs just in people with this QCS TROP2 biomarker and the broader population as well. So what is the key question? Are you going to ask these 2 questions in parallel or sequentially? What is this study actually testing them?

So the study has the ability -- it's powered to answer both those questions. So the primary endpoint would be PFS and OS in both the QCS biomarker population only and non-squamous population. So we'd be able to answer both those questions.