AstraZeneca PLC (AZN) 2021 Q4 法說會逐字稿

Good morning to those joining from the U.K. and the U.S. Good afternoon to those in Central Europe. Welcome, ladies and gentlemen, to AstraZeneca's Full Year 2021 Results Conference Call and Webcast for Investors and Analysts.

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. (Operator Instructions) And with that, I'd now like to hand the conference over to AstraZeneca.

Thank you, Martin, and good afternoon, everybody. I'm Chris Sheldon, Head of Investor Relations at AstraZeneca. I'm pleased to welcome you to AstraZeneca's Full Year 2021 Conference Call. All materials presented are available on our website, and Slide 2 has the usual safe harbor statements.

We'll be making comments on our performance using constant exchange rates, or CER, core financial numbers and other non-GAAP measures. A non-GAAP to GAAP reconciliation is contained within the results announcement, numbers used are in USD million and for the full year 2021, unless otherwise stated.

Please advance to Slide 3. This slide shows today's speakers from our senior executive team. In a moment, I'll hand you over to our CEO, Pascal Soriot, to begin. Please turn to Slide 4. (Operator Instructions)

Please advance to Slide 5. And with that, please Pascal, over to you.

Thank you, Chris, and hello, everyone. So if you move to Slide 6, please. 2021 was an exceptional year from a pipeline delivery, but also a commercial execution across our whole portfolio of medicines. This included the delivery of 2.5 billion doses of our COVID-19 vaccine Vaxzevria and the recent emergency use authorization of Evusheld for the prevention of COVID-19 in certain high-risk populations, immunocompromised people. Importantly, we completed the acquisition of Alexion, which accelerates our strategic and financial development. I want really to thank the amazing team of people around the world who have worked so hard for 2021 across the world to deliver this fantastic results and bring this life-changing medicines to patients across the globe.

With the inclusion of Alexion from the 21st of July, we delivered total revenue for the year of over $37 billion, an increase of 38%. Revenues excluding Vaxzevria increased by 23%. And the revenue, including only Q4 Vaxzevria increased by 30%. I'm quoting those numbers because they were the guidance we gave at the end of Q3. And as you can see here, we achieved our guidance. In fact, we overachieved it as it relates to total revenue, including Vaxzevria for Q4.

Our core EPS was $5.29, 37% growth at CER. And if you look at CER, we also overachieved our guidance from an EPS viewpoint. Our commitment to follow the science resulted in 5 new molecular entity forward in the year. We've seen unprecedented the news flow with 14 positive Phase III readouts across 9 medicines in 2021 with the potential to change the standard of care in multiple diseases.

Moving to Slide 7, please. The performance in the period was driven by strong growth across our diversified business areas in multiple geographies. The U.S., Europe and the established rest of the world, total revenue also strong growth in the full year. In the emerging markets, overall, we observed double-digit growth of 10% exclusive of Vaxzevria revenues and despite some pricing headwinds in China associated with NRDL and the VBP programs. Total revenue in China declined in the second half of the year due to this pricing pressure. And in the fourth quarter, our revenues in China declined by 9%. We -- this resulted in overall growth for China of 4% for the full year. And importantly, we had a strong performance in the emerging markets out of China. So overall, still very good growth for the totality of the emerging markets. Overall, we made, as I said, our 2021 total revenue guidance, excluding Vaxzevria revenue. And here we exceeded our updated guidance provided in the last quarter when we included the Q4 2021 Vaxzevria revenue.

So if we move to Slide 8, we're confident in the long-term outlook for the business due in large part to the durable growth of our portfolio. We have a diverse area and the geographic presence, and we have a robust late-stage weighted pipeline. This is the strength of our model, a diversified portfolio with several blockbusters. We're not depending on 1 or 2 large products. We have a whole range of blockbuster products. And we also have a diversified geographical footprint. And it's important because when geographies faces challenges, other geographies pick up the slack. And in fact, that's what happened in 2021 as China face challenges, the U.S., Europe and the rest of the world, enabled us to deliver still a pretty strong growth across the company.

So if we move to Slide 9. Beyond 2025, we expect to deliver long-term sustainable growth for multiple activities First, our robust life cycle management strategy for several of our on-market medicines should provide additional growth opportunities in the future with many of them already at blockbuster's status. Secondly, we will continue to invest in our large development pipeline, with 15 NMEs in late-stage development and 128 NMEs or major LCM projects in our combined Phase II and Phase III stage pipeline. Some attrition will occur, of course, but we're confident in the overall quality of these programs that represent many best or first-in-class prospects with the potential to redefine current standards of care. Thirdly, we continue to look for opportunities to reinforce our portfolio through value-enhancing business development.

Beyond our acquisition of Alexion Rare Diseases, our oncology partnership with Daiichi Sankyo for Dato-DXd and recent amyloidosis focus deals, they certify our belief that the best (inaudible) doesn't happen in isolation. Finally, our current portfolio, and that's an important point. Our current portfolio of marketing medicines has an industry-leading loss of exclusivity profile. If you look at it, most of our products are patent protection past 2030. And it's about less than 20% of our 2021 sales that are affected by patent expiries or loss of exclusivity, I should say, before 2030. So with this, the continued growth of our broadcast of products and additional launches, additional new products, we're confident that post-2025, we should be able to continue growing. And these activities reinforce our ambition to achieve a mid- to high 30s operating margin percentage over the mid- to long term, which is dependent on a number of factors, including, of course, successful pipeline and commercial execution as well as the evolution of our business mix over time.

Slide 10, please. Lastly, reflecting on our exceptional late-stage pipeline delivery I'd like to highlight recent regulatory decisions for 3 medicines in the last quarter with a CHMP positive opinion for Saphnelo, EU, U.S. approval for Tezspire and U.S. emergency use authorizations for Evusheld. I now hand over to Aradhana Sarin, our CFO, who will walk you through our financial performance and take you through our 2022 financial guidance. Over to you, Aradhana. Please move to Slide 11.

Thank you, Pascal, and hello, everyone. As usual, I will start with our reported P&L. Please turn to Slide 12. As Pascal has highlighted, total revenue increased by 38% in 2021. Excluding our COVID-19 vaccine, total revenue increased by 23% in the year. Our reported operating profit decreased to $1.1 billion in the year with an operating loss in the fourth quarter. The Alexion transaction has impacted our reported numbers as we amortize the purchase intangibles over their economic useful life. We have also previously mentioned that the inventory Alexion had at the time of the acquisition was valued at fair value in AstraZeneca's books at the closure of the transaction. And this fair value uplift affects reported numbers as cost of goods are sold.

In line with previous comments, we anticipate to see this impact to last approximately 18 months post acquisition. Following the Alexion acquisition towards the end of 2021, we undertook a comprehensive operational review across the rest of the organization, aimed at integrating systems and optimizing our global manufacturing footprint and looking at resource allocation across our portfolio. As a result of this restructuring, we anticipate incurring onetime costs of approximately $2.1 billion of which approximately $1.4 billion are cash costs and $0.7 billion are noncash costs and capital investments of approximately $200 million.

These activities are anticipate to realize run rate pretax benefits before reinvestments of about $1.2 billion by the end of 2025. These costs and the benefits include the previously announced Alexion synergy numbers that remain in line with what we have communicated previously. Consistent with established practice, these restructuring costs will be excluded from our core non-GAAP financial measures. We booked some initial costs relating to this review in Q4 2021, contributing to higher restructuring charges in the quarter, which also impacted the tax rate, which I'll come back to.

Please turn to Slide 13. This is our core P&L for Q4 and full year 2021. The gross margin declined by 4.7 percentage points in 2021 versus 2020, negatively impacted by Vaxzevria, our COVID-19 vaccine, the vast majority of which was on a non-for-profit basis. We have also previously highlighted that we continue to see some downward pressure on our gross margins from the VBP and NRDL programs in China. In addition, the continued success of our partner medicines, including Lynparza and the profit-sharing arrangements have put additional pressure on the gross margin percentage. This downward pressure has been partly offset by the addition of Alexion whose products have a higher gross margin.

Our core R&D costs of close to $8 billion were just over 20% of total revenue, and this is broadly in line with the steady state we have indicated. We expect going forward as we remain committed to investing in future growth. Our core SG&A costs increased by 15% to $11.1 billion. This includes Alexion from end of July 2021 versus AstraZeneca stand-alone 2020, so it is not a like-for-like comparison. We have continued to invest behind new launches and the recent positive pipeline data has also resulted in some increased launch and prelaunch investments including Saphnelo, Tezspire and Enhertu. However, we continue to manage our SG&A spend and drive operating leverage in the business, which we defined as growth in revenue exceeding growth in operating expenses.

Our core tax rate was 16.6% in 2021, partly impacted by the nontaxable gain from the Viela divestment, which impacted both the reported and core tax rate for full year 2021. We also had some reductions in tax liabilities arising from updates to estimates of prior period tax liabilities, following settlements with tax authorities and the expiry of the statutory limitations which impacted both the reported and core tax rate in the fourth quarter. We don't anticipate these one-off items to recur in 2022. Our full year 2021 core EPS was $5.29. Our core EPS growth at constant exchange rates for the full year was 37%, implying core EPS on a CER basis above our guidance range of $5.05 to $5.40. Note, that there were some negative FX impact seen during the year, especially in the fourth quarter.

Some of the currencies we're exposed to on the manufacturing side, including British sterling appreciated versus the dollar in fourth quarter 2021 versus fourth quarter 2020, while some of our key revenue currencies depreciated, which contributed to a negative FX impact in the quarter. Note that our guidance is always on a constant exchange rate basis, and we try to provide indication where possible on FX impact.

Please turn to Slide 14. Today, we are pleased to announce our full year guidance for 2022. We expect total revenue to grow by a high teens percentage at constant exchange rates. This includes a full year contribution from the Alexion business and our COVID-19 medicines now a part of our core business following the establishment of our vaccines and immune therapies disease area. Total revenue from the COVID-19 medicines is anticipated to decline by low to mid-20s percentage with an expected decline in the sales of Vaxzevria being partially offset by growth in Evusheld sales.

The majority of vaccine revenues in 2022 is expected to come from non-for-profit contracts. As expected, the gross profit margin from the COVID-19 medicines is expected to be lower than the company average. The ex-COVID gross margin is anticipated to be relatively stable versus last year given the puts and takes previously mentioned. We will continue to make disciplined investments in order to maximize shareholder value. Core operating expenses are expected to grow by low to mid-teens percentage for the full year 2022. This includes continued investment in our COVID-19 franchise.

Core EPS is expected to grow by a mid- to high 20s percentage on a constant exchange rate basis. Based on average January FX rates, we anticipate a low single-digit percentage adverse FX impact on both actual total revenue and core EPS in 2022. Our core tax rate for 2022 is anticipated to be between 18% and 22%. As usual, we are anticipating to see both some headwinds and tailwinds over the course of the year. We continue to see pricing pressure in China and anticipate to see a mid-single-digit percentage decline in revenue in 2022 compared to 2021.

The decline in China is expected to be offset by strong growth in ex-China emerging markets and we anticipate a mid-single-digit growth in 2022 across the emerging markets region as a whole. Our long-term ambition of growing by a high single digit in emerging markets overall remains intact. In addition, we continue to see impact of COVID-19 on oncology and respiratory diagnosis and treatment rates. There are also pricing dynamics that are impacting some of our medicines that Dave will speak further about.

On the positive side, 2022 will be the first full year of Alexion ownership. We expect continued strong growth for some of our key medicines, including Farxiga, Tagrisso, Calquence and Enhertu, and we continue to see strong momentum in ex-China emerging markets. Finally, we're excited about the opportunity of our COVID-19 antibody Evusheld, which offers protection for certain high-risk populations.

Please turn to Slide 15. Our current net debt is $24.3 billion, up from $12.1 billion at the beginning of the year, with the increase relating to the acquisition of Alexion. Our current net debt to EBITDA is 3.2x. If you adjust for the Alexion inventory, fair value uplift, our net debt to EBITDA is 2.5x. Our operating cash flow has improved in line with expectations, and we remain committed to reducing our net debt. It is also worth highlighting that we do have some committed BD-related payments this year, including to Daiichi Sankyo.

Also in January 2022, we made the first out of 3 payments to former shareholders of Acerta. Our capital allocation priorities remain unchanged. We're keen to keep a strong investment-grade rating, and we will continue to reinvest in the business. We will also continue to do value-enhancing business development when we believe it makes sense to do so. We are pleased to share that the Board has approved a second interim dividend for fiscal year 2021 of $1.97 payable in March 2022. Reflecting increased confidence in future growth and cash generation, the Board intends to increase the annual dividend by $0.10 to $2.90. We intend to continue to balance the annual dividends declared broadly in the ratio of 1/3 as to the first interim dividend payable in September and 2/3 as to the second interim dividend payable in March.

With that, I will hand over to Dave to cover Oncology.

Thank you, Aradhana. Slide 16, please. We're pleased to report that our oncology total revenue grew 17% during 2021 finishing the year on a strong note with 21% year-on-year growth in the fourth quarter. That performance speaks to the global momentum of new launches and the diversity of our portfolio in the face of continued headwinds from COVID-19. Last quarter, we commented that oncology diagnosis rates were improving. However, Omicron has stalled that recovery and we estimate that year-end diagnosis rates are still 5% to 15% below pre-COVID baseline levels with lung and ovarian most impacted and a lesser impact in breast and CLL. With that said, against this backdrop, strong commercial execution grew oncology to $13.7 billion for the year with a return to sequential growth of Tagrisso and robust performances from Imfinzi, Lynparza, Calquence and Enhertu. We were pleased to cross a number of important milestones in the fourth quarter. Tagrisso passed $5 billion in annual sales for the first time, Lynparza passed $2 billion and Calquence $1 billion with total oncology revenues in the quarter nearing $4 billion.

On Slide 17, which is our lung cancer franchise, both Tagrisso and Imfinzi showed strong growth in 2021 at 13% and 16%, respectively. In the U.S. and Europe, Tagrisso continues to grow from rising first-line duration of treatment and increased adjuvant use, which is partially offset by declining second-line use and the aforementioned pandemic impact on diagnosis. In Japan, strong commercial execution fueled growth of 8% for the year, bringing annual sales to $775 million. At this run rate, Japan's MHLW may assess in 2022 that annual spending on the medicine exceeds JPY 100 billion, a milestone which could trigger a mandatory price cut this year based on a formulaic application of that rule. Several, however, future growth catalysts remain for Tagrisso in Japan, notably ADAURA, which we hope to see approved in the second half of this year.

In emerging markets, Tagrisso growth for the year was 6% after a third quarter that was impacted by inventory movements in China, EM growth in Q4 accelerated to 23% versus the same quarter last year and as anticipated, demand growth in China for the quarter is now fully compensating for the lower NRDL price based on increasing first-line use and strong second line share performance. Beyond China, Tagrisso continues to benefit from increasing reimbursement and increased rates of testing. Imfinzi continues to solidify its position as the global standard of care in the PACIFIC and CASPIAN settings, which sets the foundation for anticipated future launches in gastrointestinal cancers based on the HIMALAYA and TOPAZ-1 data that we recently discussed with many of you at ASCO GI.

Please turn to Slide 18. Lynparza continued to deliver strong growth across tumor types and territories, increasing product sales by 30% to $2.3 billion and triggering a $400 million sales milestone from our partner, Merck in the quarter. U.S. sales were up 24%, driven by greater use in ovarian, prostate and notably breast cancer. Growth in Europe, established rest of world and China was supported by continued growth in HRD testing and launches in new markets for ovarian cancer. We look forward to sharing the data from the PROpel Phase III trial in first-line metastatic castrate-resistant prostate cancer at ASCO GU later this month.

Please turn to Slide 19. We are pleased to see Calquence achieve blockbuster status in the quarter, driven by a robust share performance in the U.S. in our chronic lymphocytic leukemia indication and continued momentum from new launches in Europe. We were pleased to see Calquence achieve blockbuster status in the quarter, driven by our robust share performance in the U.S. where Calquence continues to be the leading BTKi with around 55% of new patient share in CLL as well as continued momentum from new launches in Europe.

Moving on to Enhertu, 2021 saw good momentum, particularly in the U.S. and the third line breast and second-line gastric cancer indications we were encouraged that both the NCCN and ESMO guidelines were updated to include Enhertu as a new standard of care in Enhertu-positive metastatic breast cancer. Together with our partner, Daiichi Sankyo, launch efforts are in full swing as we prepare for the eagerly anticipated global approvals of DESTINY-Breast03.

I'll now hand it over to Susan to discuss our R&D progress in 2021 and opportunities in 2022.

Thank you, Dave. Please turn to Slide 20. 2021 was another fantastic year for our research and development efforts in oncology. We saw exemplary clinical progress across multiple tumor types as we continue with our mission to bring step-change benefits to patients through new medicines and the (inaudible) understanding of disease biology.

I'll now take you through some of the main highlights of what was a busy autumn conference season. At the San Antonio Breast Cancer Symposium, datopotamab deruxtecan, our TROP2-targeted antibody-drug conjugate showed encouraging efficacy in triple-negative breast cancer, with an impressive objective response rate of 53% in patients who are treatment naive to topoisomerase inhibitor-based ADC therapies. In hematology, we delivered updated durable 3-year median follow-up results from the ASCEND Phase III trial, in which Calquence significantly prolonged investigator-assessed progression-free survival versus standard of care combinations in relapsed or refractory chronic lymphocytic leukemia.

In addition, we have now submitted the ELEVATE plus data for Calquence immediate-release maleate tablet formulation in the U.S. and Europe, providing a new option for patients that will allow for coadministration with proton pump inhibitors and therefore, expanding Calquence's reach. Lastly, as showcased in our ASCO GI investor event just a few weeks ago, our immuno-oncology franchise saw remarkable results in hepatobiliary cancers with positive data for the HIMALAYA and TOPAZ-1 trials, and we look forward to discussing the data with regulators as soon as possible. We also saw impressive data from Enhertu at ASCO GI, including results from the Phase II DESTINY-CRC01 trial with an objective response rate of 45.3% as well as a median overall survival of 15.5 months. 2022 is full of exciting news flow for AstraZeneca, and I look forward to informing you of our progress. I'll now hand over to Ruud to cover biopharmaceutical.

Thank you so much, Susan. Now turning to Slide 22. In cardiovascular arena metabolism, total revenues in the year were up 9% to $8 billion, with the vast majority of growth coming from Farxiga's continued strong performance. Farxiga sales grew 49% in the year to $3 billion and remains the #1 contributor to AstraZeneca's revenue growth with over $1 billion coming from the emerging markets. Farxiga also continues its remarkable trajectory as the fastest-growing SGLT2 inhibitor globally and is now the market leader following successful launches in heart failure and chronic kidney disease with 103 and 74 approvals, respectively.

We expect to deliver Phase III trial for Farxiga in heart failure with preserved injection fraction to read out in the first half of this year. Lokelma continued its growth trajectory with revenues of $175 million in the year. In the U.S., Lokelma continued its leadership in the branded potassium binder market. And in Japan, its market share increased to 46%. In Europe, the launch continues to roll out achieving branded market leadership in new markets like Spain and Belgium and is now reimbursed in 11 markets. Importantly, Lokelma was included for the first time on the China NRDL and Farxiga was retained.

Please move to Slide 23. Turning to Respiratory & Immunology. Total revenues surpassed $6 billion, a remarkable achievement considering the ongoing effects of COVID with growth of 9% in the year. Fasenra reached blockbuster status, delivering product sales of almost $1.3 billion up 31% and continues to be the leading respiratory biologic prescribed for eosinophilic asthma globally. Fasenra's performance has been driven by sustained growth in new-to-brand patient starts in both the U.S. and Europe.

Breztri, with product sales of $203 million is now approved in 39 countries. Within the fast-growing triple fixed-dose combination class, Breztri has gained 13% branded market share and in our key markets of the U.S., China and Japan has captured 23.5% of the market.

Switching to Saphnelo. We have had a pleasing start to launch in the U.S. and Japan for our biologic treatment in systemic lupus erythematosus. In the U.S., we estimate that around 600 health care practitioners have prescribed Saphnelo with a hyper proportion of patients being biologic naive or receiving standard therapy. In Japan, following reimbursement in November, formerly listing submissions are underway, and the first patients have already received their first dose of treatment.

Please turn to Slide 24. Following approval in the United States, Tezspire is now the first and only biologic approved for severe asthma without a phenotype or biomarker limitation. Importantly, Tezspire is the only biologic proven to significantly reduce exacerbations in patients with blood eosinophil levels below 300 cells per microliter. We see a compelling value proposition for Tezspire, an opportunity to immediately address a key unmet need for severe asthma patients. We launched in the U.S. in January and our regulatory submissions are underway in Europe and Japan.

Please turn to Slide 25. Now on to the emerging markets, where total revenue grew to $12.3 billion. Growth rates, excluding vaccines, were 4% in China and 21% in emerging markets ex-China. Farxiga has continued its remarkable growth of 70% in 2021 as it continues to benefit from increased patient access in China following NRDL listing, broader access across other markets in the region and successful launches for heart failure and chronic kidney disease indications. As expected, Pulmicort sales were impacted by VBP 5, which was implemented in October. This resulted in significantly lower market access and a mandatory price reduction in China. VBP 7 is due in the first half of 2022 and will include Seloken ZOK, Prilosec and (inaudible). Outside of China, we saw broad-based growth across all regions, $6.3 billion of sales, up 89% year-on-year, of which $2.3 billion came from Vaxzevria. I will now hand over to Mene to cover the R&D advancements in the period.

Thank you, Ruud. Please turn to Slide 26. 2021 was an extremely productive year for AstraZeneca's Biopharmaceuticals R&D with 4 1st approvals for new molecular entities, Saphnelo for systemic lupus erythematosus, Tezspire for severe asthma and Vaxzevria and Evusheld for COVID-19. And Q4 was a busy quarter with the approval of Tezspire which will enable us to start an extensive life cycle management program, Farxiga's pediatric program made good progress with the regulators and Saphnelo received a positive recommendation from the CHMP in Europe. Evusheld was granted U.S. emergency use authorization in the prophylaxis setting and has now been authorized in 11 countries with more on the way. Evusheld remains the only antibody therapy authorized for the prevention of COVID-19 and multiple analyses by institutions such as the U.S. FDA and Washington University have shown that Evusheld retains neutralizing activity against the Omicron variant.

Similarly, several analyses published in recent months demonstrate Vaxzevria's ability to offer continued protection against COVID-19, including against the Omicron variant. Results comparing Vaxzevria to AZD2816 showed that both vaccines were broadly similar in their immune response to variants of concern, enabling us to focus our efforts on Vaxzevria.

Finally, in Q4, we added eplontersen to our late-stage pipeline through a partnership with Ionis Pharmaceuticals. Eplontersen is in Phase III trials for the treatment of 2 forms of transthyretin amyloidosis and was recently granted orphan drug designation by the FDA. I will now hand over to Marc to cover rare diseases, and he will also provide more details on how eplontersen fits within the AstraZeneca portfolio.

Please turn to Slide 28. Rare Disease delivered total revenue over $3 billion in 2021, a year-on-year increase of 9% on a pro forma pro rata basis calculated since the date of acquisition close. The growth rate for the fourth quarter of 2021 in total revenues was 11%. Total revenue in the period were driven by strong growth across all geographies and on a product level by durable Soliris volume growth in neurology indication and successful conversion to Ultomiris.

Alexion's leading C5 complement franchise continues to deliver durable pro forma, pro rata growth of 8% since the date of acquisition and 11% for the fourth quarter despite new competitive entrants in PNH and NMO and ongoing COVID-19 headwinds impacting Ultomiris conversion in atypical HUS, which is predominantly treated in hospital or emergency settings. Beyond the complement franchise, we continue to see strong performance in the metabolic portfolio with increased demand driving pro forma pro rata growth in Strensiq and Kanuma of 13% and 21%, respectively. We continue to assess the opportunity for further geographic expansion to broaden the reach of our rare disease medicines.

Please turn to Slide 29. We recently reinforced our commitment on amyloidosis with 2 new collaborations in TTR amyloidosis, one with Ionis for their TTR silencer eplontersen and another with Neurimmune for global rights of ATTR depleter NI-006. These collaborations add 2 new modalities relevant in TTR amyloidosis to our broader amyloidosis portfolio which also includes Japanese right to the TTR stabilizer acoramidis and CAEL-101 currently in Phase III for the treatment of AL amyloidosis.

Within TTR amyloidosis, there are deferring biological mechanism of action, which address misfolded (inaudible) deposit, including stabilizers, silencers and depleters. In ATTR cardiomyopathy, we believe multiple modalities will be necessary to address the full spectrum of disease severity. Amyloidosis presents an opportunity to leverage AstraZeneca and Alexion expertise in cardiovascular and rare disease, including our growing presence in heart failure with Farxiga. Commonly misdiagnosed as heart failure with preserved ejection fraction, amyloidosis represents a significant market adjacency with high unmet need. With our newly expanded amyloidosis portfolio, we have a comprehensive go-to-market strategy to leverage call point synergies given the overlap of heart failure and amyloidosis in treatment settings.

We are excited about the potential to bring innovative medicines to amyloidosis patients while also leveraging strength of AstraZeneca and Alexion and we look forward to providing you with development update as we go forward. Please turn to Slide 30. Rare disease represents a key growth opportunity for AstraZeneca with meaningful potential for science-led innovation, which is reinforced by our robust late-stage weighted pipeline with ongoing life cycle management trials in complement and a growing number of late-stage programs outside of the complement space. We continue to invest in rare disease in the fourth quarter, made progress in prelaunch activities for Ultomiris in myasthenia gravis, amyloidosis business development and the planned expansion of our New Haven research facility as well as the establishment of a European development hub in Barcelona. I take this opportunity to express my gratitude to my colleagues at Alexion for maintaining their level of service to our patients in a year of transition and integration.

Now please turn to Slide 31, and I'll turn the call back to Pascal.

Thank you, Mark. And please, next slide, 32. I will now comment briefly on important upcoming news flow across the company in the coming year ahead. In oncology, we anticipate data from Enhertu DESTINY-Breast04 for trial, Enhertu low breast cancer this quarter. We also anticipate multiple Imfinzi readouts across lung, liver and cervical cancers with the PEARL, PACIFIC-2 EMERALD-1 and CALLA studies during the year.

In CVRM, we will have data from the DELIVER trial for Farxiga in HFpEF. And in rare disease, we expect data from Ultomiris in NMOSD. We also look forward to data from eplontersen in hATTR polyneuropathy through our partnership with Ionis. As you can see, there is a lot more than what I have quoted, a very rich pipeline and lots of news again in 2022, and we will have a very rich series of news flows into 2023 as well.

Moving to Slide 33. We are pleased to have finished the year on a strong note. We exceeded our 2021 goals and guidance, and we believe we are well positioned to deliver long-term durable growth in the years to come. We're committed to double-digit growth on a CAGR basis for 2025. Beyond 2025, I believe we will continue to have industry-leading growth from our innovative medicines, our robust internal pipeline, supplemented with smart business development and also an attractive exclusivity profile for many of our marketing medicines. We maintain our ambition for an operating margin of mid- to high 30s percentage in the mid- to long term.

In 2022, we anticipate another year of double-digit revenue growth in the high teens, together with growth in (inaudible) of about mid- to high 20s, all of this at constant exchange rate. Thank you all for joining us today. We'll now take questions. And after the questions, we'll go back to -- I'll go back to Chris. So if I can open the questions, please.

So the first question is Tim Anderson at Wolfe Research. Tim, go ahead.

I have a couple of questions on China. So you're talking about long-term emerging market growth for emerging markets being high single digits percent. China is about half of emerging markets and what we're seeing, I think, in the last few quarters is that it's really the non-China emerging markets that are growing faster than China at this point. My question is, what's the long-term guidance for China growth, specifically over the next 4 to 5 years? I thought in the past, you said that would also be high single-digit percent. Is that still the case?

And then second question on China. You guys have been involved in this fraud case for a number of months now. I'm wondering what assurances you can give us at this blows over and it has no commercial ramifications for the company of obviously thinking back to when Glaxo ran into a brick wall in China in 2014 because of a bribery issue.

Thanks, Tim. We have Leon Wang, our VP for the emerging markets in China online. Leon, do you want to take those questions?

Yes. Thank you for the question. I think regarding China growth guidance, I think China is slowing down, obviously, in quarter 4. And also in 2022, we are facing batch 7 VBP. But I think our innovative portfolio are still growing quite rapidly, offsetting VBP tender loss and also some part in price cuts in exchange for volume, but the volume uptake really takes time. So it's a gradual movement. So I think -- in the next 5 years, I think I still believe China will be at least single-digit growth case. And outside China, we'll be growing faster. So putting together, emerging markets, including China, will be high single-digit growth in the next 5 years. So we are quite confident.

And also China opportunities still, we have Imfinzi testing, TOPAZ, HIMALAYAS and also Tagrisso, (inaudible) haven't even been launched yet and are being registered. And Lynparza having many indications and Enhertu is -- and Daiichi Sankyo 1062 also being registered and study ongoing. So I think China has been lagging a little bit behind in approval after U.S. and Europe. So I think these are also quite significant opportunities laying ahead of us.

But still, we need to digest our biggest product like Pulmicort and also (inaudible) mature portfolio, which we're doing very well and going VBP. So this is something we have to digest in short term. So -- and I think the fraud case in Shenzhen is really an individual case, and we have been working closely with a Central Government and National Medical Insurance Bureau already for 6 to 8 months. So we proactively take responsibility to claim internally and making sure we have all the measures to make sure that we don't have a similar individual cases again. So to minimize the risk for the company, I think it's still a more individual client risk rather than the company risk. We don't think this has any kind of similarity to the kind of GSK bribery in 2014.

Simon Baker, Redburn. Over to you, Simon.

Just a quick follow-up there, Leon. I couldn't I couldn't hear, when you talked about the single-digit growth for China, whether you said low medium or high before then, if I missed that, that would be very helpful. And then just a quick question on the gross margin. You hopefully said that the ex COVID gross margin will be similar to 2021. But within that, there are obviously some headwinds and tailwinds. I wonder if you could just give us any idea of the relative magnitude of the factors affecting the gross margin in '22 versus 2021?

Thanks, Simon. So first question will be to Leon, and the second one to Aradhana.

Yes. So the China growth actually, we are gradually getting out of NRDL price cuts in exchange for volume. So Tagrisso volume has been more than doubled. I think -- and also Lynparza, Imfinzi has been also capturing volume quite good growth, Imfinzi even self-pay. We have a new indication launch one after another. So I think oncology side gives us quite good confidence to grow. But at the same time, we are hit by a VBP price cut and the tender loss. So if you put all these things together. But in the long run -- mid-long run, so we're having lots of new product indication approval ahead of us. So we are still quite confident of the good part of the China business doing quite well. But the mature products, we have been quite successful in the past but are suffering for the next 1 or 2 years.

On the gross margin point, so we expect the group gross margins to improve relative to 2021. The group margins ex the COVID-19 gross margin, so the non-COVID piece we expect to be stable or sort of marginally improve versus our pre-COVID-19 so going back to 2022. The COVID-19 franchise gross margins are below company average, as would be expected. And there are several factors that really impact our gross margins up and down when you compare them on a year-by-year basis or year-on-year comparison. So some of the things that are driving the margins up are a full year of addition of Alexion products, specialty products in our mix and the mix shift to more oncology biologics, which have higher margin.

Some of the things that are driving the gross margins lower, China pricing that we discussed just now. The COVID-19 franchise, which I just said has lower gross margins given the non-for-profit sales, some of the U.S. government and other contracts, which are at much discounted prices, et cetera, some of the partnered programs, which, as they're more successful while they're very profitable on a percentage basis look lower and then some of the Tagrisso pricing dynamics that Dave mentioned in his comments as well, for example, relating to Japan.

Thank you, Aradhana. Next question is (inaudible) over to you.

This is Vineet here on behalf of Andrew. Just one quick question. I was just wondering if you could make any comments on the tolerability of the Lynparza (inaudible) combination in the PROpel trial given fragile elderly patients? And if you could comment on any adverse events.

Sorry, I'm not sure I got the question details, I must say. But Susan, maybe you got it? And if not, maybe ...

I wasn't sure which trial. Are you referring to the PROpel trial?

Yes.

Yes. Thanks for the question. So I think a couple of things. First of all, Propel is an important indication. We very much look forward to sharing more of the details at the ASCO GU conference next week. I think something to bear in mind is that the tolerability of olaparib as a monotherapy, we view as best-in-class, and it's due to the sort of profile that you have in terms of the spectrum of PARP in terms that are actually being inhibited by olaparib. Some of the other molecules have more off-target inhibition. So that gives us a good basis for the combination with abiraterone.

And again, I can't give you the specific details of all the adverse events because that will be presented in the presentation next week. But I would just say that the overall profile is something that we're pleased with. And we're confident about the potential uptake of the combination medicines on the results of those data. And I'll be happy to answer any questions that you have following the presentation next week.

Thanks, Susan. Next question is Sachin Jain at Bank of America. Over to you, Sachin.

Just 2 questions. I want to go back to the gross margin rather thanks for giving some of the moving parts there for '22. I wonder if you could just give us some color looking forward. The reason I ask the question is obviously you've got a lot of Alexion accretion in '22 that's absorbing some of the pressures. I'm just wondering how you think about gross margin once that onetime pressure -- sorry, onetime benefit goes from '23 and beyond.

And then secondly, just on pipeline, Pascal, you made a very fleeting reference to the 2023 event. I know it's a way out, and we've got a busy 2022, but I wonder if you could just highlight 2 to 3 of the events that you're most excited about. There are a number of large reason there, so just wondering if you could flag 2 or 3 that you're most interested in?

Thanks, Sachin. Aradhana, do you want to take the first question? And then maybe Susan and Mene would comment on their respective pipelines.

Yes. So on the gross margins, we definitely have some benefit from the full year from Alexion. But again, as I mentioned, there are several puts and takes. And that's just one factor that is contributing. Clearly, the commercial success of our pipeline of all the new launches that we have and the mix as it shifts will really be a determinant of how our margin evolves over the next several years.

And in terms of the pipeline readouts that we're particularly looking forward to, obviously, everybody is focused on DESTINY-Breast04, which is expected to read out this quarter. And given the data that we saw with DESTINY-Breast03 and the data that we've seen from the J101 and the DAISY trials that I've read out, we've got a good level of confidence going into the DESTINY-Breast04 data. Obviously, we have to wait for the trial results.

Another trial I'd draw your attention to that was referred to as the EMERALD-1 trial given the data that we've seen with HIMALAYA study looking at Imfinzi and in combination with tremelimumab with the STRIDE regimen. We're now looking forward to EMERALD-1, which is in local regional hepatocellular cancer in combination with TACE. I remind you that there's 3 arms, TACE plus Imfinzi, TACE plus Imfinzi plus BEV versus TACE plus Imfinzi plus placebo. So we're looking forward to the results of that. And given the prior data for those mechanisms of action, I think they've got good confidence in that trial. There are other Imfinzi trials that are also reading out that we referred to, obviously, PACIFIC-2. We've got the PEARL data and also the CALLA trial in cervical cancer that we're also looking forward to.

Sachin was asking about 2023.

Well, beyond '22 into '23, there were many different trial results reading out. Obviously, we'll see progress with camizestrant, with capivasertib. There's more readouts in terms of Lynparza combinations with Imfinzi, and we'll start to see the readouts from further trials with Enhertu, with the DESTINY-Breast06 reading out in '23, plus the opportunity to see emerging data with datopotamab deruxtecan in multiple settings. So really, there's a huge breadth of the portfolio that will read out in '23.

And then from a biopharm perspective, just because you did '22, I'll just mention the liver, obviously, which is hugely important for the Farxiga franchise and that I think we have increasing confidence with given how we're seeing the SGLT2s behave in the HFpEF population. Beyond that as we sort of talk about sort of then '22 into '23, we've got an important Phase II readout for the Dato combinations. Our MPO molecules in HFpEF our FAP inhibitors and CKD. And we've also got COPD readouts for drugs like Fasenra and tezepelumab that I think are going to hopefully pave the way for some of these biologics in COPD.

Next question is James Gordon at JP Morgan.

James Gordon, JPMorgan. First question, inherent to in Destiny-Breast04. So as I mentioned, data is imminent. When we get the headline result, are you going to tell us about efficacy for IHC 1 versus IHC2 patients -- or would we have to wait for something like ASCO? Will we get some commentary on trends there? And does it really matter? Is it all or nothing? The study is either success or it's not from a labeling and commercial point of view? Or is it important to what it looks like in the 2 different groups? That's the first question, please.

And the second one, just on COVID-19, I heard the comment, the vaccine profitability is still going to be pretty low because it's mainly not going to be for profit for '22. So when we're thinking about it, is it fair to assume that the guidance begs in something like 2 billion is not very profitable vaccine sales and about 1 billion of Evusheld. And just in terms of what sort of boost are you getting from COVID this year that might not recur in '23 based on what you're saying, it sounds like it could only be something like a low single-digit contribution at the bottom line this year that potentially wouldn't recur next year? Or could it be you're getting much more from COVID this year?

So thanks very much, James. Let me try the COVID question and then maybe Susan could take the -- your first question. The current question, we -- as you know, we don't typically guide by product. But we have guided to the total sales declining. And then in terms of additional inputs, you could consider as you said, first of all, the vaccine, the majority of sales will be nonprofit. And that, of course, drives the margin down. And as we shared, we have quite a number of doses delivered to the U.S. government at a lower price in recognition for the funding of the development costs. So that's why in 2022, the margin on those products is not as high. But as we move forward, and we get to a stage where we are in a commercial world for Vaxzevria and we sell Evusheld at a sustainable price then, of course, profitability will increase. Susan, do you want to...

Yes. So in terms of DESTINY-Breast04, just a reminder, the primary endpoint is progression-free survival in the hormone receptor positive patients. And the study obviously includes stratification factors including the IHC 2+ 1+ status. So in terms of the high-level results, we would -- as you would expect, we're going to be reporting on the primary endpoint. And the details will be coming as we present the data at a conference as you would expect.

I think in terms of the clinical relevance based on the data that you've already seen from the DAISY Study, the J-101 the activity that we're seeing in the lower end of the IHC 1+ group is still improved compared with the current estimates of standard of care chemotherapy. So we would expect that we're going to see clinically relevant results across the patient population. But obviously, the aspect of can we improve upon the testing regimen and how it's differentiated by that. We have to wait to see the results in detail of this and discuss those. And we'll continue to work on improving lab scoring techniques and the potential for improving patient selection using computational pathology.

Thanks, Susan. Next is Mark Purcell, Morgan Stanley.

Got a couple. In terms of just going back to what you were saying, if we see a strong hazard ratio, say, 0.5 or below, what does this mean in terms of the platform and differentiation versus other ADC platforms. I'm just thinking along the lines of does this really validate the bystander effect and the sort of loading of [7 to 8] toxic molecules for ADC and thinking about moving into new areas, where are you with colorectal cancer, where there's obviously a significant opportunity? You mentioned the DESTINY data in the prepared remarks? And then where are we with the pan tumor trials as well? I guess we start to get data towards the end of this year. What are the sort of opportunities on a pan-tumor basis for Enhertu?

And then secondly, PACIFIC, things are getting fairly crowded in terms of the number of trials that are being conducted in the adjuvant in the Stage III setting. You started 2 really interesting studies, PACIFIC-A, Imfinzi plus TIGIT and PACIFIC-9, Imfinzi with the (inaudible). I just wondered if you could help us understand the sort of pushes and pulls here and how considering the opportunity, PACIFIC remains for the Imfinzi family.

And then the last one just for Leon in China. Could you help us in terms of our modeling on top (inaudible) and VBP 7. So the timing there, the sort of modeling factors such as price and volume, we should consider in the retail pharmacy opportunity. It feels like it's the beginning of the end of legacy headwinds in China, but this is obviously a significant products that really help if you could help us understand the dynamics there.

Thanks, Mark. So I can see that Chris is not more successful than I was before asking for one question. But that's actually good because it shows a lot of interest in our pipeline. Susan, do you want to cover the first question and then Leon could cover China?

So in terms of the design of the Enhertu molecule and also is probably relevant for datopotamab deruxtecan, I think it's just worth reflecting that the industry has been putting antibody-drug conjugates into the clinic for about -- for over 2 decades. And we now understand the elements of the design of these complex system molecules that we need to do to optimize. And absolutely right that one important feature of that design is a linker that is stable in the peripheral circulation, but cleavable in the tumor microenvironment, and that helps to address the inevitable heterogeneity of the surface receptor expression that you get across the tumor.

So that heterogeneity effect and the importance of it has been shown preclinically. It's been shown in ex-vivo human tissue samples. And I think it is underpinned by the data that has been seen already with J-101 and the data in terms of the ability to deliver important efficacy. But there are other elements that are also important. Obviously, the mechanism of action of the warhead is different from the mechanisms that patients with this kind of cancer have been exposed to previously. And I think that's important. The number of molecules attached is also important, as you point out in terms of delivering the overall profile. And then the final piece is that the selection of the right surface marker that is not just highly expressed and differentially expressed on tumor but also rapidly internalized is another feature of the design that's important.

So I think those elements of design do give us confidence about the activity, not just in the DESTINY-Breast04 setting, but also, as you indicate, in other settings across multiple tumor types, where there is high HER2 expression and rapid internalization. The exact selection of the patient population may differ by tumor type, and we need to work that through. But that's why we are looking forward to seeing the data from these pan tumor studies. And as you say, we'll see those evolve over the next 12 to 18 months.

Your next question was around the PACIFIC setting. And again, I think there's a couple of comments I would say at the beginning. First is that moving into the earlier stages of cancer, we think there's a greater opportunity from maximizing the mechanism of action of immunotherapy-directed treatments to improve the proportion of patients that have the opportunity for long-term survival and potential for cure. So Stage 3 and the neoadjuvant setting is very important. And that's why we're investing in both (inaudible), PACIFIC-9, and we're pleased that we've dosed the first patient recently on the PACIFIC 9 study, combining Imfinzi with monalizumab in one arm and with oleclumab , our CD73 antibody in another arm based on the randomized Phase II coast data.

So whilst, yes, I do see that the settings are having a lot of trial activity there. I think actually the PACIFIC-9 setting is one where we've got the only randomized Phase II data supporting that Phase III selection. And so we're confident about the ability to further improve on the great activity we've seen with Imfinzi in that setting. In terms of the overall opportunity, I don't know if Dave wants to make a comment about the commercial opportunity in that setting.

Thanks, Susan. Happy to do it. I mean I think that there's a couple of important dimensions here. I think the first of them is that we continue to strive to bring the benefits of IO therapy and unresectable Stage III to more patients. And there's opportunity, we hope, through the promising kind of COAST data in PAC-8 and PAC-9 to be able to do that. Of course, also there's a duration of therapy benefit that if we get longer progression free times. And in fact, we've seen really impressive long-term survival and long-term PFS out of the PACIFIC study recently presented in JCO. And so that is certainly good for patients, but also is suggestive that potentially there's duration opportunities there.

And then lastly, while Imfinzi has a fairly long LOE and its past 2030, I certainly think moving towards combinations that are going to have included within them longer protection periods and exclusivity periods also allows us to be able to stay relevant within the Stage 3 space well into the next decade.

Yes. So to the China question, I think VBP, starting from VBP Q1 price store in 2018, we are still keeping 70%, 80% of the business, and most of the law users know the Crestor brand and quite are sticking to Crestor and the outflow to the pharmacy, retail pharmacy and also self-pay with their own individual accounts that happens. And Crestor has a relatively longer length of treatment already and is a well-established brand. So it has a limited impact, still a decline, but after first year decline in 2019, it actually quite stabilized in the year 2020 and '21. So Brilinta actually has a shorter lens of treatment, only one year. So the drop of Brilinta is quite significant last year. And Pulmicort is hospitalized drug, half of them is hospitalized drug nebulized center, and half of it is in the home nebulization. So self-paid by the pediatric to family. So I think Pulmicort is somewhere in between.

So the next Batch 7 is the (inaudible) and also low (inaudible). So (inaudible) is actually is CHD and high blood pressure drug, so actually reducing heart rates. So -- and it's already very cheap in China. So quite a big sales and a lot of patients use in a very, very long time in China. So very strong brand. So we expect the brands like (inaudible) will drop less compared with the typical hospital use the drug. (inaudible) actually will have quite a big drop after VBP tender loss.

Thanks. Next question is Stephen Scala, Cowen.

In absolute terms, does 2022 EPS guidance implies something in a range of $6.60 to $6.80. With all the moving parts, absolute guidance, I think, would be helpful. And if you prefer not to distill it to dollar terms, I'm just curious why.

And then secondly, Dave, how did the briefing documents for today's ODAC FDA outcome -- ADCOM change your conviction in the outlook for Tagrisso.

Dave, do you want to take the second one and Aradhana take the first one?

Sure. Thanks, Steve, I've been fairly consistently wanting to raise the fact that China only studies that don't have overall survival and that compare against an old standard of care, bring with them some regulatory risks. And I think that we see that the clinical profile of Tagrisso is so well established with overall survival with clear kind of data on CNS protection. And with the life cycle plan that continues to stay ahead of just frontline metastatic moving into the earlier settings with the ADAURA, LAURA, NeoADAURA.

So we still continue to stay vigilant on the outlook, but I do think that certainly, the ODAC from today -- that the briefing document for the ODAC gives me more confidence that there is regulatory hurdles in front of Tagrisso competition that's seeking to come in from some of the competitors that we've seen. It may not be a perfect analog because the pediac space is different than a targeted therapy space, but my sentiment has improved, certainly, Steve, and we'll see how the ODAC though goes later today.

I think on your question, Steve, regarding guiding to a particular dollar value for EPS versus a percentage growth rate I think we've guided to a percentage growth rate on revenue as well as on EPS. But we do provide, as we have done today, a lot of detail around the moving parts. There are obviously some things which we don't know, which will evolve during the year, and we do a lot of planning and scenario planning and so forth around that. There's also the foreign exchange movement and so forth. But hopefully, we've provided you enough detail to be able to get to that guidance.

Thank you, Aradhana. And Steve, I mean, you calculated yourself the EPS from the percentage is so they are more or less the same. But I think it's important to remember those growth rates are too young. And sometimes when we give numbers, people don't remember those are. So the percentages hopefully we'll remind everybody (inaudible). Next question is Richard Parkes at BNP.

Firstly, just a clarification on the COVID profitability. Is it fair to assume that, that will be dilutive to EBIT margin this year as well as gross margin? So that's the first clarification.

And then just a quick question on the operational efficiency program and margin ambition, which I think investors will very much appreciate. So thanks for that. If all of that $1.2 billion drops to the bottom line, it implies about 280 basis points of margin improvement. Now I realize you might look to reinvest some of that but you're also likely to see continued operating leverage improvements going forward. So -- and we'll see the effect of -- dilutive effect of COVID revenues wash out over time. So it makes the lower end of your mid- to high 30s margin ambition look conservative. So I just wondered if you could talk through the pushes and pulls to that and how you think about balancing investment for the long term versus letting the margin drop through?

Thanks, Richard. Aradhana do you want to take both of those?

Sure. Thank you, Richard. So on the COVID profitability, as I mentioned, the gross margins for COVID are for the COVID franchise, which is both the vaccine and the antibody will be below the corporate growth margins. We -- in terms of operating profit, as you know, we operate the whole company as sort of one business. And it's difficult to sort of get down to every element. We are also investing behind the COVID business. We do have as you can imagine, R&D commitments, long-term studies, pharmacovigilance. So there'll also be costs associated with the COVID medicines.

On your second point relating to the restructuring. So what we mentioned is that we now expect -- we essentially took the opportunity that we have as a result of integrating the Alexion business and said, let's look at AstraZeneca Group as a whole and other areas and opportunities that we might have at this time. And that includes everything from sort of portfolio prioritization to our manufacturing network optimization to supply contracts and distribution contract and in-sourcing certain activities, et cetera. What we've said is there will be $1.2 billion of savings before reinvestment and our guidance relating to -- or our ambition relating to sort of, I wouldn't say, guidance, our ambition relating to the mid- to high 30% margins. I would say this is sort of a step to getting there. The -- it's part of our journey towards operating our operating margins. And with that, maybe we can go back to Pascal.

Thanks, Aradhana. Next question is from Emmanuel Papadakis.

Emmanuel Papadakis from Deutsche. Perhaps I'll kick off with one on Enhertu. More of a commercial question just in terms of the expectations for the DESTINY-Breast03 launch this year, what speed of share gains or conversion from the incumbent in second line, should we anticipate or are you hoping to achieve? And then just a quick clarification. You've still not yet initiated an adjuvant study. Should we assume that you're not planning to taking Enhertu forward into the adjuvant setting?

And then the second question was around the Alexion assets. The autonomous conversion seems to have stalled somewhat. You alluded to pandemic-related headwinds for the aHUS indication in particular, but perhaps you could just give us an update on where we are in terms of conversion from Soliris into approved indications. And then on Soliris, where you need to provide some helpful numbers around uptake in MG. Any patient numbers you can give us? Any sense of early impact from FCR approvals in that setting would be helpful as well.

Marc, do you want to -- thanks, Emmanuel. Marc, do you want to take the Soliris question and maybe Dave could cover the Enhertu one?

Yes. Let me -- thank you for the question. And let me just cover the issue of a conversion from Soliris to Ultomiris. I think where we are today is we are in the first phase of conversion from Soliris to Ultomiris. And I must say that this has gone very well. In PNH, the conversion is high, above 70%. We passed that bar some time ago. It is not as high in atypical HUS, and I explained early on in my prepared remarks that it was due to the type of sales where often the products, the C5 inhibitor is administered. The more you go in emergency setting and in particular, during COVID impact, the more Soliris, which is better known and also a faster-acting treatment. Therefore, this has slowed down the conversion from Soliris to Ultomiris in atypical HUS.

Now we are going to enter now our second phase of conversion, which is going to be linked to the approval of Ultomiris in neurological indication. First of all, with myasthenia gravis, which has already been submitted in U.S., Europe and Japan. So this is going to be another engine of growth for Ultomiris but also the continuing geographic expansion of Ultomiris in the sort of a legacy indication, not the whole world today is reimbursing for Ultomiris in this legacy indication.

So you will have the second phase of conversion. But I think the first phase has been successful and is well -- is nearly completed for PNH but not yet for atypical HUS. And then talking about the slowdown of Ultomiris. Let you remind, in the fourth quarter, Ultomiris has grown by 26%. So this is still a very -- a brand that is growing very fast. And that is before Ultomiris received any indication in neurology, which is a fast-growing category. So I think Ultomiris is doing -- is growing quite fast.

Dave? Thanks, Marc.

So Emmanuel, I expect, in short, the uptake to be rapid based on DB-03. And there's 3 reasons for that. I think the first one is that we have seen really truly remarkable efficacy data from that study. And I think that it compares very favorably to an active standard of care, which is Kadcyla. I think secondly, the testimony to how the clinicians and thought leaders are receiving that is in the fact that NCCN and ESMO guidelines have both been updated to reflect DB-03 a standard of care prior to the approvals in both the U.S. and Europe, respectively. And I think that the commercial execution that the alliance teams between DS and AstraZeneca have done within the third line in setting to establish as the top third-line agent of choice even in the face of competition is further testimony. So my outlook is quite positive on 03 and the speed with which we can drive uptick.

Just maybe the last thing, Pascal, quickly on early DESTINY-Breast11 is in the clinical trial appendix. That is a study in high-risk HER2-positive, early nonmetastatic breast cancer there, certainly is life cycle planning beyond that could follow. But we do already have the study listed in the CTA on that.

Thanks, Dave. Keyur Parekh. Keyur, go ahead.

Pascal, one for you and one clarification from Leon. First all, I just love your thoughts on how do you see the pricing dynamics kind of not just for AstraZeneca, but more broadly -- and the reason I'm asking that is, I think in response to the ODAC documents kind of release come out and said they were thinking of pricing that kind of PD-1, 40% lower than the current kind of pricing for similar drugs. So just as we think more broadly over the next 2, 3, 4 years, how confident are you of current oncology drug pricing?

And then separately, Leon, kind of, I guess, you mentioned earlier that you see this kind of shift from the older product dynamics in China to the newer products, which should drive longer-term growth. But you also mentioned that you see this drag continuing over the next year or 2. So perhaps I could push you and say, is 2023 expected to be a growth year for your China business, or should we expect '23 to be a low decline here as well?

Thanks, Keyur. So I have to say we give a guidance for '23 and January or February '23, so we'll meet you then. Leon, do you want to talk about China and then I'll go on pricing.

Yes. I think we are quite focused on China challenges and external environment. And of course, AstraZeneca has been quite successful. And it's the first time we passed USD 6 billion threshold in China. So we have been growing well in the past, but then we carry also many mature products has been doing so well. So like Pulmicort, Seloken Crestor, Byetta, it's a long list of names. So this long list will get -- go into VBP more or less this year or late this year. So 2023, we see less such kind of impact. So -- and in 2022, we have more new product approval like Enhertu and a lot of the new indication life cycle extension -- life cycle indication for establish new products.

So I think even for neuro-oncology, we are registering our treatment antibody in this year and for CKD this year as well. So launching (inaudible) and Fasenra and the PT-009 the Pro version of Symbicort and Saphnelo. So I think all these new products will ultimately help our -- AstraZeneca in China is a very, very good commercial operation machine to really successfully shape the market and launch new products, not only because of the big city, but also in multiple channels and in the remote area.

Thanks, Leon. On the pricing, maybe a quick specific comment and then more general one. I'm not sure that I would -- I'm not sure that's declining price before that is a good strategy. I mean the FDA's mandate is to approve drugs that are effective and safe and not get dragged into a pricing discussion. So I'm not sure it is really the right approach, quite frankly. And as it relates to Chinese data, there are 2 issues that have been well detailed. One is, of course, you source data from a single country in centers that are not necessarily well known in the U.S. And that, of course, creates some questions. But the most important one is the lack of diversity of data in different populations. There has been a lot of work done by pharmaceutical companies and a lot of requests and correct request by the community to provide data in diverse populations, in particular in the U.S.. So they would be quite I want to call it, in fact, not appropriate to approve a product based on pure Chinese data and data for many other countries.

By the way, if it does come from a single type of population. I think the industry has to work to provide diversity of data, a diverse population. So I think that it makes it difficult really to -- for FDA to approve this type of products, but we'll have to see what the ODAC decides and FDA, of course, with regulations, a decision-maker.

In terms of pricing in general, whether it's oncology or beyond, I continue to believe that products that are differentiated will attract good pricing, good reimbursement but there will be price pressure, of course, and we experienced this today, including in oncology. I mean, they've lived with pressures on Calquence, on Lynparza, et cetera. So we do have price pressures. But overall, I think we will continue to be able to achieve reasonable prices in the U.S. And in fact, in Europe, the situation is employing. Innovation is well accepted. Prices in Europe are slightly lower. So we have to see -- I mean, of course, the risk is still that the BBB version 2 gets approved with a slim down version that focuses on drug pricing. So that's a risk for the entire industry. But for the time being, I think it's fair to assume that pricing will remain stable. David, I don't know if you want to add anything to this?

I mean I think the main thing that I would add is that certainly, Part D and negotiation are elements that in past calls, we've acknowledged is going to create some gross to net pressures in the future. We certainly think about that in our own long-term planning. And I just would reiterate, Pascal, what you had said, which is, at the same time, differentiated medicines moving into areas of high unmet need. We continue to believe we're going to have an opportunity to get good value. And I do think that, that's reflected in even some of the challenging policies that we see within the U.S. So U.S. still remains a good place for value, certainly on a relative basis to the rest of the globe. And I think relative to today, we expect some pressures, but I think it will still stay an important market for us, of course.

Thanks, Dave. Jo Walton, you go ahead.

Just a quick R&D and SG&A one. So the -- it looks like the FCR that you got with Syntimmune has been dropped just checking that that's just an individual product issue and it's not something to do with the platform that you acquired with Syntimmune and you still expect to have an FcRn program going forward?

And my second question is one on marketing. So in 2021, there was obviously a limit to what you could do with COVID I'm just wondering how much you would expect your marketing expenses to bounce back in '22 and '23? And how much you've been able to change, how things are done and are able to keep that cost control at the SG&A level as tight as you have historically?

Thanks, Jo. Marc, do you want to cover the first one, and Aradhana, the second one.

Yes. Joe, thank you very much for the question. So I confirm that we have suspended the development of the FcRn that we had licensing from Syntimmune, due to reasons which are, in our view, specific to the molecule.

On your question relating to the operating expenses, which is our total OpEx, R&D and SG&A, we expect to have low to mid-single -- low to mid-teens increase in 2022. However, your point is absolutely well taken that we have evolved some of our marketing methods in terms of hybrid ways of approaching HCPs and so forth, and we're trying to make sure that we keep and enhance some of those learnings to digital ways of working and marketing as we go forward.

Thanks, Aradhana. So we have time. We'll take a few more questions, but if you can really try to limit yourself to one question. Michael Leuchten.

I'll do one, just going back to Forxiga in China, it's one situation where you're on the NRDL, but other products of the same mechanism are in VBP. Your comment about the relisting on NRDL. Did that come with an abnormally high price concession where you sort of had the quasi-match the BBP process? Or were you able to retain a high pricing level?

Thanks, Michael. Leon, do you want to cover this one?

Yes. I think Farxiga, we renegotiated NRDL entry last year. and we achieved quite a reasonable price level for continued contract. And right now, Farxiga I think is, number one, product in diabetes market. And I think the momentum is continuing to be strong, and we get heart failure indication last year and also we'll get the CKD indication this year. So I think a lot of good catalysts coming in the next 1 or 2 years. I think we -- next year, we will be launching (inaudible) as well to really continue beyond this success, initial success.

Thanks, Leon. Luisa Hector?

It's really for the medium-term outlook. So Pascal, your team has done a really excellent job filling launch is to drive the top line for the decade. You're on track for double-digit sales growth. And as you said, the LOE profile is benign through to the end of the decade. But there is a shift towards external assets that brings profit shares and pay away. And today, you're flagging incremental cost savings opportunities. So really, my question is around how comfortable you are in the profit growth and the cash generation from that strong double-digit top line as we look to the medium term, and whether simply the dividend growth is the signal to watch for the level of confidence?

Aradhana, do you want to cover this one? I mean I think the -- let me just say a few words and Aradhana you could add, but we have quite a number of products that are driving our growth that are 100% owned by us. And we have, of course, a mixture of those products and partnered products. But overall, we are very confident that we can continue to deliver on our growth, and we are working on this operating margin improvement that we've talked about a few times. So I'm not sure exactly what I want to tell you, we are quite confident in with the environment, as we know it today, of course, things could change. But with what we know today, we are confident in our forecast. Aradhana, anything else.

Yes. I think as we talked about sort of the beyond 2025 time frame, I think we have a really exciting pipeline. We have a lot of upsides in the pipeline. And not a lot of LOE sort of risk in that time frame. And I think there is more opportunity for growth. And again, just to reemphasize, our focus will always be on driving growth. and we're going to balance that with disciplined sort of operational improvements.

Thanks, Aradhana. Peter Welford. Over to you, Peter.

A question, please, on the spend. You were very helpful with R&D fighting 20% sales going forward. I'm just wondering about SG&A. And beyond this year, could you help sort of frame for us how we should think about the SG&A trend. I appreciate you said you're going to get efficiencies, and it will be lower than the top line. But particularly when we think about '23, '24, what are the things we should think about as pushes and pulls to consider the sort of rate of SG&A growth, there should be a sensible rate going forward given your commentary on margins?

Yes. I mean we've said that actually, Peter, that R&D will remain in the low 20s, 20%, 21% of our revenue. And basically, we will deliver a (inaudible) of operating margins by reducing the SG&A as a percentage of sales to become more in line with our peers. And the way we're going to do this is for efficiency improvements, but also redeployment of resources from products that are well established and don't require as much promotion to deploying this to new products. I think often people forget that when they look at our SG&A being high, they forget that we've launched so many products and we expanded quite a lot geographically in China. But of course, comes a time when our portfolio mix changes. I mean, we've been promoting a portfolio of products that are mostly new products to rebuild the company. And now we're going to get to a portfolio that is more balanced, if you want, between established and new products. So we'll be -- we'll have a greater ability to shift SG&A resources around the portfolio. Next one is Seamus Fernandez.

Great. So just actually 2 quick ones. First, Pascal, we heard a lot of commentary from Amgen as it relates to Tezspire and the opportunity there. Just hoping you can kind of frame the opportunity. There were 2 things that were commented as well outside or one other thing commented was some competition in the anti-IL-5 category on price that was highlighted by Glaxo.

And then separately, Asco took a really differentiated approach in the PD-1 category, it created a multibillion-dollar durable opportunity even though some viewed Astra as being a little bit late to the game, although you guys were kind of aligned with the rest of the folks in category. The obesity space is one that I think has been characterized by others as having PD-1 potential. You guys have Farxiga, you're taking what I would say is a higher risk approach with MTO, and we know that there are other oral opportunities to combine with incretins out there. Just wondering how AstraZeneca is thinking about the obesity space and the opportunity for incretins in cardiovascular disease.

Thanks, Seamus. Maybe, Ruud, you could cover Tezspire question and Mene the second one.

Yes, absolutely. And thank you so much for the question. First of all, I think I can speak on behalf of Amgen as well, that we are very excited by the opportunity with Tezspire. It's a completely new and unique mode of action. And as you know, it's in fact, irrespective of the years in fill level, yes, we will compete also in the highs in the fields because the ex reduction is substantial. But I think there's a high unmet medical need in the low or middle is in a fill population. Roughly 50%, 60% of the total patient population in severe asthma is in this mid- to low level of us infills. So that's clearly our level of confidence and focus equally and people are commenting on that. Yes, we are seeing a little bit of additional pricing pressure in the space. That's normal in Part D in the self-injection, but at the moment, it's absolutely manageable, and we don't expect a massive shift in the foreseeable future.

With regards to obesity and I think our approach in CVRM has really been to look at comorbidities and the comorbidities associated with metabolic disease, renal disease, heart failure, cardiovascular disease and obviously, obesity is one of those components. So the DAPA combinations that we have in play, obviously, are interesting, but we have got some that happened into the clinic get in, as you know, there's oral GLP-1s that are in development or -- and there's also some that are sort of in the Perry -- preclinical phase that we're interested in. We have a number of other programs across NASH.

And as you know, we also have a partnership with Regeneron and a target called GPR-75, which actually has got a genetic validation around obesity. And we also have a long-acting (inaudible) program. What I would say about obesity is it's a very challenging area in terms of the benefit risk. People have been burdened historically in a big way around this area. So I think we really need to go after subsets of obesity where we can really show and demonstrate the fulfillment of an unmet medical need in a patient population that really needs a therapy. So that's the approach that we're taking.

Thanks, Mene. We'll take one last question. Viktor, do you want to go ahead?

Yes, sure. So in China, on the health insurance fraud case, could you perhaps indicate the amount that these individuals have defrauded from reimbursement payments just to get a feel for the extent of this?

And secondly, you said that on a CAGR level, you see double-digit growth until 2025. I guess, your base is 2021. And then consensus looks just a little bit shy of double-digit growth. Where do you see consensus as being a bit more conservative compared to your estimates for future growth?

Thanks, Viktor. Leon, do you want to cover this? I mean the amount of money involved is extremely small. Leon, over to you, 2 questions.

Yes. I think the first question, I think the fraud, it is -- the amount is very, very small. I think -- and also the number of people involved is also very limited. And I think it's really the one indication approved for reimbursement and the other indication is not. So some patients are asking and also the -- I think it's very, very small. I think minimal, right? So let's go this way. So we don't know because it's still investigation is ongoing. But as far as we know, the amount is very, very small. So the second question, is it about the China growth?

I think.

Okay. So I think like Pascal said, we have been investing in China in the past quite many years. So that's why we have been growing quite consistently. And then -- but the China with this VBP policy already, we are facing number 7 batch of VBP and NRDL negotiation also many rounds now and quite a lot of price cuts on new products and quite many, we tender loss for more material products. So it is up -- there is patent cliff in China. So I think AstraZeneca investment in the past many years actually successfully offset by new product launches and the new indication -- clinical trial participation of China into global studies and simultaneous approval globally and locally, lots of products in China actually approved even ahead of global and -- or have quite a close gap. So -- but we still need to make efforts on approving new products, accelerating our new products very fast. So in the next 5 years, the CAGR is actually for China is a single-digit growth.

And outside China, actually, we need to pay more attention is actually achieving historical good double-digit growth, especially in quarter 4. So actually, outside China market has a lot of medical needs. So in the next 5 years, they will grow more double-digit growth and then putting together. So outside China offset China's slower growth. So we are more like a high single-digit growth in the next 5 years.

And Viktor, just to be clear, this issue in China is something of the past. It dates back many months because there was a time when the product was on the reimburse for T790M mutation but today, it's reimbursed for mGFR first line. And of course, when it was on in T790M mutation, there was, in some cases, an incentive to try and requalify patients who were mGFR first line, so they could benefit. But it was very small and very limited to a handful of medical representatives in Shenzhen I may have misunderstood your question about the growth. It may have been total company. So if I did, you mind repeating your question quickly, so we can address it.

Yes. Yes, sorry. Yes, it was on the total revenue growth for AstraZeneca. So you said that there is a double-digit growth until 2025 when you look at the CAGR growth. And when I calculate out that just looked a little bit shy of double-digit growth if I use the base year 2021. So I just wonder if there's anywhere where consensus is a bit more conservative than your estimate for future growth.

Well, I can only repeat that our forecast and our ambition is to grow by low double digit as a CAGR until 2025, starting in '21. So I cannot comment on the consensus. I can only repeat what we have guided to. And we have quite a number of -- as we talked about today, quite a number of new indications and new products to launch that will definitely support this growth. That actually gives me a good link into maybe bringing this meeting to a close. First of all, thanking you for your interest and all your great questions.

And secondly, just reminding everybody how much we've delivered from a pipeline viewpoint last year and all this positive Phase III clinical trials will come into launches this year and next year. So -- and there's more to come, as we've talked about. So there's enormous achievement in the last year that we carry us all the way to 2025. And now we are working on post-'25. We've told you we have limited patent exposure, patent expiry exposure, growth pipeline, and we'll continue looking at what can we add. So not only we drive an improvement in our operating margin over the next 2 to 3, 4 years, but also importantly, we continue to be a high-growth company post 2025. This is really our ambition.

So with this, thank you so much, and I wish you a good rest of the day.