AstraZeneca PLC (AZN) Q2 2020 Earnings Call Transcript

AstraZeneca PLC (NYSE: AZN) Q2 2020 earnings call dated July 30, 2020

Corporate Participants:

Pascal Soriot — Executive Director and Chief Executive Officer

Dave Fredrickson — Executive Vice President, Oncology Business Unit

Ruud Dobber — Executive Vice President, BioPharmaceuticals Business Unit

Marc Dunoyer — Executive Director and Chief Financial Officer

Jose Baselga — Executive Vice President, Oncology R&D

Mene Pangalos — Executive Vice President, BioPharmaceuticals R&D

Pam Cheng — Executive Vice President, Operations and Information Technology

Leon Wang — Executive Vice President, International and China President

Analysts:

Sachin Jain — Bank of America Merrill Lynch — Analyst

Timothy Anderson — Wolfe Research — Analyst

Luisa Hector — Berenberg — Analyst

Michael Leuchten — UBS Investment Bank — Analyst

James Gordon — J.P. Morgan — Analyst

Matthew Weston — Credit Suisse — Analyst

Mark Purcell — Morgan Stanley — Analyst

Richard Parkes — Exane BNP Paribas — Analyst

Simon Baker — Redburn (Europe) Limited — Analyst

Naresh Chouhan — Intron Health — Analyst

Nick Stone — Investor Relations

Christopher Uhde — SEB — Analyst

Andrew Baum — Citigroup — Analyst

Peter Welford — Jefferies & Company — Analyst

Steve Scala — Cowen and Company — Analyst

Presentation:

Operator

Good afternoon, Europe, and good morning to the US. Welcome, ladies and gentlemen to AstraZeneca’s Half Year Results 2020 Presentation Conference Call and Webcast for Investors and Analysts.

Before I hand over to AstraZeneca, I would 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]

I will now hand you over to the Company.

Pascal Soriot — Executive Director and Chief Executive Officer

Hello, everyone. It’s Pascal Soriot, CEO of AstraZeneca. Welcome to our first half 2020 conference call and webcast for investors and analysts. As always, the presentation was posted to astrazeneca.com earlier today, and we’ve also sent it to people on our distribution list. So if we turn to Slide 2, this is the usual safe harbor statement, we will be making comments on our performance using constant exchange rates, or CER, core financial numbers and other non-GAAP measures. A reconciliation between the non-GAAP and the GAAP data is contained in the results announcement, and all numbers used are in million US dollars and refer to first half 2020, unless stated otherwise.

So if we want to turn to Slide 3. We plan to spend about half an hour on the presentation and then do a Q&A for 45 minutes. We aim to end at 1:15 UK time. If you keep questions short, we’ll try and keep answers short, too. [Operator Instructions]

In the speaking order, I’m joined by Dave Fredrickson, our EVP for the Oncology Business Unit; Ruud Dobber, EVP of BioPharmaceuticals; Marc Dunoyer, our CFO; Jose Baselga, our EVP of Oncology R&D; Mene Pangalos, our EVP of Biopharmaceuticals R&D; and also joining us for the questions are Pam Cheng, our EVP for Operations & IT; and Leon Wang, who is the EVP in charge of China in the Emerging Markets.

So we’ll move to Slide 4. This is the agenda where we plan to cover all the key aspects of the results today.

And moving then to Slide 5. In the first half of 2020, performance underpinned leading response to COVID-19. The business was resilient. And while COVID-19 had an adverse impact, other medicines compensated. Total revenue advanced 14% in the half, and we estimate only a modest benefit from COVID-19 stocking. New medicines advanced by 45% and we saw continued strong progress across all therapy areas and also in the emerging markets. In the quarter, respiratory was impacted from Pulmicort in China, but as I said earlier, other medicines more than compensated.

Core operating profit grew by 23%, despite 13% lower other operating income. With a tax rate of 21%, core EPS ended at $2.01, up by 26% and much more than revenue, delivering operating leverage. As a result, our guidance is unchanged today.

We continue to see strong progress in the pipeline, mostly on regulatory approvals.

And finally, the leading response to the COVID-19 pandemic includes advancing a vaccine candidate while repositioning other medicines. You’ve heard a lot about the vaccine candidate, but we also have other projects, antibodies, but also Calquence and Farxiga trying to help patients with COVID disease. There is a relentless focus patient access, supply, and of course, our employee safety and continuity of our work.

So if we turn to Slide 6. Looking at the pipeline news flow since the results announcement in April, just mention a few highlights. There were a number of approvals for Lynparza across multiple cancer types and geographies. Since the launch at the end of 2014, Lynparza has seen significant progress with more to come. Farxiga received its important approval in the US for heart failure. And the inhaled respiratory portfolio increased its reach with Bevespi in China. And importantly, the closed triple-combination medicine Breztri in the US.

Outside approvals, it’s really encouraging to see the progress for Enhertu in breast and gastric cancers. Later on today, Jose will cover the expanded collaboration with Daiichi Sankyo on the new antibody drug conjugate. All in all, another great period for the pipeline.

If I move to Slide 7. The second quarter of 2020 was the seventh quarter now with strong growth in total revenue. Again, this was driven by the new medicine. Tagrisso crossed now the quarterly $1 billion mark with Lynparza and Imfinzi continuing their strong growth trajectories. The growth from the new medicine is now coming from a broader range of medicines. As we saw in the first quarter, revenue from Koselugo in the rare indication. In total, new medicines had a $2 billion of additional revenue, further diversifying growth and sustainability. As a result of our strategy execution, new medicines now make up more than half of our revenue.

Please turn to Slide 8. The increased business diversification — you can also see it through oncology, now more than 40% of product sales. Across AstraZeneca, specialty care medicines account for more than half of the business. Combined China and the other emerging markets, make up 35% of sales, with growth in ex-China markets at 15%, and in China 14% despite the COVID-19 impact on Pulmicort, which I’m sure we will talk about later.

In summary, the results for the first half support the guidance and also our future of sustainable growth across medicines and geographical markets. AstraZeneca remains strategically well positioned in the current environment, and we are well prepared to remain an important partner for healthcare systems globally, as evidenced also by the vaccine efforts.

Before I hand over to Dave to cover our oncology business, I would like to express my sincere thanks to all AstraZeneca coworkers across the globe that has made this and our response to COVID-19 possible. Everybody has done absolutely stellar job across the entire Company despite sometimes very challenging circumstances, and I’m very, very grateful for everyone’s contribution.

So with this, Dave, over to you. Turning to Slide 9 by the way.

Dave Fredrickson — Executive Vice President, Oncology Business Unit

Thank you, Pascal. And if we can — just as I go through this, I plan to update on the performance of our Oncology Business, before handing it over to Ruud, who’ll give an update on Biopharmaceuticals and Emerging Markets. We are pleased to report a strong growth in total revenue of 31% for oncology, to $5.3 billion in the half, a business that’s now annualizing at over $10 billion. We’re seeing regional expansion particularly outside of the US as our lifecycle efforts start to take effect. The new launches are progressing well, which is supported by additional news flow of data and approvals.

Please turn to Slide 10. Starting with our lung cancer franchise, we are pleased to report that both Tagrisso and Imfinzi showed strong growth in the quarter at 45% and 52%, respectively, with revenue of $2 billion and $954 million, respectively. Tagrisso is now approved in 86 countries in the first-line setting, and in the half we saw continued expansion in countries with national reimbursement, which now totals 28. US Tagrisso revenue was up 30% as demand growth continued, despite some negative inventory movement, and we see strong growth from Europe and emerging markets as reimbursements and launches take effect. Japan was impacted by the previously mentioned price cuts in November last year.

Imfinzi reported $954 million in the half, with the majority of revenue still coming from the US at $574 million with a growth of 21% as we’ve reached high levels of penetration in the PACIFIC Stage III non-small cell lung cancer setting. We’re now launching the CASPIAN indication in extensive stage small cell lung cancer in the US, following approval earlier in the year. Outside the US, we are starting to see revenue of Imfinzi pickup, particularly in Europe and emerging markets with revenue of $167 million and $63 million. Japan delivered $124 million. And the China launch of PACIFIC still happened in the first quarter despite the COVID-19 pandemic, and we anticipate NRDL negotiations to commence next year.

Please turn to Slide 11. Lynparza showed continued progress with product sales of $816 million in the half, up by 60%, with half of sales coming from outside the US. This reflected growth across all regions as we continue to rollout the breast and ovarian cancer indication in the major markets of the US, in Europe and Japan. US sales were $406 million, up by 55% with continued increase in demand, as Lynparza maintained its leadership in the PARP-inhibitor market in both ovarian and breast cancer as we launched the POLO-1 indication in first-line HRD positive ovarian cancer.

Europe sales were $198 million, up by 56%, driven primarily by first-line ovarian cancer launches.

Our emerging market sales were up by 120% to $56 million, driven by the China launch and the recent inclusion on the NRDL. And Japan sales amounted to $77 million, with growth of 31%, driven by the uptake in ovarian and breast cancers following the previously mentioned 14% price cut as of April of this year.

Please turn to Slide 12. Turning now to the new launches, Calquence in chronic lymphocytic leukaemia and Enhertu in third-line HER2-positive metastatic breast cancer. I am pleased to report Calquence revenue of $195 million in the half, predominantly in the US with the new label, and CLL taking effect at the end of 2019. The launch feedback has been very encouraging as the impressive Phase III data are resonating very well with physicians. We’re encouraged to see expansion in our prescriber base with around 70% of all new starts in CLL coming from new to Calquence prescribers and about one in three CLL patients now starting on Calquence.

Following the Enhertu launch at the beginning of the year, we are pleased to report a $36 million in collaboration revenue based on $76 million of sales booked by Daiichi Sankyo in the first half of 2020. Enhertu has now achieved approximately one-third patient share in the third-line setting.

Before I end, I’d like to thank all of our oncology colleagues for what they do every day to benefit the patients and our Company, especially during this global pandemic.

I’ll now turn over to Ruud for an update on our BioPharmaceuticals business and Emerging Markets.

Ruud Dobber — Executive Vice President, BioPharmaceuticals Business Unit

Please turn to Slide 13. First of all, many thanks to Dave, and today I am pleased to talk to you about the BioPharmaceuticals business. Total revenue of BioPharmaceuticals comprising New Cardiovascular, Renal and Metabolism and Respiratory & Immunology were $4.9 billion in the half growing at 9%.

Starting with New CVRM, revenue was up by 11% despite intense competition in diabetes with total revenue at $2.3 billion. Growth for both Farxiga and Brilinta continued with double-digit increases. Farxiga revenue reached $848 million in the half, with 21% growth, maintaining volume market share leadership globally with strong volume growth across all regions, while benefiting from the SGLT2 class growth. In the United States, Farxiga saw a reduction of 12% as price declines took effect, though volumes continued to grow due to the DECLARE launch. Outside the US, which accounts for 72% of revenue, we saw strong performances with volume-driven growth increasing. Europe revenue was up by 29% and emerging markets revenues were up by 59%, benefiting from the China NRDL listing.

Brilinta delivered revenue of $845 million, with 17% growth, driven by strong performance in the emerging markets, up by 40%. We also had continuous growth in the United States and Europe, up by 9% and 5%, respectively, with underlying demand continuing in the US and Europe experienced some negative COVID stocking impact in the quarter. The majority of use is still in the acute setting and Brilinta continues to outgrow the market in all regions.

Please turn to Slide 14. Turning to Respiratory & Immunology, we reported revenue of $2.7 billion, with a 7% growth in the half impacted by COVID destocking and Pulmicort notably in China. Ex-Pulmicort, Respiratory grew 14% in the quarter.

Underlying Symbicort growth was strong in the quarter with $1.4 billion, with a growth of 26% in the half and 15% in the quarter. The US saw particularly strong growth, up 46% to $558 million due to demand growth following the launch of the authorised-generic and the resilient ICS/LABA markets. Globally, Symbicort remained a leader in value and volume market share in the ICS/LABA class.

Pulmicort was down 32% in the half with a revenue of $477 million, mainly driven by the COVID impact on the business in China, especially the pediatric nebulization segments. We continue to focus on growing revenue of Symbicort and other at-home solutions ahead of Pulmicort.

Please turn to Slide 15. Now, I will focus on the new launch medicines. Fasenra contributed $426 million of revenue in the half, with the bulk continuing to come from the United States, Germany and Japan. In the US, Fasenra is performing very well against new competitors, up by 31%, with $272 million in revenue. Europe and Japan revenue were $88 million and $46 million, respectively, as Fasenra continued to be the leading novel biological medicine for severe uncontrolled asthma.

The launch of Breztri for COPD is progressing well with revenue of $11 million in the half, with launches taking place in Japan and recently in China. And, of course, we just saw the approval in the United States last week, while the EU regulatory review is progressing with anticipated decision this half.

Lokelma had revenue of $28 million in the half, mostly from the United States and we have obtained leadership in the new-to-brand prescriptions. China and Japan launches are progressing well.

On roxadustat, we reported collaboration revenue of $11 million in the half coming from China following the initial launch and the recent NRDL inclusion.

Now, I will move to the emerging markets. Please turn to Slide 16. Emerging markets, where total revenue grew by 15% in the half, continue to track ahead of our long-term performance ambition, which is to grow sales on average by mid- to high-single-digit percentage. Outside China, total revenue was up by 15% with growth spread across all regions. China delivered stable growth of 14% as we saw some impacts from the COVID-19 pandemic, notably with Pulmicort, as previously mentioned. The addition of Lynparza, Forxiga and roxadustat to the NRDL effective January 2020 contributed to the revenue performance. New medicine grew by 79%, now contributed almost to a third of the total revenue in the region with strong performance driven by Oncology and New CVRM.

With this, I will now hand over to Marc.

Marc Dunoyer — Executive Director and Chief Financial Officer

Please turn to Slide 17. Thank you, Ruud, and hello, everyone. I want to take you through our financial performance in the first half, as well as a reminder, of financial priorities and guidance for the full-year.

Please turn to Slide 18. I will start with the reported P&L before commenting on our core performance. As Pascal mentioned earlier, total revenue grew by 14% in the half, which included only a modest impact from COVID-related inventory movements. Within total revenue, we also delivered 107% increase in collaboration revenue driven by the success of Lynparza and Enhertu.

Please turn to Slide 19. Moving to the core P&L, this slide clearly demonstrate our early progress in improving operating leverage. Our gross margin ratio reached 81% in the half and increased by 1 percentage point in the second quarter to 84% versus previous year, reflecting the mix of product sales and manufacturing efficiencies.

Core R&D expenses increased by 9% in the half, partly a result of focused investments in the pipeline, including the development of Enhertu.

Merck upfront contribution in 2017 to the development of Lynparza recorded at that time on our balance sheet was not really released to the P&L until last year. This, therefore, impacted the comparative performance.

Core SG&A expenses increased by 5% in the first half, driven by additional investment in the China expansion and further support for global launches in oncology.

Core operating income declined by 13% to $604 million, while our core tax rate was 21%, in line with indicative range for the full- year.

Our core earnings per share ended at $2.01 for the half, up by 26%, demonstrating the progress we are making.

Please turn to Slide 20. Turning to net debt and cash generation, our net debt has increased by $1.7 billion since the end of last year to $13.7 billion. Encouragingly, there is a 30% improvement in EBITDA to $4.1 billion, as well as a $688 million increase in net cash from operations, reflecting the constantly improving underlying business performance. The level of net debt was in line with our expectations given that our first half sees the payment of a larger second interim dividend. We also made the second of two $675 million payment to Daiichi Sankyo as part of last year’s agreement on Enhertu.

Please turn to Slide 21. This familiar slide continues to demonstrate our progress. As I mentioned, the 14% growth in total revenue was converted into 26% increase in core earnings per share. Our core operating margin rose by 2 percentage points to 29%, even with a 13% reduction in other operating income. The operating leverage is apparent in the first half and core operating expenses represented 57% of total revenue versus 61% a year ago.

I wish to reiterate that improvement in our P&L will lead to increasing cash generation overtime, which will then help us deleverage our balance sheet further and helping us to focus on priorities like our progressive dividend policy.

Please turn to Slide 22. Finally, I will turn to guidance for 2020, which, as I mentioned a moment ago, is on total revenue and core earnings per share at constant exchange rates. I have no hesitation in retaining our guidance for the year. In the current circumstances, however, we will keep a cautious view over the remaining global impact of the COVID-19 pandemic, and there is always a potential to see further variations in our performance between quarters.

In 2020, like in 2019, we are aiming to increase operating leverage, driven by a high-single-digit to low-digit — low-double-digit percentage increase in total revenue, and this is anticipated to drive growth in core EPS of mid- to high-teens percentage.

I’m also happy to reiterate our longstanding capital allocation priorities. With this week news on ongoing collaboration with Daiichi Sankyo, we have seen another example of our most important capital allocation priority, which is reinvesting in the business. We also look to keep a strong investment-grade credit rating, as well as retain our focus on our progressive dividend policy.

And with that, I will now hand over to Jose.

Jose Baselga — Executive Vice President, Oncology R&D

Thank you, Marc, and hello, everybody. I will provide an update on our Oncology medicines since our last call. As usual, I am joined by Mene Pangalos, who will discuss BioPharmaceuticals and upcoming news flow.

Please let’s turn to Slide 24. Now, onto the recent highlights in Oncology, also the case in the — at the virtual ASCO 2020 meeting this quarter. On the left, the groundbreaking Phase III data of the ADAURA trial, where Tagrisso showed unprecedented disease-free survival in the adjuvant treatment of Stage IB-IIIA EGFR-mutated non-small cell lung cancer. Treatment with Tagrisso after surgery with curative intent reduced the risk of disease occurrence or death by around 80%.

In the middle, news from Enhertu, where we presented positive mid-stage data in gastric, lung and colorectal cancer. Enhertu recently received Orphan Drug Designation as well as Breakthrough Therapy Designation in the US for third-line gastric, highlighting the vast unmet medical need in this setup. Enhertu also received Breakthrough Therapy Designation in metastatic HER2-mutated non-small cell lung cancer.

Other ASCO highlights from our pipeline include the sustained final overall survival from Imfinzi in the CASPIAN trial, where Imfinzi maintained a 25% reduction in the risk of death versus chemotherapy alone.

We also presented Phase I data from our oral SERD AZD9833, in which an overall response rate of 16.3% and a clinical benefit rate of 42.3% was observed in a heavily pre-treated patient, where 53% of patients had received prior treatment with Faslodex, and 50% had received prior treatment with CDK4/6 inhibitors. AZD9833 is now progressing into later trials, and it is a testament to our confidence of its efficacy [Speech Overlap] sorry, it’s a testament to our confidence of its efficacy potential and safety profile.

Other news in the quarter include the PROfound trial, overall survival publication, in The New England Journal of Medicine. The PROfound indication, which was approved by the US FDA in May saw Lynparza become the only PARP inhibitor to improve overall survival versus standard of care, hormonal therapies in a biomarker-based subset of metastatic castration-resistant prostate cancer patients.

Let’s turn now to Slide 25, please. As we announced — let’s please move to Slide 25 if we could. As we announced earlier this week, we are very excited to strengthen our ongoing ADC collaboration with our partner Daiichi Sankyo by including the TROP2 medicine DS-1062. We believe that this is the best-in-class medicine with great potential in reshaping the treatment of metastatic lung cancer, a continuing healthcare challenge worldwide. Of note, 45% of non-small cell lung cancer patients are diagnosed in the metastatic setting. And currently, only 5% of these patients are still alive after five years of diagnosis.

Using the same successful linker as Enhertu, the TROP2 target has high expression in most solid tumors, providing the potential for a broad applicability, with a lower drug-antibody ratio of 4, we consider its safety profile to be manageable.

Compelling efficacy data in non-small cell lung cancer was presented by Daiichi Sankyo at this year’s ASCO, where DS-1062 showed a 27% overall response rate in unselected last-line post-platinum and post-IO non-small cell lung cancer. On the merit of this data, we will pursue in [Phonetic] Phase III trials in non-small cell lung cancer soon, with further trials in other tumors such as triple-negative breast cancer and will include combinations with immunotherapies.

Let’s turn please to Slide 26. Lastly, I would like to take you through a quick update on our progress on a few of our exciting new oncology medicines in early development. As mentioned earlier, following the positive Phase I trial, we’ll soon be kicking off an exciting Phase III program for our oral SERD in breast cancer. We also will be starting Phase III trials in advance uterine cancer for our WEE1 inhibitor, adavosertib, on the back of promising Phase II data. We also have new inclusions on this slide since April, like our B-cell maturation antigen antibody drug conjugate MEDI2228, and our CDK9 inhibitor AZD4573, both for the treatment of blood cancers.

For the progress on what’s now, regarding our PARP inhibitor, Lynparza, we can confirm that we will start soon a new Phase III trial in colorectal cancer with our partner Merck. We look forward to updating you on the progress of these medicines and others in the near future.

With this, I will hand over to Mene. Please turn to Slide 27.

Mene Pangalos — Executive Vice President, BioPharmaceuticals R&D

Thank you, Jose, and hello to everyone on today’s call. We’re really proud to be at the forefront and highly active in the pursuit of tackling the COVID-19 global health crisis. Last week, as many of you will know, we published data in The Lancet for our Phase I/II COV001 trial as part of our collaboration with Oxford University showing that the vaccine AZD1222 was tolerated and generated robust immune response in terms of both neutralizing antibodies and T-cells. Late-stage trials are currently ongoing in the UK, in Brazil, in South Africa, and are about to start in the United States.

After the evaluation of more than 1,500 antibodies for the ability to bind and neutralize the SARS-CoV-2 virus spike protein, we’ve identified AZD7442, the combination of two monoclonal antibodies have licensed from Vanderbilt University, which will be starting Phase I trials in the next few weeks. Through our proprietary YTE technology, we’ve extended the half life of these antibodies with predicted dosing of around every 150 days. This makes AZD7442 ideal for both prophylaxis and treatment regimens. The feature detailing AZD7442 neutralizing potency was published in this month’s Nature.

Please turn to Slide 28. I’ll now highlight the news presented recent CVRM congresses. At ERA-EDTA in June, we presented a number of sub-analysis from the Phase IIIb DIALIZE trial that showed the Lokelma was affected across all groups of haemodialysis patients with hyperkalemia. The concomitant RAAS inhibitor therapy, no EGFR level appeared to limit normokalemia, and the medicine is effective in haemodialysis patients with severe hyperkalemia. As a reminder, the DIALIZE trial show that 41.2% of CKD patients maintain normal potassium levels pre-dialysis compared to only 1% receiving placebo.

For roxadustat, FibroGen and Astellas presented data from the DOLOMITES Phase III trial in non-dialysis patients, where results showed non-inferiority of roxadustat versus darbepoetin alfa in the correction of hemoglobin levels during the first 24 weeks of treatment.

At this year’s ADA Congress, sub-analysis from Forxiga’s Phase III DAPA-HF trial showed reduced incidence of Type 2 diabetes in patients with heart failure with reduced ejection fraction. During the period, we also received approval from the US FDA for use of Farxiga in heart failure with reduced ejection fraction with or without type 2 diabetes.

We also showcased one of our new medicines, cotadutide, our glucagon and GLP-1 dual agonist, which continues to progress in the clinic for NASH, and is about to enter clinical trials in diabetic kidney disease. Liver and kidney are the key target organs of the hormone glucagon, and we recently highlighted the goal of glucagon in resolving inflammation and fibrosis in a paper published in Nature Metabolism underlying the potential for cotadutide in the treatment of NASH.

And finally, we shared a news earlier this week regarding Farxiga’s DAPA-CKD trial, where Farxiga met its primary endpoint of the composite of worsening of renal function or risk of death in adult patients with chronic kidney disease with and without type 2 diabetes. Exceptionally, the trial also met every one of its secondary endpoints in this population, making Farxiga the first medicine to significantly reduce the risk of death from any cause in CKD patients.

Please turn to Slide 29. And now for the update for BioPharmaceuticals and what’s next in our pipeline. I’d like to highlight a couple of new programs out in the slide since April. In CVRM, we have a molecule called AZD9977, which is a new mineralocorticoid receptor modulator, which we are going to use in combination with Farxiga. We believe AZD9977 has a low risk of hyperkalemia relative to other MR antagonist. And so, it’s ideal to combine with Farxiga and to develop in heart failure patients with CKD, who are largely under-treated currently with MRAs.

In Respiratory & Immunology, our inhaled JAK program continues to move forwards with two molecules in development for use in asthma and other inflammatory lung conditions. We also have a bispecific against nerve growth factor and tumour necrosis factor, where initial data gathered so far in osteoarthritis pain shows levels of analgesia exceeding those that we would expect from standard of care. We believe this medicine has a potential to address a very significant unmet medical need in both OA pain and neuropathic pain. Throughout the year, we look forward to updating you on the progress of these and other medicines in the BioPharmaceuticals pipeline. And the IR team also remind me to say, please take a look at the new appendix slide on the upcoming what’s next milestones added based on your feedback from the sell-side analysts.

Please turn to Slide 30. I’ll end by taking you through some of the key items of upcoming news flow in the second half of the year across our entire pipeline. In Oncology, we are expecting European regulatory decisions for Imfinzi in small cell lung cancer and for Lynparza in first-line ovarian cancer, second-line prostate cancer, and Enhertu in third-line plus HER2 positive breast cancer.

We also started regulatory submissions for the ADAURA data for Tagrisso, and we’ll have data readouts for Imfinzi in Stage III non-small cell lung cancer with PACIFIC-2.

In BioPharmaceuticals, we’re anticipating regulatory decisions for Farxiga heart failure in EU and Japan. Brilinta in stroke in the US, roxadustat in anemia in CKD in the US and PT010 in Europe. We’ll commence regulatory submissions with Forxiga in chronic kidney disease, EU and China submissions for Brilique and stroke, anifrolumab in lupus, and AZD1222 for SARS-CoV-2 vaccinations following data readout towards the end of the year.

In terms of other data readouts, we’ll have data from the OSTRO trial for Fasenra and nasal polyps, as well as the results from the NAVIGATOR and SOURCE trials with tezepelumab in severe asthma.

With that, I’ll now hand back to Pascal for closing comments. And please turn to Slide 31.

Pascal Soriot — Executive Director and Chief Executive Officer

Thank you, Mene. So if we can turn to Slide 32 before the Q&A session, I wanted to leave you with this slide for a few moments as a summary of our strategic achievements. First of all, we have a global presence, and it is a very important aspect of our Company. We have a balance of specialty and primary care, and we have a leading business in the emerging markets, also with significant R&D base. And that is important because in times of change, I think the global presence and the diversified geographical footprint and a diversified specialty and primary care business really helps bring some resilience to the Company. The other aspect of the resilience of the Company, of course, is the fantastic commitment that our employees all around the world have shown during this very challenging period of time.

Second, we have a strong pipeline with 17 Phase III medicines and significant lifecycle projects. And as you heard today, there is a lot more coming in the early and mid-stage pipeline.

And finally, and as we always said, our financials are improving, and we’ve delivered on our goals. With a number of new medicines and nine blockbuster products, we’ve returned to sustainable revenue and earnings growth and we are now focused on operating leverage and cash flow.

So with this, we’ll now move to the Q&A. [Operator Instructions]

Questions and Answers:

Pascal Soriot — Executive Director and Chief Executive Officer

[Operator Instructions] We will also take recent questions from the webcast. And I please remind everyone to limit questions to one, to be fair to all of our callers. Thanks in advance. And perhaps now we can take the first question from the conference call, that seems to be from Sachin Jain at Bank of America. Sachin, one question or maybe two, but please not three or four. Thank you.

Sachin Jain — Bank of America Merrill Lynch — Analyst

Thanks very much, Pascal. Sachin Jain, Bank of America. I’ll promise two questions. First is on guidance, the bottom end of the sales guide at high-single-digit implies limited growth in the second half of the year. It seems conservative given the trajectory, anything we’re missing or is there scope to raise guidance for 3Q?

And then one question for Mene on the recent vaccine data published. Your perspective on the strength of the data versus competition. The market seems to have conclude that it’s not as competitive. So, any thoughts there? Thank you.

Pascal Soriot — Executive Director and Chief Executive Officer

Thanks, Sachin. So, maybe I could ask Mene to answer the vaccine question after making a quick comment that, again, we’re competing against this virus and data — and efficacy safety data is one thing, but manufacturing billions of doses is what we all collectively need to achieve because there will be a need for a lot of vaccine.

So, maybe Mene, you can cover this question and then Marc, could cover the sales forecast, if I may call it that way.

Mene Pangalos — Executive Vice President, BioPharmaceuticals R&D

Thanks, Pascal. So, first of all, I think we’re very pleased that both our data shows that we’re getting a good level of neutralizing antibody presentation in the patients that are vaccinated with the two doses, as well as a good T-cell response. And the study remains on track. As you know, we’ve dosed now nearly 12,000 patients around the world, in the UK, Brazil and South Africa, and we are about to start the Phase III program in the US.

With regards to — you’re saying that the vaccine looks less effective, I’m not sure where you’re basing it on. I know people have compared neutralizing antibody levels next to convalescent patients. We’re showing that our antibody responses in the range of where convalescent patients are. I would caution you about comparing assays that are done in different labs, because the assays are very different, in terms of their IC50s, IC80s, or IC100s. The standards are bit different. And actually the convalescent samples are different as well. So, in our experiment, for example, 86% of our convalescent patient samples are from severely hospitalized subjects. If you look at the Moderna and Pfizer patients convalescent samples, less than 20%. So, it does make quite a big difference because neutralizing antibodies are very different in convalescent samples. So very difficult to compare. But, I would say, I’m pleased that everyone’s vaccine seems to be generating good neutralizing antibody responses and ours also generates a very robust T-cell response.

Pascal Soriot — Executive Director and Chief Executive Officer

Thanks, Mene. Sachin, we have very clear data showing that depending on the type of patients who take, are they severe patients in the hospital or less severe, the level of antibodies in this convalescent patients varies very, very dramatically. So you really have to be careful what is the comparison — convalescent group. And then as Mene has said, there is also this question of assays. At the end of the day, the truth will come out of the clinical studies. And as Mene has said, hopefully, we have several vaccines anyway. So that’s what we need.

Marc, do you want to cover the sales question?

Marc Dunoyer — Executive Director and Chief Financial Officer

Yes. Happily. So, Sachin, our product sales grew by 13% for the first half and for the year, the total revenues are plan to grow high-single digits, low-double digits. We do not expect — we obviously very cautious about the speed of the recovery from COVID-19. We do not expect an enormous change in the trend, but we do expect continued progressive recovery, not a fast recovery. And this is why we believe the — reiterating our guidance of high-single-digit, low-double-digit for total revenue remains adequate.

Pascal Soriot — Executive Director and Chief Executive Officer

If I may add to this, Sachin, the one thing we’ve all learned with this virus is that, it’s incredibly unpredictable. Every expert in the world has made predictions about the evolution of the disease and most of the time they have been wrong. So, we don’t know what’s going to happen in the fall and in the winter. How much of disease there will be? So, it’s a very uncertain environment that we are living in until we get a vaccine.

Sachin Jain — Bank of America Merrill Lynch — Analyst

Thank you.

Pascal Soriot — Executive Director and Chief Executive Officer

Tim Anderson — sorry. Going to Tim Anderson of Wolfe Research. Please go ahead.

Timothy Anderson — Wolfe Research — Analyst

Unrelated, I guess, to current Q2 results. Generics are starting to get approved in China. So it seems like it’s just a matter of time until a volume-based procurement kicks in. And we estimate maybe this happens in 2022 or so, which is important, because this is a $1 billion product for you guys in China. I think it’s actually the biggest drug by any multinational in China. So, should analysts be modeling a big decline in emerging market, Pulmicort starting in that type of timeframe? And how to kind of the weak Q2 results layer into how to think about this?

And then just a quick question, nirsevimab, Sanofi holding an Investor Day on this asset today, maybe you can remind listeners of your arrangement with them on this externalized asset on things like your cut [Phonetic] of the economics?

Pascal Soriot — Executive Director and Chief Executive Officer

So, two great questions, Tim. The VBP question, I’ll ask Leon to cover this. And it’s not so much an emerging markets question, it’s more of a China question. So maybe Leon you could cover Pulmicort and the VBP question in general will be on Pulmicort.

And very quickly before Leon does that, there’s nirsevimab question. It’s a sort of — from an economic difference [Phonetic] of 50-50 deal, so that’s how we agreed. And then, of course, the management, the operationality of it depends on countries. And by and large, Sanofi thinks there is a — the economics are that of a partnership.

Leon, do you want to cover the VBP?

Leon Wang — Executive Vice President, International and China President

Yeah. I think, in China, we actually focused quite a much, not just on VBP, but on actually launching new products very fast and also getting them into a reimbursement listing very fast. So, I think that’s the — our main focus. But, of course, VBP, we — this year we have a — last year already, we have lost one tender of Crestor VBP. And we won the VBP tender for Iressa. So, I think for VBP brand, we try our best to consumerize and also to really focus on the loyal customer and the patients. And a lot of Chinese patients are still stick to the original brand as we observe. So, AstraZeneca is becoming a largest online and also offline pharmacy Company already. So, I think VBP we cannot say we do not decline our sales. But I think we try to minimize the impact to the current business. At the same time, we are growing rapidly the growth platform and newly launched product and the newly reimbursement listed products. So, in 2018, we have many products getting to reimbursement listing and now they are growing fast. In 2019, we have also Lynparza, Farxiga and the roxa, and they are also doing well. In 2020, we are also getting Tagrisso, first-line Imfinzi, Lokelma, [Indecipherable], Breztri. So it’s a long list of reimbursement entry.

So, I think that’s the China government strategy and AstraZeneca is positioned as the best company in covering all the channel and also almost every tier of the city. So, it’s a very solid number one company in China. So, we believe we can make China and emerging market continue to grow.

Timothy Anderson — Wolfe Research — Analyst

Yeah. Sorry, but is Pulmicort specifically a risk for VBP over the next coming years?

Leon Wang — Executive Vice President, International and China President

Yeah. I think Pulmicort, we don’t know when. But I think when there is enough number of generic getting to 0.5 and also 1 milligram to SKU, getting to the VBP, definitely it will be in the next one or next two or net three VBP round. But I think Pulmicort has its special thing is, it’s a pediatric using drug. So, most of the children and the family they are already still self-pay. Treatment is not covered by the employee or resident insurance. So, usually, parents still will go for the branded products and also self-pay. So, I think we have a relatively good chance to slow down the decline of Pulmicort even get into VBP. But at the same time, we should definitely launch — already launched Breztri very successfully into COPD market and also continue growing asthma maintenance market. So, I think these two markets are much bigger than the Pulmicort acute asthma pediatric age below five market. So, I think we see huge potential of China respiratory business.

Timothy Anderson — Wolfe Research — Analyst

Thank you.

Pascal Soriot — Executive Director and Chief Executive Officer

So, Tim, what Leon said is really important. I mean, first of all, if you look at Pulmicort, we will be impacted. We don’t know exactly when, and you have to have several generics to be put in VBP, but it will happen one at some point. But here what Leon and his team are doing is, consumerize the product to rely on people wanting to buy their first Pulmicort and they buy it online or they buy it in pharmacy. We also are developing home nebulizing. We are working with device companies to promote the use of home nebulizers. So that’s one piece.

The more important piece is also what Leon mentioned is, the history of treating asthma in China has been reacting to asthma effect. We need to shift this to treat to maintenance and convince doctors to treat patients, so they — on the maintenance basis. And the potential for Symbicort and, in particular, Breztri is enormous in China, both in COPD and in asthma. So, that’s really the direction of travel, and that’s how we manage the decline of Pulmicort but also the growth of other products in the respiratory portfolio.

Timothy Anderson — Wolfe Research — Analyst

Thank you.

Pascal Soriot — Executive Director and Chief Executive Officer

For the next question [Speech Overlap]. Sorry. Go ahead.

Leon Wang — Executive Vice President, International and China President

Tim, one more point I had is, usually the volume of VBP volume is 50%, 60% of the total market volume and the amount is 50%, 60%, another 50%, 60% times this 50%, 60% is like a 30%, 40% at the end is on the VBP tender. So, the rest still 60%, 70% is really not a part of the VBP. So that’s something maybe people neglected. So maybe overly pessimistic.

Pascal Soriot — Executive Director and Chief Executive Officer

Thanks, Leon. Luisa Hector, Berenberg. Luisa, go ahead.

Luisa Hector — Berenberg — Analyst

Hello. Thank you for taking my question. Maybe to come back to Sachin’s question on the guidance. So, I mean, looking at the first half EPS growth is well ahead of your full-year guidance. So, I just wondered if there is any cost constraints to highlight for the second half. And I’m particularly interested in the gross margin, which saw a nice uplift in Q2 despite the fact that within that you have the pay-away to Merck on Lynparza, which is growing. So, could you address the gross margin?

And I wanted to confirm, no COVID vaccine sales within your guidance for 2020? And if not, is that because the Brazilian data probably isn’t enough to get you an approval this year? And why would that be? Is there something about the trial design, the single dose or lack of elderly patients that might constrain you there? Thank you.

Pascal Soriot — Executive Director and Chief Executive Officer

Thanks, Luisa. Several questions here. So I’ll ask Marc to cover this. Starting with the last one, there will be no profit from the vaccine this year. I mean, I’ll let Marc cover the accountings of this vaccine. We will be delivering vaccine this year assuming, of course, the vaccine works and is safe, which we keep our fingers crossed, that will be the case. But there will be no profit, that’s the important piece. So, Marc will cover the accounting of this.

In terms of the guidance, I also Marc to — ask Marc to answer, but remember, also we are transitioning away from other income. So, essentially we are turning to a business that — if you look at EPS and turning to a business that is powered by the — by our core growth drivers. We’ve always said we are going towards transition period, pruning, simplifying our portfolio, reinvesting in our pipeline and transitioning across to a different type of business and that’s what we are doing. So, don’t forget, also this piece.

Marc, over to you.

Marc Dunoyer — Executive Director and Chief Financial Officer

Yes. Thank you. So, we’ll try to take your questions one by one. First of all, on the EPS. First half we are posting a $2.01, which is very much in line with what we need to achieve for the whole year. So, therefore, I would caution you not only using the sort of the growth rates of the first half of 2020 as a sort of surrogate for the full-year. The comparative performance of the second half of 2019 is more difficult than the first half of 2019. So, I feel that the profit achieved in the first half in value is a good surrogate for the second half.

Talking about gross margin. So, gross margin, when we looked at the first quarter, the gross margin was between 78% and 79%. And I indicated that one should not look at the quarter-by-quarter gross margin, but more should look at on cumulative term on the full-year. And I indicated then that the gross margin would probably be in 2020 around 80%. Now, we have seen in the second quarter, this progression of the gross margin, which is 84%. This is due predominantly to the biologicals, due to two reasons: first of all, we consolidated — we close — we sold one site, a site of Boulder and consolidated on Frederick, our biological production, that was one factor. We also had increased volume on our biologicals for anti-cancer but for other products also, this has improved the volume and the absorption on Frederick. So, this has improved the gross margin.

There is also another factor, which is a greater absorption on the non-biologic on the other small molecules. So, you have three factors that have contributed to make the second quarter gross margin higher than average.

Now, if we’re going to look forward, what will be the gross margin for the full-year 2020? We thought it would be about 80%, and if the greater absorption that we have seen continues to some extent, we believe it will be between 80% and 81% for the full-year.

Talking about the vaccine numbers, our guidance, for the time being, it does not include any impact of the vaccine. What Pascal has indicated, which is a no profit assumption, I wouldn’t want you to draw conclusion that we are not going to sell the vaccines in 2020. We obviously do everything we can to develop and register and distribute this vaccine as early as possible in the latter part of the year, but the number that we have indicated today do not include any numbers for vaccine. We will include those when we know more about the timing of the studies and the review process by authorities.

Pascal Soriot — Executive Director and Chief Executive Officer

Thanks, Marc. The accounting of it will may also vary from deal to deal, because sometimes we get reimburse for our expenses, sometimes we invoice and we have a commitment that the price we charge is reflecting of a no profit commitment. So, we’ll have different types of accounting for some of those deals.

Mene, do you want to comment on the data and the program itself?

Mene Pangalos — Executive Vice President, BioPharmaceuticals R&D

Yes. Because I want to correct Luisa, a couple of statements. So the studies that we have running in the UK, Brazil, South Africa and soon to start in the US will all be two dose studies. And the data readouts from either the UK study, the Brazilian study or the South African study or a combination of those could be sufficient for regulatory approvals around the world. Just to be clear.

Luisa Hector — Berenberg — Analyst

Thank you.

Pascal Soriot — Executive Director and Chief Executive Officer

The one thing maybe I would add, Luisa is that, there is one thing we — one variable we do not control and that’s the case for everybody, and that’s the rate of infection. As you can imagine, if the attack rate is low and it’s going to be hard to show statistically meaningful benefit or reduction of infections, and that’s why we have quickly moved into Brazil and South Africa where infection rate is high, where we tend to have a better chance to show efficacy or lack of efficacy but at least statistically meaningful results. But that’s the kind of variable that none of us developing vaccines can control and that influencing — that influences greatly the timing of getting the results of our trials, of course.

Luisa Hector — Berenberg — Analyst

Very helpful. Thank you.

Pascal Soriot — Executive Director and Chief Executive Officer

Michael Leuchten, Michael at UBS, go ahead.

Michael Leuchten — UBS Investment Bank — Analyst

Thank you very much for taking my questions. Two, please. One, just interested in, and I guess, this is for Leon. The change of the agreement in China for roxadustat, whether there’s any operational rationale behind that? Any color would be helpful?

And then, sorry, Marc, just going back to the accounting around the vaccine. So, my understanding is at the moment, this is netted in the P&L line by line. So whatever expenses you occur are they netted against the money or the funding that you have received? How is this done on a cash flow basis? So the substantial effort you’ve been making over the last few months, is that just all in in the cash flow — in the operational cash flow number or is there also some netting and it comes in below that line? Any color there would be helpful? Thank you.

Pascal Soriot — Executive Director and Chief Executive Officer

Marc, do you want to cover both questions, including the roxa China agreement because, of course, you’ve been very much involved in that one?

Marc Dunoyer — Executive Director and Chief Financial Officer

Yeah. Okay. So, let me start with the vaccine accounting. So, first of all, I’d like to — on the P&L, as Pascal said, we have — there is more than one contract. Therefore, it’s not done uniformly — in an uniform manner around the world, but more often than not, we will book sales either to governments or through licenses and so on. So, there will be a line on sales, I mean, we’ll book it on revenues and we will have also cost of sales, I mean, cost of manufacturing, we may have some other cost involved. So it won’t be netted. It will be netted in economic term because we have a no profit commitment. But it’s not netted on the accounting statements. So, the economic result will be neutral for the vaccine, but it will be represented on our P&L on the adequate line.

As far as cash flow is concerned, most of the time we try to match the sort of commitment that we have to make to subcontractors or various parties with what — with the commitment that we receive either from governments or from supranational organization and donors but it doesn’t always work that well. So, we have usually a small time lag between the commitment that we make and the payment of the loan on the grants that we received. But at the first half of the year, this cash flow impact is limited. We expect it to be a bit larger for the reminder of 2020.

But the other point I wanted to say, there will be no netting — there is no netting at all. In other words, we will receive some subsidies, some grants from parties. It will be booked in our cash flow as subsidies. And if we make commitment to a subcontractor, we would also book it where it should be booked on our cash flow statement. So therefore, this will become visible and apparent to all.

On roxadustat, so we have renegotiated the agreement in China to facilitate the collaboration between our own organization and FibroGen, but also to take into account the change of the regulation of the two invoice rule to be more in line with the principle of the contract that we had signed in 2014, I believe. So, it’s what basically to adjust to the new regulation of China and to try and keep the principle that we had agreed upon several years ago. I believe this contract — the new contract, the new terms of the contract are going to be easier for the two local organization to collaborate with each other. And this is why we did this negotiation. But the economic terms are not changed overall. It’s just different terms.

Pascal Soriot — Executive Director and Chief Executive Officer

Thank you, Marc. So the next question is from James Gordon at J.P. Morgan. James, over to you.

James Gordon — J.P. Morgan — Analyst

Hello. James Gordon, J.P. Morgan. Thanks for taking two questions. The first question was about the COVID-19 vaccine and how to think about neutralizing antibody. So, your COVID-19 might be that revaccination is going to be required. And the one question has been whether you can reuse it? Do you know what proportion of patients end up getting neutralizing antibodies when they get given this chimp adenovirus? And did the neutralizing antibodies mean it doesn’t work at all? Or did they just made you get lower efficacy and you’d have to dose it up higher? And also, how long do the neutralizing antibodies last for? Do we know that? So, might it be that the neutralizing antibodies show that at the same pace as the protective antibodies? So that was the first question, please.

And then the second question is just on TROP2 differentiation and where you develop it? So, there is a TROP2 asset already out there, Trodelvy. Is the main differentiation the antibody ratio or the link or something else? And do we think that you are going to develop this for everyone, as in all-comers, or just in high TROP2 patients? Because when I look at the efficacy, I saw the 27% efficacy quoted on the slides. But I think in the two-thirds of people with a high TROP2 you get about 3 times the efficacy versus the low TROP2. So, what are you thinking about that, please?

Pascal Soriot — Executive Director and Chief Executive Officer

Thank you, James. So, the TROP2 — maybe we could start with the TROP2 question, Jose, you could cover this differentiation, etc. And then, Mene, the — you could cover the neutralizing antibody question, which is, as I understood, it neutralizing antibody to the vector itself. So, Jose, over to you.

Jose Baselga — Executive Vice President, Oncology R&D

So, thank you very much, James. So, on the, DS-1062, so the differentiation is two levels. One is at the level of the payload. And our payload, the DXd, is 10 times more potent than SC — NS38. So that’s point number one.

Point number two is the linker. Our compound has tremendous linker stability. And that means that over a period of days, only 5% of the payload has been released, which explains the fact that you can have a safety profile that is very different from irinotecan. And so, we believe that this is the best-in-class ADC against TROP2. The applicability on multiple tumor types, the first place to go, obviously, is in non-small cell lung cancer versus the clinical data that you have referred to, also triple-negative breast cancer and bladder cancer have proof of concept that this is an approach that works. And I would say that beyond that, there are many other tumor types. So we see this as truly pan-tumor asset. So, it would apply — we will explore in small cell lung cancer, in gastric, in pancreatic, into the neck, in cervical, etc. So, I think that’s credibly exciting on that front.

The data in lung cancer does not suggest that there is increase in higher efficacy at higher TROP2 levels. So, although we are working very hard to find a biomarker, at this point, there is no correlation in lung cancer between different levels TROP2 expression and activity. So, our plan for the Phase III study is to go into an all-comers population.

Pascal Soriot — Executive Director and Chief Executive Officer

Thanks, Jose. Mene?

Mene Pangalos — Executive Vice President, BioPharmaceuticals R&D

So, there is a few questions, really, and one is how long-lasting is the protection going to be for the vaccine? And by that, how long is the neutralizing antibody response in T-cell response? And for that we need to go to some of the Merck data because obviously we don’t know yet until we start generating data six months and 12 months out. But the Oxford Group have demonstrated that they’re getting long-lasting immune responses that go well beyond 12 months, say, 12 to 18 months at a minimum.

With regards to antibodies to the vector, following two doses so far, I would say, that’s very limited. Again, there’s some data generated with repeat dosing with other — against other viruses. And they’ve gone out to four or five doses, and again seeing very relatively little impact on the overall immune response to the antigen that you are trying to provoke the immune response to, so in this case, a spike protein for us SARS-CoV-2. So I think we’ll be able to dose repeatedly. But it will hopefully be once every one or two years.

Pascal Soriot — Executive Director and Chief Executive Officer

Thanks, Mene. So, we’ll try to shorten the responses because we have many questions. Matt Weston at Credit Suisse. Over to you, Matt.

Matthew Weston — Credit Suisse — Analyst

Thanks, Pascal. Two, please. One for Jose, adjuvant IO, I see you’ve delayed the readout of the Imfinzi trial in lung. I assume that’s because the EGFR patients are likely to move to the ADAURA regimen when approved. I’m just interested, are you reopening recruitment to add more patients? Or are you just running the smaller trial for longer?

And then secondly, actually just a follow-up to Mene’s comments to James’ question to do with neutralizing antibodies to the vector. I note that with other Oxford vaccine candidates, they’ve used their second vector, the MVA vector for the second shot, particularly for this reason of not wanting to see neutralizing antibody. So why didn’t you do that here? Why was it not necessary?

Pascal Soriot — Executive Director and Chief Executive Officer

Thank you, Matt. So, maybe we could start with this neutralizing antibody questions, Mene, and then we’ll move to the BR31 question. Over to you.

Mene Pangalos — Executive Vice President, BioPharmaceuticals R&D

The short answer is because we’ve got a very robust neutralizing antibody and T-cell response with two shots of the same vaccine and obviously that’s a much easier thing to administer logistically around the world. It doesn’t preclude us with looking at other things down the road, but in this instance, it is the easiest thing and the response is still very good.

Matthew Weston — Credit Suisse — Analyst

Thank you very much.

Pascal Soriot — Executive Director and Chief Executive Officer

Mene, thank you.

Jose Baselga — Executive Vice President, Oncology R&D

So in terms of the BR31 adjuvant study, we have announced that as a result of the positive Tagrisso, ADAURA study, we are now analyzing the potential impact that it would have on the adjuvant Imfinzi study. So, the Phase III trial analysis is currently being reviewed. So, as a result of that, we are anticipating now a delay on the results until 2021-plus. I think that’s just the normal reaction based on the fact that ADAURA has totally transformed in a good way the therapy of patients with lung cancer.

Pascal Soriot — Executive Director and Chief Executive Officer

Thanks, Jose. Next one is Mark Purcell, Morgan Stanley. Mark, over to you.

Mark Purcell — Morgan Stanley — Analyst

Yes. Thanks, Pascal. First question is on your ADC strategy more broadly, if I may. In HER2 with your DXd-directed ADC and TROP2 and all-comer ADC. But in terms of sort of your ADC-centric approach is enabling IO combinations and other combinations. Could you sort of help us understand your ambition to — in terms of the promise that ADCs offer sort of smart chemo to replace standard chemo and how that could enable earlier utilization? So sort of following vis-a-vis the MERMAID initiatives and the base you’ve generated with ADAURA and PACIFIC?

And then could you help us understand your internal capabilities there in terms of building organically ADCs, which can compete with the platform you collaborated with given that you’ve moved the BCMA ADC into Phase I in the second quarter?

And then it’s just a very quick one, Lynparza colorectal cancer Phase III trial. I don’t think we’ve seen any Phase II data. So, Jose, could you help us understand what’s giving you the confidence of starting what’s going to be a pretty length and significant Phase III program in colorectal cancer for Lynparza? Thank you.

Pascal Soriot — Executive Director and Chief Executive Officer

Jose, over to you.

Jose Baselga — Executive Vice President, Oncology R&D

Thank you very much. These are very good questions and a long question. So I’ll have to address them quickly, if I could. So in terms of the ADC program, we believe there is a huge logic in combining ADCs with IO. So, basically the way we see that is that, we see ADCs in breast cancer and in lung cancer as the backbone of therapy. And we do see them as the replacement of any form of chemotherapy in that setting just because they are far more efficient and also they have a very good profile from the point of view of safety.

Now, if you think about that, the ADCs induce a very fast response, and it’s very deep. And in non-small cell lung cancer in the first-line setting, although IO is helping tremendously, you have PFS in the first-line setting with IO alone in non-small lung cancer of five, six months, that’s what you have. So, I think with very potent ADCs, you could clearly enhance that. So it’s front and center in our strategy. And the same applies for Enhertu. So I think that’s important.

Now, I think Mark, as you also pointed out, as you can imagine, when we have two assets of this magnitude, it means that we believe in ADC as a pillar cancer therapy. So, we always had at this AZ a very good ADC effort, and we have some of our own compounds that have been moved forward. And what we’re doing now is that, we are strengthening further our internal capabilities as much as we can. So, we don’t see these two ADCs just a two of phenomena, but rather a commitment to this very exciting area of therapy.

Then, if I recall correctly, on the Lynparza study, the Phase III study in colorectal cancer. That’s being done by Merck. We have partners, but that’s a Merck brand study. The logic is quite obvious, there is proportion — a significant proportion of patients with colorectal cancer that are sensitive to platinum, and there is a correlation between platinum sensitivity and Lynparza sensitivity. So that’s the question being addressed. Now, of course, you could do a Phase II, but at some point, the only way to prove this is through Phase III. So, I totally — we totally support the approach that Merck has taken on this front.

Mark Purcell — Morgan Stanley — Analyst

Thank you.

Pascal Soriot — Executive Director and Chief Executive Officer

Thanks, Jose. Richard Parkes at Exane. Over to you, Richard.

Richard Parkes — Exane BNP Paribas — Analyst

Hi. Thanks for taking my questions. Hopefully, you can hear me okay. Couple of questions. First one for Pascal, just wondered if you could talk about your longer-term ambition in the vaccines market. Obviously, your capex is being funded by the contracts that you’ve entered and the vaccine market looks like it could open up given improved depreciation of the value of vaccination following the pandemic. So, is that an area that you would allocate your own capital to investing behind longer-term. That’s the first question.

Second question is for Jose on the SERD program. Your competitor has been pretty vocal about their belief that you’re disadvantaged by the tolerability and the bradycardia and visual disturbances. Just was hoping to get your perspective on that and whether those were on target or off-target toxicities? Thank you.

Pascal Soriot — Executive Director and Chief Executive Officer

Thanks, Richard. I’ll try to cover the first one. It’s a good question, and Jose, could cover the third question. The vaccines, I mean, it’s a good question. I cannot answer it as of today. Every year with the Board we review our long-term strategy and those are the kind of discussions we’re going to have over the next few months. I can only tell you today that our starting point was really kind of living our values, in fact, doing the right thing. We thought this is a vaccine that has a good profile. We can help, globalize the development and the manufacturing, and we can make an impact as a company on this terrible disease, and also being entrepreneurial is another one of our values. And so, everybody in the Company is very entrepreneurial. And so, that’s really why we jumped in there. We want to make an impact, we want to make a difference. And then we will see, we are entrepreneurial and we’ll see what — where it takes us. But also, we have to have strategic discussions, capital allocation, but it really start with, do we have anything, do we have an opportunity, do we have science that can — we can follow? So, lots of questions. We don’t have the answer. And we will look at this over the next few months.

Jose, the third question.

Jose Baselga — Executive Vice President, Oncology R&D

Yes. Well, as you can imagine, the SERD is right on my alley. So I’d be looking at the SERD data not with two eyes, but actually with more than that. And I would say, with two eyes and a heart. So, the activity data that was reported at ASCO, you cannot compare different, you cannot do cross-study comparisons but somehow, you need to look at your data and see what it tells you. What it tells me is that, our patient population was the most heavily pre-treated of any other reported Phase I study with SERD. And in this incredibly heavily treated population, we had perhaps the highest response rate reported and the highest clinical benefit rate. So, we are dealing with a very efficacious and likely to be best-in-class SERD inhibitor.

Now, the bradycardia is on a target effect. It’s something that it has been seen also by other SERD. I would be concerned if I did not see bradycardia, because it’s a very powerful class effect. The good news with bradycardia is that, the question is not how low that the heart rate goes, but rather can it recover upon stress or exercise, and it is — is it causing or not symptoms? And the answer is that, we have not seen patients having a symptoms that alter their functionality due to bradycardia. And the same applies with the visual disturbances. These are visual disturbances that do not interfere with their daily lives. There is tachyphylaxis, it gets better. So, we are starting this very carefully, but we are not concerned, and also, very importantly, we have not announced yet our Phase III does. This toxicity scales that are part of the clinical trials have not been adopted to the different agents. So, we are thinking that it’s going to be more relevant to perhaps present this data in a way that provides meaningful information for the drug development process. And I think here, these toxicity scales in bradycardia and in eye disturbances are not helping.

And one more last comment, if I may. We have studied extensively and there is no organic damage to any of the visual apparatus of any of these patients.

Pascal Soriot — Executive Director and Chief Executive Officer

Thank, Jose. Maybe just to add, you have to remember, bradycardia was defined as a heart rate below 60. I take confidence in myself that my heart rate is below 60 and I’m still alive. So, I think it’s a question of how you classify this bradycardia and we have more work to do in defining exactly what we mean by this because it creates questions. But in fact, as Jose explained, there is no reason to be concerned at this point.

Simon Baker at Redburn. Simon, go ahead.

Simon Baker — Redburn (Europe) Limited — Analyst

Thank you. Good morning. Two questions. Firstly one for Marc. A question on two quarterly factors and any potential impact on full-year. Firstly, on the tax rate, which was higher than we expected in Q2. Does that have any full-year impact or is that just quarterly fluctuation that will wash out in the second half? And also on SG&A, where you talked about investment in launches, but presumably, there was some COVID-related savings there. So I wonder if you could give us the dynamics around that and any impact that will on the full-year figure.

And then a question for Ruud on Brilinta. If I look at the contribution of Established Rest of World sales to the total for Brilinta, it’s one of the lowest of your focused key medicines. I just wonder if you could give us an update on where you see the potential for Brilinta in Established Rest of World. Thanks so much.

Pascal Soriot — Executive Director and Chief Executive Officer

Thank you. Should we start with Marc, and then Ruud you could cover the Brilinta question?

Marc Dunoyer — Executive Director and Chief Financial Officer

Yes. So on — Simon, thank you for the question on the tax rate, so basically 21% for the second quarter. We are confirming our guidance or indication more precisely on the tax rate for the whole year. There is no change to it. As you suggest, this is obviously a quarter-to-quarter, small — very small variation.

On the SG&A, you are right to say that, like many other companies, we have had reduced level of commercial activities and therefore, our spend of SG&A has been lower-than-expected. But conversely, we have had dramatic increase, although the line is a small line on distribution cost, the freight has been — the capacity of freight has reduced by about 50%, and the cost of freight and transportation, and warehousing and everything has increased by about 30% — 30% to 40%. So, you have the COVID-19, has brought some pluses and minuses. Our SG&A is growing year-to-date at 5%. And with this, we have invested behind several launches, and we have continued to invest for a site in China.

Pascal Soriot — Executive Director and Chief Executive Officer

Thanks, Marc. Ruud, Brilinta?

Ruud Dobber — Executive Vice President, BioPharmaceuticals Business Unit

Yeah, absolutely, very quickly. So, in established of the world markets, we are primarily talking about countries like Australia, Japan and Canada. We lost the patent. The patent expires already in Canada. In Japan, as you probably know, the sales of Brilinta is almost non-existing. So, the growth potential in — what we are calling the established markets outside of Europe and Canada and international is relatively limited. But equally, we still see a very substantial opportunity in the United States, Europe and especially in the emerging markets moving forward.

Simon Baker — Redburn (Europe) Limited — Analyst

Great. Thanks so much.

Pascal Soriot — Executive Director and Chief Executive Officer

Thanks, Ruud. Next one is Naresh Chouhan at Intron. Naresh, go ahead. Naresh, you may be on mute. We can’t hear you. Okay. So, hello?

Naresh Chouhan — Intron Health — Analyst

Hello? Can you hear me?

Pascal Soriot — Executive Director and Chief Executive Officer

Yes. Go ahead, Naresh.

Naresh Chouhan — Intron Health — Analyst

Sorry, I’m not sure what happen there. Just a couple of questions on Tagrisso, please. There were some signs that EGFR testing in US and in Europe was down quite significantly due to COVID. So, we’re not seeing any impact on Tagrisso sales. Is that something you have seen in respect to EGFR testing? And should we expect any impact on Tagrisso in H2 as a result? Or a new patient starts been pretty stable?

And then secondly, on Tagrisso in China. In your initial epidemiological data, you gave the potential patient population a pretty big haircut to reflect limited patient access. Now, you are in the market and you can see the uptick, particularly in the first-line setting. Is there any upside to your initial population data for Tagrisso in China? Thank you.

Pascal Soriot — Executive Director and Chief Executive Officer

Thank you, Naresh. So, Dave, two questions for you.

Dave Fredrickson — Executive Vice President, Oncology Business Unit

Great. Thanks, Naresh, for the question. So, on the first in terms of the EGFR testing rates, across tumor types we are seeing declines in diagnosis rates and testing rates. And so, that’s true of the EGFR testing in the US, just as it is true of actually all of the testing that we’re seeing. With that said, I think that we did see within the US, specifically, we see continued low-single-digit demand on Tagrisso continuing to be driven, and I think that that is largely due from what we see an increase in duration of therapy and TRxs.

I think again on Tagrisso, the key thing that we’ve really highlighted here is that, the strength of Tagrisso is really the global business, which is up by 7% and it speaks to the expansions that we’re making across the globe to bring FLAURA online and get national reimbursements and then the move that will make obviously to transition to ADAURA.

On the question within China, I think we still continue to stay true to the epidemiology data that we put out. We continue to work and — on making sure that we’re driving access, not only, of course, into the provinces but into the counties. But I think the estimates that we gave before are still holding true with the numbers that we’re seeing right now.

Pascal Soriot — Executive Director and Chief Executive Officer

Thank you, Dave. So, sorry, the — Nick, can you get me the — we have a couple of additional questions. Can I get the list, please? Nick, I don’t know if you hear me. Can I get the list of questions, please?

Like always, we’ll end here.

Dave Fredrickson — Executive Vice President, Oncology Business Unit

Pascal, I believe Kay [Phonetic] is on the line.

Pascal Soriot — Executive Director and Chief Executive Officer

Yeah. It’s okay. It’s okay. It’s okay. It’s okay. I’m just waiting to hear from Nick. Nick?

Nick Stone — Investor Relations

Yeah. Pascal, so…

Pascal Soriot — Executive Director and Chief Executive Officer

Okay. Thanks very much. Christopher Uhde at SEB. Thank you very much. Go ahead, Christopher.

Christopher Uhde — SEB — Analyst

So the first one, Tagrisso, I noticed that there is a change in — yeah, potential regulatory filing. So have you held pre-submission talks yet with all the major global agencies? And then do you expect to submit in H2 only in the US or elsewhere also?

And then secondly, can you quantify the impact of COVID-19 on SG&A in Q2 as a percent of — well, so as a percent of sales delta from last year?

And finally, on the logistics of vaccine delivery, it’s been reported that actually delivering the vaccine to end users may be a challenge because of the quantities that have been — that are planned to be shipped around the world. Can you comment on what if anything you’re doing to kind of prepare for that?

Pascal Soriot — Executive Director and Chief Executive Officer

Thank you so much. Marc, do you want to cover the second question?

Marc Dunoyer — Executive Director and Chief Financial Officer

The second question was basically the impact on the SG&A level or on the sales level? I’m not sure I…

Christopher Uhde — SEB — Analyst

Sorry, SG&A, so as a sort of — if you can quantify that as a sort of — yeah, in terms of a delta in percent of SG&A to sales.

Marc Dunoyer — Executive Director and Chief Financial Officer

So, I have mentioned earlier on that the — our SG&A grew for the first half at 5%. And I would say, that if — it’s a bit hard to speculate, but if COVID-19 had not taken place, I would imagine that our growth rate would have been more in line with what we have seen before, which is probably 7%. So, I would imagine a 2% impact on the growth rate of SG&A due to COVID-19-related reduction of activities. But it’s very approximative view. Does it answer your question?

Christopher Uhde — SEB — Analyst

Yes, yes.

Marc Dunoyer — Executive Director and Chief Financial Officer

Okay. Thank you.

Pascal Soriot — Executive Director and Chief Executive Officer

Thanks, Marc. And the first question is about Tagrisso filing. Do you want to take it, Dave?

Dave Fredrickson — Executive Vice President, Oncology Business Unit

Yeah, absolutely. So, we are moving at pace across the globe with health authorities on our discussions on ADAURA, as you saw from the news just today we’ve been granted Breakthrough Therapy Designation in the United States by the FDA for ADAURA. We’re also discussing Orbis countries with the FDA and other health authorities. So, I think that the enthusiasm for this data set is high and look forward to more updates on filings that are happening throughout the second half as we really move towards getting ready for a variety of global launches next year.

Pascal Soriot — Executive Director and Chief Executive Officer

Thanks, Dave. Can we return maybe to the vaccine question? And Pam, you could cover the distribution question that was asked? But you could also give people a sense of what this scale up in manufacturing means because everybody is always focused on clinical results, but having a vaccine that can help the world means you have to scale up the manufacturing, and that’s a very important dimension that tends to be forgotten. Go ahead, Pam.

Pam Cheng — Executive Vice President, Operations and Information Technology

Yeah, absolutely. Thank you, Pascal. So let me just quickly give everyone a feel in terms of what have we done in setting up supply chains to be capable of delivering over 2 billion doses of this potential vaccine between end of 2020 and to the end of 2021. So, we’ve now or in collaborations and partnership with over 20, what we call the contract manufacturing organizations, who have got two significant sub-licensees as well in place. And we’ve worked very, very hard, too, in parallel, as we are setting up clinical trials to also get these supply chain ready and manufacturing — commercial manufacturing ready.We stood up these, what we call the independent sort of parallel supply chains to ensure that we can have brought an equitable assets around the world without competing with each other as well.

So, our main focus is to do everything we can to ensure that these commercial doses are available, should these vaccine proven effective. Our goal has always been, if this vaccine is effective, we wouldn’t have lost a single day in delivering these doses to the world. We are collaborating with many governments and entities around the world on supply and distribution. We, as one Company, AstraZeneca, will not be in the position of deciding who gets what vaccine and when. We are working with the governments in due course to ensure that the doses are available, and we would — the government and the entities will decide who gets vaccinated and when.

Pascal Soriot — Executive Director and Chief Executive Officer

Thanks, Pam. So the next question is Andrew Baum at Citi. Andrew, go ahead.

Andrew Baum — Citigroup — Analyst

Yeah, afternoon. So, first question for Pascal and Jose. A couple of your former colleagues from Genentech has founded EQRx that has a drug with a very similar profile called almonertinib approved on the Chinese market, and is — and now they’ve acquired the US rights. So, as you think about the competitive risk given some of the recent action of the FDA and accepting Chinese data, realistically how are you thinking about future planning? I’m sure there is intellectual property questions, but I’m just interested in engaging how aware and the amount of thought you give to that product?

And then second, on PT027, which — the budesonide albuterol inhaler. What’s your internal level of excitement? Despite the lack of innovation, we’ve argued at least that there is significant medical need, but I’m interested in understanding commercially how important do you think it could be within the US market? Thank you.

Pascal Soriot — Executive Director and Chief Executive Officer

Thank you. So, maybe, let’s start with PT027. At the end of the day, we follow the science, but the important piece is to address patients’ needs, right? So, if you can help patients, even the science — even if the science is less breakthrough, it is exciting.

So, Ruud, do you want to talk about PT027 and then we will return to EQRx and Jose can comment?

Ruud Dobber — Executive Vice President, BioPharmaceuticals Business Unit

Yeah. Absolutely, Pascal. So, Andrew, I think it’s almost an understatement to say that there is a lot of excitement in the US organization, and it’s two-fold. First of all, there is an over-reliance on short-acting beta agonist. It’s causing a lot of issues, including asthma death in the United States. So, coming back to Pascal’s point, there’s clearly a medical need.

The second piece is, in the United States, we don’t have the smart or the anti-inflammatory relief indication because the FDA was never very keen in order to move into that direction. So in that sense also from a commercial opportunity, if PT027 is successful and will get approved, it’s the only product, who can claim that you can have an ICS and, in this case, a SABA in order to treat patients across the GINA 1 up to GINA 5 patient population. So, it’s a very exciting product. And clearly, we are beefing up our resources. We are looking into every possibility to get a good start of this product in the United States when it is registered.

Pascal Soriot — Executive Director and Chief Executive Officer

Thanks, Ruud. I mean, the Symbicort there in Europe and elsewhere has changed the guidelines on what you know, and it’s a huge opportunity and a way to chance treatment. Hopefully, we can do the same with PT027 in the US.

So, let’s move to the EQRx question. Just a quick general point actually, Andrew, is that the FDA has said they will take Chinese data. They haven’t said they will take a second-line data set to give approval for first-line or even adjuvant, right? So — but Jose, go ahead.

Jose Baselga — Executive Vice President, Oncology R&D

So thank you very much, Andrew. So I think your question has two aspects to it. One is particularly how this affects Tagrisso, and I think that the Tagrisso situation that we have is one that is incredibly strong because we have full second-line approval and also we have randomized first-line data and now we have adjuvant data. So, they — it’s a very solid position that we have. So, I think to me, Andrew, and I think that that where you’re going is the philosophy of all this. Because if there is a way down the line to get trials done in China in the Phase II setting with lack of the control arm and that can lead to approval in the US or rest of the world, I think that’s a model that pharma needs to consider. And it’s something that we will need to address in time. So, it’s all a very fluid and very interesting. But I think that in the particular case of Tagrisso, for the situation that we have is one that is extremely solid based on our data.

Pascal Soriot — Executive Director and Chief Executive Officer

Thanks, Jose. So let’s move to the next question, Peter Welford. Peter, go ahead.

Peter Welford — Jefferies & Company — Analyst

Hi, yes. Thanks for taking my questions. Just two quick ones. And firstly, just returning again, I’m sorry, to the vaccine, you said you totally [Phonetic] do. I wonder if you could comment to give us timing at all when you may have some data on elderly and also pediatric and other at-risk patients. And also, is it possible for you to pool across the UK, South Africa, Brazil studies to get data sooner depending on differential rates of infections? Or release study if they have its own independent event rate?

And then just a quick one for Marc on cash flow, which is I think in the past you’ve been very clear with covering the dividend ex the Daiichi payments. I wonder if now post the second Daiichi deal, you can give us, I guess, a reiteration or perhaps talk about when again covering the dividend. And how you look at the cash flow from that following the second obviously major collaboration? Thank you.

Pascal Soriot — Executive Director and Chief Executive Officer

Thanks, Peter. Mene, do you want to cover the first two questions and Marc will cover the cash flow question?

Mene Pangalos — Executive Vice President, BioPharmaceuticals R&D

Yeah. So, data on different age groups is coming from the Phase I study and from the Phase II, part of the Phase III study were running in the UK and we’re getting that data in on a weekly basis. And with regards to pooling data from the UK, Brazil and African studies, the answer is yes, we can, because the endpoints are exactly the same. So we would be able to pool the data for filing.

Pascal Soriot — Executive Director and Chief Executive Officer

Thanks, Mene. Next question is Steve Scala at Cowen. Steve, over to you.

Marc Dunoyer — Executive Director and Chief Financial Officer

Pascal, would you like me to answer the question on the cash flow with…

Pascal Soriot — Executive Director and Chief Executive Officer

Oh, I’m sorry, sorry. I forgot that one. Go ahead, Marc. It was too [Speech Overlap]

Marc Dunoyer — Executive Director and Chief Financial Officer

And I will make it short as I can. So, we confirm our plan for 2021 to cover the dividend with our net cash flows, including taking into account this new product right acquisition that we have just announced earlier in the week. So it doesn’t change our plan whatsoever.

Pascal Soriot — Executive Director and Chief Executive Officer

Thank you, Marc. So, Steve Scala, Cowen. Go ahead, Steve.

Steve Scala — Cowen and Company — Analyst

Thank you. Questions on a few upcoming events. The Enhertu filing for gastric seems to have been pushed out in the US and EU. The Imfinzi treme filing in first-line HCC is back in 2020, it had been pushed to — had been pushed previously to 2021. And then the PT027 data is now late 2021, it had been this year. Can you provide perspective on the reasons for these changes?

And then quickly on the oral SERD, is it safe enough for a CDK4/6 combination in the first-line setting? Thank you.

Pascal Soriot — Executive Director and Chief Executive Officer

Thank you. So, Mene, maybe you want to comment on the biopharma and then, also Jose on the changes in Oncology and also cover the SERD question?

Mene Pangalos — Executive Vice President, BioPharmaceuticals R&D

Yeah. PT027 is one of the few studies we’ve got in late-stage development that has been impacted by COVID-19 because it’s a milder population. We’ve had to pause — we had to pause enrollment and it’s the only reason to delay. Back recruiting now.

Pascal Soriot — Executive Director and Chief Executive Officer

Yeah. We’ve had a number of — a couple of studies impacted by COVID. Jose, do you want to — thanks, Mene. Jose, do you want to cover the SERD question the safety in terms of combination?

Jose Baselga — Executive Vice President, Oncology R&D

Yeah, absolutely. So, we are planning ahead to do a randomized Phase III study with the combination. We feel — we’re gathering the data, but we have no concerns.

Now, on the…

Pascal Soriot — Executive Director and Chief Executive Officer

In term — go ahead.

Jose Baselga — Executive Vice President, Oncology R&D

In terms of the clinical trials, and — it all — all the readouts that we have are purely event-driven. So, I mean, there is nothing much we can do that follow the occurrence of the events.

Pascal Soriot — Executive Director and Chief Executive Officer

Thank you, Jose. So we’ve gone over a little bit because we had so many very good questions. I’m really sorry, but we now have to close. There are still a few questions that we cannot answer, but we want to be respectful of your time. If you want to share those questions with the IR team, we’ll make sure we answer them separately.

Let me just close by, thank you all again for your interest. And maybe quickly a repeat what I said a bit earlier. What you see now in play, at play is really the strength of our global presence, our diversified footprint, our broad footprint around the world, our balanced specialty primary care portfolio and the growth we see in the emerging markets. We now have a strong pipeline with 17 Phase III medicines, lots of lifecycle projects. As you’ve heard today, lots of good questions, and there is more to come with the early and mid-stage pipeline.

And finally, even though for a period of time people have their own questions and doubts, we are showing that our financials are improving and we are delivering exactly on what we said we would do. So, we are progressing our earnings growth and improving margins and cash flow. And definitely, we will continue building the pipeline, but staying true to the financial commitments we have made to you and to our shareholders.

So with this, thank you, again, for all your interest, and I wish you a great rest of the day. Thank you. Bye-bye.