On April 27, 2017 AstraZeneca, a global, innovation-driven biopharmaceutical business that focuses on the discovery, development and commercialisation of prescription medicines, primarily for the treatment of diseases in three main therapy areas – respiratory, inflammation, autoimmune disease (RIA), cardiovascular and metabolic disease (CVMD) and oncology – as well as in infection and neuroscience reported financial results for the first quarter ended March 31, 2017 (Press release, AstraZeneca, APR 27, 2017, View Source [SID1234518737]).

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Financial Summary

$m
% change
Actual1
CER2
Total Revenue
5,405
(12)
(10)
Product Sales
4,843
(13)
(12)
Externalisation Revenue
562
2
3

Reported Operating Profit
917
(12)
(23)
Core3 Operating Profit
1,667
5
(2)

Reported Earnings Per Share (EPS)
$0.42
(17)
(35)
Core EPS
$0.99
4
(4)

● The Product Sales performance mainly reflected the residual impact of the US Crestor patent expiry
● One third of Externalisation Revenue was represented by sustainable and ongoing income4
● Continued good progress on cost control, reflecting the evolving shape of the business:
– Reported R&D costs declined by 2% (up by 2% at CER) to $1,453m; Core R&D costs declined by 6% (3% at CER) to $1,338m
– Reported SG&A costs declined by 11% (8% at CER) to $2,300m; Core SG&A costs declined by 14% (12% at CER) to $1,829m
● Reported EPS declined by 17% (35% at CER); Core EPS increased by 4% (down by 4% at CER)
● Financial guidance for 2017 confirmed

Commercial Highlights
The Growth Platforms grew by 4% (5% at CER) and represented 66% of Total Revenue:
● Emerging Markets: 7% growth (9% at CER), becoming AstraZeneca’s largest sales region
● Respiratory: A decline of 2% (stable at CER), with growth offset by the performance of Symbicort in the US
● New CVMD5: Growth of 5% (6% at CER), with competitive pressures in the US continuing
● Japan: Growth of 5% (3% at CER), partly reflecting the ongoing successful launch of Tagrisso and the performance of Symbicort
● New Oncology6: Sales of $236m (Q1 2016: $99m), accompanied by regulatory approval for Tagrisso in China

Achieving Scientific Leadership
The table below highlights the number of successes in the late-stage pipeline since the last results announcement:

Regulatory Approvals
Tagrisso – lung cancer (US, EU; full approval)
Tagrisso – lung cancer (CN)
Forxiga – type-2 diabetes (CN)
Qtern – type-2 diabetes (US)
Siliq – psoriasis (US; by partner)
Regulatory Submission Acceptances
Lynparza – ovarian cancer (2nd line) (US) (Priority Review)
Bydureon – type-2 diabetes (autoinjector) (US)
Symbicort – COPD exacerbations (US)
benralizumab – severe, uncontrolled asthma (JP)
Phase III or Major Data Readouts
Lynparza – breast cancer
Farxiga – type-2 diabetes (CVD-REAL real-world study)
Other Key Developments
Orphan Drug Designation: Lynparza – ovarian cancer (JP)
Complete Response Letter: ZS-9 (sodium zirconium cyclosilicate) – hyperkalaemia (US)
Orphan designation: inebilizumab – neuromyelitis optica spectrum disorder (EU)

Pascal Soriot, Chief Executive Officer, commenting on the results said:
"Our good start to the year supported our guidance for 2017. Notably, Emerging Markets became our largest region, representing 32% of sales. The pipeline continued to deliver in what we expect will be a pivotal year for AstraZeneca as we announced important developments, in particular in Oncology. In addition to the availability of positive data for Lynparza in ovarian and breast cancer, we also received full approvals in the US and Europe for Tagrisso in lung cancer and launched this important medicine in record time in China. While we were disappointed to receive the Complete Response Letter for ZS-9, we remain confident in this treatment for hyperkalaemia.

"The Total Revenue performance reflected the transitional impact of recent patent expiries, which is expected to recede in the second half of the year. Importantly, we anticipate the significant progress of the pipeline to continue, including our Immuno-Oncology and targeted treatments. We will also maintain our commitment to drive efficiency across the company to support our efforts to bring new medicines to patients."

FY 2017 Guidance: Confirmed
The Company provides guidance on Total Revenue and Core EPS only. All commentary in this section is at CER and is unchanged from the prior results announcement:

Total Revenue
A low to mid single-digit percentage decline
Core EPS
A low to mid teens percentage decline*
*The Core EPS guidance anticipates a normalised effective Core tax rate in FY 2017 of 16-20% (FY 2016: 11%)

Guidance is subject to base-case assumptions of the progression of the pipeline and the extensive level of news flow listed on the following page. Variations in performance between quarters can be expected to continue, with year-on-year comparisons expected to ease in H2 2017, when the impact of the entry in July 2016 of multiple Crestor generic medicines in the US will annualise.

The Company presents Core EPS guidance only at CER. It is unable to provide guidance on a Reported/GAAP basis because the Company cannot reliably forecast material elements of the Reported/GAAP result, including the fair value adjustments arising on acquisition-related liabilities, intangible asset impairment charges and legal settlement provisions. Please refer to the section ‘Cautionary Statements Regarding Forward-Looking Statements’ at the end of this announcement.

In addition to the unchanged guidance above, the Company also provides indications in other areas of the Income Statement. The sum of Externalisation Revenue and Other Operating Income in FY 2017 is anticipated to be ahead of that in FY 2016. Sustainable and ongoing income is expected to increase further as a proportion of total Externalisation Revenue in FY 2017. Core R&D costs are expected to be broadly in line with those in FY 2016 and the Company anticipates a further reduction in Core SG&A costs in FY 2017, reflecting the evolving shape of the business. A full explanation of these items is listed in the Operating & Financial Review.

FY 2017 Currency Impact
Based only on average exchange rates in Q1 2017 and the Company’s published currency sensitivities, the Company expects a low single-digit percentage adverse impact from currency movements on Total Revenue and a minimal impact on Core EPS. Further details on currency sensitivities are contained within the Operating and Financial Review.

Notes

1. All growth rates are shown at actual exchange rates, unless stated otherwise.
2. Constant exchange rates. These are non-GAAP measures because they remove the effects of currency movements from Reported results.
3. Core financial measures. These are non-GAAP measures because, unlike Reported performance, they cannot be derived directly from the information in the Group Financial Statements. See the Operating and Financial Review for a definition of Core financial measures and a reconciliation of Core to Reported financial measures.
4. Sustainable and ongoing income is defined as Externalisation Revenue, excluding upfront receipts.
5. New Cardiovascular and Metabolic Diseases, incorporating Brilinta and Diabetes.
6. New Oncology comprises Tagrisso, Lynparza and Iressa (US).

Pipeline: Forthcoming Major News Flow
Innovation is critical to addressing unmet patient needs and is at the heart of the Company’s growth strategy. The focus on research and development is designed to yield strong results from the pipeline.

Q2 2017
Faslodex – breast cancer (1st line): Regulatory decision (JP)
Lynparza – ovarian cancer (2nd line): Regulatory submission (EU)durvalumab (durva) – bladder cancer: Regulatory decision (US)
acalabrutinib – blood cancer: Data readout, regulatory submission (US) (Phase II)#
Bevespi – COPD: Regulatory submission (EU)
Mid-2017
durva +/- tremelimumab (treme) – lung cancer (MYSTIC): Data readout
H2 2017
Faslodex – breast cancer (1st line): Regulatory decision (US, EU)
Lynparza – ovarian cancer (2nd line): Regulatory decision (US)
Lynparza – breast cancer: Regulatory submission
Lynparza – ovarian cancer (1st line): Data readout
Tagrisso – lung cancer (1st line): Data readout
durvalumab – lung cancer (PACIFIC): Data readout, regulatory submission (US)durva +/- treme – lung cancer (ARCTIC): Data readout, regulatory submission
durva +/- treme – lung cancer (MYSTIC): Regulatory submission
durva +/- treme – head & neck cancer (KESTREL): Data readout
moxetumomab – leukaemia: Data readout

Bydureon – cardiovascular (CV) outcomes trial: Data readout, regulatory submission

benralizumab – severe, uncontrolled asthma: Regulatory decision (US)
tralokinumab – severe, uncontrolled asthma: Data readout
2018
Lynparza – ovarian cancer (1st line): Regulatory submission
Tagrisso – lung cancer (1st line): Regulatory submission
durva + treme – lung cancer (NEPTUNE): Data readout
durva +/- treme – head & neck cancer (KESTREL): Regulatory submission
durva +/- treme ­ head & neck cancer (EAGLE): Data readout, regulatory submission
durva +/- treme – bladder cancer (DANUBE): Data readout, regulatory submission
moxetumomab – leukaemia: Regulatory submission
selumetinib – thyroid cancer: Data readout, regulatory submission

Bydureon – autoinjector: Regulatory decision (US)
roxadustat – anaemia: Data readout (AstraZeneca-sponsored trials), regulatory submission

Duaklir – COPD: Regulatory submission (US)benralizumab – severe, uncontrolled asthma: Regulatory decision (EU, JP)
benralizumab – COPD: Data readout, regulatory submission
tralokinumab – severe, uncontrolled asthma: Regulatory submission
PT010 – COPD: Data readout, regulatory submission

anifrolumab – lupus: Data readout
The term ‘data readout’ in this section refers to Phase III data readouts, unless specified otherwise.

#Potential fast-to-market opportunity ahead of randomised, controlled trials.