Earnings Call Transcript - AZN Q4 2025

Operator, Operator

Good morning to those joining from the U.K. and the U.S. Good afternoon to those in Central Europe, and good evening to those listening in Asia. Welcome, ladies and gentlemen, to AstraZeneca's Full Year and Q4 2025 Results Conference Call for investors and analysts. Before I hand over to AstraZeneca, I'd like to read the safe harbor statement. The company intends to utilize the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Participants on this call may make forward-looking statements with respect to the operations and financial performance of AstraZeneca. Although we believe our expectations are based on reasonable assumptions, by their very nature, forward-looking statements involve risks and uncertainties and may be influenced by factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Any forward-looking statements made on this call reflect the knowledge and information available at the time of this call. The company undertakes no obligation to update forward-looking statements. Please also carefully review the forward-looking statements disclaimer in the slide deck that accompanies this meeting. For those joining remotely, there will be an opportunity to ask questions after today's presentations. I must advise you that this presentation is being recorded today. And with that, I will now hand you over to the company.

Andrew Barnett, Head of Investor Relations

All right. A warm welcome, everybody, to AstraZeneca's Full Year Fourth Quarter 2025 Presentation Conference Call and webcast for investors and analysts. I'm Andy Barnett, Head of Investor Relations. And before I hand over to Pascal and the rest of the executive team, I'd like to cover some housekeeping items. Firstly, all the materials presented today are already available on the AstraZeneca Investor Relations website. Next slide, please. This slide contains our forward-looking statements, including the safe harbor provisions, which I'd encourage you to take the time to read. We would be making comments on our performance using constant exchange rates, or CER, core financial numbers and other non-GAAP measures. A non-GAAP to GAAP reconciliation is contained within the results announcement and all numbers quoted today are in millions of U.S. dollars unless stated otherwise. Next slide, please. Here's the agenda for today's call. Following our prepared remarks, as usual, we'll open the line for questions. We will try and address as many questions as we can during the allocated time or to please limit the number of questions you ask set to allow others a fair chance to participate. We do have a hard stop today at quarter past the hour as many of us have to catch flights in order to participate in the full year roadshow. So we will need to cut it short. We'll try and get to as many people as we can. Hopefully, everybody gets a clear chance to ask a question. And with that, Pascal, great year. Over to you.

Pascal Soriot, CEO

Thank you, Andy. Welcome, everyone. It's really a great pleasure to see you all again and to present our full year results. It's been a great year. If we can move to the next slide, the company delivered very strong performance, both on the financial and, most importantly, the pipeline front. On the financial side, revenue grew 8%, and product revenue importantly grew 10%, driven by continued global demand for our innovative medicines. Our core EPS, as you can see here, grew by 11%. We had 16 blockbuster medicines in 2025, with 17 of those growing at double digits. And we have the potential to get to 25 blockbusters by 2030. Remember, when we announced our $80 billion target back in May 2024, we had 12 blockbusters at the time. We now have 16, and we hope to get 25. Many of those new ones actually are either approved or soon approved or in Phase III. So good hopes that we will indeed get to 25. At our full year results last year, we signaled that we are entering an unprecedented catalyst switch period for our company. Our R&D teams continue to deliver. We had 16 positive Phase III trial readouts in 2025. Together, they have a combined peak-year sales potential of $10 billion, as you see on this slide. In the last 12 months, we have secured 43 approvals for our medicines across major regions, helping us to sustain growth into 2026. It's important for me to recognize the work everybody has done in the company as far as the company to do this, in particular, our global operations colleagues, because each time we launch one product, for them it's probably 50 or 60 launches, so many different SKUs around the world. Everybody has done a tremendous job across the organization. The strength of our portfolio was really clear in 2025. We are not taking significant steps to continue to strengthen our manufacturing and R&D footprint in both the U.S. and China. Together, our global reach and our diverse revenue streams really support our low concentration risk and ensure resilience to regional disruptions. I know a couple of years ago, many questions we were getting were about how our pipeline is complicated and diversified. I hope today, people realize better the value of this diversification. We're now talking about concentration risk. It's great to have one or two big products; they make you very profitable and make you look good. But if you lose one of those, as we've seen happen to some actors in the industry lately, it really becomes very painful very quickly. This diversification, both product-wise but also geographically, is certainly becoming more apparent as we drive growth through therapy areas and regions. If you look at this chart, we saw growth across oncology and R&I in particular, growing each 17% and 12%, respectively. CVRM, of course, was impacted by the patent expiry of Brilinta and Farxiga in the U.K., and there will be more of this, unfortunately, in 2026. Despite this, we still grew 2%. Overall, biopharmaceuticals still grew 6% and represents about 40% of our global sales. Rare disease grew 5% despite the impact of biosimilars on Soliris. I would say the transition from Soliris to Ultomiris is not totally finished but is close to being completed, and Ultomiris is now growing very nicely. We continue to see increasing demand for our medicines across all our regions. Of course, strong growth in the U.S., 10%. We continue to grow in Europe. But importantly, I think I would like to highlight, attract your attention to the emerging markets outside of China. China still grew 4% despite losing Pulmicort to generics. We still grew 4%, which is quite nice, and we remain the largest pharma company in China. But outside of China, we saw 22% growth. This part of the world is starting to play an important role. As I said, Europe, we still grew 7%. Our momentum through the pipeline continues. We now have more than 100 Phase III trials that are ongoing. Think about that, 100 Phase III trials. It's an enormous momentum going through the pipeline. This year, we should have 20 Phase III readouts. If they are positive, they will collectively drive another more than $10 billion of peak revenue. The pipeline '27 should also deliver a similar number, actually slightly higher in 2027. Of course, not all, but at least the great majority of these Phase III readouts need to be positive. Importantly, you can see that there's a growing number of late-stage assets but also an increasing value per indication. As our pipeline grows, we continue to focus and prioritize the most valuable projects. So the question is often asked of us beyond 2030. We said back in May 2024 and we continue saying the same. We want to be a growth company until 2030, reaching this $80 billion ambition, but also to be a growth company post-2030. That is why we need to continue investing in R&D, focusing on technologies and new medicines that will change the future of medicines and drive our growth post-2030. You can see here the list of the 5 technologies that we prioritize and decided to invest in. Looking at weight management, cardiovascular risk factors, we now have 2 products in Phase III, both for which we will receive data in 2027. We also announced that we have moved our oGLP-1 into Phase III, and we have a broad set of studies covering diabetes and weight loss in monotherapy and combination products, as well as cardiovascular outcome studies. We have a very ambitious plan for our oGLP-1, and we're investing in new products that will shape the future of the weight management sector. The future will be about better convenience and longer duration of action for injectables moving to weekly and monthly administration. Some of this will come from our recent partnership with CSPC, but also from new mechanisms. We are waiting for data on our GLP-1/glucagon and amylin product. The GLP-1/glucagon in itself has independent value, but we will also combine it with amylin, and we should get data this year. Now if you look at ADCs and Radioconjugates, we now have 8 ADCs that came out of our own pipeline, our efforts. Three of those are in Phase III. We will get data in the first half of this year for one of those, as you can see here, sone-ve. Importantly, we have new ones, both as ADCs and radioconjugates that are moving through early development. We have novel linker combinations and payload combinations. We are continuing to build this that will drive our growth post-2030. We'll invest in our next-generation IO bispecifics, in particular, rilvegostomig. We are combining those with our ADCs, as we've said in the past. Cell therapy, T-cell engagers, we've been making good progress with AZD0120 that has encouraging data in Phase I but is entering Phase III this year. We're moving as fast as we can to shift it into hematology indications and immunology indications. We also have early data for surovatamig which is also moving into Phase III. Finally, we're making progress in our gene therapy programs. If we move to the next slide, I will hand out to Aradhana, who will take you through the financials. Thank you.

Aradhana Sarin, CFO

Thank you, Pascal, and good afternoon, everyone, and good morning to our colleagues in the U.S. who woke up very early to join us. As usual, I'll start with our reported P&L. Next slide, please. Total revenue increased 8% in 2025. Product revenue, which consists of product sales and alliance revenue, increased 10% with continued growth across all key regions. Alliance revenue increased by 38%, reflecting increased contribution from our share of profits with partnered products such as Enhertu, Tezspire and Beyfortus in regions where our partners book product sales. Next slide, please. This is our core P&L. The core gross margin landed at 82% in 2025, in line with expectations set out at the start of the year. Fourth quarter gross margin reflected the normal seasonal pattern as well as $235 million of royalty buyouts for Saphnelo and rilvegostomig which were recorded in the cost of sales. Core R&D expenses increased by 12%, reflecting the growing number of investment opportunities in our broad and deep pipeline. At the end of 2025, we had more than 300 active trials, and as Pascal mentioned, more than 100 of these in Phase III. SG&A expenses increased by only 3% in 2025, reflecting continued cost discipline and focus on operating leverage. We continue to streamline our business, and as a proportion of total revenue, SG&A expenses decreased from 28% in 2024 to 26% in 2025. Operating profit increased by 9%, with operating leverage continuing to be a key focus for the company. We manage our P&L in totality, enabling flexibility and investment decisions throughout the year. The lower tax rate seen in the fourth quarter reflected a release of certain tax provisions taken in prior years. Core EPS increased by 11%, in line with our full year guidance. Next slide, please. We continue to see strong cash flow from operating activities, which increased by 23% to $14.6 billion in 2025. We saw CapEx increasing by $1.1 billion to $3.3 billion, in line with expectations set out at the beginning of the year. For 2026, we anticipate CapEx investment to increase by approximately one-third versus 2025 as we expand capacity to support future growth. This includes our recently announced U.S. and China investments and previously announced investments in our ADC facility in Singapore, all of which are multiyear projects. Total deal payments in 2025 amounted to $4.2 billion, of which around $3 billion were payments relating to past deals and the remaining were payments for deals announced in 2025 such as EsoBiotec. In 2026, we anticipate success-based milestones and sales payments relating to past deals to total around $2.5 billion. Our capital allocation priorities remain unchanged. We currently have interest-bearing debt of close to $30 billion, which is a level we're comfortable with as we continue making investments to drive future growth, expand our supply chain globally and further strengthen our R&D pipeline. Our net debt-to-EBITDA ratio currently sits at 1.2x. Today, we are pleased to confirm a second interim dividend of $2.17 per share, resulting in a full year 2025 declared dividend of $3.20 per share. In 2026, we intend to increase the annual declared dividend to $3.30 per share, in line with our progressive dividend policy. Today, we also issue our 2026 guidance. Our full year guidance is at constant exchange rates. We anticipate total revenue to grow by a mid- to high single-digit percentage driven by strong underlying momentum in the business. The growth will be delivered despite known headwinds in 2026, including VBP in China this quarter for Farxiga, Lynparza and Roxadustat. Farxiga will also face loss of exclusivity in the U.S. in April. In 2025, U.S. Farxiga generated $1.7 billion or 21% of global revenues, while China represented just under half of emerging markets revenue. In Europe, which accounts for 35% of Farxiga total revenue, patent protections across EU markets extend to 2028. While the MFN deal presents a headwind in 2026, the effect is already factored into our guidance and can be absorbed given our large and growing revenue base. Despite these headwinds, we anticipate a broadly flat to slightly higher core gross margin in 2026, driven by backing out the royalty buyout and product sales mix. We expect a core tax rate between 18% and 22% in 2026 and core EPS growth of low double-digit percentage at constant exchange rates. Based on January average exchange rates, we anticipate a low single-digit positive FX impact on total revenue and neutral impact on core EPS. Next slide, please. As I mentioned earlier, we continue to make significant R&D investments in emerging areas such as ADCs, cell therapy, bispecific and late-stage CVRM portfolio which have the potential to drive growth beyond 2030. As a result, we anticipate R&D expenses to be at the upper end of the low 20s percentage range of total revenue in 2026. SG&A as a percentage of total revenue has continued to decline over recent years, reflecting our disciplined approach to efficiency and operating leverage. At the same time, we're making targeted investment to support the next wave of growth with several important NME launches ahead of us, including baxdrostat, camizestrant and gefurulimab, all of which are medicines with blockbuster potential. While we continue to target a mid-30s operating margin in 2026, our priority remains to drive absolute profit growth and long-term value for our shareholders. As highlighted earlier, we remain comfortable with our current level of gross debt, and we anticipate a step-up in core net finance expense for 2026 driven by higher lease expenses and lower interest income. In summary, we saw a very strong financial performance in 2025, which we anticipate to continue in 2026. Next slide, please. With that, I will hand over to Dave, who will take you through the commercial performance of our oncology business.

David Fredrickson, Executive Vice President, Oncology

Thank you, Aradhana. Next slide, please. In 2025, oncology delivered total revenues of $25.6 billion, an increase of 14% on the prior year or 17% excluding the 2024 Lynparza sales milestone. Many of our key medicines have surpassed notable multi-blockbuster milestones with Tagrisso achieving over $7 billion in full year revenues, Imfinzi over $6 billion, Calquence over $3.5 billion and Enhertu over $2.5 billion in AZ revenues. This performance is a tangible demonstration of our commitment to bringing medicines with transformative potential to patients globally and is particularly notable given the headwinds from the introduction of the 20% manufacturers liability under Medicare Part D reform from last year. Turning now to our fourth-quarter performance. Total revenues exceeded $7 billion for the first time, up 20% on the year, excluding the Lynparza milestone, with all our key medicines in regions demonstrating double-digit growth. Tagrisso global revenues were up 10%, reflecting continued demand growth across all indications. In the first-line setting, we are now seeing a significant proportion of patients receiving a combination regimen, with FLAURA-2 being the clear preference across key markets. In earlier lines, increased adoption of ADAURA and LAURA has been another meaningful source of growth. Imfinzi and Imjudo delivered 37% and 26% growth, respectively, reflecting continued demand across tumor types. This growth is broad-based from both continued expansion of newer indications such as ADRIATIC in small cell lung cancer and NIAGARA in bladder cancer, as well as increased uptake of more established indications such as HIMALAYA in liver cancer. Calquence total revenues increased 17% in the fourth quarter, driven by additional demand in frontline CLL as we maintain our class leadership position across major markets. Specifically, in the United States, we've seen our market share leadership grow over the course of the year, demonstrating our competitive positioning and differentiation. Enhertu delivered total revenue growth of 46% in the fourth quarter. Across all regions, Enhertu is seeing share gains both in HER2-positive and HER2 low metastatic breast cancer. And in China, demand continues to increase following NRDL enlistment in January of last year. Truqap revenues grew 41% in the fourth quarter, with year-over-year comparisons benefiting from both inventory build in the U.S. and the reversal of pricing accruals in Europe. In the U.S., we now believe Truqap is at peak, with further incremental growth to be driven by other markets. Finally, Datroway revenues of $40 million in the fourth quarter reflect our early launch momentum in late-line EGFR mutated lung cancer, including an emerging leadership position in the third line. Next slide, please. The strong momentum in 2025 continues into 2026. For Imfinzi, we were pleased to see the U.S. approval for MATTERHORN in early gastric cancer at the end of November and are already seeing encouraging uptake. POTOMAC in bladder cancer will add another growth opportunity this year, with the first approval expected in the first half. We expect data in 2026 for several Imfinzi combinations, including Imjudo in bladder cancer, and HCC with Datroway in lung, with commercial launches planned in 2027, pending positive results and regulatory approvals. 2026 is set to be another landmark year for Enhertu as we further expand our position as the standard of care in HER2-positive breast cancer by bringing this transformational medicine to three new settings. This includes the first-line metastatic setting following the recent approval of DESTINY-Breast09, with approvals in early breast cancer for DESTINY-Breast11 and DB05 also expected this year. Looking to 2027 and beyond, we remain focused on bringing Enhertu to more patients globally, including in settings beyond breast cancer, such as lung cancer. For Calquence, we expect the imminent U.S. launch of the AMPLIFY finite therapy regimen to be an important driver of growth for the year. This complements the sustained demand in the treat-to-progression segment within first-line CLL, where Calquence remains the leading BTKi inhibitor. Looking ahead, we aim to leverage our broader hematology portfolio to improve outcomes through combination approaches in CLL as well as in other hematologic malignancies. Building on double-digit growth for Tagrisso in 2025, we anticipate strong performance in 2026 driven by further adoption and geographic expansion of LAURA and ADAURA in early disease and sustained leadership in first-line metastatic disease, particularly within the growing combination market. Longer term, we look forward to the results of multiple combination trials that have the potential to reinforce Tagrisso as the backbone TKI, both in later lines with SAFFRON and TROPION-Lung15 and in the front line with TROPION-Lung14.

Susan Galbraith, Executive Vice President, Oncology Research & Development

Thank you, Dave. Momentum continues to build across our oncology portfolio. As we enter 2026 with a robust pipeline, we have an important opportunity to advance therapies for patients with high unmet needs. Today, I want to spotlight several key catalysts supporting our continued growth, starting with our TROP2 ADC Datroway. Last year, we saw Datroway demonstrate its profile as a best-in-class TROP2 ADC with launches in HR-positive breast cancer and later-line EGFR mutated lung cancer and with compelling data presented at ESMO in triple-negative breast cancer, demonstrating a 5-month improvement in overall survival versus standard of care chemotherapy. TROPION-Breast02 has now been accepted by the FDA for priority review. This year, we expect the readout for AVANZAR, a pivotal trial evaluating Datroway as the first-line lung cancer setting. AVANZAR investigates the combination of Datroway with Imfinzi and carboplatin, aiming to deepen and extend responses for this large high unmet need population. Crucially, AVANZAR will be the first trial to validate our QCS TROP2-NMR biomarker designed to identify patients most likely to respond to Datroway in this first-line lung cancer setting. Success here could enable broader application of this technology in other tumor types and across our ADC portfolio. Building on Datroway's current approval and later-line EGFR mutated lung cancer, we also anticipate the readout from TROPION-Lung15, which evaluates Datroway alone or in combination with Tagrisso for patients who have progressed on a TKI. This trial aims to set new standards for second-line treatment, further reinforcing Tagrisso's role as the backbone of care in EGFR mutant lung cancer and paving the way for TROPION-Lung14 in first-line setting, which can build on the success of FLAURA and FLAURA-2. Imfinzi continues to deliver transformative benefits across cancer types, and this year's key readouts in GI, lung and bladder cancer signal a third wave of Imfinzi growth highlighting the potential of combination regimens. I want to highlight two today. First, the EMERALD-3 trial aims to bring the combination of Imfinzi and Imjudo into the local regional setting for hepatocellular carcinoma, building on the transformative results we've already demonstrated in the later-line HIMALAYA trial. Second, VOLGA looks to build on our existing presence in muscle-invasive bladder cancer. The NIAGARA regimen established a role for Imfinzi as the first perioperative immunotherapy regimen in cisplatin-eligible patients. VOLGA explores whether the combination of enfortumab vedotin, Imfinzi plus or minus Imjudo can improve outcomes for the 50% of patients that are not candidates for cisplatin. This regimen is differentiated in two important ways. First, enfortumab vedotin is limited to the neoadjuvant setting, aiming to optimize outcomes while balancing the overall benefit risk profile. And secondly, acknowledging bladder cancer's sensitivity to CTLA-4 blockade, VOLGA includes an arm delivering three cycles of Imjudo, two preoperatively and one postoperatively with the goal of further deepening responses in this patient population.

Sharon Barr, Executive Vice President, Rare Disease

Thanks, Ruud. Next slide, please. Rare diseases delivered total revenue of $9.1 billion in 2025, up 4% over the last year, driven by growth in neurology indications, increased patient demand and continued global expansion. In the quarter, Ultomiris grew 15%, driven by patient demand across indications, including the competitive gMG and PNH markets. Soliris revenues continued to decline due to the successful conversion to Ultomiris as well as biosimilar pressure. Strensiq grew 15% due to strong demand with a quarter benefiting from tender or the timing. We also saw strong underlying demand for Koselugo offset in the fourth quarter by timing in certain tender markets. We continue to see great momentum across our rare disease portfolio with further approvals for Koselugo and Ultomiris, expanding our geographic reach for these medicines. Five years after announcing the acquisition, I'm pleased to report that Alexion has delivered low double-digit compounded annual growth from 2020 to 2025 at constant exchange rates. We have also significantly expanded our global reach. At the time of the acquisition, Alexion medicines were available in 20 countries. By leveraging AstraZeneca's footprint and the outstanding efforts of our teams, our life-changing rare disease therapies are now available in more than 75 countries worldwide. Finally, we have made meaningful progress in deepening scientific collaborations between AstraZeneca and Alexion researchers, further accelerating innovation. Our work across similar disease areas, such as transthyretin cardiac amyloidosis and the development of our dual CD19/BCMA CAR-T across multiple therapeutic areas, are two examples of this. This integrated approach enables the seamless exchange of technologies and advancements across medicinal and process chemistry, molecular editing, and library platform. We now have over 120 collaborative initiatives across AstraZeneca and Alexion which are advancing our ambition to pioneer new treatments and lead in our core therapeutic area.

Marc Dunoyer, Executive Vice President, Rare Disease

Thank you, Sharon. Next slide, please. In 2026, we expect Ultomiris to continue to grow, driven primarily by neurology indication including new-to-brand patients and those switching from Soliris, as well as further market expansions. We project peak-year sales for Ultomiris to exceed $5 billion with contributions from both existing and new indications such as HSCT-TMA, IgAN and CSA-AKI. In the first half of the year, we anticipate high-level results in IgAN where we have guided for the first endpoint at 34 weeks assessing proteinuria. If positive, we will explore the potential for accelerated approval in certain major markets. We also anticipate results from adult patients with HSCT-TMA. This data builds on a positive finding from the single-arm pediatric study completed in 2025. For Strensiq, we expect continued adoption supported by hypophosphatasia guidelines, which have led to increased disease awareness, diagnosis rates and accelerated new patient starts. Our priority remains advancing disease education to strengthen market readiness ahead of the readout for efzimfotase alfa which we anticipate in the first half of 2026. Patient demand and geographic expansion in pediatric patients, in addition to the recent approval in adult patients, will continue to drive Koselugo's growth. We are well-placed to deliver another year of strong performance, supported by global demand for rare disease medicine as well as meaningful indication expansion opportunities. Please advance to the next slide. Our antibody-based depletion portfolio for cardiac and systemic amyloidosis continues to advance with a focus on the two most prevalent forms of amyloidosis, transthyretin and light chain. We announced the first Phase III results last year for our most advanced pipeline candidate, anselamimab. In the CARES Phase III program, anselamimab demonstrated a highly clinically meaningful improvement in both all-cause mortality and cardiovascular hospitalization in the subgroup of patients with kappa light chain amyloidosis. Global regulatory reviews and submissions are underway. We have also expanded our collaboration with Neurimmune in December '25 to include NI009, a fibril-depleting antibody for the lambda light chain amyloidosis which represents 80% of the light chain population and complements anselamimab to address the broad patient population. We have accelerated a development plan to move this molecule as quickly as possible into the clinic. Cliramitug, our first collaboration with Neurimmune is now in Phase III for ATTR cardiomyopathy. The DepleTTR trial completed enrollment a full year ahead of plan with more than 1,000 patients recruited. We also plan to initiate a Phase IIb of our silencer Wainua with our DepleTTR cliramitug, and we believe the combination of these two medicines has the potential to deliver a new standard of care for patients with ATTR cardiomyopathy. The data generation to date reinforce our belief that targeted amyloid fibril depletion with specific antibodies can significantly reduce mortality and hospitalization transforming the course of the disease for these patients.

Pascal Soriot, CEO

Thank you, Marc. Please, next slide. As you can see here, the momentum of our pipeline continues, not just in 2026, but also through to 2027. We have a significant number of high-value Phase III trials that can read out and support our growth to 2030 and beyond. In 2026 alone, the risk-adjusted combined figure revenue opportunities exceed $10 billion as I said before, and again, the same in 2027. In closing, we saw strong commercial momentum and great delivery across the pipeline in 2025. Our confidence in delivering the $80 billion ambition by 2030 is definitely increasing. With our broad portfolio and our deep pipeline, the meaningful progress we're making with our multiple transformational technologies, we can definitely reach this $80 billion ambition we have but also continue to grow post-2030. Before we move to the Q&A, I want to thank Andy Barnett for his amazing contribution as Head of Investor Relations over the last few years. He has enjoyed very much interacting with you, and I'm sure you have enjoyed interacting with him. He's very knowledgeable. He's a great guy, and he has a great sense of humor. It was a pleasure working with Andy, certainly for me and for the team, and I'm sure it was the case for you. I want to wish Andy great success in his new role as Country President for Japan. I also want to welcome Joris, who must be somewhere in the room. Joris was until recently the Country President for the U.S., Biopharma and overall President, Representative of AZ in the United States. Joris drove tremendous growth throughout our company in the United States, particularly building Farxiga to what it is, and really did a great job. Joris, prior to being in the U.S., worked in Asia and has great experience across Asia, the U.S. and Europe. Since he joined the company in 2000, I'm sure Joris will also do a great job in IR, and I'm sure you'll enjoy working with him. So if we move to the next slide, as Andy mentioned at the start of the call, please limit the number of questions you ask to allow everybody a fair chance to participate. Operator Instructions. And with that, let's move to the first question. There are so many first questions. Over to you.

Luisa Hector, Analyst

Thank you, Pascal. I have two questions, please. I wanted to think a little bit about the growth beyond 2030, but it does connect to the readouts in 2026. You talked about the $10 billion risk-adjusted peak sales potential. Can you give us any more color on that, the mix of the $10 billion, the risk adjustments you've assumed, and any assets in particular dominating the $10 billion? Should we assume higher success rates now for AstraZeneca after last year's strong performance? And then I'd love to hear an update from Iskra on China; 2026 has a lot of moving parts but some good new launches and reimbursement going on as well. Just an update on how we should think about '26 and perhaps some color on the profitability of China versus history versus the rest of the group?

Pascal Soriot, CEO

Thank you. Iskra, do you want to cover the second one? And maybe for the first one, we'll have to get input from a number of people there. But go ahead, Iskra to start.

Iskra Reic, Executive Vice President, Commercial Operations

Thanks, Luisa, for the question. Let me start by saying that we are very happy to see the strong performance in China in '25, and it definitely gives us confidence in the outlook of '26. When you think about '26 in China, I think there are two main components. One is obviously the headwind of the VBP for Farxiga, roxadustat, and Lynparza. As we have always seen, there is expectations from the decline post-VBP that is driven by both price decrease as well as volume reduction. Specifically for Farxiga, I do believe that we can also expect brand recovery in the midterm. We saw a similar trend with Betaloc and CRESTOR in the past. It's driven by strong brand perception, strong brand loyalty, and recovery specifically in the retail channel. For the tailwinds in China, we feel very confident that we will continue to see the growth of the new launches, specifically driven by our success of including Fasenra, Truqap and Calquence tablets in the NRDL starting 1st of January this year. Regarding the Enhertu performance post-NRDL, we've seen very strong uptake. Our ability to include Enhertu in more than 1,000 hospital listings in less than a quarter gives us the confidence that we will be able to see successful launches going forward. When it comes to profitability, the profitability in China is still lower than the group. However, you need to consider the huge volume and unmet need as a perspective against slightly lower prices than in the rest of the world.

Pascal Soriot, CEO

In your first question, I had like two sub-questions really. The second sub-question was about success rate. I wish that we continue experiencing the same success rate, but I don't think we can promise this because, as you know, the risk is part of our industry. We brace ourselves for the fact that we will experience failures. Now having said that, I'd like to ask maybe Susan to do two things. One is to talk about the joint venture project we are working together with Tempus and using AI and multi-modal models to help improve the probability of success in our studies and better shape them. You can provide a bit of highlights on this and then comment on what are the two or three big projects, not too many, that you think will drive growth in oncology and hematology.

Susan Galbraith, Executive Vice President, Oncology Research & Development

Yes. Thanks, Pascal. My reflection, if you like, on the last decade in oncology about the success rates we've had has been predicated on being able to identify the right patient population to treat. You've seen that been important with Lynparza; it's been important with Tagrisso, and that continues to be something that's important. The foundation model work that we do with Tempus and Pathos has the ambition of having the largest multimodal foundation model that will take unstructured data from patient records, lab data, genomics data, transit data, and available imaging and pathology, and integrate all of that into the largest foundation model for oncology because of the large data set that we have with Tempus and Pathos. The hope is that we've already been using those kinds of real-world evidence datasets to help design our Phase III trials and predict what the control arm performance is going to be, particularly when you're going in with a new biomarker and you don't have the historical literature data; if you can benchmark that using these datasets, it's helpful. The idea is that you would reduce the uncertainty in both the design and the production of outcomes of Phase III trials using these foundation models. The hope is also that you can better identify the patient populations where the biology is a little more complicated. We're still relying, for example, on PD-L1 in the IO space as the only biomarker that's really broadly been taken up, and everybody is aware that this is imperfect. This technology can really help in those spaces. It's still to be proven, but I'm optimistic that it can make a difference.

David Fredrickson, Executive Vice President, Oncology

So Luisa, very specifically on the readouts that Pascal went through. EMERALD-3 is a blockbuster-plus opportunity in HCC. I think it builds off of a program that has current success with Imfinzi. When you take a look at data across AVANZAR07, that is for just the AZ share alone; it presents a multi-blockbuster opportunity if those studies are positive. And we have an opportunity to move forward with that. SERENA-4 is also multi-blockbuster in terms of the opportunity that it represents. Lastly, PAC-9, we don't talk a lot about PAC-9, but I think PAC-9, if that study were to come through, gives an opportunity to build off of our Pacific leadership where we've been able to enjoy a space without many competitors coming into the area.

Ruud Dobber, Executive Vice President, BioPharmaceuticals

Yes. And a few highlights from a biopharma perspective. Laroprovstat, our oral PCSK9, is expected to deliver its first data set in the course of 2027, which has potentially a $5 billion-plus potential. Clearly, baxdrostat, I'm sure there will be many more questions about baxdrostat. It's not only the mono component but also the combination with the SGLT2, dapagliflozin is very important. The other two combinations, balci and dapa in kidney disease and heart failure have high unmet medical needs, and the combination of zibotentan and dapagliflozin has sales potential of between $3 billion and $5 billion. There are a couple of big products mentioned. And of course, the bonus will be potentially those as mentioned by Sharon, which has high unmet medical needs still in the COPD space. If the product hits the TPP, I firmly believe that this will also be a multibillion-dollar opportunity.

Pascal Soriot, CEO

I have to stay on this table, but please, one question. I'll pick one question and give the second one. If you have a second one follow-up.

Richard Vosser, Analyst

Richard Vosser from JPMorgan. Could you share thoughts on the implications of the lidERA result over the SERENA-4 trial in terms of design? Susan, you mentioned choosing the right patient population. Just thoughts on what you've done in SERENA-4 on the back of the lidERA result. If I could sneak in, thoughts on CAMBRIA-1 as well. Given what lidERA does, that impacts the commerciality.

Pascal Soriot, CEO

I'll grant you the second one because it's still related to CAMBRIA anyway. So over to you, Susan.

Susan Galbraith, Executive Vice President, Oncology Research & Development

I think what we've now seen is proof, as we've been saying consistently, that because of the mechanism of action of both full antagonism and inhibition of estrogen receptor, as well as degradation can have activity not just in the ESR1, but in endocrine-sensitive, too, wild type. We've been saying it for a while, but when you look at the second-line setting, that is less endocrine sensitive, and the effect size has been smaller there. The basis for SERENA-4's confidence is that we have designed the study to enrich for the endocrine-sensitive components of the first-line setting. That's based on recruiting patients with recurrence of early-stage disease after at least two years of standard adjuvant therapy because those that are less sensitive will progress faster than that. At least 12 months must have elapsed since the patient's last dose of the adjuvant AI, and there are some patients with de novo stage IV disease. These clinical features enrich for the endocrine-sensitive patient population. Of course, what you've also got is potentially the prevention of the emergence of ESR1 mutations because you are essentially blocking that clonal selection drive due to the mechanism of action. That underpins our confidence in SERENA-4. I think having seen that there is activity in the adjuvant setting in an endocrine-sensitive population increases the confidence in that. There are still those trial design features. Of course, it is in combination with the CDK4/6 inhibitor, which will be very relevant as the data continue to mature for CDK4/6 in the adjuvant setting.

Richard Vosser, Analyst

Could you elaborate on the implications of the lidERA result for SERENA-4's design? Any plans to run a lidERA-like study, or are you looking predominantly for the market opportunity for high-risk populations in combination with Verzenio?

David Fredrickson, Executive Vice President, Oncology

Yes. I'll simply amplify and echo some of the things you had said previously, Susan. CAMBRIA-1 is in this 2- to 5-year population, which is the prevalent population. While it's true that over time the upfront CAMBRIA-2 population, we would expect to grow. There is a large population of patients that are prevalent on AI and AI CDK4/6. The program allows for looking at both AI and CDK4/6 combinations. It's the broadest program that allows both that prevalent and incident pool and allows us to be in a competitive set of timelines by putting it together.

Sharon Barr, Executive Vice President, Rare Disease

Sure. Starting with Wainua, we expect the cardio transform readout in ATTR cardiomyopathy in the second half of this year. Wainua is an anti-sense oligonucleotide designed selectively to suppress hepatic production of transthyretin addressing the upstream driver of amyloid fibril formation. ATTR cardiomyopathy is often underdiagnosed as symptoms overlap with common cardiac issues, leading to delayed diagnosis, poor prognosis, and high morbidity. This highlights the need for better diagnostics and innovative new treatment options. CARDIO-TTRansform is the largest study ever conducted in this disease, enrolling more than 1,400 patients to receive Wainua or placebo on top of standard care for 140 weeks. The trial's primary endpoint is a robust composite of cardiovascular mortality and recurrent cardiovascular clinical events designed to capture clinically meaningful outcomes. Importantly, Wainua can be administered once monthly as a single dose via a subcutaneous auto-injector, enabling convenient at-home dosing. That's an advantage for this largely aging population. Wainua represents just one component of our leading amyloidosis portfolio; we believe that multiple mechanisms of action will be needed to address the full spectrum of ATTR cardiomyopathy.

Pascal Soriot, CEO

Thank you, Sharon. So we'll take Steve Scala's question online and then return to the room. I think Rajan has the microphone.

Steve Scala, Analyst

Pascal, a general question, but a highly competitive market of undifferentiated products which isn't growing very much despite huge awareness doesn't strike me as the type of market AstraZeneca pursues aggressively. Obesity could be described as that, and you are not only involved but increased exposure. So what am I missing? Are you assuming that fundamentals improve, that pricing stabilizes and increases, that strong growth will resume? I know that you're pursuing combos, but value-added products launched into a tough market would strike me as a high probability path to success. Also, could you shed light on why AstraZeneca continues to pursue an oral relaxant?

Pascal Soriot, CEO

I will only take the first one, if I may. It's an easy one, Ruud for you. It's a fair question. First of all, I think we truly believe that the market in itself is still quite immature. Yes, injectables have their place. The first oral is moving in, but there's still so much improvement possible in combination therapies. For overweight patients, this is crucial to help reduce cardiovascular risk events. That's one big ticket item. Second, those products are still not used much in international markets. If you look at the success of Farxiga, a big part of this success across the three indications is that we have a very large footprint in international markets. There is clearly room to maneuver. The third piece is that we are doing a lot of research and development regarding the quality of weight loss. It’s not just about the percentage of weight loss, but are you able to preserve lean muscle, and if so, how much. Additionally, are you able to target bad fat, the visceral fat. There are enormous possibilities to move to the next generation of anti-obesity medicines, and I believe AstraZeneca is well-equipped in this regard.

Rajan Sharma, Analyst

I wanted to focus on the growth drivers in 2026 outside of oncology. Do you think the biopharma business can grow through the Farxiga LOE? What has to go right to get to the upper end of that guidance? When do we get visibility on those factors?

Ruud Dobber, Executive Vice President, BioPharmaceuticals

Yes. The respiratory and immunology portfolio is growing very fast. It was already $9 billion in the course of 2025. There's no reason to believe that products like Breztri with asthma, or Fasenra and Tezspire, are not growing anymore double-digit moving forward. That's a very important growth driver, not only in the United States and Europe, but also in international markets. The other one is that we hope to see the approval of baxdrostat in the course of the year as an approval that, of course, will not immediately generate substantial sales in 2026. It's a highly dominated Part D population. Market research indicates this product has a multibillion-dollar opportunity. Internally, we foresee a blip from the Farxiga LOE, but there are enough growth drivers to potentially exceed growth moving forward. We are quite bullish in our internal forecast for the biopharma business.

Rajesh Kumar, Analyst

Looking at 2026, you are sitting at 1.2x net debt to EBITDA. You have consensus inching towards your $80 billion target by 2030. Considering your upcoming patent expirations, how do you view your capital allocation? Have you factored in a higher R&D in your models now? Will you pursue the organic route for growth beyond 2030 or consider acquisitions?

Pascal Soriot, CEO

Regarding capital allocation, the $80 billion ambition was based on an organic basis, and that does not assume any M&A of any size and scale. I think we're on track to achieve that. We have substantial firepower and are comfortable at 1.2x leverage, but we have plenty of capacity. However, we remain disciplined in terms of which assets to bring in because it's about creating value for shareholders from acquired assets. Substantial investments in R&D are required once we acquire or license assets. We must add value consistently. Looking beyond 2030, that's why Pascal highlighted investment trends in our R&D, which won't yield significant revenue in 2030 but are crucial for future growth during expected LOEs. If you look at it, we are in a good position. We don't have to go after Phase III assets that are proven at high costs; we focus on building our pipeline. Our strategy really has been to expand our pipeline with earlier investments and add value over time. We have the capacity for growth but must remain focused. So, Andy, I think we must stop here as some of us have to be on the road show. Thank you for all your interest and your great questions.